Alcoa 2003 Annual Report Download - page 52

Activity and reserve balances related to special items in 2001,
2002, and 2003 are as follows:
Asset
write-
downs
Employee
termina-
tion and
severance
costs Other Total
2001:
2001 restructuring charges $ 372 $ 178 $ 16 $ 566
Cash payments (3) (32) (5) (40)
Noncashcharges (288) — — (288)
Reserve balances at
December 31, 2001 81 146 11 238
2002:
Cash payments (17) (74) (13) (104)
2002 restructuring charges 296 105 31 432
Noncashcharges in 2002 (296) — — (296)
Additions to 2001
restructuring charges 9 9 — 18
Reversals of 2001
restructuring reserves (10) (20) (2) (32)
Reserve balances at
December 31, 2002 63 166 27 256
2003:
Cash payments (16) (120) (17) (153)
2003 restructuring charges —45—45
Additions to 2002
restructuring charges 20 — — 20
Reversals of 2002
restructuring charges (53) (38) — (91)
Noncash additions/
reversals to the
reserves in 2003 24 — — 24
Reserve balances at
December 31, 2003 $38 $53 $10 $101
E. Goodwill and Other Intangible Assets
The following table details the changes in the carrying amount of
goodwill.
December 31 2003 2002
Balance at beginning of year $6,379 $5,604
Intangible assets reclassified to goodwill —28
Impairmentloss recognized in cumulative
effect adjustment —(15)
Additions during the period 84 765
Impairment loss —(44)
Tra nslation and other adjustments 86 41
Balance at end of year $6,549 $6,379
Goodwill increased $84 during 2003 primarily due to the acqui-
sition of the remaining 40.9% interest in Alcoa Aluminio (see Note
F), aswellasadjustments to preliminary purchase price allocations
from prior periods. The impact to the segments follows: Alumina
and Chemicals $13, Primary Metals $27, Flat-Rolled Products $8,
Engineered Products $40, and the Other group $(8). The impact to
corporate was $4.
During 2002, in accordance with the provisions of
SFAS No. 141,
‘‘Business Combinations,’ ’Alcoa transferred $28 of customer base
intangibles, initially recorded in the Reynolds acquisition, to goodwill
(Packaging and Consumer segment). Upon adoption of
SFAS No. 142
50
The 2002chargeswerecomprised of $296 for asset write-downs,
consisting of $113 of goodwill on businesses to be divested, as
well as $183 for structures, machinery, and equipment; $105 for
employee termination and severance costs related to approximately
6,700 salaried and hourly employees at over 70 locations, primarily
in Mexico, Europe, and the U.S.; and charges of $31 for exit costs,
primarily for remediation and demolition costs, as well as lease
termination costs.
As part of the 2002 restructuring program, Alcoa temporarily
curtailed aluminum production at its Badin, NC plant and perma-
nently closed its Troutdale, ORplantaswell as approximately
25% of the capacity at its Rockdale, TX facility.Alcoa recognized
arestructuring charge of $39 associated with these curtailments.
The remaining carrying value and results of operations related
to these facilities were not material. The restructuring of operations
of businesses servingthe aerospace, automotive, and industrial gas
turbine markets, and in the U.S. smelting system resulted in a charge
of $154. The remaining$232ofspecial items was related to losses
recognized on assets held for sale, as detailed in Note B.
As of December 31, 2003, approximately 6,400 of the 6,700
employees associated with the 2002 restructuring charges had been
terminated. Alcoa expects to complete substantiallyallactions
relative to the restructuring charges by the end of 2004.
Certain adjustments were recorded to the 2001 restructuring
program reserves in 2002. Additional restructuring charges of $18
were recorded for additional asset impairments and for additional
employee termination and severance costs, primarily related to
additional severance costs not accruable in 2001 for layoffs of
approximately 250 salaried and hourly employees, primarily in
Europe and Mexico. Also, reversals of 2001 re s tructuring reserves
of $32were recorded due to changes in estimates of liabilities
resultingfromlower than expected costs associated with certain
plant shutdowns and disposals.
During 2001, Alcoa recorded charges of $566 ($355 after tax and
minority interests) as a result of a restructuring plan based on a
strategic review of thecompany’s primary products and fabricating
businesses aimed at optimizing and aligning its manufacturing
systems with customer needs, while positioning the company for
stronger profitability. These charges consisted of costs associated
with the shutdown of 18 facilities in the U.S. and Europe and were
comprised of asset write-downs of $372, employee termination
and severance costs of $178 related to workforce reductions of
approximately 10,400 hourly and salaried employees, primarily
located outside of the U.S., and other exit costs of $16 related to
the shutdown of facilities.
As of December 31, 2003, the 2001 restructuring program was
substantially complete, with the exception of approximately $60
in reserves for ongoing site remediation work and employee layoff
costs thatconsist of monthly payments being madeoveran
extended period of time.