Alcoa 2015 Annual Report Download - page 81

Anglesea power station (includes the closure of a related coal mine) in Australia. The entire capacity at Poços de
Caldas had been temporarily idled since May 2014 and the Anglesea power station was shut down at the end of August
2015. Demolition and remediation activities related to the Poços de Caldas smelter and the Anglesea power station
began in late 2015 and are expected to be completed by the end of 2026 and 2020, respectively.
The decision on the Poços de Caldas smelter was due to management’s conclusion that the smelter was no longer
competitive as a result of challenging global market conditions for primary aluminum, which led to the initial
curtailment, that have not dissipated and higher costs. For the Anglesea power station, the decision was made because a
sale process did not result in a sale and there would have been imminent operating costs and financial constraints
related to this site in the remainder of 2015 and beyond, including significant costs to source coal from available
resources, necessary maintenance costs, and a depressed outlook for forward electricity prices. The Anglesea power
station previously supplied approximately 40 percent of the power needs for the Point Henry smelter, which was closed
in August 2014 (see 2014 Actions below).
In 2015, costs related to the shutdown and curtailment actions included asset impairments of $217, representing the
write-off of the remaining book value of all related properties, plants, and equipment; $156 for the layoff of
approximately 3,100 employees (1,800 in the Primary Metals segment and 1,300 in the Alumina segment), including
$30 in pension costs; accelerated depreciation of $84 related to certain facilities as they continued to operate during
2015; and $227 in other exit costs. Additionally in 2015, remaining inventories, mostly operating supplies and raw
materials, were written down to their net realizable value, resulting in a charge of $90 ($43 after-tax and noncontrolling
interest), which was recorded in COGS. The other exit costs of $227 represent $76 in asset retirement obligations and
$86 in environmental remediation, both of which were triggered by the decisions to permanently shut down and
demolish the aforementioned structures in the United States, Brazil, and Australia (includes the rehabilitation of a
related coal mine in each of Australia and the United States), and $65 in supplier and customer contract-related costs.
As of December 31, 2015, approximately 1,500 of the 5,200 employees were separated. The remaining separations for
2015 restructuring programs are expected to be completed by the end of 2016. In 2015, cash payments of $42 were
made against layoff reserves related to 2015 restructuring programs.
2014 Actions. In 2014, Alcoa recorded Restructuring and other charges of $1,168 ($703 after-tax and noncontrolling
interest), which were comprised of the following components: $693 ($443 after-tax and noncontrolling interest) for exit
costs related to decisions to permanently shut down and demolish three smelters and two rolling mills (see below); a
$332 ($163 after-tax and noncontrolling interest) net loss for the divestitures of four operations (see Alumina, Primary
Metals, 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 (470
in the Engineered Products and Solutions segment, 360 in the Transportation and Construction Solutions segment, 45
in the Global Rolled Products segment, 60 in the Alumina and Primary Metals segments combined, and 185 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, NY smelter 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,
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