Restructuring and Other Charges, Net

9 Months Ended

Sep. 30, 2022

Restructuring And Related Activities [Abstract]

Restructuring and Other Charges, Net

D. Restructuring and Other Charges, Net – 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 (see Note K);

• 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 Q);

• 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 (Washington) smelter;

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

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

• 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 (Washington). 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. Associated cash outlays are expected to be paid over the next three to five years.

In the third quarter and nine-month period of 2021, Alcoa Corporation recorded Restructuring and other charges, net, of $33 and $73, respectively, which were comprised of:

• A charge of $27 (both periods) related to the closure of the previously curtailed anode facility in Lake Charles (Louisiana) (see below);

• A charge of $8 and $47, respectively, related to the settlement of certain pension benefits (see Note K);

• A reversal of $6 (both periods) for a take or pay energy-related obligation at the Sao Luis smelter no longer required due to the announced restart;

• Charges of $2 and $11, respectively, for additional take or pay energy contract costs related to the curtailed Wenatchee (Washington) and Intalco (Washington) smelters;

• Reversals of $22 (nine-month period only) due to lower costs for demolition and remediation related to previously established reserves (see Note P);

• A net charge of $9 (nine-month period only) related to the settlement and curtailment of certain other postretirement benefits resulting from the sale of the Warrick Rolling Mill (see Note K);

• Net charges of $2 and $7, respectively, for several other insignificant items.

In July 2021, Alcoa made the decision to permanently close the previously curtailed anode facility in Lake Charles (Louisiana). The anode facility within the Lake Charles site has been fully curtailed since 2015. The Company recorded restructuring and other charges of $27 in the third quarter of 2021, comprised of asset impairments of $22 and cash-based charges for closure and asset retirement obligations (AROs) of $5. The closure was completed in September 2022. The decision to permanently close the facility was made as part of the Company’s on-going portfolio review. The Company’s petroleum coke calciner located at the same site in Lake Charles remains in operation, unaffected by the closure of the anode facility.

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,
	2022			2021		2022			2021
Bauxite	$	—		$	—	$	58		$	—
Alumina		(3	)		—		(86	)		—
Aluminum		—			23		73			41
Segment total		(3	)		23		45			41
Corporate		655			10		657			32
Total Restructuring and other charges, net	$	652		$	33	$	702		$	73

In December 2021, the Company announced the two-year curtailment of 228 kmt of smelting capacity at the San Ciprián (Spain) aluminum smelter as a result of an agreement reached with the workers at the site to suspend production due to exorbitant energy prices in Spain. As a result of the curtailment, a restructuring reserve of $62 was established at December 31, 2021 related to certain financial employee and contractual obligations during the curtailment period. In the third quarter and nine-month period of 2022, cash payments of $9 and $17, respectively, were made to reduce the reserve.

Activity and reserve balances for restructuring charges were as follows:

	Severance and employee termination costs			Other costs			Total
Balance at December 31, 2020	$	6		$	57		$	63
Restructuring and other charges, net		1			80			81
Cash payments		(4	)		(25	)		(29	)
Reversals and other		—			(22	)		(22	)
Balance at December 31, 2021		3			90			93
Restructuring and other charges, net		—			73			73
Cash payments		(1	)		(27	)		(28	)
Reversals and other		—			(17	)		(17	)
Balance at September 30, 2022	$	2		$	119		$	121

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 accounts such as Investments (see Note H), AROs (see Note O), Environmental obligations (see Note P), and Other noncurrent assets (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 $11 and $43 at September 30, 2022 and December 31, 2021, respectively.