Alcoa 2012 Annual Report Download - page 67

As of December 31, 2012, approximately 270 of the 800 employees were separated. The remaining separations for the
2012 restructuring programs are expected to be completed by the end of 2013. In 2012, cash payments of $16 were
made against layoff reserves related to the 2012 restructuring programs.
2011 Actions—In 2011, Alcoa recorded Restructuring and other charges of $281 ($181 after-tax and noncontrolling
interests), which were comprised of the following components: $127 ($82 after-tax) in asset impairments and $36
($23 after-tax) in other exit costs related to the permanent shutdown and planned demolition of certain idled structures at
two U.S. locations (see below); $93 ($68 after-tax and noncontrolling interests) for the layoff of approximately 1,600
employees (820 in the Primary Metals segment, 470 in the Global Rolled Products segment, 160 in the Alumina 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; 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 and $17 ($11 after-tax) in asset retirement obligations, 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
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