Restructuring and Other Charges, Net

6 Months Ended

Jun. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring and Other Charges, Net

D. Restructuring and Other Charges, Net – In the second quarter and the six-month period of 2023, Alcoa Corporation recorded Restructuring and other charges, net, of $24 and $173, respectively, which were comprised of:

•A charge of $101 (six-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 (six-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 (both periods) related to the settlement of certain pension benefits (see Note M);

•A charge of $2 (both periods) for employee termination and severance costs for overhead reductions; and,

•Charges of $1 (six-month period only) and $1 (both periods) for several other insignificant items.

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 six-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 over the next three years, with approximately $25 to be spent in 2023.

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 six-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 benefit of $75 in the second quarter of 2022 and a net charge of $50 in the six-month period of 2022 in Restructuring and other charges, net, which were comprised of:

•A reversal of $83 (both periods) for the reversal of a valuation allowance on Brazil value added taxes (VAT) (see Note R);

•A net charge of $3 and net reversal of $6, respectively, for changes in estimated take-or-pay contract costs at the closed Wenatchee (Washington) and Intalco smelters;

•A net charge of $3 and $2, respectively, for site remediation at previously closed sites;

•A charge of $2 and $79, respectively, for the offer made to the workers of the divested Avilés and La Coruña (Spain) facilities to settle various legal disputes related to the 2019 divestiture (see Note Q); and,

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

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:

	Second quarter ended June 30,					Six months ended June 30,
	2023		2022			2023		2022
Alumina (1)	$	1	$	(83	)	$	2	$	(25	)
Aluminum		19		5			165		73
Segment total		20		(78	)		167		48
Corporate		4		3			6		2
Total Restructuring and other charges, net	$	24	$	(75	)	$	173	$	50

(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		3			49			52
Cash payments		(1	)		(22	)		(23	)
Reversals and other		—			4			4
Balance at June 30, 2023	$	3		$	147		$	150

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 $30 and $3 at June 30, 2023 and December 31, 2022, respectively.