Document:

Exhibit

Exhibit 10.1

H&R BLOCK, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
(as amended and restated effective January 1, 2020)

SECTION 1.   PURPOSE OF PLAN

The H&R Block, Inc. 2000 Employee Stock Purchase Plan (the "Plan") is designed to encourage and assist employees of the subsidiaries of H&R Block, Inc. (collectively H&R Block, Inc. ("Block") and such subsidiaries shall be referred to as the "Company") to acquire an equity interest in Block through the purchase of shares of Block common stock, without par value ("Common Stock").  This Plan is intended to constitute an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code (the "Code").

SECTION 2.   ADMINISTRATION OF THE PLAN

The Plan shall be administered by Block's Board of Directors (the "Board") or by a committee of the Board (the "Committee") appointed by the Board and serving at its pleasure (the Board or any such Committee being herein referred to as the "Administrator").  Until such time as the Board shall determine otherwise, the Compensation Committee of the Board shall serve as Administrator.  The Administrator shall have full power and authority, not inconsistent with the express provisions of the Plan, to administer and interpret the Plan, including the authority to:

(i)          grant options and authorize the issuance of shares;
		
	(ii)    
	make and amend all rules, regulations, guidelines, procedures and policies for administering the Plan;

		
	(iii)    
	decide all questions and settle all disputes that may arise in connection with the Plan;

		
	(iv)    
	appoint persons and entities to act as designated representatives on its behalf in administering the Plan pursuant to its provisions (in which case the term "Administrator" as used herein shall include such persons or entities to the extent of such appointment);

		
	(v)      
	establish accounts with a person or entity appointed pursuant to (iv) above ("Custodian") to hold Common Stock purchased under the Plan ("Stock Account");

		
	(vi)     
	cause Block to enter into a written agreement with the Custodian setting forth the terms and conditions upon which Stock Accounts shall be governed ("Custodial Agreement"); and

		
	(vii)   
	require Participants to hold shares of Common Stock under the Plan in Stock Accounts (in which case each Participant's decision to participate in the Plan shall constitute the appointment of such Custodian as custodial agent for the purpose of holding such shares) until such time as shall be specified in the Custodial Agreement.

All interpretations, decisions and determinations made by the Administrator shall be binding on all persons concerned.

SECTION 3.   NATURE AND NUMBER OF SHARES

The Common Stock subject to issuance under the terms of the Plan shall be authorized but unissued shares or previously issued shares reacquired and held by the Company.  The aggregate number of shares that may be issued under the Plan shall not exceed 6,000,000 shares of Common Stock.

In the event of any reorganization, recapitalization, stock split, reverse stock split, stock dividend, combination of shares, exchange of shares, merger, consolidation, offering of rights or other similar change 

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in the capital structure of the Company, the Board or the Committee may make such adjustment, if any, as it deems appropriate in the number, kind and purchase price of the shares available for purchase under the Plan and in the maximum number of shares which may be issued under the Plan.

SECTION 4.   ELIGIBILITY

Each individual employed by a Participating Subsidiary (as hereinafter defined), except as provided below, shall be eligible to participate in the Plan ("Employee").  The following individuals shall be excluded from participation:

(a) Persons who, as of the date of grant of an Option, have been continuously employed by the Participating Subsidiary for less than twelve (12) consecutive months;

(b) Persons who, immediately upon the grant of an Option, own directly or indirectly, or hold options or rights to acquire, an aggregate of five percent (5%) or more of the total combined voting power or value of all outstanding shares of all classes of Block or any Subsidiary; and

(c) Persons who are customarily employed by the Company less than twenty (20) hours per week or for not more than five (5) months in any calendar year.

For purposes of the Plan, a "Subsidiary" is any corporation or other entity in which Block owns, directly or indirectly, stock (or other ownership interests) possessing fifty percent (50%) or more of the total combined voting power of all classes of stock (or other ownership interests). A "Participating Subsidiary" is any Subsidiary meeting the requirements above that is designated by the Administrator as a subsidiary whose employees are eligible to participate in the Plan.

SECTION 5.   ENROLLMENT AND WITHDRAWAL

Each eligible Employee may enroll or re-enroll in the Plan as of the first day of any Option Period (as hereinafter defined) after the Employee first becomes eligible to participate.  To enroll, an Employee must complete and sign an enrollment form (including a payroll deduction authorization) in a form acceptable to the Administrator and submit it to the Company, or use such other means to enroll as is authorized by the Administrator, at least 15 calendar days prior to the commencement of such Option Period or by such other date as the Administrator may prescribe. Participation in the Plan is voluntary.  A "Participant" shall be an Employee enrolled in the Plan.

A Participant will automatically be enrolled in all future Option Periods unless the Participant elects otherwise during an open enrollment period. If a Participant withdraws from the Plan, he or she will cease to be a Participant and may only participate in future Option Periods if he or she re-enrolls in the Plan during an open enrollment period in accordance with the preceding paragraph. 

SECTION 6.   GRANT OF OPTIONS

Under the Plan, each "Option Period" shall be a period of approximately six (6) months beginning on January 1 and July 1, respectively, and ending on June 30 and December 31, respectively, or such other period (not to exceed 5 years) as the Board or the Committee may designate from time to time.

Each person who is a Participant on the first day of an Option Period (the "Grant Date") will as of such day be granted an option for the Period (the "Option").  Such Option will be for the number of whole and fractional shares of Common Stock to be determined by dividing (i) the balance credited to the 

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Participant's Payment Account (as defined in Section 7(b)) during such Option Period by means of payroll deduction (or such other means deemed acceptable by the Administrator) as of the Purchase Date (as determined under Section 8 below), by (ii) the purchase price per share of the Common Stock as determined under Section 8.  In addition to other limitations imposed under the Plan, the maximum number of whole and fractional shares of Common Stock that may be purchased with payments made by a Participant during an Option Period equals $25,000 divided by the fair market value of the Common Stock on the Grant Date. 

The Administrator will reduce, on a proportionate basis, the number of shares of Common Stock receivable by each Participant upon exercise of his or her Option for an Option Period in the event that the number of shares then available under the Plan is otherwise insufficient, and will return to Participant without interest any remaining unused balance in the Participant's Payment Account as soon as administratively practicable. 

SECTION 7.   METHOD OF PAYMENT

(a) Form of Payment.  Payment for shares shall be made in installments through after-tax payroll deductions over the Option Period, with such deductions taken from paychecks dated during the Option Period, or in such other form of payment deemed acceptable by the Administrator.

Subject to the limits below and in Section 6, each Participant may elect through payroll withholding during the Option Period (or such other means deemed acceptable by the Company) to have credited to his or her Payment Account an amount not less than one percent, and not greater than ten percent (10%) of Compensation (as defined below); provided that the Administrator from time to time before an enrollment date may establish limits other than those herein described for all purchases to occur during the relevant Option Period.

For purposes of the Plan, "Compensation" shall mean all compensation paid to the Participant by the Company and currently includible in his or her income, including such amounts as commissions, overtime, and other amounts includible in the general definition of compensation provided in Treasury Regulation §1.415-2(d)(1), plus any amount that would be so included but for the fact that it was contributed to (a) a qualified plan pursuant to an elective deferral under Section 401(k) of the Code, (b) a nonqualified deferred compensation plan, and/or (c) a cafeteria plan on a before-tax basis pursuant to an election under Section 125 of the Code, but not including (i) payments under stock option plans and other employee benefit plans or other amounts excluded from the definition of compensation provided in the Treasury Regulations under Section 415 of the Code, (ii) bonuses or compensation paid under short-term incentive plans, and (iii) reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, payments of benefits under nonqualified deferred compensation plans, and welfare benefits.

A Participant shall have thirty (30) days from the date of the first written statement confirming the Participant’s elected amount to be withheld to advise the Administrator in writing that the Participant’s elected amount was not properly implemented.  If a Participant fails to inform the Administrator within such 30-day period, such Participant shall be deemed to have selected the amount to be withheld from Compensation that was implemented until another election is received and a new Option Period begins.
(b) Accounts.  A "Payment Account" means the book entry account maintained by the Company or Administrator to record the amount of Participant's payments made pursuant to Section 7(a).  All payments by each Participant shall be credited to such Participant's Payment Account pending the purchase of Common Stock in accordance with the provisions of the Plan.  All such amounts in the Payment Account 

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shall be assets of the Company and may be used by the Company for any corporate purpose. No interest will be paid on amounts credited to a Participant's Payment Account.

(c) Limits on Purchase.  In no event shall the rights of any Participant to purchase shares (under this Plan and under any other stock purchase plans of Block or any Subsidiary) accrue at a rate that exceeds $25,000 as measured by the fair market value of such shares (determined in the case of each such share as of the date of grant of the related option) for each calendar year in which such option is outstanding at any time.  If, in any calendar year, a Participant holds two or more options (under this Plan and under any other stock purchase plans of Block or any Subsidiary), then the Participant’s purchases of shares of Common Stock attributable to that calendar year under all such options must not exceed $25,000 as measured by the fair market value of such shares (determined in the case of each such share as of the date of grant of the related option). 

SECTION 8.   PURCHASE PRICE

The purchase price of Common Stock issued pursuant to the exercise of an Option shall be eighty-five percent (85%) of the fair market value of Common Stock on the last trading day of the Option Period (the "Purchase Date").

Fair market value shall mean the closing price of Common Stock on the New York Stock Exchange or other national securities exchange on which the Common Stock is then principally traded or, if that measure of price is not available, on a composite index of such exchanges or, if that measure of price is not available, in a national market system for securities.  In the event that there are no sales of Common Stock on any such exchange or market on the Grant Date, the fair market value of the Common Stock shall be deemed to be the closing sales price on the next following day on which Common Stock was sold on any such exchange or market. In the event that there are no sales of Common Stock on any such exchange or market on the Purchase Date, the fair market value of the Common Stock shall be deemed to be the closing sales price on the next preceding day on which Common Stock was sold on any such exchange or market.  In the event that the Common Stock is not listed on any such market or exchange on the Grant or Purchase Dates, a reasonable valuation of the fair market value of the Common Stock on such dates shall be made by the Administrator.

SECTION 9.   EXERCISE OF OPTIONS; SIX-MONTH HOLDING PERIOD

If an Employee is a Participant in the Plan on a Purchase Date, he or she will be deemed to have exercised the Option granted to him or her for the period ending on that Purchase Date.  Upon such exercise, the Company will apply the balance of the Participant's Payment Account to the purchase of the number of whole or fractional shares of Common Stock determined under Section 6 and, as soon as practicable thereafter, will issue and deliver said whole shares to the Participant (unless Stock Accounts are established by the Administrator pursuant to Section 2 of the Plan).  Any cash remaining in the Participant's Payment Account shall be paid to Participant without interest.

Notwithstanding anything herein to the contrary, Block's obligation to issue and deliver whole shares of Common Stock under the Plan will be subject to the approval required by any governmental authority in connection with the authorization, issuance, sale or transfer of said shares, to any requirements of any national securities exchange applicable thereto, and to compliance by Block with other applicable legal requirements in effect from time to time.

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Any shares of Common Stock issued under the Plan may not be sold, transferred or assigned for a period of six months after the date issued. Each certificate or book entry representing shares of Common Stock issued under this Plan during such six-month period shall bear the following legend or notation:

"These Shares may not be sold, transferred or assigned, and the issuer shall not be required to give effect to any attempted sale, transfer or assignment, until a date that is more than six months after the date of issuance.";

or such other legend or notation as shall be approved by the Administrator.

SECTION 10.   TERMINATION OF EMPLOYMENT

Subject to Section 11, upon the termination of a Participant's employment with the Company for any reason, the Participant's Payment Account balance shall be frozen to future accruals and the Participant shall be withdrawn from Plan participation and cease to be a Participant. Upon the cessation of participation, any Option held by the Participant under the Plan will be deemed cancelled, the balance of the Participant's Payment Account will be returned to the Participant, without interest, or, in the case of death, refunded or paid in accordance with Section 11, without interest, as soon as administratively practicable and the Participant will have no further rights under the Plan.

SECTION 11.   DEATH OF A PARTICIPANT

Upon the death of a Participant any cash then credited to the Participant’s Payment Account will be refunded to the Participant’s estate without interest.

SECTION 12.   ASSIGNMENT

Except as provided in Section 11 above, funds, securities, rights or other property held for the account of a Participant shall not be sold, pledged, assigned, transferred, or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, or similar process.  A Participant's right to purchase shares under the Plan shall be exercisable during the Participant's lifetime only by the Participant.  If this provision is violated, the Participant's election to purchase Common Stock shall terminate and the only obligation of the Company remaining under the Plan will be to refund to the Participant the amount then credited to his or her Payment Account and deliver to Participant any whole shares of Common Stock credited to him or her under any Stock Account.

SECTION 13.   EQUAL RIGHTS AND PRIVILEGES

All eligible Employees shall have equal rights and privileges with respect to the Plan so that the Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 or any successor provisions of the Code and related regulations.  Any provision of the Plan that is inconsistent with Section 423 or any successor provision of the Code shall without further act of amendment by the Company be reformed to comply with the requirements of Section 423.  This Section 13 shall take precedence over all other provisions of the Plan.

SECTION 14.   RIGHTS AS STOCKHOLDER

A Participant shall have no rights as a stockholder under an Option until he or she becomes a stockholder as herein provided.  A Participant will become a stockholder with respect to shares for which 

5

payment has been completed as provided in Section 8 as of the close of business on the Purchase Date for the Option Period.

SECTION 15.   MODIFICATION AND TERMINATION OF THE PLAN

The Board or the Committee may terminate the Plan at any time and may at any time and from time to time amend the Plan in any manner permitted by law.  No amendment shall be effective unless within one (1) year after it is adopted by the Board it is approved by Block's shareholders in the manner prescribed under the Treasury Regulations under Section 423 of the Code, if such amendment would:

		
	(i)     
	increase the number of shares reserved for purchase under the Plan, unless such increase is by reason of any change in the capital structure of the Company referred to in Section 3 hereof;

		
	(ii)    
	change the designation of corporations or other entities whose employees may be offered Options under the Plan, except as permitted under Treasury Regulations ss.1.423-2(c)(4);

		
	(iii)   
	materially modify the requirements as to eligibility for participation in the Plan; or

(iv)        materially increase the benefits accruing to Participants under the Plan.

In the event the Plan is terminated, the Board or Committee may elect to terminate all outstanding Options either immediately or upon completion of the purchase of shares on the next Purchase Date, unless the Board has determined that the right to make all such purchases shall expire on some other designated date occurring prior to the next Purchase Date.  If Options are terminated prior to expiration, all funds contributed to the Plan that have not been used to purchase shares shall be returned without interest to the Participants.

SECTION 16.   OTHER PROVISIONS

Options and other documentation under the Plan shall contain such other provisions as the Administrator shall deem advisable, provided that no such provision shall conflict with the express terms of the Plan.

SECTION 17.   EMPLOYMENT RIGHTS

Nothing contained in the provisions of the Plan shall be construed to give to any individual the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge any employee at any time.

6ex1031

   CONSTELLIUM-UACJ ABS LLC   FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016   Index to Financial Statements    Report of Independent Auditors .................................................................................................................................... 1   Balance Sheets ............................................................................................................................................................... 2   Statements of Comprehensive Loss ............................................................................................................................... 3   Statements of Members’ Equity (Deficit) ...................................................................................................................... 4   Statements of Cash Flows .............................................................................................................................................. 5   Notes to the Financial Statements .................................................................................................................................. 6        

 

                                       Report of Independent Auditors    To the Management of Constellium Bowling Green LLC  We have audited the accompanying 2017 financial statements of Constellium-UACJ ABS LLC, which comprise  the  balance sheet  as of December 31, 2017 and the related statements of comprehensive loss, members’ equity  (deficit) and cash flows for the year then ended.   Management’s Responsibility for the Financial Statements   Management is responsible for the preparation and fair presentation of the financial statements in accordance with  accounting principles generally accepted in the United States of America; this includes the design, implementation,  and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are  free from material misstatement, whether due to fraud or error.   Auditors’ Responsibility   Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in  accordance with auditing standards generally accepted in the United States of America. Those standards require that  we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from  material misstatement.  An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial  statements. The procedures selected depend on our judgment, including the assessment of the risks of material  misstatement of the  financial statements, whether due to fraud or error. In making those risk assessments, we  consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in  order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an  opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit  also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant  accounting estimates made by management, as well as evaluating the overall presentation of the financial  statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for  our audit opinion.   Opinion   In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position  of Constellium-UACJ ABS LLC as of December 31, 2017, and the results of its operations and its cash flows for the  year then ended in accordance with accounting principles generally accepted in the United States of America.   Other Matter   The accompanying balance sheet of Constellium-UACJ ABS LLC as of December 31, 2018, and the related  statements of comprehensive loss, members’ equity (deficit) and cash flows for the years ended December 31, 2018  and 2016 are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does  not require the 2018 and 2016 financial statements to be audited and they are therefore not covered by this report.   /s/ PricewaterhouseCoopers LLP  McLean, Virginia  February 15, 2018                                                                                                       1   

 

                                                                                                                                                                            CONSTELLIUM-UACJ ABS LLC                                            BALANCE SHEETS                                                (In thousands)                                                                       December 31, 2018*   December 31, 2017 ASSETS Current assets:  Cash and cash equivalents                                           $                            8,964 $                            5,772  Accounts receivable, less allowance for doubtful accounts of $0 in 2018 and 2017                             55,677                              41,815  Inventories                                                                                     78,152                              68,225  Prepaid and other current assets                                                                     484                                  265      Total current assets                                                                      143,277                            116,077  Property and equipment, net                                                                    190,140                           194,261      Total assets                                                    $                      333,417 $                      310,338  LIABILITIES AND MEMBERS' EQUITY (DEFICIT) Current liabilities:  Accounts payable                                                    $                          88,716 $                          27,302  Accrued expenses and other current liabilities                                                    6,417                              16,663  Current maturities of capital lease obligations and other long-term debt                             11,900                               6,903  Borrowings under asset-backed loans                                                          24,718                          12,743      Total current liabilities                                                                 131,751                             63,611  Loans from members                                                                            279,000                            224,000  Capital lease obligations and other long-term debt, less current maturities                             44,369                              56,268      Total liabilities                                                                         455,120                           343,879  Commitments and contingencies (Note 11 )  Members' equity (deficit):  Contributed capital                                                                             70,000                              70,000  Accumulated other comprehensive loss                                                                (210)                                   (30)  Retained deficit                                                                             (191,493)                          (103,511)      Total members' deficit                                                                  (121,703)                           (33,541)       Total liabilities and members' deficit                          $                      333,417 $                      310,338  * Not covered by the auditor’s report                                                                                                                                       The accompanying notes are an integral part of these financial statements.                                                       1                    

 

                                                                                                             CONSTELLIUM-UACJ ABS LLC                              STATEMENTS OF COMPREHENSIVE LOSS                                                (In thousands)                                                                     Years Ended December 31,                                                        2018 *               2017               2016 * Net sales                                         $                   308,540 $                    138,997 $                      11,833 Cost of sales                                                          354,728                       171,667                         25,846     Gross loss                                                          (46,188)                        (32,670)                        (14,013)  Operating expenses     Selling, general, and administrative expenses                        18,844                         16,318                           8,662 Operating loss                                                        (65,032)                      (48,988)                      (22,675)  Other expense (income)     Interest expense                                                     20,504                         17,338                           6,937     Loss on derivative instruments, net                          2,357                               -                               -     Other (income) expense, net                                                 89                             (743)                               (38) Total other expense (income)                                             22,950                        16,595                          6,899  Net loss                                          $                  (87,982) $                   (65,583) $                   (29,574) Other comprehensive loss     Foreign currency translation adjustments                            (180)                               (30)                               - Total other comprehensive loss                                               (180)                               (30)                               - Comprehensive loss                                $                  (88,162) $                  (65,613) $                  (29,574)  * Not covered by the auditor’s report                                                                                                                                        The accompanying notes are an integral part of these financial statements.                                                       2                    

 

                                               CONSTELLIUM-UACJ ABS LLC                                   STATEMENTS OF MEMBERS' EQUITY (DEFICIT)                                                         (In thousands)                                                                         Accumulated                                                                            Other                                                                        Comprehensive         Contributed       Total Members'                                                    Retained Deficit         Loss               Capital          Equity (Deficit)  Balance at December 31, 2015 *$                   (8,354)           $                              - $                  70,000 $                  61,646   Net loss                                                            (29,574)                                 -                                 -                      (29,574)  Balance at December 31, 2016*$                 (37,928)             $                              - $                  70,000 $                  32,072    Net loss                                                            (65,583)                                 -                                 -                      (65,583)   Foreign currency translation adjustments                                -                             (30)                                 -                             (30) Balance at December 31, 2017$                            (103,511)   $                         (30) $                  70,000 $                 (33,541)    Net loss                                                            (87,982)                                 -                                 -                      (87,982)   Foreign currency translation adjustments                                -                           (180)                                 -                           (180) Balance at December 31, 2018 *                   $              (191,493) $                      (210) $                  70,000 $              (121,703)  * The statement of members’ equity (deficit) for the year ended December 31, 2017 is audited. The statements of members’ equity (deficit) for the years      ended December 31, 2018, 2016 and 2015 are unaudited.                                                                                                     The accompanying notes are an integral part of these financial statements.                                                                3   

 

                                                CONSTELLIUM-UACJ ABS LLC                                              STATEMENTS OF CASH FLOWS                                                          (In thousands)                                                                                        Years Ended December 31,                                                                            2018*               2017                2016*  Operating activities:  Net loss                                                             $                 (87,982) $                 (65,583) $                 (29,574) Adjustments to reconcile net loss to net cash    used in operating activities:     Depreciation, depletion, and amortization                                               10,167                          9,647                          4,618     Loss on disposal of assets                                                                     89                             -                             -  Changes in cash from operating assets and liabilities:     Accounts receivable                                                                    (13,862)                      (34,426)                        (7,039)     Inventories                                                                              (9,927)                      (38,222)                      (28,192)     Prepaid and other current assets                                                            (219)                             136                           (181)     Accounts payable                                                                        60,798                          3,671                          4,664     Accrued expenses and other current liabilities                                         (11,270)                        10,646                          4,771  Net cash used in operating activities                                                   (52,206)                  (114,131)                     (50,933)   Investing activities:   Purchases of property and equipment                                                         (4,720)                        (3,199)                      (59,107)  Proceeds from disposals of property and equipment                                                 45                             -                             -  Net cash used in investing activities                                                     (4,675)                       (3,199)                     (59,107)   Financing activities:  Short-term borrowings under asset-backed loans                                             11,975                        12,743                             -  Proceeds from loans from members                                                           55,000                        90,000                        80,500  Capital leases and other long-term debt borrowings                                               -                        20,965                        35,804  Payments on capital leases and other long-term debt                                         (6,902)                        (6,395)                        (2,499)  Net cash provided by financing activities                                                60,073                    117,313                    113,805   Net (decrease) increase in cash and cash equivalents                                         3,192                             (17)                          3,765  Cash and cash equivalents at beginning of period                                             5,772                          5,789                          2,024  Cash and cash equivalents at end of period                           $                    8,964 $                     5,772 $                     5,789   Supplemental disclosures of cash flow information:  Interest payments                                                    $                    19,891 $                    15,182 $                    10,266  Capitalized interest                                                 $                          - $                          - $                      3,666 * Not covered by the auditor’s report                                                                                                                                                              The accompanying notes are an integral part of these financial statements.                                                                4   

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        1.  Description of Business and Basis of Presentation   As of December 31, 2018, Constellium-UACJ ABS LLC was a joint venture between Constellium U.S. Holdings I  LLC (“Constellium U.S.”), an indirect wholly-owned U.S.-based subsidiary of Constellium N.V. (collectively, with  its subsidiaries, “Constellium”) and Tri-Arrows Aluminum Holding Inc. (“Tri-Arrows”), a U.S.-based subsidiary of  UACJ Corporation (collectively, with its subsidiaries, “UACJ”), Sumitomo Corporation, Itochu Corporation,  and  Itochu Metals Corporation, to produce automotive body-in-white/aluminum flat-rolled sheet (“BiW”) in the United  States and serve the growing North American automotive body sheet market. As of December 31, 2018, Constellium  U.S. owned 51% of the joint venture, and Tri-Arrows owned the remaining 49%. Certain key decisions required joint  approval by the Company’s Board of Managers, which is organized by designees of Constellium U.S. and Tri-Arrows.  The Company is operated from one combined manufacturing and administrative facility in Bowling Green, Kentucky,  USA.   On December 11, 2018, Constellium, Constellium U.S., UACJ, and Tri-Arrows entered into an agreement for the  purchase and transference of all interests held by Tri-Arrows to Constellium U.S. (the “Member Interest Purchase  Agreement” or “MIPA”). On January 10, 2019, Constellium completed the acquisition of Tri-Arrows’ 49% ownership  interest in the Company, pursuant to which the Company became a wholly-owned subsidiary of Constellium (the  “CUA Acquisition”).  See Footnote 14 - Subsequent Events.  The  parties  to  the  joint  venture  executed  the  agreement  to  incorporate  the  Company  in  May  2014  (the  “JV  Agreement”). Construction of the manufacturing facility with a continuous annealing line with pre-treatment (“CALP  line”) was completed in 2016, and operations commenced in June 2016.  Unless otherwise noted, references to the “Company,” “Joint Venture” and “CUA” relate to Constellium-UACJ ABS  LLC.   The Company’s financial statements have been prepared in accordance with accounting principles generally accepted  in the United States of America (“U.S. GAAP”). Amounts reported as of and for the year ended December 31, 2017  were audited by the Company’s independent auditor. All other years within these financial statements and notes are  unaudited and not covered by the auditor’s report.  At December 31, 2018, the Company had a net asset deficiency of $121.7 million, which included related party loans  of  $279.0  million.  However,  Constellium  has  pledged  its  ability  and  intent  to  financially  support  the Company  unconditionally, and, as a result, the Company is expected to be in a position to meet its financial obligations for the  foreseeable future. With the purchase of UACJ’s interest by Constellium in January 2019, the Company became a  wholly-owned indirect subsidiary of Constellium with the operational and financial support of the parent company.  See Note 14 – Subsequent Events for more information on this transaction.  Significant Accounting Policies  Use of Estimates  The  preparation  of  these  financial  statements  and  related  disclosures  in  conformity  with  U.S.  GAAP  requires  management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure  of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and  expenses during the reporting periods. Actual results could differ materially from these estimates.   Concentrations of Risk  Purchases and Sales  The Company purchases flat-rolled aluminum from the joint venture partners and certain of their affiliates in the  United States, Europe, and Japan and sells auto body sheet to U.S. based customers in the automotive industry. The  loss of any of these large aluminum producers  or automotive  customers  could  have  a  significant impact on  the  Company’s operations and cash flows.  For the years ended December 31, 2018, 2017 and 2016, the Company purchased approximately 98%, 97% and 96%,  respectively, of its raw materials from its five largest suppliers.  During the years ended December 31, 2018, 2017 and 2016, the Company earned approximately 86%, 82% and 77%,                                                  5  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        respectively, of its revenue from its four largest customers. In 2018, two of the Company’s customers represented  approximately 44% and 26%, respectively, of its revenue. In 2017, two of the Company’s customers represented  approximately  59%  and  17%,  respectively,  of  its  revenue.  Three  customers  accounted  for  10%  or  more  of the  Company’s  revenue  in  2016,  comprising  approximately  39%,  17%,  and  14%,  respectively,  of  its  revenue.  The  Company’s four largest customers accounted for approximately 78% and 83% of the trade receivable balances as of  December 31, 2018 and 2017, respectively.  Credit Risk  The  Company  currently  does  not require  collateral from its  customers.   For  certain  of  its larger  customers,  the  Company mitigates the risk of payment default through financial instruments designed to reduce risks, including but  not limited to credit insurance.  At December 31, 2018, accounts receivables of up to $26.0 million were covered by  these contractual arrangements.  In the event of a credit default, depending on the customer, the Company’s maximum  out of pocket costs are limited to $1.6 million annually.  Based on the Company’s historical experience with customers  covered by these contractual arrangements, the Company does not anticipate a payment default at this time. The  Company expects these or similar arrangements to remain in effect for 2019.  Employment Related  As of December 31, 2018, the Company employed 175 full-time and part-time employees and utilized the services of  an additional nine contractors at its Bowling Green facility. None of the Company’s employees are covered under  collective bargaining agreements.   Cash and Cash Equivalents   Cash and cash equivalents include all highly liquid instruments with a maturity date of three months or less when  purchased.  Cash and cash equivalents are maintained at financial institutions and balances may exceed federally  insured limits at times.    Accounts Receivable and Allowance for Doubtful Accounts  Accounts  receivable  consists of  amounts due  from  customers located throughout the  United  States.  Collateral  is  generally not required to be posted by the Company’s customers.  The Company provides an allowance for doubtful accounts by a charge to the statements of comprehensive loss in  amounts equal to the estimated losses expected to be incurred. The estimated losses are based on the contractual terms  of the receivables, historical collection experience, and a review of the current status of the existing receivables and  customer creditworthiness. Customer accounts are written off against the allowance for doubtful accounts when an  account is determined to be uncollectible.  Management determined that no allowance for  doubtful accounts  was  necessary as of December 31, 2018 and 2017; however, there can be no assurance that unanticipated future business  conditions of customers will not have a negative impact in excess of amounts reserved on the Company’s results of  operations.  The Company sells certain of its accounts receivable to a third party financial institution under the terms of a factoring  arrangement with recourse. Under the recourse terms of the factoring arrangement, the Company is obligated  to  repurchase any accounts receivable that the third party financial institution is unable to collect or becomes past due.  At the time of the transfer, the Company does not derecognize the accounts receivable from its balance sheet due to  the lack of transfer of effective control of the accounts  receivable.  Therefore, the  Company  reports  its  accounts  receivable, including accounts transferred to the third party financial institution, and corresponding secured debt on a  gross basis in the balance sheets.  Derivatives and Hedging Activity   The Company has entered into long-term agreements to supply auto body sheet to its largest customers. To reduce the  risk  of  changing  prices  for  purchases  and  sales  of aluminum,  including  firm  commitments  under  these  supply  agreements, the Company uses commodity futures and option contracts.  The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at fair value. The  Company’s derivatives do not qualify for hedge accounting treatment and are not designated as cash flow hedges.   Accordingly, these instruments are adjusted to fair value each reporting period with corresponding gains and losses  recognized in the statements of comprehensive loss.                                                  6  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        The Company from time to time enters into natural gas forward price lock contracts to reduce the risks associated with  utility cost volatility. Natural gas acquired under these types of contracts is accounted for as a normal purchase with  expenses recognized in the period incurred.   Inventory Valuation   Manufacturing inventories are valued at the lower of cost or net realizable value using the weighted average method  of accounting. Supplies inventory is valued on an average cost basis, with periodic evaluation of diminished utility  through a depletion and obsolescence reserve. Certain items in inventory may be considered impaired, obsolete, or in  excess quantities, and, as such, the Company may reduce the carrying value of these items to their net realizable value.  Based on  certain assumptions and judgments  made from the information available, the Company recognizes  the  amounts of these inventory adjustments as charges to Cost of sales in the statements of comprehensive loss. If these  estimates and related assumptions or the market changes, the Company may be required to record additional write- downs.   Property and Equipment, Net   Property and equipment are stated at cost. Major additions are capitalized as assets, while maintenance and repairs,  which do not improve or extend the lives of assets, are expensed as incurred. Depreciation is computed using the  straight-line method over the estimated useful lives of the respective assets. Interest costs incurred to bring an intended  capital project to its intended use are capitalized as a component of the asset under construction. Upon retirement or  disposition of property and equipment, the cost and accumulated depreciation are removed from the asset accounts,  and any resulting gain or loss is included in the statements of comprehensive loss.   Impairments  The Company evaluates long-lived assets subject to amortization for impairment  whenever events or changes  in  circumstances  indicate  the  carrying  amount  of  the  assets  may  not  be  recoverable.  Triggering  events  include  a  significant change in the extent or manner in which long-lived assets are being used, in the physical condition of the  assets, in legal factors, or in the business and regulatory climate that could affect the value of the long-lived assets.  The interpretation of such events requires judgment from management as to whether such an event has occurred. When  factors indicate that an asset should be evaluated for possible impairment, the Company reviews long-lived assets to  assess recoverability from future operations using undiscounted cash flows. If undiscounted cash flows are greater  than carrying value, no impairments are recognized. Impairments are recognized in the statements of comprehensive  loss to the extent that the carrying value exceeds fair value. Fair value is based on discounted estimated cash flows  from the future use of the assets.   Revenue Recognition  The Company records revenue when the following criteria are met: persuasive evidence of an arrangement exists,  delivery has occurred, the Company’s price to the customer is fixed or determinable, and collectability is reasonably  assured. Delivery is not considered to have occurred until the customer assumes the risks and rewards of ownership.  Customers take delivery at the time of shipment for sales designated free on board shipping point. For sales designated  free on board destination, customers take delivery when the product is received at the customer’s designated site. Sales  are recorded net of provisions for returns, discounts, and allowances, including customer specific discounts based on  contractual obligations.  The Company's standard sales terms and conditions allow for the return of certain products within a specified period  from the date of shipment. At the time revenue is recognized, the Company considers the recognition of a provision  for the estimated amount of future returns, primarily based on historical experience, specific notification of pending  returns, or contractual terms with the respective customers.  Aluminum Scrap Sales  Aluminum scrap is produced during the normal manufacturing process or determined as unusable product at later  points in the supply chain. Scrap on-hand is sold at contractual or prevailing market prices to market participants,  including subsidiaries and affiliates of the parent companies. Sales of scrap and scrap products are recognized at the  agreed  upon  selling  price  with  the  buyer  and  recorded  as  a  reduction  to  Cost  of  sales  in  the  statements  of  comprehensive loss.                                                   7  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        Shipping and Handling Costs  Shipping and handling costs incurred by the Company totaled $21.7 million, $11.2 million and $1.7 million for the  years ended December 31, 2018, 2017 and 2016, respectively, and are included as a component of Cost of sales in the  statements of comprehensive loss. Amounts billed to customers related to shipping and handling are included in Net  sales in the statements of comprehensive loss.   Grants and Incentives  The  Company  is  provided  certain  government  grants  and  other  incentives  through  programs  offered  by  the  Commonwealth of Kentucky, local agencies, and regulated service providers. The programs vary by requirements and  conditions—including  capital  investments,  minimum  headcount  and  average  employee  wage  and  benefit  levels,  training programs for state residents, location and capacity of the manufacturing facility, and energy usage, among  other criteria—and incentives provided, such as cash refunds, tax abatements, and energy credits. Depending on the  nature of the programs and the form of consideration given, the Company recognizes the benefits upon compliance  with the relevant program requirements and assurance of receipt. Most consideration received is netted against the  applicable expense (e.g., utilities, property taxes, employee costs, etc.) in the statements of comprehensive loss, except  for cash grants received during 2016 attributable to the development of the property and equipment, which were  deducted from the carrying value of the related assets within Property and equipment, net.  Interest Expense  Interest expense includes interest associated with interest bearing debt from owners and  capital leases,  factoring  discount fees, bank fees, and other interest charges. Interest expense excludes the amount of interest costs incurred to  finance the long-term construction projects, which costs are capitalized as a component of property and equipment.  Foreign Currency Translation  Certain supplier and customer transactions are denominated in Euros based on the terms of the respective contracts.  The translation of these Euro-denominated transactions into U.S. dollars is performed for balance sheet accounts using  exchange rates in effect at each balance sheet date and for revenue and expense accounts using an average exchange  rate each month during the year. The gains or losses resulting from the balance sheet translation are included in Foreign  currency translation adjustments in the statements of comprehensive loss and are excluded from net income.  Income Taxes  The Company is taxed as a partnership under Subchapter K of the Internal Revenue Code. Therefore, the results of  the Company’s operations are included in the taxable income of the individual members. As a result, no provisions  for federal or state income taxes are included in the Company’s financial statements.  2.  Recent Accounting Pronouncements   In  September  2017,  the  Financial  Accounting  Standards  Board  (“FASB”)  issued  ASU  No.  2017-13,  “Revenue  Recognition (Topic 605), Revenue from Contracts with  Customers  (Topic  606),  Leases  (Topic  840),  and  Leases  (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting  and Rescission of Prior SEC Staff Announcements and Observer Comments (SEC Update): (“ASU 2017-13”), which  allows entities that otherwise would not meet the definition of a public business entity except for a requirement to  include its financial statements or financial information in another entity’s filing with the Securities and Exchange  Commission (“SEC”) to adopt the new guidance on revenue recognition and leases at the later effective dates specified  for all other entities. As of December 31, 2018, the Company is considered a public business entity based solely on  the requirement that these financial statements be included in Constellium’s 2018 Annual Report on Form  20-F.  Accordingly, the effective dates discussed below are those specified for non-public entities.  In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses – Measurement of Credit  Losses  on  Financial  Instruments”  (“ASU  2016-13”),  as  subsequently  amended  by  ASU  2018-19,  “Codification  Improvements  to  Topic  26,  Financial  Instruments-Credit  Losses,”  issued  in  November  2018.  This  standard,  as  amended, changes the methodology used to estimate losses on financial instruments (e.g., trade receivables, loans,  debt securities, off-balance sheet credit exposures, etc.) from an incurred loss impairment model to an expected credit  loss model. Therefore, ASU 2016-13 replaces the current approach that delays recognition until a probable loss has  been incurred with a new approach that estimates an allowance for anticipated credit losses on the basis of an entity’s                                                  8  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        own expectations. The objective of the new approach for estimating credit losses is to require consideration of a  broader range of forward-looking information, which is expected to result in earlier recognition of credit losses on  financial instruments. ASU 2016-13 will be effective for the Company for fiscal year 2021 and interim periods within  fiscal year 2022. Early adoption is permitted for fiscal years and interim periods beginning after December 15, 2018.  The Company is currently in the process of evaluating the impact adoption of this standard will have on its financial  statements.  In  February  2016,  the  FASB  issued  Accounting  Standards  Update  (“ASU”)  2016-02,  “Leases”,  as  codified  in  Accounting Standards Codification (“ASC”) Topic 842 – Leases (“ASC 842”).  This standard, as amended, requires  lessees to recognize right-of-use assets, representing their right to use the underlying asset for the lease term, and lease  liabilities on the balance sheet for all leases with terms greater than 12 months. The guidance also modifies  the  classification  criteria  and  the  accounting  for  sales-type  and  direct  financing  leases  by  lessors.  Additionally,  the  guidance requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of  cash flows arising from leases. This standard will be effective for the Company for the annual reporting  period  beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020,  with early adoption permitted. The Company is in the process of determining the adoption method for ASU 2016-02,  and is still evaluating the effects the adoption will have on its financial statements.  However, the Company expects  the updated standard will result initially in relatively small increases to reported non-current assets and liabilities.  Management will monitor any new operating leases as it prepares to implement ASU 2016-02, as these could have a  more pronounced impact on long-term assets and liabilities than currently anticipated.   In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”),  which  outlines  a  comprehensive  revenue  recognition model  and  supersedes  most  current  revenue  recognition  guidance. The new standard requires a company to recognize revenue upon transfer of goods or services to a customer  at an amount that reflects the expected consideration to be received in exchange for those goods or services. ASU  2014-09 defines a five-step approach for recognizing revenue, which may require a company to use more judgment  and make more estimates than under the current guidance. With the issuance of ASU No. 2015-14, “Revenue from  Contracts with Customers – Deferral of the Effective Date” and ASU 2017-13, the Company expects to adopt the  standard and all related updates for the annual reporting period beginning after December 15, 2018, and for interim  periods within fiscal years beginning after December 15, 2019. The new standard and related updates allow for two  methods of adoption: (a) full retrospective adoption, meaning the standard is applied to all periods presented; or (b)  modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized as an  adjustment  to the opening  retained  earnings  balance in the year of adoption. The Company is in the process  of  determining the adoption method to be applied; however, the Company does not expect the adoption of this standard  to have a material impact on its financial statements.   In addition, the FASB-IASB Joint Transition Resource Group for Revenue Recognition (“TRG”) continues to inform  the FASB of potential implementation issues related to ASU 2014-09. The FASB has issued a number of technical  improvements, practical expedients, and clarifications since 2014. None of the additional ASUs related to contracts  with customers are expected to have a material impact on the Company’s adoption of ASU 2014-09.  In  August  2018,  the  FASB  issued  ASU  No.  2018-13,  “Disclosure  Framework  —  Changes  to  the  Disclosure  Requirements for Fair Value Measurement” (“ASU 2018-13”). The standard update removes, modifies, and adds  certain disclosure requirements in ASC 820 — Fair Value Measurements (“ASC 820”) on the basis of the concepts in  the FASB Concepts Statement Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial  Statements, which explains the information to be considered for inclusion in the notes to the financial statements by  describing the purpose of the notes, the nature of appropriate content, and general limitations, as well as consideration  specific to interim reporting disclosure requirements. In addition to the changes prescribed by the guidance, ASU  2018-13 eliminates the concept of minimum disclosures under the fair value measurements guidance in order to  promote discretion and proper use of materiality by entities in determining appropriate disclosures.  ASU 2018-13 is effective for all organizations for fiscal years beginning after December 15, 2019 and interim periods  within those fiscal years with some amendments applicable prospectively and others retrospectively for all periods  presented. Early adoption is permitted. The Company is currently assessing the impact of adoption of ASU 2018-13  and expects any effect(s) to be limited to disclosures only.                                                  9  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        3.  Inventories   Inventories consisted of the following (in thousands):                                                             December 31,      December 31,                                                                2018             2017        Manufacturing inventories:         Raw materials                                   $                    29,789 $                    36,176         Work in progress                                                      20,397                        19,018         Finished goods                                                        24,179                        12,000       Total manufacturing inventories                                         74,365                        67,194       Supplies inventory                                                        3,787                          1,031       Total inventories                                 $                    78,152 $                    68,225                                                                                             Manufacturing inventories are stated at the lower of cost or net realizable value based on the weighted average cost  method. Adjustments for obsolete inventory on-hand were recorded for inventory designated or expected to be sold  as scrap. At December 31, 2018 and 2017, the Company recorded obsolete and scrap inventory write-downs totalling  $0.6 million and $1.7 million, respectively.  Supplies inventory includes spare parts and consumable products required to support the manufacturing operations,  and is valued on an average cost basis, with the effects of periodic evaluations of diminished utility recorded through  a depletion writedown or adjustment. Increases to the depletion reserve balance have a corresponding increase on Cost  of sales in the statements of comprehensive loss. Based on the utilization of supplies inventory and current stocks, no  write-downs were recorded during the years ended December 31, 2018 and 2017.  4.  Property and Equipment, Net   Property and equipment, net consisted of the following as of December 31, 2018 and 2017 (in thousands):                                          Estimated Useful   December 31,     December 31,                                         Lives in Years (a)    2018              2017        Land, buildings and improvements     20 to 40$                    53,936 $                    53,305       Machinery and equipment              3 to 20                    152,930                      149,932       Furniture, fixtures and other        3 to 10                        3,313                          2,857       Construction in progress                                                  4,411                          2,450           Total cost                                                        214,590                      208,544       Less: Accumulated depreciation                                        (24,450)                      (14,283)       Property and equipment, net                       $                  190,140 $                  194,261        (a) reflects range of majority of assets per category                                 Depreciation expense was $10.2 million for the year ended December 31, 2018, $9.3 million of which is included in  Cost of sales and $0.9 million of which is included in Selling, general and administrative expenses in the statements  of comprehensive loss. Depreciation expense was $9.6 million and $4.6 million for the years ended December 31,  2017 and 2016, respectively, and is included in Cost of sales in the statements of comprehensive loss.  Equipment capitalized under capital leases was $74.2 million at cost as of December 31, 2018 and 2017, respectively.  The associated accumulated depreciation was $9.3 million and $5.6 million as of December 31, 2018 and 2017,  respectively.  Accounts  payable  and  Accrued  expenses  and  other  current  liabilities  included  $0.7  million  and  $0.8  million,  respectively, for amounts due for capital expenditures for the year ended December 31, 2018. No amounts  were  accrued or payable for capital expenditures at December 31, 2017 and 2016.                                                 10  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        Capitalized interest was not material for the years ended December 31, 2018 and 2017.  5.  Derivatives and Hedging Activity   The Company has entered into long-term contracts to supply auto body sheet to its largest customers. To reduce the  risk of changing prices for purchases and sales of metal, the Company uses commodity futures contracts and options  to manage its price exposure with respect to firm commitments to purchase or sell aluminum. In 2018, the Company  entered into derivative contracts administered through Constellium N.V.’s global hedging program.    The Company recognizes all derivative instruments as either current assets or current liabilities in the balance sheets  at fair value. Derivatives that do not qualify or are not designated as cash flow hedges pursuant to the applicable  accounting guidance are adjusted to fair value through the statements of comprehensive loss. The Company has elected  not to designate any of its derivative instruments as cash flow hedges.  Changes in the fair value of derivative instruments are recorded as gains and losses in earnings. For the year ended  December 31, 2018, net realized and unrealized losses on aluminum futures and options were $2.4 million, which are  included in Loss on derivative instruments, net in the statements of comprehensive loss.  As of December 31, 2018, the Company had futures contracts for 15.1 million pounds of aluminum. At December 31,  2018, all of the Company’s derivative instruments totaled a $0.7 million net liability position.  The Company from time to time enters into natural gas forward purchases to reduce the risks associated with utility  cost volatility. As of December 31, 2018, the Company had forward price lock contracts to purchase 0.2 million  MMBtu of natural gas. Natural gas purchases under these forward price lock contracts are accounted for as normal  purchases, and expenses are recognized as incurred.   6.  Fair Value of Financial Instruments   Current accounting guidance defines fair value as 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. It requires all  assets  and  liabilities that are measured and carried on a fair value basis to be classified and disclosed in one of the following three  categories based upon the inputs used to determine fair value measurements (hierarchy based on quality and reliability  of inputs):      Level 1 – Quoted prices in active markets for identical assets or liabilities;      Level 2 – Observable market based inputs or unobservable inputs that are corroborated by market data; or      Level 3 – Unobservable inputs that are not corroborated by market data.  The  Company’s  financial  instruments  include  cash  and  cash  equivalents,  accounts  receivable,  accounts  payable,  derivative instruments (metal and natural gas forward contracts), short-term borrowings, fixed rate long-term debt,  and capital lease obligations. The Company endeavors to utilize the best available information in measuring fair value.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the  fair value measurement.  The Company utilizes valuation methodologies to determine the fair values of its financial assets and liabilities in  conformity with the concepts of “exit price” and the fair value hierarchy. All valuation methods and assumptions are  validated at least quarterly to ensure the accuracy and relevance of the fair values. There were no material changes to  the valuation methods or assumptions used to determine fair values during 2018.  The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings  approximate their fair value because of the short-term maturity and highly liquid nature of these instruments and are  considered Level 1. The Company values its aluminum futures contracts using market prices as published by the LME,  which is an active market. As such, these derivative instruments are included in Level 1.  The following table summarizes the valuation of the Company’s financial instruments, that are required to be measured  at fair value on a recurring basis, based on the appropriate level of the fair value hierarchy as of December 31, 2018  (in thousands):                                                 11  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                                                                          Fair Value Measurements at December 31, 2018 Description                              Level 1        Level 2        Level 3         Total Derivative liability   Aluminum option contracts          $                           663 $                            - $                            - $                           663                                                                                                  There were no Level 3 financial assets or liabilities or transfers into or out of Level 1, Level 2, and Level 3 during the  years ended December 31, 2018 and 2017.  7.  Employee Benefit Plans   Defined Contribution Plans – 401K  The Company maintains  defined contribution plans for all of its employees. The Company matches 50% of the  employee’s elected deferral up to the first 6% of the employee’s pay. Additionally, the Company makes an annual  contribution to the plan based on a defined formula. The Company’s contributions to the plans amounted to $0.5  million, $0.3 million and $0.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. These  contributions were recorded in Cost of Sales and Selling, general, and administrative expenses in the statements of  comprehensive loss.  8.  Short-Term Borrowings   Factoring Arrangement  On September 6, 2017, the Company (the “Seller”) entered into a receivables purchase agreement (the “Recourse  Factoring Agreement”) with Wells Fargo Bank, NA (the “Purchaser” or “Factor”) providing for the recourse sale of  certain customer accounts receivable owed to the Seller. The terms of the Recourse Factoring Agreement extend  through September 6, 2019, with annual renewals based on certain criteria. The Seller may terminate the agreement  by means of written notice of termination 60 days prior to any annual renewal date. Any uncollected receivables are  repurchased from the Factor by the Company at the gross amount of the outstanding receivable. Substantially all of  the risks and rewards related to these outstanding receivables are not transferred at the time of each transaction. Hence,  the transfer of accounts receivable to the Purchaser does not meet the requirements of a sale, and the cash consideration  received is considered borrowings secured by collateral assets (i.e., accounts receivable).  The Company pays the Purchaser an annual facility fee of $62,500 payable on the effective date of the agreement and  on each anniversary date.  The Recourse Factoring Agreement provides for a number of termination events, the occurrence of which permits the  Purchaser  to  terminate  its  obligation  to  purchase  receivables  under  the  Recourse  Factoring  Agreement. As  of  December 31, 2018, no termination events had occurred. In January 2019, the Company determined that it was not in  technical compliance with one of the covenants related to Net Cash Flow at December 31, 2018, as defined under the  terms of the Recourse Factoring Agreement. The Purchaser granted a waiver of this covenant violation to the Company  in the same month of determination. As of December 31, 2018, no changes in accounting or reporting of the Recourse  Factoring Agreement was required in response to the covenant violation and subsequent waiver granted, and no impact  to the Company’s results of operations, financial position, or cash flows occurred. With the execution of this Recourse  Factoring Agreement, Constellium U.S. and Tri-Arrows, as lenders to the Company, agreed to subordinate their loans  to the obligations payable to the Factor.  At December 31, 2018, the maximum outstanding accounts receivable that can be sold to the Factor was $25.0 million  per the terms of the Recourse Factoring Agreement. The outstanding amounts of receivables sold to the Factor were  $24.7 million and $12.7 million at December 31, 2018 and 2017, respectively, which represent amounts still due from  the customers to the Purchaser. Control related to these outstanding receivables was not transferred to the Purchaser  due to the continuing involvement with the assets, including the Seller’s right to repurchase any uncollected accounts  with one-day prior notice. Under the terms of the Recourse Factoring Agreement, the gross amount of the receivables  transferred is discounted by an amount based on LIBOR plus 2.75%. As of December 31, 2018, the contract rate was  5.27%.  Accounts receivable sold with recourse under the Recourse Factoring Agreement totaled approximately $295.6 million  and $41.9 million during the years ended December 31, 2018 and 2017, respectively. This amount represents the                                                 12  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        aggregate  value  of  receivables  transferred  to  the  Purchasers  for  cash  consideration.  No  historical  experience  of  uncollectible receivables has occurred since the inception of the agreement, and no liability for possible repurchases  was necessary at December 31, 2018.  Discount and other fees incurred during the years ended December 31, 2018 and 2017 under the terms of the Recourse  Factoring Agreement totaled $0.6 million and $0.2 million, respectively, and are included in Interest expense in the  statements of comprehensive loss.  9.  Debt   Borrowings consisted of the following as of December 31, 2018 and 2017 (in thousands):                                                                  December 31, 2018 December 31, 2017                                                                  Debt Principal   Debt Principal                                                                     Amount           Amount  Constellium U.S. commited loan facility                       $                  142,290 $                  114,240  Tri-Arrows commited loan facility                                                 136,710                      109,760  Capital lease obligations                                                           56,269                        63,171  Total debt obligations                                                            335,269                      287,171  Less current maturities:   Current portion of capital leases                                                (11,900)                        (6,903)  Total long-term debt                                          $                  323,369 $                  280,268                                                                                                  Loans from Members  The Company’s debt obligations consist of fixed rate committed loan facilities from Constellium U.S. and Tri-Arrows  (collectively, the “Issuers”) (“Member Loans”). In accordance with the JV Agreement, the Member Loans were issued  to the Company by the parties to the joint venture and include an interest rate of 8.0%, payable in arrears to each of  the Issuers on the maturity date for each unpaid draw. On February 8, 2018, the Company and the Issuers amended  the agreements to extend the maturity date of the Member Loans to March 31, 2023, with a five year extension  thereafter upon written confirmation from the Issuers. Additionally, the annual interest rate on Member Loans was  modified to 6.5% of the outstanding principal balance beginning on February 1, 2018. In March and November 2018,  the Member Loans were amended to increase the maximum borrowing amount to $270.0 million and $286.0 million,  respectively under terms similar to those in effect under the previous facility agreements and amendments. As of  December 31, 2018, the Company classified the Member Loans as noncurrent liabilities in the balance sheets.    In certain cases, the Issuers can elect to increase the principal amount of the borrowings for any outstanding interest  payments due and not received by the maturity date(s). A quarterly commitment fee of 1% is payable to the Issuers  on amounts below the maximum principal amount of borrowings permitted.  The Member Loans were executed by the Issuers and the Company on September 30, 2015 for an initial aggregate  draw of $30.0 million, which was subsequently increased to $90.0 million by the end of 2015. The initial draw matured  on December 31, 2015; however, the Member Loans were renewed for another year. A one-time non-refundable  signing fee was paid in the amount of $450,000 to the Issuers, ratably by the individual amounts loaned. Subsequent  principal increases to the committed facilities were facilitated through amendments to the Member Loans, which  allowed for additional borrowings by the Company.  During 2016, the Issuers increased the maximum amount of the Member Loans to $164.0 million under the same  terms of the previous facility agreements and amendments.   On April 18, 2017 and November 27, 2017, the Member Loans were amended to increase the maximum borrowing  amount to $184.0 million and $204.0 million, respectively, under similar terms and conditions. On December 28,  2017, the Issuers agreed to increase the maximum amount of the Member Loans to $224.0 million with a maturity  date of March 31, 2018, under terms similar to those in effect under the previous facility agreements and amendments.  In March and November 2018, the Member Loans were amended to increase the maximum borrowing amount to                                                 13  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        $270.0 million and $286.0 million, respectively under terms similar to those in effect under the previous facility  agreements and amendments.  As of December 31, 2018, the Company had availability of $7.0 million to borrow under the Member Loans. As of  December 31, 2017, the Company had no availability to borrow under the Member Loans, as all committed availability  had been drawn.  The effective interest rate on the Member Loans was 6.5% for 2018 and 8.0% for 2017 and 2016, respectively. All  outstanding principal will be payable to the Issuers on March 31, 2023, unless the extension option is elected.  Tri-Arrows’ Member Loan was extinguished in full as a result of the CUA Acquisition.  Additionally, on January 10,  2019, Constellium U.S.’s Member Loan was repaid in full, and the Company and Constellium entered into various  new loan agreements. See Note 14 – Subsequent Events.   Covenants  As of December 31, 2018, the Company was in compliance with all of the covenants related to the Member Loans.  Any failure to comply with the covenants could result in an event of default, which if not cured or waived, could have  a material adverse effect on the Company’s business, financial condition, and results of operations. Additionally, if  one or both of the Issuers become incapable of holding the Member Loans or decide to no longer fund the Company,  these events could have a material adverse effect on  the Company’s  liquidity,  financial  condition,  and  results of  operations.  The Member Loans were fully and unconditionally guaranteed by Constellium and UACJ at December 31, 2018.  Minimum Principal Payments   Minimum principal payments due on total long-term debt and capital lease obligations as of December 31, 2018 are  as follows for the years indicated (in thousands):         2019                                                                $                    11,900       2020                                                                                      16,670       2021                                                                                      17,413       2022                                                                                        8,239       2023                                                                                    281,047       Total                                                               $                  335,269                                                                                             10.  Leases   The Company leases certain equipment used in its manufacturing and office facility. These leases are designated as  either capital or operating leases. Future minimum lease payments as of December 31, 2018 for those leases having  an initial or remaining non-cancelable lease term in excess of one year are as follows for the years indicated (in  thousands):                                                   14  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                                                                                Operating Leases   Capital Leases        2019                                              $                         131 $                    14,739       2020                                                                         106                        18,783       2021                                                                         104                        18,567       2022                                                                           99                          8,606       2023                                                                           78                          2,076       Total minimum future payments                     $                         518 $                    62,771       Less: imputed interest                                                                   (6,502)        Less: current maturities                                                               (11,900)        Long-term capital lease obligations                                $                    44,369                                                                                            Mitsubishi Equipment Financing Agreement  On April 29, 2015, the Company entered into a non-cancellable lease agreement with Mitsubishi UFJ Lease & Finance  (U.S.A.) Inc. (“Mitsubishi Finance”) for equipment acquired by the Company and ownership of which was transferred  to  Mitsubishi  Finance  in  exchange  for  cash  consideration  equal  to  the  value  of  the  equipment  purchased  (the  “Mitsubishi direct financing agreement”). Rights of ownership were transferred to Mitsubishi Finance at the inception  of  the  lease  agreement,  but  control  and  certain  risks  of  ownership  (e.g.,  responsibility  for  taxes,  repairs  and  maintenance costs, risk of loss, etc.) of the leased equipment remained with the Company. The Mitsubishi direct  financing agreement was for maximum equipment purchases up to $21.1 million and with an original term of five  years upon installation of the equipment. The Company is obligated to repurchase all of the leased equipment on an  as-is basis for $1.00 at the end of the lease period. The Mitsubishi direct financing agreement provides for a number  of termination events, the occurrence of which would require the Company to return all equipment to Mitsubishi  Finance. As of December 31, 2018, the Company was in discussions with Mitsubishi Finance regarding termination  and settlement of the lease in connection with the CUA Acquisition. See Note 13 – Related Party Transactions and  Note 14 – Subsequent Events.  On January 10, 2019, the Company terminated the Mitsubishi Equipment Financing Agreement.  The Company repaid   principal and interest due of $11.7 million, termination fees of $0.6 million, and purchased all equipment covered by  the lease agreement.   Tokyo Century Equipment Financing Agreement  On March 31, 2016, the Company entered into a non-cancellable lease agreement with Tokyo Century (U.S.A.) Inc.  (“Tokyo Century”) for equipment acquired by the Company and ownership of which was transferred to Tokyo Century  in exchange for cash consideration equal to the value of the equipment purchased (the “Tokyo Century master lease  agreement”). Rights of ownership were transferred to Tokyo Century at the inception of the lease agreement, but  control and certain risks of ownership (e.g., responsibility for taxes, repairs and maintenance costs, risk of loss, etc.)  of the leased equipment were retained by the Company. Under separate borrowing tranches executed on April 5, 2016  and  June  20,  2017,  the  Company  entered  into  equipment  financing  leases  for  $30.0  million  and  $13.0  million,  respectively, with terms of six  years upon installation of the equipment (collectively, the “Tokyo Century  direct  financing agreements”). The terms and conditions of the Tokyo Century master lease agreement were incorporated by  reference into the Tokyo Century direct financing agreements. The Company has the option to repurchase all of the  leased equipment on an as-is basis for $1.00 for each tranche at the end of the respective lease periods. The Tokyo  Century master lease and direct financing agreements provide for a number of termination events, the occurrence of  which would require the Company to return all equipment to Tokyo Century. As of December 31, 2018, the Company  was in discussions with Tokyo Century regarding termination and settlement of the lease in connection with the CUA  Acquisition. See Note 13 – Related Party Transactions and Note 14 – Subsequent Events.  On January 10, 2019, the Company terminated the Tokyo Century Equipment Financing Agreement. The Company  repaid principal and interest due of $37.9 million, termination fees of $4.7 million, and purchased all  equipment  covered by the lease agreement.                                                  15  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        Sumitomo Equipment Financing Agreement  On February 28, 2017, the Company entered into a non-cancellable lease agreement with Sumitomo Mitsui Finance  and Leasing Company Limited (“Sumitomo”), an affiliate and subsidiary of Sumitomo Corporation as well as a related  party of the Company (see Notes 1 and 13 ), for equipment acquired by the Company and ownership of which was  transferred  to  Sumitomo  in  exchange  for  cash  consideration  equal  to  the  value  of  the  equipment  purchased  (the  “Sumitomo direct financing agreement”). Rights of ownership were transferred to Sumitomo at the inception of the  lease agreement, but control and certain risks of ownership (e.g., responsibility for taxes, repairs and maintenance  costs, risk of loss, etc.) of the leased equipment were retained by the Company. The Sumitomo direct financing  agreement was for equipment purchases of $8.0 million and had a term of six years. The Company has the option to  repurchase all of the leased equipment on an as-is basis for $1.00 at the end of the lease period. The Sumitomo direct  financing agreement provides for a number of termination events, the occurrence of which would require the Company  to return all equipment to Sumitomo. As of December 31, 2018, the Company was in discussions with Sumitomo  regarding termination and settlement of the lease in connection with the CUA Acquisition. See Note 13 – Related  Party Transactions and Note 14 – Subsequent Events.  On January 10, 2019, the Company terminated the Sumitomo Equipment Financing Agreement. The Company repaid  principal and interest due of $6.8 million, termination fees of $1.1 million, and purchased all equipment covered by  the lease agreement.  Operating Leases   Rent expense under operating leases, including short-term rentals, is included in both Cost of sales and Selling, general  and administrative expenses in the statements of comprehensive loss for the years ended December 31, 2018, 2017  and 2016 as follows (in thousands):                                                               Years Ended December 31,                                                     2018            2017             2016  Cost of sales                                 $                         188 $                             9 $                           90  Selling, general, and administrative expenses                             90                             107                               33  Total rent expense                            $                         278 $                         116 $                         123                                                                                                  11.  Commitments and Contingencies    Commitments  Capital expenditure and purchase commitments  As of December 31, 2018, the Company had future commitments for purchases of capital equipment of $0.2 million  and commitments for unconditional product purchases of approximately 47.9 million pounds of aluminum.   Contingencies  Future environmental regulations, including those under the Clean Air Act and Clean Water Act, or more aggressive  enforcement of existing regulations, may result in stricter compliance requirements for the Company and  for  the  aluminum industry in general.  At December 31, 2018, the Company had no events or circumstances that required material provisions to be recorded.  During 2018, the Company entered into discussions with another party about various legal matters during which both  parties requested payment from the other due to estimated losses. The Company is in continued discussions with the  other party and because there are offsetting amounts,  a  reasonable  estimate  of  a  potential  loss provision  was not  reliably possible at December 31, 2018. In addition, the Company has evaluated the matter and does not believe it is  probable that a loss or present obligation has been incurred in connection with the other party’s assertion. Accordingly,  the Company has not recorded a loss or related liability for this contingency in the Statement of Comprehensive Loss  or Balance Sheet.                                                      16  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        The Company is a party from time to time in various legal actions arising in the normal course of business, the  outcomes of which, in the opinion of management, neither individually nor in the aggregate are likely to have a  material adverse effect on the Company's financial position, results of operations, or cash flows.  Standby Letters of Credit  The Company provides certain third parties with irrevocable letters of credit in the normal course of business to secure  its obligations to pay or perform pursuant to the requirements of an underlying agreement or the provision of goods  and services. These standby letters of credit are cancelable only at the option of the beneficiary who is authorized to  draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms. At  December 31, 2018 and 2017, the Company had letters of credit of $2.1 million and $0.8 million, respectively, for  which no draws were outstanding. These letters of credit supported incentive grants received by the Company and are  contingent on the Company meeting certain equity requirements and employment thresholds. The standby letters of  credit renew annually.  12.  Capital Contributions and Related Matters   On January 10, 2019, Constellium acquired Tri-Arrows’ 49% ownership interest in the Company, pursuant to which  the Company became a wholly-owned subsidiary of Constellium. See Note 14 – Subsequent Events.  In accordance with the JV Agreement in force at December 31, 2018, Constellium U.S. and Tri-Arrows are required  to maintain the proportionate agreed upon ownership percentages in the Company of 51% and 49%, respectively,  through equity cash contributions and loans. Any future contributed capital or additional Member Loans will require  a corresponding transaction from the other partner in the joint venture to maintain this structure.  In December 2014, Constellium U.S. and Tri-Arrows contributed $25.5 million and $24.5 million, respectively, of  cash to  capitalize the  Company.  In February and March 2015,  Constellium  U.S.  made cash  contributions to  the  Company totaling $5.1 million in each month, and Tri-Arrows contributed $4.9 million of cash to the Company in  each of these months as well. The aggregate of these equity infusions constitutes Contributed capital on the balance  sheets.   13.  Related Party Transactions   Constellium Hedging Program  The Company transitioned the execution of substantially all of its hedging activity to Constellium Switzerland AG, a  wholly-owned subsidiary of Constellium N.V., during 2018. All of the Company’s derivative instruments at December  31,  2018  are  administered  through  Constellium  N.V.’s  global  hedging  program.  The  fair  value  of  outstanding  derivative contracts is presented in Accrued expenses and other current liabilities in the balance sheets. Gains and  losses  (both  realized  and  unrealized)  are  included in  Loss  on  derivative  instruments,  net  in  the  statements  of  comprehensive loss.  Net amounts outstanding and due to Constellium Switzerland AG related to the derivative purchase and settlement  activity described above was $0.7 million as of December 31, 2018. This amount is included in Accrued expenses and  other current liabilities at December 31, 2018.   Purchase and Services Agreements  On September 15, 2016, Tri-Arrows, UACJ, Wise Alloys LLC, and Constellium Neuf-Brisach SAS (the two latter  companies  are  indirect  wholly-owned  subsidiaries  of  Constellium)  executed  a  metal  supply  agreement  with  the  Company to purchase cold rolled coils for auto body sheet products (the “Metal Supply Agreement”). The Metal  Supply  Agreement is effective for a  term  of 15  years.  On February 8, 2018, the Company, Tri-Arrows, UACJ,  Constellium Muscle Shoals LLC (formerly known as Wise Alloys LLC), and Constellium Neuf Brisach SAS agreed  to amend the Metal Supply Agreement. Effective retroactively to January 1, 2018, the amendment changes the metal  and conversion pricing formula and extends the payment terms under the Metal Supply Agreement. Additionally, a  review of the new conversion price and payment terms for purchased materials shall be performed to determine the  applicable  provisions to  be  effective  after  January 1, 2020. The original 15-year  term  of the agreement  remains  unchanged.                                                 17  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        The Company procures raw materials and certain support services from Constellium and its subsidiaries. During the  years ended December 31, 2018, 2017 and 2016, the Company had related party purchases from Constellium of $108.4  million,  $86.9  million  and  $18.8  million,  respectively,  included  in  Inventories  in  the  balance  sheets and,  when  consumed, in Cost of sales in the statements of comprehensive loss. As of December 31, 2018, and 2017, outstanding  related party accounts payable balances due to Constellium totaled $50.2 million and $19.0 million, respectively,  which are included in Accounts payable in the balance sheets.  The Company procures raw materials and certain support services from UACJ and its affiliated companies. During  the years ended December 31, 2018, 2017 and 2016, the Company had related party purchases from UACJ and its  affiliated companies of $73.6 million, $108.7 million and $26.3 million, respectively, included in Inventories in the  balance sheets and, when consumed, in Cost of sales in the statements of comprehensive loss. As of December 31,  2018, and 2017, outstanding related party accounts payable balances due to UACJ totaled $30.9 million and $2.1  million, respectively, which are included in Accounts payable in the balance sheets. Amounts outstanding as of the  date of the CUA Acquisition will be settled in the ordinary course of business.   During the year ended December 31, 2018 and 2017, the Company also incurred $0.9 million, respectively, in leasing  costs related to its lease agreement with Sumitomo.  The Company sells aluminum scrap to Constellium and Tri-Arrows as a means of disposition of unusable materials  resulting from the normal manufacturing process and damaged or returned products without an alternative best use.  On February 8, 2018, the parties to the joint venture amended the joint venture agreement to define terms for the sale  of aluminum scrap by the Company to Constellium and Tri-Arrows. The amendment, which is effective as of January  1, 2018, outlines pricing and payment terms for the sale of scrap for an initial term of two years. Constellium Muscle  Shoals LLC and Tri-Arrows possess a right of first refusal to purchase any scrap material produced by the Company  during the manufacture of BiW products. The Company is allowed to sell aluminum scrap to a third party willing to  pay a price greater than the stated price in the amendment if Constellium Muscle Shoals LLC and Tri-Arrows elect  not to match the third party offer.  The Company sold $23.6 million of aluminum scrap to Constellium during 2018, which are included as a reduction  to Cost of sales in the statements of comprehensive loss. There were no scrap sales to Constellium in 2017 and 2016.  As of December 31, 2018, accounts receivable balances due from Constellium for scrap sold totaled $4.1 million,  which are included in Accounts receivable in the balance sheets. The Company sold $31.5 million, $30.6 million and  $9.3 million of aluminum scrap to Tri-Arrows during 2018, 2017 and 2016, respectively, included as a reduction to  Cost  of  sales in the  statements  of  comprehensive loss.  As  of  December  31,  2018,  and  2017,  accounts  receivable  balances due from Tri-Arrows for scrap sold totaled $4.4 million and $2.4 million, respectively, which are included  in Accounts receivable in the balance sheets.  14.  Subsequent Events   The Company has evaluated subsequent events through February 20, 2019, the date that these financial statements  were available to be issued.  On December 11, 2018, Constellium, Constellium U.S., UACJ, and Tri-Arrows entered into an agreement for the  purchase and transference of all interests held by Tri-Arrows to Constellium U.S. (the “Member Interest Purchase  Agreement” or “MIPA”). On January 10, 2019, Constellium completed the acquisition of Tri-Arrows’ 49% ownership  interest in the Company, pursuant to which the Company became a wholly-owned subsidiary of Constellium and  changed its name to Constellium Bowling Green LLC. The consideration transferred in exchange for the ownership  interest was $100.0 million in cash and the assumption of Tri-Arrows’ portion of the Member Loans and Tri-Arrows’  share of other outstanding debt. Amounts outstanding under the Tri-Arrow’s Member Loan in excess of $100.0 million  were  contributed  to  the  Company  as  a  capital  contribution  prior  to  and  contingent  upon  the  close  of  the CUA Acquisition.  On January 10, 2019, Constellium and the Company entered into a term loan agreement (the “Term Loan Agreement”)  in the principal amount of $142.5 million, the proceeds of which were used to refinance all obligations outstanding  under the Constellium U.S.’s Member Loan. The Term Loan has an effective annual interest rate of 6.5% and a  maturity date of January 10, 2024.                                                 18  *Not covered by the auditor’s report  

 

CONSTELLIUM-UACJ ABS LLC  NOTES TO THE FINANCIAL STATEMENTS  YEARS ENDED DECEMBER 31, 2018*, 2017 and 2016*                                        On January 10, 2019, Constellium and the Company entered into an intergroup loan agreement (the “Intergroup Loan  Agreement”) in the principal  amount of $63.0 million to finance the Company’s general corporate and business  activities. The Intergroup Loan Agreement has a maturity date of April 10, 2019, and bears interest at the 3-month  LIBOR USD rate plus 2.5%.  On January 10, 2019, Constellium and the Company entered into a revolving credit facility for drawdowns up to a  maximum aggregate outstanding principal amount of $20.0 million at any one time for the purpose of meeting the  Company’s general financing requirements. The revolving credit facility matures on January 10, 2020 and may be  extended by successive one year periods unless otherwise terminated under the terms of the agreement. The facility  bears interest at the 3-month LIBOR USD rate plus 2.35%.  On January 10, 2019, Tri-Arrows and the Company executed a new metal supply agreement to purchase cold rolled  coils for auto body sheet products (the “New Metal Supply Agreement”). The New Metal Supply Agreement shall  continue in effect through December 31, 2023.      In January 2019, the Company terminated and repaid all outstanding amounts related to the Mitsubishi Direct  Financing Agreement, the Tokyo Century Direct Financing Agreements, and the Sumitomo Direct Financing  Agreement. See NOTE 10 – Leases for details.                                                      19  *Not covered by the auditor’s report

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