Alcoa 2010 Annual Report Download - page 105

Computer software consists primarily of software costs associated with an enterprise business solution (EBS) within
Alcoa to drive common systems among all businesses.
Amortization expense related to the intangible assets in the tables above for the years ended December 31, 2010, 2009,
and 2008 was $85, $84, and $76, respectively, and is expected to be in the range of approximately $80 to $90 annually
from 2011 to 2015.
F. Acquisitions and Divestitures
Pro forma results of the Company, assuming all acquisitions discussed below were made at the beginning of the earliest
prior period presented, would not have been materially different from the results reported.
2010 Acquisitions. In July 2010, Alcoa completed an acquisition of the commercial building and construction business
of a privately-held company, Traco, for $77. This business, located in Cranberry, Pennsylvania, employing 650 people,
is a premier manufacturer of windows and doors for the commercial building and construction market and generated
sales of approximately $100 in 2009. The assets and liabilities of this business were included in the Engineered
Products and Solutions segment as of the end of July 2010 and this business’ results of operations were included in this
segment since the beginning of August 2010. Based on the current purchase price allocation, goodwill of $28 was
recorded for this transaction, all of which is deductible for income tax purposes. The final allocation of the purchase
price will be based on valuation and other studies, including environmental and other contingent liabilities, which will
be completed in 2011. This transaction is subject to certain post-closing adjustments as defined in the acquisition
agreement.
2010 Divestitures. In April 2010, Alcoa completed the divestiture of the Transportation Products Europe business, the
assets and liabilities of which were classified as held for sale in 2008 (see Note B), to two separate buyers. Combined,
this business sold for $14, which was included in Proceeds from the sale of assets and businesses on the accompanying
Statement of Consolidated Cash Flows; a gain of $5 ($5 after-tax) was recognized in Restructuring and other charges
on the accompanying Statement of Consolidated Operations. These two transactions are no longer subject to post-
closing adjustments. This business generated sales of $78 in 2009 and, at the time of divestiture, had approximately
360 employees at three locations.
2009 Acquisitions. In March 2009, Alcoa completed a non-cash exchange of its 45.45% stake in the Sapa AB joint
venture for Orkla ASA’s (Orkla) 50% stake in the Elkem Aluminium ANS joint venture (Elkem). As a result of this
transaction, Elkem is now owned 100% by Alcoa and Sapa AB is now owned 100% by Orkla. Prior to the completion
of the exchange transaction, Alcoa accounted for its investments in Sapa AB and Elkem on the equity method and the
carrying values were $475 and $435, respectively, at December 31, 2008. Elkem includes aluminum smelters in Lista
and Mosjøen, Norway with a combined output of 282 kmt and the anode plant in Mosjøen in which Alcoa already held
an 82% stake. These three facilities employed approximately 700 workers combined. The addition of the two smelters
and anode plant (supports Norway and Iceland operations) strengthens Alcoa’s leadership position within the
aluminum industry. The assets and liabilities of Elkem were included in the Primary Metals segment beginning
March 31, 2009 (the final amounts to be recorded will be based on valuation and other studies that have not yet been
completed – see below) and Elkem’s results of operations were reflected in this segment starting on April 1, 2009
(prior to this transaction, Alcoa’s existing 50% stake in Elkem was reflected as equity income in this segment). The
exchange transaction resulted in the recognition of a $188 gain ($133 after-tax), comprised of a $156 adjustment to the
carrying value of Alcoa’s existing 50% interest in Elkem in accordance with fair value accounting and a $32
adjustment for the finalization of the estimated fair value of the Sapa AB joint venture. The $188 gain was reflected in
Other income, net on the accompanying Statement of Consolidated Operations, of which $156 ($112 after-tax) was
reflected in the Primary Metals segment and $32 ($21 after-tax) was reflected in Corporate. The portion of the gain
reflected in Corporate was because the original write-down of the 45.45% Sapa AB investment to its estimated fair
value in December 2008 was reflected in Corporate (see Note D and I). At the time the exchange transaction was
completed, Elkem had $18 in cash, which was reflected in the accompanying Statement of Consolidated Cash Flows as
a cash inflow on the acquisitions line.
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