Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the period covered by the annual
report:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. ☒ Yes ☐ No
If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes
☒ No
NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). ☒ Yes ☐ No
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated
filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2
of the Exchange Act. (Check one):
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☐
The term new or revised financial accounting standard refers to any update issued by the Financial Accounting Standards Board
to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used
to prepare the financial statements included in this filing:
If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the registrant has elected to follow: Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). ☐ Yes ☒ No
Important
factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements are disclosed under Item 3. Key InformationD. Risk Factors and elsewhere in this Annual Report,
including, without limitation, in conjunction with the forward-looking statements included in this Annual Report and including with respect to our estimated and projected earnings, income, equity, assets, ratios and other estimated financial
results. All forward-looking statements in this Annual Report and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.
Some of the factors that we believe could materially affect our results include:
We caution you that the foregoing list may not contain all of the factors that are important to you. In addition, in light of these risks and
uncertainties, the matters referred to in the forward-looking statements contained in this Annual Report may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information,
future events or otherwise, except as required by law.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A.
|
Selected Financial Data
|
The following tables set forth our selected historical
financial and operating data.
On January 4, 2011, Omega Holdco B.V., which later changed its name to Constellium Holdco B.V., and
then again to Constellium N.V. (Constellium) acquired the Engineered Aluminum Products business unit (the EAP Business) from affiliates of Rio Tinto, a leading international mining group (the Acquisition).
The selected historical financial information as of December 31, 2017 and 2016 and for each of the three years in the period ended
December 31, 2017 has been derived from our audited consolidated financial statements (the Consolidated Financial Statements) included elsewhere in this Annual Report. The selected historical financial information as of
December 31, 2015, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 have been derived from our audited consolidated financial statements not included in this Annual Report.
The audited Consolidated Financial Statements included elsewhere in this Annual Report have been prepared in a manner that complies, in all
material respects, with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (the IASB), and as endorsed by the European Union (EU).
Effective January 1, 2014, we changed the measure of profitability for our segments under IFRS 8 Operating Segments from
Management Adjusted EBITDA to Adjusted EBITDA.
References to tons throughout this Annual Report are to metric tons.
References to the Wise Acquisition refer to our January 5, 2015 acquisition of Wise Metals Intermediate Holdings LLC and its
subsidiaries, which companies we refer to collectively as Wise.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended
December 31,
|
|
( in millions other than per share and per ton
data)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Statement of income data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
5,237
|
|
|
|
4,743
|
|
|
|
5,153
|
|
|
|
3,666
|
|
|
|
3,495
|
|
Gross profit
|
|
|
539
|
|
|
|
516
|
|
|
|
450
|
|
|
|
483
|
|
|
|
471
|
|
Income/(Loss) from operations
|
|
|
321
|
|
|
|
246
|
|
|
|
(426
|
)
|
|
|
150
|
|
|
|
209
|
|
Net (loss)/income for the periodcontinuing operations
|
|
|
(31
|
)
|
|
|
(4
|
)
|
|
|
(552
|
)
|
|
|
54
|
|
|
|
96
|
|
Net (loss)/income for the period
|
|
|
(31
|
)
|
|
|
(4
|
)
|
|
|
(552
|
)
|
|
|
54
|
|
|
|
100
|
|
(Loss)/earnings per sharebasic
|
|
|
(0.28
|
)
|
|
|
(0.04
|
)
|
|
|
(5.27
|
)
|
|
|
0.48
|
|
|
|
1.00
|
|
(Loss)/earnings per sharediluted
|
|
|
(0.28
|
)
|
|
|
(0.04
|
)
|
|
|
(5.27
|
)
|
|
|
0.48
|
|
|
|
0.99
|
|
(Loss)/earnings per sharebasiccontinuing operations
|
|
|
(0.28
|
)
|
|
|
(0.04
|
)
|
|
|
(5.27
|
)
|
|
|
0.48
|
|
|
|
0.96
|
|
-1-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended
December 31,
|
|
( in millions other than per share and per ton
data)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
(Loss)/earnings per sharedilutedcontinuing operations
|
|
|
(0.28
|
)
|
|
|
(0.04
|
)
|
|
|
(5.27
|
)
|
|
|
0.48
|
|
|
|
0.95
|
|
Weighted average number of shares outstanding
|
|
|
110,164,320
|
|
|
|
105,500,327
|
|
|
|
105,097,442
|
|
|
|
105,326,872
|
|
|
|
98,890,945
|
|
Dividends per ordinary share
(Euro)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
(2)
|
|
|
3,711
|
|
|
|
3,787
|
|
|
|
3,628
|
|
|
|
3,012
|
|
|
|
1,764
|
|
Net (liabilities)/assets or total invested equity
|
|
|
(319
|
)
|
|
|
(570
|
)
|
|
|
(540
|
)
|
|
|
(37
|
)
|
|
|
36
|
|
Share capital
|
|
|
3
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Other operational and financial data (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net trade working capital
(3)
|
|
|
232
|
|
|
|
199
|
|
|
|
149
|
|
|
|
210
|
|
|
|
222
|
|
Capital expenditure
(4)
|
|
|
276
|
|
|
|
355
|
|
|
|
350
|
|
|
|
199
|
|
|
|
144
|
|
Volumes (in kt)
|
|
|
1,482
|
|
|
|
1,470
|
|
|
|
1,478
|
|
|
|
1,062
|
|
|
|
1,025
|
|
Revenue per ton ( per ton)
|
|
|
3,534
|
|
|
|
3,227
|
|
|
|
3,486
|
|
|
|
3,452
|
|
|
|
3,410
|
|
(1)
|
Prior to our initial public offering in May 2013 (the IPO), we paid certain dividends to holders of our ordinary shares, as well as to holders of our preferred shares.
|
(2)
|
In 2015, the Company decided to withdraw its disposal plan for a company from the A&T operating segment classified as held for sale at the end of 2014. Accordingly, related assets and liabilities are not presented
as held for sale at December 31, 2014 and 2015.
|
(3)
|
Net trade working capital, a measurement not defined by IFRS, represents total inventories plus trade receivables less trade payables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
( in millions)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Trade receivables net
|
|
|
306
|
|
|
|
235
|
|
|
|
264
|
|
|
|
436
|
|
|
|
363
|
|
Inventories
|
|
|
643
|
|
|
|
591
|
|
|
|
542
|
|
|
|
436
|
|
|
|
328
|
|
Trade payables
|
|
|
(717
|
)
|
|
|
(627
|
)
|
|
|
(657
|
)
|
|
|
(662
|
)
|
|
|
(469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net trade working capital
|
|
|
232
|
|
|
|
199
|
|
|
|
149
|
|
|
|
210
|
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
Represents purchases of property, plant, and equipment.
|
B.
|
Capitalization and Indebtedness
|
Not applicable.
C.
|
Reasons for the Offer and Use of Proceeds
|
Not applicable.
You should carefully consider the risks and uncertainties described
below and the other information in this Annual Report. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our ordinary shares could
decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. See Special Note
-2-
About Forward-Looking Statements. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.
Risks Related to Our Business
We may not be able to compete successfully in the highly competitive markets in which we operate, and new competitors could emerge, which could negatively
impact our share of industry sales, sales volumes and selling prices.
We are engaged in a highly competitive industry. We compete in
the production and sale of rolled and extruded aluminium products with a number of other producers, some of which are larger and have greater financial and technical resources than we do. Producers with a different cost basis may, in certain
circumstances, have a competitive pricing advantage. Our competitors may be better able to withstand reductions in price or other adverse industry or economic conditions.
In addition, a current or new competitor may also add or build new capacity, which could diminish our profitability by decreasing prices in
our markets. New competitors could emerge from within Europe or North America or globally, including from China, Russia and the Middle East, and could include existing producers and sellers of steel and other products that may seek to compete in our
industry. Emerging or transitioning markets in these regions with abundant natural resources,
low-cost
labor and energy, and lower environmental and other standards may pose a significant competitive threat to
our business. Our competitive position may also be affected by exchange rate fluctuations that may make our products less competitive. Changes in regulation that have a disproportionately negative effect on us or our methods of production may also
diminish our competitive advantage and industry position. In addition, technological innovation is important to our customers who require us to lead or keep pace with new innovations to address their needs. If we do not compete successfully, our
share of industry sales, sales volumes and selling prices may be negatively impacted.
In addition, the aluminium industry has experienced
consolidation over the past years and there may be further industry consolidation in the future. Although industry consolidation has not yet had a significant negative impact on our business, if we do not have sufficient market presence or are
unable to differentiate ourselves from our competitors, we may not be able to compete successfully against other companies. If as a result of consolidation, our competitors are able to obtain more favorable terms from suppliers or otherwise take
actions that could increase their competitive strengths, our competitive position and therefore our business, results of operations and financial condition may be materially adversely affected.
The beverage can sheet industry is competitive, and our competitors have greater resources and product and geographic diversity than we do.
The market for beverage can sheet products is competitive. Our competitors have market presence, operating capabilities and financial and other
resources that are greater than ours. They also have greater product and geographic diversity than we do. Because of their greater resources and product and geographic diversity, these competitors may have an advantage over us in their abilities to
research and develop technology, pursue acquisition, investment and other business opportunities, market and sell their products and services, capitalize on market opportunities, enter new markets and withstand business interruptions or adverse
global economic conditions. There are no assurances that we will be able to compete successfully in these circumstances.
In addition, we
are subject to competition from
non-aluminium
sources of packaging, such as plastics and glass. Consumer demand and preferences also impact customer selection of packaging materials. While we believe that the
recyclability of aluminium, coupled with increasing consumer focus on resource conservation, may reduce the impact of competition from certain alternative packaging sources, there is no guarantee that such competition will be reduced.
-3-
Our business requires substantial capital investments that we may be unable to fulfill. We may be unable to
timely complete our expected capital investments, including in Auto Body Sheet (ABS), or may be unable to achieve the anticipated benefits of such investments.
Our operations are capital intensive. Our total capital expenditures were 276 million for the year ended December 31, 2017, and
355 million and 350 million for the years ended December 31, 2016 and 2015, respectively.
There can be no
assurance that we will be able to complete our capital investments, including our expected investments in ABS, on schedule, or that we will be able to achieve the anticipated benefits of such capital investments. In addition, we are under no legal
obligation to complete the expansion of our ABS program. We may at any time determine not to complete the expansion of our ABS program. Additionally, we may not generate sufficient operating cash flows and our external financing sources may not be
available in an amount sufficient to enable us to make anticipated capital expenditures (including completing our expected ABS investments), service or refinance our indebtedness or fund other liquidity needs, including additional investments. We
may experience delays in materializing demand for our ABS products, and we may not receive customer orders for ABS products as quickly as we had anticipated. Delays in materializing demand or revenues from our ABS investments could adversely affect
our results of operations.
If we are unable to make upgrades, repairs or purchase new plants and equipment, our financial condition and
results of operations could be materially adversely affected by higher maintenance costs, lower sales volumes due to the impact of reduced product quality, reduced production capacity and other competitive factors. In addition, if we are unable to,
or determine not to, complete our expected or additional ABS investments, or such investments are delayed, we will not realize the anticipated benefits of such investments, which may adversely affect our results of operations.
We may experience difficulties in the launch or production
ramp-up
of our existing or new products.
As we begin manufacturing processes in our new locations or for newly introduced products, we may experience difficulties, including
manufacturing disruptions, delays or other complications, which could adversely affect our ability to serve our customers, our reputation or our costs of production and ultimately, our financial position and results of operations.
We are subject to unplanned business interruptions that may materially adversely affect our business and financial results.
Our operations may be materially adversely affected by unplanned business interruptions caused by events such as explosions, fires, war or
terrorism, inclement weather, natural disasters, accidents, equipment failure and breakdown, IT systems and process failures, electrical blackouts or outages, transportation interruptions and supply interruptions. Operational interruptions at one or
more of our production facilities could cause substantial losses and delays in our production capacity, increase our operating costs and have a negative financial impact on the company and our customers. In addition, replacement of assets damaged by
such events could be difficult, lengthy or expensive, and to the extent these losses are not covered by insurance or our insurance policies have significant deductibles, our financial position, results of operations and cash flows may be adversely
affected by such events. For example, in September 2015, Constelliums Neuf-Brisach plant suffered an unplanned outage at the manufacturing facility as a result of the breakdown of a scalper, which adversely affected earnings. From time to
time, we have similar or other equipment failures impacting our production capacity, which may adversely affect our financial results.
Furthermore, because customers may be dependent on planned deliveries from us, customers that have to reschedule, delay or cancel their own
production due to our delivery delays or operational challenges, may be able to pursue financial and legal claims against us, and we may incur costs to correct such problems in addition
-4-
to any liability resulting from such claims. Interruptions may also harm our reputation among actual and potential customers, and the reputation of our customers, potentially resulting in a loss
of business, operational shutdowns or other adverse consequences for us and our customers. In addition, because in many cases we have dedicated facilities and arrangements with customers, production outages or other business operations at an
isolated facility could adversely affect our ability to timely fulfill orders for the applicable customer, potentially adversely affecting our relationship with that customer or our business and results of operations.
Our production capacity might not be able to meet customer or market demand or changing market conditions.
We may be unable to meet customer or market demand, or changing market conditions due to production capacity constraints or operational
challenges and disruptions. Meeting such demand may also require us to make substantial capital investments to repair, maintain, upgrade, and expand our facilities and equipment. Notwithstanding our ongoing plans and investments to increase our
capacity, we may not be able to expand our production capacity quickly enough in response to operational challenges or changing market conditions, and there can be no assurance that our production capacity will be able to meet our existing
obligations and the growing market demand for our products. If we are unable to adequately expand our production capacity, we may be unable to take advantage of improved market conditions and increased demand for our products. We may also experience
loss of market share, operational challenges, increased costs, penalties for late delivery, disruption in our ability to supply our products, reduction in demand for our products, our reputation with actual and potential customers may be harmed, and
our customers reputation may be harmed, resulting in loss of business and a negative impact on our financial performance.
We could experience
labor disputes and work stoppages that could disrupt our business and have a negative impact on our financial condition and results of operations.
From time to time, we may experience labor disputes and work stoppages at our facilities. For example, we experienced work stoppages and labor
disturbances at our Ravenswood, West Virginia facility in 2012 in conjunction with the renegotiation of the collective bargaining agreement. Additionally, we experienced work stoppages and labor disturbances at our Issoire and Neuf-Brisach
facilities in November 2013 and resumed normal operations in early December 2013. We also faced minor stoppages in our Issoire site in December 2015 during the yearly collective bargaining agreement negotiations. Existing collective bargaining
agreements may not prevent a strike or work stoppage at our facilities in the future. Any such stoppages or disturbances may adversely affect our financial condition and results of operations by limiting plant production, sales volumes,
profitability and operating costs.
In addition, in light of demographic trends in the labor markets where we operate, we expect that our
factories will be confronted with high levels of natural attrition in the coming years due to retirements. Strategic workforce planning will be a challenge to ensure a controlled exit of skills and competencies and the timely acquisition of new
talent and competencies, in line with changing technological and industrial needs.
We are dependent on a limited number of customers for a substantial
portion of our sales, and a failure to successfully renew, renegotiate or
re-price
our long-term or other agreements with our customers may adversely affect our results of operations, financial condition and
cash flows.
Our business is exposed to risks related to existing market concentration of our customers. We estimate that our ten
largest customers accounted for approximately 55% of our consolidated revenues in 2017, two of which accounted for more than 10% of our consolidated revenues over the same period. A significant downturn in the business or financial condition of our
significant customers exposes us to the risk of default on contractual agreements and trade receivables, and this risk is increased by weak and deteriorating economic conditions on a global, regional or industry sector level.
-5-
We have long-term contracts and related arrangements with a significant number of our customers.
Some of our long-term customer contracts and related arrangements have provisions that, by their terms, may become less favorable to us over time. If we fail to successfully renegotiate or
re-price
these less
favorable provisions, including payment terms, in our long-term agreements and related arrangements then our results of operations, financial condition and cash flows could be materially adversely affected. Furthermore, some of our long-term
contracts and related arrangements are subject to renewal, renegotiation or
re-pricing
at periodic intervals or upon changes in competitive and regulatory supply conditions, or provide termination rights to
our customers. If we fail to renew, renegotiate or
re-price
these long-term contracts or arrangements at all, or on favorable terms, including payment terms, then our results of operations, financial condition
and cash flows could be materially adversely affected. Any of these risks, or any material deterioration in, or termination of, these customer relationships, could result in a reduction or loss in sales volume or revenue, which could adversely
affect our results of operations. If we are not successful in replacing business lost from such customers, or in negotiating favorable terms, our results of operations, financial condition and cash flows could be materially adversely affected.
In addition, our strategy of having dedicated facilities and arrangements with customers subjects us to the inherent risk of increased
dependence on a single or a few customers with respect to these facilities. In such cases, the loss of such a customer, or the reduction of that customers business at one or more of our facilities, could materially adversely affect our
financial condition and results of operations, and we may be unable to timely replace, or replace at all, lost order volumes and revenue.
Customer
consolidation could adversely affect our financial position, results of operations and cash flows.
Customers in our
end-markets,
including the can, packaging, aerospace and automotive sectors, may consolidate and grow in a manner that could affect their relationships with us. For example, if one of our competitors customers
acquires any of our customers, we may lose that acquired customers business. Additionally, if our customers become larger and more concentrated, they could exert pressure in pricing and payment terms on all suppliers, including us.
Accordingly, our ability to maintain or raise prices in the future may be limited, including during periods of raw material and other cost increases. If we are forced to reduce prices or maintain prices during periods of increased costs, or if we
lose customers because of consolidation, pricing or other methods of competition, our financial position, results of operations and cash flows may be adversely affected.
If our products fail to meet customer requirements, we could incur losses and could adversely affect our reputation, business and results of operations.
Product manufacturing in our business is a highly complex process. Our customers specify quality, performance and reliability
standards that we must meet. If our products do not meet these standards or are defective, we may be required to replace or rework the products. In some cases, our products may contain undetected defects or flaws that only become evident at a later
time, including after shipment. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, supply chain interruptions, natural
disasters, labor unrest and environmental factors. We have experienced product quality, performance or reliability problems and defects from time to time, and similar defects or failures may occur in the future. If these failures or defects occur,
they could result in losses or product recalls, customer penalties, contract cancellation and product liability exposure. A significant product recall could adversely affect product demand, result in negative publicity, damage to our reputation and
could lead to a loss of customer confidence in our products. Any of such consequences could have a material adverse effect on our reputation, business and results of operations.
-6-
The qualification process for our products can be lengthy and unpredictable, potentially delaying adoption of
our products and causing us to incur expense potentially without recovery.
Qualification of our products by many of our customers can
be lengthy and unpredictable and many of these customers have extensive sourcing and qualification processes. The qualification process requires substantial time and financial resources, with no certainty of success or recovery of our related
expenses. In addition, even after an extensive qualification process, our products may fail to meet the standards sought by our customers and may not be qualified for use by such customers. Further, our continued process improvements and
cost-reduction efforts may require us or our customers to
re-qualify
our products. Failure to qualify or
re-qualify
our products may result in us losing such customers
or customer contracts, which could materially adversely affect our business and results of operations.
We are dependent on a limited number of
suppliers for a substantial portion of our aluminium supply and a failure to successfully renew, renegotiate or
re-price
our long-term agreements or other arrangements with our suppliers may adversely affect
our results of operations, financial condition and cash flows.
Our ability to produce competitively priced aluminium products depends
on our ability to procure competitively priced supply of aluminium in a timely manner and in sufficient quantities to meet our production needs. We have supply arrangements with a limited number of suppliers for aluminium and other raw materials.
Our top ten suppliers accounted for approximately 40% of our total purchases for the year ended December 31, 2017. Increasing aluminium demand levels have caused regional supply constraints in the industry, and further increases in demand
levels, could exacerbate these issues. We maintain long-term contracts for a majority of our supply requirements, and for the remainder we depend on annual and spot purchases. There can be no assurance that we will be able to renew, or obtain
replacements for, any of our long-term contracts or any related arrangements when they expire on terms that are as favorable as our existing agreements or at all. Additionally, if any of our key suppliers is unable to deliver sufficient quantities
on a timely basis, our production may be disrupted, and we could be forced to purchase primary metal and other supplies from alternative sources, which may not be available in sufficient quantities or may only be available on terms that are less
favorable to us. As a result, an interruption in key supplies required for our operations could have a material adverse effect on our ability to produce and deliver products on a timely or cost-efficient basis and therefore on our financial
condition, results of operations and cash flows. In addition, a significant downturn in the business or financial condition of our significant suppliers exposes us to the risk of default by the supplier on our contractual agreements. This risk is
increased by weak and deteriorating economic conditions on a global, regional or industry sector level.
We depend on scrap aluminium for
our operations and acquire our scrap inventory from numerous sources. Our suppliers generally are not bound by long-term contracts and have no obligation to sell scrap metal to us. In periods of low inventory prices, suppliers may elect to hold
scrap until they are able to charge higher prices. In addition, a decrease in the supply of used beverage containers (
UBCs
) available to us resulting from a decrease in the rate at which consumers consume or recycle products
contained or packaged in aluminium beverage cans could negatively impact our supply of aluminium. For example, the slowdown in industrial production and consumer consumption during the most recent economic crisis reduced and may continue to reduce
the supply of scrap metal available. Previously, we had relied on our relationship with AB InBev to provide us with certain amounts of UBCs but, since November 2016, we transitioned the procurement of UBCs inhouse to Constellium Metal Procurement,
in Muscle Shoals, Alabama. If an adequate supply of scrap metal is not available to us, we would be unable to recycle metals at desired volumes and our results of operations, financial condition and cash flows could be materially adversely affected.
In addition, we seek to take advantage of the lower price of scrap aluminium compared to primary aluminium to provide a cost-competitive
product. A decrease in the supply of scrap aluminium could increase its cost. To the extent the discount between the primary aluminium price and scrap price narrows, our competitive advantage may be reduced. We cannot make use of financial markets
to effectively hedge against reductions in this discount as this market is not readily available. If the difference between the price of primary and scrap
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aluminium is narrow for a considerable period of time, it could adversely affect our business, financial condition and results of operations.
The loss of certain key members of our management team may have a material adverse effect on our operating results.
Our success will depend, in part, on the efforts of our senior management and other key employees. These individuals including our Chief
Executive Officer and Chief Financial Officer, possess sales, marketing, engineering, technical, manufacturing, financial and administrative skills that are critical to the operation of our business. If we lose or suffer an extended interruption in
the services of one or more of our senior officers or other key employees, our ability to operate and expand our business, improve our operations, develop new products, and, as a result, our financial condition and results of operations, may be
adversely affected. Moreover, the hiring of qualified individuals is highly competitive in our industry, and we may not be able to attract and retain qualified personnel to replace or succeed members of our senior management or other key employees.
If we fail to implement our business strategy, including our productivity improvement initiatives, our financial condition and results of operations
could be materially adversely affected.
Our future financial performance and success depend in large part on our ability to
successfully implement our business strategy, including investing in high-return opportunities in our core markets, focusing on higher-margin, technologically advanced products, differentiating our products, expanding our strategic relationships
with customers in selected international regions, fixed-cost containment and cash management, and executing on our manufacturing productivity improvement programs. We cannot assure you that we will be able to successfully implement our business
strategy or be able to continue improving our operating results.
Implementation of our business strategy could be affected by a number of
factors beyond our control, such as increased competition, legal and regulatory developments, or general economic conditions. Any failure to successfully implement our business strategy could adversely affect our financial condition and results of
operations. In addition, we may decide to alter or discontinue certain aspects of our business strategy at any time. Although we have undertaken and expect to continue to undertake productivity and manufacturing system and process transformation
initiatives to improve performance, we cannot assure you that all of these initiatives will be completed or that any estimated cost savings from such activities will be fully realized. Even when we are able to generate new efficiencies in the short-
to medium-term, we may not be able to continue to reduce costs and increase productivity over the long term.
Our results of operations, cash flows and
liquidity could be adversely affected if we are unable to execute on our hedging policy, if counterparties to our derivative instruments fail to honor their agreements or if we are unable to enter into certain derivative instruments.
We purchase and sell LME and other forwards, futures and options contracts as part of our efforts to reduce our exposure to changes in currency
exchange rates, aluminium prices and other raw materials and energy prices. If we are unable to enter into such derivative instruments to manage those risks due to the cost or availability of such instruments or other factors, or if we are not
successful in passing through the costs of our risk management activities, our results of operations, cash flows and liquidity could be adversely affected. Our ability to realize the benefit of our hedging program is dependent upon many factors,
including factors that are beyond our control. For example, our foreign exchange hedges are scheduled to mature on the expected payment date by the customer; therefore, if the customer fails to pay an invoice on time and does not warn us in advance,
we may be unable to reschedule the maturity date of the foreign exchange hedge, which could result in an outflow of foreign currency that will not be offset until the customer makes the payment. We may realize a gain or a loss in unwinding such
hedges. In addition, our metal-price hedging program depends on our ability to match our monthly exposure to sold and purchased metal, which can be made difficult by seasonal variations in metal demand, unplanned changes in metal delivery dates by
either us or by our customers and other disruptions to our
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inventories, including for maintenance. As an example, in 2015, we were unable to hedge all of our exposure to the decrease in the Midwest regional premium component of aluminium prices,
resulting in unrecovered Midwest premium charges of 22 million at our Muscle Shoals facility.
We may also be exposed to losses
if the counterparties to our derivative instruments fail to honor their agreements.
To the extent our hedging transactions fix prices or
exchange rates and if primary aluminium prices, energy costs or foreign exchange rates are below the fixed prices or rates established by our hedging transactions, then our income and cash flows will be lower than they otherwise would have been.
Similarly, if we do not effectively manage and adequately hedge for prices and premiums (including the Midwest regional premium) of our aluminium and other raw materials, our financial results may also be adversely affected. Further, with the
exception of derivatives hedging forecasted cash flows on certain long-term aerospace contracts, we do not apply hedge accounting to our forwards, futures or option contracts. Unrealized gains and losses on our derivative financial instruments that
do not qualify for hedge accounting are reported in our consolidated results of operations. The inclusion of such unrealized gains and losses in earnings may produce significant period-over-period earnings volatility that is not necessarily
reflective of our underlying operating performance. In addition, in certain scenarios when market price movements result in a decline in value of our current derivatives position, our
mark-to-market
expense may exceed our credit line and counterparties may request the posting of cash collateral which, in turn, can be a significant demand on our
liquidity.
At certain times, hedging instruments may simply be unavailable or not available on terms acceptable to us. In addition,
recent legislation has been adopted to increase the regulatory oversight of
over-the-counter
derivatives markets and derivative transactions. The companies and
transactions that are subject to these regulations may change. If future regulations subject us to additional capital or margin requirements or other restrictions on our trading and commodity positions, this could have an adverse effect on our
financial condition and results of operations.
Our cash flows and liquidity could be adversely affected as a result of the maturity mismatch between
certain of our derivative instruments and the underlying exposure.
We use financial derivatives to hedge the foreign currency risk
associated with the repayment of a portion of our U.S. Dollar-denominated debt. These financial derivatives may have a shorter maturity than either the maturity or call date of the hedged debt instrument. This could result in an adverse impact on
our cash flows and liquidity as the impact from changes in foreign exchange rates on the hedging instruments could result in a cash outflow before the corresponding favourable impact on the underlying hedged debt results in a positive cash flow.
Our joint venture with UACJ in ABS products in the United States may not generate the expected returns and we may be unable to execute on our strategy
with respect to the joint venture.
We have a joint venture with UACJ to produce ABS sheet in the United States and establish a
leadership position in the growing North American ABS market. In 2016, we expanded the scope of our joint venture agreement to include investment in two additional 100 kt finishing lines, to be funded 51% by Constellium and 49% by
Tri-Arrows
Aluminum Holdings, a U.S. affiliate of UACJ. We cannot assure you that we will be able to successfully implement the planned expansion or our business strategy with respect to our joint venture with UACJ.
Any inability to execute on the expansion or our strategy with respect to the joint venture could materially reduce our expected earnings and could adversely affect our operations overall.
The joint ventures automotive line continues to undergo an extensive qualification process and production ramp up for original equipment
manufacturer (OEM) products. Any significant delays incurred during this qualification process and production ramp up, which would jeopardize the start of series production of OEM
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customer products, would be detrimental to the financial performance of our joint venture and would adversely affect our North American ABS strategy and our anticipated return on investments.
In addition, we believe joint ventures generally involve special risks. Whether or not we hold a majority interest or maintain
operational control in a joint venture, our partners may have economic or business interests or goals that may be inconsistent with our interests or goals. Further, an important element in the success of any joint venture is a constructive
relationship between the members of that joint venture. If there were to be a change in ownership, a change of control, a change in management or management philosophy, a change in business strategy or another event with respect to UACJ or its
affiliates who are involved in our joint venture, the joint venture and the relationship between the joint venture members, as well as our financial results and operations, could be materially adversely affected.
We may not be able to successfully develop and implement new technology initiatives and other strategic investments in a timely manner.
We have invested in, and are involved with, a number of technology and process initiatives, including the development of new aluminium-lithium
products. Being at the forefront of technological development is important to remain competitive. Several technical aspects of certain of these initiatives are still unproven and/or the eventual commercial outcomes and feasibility cannot be assessed
with any certainty. Even if we are successful with these initiatives, we may not be able to bring them to market as planned before our competitors or at all, and the initiatives may end up costing more than expected. As a result, the costs and
benefits from our investments in new technologies and the impact on our financial results may vary from present expectations.
In
addition, we have undertaken and may continue to undertake growth, streamlining and productivity initiatives to improve performance. We cannot assure you that these initiatives will be completed or that they will have their intended benefits.
Capital investments in debottlenecking or other organic growth initiatives may not produce the returns we anticipate. Even if we are able to generate new efficiencies successfully in the short- to medium-term, we may not be able to continue to
reduce cost and increase productivity over the long term.
Interruptions or failures in our IT systems, or failure to protect our IT systems against
cyber-attacks or information security breaches, could have a material adverse effect on our business and financial results.
The
efficient operation of our business depends on our IT systems. We rely on our IT systems to effectively manage and operate our business, including such processes as data, accounting, financial reporting, communications, supply chain, order entry and
fulfillment and other business processes. The failure of our IT systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our
business and results of operations to suffer.
In addition, some of our IT are nearing obsolescence, in that the software versions they
are developed on are no longer fully supported or kept
up-to-date
by the original vendors. While
day-to-day
operations are not at risk, major new requirements (e.g., in legal or payroll) might require manual workarounds if the current software versions do not
support those new functionalities. Information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.
A failure in, or breach of, our IT systems as a result of cyber-attacks or information security breaches could disrupt our business, result in
the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs or cause losses. As cyber threats continue to evolve, we are expending additional resources to continue to enhance our information
security measures and be able to investigate and remediate promptly any information security vulnerabilities. We experienced a few security incidents in 2017, but they were successfully detected and handled. They did not have a material negative
impact on the Company, our business or our operations.
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We continue to make investments and adopt measures designed to enhance our protection, detection,
response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cyber-attacks. However, given the unpredictability, nature and scope of cyber-attacks, it is possible
that potential vulnerabilities could go undetected for an extended period. We could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our
customers, the compromise of confidential or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our or third-party systems, networks or products, financial
losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
The process of upgrading our IT infrastructure may disrupt our operations.
We have performed an evaluation of our IT systems and requirements and have implemented or plan to implement upgrades to our IT systems that
support our business. These upgrades involve replacing legacy systems with
state-of-the-art
systems, making changes to legacy
systems or acquiring new systems with new functionality. There are inherent risks associated with replacing, changing or acquiring new systems, including accurately capturing data and system disruptions. We may experience operational problems with
our information systems as a result of system failures, viruses, computer hackers or other causes. Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to successfully upgrade our
systems could cause information losses, including data related to customer orders. Such a disruption could adversely affect our business, financial condition or results of operations.
A substantial percentage of our workforce is unionized or covered by collective bargaining agreements that may not be successfully renegotiated.
A significant number of our employees are represented by unions or equivalent bodies or are covered by collective bargaining or similar
agreements that are subject to periodic renegotiation. Although we believe that we will be able to successfully negotiate new collective bargaining agreements when the current agreements expire, these negotiations may not prove successful, and may
result in a significant increase in the cost of labor, or may break down and result in the disruption or cessation of our operations.
As part of our
ongoing evaluation of our operations, we may undertake additional restructuring efforts in the future, which could in some instances result in significant severance-related costs and other restructuring charges.
We recorded restructuring charges of 4 million for the year ended December 31, 2017, 5 million for the year ended
December 31, 2016 and 8 million for the year ended December 31, 2015. Restructuring costs in 2017, 2016, and 2015 were primarily related to corporate and production sites restructuring operations. We may pursue additional
restructuring activities in the future, which could result in significant severance-related costs, restructuring charges and related costs and expenses, including resulting labor disputes, which could materially adversely affect our profitability
and cash flows.
Our business involves significant activity in Europe, and adverse conditions and disruptions in European economies could have a
material adverse effect on our operations or financial performance.
A material portion of our sales are generated by customers located
in Europe. The financial markets remain concerned about the ability of certain European countries to finance their deficits and service growing debt burdens amidst difficult economic conditions. This loss of confidence led to rescue measures by
Eurozone countries and the International Monetary Fund. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro and
the suitability of the euro as a single currency given the diverse economic and political
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circumstances in individual Eurozone countries. The interdependencies among European economies and financial institutions have also exacerbated concern regarding the stability of European
financial markets generally. These concerns could lead to the
re-introduction
of individual currencies in one or more Eurozone countries, or, in more extreme circumstances, the possible dissolution of the euro
currency entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be determined by laws in effect at such time. These potential developments, or market perceptions
concerning these and related issues, could materially adversely affect the value of our euro-denominated assets and obligations.
In
addition, Brexit could have implications on economic conditions globally as a result of changes in policy direction which may in turn influence the economic outlook for the European Union and its key trading partners. There can be no assurance that
the actions we have taken or may take in response to global economic conditions more generally may be sufficient to counter any continuation or reoccurrence of the downturn or disruptions. A significant global economic downturn or disruptions in the
financial markets would have a material adverse effect on our financial position, results of operations and cash flows.
A portion of our revenues is
derived from our international operations, which exposes us to certain risks inherent in doing business globally.
We have operations
primarily in the United States, Germany, France, Slovakia, Switzerland, the Czech Republic and China and primarily sell our products across Europe, Asia and North America. We also continue to explore opportunities to expand our international
operations. Our operations generally are subject to financial, political, economic, regulatory and business risks in connection with our global operations, including:
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changes in international governmental regulations, trade restrictions and laws, including those relating to taxes, employment and repatriation of earnings;
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compliance with sanctions regimes and export control laws of multiple jurisdictions;
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currency exchange rate fluctuations;
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tariffs and other trade barriers;
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the potential for nationalization of enterprises or government policies favoring local production;
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renegotiation or nullification of existing agreements;
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interest rate fluctuations;
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high rates of inflation;
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currency restrictions and limitations on repatriation of profits;
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differing protections for intellectual property and enforcement thereof;
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divergent environmental laws and regulations; and
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political, economic and social instability.
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The occurrence of any of these events could cause
our costs to rise, limit growth opportunities or have a negative effect on our operations and our ability to plan for future periods. In certain emerging markets, the degree of these risks may be higher due to more volatile economic conditions, less
developed and predictable legal and regulatory regimes and increased potential for various types of adverse governmental action.
We could be required
to make unexpected contributions to our defined benefit pension plans as a result of adverse changes in interest rates and the capital markets.
Most of our pension obligations relate to funded defined benefit pension plans for our employees in the United States and Switzerland, unfunded
pension benefits in France and Germany, and lump sum indemnities
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payable to our employees in France and Germany upon retirement or termination. Our pension plan assets consist primarily of funds invested in listed stocks and bonds. Our estimates of liabilities
and expenses for pensions and other post-retirement benefits incorporate a number of assumptions, including interest rates used to discount future benefits. Our liquidity or shareholders equity in a particular period could be materially
adversely affected by capital market returns that are less than their assumed long-term rate of return or a decline in the rate used to discount future benefits. If the assets of our pension plans do not achieve assumed investment returns for any
period, such deficiency could result in one or more charges against shareholders equity for that period. In addition, changing economic conditions, poor pension investment returns or other factors may require us to make unexpected cash
contributions to the pension plans in the future, preventing the use of such cash for other purposes.
We also participate in various
multi-employer pension plans in one of our facilities in the United States administered by labor unions representing some of our employees. Our withdrawal liability for any multi-employer plan would depend on the extent of the
plans funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could decide to discontinue participation in a plan, and in that event we could
face a withdrawal liability. We could also be treated as withdrawing from participation in one of these plans if the number of our employees participating in these plans is reduced to a certain degree over certain periods of time. Such reductions in
the number of our employees participating in these plans could occur as a result of changes in our business operations, such as facility closures or consolidations. Any withdrawal liability could have an adverse effect on our results of operations.
We may not be able to adequately protect proprietary rights to our technology.
Our success depends in part upon our proprietary technology and processes. We believe that our intellectual property has significant value and
is important to the marketing of our products and maintaining our competitive advantage. Although we attempt to protect our intellectual property rights both in the United States and in foreign countries through a combination of patent, trademark,
trade secret and copyright laws, as well as through confidentiality and nondisclosure agreements and other measures, these measures may not be adequate to fully protect our rights. For example, we have a presence in China, which historically has
afforded less protection to intellectual property rights than the United States or Europe. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business,
results of operations and financial condition.
We have applied for patent protection relating to certain existing and proposed products
and processes. While we generally apply for patents in those countries where we intend to make, have made, use or sell patented products, we may not accurately predict all of the countries where patent protection will ultimately be desirable. If we
fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, we cannot assure you that any of our patent applications will be approved. We also cannot assure you that the patents
issued as a result of our foreign patent applications will have the same scope of coverage as our United States patents. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to
provide us with any meaningful protection or commercial advantage. Further, we cannot assure you that competitors or other third parties will not infringe our patents, or that we will have adequate resources to enforce our patents.
We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or
otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that
these agreements will provide meaningful protection for our trade secrets,
know-how
or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets,
know-how
or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected.
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We rely on our trademarks, trade names and brand names to distinguish our products from the
products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge
our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and
marketing new brands. Further, we cannot assure you that competitors or other third parties will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.
Other legal proceedings or investigations, including our enforcement of our intellectual property rights, could increase our operating costs and adversely
affect our financial condition and results of operations.
We may from
time-to-time
be involved in, or be the subject of, disputes, proceedings and investigations with respect to a variety of matters, including matters related to personal
injury, intellectual property, employees, taxes, contracts, anti-competitive or anti-corruption practices as well as other disputes and proceedings that arise in the ordinary course of business. It could be costly to address these claims or any
investigations involving them, whether meritorious or not, and legal proceedings and investigations could divert managements attention as well as operational resources, adversely affecting our financial position, results of operations and cash
flows. Although the unauthorized use of our intellectual property may adversely affect our results of operations, as our competitors would be able to utilize such property without having had to incur the costs of developing it, thus potentially
reducing our relative profitability, any attempts to enforce our intellectual property rights, even if successful, could result in costly and prolonged litigation, divert managements attention and resources, and materially adversely affect our
results of operations.
Furthermore, we may be subject to claims that we have infringed the intellectual property rights of another. Even
if without merit, such claims could result in costly and prolonged litigation, cause us to cease making, licensing or using products or technologies that incorporate the challenged intellectual property, require us to redesign, reengineer or rebrand
our products, if feasible, divert managements attention and resources, and materially adversely affect our results of operations. We may also be required to enter into licensing agreements in order to continue using technology that is
important to our business, or we may be unable to obtain license agreements on acceptable terms. The requirements of such licensing agreements, failure to obtain the rights granted under such agreements, failure to conclude them on acceptable terms
or litigation related to such agreements could adversely affect our financial position or results of operations.
Current liabilities under, as well as
the cost of compliance with, environmental, health and safety laws could increase our operating costs and adversely affect our financial condition and results of operations.
Our operations are subject to international, national, state and local laws and regulations in the jurisdictions where we do business, which
govern, among other things, air emissions, wastewater discharges, the handling, storage and disposal of hazardous substances and wastes, the remediation of contaminated sites, and employee health and safety. At December 31, 2017, we had
close-down and environmental remediation costs provisions of 81 million. Future environmental regulations or more aggressive enforcement of existing regulations could impose stricter compliance requirements on us and on the industries in
which we operate. Additional pollution control equipment, process changes, or other environmental control measures may be needed at some of our facilities to meet future requirements. If we are unable to comply with these laws and regulations, we
could incur substantial costs, including fines and civil or criminal sanctions, or costs associated with upgrades to our facilities or changes in our manufacturing processes in order to achieve and maintain compliance. Additionally, evolving
regulatory standards and expectations can result in increased litigation and/or increased costs. There are also no assurances that newly discovered conditions, or new or more aggressive enforcement of applicable environmental requirements, or any
failure by counterparties to perform indemnification obligations, will not have a material adverse effect on our business.
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Financial responsibility for contaminated property can be imposed on us where current or former
operations have had an environmental impact. Such liability can include the cost of investigating and remediating contaminated soil or ground water, financial assurance, fines and penalties sought by environmental authorities, and damages arising
out of personal injury, contaminated property and other toxic tort claims, as well as lost or impaired natural resources. Certain environmental laws impose strict, and in certain circumstances joint and several, liability for certain kinds of
matters, such that a person can be held liable without regard to fault for all of the costs of a matter regardless of legality at the time of conduct and even though others were also involved or responsible.
We have accrued, and expect to accrue, costs relating to the above matters that are reasonably expected to be incurred based on available
information. However, it is possible that actual costs may differ, perhaps significantly, from the amounts expected or accrued. Similarly, the timing of those expenditures may occur faster than anticipated. These differences could adversely affect
our financial position, results of operations and cash flows.
Product liability claims against us could result in significant costs and could
materially adversely affect our reputation and our business.
If any of the products that we sell are defective or cause harm to any of
our customers, we could be exposed to product liability lawsuits and/or warranty claims. If we were found liable under product liability claims or are obligated under warranty claims, we could be required to pay substantial monetary damages. Even if
we successfully defend ourselves against these types of claims, we could still be forced to spend a substantial amount of money in litigation expenses, our management could be required to devote significant time and attention to defending against
these claims, and our reputation could suffer, any of which could harm our business.
Our operations present significant risk of injury or death.
Because of the heavy industrial activities conducted at our facilities, there exists a risk of injury or death to our employees or
other visitors, notwithstanding the safety precautions we take. Our operations are subject to regulation by national, state and local agencies responsible for employee health and safety, which has from time to time levied fines against us for
certain isolated incidents. While such fines have not been material and we have in place policies to minimize such risks, we may nevertheless be unable to avoid material liabilities for any employee death or injury that may occur in the future, and
any such incidents may materially adversely affect our reputation.
The insurance level that we maintain may not fully cover all potential exposures.
We maintain property, casualty and workers compensation insurance in accordance with market practice, but such insurance may not
fully cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies,
including, but not limited to, liabilities for breach of contract, environmental compliance or remediation. In addition, from time to time and depending on market conditions, various types of insurance coverage for companies in our industry may not
be available on commercially acceptable terms or, in some cases, may not be available at all. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.
Risks Related to Our Industry
Our
financial results could be adversely affected by the volatility in aluminium prices.
The overall price of primary aluminium consists
of several components: (1) the underlying base metal component, which is typically based on quoted prices from the London Metal Exchange (LME); (2) the
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regional premium, which represents an incremental price over the base LME component that is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for
metal sold in the United States or the Rotterdam premium for metal sold in Europe); and (3) the product premium, which represents a separate incremental price for receiving physical metal in a particular shape (e.g., billet, slab, rod, etc.),
alloy, or purity. Each of these three components has its own drivers of variability. The LME price is typically driven by macroeconomic factors, including the global supply and demand of aluminium. Regional premiums tend to vary based on the supply
and demand for metal in a particular region, changes in tariffs and associated warehousing and transportation costs. Product premiums generally are a function of supply and demand as well as production and raw material costs for a given primary
aluminium shape and alloy combination in a particular region.
Speculative trading in aluminium has increased in recent years,
contributing to higher levels of price volatility. In 2017, the LME cash price of aluminium reached a high of $2,246 per metric ton and a low of $1,701 per metric ton. In 2016, the LME cash price of aluminium reached a high of $1,777 per metric ton
and a low of $1,453 per metric ton, compared to a high of $1,919 and a low of $1,424 per metric ton in 2015. During 2014, regional premiums reached levels substantially higher than historical averages, whereas in 2015, such premiums experienced
significant decreases in all regions, reverting to levels that are closer to historical averages. The Rotterdam regional premium increased to 26% of the LME base price in December 2014 and the Midwest regional premium increased to 27% of the LME
base price. In December 2017, regional premiums represented 8% of the LME base price for the Rotterdam regional premium and 10% of the LME base price for the U.S. Midwest regional premium. Sustained high aluminium prices, increases in aluminium
prices, the inability to meaningfully hedge our exposure to aluminium prices, or the inability to pass through any fluctuation in regional premiums or product premiums to our customers, could have a material adverse effect on our business, financial
condition, and results of operations and cash flow.
Aluminium may become less competitive with alternative materials, which could reduce our share of
industry sales, lower our selling prices and reduce our sales volumes.
Our fabricated aluminium products compete with products made
from other materialssuch as steel, glass, plastics and composite materialsfor various applications. Higher aluminium prices relative to substitute materials tend to make aluminium products less competitive with these alternative
materials. The willingness of customers to accept aluminium substitutes could result in reduced prices or sales volumes, either of which could materially and adversely affect our business, financial condition, results of operations and cash flows.
Environmental and other regulations may also increase our costs and may be passed on to our customers, and may restrict the use of
chemicals needed to produce aluminium products. These regulations may make our products less competitive as compared to materials that are subject to fewer regulations. Certain existing regulations may make our products more attractive than
competing products, including the Corporate Average Fuel Economy (CAFE) standards that require material improvements in the automotive and light truck miles per gallon by 2025 in the U.S. We believe such standards have increased demand
for lighter materials used in the vehicles body in North America. Any deregulation or relaxation of the CAFE or other fuel economy or emissions standards, which was signaled by the new Trump Administration, could reduce or delay the need for
lighter materials among our customers. Any reduction in the competitiveness of our products relative to alternative materials could adversely affect our financial position, results of operations and cash flows.
Customers in our
end-markets,
including the can, packaging, aerospace and automotive sectors, use and
continue to evaluate the further use of alternative materials to aluminium in order to reduce the weight and increase the efficiency of their products. Although trends in light-weighting have generally increased use of aluminium and
substitution of aluminium for other materials, the willingness of customers to accept substitutions for aluminium, or the ability of large customers to exert leverage in the market to reduce the pricing for fabricated aluminium products, could
adversely affect the demand for our products, and thus materially adversely affect our financial position, results of operations and cash flows.
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If we are unable to substantially pass on to our customers the cost of price increases of our raw materials,
including aluminium, our profitability could be adversely affected.
Prices for the raw materials we require are subject to continuous
volatility and may increase from time to time. Although our sales are generally made on a margin over metal price basis, if prices increase, we may not be able to pass on the entire cost of the increases to our customers. There could
also be a time lag between when changes in prices under our purchase contracts are effective and the point when we can implement corresponding changes under our sales contracts with our customers. As a result, we are exposed to fluctuations in raw
materials prices, including metal, since during this time lag we may have to temporarily bear the additional cost of the price change under our purchase contracts. Further, although most of our contracts allow us to substantially pass through metal
prices to our customers, we have certain contracts that are based on fixed metal pricing, where pass through is not available. Similarly, in certain contracts we have ineffective pass through mechanisms related to regional premium fluctuation. A
related risk is that a sustained significant increase in raw materials prices may cause some of our customers to substitute our products with other materials. We attempt to mitigate these risks, including through hedging, but we may not be able to
successfully reduce or eliminate any resulting impact, which could have a material adverse effect on our financial results.
Significant regulatory
developments stemming from the current U.S. administration could have an adverse effect on us.
Changes or uncertainties in U.S.
political and regulatory conditions or laws and policies governing foreign trade, manufacturing, and development and investment in resulting from the current U.S. administration, could adversely affect our business and financial statements. For
example, the current U.S. administration has called for substantial changes to trade agreements, such as the North American Free Trade Agreement. If the United States takes action to withdraw from or materially modify certain international trade
agreements, or to change regulations with respect to trade, or impose restrictions, quotas or tariffs, such actions could adversely affect our business, financial condition and results of operations.
In April 2017, the current U.S. administration directed a national security investigation under Section 232 of the Trade Expansion Act of
1962, with respect to steel and aluminium imports for the potential imposition of tariffs on foreign imports of these raw materials. On March 8, 2018, the current U.S. administration authorized the imposition of tariffs on steel and aluminium
imports into the United States. The imposition of tariffs on the entry or
re-entry
of aluminium into the United States from foreign locations could adversely affect customer demand for our products, our
relationships and agreements with customers. In addition, the imposition of tariffs by the United States may result in retaliatory tariffs or other adverse actions toward the United States by our customers in those countries, any of which could in
turn adversely affect our business. Any of these factors could increase our operating costs and make it more difficult for us to compete in the United States and overseas markets, and our business, financial condition and results of operations could
be adversely affected.
The price volatility of energy costs may adversely affect our profitability.
Our operations use natural gas and electricity, which represent the third largest component of our cost of sales, after metal and labor costs.
We purchase part of our natural gas and electricity on a market basis. The volatility in costs of fuel, principally natural gas, and other utility services, principally electricity, used by our production facilities affects operating costs. Fuel and
utility prices have been, and will continue to be, affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets as well as governmental regulation and imposition of further taxes
on energy. Although we have secured a large part of our natural gas and electricity under fixed price commitments or long-term contracts with suppliers, future increases in fuel and utility prices, or disruptions in energy supply, may have an
adverse effect on our financial position, results of operations and cash flows.
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Adverse changes in currency exchange rates could adversely affect our financial results.
The financial condition and results of operations of some of our operating entities are reported in various currencies and then translated into
euros at the applicable exchange rate for inclusion in our Consolidated Financial Statements. As a result, the appreciation of the euro against the currencies of our operating local entities may have a negative impact on reported revenues and
operating profit, and the resulting accounts receivable, while depreciation of the euro against these currencies may generally have a positive effect on reported revenues and operating profit. We do not hedge translation of forecasted results or
actual results.
In addition, while the majority of costs incurred are denominated in local currencies, a portion of the revenues are
denominated in U.S. dollars and other currencies. As a result, appreciation in the U.S. dollar may have a positive impact on earnings while depreciation of the U.S. dollar may have a negative impact on earnings. While we engage in significant
hedging activity to attempt to mitigate this foreign transactions currency risk, this may not fully protect us from adverse effects due to currency fluctuations on our business, financial condition or results of operations.
The cyclical and seasonal nature of the metals industry and our
end-use
markets and our customers industries
could adversely affect our financial condition and results of operations.
The metals industry is generally cyclical in nature, and
these cyclical fluctuations tend to directly correlate with changes in general and local economic conditions. These conditions include the level of economic growth, financing availability, the availability of affordable energy sources, employment
levels, interest rates, consumer confidence and housing demand. Historically, in periods of recession or periods of minimal economic growth, metals companies have often tended to underperform other sectors.
We are particularly sensitive to cycles in the aerospace, defense, automotive, other transportation, building and construction and general
engineering
end-markets,
which are highly cyclical. During recessions or periods of low growth, these industries typically experience major cutbacks in production, resulting in decreased demand for aluminium
products. This leads to significant fluctuations in demand and pricing for our products and services. Because our operations are capital intensive and we generally have high fixed costs and may not be able to reduce costs and production capacity on
a sufficiently rapid basis, our near-term profitability may be significantly affected by decreased processing volumes. Accordingly, reduced demand and pricing pressures may significantly reduce our profitability and materially adversely affect our
financial condition, results of operations and cash flows.
In particular, we derive a significant portion of our revenues from products
sold to the aerospace industry, which is highly cyclical and tends to decline in response to overall declines in the general economy. The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft.
Demand for commercial aircraft is influenced by airline industry profitability, trends in airline passenger traffic, the state of the U.S. and global economies and numerous other factors, including the effects of terrorism. A number of major
airlines have undergone Chapter 11 bankruptcy or comparable insolvency proceedings and experienced financial strain from volatile fuel prices. The aerospace industry also suffered significantly in the wake of the events of September 11, 2001,
resulting in a sharp decrease globally in new commercial aircraft deliveries and order cancellations or deferrals by the major airlines. Despite existing backlogs, continued financial uncertainty in the industry, inadequate liquidity of certain
airline companies, production issues and delays in the launch of new aircraft programs at major aircraft manufacturers, stock variations in the supply chain, terrorist acts or the increased threat of terrorism may lead to reduced demand for new
aircraft that utilize our products, which could materially adversely affect our financial position, results of operations and cash flows.
Further, the demand for our automotive extrusions and rolled products and many of our general engineering and other industrial products is
dependent on the production of cars, light trucks, and heavy duty vehicles and trailers. The automotive industry is highly cyclical, as new vehicle demand is dependent on consumer spending
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and is tied closely to the strength of the overall economy. We note that the demand for luxury vehicles in China has become significant over the past several years and therefore fluctuations in
the Chinese economy may adversely affect the demand for our products. Production cuts by manufacturers may adversely affect the demand for our products. Many automotive-related manufacturers and first tier suppliers are burdened with substantial
structural costs, including pension, healthcare and labor costs that have resulted in severe financial difficulty, including bankruptcy, for several of them. A worsening of these companies financial condition or their bankruptcy could have
further serious effects on the conditions of the markets, which directly affects the demand for our products. In addition, the loss of business with respect to, or a lack of commercial success of, one or more particular vehicle models for which we
are a significant supplier could have a materially adverse impact on our financial position, results of operations and cash flows.
Customer demand in the aluminium industry is also affected by holiday seasons, weather conditions, economic and other factors beyond our
control. Our volumes are impacted by the timing of the holiday seasons in particular, the lowest volumes typically occurring in August and December and highest volumes occurring in January to June. Our business is also impacted by seasonal slowdowns
and upturns in certain of our customers industries. Historically, the beverage can industry is strongest in the spring and summer season, whereas the automotive and construction sectors encounter slowdowns in both the third and fourth quarters
of the calendar year. Therefore, our quarterly financial results could fluctuate as a result of climatic or other seasonal changes, and a prolonged period of unusually cool summers in different regions in which we conduct our business could have a
negative effect on our financial position, results of operations and cash flows.
A sustained regional or global economic downturn could adversely
affect our business, financial condition and results of operations.
Economic downturns in regional and global economies, including in
Europe and North America, or a prolonged recession in our principal industry segments, have had a negative impact on our operations in the past by reducing overall demand of our products, and could have a negative impact on our future financial
condition or results of operations. During periods of sustained economic downturn or significant supply/demand imbalances impacting our automotive, aerospace or beverage can businesses, our sales may be negatively impacted as our customers and
consumers shift their purchases in response to such downturns. Our diversified customer base and product applications may help mitigate the effects of economic fluctuations, however, many of our customers and suppliers are reliant on liquidity from
global credit markets and, in some cases, require external financing to purchase products or finance operations. Lack of liquidity or inability to access the credit markets by our customers could adversely affect our ability to collect the
outstanding amounts due to us. Although we continue to seek to diversify our business on a geographic and
end-market
basis, the occurrence of any of the foregoing could have a material adverse effect on our
business, financial condition, and results of operations.
Ongoing uncertainty in or deterioration of the global economy due to political, regulatory
or other developments may adversely affect our operating results.
Our headquarters are in the European Union, and we maintain a
significant presence in various European markets and the United States through our operating subsidiaries, including significant sales to customers in both Europe and the United States. If political and regulatory conditions in Europe, the United
States or other key markets, remain uncertain or deteriorate, our customers may respond by suspending, delaying or reducing their capital expenditures, which may adversely affect our sales, cash flows and results of operations. For example, in June
2016, the United Kingdom held a
non-binding
advisory referendum in which voters voted for the United Kingdom to exit the European Union (Brexit). The final agreement with respect to Brexit remains
under review by the parties involved. Political or geographical events, such as Brexit, or diplomatic tensions could result in changes in trade policy, taxes, market volatility or currency exchange rate fluctuations, and resulting uncertainty in the
economy and markets could cause our customers and potential customers to delay or reduce spending on our products or services. Any of these effects, could adversely affect our business, results of operations and financial condition.
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Additionally, as with the environmental laws and regulations, other laws and regulations which
govern our business are subject to change at any time. Compliance with changes to existing laws and regulations could have a material adverse effect on our financial position, results of operations and cash flows.
Reductions in demand for our products may be more severe than, and may occur prior to, reductions in demand for our customers products.
Customers purchasing our products, such as those in the cyclical aerospace industry, generally require significant lead time in the production
of their own products. Therefore, demand for our products may increase prior to demand for our customers products. Conversely, demand for our products may decrease as our customers anticipate a downturn in their respective businesses. As
demand for our customers products begins to soften, our customers could meet the reduced demand for their products using their existing inventory without replenishing the inventory, which would result in a reduction in demand for our products
greater than the reduction in demand for their products. Further, the reduction in demand for our products can be exacerbated if inventory levels held by our customers exceed normal levels and our customers can utilize existing inventory for their
own production requirements. This amplified reduction in demand for our products while our customers consume their inventory to meet their business needs may adversely affect our financial position, results of operations and cash flows.
A higher consumer focus on obesity and other health concerns may lead to a tax upon and/or otherwise reduce customer demand in our can
end-market,
which could reduce demand for our products and adversely affect our financial condition and results of operations.
Consumers, public health officials and government officials are becoming increasingly concerned about the public health consequences associated
with obesity, particularly among young people. In addition, some researchers, health advocates and dietary guidelines are encouraging consumers to reduce consumption of certain types of beverages, especially sugar-sweetened beverages, which include
some of the beverages in which our aluminium packaging is used. Increasing public concern about these issues and possible new taxes on and governmental regulations related to these beverages may reduce demand for these beverages, which could
adversely affect the demand for our products. Any reduction in the demand for our products could have a material adverse effect on our business, financial condition and results of operations.
Regulations regarding carbon dioxide emissions, and unfavorable allocation of rights to emit carbon dioxide or other air emission related issues, as well
as other environmental laws and regulations, could have a material adverse effect on our business, financial condition and results of operations.
Global climate change associated with increased levels of greenhouse gases, including carbon dioxide, has led to significant legislative and
regulatory efforts to limit greenhouse gas emissions. Measures to reduce carbon dioxide and other greenhouse gas emissions that directly or indirectly affect us or our suppliers have been implemented and more such measures are being developed or may
be developed in the future. Substantial quantities of greenhouse gases are released as a consequence of our operations. Compliance with regulations governing such emissions tend to become more stringent over time and could lead to a need for us to
further reduce such greenhouse gas emissions, to purchase rights to emit from third parties, or to make other changes to our business, all of which could result in significant additional costs or could reduce demand for our products. In addition, we
are a significant purchaser of energy. Existing and future regulations relating to the emission of carbon dioxide by our energy suppliers could result in materially increased energy costs for our operations, and we may be unable to pass along these
increased energy costs to our customers, which could have a material adverse effect on our business, financial condition and results of operations. For example, the 21st Conference of the Parties of the United Nations Framework Convention on Climate
Change resulted in an agreement (the Paris Agreement), that calls for the parties to undertake ambitious efforts to limit the average global temperature and to conserve and enhance sinks and reservoirs of greenhouse gases and
establishes a framework for the parties to cooperate and report actions to reduce greenhouse gas emissions. Implementation of the Paris Agreement,
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whether through a revised European emissions trading system or other measures, could have a material adverse effect on our business, financial condition and results of operations.
Our fabrication process is subject to regulations that may hinder our ability to manufacture our products. Some of the chemicals we use in our
fabrication processes are subject to government regulation, such as REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) in the EU. Under REACH, we are required to register some of our products with the European
Chemicals Agency, and compliance with the registration process or obtaining necessary approvals could impose significant costs on our facilities or delay our introduction of new products. We may be required to make significant expenditures to
reformulate the chemicals that we use in our products and materials or incur costs to register such chemicals to gain and/or regain compliance, and we may lose customers or revenue as a result. Additionally, if we fail to comply with these or
similar laws and regulations, we could be subject to significant fines or other civil and criminal penalties should we not achieve such compliance. To the extent that other nations in which we operate also require chemical registration, potential
delays similar to those in Europe may delay our entry into these markets. Any failure to obtain or delay in obtaining regulatory approvals for chemical products used in our facilities could have a material adverse effect on our business, financial
condition and results of operations.
Market-driven balancing of global aluminium supply and demand may be disrupted by
non-market
forces or other impediments to production closures.
In response to market-driven
factors relating to the global supply and demand of aluminium and alumina, certain producers in the aluminium market have curtailed or closed portions of their production capacity. Certain other industry producers have independently undertaken to
reduce production as well. Reductions in production may be delayed or impaired by the terms of long-term contracts to buy power or raw materials. The existence of
non-market
forces on global aluminium industry
capacity, such as political pressures in certain countries to keep jobs or to maintain or further develop industry self-sufficiency, may prevent or delay the closure or curtailment of certain producers smelters, irrespective of their position
on the industry cost curve. The impact of such
non-market
forces on the industry as a whole might adversely affect the company and its results of operations.
Risks Related to Our Indebtedness and Financial Reporting
Our level of indebtedness could limit cash flow available for our operations and capital expenditures and could adversely affect our ability to service our
debt or obtain additional financing, if necessary.
We have now and will continue to have a significant amount of indebtedness. As of
December 31, 2017, we had total indebtedness of 2,127 million (of which 2,062 million consisted of the principal amount of the Notes, net of 36 million of issuance costs, and 65 million of the
principal amount of borrowings under the
Pan-U.S.
ABL Facility, as defined below). Further, we have substantial pension and other post-employment benefit obligations, resulting in net liabilities of
664 million as of December 31, 2017.
Our level of indebtedness could adversely affect our operations. Among other things,
our substantial indebtedness could:
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limit our ability to obtain additional financing for working capital, capital expenditures, research and development efforts, acquisitions and general corporate purposes;
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make it more difficult for us to satisfy leverage and fixed charge coverage ratios required for us to incur additional indebtedness under our existing indebtedness;
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make it more difficult for us to satisfy our financial obligations;
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increase our vulnerability to general adverse economic and industry conditions;
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require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research
and development efforts and other general corporate purposes;
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restrict us from making strategic acquisitions, introducing new technologies and exploiting business opportunities;
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adversely affect the terms under which suppliers provide goods and services to us;
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limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete; and
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place us at a competitive disadvantage compared to our competitors that have less debt.
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addition, if we are unable to meet our debt service obligations and pay our expenses, we may be forced to reduce or delay business activities and capital expenditures, sell assets, obtain additional debt or equity capital, restructure or refinance
all or a portion of our debt before maturity or take other measures. Such measures may materially adversely affect our business. If these alternative measures are unsuccessful, we could default on our obligations, which could result in the
acceleration of our outstanding debt obligations and could have a material adverse effect on our business, results of operations and financial condition.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures and agreements
governing our existing indebtedness do not fully prohibit us or our subsidiaries from doing so. If new debt is added to our and our subsidiaries current debt levels, the related risks that we and they now face could intensify.
The terms of our indebtedness contain covenants that restrict our current and future operations, and a failure by us to comply with those covenants may
materially adversely affect our business, results of operations and financial condition.
The agreements governing our existing
indebtedness contains, and the agreements governing any future indebtedness we may incur would likely contain, a number of financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term
best interests. These include, without limitation, restrictions on our ability to, among other things: (i) incur or guarantee additional debt; (ii) pay dividends and make other restricted payments and investments; (iii) create or
incur certain liens; (iv) make certain loans, acquisitions or investments; (v) engage in sales of assets and subsidiary stock; (vi) enter into transactions with affiliates; (vii) transfer all or substantially all of our assets or
enter into merger or consolidation transactions; and (viii) enter into sale and lease-back transactions.
In addition, the
Pan-U.S.
ABL Facility for our Ravenswood and Muscle Shoals sites provides that at any time during which borrowing availability thereunder is below 10% of the aggregate commitments under the
Pan-U.S.
ABL Facility, we will be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 and a minimum Borrower EBITDA Contribution of 25%, in each case calculated on a trailing twelve-month basis.
Borrower EBITDA Contribution means, for any period, the ratio of (x) the combined EBITDA of the borrowers under the
Pan-U.S.
ABL Facility and their subsidiaries for such period, to
(y) the consolidated EBITDA of the Company and its subsidiaries for such period.
A failure to comply with our debt covenants could
result in an event of default that, if not cured or waived, could have a material adverse effect on our business, results of operations and financial condition. If we default under our indebtedness, we may not be able to borrow additional amounts
and our lenders could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, or take other remedial actions. Our indebtedness also contains cross-default provisions, which means that
if an event of default occurs under certain material indebtedness, such event of default may trigger an event of default under our other indebtedness. If our indebtedness were to be accelerated, we cannot assure you that our assets would be
sufficient to repay such indebtedness in full and our lenders could foreclose on our pledged assets.
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A deterioration in our financial position or a downgrade of our ratings by a credit rating agency could
increase our borrowing costs, lead to our inability to access liquidity facilities, and adversely affect our business relationships.
A
deterioration in our financial position or a downgrade of our credit ratings could adversely affect our financing, limit access to the capital or credit markets or our liquidity facilities, or otherwise adversely affect the availability of other new
financing on favorable terms or at all, result in more restrictive covenants in agreements governing the terms of any future indebtedness that we incur, increase our borrowing costs, or otherwise impair our business, financial condition and results
of operations.
While the terms of our other existing financing arrangements do not require us to maintain a specific credit rating, the
commitments of Hitachi Capital America Corp. and Intesa Sanpaolo S.p.A., New York Branch (the Wise Factoring Purchasers), under the Wise Factoring Facility (as defined herein) are conditioned on, among other things,
(i) Constelliums corporate credit rating not having been withdrawn by either Standard & Poors or Moodys or downgraded below
B-
by Standard & Poors and B3 by
Moodys, and (ii) there not having occurred a material adverse change in the business condition, operations, or performance of Wise Alloys Funding II LLC, since renamed Constellium Muscle Shoals Funding II LLC, (the New Wise
RPA), Wise Alloys LLC, since renamed Constellium Muscle Shoals LLC, (Wise Alloys), or Constellium Holdco II B.V (Holdco II). See Item 10. Additional InformationC. Material ContractsWise Factoring
Facilities. If Constelliums corporate credit rating is withdrawn by either Standard & Poors or Moodys or downgraded below
B-
by Standard & Poors and B3 by
Moodys, or a material adverse change occurs in the business condition, operations or performance of the New Wise RPA Seller, Wise Alloys, or Holdco II, a condition precedent to the obligation of the Wise Factoring Purchasers under the Wise
Factoring Facility to purchase receivables from the New Wise RPA Seller will not be satisfied, and all purchases under the Wise Factoring Facility will become uncommitted. If the Wise Factoring Facility is not extended, refinanced or replaced,
Wises cash collections from customers will be on longer terms than currently funded through the Wise Factoring Facility. As a result, the Companys liquidity could meaningfully decrease, causing the Company to have insufficient liquidity
to operate its business and service its indebtedness, unless another source of liquidity is identified.
A deterioration of our financial
position or a downgrade of our credit ratings for any reason could also increase our borrowing costs and have an adverse effect on our business relationships with customers, suppliers and hedging counterparties. As discussed above, we enter into
various forms of hedging arrangements against currency, interest rate or metal price fluctuations and trade metal contracts on the LME. Financial strength and credit ratings are important to the availability and pricing of these hedging and trading
activities. As a result, any downgrade of our credit ratings may make it more costly for us to engage in these activities, and changes to our level of indebtedness may make it more difficult or costly for us to engage in hedging and trading
activities in the future.
Our existing, and any future, variable rate indebtedness subjects us to interest rate risk, which could cause our annual
debt service obligations to increase significantly.
A portion of our indebtedness is, and our future indebtedness may be, subject to
variable rates of interest, exposing us to interest rate risk. See Item 10. Additional InformationC. Material Contracts. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase,
resulting in a reduction of our net income that could be significant, even though the principal amount borrowed would remain the same.
To service our
indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and research and development efforts
will depend on our ability to generate cash in the future. Although there can be no assurances, we believe that the cash provided by our operations will be sufficient to provide for our
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cash requirements for the foreseeable future. However, our ability to satisfy our obligations will depend on our future operating performance and financial results, which will be subject, in
part, to factors beyond our control, including interest rates and general economic, financial and business conditions. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be
available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. If we are unable to generate sufficient cash flow to service our debt, we may be required to:
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refinance all or a portion of our debt;
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obtain additional financing;
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sell some of our assets or operations;
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reduce or delay capital expenditures and acquisitions;
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reduce or delay our research and development efforts; or
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revise or delay our strategic plans.
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If we are required to take any of these actions, it
could have a material adverse effect on our business, financial condition and results of operations. In addition, we cannot assure you that we would be able to take any of these actions, that these actions would enable us to continue to satisfy our
capital requirements or that these actions would be permitted under the terms of our various debt instruments.
Our historical financial information
presented in this report may not be representative of future results, our relatively short history operating as a standalone company may pose some challenges and we have incurred and will continue to incur increased costs and demands upon resources
as a result of being a public company.
Due to inherent uncertainties of our business, the historical financial information does not
necessarily indicate what our results of operations, financial position, cash flows or costs and expenses will be in the future as past performance is not necessarily an indicator of future performance. In addition, we have a relatively short
history operating as a standalone company which may pose some operational challenges to our management. We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting
obligations under the Exchange Act and regulations regarding internal control over financial reporting, as well as compliance with NYSE requirements. Our management is required to devote substantial time and attention to our public company reporting
obligations and other compliance matters. We evaluate and monitor developments with respect to these rules and regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs as rules and
regulations change. Our reporting and other compliance obligations as a public company may place a significant strain on our management, operational and financial resources and systems for the foreseeable future which may divert managements
attention from running our core business or otherwise materially adversely affect our operating results.
If we do not adequately maintain and continue
to evolve our financial reporting and internal controls (which could result in higher operating costs), we may be unable to accurately report our financial results or prevent fraud.
We will need to continue to improve existing, and implement new, financial reporting and management systems, procedures and controls to manage
our business effectively and support our growth in the future. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures and controls, or the obsolescence of existing financial control systems, could
harm our ability to accurately forecast sales demand and record and report financial and management information on a timely and accurate basis.
We could also suffer a loss of confidence in the reliability of our financial statements if our independent registered public accounting firm
reports a material weakness in our internal controls, if we do not develop and
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maintain effective controls and procedures or if we are otherwise unable to deliver timely and reliable financial information. Any loss of confidence in the reliability of our financial
statements or other negative reaction to our failure to develop timely or adequate disclosure controls and procedures or internal controls could result in a decline in the trading price of our ordinary shares. In addition, if we fail to remedy any
material weakness, our financial statements may be inaccurate, we may face restricted access to the capital markets and the price of our ordinary shares may be materially adversely affected.
Risks Related to Our Corporate Structure and Ownership of our Ordinary Shares
We are a foreign private issuer under the U.S. securities laws and within the meaning of the New York Stock Exchange (NYSE) rules. As a result,
we qualify for and rely on exemptions from certain corporate governance requirements and may rely on other exemptions available to us in the future.
As a foreign private issuer, as such term is defined in Rule 405 under the Securities Act of 1933, as amended (the
Securities Act), we are permitted to follow our home country practice in lieu of certain corporate governance requirements of the NYSE, including the NYSE requirements that (i) a majority of the board of directors consists of
independent directors; (ii) the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and (iii) the compensation
committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities. Foreign private issuers are also exempt from certain U.S. securities law requirements applicable to U.S.
domestic issuers, including the requirement to file quarterly reports on Form
10-Q,
to distribute a proxy statement pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), in connection with the solicitation of proxies for shareholder meetings, and Section 16 filings.
We rely
on the exemptions for foreign private issuers and follow Dutch corporate governance practices in lieu of some of the NYSE corporate governance rules specified above. We currently rely on exemptions from the requirements set out in (i), (ii) and
(iii) above, but in the future, we may change what home country corporate governance practices we follow, and, accordingly, which exemptions we rely on from the NYSE requirements. So long as we qualify as a foreign private issuer, you may not
have the same protections applicable to companies that are subject to all of the NYSE corporate governance requirements.
If we were to
lose our status as a foreign private issuer or otherwise not be considered a foreign private issuer, the regulatory and compliance costs to the Company could be significantly more than the costs we occur as a foreign private issuer. We would be
required to file periodic reports, including audited financial statements, and registration statements on U.S. domestic issuer forms with the SEC, including proxy statements pursuant to Section 14 of the Exchange Act. These SEC disclosure
requirements are more detailed and extensive than the forms available to a foreign private issuer. Furthermore, if we were not a foreign private issuer, we would be required to meet such filing requirements on a more abbreviated timetable than is
applicable to our current filings with the SEC. In addition, our directors, executive officers and 10% owners would become subject to insider short-swing profit disclosure and recovery rules under Section 16 of the Exchange Act. We could also
be required to modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers. In addition, we would lose our ability to rely upon exemptions from certain NYSE corporate governance requirements
that are available to foreign private issuers. In particular, within six months of losing our foreign private issuer status we would be required to have a majority of independent directors and a nominating/corporate governance committee and a
compensation committee comprised entirely of independent directors, unless other exemptions are available under the NYSE rules. Any of these changes would likely increase our regulatory and compliance costs and expenses, which could have a material
adverse effect on our business, financial condition and results of operations.
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If we fail to meet the continuing listing requirements to maintain the listing of our ordinary shares on the
NYSE, our ordinary shares could be delisted by the NYSE prior to any voluntary delisting.
Our ordinary shares are currently listed on
the NYSE under the symbol CSTM (we voluntarily delisted our ordinary shares from Euronext Paris on February 2, 2018). We must meet continuing listing requirements to maintain the listing of our ordinary shares on the NYSE. If we
fail to meet certain listing standards on the NYSE, our ordinary shares may be subject to delisting after the expiration of the period of time, if any, that we are allowed for regaining compliance. We may also voluntarily delist our ordinary shares
from the NYSE under certain circumstances. There can be no assurance that our ordinary shares will remain listed on the NYSE. Any delisting of our ordinary shares could adversely affect a shareholders ability to dispose, or obtain quotations
as to the market value, of such shares and the market price and liquidity of such ordinary shares.
We do not comply with all the provisions of the
Dutch Corporate Governance Code, which could affect your rights as a shareholder.
We are subject to the Dutch Corporate Governance
Code, which applies to all Dutch companies listed on a regulated market, whether in the Netherlands or elsewhere, including the NYSE. The Dutch Corporate Governance Code contains principles and best practice provisions for boards of directors,
shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. The Dutch Corporate Governance Code is based on a comply or explain principle. Accordingly, companies are
required to disclose in their annual reports, filed in the Netherlands, whether they comply with the provisions of the Dutch Corporate Governance Code and, if they do not comply with those provisions, to give the reasons for such noncompliance. The
principles and best practice provisions apply to the board (relating to, among other matters, the boards role and composition, conflicts of interest and independence requirements, board committees and remuneration), shareholders and the
general meeting of shareholders (for example, regarding anti-takeover protection and obligations of a company to provide information to its shareholders), and financial reporting (such as external auditor and internal audit requirements). We have
decided not to comply with a number of the provisions of the Dutch Corporate Governance Code because such provisions conflict, in whole or in part, with the corporate governance rules of the NYSE and U.S. securities laws that apply to our company
whose ordinary shares are traded on the NYSE, or because such provisions do not reflect best practices of global companies listed on the NYSE. This may affect your rights as a shareholder and you may not have the same level of protection as a
shareholder in a Dutch company that fully complies with the Dutch Corporate Governance Code. See Item 16G. Corporate GovernanceDutch Corporate Governance Code.
The market price of our ordinary shares may fluctuate significantly, and you could lose all or part of your investment.
The market price of our ordinary shares may be influenced by many factors, some of which are beyond our control and could result in significant
fluctuations, including: (i) the failure of financial analysts to cover our ordinary shares, changes in financial estimates by analysts or any failure by us to meet or exceed any of these estimates; (ii) actual or anticipated variations in
our operating results; (iii) announcements by us or our competitors of significant contracts or acquisitions; (iv) the recruitment or departure of key personnel; (v) regulatory and litigation developments; (vi) developments in
our industry; (vii) future sales of our ordinary shares; and (viii) investor perceptions of us and the industries in which we operate.
In addition, the stock market in general has experienced substantial price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following
periods of volatility in the market price of certain companies securities, securities class action litigation has been instituted against these companies. If any such litigation is instituted against us, it could materially adversely affect
our business, results of operations and financial condition.
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Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales
may occur, could cause the market price of our ordinary shares to decline.
Sales of substantial amounts of our ordinary shares in the
public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline. This could also impair our ability to raise additional capital through the sale of our equity securities. In addition, the
sale of our ordinary shares by our officers and directors in the public market, or the perception that such sales may occur, could cause the market price of our ordinary shares to decline.
Prior to the completion of our IPO in May 2013, we amended our memorandum and articles of association (the Amended and Restated Articles
of Association) to provide authorization to issue up to 400,000,000 Class A ordinary shares. Since August 18, 2015, the date of our effective Amended and Restated Articles of Association, our authorized capital amounts to
8,000,000 and consists of 400,000,000 Class A ordinary shares. On November 3, 2017, we sold 28,750,000 Class A ordinary shares in an underwritten public offering pursuant to an Underwriting Agreement (the Underwriting
Agreement), dated as of October 31, 2017, by and among the Company, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., as representatives of the underwriters named therein. A total of 134,510,623 Class A ordinary
shares are outstanding as of December 31, 2017.
We may issue ordinary shares or other securities from time to time as consideration
for, or to finance, future acquisitions and investments or for other capital needs. We cannot predict the size of future issuances of our shares or the effect, if any, that future sales and issuances of shares would have on the market price of our
ordinary shares. If any such acquisition or investment is significant, the number of ordinary shares or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial and may result in
additional dilution to our shareholders. We may also grant registration rights covering ordinary shares or other securities that we may issue in connection with any such acquisitions and investments.
Any shareholder acquiring 30% or more of our voting rights may be required to make a mandatory takeover bid or be subject to voting restrictions.
Under Dutch law, if a party directly or indirectly acquires control of a Dutch company, all or part of whose shares are admitted to trading on
a regulated market, that party may be required to make a public offer for all other shares of the company (mandatory takeover bid). Control is defined as the ability to exercise, whether or not in concert with others, at least 30% of the
voting rights at a general meeting of shareholders. Controlling shareholders existing before an offering are generally exempt from this requirement, unless their controlling interest drops below 30% and then increases again to 30% or more. The
purpose of this requirement is to protect the interests of minority shareholders. Any shareholder acquiring 30% or more of our voting rights may be limited in its ability to vote on our ordinary shares.
Provisions of our organizational documents and applicable law may impede or discourage a takeover, which could deprive our investors of the opportunity to
receive a premium for their ordinary shares or to make changes in our board of directors.
Several provisions of our Amended and
Restated Articles of Association and the laws of the Netherlands could make it difficult for our shareholders to change the composition of our board of directors, thereby preventing them from changing the composition of our management. In addition,
the same provisions may discourage, delay or prevent a merger, consolidation or acquisition that shareholders may consider favorable. Provisions of our Amended and Restated Articles of Association impose various procedural and other requirements,
which could make it more difficult for shareholders to effect certain corporate actions. These anti-takeover provisions could substantially impede the ability of our shareholders to benefit from a change in control and, as a result, may materially
adversely affect the market price of our ordinary shares and your ability to realize any potential change of control premium.
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Our general meeting of shareholders has empowered our board of directors to issue shares and
restrict or exclude preemptive rights on those shares for a period of five years. Accordingly, an issue of new shares may make it more difficult for a shareholder to obtain control over our general meeting of shareholders.
In addition, because certain of our products may have applications in the defense sector, we may be subject to rules and regulations in France
and other jurisdictions that could impede or discourage a takeover or other change in control of Constellium or its subsidiaries. In particular, Constellium supplies aluminium alloy products, such as plates, sheets, profiles, tubes and castings, and
related services and research and development (R&D) activities in connection with aerospace and defense programs in France. As a result, a controlling investment in Constellium or certain of its French subsidiaries, or the purchase
of assets constituting a business that produces products or provides services with applications in the defense sector, by a company or individual that is considered to be foreign or
non-resident
in France may
be subject to the French Monetary and Financial Code, which requires prior authorization of the French Ministry of Economy.
The rights of our
shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.
Our corporate affairs are
governed by our Amended and Restated Articles of Association and by the laws governing companies incorporated in the Netherlands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the
rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Dutch law to consider the interests of our company, its shareholders, its
employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a
shareholder. See Item 16G. Corporate GovernanceDutch Corporate Governance Code.
Although shareholders have the right to
approve legal mergers or demergers, Dutch law does not grant appraisal rights to a companys shareholders who wish to challenge the consideration to be paid upon a domestic legal merger or demerger of a company. In addition, if a third party is
liable to a Dutch company, under Dutch law shareholders generally do not have the right to bring an action on behalf of the company or to bring an action on their own behalf to recover damages sustained as a result of a decrease in value, or loss of
an increase in value, of their stock. Only in the event that the cause of liability of such third party to the company also constitutes a tortious act directly against such shareholder and the damages sustained are permanent, may that shareholder
have an individual right of action against such third party on its own behalf to recover damages. The Dutch Civil Code provides for the possibility to initiate such actions collectively. A foundation or an association whose objective, as stated in
its articles of association, is to protect the rights of persons having similar interests, may institute a collective action. The collective action cannot result in an order for payment of monetary damages but may result in a declaratory judgment
(
verklaring voor recht
), for example, declaring that a party has acted wrongfully or has breached a fiduciary duty. The foundation or association and the defendant are permitted to reach (often on the basis of such declaratory judgment) a
settlement that provides for monetary compensation for damages. A designated Dutch court may declare the settlement agreement binding upon all the injured parties with an
opt-out
choice for an individual
injured party. An individual injured party, within the period set by the court, may also individually institute a civil claim for damages if such injured party is not bound by a collective agreement.
The provisions of Dutch corporate law and our Amended and Restated Articles of Association have the effect of concentrating control over
certain corporate decisions and transactions in the hands of our board of directors. As a result, holders of our shares may have more difficulty in protecting their interests in the face of actions by members of the board of directors than if we
were incorporated in the United States.
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United States civil liabilities may not be enforceable against us.
We are incorporated under the laws of the Netherlands and substantial portions of our assets are located outside the United States. In
addition, certain directors, officers and experts named herein reside outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or such other persons residing outside the
United States, or to enforce outside the United States judgments obtained against such persons in U.S. courts in any action, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. In addition, it may be
difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. federal securities laws.
There is no treaty between the United States and the Netherlands for the mutual recognition and enforcement of judgments (other than
arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal
securities laws, would not be enforceable in the Netherlands unless the underlying claim is
re-litigated
before a Dutch court. However, under current practice, the courts of the Netherlands may be expected to
render a judgment in accordance with the judgment of the relevant U.S. court, provided that such judgment (i) is a final judgment and has been rendered by a court which has established its jurisdiction on the basis of internationally accepted
grounds of jurisdictions, (ii) has not been rendered in violation of elementary principles of fair trial, (iii) is not contrary to the public policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a
Netherlands court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court rendered in a dispute between the same parties, concerning the same subject matter and based on the same cause of action, provided that
such prior judgment is not capable of being recognized in the Netherlands. It is uncertain whether this practice extends to default judgments as well.
Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against us or members of our board of directors,
officers or certain experts named herein who are residents of the Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities
laws.
In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the members of our board of directors,
our officers or certain experts named herein in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against us or such members, officers or experts, respectively.
If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, our stock price and trading
volume could decline.
The trading market for our ordinary shares depends in part on the research and reports that securities or
industry analysts publish about us, our business or our industry. We may have limited research coverage by securities and industry analysts. If no significant securities or industry analysts cover our company, the trading price for our shares could
be adversely affected. In the event that one or more of the analysts who cover us downgrade our stock, our share price could decline. If one or more of these analysts, or those who currently cover us, ceases to cover us or fails to publish regular
reports on us, interest in the purchase of our shares could decrease, which could cause our stock price or trading volume to decline.
Our plan to
convert the Company into a
Societas Europaea
and transfer our corporate seat from the Netherlands to France is subject to various risks and uncertainties, including shareholder approval, and may not be completed in accordance
with the expected plans or at all.
We announced in July 2017 that we intend to move our corporate seat to France and close our
Amsterdam office (the Corporate Seat Transfer). The Corporate Seat Transfer is intended to enable us to reorganize in a
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manner that would, among other things, reduce costs and simplify our corporate structure. See Item 4. Information on the CompanyB. Business OverviewRecent DevelopmentsPlan
to Transfer Corporate Seat to France.
The Corporate Seat Transfer is subject to shareholder approval. Pursuant to governing law,
two separate shareholder approvals are required for the conversion from its present form, a Dutch public company or
Naamloze Vennootschap
(NV), into a European public company (
Societas Europaea
or SE) and for
the Corporate Seat Transfer. We are required to obtain shareholder approval for, first, the conversion into an SE and, second, the transfer of the corporate seat to France. The holding of the first shareholder meeting can only take place at the end
of the negotiations with the employee representative body known as the Special Negotiation Body (the SNB), with which we are negotiating the involvement of our European employees within the proposed SE corporate form, the duration and
results of which are not entirely within our control. If we do not obtain both of the required shareholder approvals we will not be able to consummate the Corporate Seat Transfer or realize the anticipated benefits.
We are continuing to evaluate the requirements for effectuating such conversion and transfer, and it is possible that adverse impacts of such
requirements on our Company or failure to obtain required approvals could delay or prevent the completion of such plans or could cause us to materially modify or abandon such plans. If the Corporate Seat Transfer is not approved or successfully
completed, we will continue to be governed by Dutch law.
We may not achieve the anticipated benefits from the Corporate Seat Transfer.
If approved by our shareholders and implemented by management, the Corporate Seat Transfer may not result in the expected benefits. A variety
of factors, some of which are outside the control of the Company, could result in the actual benefits that we realize from the Corporate Seat Transfer to be materially different from those we currently expect. Any failure or delay in the
implementation of the Corporate Seat Transfer may reduce the expected benefits from such transaction, which could have an adverse effect on our results of operations. In such event, we may not be able to reduce our corporate cost structure and
benefit from additional potential tax savings to the extent we expect would be possible as a public limited liability company governed by the laws of France.
If the Corporate Seat Transfer is completed, we may be exposed to the risk of future adverse changes in French law which may have an adverse effect on our
results of operations.
If the Corporate Seat Transfer is approved and completed, we will be a public limited liability company
registered under and governed by the laws of France and our revised articles of association will be amended to conform to French corporate law. As a result, the Company would be subject to the risk of future changes in French law (including French
corporate and tax law), which could have adverse effects on our results of operations.
The rights of shareholders after the Corporate Seat Transfer,
if approved and completed, will not be the same as the rights of the shareholders at present.
We are currently subject to Dutch
statutory rules governing public limited liability companies. If the Corporate Seat Transfer is approved and completed, we will be a public limited liability company registered under the laws of France and the rights of holders of our securities
will be governed by French corporate law and our revised articles of association, as amended to conform to French corporate law. Due to differences between Dutch and French law, and differences between our constituent documents before and after
implementing the Corporate Seat Transfer, your rights as a shareholder would change and may be limited if the Corporate Seat Transfer is approved and completed.
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Risks Related to Taxation
Increases or decreases in income tax rates, changes in income tax laws, additional income tax liabilities due to unfavorable resolution of tax audits and
challenges to our tax position could have a material adverse impact on our financial results.
We operate in multiple tax jurisdictions
and believe that we file our tax returns in compliance with the tax laws and regulations of these jurisdictions. Various factors determine our effective tax rate and/or the amount we are required to pay, including changes in or interpretations of
tax laws and regulations in any given jurisdiction or global- and
EU-based
initiatives such as the Action Plan on Base Erosion and Profit Shifting (BEPS) of the Organization for Economic
Co-operation
and Development (the OECD) and the EU
Anti-Tax
Avoidance Directive (EU/2016/1164 as amended by EU/2017/952) which aim among other things to address
tax avoidance by multinational companies, changes in geographical allocation of income and expense, our ability to use net operating loss and other tax attributes, and our evaluation of our deferred tax assets that requires significant judgment. The
current incorporation into domestic tax law of the OECD principles related to BEPS included in the final reports released by the OECD as well as the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS signed in Paris on
June 7, 2017 could increase administrative efforts within the Company and impact existing structures. Furthermore, the European Commission published a corporate reform package proposal on October 25, 2016 including three new proposals that
aim at
(i) re-launching
the Common Consolidated Corporate Tax Base (CCCTB) which is a single set of rules to compute companies taxable profits in the EU, (ii) avoiding loopholes
associated with profit-shifting for tax between EU countries and
non-EU
countries, and (iii) providing new dispute resolution rules to relieve problems with double taxation for businesses. Changes to our
effective tax rate could materially adversely affect our financial position, liquidity, results of operations and cash flows.
In
addition, due to the size and nature of our business, we are subject to ongoing reviews by taxing authorities on various tax matters, including challenges to positions we assert on our income tax and withholding tax returns. We accrue income tax
liabilities and tax contingencies based upon our best estimate of the taxes ultimately expected to be paid after considering our knowledge of all relevant facts and circumstances, existing tax laws and regulations, our experience with previous
audits and settlements, the status of current tax examinations and how the tax authorities and courts view certain issues. Such amounts are included in income taxes payable, other
non-current
liabilities or
deferred income tax liabilities, as appropriate, and updated over time as more information becomes available or on the basis of the lapse of the statute of limitation. We record additional tax expense or reduce tax expenses in the period in which we
determine that the recorded tax liability is less than or in excess of the ultimate assessment we expect. We are currently subject to audit and review in a number of jurisdictions in which we operate, and further audits may commence in the future.
The Company is incorporated under the laws of the Netherlands and on this basis is subject to Dutch tax laws as a Dutch resident
taxpayer. In July 2017, we announced the Corporate Seat Transfer. In anticipation of the envisaged Corporate Seat Transfer, the Company is in the process of executing certain restructuring steps including amongst others the establishment of a French
branch which is engaged in holding activities. We believe that, until completion of the Corporate Seat Transfer, because of the manner in which we conduct our business, the Company remains resident only in the Netherlands and has a French branch,
which is subject to French taxes for the operations attributable to this branch. The Company will in principle have to continue filing on an annual basis a Dutch corporate income tax return following the Corporate Seat Transfer. As we anticipate
that the Company will not have a permanent establishment in the Netherlands following the Corporate Seat Transfer and as we anticipate that the double tax treaty between the Netherlands and France will on that basis allocate taxation rights with
respect to any income of the Company to France, this could possibly be a nil return. We have approached the tax authorities in the Netherlands (Dutch Revenue) to apply for a tax ruling confirming that for book years starting after the
Corporate Seat Transfer this filing requirement will stop. The Company also believes that the Corporate Seat Transfer does not trigger a Dutch corporate income tax cost as the Company may not have assets and/or liabilities that include hidden
taxable reserves and/or goodwill and the
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Company has tax losses which could
off-set
corporate income tax due, if any. Following the transfer of its corporate seat to France, if effectuated, the
Company will become subject to the laws of France. See Item 4. Information on the CompanyB. Business OverviewRecent DevelopmentsPlan to Transfer Corporate Seat to France and the risk factors below for a discussion of
the Corporate Seat Transfer and the risks related thereto.
However, if our tax position were successfully challenged by applicable tax
authorities, or if there were changes in the tax laws, tax treaties, or the interpretation or application thereof (which could in certain circumstances have retroactive effect) or in the manner in which we conduct our business, this could materially
adversely affect our financial position.
We may not be able to make use of the remittance reduction with retroactive effect.
Currently, for Dutch dividend withholding tax purposes, we may be able to use the remittance reduction with respect to dividends received by
Holdco II from our qualifying foreign subsidiaries. However, on the basis of a conclusion of the Advocate General to the Court of Justice of the European Union (CJEU), the Dutch Cabinet has announced emergency remedial measures in the event the CJEU
were to follow this conclusion about the per element approach, which may also have an impact on the remittance reduction. The emergency remedial measures mean that, with retroactive effect to 11:00 a.m. on October 25, 2017, some
Dutch corporate income tax and dividend withholding tax rules, such as the remittance reduction, will also have to be applied in domestic relationships as if there is no fiscal unity. At present, there is still uncertainty about how the remedial
measures will exactly be implemented and when. However, there is a risk that we can no longer make use of the remittance reduction with retroactive effect to 11:00 a.m. on October 25, 2017 in relation to dividends that are received by Holdco II
from our qualifying foreign subsidiaries.
We may have to withhold Dutch withholding taxes on interest payments starting in 2019.
The new Dutch government hasas part of a coalition agreement published on October 10, 2017announced that it may start
levying withholding taxes on interest payments to low tax jurisdictions. At this stage no legislative proposal has been published yet. The Annex to the published coalition agreement suggests that such withholding taxes on interest may at
the earliest be levied as from 2023.
If we pay dividends after the Corporate Seat Transfer, we may need to withhold Dutch dividend withholding tax on
any dividends payable to Dutch resident holders of our ordinary shares,
non-Dutch
resident holders of ordinary shares with a taxable presence in the Netherlands and holders of our shares from which the
identity cannot be assessed upon a payment of a dividend.
After the Corporate Seat Transfer, if effectuated, our dividends paid on our
ordinary shares generally should be subject to French dividend withholding tax and not to Dutch dividend withholding tax on the basis of the double tax treaty between the Netherlands and France. However, Dutch dividend withholding tax may be
required to be withheld from any such dividends paid, if and when paid to Dutch resident holders of our ordinary shares (and
non-Dutch
resident holders of our ordinary shares that have a permanent
establishment in the Netherlands to which the ordinary shares are attributable). We have approached Dutch Revenue to apply for a tax ruling confirming that no withholding of any Dutch dividend tax is applicable to any dividends paid by us after the
Corporate Seat Transfer. Should we not obtain the tax ruling from Dutch Revenue, we will be required to identify our shareholders in order to assess whether there are Dutch resident holders of our ordinary shares or
non-Dutch
resident holders of our ordinary shares with a permanent establishment in the Netherlands to which the ordinary shares are attributable in respect of which Dutch dividend tax has to be withheld on
dividends paid after the Corporate Seat Transfer. Such identification may not always be possible in practice. If the identity of our shareholders cannot be assessed upon a payment of dividend after the Corporate Seat Transfer, withholding of both
French and Dutch dividend withholding tax from such dividend may occur. This could adversely affect the value of our ordinary shares.
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We may have to pay Dutch dividend withholding tax and Dutch corporate income tax upon the conversion of the
Company from an NV into an SE.
As part of the Corporate Seat Transfer, the Company will be converted from an NV into an SE. Dutch
dividend withholding tax may be required to be paid upon the conversion in case such conversion should be considered a deemed liquidation for Dutch dividend withholding tax purposes. Similarly, if the conversion would be considered a deemed
liquidation, income may be recognized that could trigger a Dutch corporate income tax costs. We believe Dutch Revenue shouldalso taking into account statements made during the legislative historynot have compelling reasons to apply the
deemed liquidation rule in our case as the envisaged conversion is based on the EU Council Regulation on the Statute for an European Company rather than on the Dutch Civil Code. Should the conversion nevertheless be considered a deemed liquidation,
we or our shareholders may be faced with Dutch dividend withholding tax for the balance between the fair market value of our ordinary shares and the amount of the fiscally recognized
paid-up
share capital on
such ordinary shares. As mentioned, if the conversion nevertheless would be considered a deemed liquidation, income may be recognized. The Company believes that such income should not trigger a Dutch corporate income tax cost as the Company may not
have assets and/or liabilities that include hidden taxable reserves and/or goodwill and the Company has tax losses which could
off-set
corporate income tax due, if any. We have approached Dutch Revenue to
apply for a tax ruling confirming that no Dutch dividend withholding tax or Dutch corporate income tax is triggered upon the conversion.
After the
Corporate Seat Transfer, dividends paid on our ordinary shares will be subject to French withholding tax on dividends.
Under French
law, dividends paid by a French corporation, as the Company would be after the completion of the Corporate Seat Transfer, to
non-residents
of France are generally subject to French withholding tax at a rate of
(i) 12.8% for payments to individuals, (ii) 15% for payments to
not-for-profit
organizations whose head office is located in a member State of the European Union or in
another State party to the European Economic Area Agreement which has entered into a convention on administrative assistance with France to fight tax evasion and fraud, and (iii) 30% until December 31, 2019, 28% as from January 1, 2020,
26.5% as from January 1, 2021, 25% as from January 1, 2022, for payments to legal persons or organizations other than those mentioned at (ii). The withholding tax rate is increased to 75% for dividends paid by a French corporation in a
non-cooperative
State or territory within the meaning of Article
238-0
A of the FTC.
Under the
France-U.S.
Treaty, the rate of French withholding tax on dividends paid to an eligible U.S.
holder who is a U.S. resident as defined pursuant to the provisions of the
France-U.S.
Treaty and whose ownership of the ordinary shares is not effectively connected with a permanent establishment or fixed
base that such U.S. holder has in France, may be reduced to 15% (or 5% if such U.S. holder is a corporation and owns directly or indirectly at least 10% of the share capital of the issuing company).
The impact of recent U.S. Tax reform is uncertain.
New U.S. federal tax legislation (commonly referred to as The Tax Cuts and Jobs Act) was enacted in December 2017. This legislation
made significant changes to the U.S. Internal Revenue Code, many of which are highly complex and may require interpretations and implementing regulations. As a result, we may incur meaningful expenses (including professional fees) as the new
legislation is implemented. The expected impact of certain aspects of the legislation is unclear and subject to change.
French tax legislation
may restrict the deductibility, for French tax purposes, of all or a portion of the interest on our indebtedness incurred in France, thus reducing the cash flow available to service our indebtedness.
Under Article 212 § II of the French Tax Code (
code général des impôts
) (the FTC), the
deduction of interest paid on loans granted by a related party or on loans granted by a third party that are guaranteed by a
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related party (a Third Party Assimilated to a Related Party) may be subject to certain limitations pursuant to French thin-capitalization rules.
These thin-capitalization rules could apply at the level of the Issuers French subsidiaries for any amount of the proceeds of the Notes
(as defined below) used by the Issuer to grant intragroup loans to such subsidiaries as well as, more generally, in respect of any loans contracted by the Issuers French subsidiaries from any related party or Third Party Assimilated to a
Related Party. As from the effective date of the Corporate Seat Transfer, these rules would also apply in respect of any loans contracted by the Issuer from any related party or Third Party Assimilated to a Related Party.
It should also be noted that interest paid by an entity to its shareholders are only tax deductible up to the rate referred to in
Article 39-1-3
of the FTC (i.e. the annual average of the average effective floating rates on bank loans to companies with an initial maturity exceeding two years) or, if
higher, up to the rate that the borrowing entity could have obtained from independent financial credit institutions in similar circumstances. These rules could apply (i) at the level of the Issuers French subsidiaries for any intragroup loans
granted to such subsidiaries from any related party and (ii) to the Issuer as from the effective date of the Corporate Seat Transfer.
In addition, Article 209 § IX of the FTC provides for a limitation of tax deductibility of financial expenses incurred in
relation to the acquisition of shares that benefit from the participation-exemption regime, provided at Article 219 I a
quinquies
of the FTC, by a French company if the company is not able to demonstrate, under conditions further specified at
Article 209 § IX, that (i) the decisions relating to such acquired shares are actually taken by the company having acquired them and (ii) where control or influence is exercised over the acquired company, such control or
influence is exercised by the acquiring company.
Moreover, Article 212 bis of the FTC provides for a general limitation of
deductibility of net financial charges, subject to certain exceptions. Adjusted net financial charges incurred by French companies that are subject to French corporate income tax and are not members of a consolidated French tax group are deductible
from their taxable result only up to 75% of their amount, to the extent that such companies financial charges (net of financial income) are at least equal to 3.0 million in a given fiscal year. Under Article 223 B bis of the
FTC, special computation rules apply to companies that belong to French tax consolidated groups. These rules which currently apply in respect of interest on loans borne by the Issuers French subsidiaries would become applicable to the Issuer
as from the effective date of the Corporate Seat Transfer.
Pursuant to Article 212 I (b) of the FTC, if the lender is a related
party to the borrower within the meaning of Article 39.12 of the FTC, the French borrower shall demonstrate, at the French tax authorities request, that the lender is, for the current fiscal year and with respect to the concerned interest,
subject to income tax in an amount that is at least equal to 25% of the corporate income tax determined under standard French tax rules. Accordingly, our ability to deduct interest payments in respect of any loans contracted by the Issuers
French subsidiaries, or the Issuer as from the effective date of the Corporate Seat Transfer, from any related party would also depend on the tax treatment of the interest payments at the level of the person to which they are made.
We expect the French restrictions on interest deduction to be amended at the latest by January 1, 2024 pursuant to the EU
Anti-Tax
Avoidance Directive EU/2016/1164 of 12 July 2016 (ATAD Directive) providing, among other things, for a limitation of deductibility of net interest expenses to an amount of 30% of the
taxpayers earnings before interest, tax, depreciation and amortization excluding
tax-exempt
income (adjusted EBITDA), it being noted that net financial expenses may in any case be deductible up to a
maximum amount of 3.0 million in a given fiscal year. The detailed implementation of such new rules in France remains largely unknown, including whether these rules will replace existing French limitation regimes or be added in full or in
part to them.
Finally, on February 22, 2017, the Council of the European Union adopted the EU Directive EU/2017/952 of May 29,
2017, (ATAD 2 Directive), amending the ATAD Directive, which, inter alia, extends the scope of
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the ATAD Directive to hybrid mismatches involving third countries, which would be applicable as from January 1, 2020, except for certain of its provisions which would be applicable as from
January 1, 2022.
The above-mentioned tax rules and the ATAD and ATAD 2 Directives (once implemented under French domestic law) may
limit our ability to deduct interest accrued on our indebtedness incurred in France and may thus increase our tax burden, which could adversely affect our business, financial condition and results of operations, and reduce the cash flow available to
service our indebtedness. Similarly, until the effective date of the Corporate Seat Transfer, the detailed Dutch rules limiting interest deductions and the ATAD and ATAD 2 Directives may limit our ability to deduct interest in the Netherlands and
may thus decrease the amount of our Dutch tax losses and increase our tax burden.
We may be classified as a passive foreign investment company for
U.S. federal income tax purposes, which could subject U.S. investors in our ordinary shares to significant adverse U.S. federal income tax consequences.
A foreign corporation will be a passive foreign investment company for U.S. federal income tax purposes (a PFIC) in any taxable
year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable look-through rules, either (i) at least 75% of its gross income is passive income, or
(ii) at least 50% of its assets produce or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest, royalties and rents and certain other categories of
income, subject to certain exceptions. We believe that we will not be a PFIC for the current taxable year and that we have not been a PFIC for prior taxable years and we expect that we will not become a PFIC in the foreseeable future, although there
can be no assurance in this regard. The determination of whether we are a PFIC is a fact-intensive determination that includes ascertaining the fair market value (or, in certain circumstances, tax basis) of all of our assets on a quarterly basis and
the character of each item of income we earn. This determination is made annually and cannot be completed until the close of a taxable year. It depends upon the portion of our assets (including goodwill) and income characterized as passive under the
PFIC rules. Accordingly, it is possible that we may become a PFIC due to changes in our income or asset composition or a decline in the market value of our equity. Because PFIC status is a fact-intensive determination, no assurance can be given that
we are not, have not been, or will not become, classified as a PFIC.
If we were to be classified as a PFIC in any taxable year, U.S.
Holders (as defined in Item 10. Additional InformationE. Material U.S. Federal Income Tax Consequences) generally would be subject to special tax rules that could result in materially adverse U.S. federal income tax consequences.
Further, investors should assume that a qualified electing fund election, which, if made, could serve as an alternative to the general PFIC rules and could reduce any adverse consequences to U.S. Holders if we were to be classified as a
PFIC, will not be available because we do not intend to provide U.S. Holders with the information needed to make such an election. A
mark-to-market
election may be
available, however, if our ordinary shares are regularly traded. For more information, see Item 10. Additional InformationE. TaxationMaterial U.S. Federal Income Tax ConsequencesPassive Foreign Investment Company
Consequences and consult your tax advisor concerning the U.S. federal income tax consequences of acquiring, owning or disposing of our ordinary shares if we are or become classified as a PFIC.
Transactions in our ordinary shares could be subject to the European financial transaction tax, if adopted.
On February 14, 2013, the European Commission adopted a proposal for a directive on a common financial transaction tax (the
FTT) to be implemented under the enhanced cooperation procedure by several Member States (Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovenia, Slovakia and Spain (the Participating Member States) and Estonia.
However, Estonia has since stated that it will not participate.
The proposed FTT has a very broad scope and could, if introduced in its
current form, apply to certain dealings in our ordinary shares (including secondary market transactions) in certain circumstances. The
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mechanism by which the tax would be applied and collected is not yet known, but if the proposed directive or any similar tax is adopted, transactions in our ordinary shares would be subject to
higher costs, and the liquidity of the market for our ordinary shares may be diminished.
Under the 2013 proposals, the FTT could apply in
certain circumstances to persons both within and outside of the Participating Member States. Generally, it would apply to certain dealings in our ordinary shares where at least one party is a financial institution, and at least one party is
established in a Participating Member State. A financial institution may be, or be deemed to be, established in a Participating Member State in a broad range of circumstances, including (a) by transacting with a person established
in a Participating Member State, or (b) where the financial instrument which is subject to the dealings is issued in a Participating Member State.
However, the FTT proposal remains subject to negotiation between the Participating Member States. It may therefore be altered prior to any
implementation, the timing of which remains unclear. Additional EU Member States such as for example the Netherlands may decide to participate and/or certain of the Participating Member States may decide to withdraw. Prospective holders of our
ordinary shares are advised to seek their own professional advice in relation to the consequences of the FTT.
Item 4. Information on the Company
A.
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History and Development of the Company
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Constellium Holdco B.V. (formerly known as Omega
Holdco B.V.) was incorporated as a Dutch private limited liability company on May 14, 2010. Constellium Holdco B.V. was formed to serve as the holding company for various entities comprising the EAP Business, which Constellium acquired from
affiliates of Rio Tinto on January 4, 2011 (the Acquisition). On May 21, 2013, Constellium Holdco B.V. was converted into a Dutch public limited liability company and renamed Constellium N.V. Any references to Dutch law and the
Amended and Restated Articles of Association are references to Dutch law and the articles of association of the Company, respectively, following the conversion. On May 29, 2013, we completed our initial public offering. The articles of
association of the Company were last amended and restated on August 18, 2015. For information on our historical capital expenditures, see Item 5. Operating and Financial Review and ProspectsCash FlowsHistorical Capital
Expenditures. For information on our capital expenditures currently in process, see B. Business OverviewOur Operating Segments. We expect to finance our capital expenditures currently in process with a combination of
internal and external financing sources.
The business address (head office) of Constellium N.V. is Tupolevlaan
41-61,
1119 NW Schiphol-Rijk, the Netherlands, and our telephone number is +31 20 654 97 80. The address for our agent for service of process in the United States is Corporation Service Company, 80 State Street,
Albany, New York 12207-2543, and its telephone number is (518)
433-4740.
The Company
Overview
We are a
global leader in the design and manufacture of a broad range of innovative rolled and extruded aluminium products, serving primarily the packaging, aerospace and automotive
end-markets.
Our business model is
to add value by converting aluminium into semi-fabricated products. We believe we are a supplier of choice to numerous blue-chip customers for many value-added products with performance-critical applications. Our product portfolio generally commands
higher margins as compared to less differentiated, more commoditized fabricated aluminium products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution.
As of December 31, 2017, we operated 23 production facilities, including a facility operated by our joint venture with UACJ Corporation
in Bowling Green, Kentucky, United States, and we had 10 administrative and commercial sites, two R&D centers and a university technology center in London, United Kingdom.
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Additionally, we are building a new facility in San Luis Potosí, Mexico, in response to growing demand for automotive structures in North America. Our facilities are strategically located
and allow us to serve our customers on a global basis. The Company had approximately 12,000 employees as of December 31, 2017. We believe our portfolio of flexible and integrated facilities is among the most technologically advanced in the
industry and that the significant growth investments we have made now leave us well-positioned to capture expected demand growth in each of our end markets. It is our view that our established presence in North America, Europe and China combined
with more than 50 years of manufacturing experience, quality and innovation, strategically position us to be a leading supplier to our global customer base.
We seek to sell to
end-markets
that have attractive characteristics for aluminium, including
(i) stability through economic cycles as seen in our North American and European packaging businesses, (ii) rigorous and complex technical requirements as seen in global aerospace and automotive businesses, and (iii) favorable growth
fundamentals supported by the vehicle lightweighting trend seen in global automotive business, as for electric vehicles.
We have invested
capital in a number of attractive growth opportunities including: (i) Auto Body Sheet capabilities in Muscle Shoals, Alabama, our joint venture in Bowling Green, Kentucky, and in Neuf-Brisach, France, (ii) a pusher furnace in Ravenswood,
West Virginia, (iii) Automotive Structures operations in Van Buren, Michigan, White, Georgia and San Luis Potosí, Mexico, (iv) two production lines for battery closure on electric vehicles in Gottmadingen, Germany, (v) doubling
capabilities for advanced body structure in Dahenfeld, Germany, (vi) new cast houses and an additional extrusion line in Děčín, Czech Republic and (vii) a number of R&D, debottlenecking and other growth initiatives. While
these investments have attractive return and growth profiles, many of them are still in the
ramp-up
phase and are not yet making significant contributions to our earnings.
Our unique platform has enabled us to develop a stable and diversified customer base and to enjoy long-standing relationships with our largest
customers. Our customer base includes market leading firms in packaging, aerospace, and automotive, such as AB InBev, Ball Corporation, Crown Holdings, Inc., Airbus, Boeing and several premium automotive OEMs, including BMW AG, Daimler AG and Ford
Motor Company. Excluding Muscle Shoals, where the customer base has undergone a strategic shift since 2010, the length of our relationships with our most significant customers approximates on average 25 years, and in some cases reaches more than 40
years, particularly with our packaging and aerospace customers. Generally, we have three- to five-year terms in contracts with our packaging customers, five-year terms in contracts with our largest aerospace customers, and three- to seven-year terms
in our life of a car platform/car model contracts with our automotive customers. We believe that we are a crucial supplier to many of our customers due to our technological and R&D capabilities as well as the long and complex
qualification process required for many of our products. Our core products require close collaboration and, in many instances, joint development with our customers. We believe that this integrated collaboration with our customers for high
value-added products reduces substitution risk, supports our competitive position and creates high barriers to entry.
For the years ended
December 31, 2017, 2016 and 2015, we shipped approximately 1,482 kt, 1,470kt and 1,478kt of finished products, generated revenues of 5,237 million, 4,743 million and 5,153 million, generated net loss of
31 million, net loss of 4 million, net loss of 552 million, and generated Adjusted EBITDA of 431 million, 377 million and 343 million, respectively. The financial performance for the
year ended December 31, 2017 represented a 1% increase in shipments, a 10% increase in revenues, a 27 million increase in
net loss and a 14% increase in Adjusted EBITDA from the prior year. Please see the reconciliation of
Adjusted EBITDA in Item 5. Operating and Financial Review and ProspectsSegment Results.
Our business also features
relatively countercyclical cash flows. During an economic downturn, lower demand causes our sales volumes to decrease, which results in a corresponding reduction in our working capital requirements and a positive impact on our operating cash flows.
We believe that this helps to drive robust free cash flow through cycles and provides significant downside protection for our liquidity position in the event of a downturn.
-37-
Our objective is to expand our leading position as a
supplier-of-choice
of high value-added, technologically advanced products in which we believe that we have a competitive advantage through the following business strategies:
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Focus on high-value added products in our core markets (automotive, aerospace and packaging).
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Provide
best-in-class
quality products, joint product development projects, market leading supply chain integration, customer technical
support and scrap and recycling solutions to facilitate long-term relationships with our customers.
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Optimize margins and asset utilization through product portfolio management.
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Execute on the business plans and harvest returns from recent investments.
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Focus on strict cost control and continuous improvement.
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Increase financial flexibility through earnings growth, strict cost control and working capital management.
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Recent Developments
Sale of
Sierre, Switzerland Plants Assets to Novelis
In February 2018, we entered into a binding agreement to sell the North
Building Assets at our plant in Sierre, Switzerland to, and to contribute to the plants infrastructure on a
50-50
basis in a joint venture with, Novelis Inc., which has leased and operated the facility
since 2005. We will continue to own and operate our cast houses, plate and extrusion manufacturing plants and other manufacturing assets at Sierre. As part of the transaction, we have agreed to enter into certain long-term production and metal
supply agreements with Novelis. The total agreed purchase price for the transaction is 200 million and it is expected to close in the second quarter of 2018, subject to customary closing conditions. Constellium and Novelis have agreed to
suspend the arbitration proceedings on the Sierre facility dispute until closing of the transaction.
Plan to Transfer Corporate
Seat to France
In line with our initiatives to reduce costs and simplify our corporate structure, we announced the Corporate Seat
Transfer in July 2017. In order to effectuate this change, the Company intends to convert its corporate form from an NV to an SE through an amendment to its articles of association, and to take other steps under Dutch and French law to transfer its
corporate seat to France. We expect the Corporate Seat Transfer, if completed, will enable us to make our corporate cost structure more efficient and to benefit from more sustainable tax treatment. The actions required to implement the Corporate
Seat Transfer are subject to shareholder approval and, if approved, we currently expect Corporate Seat Transfer could be completed in the second half of 2018 or shortly thereafter. The conversion from the NV form to the SE form requires, among other
things, the creation of an employee representative body, the SNB, to negotiate the involvement of European employees within the SE. The period in which the negotiations can take place is six months (with a possibility to extend for another six
months if the parties so agree). If no agreement is reached on the terms of the employee involvement, the standard rules for such involvement will apply. We have had a number of SNB meetings in the process of conducting these
negotiations.
We are continuing to evaluate other requirements applicable to the conversion to an SE and the transfer of the corporate
seat to France under Dutch, French, U.S., and European Union laws and regulations.
In connection with the Corporate Seat Transfer, we
contributed (the Holdco II Contribution) all of our equity interests in Holdco II to Constellium International, our subsidiary recently formed as a société par actions simplifiée organized under the laws of France,
in exchange for shares, with such shares being allocated to the French branch of the Company. We expect to cause Holdco II to merge with and into Constellium International, with Constellium International surviving (the Holdco II Merger).
-38-
The Corporate Seat Transfer, the Holdco II Contribution, and the Holdco II Merger may affect the
rights of our shareholders. For more information, see Item 3. Key InformationD. Risk Factors.
De-Listing
of Ordinary Shares from Euronext Paris Exchange
Until February 2, 2018, our
Class A ordinary shares were listed on both the NYSE and Euronext Paris under the symbol CSTM. On February 2, 2018, we delisted our ordinary shares from Euronext Paris. For more information, see Item 3. Key
InformationD. Risk FactorsRisks Related to Our Corporate Structure and Ownership of our Ordinary SharesIf we fail to meet the continuing listing requirements to maintain the listing of our ordinary shares on the NYSE, our ordinary
shares may be delisted from the NYSE prior to any voluntary delisting.
Our Operating Segments
Our business is organized into three operating segments: (i) Packaging & Automotive Rolled Products,
(ii) Aerospace & Transportation, and (iii) Automotive Structures & Industry.
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Operating
Segment
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Main Product
Category
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Description
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Packaging & Automotive Rolled Products
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Rolled Products
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Includes the production of rolled aluminium products in our European and North American facilities. We supply the packaging market with canstock and closure stock for the beverage and food industry, as well as foil stock for the
flexible packaging market. In addition, we supply the automotive market with a number of technically sophisticated applications such as ABS and heat exchangers. We also fabricate sheet and coils for the building and construction markets.
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Aerospace & Transportation
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Rolled Products
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Includes the production of rolled aluminium products (and very limited volumes of extruded products) for the aerospace market, as well as rolled products for transport, industry and defense
end-uses.
We produce aluminium plate, sheet and fabricated products in our European and North American facilities. Substantially all of these aluminium products are manufactured to specific customer
requirements using direct-chill ingot cast technologies that allow us to use and offer a variety of alloys and products.
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Automotive Structures & Industry
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Extrusions and Structures
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Includes the production of technologically advanced structures for the automotive industry including crash-management systems, body structures and side impact beams in Germany, North America and China. In addition, we fabricate hard
and soft aluminium alloy extruded profiles in Germany, France, Switzerland, the Czech Republic and Slovakia. Our extruded products are targeted at high demand
end-uses
in the automotive, engineering, building
and construction and other transportation markets (rail and shipbuilding).
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-39-
Table: Overview of Operating Segments (as of December 31, 2017)
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Packaging & Automotive
Rolled
Products
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Aerospace &
Transportation
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Automotive Structures &
Industry
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Manufacturing Sites
1
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4 (France, Germany, United States)
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6 (France, United States, Switzerland)
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15 (France, Germany, Switzerland, Czech Republic, Slovakia, North America,
China)
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Employees (as of December 31, 2017)
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3,657
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4,008
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3,988
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Key Products
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Can Stock
Can End Stock
Closure Stock
Auto Body Sheet
Heat Exchangers
Specialty reflective sheet
(Bright)
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Aerospace plates, sheets and extrusions
Aerospace wing skins
Plates for general
engineering
Sheets for
transportation applications
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Extruded products including:
Soft alloys
Hard alloys
Large profiles
Automotive structures based
on extruded products
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Key Customers
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Packaging
: AB InBev, Ball Corporation,
Can-Pack,
Crown, Amcor, Ardagh Group, Coke
Automotive
:
Daimler AG, Audi, Volkswagen, Valeo, PSA Group
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Aerospace
: Airbus, Boeing, Bombardier, Dassault, Embraer
Transportation, Industry,
Defense and Distribution
: Ryerson, ThyssenKrupp, Amari
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Automotive
: Audi, BMW AG, Daimler AG, Porsche, Ford, Benteler, PSA Group,
FCA Group, JLR
Rail
: Stadler, CAF
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Key Facilities
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Neuf-Brisach (France)
Singen (Germany)
Muscle Shoals (Alabama,
USA)
Bowling Green
(Kentucky, USA)
2
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Issoire (France)
Ravenswood (West Virginia,
USA)
Sierre
(Switzerland)
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Děčín (Czech Republic)
Singen / Gottmadingen
(Germany)
Van Buren
(Michigan, USA)
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1
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The total of 25 sites includes 23 facilities, two of which facilities are shared between two operating segments.
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2
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Joint venture with UACJ, 51% is owned by Constellium and accounted for under the equity method.
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The following charts present our revenues by operating segment and geography for the twelve
months ended December 31, 2017:
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Revenue per operating segment
3
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Revenue per geographic zone
4
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The following table presents our shipments by product lines:
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(in metric tons)
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For the year ended
December 31,
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2017
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2016
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Packaging rolled products
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807
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856
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Automotive rolled products
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158
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113
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Specialty and other thin-rolled products
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43
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44
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Aerospace rolled products
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106
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118
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Transportation, industry, and other rolled products
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132
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125
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Automotive extruded products
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109
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99
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Other extruded products
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127
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118
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Other
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(3
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)
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Total shipments
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1,482
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1,470
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Packaging & Automotive Rolled Products Operating Segment
In our Packaging & Automotive Rolled Products operating segment, we produce and develop customized aluminium sheet and coil solutions.
Approximately 80% of operating segment volume for the year ended December 31, 2017 was in packaging rolled products, which primarily include beverage and food canstock as well as closure stock and foil stock, approximately 16% of operating
segment volume for that period was in automotive rolled products and approximately 4% of operating segment volume for that period was in specialty and other thin-rolled products, which include technologically advanced products for the industrial
sector. Our Packaging & Automotive Rolled Products operating segment accounted for 54% of revenues and 47%
5
of Adjusted EBITDA for the year ended December 31, 2017.
3
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Holdings & Corporate not included.
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4
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Revenue by geographic zone is based on the destination of the shipment.
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5
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The difference between the sum of Adjusted EBITDA for our three segments and the Group Adjusted EBITDA is attributable to amounts for Holdings and Corporate.
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We are a leading European and North American supplier of canstock and the leading worldwide
supplier of closure stock. We are also a major European player in automotive rolled products for Auto Body Sheet (e.g., closure panels of a car), and heat exchangers. We have a diverse customer base, consisting of many of the worlds largest
beverage and food can manufacturers, specialty packaging producers, leading automotive firms and global industrial companies. Our customer base includes AB InBev, Ball Corporation, Crown Holdings, Inc., Ardagh Group S.A.,
Can-Pack
S.A., Coke, Amcor Ltd., VW Group, Daimler AG, Ford and PSA Group. Our customer contracts in packaging have usually a duration of three to five years. Our customer contracts in automotive are usually valid
for the lifetime of a model, which is typically six to seven years.
We have two integrated rolling operations located in Europe and one
integrated rolling operation in Muscle Shoals, Alabama. Neuf-Brisach, our facility on the border of France and Germany, is a fully integrated aluminium recycling, rolling and finishing facility producing both canstock and ABS. Singen, located in
Germany, is specialized in high-margin niche applications and has an integrated hot/cold rolling line and high-grade cold mills with special surfaces capabilities that facilitate unique metallurgy and lower production costs. We believe Singen has
enhanced our reputation in many product areas, most notably in the area of functional high-gloss surfaces for the automotive, lighting, solar and cosmetic industries, other decorative applications, ABS, closure stock, paintstock and foilstock.
Muscle Shoals is a highly focused facility mostly dedicated to canstock rolling and UBC recycling. With the benefit of our automotive readiness investment program, the plant is capable of producing high-quality Auto Body Sheet cold coils.
Our Packaging & Automotive Rolled Products operating segment has historically been relatively resilient during periods of economic
downturn and has had relatively limited exposure to economic cycles and periods of financial instability. According to CRU International Limited (CRU), during the 2008-2009 economic crisis, canstock volumes decreased by 10% in 2009
versus 2007 levels as compared to a 24% decline for flat rolled aluminium products volumes in aggregate during the same period in Europe and by 5% in 2009 versus 2006 as compared to a more than 40% decrease for flat rolled aluminium products volumes
in North America. This indicates that demand for beverage cans tends to be less correlated with general economic cycles. In addition, we believe European canstock has an attractive long-term growth outlook due to the following trends:
(i) end-market
growth in beer, soft drinks and energy drinks, (ii) increasing use of cans versus glass in the beer market, (iii) increasing use of aluminium in canstock in the European market, at the
expense of steel, and (iv) increasing consumption in Eastern Europe linked to purchasing power growth. The U.S. canstock market on the other hand has seen gradual declines in volumes over the last ten years, mostly due to the decline in
carbonated soft drinks consumption, but has recently stabilized as a result of a growth in craft beers and energy drinks consumption. Analysts expect that the growth in aluminium ABS will change the dynamic in the market, with capacity being shifted
from canstock to Auto Body Sheet.
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The following table summarizes our volume, revenue and Adjusted EBITDA for our
Packaging & Automotive Rolled Products operating segment for the periods presented:
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For the year ended December 31,
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( in millions, unless otherwise noted)
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2017
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2016
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2015
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Packaging & Automotive Rolled Products:
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Segment Revenues
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2,812
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2,498
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2,748
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Segment Shipments (kt)
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1,008
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1,013
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1,035
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Segment Revenues (/ton)
|
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2,789
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2,466
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2,655
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Segment Adjusted EBITDA
(1)
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202
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201
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183
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Segment Adjusted EBITDA(/ton)
|
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200
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199
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176
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Segment Adjusted EBITDA margin
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7
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%
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8
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%
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7
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%
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(1)
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Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in Item 5. Operating and Financial Review and ProspectsSegment Results.
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Aerospace & Transportation Operating Segment
Our Aerospace & Transportation operating segment has market leadership positions in technologically advanced aluminium and specialty
materials products with wide applications across the global aerospace, defense, transportation, and industrial sectors. We offer a wide range of products including plate, sheet, extrusions and few precision casting products which allows us to offer
tailored solutions to our customers. We seek to differentiate our products and act as a key partner to our customers through our broad product range, supply-chain solutions, advanced R&D capabilities, extensive recycling capabilities and
portfolio of plants with an extensive range of capabilities across Europe and North America. In order to reinforce the competitiveness of our metal solutions, we design our processes and alloys with a view to optimizing our customers
operations and costs. This includes offering services such as customizing alloys to our customers processing requirements, processing short lead time orders and providing vendor managed inventories or tolling arrangements. The
Aerospace & Transportation operating segment accounted for 25% of our revenues and 31%
6
of Adjusted EBITDA for the year ended December 31, 2017.
In 2017, six of our manufacturing facilities produced products that were sold via our Aerospace & Transportation operating segment.
Our aerospace plate manufacturing facilities in Ravenswood (West Virginia, United States), Issoire (France) and Sierre (Switzerland) offer a broad spectrum of plate required by the aerospace industries (alloys, temper, dimensions,
pre-machined)
and have strong capabilities such as producing some wide and very high gauge plates required for some aerospace programs (civil and commercial).
Downstream aluminium products for the aerospace market require relatively high levels of R&D investment and advanced technological
capabilities, and therefore tend to command higher margins compared to more commoditized products. We work in close collaboration with our customers to develop highly engineered solutions to fulfill their specific requirements. For example, we
developed Airware
®
, a lightweight specialty aluminium-lithium alloy, for our aerospace customers to address increasing demand for lighter and more environmentally friendly aircraft.
Aerospace products are typically subject to long development and supply lead times and the majority of our contracts with our largest
aerospace customers have a term of five years or longer, which provides visibility on volumes and profitability. In addition, demand for our aerospace products typically correlates directly with aircraft backlogs and build rates. As of
December 2017, the backlog reported by Airbus and Boeing for commercial aircraft reached 13,129 units on a combined basis, representing approximately eight to nine years of production at current build rates.
6
|
The difference between the sum of Adjusted EBITDA for our three segments and the Group Adjusted EBITDA is
attributable to amounts for Holdings and Corporate.
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-43-
Additionally, aerospace products are generally subject to long qualification periods. Aerospace
production sites are regularly audited by external certification organizations including the National Aerospace and Defense Contractors Accreditation Program (
NADCAP
) and/or the International Organization for Standardization.
NADCAP is a cooperative organization of numerous aerospace OEMs that defines industry-wide manufacturing standards. NADCAP appoints private auditors who grant suppliers like Constellium a NADCAP certification, which customers tend to require. New
products or alloys are certified by the OEM that uses the product. Our sites have been qualified by external certification organizations and our products have been qualified by our customers. We are typically able to obtain qualification within 6
months to one year. We believe we are able to obtain such qualifications within that time frame for two main reasons. First, some new product qualifications depend on having older qualifications regarding their alloy, temper or shape which we have
already obtained through our long history of working with the main aircraft OEMs. This range of qualifications includes in excess of 100 specifications, some of which we obtained during programs dating back to the 1960s. Second, over the course
of the decades that we have been working with the aerospace OEMs, we have invested in a number of capital intensive equipment and R&D programs to be able to qualify to the current industry norms and standards.
Besides the aerospace industry, we serve the transportation and defense industries. Our product portfolio in these segments include both
standard products as well as specialty products. Standard products typically face higher levels of competition in the marketplace, in the regions that we serve. Specialty products command higher margins and are exposed to less competition. Specialty
products are differentiated products, which are engineered to meet specific customer needs and as such have specific properties (e.g., mechanical properties, dimensions, surface aspect, etc.).
The following table summarizes our volume, revenues and Adjusted EBITDA for our Aerospace & Transportation operating segment for the
periods presented:
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|
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|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
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( in millions, unless otherwise noted)
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|
2017
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|
|
2016
|
|
|
2015
|
|
Aerospace & Transportation:
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|
|
|
|
|
|
|
|
|
|
|
|
Segment Revenues
|
|
|
1,335
|
|
|
|
1,302
|
|
|
|
1,355
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|
Segment Shipments (kt)
|
|
|
238
|
|
|
|
243
|
|
|
|
231
|
|
Segment Revenues (/ton)
|
|
|
5,618
|
|
|
|
5,360
|
|
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|
5,866
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Segment Adjusted EBITDA
(1)
|
|
|
133
|
|
|
|
103
|
|
|
|
103
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|
Segment Adjusted EBITDA(/ton)
|
|
|
558
|
|
|
|
425
|
|
|
|
445
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|
Segment Adjusted EBITDA margin
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|
|
10
|
%
|
|
|
8
|
%
|
|
|
8
|
%
|
(1)
|
Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in Item 5. Operating and Financial Review and ProspectsSegment Results.
|
Automotive Structures & Industry Operating Segment
Our Automotive Structures & Industry operating segment produces (i) technologically advanced structures for the automotive
industry including crash management systems (CMS), body structures and side impact beams and (ii) soft and hard alloy extrusions for automotive, road, energy and building and large profiles for rail and industrial applications. We
complement our products with a comprehensive offering of downstream technology and services, which include
pre-machining,
surface treatment, R&D and technical support services. Approximately 46% of the
segment volume for the year ended December 31, 2017 was in automotive extruded products and approximately 54% was in other extruded product applications. Our Automotive Structures & Industry operating segment accounted for 21% of
revenues and 28%
7
of Adjusted EBITDA for the year ended December 31, 2017.
7
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The difference between the sum of Adjusted EBITDA for our three segments and the Group Adjusted EBITDA is attributable to amounts for Holdings and Corporate.
|
-44-
We believe that we are one of the largest providers of aluminium automotive crash management
systems globally and a leading supplier of hard alloys for the automotive market and of large structural profiles for rail, industrial and other transportation markets in Europe. We manufacture automotive structural products for some of the largest
European and North American car manufacturers supplying a global market, including Daimler AG, BMW AG, VW Group, FCA Group and Ford. We are operating a joint venture, Astrex Inc., which is producing automotive extruded profiles in Ontario, Canada,
for our North American operations and a joint venture, Engley Automotive Structures Co., Ltd., which is currently producing aluminium crash-management systems in China. We also have a strong presence in soft alloys in France and Germany, with
customized solutions for a diverse number of end markets.
In July 2016, we announced the opening of a new manufacturing facility in
Mexico to produce aluminium automotive structural components. The facility is expected to start production in 2018. We believe that this plant, located in San Luis Potosí, will allow Constellium to respond to increasing demand for
lightweight, high-strength aluminium CMS and automotive structures for the expanding automotive industry in Mexico. We plan to invest approximately $10 million in the 5,000 sq m facility, which may be expanded to 13,000 sq m in the future to
adapt to customers supply needs. The San Luis Potosí plant will complement our growing footprint in North America for the fast expanding market of automotive structures. In addition, we opened a new manufacturing facility for automotive
structures in Bartow County, GA, which started production in spring 2017. We are currently ramping up production at the facility and expect full production by Q2 2019.
During 2017, we continued the product offering of the new generation of aluminium high-strength alloys for CMS and extruded structural parts
for automotive structures and chassis components. The
new-generation
CMS combine the properties of the 6xxx aluminium alloy familyformability, corrosion resistance, energy absorption,
recyclabilitywith high-strength mechanical performance.
Fifteen of our manufacturing and engineering facilities, located in
Germany, North America, the Czech Republic, Slovakia, France, Switzerland and China, produce products sold in our Automotive Structures & Industry operating segment. We believe our local presence, downstream services and industry leading
cycle times help to ensure that we respond to our customer demands in a timely and consistent fashion. Our two integrated remelt and casting centers in Switzerland and the Czech Republic provide security of metal supply and contribute to our
recycling efforts.
The following table summarizes our volume, revenues and Adjusted EBITDA for our Automotive Structures &
Industry operating segment for the periods presented:
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For the year ended December 31,
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( in millions, unless otherwise noted)
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2017
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2016
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2015
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Automotive Structures & Industry:
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Segment Revenues
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1,123
|
|
|
|
1,002
|
|
|
|
1,047
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Segment Shipments (kt)
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236
|
|
|
|
217
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|
|
|
212
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Segment Revenues (/ton)
|
|
|
4,756
|
|
|
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4,608
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|
|
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4,939
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|
Segment Adjusted EBITDA
(1)
|
|
|
119
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|
|
|
102
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|
|
|
80
|
|
Segment Adjusted EBITDA(/ton)
|
|
|
505
|
|
|
|
471
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|
|
|
380
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Segment Adjusted EBITDA margin
|
|
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11
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%
|
|
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10
|
%
|
|
|
8
|
%
|
(1)
|
Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in Item 5. Operating and Financial Review and ProspectsSegment Results.
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For information on the seasonality of our business, see Item 5. Operating and Financial Review and ProspectsKey Factors
Influencing Constelliums Financial Condition and Results from OperationsSeasonality.
-45-
Our Industry
Aluminium Sector Value Chain
The global aluminium industry consists of (i) mining companies that produce bauxite, the ore from which aluminium is ultimately derived,
(ii) primary aluminium producers that refine bauxite into alumina and smelt alumina into aluminium, (iii) aluminium semi-fabricated products manufacturers, including aluminium casters, extruders and rollers, (iv) aluminium recyclers
and remelters and (v) integrated companies that are present across multiple stages of the aluminium production chain.
The price of
aluminium, quoted on the LME, is subject to global supply and demand dynamics and can move independently of the costs of its inputs. Producers of primary aluminium have limited ability to manage the volatility of aluminium prices and can experience
a high degree of volatility in their cash flows and profitability. We do not smelt aluminium, nor do we participate in other upstream activities such as mining or refining bauxite. We recycle aluminium, both for our own use and as a service to our
customers.
Rolled and extruded aluminium product prices are based generally on the price of metal plus a conversion margin (i.e., the
cost incurred to convert the aluminium into a semi-finished product). The price of aluminium is not a significant driver of our financial performance, in contrast to the more direct relationship of the price of aluminium to the financial performance
of primary aluminium producers. Instead, the financial performance of producers of rolled and extruded aluminium products, such as Constellium, is driven by the dynamics in the end markets that they serve, their relative positioning in those markets
and the efficiency of their industrial operations.
There are two main sources of input metal for aluminium rolled or extruded products:
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Primary aluminium, which is primarily in the form of standard ingot.
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Recycled aluminium, which comes either from scrap from fabrication processes, known as recycled process material, or from recycled end products in their end of life phase, such as used beverage cans.
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Whether primary or recycled, the aluminium is then alloyed and cast into shapes such as:
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Sheet ingot or rolling slab.
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We buy various types of metal, including primary metal from smelters in
the form of ingots, rolling slabs or extrusion billets, remelted metal from external casthouses (in addition to our own casthouses) in the form of rolling slabs or extrusion billets, production scrap from our customers, and end of life scrap.
Primary aluminium, sheet ingot and extrusion billets can generally be purchased at prices set on the LME plus a premium that varies by
geographic region on delivery, alloying material, form (ingot or molten metal) and purity.
Recycled aluminium is also an important source
of input material and is tied to the LME pricing (typically sold at discounts of up to 25%). Aluminium is indefinitely recyclable and recycling it requires only approximately 5% of the energy required to produce primary aluminium. As a result, in
regions where aluminium is widely used, manufacturers and customers are active in setting up collection processes in which used beverage cans and other
end-of-life
aluminium products are collected for remelting at purpose-built plants. Manufacturers may also enter into agreements with customers who return recycled process material and pay to have it
re-melted
and rolled
into the same product again.
-46-
Aluminium Rolled Products Overview
Aluminium rolled products, including sheet, plate and foil, are semi-finished products that provide the raw material for the manufacture of
finished goods ranging from packaging to automotive body panels. The packaging industry is a major consumer of the majority of sheet and foil for making beverage cans, foil containers and foil wrapping. Sheet is also used extensively in transport
for airframes, road and rail vehicles, in marine applications, including offshore platforms, and superstructures and hulls of boats and in building for roofing and siding. Plate is used for airframes, military vehicles and bridges, ships and other
large vessels and as tooling plate for the production of plastic products. Foil applications outside packaging include electrical equipment, insulation for buildings and foil for heat exchangers.
Our rolling process consists of passing aluminium through a
hot-rolling
mill and then transferring it
to a cold-rolling mill, which can gradually reduce the thickness of the metal down to approximately 6 mm for plates and to approximately
0.2-6
mm for sheet. We do not produce aluminium foil.
The following chart illustrates expected global demand for aluminium rolled products according to CRU International Limited. The average
expected growth between 2017 and 2022 for the flat rolled products market is 3.9% according to CRU.
Projected Aluminium Flat Rolled Products Demand
2017-2022 (in kt)
Flat rolled
Source: Republished under license from CRU International Ltd.
Asia Pacific includes Japan, China, India, South Korea, Australia and other AsiaOther includes Central and South America, Middle East and
Africa
The aluminium rolled products industry is characterized by economies of scale, as significant capital investments are required
to achieve and maintain technological capabilities and demanding customer qualification standards. The service and efficiency demands of large customers have encouraged consolidation among suppliers of aluminium rolled products.
-47-
The supply of aluminium rolled products has historically been affected by production capacity,
alternative technology substitution and trade flows between regions. The demand for aluminium rolled products has historically been affected by economic growth, substitution trends, down-gauging, cyclicality and seasonality.
Aluminium Extrusions Overview
Aluminium extrusion is a technique used to transform aluminium billets into objects with a defined cross-sectional profile for a wide range of
uses. In the extrusion process, heated aluminium is forced through a die. Extrusions can be manufactured in many sizes and in almost any shape for which a die can be created. The extrusion process makes the most of aluminiums unique
combination of physical characteristics. Its malleability allows it to be easily machined and cast, and yet aluminium is
one-third
the density and stiffness of steel so the resulting products offer strength
and stability, particularly when alloyed with other metals.
Extruded profiles can be produced in solid or hollow form, while additional
complexities can be applied using advanced die designs. After the extrusion process, a variety of options are available to adjust the color, texture and brightness of the aluminiums finish. This may include aluminium anodizing or painting.
Today, aluminium extrusions are used for a wide range of purposes, including building, transportation and industrial markets. Virtually
every type of vehicle contains aluminium extrusions, including cars, boats, bicycles and trains. Home appliances and tools take advantage of aluminiums excellent
strength-to-weight
ratio. The increased focus on green building is also leading contractors and architects to use more extruded aluminium products, as aluminium
extrusions are flexible and corrosion-resistant. These diverse applications are possible due to the advantageous attributes of aluminium, including its particular blend of strength and ductility its conductivity, its
non-magnetic
properties and its ability to be recycled repeatedly without loss of integrity. We believe that all of these capabilities make aluminium extrusions a viable and adaptable solution for a growing
number of manufacturing needs.
Our Key
End-markets
We have a significant presence in the can sheet and packaging
end-markets,
which have proved to be
relatively stable and historically recession-resilient, the automotive and the aerospace
end-markets,
which are driven by global demand trends. Our automotive products are predominantly used in premium models
manufactured by the German and North American OEMs, which are not as dependent on the European or U.S. economies and continue to benefit from rising demand in developing economies, particularly China. For example, CRU estimates that the consumption
of ABS between 2017 and 2022 will grow 12% per annum in Europe, 12% per annum in North America and 34% per annum in China.
Rigid Packaging
Aluminium beverage cans represented approximately 15% of the total European aluminium flat rolled demand by volume and 34% of total U.S. and
Canada aluminium flat rolled demand in 2017. Aluminium is a preferred material for beverage packaging as it allows drinks to chill faster, can be stacked for transportation and storage more densely than competing formats (such as glass bottles), is
highly formable for unique or differentiated branding, and offers the environmental advantage of easy, cost- and energy-efficient recycling. As a result of these benefits, aluminium is displacing glass as the preferred packaging material in certain
markets, such as beer. In Europe, aluminium is replacing steel as the standard for beverage cans. Between 2002 and 2016, we believe that aluminiums penetration of the European canstock market versus tinplate increased from 58% to 85%. In the
United States, we believe aluminiums penetration has been at 100% for many years. In addition, we are benefitting from increased consumption in Eastern Europe and Mexico and growth in high margin products such as the specialty cans used for
energy drinks.
-48-
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Total European Rolled Products Consumption
Can Stock (Kt)
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USA and Canada Rolled Products
Consumption (Kt)
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Source: Republished under license from CRU International Ltd., Aluminium Rolled Products Market Outlook November 2017
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Source: Republished under license from CRU International Ltd., Aluminium Products Market Outlook November 2017
|
In addition, demand for can sheet has been highly resilient across economic cycles. Between 2007 and 2009,
during the economic crisis, European Can Body Stock volumes decreased by less than 9% as compared to a 24% decline for total European flat rolled products volumes.
Source: Republished under license from CRU International Ltd.
Source: Republished under license from CRU International Ltd.
According to CRU, aluminium demand for the canstock market globally is expected to grow by 3.4% per year between 2017 and 2022.
-49-
Aerospace
Demand for aerospace plates is primarily driven by the build rate of aircraft, which we believe will be supported for the foreseeable future by
(i) necessary replacement of aging fleets by airline operators, particularly in the United States and Western Europe, and (ii) increasing global passenger air traffic (the aerospace industry publication The Airline Monitor estimates that
global revenue passenger miles will grow at a compound annual growth rate (CAGR) of approximately 5% from 2017 to 2023). In 2017, Boeing and Airbus predicted respectively approximately 41,030 and 34,900 new aircraft over the next 20
years across all categories of large commercial aircraft. Boeing estimates that between 2017 and 2036, 40% of sales of new airplanes will be to Asia Pacific, 40% to Europe and North America and the remaining 20% delivered to the Middle East, Latin
America, the Commonwealth of Independent States and Africa. Demand for aluminium aerospace plates is also influenced by alternative materials becoming more mature in the aerospace market (e.g., composites).
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Worlds commercial aircraft fleet (thousands)
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Airplane order backlog (thousands)
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Source: Boeing 2017 current market outlook
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Source: Boeing & Airbus publicly available information
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Fleet Development Driven by Passenger Demand and Aging Fleet (units)
Source: Boeing 2017 current market outlook
Automotive
We supply the automotive
sector with rolled products out of our Packaging & Automotive Rolled Products operating segment and extruded and fabricated products out of our Automotive Structures & Industry operating segment.
-50-
In our view, the main drivers of automotive sales are overall economic growth, credit
availability, consumer prices and consumer confidence. According to CRU, global light vehicle production is expected to grow by approximately 2.4% CAGR from 2017 to 2022.
Light Vehicle Production
Source: Republished under license from CRU International Ltd.
Industrial & Economic Outlook December 2017
Within the automotive sector, the demand for aluminium has been increasing faster than the underlying demand for light vehicles due to recent
growth in the use of aluminium products in automotive applications. We believe the main reasons for this are aluminiums high
strength-to-weight
ratio in comparison
to steel and energy absorption. This light-weighting facilitates better fuel economy and improved emissions performance. As a result, manufacturers are seeking additional applications where aluminium can be used in place of steel and an increased
number of cars are being manufactured with aluminium panels and CMS. We believe that this trend will continue as increasingly stringent EU and U.S. regulations relating to reductions in carbon emissions, will force the automotive industry to
increase its use of aluminium to lightweight vehicles. European Union legislation has set mandatory emission reduction targets for new cars. The EU fleet average target of 130g/km by 2015 was phased in between 2012 and 2015. From 2015
onwards, all newly registered cars must comply with the limit value curve. A shorter phase in period will apply to the next target: by 2021, phased in from 2020, the fleet average to be achieved by all new cars is 95 grams of CO2 emissions per
kilometer. 95% of each manufacturers new cars will have to comply with the limit value curve in 2020, increasing to 100% in 2021. In the United States, we expect that EU and U.S. regulations requiring reductions in carbon emissions and fuel
efficiency, as well as relatively fluctuating fuel prices, will continue to drive aluminium demand in the automotive industry. In the longer term, to the extent electric vehicles become more prevalent, we believe the demand for aluminium in the
automotive industry will increase due to the greater importance of lightweighting. Further, aluminium thermal conductivity is a significant inherent advantage for battery boxes and has superior energy absorption as compared to steel. Whereas growth
in aluminium use in vehicles has historically been driven by increased use of aluminium castings, we anticipate that future growth will be primarily in the kinds of extruded and rolled products that we supply to the OEMs.
-51-
Aluminium component weight changes 2015 2020
Source: Ducker Worldwide study
We believe that Constellium is one of only a limited number of companies that is able to produce the quality and quantity required by car
manufacturers for both flat rolled products and automotive structures, and that we are therefore well positioned to take advantage of these market trends. In addition, increasing global demand for sports utility vehicles and increasing demand of
aluminium solutions for OEMs high volume series cars are expected to enhance the long-term growth prospects for our automotive products given our strong established relationships with the major car manufacturers.
Constellium Auto Body Sheet sales by OEM
According to the CRU, the global consumption for aluminium is expected to grow by 14% between 2017 and
2022.
Managing Our Metal Price Exposure
Our business model is to add value by converting aluminium into semi-fabricated products. It is our policy not to speculate on metal price
movements.
-52-
For all contracts, we continuously seek to minimize the impact of aluminium price fluctuations in
order to protect our net income and cash flows against the LME and regional premiums price variations of aluminium that we buy and sell, with the following methods:
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In cases where we are able to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to our customers, we enter into back-to-back arrangements with our customers.
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When we are unable to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to our customers, we enter into derivative financial instruments to pass through the exposure to
financial institutions at the time the price is set.
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For a small portion of our volumes, the aluminium we process is owned by our customers and we bear no aluminium price risk.
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We
mark-to-market
LME derivatives at the period end giving
rise to unrealized gains or losses which are classified as Other gains/(losses)net. These unrealized gains/losses have no bearing on the underlying performance of the business and are removed when calculating Adjusted EBITDA.
The price of the aluminium that we buy includes other premiums on top of the LME price. These premiums relate to specific features of the
metal being purchased, such as its location, purity, shape, etc.
The price of these premiums has been historically relatively stable.
However, between 2012 and 2014, the price of the geographical premiums (ECDU or ECDP in Europe, Midwest in North America) rose by more than 100%, before collapsing to initial levels. While we have historically
tried to pass through these premiums to our customers, the unexpected dramatic increase in the premiums in this period was not fully able to be passed through to our customers. Because there is not a liquid and standardized market dedicated to
premiums similar to what the LME is for the LME price, the ability to use financial instruments (OTC derivatives) was limited and did not cover the overall need created by the commercial exposure.
Where possible, we have changed sales and purchases contracts to align premium formulas and mitigate premium exposure and today we pass
through to our customers the vast majority of our premium exposure. We seek to apply the same policy and methods to minimize the impact of geographical premiums price fluctuations that we do for the LME aluminium price variations.
Sales and Marketing
Our sales force is based in Europe (France, Germany, Czech Republic, United Kingdom, Switzerland and Italy), the United States and Asia (Tokyo,
Shanghai, Seoul, and Singapore). We serve our customers either directly or through distributors.
Raw Materials and Supplies
Approximately 75% of our rolling slab demand is produced in our casthouses. In addition, our external metal supply is secured
through long-term contracts with several upstream companies. All of our top 10 metal suppliers have been long-standing suppliers to our plants (in many cases for more than 10 years) and, in aggregate, accounted for approximately 40% of our total
purchases for the year ended December 31, 2017. We typically enter into multi-year contracts with these metal suppliers pursuant to which we purchase various types of metal, including:
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Primary metal from smelters or metal traders in the form of ingots, rolling slabs or extrusion billets.
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Remelted metal in the form of rolling slabs or extrusion billets from external casthouses, as an addition to our own casthouses.
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-53-
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Production scrap from customers and scrap traders.
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End-of-life
scrap (e.g., used beverage cans) from customers, collectors and scrap traders.
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Specific alloying elements and primary ingots from producers and metal traders.
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Our
operations use natural gas and electricity, which represent the fourth largest component of our cost of sales, after metal and labor costs. We purchase natural gas and electricity from the market and typically we secured a large part of our natural
gas and electricity needs pursuant to fixed-price commitments. To reduce the risks associated with our natural gas and electricity requirements, we use financial futures or forward contracts with our suppliers to fix the price of energy costs.
Furthermore, in our longer-term sales contracts, we try to include indexation clauses on energy prices.
Our Customers
Our customer base includes some of the largest leading manufacturers in the packaging, aerospace and automotive
end-markets.
We have a relatively diverse customer base with our 10 largest customers representing approximately 55% of our revenues and approximately 56% of our volumes for year ended December 31, 2017.
Excluding Muscle Shoals, where the customer base has undergone a strategic shift since 2010, the length of our relationships with our most significant customers is approximately 25 years on average, and in some cases reaches more than 40 years,
particularly with our packaging and aerospace customers. Generally, we have three- to five-year terms in contracts with our packaging customers, five-year terms in contracts with our largest aerospace customers, and three- to seven-year terms in our
life of a car platform/car model contracts with our automotive customers.
For the year ended December 31, 2017, we
estimate that approximately 70% of our volumes were generated under multi-year contracts, more than 70% were governed by contracts valid until the end of 2018 and more than 68% were governed by contracts valid until 2019 or later. In addition, more
than 35% of our packaging volumes are contracted through 2020. This provides us with significant visibility into our future volumes and earnings.
We see our relationships with our customers as partnerships where we work together to find customized solutions to meet their evolving
requirements. In addition, we collaborate with our customers to complete a rigorous process for qualifying our products in each of our
end-markets,
which requires substantial time and investment and creates
high switching costs, resulting in longer-term, mutually beneficial relationships with our customers. For example, in the packaging industry, where qualification occurs on a
plant-by-plant
basis, we are currently one of the qualified suppliers to several facilities of our customers.
Our product portfolio is predominantly focused on high value-added products, which we believe are particularly well-suited to developing and
manufacturing for our customers. These products tend to require close collaboration with our customers to develop tailored solutions, as well as significant effort and investment to adhere to rigorous qualification procedures, which enables us to
foster long-term relationships with our customers. Our customized products typically command higher margins than more commoditized products, and are supplied to
end-markets
that we believe have highly
attractive characteristics and long-term growth trends.
Our Services
We believe that there are significant opportunities to improve the services and quality that we provide to our customers and to reduce our
manufacturing costs by implementing manufacturing excellence initiatives. Manufacturing excellence is a production practice that improves efficiency of operations by identifying and removing tasks and process steps that do not contribute to value
creation for the end customer. We continually evaluate debottlenecking opportunities globally through modifications of and investments in existing equipment and processes. We aim to establish
best-in-class
operations and achieve cost reductions by standardizing manufacturing processes and the associated upstream and downstream production elements where possible, while still allowing the
flexibility to respond to local market demands and volatility.
-54-
Competition
The worldwide rolled and extruded aluminium industry is highly competitive and we expect this dynamic to continue for the foreseeable future.
We believe the most important competitive factors in our industry are: product quality, price, timeliness of delivery and customer service, geographic coverage and product innovation. Aluminium competes with other materials such as steel, plastic,
composite materials and glass for various applications. Our key competitors in our Packaging & Automotive Rolled Products operating segment are Novelis Inc., Norsk Hydro ASA, Alcoa Corporation, Arconic Inc. and
Tri-Arrows
Aluminum Inc. Our key competitors in our Aerospace & Transportation operating segment are Arconic Inc., Aleris International, Inc., Kaiser Aluminum Corp., Austria Metall AG, and Universal Alloy
Corporation. Our key competitors in our Automotive Structures & Industry operating segment are Norsk Hydro ASA, Sankyo Tateyama, Inc., Eural Gnutti S.p.A., Gestamp, Otto Fuchs KG, Impol Aluminium Corp., Benteler International AG, Whitehall
Industries,
Step-G,
and Metra Aluminum.
Research and Development (R&D)
We believe that our research and development capabilities coupled with our integrated, longstanding customer relationships create
a distinctive competitive advantage versus our competition. Our R&D center based in Voreppe, France provides services and support to all of our facilities. The R&D center focuses on product and process development, provides technical
assistance to our plants and works with our customers to develop new products. In developing new products, we focus on increased performance that aims to lower the total cost of ownership for the end users of our products, for example, by developing
materials that decrease maintenance costs of aircraft or increase fuel efficiency in cars. As of December 31, 2017, the research and development center in Voreppe employed 230 employees, of which 96 are scientists, 97 are technicians and
37 are regular employees. The research and development center in Plymouth employed 10 employees, of which 2 are scientists, 4 are technicians and 4 are regular employees.
Within the Voreppe facility, we also focus on the development, improvement, and testing of processes used in our plants such as melting,
casting, rolling, extruding, finishing and recycling. We also develop and test technologies used by our customers, such as friction stir welding, and provide technological support to our customers.
The key contributors to our success in establishing our R&D capabilities include:
|
|
|
Close interaction with key customers, including through formal partnerships or joint development teamsexamples include Strongalex
®
, Formalex
®
and Surfalex
®
, which were developed with automotive customers (mainly Daimler and Audi) and the Fusion bottle, a draw wall ironed
technology created in partnership with Ball Corporation.
|
|
|
|
Technologically advanced equipmentfor example,
full-size
casthouse for rapid prototyping of new Airware
®
low density
alloys, innovative joining technologies for aerospace alloys (Friction steer welding), forming technologies for ABS.
|
|
|
|
Long-term partnerships with European universitiesfor example, RWTH Aachen in Germany and École Polytechnique Fédérale de Lausanne in Switzerland generate significant innovation opportunities
and foster new ideas.
|
In 2016, we inaugurated the new Constellium University Technology Center (UTC) at Brunel University
London, a dedicated center of excellence for design, development and prototyping. In addition, we opened a new R&D center in the United States in Plymouth, Michigan, in order to improve our support to North American automotive customers.
We invested 36 million in R&D in the year ended December 31, 2017, 32 million in R&D in the year ended
December 31, 2016 and 35 million in R&D in the year ended December 31, 2015.
-55-
Trademarks, Patents, Licenses and IT
We actively review intellectual property arising from our operations and our research and development activities and, when appropriate, apply
for patents in the appropriate jurisdictions. We currently hold approximately 190 active patent families and regularly apply for new ones. While these patents and patent applications are important to the business on an aggregate basis, we do not
believe any single patent family or patent application is critical to the business.
We are from time to time involved in opposition and
re-examination
proceedings that we consider to be part of the ordinary course of our business, in particular at the European Patent Office and the U.S. Patent and Trademark Office. We believe that the outcome of
existing proceedings would not have a material adverse effect on our financial position, results of operations or cash flows.
In
connection with our collaborations with universities and other third parties, we occasionally obtain royalty-bearing licenses for the use of third-party technologies in the ordinary course of business.
Insurance
We have
implemented a corporate-wide insurance program consisting of both corporate-wide master policies with worldwide coverage and local policies where required by applicable regulations. Our insurance coverage includes: (i) property damage and
business interruption; (ii) general liability including operation, professional, product and environment liability; (iii) aviation product liability; (iv) marine cargo (transport); (v) business travel and personal accident;
(vi) construction all risk (EAR/CAR); (vii) automobile liability; (viii) trade credit; (ix) Cyber risk; (x) Workers Compensation (USA); and (xi) other specific coverages for executive and special risks.
We believe that our insurance coverage terms and conditions are customary for a business such as Constellium and are sufficient to protect us
against catastrophic losses.
We also purchase and maintain insurance on behalf of our directors and officers.
Governmental Regulations and Environmental, Health and Safety Matters
Our operations are subject to a number of international, national, state and local regulations relating to the protection of the environment
and to workplace health and safety. Our operations involve the use, handling, storage, transportation and disposal of hazardous substances, and accordingly we are subject to extensive federal, state and local laws and regulations governing emissions
to air, discharges to water emissions, the generation, storage, transportation, treatment or disposal of hazardous materials or wastes and employee health and safety matters. In addition, prior operations at certain of our properties have resulted
in contamination of soil and groundwater which we are required to investigate and remediate pursuant to applicable environmental, health and safety (EHS) laws and regulations. Environmental compliance at our key facilities is supervised
by the Direction Régionale de lEnvironnement de lAménagement et du Logement in France, the Umweltbundesamt in Germany, the Service de la Protection de lEnvironnement du Canton du Valais in Switzerland, the United
States Environmental Protection Agency, West Virginia Department of Environmental Protection, the Alabama Department of the Environmental Management and the Kentucky Department for Environmental Protection in the United States, the Regional
Authority of the Usti Region in the Czech Republic, the Slovenká Ins
Ú
pekcia z
Ú
ivotného prostredia in Slovakia, and the Environmental Monitoring Agency in China.
Violations of EHS laws and regulations, and remediation obligations arising under such laws and regulations, may result in restrictions being imposed on our operating activities as well as fines, penalties, damages or other costs. Accordingly, we
have implemented EHS policies and procedures to protect the environment and ensure compliance with these laws, and incorporate EHS considerations into our planning for new projects. We perform regular risk
-56-
assessments and EHS reviews. We closely and systematically monitor and manage situations of noncompliance with EHS laws and regulations and cooperate with authorities to redress any noncompliance
issues. We believe that we have made adequate reserves with respect to our remediation and compliance obligations. Nevertheless, new regulations or other unforeseen increases in the number of our
non-compliant
situations may impose costs on us that may have a material adverse effect on our financial condition, results of operations or liquidity.
Our operations also result in the emission of substantial quantities of carbon dioxide, a greenhouse gas that is regulated under the EUs
Emissions Trading System (ETS). Although compliance with ETS to date has not resulted in material costs to our business, compliance with ETS requirements currently being developed for the 2018-2020 period, and increased energy costs due
to ETS requirements imposed on our energy suppliers, could have a material adverse effect on our business, financial condition or results of operations. We may also be liable for personal injury claims or workers compensation claims relating
to exposure to hazardous substances. In addition, we are, from time to time, subject to environmental reviews and investigations by relevant governmental authorities.
E.U. Directive 2010/75 titled Industrial Emissions regulates some of our European activities as recycling or melting/casting. With
the revision of the Best Available Technics Reference of Non Ferrous Metals in 2016, which defines associated emissions limits values for these activities applicable in 2020 at the latest, staying in compliance with the law, could require
significant expenditures to tune our processes or implement abatement installations.
Additionally, some of the chemicals we use in our
fabrication processes are subject to REACH in the EU. Under REACH, we are required to register some of the substances contained in our products with the European Chemicals Agency, and this process could cause significant delays or costs. We are
currently compliant with REACH, and expect to stay in compliance, but if the nature of the regulation changes in the future or if substances we use currently in our process, considered as Substances of Very High Concern, fall under need of
authorization for use, we may be required to make significant expenditures to reformulate the chemicals that we use in our products and materials or incur costs to register such chemicals to gain and/or regain compliance. Future noncompliance could
also subject us to significant fines or other civil and criminal penalties. Obtaining regulatory approvals for chemical products used in our facilities is an important part of our operations.
We accrue for costs associated with environmental investigations and remedial efforts when it becomes probable that we are liable and the
associated costs can be reasonably estimated. The aggregate close down and environmental remediation costs provisions at December 31, 2017 were 81 million. All accrued amounts have been recorded without giving effect to any possible
future recoveries. With respect to ongoing environmental compliance costs, including maintenance and monitoring, we expense the costs when incurred.
We have incurred, and in the future will continue to incur, operating expenses related to environmental compliance. As part of the general
capital expenditure plan, we expect to incur capital expenditures for other capital projects that may, in addition to improving operations, reduce certain environmental impacts as energy consumption, air emissions, water releases, waste streams
optimization.
Litigation and Legal Proceedings
From time to time, we are party to a variety of claims and legal proceedings that arise in the ordinary course of business. The Company is
currently not involved, nor has it been involved during the twelve-month period immediately prior to the date of this Annual Report, in any governmental, legal or arbitration proceedings which may have or have had a significant effect on the
Companys business, financial position or profitability, and the Company is not aware of any such proceedings which are currently pending or threatened. From time to time, asbestos-related claims are also filed against us, relating to historic
asbestos exposure in our production process. We have made reserves for potential occupational disease claims for a total of 3 million as of December 31, 2017. It is not anticipated that any of our currently pending litigation and
proceedings will have a material effect on the future results of the Company.
-57-
C.
|
Organizational Structure
|
The following diagram reflects our simplified corporate legal
entity structure as of January 31, 2018, including our significant subsidiaries. Percentages reflect ownership interest where ownership interest is less than 100%. The country listed for each legal entity below depicts such entitys
jurisdiction of incorporation.
D.
|
Property, Plants and Equipment
|
At December 31, 2017, we operated 23 production
sites serving both global and local customers, two R&D centers, one in Europe and one in the United States, and one university technology center in London. In addition, we are building a new facility in San Luis Potosí, Mexico. Among our
production sites, we have seven major facilities (Muscle Shoals, Neuf-Brisach, Issoire, Ravenswood, Singen, Déčín and Sierre) catering to the needs of our Aerospace & Transportation, Packaging & Automotive Rolled
Products and Automotive Structures & Industry operating segments:
|
|
|
The Muscle Shoals, Alabama facility operates one of the largest and most efficient can reclamation facilities in the world. In addition, the facility utilizes multi-station electromagnetic casting, houses the widest hot
line in North America and has the fastest can end stock coating line in the world. Production capabilities include body stock, tab stock, and end stock. In addition, we have started producing automotive cold coils for body sheet. We have invested
approximately 62 million in the facility in the year ended December 31, 2016 and 60 million in the facility for the year ended December 31, 2017.
|
|
|
|
The Neuf-Brisach, France facility is an integrated aluminium rolling, finishing and recycling facility in Europe. Our investments in a can body stock slitter and recycling furnace has enabled us to secure long-term can
stock contracts. Additionally, our latest investment in a new
state-of-the-art
automotive finishing line has further strengthened
the plants position as a significant supplier of aluminium Auto Body Sheet in the automotive market. We invested 82 million in the facility in the year ended December 31, 2016 and 37 million in the facility in the
year ended December 31, 2017.
|
|
|
|
The Issoire, France facility is one of the worlds two leading aerospace plate mills based on volumes. The
plant operates two Airware
®
industrial casthouses and currently uses recycling capabilities to take back scrap along the entire fabrication chain. Issoire works as an integrated platform with
Ravenswood,
|
-58-
|
West Virginia and Sierre, Switzerland, providing a significant competitive advantage for us as a global supplier to the aerospace industry. We invested 48 million in the facility in
the year ended December 31, 2016 and 36 million in the facility in the year ended December 31, 2017.
|
|
|
|
The Ravenswood, West Virginia facility has significant assets for producing aerospace plates and is a recognized supplier to the defense industry. The facility has stretchers and wide-coil capabilities that make it one
of the few facilities in the world capable of producing plates of a size needed for the largest commercial aircraft. We spent approximately 41 million in the year ended December 31, 2016 and 28 million for the year ended
December 31, 2017 on significant equipment upgrades.
|
|
|
|
The Singen, Germany rolling plant has industry leading cycle times and high-grade cold mills with special surfaces capabilities to serve automotive and other markets. The extrusion part has one of the largest extrusion
presses in the world as well as advanced and highly productive integrated automotive bumper manufacturing lines. A dedicated unit allows the production of crash management applications, finished side-impact beams as well as battery enclosures for
electric vehicles ready for the OEM assembly lines. We invested 32 million in the facility in the year ended December 31, 2016 and 36 million in the facility in the year ended December 31, 2017.
|
|
|
|
The Děčín, Czech Republic facility is a large extrusion facility, mainly focusing on hard alloy extrusions for automotive and industrial applications, with significant recycling capabilities. It is
located near the German border, strategically positioning it to supply the German, Czech and French Tier1s and OEMs. Its integrated casthouse allows it to offer high
value-add
customized hard alloys to
our customers. We invested 15 million in the facility in the year ended December 31, 2016 and 16 million in the facility in the year ended December 31, 2017. The investments include a new Air slip casting technology,
reinforcement of homogenizing capabilities and launch of new downstream production hall including line of Computer Numerical Control (CNC) machining centers to serve the automotive market.
|
|
|
|
The Sierre, Switzerland facility is dedicated to precision plates for general engineering, aerospace plates and slabs and is a leading supplier of extruded products for high-speed train railway manufacturers and a wide
range of applications. The Sierre facility includes the Steg casthouse that produces automotive, general engineering and aerospace slabs and the Chippis casthouse that has the capacity to produce
non-standard
billets for a wide range of extrusions. Its qualification as an aerospace plate and slabs plant increases our aerospace production and will help us to support the increased build rates of commercial aircraft OEMs. We invested
14 million in the facility in the year ended December 31, 2016 and 14 million in the facility in the year ended December 31, 2017.
|
Our current production facilities are listed below by operating segment:
|
|
|
|
|
|
|
Operating Segment(1)
|
|
Location
|
|
Country
|
|
Owned/
Leased
|
Packaging & Automotive Rolled Products
|
|
Biesheim, Neuf-Brisach
|
|
France
|
|
Owned
|
Packaging & Automotive Rolled Products
|
|
Singen
|
|
Germany
|
|
Owned
|
Packaging & Automotive Rolled Products
|
|
Muscle Shoals, AL
|
|
United States
|
|
Owned
|
Aerospace & Transportation
|
|
Ravenswood, WV
|
|
United States
|
|
Owned
|
Aerospace & Transportation
|
|
Issoire
|
|
France
|
|
Owned
|
Aerospace & Transportation
|
|
Montreuil-Juigné
|
|
France
|
|
Owned
|
Aerospace & Transportation
|
|
Ussel
|
|
France
|
|
Owned
|
Aerospace & Transportation
|
|
Steg
|
|
Switzerland
|
|
Owned
|
Aerospace & Transportation
|
|
Sierre
|
|
Switzerland
|
|
Owned
|
Automotive Structures & Industry
|
|
Van Buren, MI
|
|
United States
|
|
Leased
|
Automotive Structures & Industry
|
|
Changchun, Jilin Province (JV)
|
|
China
|
|
Leased
|
Automotive Structures & Industry
|
|
Děčín
|
|
Czech Republic
|
|
Owned
|
Automotive Structures & Industry
|
|
Nuits-Saint-Georges
|
|
France
|
|
Owned
|
Automotive Structures & Industry
|
|
Burg
|
|
Germany
|
|
Owned
|
-59-
|
|
|
|
|
|
|
Operating Segment(1)
|
|
Location
|
|
Country
|
|
Owned/
Leased
|
Automotive Structures & Industry
|
|
Crailsheim
|
|
Germany
|
|
Owned
|
Automotive Structures & Industry
|
|
Neckarsulm
|
|
Germany
|
|
Owned
|
Automotive Structures & Industry
|
|
Gottmadingen
|
|
Germany
|
|
Owned
|
Automotive Structures & Industry
|
|
Landau/Pfalz
|
|
Germany
|
|
Owned
|
Automotive Structures & Industry
|
|
Singen
|
|
Germany
|
|
Owned
|
Automotive Structures & Industry
|
|
Levice
|
|
Slovakia
|
|
Owned
|
Automotive Structures & Industry
|
|
Chippis
|
|
Switzerland
|
|
Owned
|
Automotive Structures & Industry
|
|
Sierre
|
|
Switzerland
|
|
Owned
|
Automotive Structures & Industry
|
|
White, GA
|
|
United States
|
|
Leased
|
Automotive Structures & Industry
|
|
Lakeshore, Ontario (JV)(2)
|
|
Canada
|
|
Leased
|
(1)
|
For our Packaging & Automotive Rolled Products operating segment, this table does not include our Joint Venture in Bowling Green, Kentucky, USA, with UACJ Corporation, which is 51% owned by Constellium and
accounted for under the equity method.
|
(2)
|
Constellium Joint Venture with Can Art.
|
The production capacity and utilization rate for our
main plants are listed below as of December 31, 2017:
|
|
|
|
|
Plant
|
|
Capacity
|
|
Utilization Rate
|
Neuf-Brisach
|
|
450 kt
|
|
95-100%
|
Muscle Shoals
|
|
500-550 kt
|
|
75%
|
Issoire
|
|
110 kt
|
|
90%
|
Ravenswood
|
|
175 kt
|
|
90-95%
|
Děčín
|
|
92 kt
|
|
80%
|
Singen
|
|
290-310
kt
|
|
75-85%
|
Sierre
|
|
70-75
kt
|
|
50%
|
Production
capacity and utilization rates presented above are estimates based in a theoretical output capacity assuming the plant operates with currently operating equipment and current staffing levels and product mix.
For information concerning the material plans to construct, expand or improve facilities, see Item 5. Operating and Financial Review and
ProspectsLiquidity and Capital Resources.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis is based principally on our audited Consolidated Financial Statements as of December 31, 2017
and 2016 and for each of the three years in the period ended December 31, 2017 included elsewhere in this Annual Report and is provided to supplement the audited Consolidated Financial Statements and the related notes to help provide an
understanding of our financial condition, changes in financial condition, results of our operations, and liquidity. The following discussion is to be read in conjunction with Selected Financial Data and our audited Consolidated Financial Statements
and the notes thereto, included elsewhere in this Annual Report.
The following discussion and analysis includes forward-looking
statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Factors that could cause
or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Annual Report. See in particular Special Note about Forward-Looking Statements and Item 3. Key InformationD. Risk
Factors.
-60-
Company Overview
We are a global leader in the development, manufacture and sale of a broad range of highly engineered, value-added specialty rolled and
extruded aluminium products to the packaging, aerospace, automotive, other transportation and industrial
end-markets.
We do not mine bauxite, refine alumina, or smelt primary aluminium. As of December 31,
2017, we had approximately 12,000 employees, 23 production facilities (including the Bowling Green facility, which is operated through our joint venture with UACJ), 10 administrative and commercial sites, two R&D centers and one university
technology center.
Our Operating Segments
We serve a diverse set of customers across a broad range of
end-markets
with very different product
needs, specifications and requirements. As a result, we have organized our business into three segments to better serve our customer base.
Packaging & Automotive Rolled Products Segment
Our Packaging & Automotive Rolled Products segment produces aluminium sheet and coils. Approximately 80% of segment volume for the
year ended December 31, 2017 was packaging rolled products, which primarily includes beverage and food can stock as well as closure stock and foil stock. Approximately 16% of the segment volume for this period was automotive rolled products and
the balance of the segment volume was specialty and other thin-rolled products. Our Packaging & Automotive Rolled Products segment accounted for 54% of revenues and 47%
8
of Adjusted
EBITDA for the year ended December 31, 2017.
Aerospace & Transportation Segment
Our Aerospace & Transportation segment has market leadership positions in technologically advanced aluminium and specialty materials
products with applications across the global aerospace, defense, transportation, and industrial sectors. We offer a wide range of products, including plate and sheet. Approximately 45% of the segment volume for the year ended December 31, 2017
was aerospace rolled products and approximately 55% was transportation industry and other rolled products. Aerospace & Transportation accounted for 25% of revenues and 31%
9
of Adjusted
EBITDA for the year ended December 31, 2017.
Automotive Structures & Industry Segment
Our Automotive Structures & Industry segment produces technologically advanced structures for the automotive industry, including crash
management systems, side impact beams and cockpit carriers, and soft and hard alloy extrusions and large extruded profiles for automotive, railroad, energy, building and industrial applications. Approximately 46% of the segment volume for the year
ended December 31, 2017 was automotive extruded products and approximately 54% was other extruded products. Our Automotive Structures & Industry segment accounted for 21% of revenues and
28%
10
of Adjusted EBITDA for the year ended December 31, 2017.
8
|
The difference between the sum of reported segment Adjusted EBITDA and the Group Adjusted EBITDA is related to Holdings and Corporate.
|
9
|
The difference between the sum of reported segment Adjusted EBITDA and the Group Adjusted EBITDA is related to Holdings and Corporate.
|
10
|
The difference between the sum of reported segment Adjusted EBITDA and the Group Adjusted EBITDA is related to Holdings and Corporate.
|
-61-
Discontinued Operations and Disposals
In the first quarter of 2018, we entered into a binding agreement with Novelis for the sale of the North Building Assets of our Sierre plant in
Switzerland, which have been leased to and operated by Novelis since 2005. We will contribute the plants shared infrastructure to a
50-50
joint venture with Novelis. The total purchase price for the
transactions amounts to 200 million and closing is expected in the second quarter of 2018, subject to customary closing conditions.
We will continue to own and operate our cast houses, plate and extrusion manufacturing plants and other manufacturing assets at Sierre. As
part of this agreement, we and Novelis also agreed to enter into long-term production and metal supply agreements. This operation did not meet the criteria of discontinued operations in accordance with IFRS5 and therefore has not been classified or
disclosed as such.
In the first quarter of 2015, we decided to dispose of our plant in Carquefou (France) which was part of our A&T
operating segment and it was classified as held for sale at December 31, 2015, accordingly. An 8 million charge was recorded upon the write-down of the related assets to their net realizable value. The sale was completed on
February 1, 2016 and no gain was recognized upon disposal.
Key Factors Influencing Constelliums Financial Condition and Results from
Operations
The financial performance of our operations is dependent on several factors, the most critical of which are as follows:
Economic Conditions and Markets
We are directly impacted by the economic conditions that affect our customers and the markets in which they operate. General economic
conditions such as the level of disposable income, the level of inflation, the rate of economic growth, the rate of unemployment, exchange rates and currency devaluation or revaluationinfluence consumer confidence and consumer purchasing
power. These factors, in turn, influence the demand for our products in terms of total volumes and prices that can be charged. In some cases we are able to mitigate the risk of a downturn in our customers businesses by building committed
minimum volume thresholds into our commercial contracts. We further seek to mitigate the risk of a downturn by utilizing a temporary workforce for certain operations, which allows us to match our resources with the demand for our services.
Although the metals industry and our
end-markets
are cyclical in nature and expose us to related
risks, we believe that our portfolio is relatively resistant to these economic cycles in each of our three main
end-markets
of packaging, aerospace and automotive:
|
|
|
Can packaging tends not to be highly correlated to the general economic cycle. In addition, we believe European canstock has an attractive long-term growth outlook due to ongoing trends in (i) growth in beer, soft
drinks and energy drinks consumption, (ii) increasing use of cans versus glass in the beer market, and (iii) increasing penetration of aluminium in canstock at the expense of steel.
|
|
|
|
We believe that the aerospace industry is currently insulated from economic cycles by a combination of growth drivers. These drivers include increasing passenger traffic and the fleet replacement towards newer and more
fuel efficient aircrafts. These factors have materialized in the form of historically high backlogs for the aircraft manufacturers. The combined order backlog for Boeing and Airbus represents approximately eight- to nine-years of manufacturing at
current build rates.
|
|
|
|
Although the automotive industry is a cyclical industry, its demand for aluminium has been increasing in recent years. This has been triggered by a light-weighting trend for new car models and electric vehicles, which
drives substitution of heavier metals in favor of aluminium.
|
-62-
Aluminium Consumption
The aluminium industry is cyclical and is affected by global economic conditions, industry competition and product development. Aluminium is
increasingly seen as the material of choice in a number of applications, including packaging, aerospace and automotive. Aluminium is lightweight, has a high
strength-to-weight
ratio and is resistant to corrosion. It compares favorably to several alternative materials, such as steel, in these respects. Aluminium is also
unique in the respect that it recycles repeatedly without any material decline in performance or quality. The recycling of aluminium delivers energy and capital investment savings relative to the cost of producing both primary aluminium and many
other competing materials. Due to these qualities, the penetration of aluminium into a wide variety of applications continues to increase. We believe that long-term growth in aluminium consumption generally, and demand for those products we produce
specifically, will be supported by factors that include growing populations, greater purchasing power and increasing focus on sustainability and environmental issues, globally.
Aluminium Prices
Aluminium prices are determined by worldwide forces of supply and demand and, as a result they are volatile. The average LME transaction price,
Midwest Premium and Rotterdam Premium per ton of primary aluminium in the years ended December 31, 2017, 2016 and 2015 are presented below:
Average
quarterly LME per ton using U.S. dollar prices converted to Euros using the applicable European Central Bank rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Euros/ton)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
First Quarter
|
|
|
1,737
|
|
|
|
1,374
|
|
|
|
1,600
|
|
Second Quarter
|
|
|
1,736
|
|
|
|
1,393
|
|
|
|
1,600
|
|
Third Quarter
|
|
|
1,714
|
|
|
|
1,451
|
|
|
|
1,431
|
|
Fourth Quarter
|
|
|
1,786
|
|
|
|
1,588
|
|
|
|
1,366
|
|
Average for the year
|
|
|
1,743
|
|
|
|
1,452
|
|
|
|
1,498
|
|
Average quarterly Midwest Premium per ton using U.S. dollar prices converted to Euros using the applicable European Central
Bank rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Euros/ton)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
First Quarter
|
|
|
198
|
|
|
|
173
|
|
|
|
449
|
|
Second Quarter
|
|
|
180
|
|
|
|
153
|
|
|
|
257
|
|
Third Quarter
|
|
|
144
|
|
|
|
125
|
|
|
|
159
|
|
Fourth Quarter
|
|
|
176
|
|
|
|
154
|
|
|
|
163
|
|
Average for the year
|
|
|
175
|
|
|
|
151
|
|
|
|
255
|
|
We believe our cash flows are largely protected from variations in LME prices due to the fact that we hedge
our sales based on their replacement cost, by setting the maturity of our futures on the delivery date to our customers. As a result, when LME prices increase, we have limited additional cash requirements to finance the increased replacement cost of
our inventory.
Average quarterly Rotterdam Premium per ton using U.S. dollar prices converted to Euros using the applicable European Central Bank rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Euros/ton)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
First Quarter
|
|
|
137
|
|
|
|
133
|
|
|
|
382
|
|
Second Quarter
|
|
|
131
|
|
|
|
117
|
|
|
|
188
|
|
Third Quarter
|
|
|
120
|
|
|
|
107
|
|
|
|
139
|
|
Fourth Quarter
|
|
|
135
|
|
|
|
121
|
|
|
|
143
|
|
Average for the year
|
|
|
131
|
|
|
|
119
|
|
|
|
211
|
|
-63-
The price we pay for aluminium includes regional premiums, such as the Rotterdam premium for
metal purchased in Europe or the Midwest premium for metal purchased in the U.S. The regional premiums, which had historically been fairly stable, have been more volatile in recent years. Notably, regional premiums increased significantly in 2013
and 2014, with the Rotterdam premium and the Midwest premium reaching unprecedented levels in the fourth quarter of 2014. During the second half of 2015, both the Rotterdam and Midwest premiums returned to levels seen prior to 2013. Although our
business model seeks to minimize the impact of aluminium price fluctuations on our net income and cash flows, we are not always able to pass through the cost of regional premiums to our customers or adequately hedge the impact of regional premium
differentials. See Item 3. Key InformationD. Risk FactorsRisks Related to Our IndustryOur financial results could be adversely affected by the volatility in aluminium prices.
Product Price and Margin
Our products are typically priced based on three components: (i) LME, (ii) regional premiums and (iii) a conversion margin. We seek
to minimize the impact of aluminium price fluctuations in order to protect our cash flows against the LME and regional price fluctuations with the following methods:
|
|
|
In cases where we are able to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to customers, we enter
back-to-back
arrangements with our customers.
|
|
|
|
However, when we are unable to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to our customers, we enter into derivative financial instruments to pass through the
exposure to financial institutions at the time the price is set.
|
|
|
|
For a small portion of our volumes, the aluminium we process is owned by our customers and we bear no aluminium price risk.
|
Our risk management practices aim to reduce, but do not entirely eliminate, our exposure to changing primary aluminium and regional premium
prices. Moreover, while we limit our exposure to unfavorable price changes, we also limit our ability to benefit from favorable price changes. As we do not apply hedge accounting for the derivative instruments entered into to hedge our exposure to
changes in metal prices,
mark-to-market
movements for these instruments are recognized in Other (losses)/gainsnet.
Our results are also impacted by differences between changes in the prices of primary and scrap aluminium. As we price our product using the
prevailing price of primary aluminium but purchase large amounts of scrap aluminium to manufacture our products, we benefit when primary aluminium price increases exceed scrap price increases. Conversely, when scrap price increases exceed primary
aluminium price increases, our results are negatively impacted. The difference between the price of primary aluminium and scrap prices is referred to as the scrap spread and is impacted by the effectiveness of our scrap purchasing
activities, the supply of scrap available and movements in the terminal commodity markets.
The conversion margin is the margin we earn
over the cost of our metal inputs. We seek to maximize our conversion margins based on the value-added product capabilities we provide and the supply/demand dynamics in the market.
Volumes
The
profitability of our businesses is determined, in part, by the volume of tons processed and sold. Increased production volumes will generally result in lower per unit costs, while higher sold volumes will generally result in additional revenues and
associated margins.
Personnel Costs
Our operations are labor intensive and, as a result, our personnel costs represent 19%, 20% and 18% of our cost of sales, selling and
administrative expenses and R&D expenses for the years ended December 31, 2017, 2016, and 2015, respectively.
-64-
Personnel costs generally increase and decrease proportionately with the expansion, addition or
closing of operating facilities. Personnel costs include the salaries, wages and benefits of our employees, as well as costs related to temporary labor. During our seasonal peaks and especially during the summer months, we have historically
increased our temporary workforce to compensate for staff on vacation and increased volume of activity.
Currency
We are a global company with operations in France, the United States, Germany, Switzerland, the Czech Republic, Slovakia, Mexico, Canada and
China, as of December 31, 2017. As a result, our revenue and earnings have exposure to a number of currencies, primarily the euro, the U.S. dollar and the Swiss Franc. As our presentation currency is the euro, and the functional currencies of
the businesses located outside of the Eurozone are primarily the U.S. dollar and the Swiss franc, the results of the businesses located outside of the Eurozone must be translated each period to euros. Accordingly, fluctuations in the exchange rate
of the functional currencies of our businesses located outside of the Eurozone against the euro impacts our results of operations. This impact is referred to as the effect of foreign currency translation in the Results of
Operations discussion below. We calculate the effect of foreign currency translation by converting our current period local currency financial information using the prior period foreign currency average exchange rates and comparing these
adjusted amounts to our prior period reported results. This calculation may differ from similarly titled measures used by other companies and, accordingly, the changes excluding the effect of foreign currency translation are not meant to substitute
for changes in recorded amounts presented in conformity with IFRS nor should such amounts be considered in isolation.
A portion of our
revenues are denominated in U.S. dollars while the majority of our costs incurred are denominated in local currencies. We engage in significant hedging activity to attempt to mitigate the effects of foreign transaction currency fluctuations on our
profitability. Transaction impacts arise when our businesses transact in a currency other than their own functional currency. As a result, we are exposed to foreign exchange risk on payments and receipts in multiple currencies. Where we have
multiple-year sale agreements for the sale of fabricated metal products in U.S. dollars, we have entered into derivative contracts to forward sell U.S. dollars to match these future sales. With the exception of certain derivative instruments entered
into to hedge the foreign currency risk associated with the cash flows of certain highly probable forecasted sales, which we have designated for hedge accounting, hedge accounting is not applied to such ongoing commercial transactions and therefore
the
mark-to-market
impact is recorded in Other gains/(losses)net.
Seasonality
Customer demand in the aluminium industry is seasonal due to a variety of factors, including holiday seasons, weather conditions, economic and
other factors beyond our control. Our volumes are impacted by the timing of the holiday seasons in particular, with the lowest volumes typically delivered in August and December and highest volumes delivered in January to June. Our business is also
impacted by seasonal slowdowns and upturns in certain of our customers industries. Historically, the can industry is strongest in the spring and summer seasons and the automotive and aerospace sectors encounter slowdowns in both the third and
fourth quarters of the calendar year. In response to this seasonality, we seek to scale back and may even temporarily close some operations to reduce our operating costs during these periods.
-65-
Results of Operations
Results of Operations for the years ended December 31, 2017 and 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
( in millions and as a % of revenues)
|
|
|
|
|
|
|
%
|
|
|
|
|
|
%
|
|
Revenue
|
|
|
5,237
|
|
|
|
100
|
%
|
|
|
4,743
|
|
|
|
100
|
%
|
Cost of sales
|
|
|
(4,698
|
)
|
|
|
90
|
%
|
|
|
(4,227
|
)
|
|
|
89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
539
|
|
|
|
10
|
%
|
|
|
516
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses
|
|
|
(248
|
)
|
|
|
5
|
%
|
|
|
(254
|
)
|
|
|
5
|
%
|
Research and development expenses
|
|
|
(36
|
)
|
|
|
1
|
%
|
|
|
(32
|
)
|
|
|
1
|
%
|
Restructuring costs
|
|
|
(4
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
Other gains net
|
|
|
70
|
|
|
|
1
|
%
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
321
|
|
|
|
6
|
%
|
|
|
246
|
|
|
|
5
|
%
|
Finance costs, net
|
|
|
(243
|
)
|
|
|
5
|
%
|
|
|
(167
|
)
|
|
|
4
|
%
|
Share of loss of joint ventures
|
|
|
(29
|
)
|
|
|
1
|
%
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
49
|
|
|
|
1
|
%
|
|
|
65
|
|
|
|
1
|
%
|
Income tax expense
|
|
|
(80
|
)
|
|
|
2
|
%
|
|
|
(69
|
)
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(31
|
)
|
|
|
1
|
%
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipment volumes (in kt)
|
|
|
1,482
|
|
|
|
n/a
|
|
|
|
1,470
|
|
|
|
n/a
|
|
Revenue per ton ( per ton)
|
|
|
3,534
|
|
|
|
n/a
|
|
|
|
3,227
|
|
|
|
n/a
|
|
Revenue
Revenue increased by 10% or 494 million to 5,237 million for the year ended December 31, 2017, from
4,743 million for the year ended December 31, 2016. This increase reflects a slight increase in shipments and higher average revenue per ton.
Sales volumes increased by 1%, or 12 kt, to 1,482 kt for the year ended December 31, 2017 compared to 1,470 kt for the year ended
December 31, 2016. This increase is primarily driven by higher shipment volumes in our AS&I segment offset by slightly lower year-over-year shipments in our P&ARP and A&T segments.
Average sales prices increased by 307 per ton, or 10%, from 3,227 to 3,534, mainly attributable to the year-over-year
increase in aluminium market prices, coupled with the rise in regional premium both in Europe and North America.
Our revenue is discussed
in more detail in the Segment Results section.
Cost of Sales
Cost of sales increased by 11%, or 471 million, to 4,698 million for the year ended December 31, 2017, from
4,227 million for the year ended December 31, 2016. This increase in cost of sales was primarily driven by an increase of 405 million, or 15%, in the total cost of raw material and consumables used primarily as a result of
higher LME prices and regional premiums, compared to the prior year, a 31 million increase in labor costs and a 13 million increase in depreciation.
Selling and Administrative Expenses
Selling and administrative expenses decreased by 2%, or 6 million, to 248 million for the year ended December 31,
2017 from 254 million for the year ended December 31, 2016, reflecting a decrease in professional fees and other
non-labor
expense; partially offset by an increase in labor cost primarily as a
result of inflation.
-66-
Research and Development Expenses
Research and development expenses increased by 13% or 4 million, to 36 million for the year ended December 31, 2017,
from 32 million for the year ended December 31, 2016. Research and development expenses are presented net of 11 million and 10 million of research and development tax credits received in France for the years
ended December 31, 2017 and 2016, respectively. Research and development expenses, excluding tax credits received were 17 million, 18 million, and 12 million for the P&ARP, A&T, and AS&I segments,
respectively, in the year ended December 31, 2017.
Restructuring Costs
In the year ended December 31, 2017, restructuring costs amounted to 4 million and were primarily related to our restructuring
activities of German and Swiss operations. Restructuring costs amounted to 5 million in the year ended December 31, 2016, and were primarily incurred in connection with restructuring activities at our Valais Switzerland and Muscle
Shoals, Alabama operations.
Other Gains, net
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
( in millions)
|
|
|
|
|
|
|
Realized losses on derivatives
|
|
|
|
|
|
|
(62
|
)
|
Unrealized gains on derivatives at fair value through profit and lossnet
|
|
|
57
|
|
|
|
71
|
|
Unrealized exchange losses/(gains) from the remeasurement of monetary assets and
liabilitiesnet
|
|
|
(4
|
)
|
|
|
3
|
|
Gains on pension plan amendments
|
|
|
20
|
|
|
|
|
|
Wise purchase price adjustment
|
|
|
|
|
|
|
20
|
|
Losses on disposal
|
|
|
(3
|
)
|
|
|
(10
|
)
|
Othernet
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total other gains, net
|
|
|
70
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Other gainsnet were 70 million for the year ended December 31, 2017 compared to Other
gainsnet of 21 million for the year ended December 31, 2016. Realized losses recognized upon the settlement of derivative instruments amounted to 0 million and 62 million in the years ended
December 31, 2017 and 2016, respectively. Of these, realized gains on metal derivatives were 16 million for the year ended December 31, 2017 compared to realized losses 16 million in the year ended December 31,
2016 and realized losses on foreign exchange derivatives were 16 million and 46 million in the years ended December 31, 2017 and 2016, respectively.
Unrealized gains on derivative instruments amounted to 57 million in the year ended December 31, 2017 and were primarily
comprised of 16 million of gains related to foreign exchange derivatives and 41 million of gains related to metal derivatives. Unrealized gains on derivative instruments amounted to 71 million in the year ended
December 31, 2016 and were comprised of 40 million of gains related to foreign exchange derivatives and 31 million of gains related to metal derivatives.
In the year ended December 31, 2017, we recognized a 20 million net gain relating to benefit plan amendments in Switzerland
and in the United States.
In the year ended December 31, 2016, we recognized a 20 million gain related to the
finalization of the contractual price adjustment for the acquisition of Wise Metals.
-67-
Losses on disposal recognized in the year ended December 31, 2017 primarily related to the
write-off
of abandoned development projects in the A&T segment. Losses on disposal recognized in the year ended December 31, 2016 primarily related to the
write-off
of abandoned development projects in the P&ARP segment.
Finance Costs, net
Finance costs, net increased by 76 million, to 243 million for the year ended December 31, 2017, from
167 million for the year ended December 31, 2016. This increase primarily reflects 91 million of net loss on settlement of debt incurred in connection with the refinancing, in February 2017, of the $650 Wise Senior Secured
Notes due 2018 and the refinancing, in November 2017, of i) our $425 million - 8.750% Senior Secured Notes due 2021, ii) our $400 million 7.875% Senior Notes due 2023 and iii) our 240 million - 7.875% Senior Notes due 2023. The
increase from these refinancing
one-off
costs was partially offset by lower interest costs resulting primarily from the refinancing of the Wise Senior Secured Notes in February 2017 and to a lesser extent to
the refinancing of the Wise PIK Toggle Notes in December 2016.
In the year ended December 31, 2017, foreign exchange net gains from
the revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to 91 million and were largely offset by losses on derivative instruments entered into to hedge this exposure. In the
year ended December 31, 2016, foreign exchange net losses from the revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to 42 million and was offset by gains on derivative
instruments entered into to hedge this exposure.
Share of loss of joint-ventures
Our share of loss of joint-ventures for the year ended December 31, 2017 amounted to 29 million compared to
14 million for the year ended December 31, 2016 and is comprised primarily of our share in the net results of Constellium-UACJ ABS LLC, which is accounted for under the equity method. We expect Constellium-UACJ ABS LLC to continue to
incur losses over the next 12 to 24 months as it completes the
ramp-up
of its activities and the partners to make additional contributions to fund its operations.
Income Tax
Income
tax for the year ended December 31, 2017 was an expense of 80 million for the year ended December 31, 2017 compared to an income tax expense of 69 million for the year ended December 31, 2016.
Our effective tax rate represented 163% of our income before income tax for the year ended December 31, 2017 and 106% of our income
before tax for the year ended December 31, 2016. This change in our effective tax rate primarily reflects an increase in the composite statutory tax rate applicable by tax jurisdiction (the blended tax rate), from 25% in 2016 to 32%
in 2017 and the impact of significant reconciling items in both years.
Our blended tax rate increased by approximately 7 percentage
points in the year ended December 31, 2017 compared to the year ended December 31, 2016 as a result of changes in the geographical mix of our
pre-tax
results and a temporary increase the tax rate in
France from 34.4% to 39.2% for fiscal year 2017.
The effective tax rate for the year ended December 31, 2017 applies to
49 million of
pre-tax
income and is significantly higher than our blended statutory tax rate primarily as a result of the unfavorable effect of unrecognized tax benefits for losses in jurisdictions
where we believe it is more likely than not that we will not be able to utilize those losses and a 16 million unfavorable impact from the U.S. tax reform on deferred taxes.
The effective tax rate for the year ended December 31, 2016 applies to 65 million of
pre-tax
income and is significantly higher than our projected blended statutory tax rate primarily as a result of the unfavorable effect of unrecognized tax benefits for losses in jurisdictions where we
believe it is more likely than not that we will not be able to utilize those losses.
-68-
Net Loss
As a result of the above factors, we recognized a net loss of 31 million, in the year ended December 31, 2017 compared to a net
loss of 4 million in the year ended December 31, 2016.
Results of Operations for the years ended December 31,
2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
( in millions and as a % of revenues)
|
|
|
|
|
|
|
%
|
|
|
|
|
|
%
|
|
Revenue
|
|
|
4,743
|
|
|
|
100
|
%
|
|
|
5,153
|
|
|
|
100
|
%
|
Cost of sales
|
|
|
(4,227
|
)
|
|
|
89
|
%
|
|
|
(4,703
|
)
|
|
|
91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
516
|
|
|
|
11
|
%
|
|
|
450
|
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses
|
|
|
(254
|
)
|
|
|
5
|
%
|
|
|
(245
|
)
|
|
|
5
|
%
|
Research and development expenses
|
|
|
(32
|
)
|
|
|
1
|
%
|
|
|
(35
|
)
|
|
|
1
|
%
|
Restructuring costs
|
|
|
(5
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
(457
|
)
|
|
|
9
|
%
|
Other gains / (losses), net
|
|
|
21
|
|
|
|
|
|
|
|
(131
|
)
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
246
|
|
|
|
5
|
%
|
|
|
(426
|
)
|
|
|
8
|
%
|
Finance costs, net
|
|
|
(167
|
)
|
|
|
4
|
%
|
|
|
(155
|
)
|
|
|
3
|
%
|
Share of loss of joint ventures
|
|
|
(14
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
65
|
|
|
|
1
|
%
|
|
|
(584
|
)
|
|
|
11
|
%
|
Income tax (expense)/benefit
|
|
|
(69
|
)
|
|
|
1
|
%
|
|
|
32
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(4
|
)
|
|
|
|
|
|
|
(552
|
)
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipment volumes (in kt)
|
|
|
1,470
|
|
|
|
n/a
|
|
|
|
1,478
|
|
|
|
n/a
|
|
Revenue per ton ( per ton)
|
|
|
3,227
|
|
|
|
n/a
|
|
|
|
3,486
|
|
|
|
n/a
|
|
Revenue
Revenue decreased by 8% or 410 million to 4,743 million for the year ended December 31, 2016, from
5,153 million for the year ended December 31, 2015. This decrease reflects lower average revenue per ton as well as a slight decrease in shipments.
Sales volumes decreased by 1%, or 8 kt, to 1,470 kt for the year ended December 31, 2016 compared to 1,478 kt for the year ended
December 31, 2015. This decrease is primarily driven by lower shipment volumes in our P&ARP segment offset by higher year over year shipments in our A&T and AS&I segments.
Average sales prices declined by 259 per ton, or 7%, from 3,486 to 3,227, mainly attributable to the year over year decrease
in aluminium market prices, coupled with the drop in regional premium both in Europe and North America.
Our revenue is discussed in more
detail in the Segment Results section.
Cost of Sales
Cost of sales decreased by 10%, or 476 million, to 4,227 million for the year ended December 31, 2016, from
4,703 million for the year ended December 31, 2015.
-69-
This decrease in cost of sales was driven by the following:
|
|
|
A decrease of 384 million, or 12%, in the total cost of raw material and consumables used primarily reflecting a decrease in the costs per ton as a result of lower LME prices and regional premiums, compared
to the prior year.
|
|
|
|
A decrease of 83 million, or 15%, in
non-labor
costs, primarily reflecting operational improvements, particularly at our Muscle Shoals facility, and the impact of
non-recurring
items related to the acquisition and integration of Wise Metals recognized in the prior year.
|
|
|
|
A decrease of 28 million, or 17%, in energy expense driven by lower electricity and natural gas prices.
|
|
|
|
An increase of 15 million, or 11%, in depreciation and amortization driven by increased investment in our production facilities in prior years to support our operations and respond to market demand.
|
Selling and Administrative Expenses
Selling and administrative expenses increased by 4%, or 9 million, to 254 million for the year ended December 31,
2016 from 245 million for the year ended December 31, 2015, driven by a 6 million increase in labor costs mostly due to inflation and 3 million of costs related to changes in the executive management team in the
year ended December 31, 2016.
Research and Development Expenses
Research and development expenses decreased by 9% or 3 million, to 32 million for the year ended December 31, 2016,
from 35 million for the year ended December 31, 2015. Research and development expenses are presented net of 10 million and 9 million of research and development tax credits received in France for the years
ended December 31, 2016 and 2015, respectively. Research and development expenses, excluding tax credits received were 14 million, 18 million, and 10 million for the P&ARP, A&T, and AS&I segments,
respectively, in the year ended December 31, 2016.
Restructuring Costs
In the year ended December 31, 2016, restructuring costs amounted to 5 million and were primarily related to a restructuring
plan at our Muscle Shoals facility. Restructuring costs amounted to 8 million in the year ended December 31, 2015, and were primarily incurred in connection with restructuring activities at our Valais, Switzerland and Muscle Shoals,
Alabama operations.
Impairment
Impairment charges of 457 million were recorded in the year ended December 31, 2015. The impairment charges recorded in 2015
are primarily comprised of a 400 million impairment related to our Muscle Shoals operations, within our P&ARP segment and a 49 million impairment related to our operations in Valais, Switzerland, within the AS&I and
A&T segments.
-70-
Other Gains/(Losses), net
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
( in millions)
|
|
|
|
|
|
|
Realized losses on derivatives
|
|
|
(62
|
)
|
|
|
(93
|
)
|
Unrealized gains/(losses) on derivatives at fair value through profit and lossnet
|
|
|
71
|
|
|
|
(20
|
)
|
Unrealized exchange gains/(losses) from the remeasurement of monetary assets and
liabilitiesnet
|
|
|
3
|
|
|
|
(3
|
)
|
Loss on Ravenswood OPEB plan amendment
|
|
|
|
|
|
|
(5
|
)
|
Wise purchase price adjustment
|
|
|
20
|
|
|
|
|
|
Wise acquisition costs
|
|
|
|
|
|
|
(5
|
)
|
Loss on disposal and assets classified as held for sale
|
|
|
(10
|
)
|
|
|
(5
|
)
|
Othernet
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other gains/(losses), net
|
|
|
21
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
Other gainsnet were 21 million for the year ended December 31, 2016 compared to Other
lossesnet of 131 million for the year ended December 31, 2015. Realized losses recognized upon the settlement of derivative instruments amounted to 62 million and 93 million in the years ended
December 31, 2016 and 2015, respectively. Of these, realized losses on metal derivatives were 16 million and 56 million in the years ended December 31, 2016 and 2015, respectively and realized losses on foreign
exchange derivatives were 46 million and 37 million in the year ended December 31, 2016 and 2015, respectively.
Unrealized gains on derivative instruments amounted to 71 million in the year ended December 31, 2016 and were primarily
comprised of 40 million of gains related to foreign exchange derivatives and 31 million of gains related to metal derivatives. Unrealized losses on derivative instruments amounted to 20 million in the year ended
December 31, 2015 and were comprised of 10 million of losses related to foreign exchange derivatives and 10 million of losses related to metal derivatives.
In the year ended December 31, 2016, we recognized a 20 million gain related to the finalization of the contractual price
adjustment for the acquisition of Wise Metals.
Losses on disposal and assets classified as
held-for-sale
recognized in the year ended December 31, 2016 primarily related to the
write-off
of abandoned development projects in the P&ARP segment. Losses
on disposal and assets classified as
held-for-sale
recognized in the year ended December 31, 2015, primarily related to the write-down of assets at our plant in
Carquefou, France upon our decision to sell the plant.
Finance
Costs-Net
Finance costsnet increased by 12 million, to 167 million for the year ended December 31, 2016, from
155 million for the year ended December 31, 2015. This increase is mainly due to additional interest expense on our $425 million Senior Secured Notes, issued in March 2016.
In the year ended December 31, 2016, foreign exchange net losses from the revaluation of the portion of our U.S. dollar-denominated debt
held by Euro functional currency entities amounted to 42 million and was offset by gains on derivative instruments entered into to hedge this exposure. In the year ended December 31, 2015, foreign exchange net losses from the
revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to 48 million and was offset by gains on derivative instruments entered into to hedge this exposure.
Finance costs, net in the year ended December 31, 2016 also included a 4 million net loss on the settlement of debt, which was
comprised of a 2 million net loss on the early redemption of the Wise Senior PIK Toggle
-71-
Notes and the
write-off
of 2 million of unamortized arrangement fees upon cancellation of our Unsecured Revolving Credit Facility in March 2016.
Income Tax
Income tax for the year ended December 31, 2016 was an expense of 69 million for the year ended December 31, 2016 compared
to an income tax benefit of 32 million for the year ended December 31, 2015.
Our effective tax rate represented 106% of
our income before income tax for the year ended December 31, 2016 and 5% of our loss before tax for the year ended December 31, 2015. This change in our effective tax rate primarily reflects a decrease in the composite statutory tax rate
applicable by tax jurisdiction (the blended tax rate), from 38% in 2015 to 25 % in 2016 and the impact of significant reconciling items in both years.
Our blended tax rate decreased by approximately 13 percentage points in the year ended December 31, 2016 compared to the year ended
December 31, 2015 as a result of changes in the geographical mix of our
pre-tax
results and primarily reflected a decrease in our
pre-tax
losses in the United
States where the statutory rate is 40%.
The effective tax rate for the year ended December 31, 2016 applies to 65 million
of
pre-tax
income and is significantly higher than our projected blended statutory tax rate primarily as a result of the unfavorable effect of unrecognized tax benefits for losses in jurisdictions where we
believe it is more likely than not that we will not be able to utilize those losses.
The effective tax rate for the year ended
December 31, 2015 applies to 584 million of
pre-tax
loss and is significantly lower than our projected blended statutory tax rate primarily as a result of the unfavorable effect of unrecognized
tax benefits for losses in jurisdictions where we believe it is more likely than not that we will not be able to utilize those losses.
Net Loss
As a
result of the above factors, we recognized a net loss of 4 million, in the year ended December 31, 2016 compared to a net loss of 552 million in the year ended December 31, 2015.
Segment Results
Segment Revenue
The following table sets forth the revenues for our operating segments for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(millions of and as a % of revenue)
|
|
P&ARP
|
|
|
2,812
|
|
|
|
54
|
%
|
|
|
2,498
|
|
|
|
52
|
%
|
|
|
2,748
|
|
|
|
53
|
%
|
A&T
|
|
|
1,335
|
|
|
|
25
|
%
|
|
|
1,302
|
|
|
|
27
|
%
|
|
|
1,355
|
|
|
|
26
|
%
|
AS&I
|
|
|
1,123
|
|
|
|
21
|
%
|
|
|
1,002
|
|
|
|
21
|
%
|
|
|
1,047
|
|
|
|
20
|
%
|
Holdings and Corporate
|
|
|
13
|
|
|
|
0
|
%
|
|
|
(11
|
)
|
|
|
0
|
%
|
|
|
29
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inter-segment eliminations
|
|
|
(46
|
)
|
|
|
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
5,237
|
|
|
|
100
|
%
|
|
|
4,743
|
|
|
|
100
|
%
|
|
|
5,153
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&ARP
. Revenues in our P&ARP segment increased by 13%, or 314 million, to
2,812 million in the year ended December 31, 2017, from 2,498 million for the year ended December 31, 2016, reflecting primarily higher revenue per ton driven by higher metal prices and relatively stable shipments.
P&ARP shipments were in
-72-
line with the prior year with a 5kt decrease, reflecting lower shipments in Packaging rolled products partially offset by a 45kt, or 40%, increase in Automotive rolled products shipments. Revenue
per ton increased by 13% to 2,789 per ton in the year ended December 31, 2017 from 2,466 per ton in the year ended December 31, 2016, primarily as a result of higher LME and premium prices.
Revenues in our P&ARP segment decreased by 9%, or 250 million, to 2,498 million in the year ended December 31,
2016, from 2,748 million for the year ended December 31, 2015, reflecting primarily lower revenue per ton driven by lower metal prices and relatively stable shipments. P&ARP shipments declined slightly by 2%, or 22kt, reflecting
lower shipments in Packaging rolled products, primarily as a result of lower foil stock demand, and in Specialty and other thin-rolled products. These decreases were partially offset by a 25kt, or 28%, increase in Automotive rolled products
shipments. Revenue per ton decreased by 7% to 2,466 per ton in the year ended December 31, 2016 from 2,655 per ton in the year ended December 31, 2015, primarily as a result of decreases in LME and premium prices.
A&T
. Revenue at our A&T segment increased by 33 million, or 3% to 1,335 million in the year ended
December 31, 2017 from 1,302 million in the year ended December 31, 2016, reflecting relatively stable shipments and higher revenue per ton driven by higher metal prices. A&T shipments decreased by 2% or 5kt, reflecting a
12kt decrease in Aerospace rolled products shipments partially offset by higher shipments in Transportation, industry and other rolled products. Revenue per ton increased by 5% to 5,618 per ton in the year ended December 31, 2017 from
5,360 per ton in the year ended December 31, 2016, primarily reflecting higher LME and premium prices, partially offset by product mix effects.
Revenue at our A&T segment decreased by 53 million, or 4% to 1,302 million in the year ended December 31, 2016
from 1,355 million in the year ended December 31, 2015, reflecting lower revenue per ton driven by lower metal prices, a shift in a mix, partially offset by higher volumes. A&T shipments increased by 5% or 12kt, primarily as a
result of higher shipments in Transportation, industry and other products. Revenue per ton decreased by 9% to 5,360 per ton in the year ended December 31, 2016 from 5,866 per ton in the year ended December 31, 2015, primarily
reflecting lower LME and premium prices.
AS&I
. Revenues in our AS&I segment increased by 12%, or
121 million, to 1,123 million for the year ended December 31, 2017, from 1,002 million for the year ended December 31, 2016, reflecting higher shipments and higher revenue per ton driven by higher metal
price. AS&I shipments increased 9%, or 19kt, reflecting a 10% or 10kt increase in Automotive extruded products shipments and an 8% or 9kt increase in Other extruded products shipments. Revenue per ton increased by 3% to 4,756 per ton in
the year ended December 31, 2017 from 4,608 per ton in the year ended December 31, 2016, reflecting higher LME and premium prices, partially offset by product mix effects.
Revenues in our AS&I segment decreased by 4%, or 45 million, to 1,002 million for the year ended December 31,
2016, from 1,047 million for the year ended December 31, 2015, reflecting lower revenue per ton driven by lower metal price, partially offset by increased volumes and favorable product mix. AS&I shipments increased 3%, or 5kt,
reflecting higher shipments in both Other extruded products and Automotive extruded products.
Holdings and Corporate
.
Revenue in the Holdings and Corporate segment for the years ended December 31, 2017 are primarily related to metal sales to third parties. Revenue in the Holdings and Corporate segment for the year ended December 31, 2016, include a
20 million
one-time
payment recorded as reduction of revenue related to renegotiation of a contract with one of Wises customers, partially offset by metal sales to third parties.
Adjusted EBITDA
Adjusted EBITDA is not a measure defined by IFRS. We believe the most directly comparable IFRS measure to Adjusted EBITDA is our net income or
loss for the relevant period.
-73-
In considering the financial performance of the business, management analyzes the primary
financial performance measure of Adjusted EBITDA in all of our business segments. Our Chief Operating Decision Maker (CODM) measures the profitability and financial performance of our operating segments based on Adjusted EBITDA. Adjusted
EBITDA is defined as income/(loss) from continuing operations before income taxes, results from joint ventures, net finance costs, other expenses and depreciation and amortization as adjusted to exclude restructuring costs, impairment charges,
unrealized gains or losses on derivatives and on foreign exchange differences on transactions that do not qualify for hedge accounting, metal price lag, share-based compensation expense, effects of certain purchase accounting adjustments,
start-up
and development costs or acquisition, integration and separation costs, certain incremental costs and other exceptional, unusual or generally
non-recurring
items.
We believe Adjusted EBITDA, as defined above, is useful to investors as it illustrates the underlying performance of continuing
operations by excluding
non-recurring
and
non-operating
items. Similar concepts of adjusted EBITDA are frequently used by securities analysts, investors and other
interested parties in their evaluation of our company and in comparison to other companies, many of which present an adjusted EBITDA-related performance measure when reporting their results.
Adjusted EBITDA has limitations as an analytical tool. It is not a measure defined by IFRS and therefore does not purport to be an alternative
to operating profit or net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. As a
result, you should not consider these performance measures in isolation from, or as a substitute analysis for, our results of operations.
The following table shows Constelliums consolidated Adjusted EBITDA for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(millions of and as a % of revenue)
|
|
P&ARP
|
|
|
202
|
|
|
|
7
|
%
|
|
|
201
|
|
|
|
8
|
%
|
|
|
183
|
|
|
|
7
|
%
|
A&T
|
|
|
133
|
|
|
|
10
|
%
|
|
|
103
|
|
|
|
8
|
%
|
|
|
103
|
|
|
|
8
|
%
|
AS&I
|
|
|
119
|
|
|
|
11
|
%
|
|
|
102
|
|
|
|
10
|
%
|
|
|
80
|
|
|
|
8
|
%
|
Holdings and Corporate
|
|
|
(23
|
)
|
|
|
n.m.
|
|
|
|
(29
|
)
|
|
|
n.m.
|
|
|
|
(23
|
)
|
|
|
n.m.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted EBITDA
|
|
|
431
|
|
|
|
8
|
%
|
|
|
377
|
|
|
|
8
|
%
|
|
|
343
|
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n.m. not
meaningful
Total Adjusted EBITDA for the year ended December 31, 2017 was 431 million, which represented a
54 million, or 14% increase compared to 377 million of total Adjusted EBITDA for the year ended December 31, 2016. This increase mainly reflected improved results at our A&T and AS&I segments.
Total Adjusted EBITDA for the year ended December 31, 2016 was 377 million, which represented a 34 million, or 10%
increase compared to 343 million of total Adjusted EBITDA for the year ended December 31, 2015. This increase mainly reflected the positive impact of improved mix at our AS&I segment and operational improvements in our P&ARP
segment, partially offset by increased costs from Holdings and Corporate.
-74-
The following table presents the primary drivers for changes in Adjusted EBITDA from the year
ended December 31, 2016 to the year ended December 31, 2017 for each one of our three segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&ARP
|
|
|
A&T
|
|
|
AS&I
|
|
|
|
(millions of )
|
|
Adjusted EBITDA for the year ended December 31, 2016
|
|
|
201
|
|
|
|
103
|
|
|
|
102
|
|
Volume
|
|
|
(1
|
)
|
|
|
(13
|
)
|
|
|
27
|
|
Price and product mix
|
|
|
17
|
|
|
|
40
|
|
|
|
(12
|
)
|
Costs
|
|
|
(10
|
)
|
|
|
10
|
|
|
|
2
|
|
Foreign exchange and premium
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
|
|
|
Other changes
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA for the year ended December 31, 2017
|
|
|
202
|
|
|
|
133
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the primary drivers for changes in Adjusted EBITDA from the year ended
December 31, 2015 to the year ended December 31, 2016 for each one of our three segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&ARP
|
|
|
A&T
|
|
|
AS&I
|
|
|
|
(millions of )
|
|
Adjusted EBITDA for the year ended December 31, 2015
|
|
|
183
|
|
|
|
103
|
|
|
|
80
|
|
Volume
|
|
|
(10
|
)
|
|
|
20
|
|
|
|
7
|
|
Price and product mix
|
|
|
(22
|
)
|
|
|
(43
|
)
|
|
|
21
|
|
Costs
|
|
|
52
|
|
|
|
27
|
|
|
|
(7
|
)
|
Foreign exchange and premium
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
2
|
|
Other changes
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA for the year ended December 31, 2016
|
|
|
201
|
|
|
|
103
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&ARP
. Adjusted EBITDA at our P&ARP segment was 202 million for the year
ended December 31, 2017 was comparable to 201 million in the year ended December 31, 2016. Adjusted EBITDA per metric ton for the year ended December 31, 2017 was relatively stable at 200 for the year ended
December 31, 2017 compared to 199 for the year ended December 31, 2016, reflecting better price and mix offset by the impact of our ABS program in the US.
Adjusted EBITDA at our P&ARP segment was 201 million for the year ended December 31, 2016 which represented a 10% increase
from 183 million in the year ended December 31, 2015, mostly attributable to operational improvements, particularly at Muscle Shoals, partially offset by a slight decrease in shipments and a decrease in price and mix. Adjusted EBITDA
per metric ton for the year ended December 31, 2016 increased 13% from the prior year to 199.
A&T
. Adjusted
EBITDA was 133 million, an increase of 28% from the year ended December 31, 2016 and Adjusted EBITDA per metric ton increased 31% to 558 from 425 in the year ended December 31, 2016, primarily reflecting better price
and mix and strong management of operating costs, partially offset by the impact of lower Aerospace rolled product volumes and foreign exchange and premium effects.
Adjusted EBITDA was 103 million for the year ended December 31, 2016 which was in line with the prior year as higher volumes
and improved costs were offset by a less favorable product mix. Adjusted EBITDA per ton decreased 4% to 425 from 445 in the year ended December 31, 2015.
AS&I
. Adjusted EBITDA was 119 million, a 16% increase from the same period in the prior year, reflecting higher
volumes and solid cost control.
Adjusted EBITDA at our AS&I segment was 102 million for the year ended December 31,
2016, a strong increase of 27% from the prior year, reflecting increased volumes, and improved price and mix due to solid end
-75-
market demand in both our automotive and industry end markets. Adjusted EBITDA per ton increased 24% to 471 per ton in the year ended December 31, 2016 as compared to the prior year.
Holdings and Corporate
. Our Holdings and Corporate segment generated Adjusted EBITDA losses of 23 million and
29 million in the year ended December 31, 2017 and 2016, respectively. The decrease in Holdings and Corporate costs from period to period is notably attributable to additional costs incurred in 2016, in connection with changes in the
executive management team.
Adjusted EBITDA at our Corporate and Holdings segment was a loss of 29 million, for the year ended
December 31, 2016 compared to losses of 23 million in the year ended December 31, 2015. The increase in the loss in the year ended December 31, 2016 versus the year ended December 31, 2015 was attributable to
additional costs incurred in 2016, in connection with changes in our executive management team.
The following table reconciles our net
loss for each of the three years in the period ending December 31, 2017 to our Adjusted EBITDA for the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
( in millions)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(31
|
)
|
|
|
(4
|
)
|
|
|
(552
|
)
|
Net income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense / (benefit)
|
|
|
80
|
|
|
|
69
|
|
|
|
(32
|
)
|
Finance costs, net
|
|
|
243
|
|
|
|
167
|
|
|
|
155
|
|
Share of loss of joint ventures
|
|
|
29
|
|
|
|
14
|
|
|
|
3
|
|
Depreciation and amortization
|
|
|
171
|
|
|
|
155
|
|
|
|
140
|
|
Impairment
(a)
|
|
|
|
|
|
|
|
|
|
|
457
|
|
Restructuring costs
|
|
|
4
|
|
|
|
5
|
|
|
|
8
|
|
Unrealized (gains) / losses on derivatives
|
|
|
(57
|
)
|
|
|
(71
|
)
|
|
|
20
|
|
Unrealized exchange losses / (gains) from remeasurement of monetary assets and
liabilitiesnet
|
|
|
4
|
|
|
|
(3
|
)
|
|
|
3
|
|
(Gains) / losses on pension plan
amendments
(b)
|
|
|
(20
|
)
|
|
|
|
|
|
|
5
|
|
Share-based compensation
|
|
|
8
|
|
|
|
6
|
|
|
|
7
|
|
Metal price lag
(c)
|
|
|
(22
|
)
|
|
|
(4
|
)
|
|
|
34
|
|
Start-up
and development costs
(d)
|
|
|
17
|
|
|
|
25
|
|
|
|
21
|
|
Manufacturing system and process transformation costs
|
|
|
2
|
|
|
|
5
|
|
|
|
11
|
|
Wise integration and acquisition costs
|
|
|
|
|
|
|
2
|
|
|
|
14
|
|
Wise
one-time
costs
(e)
|
|
|
|
|
|
|
20
|
|
|
|
38
|
|
Wise purchase price adjustment
(f)
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
Losses on disposals and assets classified as held for sale
|
|
|
3
|
|
|
|
10
|
|
|
|
5
|
|
Other
(g)
|
|
|
|
|
|
|
1
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
431
|
|
|
|
377
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes mainly for the year ended December 31, 2015, an impairment charge of 400 million related to Muscle Shoals intangible assets and property, plant and equipment and 49 million related to
Constellium Valais Property, plant and equipment.
|
(b)
|
For the year ended December 31, 2017, amendments to certain Swiss pension plan, U.S. pension plan and OPEB resulted in a 20 million net gain.
|
(c)
|
Metal price lag represents the financial impact of the timing difference between when aluminium prices included
within Constellium revenues are established and when aluminium purchase prices included in Cost of sales are established. The Company accounts for inventory using a weighted average price basis and this adjustment aims to remove the effect of
volatility in LME prices. The calculation of the Company metal price lag adjustment is based on an internal standardized methodology calculated at each of Constellium
|
-76-
|
manufacturing sites and is calculated as the average value of product recorded in inventory, which approximates the spot price in the market, less the average value transferred out of inventory,
which is the weighted average of the metal element of cost of sales, based on the quantity sold in the period.
|
(d)
|
For the year ended December 31, 2017,
start-up
costs and development costs include mainly 16 million related to new projects in our AS&I operating segment. For
the year ended December 31, 2016, and 2015,
start-up
and development costs included 20 million and 16 million related to ABS growth projects both in Europe and the United States.
|
(e)
|
For the year ended December 31, 2016, Wise
one-time
costs related to a
one-time
payment of 20 million, recorded as a
reduction of revenues, in relation to the
re-negotiation
of payment terms, pass through of Midwest premium amounts and other pricing mechanisms in a contract with one of Wises customers. We entered into
the
re-negotiation
of these terms in order to align the terms of this contract, acquired during the acquisition of Wise, with Constelliums normal business terms. For the year ended December 31,
2015, Wise
one-time
costs related to
non-cash
step-up
in inventory costs on the acquisition of Wise entities (effects of purchase
price adjustment for 12 million), to losses incurred on the unwinding of Wise previous hedging policies (4 million) and to Midwest premium losses (22 million).
|
(f)
|
The contractual price adjustment relating to the acquisition of Wise Metals Intermediate Holdings was finalized in 2016. We received a cash payment of 21 million and recorded a 20 million net gain.
|
(g)
|
For the year ended December 31, 2017, other includes 3 million of legal fees and
lump-sum
payments in connection with the renegotiation of a new
5-year
collective bargaining agreement offset by accrual reversals of unused provisions related to
one-time
loss contingencies. For the year ended December 31, 2016,
other includes individually immaterial other adjustments offset by 4 million of insurance proceeds.
|
Liquidity and Capital
Resources
Our primary sources of cash flow have historically been cash flows from operating activities and funding or borrowings from
external parties.
Based on our current and anticipated levels of operations, and the condition in our markets and industry, we believe
that our cash flows from operations, cash on hand, new debt issuances or refinancing of existing debt facilities, and availability under our factoring and revolving credit facilities will enable us to meet our working capital, capital expenditures,
debt service and other funding requirements for the foreseeable future. However, our ability to fund working capital needs, debt payments and other obligations depends on our future operating performance and cash flows and many factors outside of
our control, including the costs of raw materials, the state of the overall industry and financial and economic conditions and other factors, including those described under the following risk factors within Item 3. Key InformationD.
Risk Factors.
|
|
|
We have substantial leverage and may be unable to obtain sufficient liquidity to operate our business and service our indebtedness;
|
|
|
|
A deterioration in our financial position or a downgrade of our ratings by a credit rating agency could increase our borrowing costs, lead to our inability to access liquidity facilities, and adversely affect our
business relationships;
|
|
|
|
The terms of our indebtedness contain covenants that restrict our current and future operations, and a failure by us to comply with those covenants may materially adversely affect our business, results of operations and
financial condition; and
|
|
|
|
Our results of operations, cash flows and liquidity could be adversely affected if we are unable to execute on our hedging policy, if counterparties to our derivative instruments fail to honor their agreements or if we
are unable to purchase derivative instruments.
|
It is our policy to hedge all highly probable or committed foreign currency
operating cash flows. As we have significant third party future receivables denominated in U.S. dollars, we generally enter into combinations of forward contracts with financial institutions, selling forward U.S. dollars against Euros. In addition,
as discussed
-77-
in Item 4. Information on the CompanyB. Business OverviewManaging our Metal Price Exposure, when we are unable to align the price and quantity of physical aluminium
purchases with that of physical aluminium sales, we enter into derivative financial instruments to pass through the exposure to metal price fluctuations to financial institutions at the time the price is set. As the U.S. dollar appreciates versus
the Euro or the LME price for aluminium falls, the derivative contracts related to transactional hedging entered into with financial institution counterparties will have a negative
mark-to-market.
We borrow in a combination of Euros and U.S. Dollars. When the external currency mix of our debt does not match exactly the mix of our assets, we use a
combination of cross-currency swaps and forwards to balance the risk. We have bought forward significant U.S. Dollars versus the Euro for this purpose. As the U.S. Dollar depreciates against the Euro, the derivative contracts entered into with
financial institutions will have a negative
mark-to-market.
Our financial institution counterparties may require margin calls should our negative
mark-to-market
exceed a
pre-agreed
contractual limit. In order to protect the Company from the potential margin calls for significant
market movements, we maintain additional cash or availability under our various borrowing facilities, we enter into derivatives with a large number of financial counterparties and we monitor margin requirements on a daily basis for adverse movements
in the U.S. dollar versus the Euro and in aluminium prices. No margins were posted at December 31, 2017 or December 31, 2016.
At December 31, 2017, we had 531 million of total liquidity, comprised of 269 million in cash and cash equivalents,
136 million of undrawn credit facilities under our
Pan-U.S.
ABL Facility, 71 million of undrawn credit facilities under our French Inventory Facility (as defined below), and
55 million available under our factoring arrangements.
At December 31, 2016, we had 537 million of total
liquidity, comprised of 347 million in cash and cash equivalents, 150 million of undrawn credit facilities under our ABL facilities, 33 million available under our factoring arrangements, and 7 million
under a revolving credit facility.
Cash Flows
The following table summarizes our operating, investing and financing activities for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
( in millions)
|
|
Net Cash Flows from/(used) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
160
|
|
|
|
88
|
|
|
|
368
|
|
Investing activities
|
|
|
(292
|
)
|
|
|
(365
|
)
|
|
|
(722
|
)
|
Financing activities
|
|
|
61
|
|
|
|
145
|
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents, excludingthe effect of exchange rate
changes
|
|
|
(71
|
)
|
|
|
(132
|
)
|
|
|
(519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash Flows from Operating Activities
Net cash from operating activities in the year ended December 31, 2017 increased by 72 million to 160 million, from
an inflow of 88 million in the year ended December 31, 2016. The year over year increase in operating cash flows is attributable to an 108 million increase in cash flow from operating activities before working capital
changes partially offset by a 36 million increase in cash flows used in working capital.
In the year ended December 31,
2017, cash flows used in working capital amounted to 78 million reflecting a 19 million increase in working capital before factoring and a 59 million negative cash effect from the reduction in
non-recourse
factoring in the period.
-78-
In the year ended December 31, 2016, cash flows used in working capital amounted to
42 million reflecting an 179 million increase in working capital before factoring, partially offset by 137 million of additional
non-recourse
factoring in the period.
Net Cash Flows used in Investing Activities
Cash flows used in investing activities in the year ended December 31, 2017 decreased by 73 million to 292 million
from 365 million for the year ended December 31, 2016, mainly driven by lower capital expenditures. Capital expenditures of 276 million for the year ended December 31, 2017 decreased by 79 million from
355 million for the year ended December 31, 2016 and related primarily to recurring investment in our manufacturing facilities and our growth projects. Cash flows used in investing activities in the year ended December 31, 2017
also included 41 million of equity contributions and loans to joint ventures, related to Constellium UACJ ABS LLC, our joint venture with UACJ.
Cash flows used in investing activities in the year ended December 31, 2016 decreased by 357 million to 365 million
from 722 million for the year ended December 31, 2015. The main driver of the difference was the net consideration of 348 million paid in connection with the Wise Acquisition. Capital expenditures of 355 million
were stable compared to the prior year. Cash flows used in investing activities in the year ended December 31, 2016 also included 37 million of equity contributions and loans to joint ventures, related to Constellium UACJ ABS
LLC, our joint venture with UACJ.
For further details on capital expenditures projects, see the Historical Capital
Expenditures section below.
Net Cash flows from / (used in) Financing Activities
Net cash flows from financing activities were 61 million for the year ended December 31, 2017, compared to
145 million for the year ended December 31, 2016.
Net cash flows from financing activities in the year ended
December 31, 2017 reflect i) 610 million of net proceeds from the issuance, in February 2017, of our $650 million 6.625% Senior Notes due 2025,ii) 830 million of net proceeds from the issuance, in November 2017, of
our $500 million 5.875% Senior Notes due 2026 and our 400 million 4,250% Senior Notes due 2026 and iv) 259 of net proceeds from the issuance of shares in November 2017. The net proceeds received from these transactions were
partially offset by i) a 610 million outflow from the redemption in February 2017 of the $650 million 8.750% Wise Senior Secured Notes due 2018, ii)a 949 million outflow from the redemption, in November 2017, of the
$425 million 7.875% Senior Secured Notes due 2021, the $400 million 8.000% Senior Notes due 2023 and the 240 million 7.000% Senior Notes due 2023 and iii) deferred financing costs and exit fees relating to these transactions for
an amount of 118 million.
Net cash flows from financing activities in the year ended December 31, 2016 increased by
310 million to 145 million from an outflow of 165 million for the year ended December 31, 2015. Net cash provided by financing activities reflected the net impact of 375 million in proceeds from the
issuance of the Constellium N.V. Senior Secured Notes in March 2016 and a 148 million outflow relating to the redemption of the Wise Senior PIK Toggle Notes in the fourth quarter of 2016. The outflow in the year ended December 31,
2016 also included 69 million in repayments made on the Wise ABL Facility (as defined below) and other loans.
-79-
Historical Capital Expenditures
The following table provides a breakdown of the historical capital expenditures for property, plant and equipment by segment for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
( in millions)
|
|
P&ARP
|
|
|
115
|
|
|
|
166
|
|
|
|
170
|
|
A&T
|
|
|
73
|
|
|
|
96
|
|
|
|
112
|
|
AS&I
|
|
|
83
|
|
|
|
84
|
|
|
|
60
|
|
Holdings and Corporate
|
|
|
5
|
|
|
|
9
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
|
276
|
|
|
|
355
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our capital expenditures for the year ended December 31, 2017 reflected primarily our investments in
automotive growth projects for both P&ARP and AS&I as well as sustaining projects across all segments.
The main projects
undertaken during the year ended December 31, 2016 include our ABS investments in Europe and in the U.S., within the P&ARP segment, investments in our AS&I segment in response to OEM demand and capital investments projects, mainly at
our Issoire and Ravenswood, West Virginia facilities, to support improved production capacity and manufacturing efficiency within the A&T segment.
As at December 31, 2017, we had 198 million of construction in progress which primarily related to our continued maintenance,
modernization and expansion projects at our Muscle Shoals, Ravenswood, Neuf Brisach, Singen, Van Buren, Děčín, and Issoire facilities.
Our capital expenditures are expected to total approximately 1,400 million in the years ended December 31, 2018 to 2022, in
the aggregate. We currently expect all of our capital expenditures to be financed with cash on hand and external financing.
Covenant Compliance
The indentures governing our outstanding debt securities contain no maintenance covenants but contain customary affirmative and
negative covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries, to incur or guarantee indebtedness, sell assets, make investments, engage in acquisitions, mergers or
consolidations and make dividends and other restricted payments.
The
Pan-U.S.
ABL Facility
contains a financial covenant that provides that at any time during which borrowing availability thereunder is below 10% of the aggregate commitments under the
Pan-U.S.
ABL Facility, we will be required to
maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 and a minimum Borrower EBITDA Contribution of 25%, in each case calculated on a trailing twelve month basis. Borrower EBITDA Contribution means, for any period, the ratio of
(x) the combined EBITDA of the borrowers under the
Pan-U.S.
ABL Facility and their subsidiaries for such period, to (y) the consolidated EBITDA of the Company and its subsidiaries for such period.
The
Pan-U.S.
ABL Facility also contains customary negative covenants on liens, investments and restricted payments related to Ravenswood and Muscle Shoals.
The Wise Factoring Facility contains customary covenants and the factors commitment to purchase the receivables is subject to the
maintainance of certain credit rating levels.
The European Factoring Facilities contain customary covenants.
We were in compliance with our covenants at and for the years ended December 31, 2017 and 2016.
-80-
See Item 10. Additional InformationC. Material Contracts for a description of
our significant financing arrangements.
Off-Balance
Sheet Arrangements
As of December 31, 2017, we have no significant
off-balance
sheet arrangements.
Contractual Obligations
The following
table summarizes our estimated material contractual cash obligations and other commercial commitments at December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments due by period
|
|
|
|
Total
|
|
|
Less
than
1 year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
After 5
years
|
|
|
|
(unaudited, in millions)
|
|
Borrowings
(1)
|
|
|
2,077
|
|
|
|
67
|
|
|
|
14
|
|
|
|
304
|
|
|
|
1,692
|
|
Interest
(2)
|
|
|
788
|
|
|
|
103
|
|
|
|
221
|
|
|
|
200
|
|
|
|
264
|
|
Derivatives relating to currencies and metal
|
|
|
28
|
|
|
|
17
|
|
|
|
5
|
|
|
|
6
|
|
|
|
0
|
|
Operating lease obligations
(3)
|
|
|
108
|
|
|
|
19
|
|
|
|
17
|
|
|
|
32
|
|
|
|
40
|
|
Capital expenditures
|
|
|
101
|
|
|
|
94
|
|
|
|
7
|
|
|
|
0
|
|
|
|
0
|
|
Finance leases
|
|
|
71
|
|
|
|
15
|
|
|
|
14
|
|
|
|
23
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(4)
|
|
|
3,173
|
|
|
|
315
|
|
|
|
278
|
|
|
|
565
|
|
|
|
2,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Borrowings include our
Pan-U.S.
ABL Facility which are considered short-term in nature and is included in the category Less than 1 year.
|
(2)
|
Interests accrue under the May 2014 Notes denominated in U.S. dollars at a rate of 5.750% per annum, under the May 2014 Notes denominated in euros at a rate of 4.625% per annum, under the February 2017 Notes at a rate
of 6.625% per annum, under the November 2017 Notes denominated in U.S. dollars at a rate of 5.875%, per annum, and under the November 2017 Notes denominated in euros at a rate of 4.250% per annum.
|
(3)
|
Operating leases relate to buildings, machinery and equipment.
|
(4)
|
Retirement benefit obligations of 664 million are not presented above as the timing of the settlement of this obligation is uncertain.
|
Environmental Contingencies
Our
operations, like those of many other basic industries, are subject to federal, state, local and international laws, regulations and ordinances. These laws and regulations (i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as waste handling and disposal practices and (ii) impose liability for costs of cleaning up, and certain damages resulting from, spills, disposals or other releases or regulated materials.
From time to time, our operations have resulted, or may result, in certain noncompliance with applicable requirements under such environmental laws. To date, any such noncompliance with such environmental laws has not had a material adverse effect
on our financial position or results of operations.
Pension Obligations
Constellium operates various pension plans for the benefit of its employees across a number of countries. Some of these plans are defined
benefit plans and others are defined contribution plans. The largest of these plans are in the United States, Switzerland, Germany and France. Pension benefits are generally based on the employees service and highest average eligible
compensation before retirement, and are periodically adjusted for cost of living increases, either by practice, collective agreement or statutory requirement.
-81-
We also provide health and life insurance benefits to retired employees and in some cases to
their beneficiaries and covered dependents. These plans are predominantly in the United States.
Finally, we also participate in various
multi-employer pension plans in one of our facilities in the United States.
For the year ended December 31, 2017, the total expense
recognized in the income statement in relation to all our pension and post-retirement benefits was 24 million (compared to 51 million for the year ended December 31, 2016). In 2017, we amended some pension plans in
Switzerland and in the U.S. which resulted in the recognition of a 20 million gain. At December 31, 2017, the fair value of the plans assets was 387 million (compared to 391 million as of December 31,
2016). At December 31, 2017, the present value of our obligations amounted to 1,051 million (compared to 1,126 million as of December 31, 2016), resulting in an aggregate plan deficit of 664 million and
735 million as of December 31, 2017 and 2016, respectively.
Our estimated funding for our funded pension plans and other
post-retirement benefit plans is based on actuarial estimates using benefit assumptions for discount rates, rates of compensation increases, and health care cost trend rates. The deficit related to the funded pension plan and the present value of
the unfunded obligations as of December 31, 2017 were 304 million and 360 million, respectively. The deficit related to funded pension plan and other benefits and the present value of the unfunded obligations as of
December 31, 2016 were 330 million and 405 million, respectively. Estimating when the obligations will require settlement is not practicable and therefore these have not been included in the Contractual Obligations table
above.
Contributions to pension and other benefit plans totaled 47 million for the year ended December 31, 2017, compared
to 48 million for the year ended December 31, 2016.
Contributions to our multi-employer plans amounted to approximately
3 million for each of the two years ended December 31, 2017 and 2016.
Principal Accounting Policies, Critical Accounting Estimates and
Key Judgments
Our principal accounting policies are set out in Note 2 to the audited Consolidated Financial Statements, which appear
elsewhere in this Annual Report. New standards and interpretations not yet adopted are also disclosed in Note 2.3 to our audited Consolidated Financial Statements.
Item 6. Directors, Senior Management and Employees
A.
|
Directors and Senior Management
|
The following table provides information regarding the
members of our board of directors as of the date of this Annual Report (ages are given as of December 31, 2017). The business address of each of our directors listed below is c/o Constellium, Tupolevlaan
41-61,
1119 NW Schiphol-Rijk, the Netherlands.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
Date of Appointment
|
|
Current Term
|
Richard B. Evans
|
|
|
70
|
|
|
Chairman
|
|
January 5, 2011
|
|
2016-2019
|
Guy Maugis
|
|
|
64
|
|
|
Director
|
|
January 5, 2011
|
|
2017-2019
|
Philippe Guillemot
|
|
|
58
|
|
|
Director
|
|
May 21, 2013
|
|
2017-2018
|
Werner P. Paschke
|
|
|
67
|
|
|
Director
|
|
May 21, 2013
|
|
2017-2019
|
Michiel Brandjes
|
|
|
63
|
|
|
Director
|
|
June 11, 2014
|
|
2017-2018
|
Peter F. Hartman
|
|
|
68
|
|
|
Director
|
|
June 11, 2014
|
|
2016-2018
|
John Ormerod
|
|
|
68
|
|
|
Director
|
|
June 11, 2014
|
|
2017-2018
|
Lori A. Walker
|
|
|
60
|
|
|
Director
|
|
June 11, 2014
|
|
2017-2018
|
Martha Brooks
|
|
|
58
|
|
|
Director
|
|
June 15, 2016
|
|
2017-2018
|
Jean-Marc Germain
|
|
|
51
|
|
|
Director
|
|
June 15, 2016
|
|
2017-2020
|
Nicolas A. Manardo
|
|
|
39
|
|
|
Director
|
|
June 15, 2017
|
|
2017-2018
|
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Pursuant to a shareholders agreement between the Company and Bpifrance, Mr. Manardo was
selected to serve as a director by Bpifrance in 2017. Mr. Maugis no longer serves in that capacity.
Richard B. Evans
.
Mr. Evans has served as a director since January 2011 and as our Chairman since December 2012. Mr. Evans is currently an independent director of CGI, an IT consulting and outsourcing company. In 2016, Mr. Evans resigned as a
non-Executive
Director of Noranda Aluminum Holding Corporation following its successful liquidation through the Chapter 11 bankruptcy process. He retired in May 2013 as
non-executive
Chairman of Resolute Forest Products, a Forest Products company based in Montreal. He retired in April 2009 as an executive director of London-based Rio Tinto plc and Melbourne-based Rio Tinto
Ltd., and as Chief Executive Officer of Rio Tinto Alcan Inc., a wholly owned subsidiary of Rio Tinto. Previously, Mr. Evans was President and Chief Executive Officer of Montreal based Alcan Inc. from March 2006 to October 2007, and led the
negotiation of the acquisition of Alcan by Rio Tinto in October 2007. He was Alcans Executive Vice President and Chief Operating Officer from September 2005 to March 2006. Prior to joining Alcan in 1997, he held various senior management
positions with Kaiser Aluminum and Chemical Company during his 27 years with that company. Mr. Evans is a past Chairman of the International Aluminum Institute (IAI) and is a past Chairman of the Washington,
DC-based
U.S. Aluminum Association. He previously served as
Co-Chairman
of the Environmental and Climate Change Committee of the Canadian Council of Chief Executives and
as a member of the Board of USCAP, a Washington,
DC-based
coalition concerned with climate change.
Guy Maugis
. Mr. Maugis has served as a
non-executive
director since 2011.
Mr. Maugis is advisor of the Board of Robert Bosch GmbH, after being President of Robert Bosch France SAS for 12 years. The French subsidiary covers all the activities of the Bosch Group, a leader in the domains of the Automotive Equipments,
Industrial Techniques and Consumer Goods and Building Techniques. He is also President of the French-German Chamber of Commerce and Industry. Mr. Maugis is a former graduate of Ecole Polytechnique, Engineer of Corps des Ponts et
Chaussées and worked for several years at the Equipment Ministry. At Pechiney, he managed the flat rolled products factory of Rhenalu Neuf-Brisach. At PPG Industries, he became President of the European Flat Glass activities. With the
purchase of PPG Glass Europe by ASAHI Glass, Mr. Maugis assumed the function of Vice-President in charge of the business development and European activities of the automotive branch of the Japanese group.
Philippe Guillemot
. Mr. Guillemot has served as a
non-executive
director since May
2013. He has nearly thirty-five years of experience in Automotive, Energy and the Telecom industry, where he held CEO and COO positions leading many successful transformations. In December 2017, Mr. Guillemot was appointed CEO of Elior Group, a
concession and contract catering leader. Prior to that, Mr. Guillemot served as Chief Operating Officer of Alcatel-Lucent until a successful turnaround led to Nokias full acquisition at the end of 2016. From April 2010 to February 2012,
he served as Chief Executive Officer of Europcar Group. From 2010 to 2012, Mr. Guillemot served as a director and audit committee member of Visteon Corp. Mr. Guillemot served as Chairman and CEO of Areva T&D from 2004 to 2010, and as
division Vice President at Valeo and then Faurecia from 1998 to 2003. Mr. Guillemot began his career at Michelin, where he held various positions in quality and production at sites in Canada, France and Italy. He was a member of Booz Allen
Hamiltons Automotive Practice from 1991 to 1993 before returning to Michelin to serve as an operations manager, director of Michelin Groups restructuring in 1995-1996, Group Quality Executive Vice-President, Chief Information Officer and
member of the Group Executive Committee. Mr. Guillemot received his undergraduate degree in 1982 from Ecole des Mines in Nancy and received his MBA from Harvard Business School in Cambridge, MA in 1991.
Werner P. Paschke
. Mr. Paschke has served as a
non-executive
director since May
2013. From 2008 until April 2017, he served as an independent director of Braas Monier Building Group, Luxembourg, where he chaired the Audit Committee. He is an Advisory Board Member for Weber Automotive GmbH. In previous years, he served on the
Supervisory Boards of Conergy Aktiengesellschaft, Hamburg, Coperion GmbH, Stuttgart and several smaller companies. From 2003 to 2006, he was Managing Director and Chief Financial Officer of Demag Holding in Luxembourg, where he actively enhanced the
value of seven former Siemens and Mannesmann Units. From 1992 to 2003, he worked for Continental Aktiengesellschaft in Hannover/Germany,
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and since 1993 as Generalbevollmächtigter responsible for corporate controlling plus later, accounting. From 1989 to 1992, he served as Chief Financial Officer for General Tire Inc., in
Akron/Ohio, USA. From 1973 to 1987, he held different positions at Continental AG in finance, distribution, marketing and controlling. Mr. Paschke studied economics at Universities Hannover, Hamburg and Münster/Westphalia, where he graduated as
Diplomkaufmann in 1973. He is a 1993 graduate of the International Senior Management Program at Harvard Business School.
Michiel
Brandjes
. Mr. Brandjes has served as a
non-executive
director since June 2014. He served as Company Secretary and General Counsel Corporate of Royal Dutch Shell plc from 2005 to 2017.
Mr. Brandjes formerly served as Company Secretary and General Counsel Corporate of Royal Dutch Petroleum Company. He served for 25 years on numerous legal and
non-legal
jobs in the Shell Group within the
Netherlands and abroad, including as head of the legal department in Singapore and as head of the legal department for North East Asia based in Beijing and Hong Kong. Before he joined Shell, Mr. Brandjes worked at a law firm in Chicago after
graduating from law school at the University of Rotterdam and at Berkeley, California. He has published a number of articles on legal and business topics, is a regular speaker on corporate legal and governance topics and serves in a number of
advisory and
non-executive
director positions not related to Shell or Constellium.
Peter F.
Hartman
. Mr. Hartman has served as a
non-executive
director since June 2014. He served as Vice Chairman of Air France KLM from July 2013 until May 2017. He also serves as member of the supervisory
boards of Fokker Technologies Group B.V since 2013 (chairman since 2016), Air France KLM S.A. since 2010 (member of the audit committee from July 2016 until May 2017), Royal KPN N.V. since April 2015 (chairman of the remuneration committee) and
Texel Airport N.V. since
mid-2013
(chairman since January 2014). Previously, Mr. Hartman served as President and CEO of KLM Royal Dutch Airlines from 2007 to 2013, and as member of the supervisory boards
of Kenya Airways from 2004 to 2013, Stork B.V. from 2008 to 2013, CAI Compagnia Aerea Italiana S.p.A. from 2009 to January 2014, Delta Lloyd Group N.V. from 2010 to May 2014 and Royal Ten Cate N.V. from July 2013 to February 2016. Mr. Hartman
received a Bachelors degree in Mechanical Engineering from HTS Amsterdam, Amsterdam and a Masters degree in Business Economics from Erasmus University, Rotterdam.
John Ormerod
. Mr. Ormerod has served as a
non-executive
director since June 2014.
Mr. Ormerod is a chartered accountant and worked for over 30 years in public accounting firms. He served for 32 years at Arthur Andersen, serving in various client service and management positions, with last positions held from 2001 to 2002
serving as Regional Managing Partner UK and Ireland, and Managing Partner (UK). From 2002 to 2004, he was Practice Senior Partner for London at Deloitte (UK) and was member of the UK executives and Board. Mr. Ormerod is a graduate of Oxford
University. Mr. Ormerod currently serves in the following director positions: since 2006, as
non-executive
director of the audit committee of Gemalto N.V., where he also served as its Chairman until
September 2017, and as member of the compensation committee; since 2008, as
non-executive
director of ITV plc, and as member of the remuneration and nominations committees, and as Chairman of the audit
committee since 2010. Until December 31, 2015, Mr. Ormerod served as a
non-executive
director of Tribal Group plc., as member of the audit, remuneration and nominations committees and as Chairman of
the board. Mr. Ormerod served as
non-executive
director and Chairman of the audit committee of Computacenter plc., and as member of the remuneration and nominations committees until April 1, 2015.
Mr. Ormerod also served as a senior independent director of Misys plc. from 2006 to 2012, and as Chairman of the audit committee from 2005 to 2012.
Lori A. Walker
. Ms. Walker has served as a
non-executive
director since June 2014.
Ms. Walker currently serves as the audit committee chair of Southwire since 2014, and as a member of the audit and compensation committees of Compass Minerals since 2015. In August 2016, Ms. Walker was appointed to the Audit Committee
Chair at Compass Minerals. Ms. Walker previously served as Chief Financial Officer and Senior Vice President of The Valspar Corporation from 2008 to 2013, where she led the Finance, IT and Communications teams. Prior to that position,
Ms. Walker served as Valspars Vice President, Controller and Treasurer from 2004 to 2008, and as Vice President and Controller from 2001 to 2004. Prior to joining Valspar, Ms. Walker held a
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number of roles with progressively increasing responsibility at Honeywell Inc. during a 20-year tenure, with her last position there serving as director of Global Financial Risk Management.
Ms. Walker holds a Bachelor of Science of Finance from Arizona State University and attended the Executive Institute Program and the Directors College at Stanford University.
Martha Brooks
. Ms. Brooks has served as a
non-executive
director since June 2016.
Ms. Brooks was until her retirement in May 2009, President and Chief Operating Officer of Novelis, Inc, where she held senior positions since 2005. From 2002 to 2005, she served as Corporate Senior Vice President and President and Chief
Executive Officer of Alcan Rolled Products, Americas and Asia. Before she joined Alcan, Ms. Brooks served 16 years with Cummins, the global leader in diesel engine and power generation from 1986 to 2002, ultimately running the truck and bus
engine business. She is currently a member of the Boards of Directors of Bombardier Inc. and Jabil Circuit Inc. and has previously served as a director of Harley Davidson and International Paper. Ms. Brooks holds a BA in Economics and Political
Science and a Masters in Public and Private Management from Yale University.
Jean-Marc Germain
. Mr. Germain has
served as an executive director since June 2016 and as our Chief Executive Officer since July 2016. Prior to joining Constellium, Jean-Marc Germain was Chief Executive Officer of Algeco Scotsman, a Baltimore-based leading global business services
provider focused on modular space and secure portable storages. Previously, Mr. Germain held numerous leadership positions in the aluminium industry, including senior executive roles in operations, sales & marketing, financial planning
and strategy with Pechiney, Alcan and Novelis. His last position with Novelis from 2008 to 2012 was as President for North American operations. Earlier in his career, he held a number of international positions with Bain & Company and GE
Capital. Mr. Germain is a graduate of Ecole Polytechnique in Paris, France and a dual French and American citizen.
Nicolas A.
Manardo
. Mr. Manardo was appointed as a
non-executive
director in June 2017. Since January 2018, Mr. Manardo has served as Managing Director at LBO France, a leading private equity sponsor in
France. Prior to that, he was in charge of the Mid Cap Private Equity Investments at Bpifrance Investissement, a position held since 2009. Mr. Manardo is also a Director of Imalliance SA, and is an observer on the Supervisory Board of
STMicroelectronics N.V. Mr. Manardo has held senior positions at Lazard and Société Générale CIB in the U.S. and Europe and various financial positions at Saint Gobain in Latin America and Europe. Mr. Manardo
graduated from the ESCP Europe Business School in Paris in 2000.
The following persons are our officers as of the date of this Annual
Report (ages are given as of December 31, 2017). The business address of each of our officers listed below is c/o Constellium, Tupolevlaan
41-61,
1119 NW Schiphol-Rijk, the Netherlands.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Title
|
Jean-Marc Germain
|
|
|
51
|
|
|
Chief Executive Officer
|
Peter R. Matt
|
|
|
55
|
|
|
Executive Vice President and Chief Financial Officer
|
Peter Basten
|
|
|
42
|
|
|
President, Packaging and Automotive Rolled Products business unit
|
Ingrid Joerg
|
|
|
48
|
|
|
President, Aerospace and Transportation business unit
|
Paul Warton
|
|
|
56
|
|
|
President, Automotive Structures and Industry business unit
|
Jack Clark
|
|
|
58
|
|
|
Senior Vice President Manufacturing Excellence and Chief Technical Officer
|
Philip Ryan Jurkovic
|
|
|
46
|
|
|
Senior Vice President and Chief Human Resources Officer
|
Nicolas Brun
|
|
|
51
|
|
|
Senior Vice President, Public Affairs and Communications
|
Jeremy Leach
|
|
|
55
|
|
|
Senior Vice President and Group General Counsel
|
The following paragraphs set forth biographical information regarding our officers (other than
Mr. Germain, whose biographical information is set forth above in the description of biographical information of our directors):
Peter R. Matt
. Mr. Matt has served as our Executive Vice President and Chief Financial Officer Designate since November
2016 and became our Chief Financial Officer on January 1, 2017. Prior to joining Constellium,
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he spent 30 years in investment banking at First Boston/Credit Suisse where he built leading Metals and Diversified Industrials coverage practices. From 2010-2015, he was the Managing Director
and Group Head at First Boston/Credit Suisse responsible for managing the firms Global Industrials business in the Americas. Throughout his career, Mr. Matt has worked closely with management teams across a broad range of competencies
including business strategy, capital structure, capital allocation, investor communications, treasury and mergers and acquisitions. He is a graduate of Amherst College.
Peter Basten
. Mr. Basten has served as President of the Packaging and Automotive Rolled Products business unit since
September 2017. He previously served as our Executive Vice President, Strategy, Business Development, Research & Development since 2016, and prior to that as our Vice President, Strategy and Business Planning, the Managing Director of Soft
Alloys Europe at our Automotive Structures and Industry Business Unit and our Vice President Strategic Planning & Business Development. Mr. Basten joined Alcan in 2005 as the Director of Strategy and Business Planning at Alcan
Specialty Sheet, and became Director of Sales and Marketing in 2008, responsible for the aluminium packaging applications markets. Prior to joining Alcan, Mr. Basten worked as a consultant at Monitor Group, a Strategy Consulting firm. His
assignments ranged from developing marketing, corporate, pricing and competitive strategy to M&A and optimizing manufacturing operations. Mr. Basten holds degrees in Applied Physics (Delft University of Technology, Netherlands) and
Economics & Corporate Management (ENSPM, France).
Ingrid Joerg
. Ms. Joerg has served as President of our
Aerospace and Transportation business unit since June 2015. Previously, Ms. Joerg served as Chief Executive Officer of Aleris Rolled Products Europe. Prior to joining Aleris, Ms. Joerg held leadership positions with Alcoa where she was
President of its European and Latin American Mill Products business unit, and commercial positions with Amag Austria. Ingrid Joerg received a Masters Degree in Business Administration from the University of Linz, Austria.
Paul Warton
. Mr. Warton has served as President of our Automotive Structures & Industry business unit since
January 2011, and previously held the same role at Alcan Engineered Products since November 2009. Mr. Warton joined Alcan Engineered Aluminum Products in November 2009. Following manufacturing, sales and management positions in the automotive
and construction industries, he spent 17 years managing aluminium extrusion companies across Europe and in China. He has held the positions of President Sapa Building Systems & President Sapa North Europe Extrusions during the integration
process with Alcoa soft alloy extrusions. Mr. Warton served on the Building Board of the European Aluminium Association (EAA) and was Chairman of the EAA Extruders Division. He holds an MBA from London Business School.
Jack Clark
. Mr. Clark has served as our Senior Vice President Manufacturing Excellence and Chief Technical Officer since
October 2016. In this role, Mr. Clark is responsible for research and technology at Constellium and supervises all EHS, Lean Continuous Improvement activities as well as Engineering, Reliability and CAPEX planning and execution. Prior to
joining Constellium, Mr. Clark was Senior Vice President and Chief Technical Officer of Novelis. Mr. Clark graduated from Purdue University in Engineering and has more than 30 years of industry experience with Alcoa and Novelis on
three continents.
Philip Ryan Jurkovic
. Mr. Jurkovic has served as our Senior Vice President and Chief Human Resources
Officer since November 2016. Prior to joining Constellium, Mr. Jurkovic was Senior Vice President and Chief Human Resources Officer of Algeco Scotsman. He started his career as a financial analyst before taking on various HR leadership roles in
Europe, Asia and the U.S. with United Technologies and Novelis. Mr. Jurkovic has a BS from Allegheny College and an MBA from Purdue University.
Nicolas Brun
. Mr. Brun has served as our Senior Vice President, Public Affairs and Communications since September 2017 and
was previously our Vice President, Communications since January 2011. He previously held the same role at Alcan Engineered Products since June 2008. From 2005 through June 2008, Mr. Brun served in the roles of Vice President, Communications for
Thales Alenia Space and also as Head of Communications for Thales Space division. Prior to 2005, Mr. Brun held senior global communications
-86-
positions as Vice President External Communications with Alcatel, Vice President Communications Framatome ANP/AREVA, and with the Carlson Wagonlit Travel Group. Mr. Brun is currently
President of Constellium Neuf-Brisach SAS since January 1, 2015. Mr. Brun attended University of
Paris-La
Sorbonne and received a degree in economics. He has a masters degree in corporate
communications from Ecole Française des Attachés de Presse and a certificate in marketing management for distribution networks from the Ecole Supérieure de Commerce in Paris.
Jeremy Leach
. Mr. Leach has served as our Senior Vice President and Group General Counsel and Secretary to the Board of
Constellium since January 2011 and previously was Vice President and General Counsel at Alcan Engineered Products. Mr. Leach joined Pechiney in 1991 from the international law firm Richards Butler (now Reed Smith). Prior to becoming General
Counsel at Alcan Engineered Products, he was the General Counsel of Alcan Packaging and held various senior legal positions in Rio Tinto, Alcan and Pechiney. He has been admitted in a number of jurisdictions, holds a law degree from Oxford
University (MA Jurisprudence) and an MBA from the London Business School.
Non-Executive
Director Compensation
For 2017, each of our
non-executive
directors was paid an annual retainer of 60,000 and received
2,000 for each meeting of the board of directors they attended in person and 1,000 for each meeting they attended by telephone. In addition, the Chairman of the audit committee received an annual retainer of 15,000, and the
Chairman of each of the human resources and remuneration, the environment, health and safety and the nominating/governance committees received an annual retainer of 8,000.
Mr. Evans, as Chairman of the board of directors, a position to which he was appointed on December 6, 2012, was paid an additional
60,000 per year for his services.
In addition, on June 15, 2017, our
non-executive
directors received a grant of restricted stock units (RSUs) having a grant date fair value equal to $50,000 for the Chairman of the Board and $40,000 for each other
non-executive
director.
The RSUs vest in equal installments on each of the first and second anniversaries of the grant date, subject to the recipients
continuous service on the Board through the applicable anniversary.
The directors of the Board have not entered into any service
contracts with the Company that provide for benefits upon termination of employment.
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The following table sets forth the remuneration due in respect of our 2017 fiscal year to our
non-executive
directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Annual
Director
Fees
|
|
|
Board/
Committee
Attendance
Fees
|
|
|
Equity
Award 2017
Grant
(1)
|
|
|
Total
|
|
Richard B. Evans
|
|
|
128,000
|
|
|
|
29,000
|
|
|
|
44,780
|
|
|
|
201,780
|
|
Guy Maugis
|
|
|
68,000
|
|
|
|
21,000
|
|
|
|
35,824
|
|
|
|
124,824
|
|
Philippe Guillemot
|
|
|
60,000
|
|
|
|
23,000
|
|
|
|
35,824
|
|
|
|
118,824
|
|
Michiel Brandjes
|
|
|
60,000
|
|
|
|
20,000
|
|
|
|
35,824
|
|
|
|
115,824
|
|
Werner P. Paschke
|
|
|
75,000
|
|
|
|
24,000
|
|
|
|
35,824
|
|
|
|
134,824
|
|
Peter F. Hartman
|
|
|
68,000
|
|
|
|
19,000
|
|
|
|
35,824
|
|
|
|
122,824
|
|
John Ormerod
|
|
|
60,000
|
|
|
|
32,000
|
|
|
|
35,824
|
|
|
|
127,824
|
|
Lori A. Walker
|
|
|
60,000
|
|
|
|
28,000
|
|
|
|
35,824
|
|
|
|
123,824
|
|
Martha Brooks
|
|
|
60,000
|
|
|
|
31,000
|
|
|
|
35,824
|
|
|
|
126,824
|
|
Nicolas A. Manardo
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
639,000
|
|
|
|
227,000
|
|
|
|
331,372
|
|
|
|
1,197,372
|
|
(1)
|
The amount reported in this column represents the grant date fair value of RSU awards granted on June 15, 2017, computed in accordance with IFRS 2. On June 15, 2017, Mr. Evans was granted 7,353 RSUs and
all other
non-executive
directors, except for Mr. Manardo, were granted 5,882 RSUs each. The RSUs vest 50% on each of the first two anniversaries of the date of the grant date, subject to continued
service. Amounts have been converted to Euros based on an exchange rate of 0.8956 Dollars to Euros to reflect the equivalent of $ 50,000 for the Chairman and $ 40,000 for each other
non-executive
directors,
except for Mr. Manardo. See also Note 28 of the Consolidated Financial Statements.
|
(2)
|
Mr. Manardo did not receive any fees for his services.
|
Officer Compensation
The table below sets forth the remuneration paid during our 2017 fiscal year to certain of our executive officers. They include Jean-Marc
Germain, our Chief Executive Officer, Peter Matt, our Chief Financial Officer, Paul Warton, our President Automotive Structures & Industry, Ingrid Joerg, our President Aerospace & Transportation, Arnaud Jouron, our President
Packaging & Automotive Rolled Products until September 30, 2017, and Peter Basten, our President Packaging & Automotive Rolled Products as of October 1, 2017. The remuneration information for our executive officers other
than our Chief Executive Officer Jean-Marc Germain is presented on an aggregate basis in the row Other Executive Officers in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base
Salary
Paid
|
|
|
Bonus
EPA
Paid
(1)
|
|
|
Equity
Awards
(2)
|
|
|
Pension
(3)
|
|
|
Other
Compensation
(4)
|
|
|
Total
(5)
|
|
Jean-Marc Germain
|
|
|
862,681
|
|
|
|
505,127
|
|
|
|
3,329,186
|
|
|
|
21,556
|
|
|
|
24,405
|
|
|
|
4,742,955
|
|
Other Executive Officers (Peter Matt, Paul Warton, Ingrid Joerg, Arnaud Jouron, and Peter
Basten)
|
|
|
2,334,023
|
|
|
|
1,962,713
|
|
|
|
3,049,079
|
|
|
|
224,487
|
|
|
|
852,879
|
|
|
|
8,423,181
|
|
(1)
|
Due to his departure and as part of his termination arrangement with the Company, Mr. Jouron received both an annual bonus under the EPA in respect of 2016 and an annual bonus under the EPA in respect of 2017 (with
applicable performance objectives for the latter deemed satisfied at target (100%) level).
|
(2)
|
The amount reported as Equity Awards represents the grant date fair value of the awards granted in 2017, computed
in accordance with IFRS 2. Jean-Marc Germain was granted the following in July 2017: (a) 216,943 performance-based restricted stock units (PSUs); and (b) 110,667 RSUs. Our other executive
|
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|
officers listed were granted, in the aggregate, 198,690 PSUs and 101,356 RSUs. The PSUs vest on the third anniversary of the date of grant, subject to continued service and certain market-related
performance conditions being satisfied, and have a vesting range of 0 - 200% (based on actual performance). RSUs vest 100% on the third anniversary of the date of grant, subject to continued service. See hereafter 2017 Long-Term Incentive
Plan for description of market-related performance conditions. See also Note 28 of the Consolidated Financial Statements for more information.
|
(3)
|
Pension represents amounts contributed by the Company during the 2017 fiscal year to the U.S. and Swiss governments as part of the employer overall pension requirements apportioned to the base salary of these
individuals.
|
(4)
|
Other compensation for Jean-Marc Germain includes car allowance, parking and premium for health and life insurances. Other compensation for the Ms. Joerg as well as for the Messrs. Matt, Warton, Jouron and Basten
includes car allowance, lunch allowance, tax services and premiums for health care. Due to his departure, Mr Jouron received a
one-time
payment of approximately 774,000, consisting of severance payment,
outplacement, relocation, tax services and payout of unused vacation.
|
(5)
|
The total remuneration paid to such executive officers, including Mr. Germain and Mr. Matt, during our 2017 fiscal year amounted to 6,787,871, consisting of (i) an aggregate base salary of
3,196,704, (ii) aggregate short-term incentive compensation of 2,467,840, and (iii) aggregate other compensation in an amount equal to 877,284. The total amount contributed to the value of the pensions for such executive
officers was 246,043. These amounts for individuals who were not in an executive officer function for all of 2017 are prorated.
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Below is a brief description of the compensation and benefit plans in which our executive officers participate.
2017 Employee Performance Award Plan
Each of our executive officers, among other selected employees, participates in the Employee Performance Award Plan (which we refer to as the
EPA). The EPA is an annual cash bonus plan intended to provide performance-related award opportunities to employees contributing substantially to the success of Constellium. Under the EPA, participants are provided opportunities to earn
cash bonuses (expressed as a percentage of base salary, and paid in the year following the performance period) based on the level of achievement of certain Financial and EHS Objectives as approved by our human resources and remuneration committee
for the applicable annual performance period, as well as Individual Objectives established by the applicable participants supervisor (as described below).
The three components of bonuses awarded under the EPA for 2017 had the following weights:
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Financial Objectives 70%;
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EHS Objective 10%; and
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Individual Objectives 20%.
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The Financial Objectives are calculated on an annual basis
and take into account two components as defined and reported by the Companys corporate controller: Adjusted EBITDA (50%) and Trade Working Capital Days (20%). To promote synergies throughout the Company, the EPA is designed to encourage
individual plants, business units and our corporate division to work closely together to achieve common strategic, operating and financial goals. Therefore, the Financial Objectives are defined, depending on the level of the employee, on one or more
financial results of either Constellium Group, business unit, operating unit or site, or a combination of some or all of the foregoing.
The EHS Objective is measured on an annual basis for Constellium and its subsidiaries. In case of a fatality or type I (major) environmental
event, the payout for the EHS Objective is zero, both for employees of the concerned business unit and the operating unit/site and for employees on Group level. This substantial impact on EPA payout reflects the fact that the safety of our employees
is our number one priority.
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The Individual Objectives are evaluated annually via the Performance Management Program, and
achievement against these objectives is used to determine the percentage attained of the Individual Objectives target.
The payout scale
defines the performance levels and resulting payouts. Achieving target performance results in a payout at 100% of the target amount. Overall payout can range from 0% to 150% of the target amount.
The threshold performance level for the Financial Objectives is typically set at 80% of the target level. If threshold performance is not
achieved, there is no bonus payout. Between threshold performance and target performance, payouts increase linearly from 0% to 100%. With regard to Adjusted EBITDA, the maximum performance level is set at 110% of the target level. Achieving 110% of
the target level results in a payout of 150%, with linear interpolation (meaning each percentage point higher than 100% adds additional payout of 5%). With regard to Trade Working Capital Days, achieving performance higher than target level for one
day results in a payout of 150%.
The Financial Objectives for corporate functions are capped at the highest payout in one of the business
units.
The EPA 2017 was applicable to approximately 1,200 employees worldwide. For its payout in 2018, the following results were earned
by our employees:
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Financial Objectives
: The payout ranged from 41% - 142%.
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EHS Objective
: The payout ranged from 0% to 150%.
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Individual Objectives
: The payout ranged from 0% to 150%. The payout for Mr. Germain was 130%.
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Constellium N.V. 2013 Equity Incentive Plan
The Company adopted the Constellium N.V. 2013 Equity Incentive Plan (the Constellium 2013 Equity Plan). The principal purposes of
this plan are to focus directors, officers and other employees and consultants on business performance to help create shareholder value, to encourage innovative approaches to the business of the Company and to encourage ownership of our ordinary
shares by directors, officers and other employees and consultants. It is also intended to recognize and retain our key employees and high potentials needed to sustain and ensure our future and business competitiveness.
The Constellium 2013 Equity Plan provides for a variety of awards, including incentive stock options (within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the Code) (ISOs), nonqualified stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, performance units, other
stock-based awards or any combination of those awards. The Constellium 2013 Equity Plan provides that awards may be made under the plan for 10 years. We have reserved a total of 7,292,291 ordinary shares for issuance under the Constellium 2013
Equity Plan, subject to adjustment in certain circumstances to prevent dilution or enlargement.
Administration
The Constellium 2013 Equity Plan is administered by our human resources and remuneration committee. The board of directors or the human
resources and remuneration committee may delegate administration to one
or more members of our board of directors. The human resources and remuneration
committee has the power to interpret the Constellium 2013 Equity Plan and to adopt rules for the administration, interpretation and application of the Constellium 2013 Equity Plan according to its terms. The human resources and remuneration
committee determines the number of our ordinary shares that will be subject to each award granted under the
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Constellium 2013 Equity Plan and may take into account the recommendations of our senior management in determining the award recipients and the terms and conditions of such awards. Subject
to certain exceptions as may be required pursuant to
Rule 16b-3
under the Exchange Act, if applicable, our board of directors may, at any time and from time, to time exercise any and all rights and duties
of the human resources and remuneration committee under the Constellium 2013 Equity Plan.
Eligibility
Certain directors, officers, employees and consultants are eligible to be granted awards under the Constellium 2013 Equity Plan. Our human
resources and remuneration committee determines:
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which directors, officers, employees and consultants are to be granted awards;
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the type of award that is granted;
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the number of our ordinary shares subject to the awards; and
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the terms and conditions of such awards, consistent with the Constellium 2013 Equity Plan.
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Our human resources and remuneration committee has the discretion, subject to the limitations of the Constellium 2013 Equity Plan and
applicable laws, to grant awards under the plan (except that only our employees may be granted ISOs).
Stock Options
Subject to the terms and provisions of the Constellium 2013 Equity Plan, stock options to purchase our ordinary shares may be granted to
eligible individuals at any time and from time to time as determined by our human resources and remuneration committee. Stock options may be granted as ISOs, which are intended to qualify for favorable treatment to the recipient under U.S. federal
tax law, or as nonqualified stock options, which do not qualify for this favorable tax treatment. Subject to the limits provided in the Constellium 2013 Equity Plan, our human resources and remuneration committee has the authority to determine the
number of stock options granted to each recipient. Each stock option grant is evidenced by a stock option agreement that specifies the stock option exercise price, whether the stock options are intended to be incentive stock options or nonqualified
stock options, the duration of the stock options, the number of shares to which the stock options pertain, and such additional limitations, terms and conditions as our human resources and remuneration committee may determine.
Our human resources and remuneration committee determines the exercise price for each stock option granted, except that the stock option
exercise price may not be less than 100% of the fair market value of an ordinary share on the date of grant. All stock options granted under the Constellium 2013 Equity Plan expire no later than 10 years from the date of grant. Stock options are
nontransferable except by will or by the laws of descent and distribution or, in the case of nonqualified stock options, as otherwise expressly permitted by our human resources and remuneration committee. The granting of a stock option does not
accord the recipient the rights of a shareholder, and such rights accrue only after the exercise of a stock option and the registration of ordinary shares in the recipients name.
Stock Appreciation Rights
Our human resources and remuneration committee in its discretion may grant SARs under the Constellium 2013 Equity Plan. SARs may be
tandem SARs, which are granted in conjunction with a stock option, or free-standing SARs, which are not granted in conjunction with a stock option. A SAR entitles the holder to receive from us, upon exercise, an amount equal
to the excess, if any, of the aggregate fair market value of a specified number of our ordinary shares to which such SAR pertains over the aggregate exercise price for the underlying shares. The exercise price of a free-standing SAR may not be less
than 100% of the fair market value of an ordinary share on the date of grant.
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A tandem SAR may be granted at the grant date of the related stock option. A tandem SAR may be
exercised only at such time or times and to the extent that the related stock option is exercisable and has the same exercise price as the related stock option. A tandem SAR terminates or is forfeited upon the exercise or forfeiture of the related
stock option, and the related stock option terminates or is forfeited upon the exercise or forfeiture of the tandem SAR.
Each SAR is
evidenced by an award agreement that specifies the exercise price, the number of ordinary shares to which the SAR pertains and such additional limitations, terms and conditions as our human resources and remuneration committee may determine. We may
make payment of the amount to which the participant exercising the SARs is entitled by delivering ordinary shares, cash or a combination of stock and cash as set forth in the award agreement relating to the SARs. SARs are not transferable except by
will or the laws of descent and distribution or, with respect to SARs that are not granted in tandem with a stock option, as expressly permitted by our human resources and remuneration committee.
Restricted Stock
The
Constellium 2013 Equity Plan provides for the award of ordinary shares that are subject to forfeiture and restrictions on transferability to the extent permitted by applicable law and as set forth in the Constellium 2013 Equity Plan, the applicable
award agreement and as may be otherwise determined by our human resources and remuneration committee. Except for these restrictions and any others imposed by our human resources and remuneration committee to the extent permitted by applicable law,
upon the grant of restricted stock, the recipient will have rights of a shareholder with respect to the restricted stock, including the right to vote the restricted stock and to receive all dividends and other distributions paid or made with respect
to the restricted stock on such terms as set forth in the applicable award agreement. During the restriction period set by our human resources and remuneration committee, the recipient is prohibited from selling, transferring, pledging, exchanging
or otherwise encumbering the restricted stock to the extent permitted by applicable law.
Restricted Stock Units
The Constellium 2013 Equity Plan authorizes our human resources and remuneration committee to grant RSUs. RSUs are not ordinary shares and do
not entitle the recipient to the rights of a shareholder, although the award agreement may provide for rights with respect to dividend equivalents. The recipient may not sell, transfer, pledge or otherwise encumber RSUs granted under the Constellium
2013 Equity Plan prior to their vesting. RSUs may be settled in cash, ordinary shares or a combination thereof as provided in the applicable award agreement, in an amount based on the fair market value of an ordinary share on the settlement date.
Performance-Based Restricted Stock Units
The Constellium 2013 Equity Plan provides for the award of PSUs that are valued by reference to a designated amount of cash or to property
other than ordinary shares. The payment of the value of a PSU is conditioned upon the achievement of performance goals set by our human resources and remuneration committee in granting the PSU and may be paid in cash, ordinary shares, other property
or a combination thereof. Any terms relating to the termination of a participants employment will be set forth in the applicable award agreement.
Other Stock-Based Awards
The Constellium 2013 Equity Plan also provides for the award of ordinary shares and other awards that are valued by reference to our ordinary
shares, including unrestricted stock, dividend equivalents and convertible debentures.
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Performance Goals
The Constellium 2013 Equity Plan provides that performance goals may be established by our human resources and remuneration committee in
connection with the grant of any award under the Constellium 2013 Equity Plan.
Termination without Cause Following a Change in Control
Upon a termination of employment of a plan participant occurring upon or during the two years immediately following the date of a
change in control (as defined in the Constellium 2013 Equity Plan) by the Company without cause (as defined in the Constellium 2013 Equity Plan), unless otherwise provided in the applicable award agreement, (i) all
awards held by such participant will vest in full (in the case of any awards that are subject to performance goals, at target) and be free of restrictions, and (ii) any option or SAR held by the participant as of the date of the change in
control that remains outstanding as of the date of such termination of employment may thereafter be exercised until (A) in the case of ISOs, the last date on which such ISOs would otherwise be exercisable or (B) in the case of nonqualified
options and SARs, the later of (x) the last date on which such nonqualified option or SAR would otherwise be exercisable and (y) the earlier of (I) the second anniversary of such change in control and (II) the expiration of the
term of such nonqualified option or SAR.
Amendments
Our board of directors or our human resources and remuneration committee may amend, alter or discontinue the Constellium 2013 Equity Plan, but
no amendment, alteration or discontinuation will be made that would materially impair the rights of a participant with respect to a previously granted award without such participants consent, unless such an amendment is made to comply with
applicable law, including, without limitation, Section 409A of the Code, stock exchange rules or accounting rules. In addition, no such amendment will be made without the approval of the Companys shareholders to the extent such approval
is required by applicable law or the listing standards of the applicable stock exchange.
2017 Long-Term Incentive Plan
In 2017, our human resources and remuneration committee approved a redesign of our Long-Term Incentive Plan (which we refer to as the
2017 LTIP). For our executive officers, as well as for other selected employees, awards consisted of PSUs and RSUs. These awards were granted on July 31, 2017, and are subject to a three-year cliff vesting period, the
participants continued service through the vesting, and for PSUs, certain market-related performance conditions being satisfied. For other selected employees, awards consisted of RSUs only.
With regard to PSUs, for the purposes of computing the Constellium Total Shareholder Return (the Constellium TSR), (i) the
stock price at the beginning of the performance period is deemed to be the average closing share price for the 20 trading days preceding the grant date, and (ii) the stock price at the end of the performance period is deemed to be the
average closing share price for the 20 trading days preceding the third anniversary of the grant date. Constellium measures itself against a peer group consisting of the S&P 400 Materials Index and the S&P 600 Materials Index. The
20-day
average starting point of a Constellium share for the July 31, 2017 grant date is $7.83. The level of achievement shall be determined by comparing the Constellium TSR to the average of the TSRs of the
two indices indicated above as follows:
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If the Constellium TSR is below the average of the two median TSRs, no PSUs will vest.
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If the Constellium TSR is at the average of the two median TSRs, 100% of the target PSUs will vest.
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If the Constellium TSR is at or above the average of the two 75th percentile TSRs, 200% of the target PSUs will vest.
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If the Constellium TSR is between the average of the two median TSRs and the average of the two 75th percentile TSRs, then the number of PSUs will be determined by linear interpolation on a straight line basis.
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If the Constellium TSR is negative, the number of PSUs that vest will be capped at 100% of target.
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For the purposes of the 2017 LTIP, certain thresholds of the Change in Control definition and vesting criteria in the Constellium 2013 Equity
Plan were modified. For more information, see Exhibit 10.7 of our Registration Statement on Form F-3ASR filed on October 30, 2017, File No. 333-221221.
Employment and Service Arrangements
Constellium is party to employment or services agreements with each of its officers. In general, the Company may terminate its officers
employment or services for cause upon advance written notice, without compensation, for certain acts of the officer. Each officer may terminate his or her employment at any time upon advance written notice to Constellium. In the event
that the officers employment or services is terminated by Constellium without cause or, in the case of certain executives, by him for good reason, the officer is entitled to certain payments as provided by applicable laws or
collective bargaining agreements or as otherwise provided under the applicable employment or services agreements. Except for the foregoing, our officers are not entitled to any severance payments upon the termination of their employment or services
for any reason.
Under such employment and services agreements, each of the officers has also agreed not to engage or participate in any
business activities that compete with Constellium or solicit its employees or customers for (depending on the officer) up to two years after the termination of the employment or services. The officers have further agreed not to use or disseminate
any confidential information concerning Constellium as a result of performing their duties or using Constellium resources during their employment or services.
Contracts with certain of our executive officers are described below.
Employment Agreement with Jean-Marc Germain
The Company entered into an employment agreement with Jean-Marc Germain, dated April 25, 2016. The employment agreement with
Mr. Germain provides for an annual base salary of $950,000 per year until March 31, 2017, which amount was raised to $980,000 per year as of April 1, 2017, a target annual bonus of 120% of base salary, and a maximum annual bonus of
180% of base salary. In addition, as described above, Mr. Germain was granted the following equity awards in July 2017: (1) 216,943 PSUs and (2) 110,667 RSUs. The PSUs vest on the third anniversary of the grant date, subject to continued
service and certain market-related performance conditions being satisfied, and have a vesting range of 0-200% (based on actual performance). RSUs vest 100% on the third anniversary of the date of grant, subject to continued service.
If Mr. Germain is terminated by the Company without cause or he resigns for good reason (each as defined in the
employment agreement), he will be entitled to receive, subject to his execution and
non-revocation
of a general release of claims, cash severance in an amount equal to the product of (1) one (two, if such
termination occurs within the
12-month
period following a change in control (as defined in the employment agreement)) multiplied by (2) the sum of his base salary and target annual bonus,
which severance will be payable over the
12-month
(24-month,
in the case of a termination within the
12-month
period following a
change in control) period following his termination of employment. The employment agreement also includes a perpetual confidentiality covenant, a perpetual mutual
non-disparagement
covenant, and
12-month
post-termination
non-competition
and
non-solicitation
covenants.
Employment Agreement with Peter Matt
The Company entered into an employment agreement with Peter Matt, dated as of October 26, 2016. The employment agreement with
Mr. Matt provides for an annual base salary of $600,000 (for 2017), a target annual
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bonus of 90% of base salary, and a maximum annual bonus of 135% of base salary. In addition, Mr. Matt was granted the following equity awards in July 2017: (1) 71,946 PSUs and (2) 36,701 RSUs.
The PSUs vest on the third anniversary of the grant date, subject to continued service and certain market-related performance conditions being satisfied, and have a vesting range of 0-200% (based on actual performance). RSUs vest 100% on the third
anniversary of the date of grant, subject to continued service.
If Mr. Matt is terminated by the Company without cause
or he resigns for good reason (each as defined in the employment agreement), he will be entitled to receive, subject to his execution and
non-revocation
of a general release of claims,
(1) cash severance in an amount equal to the sum of his base salary and target annual bonus and (2) six months of continued welfare benefits at the Companys expense. The employment agreement also includes a perpetual confidentiality
covenant and
12-month
post-termination
non-competition
and
non-solicitation
covenants. If Mr. Matts employment is
terminated without cause, the Company will also offer Mr. Matt an additional amount equal to 50% of the sum of his base salary, target annual bonus, and vacation pay in consideration for his agreeing to not compete.
Our board of directors (the Board) currently consists of 11
directors, less than a majority of whom are citizens or residents of the United States. The Board held eight meetings in 2017.
We
currently have a
one-tier
Board consisting of one Executive Director and ten
Non-Executive
Directors (each, a Director). For a listing of the current terms
of service of our Directors, see A. Directors and Senior Management above. Under Dutch law, the Board is responsible for our policy making and
day-to-day
management. The
Non-Executive
Directors supervise and provide guidance to the Executive director. None of our
Non-Executive Directors have an employment arrangement with the Company. Each Director owes a duty to us to properly perform the duties assigned to him/her and to act in our corporate interest. Under Dutch law, the corporate interest extends to the
interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers.
The Management and
Supervision Act (
Wet bestuur en toezicht
) strives for a balanced composition of management and supervisory boards of large companies, such as Constellium, to the effect that at least 30% of the positions on the management and
supervisory boards of such companies were held by women and at least 30% by men. There is no legal sanction if the composition of such companys board is not balanced in accordance with the Act. An appointment contrary to these rules is
therefore not null and void. However, in such case, the company has to explain any noncompliance with the 30% criteria in its annual report. The explanation has to include the reasons for noncompliance and the actions the company intended to take in
order to comply in the future.
Our Articles of Association provide that our shareholders acting at a general meeting (a General
Meeting) appoint directors upon a binding nomination by the Board. The General Meeting may at all times overrule the binding nature of such nomination by a resolution adopted by a majority of at least
two-thirds
of the votes cast, provided that such majority represents more than 50% of our issued share capital. If the binding nomination is overruled, the
Non-Executive
Directors may then make a new nomination. If such a nomination has not been made or has not been made in time, this shall be stated in the notice and the General Meeting shall be free to appoint a director in its discretion. Such a resolution of the
General Meeting must be adopted by at least
two-thirds
of the votes cast, provided that such majority represents more than 50% of our issued share capital.
The Directors may be suspended or dismissed at any time by the General Meeting. A resolution to suspend or dismiss a Director must be adopted
by at least
two-thirds
of the votes cast, provided that such majority represents more than 50% of our issued share capital. If, however, the proposal to suspend or dismiss the Directors is made by the Board,
the proposal must be adopted by a simple majority of the votes cast at the General Meeting. The Executive Director can at all times be suspended by the Board.
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Director Independence
As a foreign private issuer under the NYSE rules, we are not required to have independent Directors on our Board, except to the extent that our
audit committee is required to consist of independent Directors. However, our Board has determined that, under current NYSE listing standards regarding independence (which we are not currently subject to), and taking into account any applicable
committee standards, as of December 31, 2017, Messrs. Evans, Brandjes, Guillemot, Hartman, Maugis, Ormerod, Paschke, Manardo, Ms. Walker and Ms. Brooks are deemed independent directors. Under these standards, Mr. Germain is not
deemed independent as he serves as the CEO to the Company.
Committees
Audit Committee
As
of December 31, 2017, our audit committee consisted of the following independent directors under the NYSE requirements: Werner Paschke (Chair), Martha Brooks, Philippe Guillemot, John Ormerod and Lori Walker. Our Board has determined that at
least one member is an audit committee financial expert as defined by the SEC and also meets the additional criteria for independence of audit committee members set forth in Rule
10A-3(b)(1)
under
the Exchange Act. The audit committee held eight meetings in 2017.
The principal duties and responsibilities of our audit committee are
to oversee and monitor the following:
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our financial reporting process and internal control system;
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the integrity of our consolidated financial statements;
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the independence, qualifications and performance of our independent registered public accounting firm;
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the performance of our internal audit function; and
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our compliance with legal, ethical and regulatory matters.
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Human Resources and
Remuneration Committee
As of December 31, 2017, our human resources and remuneration committee consisted of four directors:
Peter Hartman (Chair), Martha Brooks, Richard Evans and Guy Maugis. The human resources and remuneration committee held five meetings in 2017.
The principal duties of our human resources and remuneration committee are as follows:
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to review, evaluate and make recommendations to the full Board regarding our compensation policies and establish performance-based incentives that support our long-term goals, objectives and interests;
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to review and approve the compensation of our Chief Executive Officer, all employees who report directly to our Chief Executive Officer and other members of our senior management;
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to review and approve the departure conditions of employees who reported directly to our CEO and who have left Constellium;
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to review and approve compensation structure and level of any new employee who reports directly to our CEO;
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to review and make recommendations to the Board with respect to our incentive compensation plans and equity-based compensation plans;
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to set and review the compensation of and reimbursement policies for members of the Board;
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to provide oversight concerning selection of officers, management succession planning, expense accounts, indemnification and insurance matters, and separation packages; and
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to provide regular reports to the Board and take such other actions as are necessary and consistent with our Articles of Association.
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Nominating/Governance Committee
As of December 31, 2017, our nominating/governance committee consisted of three directors: Richard Evans (Chair), Michiel Brandjes and
John Ormerod. The nominating/governance committee held four meetings in 2017.
The principal duties and responsibilities of the
nominating/governance committee are as follows:
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to establish criteria for Board and committee membership and recommend to our Board proposed nominees for election to the Board and for membership on committees of our Board; and
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to make recommendations to our Board regarding board governance matters and practices; and
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to review conflicts of interest, related party matters and director independence.
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Environment, Health and Safety Committee
As of December 31, 2017, our environment, health and safety committee consisted of three directors: Guy Maugis (Chair), Philippe Guillemot
and Lori Walker. The environment, health and safety committee held two meetings in 2017.
The principal duties and responsibilities of the
environment, health and safety committee are to review and monitor the following:
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the Companys policies, practices and programs with respect to the management of EHS affairs, including sustainability;
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the adequacy of the Companys policies, practices and programs for ensuring compliance with EHS laws and regulations; and
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any significant EHS litigation and regulatory proceedings in which the Company is or may become involved.
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As of December 31, 2017, we employed approximately 12,000 employees,
including approximately 1,500 fixed-term contractors as well as temporary employees. 90% of our employees were engaged in production and maintenance activities and approximately 10% were employed in support functions. Approximately 38% of our
employees were employed in France, 26% in the United States, 20% in Germany, 7% in Switzerland, and 9% in Eastern Europe and other regions, which percentages are comparable to the distribution of employees geographically in 2016.
A vast majority of
non-U.S.
employees and approximately 49% of U.S. employees are covered by
collective bargaining agreements. These agreements are negotiated on site, regionally or on a national level, and are of different durations.
Information with respect to share ownership of members of our board of
directors and our senior management is included in Item 7. Major Shareholders and Related Party Transactions.
Equity Incentive Plans
The Company adopted the Constellium 2013 Equity Plan as well as the 2017 LTIP under which certain of our directors, officers,
employees, and consultants are eligible to receive equity awards. See Constellium N.V. 2013 Equity Incentive Plan and 2017 Long-Term Incentive Plan above.
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Item 7. Major Shareholders and Related Party Transactions
The following table sets forth the major shareholders of Constellium
N.V. as known by us or ascertained from public filings made by our major shareholders (each person or group of affiliated persons who is known to be the beneficial owner of more than 5% of ordinary shares) and the number and percentage of ordinary
shares owned by each such shareholder, in each case as of March 9, 2018.
Under the rules of the SEC, a person is deemed to be a
beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of such security, or investment power, which includes the power to dispose of or
to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to
be a beneficial owner of such securities as to which such person has voting or investment power.
The beneficial ownership percentages in
this table have been calculated on the basis of the total number of Class A ordinary shares.
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Name of beneficial owner
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Number of
Class A
ordinary shares
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Beneficial
ownership
percentage
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Caisse des Dépôts (f/k/a Caisse des Dépôts et Consignations), Bpifrance
Participations S.A., Bpifrance S.A. (f/k/a
BPI-Groupe
(bpifrance)), EPIC Bpifrance (f/k/a EPIC
BPI-Groupe)
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16,393,903
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(1)
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12.19
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%
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Directors and Senior Management
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Richard B. Evans
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180,260
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(2)
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*
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Guy Maugis
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7,582
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(3)
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*
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Philippe Guillemot
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11,990
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(4)
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*
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Werner P. Paschke
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76,990
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(5)
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*
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Michiel Brandjes
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|
|
25,000
|
(6)
|
|
|
*
|
|
Peter F. Hartman
|
|
|
9,807
|
(7)
|
|
|
*
|
|
John Ormerod
|
|
|
14,807
|
(8)
|
|
|
*
|
|
Lori A. Walker
|
|
|
9,807
|
(9)
|
|
|
*
|
|
Martha Brooks
|
|
|
4,425
|
(10)
|
|
|
*
|
|
Nicolas A. Manardo
|
|
|
0
|
(11)
|
|
|
*
|
|
Jean-Marc Germain
|
|
|
110,000
|
(12)
|
|
|
|
|
Peter R. Matt
|
|
|
75,000
|
(13)
|
|
|
*
|
|
Ingrid Joerg
|
|
|
70,000
|
(14)
|
|
|
*
|
|
Paul Warton
|
|
|
239,408
|
(15)
|
|
|
*
|
|
Peter Basten
|
|
|
164,423
|
(16)
|
|
|
*
|
|
*
|
Represents beneficial ownership of less than 1%.
|
(1)
|
This information is based on a Schedule 13D/A filed with the SEC on November 8, 2017. Bpifrance
Participations S.A. (Bpifrance) is a French public investment fund specializing in the business of equity financing via direct investments or fund of funds and a wholly owned subsidiary of Bpifrance S.A. , a French financial institution
(Bpifrance S.A.). Caisse des Dépôts (CDC) and EPIC Bpifrance (EPIC) each hold 50% of the share capital of Bpifrance S.A. and jointly control Bpifrance S.A. CDC is principally engaged in the business
of long-term investments. EPIC is principally engaged in the business of banking finance. Bpifrance holds directly 16,393,903 ordinary shares. As of the date hereof, neither Bpifrance S.A., CDC nor EPIC holds any ordinary shares directly. Bpifrance
S.A. may be deemed to be the beneficial owner of 16,393,903 ordinary shares, indirectly through its sole ownership of Bpifrance. CDC and EPIC may be deemed to be the beneficial owners of 16,393,903 ordinary shares, indirectly through their joint
ownership
|
-98-
|
and control of Bpifrance S.A. The principal address for CDC is 56, rue de Lille, 75007 Paris, France and for Bpifrance, Bpifrance S.A. and EPIC is
27-31
avenue du Général Leclerc 94700 Maisons-Alfort, France.
|
(2)
|
Consists of 180,260 Class A ordinary shares held indirectly by Mr. Evans through the Evans Family Inter Vivos Revocable Trust. Excludes the remaining portions of previous grants: 9,207 Class A ordinary
shares underlying unvested restricted stock units (RSUs) that will vest on June 15, 2018 and 3,677 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(3)
|
Consists of 7,582 Class A ordinary shares held directly by Mr. Maugis. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(4)
|
Consists of 11,990 Class A ordinary shares held directly by Mr. Guillemot. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(5)
|
Consists of 76,990 Class A ordinary shares held directly by Mr. Paschke. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(6)
|
Consists of 25,000 Class A ordinary shares held directly by Mr. Brandjes. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(7)
|
Consists of 9,807 Class A ordinary shares held directly by Mr. Hartman. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(8)
|
Consists of 14,807 Class A ordinary shares held by Mr. Ormerod. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on June 15,
2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(9)
|
Consists of 9,807 Class A ordinary shares held directly by Ms. Walker. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(10)
|
Consists of 4,425 Class A ordinary shares held directly by Ms. Brooks. Excludes the remaining portions of previous grants: 7,366 Class A ordinary shares underlying unvested RSUs that will vest on
June 15, 2018 and 2,941 Class A ordinary shares underlying unvested RSUs that will vest on June 15, 2019, subject to continued service.
|
(11)
|
No Class A ordinary shares are held directly by Mr. Manardo and RSUs or PSUs were granted in 2017.
|
(12)
|
Consists of 110,000 Class A ordinary shares held directly by Mr. Germain. Excludes the remaining portions of previous grants: 50,000 Class A ordinary shares underlying unvested RSUs that will vest on
August 4, 2018, subject to continued service; 100,000 Class A ordinary shares underlying unvested RSUs that will vest on August 4, 2019, subject to continued service; a target of 150,000 Class A ordinary shares underlying
unvested PSUs that could vest ranging from 0% to 300% of target on August 4, 2019, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the three-year vesting
period; 216,943 Class A ordinary shares underlying unvested PSUs that could vest ranging from 0% to 200% of target on July 31, 2020, subject to continued service and certain market-related performance conditions being satisfied at the end
of the three-year vesting period; and 110,667 Class A ordinary shares underlying unvested RSUs that will vest on July 31, 2020, subject to continued service.
|
(13)
|
Consists of 75,000 Class A ordinary shares held directly by Mr. Matt. Excludes the remaining portions
of previous grants: 15,000 Class A ordinary shares underlying unvested RSUs that will vest on November 14, 2018, subject to continued service; 80,000 Class A ordinary shares underlying unvested PSUs that could
|
-99-
|
vest ranging from 0% to 300% of target on November 14, 2019, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the
three-year vesting period; 71,946 Class A ordinary shares underlying unvested PSUs that could vest ranging from 0% to 200% of target on July 31, 2020, subject to continued service and certain market-related performance conditions being
satisfied at the end of the three-year vesting period; and 36,701 Class A ordinary shares underlying unvested RSUs that will vest on July 31, 2020, subject to continued service.
|
(14)
|
Consists of 70,000 Class A ordinary shares held directly by Ms. Joerg. Excludes the remaining portions of previous grants: 60,000 Class A ordinary shares underlying unvested PSUs that could vest ranging
from 0% to 300% of target on March 17, 2019, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the three-year vesting period; 47,214 Class A ordinary shares underlying
unvested PSUs that could vest ranging from 0% to 200% of target on July 31, 2020, subject to continued service and certain market-related performance conditions being satisfied at the end of the three-year vesting period; and 24,085
Class A ordinary shares underlying unvested RSUs that will vest on July 31, 2020, subject to continued service.
|
(15)
|
Consists of 239,408 Class A ordinary shares held directly by Mr. Warton. Excludes the remaining portions of previous grants: 20,000 Class A ordinary shares underlying unvested PSUs that could vest ranging
from 0% to 300% of target on June 15, 2018, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the three-year vesting period; 50,000 Class A ordinary shares underlying
unvested PSUs that could vest ranging from 0% to 300% of target on March 17, 2019, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the three-year vesting period; 42,170
Class A ordinary shares underlying unvested PSUs that could vest ranging from 0% to 200% of target on July 31, 2020, subject to continued service and certain market-related performance conditions being satisfied at the end of the
three-year vesting period; and 21,512 Class A ordinary shares underlying unvested RSUs that will vest on July 31, 2020, subject to continued service.
|
(16)
|
Consists of 164,423 Class A ordinary shares held directly by Mr. Basten. Excludes the remaining portions of previous grants: 20,000 Class A ordinary shares underlying unvested PSUs that could vest ranging
from 0% to 300% of target on March 17, 2018, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the three-year vesting period; 35,000 Class A ordinary shares underlying
unvested PSUs that could vest ranging from 0% to 300% of target on March 17, 2019, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during the three-year vesting period; 35,000
Class A ordinary shares underlying unvested PSUs that could vest ranging from 0% to 300% of target on August 4, 2019, subject to continued service and certain market-related performance conditions being satisfied at each anniversary during
the three-year vesting period; 31,485 Class A ordinary shares underlying unvested PSUs that could vest ranging from 0% to 200% of target on July 31, 2020, subject to continued service and certain market-related performance conditions being
satisfied at the end of the three-year vesting period; and 16,061 Class A ordinary shares underlying unvested RSUs that will vest on July 31, 2020, subject to continued service.
|
None of our principal shareholders have voting rights different from those of our other shareholders.
Over the last three years, the only significant changes of which we have been notified in the percentage ownership of our shares by our major
shareholders described above were that prior to the IPO, immediately following the completion of the purchase of the EAP Business: Apollo Funds held 51% of our ordinary shares, Rio Tinto held 39% of our ordinary shares, and Bpifrance (f/k/a FSI)
held 10% of our ordinary shares. As of the date of this Annual Report, Apollo Funds holds 0% of our ordinary shares, Rio Tinto holds 10 shares of our ordinary shares and Bpifrance holds 12.19% of our class A ordinary shares, respectively. See
Item 4. Information on the CompanyA. History and Development of the Company.
-100-
B.
|
Related Party Transactions
|
Amended and Restated Shareholders Agreement and Related Transactions
The Company, Apollo Omega, Rio Tinto and Bpifrance entered into an amended and restated shareholders agreement on May 29, 2013
(the Shareholders Agreement). The Shareholders Agreement terminated with respect to Apollo Omega and Rio Tinto in connection with certain of their respective sales of our ordinary shares described elsewhere in this Annual Report. The
Shareholders Agreement provides for, among other things, piggyback registration rights and demand registration rights for Bpifrance for so long as Bpifrance owns any of our ordinary shares.
In addition, the Shareholders Agreement provides that, except as otherwise required by applicable law, Bpifrance will be entitled to designate
for binding nomination one director to our board of directors so long as its percentage ownership interest is equal to or greater than 4% or it continues to hold all of the ordinary shares it subscribed for at the closing of the Acquisition (such
share number adjusted for the pro rata share issuance). Our directors will be elected by our shareholders acting at a general meeting upon a binding nomination by the board of directors as described in Item 6. Directors, Senior Management and
EmployeesA. Directors and Senior Management. A shareholders percentage ownership interest is derived by dividing (i) the total number of ordinary shares owned by such shareholder and its affiliates by (ii) the total
number of outstanding ordinary shares.
The Company agreed to share financial and other information with Bpifrance to the extent
reasonably required to comply with its tax, investor or regulatory obligations and with a view to keeping Bpifrance properly informed about the financial and business affairs of the Company. The Shareholders Agreement contains provisions to the
effect that Bpifrance is obliged to treat all information provided to it as confidential, and to comply with all applicable rules and regulations in relation to the use and disclosure of such information. Nicolas Manardo, who was appointed as a
non-executive
director of the Company in June 2017, served as Managing Director at Bpifrance Investissement in charge of Mid & Large Cap Private Equity Investments from 2009 until December 2017. Bpifrance
Investissement is an affiliate of Bpifrance, which is a wholly owned subsidiary of
BPI-Groupe
(bpifrance), a French financial institution jointly owned and controlled by the Caisse des Dépôts et
Consignations, a French special public entity (établissement special) and EPIC
BPI-Groupe,
a French public institution of industrial and commercial nature. As of March 9, 2017, Bpifrance owns
approximately 12.19% of the Companys outstanding ordinary shares. In January 2015, Bpifrance Financement, an affiliate of Bpifrance Investissement, entered into a three-year revolving credit facility with Constellium Issoire (f/k/a Constellium
France) for an aggregate amount of 10 million. The facility was subject to automatic reduction of 33% of the aggregate amount per year. The facility was undrawn and the amount available for drawing was 3.3 million, subject to a
commitment fee of 1% per year. Should any amount have been drawn under this facility, it would have borne interest at a rate equal to 3 months Euribor + 2.5%. This facility matured on January 12, 2018.
Transactions with Joint Venture
Constellium-UACJ ABS LLC, our joint venture with UACJ is a related party. See Note 17 and Note 27 in the Consolidated Financial Statements
attached hereto starting on Page F-1 of this Annual Report for additional information about our transactions with Constellium-UACJ ABS LLC.
Management
Equity Plan
Following the Acquisition, a management equity plan (the MEP) was established effective February 4, 2011,
to facilitate investments by our officers and other members of management in Constellium. In connection with the MEP, a German limited partnership, Omega Management GmbH & Co. KG (Management KG), was formed.
Management KG was a vehicle that allowed current and former directors, officers and employees of Constellium who invested in the MEP (either
directly or indirectly through one or more investment vehicles) (the MEP Participants) to hold a limited partnership interest in Management KG that corresponded to a portion of
-101-
the shares in Constellium held by Management KG. Certain of our executive officers participated in the MEP. In connection with our IPO, the MEP was frozen and no other employees, officers or
directors of Constellium were invited to become MEP Participants after 2013.
Following the advisory board resolution of Omega MEP GmbH
(GP GmbH), the general partner of Management KG, dated November 6, 2015, it was resolved to
wind-up
the MEP. In connection with the
wind-up
of the MEP
and with effect as of November 10, 2015, 2,410,357 Class A ordinary shares were transferred to the 34 MEP Participants in accordance with their respective share allocations under the MEP.
Management KG no longer holds any shares in Constellium and the limited partnership interests no longer represent an indirect economical
interest in Constellium; the Management KG was liquidated as of October 31, 2016.
Share Sales by Management KG
During November 2013, limited partners of Management KG (other than the limited partners who were former employees of Constellium or who were
to become former employees of Constellium imminently) were offered the opportunity to participate in trading plans to be established by Management KG under Rule
10b5-1
promulgated under the Exchange Act (the
MEP Trading Plans) for the orderly liquidation of shares held in the MEP. The first such plan was established on December 13, 2013 and a total of 30 limited partners elected to participate in such plan, which commenced trading on
January 13, 2014. A second such trading plan was established on June 13, 2014 and a total of 33 limited partners elected to participate in such plan, which commenced trading on July 14, 2014. As of December 31, 2015, all
Class A ordinary shares have been sold pursuant to the MEP Trading Plans.
C.
|
Interests of Experts and Counsel
|
Not applicable.
Item 8. Financial Information
A.
|
Consolidated Statements and Other Financial Information
|
Our Consolidated Financial
Statements as of December 31, 2016 and 2017 and for the years ended December 31, 2015, 2016 and 2017 are included in this Annual Report at Item 18. Financial Statements.
Legal Proceedings
Legal proceedings are
disclosed in Item 4. Information on the CompanyB. Business OverviewLitigation and Legal Proceedings.
Dividend Policy
Our board of directors periodically explores the potential adoption of a dividend program; however, no assurances can be made that any future
dividends will be paid on the ordinary shares. Any declaration and payment of future dividends to holders of our ordinary shares will be at the discretion of our board of directors and will depend on many factors, including our financial condition,
earnings, capital requirements, level of indebtedness, statutory future prospects and contractual restrictions applying to the payment of dividends and other considerations that our board of directors deems relevant. In general, any payment of
dividends must be made in accordance with our Amended and Restated Articles of Association and the requirements of Dutch law. Under Dutch law, payment of dividends and other distributions to shareholders may be made only if our shareholders
equity exceeds the sum of our called up and
paid-in
share capital plus the reserves required to be maintained by law and by our Amended and Restated Articles of Association.
Generally, we rely on dividends paid to Constellium N.V., or funds otherwise distributed or advanced to Constellium N.V. by its subsidiaries
to fund the payment of dividends, if any, to our shareholders. In addition,
-102-
restrictions contained in the agreements governing our outstanding indebtedness limit our ability to pay dividends on our ordinary shares and limit the ability of our subsidiaries to pay
dividends to us. Future indebtedness that we may incur may contain similar restrictions.
Except as otherwise disclosed within this annual report, no
significant change has occurred since the date of the Consolidated Financial Statements.
On January 2, 2018, the Wise Factoring
Facility was amended to extend the date on which the Wise Factoring Purchasers obligation will terminate and to increase the commitments thereunder, among other things. See Item 10C. Material ContractsWise Factoring
Facility.
In February 2018, we entered into a binding agreement to sell the North Building Assets at our plant in Sierre,
Switzerland to, and to contribute to the plants infrastructure on a
50-50
basis in a joint venture with, Novelis Inc. See Item 4. Information on the CompanyB. Business OverviewRecent
DevelopmentsSale of Sierre, Switzerland Plants Assets to Novelis.
We voluntarily delisted our ordinary shares from
Euronext Paris on February 2, 2018.
Item 9. The Offer and Listing
A.
|
Offer and Listing Details
|
Price History of Stock
On November 3, 2017, we closed a previously announced underwritten public offering of 28,750,000 class A ordinary shares of the Company,
including 3,750,000 class A ordinary shares sold to the underwriters named in the Underwriting Agreement pursuant to the overallotment option granted therein, which such underwriters exercised on November 2, 2017 (the Equity
Offering). The Equity Offering was priced at $11.00 per Class A ordinary share.
-103-
The table below sets forth, for the periods indicated, the reported high and low closing market
prices of our shares on the NYSE (source: Bloomberg).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYSE
|
|
|
Euronext Paris
|
|
Calendar Period
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Monthly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2017
|
|
$
|
11.55
|
|
|
$
|
9.60
|
|
|
|
9.28
|
|
|
|
8.15
|
|
October 2017
|
|
$
|
12.15
|
|
|
$
|
10.30
|
|
|
|
10.53
|
|
|
|
8.61
|
|
November 2017
|
|
$
|
11.55
|
|
|
$
|
9.15
|
|
|
|
10.00
|
|
|
|
7.91
|
|
December 2017
|
|
$
|
11.40
|
|
|
$
|
9.80
|
|
|
|
9.40
|
|
|
|
8.39
|
|
January 2018
|
|
$
|
13.35
|
|
|
$
|
11.45
|
|
|
|
10.80
|
|
|
|
9.45
|
|
February 2018 (with respect to Euronext Paris, through February 2)
|
|
$
|
13.95
|
|
|
$
|
11.60
|
|
|
|
11.00
|
|
|
|
10.00
|
|
March 2018 (through March 9)
|
|
$
|
12.20
|
|
|
$
|
11.65
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
NYSE
|
|
|
Euronext Paris
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Quarterly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
8.22
|
|
|
$
|
4.03
|
|
|
|
7.70
|
|
|
|
3.80
|
|
Second Quarter
|
|
$
|
6.47
|
|
|
$
|
4.15
|
|
|
|
5.95
|
|
|
|
3.90
|
|
Third Quarter
|
|
$
|
7.87
|
|
|
$
|
4.66
|
|
|
|
7.13
|
|
|
|
3.82
|
|
Fourth Quarter
|
|
$
|
7.01
|
|
|
$
|
5.10
|
|
|
|
6.35
|
|
|
|
4.75
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
8.70
|
|
|
$
|
5.55
|
|
|
|
8.10
|
|
|
|
5.50
|
|
Second Quarter
|
|
$
|
7.35
|
|
|
$
|
5.45
|
|
|
|
7.00
|
|
|
|
5.67
|
|
Third Quarter
|
|
$
|
11.55
|
|
|
$
|
6.85
|
|
|
|
9.70
|
|
|
|
6.05
|
|
Fourth Quarter
|
|
$
|
12.15
|
|
|
$
|
9.15
|
|
|
|
10.53
|
|
|
|
7.91
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter (through March 9 with respect to NYSE and through February 2 with respect to
Euronext Paris)
|
|
$
|
13.95
|
|
|
$
|
11.45
|
|
|
|
11.00
|
|
|
|
9.45
|
|
|
|
NYSE
|
|
|
Euronext Paris
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Yearly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
$
|
23.27
|
|
|
$
|
14.53
|
|
|
|
14.63
|
|
|
|
12.03
|
|
2014
|
|
$
|
32.39
|
|
|
$
|
15.42
|
|
|
|
24.90
|
|
|
|
13.00
|
|
2015
|
|
$
|
20.51
|
|
|
$
|
3.66
|
|
|
|
21.10
|
|
|
|
3.15
|
|
2016
|
|
$
|
8.22
|
|
|
$
|
4.03
|
|
|
|
7.70
|
|
|
|
3.80
|
|
2017
|
|
$
|
12.15
|
|
|
$
|
5.45
|
|
|
|
10.53
|
|
|
|
5.50
|
|
Not applicable.
We began trading on the NYSE on May 23, 2013 and on the professional
segment of Euronext Paris on May 27, 2013 through a public offering in the United States. Trading on the NYSE is under the symbol CSTM. In February 2018, we voluntarily delisted our ordinary shares from Euronext Paris to reduce
costs and complexity associated with listing in multiple jurisdictions. For more information on our shares see Item 10. Additional InformationB. Memorandum and Articles of Association.
-104-
Not applicable.
Not applicable.
Not applicable.
Item 10. Additional Information
Not applicable.
B.
|
Memorandum and Articles of Association
|
The information called for by this Item has been
reported previously in our Registration Statement on Form F-3ASR (File
No. 333-221221),
filed with the SEC on October 30, 2017, under the heading Description of Capital Stock, and is
incorporated by reference into this Annual Report.
The following is a summary of each material contract, other than
material contracts entered into in the ordinary course of business, to which we are a party, for the two years immediately preceding the date of this Annual Report:
|
|
|
Employment Agreements and Benefit Plans
. See Item 6. Directors, Senior Management and EmployeesE. Share Ownership for a description of the material terms of our employment agreements and
benefits plans.
|
|
|
|
Amended and Restated Shareholders Agreement
. See Item 7. Major Shareholders and Related Party Transactions for a description of material terms of this contract.
|
|
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Notes, Pan-U.S. ABL Facility, French Inventory Facility and Factoring Agreements
. As disclosed below.
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Metal Supply Agreement
. As disclosed below.
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May 2014 Notes
On May 7, 2014, the Company completed a private offering of $400 million in aggregate principal amount of 5.750% Senior Notes due
2024 (the 2024 U.S. Dollar Notes) and 300 million in aggregate principal amount of 4.625% Senior Notes due 2021 (the 2021 Euro Notes, and together with the 2024 U.S. Dollar Notes, the May 2014
Notes) pursuant to indentures among the Company, the guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee. A portion of the net proceeds of the May 2014 Notes were used to repay amounts outstanding under our senior
secured term loan B facility, including related transaction fees, expenses, and prepayment premium thereon. We used the remaining net proceeds for general corporate purposes, including to put additional cash on our balance sheet.
Interest on the 2024 U.S. Dollar Notes and 2021 Euro Notes accrues at rates of 5.750% and 4.625% per annum, respectively, and is payable
semi-annually beginning November 15, 2014. The 2024 U.S. Dollar Notes mature on May 15, 2024, and the 2021 Euro Notes mature on May 15, 2021.
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Prior to May 15, 2019, we may redeem some or all of the 2024 U.S. Dollar Notes at a
price equal to 100% of the principal amount of the 2024 U.S. Dollar Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after May 15, 2019, we may redeem the 2024
U.S. Dollar Notes at redemption prices (expressed as a percentage of the principal amount thereof) equal to 102.875% during the
12-month
period commencing on May 15, 2019, 101.917% during the
12-month
period commencing on May 15, 2020, 100.958% during the
12-month
period commencing on May 15, 2021, and par on or after May 15, 2022, in each case plus
accrued and unpaid interest, if any, to the redemption date.
Prior to May 15, 2017, we were permitted to redeem some or all of the
2021 Euro Notes at a price equal to 100% of the principal amount of the 2021 Euro Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after May 15, 2017, we may redeem the
2021 Euro Notes at redemption prices (expressed as a percentage of the principal amount thereof) equal to 102.313% during the
12-month
period commencing on May 15, 2017, 101.156% during the
12-month
period commencing on May 15, 2018, and par on or after May 15, 2019, in each case plus accrued and unpaid interest, if any, to the redemption date.
In addition, at any time or from time to time prior to May 15, 2017, we were permitted to, within 90 days of a qualified equity offering,
redeem May 2014 Notes of either series in an aggregate amount equal to up to 35% of the original aggregate principal amount of the May 2014 Notes of the applicable series (after giving effect to any issuance of additional May 2014 Notes of such
series) at a redemption price equal to 100% of the principal amount thereof plus a premium (expressed as a percentage of the principal amount thereof) equal to 5.750% for the 2024 U.S. Dollar Notes and 4.625% for the 2021 Euro Notes, plus
accrued and unpaid interest thereon (if any) to the redemption date, with the net cash proceeds of such qualified equity offering, provided that at least 50% of the original aggregate principal amount of May 2014 Notes of the series being redeemed
would remain outstanding immediately after giving effect to such redemption.
Within 30 days of the occurrence of specific kinds of
changes of control, the Company is required to make an offer to purchase all outstanding May 2014 Notes at a price in cash equal to 101% of the principal amount of the May 2014 Notes, plus accrued and unpaid interest, if any, to the purchase date.
The May 2014 Notes are senior unsecured obligations of Constellium and are guaranteed on a senior unsecured basis by Constellium
International, Holdco II, Constellium France Holdco, Constellium Neuf Brisach, Constellium Issoire, Constellium Finance, Engineered Products International, Constellium W, Constellium Germany Holdco GmbH & Co. KG, Constellium Deutschland
GmbH, Constellium Singen GmbH, Constellium Rolled Products Singen GmbH & Co. KG, Constellium Switzerland AG, Constellium US Holdings I, LLC, Ravenswood, Wise Metals Intermediate Holdings LLC (which has since been merged into Wise Metals
Group LLC), Wise Metals Group LLC, and Wise Alloys, since renamed Constellium Muscle Shoals LLC. Each of Constelliums existing or future restricted subsidiaries (other than receivables subsidiaries) that guarantees certain indebtedness of
Constellium or certain indebtedness of any of the guarantors of the May 2014 Notes must also guarantee the May 2014 Notes.
The indentures
governing the May 2014 Notes contain customary terms and conditions, including, among other things, negative covenants limiting our and our restricted subsidiaries ability to incur debt, grant liens, enter into sale and lease-back
transactions, make investments, loans and advances, make acquisitions, sell assets, pay dividends and other restricted payments, prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions.
The indentures governing the May 2014 Notes also contain customary events of default.
December 2014 Notes
On December 19,
2014, the Company completed a private offering of $400 million in aggregate principal amount of 8.00% Senior Notes due 2023 (the 2023 U.S. Dollar Notes) and 240 million in aggregate principal
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amount of 7.00% Senior Notes due 2023 (the 2023 Euro Notes, and together with the 2023 U.S. Dollar Notes, the December 2014 Notes) pursuant to indentures among the
Company, the guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee. A portion of the net proceeds of the December 2014 Notes were used to finance the Wise Acquisition, including related transaction fees and expenses. We used
the remaining net proceeds for general corporate purposes.
In November 2017, we completed cash tender offers (the Tender
Offers) for any and all of the 2023 Euro Notes, 2023 U.S. Dollar Notes, and Senior Secured Notes (as defined below, and together with the 2023 Euro Notes and the 2023 U.S. Dollar Notes, the Tender Offer Notes). We
completed the redemption (the Redemption) of the Tender Offer Notes not purchased in the Tender Offers, at redemption prices equal to 100% of the principal amount of the respective series of Tender Offer Notes redeemed, plus the
Applicable Premium (as defined under the relevant indenture), in each case plus accrued and unpaid interest, if any, to the redemption date, on November 29, 2017, in the case of the Senior Secured Notes and the 2023 U.S. Dollar Notes, and
November 30, 2017 in the case of the 2023 Euro Notes.
Interest on the 2023 U.S. Dollar Notes and 2023 Euro Notes accrued at
rates of 8.00% and 7.00% per annum, respectively, and was payable semi-annually beginning July 15, 2015. The 2023 U.S. Dollar Notes and 2023 Euro Notes had a stated maturity date of January 15, 2023.
Prior to January 15, 2018, we were permitted to redeem some or all of the 2023 U.S. Dollar Notes at a price equal to 100% of the
principal amount of the 2023 U.S. Dollar Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after January 15, 2018, we were permitted to redeem the 2023
U.S. Dollar Notes at redemption prices (expressed as a percentage of the principal amount thereof) equal to 106.000% during the
12-month
period commencing on January 15, 2018, 104.000% during the
12-month
period commencing on January 15, 2019, 102.000% during the
12-month
period commencing on January 15, 2020, and par on or after January 15, 2021, in
each case plus accrued and unpaid interest, if any, to the redemption date.
Prior to January 15, 2018, we were permitted to redeem
some or all of the 2023 Euro Notes at a price equal to 100% of the principal amount of the 2023 Euro Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after January 15,
2018, we were permitted to redeem the 2023 Euro Notes at redemption prices (expressed as a percentage of the principal amount thereof) equal to 105.250% during the
12-month
period commencing on
January 15, 2018, 103.500% during the
12-month
period commencing on January 15, 2019, 101.750% during the
12-month
period commencing on January 15, 2020,
and par on or after January 15, 2021, in each case plus accrued and unpaid interest, if any, to the redemption date.
In addition, at
any time or from time to time prior to January 15, 2018, we were permitted, within 90 days of a qualified equity offering, to redeem December 2014 Notes of either series in an aggregate amount equal to up to 35% of the original aggregate
principal amount of the December 2014 Notes of the applicable series (after giving effect to any issuance of additional December 2014 Notes of such series) at a redemption price equal to 100% of the principal amount thereof plus a premium (expressed
as a percentage of the principal amount thereof) equal to 8.00% for the 2023 U.S. Dollar Notes and 7.00% for the 2023 Euro Notes, plus accrued and unpaid interest thereon (if any) to the redemption date, with the net cash proceeds of such
qualified equity offering, provided that at least 50% of the original aggregate principal amount of December 2014 Notes of the series being redeemed would remain outstanding immediately after giving effect to such redemption.
Within 30 days of the occurrence of specific kinds of changes of control, the Company was required to make an offer to purchase all
outstanding December 2014 Notes at a price in cash equal to 101% of the principal amount of the December 2014 Notes, plus accrued and unpaid interest, if any, to the purchase date.
The December 2014 Notes were senior unsecured obligations of Constellium and were guaranteed on a senior unsecured basis by each of its
restricted subsidiaries that guaranteed the May 2014 Notes. Each of
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Constelliums existing or future restricted subsidiaries (other than receivables subsidiaries) that guaranteed certain indebtedness of Constellium or certain indebtedness of any of the
guarantors of the December 2014 Notes was also required to guarantee the December 2014 Notes.
The indentures governing the December 2014
Notes contained customary terms and conditions, including, among other things, negative covenants limiting our and our restricted subsidiaries ability to incur debt, grant liens, enter into sale and lease-back transactions, make investments,
loans and advances, make acquisitions, sell assets, pay dividends and other restricted payments, prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions.
The indentures governing the December 2014 Notes also contained customary events of default.
March 2016 Senior Secured Notes
On
March 30, 2016, the Company completed a private offering of $425 million in aggregate principal amount of 7.875% Senior Secured Notes due 2021 (the Senior Secured Notes) pursuant to an indenture among the Company, the
guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee and collateral agent. The Company invested 100 million of the net proceeds of the offering in Wise. We used the remaining net proceeds for general corporate
purposes, including to put additional cash on our balance sheet. The Senior Secured Notes were redeemed on November 29, 2017 in connection with the the Tender Offers and the Redemption.
Interest on the Senior Secured Notes accrued at a rate of 7.875% per annum and is payable semi-annually beginning October 1, 2016.
The Senior Secured Notes had a stated maturity date of April 1, 2021. In addition, each holder of Senior Secured Notes had the right to
require the Company to repurchase all or any part of that holders Senior Secured Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase, if on the 136th day prior to
May 15, 2021 (i.e., the final stated maturity of the 2021 Euro Notes) more than 30 million of the 2021 Euro Notes remained outstanding.
Prior to April 1, 2018, we were permitted to redeem some or all of the Senior Secured Notes at a price equal to 100% of the principal
amount of the Senior Secured Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after April 1, 2018, we were permitted to redeem the Senior Secured Notes at redemption
prices (expressed as a percentage of the principal amount thereof) equal to 103.938% during the
12-month
period commencing on April 1, 2018, 101.969% during the
12-month
period commencing on April 1, 2019, and par on or after April 1, 2020, in each case plus accrued and unpaid interest, if any, to the redemption date.
In addition, at any time or from time to time prior to April 1, 2018, we were permitted, within 90 days of a qualified equity offering,
to redeem Senior Secured Notes in an aggregate amount equal to up to 35% of the original aggregate principal amount of the Senior Secured Notes (after giving effect to any issuance of additional Senior Secured Notes) at a redemption price equal to
100% of the principal amount thereof plus a premium (expressed as a percentage of the principal amount thereof) equal to 7.875%, plus accrued and unpaid interest thereon (if any) to the redemption date, with the net cash proceeds of such qualified
equity offering, provided that at least 50% of the original aggregate principal amount of Senior Secured Notes would remain outstanding immediately after giving effect to such redemption.
Within 30 days of the occurrence of specific kinds of changes of control, the Company was required to make an offer to purchase all
outstanding Senior Secured Notes at a price in cash equal to 101% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to the purchase date.
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The Senior Secured Notes were senior secured obligations of Constellium and were guaranteed on a
senior secured basis by each of its restricted subsidiaries that guaranteed the May 2014 Notes. In addition, the Company was required to cause (a) existing or future subsidiaries to guarantee the Senior Secured Notes from time to time so as to
satisfy the Guarantor Coverage Test (as defined below), and (b) each existing or future subsidiary that directly or indirectly owned the capital stock of a guarantor of the Senior Secured Notes, or guaranteed certain indebtedness of Constellium
or certain indebtedness of any of the guarantors of the Senior Secured Notes, to guarantee the Senior Secured Notes.
The Guarantor
Coverage Test required, on any one date between and including the date that the Companys annual financial statements are delivered and the date that is forty-five (45) days following such delivery, that (a) the EBITDA of the
Company and the guarantors of the Senior Secured Notes, taken together, represented not less than 80% of the EBITDA of the Company and its restricted subsidiaries, taken together, and (b) the consolidated total assets of the Company and the
guarantors of the Senior Secured Notes, taken together, represented not less than 80% of the consolidated total assets of the Company and its restricted subsidiaries, taken together.
The indenture governing the Senior Secured Notes provided for the obligations of the Company and the guarantors with respect to the Senior
Secured Notes and the guarantees thereof to be secured by (i) a pledge by Constellium N.V. of its shares in Holdco II, (ii) a pledge by Holdco II of its shares in certain of its subsidiaries, (iii) a pledge by certain other guarantors
of their shares in certain of their subsidiaries, (iv) subject to certain exceptions, a pledge of intercompany indebtedness owed to the Company and the guarantors and bank accounts owned by the Company and the guarantors, and (v) subject
to certain exceptions, substantially all the assets of each guarantor organized in the U.S. The liens on the collateral securing the Senior Secured Notes and the guarantees thereof were required to be first-priority, provided that (x) the liens
on the Ravenswood ABL Priority Collateral (as defined below) securing the Senior Secured Notes and the guarantees thereof were required to be junior in priority to the liens on the Ravenswood ABL Priority Collateral securing the obligations under
the Ravenswood ABL Facility, and (y) the liens on certain property of Ravenswood securing the Senior Secured Notes and the guarantees thereof were required to be junior in priority to the liens on such property securing certain obligations of
Ravenswood to the Pension Benefit Guaranty Corporation. The Ravenswood ABL Priority Collateral consisted of the following property owned by Ravenswood: (i) accounts and payment intangibles, (ii) inventory,
(iii) deposit accounts and any cash, financial assets or other assets in such accounts, (iv) cash and cash equivalents, (v) all general intangibles, chattel paper, instruments, investment property and books and records pertaining to any of
the foregoing, and (vi) all proceeds of the foregoing, in each case subject to certain exceptions.
The indenture governing the
Senior Secured Notes contained customary terms and conditions, including, among other things, negative covenants limiting our and our restricted subsidiaries ability to incur debt, grant liens, enter into sale and lease-back transactions, make
investments, loans and advances, make acquisitions, sell assets, pay dividends and other restricted payments, prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions.
The indenture governing the Senior Secured Notes also contained customary events of default.
February 2017 Notes
On February 16,
2017, the Company completed a private offering of $650 million in aggregate principal amount of 6.625% Senior Notes due 2025 (the February 2017 Notes) pursuant to an indenture among the Company, the guarantors party thereto, and
Deutsche Bank Trust Company Americas, as trustee. The Company used the net proceeds from the offering, together with cash on hand, to retire all of the outstanding Wise Senior Secured Notes and used the remaining net proceeds, if any, for general
corporate purposes.
Interest on the February 2017 Notes accrues at rate of 6.625% per annum and is payable semi-annually beginning
September 1, 2017. The February 2017 Notes mature on March 1, 2025.
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Prior to March 1, 2020, we may redeem some or all of the February 2017 Notes at a price
equal to 100% of the principal amount of the February 2017 Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after March 1, 2020, we may redeem the February 2017 Notes
at redemption prices (expressed as a percentage of the principal amount thereof) equal to 103.313% during the
12-month
period commencing on March 1, 2020, 101.656% during the
12-month
period commencing on March 1, 2021, and par on or after March 1, 2022, in each case plus accrued and unpaid interest, if any, to the redemption date.
In addition, at any time or from time to time prior to March 1, 2020, we may, within 90 days of a qualified equity offering, redeem
February 2017 Notes in an aggregate amount equal to up to 35% of the original aggregate principal amount thereof (after giving effect to any issuance of additional February 2017 Notes) at a redemption price equal to 100% of the principal amount
thereof plus a premium (expressed as a percentage of the principal amount thereof) equal to 6.625%, plus accrued and unpaid interest thereon (if any) to the redemption date, with the net cash proceeds of such qualified equity offering, provided that
at least 50% of the original aggregate principal amount of February 2017 Notes would remain outstanding immediately after giving effect to such redemption.
Within 30 days of the occurrence of specific kinds of changes of control, the Company is required to make an offer to purchase all outstanding
February 2017 Notes at a price in cash equal to 101% of the principal amount of the February 2017 Notes, plus accrued and unpaid interest, if any, to the purchase date.
The February 2017 Notes are senior unsecured obligations of Constellium and are guaranteed on a senior unsecured basis by each of its
restricted subsidiaries that guarantees the May 2014 Notes. Each of Constelliums existing or future restricted subsidiaries (other than receivables subsidiaries) that guarantees certain indebtedness of Constellium (including the May 2014
Notes) or certain indebtedness of any of the guarantors of the February 2017 Notes must also guarantee the February 2017 Notes.
The
indenture governing the February 2017 Notes contains customary terms and conditions, including, among other things, negative covenants limiting our and our restricted subsidiaries ability to incur debt, grant liens, enter into sale and
lease-back transactions, make investments, loans and advances, make acquisitions, sell assets, pay dividends and other restricted payments, prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions.
The indenture governing the February 2017 Notes also contains customary events of default.
November 2017 Notes
On November 9,
2017, the Company completed a private offering (the November 2017 Notes Offering) of $500 million in aggregate principal amount of 5.875% Senior Notes due 2026 (the 2026 U.S. Dollar Notes) and 400 million
in aggregate principal amount of 4.250% Senior Notes due 2026 (the 2026 Euro Notes, and together with the 2026 U.S. Dollar Notes, the November 2017 Notes; and the November 2017 Notes, together with the May 2014 Notes and
the February 2017 Notes, the Notes) pursuant to indentures among the Company, the guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee. The Company used the net proceeds from the Equity Offering (as defined
below) and the November 2017 Notes Offering, together with cash on hand, to fund the Tender Offers and the Redemption, with the remaining net proceeds being used for general corporate purposes.
Interest on the 2026 U.S. Dollar Notes and 2026 Euro Notes accrues at rates of 5.875% and 4.250% per annum, respectively, and is payable
semi-annually beginning February 15, 2018. The February 2017 Notes mature on February 15, 2026.
Prior to November 15,
2020, we may redeem some or all of the 2026 U.S. Dollar Notes at a price equal to 100% of the principal amount of the 2026 U.S. Dollar Notes redeemed plus accrued and unpaid interest, if any, to
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the redemption date plus a make-whole premium. On or after November 15, 2020, we may redeem the 2026 U.S. Dollar Notes at redemption prices (expressed as a percentage of the
principal amount thereof) equal to 102.938% during the
12-month
period commencing on November 15, 2020, 101.469% during the
12-month
period commencing on
November 15, 2021, and par on or after November 15, 2022, in each case plus accrued and unpaid interest, if any, to the redemption date.
Prior to November 15, 2020, we may redeem some or all of the 2026 Euro Notes at a price equal to 100% of the principal amount of the 2026
Euro Notes redeemed plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after November 15, 2020, we may redeem the 2026 Euro Notes at redemption prices (expressed as a percentage of the
principal amount thereof) equal to 102.125% during the
12-month
period commencing on November 15, 2020, 101.063% during the
12-month
period commencing on
November 15, 2021, and par on or after November 15, 2022, in each case plus accrued and unpaid interest, if any, to the redemption date.
In addition, at any time or from time to time prior to November 15, 2020, we may, within 90 days of a qualified equity offering, redeem
November 2017 Notes of either series in an aggregate amount equal to up to 35% of the original aggregate principal amount of the November 2017 Notes of the applicable series (after giving effect to any issuance of additional February 2017 Notes of
such series) at a redemption price equal to 100% of the principal amount thereof plus a premium (expressed as a percentage of the principal amount thereof) equal to 5.875% for the 2026 U.S. Dollar Notes and 4.250% for the 2026 Euro Notes, plus
accrued and unpaid interest thereon (if any) to the redemption date, with the net cash proceeds of such qualified equity offering, provided that at least 50% of the original aggregate principal amount of February 2017 Notes of the series being
redeemed would remain outstanding immediately after giving effect to such redemption.
Within 30 days of the occurrence of specific kinds
of changes of control, the Company is required to make an offer to purchase all outstanding February 2017 Notes at a price in cash equal to 101% of the principal amount of the February 2017 Notes, plus accrued and unpaid interest, if any, to the
purchase date.
The February 2017 Notes are senior unsecured obligations of Constellium and are guaranteed on a senior unsecured basis by
each of its restricted subsidiaries that guarantees the May 2014 Notes and the February 2017 Notes. Each of Constelliums existing or future restricted subsidiaries (other than receivables subsidiaries) that guarantees certain indebtedness of
Constellium (including the May 2014 Notes and the February 2017 Notes) or certain indebtedness of any of the guarantors of the November 2017 Notes must also guarantee the November 2017 Notes.
The indentures governing the November 2017 Notes contain customary terms and conditions, including, among other things, negative covenants
limiting our and our restricted subsidiaries ability to incur debt, grant liens, enter into sale and lease-back transactions, make investments, loans and advances, make acquisitions, sell assets, pay dividends and other restricted payments,
prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions.
The indentures governing the November 2017
Notes also contain customary events of default.
Ravenswood ABL Facility
On May 25, 2012, Ravenswood entered into a $100 million asset-based revolving credit facility (the Ravenswood ABL
Facility), with the lenders from time to time party thereto and Deutsche Bank Trust Company Americas, as administrative agent (the Ravenswood ABL Administrative Agent) and collateral agent. Ravenswood amended the Ravenswood ABL
Facility on October 1, 2013 to, among other things, extend the maturity to October 2018 and reduce pricing. As amended, the Ravenswood ABL Facility had sublimits of $25 million for letters of credit and 10% of the revolving credit facility
commitments for swingline loans. The Ravenswood ABL Facility provided Ravenswood a working capital facility for its operations. The Ravenswood ABL Facility was terminated on June 21, 2017 and was replaced by the
Pan-U.S.
ABL Facility.
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Ravenswoods ability to borrow under the Ravenswood ABL Facility was limited to a borrowing
base equal to the sum of (a) 85% of eligible accounts receivable plus (b) up to the lesser of (i) 80% of the lesser of cost or market value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory minus
(c) applicable reserves, and was subject to other conditions, limitations and reserve requirements.
Interest under the Ravenswood
ABL Facility was calculated, at Ravenswoods election, based on either the LIBOR or base rate (as calculated by the Ravenswood ABL Administrative Agent in accordance with the Ravenswood ABL Facility). LIBOR loans accrued interest at a rate of
LIBOR plus a margin of
1.50-2.00%
per annum (determined based on average quarterly excess availability). Base rate loans accrued interest at the base rate plus a margin of
0.50-1.00%
per annum (determined based on average quarterly excess availability). Ravenswood was required to pay a commitment fee on the unused portion of the Ravenswood ABL Facility of 0.25% or 0.375% per
annum (determined on a ratio of unutilized revolving credit commitments to available revolving credit commitments).
Subject to customary
breakage costs with respect to LIBOR loans, borrowings under the Ravenswood ABL Facility could be repaid from time to time without premium or penalty.
Ravenswoods obligations under the Ravenswood ABL Facility were guaranteed by Constellium U.S. Holdings I, LLC and Holdco II.
Ravenswoods obligations under the Ravenswood ABL Facility were not guaranteed by the Company, Wise Metals Intermediate Holdings LLC or any of its subsidiaries or any of Holdco IIs subsidiaries organized outside of the United States.
Ravenswoods obligations under the Ravenswood ABL Facility were, subject to certain permitted liens, secured on a first priority basis by the Ravenswood ABL Priority Collateral, and on a second priority basis (junior to the liens on such assets
securing the Senior Secured Notes) by substantially all other assets of Ravenswood. Ravenswoods obligations under the Ravenswood ABL Facility were not secured by any assets of Wise Metals Intermediate Holdings LLC or any of its subsidiaries or
the Company or any of its subsidiaries organized outside of the United States. The guarantee by Holdco II of the Ravenswood ABL Facility was unsecured.
The Ravenswood ABL Facility contained customary terms and conditions, including, among other things, negative covenants limiting
Ravenswoods ability to incur debt, grant liens, enter into sale and lease-back transactions, make investments, loans and advances (including to other Constellium group companies), make acquisitions, sell assets, pay dividends and other
restricted payments, prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions. The negative covenants contained in the Ravenswood ABL Facility did not apply to Wise Metals Intermediate Holdings LLC or any of its
subsidiaries or the Company or any of its subsidiaries organized outside of the United States.
The Ravenswood ABL Facility also contained
a minimum availability covenant that required Ravenswood to maintain excess availability under the Ravenswood ABL Facility of at least the greater of (a) $10 million and (b) 10% of the aggregate revolving loan commitments.
The Ravenswood ABL Facility also contained customary events of default.
Pan-U.S.
ABL Facility
On June 21, 2017, Ravenswood and Wise Alloys, since renamed Constellium Muscle Shoals LLC, entered into a $300 million asset-based
revolving credit facility (the
Pan-U.S.
ABL Facility), with the lenders from time to time party thereto and Wells Fargo Bank, National Association as administrative agent (the
Pan-U.S.
ABL Administrative Agent) and collateral agent. The
Pan-U.S.
ABL Facility has sublimits of $30 million for letters of credit and $30 million for
swingline loans. At the option of Ravenswood and Wise Alloys, the maximum borrowings under the
Pan-U.S.
ABL Facility may be increased by up to an additional $200 million subject to, among other things,
payment of a fee in the amount of 0.125% of such increase and the granting of a lien in favor of the
Pan-U.S.
ABL Administrative Agent over certain accounts receivable (and termination of any
factoring facilities with respect to
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such receivables). The lenders under the
Pan-U.S.
ABL Facility have provided commitments with respect to such increase (the
Pan-U.S.
ABL Incremental Commitments). The
Pan-U.S.
ABL Facility provides Ravenswood and Wise Alloys a working capital facility for their respective
operations. Concurrently with Ravenswood and Wise Alloys entry into the
Pan-U.S.
ABL Facility, Ravenswooods asset-based revolving credit facility, entered into on May 25, 2012 (the
Ravenswood ABL Facility) and the Wise ABL Facility were each terminated.
The
Pan-U.S.
ABL Facility matures on June 21, 2022.
Ravenswood and Wise Alloys ability to borrow under the
Pan-U.S.
ABL Facility is limited to a borrowing base equal to the sum of (a) 85% of eligible accounts plus (b) up to the lesser of (i) 80% of the lesser of cost or market value of eligible inventory and
(ii) 85% of the net orderly liquidation value of eligible inventory minus (c) applicable reserves, and is subject to other conditions, limitations and reserve requirements.
Interest under the
Pan-U.S.
ABL Facility is calculated, at the applicable borrowers election,
based on either the LIBOR or base rate (as calculated by the
Pan-U.S.
ABL Administrative Agent in accordance with the
Pan-U.S.
ABL Facility). LIBOR loans accrue interest
at a rate of LIBOR plus a margin of
1.50-2.00%
per annum (determined based on average quarterly excess availability). Base rate loans accrue interest at the base rate plus a margin of
0.50-1.00%
per annum (determined based on average quarterly excess availability). Ravenswood and Wise Alloys are required to pay a commitment fee on the unused portion of the
Pan-U.S.
ABL Facility of 0.25% or 0.375% per annum (determined on a ratio of unutilized revolving credit commitments to available revolving credit commitments). Ravenswood and Wise Alloys are also required to
pay a commitment fee on the unused
Pan-U.S.
ABL Incremental Commitments of 0.25% per annum.
Subject to customary breakage costs with respect to LIBOR loans, borrowings under the
Pan-U.S.
ABL Facility may be repaid from time to time without premium or penalty.
Ravenswoods and Wise Alloys obligations under the
Pan-U.S.
ABL Facility are guaranteed by
Constellium U.S. Holdings I, LLC, Wise Metals Group, and Holdco II. Ravenswoods and Wise Alloys obligations under the
Pan-U.S.
ABL Facility are, subject to certain permitted liens, secured by
substantially all assets of Ravenswood and Wise Alloys. The guarantee by Holdco II of the
Pan-U.S.
ABL Facility is unsecured.
The
Pan-U.S.
ABL Facility contains customary terms and conditions, including, among other things,
negative covenants limiting Ravenswoods and Wise Alloys ability to incur debt, grant liens, enter into sale and lease-back transactions, make investments, loans and advances (including to other Constellium group companies), make
acquisitions, sell assets, pay dividends and other restricted payments, prepay certain debt, merge, consolidate or amalgamate and engage in affiliate transactions.
The
Pan-U.S.
ABL Facility also contains a financial maintenance covenant that provides that at any
time during which borrowing availability thereunder is below 10% of the aggregate commitments under the
Pan-U.S.
ABL Facility, the Company will be required to maintain a minimum fixed charge coverage ratio of
1.0 to 1.0 and a minimum Borrower EBITDA Contribution of 25%, in each case calculated on a trailing twelve month basis. Borrower EBITDA Contribution means, for any period, the ratio of (x) the combined EBITDA of Ravenswood, Wise
Alloys, and their respective subsidiaries for such period, to (y) the consolidated EBITDAS of the Company and its subsidiaries for such period.
The
Pan-U.S.
ABL Facility also contains customary events of default.
French Inventory Facility
On
April 21, 2017, Constellium Issoire and Constellium Neuf Brisach (the French Borrowers) entered into a 100 million asset-based revolving credit facility (the French Inventory Facility) with the lenders from time to
time party thereto and Factofrance as agent. The French Inventory Facility was amended on June 13,
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2017 to, among other things, make certain changes to the procedure for calculating the Turn Ratio (as defined below). The French Inventory Facility provides the French Borrowers a working capital
facility for their operations.
The French Borrowers ability to borrow under the French Inventory Facility is limited to a borrowing
base equal to the lesser of (i) the sum of (A) 90% of the net orderly liquidation value of eligible inventory of the applicable French Borrower pledged and in possession of an escrow agent (the Inventory Pledged With Dispossession by
such French Borrower), plus (B) 70% of the net orderly liquidation value of eligible inventory of the applicable French Borrower pledged without possession by the escrow agent (the Inventory Pledged Without Dispossession by such French
Borrower), and (ii) the product of 90% of the net orderly liquidation value of the Inventory Pledged With Dispossession by the applicable French Borrower, multiplied by four.
Notwithstanding the foregoing, if on any quarterly test date the ratio of a French Borrowers aggregate sales for the previous 365 days
to the average book value of the eligible inventory pledged by such French Borrower under the French Inventory Facility (the Turn Ratio for such French Borrower) is less than 3, in the case of Constellium Issoire, or 6, in the case of
Constellium Neuf Brisach, the borrowing base for such French Borrower will equal 70% of the net orderly liquidation value of the Inventory Pledged With Dispossession by such French Borrower until the next quarterly test date on which such French
Borrowers Turn Ratio is greater than or equal to 3, in the case of Constellium Issoire, or 6, in the case of Constellium Neuf Brisach (such period, a Borrowing Base Event).
Loans not in excess of 90% of the net orderly liquidation value of the Inventory Pledged with Dispossession of the applicable French Borrower
at the time of borrowing bear interest at a rate of EURIBOR plus 2% per annum (Tranche A Loans), and loans in excess of that amount at the time of borrowing bear (Tranche B Loans) interest at a rate of EURIBOR plus 2.75% per
annum. The French Borrowers are also required to pay a commitment fee on the unused portion of the French Inventory Facility of 0.80% per annum. Borrowings of Tranche B Loans by a French Borrower are subject to a minimum EBITDA for such
French Borrower, calculated on a trailing twelve months of 40 million in the case of Constellium Issoire, and 65 million in the case of Constellium Neuf Brisach.
Subject to customary breakage costs, borrowings under the French Inventory Facility are permitted to be repaid from time to time
without premium or penalty.
The French Borrowers obligations under the French Inventory Facility are guaranteed by Constellium
Holdco II B.V. and are secured by possessory and non-possessory pledges of the eligible inventory of the French Borrowers.
European Factoring
Agreements
On January 4, 2011, certain of our French subsidiaries (the French Sellers) entered into a factoring
agreement with GE Factofrance S.A.S., as factor (the French Factor), which has been amended from time to time, and has been fully restated on December 3, 2015 (the French Factoring Agreement). On December 16, 2010,
certain of our German and Swiss subsidiaries (the German/Swiss Sellers) entered into factoring agreements with GE Capital Bank AG, as factor (the German/Swiss Factor), which have been amended from time to time or replaced
with a factoring agreement entered into on March 26, 2014 (the Original German/Swiss Factoring Agreements). On June 26, 2015, our Czech subsidiary (the Czech Seller, and together with the German/Swiss Sellers and
the French Sellers, the European Factoring Sellers) entered into a factoring agreement with GE Capital Bank AG, as factor (the Czech Factor, and together with the German/Swiss Factor and the French Factor, the European
Factors), as amended from time to time (the Czech Factoring Agreement, and together with the German/Swiss Factoring Agreements and the French Factoring Agreement, the European Factoring Agreements). On May 27,
2016, one of our German subsidiaries, Constellium Rolled Products Singen GmbH & Co. KG (another German/Swiss Seller), entered into a factoring agreement with the
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German/Swiss Factor (the Additional German/Swiss Factoring Agreement and, together with the Original German/Swiss Factoring Agreements, the German/Swiss Factoring
Agreements) while certain of the Original German/Swiss Factoring Agreements were amended.
On July 20, 2016, the Banque
Fédérative du Crédit Mutuel purchased the Equipment Finance and Receivable Finance businesses of GE. Pursuant to this transaction, GE Factofrance S.A.S. was renamed Factofrance and GE Capital Bank AG was renamed Targo Commercial
Financing AG. The transaction had no other impact on the European Factoring Agreements.
The European Factoring Agreements provide for the
sale by the European Factoring Sellers to the European Factors of receivables originated by the European Factoring Sellers, subject to a maximum financing amount of 235 million available to the French Sellers under the French Factoring
Agreement and 150 million available to the German/Swiss Sellers and the Czech Seller under the German/Swiss Factoring Agreements and the Czech Factoring Agreement, respectively. The funding made available to the European Factoring Sellers
by the European Factors is used by the Sellers for general corporate purposes.
The German/Swiss Factoring Agreements were amended on
December 21, 2016 to, among other things, increase the maximum financing amount from 115 million to 150 million, extend the termination date from June 15, 2017 to October 29, 2021, and reduce the fees payable by
the German/Swiss Sellers. The French Factoring Agreement was amended and restated on April 19, 2017 to, among other things, extend the commitment period thereunder from December 2018 to October 2021.
Generally speaking, receivables sold to the European Factors under the European Factoring Agreements are with no recourse to the European
Factoring Sellers in the event of a payment default by the relevant customer. The European Factors are entitled to claim the repayment of any amount financed by them in respect of a receivable by withdrawing the financing provided against such
assigned receivable or requiring the European Factoring Sellers to repurchase/unwind the purchase of such receivable under certain circumstances, including when (i) the nonpayment of that receivable arises from a dispute between a European
Factoring Seller and the relevant customer or (ii) the receivable proves not to have satisfied the eligibility criteria set forth in the European Factoring Agreements.
The German/Swiss Factoring Agreements and the Czech Factoring Agreement are without recourse to the German/Swiss Sellers and the Czech Seller,
respectively, for any credit risk resulting from the inability of a debtor to meet its payment obligations under the receivables sold to the German/Swiss Factor, and the Czech Factor, respectively. Holdco II has provided a performance guaranty for
the Sellers obligations under the European Factoring Agreements.
Subject to some exceptions, the European Factoring Sellers will
collect the transferred receivables on behalf of the European Factors pursuant to a receivables collection mandate under the European Factoring Agreements. The receivables collection mandate may be terminated upon the occurrence of certain events.
In the event that the receivables collection mandate is terminated, the European Factors will be entitled to notify the account debtors of the assignment of receivables and collect directly from the account debtors the assigned receivables.
The European Factoring Agreements contain customary fees, including (i) a financing fee on the outstanding amount financed in respect of
the assigned receivables, (ii) a
non-utilization
fee on the portion of the facilities not utilized by the European Factors and (iii) a factoring fee on all assigned receivables in the case of the
German/Swiss Factoring Agreements and sold receivables, which were approved by the French Factor in the case of the French Factoring Agreement. In addition, the European Factoring Sellers incur the cost of maintaining the necessary credit insurance
(as stipulated in the European Factoring Agreements) on assigned receivables.
The European Factoring Agreements contain certain
affirmative and negative covenants, including relating to the administration and collection of the assigned receivables, the terms of the invoices and the exchange of
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information, but do not contain restrictive financial covenants. As of and for the fiscal year ended December 31, 2017, the European Factoring Sellers were in compliance with all applicable
covenants under the European Factoring Agreements.
Wise Senior Secured Notes
On December 11, 2013, Wise Metals Group LLC, since renamed Constellium Holdings Muscle Shoals LLC, and Wise Alloys Finance Corporation
(which entity has since been dissolved) issued $650 million in aggregate principal amount of 8.75% Senior Secured Notes due 2018 (the Wise Senior Secured Notes). Wise used a portion of the proceeds from the offering of the Wise
Senior Secured Notes to repay all outstanding indebtedness under a $400 million term loan and a $70 million delayed draw term loan owed to the Employees Retirement System of Alabama and the Teachers Retirement System of Alabama
(collectively, the RSA) and to redeem all of the outstanding cumulative-convertible 10%
paid-in-kind
preferred membership interests in Wise Metals Group LLC
held by the RSA. On March 3, 2017, the Wise Senior Secured Notes were redeemed in full in connection with the issuance of the February 2017 Notes.
Interest on the Wise Senior Secured Notes accrued at a rate of 8.75% per annum and was payable semi-annually in arrears on June 15 and
December 15 of each year. The Wise Senior Secured Notes had a stated maturity date of December 15, 2018.
The Wise Senior
Secured Notes were guaranteed by certain of Wise Metals Group LLCs 100% owned domestic restricted subsidiaries. The Wise Senior Secured Notes were not guaranteed by the Company or any of its other subsidiaries. The Wise Senior Secured Notes
and related guarantees were secured on a first-priority basis, subject to certain exceptions and permitted liens, by a lien on substantially all of the issuers and guarantors existing and after-acquired material domestic real estate,
equipment, stock of subsidiaries, intellectual property and substantially all of the issuers and guarantors other assets that did not secure the Wise ABL Facility on a first-priority basis, other than the Specified Mill Assets Collateral
(as defined below), which had been pledged to secure the Wise Senior Secured Notes and the related guarantees, as well as certain obligations to Rexam under the Rexam Advance Agreement, on a first-priority, equal and ratable basis. The Wise Senior
Secured Notes and related guarantees were secured on a second-priority basis by a lien on all of the issuers and guarantors domestic assets that consisted of Wise ABL Priority Collateral (as defined below).
Prior to June 15, 2016, the Wise Senior Secured Notes could be redeemed in whole or in part at a redemption price equal to 100% of the
principal amount of the Wise Senior Secured Notes redeemed plus an applicable make-whole premium and accrued and unpaid interest to, but not including, the redemption date. Prior to June 15, 2016, up to 35% of the aggregate principal amount of
Wise Senior Secured Notes outstanding could be redeemed with the net proceeds of specified equity offerings at 108.750% of the principal amount of the Wise Senior Secured Notes to be redeemed plus accrued and unpaid interest, if any, to the date of
redemption.
On or after June 15, 2016, the Wise Senior Secured Notes could be redeemed in whole or in part at redemption prices
(expressed as percentages of principal amount) of 104.375% for the
12-month
period beginning on June 15, 2016, 102.188% for the
12-month
period beginning on
June 15, 2017, and par on or after June 15, 2018, in each case plus accrued and unpaid interest to the date of redemption.
In
addition, upon certain events constituting a Change of Control (as defined in the indenture governing the Wise Senior Secured Notes), the issuers of the Wise Senior Secured Notes were required to make an offer (a Senior Secured
Notes Offer to Purchase) to repurchase all outstanding Wise Senior Secured Notes at a purchase price equal to 101% of the aggregate principal amount of Wise Senior Secured Notes so repurchased, plus accrued and unpaid interest to the date of
repurchase.
The Wise Senior Secured Notes contained customary covenants including, among other things, limitations and restrictions on
Wises ability to: incur additional indebtedness; make dividend payments or other restricted
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payments; create liens; sell assets; sell securities of subsidiaries; agree to payment restrictions affecting Wises restricted subsidiaries; designate subsidiaries as unrestricted
subsidiaries; enter into certain types of transactions with affiliates; and enter into mergers, consolidations or certain asset sales.
On
October 10, 2014, Constellium, on behalf of the issuers of the Wise Senior Secured Notes, solicited consents from the holders of the Wise Senior Secured Notes to certain amendments (the Proposed Amendments) to the indenture
governing the Wise Senior Secured Notes. The Proposed Amendments provided that the Wise Acquisition would not constitute a Change of Control. On October 17, 2014, Constellium obtained the requisite consents to the Proposed
Amendments and the issuers and guarantors of the Wise Senior Secured Notes and Wells Fargo Bank, National Association, as trustee and collateral agent, entered into a supplemental indenture to the indenture governing the Wise Senior Secured Notes.
Pursuant to the terms of the supplemental indenture, the Proposed Amendments became operative immediately prior to the effective time of the Wise Acquisition. Accordingly, the issuers of the Wise Senior Secured Notes were not required to make a
Senior Secured Notes Offer to Purchase in connection with the Wise Acquisition.
Wise ABL Facility
On December 11, 2013, Wise Alloys, since renamed Constellium Muscle Shoals LLC, as borrower, and Wise Metals Group LLC, since renamed
Constellium Holdings Muscle Shoals LLC, Listerhill Total Maintenance Center, LLC (TMC), Wise Alloys Finance Corporation, and Alabama Electric Motor Services, LLC (AEM), as guarantors, entered into an asset-based revolving
credit facility (as amended, the Wise ABL Facility) with the lenders from time to time party thereto and General Electric Capital Corporation as administrative agent (the Wise ABL Facility Agent). The Wise ABL Facility was
subsequently amended in connection with the Wise Acquisition, in connection with the Wise RPA, and in connection with the issuance of the February 2017 Notes. On June 21, 2017, the Wise ABL Facility was terminated and was replaced by the
Pan-U.S.
ABL Facility.
The Wise ABL Facility provided for total commitments of $170 million. Wise
Alloys had the option to increase the commitments under the Wise ABL Facility from time to time by up to $100 million in the aggregate for all such increases. Any increase of the commitments under the Wise ABL Facility was subject to the
commitment of one or more lenders to such increased amount and the satisfaction of certain customary conditions, including the absence of any default under the Wise ABL Facility and, to the extent otherwise required under the Wise ABL Facility at
the time of the proposed increase, compliance with the financial covenant (as described below) on an as adjusted basis.
Wise Alloys
ability to borrow under the Wise ABL Facility was limited to a borrowing base equal to the sum of (a) 85% of net book value of Wise Alloys, AEMs, and TMCs eligible accounts receivable (other than any accounts receivable from
certain foreign account debtors (Eligible Foreign Account Debtors)) and other ineligible account debtors (or 90% of the net book value of Wise Alloys, AEMs, and TMCs eligible accounts receivable from Coke), plus
(b) the lesser of (i) 85% of the net book value of Wise Alloys, AEMs, and TMCs eligible accounts receivable from Eligible Foreign Account Debtors and (ii) $12.5 million, plus (c) the lesser of (i) 75% of the value of
Wise Alloys eligible raw materials,
work-in-progress
and finished goods inventory and (ii) 85% of the net orderly liquidation value of Wise Alloys eligible
raw materials,
work-in-progress
and finished goods inventory, plus (d) the lesser of (i) 5% of the value of Wise Alloys eligible raw materials,
work-in-progress
and finished goods inventory and (ii) 5% of the net orderly liquidation value of Wise Alloys eligible raw materials,
work-in-process
and finished goods inventory; provided that, in the case of each of clauses (i) and (ii), such amount could not exceed $10 million, minus (e) the excess, if any, of the
aggregate amount of TMCs and AEMs eligible accounts receivable included in the borrowing base pursuant to the foregoing clause (a) over $1.5 million (which could, at the Wise ABL Facility Agents sole discretion after
completion of a collateral audit, be increased to an amount not to exceed $5 million) minus (f) the aggregate amount of reserves, if any, established by the Wise ABL Facility Agent. Wise Alloys ability to borrow under the Wise ABL
Facility was also subject to other conditions and limitations.
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Interest rates under the Wise ABL Facility were based, at Wise Alloys election, on either
the LIBOR rate or a base rate, plus a spread that ranged from 1.75% to 2.25% for LIBOR loans and 0.75% to 1.25% for base rate loans. The spread was determined on the basis of a pricing grid that resulted in a higher spread as Wise Alloys
average quarterly borrowing availability under the Wise ABL Facility declined, and, in each case, was based upon the borrowing base calculation delivered to the Wise ABL Facility Agent for the last calendar month (or, in certain instances, week) of
the immediately preceding fiscal quarter.
Letters of credit under the Wise ABL Facility were subject to a fee payable to the lenders
equal to the current margin applicable to LIBOR loans multiplied by the daily balance of the undrawn amount of all outstanding letters of credit, payable in cash monthly in arrears.
Unused commitments under the Wise ABL Facility were subject to an unused commitment fee equal to the aggregate amount of such unused
commitments multiplied by a rate equal to 0.375% per annum, payable in cash monthly in arrears, of the average available but unused borrowing capacity under the Wise ABL Facility.
Subject to customary breakage costs with respect to LIBOR loans, borrowings under the Wise ABL Facility could be repaid from time
to time without premium or penalty.
The obligations of Wise Alloys under the Wise ABL Facility were guaranteed by Holdco II and Wise
Metals Group LLC. The obligations under the Wise ABL Facility were secured by (i) a first priority (subject to certain specified permitted liens) perfected security interest in all of Wise Alloys and the guarantors (other than Holdco II)
assets and properties consisting of Wise ABL Priority Collateral, (ii) a second priority (subordinate only to the security interest and liens under the Wise Senior Secured Notes and subject to certain specified permitted liens) perfected
security interest in all of Wise Alloys and the guarantors (other than Holdco II) assets and properties, other than Wise ABL Priority Collateral and the Specified Mill Assets Collateral, and (iii) a second priority (subordinate only to
the security interest under the Wise Senior Secured Notes and the Rexam Advance Agreement and subject to certain specified permitted liens) perfected security interest in all of Wise Alloys and the guarantors (other than Holdco II) assets and
properties consisting of Specified Mill Assets Collateral. The guarantee of the Wise ABL Facility by Holdco II was unsecured.
Wise
ABL Priority Collateral consisted of (i) accounts and payment intangibles, (ii) inventory, (iii) deposit accounts and securities accounts, including all monies, uncertificated securities and other funds held in or on deposit therein
(including all cash, marketable securities and other funds held in or on deposit in either of the foregoing), (iv) all investment property, equipment, general intangibles, books and records pertaining to the Wise ABL Priority Collateral, documents,
instruments, chattel paper,
letter-of-credit
rights, supporting obligations related to the foregoing, business interruption insurance, commercial tort claims, and
(v) all proceeds of the foregoing, in each case subject to certain exceptions.
Specified Mill Assets Collateral
consisted of the equipment and fixtures of Wise Alloys and the guarantors constituting the three-stand mill located in Muscle Shoals, Alabama which are being financed pursuant to the Rexam Advance Agreement and related assets.
The Wise ABL Facility contained customary terms and conditions, including, among other things, negative covenants limiting Wise Alloys, the
guarantors, and their respective restricted subsidiaries ability to incur debt, grant liens, make investments, loans and advances, make acquisitions, sell assets, pay dividends and other restricted payments, prepay certain debt, merge,
consolidate or amalgamate and engage in affiliate transactions.
The Wise ABL Facility provided that if borrowing availability thereunder
dropped below a threshold amount equal to the greater of (a) 10% of the aggregate commitments under the Wise ABL Facility and (b) $20 million, Wise Alloys was required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0, calculated
on a trailing
12-month
basis until such time as borrowing availability was at least equal to the greater of $20 million and 10% of the aggregate commitments under the Wise ABL Facility for 30 consecutive
days.
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The Wise ABL Facility also contained customary events of default, including an event of default
triggered by certain changes of control. The Wise Acquisition constituted such a change of control.
In connection with the Wise
Acquisition, we amended the Wise ABL Facility to, among other things, (i) provide that the consummation of the Wise Acquisition did not constitute an event of default, (ii) remove from the collateral securing the Wise ABL Facility the
receivables of a single obligor that were to be sold under the Wise RPA (as defined below), (iii) permit transactions between Wise and its subsidiaries on the one hand and Constellium and its subsidiaries on the other, subject to certain conditions,
(iv) on the effective date of the Wise RPA, reduce the size of the facility to $200 million, and (v) provide for Holdco II to guarantee the obligations thereunder.
On November 4, 2015, in connection with the Wise RPA Amendment (as defined below), we amended the Wise ABL Facility to increase the
amount of certain receivables permitted to be sold pursuant to receivables factoring arrangements from $300 million to $400 million.
On March 1, 2016, General Electric Capital Corporation resigned as the Wise ABL Facility Agent and was replaced by Wells Fargo Bank,
National Association.
On February 7, 2017, in connection with the issuance of the February 2017 Notes, we amended the Wise ABL
Facility to (i) amend the negative covenants to permit Wise Metals Group LLC and its subsidiaries to guarantee debt of Constellium and its subsidiaries and to grant liens on their assets to secure any such guarantees, (ii) release TMC,
AEM, and Wise Alloys Finance Corporation as guarantors of the Wise ABL Facility, (iii) extend the maturity date of the Wise ABL Facility to September 14, 2020, and (iv) make certain other changes to the negative covenants under the
Wise ABL Facility. The amendment also reduced the maximum aggregate revolving commitments under the Wise ABL Facility to $170 million.
Wise
Factoring Facility
On March 16, 2016, Wise Alloys, since renamed Constellium Muscle Shoals LLC, entered into a Receivables
Purchase Agreement (the Wise Factoring Facility) with New Wise RPA Seller, since renamed Constellium Muscle Shoals Funding II LLC, Hitachi Capital America Corp. (Hitachi), and Greensill Capital Inc., as purchaser agent,
providing for the sale of certain receivables of Wise Alloys to Hitachi. The Wise Factoring Facility was amended on November 22, 2016 to join Intesa Sanpaolo S.p.A., New York Branch (together with Hitachi, the Wise Factoring
Purchasers) as a purchaser. As of December 31, 2017, the Wise Factoring Facility provides for the sale of receivables to the Wise Factoring Purchasers in an amount not to exceed $325 million in the aggregate outstanding at any time.
Receivables under the Wise Factoring Facility are sold at a discount based on a rate equal to a LIBOR rate plus
2.00-2.50%
(based on the credit rating of the account debtor) per annum. The New Wise RPA Seller
is required to pay a commitment fee in the amount of $20,000 per annum plus 1% per annum of the total commitments under the Wise Factoring Facility.
Subject to certain customary exceptions, each purchase under the Wise Factoring Facility is made without recourse to the New Wise RPA Seller.
The New Wise RPA Seller has no liability to the Wise Factoring Purchasers, and the Wise Factoring Purchasers are solely responsible for the account debtors failure to pay any purchased receivable when it is due and payable under the terms
applicable thereto. Holdco II has provided a guaranty for the New Wise RPA Sellers and Wise Alloys performance obligations under the Wise Factoring Facility.
The Wise Factoring Facility contains customary covenants. The Wise Factoring Purchasers obligation to purchase receivables under the
Wise Factoring Facility is subject to certain conditions, including without limitation that certain changes of control shall not have occurred, that there shall not have occurred a material adverse change in the business condition, operations or
performance of the New Wise RPA Seller, Wise Alloys, or Holdco II, and that Constelliums corporate credit rating shall not have been withdrawn by either Standard & Poors or Moodys or downgraded below
B-
by Standard & Poors and B3 by Moodys.
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On January 25, 2017, the Wise Factoring Facility was amended to extend the date on which the
Wise Factoring Purchasers obligation to purchase receivables under the Wise Factoring Facility will terminate to January 24, 2018.
On May 12, 2017, the Wise Factoring Facility was amended to permit the sale of certain receivables with due dates up to 115 days after
the invoice date (increased from 90 days).
On January 2, 2018, the Wise Factoring Facility was amended to, among other things,
increase the commitments thereunder to $375 million in the aggregate outstanding at any time, reduce the discount at which receivables are sold to a rate equal to a LIBOR rate plus
1.75-2.25%
(based on
the credit rating of the account debtor) per annum, and extend the date on which the Wise Factoring Purchasers obligation to purchase receivables under the Wise Factoring Facility will terminate to January 24, 2020.
Metal Supply Agreement
In connection
with the Acquisition, Constellium Switzerland, a wholly owned indirect subsidiary of Constellium N.V., entered into certain agreements dated as of January 4, 2011 with Rio Tinto Alcan Inc. (Rio Tinto Alcan), Aluminium Pechiney and
Alcan Holdings Switzerland AG (AHS), each of which is an affiliate of Rio Tinto, which provide for, among other things, the supply of metal by Rio Tinto affiliates to Constellium Switzerland, the provision of certain technical assistance
and other services relating to aluminium-lithium, a covenant by Rio Tinto Alcan to refrain from producing, supplying or selling aluminium-lithium alloys to third parties and certain cost reimbursement obligations of AHS. Constellium has provided a
guarantee to Rio Tinto Alcan and Aluminium Pechiney in respect of Constellium Switzerlands obligations under the supply agreements. Constellium Switzerland and Rio Tinto Alcan have a multi-year supply agreement for the supply of sheet ingot.
The agreement provides for certain representations and warranties, audit and inspection rights,
on-time
shipment requirements and other customary terms and conditions. Each party is required to pay certain
penalty or reimbursement amounts in the event it fails or is unable to purchase or supply, as applicable, specified minimum annual quantities of metal.
There are no limits under the laws of the Netherlands or in our
Amended and Restated Articles of Association on
non-residents
of the Netherlands holding or voting our ordinary shares. Currently, there are no exchange controls under the laws of the Netherlands on the
conduct of our operations or affecting the remittance of dividends.
French exchange control regulations currently do not limit the amount
of payments that we may remit to
non-residents
of France, subject to any restrictions that may be applicable by reason of embargos or similar measures in force with respect to certain countries and/or persons.
Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a
non-resident
be handled by an accredited intermediary.
Material U.S. Federal Income Tax Consequences
The following discussion describes the material U.S. federal income tax consequences relating to acquiring, owning and disposing of our
ordinary shares by a U.S. Holder (as defined below) that holds the ordinary shares as capital assets (generally, property held for investment) under the Code. This discussion is based upon existing U.S. federal income tax law, including
the Code, U.S. Treasury regulations thereunder, rulings and court decisions, all of which are subject to differing interpretations or change, possibly with retroactive effect. No ruling from the Internal Revenue Service (the IRS) has
been sought with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position.
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This discussion does not address all aspects of U.S. federal income taxation that may be relevant
to particular investors in light of their individual circumstances, including investors subject to special tax rules (for example, financial institutions, insurance companies, regulated investment companies, real estate investment trusts,
broker-dealers, traders in securities that elect
mark-to-market
treatment, any entity or arrangement treated as a partnership or pass-through entity for U.S. federal
income tax purposes and any investor therein,
tax-exempt
organizations (including private foundations), individual retirement and other
tax-deferred
accounts, U.S.
expatriates, investors who are not U.S. Holders, U.S. Holders who at any time own or owned (directly, indirectly or constructively) 10% or more of our stock (by vote or value), U.S. Holders that acquire their ordinary shares pursuant to any employee
share option or otherwise as compensation, U.S. Holders that hold their ordinary shares as part of a straddle, hedge, conversion, wash sale, constructive sale or other integrated transaction for U.S. federal income tax purposes or U.S. Holders that
have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those summarized below). In addition, this discussion does not discuss any U.S. federal estate, gift or alternative minimum
tax consequences, any tax consequences of the Medicare tax on certain investment income pursuant to the Health Care and Education Reconciliation Act of 2010, any considerations with respect to FATCA (which for this purpose means Sections 1471
through 1474 of the Code, the Treasury regulations and administrative guidance promulgated thereunder, any intergovernmental agreement entered in connection therewith, and any
non-U.S.
laws, rules or
directives implementing or relating to any of the foregoing), or any state, local or
non-U.S.
tax consequences. Each U.S. Holder is urged to consult its tax advisor regarding the U.S. federal, state, local and
non-U.S.
income and other tax considerations of an investment in our ordinary shares.
General
For
purposes of this discussion, a U.S. Holder is a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or
other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the law of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is includable in
gross income for U.S. federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a U.S. person under the Code.
If an entity or arrangement treated as a partnership or pass-through entity for U.S. federal income tax purposes is a beneficial owner of our
ordinary shares, the tax treatment of an investor therein will generally depend upon the status of such investor, the activities of the entity or arrangement, and certain determinations made at the investor level or the level of the entity or
arrangement. Such entities or arrangements, and investors therein, are urged to consult their own tax advisors regarding their investment in our ordinary shares.
The Tax Cuts and Jobs Act, enacted in December 2017, made significant changes to the Code, many of which are highly complex and may require
interpretations and implementing regulations. The expected impact of certain aspects of the legislation is unclear and subject to change. You should consult your tax advisors regarding the application of The Tax Cuts and Jobs Act to your particular
circumstances.
Passive Foreign Investment Company Consequences
We believe that we will not be a passive foreign investment company for U.S. federal income tax purposes (PFIC) for the
current taxable year and that we have not been a PFIC for prior taxable years and we expect that we will not become a PFIC in the foreseeable future, although there can be no assurance in this regard. A foreign corporation will be a PFIC in any
taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable look-through rules, either (i) at least 75% of its gross income is passive income,
or (ii) at least 50% of its assets produce or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest,
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royalties and rents and certain other categories of income, subject to certain exceptions. The determination of whether we are a PFIC is fact-intensive and includes ascertaining the fair market
value (or, in certain circumstances, tax basis) of all of our assets on a quarterly basis and the character of each item of income we earn. This determination is made annually and cannot be completed until the close of a taxable year. It depends
upon the portion of our assets (including goodwill) and income characterized as passive under the PFIC rules, as described above. Accordingly, it is possible that we may become a PFIC due to changes in our income or asset composition or a decline in
the market value of our equity. Because PFIC status is a fact-intensive determination, no assurance can be given that we are not, have not been, or will not become, classified as a PFIC.
If we are a PFIC for any taxable year, U.S. Holders generally will be subject to special tax rules that could result in materially adverse
U.S. federal income tax consequences. In such event, a U.S. Holder may be subject to U.S. federal income tax at the highest applicable ordinary income tax rates on (i) any excess distribution that we make to the U.S. Holder (which
generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holders holding period for the
ordinary shares), or (ii) any gain realized on the disposition of our ordinary shares. In addition, a U.S. Holder may be subject to an interest charge on such tax. Furthermore, the favorable dividend tax rates that may apply to certain U.S.
Holders on our dividends will not apply if we are a PFIC during the taxable year in which such dividend was paid, or the preceding taxable year.
As an alternative to the foregoing rules, if we are a PFIC for any taxable year, a U.S. Holder may make a
mark-to-market
election with respect to our ordinary shares, provided that the ordinary shares are regularly traded. Although no assurances may be given, we expect that our ordinary shares should qualify as
being regularly traded. If a U.S. Holder makes a valid
mark-to-market
election, the U.S. Holder will generally (i) include as ordinary income for each taxable year
that we are a PFIC the excess, if any, of the fair market value of our ordinary shares held at the end of the taxable year over the adjusted tax basis of such ordinary shares and (ii) deduct as an ordinary loss the excess, if any, of the
adjusted tax basis of the ordinary shares over the fair market value of such ordinary shares held at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the
mark-to-market
election. The U.S. Holders tax basis in the ordinary shares would be adjusted to reflect any income or loss resulting from the
mark-to-market
election. Gain on the sale or other disposition of our ordinary shares would be treated as ordinary income, and loss on the sale or other disposition of our
ordinary shares would be treated as an ordinary loss, but only to the extent of the amount previously included in income as a result of the
mark-to-market
election. If a
U.S. Holder makes a
mark-to-market
election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the holder will not
be required to take into account the gain or loss described above during any period that such corporation is not classified as a PFIC. Because a
mark-to-market
election
cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holders indirect interest in any investment held by us that is treated as an equity interest in a
PFIC for U.S. federal income tax purposes.
A qualified electing fund election (QEF election), in certain limited
circumstances, could serve as a further alternative to the foregoing rules with respect to an investment in a PFIC. However, in order for a U.S. Holder to be able to make a QEF election, we would need to provide such U.S. Holder with certain
information. Because we do not intend to provide U.S. Holders with the information they would need to make such an election, prospective investors should assume that the QEF election will not be available in respect of an investment in our ordinary
shares.
Each U.S. Holder is urged to consult its tax advisor concerning the U.S. federal income tax consequences of acquiring, owning or
disposing of our ordinary shares if we are or become classified as a PFIC, including the possibility of making a
mark-to-market
election.
The remainder of the discussion below assumes that we are not a PFIC, have not been a PFIC and will not become a PFIC in the future.
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Distributions
The gross amount of distributions with respect to our ordinary shares (including the amount of any
non-U.S.
withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Such distributions
will be includable in a U.S. Holders gross income as ordinary dividend income on the day actually or constructively received by the U.S. Holder. Such dividends will not be eligible for the dividends-received deduction generally allowed to U.S.
corporations in respect of dividends received from other U.S. corporations.
To the extent that the amount of the distribution exceeds our
current and accumulated earnings and profits for a taxable year, as determined under U.S. federal income tax principles, the distribution will be treated first as a
tax-free
return of capital to the extent of
the U.S. Holders tax basis in our ordinary shares, and to the extent the amount of the distribution exceeds the U.S. Holders tax basis, the excess will be taxed as capital gain recognized on a sale or exchange of such ordinary shares.
Because we do not expect to determine our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect that a distribution will generally be reported as a dividend for U.S. federal income tax purposes, even
if that distribution would otherwise be treated as a
tax-free
return of capital or as capital gain under the rules described above.
With respect to noncorporate U.S. Holders, certain dividends received from a qualified foreign corporation may be subject to
reduced rates of U.S. federal income taxation. A
non-U.S.
corporation is treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares that are readily tradable on an
established securities market in the United States. We believe our ordinary shares, which are listed on the NYSE, are considered to be readily tradable on an established securities market in the United States, although there can be no assurance that
this will continue to be the case in the future. Noncorporate U.S. Holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss, or that elect to treat the dividend income as
investment income pursuant to Section 163(d)(4) of the Code, will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, even if the minimum holding period
requirement has been met, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. You should consult your own tax
advisors regarding the application of these rules given your particular circumstances.
In the event that a U.S. Holder is subject to
non-U.S.
withholding taxes on dividends paid to such U.S. Holder with respect to our ordinary shares, such U.S. Holder may be eligible, subject to certain conditions and limitations, to claim a foreign tax credit
for such
non-U.S.
withholding taxes against the U.S. Holders U.S. federal income tax liability or alternatively deduct such
non-U.S.
withholding taxes in computing
such U.S. Holders U.S. federal income tax liability. Dividends paid to a U.S. Holder with respect to our ordinary shares are expected to generally constitute foreign source income and to generally be treated as passive
category income, for purposes of the foreign tax credit, except that a portion of such dividends may be treated as income from U.S. sources if (i) U.S. persons (as defined in the Code and applicable Treasury regulations) own, directly or
indirectly, 50% or more of our ordinary shares (by vote or value) and (ii) we receive more than a
de minimis
amount of income from U.S. sources. The rules governing the foreign tax credit and ability to deduct such
non-U.S.
withholding taxes are complex and involve the application of rules that depend upon your particular circumstances. You are urged to consult your own tax advisors regarding the availability of, and any
limits or conditions to, the foreign tax credit or deduction under your particular circumstances.
Sale, Exchange or Other
Disposition
For U.S. federal income tax purposes, a U.S. Holder generally will recognize taxable gain or loss on any sale,
exchange or other taxable disposition of our ordinary shares in an amount equal to the difference between the amount realized for our ordinary shares and the U.S. Holders tax basis in such ordinary shares. Such gain or loss will generally be
capital gain or loss. Capital gains of individuals derived with respect to capital assets held
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for more than one year generally are eligible for reduced rates of U.S. federal income taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a
U.S. Holder will generally be treated as U.S. source gain or loss. You are urged to consult your tax advisors regarding the tax consequences if a
non-U.S.
tax is imposed on a sale, exchange or other
disposition of our ordinary shares, including the availability of the foreign tax credit or deduction under your particular circumstances.
Information Reporting and Backup Withholding
A U.S. Holder with interests in specified foreign financial assets (including, among other assets, our ordinary shares, unless such
shares were held on such U.S. Holders behalf through certain financial institutions) may be required to file an information report with the IRS if the aggregate value of all such assets exceeds certain threshold amounts. You should consult
your own tax advisor as to the possible obligation to file such information reports in light of your particular circumstances.
Moreover,
information reporting generally will apply to dividends in respect of our ordinary shares and the proceeds from the sale, exchange or other disposition of our ordinary shares, in each case, that are paid to a U.S. Holder within the United States
(and in certain cases, outside the United States or through certain U.S. intermediaries), unless the U.S. Holder is an exempt recipient. Backup withholding (currently at a rate of 24%) may also apply to such payments, unless the U.S. Holder provides
a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding by providing a properly completed IRS Form
W-9
and otherwise complies with applicable requirements of the
backup withholding rules, or otherwise establishes an exemption. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holders U.S.
federal income tax liability provided the required information is timely furnished to the IRS. You should consult your tax advisors regarding the application of the U.S. information reporting and backup withholding rules to your particular
circumstances.
Material Dutch Tax Consequences
General
The
information set out below is a summary of certain material Dutch tax consequences in connection with the acquisition, ownership and disposition of our ordinary shares until completion of the Corporate Seat Transfer. Subject to the assumptions,
qualifications and risk factors in this Annual Report, this summary should generally not be affected by the Corporate Seat Transfer. This summary does not purport to be a comprehensive description of all the Dutch tax considerations that may be
relevant to a particular holder of our ordinary shares. Such holders may be subject to special tax treatment under any applicable law and this summary is not intended to be applicable in respect of all categories of holders of our ordinary shares.
This summary is based on the tax laws of the Netherlands as in effect on January 1, 2018, as well as regulations, rulings and
decisions of the Netherlands or of its taxing and other authorities available in printed form on or before such date and now in effect, and as applied and interpreted by Netherlands courts, without prejudice to any amendments introduced at a later
date and implemented with or without retroactive effect. All of the foregoing is subject to change, which change could apply retroactively and could affect the continued validity of this summary.
For Dutch tax purposes, a holder of our ordinary shares may include an individual who, or an entity that, does not have the legal title to our
ordinary shares, but to whom nevertheless our ordinary shares are attributed based either on such individual or entity holding a beneficial interest in our ordinary shares or based on specific statutory provisions, including statutory provisions
pursuant to which our ordinary shares are attributed to an individual who is, or who has directly or indirectly inherited from a person who was, the settlor, grantor or similar originator of a trust, foundation or similar entity that holds our
ordinary shares, such as the separated private assets (
afgezonderd particulier vermogen
) provisions of the Dutch Income Tax Act 2001 (
Wet inkomstenbelasting 2001
) and the Dutch Gift and Inheritance Tax Act 1956 (S
uccessiewet
1956
).
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Because it is a general summary, (prospective) holders of our ordinary shares should consult
their own tax advisors as to the Dutch or other tax consequences of the acquisition, holding and disposition of the ordinary shares including, in particular, the application to their particular situations of the tax considerations discussed below,
as well as the application of foreign or other tax laws.
This summary does not describe any tax consequences arising under the laws of
any taxing jurisdiction other than the Netherlands in connection with the acquisition, ownership and disposition of our ordinary shares. All references in this summary to the Netherlands and to Netherlands or Dutch law are to the European part of
the Kingdom of the Netherlands and its law, respectively, only. In addition, any reference hereafter made to a treaty for the avoidance of double taxation concluded by the Netherlands, includes the Tax Arrangement for the Kingdom of the Netherlands
(
Belastingregeling voor het Koninkrijk
), the Tax Arrangement the NetherlandsCuracao (
Belastingregeling NederlandCuracao
), the Tax Arrangement for the country of the Netherlands (
Belastingregeling voor het land
Nederland
) and the Tax Arrangement the NetherlandsSt. Maarten (
Belastingregeling NederlandSt. Maarten
).
References
in this summary to withholding tax refer to the Dutch dividend withholding tax only. Further, the scenario wherein both French and Dutch dividend withholding tax would be withheld is not dealt with in this summary.
This summary is not intended for any holder of our ordinary shares, who:
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(i)
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is an individual and for whom the income or capital gains derived from the ordinary shares are attributable to (former) employment activities the income from which is taxable in the Netherlands;
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(ii)
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is an entity that is a resident or deemed to be a resident of the Netherlands and that is, in whole or in part, not subject to or exempt from Netherlands corporate income tax (such as qualifying pension funds);
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(iii)
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is an entity that has an interest in us to which the participation exemption (
deelnemingsvrijstelling
) or the participation credit (
deelnemingsverrekening
) is applicable as set out in the Dutch Corporate
Income Tax Act 1969;
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(iv)
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is a fiscal investment institution (
fiscale
beleggingsinstelling
) or an exempt investment institution (
vrijgestelde
beleggingsinstelling
) as defined in the Dutch Corporate Income Tax Act
1969;
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(v)
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is not considered the beneficial owner of our ordinary shares and/or the income and/or capital gains derived from our ordinary shares; or
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(vi)
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has a substantial interest (
aanmerkelijk
belang
) or a deemed substantial interest as defined in the Dutch Income Tax Act 2001 and the Dutch Corporate Income Tax Act 1969 in us.
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Generally a holder of our ordinary shares will have a substantial interest in us in the meaning of paragraph (vi) above if he holds,
alone or together with his partner (statutorily defined term), whether directly or indirectly, the ownership of, or certain other rights over shares representing 5% or more of our total issued and outstanding capital (or the issued and outstanding
capital of any class of our shares), or rights to acquire shares, whether or not already issued, which represent at any time 5% or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares) or
the ownership of certain profit participating certificates that relate to 5% or more of the annual profit and/or to 5% or more of the liquidation proceeds of us. A holder of our ordinary shares will also have a substantial interest in us if one of
certain relatives of that holder or of his partner (a statutory defined term) has a substantial interest in us.
If a holder of our
ordinary shares does not have a substantial interest, a deemed substantial interest will be present if (part of) a substantial interest has been disposed of, or is deemed to have been disposed of, without recognizing taxable gain.
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For the Dutch corporate income tax consequences and Dutch dividend withholding tax consequences
of the conversion of the Company from an NV into an SE and the Corporate Seat Transfer, see Item 3. Key InformationD. Risk FactorsRisks Related to TaxationIf we pay dividends after the Corporate Seat Transfer, we may need to
withhold Dutch dividend withholding tax on any dividends payable to Dutch resident holders of our ordinary shares,
non-Dutch
resident holders of ordinary shares with a taxable presence in the Netherlands and
holders of our shares from which the identity cannot be assessed upon a payment of a dividend. and Item 3. Key InformationD. Risk FactorsRisks Related to TaxationWe may have to pay Dutch dividend withholding tax and
Dutch corporate income tax upon the conversion of the Company from an NV into an SE.
Dividend Withholding Tax
General
Dividends paid on
our ordinary shares to a holder of ordinary shares are generally subject to withholding tax of 15% imposed by the Netherlands.
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Generally, the dividend withholding tax will not be borne by us,
but we will withhold from the gross dividends paid on our ordinary shares. The term dividends for this purpose includes, but is not limited to:
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distributions in cash or in kind, deemed and constructive distributions and repayments of
paid-in
capital not recognized for Dutch dividend withholding tax purposes;
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liquidation proceeds, proceeds of redemption of ordinary shares or, generally, consideration for the repurchase of ordinary shares by us in excess of the average
paid-in
capital
of those ordinary shares recognized for Dutch dividend withholding tax purposes;
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the nominal value of ordinary shares issued to a shareholder or an increase of the nominal value of ordinary shares, as the case may be, to the extent that it does not appear that a contribution to the capital
recognized for Dutch dividend withholding tax purposes was made or will be made; and
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partial repayment of
paid-in
capital, recognized for Dutch dividend withholding tax purposes, if and to the extent that there are net profits (
zuivere winst
), within the
meaning of the Dutch Dividend Withholding Tax Act 1965 (
Wet op de dividendbelasting 1965
), unless the general meeting of shareholders has resolved in advance to make such a repayment and provided that the nominal value of the ordinary shares
concerned has been reduced by a corresponding amount by way of an amendment of our Amended and Restated Articles of Association.
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After the Corporate Seat Transfer, if effectuated, dividends paid on our ordinary shares generally will be subject to French dividend
withholding tax and not Dutch dividend withholding tax. However, Dutch dividend withholding tax may be required to be withheld from any such dividends paid, if and when paid to Dutch resident holders of our ordinary shares and
non-Dutch
resident holders of our ordinary shares that have a permanent establishment in the Netherlands to which the ordinary shares are attributable. See Item 3. Key InformationD. Risk
FactorsRisks Related to TaxationIf we pay dividends after the Corporate Seat Transfer, we may need to withhold Dutch dividend withholding tax on any dividends payable to Dutch resident holders of our ordinary shares,
non-Dutch
resident holders of ordinary shares with a taxable presence in the Netherlands and holders of our shares from which the identity cannot be assessed upon a payment of a dividend. and Item 3. Key
InformationRisks Related to TaxationWe may have to pay Dutch dividend withholding tax and Dutch corporate income tax upon the conversion of the Company from an NV into an SE.
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However, the new Dutch government has as part of a coalition agreement published on 10 October 2017 announced that it may abolish as from 2019 at the earliest the dividend withholding tax, except for
dividend payments to low tax jurisdictions or dividend payments in abusive situations. At this stage no legislative proposal has been published yet.
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Remittance Reduction
In general, we will be required to remit all amounts withheld as Dutch dividend withholding tax to the Dutch tax authorities. However, in
connection with distributions received by Holdco II from its foreign subsidiaries, we are allowed as long as we are required to withheld Dutch dividend withholding tax, until the Holdco II Merger and subject to certain conditions, to reduce the
amount of Dutch dividend withholding tax to be remitted to Dutch tax authorities by the lesser of:
(i) 3% of
the portion of the distribution paid by us that is subject to Dutch dividend withholding tax; and
(ii) 3% of the
dividends and profit distributions, before deduction of
non-Dutch
withholding taxes, received by Holdco II from qualifying foreign subsidiaries in the current calendar year (up to the date of the distribution
by us) and the two preceding calendar years, insofar as such dividends and profit distributions have not yet been taken into account for purposes of establishing the above-mentioned deductions.
For purposes of determining the 3% threshold under (i) above, a distribution by us is not taken into account in case the Dutch dividend
withholding tax withheld in respect thereof may be fully refunded, unless the recipient of such distribution is a qualifying entity that is not subject to corporate income tax.
Although this reduction reduces the amount of Dutch dividend withholding tax that we are required to pay to the Dutch tax authorities, it does
not reduce the amount of tax that we are required to withhold from dividends.
The regulation regarding the remittance may be adjusted
with retroactive effect to October 25, 2017. See Item 3. Key InformationD. Risk FactorsRisks Related to TaxationWe may not be able to make use of the remittance reduction with retroactive effect.
Dutch Residents
A holder
of our ordinary shares who is, or who is deemed to be, resident in the Netherlands for purposes of Dutch taxation can generally credit the dividend withholding tax against his Dutch income tax or Dutch corporate income tax liability and is generally
entitled to a refund of dividend withholding taxes exceeding his aggregate Dutch income tax or Dutch corporate income tax liability, provided certain conditions are met, unless such holder of our ordinary shares is not considered to be the
beneficial owner (
uiteindelijk gerechtigde
) of the dividends.
A holder of our ordinary shares who is the recipient of dividends
(the Recipient) will in any case not be considered the beneficial owner of these dividends for Dutch dividend withholding tax purposes if:
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as a consequence of a combination of transactions, a person or legal entity other than the Recipient wholly or partly, directly or indirectly, benefits from the dividends;
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such other person or legal entity would:
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as opposed to the Recipient, not be entitled to an exemption from dividend withholding tax; or
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in comparison to the Recipient, to a lesser extent be entitled to a credit, reduction or refund of dividend withholding tax; and
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such other person or legal entity has, directly or indirectly, retained or acquired a similar interest in our ordinary shares.
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Non-Dutch
Residents
With respect to a holder of our ordinary shares, who is not, and is not deemed to be, resident in the Netherlands for purposes of Dutch
taxation and who is considered to be a resident of a country other than the Netherlands under
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the provisions of a treaty for the avoidance of double taxation concluded by the Netherlands and such country, the following may apply. Such holder of ordinary shares may, depending on the terms
of and subject to compliance with the procedures for claiming benefits under such treaty for the avoidance of double taxation, be eligible for a full or partial exemption from or a reduction or refund of Dutch dividend withholding tax.
On the basis of article 35 of the Convention Between the Kingdom of the Netherlands and the United States for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with respect to Taxes on Income, executed in Washington on December 18, 1992, as amended from time to time (the
Netherlands-U.S.
Convention), qualifying
U.S. pension trusts are under certain conditions entitled to a full exemption from Dutch dividend withholding tax. Such qualifying exempt U.S. pension trusts must provide us form IB 96 USA, along with a valid certificate, for the application of
relief at source from dividend withholding tax. If we receive the required documentation prior to the relevant dividend payment date, then we may apply such relief at source. If a qualifying exempt U.S. pension trust fails to satisfy these
requirements prior to the payment of a dividend, then such qualifying exempt pension trust may claim a refund of Dutch withholding tax by filing form IB 96 USA with the Dutch tax authorities. On the basis of article 36 of the
Netherlands-U.S.
Convention, qualifying exempt U.S. organizations are under certain conditions entitled to a full exemption from Dutch dividend withholding tax. Such qualifying exempt U.S. organizations are not
entitled to claim relief at source, and instead must claim a refund of Dutch withholding tax by filing form IB 95 USA with the Dutch tax authorities.
Tax on Income and Capital Gains
Dutch Resident Individuals
An individual who is resident or deemed to be resident in the Netherlands (a Dutch Resident Individual) and who holds our ordinary
shares will be subject to Netherlands income tax on income and/or capital gains derived from our ordinary shares at the progressive rate (up to 51.95%; rate for 2018) if:
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(i)
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the holder derives profits from an enterprise or deemed enterprise, whether as an entrepreneur (
ondernemer
) or pursuant to a
co-entitlement
to the net worth of such
enterprise (other than as an entrepreneur or a shareholder), to which enterprise the ordinary shares are attributable; or
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(ii)
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the holder derives income or capital gains from the ordinary shares that are taxable as benefits from miscellaneous activities (
resultaat uit overige werkzaamheden
, as defined in the Dutch Income Tax
Act 2001), which include the performance of activities with respect to the ordinary shares that exceed regular, active portfolio management (
normaal, actief vermogensbeheer
) and also includes benefits resulting from a lucrative interest
(
lucratief belang
).
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If conditions (i) and (ii) above do not apply, any holder of our ordinary shares who is a
Dutch Resident Individual will be subject to Netherlands income tax on a deemed return regardless of the actual income and/or capital gains derived from our ordinary shares. This deemed return is calculated by applying the applicable deemed return
percentage(s) to the individuals yield basis (
rendementsgrondslag
) insofar as this exceeds a certain threshold (
heffingvrijvermogen
). The individuals yield basis is determined as the fair market value of certain qualifying
assets (including, as the case may be, the ordinary shares) held by the Dutch Resident Individual less the fair market value of certain qualifying liabilities, both determined on January 1 of the relevant year. The deemed return percentage to
be applied to the yield basis increases progressively from 2.02% to 5.38% depending on such individuals yield basis. The deemed return percentages will be adjusted annually. The deemed return will be taxed at a rate of 30% (rate for 2018).
Dutch Resident Entities
An entity that is resident or deemed to be resident in the Netherlands (a Dutch Resident Entity) will generally be subject to
Netherlands corporate income tax with respect to income and capital gains derived from the ordinary shares. The Netherlands corporate income tax rate is 20% for the first 200,000 of the taxable amount, and 25% for the excess of the taxable
amount over 200,000 (rates applicable for 2018).
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Non-Dutch
Residents
A person who is neither a Dutch Resident Individual nor Dutch Resident Entity (a
Non-Dutch
Resident) and who holds our ordinary shares is generally not subject to Netherlands income tax or corporate income tax (other than dividend withholding tax described above) on income and capital gains derived from the ordinary shares, provided
that:
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(i)
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such
Non-Dutch
Resident does not derive profits from an enterprise or deemed enterprise, whether as an entrepreneur (
ondernemer
) or pursuant to a
co-entitlement
to the net worth of such enterprise (other than as an entrepreneur or a shareholder) which enterprise is, in whole or in part, carried on through a permanent establishment or a permanent
representative in the Netherlands and to which enterprise or part of an enterprise, as the case may be, the ordinary shares are attributable or deemed attributable;
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(ii)
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in the case of a
Non-Dutch
Resident who is an individual, such individual does not derive income or capital gains from the Shares that are taxable as benefits from
miscellaneous activities (
resultaat
uit
overige
werkzaamheden
, as defined in the Dutch Income Tax Act 2001) performed or deemed to be performed in the Netherlands, which include the performance of activities
with respect to the ordinary shares that exceed regular, active portfolio management (
normaal
,
actief
vermogensbeheer
) and also includes benefits resulting from a lucrative interest (
lucratief belang
); and
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(iii)
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such
Non-Dutch
Resident is neither entitled to a share in the profits of an enterprise nor
co-entitled
to the net worth of such enterprise
effectively managed in the Netherlands, other than by way of the holding of securities.
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Gift and Inheritance Taxes
Dutch Residents
Generally, gift taxes (
schenkbelasting
) and inheritance taxes (
erfbelasting
) may arise in the Netherlands with respect to a
transfer of our ordinary shares by way of a gift by or on the death of a holder of our ordinary shares who is resident or deemed to be resident in the Netherlands for the purpose of the Netherlands Gift and Inheritance Tax Act 1956 at the time of
the gift or his/her death.
Non-Dutch
Residents
No Netherlands gift or inheritance taxes will be levied on the transfer of our ordinary shares by way of gift by or on the death of a holder of
our ordinary shares, who is neither a resident nor deemed to be a resident of the Netherlands for the purpose of the relevant provisions, unless:
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(i)
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the transfer is construed as an inheritance or bequest or as a gift made by or on behalf of a person who, at the time of the gift or death, is or is deemed to be a resident of the Netherlands for the purpose of the
relevant provisions; or
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(ii)
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in the case of a gift of the ordinary shares by an individual who at the date of the gift was neither resident nor deemed to be resident of the Netherlands such holder dies within 180 days after the date of a gift of
the ordinary shares while being a resident or deemed resident of the Netherlands.
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For purposes of the Dutch Gift and
Inheritance Tax Act 1956, an individual who is of Dutch nationality will be deemed to be a resident of the Netherlands if he has been a resident in the Netherlands at any time during the ten years preceding the date of the gift or his death.
For purposes of Netherlands gift tax, an individual will, irrespective of his nationality, be deemed to be resident of the Netherlands if he
has been a resident in the Netherlands at any time during the 12 months preceding the date of the gift. The same
12-months
rule may apply to entities that have transferred their seat of residence out of the
Netherlands.
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Applicable tax treaties may override such deemed residency. For purposes of the Dutch Gift and
Inheritance Tax Act 1956, a gift made under a condition precedent is deemed to be made at the time the condition precedent is fulfilled and is subject to gift tax if the donor is or is deemed to be a resident of the Netherlands at that time.
Value-Added Tax
No Netherlands value-added tax will be payable by a holder of our ordinary shares in consideration for the offer of our ordinary shares (other
than value-added taxes on fees payable in respect of services not exempt from Netherlands value added tax).
Other Taxes or Duties
No Netherlands registration tax, custom duty, stamp duty or any other similar tax or duty, other than court fees, will be payable
in the Netherlands by a holder of our ordinary shares in respect of or in connection with the acquisition, ownership and disposition of the ordinary shares, except to the extent that the FTT would become applicable. See Item 3. Key
InformationD. Risk FactorsRisks Related to TaxationTransactions in our ordinary shares could be subject to the European financial transaction tax, if adopted.
Residence
A
holder of our ordinary shares will not become or be deemed to become a resident of the Netherlands solely by reason of holding these ordinary shares.
F.
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Dividends and Paying Agents
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Not applicable.
Not applicable.
You may read and copy any reports or other information that we
file at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the
SEC. The address of that site is www.sec.gov.
We also make available on our website, free of charge, our annual reports on Form
20-F
and the text of our reports on Form
6-K,
including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are
electronically filed with or furnished to the SEC. Our website address is www.constellium.com. The information contained on our website is not incorporated by reference in this document.
I.
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Subsidiary Information
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Not applicable.
-130-
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Refer to the information set forth under the Notes to the Consolidated Financial Statements at Item 18. Financial
Statements:
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Note 2Summary of Significant Accounting Policies2.6 Principles governing the preparation of the Consolidated Financial Statements Financial Instruments; and
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Note 22Financial Risk Management.
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Item 12. Description of
Securities Other than Equity Securities
Not applicable.
-131-
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTE 1GENERAL INFORMATION
Constellium is a global
leader in the design and manufacture of a broad range of innovative specialty rolled and extruded aluminium products, serving primarily the packaging, aerospace and automotive
end-markets.
The Group has a
strategic footprint of manufacturing facilities located in the North America, Europe and China, operates 23 production facilities, 10 administrative and commercial sites and two world-class technology centers. It has approximately 12,000 employees.
Constellium is a public company with limited liability. The business address (head office) of Constellium N.V. is Tupolevlaan
41-61,
1119 NW Schiphol-Rijk, the Netherlands.
Unless the context indicates otherwise, when we refer to we,
our, us, Constellium, the Group and the Company in this document, we are referring to Constellium N.V. and its subsidiaries.
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
The consolidated financial
statements of Constellium N.V. and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU).
The Groups application of IFRS results in no difference between IFRS as issued by the IASB and IFRS as endorsed by the EU
(https://ec.europa.eu/info/law/international-accounting-standards-regulation-ec-no-1606-2002_en).
The consolidated financial statements have been authorized for issue by the Board of Directors on March 8, 2018.
2.2 Application of new and revised IFRS
The following
new standards and amendments apply to the Group for the first time in 2017.
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Amendments to IAS 7, Disclosure Initiative
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The amendments to IAS 7, Statement of Cash
Flows, are part of the IASBs Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes
arising from cash flows and
non-cash
changes. Additional disclosures have been made to address the amendments.
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Amendments to IAS 12, Recognition of Deferred Tax Assets for Unrealised Losses
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Annual improvements 2014-2016 IFRS 12, Disclosure of Interests in Other Entities: Clarifying the scope
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The amendments to IAS 12 and annual improvements 2014-2016 to IFRS 12 do not have any impact on the consolidated financial statements of the Group.
2.3 New standards and interpretations not yet mandatorily applicable
The Group has not applied the following new standards and interpretations that have been issued but are not yet effective and which could affect the
Groups future Consolidated Financial Statements:
IFRS 15, Revenue from contracts with customers and its clarifications deal with
revenue recognition and establish principles for reporting information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entitys contracts with customers. Revenue is
F-9
recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18,
Revenue and IAS 11, Construction contracts and related interpretations. The clarifications provide guidance on identifying performance obligations, the principal versus agent assessment, accounting for licenses of
intellectual property, and transition to the new revenue standard. The Group has completed its assessment of the expected impact of IFRS 15 on its consolidated financial position and results of operations. IFRS 15 requires the Group to
recognize revenue over time for products that have no alternative use and for which the Group has an enforceable right to payment for production completed to date. In certain limited circumstances this could result in recognizing revenue
earlier than under current IFRS rules which require recognition at a point in time. However, based on the analysis performed, the Group does not anticipate the adoption of IFRS 15 to result in any significant impact on its financial position or
results of operations. The Group intends to use the cumulative effect method on January 1, 2018. Adoption of the standard will likely increase the level of revenue disclosures in the financial statements.
The standard and its clarifications will be effective for accounting periods beginning on or after January 1, 2018.
IFRS 16, Leases, deals with principles for the recognition, measurement, presentation and disclosures of leases. The standard provides an
accounting model, requiring lessee to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. The lessor accounting approach remains unchanged. The Group is currently
evaluating the impact of the standard on our consolidated financial position and results of operations. The Group expects that the adoption will result in an increase of
non-current
assets and
non-current
liabilities as a result of substantially all operating leases existing as of the adoption date being capitalized along with the associated obligations.
The standard will replace IAS 17, Leases and will be effective for accounting periods beginning on or after January 1, 2019.
IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. It will
replace the guidance in IAS 39, Financial instruments that relates to the classification and measurement of financial instruments.
Modifications introduced by IFRS 9 relate primarily to:
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classification and measurement of financial assets. The basis of classification depends on the entitys business model and the contractual cash flow characteristics of the financial asset.
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impairment of receivables, now based on the expected credit loss model.
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The Group does not anticipate that the adoption will result in any significant impact on
its financial statements. The Group does not plan to adopt the provisions of IFRS 9 on hedge accounting and will continue applying IAS 39.
The
standard will be effective for accounting periods beginning on or after January 1, 2018.
IFRIC 23, Uncertainty over Income Tax
Treatments
This interpretation provides a framework to consider, recognize and measure the accounting impact of tax uncertainties. It specifies how
to determine the unit of account and the recognition and measurement guidance to be applied to that unit. The Interpretation also explains when to reconsider the accounting for a tax uncertainty, and it states specifically that the absence of
comment from the tax authority is unlikely, in isolation, to trigger a reassessment. The impact of this interpretation on the Groups results and financial situation is currently being evaluated.
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The interpretation is effective for annual periods beginning on or after January 1, 2019.
The Group plans to adopt the new standards and interpretations on their required effective dates.
2.4 Basis of preparation
In accordance with IAS 1,
Presentation of Financial Statements, the Consolidated Financial Statements are prepared on the assumption that Constellium is a going concern and will continue in operation for the foreseeable future.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements respectively in
NOTE 12Cash and Cash Equivalents, NOTE 20Borrowings and NOTE 22Financial Risk Management.
The Groups forecasts and
projections, taking account of reasonably possible changes in trading performance, including an assessment of the current macroeconomic environment, indicate that the Group should be able to operate within the level of its current facilities and
related covenants.
Accordingly, the Group continues to adopt the going concern basis in preparing the Consolidated Financial Statements. Management
considers that this assumption is not invalidated by the Groups negative equity at December 31, 2017. This assessment was confirmed by the Board of Directors on March 8, 2018.
2.5 Presentation of the operating performance of each operating segment and of the Group
In accordance with IFRS 8, Operating Segments, operating segments are based upon product lines, markets and industries served, and are reported in
a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the
Chief Executive Officer.
Constelliums CODM measures the profitability and financial performance of its operating segments based on Adjusted EBITDA
as it illustrates the underlying performance of continuing operations by excluding certain
non-recurring
and
non-operating
items. Adjusted EBITDA is defined as income /
(loss) from continuing operations before income taxes, results from joint ventures, net finance costs, other expenses and depreciation and amortization as adjusted to exclude restructuring costs, impairment charges, unrealized gains or losses on
derivatives and on foreign exchange differences on transactions that do not qualify for hedge accounting, metal price lag, share-based compensation expense, effects of certain purchase accounting adjustments,
start-up
and development costs or acquisition, integration and separation costs, certain incremental costs and other exceptional, unusual or generally
non-recurring
items.
2.6 Principles governing the preparation of the Consolidated Financial Statements
Basis of consolidation
These consolidated financial
statements include all the assets, liabilities, equity, revenues, expenses and cash flows of the entities and businesses controlled by Constellium. All intercompany transactions and balances are eliminated.
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group has power over the investee, is exposed to, or has
rights to variable returns from its involvement in the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries
are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
F-11
Investments over which the Group has significant influence or joint control are accounted for under the equity
method. The investments are initially recorded at cost. Subsequently they are increased or decreased by the Groups share in the profit or loss, or by other movements reflected directly in the equity of the entity.
Business combination
The Group applies the acquisition
method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair value of the assets
transferred, the liabilities assumed and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The amount of
non-controlling
interests is determined for each
business combination and is either based on the fair value (full goodwill method) or the present ownership instruments proportionate share in the recognized amounts of the acquirees identifiable net assets, resulting in recognition of
only the share of goodwill attributable to equity holders of the parent (partial goodwill method).
Goodwill is initially measured as the excess of the
aggregate of the consideration transferred and the amount of
non-controlling
interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of
the net assets of the subsidiary acquired, the difference is recognized as a gain in Other gains / (losses)net in the Consolidated Income Statement.
At the acquisition date, the Group recognizes the identifiable acquired assets, liabilities and contingent liabilities (identifiable net assets) of the
subsidiaries on the basis of fair value at the acquisition date. Recognized assets and liabilities may be adjusted during a maximum of 12 months from the acquisition date, depending on new information obtained about the facts and circumstances
existing at the acquisition date.
Significant assumptions used in determining allocation of fair value include the following valuation techniques: the
cost approach, the income approach and the market approach which are determined based on cash flow projections and related discount rates, industry indices, market prices regarding replacement cost and comparable market transactions.
Acquisition related costs are expensed as incurred and included in Other gains / (losses)net in the Consolidated Income Statement.
Cash-generating units
The reporting units (which
generally correspond to an industrial site), the lowest level of the Groups internal reporting, have been identified as its cash-generating units.
Goodwill
Goodwill arising from a business combination is
carried at cost as established at the date of the business combination less accumulated impairment losses, if any.
Goodwill is allocated and monitored at
the operating segments level which are the groups of cash-generating units that are expected to benefit from the synergies of the combination. The operating segments represent the lowest level within the Group at which the goodwill is monitored for
internal management purposes.
Gains and losses on the disposal of a cash-generating unit include the carrying amount of goodwill relating to the
cash-generating unit sold.
F-12
Impairment of goodwill
A group of cash-generating units to which goodwill is allocated is tested for impairment annually, or more frequently when there is an indication that the
group of units may be impaired.
The net carrying value of a group of cash-generating units is compared to its recoverable amount, which is the higher of
the value in use and the fair value less cost of disposal.
Value in use calculations use cash flow projections based on financial budgets approved by
management and covering usually a
5-year
period. Cash flows beyond this period are estimated using a perpetual long-term growth rate for the subsequent years.
The value in use is the sum of discounted cash flows over the projected period and the terminal value. Discount rates are determined based on the
weighted-average cost of capital of each operating segment.
The fair value is the price that would be received for the group of cash-generating units, in
an orderly transaction, from a market participant. This value is estimated on the basis of available and relevant market data or a discounted cash flow model reflecting market participant assumptions.
An impairment loss is recognized for the amount by which the group of units carrying amount exceeds its recoverable amount.
Any impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the group of cash-generating units and then, to the other
assets of the group of units pro rata on the basis of the carrying amount of each asset in the group of units.
Any impairment loss is recognized in the
line Impairment in the Consolidated Income Statement. An impairment loss recognized for goodwill cannot be reversed in subsequent periods.
Non-current
assets (and disposal groups) classified as held for sale & Discontinued operations
IFRS 5
Non-current
Assets Held for Sale and Discontinued Operations defines a discontinued operation as a component of an entity that (i) generates cash flows that are largely independent from cash flows
generated by other components, (ii) is classified as held for sale or has been disposed of, and (iii) represents a separate major line of business or geographic areas of operations.
Assets and liabilities are classified as held for sale when their carrying amount will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly probable and the
non-current
asset (or disposal group) is available for immediate sale in its present condition.
Assets and liabilities are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally
through a sale transaction rather than through continuing use.
Assets and liabilities held for sale are presented in separate line items in the
Consolidated Statement of Financial Position of the period during which the decision to sell is made.
The results of discontinued operations are shown
separately in the Consolidated Income Statement and Consolidated Statement of Cash Flows.
Foreign currency transactions and foreign operations
Functional currency
Items included in the
consolidated financial statements of each of the entities and businesses of Constellium are measured using the currency of the primary economic environment in which each of them operates (their functional currency).
F-13
Foreign currency transactions
Transactions denominated in currencies other than the functional currency are recorded in the functional currency at the exchange rate in effect at the date of
the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognized in the Consolidated Income Statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to
borrowings and cash and cash equivalents are presented within Finance costs net. Realized foreign exchange gains and losses that relate to commercial transactions are presented in Cost of sales. All other foreign exchange gains and losses,
including those that relate to foreign currency derivatives hedging commercial transactions, are presented within Other gains/(losses) net.
Foreign operations: presentation currency and foreign currency translation
In the preparation of the Consolidated Financial Statements, the
year-end
balances of assets, liabilities and
components of equity of Constelliums entities and businesses are translated from their functional currencies into Euros, the presentation currency of the Group, at their respective
year-end
exchange
rates. Revenue, expenses and cash flows of Constelliums entities and businesses are translated from their functional currencies into Euros using their respective average exchange rates for the period.
The net differences arising from exchange rate translation are recognized in the Consolidated Statement of Comprehensive Income / (Loss).
The following table summarizes the main exchange rates used for the preparation of the Consolidated Financial Statements :
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Foreign exchange rate
for 1
Euro
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Year ended
December 31, 2017
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Year ended
December 31, 2016
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Year ended
December 31, 2015
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Average
rate
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Closing
rate
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Average
rate
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Closing
rate
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Average
rate
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Closing
rate
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U.S. Dollars
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USD
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1.1273
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1.1993
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1.1063
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1.0541
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1.1089
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1.0887
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Swiss Francs
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CHF
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1.1103
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1.1702
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1.0901
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1.0739
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1.0669
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1.0835
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Czech Koruna
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CZK
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26.3151
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25.5349
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27.0342
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27.0210
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27.2762
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27.0226
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Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue from product sales, net of trade discounts, allowances and volume-based incentives, is recognized once delivery has occurred, and provided persuasive
evidence that the following criteria are met:
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The significant risks and rewards of ownership of the product have been transferred to the buyer;
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Neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained by Constellium;
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The amount of revenue can be measured reliably;
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It is probable that the economic benefits associated with the sale will flow to Constellium; and
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The costs incurred or to be incurred in respect of the sale can be measured reliably.
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The Group also enters
into tolling agreements whereby clients provide the metal which the Group will then manufacture for them. In these circumstances, revenue is recognized when services are provided at the date of redelivery of the manufactured metal.
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Amounts billed to customers in respect of shipping and handling are classified as revenue when the Group is
responsible for carriage, insurance and freight. All shipping and handling costs incurred by the Group are recognized in Cost of sales.
Deferred
tooling revenue and related costs
Certain automotive long term contracts include the design and manufacture of customized parts. To manufacture such
parts, certain specialized or customized tooling is required. In accordance with IAS 11 Construction Contracts, the Group accounts for the tooling revenue and related costs provided by third party manufacturers on the basis of percentage
of completion of the contract.
Research and development costs
Costs incurred on development projects are recognized as intangible assets when the following criteria are met:
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It is technically feasible to complete the intangible asset so that it will be available for use;
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Management intends to complete and use the intangible asset;
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There is an ability to use the intangible asset;
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It can be demonstrated how the intangible asset will generate probable future economic benefits;
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Adequate technical, financial and other resources to complete the development and use or sell the intangible asset are available; and
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The expenditure attributable to the intangible asset during its development can be reliably measured.
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Development expenditures which do not meet these criteria are expensed as incurred. Development costs previously recognized as expenses are not recognized as
an asset in a subsequent period.
Other gains / (losses)net
Other gains / (losses)net include: (i) realized and unrealized gains and losses on derivatives contracted for commercial purposes and accounted for
at fair value through profit or loss, (ii) unrealized exchange gains and losses from the remeasurement of monetary assets and liabilities and (iii) ineffective portion of changes in fair value of derivatives, which are designated for hedge
accounting.
Other gains / (losses)net separately identifies other unusual, infrequent or
non-recurring
items. Such items are those that in managements judgment need to be disclosed by virtue of their size, nature or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative
factors such as the frequency or predictability of occurrence.
Interest income and expense
Interest income is recorded using the effective interest rate method on loans receivables and on the interest bearing components of cash and cash equivalents.
Interest expense on short and long-term financing is recorded at the relevant rates on the various borrowing agreements.
Borrowing costs (including interests) incurred for the construction of any qualifying asset are capitalized during the period of time required to complete and
prepare the asset for its intended use.
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Share-based payment arrangements
Equity-settled share-based payments to employees and Board members providing similar services are measured at the fair value of the equity instruments at the
grant date.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Groups estimate
of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting year, the Group revises its estimate of the number of equity instruments expected to vest.
Property, plant and equipment
Recognition and
measurement
Property, plant and equipment acquired by the Company are recorded at cost, which comprises the purchase price (including import duties
and
non-refundable
purchase taxes), any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the
estimated close down and restoration costs associated with the asset. Borrowing costs (including interests) directly attributable to the acquisition or construction of a Property, plant and equipment are included in the cost. Subsequent to the
initial recognition, Property, plant and equipment are measured at cost less accumulated depreciation and impairment, if any. Costs are capitalized into construction
work-in-progress
until such projects are completed and the assets are available for use.
Subsequent costs
Enhancements and replacements are
capitalized as additions to Property, plant and equipment only when it is probable that future economic benefits associated with them will flow to the Company and the cost of the item can be measured with reliability. Ongoing regular maintenance
costs related to Property, plant and equipment are expensed as incurred.
Depreciation
Land is not depreciated. Property, plant and equipment are depreciated over the estimated useful lives of the related assets using the straight-line method as
follows:
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Buildings 10 50 years;
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Machinery and equipment 3 40 years; and
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Intangible assets
Recognition and measurement
Technology and Customer
relationships acquired in a business combination are recognized at fair value at the acquisition date. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and impairment losses. The useful lives of
the Group intangible assets are assessed to be finite.
Amortization
Intangible assets are amortized over the estimated useful lives of the related assets using the straight-line method as follows:
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Customer relationships 25 years; and
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Impairment of property, plant and equipment and intangible assets
Property, plant and equipment and intangible assets subject to amortization are reviewed for impairment if there is any indication that the carrying amount of
the asset (or cash-generating unit to which it belongs) may not be recoverable. The recoverable amount is based on the higher of fair value less cost of disposal (market value) and value in use (determined using estimates of discounted future net
cash flows of the asset or group of assets to which it belongs).
Any impairment loss is recognized in the line Impairment in the Consolidated Income
Statement.
Financial instruments
(i) Financial
assets
Financial assets are classified either: (a) at fair value through profit or loss, or as (b) loans and receivables. The classification
depends on the purpose for which the financial assets were acquired. Management determines the classification of Constelliums financial assets at initial recognition.
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At fair value through profit or loss: These are financial assets held for trading. A financial asset is classified in this category if it is acquired principally for the purpose of selling in the short term. Derivatives
are categorized as held for trading except when they are designated as hedging instruments in a hedging relationship that qualifies for hedge accounting in accordance with IAS 39, Financial instruments. Financial assets carried at fair
value through profit or loss are initially recognized at fair value and transaction costs are expensed in the Consolidated Income Statement.
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(b)
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Loans and receivables: These are
non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current or
non-current
assets based on their maturity date. Loans and receivables are comprised of trade receivables and other and
non-current
and current loans receivable in the
Consolidated Statement of Financial Position. Loans and receivables are carried at amortized cost using the effective interest rate method, less any impairment.
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(ii) Financial liabilities
Borrowings and other
financial liabilities (excluding derivative liabilities) are recognized initially at fair value, net of transaction costs incurred and directly attributable to the issuance of the liability. These financial liabilities are subsequently measured at
amortized cost using the effective interest rate method. Any difference between the amounts originally received (net of transaction costs) and the redemption value is recognized in the Consolidated Income Statement using the effective interest rate
method.
(iii) Derivative financial instruments
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
re-measured
to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged.
For derivative instruments that do not qualify for hedge accounting, changes in the fair value are recognized
immediately in profit or loss and are included in Other gains / (losses)net.
For derivative instruments that are designated for hedge
accounting, the group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk
F-17
management objective and strategy for undertaking the hedge transaction. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions have been and will continue to be highly effective in offsetting changes in cash flows of hedged items.
The effective
portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in Other Comprehensive Income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is
recognized immediately in the Consolidated Income Statement within Other gains / (losses)net.
Amounts accumulated in equity are
reclassified to the Consolidated Income Statement when the hedged item affects the Consolidated Income Statement. The gain or loss relating to the effective portion of derivative instruments hedging forecasted cash-flows under customer agreements is
recognized in Revenue. When the forecasted transaction that is hedged results in the recognition of a
non-financial
asset, the gains and losses previously deferred in equity are reclassified from
equity and included in the initial measurement of the cost of the asset. The deferred amounts would ultimately be recognized in the Consolidated Income Statement upon the sale, depreciation or impairment of the asset.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in the Consolidated Income Statement. When a forecasted transaction is no longer expected to occur, the cumulative gain or
loss that was recognized in equity is immediately reclassified to the Consolidated Income Statement.
(iv) Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Where available, relevant market prices are used to determine fair values. The Group periodically estimates the impact of credit risk on its derivatives instruments aggregated by counterparties and takes it into account when
estimating the fair value of its derivatives. Credit Value Adjustments are calculated for asset derivatives based on Constellium counterparties credit risk. Debit Value Adjustments are calculated for credit derivatives based on Constellium own
credit risk. The fair value method used is based on historical probability of default, provided by leading rating agencies.
(v) Offsetting financial
instruments
Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position when there is
a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
Leases
Constellium as the lessee
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Various buildings,
machinery and equipment are leased from third parties under operating lease agreements. Under operating leases, lease payments are recognized as rent expense on a straight-line basis over the term of the lease agreement, and are included in Cost of
sales or Selling and administrative expenses, depending on the nature of the leased assets.
Leases of property, plant and equipment under which the Group
has substantially all the risks and rewards of ownership are classified as finance leases. Various buildings and equipment are leased from third parties under finance lease agreements. Under such finance leases, the asset financed is recognized in
Property, plant and equipment and the financing is recognized as a financial liability, in Borrowings.
F-18
Constellium as the lessor
Certain land, buildings, machinery and equipment are leased to third parties under finance lease agreements. At lease inception, the net book value of the
related assets is removed from Property, plant and equipment and a Finance lease receivable is recorded at the lower of the fair value and the aggregate future cash payments to be received from the lessee computed at an interest rate implicit in the
lease. As the Finance lease receivable from the lessee is due, interest income is recognized.
Inventories
Inventories are valued at the lower of cost and net realizable value, primarily on a weighted-average cost basis.
Weighted-average costs for raw materials, stores, work in progress and finished goods are calculated using the costs experienced in the current period based
on normal operating capacity (and include the purchase price of materials, freight, duties and customs, the costs of production, which includes labor costs, materials and other expenses, which are directly attributable to the production process and
production overheads).
Trade account receivables
Recognition and measurement
Trade account receivables are
recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less impairment.
Impairment
An impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due.
Indicators of impairment would include financial difficulties of the debtor, likelihood of the debtors insolvency, late payments, default or a significant deterioration in creditworthiness. The amount of the provision is the difference between
the assets carrying value and the present value of the estimated future cash flows, discounted at the original effective interest rate. The expense (income) related to the increase (decrease) of the impairment is recognized in the Consolidated
Income Statement. When a trade receivable is deemed uncollectible, it is written off against the impairment account. Subsequent recoveries of amounts previously written off are credited in Other gains / (losses) in the Consolidated Income Statement.
Factoring arrangements
In
non-recourse
factoring arrangements, under which the Group has transferred substantially all the risks and rewards of ownership of the receivables, the receivables are derecognized from the Consolidated Statement of
Financial Position. When trade account receivables are sold with limited recourse, and substantially all the risks and rewards associated with these receivables are not transferred, receivables are not derecognized. Where the entity does not
derecognize the receivables, the cash received from the Factor is classified as a financing cash inflow, the derecognition of the related liability as a financing cash outflow and the settlement of the receivables as an operating cash inflow.
Arrangements in which the Group derecognizes receivables result in changes in trade receivables which are reflected as cash flows from operating activities.
Cash and cash equivalents
Cash and cash equivalents are
comprised of cash in bank accounts and on hand, short-term deposits held on call with banks and other short-term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and
which are subject to insignificant risk of changes in value, less bank overdrafts that are repayable on demand, provided there is an offset right.
F-19
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Trade payables
Trade payables are initially recorded at fair value and classified as current liabilities if payment is due in one year or less.
Provisions
Provisions are recorded for the best estimate
of expenditures required to settle liabilities of uncertain timing or amount when management determines that a legal or constructive obligation exists as a result of past events, it is probable that an outflow of resources will be required to settle
the obligation, and such amounts can be reasonably estimated. Provisions are measured at the present value of the expected expenditures to be required to settle the obligation.
The ultimate cost to settle such liabilities is uncertain, and cost estimates can vary in response to many factors. The settlement of these liabilities could
materially differ from recorded amounts. In addition, the expected timing of expenditure can also change. As a result, there could be significant adjustments to provisions, which could result in additional charges or recoveries affecting future
financial results.
Types of liabilities for which the Group establishes provisions include:
Close down and restoration costs
Estimated close down
and restoration costs are accounted for in the year when the legal or constructive obligation arising from the related disturbance occurs and it is probable that an outflow of resources will be required to settle the obligation. These costs are
based on the net present value of estimated future costs. Provisions for close down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are estimated on the basis of a
closure plan including feasibility and engineering studies, are updated annually during the life of the operation to reflect known developments (e.g. revisions to cost estimates and to the estimated lives of operations) and are subject to formal
review at regular intervals each year.
The initial closure provision together with subsequent movements in the provisions for close down and restoration
costs, including those resulting from new disturbance, updated cost estimates, changes to the estimated lives of operations and revisions to discount rates are capitalized within Property, plant and equipment. These costs are then depreciated over
the remaining useful lives of the related assets. The amortization or unwinding of the discount applied in establishing the net present value of the provisions is charged to the Consolidated Income Statement as a financing cost.
Environmental remediation costs
Environmental
remediation costs are accounted for based on the estimated present value of the costs of the Groups environmental
clean-up
obligations. Movements in the environmental
clean-up
provisions are presented as an operating cost within Cost of sales. Remediation procedures may commence soon after the time at which the disturbance, remediation process and estimated remediation
costs become known, and can continue for many years depending on the nature of the disturbance and the technical remediation.
Restructuring costs
Provisions for restructuring are recorded when Constelliums management is demonstrably committed to the restructuring plan and where such
liabilities can be reasonably estimated. The Group recognizes liabilities that
F-20
primarily include
one-time
termination benefits, or severance, and contract termination costs, primarily related to equipment and facility lease
obligations. These amounts are based on the remaining amounts due under various contractual agreements, and are periodically adjusted for any anticipated or unanticipated events or changes in circumstances that would reduce or increase these
obligations.
Legal, tax and other potential claims
Provisions for legal claims are made when it is probable that liabilities will be incurred and when such liabilities can be reasonably estimated. For asserted
claims and assessments, liabilities are recorded when an unfavorable outcome of a matter is deemed to be probable and the loss is reasonably estimable. Management determines the likelihood of an unfavorable outcome based on many factors such as the
nature of the matter, available defenses and case strategy, progress of the matter, views and opinions of legal counsel and other advisors, applicability and success of appeals, process and outcomes of similar historical matters, amongst others.
Once an unfavorable outcome is considered probable, management weights the probability of possible outcomes and the most likely loss is recorded. Legal matters are reviewed on a regular basis to determine if there have been changes in
managements judgment regarding the likelihood of an unfavorable outcome or the estimate of a potential loss. Depending on their nature, these costs may be charged to Cost of sales or Other gains/ (losses)net in the Consolidated Income
Statement. Included in other potential claims are provisions for product warranties and guarantees to settle the net present value portion of any settlement costs for potential future legal actions, claims and other assertions that may be brought by
Constelliums customers or the
end-users
of products. Provisions for product warranty and guarantees are charged to Cost of sales in the Consolidated Income Statement. When any legal action, claim or
assertion related to product warranty or guarantee is settled, the net settlement amount incurred is charged against the provision established in the Consolidated Statement of Financial Position. The outstanding provision is reviewed periodically
for adequacy and reasonableness by Constellium management.
Management establishes tax reserves and accrues interest thereon, if deemed appropriate, in
expectation that certain tax return positions may be challenged and that the Group might not succeed in defending such positions, despite managements belief that the positions taken were fully supportable.
Pension, other post-employment plans and other long-term employee benefits
For defined contribution plans, the contribution paid in respect of service rendered over the service period is recognized in the Consolidated Income
Statement. This expense is included in Cost of sales, Selling and administrative expenses or Research and development expenses, depending on its nature.
For defined benefit plans, the retirement benefit obligation recognized in the Consolidated Statement of Financial Position represents the present value of
the defined benefit obligation as reduced by the fair value of plan assets. The effects of changes in actuarial assumptions and experience adjustments are presented in the Consolidated Statement of Comprehensive Income / (Loss).
The amount charged to the Consolidated Income Statement in respect of these plans (including the service costs and the effect of any curtailment or
settlement, net of interest costs) is included within the Income / (loss) from operations.
The defined benefit obligations are assessed using the
projected unit credit method. The most significant assumption is the discount rate.
Other post-employment benefit plans mainly relate to health and life
insurance benefits to retired employees and in some cases to their beneficiaries and covered dependents. Eligibility for coverage is dependent upon certain age and service criteria. These benefit plans are unfunded and are accounted for as defined
benefit obligations, as described above.
F-21
Other long term employee benefits mainly include jubilees and other long-term disability benefits. For these
plans, actuarial gains and losses arising in the year are recognized immediately in the Consolidated Income Statement.
Taxation
The current Income tax (expense) / benefit is calculated on the basis of the tax laws enacted or substantively enacted at the Consolidated Statement of
Financial Position date in the countries where the Company and its subsidiaries operate and generate taxable income.
The Group is subject to income taxes
in the Netherlands, France, United States and numerous other jurisdictions. Certain of Constelliums businesses may be included in consolidated tax returns within the Company. In certain circumstances, these businesses may be jointly and
severally liable with the entity filing the consolidated return, for additional taxes that may be assessed.
Deferred income tax assets and liabilities
are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. This approach also requires the
recognition of deferred income tax assets for operating loss carryforwards and tax credit carryforwards.
The effect on deferred tax assets and
liabilities of a change in tax rates and laws is recognized as tax income / (loss) in the year when the rate change is substantively enacted. Deferred income tax assets and liabilities are measured using tax rates that are expected to apply in the
year when the asset is realized or the liability is settled, based on the tax rates and laws that have been enacted or substantively enacted at the date of the Consolidated Statement of Financial Position. Deferred income tax assets are recognized
only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Presentation of financial statements
The consolidated
financial statements are presented in millions of Euros, except Earnings per share in Euros. Certain reclassifications may have been made to prior year amounts to conform to current year presentation or with IFRS requirements.
2.7 Judgments in applying accounting policies and key sources of estimation uncertainty
Many of the amounts included in the consolidated financial statements involve the use of judgment and/or estimation. These judgments and estimates are based on
managements best knowledge of the relevant facts and circumstances, giving consideration to previous experience. However, actual results may differ from the amounts included in the consolidated financial statements. Key sources of estimation
uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include the items presented below.
Impairment tests for goodwill, intangible assets and property, plant and equipment
The determination of fair value and value in use of cash-generating units or groups of cash-generating units depends on a number of assumptions, in particular
market data, estimated future cash flows and discount rates.
These assumptions are subject to risk and uncertainty. Any material changes in these
assumptions could result in a significant change in a cash-generating units recoverable value or in a goodwill impairment. Details of the key assumptions applied are set out in NOTE 16 Intangible assets (including goodwill) and in NOTE
15 Property, plant and equipment.
Pension, other post-employment benefits and other long-term employee benefits
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions.
The assumptions used in determining the defined benefit obligations and net pension costs include discount rates and rates of future compensation increase.
F-22
Any material changes in these assumptions could result in a significant change in employee benefit expenses
recognized in the Consolidated Income Statement, actuarial gains and losses recognized in Equity and prepaid and accrued benefits. Details of the key assumptions applied are set out in NOTE 23Pensions and other post-employment benefit
obligations.
Taxes
Significant judgment is
sometimes required in determining the accrual for income taxes as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were recorded, such differences will impact the current and deferred income tax provisions, results of operations and
possibly cash flows in the year in which such determination is made.
Management judgment is required to determine the extent to which deferred tax assets
can be recognized. In assessing the recognition of deferred tax assets, management considers whether it is more likely than not that the deferred tax assets will be utilized. The deferred tax assets will be ultimately utilized to the extent that
sufficient taxable profits will be available in the periods in which the temporary differences become deductible. This assessment is conducted through a detailed review of deferred tax assets by jurisdiction and takes into account the scheduled
reversals of taxable and deductible temporary differences, past, current and expected future performance deriving from the budget, the business plan and tax planning strategies. Deferred tax assets are not recognized in the jurisdictions where it is
less likely than not that sufficient taxable profits will be available against which the deductible temporary differences can be utilized.
Provisions
Provisions have been recorded for: (a) close-down and restoration costs; (b) environmental remediation and monitoring costs;
(c) restructuring programs; (d) legal and other potential claims including provisions for product income tax risks, warranty and guarantees, at amounts which represent managements best estimates of the expenditure required to settle
the obligation at the date of the Consolidated Statement of Financial Position. Expectations are revised each year until the actual liability is settled, with any difference accounted for in the year in which the revision is made. Main assumptions
used are described in NOTE 24Provisions.
NOTE 3OPERATING SEGMENT INFORMATION
Management has defined Constelliums operating segments based upon product lines, markets and industries it serves, and prepares and reports operating
segment information to Constelliums chief operating decision maker (CODM) (see NOTE 2Summary of Significant Accounting Policies) on that basis. Groups operating segments are described below:
Packaging and Automotive Rolled Products (P&ARP)
P&ARP produces thin-gauge rolled products for customers in the beverage and closures, automotive, customized industrial sheet solutions and high-quality
bright surface product markets. P&ARP operates four facilities in three countries and has 3,657 employees at December 31, 2017.
Aerospace and
Transportation (A&T)
A&T focuses on thick-gauge rolled high value-added products for customers in the aerospace, defense and
mass-transportation markets and engineering industries. A&T operates six facilities in three countries and has 4,008 employees at December 31, 2017.
F-23
Automotive Structures and Industry (AS&I)
AS&I focuses on specialty products and supplies a variety of hard and soft alloy extruded products, including technically advanced products, to the
automotive, rail, industrial, energy and building industries, and to manufacturers of mass transport vehicles and shipbuilders. AS&I operates fifteen facilities in nine countries and has 3,988 employees at December 31, 2017.
Holdings & Corporate
Holdings &
Corporate includes the net cost of Constelliums head office and corporate support functions (including our technology centers).
Intersegment
elimination
Intersegment trading is conducted on an arms length basis and reflects market prices.
The accounting principles used to prepare the Companys operating segment information are the same as those used to prepare the Groups consolidated
financial statements.
3.1 Segment Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
Year ended December 31, 2015
|
|
(in millions of Euros)
|
|
Segment
revenue
|
|
|
Inter
segment
elimination
|
|
|
External
revenue
|
|
|
Segment
revenue
|
|
|
Inter
segment
elimination
|
|
|
External
revenue
|
|
|
Segment
revenue
|
|
|
Inter
segment
elimination
|
|
|
External
revenue
|
|
P&ARP
|
|
|
2,812
|
|
|
|
(7
|
)
|
|
|
2,805
|
|
|
|
2,498
|
|
|
|
(16
|
)
|
|
|
2,482
|
|
|
|
2,748
|
|
|
|
(6
|
)
|
|
|
2,742
|
|
A&T
|
|
|
1,335
|
|
|
|
(34
|
)
|
|
|
1,301
|
|
|
|
1,302
|
|
|
|
(23
|
)
|
|
|
1,279
|
|
|
|
1,355
|
|
|
|
(7
|
)
|
|
|
1,348
|
|
AS&I
|
|
|
1,123
|
|
|
|
(5
|
)
|
|
|
1,118
|
|
|
|
1,002
|
|
|
|
(9
|
)
|
|
|
993
|
|
|
|
1,047
|
|
|
|
(13
|
)
|
|
|
1,034
|
|
Holdings & Corporate
(A)
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
29
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,283
|
|
|
|
(46
|
)
|
|
|
5,237
|
|
|
|
4,791
|
|
|
|
(48
|
)
|
|
|
4,743
|
|
|
|
5,179
|
|
|
|
(26
|
)
|
|
|
5,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
For the year ended December 31, 2017, Holdings & Corporate segment includes revenues from supplying metal to third parties.
|
For the year ended December 31, 2016, Holdings & Corporate segment includes a 20 million
one-time
payment related to the
re-negotiation
of a contract with one of Wises customers offset by revenues from metal supply to third parties.
F-24
3.2 Segment adjusted EBITDA and reconciliation of Adjusted EBITDA to Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Notes
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
P&ARP
|
|
|
|
|
202
|
|
|
|
201
|
|
|
|
183
|
|
A&T
|
|
|
|
|
133
|
|
|
|
103
|
|
|
|
103
|
|
AS&I
|
|
|
|
|
119
|
|
|
|
102
|
|
|
|
80
|
|
Holdings & Corporate
|
|
|
|
|
(23
|
)
|
|
|
(29
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
431
|
|
|
|
377
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal price lag
(A)
|
|
|
|
|
22
|
|
|
|
4
|
|
|
|
(34
|
)
|
Start-up
and development costs
(B)
|
|
|
|
|
(17
|
)
|
|
|
(25
|
)
|
|
|
(21
|
)
|
Manufacturing system and process transformation costs
|
|
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(11
|
)
|
Wise integration and acquisition costs
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(14
|
)
|
Wise
one-time
costs
(C)
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
(38
|
)
|
Wise purchase price adjustment
(D)
|
|
7
|
|
|
|
|
|
|
20
|
|
|
|
|
|
Share based compensation costs
|
|
|
|
|
(8
|
)
|
|
|
(6
|
)
|
|
|
(7
|
)
|
Gains / (Losses) on pension plan amendments
(E)
|
|
23
|
|
|
20
|
|
|
|
|
|
|
|
(5
|
)
|
Depreciation and amortization
|
|
15, 16
|
|
|
(171
|
)
|
|
|
(155
|
)
|
|
|
(140
|
)
|
Impairment
|
|
15
|
|
|
|
|
|
|
|
|
|
|
(457
|
)
|
Restructuring costs
|
|
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
(8
|
)
|
Unrealized gains/(losses) on derivatives
|
|
7
|
|
|
57
|
|
|
|
71
|
|
|
|
(20
|
)
|
Unrealized exchange (losses) /gains from the remeasurement of monetary assets and
liabilitiesnet
|
|
7
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
(3
|
)
|
Losses on disposals
|
|
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(5
|
)
|
Other
(F)
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income / (loss) from operations
|
|
|
|
|
321
|
|
|
|
246
|
|
|
|
(426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costsnet
|
|
9
|
|
|
(243
|
)
|
|
|
(167
|
)
|
|
|
(155
|
)
|
Share of loss of joint-ventures
|
|
|
|
|
(29
|
)
|
|
|
(14
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income / (loss) before income tax
|
|
|
|
|
49
|
|
|
|
65
|
|
|
|
(584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) / benefit
|
|
10
|
|
|
(80
|
)
|
|
|
(69
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
(31
|
)
|
|
|
(4
|
)
|
|
|
(552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Metal price lag represents the financial impact of the timing difference between when aluminium prices included within Constellium revenues are established and when aluminium purchase prices included in Cost of sales
are established. The Group accounts for inventory using a weighted average price basis and this adjustment aims to remove the effect of volatility in LME prices. The calculation of the Group metal price lag adjustment is based on an internal
standardized methodology calculated at each of Constelliums manufacturing sites and is primarily calculated as the average value of product recorded in inventory, which approximates the spot price in the market, less the average value
transferred out of inventory, which is the weighted average of the metal element of cost of sales, based on the quantity sold in the period.
|
(B)
|
For the year ended December 31, 2017,
start-up
and development costs include mainly 16 million related to new projects in our AS&I operating segment. For the
year ended December 31, 2016,
start-up
and development costs include 20 million related to Automotive Body Sheet growth projects.
|
(C)
|
For the year ended December 31, 2016, Wise
one-time
costs related to a
one-time
payment of 20 million, recorded as a
reduction of revenues, in relation to the
re-negotiation
of payment terms, pass through of Midwest premium amounts and other pricing mechanisms in a contract with one of Wises customers. We entered into
the
re-negotiation
of these terms in order to align the terms of this contract, acquired during the acquisition of Wise, with Constelliums normal business terms.
|
F-25
(D)
|
The contractual price adjustment relating to the acquisition of Wise Metals Intermediate Holdings was finalized in 2016. We received a cash payment of 21 million and recorded a 20 million gain net
of costs.
|
(E)
|
For the year ended December 31, 2017, amendments to certain Swiss pension plan, US pension plan and OPEB resulted in a 20 million net gain.
|
(F)
|
For the year ended December 31, 2017, other includes 3 million of legal fees and
lump-sum
payments in connection with the renegotiation of a new
5-year
collective bargaining agreement offset by accrual reversals of unused provision related to
one-time
loss contingencies.
|
3.3 Revenue by product lines
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Packaging rolled products
|
|
|
2,146
|
|
|
|
2,003
|
|
|
|
2,205
|
|
Automotive rolled products
|
|
|
483
|
|
|
|
319
|
|
|
|
275
|
|
Specialty and other thin-rolled products
|
|
|
176
|
|
|
|
160
|
|
|
|
262
|
|
Aerospace rolled products
|
|
|
760
|
|
|
|
795
|
|
|
|
861
|
|
Transportation, Industry and other rolled products
|
|
|
541
|
|
|
|
484
|
|
|
|
487
|
|
Automotive extruded products
|
|
|
614
|
|
|
|
537
|
|
|
|
544
|
|
Other extruded products
|
|
|
504
|
|
|
|
456
|
|
|
|
490
|
|
Other
|
|
|
13
|
|
|
|
(11
|
)
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
5,237
|
|
|
|
4,743
|
|
|
|
5,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 Segment capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
P&ARP
|
|
|
(115
|
)
|
|
|
(166
|
)
|
|
|
(170
|
)
|
A&T
|
|
|
(73
|
)
|
|
|
(96
|
)
|
|
|
(112
|
)
|
AS&I
|
|
|
(83
|
)
|
|
|
(84
|
)
|
|
|
(60
|
)
|
Holdings & Corporate
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expendituresProperty, plant and equipment
|
|
|
(276
|
)
|
|
|
(355
|
)
|
|
|
(350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5 Segment assets
Segment assets are comprised of total assets of Constellium by segment, less deferred income tax assets, cash and cash equivalents and other financial assets.
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
P&ARP
|
|
|
1,629
|
|
|
|
1,652
|
|
A&T
|
|
|
769
|
|
|
|
768
|
|
AS&I
|
|
|
449
|
|
|
|
390
|
|
Holdings & Corporate
|
|
|
252
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
Segment Assets
|
|
|
3,099
|
|
|
|
3,022
|
|
|
|
|
|
|
|
|
|
|
Unallocated:
|
|
|
|
|
|
|
|
|
Deferred income tax assets
|
|
|
164
|
|
|
|
252
|
|
Cash and cash equivalents
|
|
|
269
|
|
|
|
347
|
|
Other financial assets
|
|
|
179
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
3,711
|
|
|
|
3,787
|
|
|
|
|
|
|
|
|
|
|
F-26
3.6 Information about major customers
Revenue arising from the P&ARP segment for the years ended December 31, 2017, 2016 and 2015 is comprised respectively of 1,364 million,
1,220 million and 1,318 million from sales to the Groups two largest customers. No other single customer contributed 10% or more to the Groups revenue for 2017, 2016 and 2015.
NOTE 4INFORMATION BY GEOGRAPHIC AREA
Revenue is reported based on destination of shipments:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
France
|
|
|
557
|
|
|
|
493
|
|
|
|
564
|
|
Germany
|
|
|
1,217
|
|
|
|
1,042
|
|
|
|
1,112
|
|
United Kingdom
|
|
|
188
|
|
|
|
203
|
|
|
|
243
|
|
Switzerland
|
|
|
123
|
|
|
|
86
|
|
|
|
72
|
|
Other Europe
|
|
|
940
|
|
|
|
798
|
|
|
|
849
|
|
United States
|
|
|
1,691
|
|
|
|
1,511
|
|
|
|
1,677
|
|
Canada
|
|
|
78
|
|
|
|
68
|
|
|
|
91
|
|
Asia and Other Pacific
|
|
|
270
|
|
|
|
292
|
|
|
|
266
|
|
All Other
|
|
|
173
|
|
|
|
250
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,237
|
|
|
|
4,743
|
|
|
|
5,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment are reported based on the physical location of the assets:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
United States
|
|
|
681
|
|
|
|
729
|
|
France
|
|
|
586
|
|
|
|
543
|
|
Germany
|
|
|
156
|
|
|
|
134
|
|
Czech Republic
|
|
|
65
|
|
|
|
45
|
|
Other
|
|
|
29
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,517
|
|
|
|
1,477
|
|
|
|
|
|
|
|
|
|
|
NOTE 5EXPENSES BY NATURE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Notes
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Raw materials and consumables used
|
|
|
|
|
(3,197
|
)
|
|
|
(2,792
|
)
|
|
|
(3,176
|
)
|
Employee benefit expenses
|
|
6
|
|
|
(924
|
)
|
|
|
(897
|
)
|
|
|
(887
|
)
|
Energy costs
|
|
|
|
|
(138
|
)
|
|
|
(140
|
)
|
|
|
(168
|
)
|
Sub-contractors
|
|
|
|
|
(99
|
)
|
|
|
(108
|
)
|
|
|
(86
|
)
|
Freight out costs
|
|
|
|
|
(124
|
)
|
|
|
(128
|
)
|
|
|
(130
|
)
|
Professional fees
|
|
|
|
|
(77
|
)
|
|
|
(85
|
)
|
|
|
(75
|
)
|
Operating lease expenses
|
|
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
(29
|
)
|
Depreciation and amortization
|
|
15,16
|
|
|
(171
|
)
|
|
|
(155
|
)
|
|
|
(140
|
)
|
Impairment
|
|
15
|
|
|
|
|
|
|
|
|
|
|
(457
|
)
|
Other operating expenses
|
|
|
|
|
(229
|
)
|
|
|
(186
|
)
|
|
|
(300
|
)
|
Other gains / (losses)net
|
|
7
|
|
|
70
|
|
|
|
21
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating expenses
|
|
|
|
|
(4,916
|
)
|
|
|
(4,497
|
)
|
|
|
(5,579
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
NOTE 6EMPLOYEE BENEFIT EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Notes
|
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Wages and salaries
|
|
|
|
|
|
|
(872
|
)
|
|
|
(841
|
)
|
|
|
(836
|
)
|
Pension costsdefined benefit plans
|
|
|
23
|
|
|
|
(28
|
)
|
|
|
(33
|
)
|
|
|
(31
|
)
|
Other postemployment benefits
|
|
|
23
|
|
|
|
(16
|
)
|
|
|
(17
|
)
|
|
|
(15
|
)
|
Share-based compensation
|
|
|
28
|
|
|
|
(8
|
)
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Employee benefit expenses
|
|
|
|
|
|
|
(924
|
)
|
|
|
(897
|
)
|
|
|
(887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 7OTHER GAINS / (LOSSES)NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Notes
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Realized gains/( losses) on
derivatives
(A)
|
|
22
|
|
|
|
|
|
|
(62
|
)
|
|
|
(93
|
)
|
Unrealized gains / (losses) on derivatives at fair value through profit and lossnet
(A)
|
|
3
|
|
|
57
|
|
|
|
71
|
|
|
|
(20
|
)
|
Unrealized exchange (losses) /gains from the remeasurement of monetary assets and
liabilitiesnet
|
|
3
|
|
|
(4
|
)
|
|
|
3
|
|
|
|
(3
|
)
|
Gains / (losses) on pension plan amendments
|
|
23
|
|
|
20
|
|
|
|
|
|
|
|
(5
|
)
|
Losses on disposal
|
|
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(5
|
)
|
Wise purchase price adjustment
(B)
|
|
3
|
|
|
|
|
|
|
20
|
|
|
|
|
|
Wise acquisition costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Other
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other gains / (losses)net
|
|
|
|
|
70
|
|
|
|
21
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Realized gains/(losses) are related to derivatives entered into with the purpose of mitigating exposure to volatility in foreign currency and commodity price. Unrealized gains and losses are related to derivatives that
do not qualify for hedge accounting.
|
(B)
|
The contractual price adjustment relating to the acquisition of Wise Metals Intermediate Holdings was finalized in 2016. We received a cash payment of 21 million and recorded 20 million gain net of
costs.
|
The cash received was presented in net cash flows used in investing activities (acquisition of subsidiaries net of
cash acquired) in the Consolidated Statement of Cash Flows.
F-28
NOTE 8CURRENCY GAINS / (LOSSES)
Currency gains and losses, which are included in Income from operations, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Euros)
|
|
Notes
|
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Included in Revenue
|
|
|
22
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Included in Cost of sales
|
|
|
|
|
|
|
(4
|
)
|
|
|
4
|
|
|
|
13
|
|
Included in Other gains / (losses)net
|
|
|
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(6
|
)
|
|
|
1
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized exchange losses on foreign currency derivativesnet
|
|
|
22
|
|
|
|
(15
|
)
|
|
|
(46
|
)
|
|
|
(37
|
)
|
Unrealized gains /(losses) on foreign currency derivativesnet
|
|
|
22
|
|
|
|
17
|
|
|
|
40
|
|
|
|
(10
|
)
|
Exchanges (losses)/gains from the remeasurement of monetary assets and
liabilitiesnet
|
|
|
|
|
|
|
(8
|
)
|
|
|
7
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(6
|
)
|
|
|
1
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See NOTE 21Financial Instruments and NOTE 22Financial Risk Management for further information regarding the
Companys foreign currency derivatives and hedging activities.
Foreign currency translation reserve
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
Foreign currency translation reserve at January 1
|
|
|
12
|
|
|
|
6
|
|
Effect of currency translation differencesnet
|
|
|
(19
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation reserve at December 31
|
|
|
(7
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
F-29
NOTE 9FINANCE COSTSNET
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Interest received
|
|
|
7
|
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
7
|
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on borrowings paid or
payable
(A)
|
|
|
(147
|
)
|
|
|
(171
|
)
|
|
|
(149
|
)
|
Expenses on factoring arrangements paid or payable
|
|
|
(16
|
)
|
|
|
(12
|
)
|
|
|
(11
|
)
|
Net loss on settlement of debt
(B)
|
|
|
(91
|
)
|
|
|
(4
|
)
|
|
|
|
|
Realized and unrealized (losses) / gains on debt derivatives at fair value
(C)
|
|
|
(79
|
)
|
|
|
45
|
|
|
|
50
|
|
Realized and unrealized exchange gains / (losses) on financing activitiesnet
(C)
|
|
|
91
|
|
|
|
(42
|
)
|
|
|
(48
|
)
|
Other finance expense
|
|
|
(15
|
)
|
|
|
1
|
|
|
|
(6
|
)
|
Capitalized borrowing costs
(D)
|
|
|
7
|
|
|
|
11
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
(250
|
)
|
|
|
(172
|
)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costsnet
|
|
|
(243
|
)
|
|
|
(167
|
)
|
|
|
(155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
For the year ended December 31, 2017, the Group incurred (i) 136 million of interest related to Constellium N.V. Senior Notes; (ii) 7 million of interest related to the Muscle Shoals Senior
Notes and (iii) 4 million of interest expense and fees related to the Muscle Shoals and Ravenswood Revolving Credit Facilities (ABLs).
|
For the year ended December 31, 2016, the Group incurred (i) 104 million of interest related to Constellium N.V. Senior Notes;
(ii) 64 million of interest related to the Muscle Shoals Senior Notes and (iii) 3 million of interest expense and fees related to the Muscle Shoals and Ravenswood Revolving Credit Facilities (ABLs).
For the year ended December 31, 2015, the Group incurred (i) 81 million of interest related to Constellium N.V. Senior Notes;
(ii) 64 million of interest related to the Muscle Shoals Senior Notes and (iii) 4 million of interest expense and fees related to the Muscle Shoals and Ravenswood Revolving Credit Facilities (ABLs).
(B)
|
For the year ended December 31, 2017, net loss on settlement of debt relates to (i) the Muscle Shoals Senior Notes redemption in February 2017 for 13 million and (ii) Constellium N.V. Senior
Notes redemption in November 2017 for 78 million. (see NOTE 20 Borrowings). The total exit fees incurred and paid related to 2017 refinancings amount to 88 million.
|
For the year ended December 31, 2016, 2 million of unamortized arrangement fees were fully recognized as financial expenses as
result of the unsecured credit facility termination in March 2016; 2 million loss result from the Muscle Shoals PIK Toggle Notes redemption (see NOTE 20 Borrowings).
(C)
|
The Group hedges the dollar exposure relating to the principal of its Constellium N.V. U.S. Dollar Senior Notes, for the portion that has not been used to finance directly or indirectly U.S. Dollar functional
currency entities. Changes in the fair value of these hedging derivatives are recognized within Finance costs net in the Consolidated Income Statement and largely offset the unrealized results related to Constellium N.V. U.S. Dollar
Senior Notes revaluation.
|
(D)
|
Borrowing costs directly attributable to the construction of assets are capitalized. The capitalization rate used for the year ended December 31, 2017 was 6% (7% for the years ended December 31, 2016 and
2015).
|
F-30
NOTE 10INCOME TAX
The current and deferred components of income tax are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Current tax expense
|
|
|
(26
|
)
|
|
|
(19
|
)
|
|
|
(21
|
)
|
Deferred tax (expense) / benefit
|
|
|
(54
|
)
|
|
|
(50
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income tax (expense) / benefit
|
|
|
(80
|
)
|
|
|
(69
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Using a composite statutory income tax rate applicable by tax jurisdictions, the income tax can be reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Income / (Loss) before income tax
|
|
|
49
|
|
|
|
65
|
|
|
|
(584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composite statutory income tax rate applicable by tax jurisdiction
|
|
|
31.9
|
%
|
|
|
24.9
|
%
|
|
|
38.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) / benefit calculated at composite statutory tax rate applicable by tax
jurisdictions
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
223
|
|
Tax effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in recognized and unrecognized deferred tax assets
(A)
|
|
|
(61
|
)
|
|
|
(45
|
)
|
|
|
(177
|
)
|
Change in tax rate
(B)
|
|
|
(11
|
)
|
|
|
(6
|
)
|
|
|
|
|
Other
|
|
|
8
|
|
|
|
(2
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) / benefit
|
|
|
(80
|
)
|
|
|
(69
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
163
|
%
|
|
|
106
|
%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Change in recognized and unrecognized deferred tax assets mainly relates to unrecognized tax losses carried forward for the years ended December 31, 2017 and 2016 and to impairment of long term assets of one of our
main entities for the year ended December 31, 2015 (see NOTE 18Deferred income taxes).
|
(B)
|
For the year ended December 31, 2017, change in tax rate relates mainly to the U.S. income tax rate decrease from 40% to 27% for 16 million applicable from January 1, 2018 and to the gradual
decrease in French tax rate to 25.82% as from 2022. For the year ended December 31, 2016, change in tax rate relates to French income tax decrease from 34,43% to 28,92% starting in 2020, enacted by 2016 Financial Tax bill.
|
The net deferred tax expense recognized following changes in the U.S. federal corporate tax rate represents our best estimate of the impact of the
Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, based on the information currently available. As clarifications or additional instructions from the US legislator or tax authorities on the
detailed application of the Act becomes available, our assessment will be reviewed accordingly.
Our composite statutory income tax rate of 31.9% for
the year ended December 31, 2017, 24.9% for the year ended December 31, 2016 and 38.2% for the year ended December 31, 2015 resulted from the statutory tax rates (i) in the United States of 40 % in 2017, 2016 and 2015, (ii)
in France of 39.2% in 2017, 34.43% in 2016 and 38.0% in 2015 (iii) in Germany of 29%, stable for the last three years (iv) in the Netherlands of 25%, stable for the last three years and (v) in Czech Republic of 19%, stable for the last
three years.
The variation in our composite tax rate mainly results from the geographical mix of our
pre-tax
results.
F-31
The 7 % increase in our composite tax rate from 2016 to 2017 is mostly related to the increase of
pre-tax
profits in France and to the increase of the tax rate in France for fiscal year 2017 only. The 13.3% decrease in our composite tax rate from 2015 to 2016 mostly results from the decrease in
pre-tax
losses in the United States.
NOTE 11EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Earnings attributable to equity holders of the parent used to calculate basic and diluted earnings
per share
|
|
|
(31
|
)
|
|
|
(4
|
)
|
|
|
(554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares attributable to equity holders of Constellium
|
|
|
|
|
|
|
|
|
|
|
|
|
(number of shares)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Weighted average number of ordinary shares used to calculate basic earnings per share
|
|
|
110,164,320
|
|
|
|
105, 500,327
|
|
|
|
105,097,442
|
|
Effect of other dilutive potential ordinary
shares
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares used to calculate diluted earnings per share
|
|
|
110,164,320
|
|
|
|
105, 500,327
|
|
|
|
105,097,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
For the years ended December 31, 2017, 2016 and 2015, there were 3,291,875, 411,902 and 510,721 potential ordinary shares respectively that could have a dilutive impact but were considered antidilutive due to
negative earnings.
|
Earnings per share attributable to the equity holders of Constellium
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Euro per share)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Basic
|
|
|
(0.28
|
)
|
|
|
(0.04
|
)
|
|
|
(5.27
|
)
|
Diluted
|
|
|
(0.28
|
)
|
|
|
(0.04
|
)
|
|
|
(5.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 12CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
(in millions of
Euros)
|
|
At
December 31, 2017
|
|
|
At
December 31, 2016
|
|
Cash in bank and on hand
|
|
|
269
|
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
Total Cash and cash equivalents
|
|
|
269
|
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017, cash in bank and on hand includes a total of 12 million held by subsidiaries that
operate in countries where capital control restrictions prevent the balances from being immediately available for general use by the other entities within the Group (7 million at December 31, 2016).
F-32
NOTE 13TRADE RECEIVABLES AND OTHER
Trade receivables and other are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Non-current
|
|
|
Current
|
|
|
Non-current
|
|
|
Current
|
|
Trade receivablesgross
|
|
|
|
|
|
|
309
|
|
|
|
|
|
|
|
238
|
|
Impairment
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trade receivablesnet
|
|
|
|
|
|
|
306
|
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease receivables
|
|
|
6
|
|
|
|
6
|
|
|
|
12
|
|
|
|
6
|
|
Deferred tooling related costs
|
|
|
28
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
Current income tax receivables
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
52
|
|
Other taxes
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
39
|
|
Restricted cash
(A)
|
|
|
1
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
Prepaid expenses
|
|
|
5
|
|
|
|
8
|
|
|
|
6
|
|
|
|
9
|
|
Other
|
|
|
8
|
|
|
|
11
|
|
|
|
9
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other receivables
|
|
|
48
|
|
|
|
113
|
|
|
|
47
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trade receivables and Other
|
|
|
48
|
|
|
|
419
|
|
|
|
47
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Restricted cash relates mainly to a pledge given to the State of West Virginia as a guarantee for certain workers compensation obligations for which the company is self-insured at December 31, 2016.
|
13.1 Aging
The
|
aging of total trade receivablesnet is as follows:
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Not past due
|
|
|
286
|
|
|
|
217
|
|
1 30 days past due
|
|
|
13
|
|
|
|
14
|
|
31 60 days past due
|
|
|
2
|
|
|
|
3
|
|
61 90 days past due
|
|
|
3
|
|
|
|
1
|
|
Greater than 91 days past due
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trade receivablesnet
|
|
|
306
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
Impairment allowance
The
Group periodically reviews its customers account aging, credit worthiness, payment histories and balance trends in order to evaluate trade account receivables for impairment. Management also considers whether changes in general economic
conditions and in the industries in which the Group operates in particular, are likely to impact the ability of the Groups customers to remain within agreed payment terms or to pay their account balances in full.
Revisions to the impairment allowance arising from changes in estimates are included as either additional allowance or recoveries. An allowance was recognized
for 0.7 million during the year ended December 31, 2017 (0.8 million allowance reversed during the year ended December 31, 2016).
None of the other amounts included in Other receivables was deemed to be impaired.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable shown above. The Group does not hold any
collateral from its customers or debtors as security.
F-33
13.2 Currency concentration
The composition of the carrying amounts of total Trade receivables net by currency is shown in Euro equivalents as follows:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Euro
|
|
|
124
|
|
|
|
101
|
|
U.S. Dollar
|
|
|
164
|
|
|
|
115
|
|
Swiss franc
|
|
|
4
|
|
|
|
3
|
|
Other currencies
|
|
|
14
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Total trade receivablesnet
|
|
|
306
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
13.3 Factoring arrangements
The Group factored specific account receivables in France by entering into factoring agreements with a third party for a maximum capacity of
235 million. The facilities were amended on April 19, 2017 to extend maturity to October 29, 2021.
The Group factored specific
account receivables in Germany, Switzerland and Czech Republic by entering into factoring agreements with a third party for a maximum capacity of 150 million. This agreement matures October 29, 2021.
Constellium Automotive USA entered into a factoring agreement which provides for the sale of specific account receivables up to a maximum capacity of
$25 million. The facilities were amended on December 13, 2017 to extend maturity to December 12, 2018.
Muscle Shoals entered into a new
factoring agreement which provides for the sale of specific account receivables up to a maximum capacity of $325 million and was amended in January 2017 to extend maturity to January 24, 2018. The agreement was further amended on
January 2, 2018. (See NOTE
31-
Subsequent events).
Under the Groups factoring agreements, most of the
account receivables are sold without recourse. Where the Group has transferred substantially all the risks and rewards of ownership of the receivables, the receivables are
de-recognized
from the Consolidated
Statement of Financial Position. Some remaining receivables do not qualify for derecognition under IAS 39, Financial instruments: Recognition and Measurement, as the Group retains substantially all the associated risks and rewards.
Under the agreements, at December 31, 2017, the total carrying amount of the original assets factored is 642 million (December 31, 2016:
681 million) of which:
|
|
|
473 million (December 31, 2016: 566 million) derecognized from the Consolidated Statement of Financial Position as the Group transferred substantially all of the associated risks and rewards to the
factor;
|
|
|
|
169 million (December 31, 2016: 115 million) recognized on the Consolidated Statement of Financial Position.
|
At December 31, 2017, there was no debt due to the factor relating to trade account receivables sold (1 million at December 31, 2016).
Covenants
The factoring arrangements contain
certain affirmative customary and negative covenants, including some relating to the administration and collection of the assigned receivables, the terms of the invoices and the exchange of information, but do not contain maintenance financial
covenants.
F-34
The commitment of the factor to buy receivables under the Muscle Shoals factoring agreement is subject to certain
credit ratings being maintained.
The Group was in compliance with all applicable covenants at December 31, 2017 and December 31, 2016.
13.4 Finance lease receivables
The Company is the lessor
for certain finance leases with third parties for certain of its property, plant and equipment located in Sierre, Switzerland. The following table shows the reconciliation of the Groups gross investments in the leases to the net investment in
the leases at December 31, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
(in millions of Euros)
|
|
Gross
investment
in the lease
|
|
|
Unearned
interest
income
|
|
|
Net
investment
in the lease
|
|
|
Gross
investment
in the lease
|
|
|
Unearned
interest
income
|
|
|
Net
investment
in the lease
|
|
Less than 1 year
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
6
|
|
Between 1 and 5 years
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
More than 5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Finance lease receivables
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
|
|
19
|
|
|
|
(1
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14INVENTORIES
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Finished goods
|
|
|
164
|
|
|
|
149
|
|
Work in progress
|
|
|
332
|
|
|
|
299
|
|
Raw materials
|
|
|
111
|
|
|
|
94
|
|
Stores and supplies
|
|
|
64
|
|
|
|
69
|
|
Adjustments
(A)
|
|
|
(28
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
|
643
|
|
|
|
591
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Includes Net realizable value adjustments.
|
Constellium records inventories at the lower of cost and net
realizable value. Any change in the net realizable value adjustment on inventories is included in Cost of sales in the Consolidated Income Statement.
F-35
NOTE 15PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Land and
Property
Rights
|
|
|
Buildings
|
|
|
Machinery
and
Equipment
|
|
|
Construction
Work in
Progress
|
|
|
Other
|
|
|
Total
|
|
Net balance at January 1, 2017
|
|
|
19
|
|
|
|
209
|
|
|
|
1,020
|
|
|
|
221
|
|
|
|
8
|
|
|
|
1,477
|
|
Additions
|
|
|
1
|
|
|
|
2
|
|
|
|
50
|
|
|
|
224
|
|
|
|
5
|
|
|
|
282
|
|
Disposals
|
|
|
|
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Depreciation expense
|
|
|
(4
|
)
|
|
|
(13
|
)
|
|
|
(135
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
(159
|
)
|
Transfer during the period
|
|
|
|
|
|
|
18
|
|
|
|
223
|
|
|
|
(237
|
)
|
|
|
4
|
|
|
|
8
|
|
Effects of changes in foreign exchange rates
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
(66
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2017
|
|
|
14
|
|
|
|
206
|
|
|
|
1,089
|
|
|
|
198
|
|
|
|
10
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
25
|
|
|
|
321
|
|
|
|
1,712
|
|
|
|
204
|
|
|
|
29
|
|
|
|
2,291
|
|
Less accumulated depreciation and impairment
|
|
|
(11
|
)
|
|
|
(115
|
)
|
|
|
(623
|
)
|
|
|
(6
|
)
|
|
|
(19
|
)
|
|
|
(774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2017
|
|
|
14
|
|
|
|
206
|
|
|
|
1,089
|
|
|
|
198
|
|
|
|
10
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Land and
Property
Rights
|
|
|
Buildings
|
|
|
Machinery
and
Equipment
|
|
|
Construction
Work in
Progress
|
|
|
Other
|
|
|
Total
|
|
Net balance at January 1, 2016
|
|
|
21
|
|
|
|
158
|
|
|
|
773
|
|
|
|
296
|
|
|
|
7
|
|
|
|
1,255
|
|
Additions
|
|
|
|
|
|
|
6
|
|
|
|
56
|
|
|
|
297
|
|
|
|
3
|
|
|
|
362
|
|
Disposals
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
(11
|
)
|
Depreciation expense
|
|
|
(4
|
)
|
|
|
(13
|
)
|
|
|
(120
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
(144
|
)
|
Transfer during the period
|
|
|
1
|
|
|
|
55
|
|
|
|
309
|
|
|
|
(370
|
)
|
|
|
5
|
|
|
|
|
|
Effects of changes in foreign exchange rates
|
|
|
1
|
|
|
|
3
|
|
|
|
8
|
|
|
|
3
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2016
|
|
|
19
|
|
|
|
209
|
|
|
|
1,020
|
|
|
|
221
|
|
|
|
8
|
|
|
|
1,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
27
|
|
|
|
324
|
|
|
|
1,581
|
|
|
|
228
|
|
|
|
27
|
|
|
|
2,187
|
|
Less accumulated depreciation and impairment
|
|
|
(8
|
)
|
|
|
(115
|
)
|
|
|
(561
|
)
|
|
|
(7
|
)
|
|
|
(19
|
)
|
|
|
(710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2016
|
|
|
19
|
|
|
|
209
|
|
|
|
1,020
|
|
|
|
221
|
|
|
|
8
|
|
|
|
1,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building, machinery and equipment includes the following amounts where the Group is a lessee under a finance lease:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Gross
value
|
|
|
Accumulated
depreciation
|
|
|
Net
|
|
|
Gross
value
|
|
|
Accumulated
depreciation
|
|
|
Net
|
|
Buildings under finance lease
|
|
|
30
|
|
|
|
(5
|
)
|
|
|
25
|
|
|
|
31
|
|
|
|
(3
|
)
|
|
|
28
|
|
Machinery and equipment under finance lease
|
|
|
62
|
|
|
|
(27
|
)
|
|
|
35
|
|
|
|
50
|
|
|
|
(21
|
)
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
92
|
|
|
|
(32
|
)
|
|
|
60
|
|
|
|
81
|
|
|
|
(24
|
)
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The future aggregate minimum lease payments under
non-cancellable
finance leases are
as follows:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Less than 1 year
|
|
|
15
|
|
|
|
13
|
|
1 to 5 years
|
|
|
37
|
|
|
|
36
|
|
More than 5 years
|
|
|
19
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
71
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
F-36
The present value of future aggregate minimum lease payments under
non-cancellable
finance leases are as follows:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Less than 1 year
|
|
|
14
|
|
|
|
10
|
|
1 to 5 years
|
|
|
30
|
|
|
|
35
|
|
More than 5 years
|
|
|
16
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
60
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense and impairment losses
Total depreciation expense and impairment losses relating to property, plant and equipment and intangible assets are presented in the Consolidated Income
Statement as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Cost of sales
|
|
|
(160
|
)
|
|
|
(147
|
)
|
|
|
(132
|
)
|
Selling and administrative expenses
|
|
|
(8
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Research and development expenses
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
(452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(171
|
)
|
|
|
(155
|
)
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of contractual commitments for the acquisition of property, plant and equipment is disclosed in
NOTE 26Commitments.
Impairment tests for property, plant and equipment and intangibles assets
No triggering events were identified at December 31, 2017 and 2016 regarding our cash-generating units.
Certain triggering events were identified as at December 31, 2015 for certain cash-generating units. In accordance with the accounting policies described
in NOTE 2.6 of the Consolidated Financial Statements, these cash-generating units were tested for impairment.
For the Muscle Shoals cash-generating unit,
a P&ARP cash-generating unit, the following triggering events were identified at December 31, 2015:
|
-
|
|
Continuing under performance and actual 2015 Muscle Shoals results showing a much lower financial performance than the initial business plan prepared as part of the Wise acquisition, and
|
|
-
|
|
Revised budget and strategic plan for Muscle Shoals downgraded, notably after taking into account new sale agreements commercial conditions for the can/packaging business.
|
Its value in use was determined based on projected cash flows expected to be generated by the can/packaging business at Muscle Shoals. These cash flow
forecasts were prepared by the Group Management and reviewed by the Board of Directors. The discount rate applied to cash flows projections was 11% and cash flows beyond the projection period were extrapolated using a 0% growth rate. The value in
use calculation led to a recoverable value being 400 million lower than the carrying value.
Management determined that the fair value less
cost of disposal of Muscle Shoals cash-generating unit did not exceed the value in use.
Accordingly, an impairment charge of 400 million was
recorded as at December 31, 2015, reducing the Muscle Shoals cash- generating unit intangible assets and property, plant and equipment.
F-37
For the Constellium Valais cash-generating units, certain triggering events were identified in 2015
(cash-generating unit ValaisAS&I operating segment: operational reorganization and industrial restructuring and cash-generating unit ValaisA&T operating segment: expected adverse change in key sale agreements).
Based on the recoverable value approached from both a value in use and a fair value models, the carrying value of the Property, plant and equipment was fully
impaired as at December 31, 2015. The related impairment charge totaled 49 million.
NOTE 16INTANGIBLE
ASSETS (INCLUDING GOODWILL)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Goodwill
|
|
|
Technology
|
|
|
Computer
Software
|
|
|
Customer
relationships
|
|
|
Work in
Progress
|
|
|
Other
|
|
|
Total
intangible
assets
(excluding
goodwill)
|
|
Net balance at January 1, 2017
|
|
|
457
|
|
|
|
28
|
|
|
|
21
|
|
|
|
18
|
|
|
|
9
|
|
|
|
3
|
|
|
|
79
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
Amortization expense
|
|
|
|
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(12
|
)
|
Transfer during the period
|
|
|
|
|
|
|
1
|
|
|
|
7
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
2
|
|
Effects of changes in foreign exchange rates
|
|
|
(54
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2017
|
|
|
403
|
|
|
|
24
|
|
|
|
18
|
|
|
|
15
|
|
|
|
9
|
|
|
|
2
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
403
|
|
|
|
81
|
|
|
|
55
|
|
|
|
38
|
|
|
|
9
|
|
|
|
3
|
|
|
|
186
|
|
Less accumulated amortization and impairment
|
|
|
|
|
|
|
(57
|
)
|
|
|
(37
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2017
|
|
|
403
|
|
|
|
24
|
|
|
|
18
|
|
|
|
15
|
|
|
|
9
|
|
|
|
2
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Goodwill
|
|
|
Technology
|
|
|
Computer
Software
|
|
|
Customer
relationships
|
|
|
Work in
Progress
|
|
|
Other
|
|
|
Total
intangible
assets
(excluding
goodwill)
|
|
Net balance at January 1, 2016
|
|
|
443
|
|
|
|
28
|
|
|
|
23
|
|
|
|
18
|
|
|
|
7
|
|
|
|
2
|
|
|
|
78
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
5
|
|
Amortization expense
|
|
|
|
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
Transfer during the period
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
Effects of changes in foreign exchange rates
|
|
|
14
|
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2016
|
|
|
457
|
|
|
|
28
|
|
|
|
21
|
|
|
|
18
|
|
|
|
9
|
|
|
|
3
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
457
|
|
|
|
91
|
|
|
|
52
|
|
|
|
43
|
|
|
|
9
|
|
|
|
3
|
|
|
|
198
|
|
Less accumulated amortization and impairment
|
|
|
|
|
|
|
(63
|
)
|
|
|
(31
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at December 31, 2016
|
|
|
457
|
|
|
|
28
|
|
|
|
21
|
|
|
|
18
|
|
|
|
9
|
|
|
|
3
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment tests for goodwill
Goodwill in the amount of 403 million has been allocated to the Groups operating segment Packaging and Automotive Rolled Products
(P&ARP) for 396 million, Aerospace and Transportation (A&T) for 5 million and Automotive Structures and Industry (AS&I) for 2 million.
F-38
At December 31, 2017, the recoverable amount of the A&T and AS&I operating segments has been
determined based on value in use calculations and significantly exceed their carrying value. No reasonable change in the assumptions retained could lead to a potential impairment charge.
For the P&ARP operating segment, the recoverable value (determined on the basis of fair value less costs of disposal) was estimated by applying a
discounted cash flow model and market participants assumptions and has been classified as a level 3 measurement under the fair value hierarchy provided by IFRS 13.
The projected future cash flows are based on the 2018-2025 medium and long term business plan approved by the management and reviewed by the Board of
Directors. They include significant capital expenditures for the Automotive Body Sheet (up to 2020) and its related returns. Considering the significant level of future capital expenditures needed to address the Automotive Body Sheet market and the
related Automotive Body Sheet cash inflows
ramping-up
from 2018/2019 to reach a normative level in 2023/2024, cash flows were projected over an
8-year
period. The
terminal value assumes a normative cash flow and a long term growth rate ranging from 0% to 1.5%. The discount rates applied to cash flows projections range between 10% and 12%. It was concluded that the carrying value (1,204 million) did not
exceed the recoverable value (1,554 million) as at December 31, 2017. Accordingly, the impairment test carried out at the P&ARP operating segment level did not lead to a goodwill impairment.
The key assumptions used in the determination of the fair value less costs of disposal for the P&ARP operating segment are the discount rates, the
perpetual growth rates used to extrapolate cash-flows beyond the forecast period and the forecasted shipments for Automotive Body Sheet, products and related revenues. They have been determined considering what market participants would assume in
estimating fair value:
|
-
|
|
Discount rates used represent the current market assessment of the risks specific to the P&ARP operating segment taking into consideration the time value of money and the risks associated with the underlying assets.
|
|
-
|
|
The growth rates used to extrapolate cash-flows beyond the forecast period were developed internally and are consistent with external sources of information.
|
|
-
|
|
Expected shipments and related revenues were determined based on estimates of future supply and demand for Automotive Body Sheet products. These estimates were developed internally based on our industry knowledge and
our analysis of available market data regarding expected future demand and industry capacity.
|
Sensitivity analysis: the calculation of the
recoverable value of the P&ARP operating segment is most sensitive to the following assumptions:
|
-
|
|
Discount rate: an increase in the discount rate by 2.25% would result in the recoverable value equaling the carrying value;
|
|
-
|
|
Perpetual growth rate: a decrease in the perpetual growth rate by 5% would result in the recoverable value equaling the carrying value; or
|
|
-
|
|
Automotive Body Sheet shipments: 65% lower shipments in the Automotive Body Sheet US business would result in the recoverable value equaling the carrying value.
|
F-39
NOTE 17INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
The Group investments accounted for under the Equity method are Constellium-UACJ ABS LLC and Rhenaroll S.A.
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended 2017
|
|
|
Year ended 2016
|
|
At January 1,
|
|
|
16
|
|
|
|
30
|
|
Group share in loss
|
|
|
(29
|
)
|
|
|
(14
|
)
|
Additions
|
|
|
|
|
|
|
|
|
Reclassified to
non-current
other financial
assets
|
|
|
14
|
|
|
|
|
|
Effects of changes in foreign exchange rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
1
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017, the loan to Constellium-UACJ ABS LLC is, in substance, part of Constelliums investment in
the joint-venture as it represents a long-term strategic investment that is not expected to be settled in the foreseeable future
.
Constelliums share of the losses of joint-ventures, in excess of the initial investment, is thus
recognized against other financial assets for 14 million at December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint ventures net assets
|
|
|
Joint ventures profit/ (loss)
|
|
(In millions of Euros)
|
|
% interest
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Constellium-UACJ ABS LLC
(A)
|
|
|
51.00
|
%
|
|
|
(14
|
)
|
|
|
15
|
|
|
|
(29
|
)
|
|
|
(14
|
)
|
Rhenaroll S.A.
(B)
|
|
|
49.85
|
%
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group share
|
|
|
|
|
|
|
(13
|
)
|
|
|
16
|
|
|
|
(29
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassified to
non-current
other financial
assets
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in joint venture
|
|
|
|
|
|
|
1
|
|
|
|
16
|
|
|
|
(29
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium-UACJ ABS LLC and Rhenaroll S.A. are private companies with no quoted market prices available for their shares.
(A)
|
Constellium-UACJ ABS LLC, a joint-venture in which Constellium holds a 51% interest, was created in 2014. This joint-venture operates a facility located in Bowling Green, Kentucky and supplies aluminium sheet to the
North American automotive industry. The joint venture started its operations during 2016.
|
(B)
|
The Group also holds a 49.85% interest in a joint-venture named Rhenaroll S.A. (located in Biesheim, France), specialized in the chrome-plating, grinding and repairing of rolling mills rolls and rollers. Revenue
was 3 million for the years ended December 31, 2017 and 2016 respectively. The entitys net income was immaterial in both 2017 and 2016.
|
Both investments are included in P&ARP segment assets.
F-40
Constellium-UACJ ABS LLC financial statements
The information presented hereafter reflects the amounts included in the financial statements of the relevant entity in accordance with Group accounting
principles and not the Companys share of those amounts.
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
5
|
|
|
|
6
|
|
Trade receivables and other
|
|
|
35
|
|
|
|
7
|
|
Inventories
|
|
|
57
|
|
|
|
28
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
161
|
|
|
|
189
|
|
Intangible assets
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
259
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Trade payables and other
|
|
|
34
|
|
|
|
26
|
|
Borrowings
(A)
|
|
|
206
|
|
|
|
129
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
47
|
|
|
|
46
|
|
Equity
|
|
|
(28
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Total Equity and Liabilities
|
|
|
259
|
|
|
|
231
|
|
|
|
|
|
|
|
|
|
|
(A)
|
In February 2018, the maturity of shareholders loan facilities was extended to March 31, 2023.
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
Revenue
|
|
|
123
|
|
|
|
15
|
|
Cost of sales
|
|
|
(151
|
)
|
|
|
(28
|
)
|
Selling and administrative expenses
|
|
|
(14
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(42
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
(15
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(57
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
The transactions during the year and the
year-end
balances between Group companies
that are fully consolidated and Constellium UACJ ABS LLC are included in Groups Consolidated income statement and Consolidated statement of financial position are detailed below:
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
At December 31, 2016
|
|
Trades receivables and othercurrent
|
|
15
|
|
|
10
|
|
Other financial assets
(A)
|
|
83
|
|
|
66
|
|
|
|
|
|
|
|
|
Total Assets
|
|
98
|
|
|
76
|
|
|
|
|
|
|
|
|
F-41
(A)
|
Other financial assets correspond to the loan to Constellium UACJ ABS LLC as of December 31, 2017 and 2016. As of December 31, 2017, the fair value of the loan is 97 million, which approximates the
carrying value. The fair value is presented net of 14 million of Constelliums share of losses of joint venture.
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
Revenue
|
|
|
59
|
|
|
|
13
|
|
Fees and recharges
(B)
|
|
|
3
|
|
|
|
3
|
|
Finance income
|
|
|
6
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total Income
|
|
|
68
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
(B)
|
Fees and recharges are presented in Cost of sales or Selling and administrative expenses depending on their nature.
|
Guarantees and commitments given to Constellium UACJ ABS LLC by the Group are:
|
|
|
|
|
|
|
|
|
(in millions of euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Financial guarantees
|
|
|
11
|
|
|
|
|
|
Loan facility commitment
|
|
|
|
|
|
|
15
|
|
Supplier guarantees
|
|
|
3
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Total Guarantees and commitments
|
|
|
14
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
Constellium and UACJ have pledged their intention to financially support the Constellium UACJ ABS LLC, such that Constellium
UACJ ABS LLC would be in a position to meet its financial obligations on a timely basis through February 14, 2019, and for a reasonable period thereafter.
NOTE 18DEFERRED INCOME TAXES
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Deferred income tax assets
|
|
|
164
|
|
|
|
252
|
|
Deferred income tax liabilities
|
|
|
(25
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
Net Deferred income tax assets
|
|
|
139
|
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
The following tables show the changes in net deferred income tax assets / (liabilities) for the years ended December 31,
2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions
of Euros)
|
|
At January 1,
2017
|
|
|
Recognized in
|
|
|
Effect of change in
foreign exchange rates
|
|
|
Other
|
|
|
At December 31,
2017
|
|
|
|
|
|
|
Profit or loss
|
|
|
OCI
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
(90
|
)
|
|
|
5
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
(76
|
)
|
Inventories
|
|
|
6
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Pensions
|
|
|
188
|
|
|
|
(39
|
)
|
|
|
(5
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
130
|
|
Derivative valuation
|
|
|
13
|
|
|
|
(17
|
)
|
|
|
(15
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(20
|
)
|
Tax losses carried forward
|
|
|
79
|
|
|
|
3
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
78
|
|
Other
(A)
|
|
|
26
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets/(liabilities)
|
|
|
222
|
|
|
|
(54
|
)
|
|
|
(20
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Mainly
non-deductible
provisions.
|
F-42
For the year ended December 31, 2017, net deferred income tax assets declined primarily due to the US income
tax rate decrease with 16 million through Profit or loss and for 8 million through Other Comprehensive Income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Euros)
|
|
At January 1,
2016
|
|
|
Recognized in
|
|
|
Effect of change in
foreign exchange rates
|
|
|
Other
|
|
|
At December
31, 2016
|
|
|
|
|
|
|
Profit or loss
|
|
|
OCI
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
(27
|
)
|
|
|
(59
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(90
|
)
|
Inventories
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
6
|
|
Pensions
|
|
|
193
|
|
|
|
(11
|
)
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
188
|
|
Derivative valuation
|
|
|
27
|
|
|
|
(21
|
)
|
|
|
9
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
13
|
|
Tax losses carried forward
|
|
|
40
|
|
|
|
38
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
79
|
|
Other
(A)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets /(liabilities)
|
|
|
260
|
|
|
|
(50
|
)
|
|
|
11
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Mainly
non-deductible
provisions.
|
Based on the expected taxable
income of the entities, the Group believes that it is more likely than not that a total of 1,393 million (1,345 million at December 31, 2016) of unused tax losses and deductible temporary differences, will not be used.
Consequently, net deferred tax assets have not been recognized. The related tax impact of 356 million (428 million at December 31, 2016) is attributable to the following:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Expiring in 2018 to 2021
|
|
|
(22
|
)
|
|
|
(13
|
)
|
Expiring in 2022 and after limited
|
|
|
(143
|
)
|
|
|
(132
|
)
|
Unlimited
|
|
|
(18
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
Tax losses
|
|
|
(183
|
)
|
|
|
(164
|
)
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
(116
|
)
|
|
|
(193
|
)
|
Pensions
|
|
|
(20
|
)
|
|
|
(25
|
)
|
Other
|
|
|
(37
|
)
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
Deductible temporary differences
|
|
|
(173
|
)
|
|
|
(264
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(356
|
)
|
|
|
(428
|
)
|
|
|
|
|
|
|
|
|
|
The 72 million total change of unrecognized deferred tax assets is mainly explained by the impact of (i) the
US income tax rate decrease for 93 million, (ii) the foreign exchange effect for 35 million offset by (iii) an increase of the unrecognized deferred tax assets on deductible temporary differences and unused tax
losses, generated during the period, for 56 million.
Substantially all of the tax losses not expected to be used reside in the Netherlands,
the United States and in Switzerland.
The holding companies in the Netherlands have been generating tax losses over the past six years, and these holding
companies are not expected to generate sufficient qualifying taxable profits in the foreseeable future to utilize these tax losses before they expire in the years from 2020 to 2025.
The tax losses not expected to be utilized in the United States relate to one of our main operating entities, such losses having a carryforward period limited
to 20 years. Although this entity is expected to be profitable in the medium or long term, considering notably the anticipated development of the Automotive Body Sheet business,
F-43
it bears significant
non-cash
depreciation and financial interests that will continue generating tax losses in the coming years. Accordingly, it is
uncertain whether the entity will be able to use, at its level given the absence of an overall U.S. tax group, these tax losses before they expire. Consequently, the related deferred tax assets have not been recognized.
The tax losses not expected to be utilized in Switzerland relate to losses generated by one of our Swiss entities most of them expiring in the years from 2019
to 2023. Following an operational reorganization and industrial restructuring in 2015, this Swiss entity is not expected to generate sufficient taxable profits over the next coming years to utilize these losses before they expire.
As at December 31, 2017 and 2016, most of the unrecognized deferred tax assets on deductible temporary differences on long-term assets and other
differences relate to the U.S. and Swiss entities discussed above. A joint assessment has been performed on the recoverability of the deferred tax assets on deductible temporary differences and tax losses for these two entities. In line with the
assessments, the related deferred tax assets on long term assets and on other differences have not been recognized.
NOTE
19TRADE PAYABLES AND OTHER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Non-current
|
|
|
Current
|
|
|
Non-current
|
|
|
Current
|
|
Trade payables
|
|
|
|
|
|
|
717
|
|
|
|
|
|
|
|
627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets payables
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
33
|
|
Employees entitlements
|
|
|
|
|
|
|
159
|
|
|
|
|
|
|
|
141
|
|
Deferred revenue
|
|
|
34
|
|
|
|
10
|
|
|
|
40
|
|
|
|
14
|
|
Taxes payable other than income tax
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
17
|
|
Other payables
|
|
|
20
|
|
|
|
5
|
|
|
|
19
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other
|
|
|
54
|
|
|
|
213
|
|
|
|
59
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trade payables and other
|
|
|
54
|
|
|
|
930
|
|
|
|
59
|
|
|
|
839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
NOTE 20BORROWINGS
20.1 Analysis by nature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
December 31, 2017
|
|
|
December 31,
2016
|
|
|
|
Nominal
Value
in Currency
|
|
|
Nominal
rate
|
|
|
Effective
rate
|
|
|
Nominal
Value
in Euros
|
|
|
(Arrangement
fees)
|
|
|
Accrued
interests
|
|
|
Carrying
value
|
|
|
Carrying
value
|
|
Secured ABL
(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ravenswood (due 2018)
|
|
|
|
|
|
|
Floating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
Muscle Shoals (due 2020)
|
|
|
|
|
|
|
Floating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pan US ABL (due 2022)
|
|
$
|
78
|
|
|
|
Floating
|
|
|
|
3.79
|
%
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Inventory Based Facility (
due 2019
)
(B)
|
|
|
|
|
|
|
Floating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium N.V.
(D)
(Issued March 2016,
due 2021)
|
|
$
|
425
|
|
|
|
7.88
|
%
|
|
|
8.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401
|
|
Muscle Shoals
(C)
|
|
$
|
650
|
|
|
|
8.75
|
%
|
|
|
7.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
635
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium N.V. (Issued May 2014, due 2024)
|
|
$
|
400
|
|
|
|
5.75
|
%
|
|
|
6.26
|
%
|
|
|
334
|
|
|
|
(4
|
)
|
|
|
2
|
|
|
|
332
|
|
|
|
377
|
|
Constellium N.V. (Issued May 2014, due 2021)
|
|
|
300
|
|
|
|
4.63
|
%
|
|
|
5.16
|
%
|
|
|
300
|
|
|
|
(4
|
)
|
|
|
2
|
|
|
|
298
|
|
|
|
298
|
|
Constellium N.V.
(D)
(Issued December
2014, due 2023)
|
|
$
|
400
|
|
|
|
8.00
|
%
|
|
|
8.61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
387
|
|
Constellium N.V.
(D)
(Issued December
2014, due 2023)
|
|
|
240
|
|
|
|
7.00
|
%
|
|
|
7.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244
|
|
Constellium N.V.
(C)
(Issued February
2017, due 2025)
|
|
$
|
650
|
|
|
|
6.63
|
%
|
|
|
7.13
|
%
|
|
|
542
|
|
|
|
(13
|
)
|
|
|
12
|
|
|
|
541
|
|
|
|
|
|
Constellium N.V.
(D)
(Issued November
2017, due 2026)
|
|
$
|
500
|
|
|
|
5.88
|
%
|
|
|
6.26
|
%
|
|
|
417
|
|
|
|
(8
|
)
|
|
|
4
|
|
|
|
413
|
|
|
|
|
|
Constellium N.V.
(D)
(Issued November
2017, due 2026)
|
|
|
400
|
|
|
|
4.25
|
%
|
|
|
4.57
|
%
|
|
|
400
|
|
|
|
(7
|
)
|
|
|
2
|
|
|
|
395
|
|
|
|
|
|
Other loans (including Finance leases)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
1
|
|
|
|
83
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,140
|
|
|
|
(36
|
)
|
|
|
23
|
|
|
|
2,127
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which
non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,021
|
|
|
|
2,361
|
|
Of which current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
|
|
|
|
107
|
|
Constellium N.V. Senior Notes are guaranteed by certain subsidiaries.
(A)
|
On June 21, 2017, Ravenswood and Muscle Shoals terminated their existing respective secured asset-based
variable rate revolving credit facilities. The two entities entered into a pan US ABL consisting of a
|
F-45
|
$300 million initial credit facility due 2022 and a $200 million committed accordion, at the companys option, under certain conditions.
|
(B)
|
On April 21, 2017, two French entities entered into a new secured Revolving Credit Facility on inventory for 100 million due 2019.
|
(C)
|
On February 16, 2017, Constellium N.V. issued a $650 million principal amount of 6.625% Senior Notes due 2025. Deferred arrangement fees amounted to 14 million on the issuance date. The net proceeds
of Constellium N.V. Senior Notes were used to repurchase the Muscle Shoals Senior Secured Notes due 2018.
|
(D)
|
On November 9, 2017, Constellium N.V. issued a $500 million principal amount of 5.875% Senior Notes due 2026 and 400 million principal amount of 4.25% Senior Notes due 2026. Deferred arrangement
fees amounted to 15 million on the issuance date. The net proceeds of the Constellium N.V. Senior Notes were used to repurchase the Constellium N.V. Senior Secured Notes issued in March 2016, due 2021 and Constellium N.V. Senior Unsecured
Notes issued in December 2014, due 2023.
|
20.2 Movements in borrowings
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended 2017
|
|
|
Year ended 2016
|
|
At January 1,
|
|
|
2,468
|
|
|
|
2,233
|
|
Cash flows
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Senior
Notes
(A)
(B)
|
|
|
1,440
|
|
|
|
375
|
|
Repayments of Senior Notes or PIK Toggle notes
(B)
(C) (D)
|
|
|
(1,559
|
)
|
|
|
(148
|
)
|
Proceeds / (Repayments) from U.S. Revolving Credit Facilities and other loans
|
|
|
29
|
|
|
|
(69
|
)
|
Arrangement fees payment
|
|
|
(29
|
)
|
|
|
(12
|
)
|
Finance lease repayment and others
|
|
|
(13
|
)
|
|
|
(10
|
)
|
Non-cash
changes
|
|
|
|
|
|
|
|
|
Movement in interests accrued or capitalized
|
|
|
(13
|
)
|
|
|
15
|
|
New finance leases
|
|
|
17
|
|
|
|
16
|
|
Deferred arrangement fees and
step-up
amortization
|
|
|
7
|
|
|
|
(10
|
)
|
Effects of changes in foreign exchange rates
|
|
|
(220
|
)
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
2,127
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
(A)
|
The proceeds from the Senior Notes issued on November 9, 2017 represented 830 million, converted at the issuance date exchange rate of EUR/USD=1.1630.
|
(B)
|
The proceeds from the Senior Notes issued on February 16, 2017 represented 610 million, converted at the issuance date exchange rate of EUR/USD=1.0652. The repurchase of Muscle Shoals Senior Notes was
completed on the same day for the same amount.
|
(C)
|
The redemption of Secured and Unsecured Notes on November 9, 2017 represented 949 million, converted at the redemption date exchange rate of EUR/USD=1.1630.
|
(D)
|
The redemption of PIK Toggle Notes on December 5, 2016 represented 148 million, converted at the redemption date exchange rate of EUR/USD=1.0702.
|
F-46
20.3 Currency concentration
The composition of the carrying amounts of total borrowings in Euro equivalents is denominated in the currencies shown below:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
U.S. Dollar
|
|
|
1,387
|
|
|
|
1,887
|
|
Euro
|
|
|
720
|
|
|
|
575
|
|
Other currencies
|
|
|
20
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
2,127
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
Covenants
The Group was
in compliance with all applicable debt covenants at and for the years ended December 31, 2017 and 2016.
Constellium N.V. Senior Notes
The indentures for our outstanding Senior Notes contain customary terms and conditions, including amongst other things, limitation on incurring or guaranteeing
additional indebtedness, on paying dividends, on making other restricted payments, on creating restriction on dividend and other payments to us from certain of our subsidiaries, on incurring certain liens, on selling assets and subsidiary stock, and
on merging.
Pan US ABL Facility
This facility
contains a fixed charge coverage ratio covenant and EBITDA contribution ratio. Evaluation of compliance is only required if the excess availability falls below 10% of the aggregate revolving loan commitment. It also contains customary affirmative
and negative covenants, but no maintenance covenants.
F-47
NOTE 21FINANCIAL INSTRUMENTS
21.1 Financial assets and liabilities by categories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of
Euros)
|
|
Notes
|
|
|
Loans and
receivables
|
|
|
At Fair
Value
through
Profit
and loss
|
|
|
At Fair
Value
through
OCI
|
|
|
Total
|
|
|
Loans and
receivables
|
|
|
At Fair
Value
through
Profit
and loss
|
|
|
At Fair
Value
through
OCI
|
|
|
Total
|
|
Cash and cash equivalents
|
|
|
12
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
269
|
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
|
347
|
|
Trade receivables and Finance Lease receivables
|
|
|
13
|
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
318
|
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
|
253
|
|
Other financial assets
|
|
|
|
|
|
|
83
|
|
|
|
77
|
|
|
|
19
|
|
|
|
179
|
|
|
|
66
|
|
|
|
100
|
|
|
|
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
|
|
|
|
|
670
|
|
|
|
77
|
|
|
|
19
|
|
|
|
766
|
|
|
|
666
|
|
|
|
100
|
|
|
|
|
|
|
|
766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of
Euros)
|
|
Notes
|
|
|
At
amortized
cost
|
|
|
At Fair
Value
through
Profit
and loss
|
|
|
At Fair
Value
through
OCI
|
|
|
Total
|
|
|
At
amortized
cost
|
|
|
At Fair
Value
through
Profit
and loss
|
|
|
At Fair
Value
through
OCI
|
|
|
Total
|
|
Trade payables and fixed assets payables
|
|
|
19
|
|
|
|
744
|
|
|
|
|
|
|
|
|
|
|
|
744
|
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
Borrowings
|
|
|
20
|
|
|
|
2,127
|
|
|
|
|
|
|
|
|
|
|
|
2,127
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
|
2,468
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
37
|
|
|
|
27
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities
|
|
|
|
|
|
|
2,871
|
|
|
|
66
|
|
|
|
|
|
|
|
2,937
|
|
|
|
3,128
|
|
|
|
37
|
|
|
|
27
|
|
|
|
3,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below details other financial assets and other financial liabilities positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Non-current
|
|
|
Current
|
|
|
Total
|
|
|
Non-current
|
|
|
Current
|
|
|
Total
|
|
Derivatives
|
|
|
29
|
|
|
|
67
|
|
|
|
96
|
|
|
|
49
|
|
|
|
51
|
|
|
|
100
|
|
Aluminium and premium future contract
|
|
|
6
|
|
|
|
39
|
|
|
|
45
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
Energy future contract
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
Other future contract
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency commercial contracts
|
|
|
21
|
|
|
|
20
|
|
|
|
41
|
|
|
|
2
|
|
|
|
11
|
|
|
|
13
|
|
Currency net debt derivatives
|
|
|
2
|
|
|
|
7
|
|
|
|
9
|
|
|
|
47
|
|
|
|
30
|
|
|
|
77
|
|
Loans
(A)
|
|
|
81
|
|
|
|
2
|
|
|
|
83
|
|
|
|
|
|
|
|
66
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial assets
|
|
|
110
|
|
|
|
69
|
|
|
|
179
|
|
|
|
49
|
|
|
|
117
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
43
|
|
|
|
23
|
|
|
|
66
|
|
|
|
30
|
|
|
|
34
|
|
|
|
64
|
|
Aluminium and premium future contract
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
|
|
4
|
|
|
|
5
|
|
|
|
9
|
|
Energy future contract
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other future contract
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Currency commercial contracts
|
|
|
6
|
|
|
|
12
|
|
|
|
18
|
|
|
|
26
|
|
|
|
27
|
|
|
|
53
|
|
Currency net debt derivatives
|
|
|
37
|
|
|
|
4
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial liabilities
|
|
|
43
|
|
|
|
23
|
|
|
|
66
|
|
|
|
30
|
|
|
|
34
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Corresponds to a loan facility to Constellium UACJ ABS LLC (See NOTE 17 Investments accounted for under the equity method)
|
F-48
21.2 Fair values
All derivatives are presented at fair value in the Consolidated Statement of Financial Position.
The carrying value of the Groups borrowings at maturity is the redemption value.
The fair value of Constellium N.V. Senior Notes issued in May 2014, February 2017 and November 2017 account for 102%, 106% and 101% respectively of the
nominal value and amount to 645 million, 572 million and 828 million respectively at December 31, 2017. The fair value was classified as a level 1 measurement under the fair value hierarchy provided by IFRS 13.
The fair values of other financial assets and liabilities approximate their carrying values, as a result of their liquidity or short maturity except for
the loan facility to Constellium UACJ ABS LLC (See NOTE 17Investments accounted for under the equity method).
21.3 Valuation hierarchy
The following table provides an analysis of derivatives measured at fair value, grouped into levels based on the degree to which the fair value is observable:
|
|
|
Level 1 valuation is based on quoted price (unadjusted) in active markets for identical financial instruments, it includes aluminium futures that are traded on the LME;
|
|
|
|
Level 2 valuation is based on inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. prices) or indirectly (i.e. derived from prices),
it includes foreign exchange derivatives;
|
|
|
|
Level 3 valuation is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Other financial assetsderivatives
|
|
|
46
|
|
|
|
50
|
|
|
|
|
|
|
|
96
|
|
|
|
6
|
|
|
|
94
|
|
|
|
|
|
|
|
100
|
|
Other financial liabilitiesderivatives
|
|
|
6
|
|
|
|
60
|
|
|
|
|
|
|
|
66
|
|
|
|
7
|
|
|
|
57
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no transfers into or out of Level 3 during the years ended December 31, 2017 and December 31, 2016.
NOTE 22FINANCIAL RISK MANAGEMENT
The Groups financial risk management strategy focuses on minimizing the cash flow impacts of volatility in foreign currency exchange rates, metal prices
and interest rates, while maintaining the financial flexibility the Group requires in order to successfully execute the Groups business strategies.
Due to Constelliums capital structure and the nature of its operations, the Group is exposed to the following financial risks: (i) market risk
(including foreign exchange risk, commodity price risk and interest rate risk); (ii) credit risk and (iii) liquidity and capital management risk.
22.1 Market risk
(i) Foreign exchange risk
Net assets, earnings and cash flows are influenced by multiple currencies due to the geographic diversity of sales and the countries in which the Group
operates.
F-49
Constellium is exposed to foreign exchange risk in the following areas:
|
|
|
Transaction exposures, which include
|
|
◇
|
|
Commercial transactions related to forecasted sales and purchases and
on-balance
sheet receivables/payables resulting from such transactions.
|
|
◇
|
|
Financing transactions, related to external and internal net debt
|
|
|
|
Translation exposures, which relate to net investments in foreign entities which are converted in Euros in the consolidated financial statements.
|
Commercial transaction exposures
The Group policy is to
hedge committed and highly probable forecasted foreign currency operational transactions. The Group uses foreign exchange forwards and foreign exchange swaps for this purpose.
The following tables outline the nominal value (converted in millions of Euros at the closing rate) of derivatives for Constelliums most significant
foreign exchange exposures as at December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward derivatives sales
|
|
Maturity Period
|
|
|
Less than 1 year
|
|
|
Over 1 year
|
|
USD/EUR
|
|
|
2018-2023
|
|
|
|
387
|
|
|
|
376
|
|
EUR/CHF
|
|
|
2018-2022
|
|
|
|
49
|
|
|
|
19
|
|
Other currencies
|
|
|
2018-2020
|
|
|
|
16
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward derivatives purchases
|
|
Maturity Period
|
|
|
Less than 1 year
|
|
|
Over 1 year
|
|
USD/EUR
|
|
|
2018-2022
|
|
|
|
395
|
|
|
|
90
|
|
EUR/CHF
|
|
|
2018-2022
|
|
|
|
103
|
|
|
|
35
|
|
EUR/CZK
|
|
|
2018-2019
|
|
|
|
63
|
|
|
|
62
|
|
Other currencies
|
|
|
2018
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward derivatives sales mean that the Group sells currency 1 versus currency 2. Forward derivatives purchases
mean that the Group buys currency 1 versus currency 2
In 2016, the Group agreed with a major customer for the sale of fabricated metal products in U.S.
Dollars to be supplied from a Euro functional currency entity. In line with its hedging policy, the Group entered into significant foreign exchange derivatives which match related highly probable future conversion sales by selling U.S. Dollars
against Euros. The Group designated these derivatives for hedge accounting, with total nominal amount of $484 million, as of December 31, 2017, with maturity 2018-2022.
For hedges that do not qualify for hedge accounting, any
mark-to-market
movements are recognized in Other gains / (losses)net.
F-50
The table below details the effect of foreign currency derivatives in the Consolidated Income Statement and the
Statement of Comprehensive Income/(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Euros)
|
|
Notes
|
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
|
Year ended
December 31,
2015
|
|
Derivatives that do not qualify for hedge accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Other gains / (losses) net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains / (losses) on foreign currency derivativesnet
|
|
|
8
|
|
|
|
(19
|
)
|
|
|
(46
|
)
|
|
|
(37
|
)
|
Unrealized gains / (losses) on foreign currency derivativesnet
(A)
|
|
|
8
|
|
|
|
16
|
|
|
|
40
|
|
|
|
(10
|
)
|
|
|
|
|
|
Derivatives that qualify for hedge accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on foreign currency derivativesnet
|
|
|
8
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Unrealized gain on foreign currency derivativesnet
|
|
|
8
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Included in Other gains / (losses)net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains on foreign currency derivativesnet
|
|
|
8
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Unrealized gains / (losses) on foreign currency derivativesnet
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain/(loss) in ineffective portion of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Other Comprehensive Income / (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains / (losses) on foreign currency derivativesnet
|
|
|
|
|
|
|
48
|
|
|
|
(27
|
)
|
|
|
|
|
Gain/loss reclassified from cash flow hedge reserve to profit and loss
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Gains or losses on the hedging instruments are expected to offset losses or gains on the underlying hedged forecasted sales that will be reflected in future periods when these sales are recognized.
|
Financing transaction exposures
When the Group enters
into intercompany loans and deposits, the financing is generally provided in the functional currency of the subsidiary. The foreign currency exposure of the Groups external funding and liquid assets is systematically hedged either naturally
through external foreign currency loans and deposits or through cross currency basis swaps and simple foreign currency swaps.
At December 31, 2017
the net position hedged related to loans and deposits was a forward purchase of $436 million versus the Euro. This comprised of a forward purchase of $870 million versus the Euro, a forward sale of $140 million versus the Euro, both
using cross currency basis swaps, and a forward sale of $294 million versus the Euro using simple foreign exchange forward contracts.
F-51
The table below details the effect of foreign currency derivatives in the Consolidated Income Statement
|
|
|
|
|
|
|
|
|
(In millions of Euros)
|
|
Year ended
December 31,
2017
|
|
|
Year ended
December 31,
2016
|
|
Derivatives
|
|
|
|
|
|
|
|
|
Included in Finance Costsnet
|
|
|
|
|
|
|
|
|
Realized gain / (loss) on foreign currency derivativesnet
|
|
|
31
|
|
|
|
15
|
|
Unrealized gain / (loss) on foreign currency derivativesnet
|
|
|
(110
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(79
|
)
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
In accordance with the Group policy, the net foreign exchange result related to financing activities is expected to be
balanced at any time.
Net debt derivatives settled during the period are presented in Other financing activities in the Consolidated
Statement of Cash Flows.
Foreign exchange sensitivity on commercial and financing transaction exposures
The largest exposures of the Group are related to the Euro/Dollar exchange rate. The table below summarizes the impact on profit and Equity (before tax effect)
of a 10 % strengthening of the U.S. Dollar versus the Euro for non U.S. Dollar functional currency entities.
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Effect on profit before tax
|
|
|
Effect on pretax equity
|
|
Trade receivables
|
|
|
5
|
|
|
|
|
|
Trade payables
|
|
|
(1
|
)
|
|
|
|
|
Derivatives on commercial
transaction
(A)
|
|
|
14
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
Commercial transaction exposure
|
|
|
18
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
Cash in Bank and intercompany loans
|
|
|
103
|
|
|
|
|
|
Borrowings
|
|
|
(144
|
)
|
|
|
|
|
Derivatives on financing transaction
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing transaction exposure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
(A)
|
Gains or losses on the hedging instruments are expected to offset losses or gains on the underlying hedged forecasted sales that will be reflected in future periods when these sales are recognized. The impact on pretax
equity (43 million) relates to derivatives hedging future sales spread from 2018 to 2022 which are designated as cash flow hedges.
|
The amounts shown in the table above may not be indicative of future results since the balances of financial assets and liabilities may change.
Translation exposures
Foreign exchange impacts related
to the translation to Euro of net investments in foreign subsidiaries, and related revenues and expenses are not hedged as the Group operates in these various countries on permanent basis.
F-52
Foreign exchange sensitivity
The exposure relates to foreign currency translation of net investments in foreign subsidiaries and arises mainly from operations conducted by U.S. Dollar
functional currency subsidiaries.
The table below summarizes the impact on profit and Equity (before tax effect) of a 10 % strengthening of the
US Dollar versus the Euro (on average rate for profit before tax and closing rate for pretax equity) for US Dollar functional currency entities.
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Effect on profit before tax
|
|
|
Effect on pretax equity
|
|
10% strengthening US Dollar/Euro
|
|
|
(8
|
)
|
|
|
11
|
|
The amounts shown in the table above may not be indicative of future results since the balances of financial assets and
liabilities may change.
Margin Calls
Our financial
counterparties may require margin calls should our
mark-to-market
exceed a
pre-agreed
contractual limit. In order to protect from
the potential margin calls for significant market movements, the Group ensures that financial counterparts hedging the transactional exposure are also hedging the foreign currency loan and deposit exposure. Further, the Group holds a significant
liquidity buffer in cash or in availability under its various borrowing facilities, enters into derivatives with a large number of financial counterparties and monitors margin requirements on a daily basis.
At December 31, 2017 and 2016, the margin requirement related to foreign exchange hedges was nil and the Group was not exposed to material margin call
risk.
(ii) Commodity price risk
The Group is
subject to the effects of market fluctuations in the price of aluminium, which is the Groups primary metal input and a significant component of its output. The Group is also exposed to variation in the premium and in the price of zinc, natural
gas, silver and copper but in a less significant way.
The Group policy is to minimize exposure to aluminium price volatility by (i) passing through
the aluminium price risk to customers and (ii) using derivatives where necessary. All sales and purchases are converted to be on the same floating basis and then ensure that the same quantities are bought and sold at the same (market) price.
The Group purchases fixed price aluminium forwards to offset the exposure of LME volatility on its fixed price sales agreements for the supply of metal.
The Group also purchases fixed price copper, aluminium premium, silver and zinc forwards to offset the commodity exposure where sales contracts have embedded
fixed price agreements for the relevant commodity.
In addition, the Group also purchases natural gas fixed price forwards to lock in energy costs where a
fixed price purchase contract is not possible.
At December 31, 2017, the nominal amount of commodity derivatives are as follows:
|
|
|
|
|
|
|
|
|
|
|
(In millions of
Euros)
|
|
Maturity period
|
|
Less than 1 year
|
|
|
Over 1 year
|
|
Aluminium
|
|
2018-2022
|
|
|
335
|
|
|
|
43
|
|
Premiums
|
|
2018-2021
|
|
|
5
|
|
|
|
7
|
|
Copper
|
|
2018
|
|
|
3
|
|
|
|
|
|
Silver
|
|
2018
|
|
|
7
|
|
|
|
|
|
Natural gas
|
|
2018
|
|
|
4
|
|
|
|
|
|
Zinc
|
|
2018
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-53
The value of the contracts will fluctuate due to changes in market prices but is intended to help protect the
Groups margin on future conversion and fabrication activities. At December 31, 2017, these contracts were directly entered into with external counterparties.
The Group does not apply hedge accounting on commodity derivatives and therefore any
mark-to-market
movements are recognized in Other gains / (losses) net.
|
|
|
|
|
|
|
|
|
(In millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
Derivatives
|
|
|
|
|
|
|
|
|
Included in Other gains / (losses)net
|
|
|
|
|
|
|
|
|
Realized gains / (losses) on commodity derivativesnet
|
|
|
16
|
|
|
|
(16
|
)
|
Unrealized gains / (losses) on commodity derivativesnet
|
|
|
41
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Commodity price sensitivity: risks associated with derivatives
The net impact on earnings and equity of a 10% increase in the market price of aluminium, based on the aluminium derivatives held by the Group at
December 31, 2017 (before tax effect), with all other variables held constant was estimated to be a 35 million gain. The balances of such financial instruments may change in future periods however, and therefore the amounts shown may
not be indicative of future results.
Margin Calls
As the LME price for aluminium falls, the derivative contracts entered into with financial institution counterparties have a negative
mark-to-market.
The Groups financial institution counterparties may require margin calls should the negative
mark-to-market
exceed a
pre-agreed
contractual limit. In order to protect from the potential margin calls for significant market movements, the Group enters into
derivatives with a large number of financial counterparties and monitors margin requirements on a daily basis for adverse movements in aluminium prices. At December 31, 2017 and 2016, the margin requirement related to aluminium or any other
commodity hedges was nil and the Group was not exposed to material margin call risk.
(iii) Interest rate risk
Interest rate risk refers to the risk that the value of financial instruments held by the Group and that are subject to variable rates will fluctuate, or the
cash flows associated with such instruments will be impacted due to changes in market interest rates. The Groups interest rate risk arises principally from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest
rate risk which is partially offset by cash and cash equivalents deposits (including short-term investments) earning interest at variable interest rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. (See NOTE
21-
Financial Instruments). At December 31, 2017, 96% of Groups borrowings were at a fixed rate.
Interest
rate sensitivity: risks associated with variable-rate financial instruments
The impact on Income/Loss before income tax for the period of a 50 basis
point increase or decrease in the LIBOR or EURIBOR interest rates, based on the variable rate financial instruments held by the Group at December 31, 2017, with all other variables held constant, was estimated to be less than
1 million for the years ended December 31, 2017 and 2016. However, the balances of such financial instruments may not remain constant in future periods, and therefore the amounts shown may not be indicative of future results.
F-54
22.2 Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The
Group is exposed to credit risk with financial institutions and other parties as a result of
cash-in-bank,
cash deposits,
mark-to-market
on derivative transactions and customer trade receivables arising from the Groups operating activities. The maximum exposure to credit risk for the year ended December 31, 2017 is
the carrying value of each class of financial asset as described in NOTE 21Financial Instruments. The Group does not generally hold any collateral as security.
Credit risk related to transactions with financial institutions
Credit risk with financial institutions is managed by the Groups Treasury department in accordance with a Board approved policy. Management is not aware
of any significant risks associated with financial institutions as a result of cash and cash equivalents deposits (including short-term investments) and financial derivative transactions.
The number of financial counterparties is tabulated below showing our exposure to the counterparty by rating type (Parent company ratings from Moodys
Investor Services):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
|
|
Number of financial
counterparties
(A)
|
|
|
Exposure
(in millions of Euros)
|
|
|
Number of financial
counterparties
(A)
|
|
|
Exposure
(in millions of Euros)
|
|
Rated Aa or better
|
|
|
3
|
|
|
|
52
|
|
|
|
3
|
|
|
|
13
|
|
Rated A
|
|
|
12
|
|
|
|
224
|
|
|
|
9
|
|
|
|
369
|
|
Rated Baa
|
|
|
3
|
|
|
|
19
|
|
|
|
3
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18
|
|
|
|
295
|
|
|
|
15
|
|
|
|
398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Financial Counterparties for which the Groups exposure is below 250 thousand have been excluded from the analysis.
|
Credit risks related to customer trade receivables
The
Group has a diverse customer base geographically and by industry. The responsibility for customer credit risk management rests with management. Payment terms vary and are set in accordance with practices in the different geographies and
end-markets
served. Credit limits are typically established based on internal or external rating criteria, which take into account such factors as the financial condition of the customers, their credit history and
the risk associated with their industry segment. Trade receivables are actively monitored and managed, at the business unit or site level. Business units report credit exposure information to Constellium management on a regular basis. Over 89% of
the Groups trade account receivables are insured by insurance companies rated A3 or better, or sold to a factor on a
non-recourse
basis. In situations where collection risk is considered to be above
acceptable levels, risk is mitigated through the use of advance payments, bank guarantees or letters of credit. Historically, we have a very low level of customer default as a result of long history of dealing with our customer base and an active
credit monitoring function.
See NOTE 13Trade Receivables and other for the aging of trade receivables.
22.3 Liquidity and capital risk management
Groups
capital structure includes shareholders equity, borrowings and various third-party financing arrangements (such as credit facilities and factoring arrangements). Constelliums total capital is defined as total equity plus net debt. Net
debt includes borrowings due to third parties less cash and cash equivalents.
F-55
Constelliums overriding objectives when managing capital are to safeguard the business as a going concern,
to maximize returns for its owners and to maintain an optimal capital structure in order to minimize the weighted cost of capital.
All activities around
cash funding, borrowings and financial instruments are centralized within Constelliums Treasury department. Direct external funding or transactions with banks at the operating entity level are generally not permitted, and exceptions must be
approved by Constelliums Treasury department.
The liquidity requirements of the overall Company are funded by drawing on available credit
facilities, while the internal management of liquidity is optimized by means of cash pooling agreements and/or intercompany loans and deposits between the Companys operating entities and central Treasury.
At December 31, 2017, the borrowing base for the pan US ABL facility amounts to $249 million and 71 million for the French entities
inventory credit facility. After deduction of amount drawn and letters of credit, the Group had 207 million outstanding availability under these secured revolving credit facilities at December 31, 2017.
At December 31, 2017, liquidity was 531 million, comprised of 269 million of cash and cash equivalents and 262 million
of available undrawn facilities (including the 207 million described above).
The tables below show undiscounted contractual values by relevant
maturity groupings based on the remaining period from December 31, 2017 and December 31, 2016 to the contractual maturity date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of
Euros)
|
|
Less than
1 year
|
|
|
Between
1 and 5 years
|
|
|
Over 5
years
|
|
|
Less than
1 year
|
|
|
Between
1 and 5 years
|
|
|
Over
5 years
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt derivatives
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
32
|
|
|
|
82
|
|
|
|
|
|
Net cash flows from derivative assets related to currencies and commodities
|
|
|
59
|
|
|
|
15
|
|
|
|
|
|
|
|
22
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
65
|
|
|
|
18
|
|
|
|
|
|
|
|
54
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Notes
|
|
|
Less than
1 year
|
|
|
Between
1 and 5 years
|
|
|
Over 5
years
|
|
|
Less than
1 year
|
|
|
Between
1 and 5 years
|
|
|
Over
5 years
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
(A)
|
|
|
|
|
|
|
67
|
|
|
|
318
|
|
|
|
1,692
|
|
|
|
54
|
|
|
|
1,329
|
|
|
|
999
|
|
Interest
|
|
|
|
|
|
|
103
|
|
|
|
421
|
|
|
|
264
|
|
|
|
170
|
|
|
|
490
|
|
|
|
125
|
|
Net debt derivatives
|
|
|
|
|
|
|
3
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from derivatives liabilities related to currencies and commodities
|
|
|
|
|
|
|
17
|
|
|
|
11
|
|
|
|
|
|
|
|
35
|
|
|
|
63
|
|
|
|
3
|
|
Trade payables and other (excluding deferred revenue)
|
|
|
19
|
|
|
|
920
|
|
|
|
20
|
|
|
|
|
|
|
|
825
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
1,110
|
|
|
|
780
|
|
|
|
1,956
|
|
|
|
1,084
|
|
|
|
1,901
|
|
|
|
1,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Borrowings include the pan US ABL facility which is considered short-term in nature and are included in the category Less than 1 year and undiscounted forecasted interest and exclude finance leases.
|
F-56
NOTE 23PENSIONS AND OTHER POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group operates a number of pensions, other post-employment benefits and other long-term employee benefit plans. Some of these plans are defined
contribution plans and some are defined benefit plans, with assets held in separate trustee-administered funds. Benefits paid through pension trusts are sufficiently funded to ensure the payment of benefits to retirees when they become due.
Actuarial valuations are reflected in the Consolidated Financial Statements as described in NOTE 2.6 Principles governing the preparation of the
Consolidated Financial Statements.
23.1 Description of the plans
Pension plans
Constelliums pension
obligations are in the U.S., Switzerland, Germany and France. Pension benefits are generally based on the employees service and highest average eligible compensation before retirement and are periodically adjusted for cost of living increases,
either by company practice, collective agreement or statutory requirement. U.S., Swiss and France benefit plans are funded through long-term employee benefit funds.
Other post-employment benefits (OPEB)
The Group
provides health care and life insurance benefits to retired employees and in some cases to their beneficiaries and covered dependents, mainly in the U.S. Eligibility for coverage depends on certain age and service criteria. These benefit plans are
unfunded.
Other long-term employee benefits
Other long term employee benefits mainly include jubilees in France, Germany and Switzerland and other long-term disability benefits in the U.S. These benefit
plans are unfunded.
23.2 Main events
In January
2017, our Swiss pension plan was amended and the conversion rates used to convert participants account balances into a pension annuity at retirement were reduced. This plan amendment resulted in a 12 million decrease in the defined
benefit obligation, which was recognized as negative past service cost.
Additionally, the Group implemented certain plan amendments that had the effect
of freezing pension plan benefits or increasing benefit for employees elected to voluntary early retirement incentive program as well as removing certain retiree medical and life insurance benefits for active salaried employees of Constellium Rolled
Products Ravenswood. These plan amendments resulted in a 8 million decrease in the defined benefit obligation, which was recognized as negative past service cost.
23.3 Description of risks
Our estimates of liabilities
and expenses for pensions and other post-employment benefits incorporate a number of assumptions, including discount rate, longevity estimate and inflation rate. The defined benefit obligations expose the Group to a number of risks, including
longevity, inflation, interest rate, medical cost inflation, investment performance, and change in law governing the employee benefit obligations. These risks are mitigated when possible by applying an investment strategy for the funded schemes
which aims to minimize the long-term costs. This is achieved by investing in a diversified selection of asset classes, which aims to reduce the volatility of returns and also achieves a level of matching with the underlying liabilities.
Investment performance risk
Our pension plan
assets consist primarily of funds invested in listed stocks and bonds.
F-57
The present value of funded defined benefit obligations is calculated using a discount rate determined by
reference to high quality corporate bond yields. If the return on plan asset is below this rate, it will increase the plan deficit.
Interest rate
risk
A decrease in the discount rate will increase the defined benefit obligation. At December 31, 2017, impacts of the change on the defined
benefit obligation of a 0.50% increase / decrease in the discount rates are calculated by using a proxy based on the duration of each scheme:
|
|
|
|
|
|
|
|
|
|
|
0.50% increase in
discount rates
|
|
|
0.50% decrease in
discount rates
|
|
(in millions of Euros)
|
|
|
France
|
|
|
(9
|
)
|
|
|
10
|
|
Germany
|
|
|
(9
|
)
|
|
|
10
|
|
Switzerland
|
|
|
(20
|
)
|
|
|
23
|
|
United States
|
|
|
(30
|
)
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
Total sensitivity on Defined Benefit Obligations
|
|
|
(68
|
)
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
Longevity risk
The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan participants. An increase in the
life expectancy of the plan participants will increase the plans liability.
23.4 Actuarial assumptions
Our estimates of liabilities and expenses for pensions and other post-employment benefits incorporate a number of assumptions, including discount rate,
longevity estimate and inflation rate. The principal actuarial assumptions used at December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
At December 31, 2016
|
|
|
Rate of increase in
salaries
|
|
Rate of increase
in pensions
|
|
|
Discount rate
|
|
Rate of increase
in salaries
|
|
Rate of increase
in pensions
|
|
|
Discount rate
|
Switzerland
|
|
1.50%
|
|
|
|
|
|
0.65%
|
|
1.65%
|
|
|
|
|
|
0.60%
|
U.S.
|
|
|
|
|
|
|
|
|
|
3.80%
|
|
|
|
|
|
|
Hourly pension
|
|
2.20%
|
|
|
|
|
|
3.70%-3.75%
|
|
|
|
|
|
|
|
4.30%-4.35%
|
Salaried pension
|
|
3.80%
|
|
|
|
|
|
3.80%
|
|
|
|
|
|
|
|
4.45%
|
OPEB
(A)
|
|
3.80%
|
|
|
|
|
|
3.70%-3.85%
|
|
|
|
|
|
|
|
4.20%-4.60%
|
Other benefits
|
|
3.80%
|
|
|
|
|
|
3.60%-3.70%
|
|
|
|
|
|
|
|
4.05%-4.20%
|
France
|
|
1.50%-1.75%
|
|
|
2.00%
|
|
|
|
|
1.50%-1.75%
|
|
|
2.00%
|
|
|
|
Retirements
|
|
|
|
|
|
|
|
1.50%
|
|
|
|
|
|
|
|
1.60%
|
Other benefits
|
|
|
|
|
|
|
|
1.20%
|
|
|
|
|
|
|
|
1.30%
|
Germany
|
|
2.75%
|
|
|
1.70%
|
|
|
1.60%
|
|
2.75%
|
|
|
1.70%
|
|
|
1.65%
|
(A)
|
The other main financial assumptions used for the OPEB (healthcare plans, which are predominantly in the U.S.) were:
|
|
-
|
Medical trend rate: pre 65: 7.00% starting in 2018 decreasing gradually to 4.50% until 2026 and stable onwards and post 65: 6.00% starting in 2018 decreasing gradually to 4.50% until 2026 and stable onwards, and
|
|
-
|
Claims costs are based on individual company experience.
|
F-58
For both pension and healthcare plans, the post-employment mortality assumptions allow for future improvements in
life expectancy.
23.5 Amounts recognized in the Consolidated Statement of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Pension
Benefits
|
|
|
Other
Benefits
|
|
|
Total
|
|
|
Pension
Benefits
|
|
|
Other
Benefits
|
|
|
Total
|
|
Present value of funded obligation
|
|
|
691
|
|
|
|
|
|
|
|
691
|
|
|
|
721
|
|
|
|
|
|
|
|
721
|
|
Fair value of plan assets
|
|
|
(387
|
)
|
|
|
|
|
|
|
(387
|
)
|
|
|
(391
|
)
|
|
|
|
|
|
|
(391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit of funded plans
|
|
|
304
|
|
|
|
|
|
|
|
304
|
|
|
|
330
|
|
|
|
|
|
|
|
330
|
|
Present value of unfunded obligation
|
|
|
110
|
|
|
|
250
|
|
|
|
360
|
|
|
|
132
|
|
|
|
273
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liability arising from defined benefit obligation
|
|
|
414
|
|
|
|
250
|
|
|
|
664
|
|
|
|
462
|
|
|
|
273
|
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
23.6 Movement in net defined benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
|
Defined benefit obligations
|
|
|
Plan
Assets
|
|
|
Net defined
benefit
liability
|
|
(In millions of
Euros)
|
|
Pension
benefits
|
|
|
Other
benefits
|
|
|
Total
|
|
|
|
At January 1, 2017
|
|
|
853
|
|
|
|
273
|
|
|
|
1,126
|
|
|
|
(391
|
)
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included the Consolidated Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
|
|
18
|
|
|
|
6
|
|
|
|
24
|
|
|
|
|
|
|
|
24
|
|
Interest cost / (income)
|
|
|
18
|
|
|
|
9
|
|
|
|
27
|
|
|
|
(9
|
)
|
|
|
18
|
|
Past service cost
|
|
|
(16
|
)
|
|
|
(4
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(20
|
)
|
Immediate recognition of gains arising over the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administration expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the Statement of Comprehensive Income / (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurements due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
actual return less interest on plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
(36
|
)
|
changes in financial assumptions
|
|
|
23
|
|
|
|
14
|
|
|
|
37
|
|
|
|
|
|
|
|
37
|
|
changes in demographic assumptions
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
experience (gains)/losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of changes in foreign exchange rates
|
|
|
(61
|
)
|
|
|
(29
|
)
|
|
|
(90
|
)
|
|
|
42
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(38
|
)
|
|
|
(18
|
)
|
|
|
(56
|
)
|
|
|
33
|
|
|
|
(23
|
)
|
Contributions by the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
(24
|
)
|
Contributions by the plan participants
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
801
|
|
|
|
250
|
|
|
|
1,051
|
|
|
|
(387
|
)
|
|
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
|
Defined benefit obligations
|
|
|
Plan
Assets
|
|
|
Net defined
benefit
liability
|
|
(In millions of
Euros)
|
|
Pension
benefits
|
|
|
Other
benefits
|
|
|
Total
|
|
|
|
At January 1, 2016
|
|
|
802
|
|
|
|
261
|
|
|
|
1,063
|
|
|
|
(362
|
)
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the Consolidated Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
|
|
20
|
|
|
|
6
|
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
Interest cost / (income)
|
|
|
21
|
|
|
|
10
|
|
|
|
31
|
|
|
|
(10
|
)
|
|
|
21
|
|
Past service cost
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Immediate recognition of losses arising over the period
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Administration expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the Statement of Comprehensive Income / (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurements due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
actual return less interest on plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
(14
|
)
|
changes in financial assumptions
|
|
|
28
|
|
|
|
6
|
|
|
|
34
|
|
|
|
|
|
|
|
34
|
|
changes in demographic assumptions
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
experience (gains)/losses
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Effects of changes in foreign exchange rates
|
|
|
12
|
|
|
|
8
|
|
|
|
20
|
|
|
|
(8
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(37
|
)
|
|
|
(17
|
)
|
|
|
(54
|
)
|
|
|
32
|
|
|
|
(22
|
)
|
Contributions by the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
(26
|
)
|
Contributions by the plan participants
|
|
|
4
|
|
|
|
1
|
|
|
|
5
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
853
|
|
|
|
273
|
|
|
|
1,126
|
|
|
|
(391
|
)
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
23.7 Net defined benefit obligations by country
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Defined
benefit
obligations
|
|
|
Plan assets
|
|
|
Net defined
benefit
liability
|
|
|
Defined
benefit
obligations
|
|
|
Plan assets
|
|
|
Net defined
benefit
liability
|
|
France
|
|
|
148
|
|
|
|
(3
|
)
|
|
|
145
|
|
|
|
144
|
|
|
|
|
|
|
|
144
|
|
Germany
|
|
|
142
|
|
|
|
(1
|
)
|
|
|
141
|
|
|
|
147
|
|
|
|
(1
|
)
|
|
|
146
|
|
Switzerland
|
|
|
251
|
|
|
|
(177
|
)
|
|
|
74
|
|
|
|
284
|
|
|
|
(181
|
)
|
|
|
103
|
|
United States
|
|
|
509
|
|
|
|
(206
|
)
|
|
|
303
|
|
|
|
550
|
|
|
|
(209
|
)
|
|
|
341
|
|
Other countries
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,051
|
|
|
|
(387
|
)
|
|
|
664
|
|
|
|
1,126
|
|
|
|
(391
|
)
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.8 Plan asset categories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
(in millions of Euros)
|
|
Quoted in
an active
market
|
|
|
Unquoted in
an active
market
|
|
|
Total
|
|
|
Quoted in
an active
market
|
|
|
Unquoted in
an active
market
|
|
|
Total
|
|
Cash and cash equivalents
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Equities
|
|
|
160
|
|
|
|
|
|
|
|
160
|
|
|
|
158
|
|
|
|
|
|
|
|
158
|
|
Bonds
|
|
|
81
|
|
|
|
93
|
|
|
|
174
|
|
|
|
82
|
|
|
|
96
|
|
|
|
178
|
|
Property
|
|
|
8
|
|
|
|
29
|
|
|
|
37
|
|
|
|
10
|
|
|
|
31
|
|
|
|
41
|
|
Other
|
|
|
5
|
|
|
|
8
|
|
|
|
13
|
|
|
|
5
|
|
|
|
5
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of plan assets
|
|
|
257
|
|
|
|
130
|
|
|
|
387
|
|
|
|
259
|
|
|
|
132
|
|
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.9 Cash flows
Expected
contributions to pension and other benefits amount to 25 million and 18 million respectively for the year ended December 31, 2018.
Benefits payments expected to be paid either by pension funds or directly by the Company to beneficiaries over the next years are as follows:
|
|
|
|
|
(in millions of Euros)
|
|
Estimated benefits payments
|
|
Year ended December 31,
|
|
|
|
|
2018
|
|
|
52
|
|
2019
|
|
|
52
|
|
2020
|
|
|
52
|
|
2021
|
|
|
55
|
|
2022
|
|
|
56
|
|
2023 to 2027
|
|
|
286
|
|
|
|
|
|
|
At December 31, 2017, the weighted-average maturity of the defined benefit obligations was 14.0 years (2016: 13.2 years).
23.10 OPEB amendments
During the third quarter of
2012, the Group implemented certain plan amendments that had the effect of reducing benefits of the participants in the Constellium Rolled Products Ravenswood Retiree Medical and Life Insurance Plan. In February 2013, five Constellium retirees and
the United Steelworkers union filed a class action lawsuit against Constellium Rolled Products Ravenswood, LLC in a federal district court in West Virginia, alleging that Constellium Rolled Products Ravenswood, LLC improperly modified retiree health
benefits.
F-61
The Group believes that these claims are unfounded, and that Constellium Rolled Products Ravenswood, LLC had a
legal and contractual right to make the applicable modification.
NOTE 24PROVISIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Close down and
environmental
remediation costs
|
|
|
Restructuring
costs
|
|
|
Legal claims
and other
costs
|
|
|
Total
|
|
At January 1, 2017
|
|
|
88
|
|
|
|
5
|
|
|
|
56
|
|
|
|
149
|
|
Allowance
|
|
|
3
|
|
|
|
3
|
|
|
|
19
|
|
|
|
25
|
|
Amounts used
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(7
|
)
|
Unused amounts reversed
|
|
|
|
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
(5
|
)
|
Unwinding of discounts
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Effects of changes in foreign exchange rates
|
|
|
(7
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
81
|
|
|
|
5
|
|
|
|
67
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
4
|
|
|
|
3
|
|
|
|
33
|
|
|
|
40
|
|
Non-Current
|
|
|
77
|
|
|
|
2
|
|
|
|
34
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provisions
|
|
|
81
|
|
|
|
5
|
|
|
|
67
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Close down and
environmental
remediation costs
|
|
|
Restructuring
costs
|
|
|
Legal claims
and other
costs
|
|
|
Total
|
|
At January 1, 2016
|
|
|
88
|
|
|
|
8
|
|
|
|
67
|
|
|
|
163
|
|
Allowance
|
|
|
|
|
|
|
6
|
|
|
|
7
|
|
|
|
13
|
|
Amounts used
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
(11
|
)
|
Unused amounts reversed
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(14
|
)
|
|
|
(16
|
)
|
Unwinding of discounts
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Reclassified to Pension liabilities
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Effects of changes in foreign exchange rates
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
88
|
|
|
|
5
|
|
|
|
56
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
3
|
|
|
|
3
|
|
|
|
36
|
|
|
|
42
|
|
Non-Current
|
|
|
85
|
|
|
|
2
|
|
|
|
20
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provisions
|
|
|
88
|
|
|
|
5
|
|
|
|
56
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Close down, environmental and remediation costs
The Group records provisions for the estimated present value of the costs of its environmental
clean-up
obligations and
close down and restoration efforts based on the net present value of estimated future costs of the dismantling and demolition of infrastructure and the removal of residual material of disturbed areas, using an average discount rate of 1.04%. A
change in the discount rate of 0.5% would change the provision by 2 million.
It is expected that these provisions will be settled over the
next 40 years depending on the nature of the disturbance and the technical remediation plans.
Restructuring costs
The Group records provisions for restructuring costs when management has a detailed formal plan, is demonstrably committed to its execution and can reasonably
estimate the associated liabilities. The related expenses are presented as Restructuring costs in the Consolidated Income Statement.
F-62
Legal claims and other costs
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Maintenance and customer related provisions
(A)
|
|
|
25
|
|
|
|
14
|
|
Litigation
(B)
|
|
|
36
|
|
|
|
35
|
|
Disease claims
(C)
|
|
|
3
|
|
|
|
4
|
|
Other
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total provisions for legal claims and other costs
|
|
|
67
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
(A)
|
These provisions include 3 million in 2017 (3 million in 2016) related to general equipment maintenance, mainly linked to the Group leases. These provisions also include 16 million in
2017 (7 million in 2016) related to customer litigation, product warranties and guarantees and 6 million in 2017 (4 million in 2016) related to late delivery penalties. These provisions are expected to be used over
the next five years.
|
(B)
|
The Group is involved in litigation and other proceedings, such as civil, commercial and tax proceedings, incidental to normal operations. It is not anticipated that the resolution of such litigation and proceedings
will have a material effect on the future results, financial position, or cash flows of the Group.
|
(C)
|
Since the early 1990s, certain activities of the Groups businesses have been subject to claims and lawsuits in France relating to occupational diseases resulting from alleged asbestos exposure, such as
mesothelioma and asbestosis. It is not uncommon for the investigation and resolution of such claims to go on over many years as the latency period for acquiring such diseases is typically between 25 and 40 years. For any such claim, it is up to the
social security authorities in each jurisdiction to determine if a claim qualifies as an occupational illness claim. If so determined, the Group must settle the case or defend its position in court. At December 31, 2017, 7 cases in which gross
negligence is alleged (
faute inexcusable
) remain outstanding (11 at December 31, 2016), the average amount per claim being less than 0.1 million. The average settlement amount per claim in 2017 and 2016 was less
than 0.1 million. It is not anticipated that the resolution of such litigation and proceedings will have a material effect on the future results from continuing operations, financial position, or cash flows of the Group.
|
NOTE 25SHARE CAPITAL
At December 31, 2017, authorized share capital amounts to 8 million and is divided into 400,000,000 Class A ordinary shares, each with a
nominal value of 0.02. All shares, except for the ones held by Constellium N.V., have the right to one vote.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions of Euros
|
|
|
|
Number of shares
|
|
|
Share capital
|
|
|
Share premium
|
|
At January 1, 2017
|
|
|
105,581,673
|
|
|
|
2
|
|
|
|
162
|
|
New shares issued
(A)
|
|
|
28,928,950
|
|
|
|
1
|
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
(B)
|
|
|
134,510,623
|
|
|
|
3
|
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Constellium N.V. issued and granted 125,000 Class A ordinary shares to certain employees and 53,950 Class A ordinary shares to its Board members. (See NOTE
28-
Share-Based Compensation).
|
On November 3
rd
, 2017, the Group issued
28,750,000 Class A ordinary shares at $11.00 per share. The proceeds received amount to 259 million, net of 12 million of arrangement fees
(B)
|
Constellium N.V. holds 38,597 Class A ordinary shares at December 31, 2017.
|
F-63
NOTE 26COMMITMENTS
Non-cancellable
operating leases commitments
The Group leases various buildings, machinery, and equipment under operating lease agreements. Total rent expense was 27 million for the year ended
December 31, 2017 (27 million for the year ended December 31, 2016 and 29 million for the year ended December 31, 2015).
The future aggregate minimum lease payments under
non-cancellable
operating leases are as follows:
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Less than 1 year
|
|
|
19
|
|
|
|
17
|
|
1 to 5 years
|
|
|
49
|
|
|
|
40
|
|
More than 5 years
|
|
|
40
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
Total
non-cancellable
operating leases minimum
payments
|
|
|
108
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures commitments
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Computer Software
|
|
|
2
|
|
|
|
3
|
|
Property, plant and equipment
|
|
|
99
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditure commitments
|
|
|
101
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2017, the Company has no other significant commitments. Guarantee and commitments given to Constellium
UACJ LLC are described in NOTE 17 Investments accounted for under the equity method.
NOTE 27RELATED PARTIES
Subsidiaries and affiliates
A list of the
principal companies controlled by the Group is presented in NOTE 29 Subsidiaries and operating segments. Transactions between fully consolidated companies are eliminated when preparing the Consolidated Financial Statements.
Investments accounted for under the equity method are the only related parties identified by the Group during the years ended December 31, 2017, 2016 and
2015. Transactions with these related parties are described in NOTE 17 Investments accounted for under the equity method.
Key management
remuneration
The Groups key management comprises the Board members and the Executive committee members effectively present during 2017.
Executive committee members are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly reporting to the CEO.
The costs reported below are compensation and benefits for key management:
|
-
|
|
Short term employee benefits include their base salary plus bonus.
|
F-64
|
-
|
|
Directors fees include annual director fees, Board and committees attendance fees.
|
|
-
|
|
Share-based compensation includes the portion of the IFRS 2 expense as allocated to key management.
|
|
-
|
|
Post-employment benefits mainly include pension costs.
|
|
-
|
|
Termination benefits include departure costs.
|
As a result, the aggregate compensation for the Groups
key management is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Short term employee benefits
|
|
|
8
|
|
|
|
10
|
|
|
|
8
|
|
Directors fees
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Share-based compensation
|
|
|
4
|
|
|
|
2
|
|
|
|
2
|
|
Post-employments benefits
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Termination benefits
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Employer social contribution
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
15
|
|
|
|
16
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 28SHARE-BASED COMPENSATION
Description of the plans
Performance-Based
Restricted Stock Units (equity-settled)
The Company granted Performance Share Units (PSUs) to selected employees. These units will vest after
three years from the grant date if the following conditions are met:
|
|
|
A vesting condition under which the beneficiaries must be continuously employed by the Company through the end of the vesting period (3 years); and
|
|
|
|
For PSUs granted in 2015 and 2016, a performance condition, contingent on the Total Stockholder Return (TSR) performance of Constellium over the measurement periods compared to the TSR of a specified group of peer
companies. PSUs will ultimately vest, depending on the TSR performance at each testing period, based on a vesting multiplier in a range from 0% to 300%;
|
|
|
|
For PSUs granted in 2017, a performance condition, contingent on the TSR performance of Constellium over the three years measurement period compared to the TSR of specified indices. PSUs will ultimately vest based on a
range from 0% to 200%.
|
The PSUs granted in November 2015 achieved a TSR performance of 118.2% at its first testing period and of 251.1% at
its second testing period, which represents respectively 47,229 potential additional shares in 2016 and 366,669 potential additional shares in 2017, that all could vest in November 2018 subject to the continued employment of the beneficiaries.
The PSUs granted in March 2016, August 2016 and November 2016 achieved, respectively, a TSR performance of 115.9%, 191.6% and 223.8% at their first testing
period, which represents 186,059 potential additional shares that could vest in 2019 subject to the continued employment of the beneficiaries.
F-65
The following table lists the inputs to the model used for the PSUs granted in 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
Fair value at grant date (in Euros)
|
|
|
11.52
|
|
|
|
[6.76 9.86]
|
|
Share price at grant date (in Euros)
|
|
|
7.50
|
|
|
|
[4.46 5.61]
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
75%
|
|
|
|
[69% 71%]
|
|
Risk-free interest rate (U.S. government bond yield)
|
|
|
1.51%
|
|
|
|
[0.76% 1.27%]
|
|
Model used
|
|
|
Monte Carlo
|
|
|
|
Monte Carlo
|
|
Restricted Stock Units Award Agreements (equity-settled)
The Company grants Restricted Stock Units (RSUs) to a certain number of employees subject to the beneficiaries remaining continuously employed within the Group
from the grant date through the end of the vesting period. Vesting period is three years.
In 2016, the Company also granted 150,000 RSUs which vest in
equal installments on the first two anniversaries of the grant date, subject to continued employment, of which 75,000 vested on the first anniversary in 2017.
The fair value of RSUs awarded under the plans described above is the quoted market price at grant date.
Equity Awards Plans (equity-settled)
Company
Board members have been granted RSU awards annually since 2012. These RSUs vest in equal installments on the first two anniversaries of the date of grant, subject to their continued service.
The fair value of RSUs awarded under the plan is the quoted market price at grant date.
Expense recognized during the year
In accordance
with IFRS 2, share based compensation is recognized as expense over the vesting period. The estimate of this expense is based upon the fair value of a Class A potential ordinary share at the grant date. The total expense related to the
potential ordinary shares for the year ended December 31, 2017, 2016 and 2015 amounted to 8 million, 6 million and 5 millions respectively.
F-66
Movement of potential shares
The following table illustrates the number, weighted-average fair value of, and movements in shares during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based RSU
|
|
|
Restricted Stock Units
|
|
|
Equity Award Plans
|
|
|
|
Potential
Shares
|
|
|
Weighted-Average
Grant-Date Fair
Value per Share
|
|
|
Potential
Shares
|
|
|
Weighted-Average
Grant-Date Fair
Value per Share
|
|
|
Potential
Shares
|
|
|
Weighted-Average
Grant-Date Fair
Value per Share
|
|
At January 1, 2016
|
|
|
1,007,000
|
|
|
|
7.77
|
|
|
|
269,500
|
|
|
|
16.10
|
|
|
|
34,865
|
|
|
|
14.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
(A)
|
|
|
1,292,000
|
|
|
|
7.56
|
|
|
|
340,300
|
|
|
|
5.40
|
|
|
|
81,858
|
|
|
|
4.02
|
|
Over-performance
(B)
|
|
|
47,229
|
|
|
|
7.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
(87,300
|
)
|
|
|
19.75
|
|
|
|
(21,842
|
)
|
|
|
15.84
|
|
Forfeited
(C)
|
|
|
(279,394
|
)
|
|
|
8.71
|
|
|
|
(43,000
|
)
|
|
|
16.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
2,066,835
|
|
|
|
7.50
|
|
|
|
479,500
|
|
|
|
7.82
|
|
|
|
94,881
|
|
|
|
5.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
(A)
|
|
|
892,781
|
|
|
|
11.52
|
|
|
|
703,180
|
|
|
|
7.50
|
|
|
|
54,409
|
|
|
|
6.09
|
|
Over-performance
(B)
|
|
|
552,728
|
|
|
|
7.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
(125,000
|
)
|
|
|
7.02
|
|
|
|
(53,950
|
)
|
|
|
5.76
|
|
Forfeited
(C)
|
|
|
(254,504
|
)
|
|
|
8.29
|
|
|
|
(113,180
|
)
|
|
|
7.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
3,257,840
|
|
|
|
8.56
|
|
|
|
944,500
|
|
|
|
7.76
|
|
|
|
95,340
|
|
|
|
5.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
For PSUs, the number of potential shares granted is presented using a vesting multiplier of 100%.
|
(B)
|
When the achievement of TSR performance exceeds the vesting multiplier of 100%, the additional potential shares are presented as over-performance shares.
|
(C)
|
For potential shares related to PSUs, 175,837 were forfeited following the departure of certain beneficiaries and 78,667 were forfeited in relation to the non-fulfilment of performance conditions.
|
NOTE 29SUBSIDIARIES AND OPERATING SEGMENTS
The following Groups affiliates are legal entities included in the consolidated financial statements of the Group at December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity
|
|
Country
|
|
|
% Group Interest
|
|
|
Consolidation
Method
|
|
Cross Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium Singen GmbH (AS&I and P&ARP)
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Valais S.A. (AS&I and A&T)
|
|
|
Switzerland
|
|
|
|
100
|
%
|
|
|
Full
|
|
|
|
|
|
AS&I
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium Automotive USA, LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Engley (Changchun) Automotive
Structures Co Ltd.
|
|
|
China
|
|
|
|
54
|
%
|
|
|
Full
|
|
Constellium Extrusions Decin S.r.o.
|
|
|
Czech Republic
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Extrusions Deutschland GmbH
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Extrusions Landau GmbH
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Extrusions Burg GmbH
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Extrusions France S.A.S.
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Extrusions Levice S.r.o.
|
|
|
Slovakia
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Automotive Mexico, S. DE R.L. DE C.V.
|
|
|
Mexico
|
|
|
|
100
|
%
|
|
|
Full
|
|
F-67
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity
|
|
Country
|
|
|
% Group Interest
|
|
|
Consolidation
Method
|
|
Constellium Automotive Mexico
Trading, S. DE R.L. DE C.V.
|
|
|
Mexico
|
|
|
|
100
|
%
|
|
|
Full
|
|
Astrex Inc
|
|
|
Canada
|
|
|
|
50
|
%
|
|
|
Full
|
|
Constellium Automotive Zilina S.r.o.
|
|
|
Slovakia
|
|
|
|
100
|
%
|
|
|
Full
|
|
|
|
|
|
A&T
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium Issoire
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Montreuil Juigné
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium China
|
|
|
China
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Italy S.p.A
|
|
|
Italy
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Japan KK
|
|
|
Japan
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Rolled Products Ravenswood, LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Southeast Asia PTE LTD
|
|
|
Singapore
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Ussel S.A.S.
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
|
|
|
|
P&ARP
|
|
|
|
|
|
|
|
|
|
|
|
|
Constellium Deutschland GmbH
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Rolled Products Singen GmbH KG
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Property and Equipment Company, LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Neuf Brisach
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Wise Metals Group LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Wise Alloys, LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Wise Alloys Funding LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Wise Alloys Funding II LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Listerhill Total Maintenance Center LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Metal Procurement LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium-UACJ ABS LLC
|
|
|
U.S.
|
|
|
|
51
|
%
|
|
|
Equity
|
|
Rhenaroll
|
|
|
France
|
|
|
|
50
|
%
|
|
|
Equity
|
|
Holdings & Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
C-TEC
Constellium Technology Center
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Finance S.A.S.
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium France III
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium France Holdco S.A.S.
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium International
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Paris S.A.S
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Germany Holdco GmbH & Co. KG
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Germany Verwaltungs GmbH
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Holdco II B.V.
|
|
|
Netherlands
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium UK Limited
|
|
|
United Kingdom
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium U.S. Holdings I, LLC
|
|
|
U.S.
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Switzerland AG
|
|
|
Switzerland
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium W S.A.S.
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
Constellium Treuhand UG
|
|
|
Germany
|
|
|
|
100
|
%
|
|
|
Full
|
|
Engineered Products International S.A.S.
|
|
|
France
|
|
|
|
100
|
%
|
|
|
Full
|
|
F-68
NOTE 30PARENT COMPANY
Statement of Financial Position of Constellium N.V. (parent company only)
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
At December 31, 2017
|
|
|
At December 31, 2016
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Trade receivables and other
|
|
|
53
|
|
|
|
233
|
|
Other financial assets
|
|
|
28
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
2,143
|
|
|
|
1,508
|
|
Investments in subsidiaries
|
|
|
131
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,274
|
|
|
|
1,619
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
2,355
|
|
|
|
1,885
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Trade payables and other
|
|
|
6
|
|
|
|
3
|
|
Other financial liabilities
|
|
|
22
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
1,957
|
|
|
|
1,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,957
|
|
|
|
1,673
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,985
|
|
|
|
1,711
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
3
|
|
|
|
2
|
|
Share premium
|
|
|
429
|
|
|
|
171
|
|
Accumulated retained earnings
|
|
|
(17
|
)
|
|
|
(11
|
)
|
Other reserves
|
|
|
25
|
|
|
|
18
|
|
Net (loss) for the year
|
|
|
(70
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
370
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
Total Equity and Liabilities
|
|
|
2,355
|
|
|
|
1,885
|
|
|
|
|
|
|
|
|
|
|
F-69
Statement of Comprehensive Income / (Loss) of Constellium N.V. (parent company only)
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Revenue
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses
|
|
|
(5
|
)
|
|
|
(8
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefit expenses
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from recurring operations
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial resultnet
|
|
|
(65
|
)
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
|
|
|
(70
|
)
|
|
|
(6
|
)
|
|
|
|
|
Income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(70
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
(70
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-70
Statement of Cash Flows of Constellium N.V. (parent company only)
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Euros)
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
Year ended
December 31, 2015
|
|
Net loss
|
|
|
(70
|
)
|
|
|
(6
|
)
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costsnet
|
|
|
65
|
|
|
|
(1
|
)
|
|
|
(9
|
)
|
Dividend received
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
(148
|
)
|
|
|
(95
|
)
|
|
|
(61
|
)
|
Interest received
|
|
|
149
|
|
|
|
103
|
|
|
|
74
|
|
Changes in working capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables and other
|
|
|
(1
|
)
|
|
|
|
|
|
|
26
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Trade payables and other
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(3
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Current account with subsidiary (for cash pooling)
|
|
|
180
|
|
|
|
(186
|
)
|
|
|
17
|
|
Loans granted to subsidiary and related parties
|
|
|
(1,640
|
)
|
|
|
(375
|
)
|
|
|
|
|
Repayment of loans granted to subsidiary and related parties
|
|
|
823
|
|
|
|
181
|
|
|
|
|
|
Exit fees received from Subsidiaries
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in)/ from investing activities
|
|
|
(639
|
)
|
|
|
(380
|
)
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds received from issuance of shares
|
|
|
259
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Senior Notes
|
|
|
1,440
|
|
|
|
375
|
|
|
|
|
|
Payment of deferred financing costs
|
|
|
(29
|
)
|
|
|
(12
|
)
|
|
|
(2
|
)
|
Repayment of Senior Notes
|
|
|
(949
|
)
|
|
|
|
|
|
|
|
|
Payment of exit fees
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
Realized foreign exchange gains / (losses)
|
|
|
(17
|
)
|
|
|
17
|
|
|
|
|
|
Other
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from / (used in) financing activities
|
|
|
642
|
|
|
|
380
|
|
|
|
(2
|
)
|
|
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Net increase in cash and cash equivalents
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Cash and cash equivalentsbeginning of period
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Effect of exchange rate changes on cash and cash equivalents
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Cash and cash equivalentsend of period
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Basis of preparation
The parent company only financial information of Constellium N.V., presented above, is prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board and as endorsed by the European Union. Accounting policies adopted in the preparation of this condensed parent company only financial information are the same as those adopted in the
consolidated financial statements and described in NOTE 2Summary of significant accounting policies, except that the cost method has been used to account for investments in subsidiaries.
As at December 31, 2017, there were no material contingencies at Constellium N.V.
A description of Constellium N.V. (parent company only) borrowings and related maturity dates is provided in NOTE 20Borrowings.
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Non-current
financial assets represent loans to Constellium Holdco II
B.V., Constellium France Holdco and Constellium Finance and current other financial assets represent related interest receivables.
Other financial
liabilities represent interest payable on borrowings.
NOTE 31SUBSEQUENT EVENTS
In January 2018, the Muscle Shoals factoring agreement was amended to increase maximum capacity to $375 million and extend maturity to January 24,
2020.
On January 31, 2018, Constellium announced that the request by Constellium to delist its shares from Euronext Paris has been approved by the
Board of Directors of Euronext Paris SA.
On February 1, 2018 Constellium announced that it signed a binding agreement with Novelis to sell the North
Building Assets of its Sierre plant in Switzerland, which have been leased and operated by Novelis since 2005, and to contribute the plants shared infrastructure to a
50-50
joint venture with Novelis.
Constellium and Novelis agreed on a total purchase price for the transactions of 200 million.
F-72