During 2004, Alcoa recorded income of $21 ($41 after tax and minority interests) for restructuring and other items. The income recognized was comprised of the following components: a gain of $53 ($61 after tax and minority interests) on the sale of Alcoa’s specialty chemicals business and $15 resulting from adjustments to prior year reserves; offset by charges of $41 related to additional layoff reserves associated with approxi- mately 4,100 hourly and salaried employees (located primarily in Mexico and the U.S.), as the company continued to focus on reducing costs, and $6 of asset write-downs. As of December 31, 2004, approximately 3,700 of the 4,100 employees had been terminated, and cash payments of approxi- mately $22 were made against the reserves. Restructuring and other charges consisted of income of $27 ($25 after tax and minority interests) in 2003. The income was comprised of: $33 of net favorable adjustments on assets held for sale; $38 of income resulting from adjustments to prior year layoff reserves; and $44 of charges for additional layoff costs associated with approximately 1,600 hourly and salaried employees located primarily in Europe, the U.S., and Brazil, as the company continued to focus on cost reductions in businesses that continued to be impacted by market declines. The 2003 restructuring program is essentially complete. During 2002, Alcoa recorded restructuring and other charges of $414 ($272 after tax and minority interests) for restructurings associated with the curtailment of aluminum production at three smelters, as well as restructuring operations for those businesses experiencing negligible growth due to continued market declines and the decision to divest certain businesses that have failed to meet internal growth and return measures. The 2002 charges were comprised of the following components: $104 of charges for employee termination and severance costs associated with approximately 6,700 salaried and hourly employees at over 70 locations, primarily in Mexico, Europe, and the U.S.; $292 related to asset write-downs, consisting of $113 of goodwill on businesses to be divested, as well as $179 for structures, machinery, and equipment; and $25 for exit costs, primarily for remediation and demolition costs, as well as lease termination costs. Additionally, net reversals of $7 were recorded in 2002, primarily associated with adjust- ments to 2001 restructuring program reserves due to changes in estimates of liabilities resulting from lower than expected costs. The 2002 restructuring program is essentially complete. The increase in goodwill of $24 during 2004 was due primarily to adjustments to preliminary purchase price alloca- tions from prior periods, which had a $13 impact on the Engineered Products segment and an $11 impact on corporate. The increase in goodwill of $75 during 2003 was due primarily to the acquisition of the remaining 40.9% interest in Alcoa Aluminio, as well as adjustments to preliminary purchase price allocations from prior periods. See Note F for additional information. The impact to the segments follows: Engineered Products $40 and the Other group $(17). The impact to corporate was $52. Upon adoption of SFAS No. 142 on January 1, 2002, Alcoa recognized a cumulative effect adjustment of $34 (after tax) consisting of income from the write-off of negative goodwill from prior acquisitions of $49, offset by a $15 write-off for the impairment of goodwill in the automotive business resulting from a change in criteria for the measurement of fair value under SFAS No. 142 from an undiscounted to a discounted cash flow method. In the fourth quarter of 2002, Alcoa recorded an impairment charge of $44 for goodwill associated with its operations serving the telecommunications market due to lower than expected projected operating profits and cash flows. This amount was recorded in discontinued operations. Activity and reserve balances related to restructuring charges in 2002, 2003, and 2004 are as follows: Employee termination and severance costs Other exit costs Total Reserve balance at December 31, 2001 $ 142 $ 92 $ 234 2002: Cash payments (74) (30) (104 ) 2002 restructuring charges 104 25 129 Net changes to 2001 restructuring reserves (11) (3) (14) Reserve balances at December 31, 2002 $ 161 $ 84 $ 245 2003: Cash payments (120) (27) (147 ) 2003 restructuring charges 44 — 44 Additions to/(reversals) of 2002 restructuring charges (38) (9) (47) Reserve balances at December 31, 2003 $ 47 $ 48 $ 95 2004: Cash payments (52) (5) (57) 2004 restructuring charges 41 — 41 Reversals of 2003 restructuring charges (11) (4) (15) Reserve balances at December 31, 2004 $ 25 $ 39 $ 64 December 31 2004 2003 Balance at beginning of year $6,443 $6,282 Additions during the period 24 75 Translation and other adjustments 74 86 Balance at end of year $6,541 $6,443 E. Goodwill and Other Intangible Assets The following table details the changes in the carrying amount of goodwill. 49