Why is Howmet Aerospace (Alcoa) shutting down these facilities?

The decision to permanently shut down the Alcoa, Tennessee smelter and two potlines at the Rockdale, Texas smelter was made after a strategic analysis. Key factors cited include the lack of an economically viable, long-term power solution, changes in market fundamentals, cost competitiveness, and the need for future capital investment and restart costs.

What is the expected financial impact of these closures?

The company anticipates recording a charge of approximately $165 million pre-tax ($105 million after-tax) in the fourth quarter of 2011. This charge consists of about $130 million in non-cash asset impairments and approximately $35 million in cash expenditures for environmental and asset retirement obligations. Additionally, an estimated $50 million to $55 million in demolition and holding costs are expected between 2012 and 2016.

When will the demolition and remediation activities be completed?

Demolition and remediation activities are expected to commence in the first half of 2012. The Tennessee smelter demolition is anticipated to be completed by 2015, and the two potlines at the Rockdale smelter by 2013.

Will this impact earnings per share (EPS) in the fourth quarter of 2011?

Yes, the company expects total restructuring-related charges for the fourth quarter of 2011 to be between $155 million and $165 million after-tax, which translates to an estimated impact of $0.15 to $0.16 per share. Approximately 60% of these charges are expected to be non-cash.

HWM 8-K: Financial Events

Summary

Howmet Aerospace Inc. (formerly Alcoa Inc. at the time of this filing) reported a significant restructuring event on January 6, 2012, related to the permanent shutdown and demolition of specific facilities. The company announced the closure of its Alcoa, Tennessee smelter (215,000 metric tons/year capacity) and two potlines at its Rockdale, Texas smelter (76,000 metric tons/year capacity). This decision stems from a strategic analysis aimed at achieving sustained competitiveness, citing factors such as lack of a viable long-term power solution, altered market fundamentals, cost competitiveness issues, and anticipated future capital investments. Investors should note the financial impact of these closures. Alcoa expects to record a pre-tax charge of approximately $165 million ($105 million after-tax) in the fourth quarter of 2011, comprising non-cash asset impairments and cash expenditures for environmental and asset retirement obligations. Furthermore, additional charges between $50 million and $55 million are anticipated for demolition and holding costs between 2012 and 2016. The company will provide more detailed information in its upcoming 2011 Form 10-K.

Key Highlights

1Permanent shutdown of Alcoa, Tennessee smelter (215,000 metric tons/year capacity) and two potlines at Rockdale, Texas smelter (76,000 metric tons/year capacity).
2Decision driven by strategic analysis focused on sustained competitiveness, power solutions, market changes, and cost factors.
3Expected pre-tax restructuring charge of approximately $165 million ($105 million after-tax) for Q4 2011.
4Charge includes ~ $130 million in non-cash asset impairments and ~ $35 million in cash expenditures for environmental and retirement obligations.
5Additional demolition and holding costs estimated between $50 million and $55 million from 2012-2016.
6Restructuring charges for Q4 2011 estimated at $155 million to $165 million after-tax, or $0.15 to $0.16 per share, with ~60% being non-cash.
7Detailed financial information will be disclosed in the company's 2011 Form 10-K filing.

Howmet Aerospace Inc. 8-K Report, Exit or Disposal Costs (Jan 6, 2012)

Summary

Key Highlights

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