Alcoa 2009 Annual Report Download - page 105

Computer software consists primarily of software costs associated with an enterprise business solution (EBS) within
Alcoa to drive common systems among all businesses.
Amortization expense related to the intangible assets in the tables above for the years ended December 31, 2009, 2008,
and 2007 was $84, $76, and $74, respectively, and is expected to be in the range of approximately $90 to $100
annually from 2010 to 2014.
F. Acquisitions and Divestitures
2009 Acquisitions. In March 2009, Alcoa completed a non-cash exchange of its 45.45% stake in the Sapa AB joint
venture for Orkla ASA’s (Orkla) 50% stake in the Elkem Aluminium ANS joint venture (Elkem). As a result of this
transaction, Elkem is now owned 100% by Alcoa and Sapa AB is now owned 100% by Orkla. Prior to the completion
of the exchange transaction, Alcoa accounted for its investments in Sapa AB and Elkem on the equity method and the
carrying values were $475 and $435, respectively, at December 31, 2008. Elkem includes aluminum smelters in Lista
and Mosjøen, Norway with a combined output of 282 kmt and the anode plant in Mosjøen in which Alcoa already held
an 82% stake. These three facilities employed approximately 700 workers combined. The addition of the two smelters
and anode plant (supports Norway and Iceland operations) strengthens Alcoa’s leadership position within the
aluminum industry. The assets and liabilities of Elkem were included in the Primary Metals segment beginning
March 31, 2009 (the final amounts to be recorded will be based on valuation and other studies that have not yet been
completed) and Elkem’s results of operations were reflected in this segment starting on April 1, 2009 (prior to this
transaction, Alcoa’s existing 50% stake in Elkem was reflected as equity income in this segment). The exchange
transaction resulted in the recognition of a $188 gain ($133 after-tax), comprised of a $156 adjustment to the carrying
value of Alcoa’s existing 50% interest in Elkem in accordance with fair value accounting and a $32 adjustment for the
finalization of the estimated fair value of the Sapa AB joint venture. The $188 gain was reflected in Other income, net
on the accompanying Statement of Consolidated Operations, of which $156 ($112 after-tax) was reflected in the
Primary Metals segment and $32 ($21 after-tax) was reflected in Corporate. The portion of the gain reflected in
Corporate was because the original write-down of the 45.45% Sapa AB investment to its estimated fair value in
December 2008 was reflected in Corporate (see Note D and I). At the time the exchange transaction was completed,
Elkem had $18 in cash, which was reflected in the accompanying Statement of Consolidated Cash Flows as a cash
inflow on the acquisitions line.
In June 2009, Alcoa completed an acquisition of a fasteners business located in Mexico for $3. This transaction did not
have a material impact on Alcoa’s Consolidated Financial Statements.
In July 2009, Alcoa World Alumina LLC (AWA LLC), a majority-owned subsidiary of Alcoa and part of Alcoa World
Alumina and Chemicals, acquired a BHP Billiton (BHP) subsidiary that holds interests in four bauxite mines and one
refining facility in the Republic of Suriname. These interests were part of joint ventures between AWA LLC’s wholly-
owned subsidiary in Suriname (Suriname Aluminum Company LLC (Suralco)) and BHP’s subsidiary in which Suralco
held a 55% stake and BHP’s subsidiary held a 45% stake. This acquisition strengthens Alcoa’s presence in Suriname
and supports its overall growth strategy. In this transaction, in exchange for relinquishing BHP of any further
obligations, liabilities, and responsibilities related to the joint ventures (certain of which could result in the recognition
of charges in future periods), AWA LLC received direct ownership of the BHP subsidiary. This transaction was
accounted for as an asset acquisition as it did meet the requirements to be accounted for as a business combination.
Prior to the completion of this transaction, Suralco accounted for its 55% interest in the Suriname operations on the
proportional consolidation method. The assets and liabilities of the former BHP subsidiary were included in the
Alumina segment beginning July 31, 2009 and 100% of the results of the Suriname operations were reflected in this
segment starting on August 1, 2009. This acquisition resulted in the addition of 993 kmt of alumina refining capacity
(2,207 kmt is total refinery capacity – approximately 870 kmt is curtailed) to Alcoa’s global refining system. Alcoa
recorded a gain of $92 ($36 after-tax and noncontrolling interest), which was reflected in Other income, net on the
accompanying Statement of Consolidated Operations and was reflected in the Alumina segment’s results ($60 after-
tax). At the time this transaction was completed, the BHP subsidiary had $97 in cash, which was reflected in the
accompanying Statement of Consolidated Cash Flows as a cash inflow on the acquisitions line.
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