Alcoa 2014 Annual Report Download - page 79

and Global Rolled Products in Segment Information below); $68 ($45 after-tax and noncontrolling interest) for the
temporary curtailment of two smelters and a related production slowdown at one refinery (see below); $51 ($36 after-
tax and noncontrolling interest) for layoff costs, including the separation of approximately 1,120 employees (550 in the
Engineered Products and Solutions segment, 45 in the Global Rolled Products segment, 60 in the Alumina and Primary
Metals segments combined, and 465 in Corporate); $34 ($26 after-tax) for asset impairments related to prior
capitalized costs for a modernization project at a smelter in Canada that is no longer being pursued; a net charge of $18
($11 after-tax and noncontrolling interest) for other miscellaneous items, including $2 ($2 after-tax) for asset
impairments and accelerated depreciation; and $28 ($21 after-tax and noncontrolling interest) for the reversal of a
number of layoff reserves related to prior periods, including those associated with a smelter in Italy due to changes in
facts and circumstances (see below).
In early 2014, management approved the permanent shutdown and demolition of the remaining capacity (84 kmt-per-
year) at the Massena East smelter in New York and the full capacity (190 kmt-per-year) at the Point Henry smelter in
Australia. The capacity at Massena East was fully shut down by the end of March 2014 and the Point Henry smelter
was fully shut down in August 2014. Demolition and remediation activities related to both the Massena East and Point
Henry smelters began in late 2014 and are expected to be completed by the end of 2020 and 2018, respectively.
The decisions on the Massena East and Point Henry smelters were part of a 15-month review of 460 kmt of smelting
capacity initiated by management in May 2013 (see 2013 Actions below) for possible curtailment. Through this
review, management determined that the remaining capacity of the Massena East smelter was no longer competitive
and the Point Henry smelter had no prospect of becoming financially viable. Management also initiated the temporary
curtailment of the remaining capacity (62 kmt-per-year) at the Poços de Caldas smelter and additional capacity (85
kmt-per-year) at the São Luís smelter, both in Brazil. These curtailments were completed by the end of May 2014. As a
result of these curtailments, 200 kmt-per-year of production at the Poços de Caldas refinery was reduced by the end of
June 2014.
Also in early 2014, management approved the permanent shutdown of Alcoa’s two rolling mills in Australia, Point
Henry and Yennora. This decision was made due to the significant impact of excess can sheet capacity in both
Australia and Asia. The two rolling mills had a combined can sheet capacity of 200 kmt-per-year and were closed by
the end of 2014. Demolition and remediation activities related to the two rolling mills will begin in 2015 and are
expected to be completed by the end of 2018.
Additionally, in August 2014, management approved the permanent shutdown and demolition of the capacity (150
kmt-per-year) at the Portovesme smelter in Italy, which had been idle since November 2012. This decision was made
because the fundamental reasons that made the Portovesme smelter uncompetitive remained unchanged, including the
lack of a viable long-term power solution. Demolition and remediation activities related to the Portovesme smelter will
begin in 2015 and are expected to be completed by the end of 2019.
In 2014, costs related to the shutdown and curtailment actions included $208 for the layoff of approximately 1,790
employees (1,210 in the Primary Metals segment, 470 in the Global Rolled Products segment, 80 in the Alumina
segment, and 30 in Corporate), including $26 in pension costs; accelerated depreciation of $204 related to the three
facilities in Australia as they continued to operate during 2014; asset impairments of $166 representing the write-off of
the remaining book value of all related properties, plants, and equipment; and $183 in other exit costs. Additionally in
2014, remaining inventories, mostly operating supplies and raw materials, were written down to their net realizable
value, resulting in a charge of $67 ($47 after-tax and noncontrolling interest), which was recorded in Cost of goods
sold on Alcoa’s Statement of Consolidated Operations. The other exit costs represent $95 in asset retirement
obligations and $42 in environmental remediation, both of which were triggered by the decisions to permanently shut
down and demolish the aforementioned structures in Australia, Italy, and the United States, and $46 in other related
costs, including supplier and customer contract-related costs.
As of December 31, 2014, approximately 2,185 of the 2,910 employees were separated. The remaining separations for
the 2014 restructuring programs are expected to be completed by the end of 2015. In 2014, cash payments of $141
were made against layoff reserves related to the 2014 restructuring programs.
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