Alcoa 2006 Annual Report Download - page 56

been determined that approximately 1,500 of the approx-
imately 8,450 employees will not be terminated due to
natural attrition and other changes in facts and circum-
stances. Approximately $45 and $69 of cash payments were
made against the 2005 program reserves in 2006 and 2005,
respectively.
2004 Restructuring Program. During 2004, Alcoa
recorded income of $22 ($41 after-tax and minority inter-
ests) for restructuring and other items. The income
recognized was comprised of the following components: a
gain of $53 ($61 after-tax and minority interests) on the sale
of Alcoa’s specialty chemicals business and $15 resulting
from adjustments to prior year reserves, offset by charges of
$40 related to additional layoff reserves associated with
approximately 4,100 hourly and salaried employees (located
primarily in Mexico and the U.S.), as the company con-
tinued to focus on reducing costs, and $6 of asset
impairments. The 2004 restructuring program is essentially
complete.
While restructuring charges are not reflected in the
segment results, the following table details what the impact
of allocating these items to segment results would have been
as follows:
2006 2005 2004
Alumina $4 $ 6 $(48)
Primary Metals 26 36 (1)
Flat-Rolled Products 134 15 1
Extruded and End Products 318 70 9
Engineered Solutions 37 109 8
Packaging and Consumer 15 39 10
Segment total 534 275 (21)
Corporate 917 (1)
Total restructuring and other
charges $543 $292 $(22)
Activity and reserve balances for restructuring charges
are as follows:
Employee
termination and
severance costs Other exit costs Total
Reserve balances at
December 31, 2003 $ 47 $ 48 $ 95
2004:
Cash payments (52) (5) (57)
2004 restructuring charges 40 — 40
Reversals of previously
recorded restructuring
charges (11) (4) (15)
Reserve balances at
December 31, 2004 24 39 63
2005:
Cash payments (78) (7) (85)
2005 restructuring charges 238 6 244
Reversals of previously
recorded restructuring
charges (48) — (48)
Reserve balances at
December 31, 2005 136 38 174
2006:
Cash payments (44) (3) (47)
2006 restructuring charges 107 17 124
Reversals of previously
recorded restructuring
charges (31) (12) (43)
Reserve balances at
December 31, 2006 $168 $ 40 $208
E. Goodwill and Other Intangible Assets
The following table details the changes in the carrying
amount of goodwill:
December 31, 2006 2005
Balance at beginning of year $6,108 $6,266
Acquisition of businesses 17 (27)
Divestiture of businesses —(16)
Translation and other adjustments 41 (115)
Balance at end of year $6,166 $6,108
The divestiture of businesses is primarily related to the
sale of railroad assets within the Primary Metals segment.
The following tables detail other intangible assets:
December 31, 2006
Gross
carrying
amount Accumulated amortization
Computer software $ 849 $(317)
Patents and licenses 153 (81)
Other intangibles 377 (132)
Total amortizable intangible assets 1,379 (530)
Indefinite-lived trade names and
trademarks 158 —
Total other intangible assets $1,537 $(530)
December 31, 2005
Gross
carrying
amount Accumulated amortization
Computer software $ 741 $(249)
Patents and licenses 153 (71)
Other intangibles 364 (116)
Total amortizable intangible assets 1,258 (436)
Indefinite-lived trade names and
trademarks 165 —
Total other intangible assets $1,423 $(436)
Computer software costs consisted primarily of software
costs associated with an enterprise business solution (EBS)
within Alcoa to drive common systems among all busi-
nesses. Other intangibles, recorded within other assets in the
Consolidated Balance Sheet, consisted primarily of acquired
customer relationship intangibles.
Amortization expense related to the intangible assets in
the tables above for the years ended December 31, 2006,
2005, and 2004 was $93, $80, and $70, respectively.
Amortization expense is expected to be in the range of
approximately $95 to $105 annually from 2007 to 2011.
F. Acquisitions and Divestitures
2006 Acquisitions. In September 2006, Alcoa completed
the acquisition of its 70% interest in the aluminum brazing
sheet venture in Kunshan City, China. Alcoa will be the
managing partner in the venture, with the remaining 30%
shares held by Shanxi Yuncheng Engraving Group. The
total acquisition price was approximately $61.
In June 2006, Alcoa completed the acquisition of the
minority interests (including the purchase of certain raw
material inventories) in its Intalco and Eastalco aluminum
smelters in Ferndale, Washington, and Frederick, Maryland,
respectively, in exchange for the assumption of certain
liabilities related to the facilities and receipt of a net cash
payment of $25.
2006 Divestitures. In October 2006, Alcoa completed
the sale of the home exteriors business to Ply Gem
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