Alcoa 2011 Annual Report Download - page 62

Alcoa does not include Restructuring and other charges in the results of its reportable segments. The pretax impact of
allocating such charges to segment results would have been as follows:
2011 2010 2009
Alumina $39$12$5
Primary Metals 212 145 30
Flat-Rolled Products 19 (11) 65
Engineered Products and Solutions (3) 18 64
Segment total 267 164 164
Corporate 14 43 73
Total restructuring and other charges $281 $207 $237
Interest Expense—Interest expense was $524 in 2011 compared with $494 in 2010. The increase of $30, or 6%, was
primarily due to a $41 net charge related to the early retirement of various outstanding notes ($74 in purchase
premiums paid partially offset by a $33 gain for “in-the-money” interest rate swaps), somewhat offset by the absence
of a $14 net charge related to the early retirement of various outstanding notes ($42 in purchase premiums paid
partially offset by a $28 gain for “in-the-money” interest rate swaps).
Interest expense was $494 in 2010 compared with $470 in 2009. The increase of $24, or 5%, was principally caused by
a $69 decline in interest capitalized, mainly the result of placing the Juruti and São Luís growth projects in service
during the second half of 2009; and a $14 net charge related to the early retirement of various outstanding notes ($42 in
purchase premiums paid partially offset by a $28 gain for “in-the-money” interest rate swaps); mostly offset by a 7%
lower average debt level, primarily due to the absence of commercial paper resulting from Alcoa’s improved liquidity
position; and lower amortization expense of financing costs, principally related to the fees paid (fully amortized in
October 2009) for the former $1,900 364-day senior unsecured revolving credit facility.
Other (Income) Expenses, net—Other income, net was $87 in 2011 compared with Other expenses, net of $5 in 2010.
The change of $92 was mainly the result of a net favorable change of $89 in mark-to-market derivative contracts, a
gain of $43 from the sale of land in Australia, and higher equity income from an investment in a natural gas pipeline in
Australia due to the recognition of a discrete income tax benefit by the consortium (Alcoa World Alumina and
Chemicals’ share of the benefit was $24), slightly offset by a decrease in the cash surrender value of company-owned
life insurance.
Other expenses, net was $5 in 2010 compared with Other income, net of $161 in 2009. The change of $166 was mostly
due to the absence of a $188 gain on the Elkem/Sapa AB exchange transaction, a $92 gain related to the acquisition of
a BHP Billiton subsidiary in the Republic of Suriname, and a $22 gain on the sale of property in Vancouver, WA; net
foreign currency losses; and a smaller improvement in the cash surrender value of company-owned life insurance;
partially offset by the absence of both a $182 realized loss on the sale of an equity investment and an equity loss related
to Alcoa’s former 50% equity stake in Elkem; and a net favorable change of $25 in mark-to-market derivative
contracts.
Income Taxes—Alcoa’s effective tax rate was 24.0% (provision on income) in 2011 compared with the U.S. federal
statutory rate of 35%. The effective tax rate differs from the U.S. federal statutory rate mainly due to foreign income
taxed in lower rate jurisdictions.
Alcoa’s effective tax rate was 26.9% (provision on income) in 2010 compared with the U.S. federal statutory rate of
35%. The effective tax rate differs from the U.S. federal statutory rate primarily due to foreign income taxed in lower
rate jurisdictions, a $57 discrete income tax benefit for the reversal of a valuation allowance as a result of previously
restricted net operating losses of a foreign subsidiary now available, a $24 discrete income tax benefit related to a
Canadian provincial tax law change permitting a tax return to be filed in U.S. dollars, and a $13 net discrete income tax
benefit for various other items, partially offset by a $79 discrete income tax charge as a result of a change in the tax
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