D. Restructuring and Other Charges

Restructuring and other charges for each year in the three-year period ended December 31, 2015 were comprised of the following:


	2015			2014			2013
Asset impairments	$	335		$	406		$	116
Layoff costs		299			259			201
Legal matters in Italy (N)		201			-			-
Net loss on divestitures of businesses (F)		161			332			-
Resolution of a legal matter (N)		-			-			391
Other		213			199			82
Reversals of previously recorded layoff and other exit costs		(14	)		(28	)		(8	)
Restructuring and other charges	$	1,195		$	1,168		$	782

Layoff costs were recorded based on approved detailed action plans submitted by the operating locations that specified positions to be eliminated, benefits to be paid under existing severance plans, union contracts or statutory requirements, and the expected timetable for completion of the plans.

2015 Actions. In 2015, Alcoa recorded Restructuring and other charges of $1,195 ($836 after-tax and noncontrolling interest), which were comprised of the following components: $438 ($281 after-tax and noncontrolling interest) for exit costs related to decisions to permanently shut down and demolish three smelters and a power station (see below); $246 ($118 after-tax and noncontrolling interest) for the curtailment of two refineries and two smelters (see below); $201 (pre- and after-tax) related to legal matters in Italy (see Note N); a $161 ($151 after-tax and noncontrolling interest) net loss related to the March 2015 divestiture of a rolling mill in Russia and post-closing adjustments associated with three December 2014 divestitures (see Note F); $143 ($102 after-tax and noncontrolling interest) for layoff costs, including the separation of approximately 2,100 employees (425 in the Transportation and Construction Solutions segment, 645 in the Engineered Products and Solutions segment, 380 in the Primary Metals segment, 90 in the Global Rolled Products segment, 85 in the Alumina segment, and 475 in Corporate); $34 ($14 after-tax and noncontrolling interest) for asset impairments, virtually all of which was related to prior capitalized costs for an expansion project at a refinery in Australia that is no longer being pursued; an $18 ($13 after-tax) gain on the sale of land related to one of the rolling mills in Australia that was permanently closed in December 2014 (see 2014 Actions below); a net charge of $4 (a net credit of $7 after-tax and noncontrolling interest) for other miscellaneous items; and $14 ($11 after-tax and noncontrolling interest) for the reversal of a number of small layoff reserves related to prior periods.

During 2015, management initiated various alumina refining and aluminum smelting capacity curtailments and/or closures. The curtailments were composed of the remaining capacity at all of the following: the São Luís smelter in Brazil (74,000 metric-tons-per-year); the Suriname refinery (1,330,000 metric-tons-per-year); the Point Comfort, TX refinery (2,010,000 metric-tons-per-year); and the Wenatchee, WA smelter (143,000 metric-tons-per-year). All of the curtailments were completed in 2015 except for 1,635,000 metric-tons-per-year at the Point Comfort refinery, which is expected to be completed by the end of June 2016. The permanent closures were composed of the capacity at the Warrick, IN smelter (269,000 metric-tons-per-year) (includes the closure of a related coal mine) and the infrastructure of the Massena East, NY smelter (potlines were previously shut down in both 2013 and 2014—see 2013 Actions and 2014 Actions below), as the modernization of this smelter is no longer being pursued. The shutdown of the Warrick smelter is expected to be completed by the end of March 2016.

The decisions on the above actions were part of a separate 12-month review in refining (2,800,000 metric-tons-per-year) and smelting (500,000 metric-tons-per-year) capacity initiated by management in March 2015 for possible curtailment (partial or full), permanent closure or divestiture. While many factors contributed to each decision, in general, these actions were initiated to maintain competitiveness amid prevailing market conditions for both alumina and aluminum. Demolition and remediation activities related to the Warrick smelter and the Massena East location will begin in 2016 and are expected to be completed by the end of 2020.

Separate from the actions initiated under the reviews described above, in mid-2015, management approved the permanent shutdown and demolition of the Poços de Caldas smelter (capacity of 96,000 metric-tons-per-year) in Brazil and the 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 (see Note W); 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 Cost of goods sold on the accompanying Statement of Consolidated Operations. 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 Note F); $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 (84,000 metric-tons-per-year) at the Massena East, NY smelter and the full capacity (190,000 metric-tons-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 460,000 metric tons 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 (62,000 metric-tons-per-year) at the Poços de Caldas smelter and additional capacity (85,000 metric-tons-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, 200,000 metric-tons-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 200,000 metric-tons-per-year and were closed by the end of 2014. Demolition and remediation activities related to the two rolling mills began in mid-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 (150,000 metric-tons-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 2016 and are expected to be completed by the end of 2020 (delayed due to discussions with the Italian government and other stakeholders).

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 (see Note W); 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 the accompanying Statement of Consolidated Operations. The other exit costs of $183 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, 2015, approximately 2,500 of the 2,870 employees (previously 2,910) were separated. The total number of employees associated with 2014 restructuring programs was updated to reflect employees, who were initially identified for separation, accepting other positions within Alcoa and natural attrition. The remaining separations for 2014 restructuring programs are expected to be completed by the end of 2016. In 2015 and 2014, cash payments of $62 and $141, respectively, were made against layoff reserves related to 2014 restructuring programs.

2013 Actions. In 2013, Alcoa recorded Restructuring and other charges of $782 ($585 after-tax and noncontrolling interests), which were comprised of the following components: $391 ($305 after-tax and noncontrolling interest) related to the resolution of a legal matter (see Government Investigations under Litigation in Note N); $245 ($183 after-tax) for exit costs related to the permanent shutdown and demolition of certain structures at three smelter locations (see below); $87 ($61 after-tax and noncontrolling interests) for layoff costs, including the separation of approximately 1,110 employees (340 in the Primary Metals segment, 250 in the Global Rolled Products segment, 220 in the Engineered Products and Solutions segment, 85 in the Alumina segment, 75 in the Transportation and Construction Solutions segment and 140 in Corporate), of which 590 relates to a global overhead reduction program, and $9 in pension plan settlement charges related to previously separated employees; $25 ($17 after-tax) in net charges, including $12 ($8 after-tax) for asset impairments, related to retirements and/or the sale of previously idled structures; $25 ($13 after-tax and noncontrolling interests) for asset impairments related to the write-off of capitalized costs for projects no longer being pursued due to the market environment; a net charge of $17 ($12 after-tax and noncontrolling interests) for other miscellaneous items, including $3 ($2 after-tax) for asset impairments; and $8 ($6 after-tax and noncontrolling interests) for the reversal of a number of small layoff reserves related to prior periods.

In May 2013, management approved the permanent shutdown and demolition of two potlines (capacity of 105,000 metric-tons-per-year) that utilize Soderberg technology at the Baie Comeau smelter in Québec, Canada (remaining capacity of 280,000 metric-tons-per-year composed of two prebake potlines) and the full capacity (44,000 metric-tons-per-year) at the Fusina smelter in Italy. Additionally, in August 2013, management approved the permanent shutdown and demolition of one potline (capacity of 41,000 metric-tons-per-year) that utilizes Soderberg technology at the Massena East, NY smelter (remaining capacity of 84,000 metric-tons-per-year composed of two Soderberg potlines). The aforementioned Soderberg lines at Baie Comeau and Massena East were fully shut down by the end of September 2013 while the Fusina smelter was previously temporarily idled in 2010. Demolition and remediation activities related to all three facilities began in late 2013 and are expected to be completed by the end of 2016 for Massena East and by the end of 2017 for both Baie Comeau and Fusina.

The decisions on the Soderberg lines for Baie Comeau and Massena East were part of a 15-month review of 460,000 metric tons of smelting capacity initiated by management in May 2013 for possible curtailment, while the decision on the Fusina smelter was in addition to the capacity being reviewed. Factors leading to all three decisions were in general focused on achieving sustained competitiveness and included, among others: lack of an economically viable, long-term power solution (Italy); changed market fundamentals; other existing idle capacity; and restart costs.

In 2013, exit costs related to the shutdown actions included $114 for the layoff of approximately 550 employees (Primary Metals segment), including $83 in pension costs (see Note W); accelerated depreciation of $58 (Baie Comeau) and asset impairments of $18 (Fusina and Massena East) representing the write-off of the remaining book value of all related properties, plants, and equipment; and $55 in other exit costs. Additionally in 2013, remaining inventories, mostly operating supplies and raw materials, were written down to their net realizable value resulting in a charge of $9 ($6 after-tax), which was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. The other exit costs of $55 represent $48 in asset retirement obligations and $5 in environmental remediation, both of which were triggered by the decisions to permanently shut down and demolish these structures, and $2 in other related costs.

As of December 31, 2015, the separations associated with 2013 restructuring programs were essentially complete. In 2015, 2014, and 2013, cash payments of $7, $39, and $33, respectively, were made against layoff reserves related to 2013 restructuring programs.

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:


	2015		2014		2013
Alumina	$	233	$	287	$	11
Primary Metals		691		553		295
Global Rolled Products		131		266		15
Engineered Products and Solutions		49		13		12
Transportation and Construction Solutions		8		10		16
Segment total		1,112		1,129		349
Corporate		83		39		433
Total restructuring and other charges	$	1,195	$	1,168	$	782

Activity and reserve balances for restructuring charges were as follows:


	Layoff costs			Other exit costs			Total
Reserve balances at December 31, 2012	$	59		$	52		$	111
2013:
Cash payments		(63	)		(11	)		(74	)
Restructuring charges		201			85			286
Other*		(101	)		(84	)		(185	)
Reserve balances at December 31, 2013		96			42			138
2014:
Cash payments		(191	)		(22	)		(213	)
Restructuring charges		259			194			453
Other*		(66	)		(180	)		(246	)
Reserve balances at December 31, 2014		98			34			132
2015:
Cash payments		(111	)		(12	)		(123	)
Restructuring charges		299			233			532
Other*		(60	)		(231	)		(291	)
Reserve balances at December 31, 2015	$	226		$	24		$	250

Other includes reversals of previously recorded restructuring charges and the effects of foreign currency translation. In 2015, 2014, and 2013, Other for layoff costs also included a reclassification of $35, $26, and $92, respectively, in pension and/or other postretirement benefits costs, as these obligations were included in Alcoa’s separate liability for pension and other postretirement benefits obligations (see Note W). Additionally in 2015, 2014, and 2013, Other for other exit costs also included a reclassification of the following restructuring charges: $76, $95, and $58, respectively, in asset retirement and $86, $47, and $12, respectively, in environmental obligations, as these liabilities were included in Alcoa’s separate reserves for asset retirement obligations (see Note C) and environmental remediation (see Note N).

The remaining reserves are expected to be paid in cash during 2016, with the exception of approximately $10 to $15, which is expected to be paid over the next several years for ongoing site remediation work and special layoff benefit payments.