Alcoa 2013 Annual Report Download - page 70

productivity improvements, net favorable foreign currency movements due to a stronger U.S. dollar, and a change in
LIFO adjustments from unfavorable to favorable, primarily due to lower prices for alumina and metal and lower costs
for calcined coke.
Selling, General Administrative, and Other Expenses—SG&A expenses were $1,008, or 4.4% of Sales, in 2013
compared with $997, or 4.2% of Sales, in 2012. The increase of $11 was principally the result of higher labor costs,
partially offset by a decrease in professional expenses and contract services and lower bad debt expense.
SG&A expenses were $997, or 4.2% of Sales, in 2012 compared with $1,027, or 4.1% of Sales, in 2011. The decline of
$30 was mostly due to lower stock-based compensation expense; a decrease in bad debt expense due to the absence of
charges for anticipated customer credit losses, primarily related to those in Europe; a decline in travel expense; and less
spending across various other expenses. These items were partially offset by higher pension costs, due to the
recognition of higher net actuarial losses, and increased professional expenses, due to consulting fees associated with
productivity initiatives and higher legal expenses.
Research and Development Expenses—R&D expenses were $192 in 2013 compared with $197 in 2012 and $184 in
2011. The decrease in 2013 as compared to 2012 was mainly driven by lower spending related to inert anode and
carbothermic technology for the Primary Metals segment and other various projects, mostly offset by new spending
related to an upgrade of a Micromill™ in San Antonio, TX for the Global Rolled Products segment. This upgrade is
expected to be completed by the end of 2015 and, as a result, the Micromill™ will develop and qualify aluminum
products for the automotive and packaging end markets. The increase in 2012 as compared to 2011 was primarily
caused by additional spending related to inert anode technology for the Primary Metals segment.
Provision for Depreciation, Depletion, and Amortization—The provision for DD&A was $1,421 in 2013 compared
with $1,460 in 2012. The decrease of $39, or 3%, was mostly due to net favorable foreign currency movements due to
a stronger U.S. dollar, particularly against the Australian dollar and Brazilian real; a reduction in expense related to the
permanent shutdown of smelter capacity in Canada, the U.S., and Italy that occurred mid 2013; and the absence of
expense due to the divestiture of U.S. hydroelectric power assets in late 2012. These declines were slightly offset by
new depreciation associated with a hydroelectric power project in Brazil (Machadinho). In early 2013, there was a
change in the legal structure of the entity that owned the project resulting in Alcoa recording its 30.99% share of the
project’s assets directly, whereas in 2012, Alcoa’s share was recorded as an equity method investment.
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. These declines were partially offset by an
increase related to assets placed into service associated with a new hydroelectric power project in Brazil (Estreito) 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.
Impairment of Goodwill—In 2013, Alcoa recognized an impairment of goodwill in the amount of $1,731 ($1,719
after noncontrolling interest) related to the annual impairment review of the Primary Metals segment (see Goodwill in
Critical Accounting Policies and Estimates below).
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