Alcoa 2009 Annual Report Download - page 107

book value of the businesses, additional transaction costs, and various post-closing adjustments. Also, a net discrete
income tax charge of $19 was recognized in 2008 primarily due to the allocation of the sale proceeds to higher tax rate
jurisdictions as opposed to the allocation previously contemplated, changes in tax assumptions surrounding transaction
costs, and the finalization of the divestiture of certain foreign locations. Furthermore, Alcoa paid Rank a net $42 as a
result of working capital and certain other post-closing adjustments as defined in the sales agreement. This transaction
is no longer subject to working capital and other post-closing adjustments. Alcoa will sell metal to Rank under a supply
agreement that was entered into in conjunction with the sale agreement in December 2007. This metal supply
agreement constitutes significant continuing involvement in the sold businesses by Alcoa, and, therefore, the results of
operations of the Packaging and Consumer businesses were not classified as discontinued operations. The Packaging
and Consumer segment generated sales of $3,288 in 2007 and had approximately 9,300 employees in 22 countries.
This segment no longer contains any operations. The following is a description of the four businesses that were
included in this segment:
• Flexible Packaging, manufacturers of laminated, printed, and extruded non-rigid packaging materials such as
pouch, blister packaging, unitizing films, high quality shrink labels, and foil lidding for the pharmaceutical,
food and beverage, tobacco, and industrial markets;
• Closure Systems International, a leading global manufacturer of plastic and aluminum packaging closures
and capping equipment for beverage, food, and personal care customers;
• Consumer Products, a leading manufacturer of branded and private label foil, wraps and bags, and includes
the Reynolds®and Baco®branded products;
• Food Packaging, makers of stock and customer products for the foodservice, supermarket, food processor,
and agricultural markets, including foil, film, and both plastic and foil food containers.
2007 Acquisitions. In connection with the 2005 acquisition of the Belaya Kalitva and Samara fabricating facilities located
in Russia, Alcoa entered into a long-term aluminum supply contract with the seller of these facilities and made a
prepayment of $93. In January 2007, this $93 was repaid to Alcoa as provided for in the contract, and was reflected in the
cash from operations section on the accompanying Statement of Consolidated Cash Flows. The long-term aluminum
supply contract is still in place and none of the provisions of the contract changed due to the receipt of the $93.
In May 2007, Alcoa announced an offer to purchase all of the outstanding common shares of Alcan Inc. (Alcan), for a
combination of cash and stock. In July 2007, Alcan’s board of directors agreed to recommend acceptance of a takeover
offer by Rio Tinto plc, and Alcoa effectively withdrew its offer for Alcan due to said agreement. In 2007, Alcoa
recorded $46 ($30 after-tax) in transaction costs (investment banking, legal, audit-related, and other third-party
expenses) related to the offer for Alcan in Selling, general administrative, and other expenses on the accompanying
Statement of Consolidated Operations. In addition, Alcoa expensed $67 ($43 after-tax) in commitment fees, which
were paid to secure an 18-month $30,000 senior unsecured credit facility associated with the offer for Alcan. The $67
in commitment fees was recorded in Interest expense on the accompanying Statement of Consolidated Operations.
During 2007, Alcoa completed two acquisitions, including one for an outstanding noncontrolling interest in Russia, and
made a final contingent payment related to its 2002 acquisition of Fairchild Fasteners (Fairchild), all for a total cash
cost of $18. None of these transactions had a material impact on Alcoa’s Consolidated Financial Statements.
2007 Divestitures. In September 2007, Alcoa completed the sale of a lignite mine in Texas to TXU Mining Company
LP for $140, which consisted of $70 in cash and a $70 note receivable due in 2009. No material gain or loss was
recognized on the transaction. The cash proceeds were included in Proceeds from the sale of assets and businesses on
the accompanying Statement of Consolidated Cash Flows and the note receivable was recorded in Other noncurrent
assets on the Consolidated Balance Sheet. In conjunction with this transaction, Alcoa entered into a supply agreement
with TXU Mining Company LP to supply lignite for use at Alcoa’s power plant in Rockdale, TX.
In November 2007, Alcoa completed the sale of its Automotive Castings business to Compass Automotive Group, LLC
(Compass), a portfolio company of Monomoy Capital Partners, L.P. for $33 in cash, which was included in Proceeds
from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows. A loss of $72 ($53
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