Alcoa 2015 Annual Report Download - page 86

AWAC’s operating results was largely attributable to net favorable foreign currency movements, net productivity
improvements, and lower input costs, slightly offset by a lower average realized alumina price (see Alumina in
Segment Information below).
In 2014, AWAC generated a smaller loss compared to 2013 mainly driven by the absence of a $384 charge for a legal
matter (see below), improved operating results, and a $28 gain ($11 was noncontrolling interest’s share) on the sale of
a mining interest in Suriname. These positive impacts were mostly offset by restructuring and other charges associated
with both the permanent shutdown of the Point Henry smelter in Australia (see Restructuring and Other Charges
above) and the divestiture of an ownership interest in a mining and refining joint venture in Jamaica (see Alumina in
Segment Information below) and a combined $79 ($32 was noncontrolling interest’s share) discrete income tax charge
related to a respective tax rate change in both Brazil and Spain (see Income Taxes above). The improvement in
AWAC’s operating results was principally due to net favorable foreign currency movements and net productivity
improvements, partially offset by an increase in input costs (see Alumina in Segment Information below). Even though
AWAC generated an overall loss in both 2014 and 2013, the noncontrolling interest’s share resulted in income in 2013
due to the manner in which the charges and costs related to a legal matter were allocated. A description of how these
charges and costs for this legal matter impacted Noncontrolling interests follows.
The noncontrolling interest’s share of AWAC’s charge for a legal matter in 2013 and 2012 was $58 (related to the
aforementioned $384) and $34 (an $85 charge related to the civil portion of the same legal matter), respectively. In
2012, the $34 was based on the 40% ownership interest of Alumina Limited, while, in 2013, the $58 was based on
15%. The application of a different percentage was due to the criteria in a 2012 allocation agreement between Alcoa
and Alumina Limited related to this legal matter being met. Additionally, the $34 charge, as well as costs related to this
legal matter, was retroactively adjusted to reflect the terms of the allocation agreement, resulting in a credit to
Noncontrolling interests of $41 in 2013. In summary, Noncontrolling interests included a charge of $17 and $34 related
to this legal matter in 2013 and 2012, respectively.
Segment Information
Alcoa’s operations consist of five worldwide reportable segments: Alumina, Primary Metals, Global Rolled Products,
Engineered Products and Solutions, and Transportation and Construction Solutions (see below). Segment performance
under Alcoa’s management reporting system is evaluated based on a number of factors; however, the primary measure
of performance is the after-tax operating income (ATOI) of each segment. Certain items such as the impact of LIFO
inventory accounting; metal price lag (see below); interest expense; noncontrolling interests; corporate expense
(general administrative and selling expenses of operating the corporate headquarters and other global administrative
facilities, along with depreciation and amortization on corporate-owned assets); restructuring and other charges; and
other items, including intersegment profit eliminations, differences between tax rates applicable to the segments and
the consolidated effective tax rate, and other nonoperating items such as foreign currency transaction gains/losses and
interest income are excluded from segment ATOI.
Effective in the second quarter of 2015, management removed the impact of metal price lag from the results of the
Global Rolled Products and Engineered Products and Solutions (now Engineered Products and Solutions and
Transportation and Construction Solutions—see below) segments in order to enhance the visibility of the underlying
operating performance of these businesses. Metal price lag describes the timing difference created when the average
price of metal sold differs from the average cost of the metal when purchased by the respective segment. In general,
when the price of metal increases, metal price lag is favorable, and when the price of metal decreases, metal price lag is
unfavorable. The impact of metal price lag is now reported as a separate line item in Alcoa’s reconciliation of total
segment ATOI to consolidated net (loss) income attributable to Alcoa. As a result, this change does not impact the
consolidated results of Alcoa. Segment information for all prior periods presented was updated to reflect this change.
In the third quarter of 2015, management approved a realignment of Alcoa’s Engineered Products and Solutions
segment due to the expansion of this part of Alcoa’s business portfolio through both organic and inorganic growth.
This realignment consisted of moving both the Alcoa Wheel and Transportation Products and Building and
Construction Systems business units to a new reportable segment named Transportation and Construction Solutions.
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