Alcoa AA (“Alcoa”) confirmed today that it has entered into a
settlement agreement with Aluminium Bahrain B.S.C. ("Alba") resolving a civil
lawsuit that had been pending in the U.S. District Court for the Western
District of Pennsylvania since 2008.
Without admitting any liability, Alcoa agreed to make a cash payment to Alba
of $85 million payable in two installments. One half was made at settlement
and the other half will be made one year later. The settlement amount is
within the range Alcoa previously estimated as its reasonably possible losses,
which it disclosed in its second quarter 2012 earnings announcement.
Alcoa said the settlement with Alba represents the best possible outcome and
avoids the time and expense of complex litigation.
Based on the settlement agreement with Alba, Alcoa recorded a $40 million
charge ($15 million after-tax and noncontrolling interest) in the third
quarter in addition to the $45 million charge ($18 million after-tax and
noncontrolling interest) it recorded in the second quarter. Alcoa estimates an
additional possible after-tax charge of approximately $25-30 million to
reflect an agreement between the shareholders of Alcoa World Alumina LLC
regarding the cash costs of the settlement of the Alba civil lawsuit; such
charge would be recognized in the event that a settlement is reached with the
Department of Justice and the Securities and Exchange Commission regarding
their investigations.
Alcoa and Alba have also resumed a commercial relationship and have entered
into an Alumina Price Index-based, long-term alumina supply agreement,
demonstrating a mutual desire to work together going forward and the
significant value that Alcoa brings to customers in the region through
superior quality and optimal logistics of its alumina.
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