Alcoa 2012 Annual Report Download - page 111

segment, 20 in the Engineered Products and Solutions segment, and 130 in Corporate), including the effects of planned
smelter curtailments (see below); $23 ($12 after-tax and noncontrolling interests) for other asset impairments,
including the write-off of the carrying value of an idled structure in Australia that processed spent pot lining and
adjustments to the fair value of the one remaining foil location while it was classified as held for sale due to foreign
currency movements; $20 ($8 after-tax and noncontrolling interests) for a litigation matter related to the former St.
Croix location (see the Litigation section of Note N); a net charge of $5 ($4 after-tax) for other small items; and $23
($16 after-tax) for the reversal of previously recorded layoff reserves due to normal attrition and changes in facts and
circumstances, including a change in plans for Alcoa’s aluminum powder facility in Rockdale, TX.
In late 2011, management approved the permanent shutdown and demolition of certain facilities at two U.S. locations,
each of which was previously temporarily idled for various reasons. The identified facilities are the smelter located in
Alcoa, TN (capacity of 215 kmt-per-year) and two potlines (capacity of 76 kmt-per-year) at the smelter located in
Rockdale, TX (remaining capacity of 191 kmt-per-year composed of four potlines). Demolition and remediation activities
related to these actions began in 2012 and are expected to be completed in 2015 for the Tennessee smelter and in 2013 for
the two potlines at the Rockdale smelter. This decision was made after a comprehensive strategic analysis was performed
to determine the best course of action for each facility. Factors leading to this decision were in general focused on
achieving sustained competitiveness and included, among others: lack of an economically viable, long-term power
solution; changed market fundamentals; cost competitiveness; required future capital investment; and restart costs. The
asset impairments of $127 represent the write off of the remaining book value of properties, plants, and equipment related
to these facilities. Additionally, remaining inventories, mostly operating supplies, were written down to their net realizable
value resulting in a charge of $6 ($4 after-tax), which was recorded in Cost of goods sold on the accompanying Statement
of Consolidated Operations. The other exit costs of $36 represent $18 ($11 after-tax) in environmental remediation (see
Note N) and $17 ($11 after-tax) in asset retirement obligations (see Note C), both triggered by the decision to permanently
shut down and demolish these structures, and $1 ($1 after-tax) in other related costs.
Also, at the end of 2011, management approved a partial or full curtailment of three European smelters as follows:
Portovesme, Italy (150 kmt-per-year); Avilés, Spain (46 kmt out of 93 kmt-per-year); and La Coruña, Spain (44 kmt out of
87 kmt-per-year). These curtailments were completed by the end of 2012. The curtailment of the Portovesme smelter may
lead to the permanent closure of the facility, which would result in future charges, while the curtailments at the two smelters
in Spain are planned to be temporary. These actions were the result of uncompetitive energy positions, combined with rising
material costs and falling aluminum prices (mid-2011 to late 2011). As a result of these decisions, Alcoa recorded costs of
$33 ($31 after-tax) for the layoff of approximately 650 employees. As Alcoa engaged in discussions with the respective
employee representatives and governments, additional charges were recognized in 2012 (see 2012 Actions above).
As of December 31, 2012, approximately 895 of the 1,475 employees were separated. The total number of employees
associated with the 2011 restructuring programs was updated to reflect changes in plans (agreement related to the
smelters in Spain – see 2012 Actions above), better than expected operating performance at certain locations, and
natural attrition. The remaining separations for the 2011 restructuring programs are expected to be completed by the
end of 2013. In 2012 and 2011, cash payments of $23 and $24, respectively, were made against layoff reserves related
to the 2011 restructuring programs.
2010 Actions. In 2010, Alcoa recorded Restructuring and other charges of $207 ($130 after-tax and noncontrolling
interests), which were comprised of the following components: $127 ($80 after-tax and noncontrolling interests) in
asset impairments and $46 ($29 after-tax and noncontrolling interests) in other exit costs related to the permanent
shutdown and planned demolition of certain idled structures at five U.S. locations (see below); $43 ($29 after-tax and
noncontrolling interests) for the layoff of approximately 875 employees (625 in the Engineered Products and Solutions
segment; 75 in the Primary Metals segment; 60 in the Alumina segment; 25 in the Global Rolled Products segment;
and 90 in Corporate); $22 ($14 after-tax) in net charges (including $12 ($8 after-tax) for asset impairments) related to
divested and to be divested businesses (Automotive Castings, Global Foil, Transportation Products Europe, and
Packaging and Consumer) for, among other items, the settlement of a contract with a former customer, foreign
currency movements, working capital adjustments, and a tax indemnification; $2 ($2 after-tax and noncontrolling
interests) for various other exit costs; and $33 ($24 after-tax and noncontrolling interests) for the reversal of prior
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