Alcoa 2012 Annual Report Download - page 66

SG&A expenses were $1,027, or 4.1% of Sales, in 2011 compared with $961, or 4.6% of Sales, in 2010. The increase
of $66 was principally the result of higher labor costs and an increase in bad debt expense. The increase in labor costs
was the result of a higher average employee base and a higher cost of employee benefits. The higher bad debt expense
was caused by charges for anticipated customer credit losses, primarily related to those in Europe.
Research and Development Expenses—R&D expenses were $197 in 2012 compared with $184 in 2011 and $174 in
2010. The increase in 2012 as compared to 2011 was primarily caused by additional spending related to inert anode
technology for the Primary Metals segment. The increase in 2011 as compared to 2010 was mainly driven by
incremental increases across various expenses necessary to support R&D activities.
Provision for Depreciation, Depletion, and Amortization—The provision for DD&A was $1,460 in 2012 compared
with $1,479 in 2011. The decrease of $19, or 1%, was principally the result of the cessation of DD&A due to the
decision at the end of 2011 to permanently shut down and demolish the smelter in Tennessee (see Restructuring and
Other Charges below) and the absence of DD&A on various in-use assets that reached the end of their estimated useful
life in 2011, partially offset by an increase related to assets placed into service associated with a new hydroelectric
power facility in Brazil and higher DD&A due to the capitalization of new haul roads and the write-off of old haul
roads no longer in use for mining sites in Australia.
The provision for DD&A was $1,479 in 2011 compared with $1,450 in 2010. The increase of $29, or 2%, was mostly
due to a portion of the assets placed into service in mid-2011 related to a new hydroelectric power facility in Brazil,
along with a number of small increases at various locations.
Restructuring and Other Charges—Restructuring and other charges for each year in the three-year period ended
December 31, 2012 were comprised of the following:
2012 2011 2010
Asset impairments $ 40 $150 $139
Layoff costs 47 93 43
Other exit costs 21 61 58
Reversals of previously recorded layoff and other exit costs (21) (23) (33)
Restructuring and other charges $ 87 $281 $207
Layoff costs were recorded based on approved detailed action plans submitted by the operating locations that specified
positions to be eliminated, benefits to be paid under existing severance plans, union contracts or statutory requirements,
and the expected timetable for completion of the plans.
2012 Actions—In 2012, Alcoa recorded Restructuring and other charges of $87 ($73 after-tax and noncontrolling
interests), which were comprised of the following components: $47 ($29 after-tax and noncontrolling interests) for the
layoff of approximately 800 employees (390 in the Engineered Products and Solutions segment, 250 in the Primary
Metals segment, 85 in the Alumina segment, and 75 in Corporate), including $10 ($7 after-tax) for the layoff of an
additional 170 employees related to the previously reported smelter curtailments in Spain (see 2011 Actions below);
$30 ($30 after-tax) in asset impairments and $6 ($6 after-tax) for lease and contract termination costs due to a decision
to exit the lithographic sheet business in Bohai, China; $11 ($11 after-tax) in costs to idle the Portovesme smelter (see
2011 Actions below); $10 ($8 after-tax) in other asset impairments; a net charge of $4 ($4 after-tax and noncontrolling
interests) for other miscellaneous items; and $21 ($15 after-tax and noncontrolling interests) for the reversal of a
number of layoff reserves related to prior periods, including $10 ($7 after-tax) related to the smelters in Spain. The
reversal related to the smelters in Spain is due to lower than expected costs based on agreements with employee
representatives and the government, as well as a reduction of 55 in the number of layoffs due to the anticipation of the
restart of a portion of the previously curtailed capacity based on an agreement with the Spanish government that will
provide interruptibility rights (i.e. compensation for power interruptions when grids are overloaded) to the smelters
during 2013. A portion of this reversal relates to layoff costs recorded at the end of 2011 (see 2011 Actions below) and
a portion of this reversal relates to layoff costs recorded during 2012 (see above).
55