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Acquisitions and Divestitures | 9 Months Ended
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Sep. 30, 2015
Business Combinations [Abstract] |
Acquisitions and Divestitures | E. Acquisitions and Divestitures – In November 2014, Alcoa completed the acquisition of an aerospace jet engine components company, Firth Rixson, for $2,995 plus $130 in contingent consideration. The preliminary allocation of the purchase price at that time resulted in total assets of $3,470, including $1,898 in goodwill and $398 in intangibles, and $475 in total liabilities, including the $130 of contingent consideration. In the 2015 nine-month period, Alcoa updated the estimated beginning balances of certain assets acquired, including a decrease to properties, plants, and equipment of $166, an increase to intangible assets of $393, and a decrease to goodwill of $94. These changes were based, in part, on management’s review of information from a completed third-party valuation. The intangible assets of $791 consist primarily of customer relationships and contracts, backlog, qualifications, and technology. These amounts, which will be finalized in the fourth quarter of 2015, are subject to change upon further review by management. In March 2015, Alcoa completed the acquisition of an aerospace structural castings company, TITAL, for $204 (€188) in cash (an additional $1 (€1) was paid in the 2015 third quarter to settle working capital in accordance with the purchase agreement). This transaction is no longer subject to post-closing adjustments. TITAL, a privately held company with approximately 650 employees based in Germany, produces aluminum and titanium investment casting products for the aerospace and defense end markets. The purpose of this acquisition is to capture increasing demand for advanced jet engine components made of titanium, establish titanium-casting capabilities in Europe, and expand existing aluminum casting capacity. The assets, including the associated goodwill, and liabilities of this business were included within Alcoa’s Engineered Products and Solutions segment since the date of acquisition. Based on the preliminary allocation of the purchase price, goodwill of $123 was recorded for this transaction, none of which is estimated to be deductible for income tax purposes. The final allocation of the purchase price will be based on management’s best estimates, including a valuation of the assets acquired and liabilities assumed, which may result in the identification of other intangible assets, and other studies related to potential environmental and contingent liabilities. Also in March 2015, Alcoa signed a definitive agreement to acquire RTI International Metals, Inc. (RTI), a U.S. company that was publicly traded on the New York Stock Exchange under the ticker symbol “RTI.” On July 23, 2015, after satisfying all customary closing conditions and receiving the required regulatory and RTI shareholder approvals, Alcoa completed the acquisition of RTI. Alcoa purchased all outstanding shares of RTI common stock in a stock-for-stock transaction valued at $870 (based on the $9.96 per share July 23, 2015 closing price of Alcoa’s common stock). Each issued and outstanding share of RTI common stock prior to the completion of the transaction was converted into the right to receive 2.8315 shares of Alcoa common stock. In total, Alcoa issued 87,397,414 shares of its common stock to consummate this transaction, which was not reflected in the accompanying Statement of Consolidated Cash Flows as it represents a noncash financing activity. The exchange ratio was the quotient of a $41 per RTI common share acquisition price and the $14.48 per share March 6, 2015 closing price of Alcoa’s common stock. In addition to the transaction price, Alcoa also paid $25 ($19 after-tax) in professional fees and costs related to this acquisition. This amount was recorded in Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations. RTI is a global supplier of titanium and specialty metal products and services for the commercial aerospace, defense, energy, and medical device end markets. The purpose of this acquisition is to expand Alcoa’s range of titanium offerings and add advanced technologies and materials, primarily related to the aerospace end market. In 2014, RTI generated net sales of $794 and had approximately 2,600 employees. The operating results and assets and liabilities of RTI were included within Alcoa’s Engineered Products and Solutions segment since the date of acquisition. Third-party sales and after-tax operating income (Alcoa’s primary segment performance measure – see Note I) of RTI from the acquisition date through September 30, 2015 were $127 and $(7), respectively. The following table represents the preliminary allocation of the purchase price by major asset acquired and liability assumed, as well as the amount of goodwill recognized:
Assets: |  |  |  |
Cash and cash equivalents |  | $ | 302 |
Receivables from customers |  |  | 103 |
Inventories |  |  | 538 |
Other current assets |  |  | 68 |
Properties, plants, and equipment, net |  |  | 436 |
Goodwill |  |  | 209 |
Other noncurrent assets |  |  | 91 |
Total assets |  | $ | 1,747 |
Liabilities: |  |  |  |
Accounts payable |  | $ | 90 |
Long-term debt due within one year |  |  | 115 |
Other current liabilities |  |  | 93 |
Long-term debt |  |  | 440 |
Other noncurrent liabilities |  |  | 139 |
Total liabilities |  | $ | 877 |
The amounts in the table above are subject to change upon completion of a third-party valuation of the assets acquired and liabilities assumed. This valuation is expected to be completed in 2016. As reflected in the table above, Alcoa recognized goodwill of $209, which represents the earnings growth potential of RTI, Alcoa’s ability to expand its titanium capabilities in the aerospace market, and expected synergies from combining the operations of the two companies. This goodwill will be allocated to a new Alcoa reporting unit associated with the Engineered Products and Solutions segment, Alcoa Titanium and Engineered Products, which consists solely of the acquired RTI business. None of this goodwill is deductible for income tax purposes. The other noncurrent assets in the table above include an estimate for intangible assets of $73, most of which were included in Alcoa’s other intangibles class. The specific identification and weighted-average amortization period for these intangible assets is dependent on the final valuation. As part of this acquisition, Alcoa also assumed the obligation to repay two tranches of convertible debt; one tranche is due on December 1, 2015 and the other tranche is due in 2019. Alcoa may elect to settle these convertible notes either in cash or shares of common stock (up to 37,009,898 shares combined). In the 2015 nine-month period, Alcoa completed the divestiture of an operation in Russia (see below) and had post-closing adjustments, as provided for in the respective purchase agreements, related to three divestitures completed in December 2014. The divestiture and post-closing adjustments combined resulted in net cash received of $30 and a net loss of $161 ($151 after-tax and noncontrolling interest), which was recorded in Restructuring and other charges (see Note D) on the accompanying Statement of Consolidated Operations. One of these four divestitures remains subject to certain post-closing adjustments as defined in the respective purchase agreement. In March 2015, Alcoa completed the sale of a rolling mill located in Belaya Kalitva, Russia to a wholly-owned subsidiary of Stupino Titanium Company. While owned by Alcoa, the operating results and assets and liabilities of the rolling mill were included in the Global Rolled Products segment. The rolling mill generated sales of approximately $130 in 2014 and, at the time of divestiture, had approximately 1,870 employees.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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