Alcoa 2009 Annual Report Download - page 67

The significant changes in the reconciling items between total segment ATOI and consolidated net (loss) income
attributable to Alcoa for 2008 compared with 2007 consisted of:
• a $4 increase in Interest expense, principally caused by a 22% higher average debt level, mostly due to the
issuance of $1,500 in new senior notes in July 2008 and significantly higher commercial paper levels; and a
decrease in capitalized interest ($21), primarily due to placing growth projects into service, such as the
Iceland smelter and the Norway anode facility in 2007; both of which were almost completely offset by the
absence of credit facility commitment fees related to the 2007 offer for Alcan Inc. ($43) and a lower
weighted-average effective interest rate, driven mainly by the decrease in LIBOR rates;
• a $144 decrease in Noncontrolling interests, mostly due to lower earnings at AWAC, attributed primarily to
significant cost increases for raw materials and energy, unfavorable foreign currency movements due to a
weaker U.S. dollar, and the impact of the gas outage in Western Australia;
• a $60 decline in Corporate expense, principally due to the absence of transaction costs related to the 2007
offer for Alcan Inc. ($30);
• a $492 change in Restructuring and other charges, reflecting, 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; compared with, in 2007, $174 in asset impairments associated with a strategic review of
the Packaging and Consumer and Automotive Castings businesses; a $23 reduction to the original
impairment charge recorded in 2006 related to the estimated fair value of the soft alloy extrusion business;
and the remainder for the layoff of approximately 400 employees, asset impairments of various other
businesses and facilities, other exit costs, primarily for accelerated depreciation associated with the shutdown
of certain facilities in 2007 related to the 2006 Restructuring Program, and reversals of previously recorded
layoff and other exit costs due to normal attrition and changes in facts and circumstances;
• a $53 change in Discontinued operations, mainly due to a $51 higher net operating loss of the EES business;
and
• a $1,342 change in Other, mostly due to the following: the absence of a $1,140 gain on the sale of the Chalco
investment; a net income tax charge of $100 for various items; losses related to the cash surrender value of
life insurance as a result of the deterioration of the investment markets; and unfavorable foreign currency
movements due to a weaker U.S. dollar; all of which was somewhat offset by the absence of a $142 discrete
income tax charge related to goodwill that is non-deductible for tax purposes associated with the sale of the
Packaging and Consumer businesses; mark-to-market gains on derivative contracts; and income related to a
negotiated partial refund of an indemnification payment previously made to the buyer of a prior Alcoa
divestiture ($24).
Environmental Matters
See the Environmental Matters section of Note N to the Consolidated Financial Statements in Part II Item 8 of this
Form 10-K.
Liquidity and Capital Resources
Alcoa takes a very disciplined approach to cash management and strengthening of its balance sheet. In 2009,
management continued to face the significant challenge of maintaining this approach while providing the Company
with the necessary liquidity to operate effectively due to the global economic downturn.
In response to changes in the economic markets across the globe in the second half of 2008, management initiated the
following actions to conserve cash and preserve liquidity: greater scrutiny over the daily management of Alcoa’s cash
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