Alcoa 2010 Annual Report Download - page 67

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 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;
• an 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 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 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 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 change in Discontinued operations, reflecting a $129 loss on the divestiture of the wire harness and
electrical portion of the EES business, a $9 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 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, net foreign
currency gains 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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