Alcoa 2012 Annual Report Download - page 68

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
periods’ layoff reserves, including a portion of those related to the Portovesme smelter in Italy due to the execution of a
new power agreement.
In early 2010, management approved the permanent shutdown and demolition of the following structures, each of which
was previously temporarily idled for different reasons: the Eastalco smelter located in Frederick, MD (capacity of 195
kmt-per-year); the smelter located in Badin, NC (capacity of 60 kmt-per-year); an aluminum fluoride plant in Point
Comfort, TX; a paste plant and cast house in Massena, NY; and one potline at the smelter in Warrick, IN (capacity of 40
kmt-per-year). 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 included current market fundamentals, cost
competitiveness, other existing idle capacity, required future capital investment, and restart costs, as well as the
elimination of ongoing holding 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 $8 ($5 after-tax and noncontrolling
interests), which was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. The
other exit costs of $46 represent $30 ($19 after-tax and noncontrolling interests) in asset retirement obligations and $14
($9 after-tax) in environmental remediation, both triggered by the decision to permanently shut down and demolish these
structures, and $2 ($1 after-tax and noncontrolling interests) in other related costs.
As of December 31, 2012, the separations associated with 2010 restructuring programs were essentially complete. In
2012 and 2011, cash payments of $3 and $7, respectively, were made against layoff reserves related to 2010
restructuring programs.
Alcoa does not include Restructuring and other charges in the results of its reportable segments. The pretax impact of
allocating such charges to segment results would have been as follows:
2012 2011 2010
Alumina $3 $39 $12
Primary Metals 20 212 145
Global Rolled Products 43 19 (11)
Engineered Products and Solutions 13 (3) 18
Segment total 79 267 164
Corporate 8 14 43
Total restructuring and other charges $87 $281 $207
Interest Expense—Interest expense was $490 in 2012 compared with $524 in 2011. The decline of $34, or 6%, was
principally caused by the absence of a $41 net charge related to the early retirement of various outstanding notes (see
below), somewhat offset by lower capitalized interest ($8). The decrease in capitalized interest was largely attributable
to the Estreito hydroelectric power project in Brazil as construction nears completion, partially offset by an increase
related to the aluminum complex in Saudi Arabia.
Interest expense was $524 in 2011 compared with $494 in 2010. The increase of $30, or 6%, was primarily due to a
$41 net charge related to the early retirement of various outstanding notes ($74 in purchase premiums paid partially
offset by a $33 gain for “in-the-money” interest rate swaps), somewhat offset by the absence of a $14 net charge
related to the early retirement of various outstanding notes ($42 in purchase premiums paid partially offset by a $28
gain for “in-the-money” interest rate swaps).
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