Alcoa 2009 Annual Report Download - page 66

The significant changes in the reconciling items between total segment ATOI and consolidated net loss attributable to
Alcoa for 2009 compared with 2008 consisted of:
• a $242 change in the Impact of LIFO due to lower prices for alumina and metal, both of which were driven
by a significant drop in LME prices, and reductions in LIFO inventory quantities, which caused a partial
liquidation of the lower cost LIFO inventory base;
• a $41 increase in Interest expense, primarily due to a 10% higher average debt level, mostly the result of
$575 in convertible notes issued in March 2009 and increased borrowings on loans in Brazil (began in April
2008) related to the Juruti, São Luís, and Estreito growth projects; and a significant increase in the
amortization of debt costs, mainly due to a $66 beneficial conversion option related to the convertible notes
and $43 in fees paid for the $1,900 364-day senior unsecured revolving credit facility (entered into in
October 2008 and expired in October 2009); both of which were slightly offset by a decrease in the weighted
average interest rate of Alcoa’s debt portfolio;
• a $160 decrease in Noncontrolling interests, principally due to lower earnings at AWAC, mainly driven by a
significant drop in realized prices, somewhat offset by the gain related to the acquisition of a BHP Billiton
subsidiary in the Republic of Suriname and the absence of the impact of the 2008 gas outage in Western
Australia;
• a $24 decline in Corporate expense, primarily due to reductions in labor costs, mainly as a result of
implemented severance programs; and decreases in expenses for travel, contractors and consultants,
information technology, and various other administrative items as part of Alcoa’s cost reduction initiatives;
all of which was partially offset by an increase in deferred compensation, mostly the result of the plans’
improved performance;
• a $538 change in Restructuring and other charges, reflecting, in 2009, $20 in adjustments to the Global Foil
and Transportation Products Europe businesses held for sale due to unfavorable foreign currency movements
for both businesses and a change in the estimated fair value for the Global Foil business; $12 for the write-off
of previously capitalized third-party costs related to potential business acquisitions due to the adoption of
changes to accounting for business combinations; and the remainder for the layoff of approximately 6,600
employees to address the impact of the global economic downturn on Alcoa’s businesses and a related
curtailment charge due to the remeasurement of pension plans as a result of the workforce reductions, asset
impairments, accelerated depreciation and lease termination costs for shutdown facilities, and reversals of
previously recorded layoff and other exit costs due to normal attrition and changes in facts and
circumstances; compared with, in 2008, $372 in asset impairments to reflect the estimated fair values of
Alcoa’s investment in Sapa AB and the Global Foil and Transportation Products Europe businesses, as a
result of management’s decision to divest these assets; a $32 loss on the sale of the Packaging and Consumer
businesses; and the remainder for the layoff of approximately 6,200 employees, additional asset impairments,
and other exit costs due to the global economic downturn and curtailed operations, and the reversal of
previously recorded costs, slightly more than half of which related to a shutdown facility;
• a $137 change in Discontinued operations, reflecting a $124 loss on the divestiture of the wire harness and
electrical portion of the EES business, a $13 loss on the divestiture of the electronics portion of the EES
business, and the remainder was for the operational results of the EES business prior to the divestitures in
2009, compared with asset impairments of $162 to reflect the estimated fair value of the EES business and a
net operating loss of $141, which included restructuring charges of $39 for headcount reductions of
approximately 6,200 and a charge of $16 for obsolete inventory, for EES in 2008; and
• a $319 change in Other, mainly due to income tax benefits related to the difference in the consolidated
effective tax rate and tax rates applicable to the segments, including various discrete income tax items,
favorable foreign currency movements due to a stronger U.S. dollar, and a $21 adjustment for the finalization
of the estimated fair value of the Sapa AB joint venture, all of which was partially offset by a $118 realized
loss on the sale of the Shining Prospect investment and the absence of a 2008 negotiated partial refund of an
indemnification payment ($24).
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