Novelis Reports Regional Income Increased 14% Rolled Product
Shipments up 4% in the 1st Quarter ATLANTA, May 11
/PRNewswire-FirstCall/ -- Novelis Inc. (NYSE, TSX: NVL) today
reported first quarter 2005 net income on a stand alone basis of
$59 million (EPS $0.78) compared to net income in the carve out
statements as a part of Alcan for the first quarter 2004 of $69
million (EPS $0.92). The 2004 carve out statements included an
allocation of interest expense and corporate costs of Alcan. The
after-tax increase between first quarter 2004 and first quarter
2005 is $17 million for interest expense and $12 million for
corporate costs. FAS 133 mark-to-market income increased by $9
million after-tax. Rolled product shipments climbed by 4% to 712
thousand tonnes (kt) for the first quarter of 2005 over the
equivalent period in 2004. For 2005, the increase in shipments is
attributed to strong market demand, largely in North America and
Asia, and continued market share growth in South America. Sales and
operating revenues rose by 17% for the first quarter of 2005 over
the same quarter of 2004 while cost of sales and operating expenses
experienced a similar percentage increase. The major contributing
factors to both sales and operating revenues and cost of sales were
an increase in London Metal Exchange (LME) pricing, which was up
13% for the year ago quarter, and stronger shipment levels.
Selling, general and administrative expenses (SG&A) were $76
million in the first quarter, up $16 million from the year-ago
quarter. Included in SG&A for the quarter are additional
corporate head office costs we incurred for the first time as a
stand-alone company, $6 million in one-time start-up costs and the
strengthening euro. Interest expense at $44 million in first
quarter 2005 was significantly higher than the interest allocated
from Alcan in the carve out statements in first quarter 2004. A
comparison to first quarter 2004 interest expense is not meaningful
as it did not reflect the level of debt, nor the associated
interest costs the Company would have incurred had it operated on a
stand- alone basis at that time. Other expenses (income) - net was
$59 million in the first quarter of 2005 and included Financial
Accounting Standard No. 133 (FAS 133) mark-to-market adjustments on
derivatives of $59 million. We also incurred debt issue costs of
$13 million on undrawn facilities used to back-up the Alcan notes
we received in January 2005 as part of our separation from Alcan.
Alcan funded the $13 million of debt issuance costs by reimbursing
Novelis and the Alcan notes were repaid from the proceeds of our
7.25% unsecured senior notes due February 15, 2015. The first
quarter of 2004 included FAS 133 mark-to-market adjustments of $42
million as well as a gain on asset sales of $7 million. In the
first quarter of 2005, the effective tax rate was 41% compared to a
composite statutory rate of 34%. In 2004, the effective tax rate
for the first quarter was 38%, compared to the composite statutory
rates of 37%. The main difference in the first quarter 2005 rate
was a $6 million tax provision in connection with our spin-off from
Alcan, for which there was no related income. "Our first quarter
performance was an insight into the true abilities of this
company," said Brian Sturgell, President and CEO. "We ended our
last year as a part of Alcan on solid operational footing, and we
are starting our first year as Novelis in a global leadership
position. The first quarter reflects the capabilities of our people
and technology and what can be accomplished in an environment of
high metal prices. We stepped out as an independent company and
performed well on all key points - cash flow therefore debt
paydown, regional income, and shipment growth. Our goal is to
provide maximum value to the shareholder and our efforts and
strategy came together to do just that." The historical 2004
unaudited combined financial statements are presented in U.S.
dollars using United States (U.S.) Generally Accepted Accounting
Principles (GAAP) and have been derived from the accounting records
of Alcan using the historical results of operations and historical
basis of assets and liabilities of the businesses comprising
Novelis. However, the historical unaudited combined financial
statements included herein may not necessarily reflect the Group's
results of operations, financial position and cash flows in the
future or what its results of operations, financial position and
cash flows would have been had Novelis been a stand-alone company
during the historical periods presented. As these historical
combined financial statements represent a portion of the businesses
of Alcan which did not at the time constitute a separate legal
entity, the net assets of Novelis have been presented as Alcan's
net investment in the businesses. Alcan's investment in the
businesses includes the accumulated earnings of the businesses as
well as cash transfers related to cash management functions
performed by Alcan. Subsequent to the spin-off from Alcan, the
financial statements no longer reflect Alcan as a related party.
For more information on the basis of presentation of the historical
combined financial statements, see note 2 to the audited combined
financial statements included in the Company's recently filed
annual report on Form 10-K for the year ended December 31, 2004.
Regional Results See Attachment A for a description of Regional
Income and a reconciliation of Regional Income to Income Before
Income Taxes and Other Items. Total Regional Income 1st Qtr 1st Qtr
% Chg 4th Qtr % Chg ($ in millions) 2005 2004 2004 Sales 2,118
1,810 17.0 % 2,016 5.1 % Regional Income 182 159 14.5 % 116 56.9 %
Rolled Product Shipments (kt) 712 683 4.2 % 671 6.1 % Regional
Income per Ton 256 233 9.8 % 173 47.9 % Depreciation 58 61 -4.9 %
68 -14.7 % Capital Expenditures 23 20 15.0 % 70 -67.1 % Total
Assets 5,667 6,691 -15.3 % 5,954 -4.8 % Regional Income increased
$23 million or approximately 14% for the first quarter 2005 versus
the prior year period. Rolled product shipments climbed 4% in the
quarter over the same period in 2004. Volume was the largest driver
behind the increase in Regional Income in the first quarter 2005,
with improved pricing being an additional factor. The positive
impact of the spreads between used beverage cans (UBC) and primary
metal along with our hedging program more than offset the impact of
our can price ceilings. These gains more than compensated the
negative effect of metal price timing differences and a mix shift
in Europe. Novelis North America North America 1st Qtr 1st Qtr %
Chg 4th Qtr % Chg ($ in millions) 2005 2004 2004 Sales 827 670 23.4
% 735 12.5 % Regional Income 57 69 -17.4 % 32 78.1 % Rolled Product
Shipments (kt) 283 274 3.3 % 256 10.5 % Regional Income per Ton 201
252 -20.2 % 125 60.8 % Depreciation 18 17 5.9 % 17 5.9 % Capital
Expenditures 8 11 -27.3 % 21 -61.9 % Total Assets 1,480 2,688 -44.9
% 1,406 5.3 % Regional Income declined 17% or $12 million from the
first quarter 2004. The reduction was mainly due to the adverse
effect of metal price timing differences, as well as higher freight
and energy costs. These were partially offset by an increase in
rolled product shipments of 3% in the first quarter of 2005 versus
the same period last year, pricing improvements in Industrial
Products and Light Gauge Products as well as a product portfolio
improvement in Can Products. The positive impact of the spreads
between UBC and primary metal along with our hedging program more
than offset the impact of our can price ceilings. Novelis Europe
Europe 1st Qtr 1st Qtr % Chg 4th Qtr % Chg ($ in millions) 2005
2004 2004 Sales 807 756 6.7 % 792 1.9 % Regional Income 57 42 35.7
% 38 50.0 % Rolled Product Shipments (kt) 252 249 1.2 % 228 10.5 %
Regional Income per Ton 226 169 34.1 % 167 35.7 % Depreciation 26
28 -7.1 % 36 -27.8 % Capital Expenditures 8 10 -20.0 % 33 -75.8 %
Total Assets 2,469 2,363 4.5 % 2,885 -14.4 % Regional Income for
the first quarter of 2005 increased by 36% or $15 million over the
first quarter of 2004 results due to effective management of
SG&A and positive timing of expenses. The first quarter 2005
saw gains from higher shipments and the impact of the stronger euro
on the translation of euro profits into U.S. dollars. These
improvements more than offset the shift in the product mix as the
softer economy in Europe led to lower sales in certain high-end
product lines. Novelis Asia Asia 1st Qtr 1st Qtr % Chg 4th Qtr %
Chg ($ in millions) 2005 2004 2004 Sales 338 268 26.1 % 336 0.6 %
Regional Income 30 20 50.0 % 18 66.7 % Rolled Product Shipments
(kt) 114 108 5.6 % 118 -3.4 % Regional Income per Ton 263 185 42.2
% 153 71.9 % Depreciation 12 12 0 % 12 0 % Capital Expenditures 3 4
-25.0 % 14 -78.6 % Total Assets 987 922 7.0 % 954 3.5 % Asia
experienced a nearly 6% increase in volume over the first quarter
2004, while regional income in the first quarter 2005 increased by
50% or $10 million over the same period last year. In the first
quarter 2005 we experienced better pricing which more than offset
the adverse impact from the strengthening Korean currency on our
costs. Productivity improvements provided a benefit to the quarter
as de-bottlenecking opportunities helped expand capacity and
allowed us to grow. Novelis South America South America 1st Qtr 1st
Qtr % Chg 4th Qtr % Chg ($ in millions) 2005 2004 2004 Sales 149
118 26.3 % 156 -4.5 % Regional Income 38 28 35.7 % 28 35.7 % Rolled
Product Shipments (kt) 63 52 21.2 % 69 -8.7 % Regional Income per
Ton 603 538 12.1 % 406 48.5 % Depreciation 11 12 -8.3 % 11 0.0 %
Capital Expenditures 2 3 -33.3 % 11 -81.8 % Total Assets 766 812
-5.7 % 779 -1.7 % South America had a strong quarter with regional
income up $10 million or almost 36% in the first quarter 2005
versus first quarter 2004. Shipments in the first quarter 2005 were
up over 21%, a significant increase from the same period in 2004.
Improved pricing, higher shipments and the positive impact from
higher ingot prices on the production from our smelters in Brazil
accounted for the improvement. Cash from Operating Activities Cash
from operating activities was $112 million for the first quarter of
2005 with a change in working capital deferred items and other-net
of $2 million. This represents a $26 million change in cash from
operating activities from the same quarter in 2004, or a 19%
change. The change in working capital deferred items and other-net
for the same period in 2004 was $9 million. Free cash flow for the
first quarter of 2005 was $76 million, representing a 34% change
the first quarter of 2004, which was $116 million. Cash Flow 1st
Qtr 1st Qtr % Chg 4th Qtr % Chg ($ in millions) 2005 2004 2004 Cash
from Operating Activities 112 138 -18.8 % -75 249 % Dividends -13
-2 550 % 0 N/M Capital Expenditures -23 -20 15 % -70 67 % Free Cash
Flow (1) 76 116 -34.5 % -145 152 % (1) "Free cash flow" consists of
cash from operating activities less capital expenditures and
dividends. Management believes that free cash flow is relevant to
investors as it provides a measure of the cash generated internally
that is available for debt service and investment opportunities.
Financing and Investment Activities In connection with the
reorganization transactions described below in Note 1 - Background
and Basis of Presentation, the Company entered into senior secured
credit facilities providing for aggregate borrowings of up to $1.8
billion (as described in Note 3 thereof). These facilities consist
of a $1.3 billion seven-year senior secured Term Loan B facility,
bearing interest at LIBOR plus 1.75%, all of which was borrowed on
January 10, 2005, and a $500 million five-year multi-currency
revolving credit facility. The Term Loan B facility consists of an
$825 million Term Loan B in the United States and a $475 million
Term Loan B in Canada. The proceeds of the Term Loan B facility
were used in connection with the reorganization transactions,
Novelis' separation from Alcan and to pay related fees and
expenses. On February 3 2005, Novelis sold $1.4 billion aggregate
principal amount of senior unsecured debt securities (Senior
Notes). The Senior Notes, which were priced at par, bear interest
at 7.25% and will mature on February 15, 2015. The net proceeds of
the placement were used to repay Alcan notes that were issued in
connection with the reorganization transaction. At the spin-off
from Alcan, Novelis had $2,951 million of long term debt and
capital leases. With the strength of the cash flows in the first
quarter 2005, Novelis paid $77 million towards the reduction in
their long term debt. The current debt balance at quarter end was
$2,881 million. Capital expenditures totaled $23 million for the
first quarter 2005 and $20 million in the prior year quarter
representing re-investment rates of 40% and 33% of depreciation,
respectively. The majority of Novelis' capital expenditures for the
quarter were spent on keeping our quality and technology advantage
in the market, increasing productivity, finding additional cost
reductions and undertaking small projects to increase capacity.
2005 Outlook The guidance for 2005 is based on the fundamental
drivers of the business moving forward. Regional demand levels
continue to be strong in all regions except Europe, where economic
activity continues to track sideways at best and all four regions
are performing well from an operational perspective. Our clear
focus over the next three years is to strengthen the balance sheet
and de-lever the company while maintaining our operating
leadership. The ability to achieve this goal is within our reach as
we drive value through improvements in our product portfolio and
focused growth. The outlook for 2005 includes two key components.
First, capital expenditures will not exceed $175 million. Second,
regional income is expected to grow between 5% and 10%, excluding
the impact of FAS 133 mark-to-market gains or losses on derivatives
but including the income from joint ventures. The original guidance
figure for growth was based on a historical calculation of Business
Group Profit for the full year 2004 of $597 million. However, in
the future we will base the guidance on the Total Regional Income
as this is the measurement that is most relied on by management for
allocating resources and making regional decisions. Under this new
measurement, that base figure would have been $655 million for
2004. Therefore, for 2005 the regional income guidance is a 5% to
10% increase from the 2004 base figure or a $33 million to $66
million increase. Novelis faces challenges in our first year as an
independent company. Fluctuations in metal pricing and significant
changes in currency, energy costs and economies are uncertainties
that are not under our control. The 2005 outlook is based on
information currently available to management. Attachment A The
following table summarizes the reconciliation of Regional Income to
Income Before Income Taxes and Other Items. Fourth First Quarter
Quarter ($ in millions) 2005 2004 2004 Regional Income Novelis
North America 57 69 32 Novelis Europe 57 42 38 Novelis Asia 30 20
18 Novelis South America 38 28 28 Total Regional Income 182 159 116
Corporate Office (27) (10) (18) Additional Items for Reconciliation
Equity accounted joint venture eliminations (11) (11) (16) Change
in fair market value of derivatives 64 49 40 Restructuring,
rationalization & impairment 1 7 (74) Depreciation &
amortization (58) (61) (68) Interest (44) (19) (19) Income before
income taxes and other items 107 114 (39) Regional Income comprises
earnings before interest, taxes, depreciation and amortization
excluding certain items, such as corporate office costs and asset
and goodwill impairments, restructuring, rationalization and the
change in fair market value of our derivatives, which are not under
the control of the regional groups. These items are managed by the
company's head office, which focuses on strategy development and
oversees governance, policy, legal compliance, human resources and
finance. Financial information for the regional groups includes the
results of certain joint ventures on a proportionately consolidated
basis, which is consistent with the way the business groups are
managed. Under U.S. GAAP, these joint ventures are accounted for
under the equity method. Therefore, in order to reconcile to income
(loss) before income taxes and other items, the Regional Income of
these joint ventures is removed from Total Regional Income for the
company and the net after-tax results are reported as equity
income. The change in the fair market value of derivatives has been
removed from individual regional results and is shown on a separate
line. This presentation provides a more accurate portrayal of
underlying business group results and is in line with the company's
portfolio approach to risk management. Novelis Inc. CONSOLIDATED
STATEMENT OF INCOME (unaudited) (in millions of US$, except per
share amounts) (COMBINED) Three months ended March 31 2005 2004
Sales and operating revenues - third parties 2,118 1,718 - related
parties -- 92 2,118 1,810 Costs and expenses Cost of sales and
operating expenses, excluding depreciation and amortization noted
below - third parties 1,884 1,505 - related parties -- 80
Depreciation and amortization 58 61 Selling, general and
administrative expenses 76 60 Research and development expenses 8
10 Interest - third parties 44 11 - related parties -- 8 Other
expenses (income) - net - third parties (60) 4 - related parties 1
(43) 2,011 1,696 Income before income taxes and other items 107 114
Income taxes 44 43 Income before other items 63 71 Equity income 2
2 Minority interests (6) (4) Net income 59 69 Earnings per share
Net income per share - basic 0.78 0.93 Net income per share -
diluted 0.78 0.92 Dividends per common share 0.09 -- Novelis Inc.
CONSOLIDATED BALANCE SHEET (unaudited) (in millions of US$)
(COMBINED) March 31, December 31, As at 2005 2004 ASSETS Current
assets Cash and time deposits 78 31 Trade receivables (net of
allowances of $33 in 2005 and $33 in 2004) - third parties 1,078
710 - related parties -- 87 Other receivables - third parties 308
118 - related parties 38 846 Inventories Aluminum 1,085 1,081 Raw
materials 18 20 Other supplies 146 125 1,249 1,226 Total current
assets 2,751 3,018 Deferred charges and other assets 277 193
Long-term receivables from related parties 93 104 Property, plant
and equipment Cost (excluding Construction work in progress) 5,365
5,506 Construction work in progress 116 112 Accumulated
depreciation (3,231) (3,270) 2,250 2,348 Intangible assets (net of
accumulated amortization of $10 in 2005 and $9 in 2004) 33 35
Goodwill 263 256 Total assets 5,667 5,954 LIABILITIES AND
SHAREHOLDERS'/INVESTED EQUITY Current liabilities Payables and
accrued liabilities - third parties 1,443 859 - related parties 36
401 Short-term borrowings - third parties 26 229 - related parties
-- 312 Debt maturing within one year - third parties 4 1 - related
parties -- 290 Total current liabilities 1,509 2,092 Debt not
maturing within one year - third parties 2,851 139 - related
parties -- 2,307 Deferred credits and other liabilities 460 472
Deferred income taxes 179 249 Minority interests 141 140
Shareholders'/Invested equity Common shares, no par value -
unlimited number of shares authorized; issued and outstanding:
73,988,932 shares -- -- Additional paid-in capital 460 -- Retained
earnings 52 -- Accumulated other comprehensive income 15 88 Owner's
net investment -- 467 527 555 Commitments and contingencies Total
liabilities and shareholders'/invested equity 5,667 5,954 Novelis
Inc. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (in millions
of US$) (COMBINED) Three months ended March 31 2005 2004 OPERATING
ACTIVITIES Net income 59 69 Adjustments to determine cash from
operating activities: Depreciation and amortization 58 61 Deferred
income taxes (6) 19 Equity income (2) (2) Stock option compensation
1 -- Change in operating working capital, deferred items and other
- net 2 (9) Cash from operating activities 112 138 FINANCING
ACTIVITIES Proceeds from issuance of new debt - third parties 2,748
317 - related parties -- -- Debt repayments - third parties (2,720)
-- - related parties -- -- Short-term borrowings - net - third
parties (517) (152) - related parties -- 8 Dividends (7) --
Dividends - minority interest (6) (2) Net receipts from (payments
to) Alcan 82 (81) Cash from (used for) financing activities (420)
90 INVESTMENT ACTIVITIES Purchase of property, plant and equipment
(23) (20) Change in loans receivable - third parties 370 -- Change
in loans receivable - related parties 8 (212) Cash from (used for)
investment activities 355 (232) Effect of exchange rate changes on
cash and time deposits -- -- Increase (Decrease) in cash and time
deposits 47 (4) Cash and time deposits - beginning of period 31 27
Cash and time deposits - end of period 78 23 Novelis Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS'/INVESTED EQUITY (unaudited)
(in millions of US$, except number of shares which is in thousands)
Accumulated Other Common Additional Compre Owner's Shares Paid-in
Retained -hensive Net Shares Amount Capital Earnings Income
Investment Total Balance at December 31, 2004 -- -- -- -- 88 467
555 Net income - Q1 2005 -- -- -- 59 -- -- 59 Comprehensive loss --
-- -- -- (73) -- (73) Mark to market losses on derivative contracts
with Alcan from January 1 to 5, 2005 (note 1) -- -- -- -- -- (30)
(30) Dividends -- -- -- (7) -- (7) (14) Transfer (to)/from Alcan -
net -- -- -- -- -- 30 30 Issuance of common stock in connection
with the distribution 73,989 -- 460(a) -- -- (460) -- Balance at
March 31, 2005 73,989 -- 460 52 15 -- 527 a. Represents the amount
of Owner's net investment after transfers (to)/from Alcan - net. 1.
BACKGROUND AND BASIS OF PRESENTATION Background On May 18, 2004,
Alcan Inc. (Alcan) announced its intention to separate its rolled
products business into a separate company and to pursue a spin-off
of that business to its shareholders. The rolled products
businesses were managed under two separate operating segments
within Alcan, Rolled Products Americas and Asia and Rolled Products
Europe. Alcan and its subsidiaries contributed and on January 6,
2005, transferred to a new public company, Novelis Inc. (the
Company or Novelis), substantially all of the aluminum rolled
products businesses operated by Alcan prior to its 2003 acquisition
of Pechiney, together with some of Alcan's alumina and primary
metal-related businesses in Brazil, which are fully integrated with
the rolled products operations there, as well as four former
Pechiney rolling facilities in Europe, as their end-use markets and
customers are more similar to those of Novelis. Novelis, which was
formed in Canada on September 21, 2004, acquired the abovementioned
businesses on January 6, 2005, through the reorganization
transactions described above. On January 6, 2005, the spin-off
occurred following the approval by Alcan's Board of Directors and
shareholders, and the receipt of other required legal and
regulatory approvals. Alcan shareholders received one Novelis
common share for every five Alcan common shares held. Common shares
of Novelis began trading on a "when issued" basis on the Toronto
(TSX) and New York (NYSE) stock exchanges on January 6, 2005, with
a distribution record date of January 11, 2005. "Regular Way"
trading began on the TSX on January 7, 2005, and on the NYSE on
January 19, 2005. The Company together with its subsidiaries
produces aluminum sheet and light gauge products where the end-use
destination of the products includes the construction and
industrial, beverage and food cans, foil products and
transportation markets. The Company operates in four continents,
North America, South America, Asia and Europe through 37 operating
plants and three research facilities in 12 countries. In addition
to aluminum rolled products plants, the Company's South American
businesses include bauxite mining, aluminum refining and smelting
facilities that are integrated with the rolling plants in Brazil.
In certain instances, amounts presented in the unaudited historical
combined financial statements have been adjusted prospectively in
the unaudited consolidated financial statements as at and for the
quarter ended March 31, 2005. Significant adjustments of this
nature have been disclosed in the accompanying notes as
appropriate. Post-transaction adjustments The agreements giving
effect to the spin-off provide for various post- transaction
adjustments and the resolution of outstanding matters, which are
expected to be carried out by the parties to the end of 2005. These
adjustments, for the most part, will be reflected as changes to
equity. Agreements between Novelis and Alcan Novelis has entered
into various agreements with Alcan for the use of transitional and
technical services, the supply of Alcan's metal and alumina, the
licensing of certain of Alcan's patents, trademarks and other
intellectual property rights, and the use of certain buildings,
machinery and equipment, technology and employees at certain
facilities retained by Alcan, but required in Novelis' business.
Basis of presentation The unaudited consolidated financial
statements as at and for the quarter ended March 31, 2005 represent
the operations, cash flows and financial position of the Company as
a stand-alone entity. All income earned and cash flows generated by
the Novelis entities as well as the risks and rewards of these
businesses from January 1 to 5, 2005 were primarily attributed to
Novelis and are included in the accompanying consolidated financial
statements, with the exception of $45 of pre-tax net gains on
derivative contracts that were attributed to Alcan and were
therefore recorded as an adjustment to the Owner's net investment
account. The historical combined financial statements as at
December 31, 2004 and for the quarter ended March 31, 2004 (the
historical combined financial statements) have been derived from
the accounting records of Alcan using the historical results of
operations and historical basis of assets and liabilities of the
businesses subsequently transferred to Novelis. Management believes
the assumptions underlying the combined financial statements are
reasonable. However, the historical combined financial statements
included herein may not necessarily reflect the Company's results
of operations, financial position and cash flows or what its
results of operations, financial position and cash flows would have
been had Novelis been a stand-alone company during the periods
presented. Alcan's investment in the Novelis businesses, presented
as Owner's net investment in the historical combined financial
statements, includes the accumulated earnings of the businesses as
well as cash transfers related to cash management functions
performed by Alcan. 2. RELATED PARTY TRANSACTIONS The Company
enters into transactions with related parties in the ordinary
course of business. Alcan is the primary supplier of prime and
sheet ingot to the Company as well as the counterparty to all of
the Company's metal derivatives and most of the currency
derivatives. The Company also sells inventory to Alcan and certain
equity-accounted investees. In 2004 and prior years, Alcan was
considered a related party to Novelis. However, subsequent to the
spin-off, Alcan is no longer a related party, as defined in SFAS
No. 57, Related Party Disclosures. In 2004, all related parties
balances on the statement of income represent principally
transactions between Alcan and Novelis. Subsequent to the spin-
off, Novelis repaid its net obligation to Alcan at December 31,
2004 through third party financing (see note 3). At March 31, 2005,
balances due to and from related parties comprise balances between
Novelis and its equity- accounted investees. 3. DEBT NOT MATURING
WITHIN ONE YEAR All of the Company's related party debt of $2,597
as at December 31, 2004 was payable to Alcan and was fully repaid
in the first quarter of 2005. The related party debt was comprised
of a combination of fixed and floating rate debt of $1,392 and
fixed rate promissory notes (Alcan Notes) obtained in December 2004
of $1,205. The Alcan Notes comprised a major portion of the $1,375
bridge financing provided by Alcan to the Company as a result of
the reorganization transactions described in note 1 - Background
and Basis of Presentation. The remaining balance of the Alcan Notes
of $170 was obtained in January 2005. The Alcan Notes were duly
refinanced with the proceeds of the $1.4 billion 10-year Senior
Notes issued in February 2005, discussed below. In connection with
the reorganization transactions described in note 1 - Background
and Basis of Presentation, the Company entered into senior secured
credit facilities providing for aggregate borrowings of up to $1.8
billion. These facilities consist of a $1.3 billion seven-year
senior secured Term Loan B facility, bearing interest at LIBOR plus
1.75%, all of which was borrowed on January 10, 2005, and a $500
five-year multi-currency revolving credit facility. The Term Loan B
facility consists of an $825 Term Loan B in the U.S. and a $475
Term Loan B in Canada. The proceeds of the Term Loan B facility
were used in connection with the reorganization transactions, the
Company's separation from Alcan and to pay related fees and
expenses. The Company has entered into interest rate swaps to fix
the interest rate on $310 of the variable rate Term Loan B debt at
an effective weighted average interest rate of 5.5% for periods of
up to three years. On February 3, 2005, Novelis sold $1.4 billion
aggregate principal amount of senior unsecured debt securities
(Senior Notes). The Senior Notes, which were priced at par, bear
interest at 7.25% and will mature on February 15, 2015. The net
proceeds of the placement, received on February 3, 2005, were used
to repay the Alcan Notes. Novelis, incorporated January 6, 2005, is
the global leader in aluminum rolled products and aluminum can
recycling, with 37 operating facilities in 12 countries and more
than 13,500 dedicated employees. Novelis has the unique ability to
provide its customers with a regional supply of high-end rolled
aluminum throughout Asia, Europe, North America, and South America.
Through its advanced production capabilities, Novelis supplies
aluminum sheet and foil to automotive, transportation, beverage and
food packaging, construction, industrial and printing markets.
Please visit http://www.novelis.com/ for more information on
Novelis. Statements made in this news release which describe the
Company's intentions, expectations or predictions may be
forward-looking statements within the meaning of securities laws.
The Company cautions that, by their nature, forward-looking
statements involve risk and uncertainty and that the Company's
actual results could differ materially from those expressed or
implied in such statements. Important factors which could cause
such differences include global supply and demand conditions for
rolled aluminium products, changes in the relative value of various
currencies, demand and pricing within the principal markets for the
Company's products, changes in government regulations, particularly
those affecting environmental, health or safety compliance,
economic developments, relationships with (and financial or
operating conditions of) customers and suppliers, competition from
other aluminium rolled products producers as well as from
substitute materials such as steel, glass, plastic and composite
materials, and the level of our indebtedness and ability to
generate cash and other factors relating to the Company's ongoing
operations. Reference should be made to the Company's 2004 annual
report on Form 10-K for a summary of major risk factors. NOTE TO
FINANCIAL MEDIA Novelis executives will discuss the company's
performance during a conference call today with financial analysts
beginning at 8:00 a.m. ET. Reporters are invited to listen to the
call. To access the call, U.S. callers should dial (800) 561-2601.
International callers should dial (617) 614-3518, passcode for both
numbers is 4975 6737. Beginning at 11:00 a.m. ET today, a replay of
the presentation will be available until midnight on Wednesday, May
18, 2005. To access the replay, U.S. callers should dial
888-286-8010, international callers should call 617-801-6888. The
access code for U.S. and International is 6311 2284. The conference
call will also be webcast on the Novelis Investor Relations website
at http://www.novelis.com/. A presentation will be available during
the webcast and a downloadable version will be accessible on the
Novelis website. DATASOURCE: Novelis Inc. CONTACT: Media: Jennifer
Dervin, +1-404-814-4208, or Investor: Holly Ash, +1-404-814-4212,
both of Novelis Inc. Web site: http://www.novelis.com/
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