Restructuring and Other Charges, Net

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring and Other Charges, Net

D. Restructuring and Other Charges, Net

In the third quarter and the nine-month period of 2023, Alcoa Corporation recorded Restructuring and other charges, net, of $22 and $195, respectively, which were comprised of:

•A charge of $101 (nine-month period only) for asset impairments and to establish reserves for environmental, demolition and employee severance costs related to the permanent closure of the Intalco (Washington) aluminum smelter;

•A charge of $47 (nine-month period only) for increased reserves for certain employee obligations related to the updated viability agreement for the San Ciprián (Spain) aluminum smelter;

•A charge of $21 (nine-month period only) related to the settlement of certain pension benefits (see Note M);

•A net charge of $15 (both periods) to record additional environmental and asset retirement obligation reserves at previously closed locations (see Note Q);

•A charge of $7 and $10, respectively, for employee termination and severance costs primarily related to the Kwinana (Australia) refinery productivity program; and,

•A charge of $1 (nine-month period only) for several other insignificant items.

In September 2023, the Company continued to pursue cost reduction measures and initiated productivity programs across its operations in Australia to mitigate the financial impacts of lower grade bauxite and to optimize current operating levels. In connection with this program, the Company recorded Restructuring and other charges, net of $6 for employee termination and severance costs for approximately 90 employees at the Kwinana refinery. The restructuring action and associated cash outlays are anticipated to be complete by the end of the first quarter of 2024.

In March 2023, Alcoa Corporation announced the closure of the previously curtailed Intalco aluminum smelter. The facility had been fully curtailed since 2020. Charges related to the closure totaled $117 in the nine-month period of 2023 and included a charge of $16 for the write down of remaining inventories to net realizable value recorded in Cost of goods sold on the Statement of Consolidated Operations and a charge of $101 recorded in Restructuring and other charges, net on the Statement of Consolidated Operations. The restructuring charges were comprised of asset impairments of $50, environmental and demolition obligation reserves of $50, and severance and employee termination costs from the separation of approximately 12 employees of $1. Cash outlays related to the permanent closure of the site are expected to be approximately $85 in 2024 and 2025. The Company spent $1 in the third quarter and nine-month period of 2023 against the reserve.

On February 3, 2023, the Company reached an updated viability agreement with the workers’ representatives to commence the restart process of the San Ciprián aluminum smelter in phases beginning in January 2024. Under the terms of the updated viability agreement, the Company is responsible for certain employee obligations during 2024 and 2025. As a result, the Company recorded charges of $47 in the nine-month period of 2023 in Restructuring and other charges, net on the Statement of Consolidated Operations. Cash outlays related to these obligations are expected in 2024 and 2025.

Alcoa Corporation recorded a net charge of $652 in the third quarter of 2022 and a net charge of $702 in the nine-month period of 2022 in Restructuring and other charges, net, which were comprised of:

•A net charge of $626 (both periods) related to the settlement of certain pension benefits;

•A charge of $29 (both periods) related to the closure of the previously curtailed magnesium smelter facility in Addy (Washington);

•A reversal of $83 (nine-month period only) for the release of a valuation allowance on Brazil value added taxes (VAT) (see Note R);

•A net reversal of $6 (nine-month period only) for changes in estimated take-or-pay contract costs at the closed Wenatchee (Washington) smelter and the curtailed Intalco smelter;

•A net reversal of $3 and $1, respectively, for site remediation at previously closed sites (see Note Q);

•A charge of $79 (nine-month period only) for the agreement reached with the workers of the divested Avilés and La Coruña (Spain) facilities to settle various legal disputes related to the 2019 divestiture (see Note Q);

•A charge of $58 (nine-month period only) for an asset impairment related to the sale of the Company’s interest in MRN (see Note H).

In July 2022, Alcoa made the decision to permanently close the previously curtailed magnesium smelter in Addy. The facility has been fully curtailed since 2001. The Company recorded a charge of $29 to establish reserves for environmental and demolition obligations in Restructuring and other charges, net on the Statement of Consolidated Operations in the third quarter of 2022.

Alcoa Corporation does not include Restructuring and other charges, net in the results of its reportable segments. The impact of allocating such charges to segment results would have been as follows:

	Third quarter ended September 30,						Nine months ended September 30,
	2023			2022			2023		2022
Alumina (1)	$	6		$	(3	)	$	8	$	(28	)
Aluminum		(3	)		—			162		73
Segment total		3			(3	)		170		45
Corporate		19			655			25		657
Total Restructuring and other charges, net	$	22		$	652		$	195	$	702

(1)Beginning in January 2023, the Company changed its operating segments, by combining the Bauxite and Alumina segments, and reported its financial results in the following two segments: (i) Alumina and (ii) Aluminum (see Note E).

Activity and reserve balances for restructuring charges were as follows:

	Severance and employee termination costs			Other costs			Total
Balance at December 31, 2021	$	3		$	90		$	93
Restructuring and other charges, net		1			73			74
Cash payments		(2	)		(37	)		(39	)
Reversals and other		(1	)		(10	)		(11	)
Balance at December 31, 2022		1			116			117
Restructuring and other charges, net		10			49			59
Cash payments		(4	)		(108	)		(112	)
Reversals and other		—			2			2
Balance at September 30, 2023	$	7		$	59		$	66

The activity and reserve balances include only Restructuring and other charges, net that impact the reserves for Severance and employee termination costs and Other costs. Restructuring and other charges, net that affected other liability accounts such as Investments (see Note H), Accrued pension benefits (see Note M), Asset retirement obligations (see Note P), and Environmental remediation (see Note Q) are excluded from the above activity and balances. Reversals and other includes reversals of previously recorded liabilities and foreign currency translation impacts.

The noncurrent portion of the reserve was $21 and $3 at September 30, 2023 and December 31, 2022, respectively.