Delaware

(State or other jurisdiction of

incorporation or organization)

		81-1789115 (I.R.S. Employer Identification No.)
~~Delaware~~		~~81-1789115~~
~~(State of incorporation)~~		~~(I.R.S. Employer Identification No.)~~

201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania		~~15212-5858~~
(Address of principal executive offices)		15212-5858 (Zip ~~code)~~Code)

412-315-2900

(Registrant’s telephone number, including area code)

~~390 Park Avenue, New York, New York 10022-4608~~Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.


Large accelerated filer	☒	☐	Accelerated filer	☐

Non-accelerated filer	☐	~~☒ (Do not check if a smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~20, 2017, 185,022,929~~29, 2019, 185,572,917 shares of common stock, par value $0.01 per share, of the registrant were outstanding.

000

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION				1

Item 1.	Financial Statements		3	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40	30

Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk		53	40

Item 4.	Controls and Procedures		54	40

PART II – OTHER INFORMATION			41

Item 4.	Mine Safety Disclosures		55	41

Item 6.	Exhibits		56	42

SIGNATURES		57	43

Forward-Looking Statements

This report contains statements that relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. All statements by Alcoa Corporation that reflect expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts concerning global demand growth for bauxite, alumina, and aluminum, and supply/demand balances; statements, projections or forecasts of future financial results or operating performance; statements about strategies, outlook, and business and financial prospects; and statements about return of capital. These statements reflect beliefs and assumptions that are based on Alcoa Corporation’s perception of historical trends, current conditions, and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and changes in circumstances that are difficult to predict. Although Alcoa Corporation believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally and which may also affect Alcoa Corporation’s ability to obtain credit or financing upon acceptable terms; (c) unfavorable changes in the markets served by Alcoa Corporation; (d) the impact of changes in foreign currency exchange and tax rates on costs and results; (e) increases in energy costs or uncertainty of energy supply; (f) declines in the discount rates used to measure pension liabilities or lower-than-expected investment returns on pension assets, or unfavorable changes in laws or regulations that govern pension plan funding; (g) the inability to achieve improvement in profitability and margins, cost savings, cash generation, revenue growth, fiscal discipline, or strengthening of competitiveness and operations anticipated from operational and productivity improvements, cash sustainability, technology advancements, and other initiatives; (h) the inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, restarts, expansions, or joint ventures; (i) political, economic, trade, legal, and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (j) labor disputes and/or work stoppages; (k) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation; (l) the impact of cyberattacks and potential information technology or data security breaches; and (m) the other risk factors discussed in Item 1A of Alcoa Corporation’s Form 10-K for the fiscal year ended December 31, 2018 and other reports filed by Alcoa Corporation with the U.S. Securities and Exchange Commission, including those described in this report. Alcoa Corporation disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Market projections are subject to the risks described above and other risks in the market.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Alcoa Corporation and ~~subsidiaries~~Subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, exceptper-share amounts)

   Third quarter ended
September 30, Nine months ended
September 30,
   2017 2016 2017 2016
Sales to unrelated parties
   $ 2,725 $ 2,075 $ 7,837 $ 6,028
Sales to related parties (A)
   239 254 641 753


Total sales (E)
   2,964 2,329 8,478 6,781
Cost of goods sold (exclusive of expenses below)
   2,361 1,968 6,713 5,775
Selling, general administrative, and other expenses (A)
   70 92 214 267
Research and development expenses
   8 8 23 26
Provision for depreciation, depletion, and amortization
   194 181 563 536
Restructuring and other charges (D)
   (10 ) 17 12 109
Interest expense
   26 67 77 197
Other expenses (income), net (N)
   27 (106 ) (67 ) (90 )


Total costs and expenses
   2,676 2,227 7,535 6,820
Income (loss) before income taxes
   288 102 943 (39 )
Provision for income taxes (L)
   119 92 328 178


Net income (loss)
   169 10 615 (217 )
Less: Net income attributable to noncontrolling interest
   56 20 202 58


NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA CORPORATION
   $ 113 $ (10 ) $ 413 $ (275 )


EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS (F):

Basic
   $ 0.61 $ (0.06 ) $ 2.24 $ (1.51 )


Diluted
   $ 0.60 $ (0.06 ) $ 2.21 $ (1.51 )

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Sales (D)	$	2,567		$	3,390		$	7,997		$	10,059
Cost of goods sold (exclusive of expenses below) (H)		2,120			2,485			6,489			7,540
Selling, general administrative, and other expenses		66			58			218			189
Research and development expenses		7			7			21			24
Provision for depreciation, depletion, and amortization		184			173			530			559
Restructuring and other charges, net (C)		185			177			668			389
Interest expense		30			33			90			91
Other expenses, net (N)		27			2			118			32
Total costs and expenses		2,619			2,935			8,134			8,824
(Loss) income before income taxes		(52	)		455			(137	)		1,235
Provision for income taxes		95			260			361			569
Net (loss) income		(147	)		195			(498	)		666
Less: Net income attributable to noncontrolling interest		74			201			324			467
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION	$	(221	)	$	(6	)	$	(822	)	$	199
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS (E):
Basic	$	(1.19	)	$	(0.03	)	$	(4.43	)	$	1.07
Diluted	$	(1.19	)	$	(0.03	)	$	(4.43	)	$	1.06

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and ~~subsidiaries~~Subsidiaries

Statement of Consolidated Comprehensive ~~(Loss)~~ Income (unaudited)

(in millions)

   Alcoa Corporation Noncontrolling
interest Total
   Third quarter ended
September 30, Third quarter ended
September 30, Third quarter ended
September 30,
   2017 2016 2017 2016 2017 2016
Net income (loss)
   $ 113 $ (10 ) $ 56 $ 20 $ 169 $ 10
Other comprehensive (loss) income, net of tax (G):

Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits
   44 20 5 (1 ) 49 19
Foreign currency translation adjustments
   141 32 44 45 185 77
Net change in unrecognized gains/losses on cash flow hedges
   (415 ) (370 ) (5 ) (10 ) (420 ) (380 )


Total Other comprehensive (loss) income, net of tax
   (230 ) (318 ) 44 34 (186 ) (284 )


Comprehensive (loss) income
   $ (117 ) $ (328 ) $ 100 $ 54 $ (17 ) $ (274 )


   Nine months ended
September 30, Nine months ended
September 30, Nine months ended
September 30,
   2017 2016 2017 2016 2017 2016
Net income (loss)
   $ 413 $ (275 ) $ 202 $ 58 $ 615 $ (217 )
Other comprehensive (loss) income, net of tax (G):

Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits
   190 19 24 2 214 21
Foreign currency translation adjustments
   281 446 121 184 402 630
Net change in unrecognized gains/losses on cash flow hedges
   (729 ) (639 ) 57 4 (672 ) (635 )


Total Other comprehensive (loss) income, net of tax
   (258 ) (174 ) 202 190 (56 ) 16


Comprehensive income (loss)
   $ 155 $ (449 ) $ 404 $ 248 $ 559 $ (201 )

	Alcoa Corporation						Noncontrolling interest						Total
	Third quarter ended September 30,						Third quarter ended September 30,						Third quarter ended September 30,
	2019			2018			2019			2018			2019			2018
Net (loss) income (H)	$	(221	)	$	(6	)	$	74		$	201		$	(147	)	$	195
Other comprehensive (loss) income, net of tax (F):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits		19			398			(6	)		4			13			402
Foreign currency translation adjustments		(224	)		(142	)		(75	)		(54	)		(299	)		(196	)
Net change in unrecognized gains/losses on cash flow hedges		61			(29	)		(3	)		5			58			(24	)
Total Other comprehensive (loss) income, net of tax		(144	)		227			(84	)		(45	)		(228	)		182
Comprehensive (loss) income	$	(365	)	$	221		$	(10	)	$	156		$	(375	)	$	377


	Alcoa Corporation						Noncontrolling interest						Total
	Nine months ended September 30,						Nine months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018			2019			2018
Net (loss) income (H)	$	(822	)	$	199		$	324		$	467		$	(498	)	$	666
Other comprehensive (loss) income, net of tax (F):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits		70			682			(7	)		7			63			689
Foreign currency translation adjustments		(206	)		(586	)		(69	)		(219	)		(275	)		(805	)
Net change in unrecognized gains/losses on cash flow hedges		(148	)		346			2			(25	)		(146	)		321
Total Other comprehensive (loss) income, net of tax		(284	)		442			(74	)		(237	)		(358	)		205
Comprehensive (loss) income	$	(1,106	)	$	641		$	250		$	230		$	(856	)	$	871

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and ~~subsidiaries~~Subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)


	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents (K)	$	1,119		$	853
Cash and cash equivalents (J)							$	841		$	1,113
Receivables from customers		840			668			596			830
Other receivables		193			166			228			173
Inventories (I)		1,323			1,160
Fair value of derivative contracts (K)		112			51
Prepaid expenses and other current assets		217			283

Inventories (H)								1,649			1,819
Fair value of derivative instruments (J)								84			73
Prepaid expenses and other current assets (H)								245			320
Total current assets		3,804			3,181			3,643			4,328

Properties, plants, and equipment		23,253			22,550			21,456			21,807
Less: accumulated depreciation, depletion, and amortization		13,971			13,225			13,527			13,480

Properties, plants, and equipment, net		9,282			9,325			7,929			8,327

Investments (H & M)		1,408			1,358
Investments (G & M)								1,114			1,360
Deferred income taxes		862			741			560			560
Fair value of derivative contracts (K)		153			468
Fair value of derivative instruments (J)								47			82
Other noncurrent assets		1,745			1,668			1,377			1,475

Total assets	$	17,254		$	16,741		$	14,670		$	16,132

LIABILITIES
Current liabilities:
Accounts payable, trade	$	1,618		$	1,455		$	1,418		$	1,663
Accrued compensation and retirement costs		450			456			404			400
Taxes, including income taxes		166			147			81			426
Fair value of derivative contracts (K)		139			35
Other current liabilities (C)		376			707
Long-term debt due within one year (K)		17			21

Fair value of derivative instruments (J)								67			82
Other current liabilities								484			347
Long-term debt due within one year (J)								1			1
Total current liabilities		2,766			2,821			2,455			2,919

Long-term debt, less amount due within one year (K)		1,384			1,424
Accrued pension benefits		1,703			1,851
Accrued other postretirement benefits		1,076			1,166
Long-term debt, less amount due within one year (J)								1,805			1,801
Accrued pension benefits (I)								1,389			1,407
Accrued other postretirement benefits (I)								820			868
Asset retirement obligations		627			604			491			529
Environmental remediation (M)		270			264			238			236
Fair value of derivative contracts (K)		689			234
Fair value of derivative instruments (J)								425			261
Noncurrent income taxes		318			310			299			301
Other noncurrent liabilities and deferred credits		303			370			338			222

Total liabilities		9,136			9,044			8,260			8,544

CONTINGENCIES AND COMMITMENTS (M)

EQUITY
Alcoa Corporation shareholders’ equity:
Common stock		2			2			2			2
Additional capital		9,584			9,531			9,638			9,611
Retained earnings (deficit)		309			(104	)
Accumulated other comprehensive loss (G)		(4,033	)		(3,775	)

Retained (deficit) earnings (H)								(252	)		570
Accumulated other comprehensive loss (F)								(4,849	)		(4,565	)
Total Alcoa Corporation shareholders’ equity		5,862			5,654			4,539			5,618

Noncontrolling interest		2,256			2,043

Noncontrolling interest (H)								1,871			1,970
Total equity		8,118			7,697			6,410			7,588

Total liabilities and equity	$	17,254		$	16,741		$	14,670		$	16,132

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and ~~subsidiaries~~Subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)

   Nine months ended
September 30,
   2017 2016
CASH FROM OPERATIONS

Net income (loss)
   $ 615 $ (217 )
Adjustments to reconcile net income (loss) to cash from operations:

Depreciation, depletion, and amortization
   564 536
Deferred income taxes
   64 6
Equity income, net of dividends
   1 34
Restructuring and other charges (D)
   12 109
Net gain from investing activities – asset sales (C & N)
   (115 ) (164 )
Net periodic pension benefit cost (J)
   83 43
Stock-based compensation
   21 24
Other
   31 12
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:

(Increase) in receivables
   (112 ) (126 )
(Increase) Decrease in inventories
   (102 ) 39
Decrease (Increase) in prepaid expenses and other current assets
   62 (22 )
Increase (Decrease) in accounts payable, trade
   109 (175 )
(Decrease) in accrued expenses
   (320 ) (338 )
Increase (Decrease) in taxes, including income taxes
   15 (103 )
Pension contributions
   (82 ) (45 )
(Increase) in noncurrent assets
   (88 ) (188 )
Increase in noncurrent liabilities
   11 25


CASH PROVIDED FROM (USED FOR) OPERATIONS
   769 (550 )


FINANCING ACTIVITIES

Net transfers from Parent Company (A)
   —   407
Cash paid to Arconic related to separation (A & C)
   (247 ) —
Net change in short-term borrowings (original maturities of three months or less)
   2 —
Additions to debt (original maturities greater than three months)
   3 —
Payments on debt (original maturities greater than three months)
   (55 ) (16 )
Proceeds from the exercise of employee stock options
   38 —
Contributions from noncontrolling interest
   56 —
Distributions to noncontrolling interest
   (244 ) (176 )
Other
   (6 ) —


CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES
   (453 ) 215


INVESTING ACTIVITIES

Capital expenditures
   (255 ) (258 )
Proceeds from the sale of assets and businesses (C)
   243 112
Additions to investments (M)
   (44 ) (3 )
Sales of investments
   —   146
Net change in restricted cash
   —   (2 )


CASH USED FOR INVESTING ACTIVITIES
   (56 ) (5 )


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
   6 24


Net change in cash and cash equivalents
   266 (316 )
Cash and cash equivalents at beginning of year
   853 557


CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $ 1,119 $ 241

	Nine Months Ended September 30,
	2019			2018
CASH FROM OPERATIONS
Net (loss) income (H)	$	(498	)	$	666
Adjustments to reconcile net (loss) income to cash from operations:
Depreciation, depletion, and amortization		530			559
Deferred income taxes (H)		59			(16	)
Equity earnings, net of dividends		12			(11	)
Restructuring and other charges, net (C)		668			389
Net gain from investing activities – asset sales (N)		(6	)		—
Net periodic pension benefit cost (I)		90			115
Stock-based compensation		29			29
Provision for bad debt expense		21			—
Other		19			(64	)
Changes in assets and liabilities, excluding effects of divestitures and foreign currency translation adjustments:
Decrease (Increase) in receivables		127			(209	)
Decrease (Increase) in inventories (H)		111			(286	)
Decrease in prepaid expenses and other current assets		70			3
(Decrease) in accounts payable, trade		(199	)		(135	)
(Decrease) in accrued expenses		(147	)		(288	)
(Decrease) Increase in taxes, including income taxes		(344	)		248
Pension contributions (I)		(67	)		(940	)
(Increase) in noncurrent assets		(24	)		(89	)
(Decrease) in noncurrent liabilities		(27	)		(58	)
CASH PROVIDED FROM (USED FOR) OPERATIONS		424			(87	)
FINANCING ACTIVITIES
Additions to debt (original maturities greater than three months)		—			553
Payments on debt (original maturities greater than three months)		—			(105	)
Proceeds from the exercise of employee stock options		2			23
Contributions from noncontrolling interest		41			109
Distributions to noncontrolling interest		(388	)		(566	)
Other		(6	)		(8	)
CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES		(351	)		6
INVESTING ACTIVITIES
Capital expenditures		(245	)		(251	)
Proceeds from the sale of assets		23			—
Additions to investments		(112	)		(6	)
CASH USED FOR INVESTING ACTIVITIES		(334	)		(257	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(11	)		(1	)
Net change in cash and cash equivalents and restricted cash		(272	)		(339	)
Cash and cash equivalents and restricted cash at beginning of year		1,116			1,365
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	844		$	1,026

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and ~~subsidiaries~~Subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(in millions)

   Alcoa Corporation Shareholders
   Parent
Company
net
investment Common
stock    Additional
capital Retained
(deficit)
earnings Accumulated
other
comprehensive
loss Non-
controlling
interest Total
equity
Balance at June 30, 2016
   $ 11,127 $ —      $ —   $ —   $ (1,456 ) $ 2,180 $ 11,851
Net (loss) income
   (10 ) —      —   —   —   20 10
Other comprehensive (loss) income (G)
   —   —      —   —   (318 ) 34 (284 )
Establishment of defined benefit plans
   176 —      —   —   (2,704 ) —   (2,528 )
Change in Parent Company net investment
   151 —      —   —   —   —   151
Distributions
   —   —      —   —   —   (92 ) (92 )
Other
   —   —      —   —   —   4 4




Balance at September 30, 2016
   $ 11,444 $ —      $ —   $ —   $ (4,478 ) $ 2,146 $ 9,112




Balance at June 30, 2017
   $ —   $ 2    $ 9,559 $ 196 $ (3,803 ) $ 2,245 $ 8,199
Net income
   —   —      —   113 —   56 169
Other comprehensive (loss) income (G)
   —   —      —   —   (230 ) 44 (186 )
Stock-based compensation
   —   —      7 —   —   —   7
Common stock issued: compensation plans
   —   —      20 —   —   —   20
Distributions
   —   —      —   —   —   (89 ) (89 )
Other
   —   —      (2 ) —   —   —   (2 )




Balance at September 30, 2017
   $ —   $ 2    $ 9,584 $ 309 $ (4,033 ) $ 2,256 $ 8,118




Balance at December 31, 2015
   $ 11,042 $ —      $ —   $ —   $ (1,600 ) $ 2,071 $ 11,513
Net (loss) income
   (275 ) —      —   —   —   58 (217 )
Other comprehensive (loss) income (G)
   —   —      —   —   (174 ) 190 16
Establishment of defined benefit plans
   176 —      —   —   (2,704 ) —   (2,528 )
Change in Parent Company net investment
   501 —      —   —   —   —   501
Distributions
   —   —      —   —   —   (176 ) (176 )
Other
   —   —      —   —   —   3 3




Balance at September 30, 2016
   $ 11,444 $ —      $ —   $ —   $ (4,478 ) $ 2,146 $ 9,112




Balance at December 31, 2016
   $ —   $ 2    $ 9,531 $ (104 ) $ (3,775 ) $ 2,043 $ 7,697
Net income
   —   —      —   413 —   202 615
Other comprehensive (loss) income (G)
   —   —      —   —   (258 ) 202 (56 )
Stock-based compensation
   —   —      21 —   —   —   21
Common stock issued: compensation plans
   —   —      37 —   —   —   37
Contributions
   —   —      —   —   —   56 56
Distributions
   —   —      —   —   —   (244 ) (244 )
Other
   —   —      (5 ) —   —   (3 ) (8 )




Balance at September 30, 2017
   $ —   $ 2    $ 9,584 $ 309 $ (4,033 ) $ 2,256 $ 8,118

	Alcoa Corporation shareholders
	Common stock		Additional capital			Retained earnings (deficit)			Accumulated other comprehensive loss			Non- controlling interest			Total equity
Third quarter ended September 30, 2018
Balance at June 30, 2018	$	2	$	9,650		$	524		$	(4,967	)	$	2,036		$	7,245
Net (loss) income		—		—			(6	)		—			201			195
Other comprehensive income (loss) (F)		—		—			—			227			(45	)		182
Stock-based compensation		—		9			—			—			—			9
Common stock issued: compensation plans		—		1			—			—			—			1
Distributions		—		—			—			—			(181	)		(181	)
Other		—		(4	)		—			—			15			11
Balance at September 30, 2018	$	2	$	9,656		$	518		$	(4,740	)	$	2,026		$	7,462

Third quarter ended September 30, 2019
Balance at June 30, 2019	$	2	$	9,629		$	(31	)	$	(4,705	)	$	1,964		$	6,859
Net (loss) income		—		—			(221	)		—			74			(147	)
Other comprehensive loss (F)		—		—			—			(144	)		(84	)		(228	)
Stock-based compensation		—		8			—			—			—			8
Common stock issued: compensation plans		—		1			—			—			—			1
Contributions		—		—			—			—			20			20
Distributions		—		—			—			—			(102	)		(102	)
Other		—		—			—			—			(1	)		(1	)
Balance at September 30, 2019	$	2	$	9,638		$	(252	)	$	(4,849	)	$	1,871		$	6,410

Nine months ended September 30, 2018
Balance at December 31, 2017	$	2	$	9,590		$	318		$	(5,182	)	$	2,240		$	6,968
Net income		—		—			199			—			467			666
Other comprehensive income (loss) (F)		—		—			—			442			(237	)		205
Stock-based compensation		—		29			—			—			—			29
Common stock issued: compensation plans		—		23			—			—			—			23
Contributions		—		—			—			—			109			109
Distributions		—		—			—			—			(566	)		(566	)
Other		—		14			1			—			13			28
Balance at September 30, 2018	$	2	$	9,656		$	518		$	(4,740	)	$	2,026		$	7,462

Nine months ended September 30, 2019
Balance at December 31, 2018	$	2	$	9,611		$	570		$	(4,565	)	$	1,970		$	7,588
Net (loss) income		—		—			(822	)		—			324			(498	)
Other comprehensive loss (F)		—		—			—			(284	)		(74	)		(358	)
Stock-based compensation		—		29			—			—			—			29
Common stock issued: compensation plans		—		2			—			—			—			2
Contributions		—		—			—			—			41			41
Distributions		—		—			—			—			(388	)		(388	)
Other		—		(4	)		—			—			(2	)		(6	)
Balance at September 30, 2019	$	2	$	9,638		$	(252	)	$	(4,849	)	$	1,871		$	6,410

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and ~~subsidiaries~~Subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

(dollars in millions, exceptper-share ~~amounts)~~ amounts; metric tons in thousands (kmt))

A.Basis of Presentation– The interim Consolidated Financial Statements of Alcoa Corporation and its subsidiaries ~~(“Alcoa Corporation”~~(Alcoa Corporation or the ~~“Company”)~~Company) are unaudited. These Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The ~~2016~~2018 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). This Quarterly Report on Form10-Q ~~report~~ should be read in conjunction with ~~Alcoa Corporation’s~~the Company’s Annual Report on Form10-K for the year ended December 31, ~~2016,~~2018, which includes all disclosures required by GAAP.

In preparing the Consolidated Financial Statements for the year ended December 31, 2016, management discovered that the amount for Cost of goods sold previously reported for the three and nine months ended September 30, 2016 included an immaterial error due to an under-allocation of LIFO~~(last-in,first-out)~~ expense of $4 and $14, respectively. The amount for Cost of goods sold in the accompanying Statement of Consolidated Operations for the three and nine months ended September 30, 2016 was revised to correct this immaterial error.

References in these Notes to ~~“ParentCo”~~ParentCo refer to Alcoa Inc., a Pennsylvania corporation, and its consolidated subsidiaries ~~(through~~through October 31, 2016, at which time it was renamed Arconic Inc. (Arconic)).

~~Separation Transaction.~~On November 1, 2016 (the ~~“Separation Date”)~~Separation Date), ParentCo separated into two standalone, publicly-traded companies, Alcoa Corporation ~~separated from ParentCo into a standalone, publicly-traded company, effective at 12:01 a.m. Eastern Standard Time,~~and Arconic (the ~~“Separation Transaction”)~~Separation Transaction). Alcoa Corporation is comprised of the bauxite mining, alumina refining, aluminum smelting and casting, and energy operations of ParentCo’s former Alumina and Primary Metals segments, as well as the Warrick, Indiana rolling operations and the 25.1% equity interest in the rolling mill at the joint venture in Saudi Arabia, both of which were part of ParentCo’s Global Rolled Products segment. ParentCo, which later changed its name to Arconic, continues to own the operations within its Global Rolled Products (except for the aforementioned rolling operations that are owned by Alcoa Corporation), Engineered Products and Solutions, and Transportation and Construction Solutions segments.

To effect the Separation Transaction, ParentCo undertook a series of transactions to separate the net assets and certain legal entities of ParentCo, resulting in a cash payment of $1,072 to ParentCo by Alcoa Corporation (an additional $247 was paid to Arconic by Alcoa Corporation in the 2017 nine-month period, including $243 associated with the sale of certain of the Company’s energy operations – see Note C) with the net proceeds of a previous debt offering. In conjunction with the Separation Transaction, 146,159,428 shares of Alcoa Corporation common stock were distributed to ParentCo shareholders. Additionally, Arconic retained 36,311,767 shares of Alcoa Corporation common stock representing its 19.9% retained interest (Arconic sold 23,353,000 of these shares on February 14, 2017 and the remaining 12,958,767 shares on May 4, 2017).~~“Regular-way”~~ trading of Alcoa Corporation’s common stock began with the opening of the New York Stock Exchange on November 1, 2016 under the ticker symbol “AA.” Alcoa Corporation’s common stock has a par value of $0.01 per share.

In connection with the Separation Transaction, as of October 31, 2016, ~~Alcoa Corporation~~the Company and Arconic entered into ~~certain~~several agreements ~~with Arconic~~ to ~~implement the legal and structural separation between the two companies, govern the relationship between Alcoa Corporation and Arconic after the completion of~~effect the Separation Transaction, ~~and allocate between Alcoa Corporation and Arconic various assets, liabilities and obligations,~~ including ~~among other things, employee benefits, environmental liabilities, intellectual property, andtax-related~~ ~~assets and liabilities. These agreements included~~ a Separation and Distribution Agreement and a Tax Matters ~~Agreement, Employee Matters Agreement, Transition Services Agreement, certain Patent,Know-How,~~ ~~Trade Secret License and Trademark License Agreements, and Stockholder and Registration Rights~~ Agreement.

ParentCo incurred costs to evaluate, plan, and execute the Separation Transaction, and Alcoa Corporation was allocated a pro rata portion of those costs based on segment revenue (see Cost Allocations below). ParentCo recognized $152 from January 2016 through October 2016 and $24 in 2015 for costs related See Note A to the ~~Separation Transaction,~~Consolidated Financial Statements in Part II Item 8 of ~~which $68 and $12, respectively, was allocated~~Alcoa Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

As of January 1, 2019, the Company changed its accounting method for valuing certain inventories from last-in, first-out (LIFO) to ~~Alcoa Corporation. Accordingly,~~average cost. The effects of the change in accounting principle have been retrospectively applied to all prior periods presented. See Note H for more information regarding the ~~2016 third quarter and nine-month period, an allocation of $23 and $54, respectively, was included~~change in ~~Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations.~~

inventory accounting method.

Principles of Consolidation. The Consolidated Financial Statements of Alcoa Corporation include the accounts of Alcoa Corporation and companies in which Alcoa Corporation has a controlling interest, including those that comprise the Alcoa World Alumina & Chemicals (AWAC) joint venture (see below). Intercompany transactions have been eliminated. The equity method of accounting is used for investments in affiliates and other joint ventures over which Alcoa Corporation has significant influence but does not have effective control. Investments in affiliates in which Alcoa Corporation cannot exercise significant influence are accounted for on the cost method.

AWAC is an unincorporated global joint venture between Alcoa Corporation and Alumina Limited ~~of Australia (Alumina Limited)~~ and consists of several affiliated operating entities, which own, or have an interest in, or operate the bauxite mines and alumina refineries within Alcoa Corporation’s Bauxite and Alumina segments (except for the Poços de Caldas mine and refinery and a portion of the São Luís refinery, all in Brazil) and the Portland smelter in ~~Australia.~~Australia within Alcoa Corporation’s Aluminum segment. Alcoa Corporation owns 60% and Alumina Limited owns 40% of these individual entities, which are consolidated by the Company for financial reporting purposes and include Alcoa of Australia Limited, Alcoa World Alumina LLC (AWA), and Alcoa World Alumina Brasil Ltda. (AWAB). Alumina Limited’s interest in the equity of such entities is reflected as Noncontrolling interest on the accompanying Consolidated Balance Sheet.

Prior to the Separation Date, Alcoa Corporation did not operate as a separate, standalone entity. Alcoa Corporation’s operations were included in ParentCo’s financial results. Accordingly, for all periods prior to the Separation Date, the accompanying Consolidated Financial Statements were prepared from ParentCo’s historical accounting records and were presented on a standalone basis as if Alcoa Corporation’s operations had been conducted independently from ParentCo. Such Consolidated Financial Statements include the historical operations that were considered to comprise Alcoa Corporation’s businesses, as well as certain assets and liabilities that were historically held at ParentCo’s corporate level but were specifically identifiable or otherwise attributable to Alcoa Corporation. ParentCo’s net investment in these operations is reflected as Parent Company net investment on Alcoa Corporation’s Consolidated Balance Sheet. All significant transactions and accounts within Alcoa Corporation have been eliminated. All significant intercompany transactions between ParentCo and Alcoa Corporation were included within Parent Company net investment in the accompanying Consolidated Financial Statements.

~~Cost Allocations.~~ ~~The description and information on cost allocations is applicable for all periods included in the Consolidated Financial Statements prior to the Separation Date.~~

The Consolidated Financial Statements of Alcoa Corporation include general corporate expenses of ParentCo that were not historically charged to Alcoa Corporation for certain support functions that were provided on a centralized basis, such as expenses related to finance, audit, legal, information technology, human resources, communications, compliance, facilities, employee benefits and compensation, and research and development activities. These general corporate expenses were included in the accompanying Statement of Consolidated Operations within Cost of goods sold, Selling, general administrative and other expenses, and Research and development expenses. These expenses were allocated to Alcoa Corporation on the basis of direct usage when identifiable, with the remainder allocated based on Alcoa Corporation’s segment revenue as a percentage of ParentCo’s total segment revenue for both Alcoa Corporation and Arconic.

All external debt not directly attributable to Alcoa Corporation was excluded from Alcoa Corporation’s Consolidated Balance Sheet. Financing costs related to these debt obligations were allocated to Alcoa Corporation based on the ratio of capital invested in Alcoa Corporation to the total capital invested by ParentCo in both Alcoa Corporation and Arconic, and were included in the accompanying Statement of Consolidated Operations within Interest expense.

~~The following table reflects the allocations described above:~~

   Third
quarter
ended    Nine
months
ended
   September 30, 2016
Cost of goods sold⁽¹⁾
   $ 13    $ 39
Selling, general administrative, and other expenses⁽²⁾
   47    124
Research and development expenses
   –      2
Provision for depreciation, depletion, and amortization
   5    15
Restructuring and other charges⁽³⁾
   1    1
Interest expense
   59    178
Other expenses (income), net
   1    (8 )

⁽¹⁾	~~Allocation principally relates to expenses for ParentCo’s retained pension and other postretirement benefits associated with closed and sold operations.~~

⁽²⁾	~~Allocation includes costs incurred by ParentCo associated with the Separation Transaction (see Separation Transaction above).~~

⁽³⁾	~~Allocation primarily relates to layoff programs for ParentCo corporate employees.~~

~~Management believes the assumptions regarding the allocation of ParentCo’s general corporate expenses and financing costs were reasonable.~~

Nevertheless, the Consolidated Financial Statements of Alcoa Corporation may not include all of the actual expenses that would have been incurred and may not reflect Alcoa Corporation’s consolidated results of operations, financial position, and cash flows had it been a standalone company during the periods prior to the Separation Date. Actual costs that would have been incurred if Alcoa Corporation had been a standalone company would depend on multiple factors, including organizational structure, capital structure, and strategic decisions made in various areas, including information technology and infrastructure. Transactions between Alcoa Corporation and ParentCo, including sales to Arconic, were included as related party transactions in the Consolidated Financial Statements and are considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these transactions is reflected in the accompanying Statement of Consolidated Cash Flows as a financing activity and in Alcoa Corporation’s Consolidated Balance Sheet as Parent Company net investment.

~~Cash Management.~~ ~~The description and information on cash management is applicable for all periods included in the Consolidated Financial Statements prior to the Separation Date.~~

Cash was managed centrally with certain net earnings reinvested locally and working capital requirements met from existing liquid funds. Accordingly, the cash and cash equivalents held by ParentCo at the corporate level were not attributed to Alcoa Corporation for any of the periods prior to the Separation Date. Only cash amounts specifically attributable to Alcoa Corporation were reflected on the Company’s Consolidated Balance Sheet. Transfers of cash, both to and from ParentCo’s centralized cash management system, were reflected as a component of Parent Company net investment on Alcoa Corporation’s Consolidated Balance Sheet and as a financing activity on the accompanying Consolidated Statement of Cash Flows.

ParentCo had an arrangement with several financial institutions to sell certain customer receivables without recourse on a revolving basis. The sale of such receivables was completed through the use of a bankruptcy-remote special-purpose entity, which was a consolidated subsidiary of ParentCo. In connection with this arrangement, certain of Alcoa Corporation’s customer receivables were sold on a revolving basis to this bankruptcy-remote subsidiary of ParentCo; these sales were reflected as a component of Parent Company net investment on Alcoa Corporation’s accompanying Consolidated Balance Sheet.

ParentCo participated in several accounts payable settlement arrangements with certain vendors and third-party intermediaries. These arrangements provided that, at the vendor’s request, the third-party intermediary advance the amount of the scheduled payment to the vendor, less an appropriate discount, before the scheduled payment date and ParentCo made payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its vendors. In connection with these arrangements, certain of Alcoa Corporation’s accounts payable were settled, at the vendor’s request, before the scheduled payment date; these settlements were reflected as a component of Parent Company net investment on Alcoa Corporation’s Consolidated Balance Sheet.

~~Related Party Transactions.~~ Transactions between Alcoa Corporation and Arconic have been presented as related party transactions in the accompanying Consolidated Financial Statements. Sales to Arconic from Alcoa Corporation were $239 and $641 in the 2017 third quarter and nine-month period, respectively, and $254 and $753 in the 2016 third quarter and nine-month period, respectively. As of

September 30, 2017 and December 31, 2016, outstanding receivables from Arconic were $96 and $67, respectively, and were included in Receivables from customers on the accompanying Consolidated Balance Sheet.

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

On January 1, ~~2017,~~2019 Alcoa Corporation adopted ~~changes~~Accounting Standards Update (ASU) No. 2016-02, Leases, issued by the Financial Accounting Standards Board (FASB) regarding the accounting for leases, using the modified retrospective approach. This ASU requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for operating and finance leases with a term of 12 months or more. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option, or not exercise an option to terminate the lease. A right-of-use asset represents an entity’s right to use the underlying asset for the lease term, and a lease liability represents an entity’s obligation to make lease payments. The Company has made a policy election not to record any non-lease components in the lease liability. Previously, an asset and liability were only recorded for leases classified as capital leases (financing leases). The measurement, recognition, and presentation of expenses and cash flows arising from leases by a lessee remains the same. Management elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed carry forward of historical lease classifications. Additionally, in July 2018, the FASB issued ASU No. 2018-11, Targeted Improvements, to provide for an alternative transition method to the ~~subsequent measurement of inventory. Prior to these changes,~~new lease guidance, whereby an entity ~~was required~~can choose to ~~measure its inventory at~~not reflect the lower of cost or market, whereby market can be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The changes require that inventory be measured at the lower of cost and net realizable value, thereby eliminating the useimpact of the ~~other two market methodologies. Net realizable value is defined as the estimated selling prices~~new lease guidance in the ~~ordinary course~~prior periods included in its financial statements. The Company elected this alternative transition method upon adoption on January 1, 2019. Management also elected the practical expedient related to land easements, allowing the Company to carry forward the current treatment on existing arrangements.

As a result of ~~business less reasonably predictable costs~~the adoption, management recorded a right-of-use asset and lease liability, each in the amount of ~~completion, disposal,~~$201, on Alcoa Corporation’s Consolidated Balance Sheet as of January 1, 2019 for several types of operating leases, including land and ~~transportation. These changes do not apply~~buildings, alumina refinery process control technology, plant equipment, vehicles, and computer equipment. See Note L for additional information related to ~~inventories measured using LIFO or~~ the ~~retail inventory method. Prior to these changes, Alcoa Corporation applied the net realizable value market option to measurenon-LIFO~~ ~~inventories at the lower of cost or market. The~~ adoption of ~~these changes had no~~this standard.

Alcoa Corporation’s adoption of the following accounting guidance in 2019 did not have a material impact on the Company’s Consolidated Financial ~~Statements.~~Statements:

~~On January 1, 2017, Alcoa Corporation adopted changes issued by~~

Accounting Standards Update

2018-01 Leases: Land Easement Practical Expedient for Transition

2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

2018-07 Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting

Issued

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General. This ASU makes changes to ~~derivative instruments designated as hedging instruments. These changes clarify that a change in~~ the ~~counterparty to a derivative instrument that has been designated as a hedging instrument does not, in~~disclosures of fair value measurements and defined benefit plans through several removals, modifications, additions, and/or clarifications of ~~itself, requirede-designation~~ of that hedging relationship provided that all other hedge accounting criteria continue to be met. The adoption of these changes had no immediate impact on the Consolidated Financial Statements; however, this guidance will need to be considered in the event the existing ~~counterparty to any of Alcoa Corporation’s derivative instruments changes to a new counterparty.~~

On January 1, 2017, Alcoa Corporation adopted changes issued by the FASB to equity method investments. These changes eliminate the requirement for an investor to adjust an equity method investment, results of operations, and retained earnings retroactively on a~~step-by-step~~ basis as if the equity method had been in effect during all previous periods that the investment had been held as a result of an increase in the level of ownership interest or degree of influence. Additionally, an entity that has an~~available-for-sale~~ ~~equity security that becomes qualified for the equity method of accounting must recognize through earnings the unrealized holding gain or loss in~~requirements. Certain disclosures associated with accumulated other comprehensive income, ~~at the date the investment becomes qualified for use~~valuation of ~~the equity method. The adoption of these changes had no immediate impact on the Consolidated Financial Statements; however, this guidance will need~~Level 3 assets, and sensitivities in assumed health care trend rates and interest rates have been eliminated. New disclosures have been added to ~~be considered in the event any of Alcoa Corporation’s investments undergo a change as previously described.~~

On January 1, 2017, Alcoa Corporation adopted changes issued by the FASB to employee share-based payment accounting. Prior to these changes, an entity must determine for each share-based payment award whether the difference between the deduction for tax purposesexplain significant gains and ~~the compensation cost recognized for financial reporting purposes results in either an excess tax benefit or a tax deficiency. Excess tax benefits are recognized in additionalpaid-in~~ capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement. Excess tax benefits are not recognized until the deduction reduces taxes payable. The changes require all excess tax benefits and tax deficiencieslosses related to ~~share-based payment awards to be recognized as~~changes in benefit obligations, changes included in other comprehensive income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Additionally, the presentation of excess tax benefits related to share-based payment awards in the statement of cash flows is changed. Prior to these changes, excess tax benefits must be separated from other income tax cash flows and classified as a financing activity. The changes require excess tax benefits to be classified along with other income tax cash flows as an operating activity. Also, the changes require cash paid by an employer when directly withholding shares for~~tax-withholding~~ purposes to be classified as a financing activity. Prior to these changes, there was no specific guidance on the classification in the statement of cash flows of cash paid by an employer to the tax authorities when directly withholding shares for~~tax-withholding~~ ~~purposes. Additionally,~~ for a share-based award to qualify for equity classification it cannot partially settle in cash in excess of the employer’s minimum statutory withholding requirements. The changes permit equity classification of share-based awards for withholdings up to the maximum statutory tax rates in applicable jurisdictions. The adoption of these changes had an immaterial impact on the Consolidated Financial Statements.

~~On January 1, 2017, Alcoa Corporation adopted changes issued by the FASB to the accounting for intra-entity transactions, other than inventory. Prior to these changes, no immediate tax impact is~~

recognized in an entity’s financial statements as a result of intra-entity transfers of assets. An entity is precluded from reflecting a tax benefit or expense from an intra-entity asset transfer between entities that file separate tax returns, whether or not such entities are in different tax jurisdictions, until the asset has been sold to a third party or otherwise recovered. The buyer of such asset is prohibited from recognizing a deferred tax asset for the temporary difference arising from the excess of the buyer’s tax basis over the cost to the seller. The changes require the current and deferred income tax consequences of the intra-entity transfer to be recorded when the transaction occurs. The exception to defer the tax consequences of inventory transactions is maintained. The adoption of these changes had an immaterial impact on the Consolidated Financial Statements.

On January 1, 2017, Alcoa Corporation adopted changes issued by the FASB to consolidation accounting. Prior to these changes, an entity was required to consider indirect economic interests in a variable interest entity held through related parties under common control as direct interests in their entirety in the entity’s assessment of whether it is the primary beneficiary of the variable interest entity. The changes result in an entity considering such indirect economic interests only on a proportionate basis as indirect interests instead of as direct interests in their entirety. The adoption of these changes had no impact on the Consolidated Financial Statements; however, this guidance will need to be considered in future assessments of whether Alcoa Corporation is the primary beneficiary of a variable interest entity.

~~Issued~~

In January 2017, the FASB issued changes to accounting for business combinations. These changes clarify the definition of a business for the purposes of evaluating whether a particular transaction should be accounted for as an acquisition or disposal of a business or an asset. Generally, a business is an integrated set of assets and activities that contain inputs, processes, and outputs, although outputs are not required. These changes provide a “screen” to determine whether an integrated set of assets and activities qualifies as a business. If substantially all of therecurring Level 3 fair value ~~of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets, the definition of a business has not been met~~measurements, and ~~the transaction should be accounted for as an acquisition or disposal of an asset. Otherwise, an entity is required~~information on significant unobservable inputs used to evaluate whether the integrated set of assets and activities include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and are no longer to consider whether a market participant could replace any missing elements. These changes also narrow the definition of an output. Currently, an output is defined as the ability to provide a return in the form of dividends, lower costs, or other economic benefits directly to investors, owners, members, or participants. An output would now be defined as the ability to provide goods or services to customers, investment income, or other revenues.develop Level 3 fair value measurements. These changes become effective for Alcoa Corporation for its fiscal year ending December 31, 2020 and for interim periods therein with early adoption permitted and retrospective presentation for all periods presented required. Other than updating the applicable disclosures, the adoption of this guidance will not have an impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software. This ASU aligns the accounting for cloud computing implementation costs with that of costs to develop or obtain internal-use software, meaning such costs that are part of the application development stage are capitalized as an asset and amortized over the term of the arrangement, otherwise, such costs are expensed as incurred. It also clarifies the classification of amounts related to capitalized implementation costs in the financial statements. This guidance becomes effective for Alcoa Corporation on January 1, ~~2018.~~2020, with early adoption permitted. Management has ~~determined~~completed our assessment of the impact related to this guidance and concluded that the adoption of ~~these changes~~this guidance will not have ~~an immediate~~a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. This ASU added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to ~~be considered in the event Alcoa Corporation acquires or disposes~~measure expected credit losses on assets that have a low risk of ~~an integrated set of assets and activities.~~

In January 2017, the FASB issued changes to the assessment of goodwill for impairment as it relates to the quantitative test. Currently, there are two steps when performing a quantitative impairment test. The first step requires an entity to compare the current fair value of a reporting unit to its carrying value. In the event the reporting unit’s estimated fair value is less than its carrying value, an entity performs the second step, which is to compare the carrying amount of the reporting unit’s goodwill with the implied fair value of that goodwill. The implied fair value of goodwill is the excess of the fair value of the reporting unit over the fair value amounts assigned to all of the assets and liabilities of that unit as if the reporting unit was acquired in a business combination and the fair value of the reporting unit represented the purchase price. If the carrying value of goodwill exceeds its implied fair value, an impairment loss equal to such excess would be recognized. These changes eliminate the second step of the quantitative impairment test. Accordingly, an entity would recognize an impairment of goodwill for a reporting unit, if under what is currently referred to as the first step, the estimated fair value of the reporting unit is less than the carrying value. The impairment would be equal to the excess of the reporting unit’s carrying value over its fair value not to exceed the total amount of goodwill applicable to that reporting unit.loss. These changes become effective for Alcoa Corporation on January 1, 2020. Management has determined that the adoption of these changes will not have an immediate impact on the Consolidated Financial Statements. This guidance will need to be considered each time Alcoa Corporation performs anis finalizing our assessment of ~~goodwill for impairment under~~ the ~~quantitative test.~~

In March 2017, the FASB issued changes to the presentation of net periodic benefit cost related to pension and other postretirement benefit plans. These changes require that an entity report the service cost component of net periodic benefit cost in the same line item(s) on the statement of operations as other compensation costs arising from services rendered by the pertinent employees during a reporting period. The other components of net periodic benefit cost (see Note J) are required to be presented

separately from the service cost component. In other words, these other components may be aggregated and presented as a separate line item or they may be included in existing line items on the statement of operations other than such line items that include the service cost component. Currently, Alcoa Corporation includes all components of net periodic benefit cost in Cost of goods sold (business employees) and Selling, general administrative, and other expenses (corporate employees) consistent with the location of other compensation costs related to the respective employees. Additionally, these changes only allow the service cost component to be capitalized as applicable (e.g., as a cost of internally manufactured inventory). These changes become effective for Alcoa Corporation on January 1, 2018. Other than providing additional disclosure, management has determined that the adoption of these changes will not have a material impact on the Consolidated Financial Statements.

In May 2017, the FASB issued changes to the accounting for stock-based compensation when there has been a modification to the terms or conditions of a share-based payment award. These changes require an entity to account for the modification only when there has been a substantive change to the terms or conditions of a share-based payment award. A substantive change occurs when the fair value, vesting conditions or balance sheet classification (liability or equity) of a share-based payment award is/are different immediately before and after the modification. Currently, an entity is required to account for any modification in the terms or conditions of a share-based payment award. These changes become effective for Alcoa Corporation on January 1, 2018. Management has determined that the adoption of these changes will not have an immediate impact on the Consolidated Financial Statements. This guidance will need to be considered if Alcoa Corporation initiates a modification that is determined to be a substantive change to an outstanding stock-based award.

In August 2017, the FASB issued changes to the accounting for hedging activities. These changes permit hedge accounting for risk components in hedging relationships involving nonfinancial risk and interest rate risk; reduce current limitations on the designation and measurement of a hedged item in a fair value hedge of interest rate risk; remove the requirement to separately measure and report hedge ineffectiveness; provide an election to systematically and rationally recognize in earnings the initial value of any amount excluded from the assessment of hedge effectiveness for all types of hedges; and lighten the requirements of effectiveness testing. Additionally, modifications to existing disclosures, as well as additional disclosures, will be required to reflect these changes regarding the measurement and recording of hedging activities. These changes become effective for Alcoa Corporation on January 1, 2019 (early adoption is permitted). Management is currently evaluating early adopting these changes and the potential impact of these changes on the Company’s Consolidated Financial ~~Statements.~~

In May 2014, the FASB issued changes to the recognition of revenue from contracts with customers. These changes created a comprehensive framework for all entities in all industries to apply in the determination of when to recognize revenue, and, therefore, supersede virtually all existing revenue recognition requirements and guidance. This framework is expected to result in less complex guidance in application while providing a consistent and comparable methodology for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as, the entity satisfies a performance obligation. In August 2015, the FASB deferred the effective date by one year, making these changes effective for Alcoa Corporation on January 1, 2018. Through a previously established project team, the Company has completed a detailed review of the terms and provisions of its customer contracts in light of these changes. The project team is in the process of finalizing the evaluation of these contracts under the new guidance, as well as assessing the need for any potential changes to the Company’s accounting policies and internal control structure. That said, Alcoa Corporation recognizes revenue when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms. Alcoa Corporation’s sales of its products to customers represent single performance obligations, which are not expected to be impacted by these changes. As a result, managementStatements but does not expect a material impact from the adoption of ~~these changes to have a material impact on the Consolidated Financial Statements.~~this guidance, as our current loss models incorporate both historic and forward-looking information.

~~C. Acquisitions and Divestitures~~– ~~In February 2017, Alcoa Corporation’s wholly-owned subsidiary, Alcoa Power Generating Inc., completed the sale of its215-megawatt~~ Yadkin Hydroelectric Project (Yadkin) to Cube Hydro Carolinas, LLC for $246 in cash ($241 was received in the 2017 first quarter and $5 was received in the 2017 second quarter). In the 2017 nine-month period, Alcoa Corporation recognized a gain of $120~~(pre-~~ ~~andafter-tax)~~ in Other income, net on the accompanying Statement of Consolidated Operations. In accordance with the Separation and Distribution Agreement (see Note A), Alcoa Corporation remitted $243 of the proceeds to Arconic. At December 31, 2016, Alcoa Corporation had a liability of $243, which was included in Other current liabilities on the accompanying Consolidated

Balance Sheet. The sale of Yadkin is subject to post-closing adjustments related to potential earnouts through January 31, 2027, unless the provisions of the earnouts are met earlier. Any such adjustment would result in Alcoa Corporation receiving additional cash (none of which would be remitted to Arconic) and recognizing income. Yadkin encompasses four hydroelectric power developments (reservoirs, dams, and powerhouses), known as High Rock, Tuckertown, Narrows, and Falls, situated along a~~38-mile~~ stretch of the Yadkin River through the central part of North Carolina. Prior to the divestiture, the power generated by Yadkin was primarily sold into the open market. Yadkin generated sales of $29 in 2016, and had approximately 30 employees as of December 31, 2016.

D.C. Restructuring and Other Charges, Net– In the third quarter and nine-month period of ~~2017,~~2019, Alcoa Corporation recorded ~~$10 of income and $12 of expense, respectively, in~~ Restructuring and other charges, net, of $185 and $668, respectively, which were comprised of the following components: $6$134 and ~~$24,~~$242, respectively, for ~~additional contract~~exit costs related to the ~~curtailed Wenatchee (Washington)~~smelter curtailment and ~~São Luí~~subsequent divestiture of the Avilés ~~(Brazil) smelters; $4~~ and ~~$17, respectively, for layoff costs, including the separation of approximately 10 and 120 (110~~La Coruña facilities in ~~the Aluminum segment) employees, respectively, and related pension costs of $3 and $6, respectively~~Spain (see ~~Note J)~~below); $7$37 (both periods) for employee termination and severance costs related to the ~~relocation~~implementation of the new operating model (see below); $5 (both periods) related to settlements of certain pension benefits (Note I); $38 (nine-month period only) related to the curtailment of certain pension benefits (see Note I); $319 (nine-month period only) related to the divestiture of Alcoa Corporation’s interest in the Ma’aden Rolling Company (MRC) (see below); $1 and $9, respectively, for closure costs related to a coal mine; and $8 and $18, respectively, for net charges related to various other items.

In September 2019, Alcoa Corporation announced the implementation of a new operating model that will result in a leaner, more integrated, operator-centric organization. Effective November 1, 2019, the new operating model eliminates the business unit structure, consolidates sales, procurement and other commercial capabilities at an enterprise level, and streamlines the Executive Team from 12 to 7 direct reports to the Chief Executive Officer. The new structure will reduce overhead with the intention of promoting operational and commercial excellence, and increasing connectivity between the Company’s ~~headquarters~~plants and ~~principal executive office from New York, New York to Pittsburgh, Pennsylvania;~~leadership. As a result of the

new operating model, Alcoa Corporation recorded a charge of ~~$2 (both periods)~~$37 related to employee termination and severance costs for approximately 260 employees company-wide. The restructuring actions are anticipated to be complete by the end of the first quarter 2020, with cash outlays estimated through March 31, 2020.

In January 2019, Alcoa Corporation reached an agreement with the workers’ representatives at the Avilés and La Coruña (Spain) aluminum facilities as part of the collective dismissal process announced in October 2018 and curtailed the smelters at these two locations, with a combined remaining operating capacity of 124 kmt, in February 2019. As part of the agreement, the Company agreed to conduct a sale process to identify third parties with interest in acquiring the facilities and to maintain the smelters in restart condition up to June 30, 2019. Through the sale process, PARTER Capital Group AG (PARTER), a private equity investment firm, was identified as a potential buyer for both of the Spanish facilities, inclusive of the smelters and casthouses at both facilities and the paste plant at La Coruña. Prior to the June 30, 2019 deadline, Alcoa Corporation agreed with the workers’ representatives to extend the timeline for the potential buyer to meet the financial conditions of a draft share purchase agreement by one week. On July 5, 2019, Alcoa Corporation signed a conditional share purchase agreement with PARTER for the purchase of these2 facilities, which was subject to PARTER meeting certain financial conditions prior to July 31, 2019 to support the facilities future operations. Prior to signing the conditional share purchase agreement with PARTER, Alcoa Corporation reached agreement with the workers’ representatives related to the potential transaction. If PARTER was not able to meet the financial conditions prior to July 31, 2019, the Company would have proceeded with the collective dismissal and social plan as of August 1, 2019.

As of July 31, 2019, PARTER met the financial conditions and the transaction has closed. Alcoa Corporation recorded Restructuring and other ~~miscellaneous items;~~charges, net, of $134 in the third quarter of 2019 resulting from financial contributions of up to $95 to PARTER per the agreement and a ~~reversal~~charge of ~~$29~~$39 to meet a working capital commitment and ~~$38, respectively, associated~~write-off the remaining net book value of the plants’ assets. Cash outflows at the close of the transaction were $37 with ~~several reserves~~the remaining financial contributions of $80 to be paid in quarterly installments through the second quarter of 2021.

Restructuring charges recorded in the first quarter of 2019 related to ~~prior periods (see below).~~

~~On July 11, 2017, Alcoa Corporation announced plans~~the collective dismissal process included asset impairments of $80, employee-related costs of $15 and contract termination costs of $8. Additional charges recorded in the first quarter included a $15 write down of remaining inventories to ~~restart three (161,400 metric tons~~their net realizable value, which was recorded in Cost of ~~capacity)~~goods sold, and $2 in miscellaneous charges recorded in Selling, general administrative, and other expenses on the accompanying Statement of ~~the five potlines (268,800 metric tons of capacity) at the Warrick (Indiana) smelter, which is expected to be complete~~Consolidated Operations. Restructuring charges recorded in the second quarter of ~~2018. This smelter was previously permanently closed in March 2016 by ParentCo. The capacity identified for restart will directly supply the existing rolling mill at the Warrick location~~2019 related to ~~improve efficiency~~this process are comprised of ~~the integrated site~~severance costs of $3 and ~~provide an additional source~~other employee-related costs of ~~metal to help meet an anticipated increase in production volumes. As a result of the decision to reopen this smelter, in the 2017 third quarter,~~$2.

In December 2009, Alcoa Corporation ~~reversed $29~~invested in ~~remaining liabilities~~a joint venture related to the ~~original closure decision. These liabilities~~ownership and operation of an integrated aluminum complex (bauxite mine, alumina refinery, aluminum smelter, and rolling mill) in the Kingdom of Saudi Arabia. The joint venture is owned 74.9% by the Saudi Arabian Mining Company (known as Ma’aden) and 25.1% by Alcoa Corporation, and originally consisted of ~~$20 in asset retirement obligations~~three separate companies as follows: the Ma’aden Bauxite and ~~$4 in environmental remediation obligations, which were necessary due to~~Alumina Company (MBAC; the ~~previous decision to demolish~~bauxite mine and alumina refinery), the Ma’aden Aluminium Company (MAC; the aluminum smelter and $5casthouse), and MRC (the rolling mill). Alcoa Corporation accounts for its investment in ~~severance~~the joint venture under the equity method as one integrated investment asset, consistent with the terms of the joint venture agreement.

In the second quarter of 2019, Alcoa Corporation and ~~contract termination costs. Additionally,~~Ma’aden amended the joint venture agreement that governs the operations of each of the three companies that comprise the joint venture. Under the terms of the amended agreement:

•

Alcoa Corporation made a contribution to MRC in the amount of $100, along with Ma’aden’s earlier capital contribution of $100, to meet current MRC cash requirements,including paying certain amounts owed by MRC to MAC and Alcoa Corporation;

•

Alcoa Corporation and Ma’aden consented to the write-off of $235 of MRC’s delinquent payables to MAC;

•

Alcoa Corporation transferred its 25.1% interest in MRC to Ma’aden and, as a result, has 0 further direct or indirect equity interest in MRC;

•

Alcoa Corporation is released from all future MRC obligations, including Alcoa Corporation’s sponsor support of $296 of MRC debt (see Note M) and its share of any future MRC cash requirements; and,

•

Alcoa Corporation and Ma’aden further defined MBAC and MAC shareholder rights, including the timing and determination of the amount of dividend payments of excess cash to the joint venture partners following required distributions to the commercial lenders of MBAC and MAC; among other matters.

The amendment also defines October 1, 2021 as the date after which Alcoa Corporation is permitted to sell all of its shares in both MBAC and MAC collectively, for which Ma’aden has a right of first refusal. The agreement further outlines that Alcoa Corporation’s call option and Ma’aden’s put option, relating to additional interests in the joint venture, are exercisable for a period of six-months after October 1, 2021.

The parties will maintain their commercial relationship, which includes Alcoa Corporation providing sales, logistics and customer technical services support for MRC products for the North American can sheet market. The Company will retain its 25.1% minority interest in MBAC and MAC, and Ma’aden will continue to own a 74.9% interest. As of September 30, 2019 and December 31, 2018, the carrying value of Alcoa Corporation’s investment in this joint venture was $615 and $874, respectively.

The $319 restructuring charge resulting from the ~~smelter and related assets was reduced to zero as~~MRC divestiture includes the ~~smelter ramped down between~~write-off of Alcoa Corporation’s investment in MRC of $161, the ~~permanent closure decision date (end~~cash contributions described above of ~~2015)~~$100, and the ~~end~~write-off of ~~March 2016. Once these assets are placed back into service in conjunction with~~Alcoa Corporation’s share of MRC’s delinquent payables due to MAC of $59 that were forgiven as part of this transaction, which were partially offset by a gain of $1 resulting from the ~~restart, their carrying~~write-off of the fair value ~~will remain zero. As such, only newly acquired or constructed assets related to the Warrick smelter will be depreciated.~~of debt guarantee.

In the third quarter and nine-month period of ~~2016,~~2018, Alcoa Corporation recorded Restructuring and other charges, net of ~~$17~~$177 and ~~$109, respectively.~~

~~Restructuring~~$389, respectively, which were comprised of the following components: $174 and $318, respectively, related to settlements and/or curtailments of certain pension and other ~~charges in the 2016 third quarter included $17~~postretirement employee benefits; $2 and $86, respectively, for layoff costs related to cost reduction initiatives, including the separation of approximately 30 employees in the Aluminum segment and related pension settlement costs (see Note J); a net credit of $1 for other miscellaneous items; and a net charge of $1 related to corporate actions of ParentCo allocated to Alcoa Corporation.

In the 2016 nine-month period, Restructuring and other charges included $84 for additional net costs related to decisions made in late 2015 to permanently close and demolish the Warrick smelter (see above) and to curtail the Wenatchee smelter and Point Comfort (Texas) refinery (see below); $28 for layoff costs related to cost reduction initiatives, including the separation of approximately 60 employees in the Aluminum segment and related pension settlement costs (see Note J); a net charge of $1 related to corporate actions of ParentCo allocated to Alcoa Corporation (see Cost Allocations in Note A); and a reversal of $4 associated with several layoff reserves related to prior periods.

~~In the 2016 nine-month period, the additional net~~ costs related to the ~~closure and curtailment actions included accelerated depreciation~~energy supply agreement at the curtailed Wenatchee (Washington) smelter, including $73 (nine-month period only) associated with management’s decision not to restart the fully curtailed Wenatchee smelter within the term provided in the energy supply agreement; a $15 net benefit (nine-month period only) for settlement of ~~$70~~matters related to the ~~Warrick smelter as it continued to operate through March 2016;~~Portovesme (Italy) smelter; and a reversal of $24 ($4 in the 2016 third quarter) associated with severance costs initially recorded in late 2015; and $38 ($2 in the 2016 third quarter) in other costs. Additionally in the 2016 nine-month period, remaining inventories, mostly operating supplies and raw materials, were written down to their$1 net ~~realizable value, resulting in a~~ charge of $5, which was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. The other costs of $38 ($2 in the 2016 third quarter) represent $30 ($3 in the 2016 third quarter)(third quarter only) for contract terminations, $4 (($3) in the 2016 third quarter) in asset retirement obligations for the rehabilitation of a coal mine related to the Warrick smelter, and $4 ($2 in the 2016 third quarter) in other related costs.

miscellaneous items.

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:


	Third quarter ended September 30,						Nine months ended September 30,					Third quarter ended September 30,				Nine months ended September 30,
	2017			2016			2017			2016		2019		2018		2019		2018
Bauxite	$	1		$	–		$	1		$	–	$	5	$	1	$	5	$	1
Alumina		4			(1	)		4			1		15		1		16		3
Aluminum		(22	)		17			(1	)		107		147		2		607		86

Segment total		(17	)		16			4			108		167		4		628		90
Corporate		7			1			8			1		18		173		40		299

Total restructuring and other charges	$	(10	)	$	17		$	12		$	109

Total Restructuring and other charges, net												$	185	$	177	$	668	$	389

~~As of September 30, 2017, approximately 70 of the 120 employees associated with 2017 restructuring programs were separated.~~ The remaining separations for 2017 restructuring programs are expected to be completed by the end of 2017. As of June 30, 2017, the separations associated with 2016 and 2015 restructuring programs were essentially complete.

~~In the 2017 third quarter and nine-month period, cash payments of $2 and $7, respectively, were made against layoff reserves~~activity related to ~~2017~~layoff costs and other costs included within the restructuring programs, less than $1 and $2, respectively, were made against layoff reserves related to 2016 restructuring programs, and $4 and $16, respectively, were made against layoff reserves related to 2015 restructuring programs.

~~Activity and~~ reserve balances ~~for restructuring charges were~~is as follows:

   Layoff
costs    Other
costs    Total
Reserve balances at December 31, 2015
   $ 137    $ 15    $ 152






2016:

Cash payments
   (74 )    (35 )    (109 )
Restructuring charges
   32    168    200
Other*
   (57 )    (120 )    (177 )






Reserve balances at December 31, 2016
   38    28    66






2017:

Cash payments
   (25 )    (33 )    (58 )
Restructuring charges
   17    30    47
Other*
   (17 )    (2 )    (19 )






Reserve balances at September 30, 2017
   $ 13    $ 23    $ 36

	Layoff costs			Other costs			Total
Balance at December 31, 2017	$	11		$	34		$	45
Restructuring and other charges, net		2			117			119
Cash payments		(7	)		(95	)		(102	)
Other⁽¹⁾		(1	)		(14	)		(15	)
Balance at December 31, 2018		5			42			47
Restructuring and other charges, net		52			160			212
Cash payments		(9	)		(84	)		(93	)
Other⁽¹⁾		(6	)		(5	)		(11	)
Balance at September 30, 2019	$	42		$	113		$	155

⁽¹⁾

Other includes reversals of previously recorded restructuring charges, ~~and~~ the effects of foreign currency ~~translation. In the 2017 nine-month period~~translation, and 2016, Other for layoff costs also included a reclassification of $6 (see Note J) and $16, respectively, in pension benefits costs, as these obligations were included in Alcoa Corporation’s separate liability for pension benefits obligations. Additionally in 2016, Other forreclassifications to other costs also included a reclassification of the following restructuring charges: $97 in asset retirement and $26 in environmental obligations, as these liabilities were included in Alcoa Corporation’s separate reserves, ~~for~~primarily asset retirement obligations, environmental remediation obligations and ~~environmental remediation.~~pension and/or other postretirement benefit costs.

The remaining reserves are expected to be paid in cash during the remainder of 2017, with the exception of $15, which is expected to be paid by no later than the end of 2019, for contract termination and special layoff benefit payments.

~~E. Segment Information~~ ~~– Effective in the first quarter of 2017, management elected to change the profit and loss measure of Alcoa Corporation’s reportable segments fromAfter-tax~~ operating income (ATOI) to Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) for internal reporting and performance measurement purposes. This change was made to enhance the transparency and visibilitynoncurrent portion of the ~~underlying operating performance~~reserve at September 30, 2019 was $19, of each segment. Alcoa Corporation calculates Adjusted EBITDA as Total sales (third-party and intersegment) minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; and Research and development expenses. Previously, Alcoa Corporation calculated ATOI as Adjusted EBITDA minus (plus) the following items: Provision for depreciation, depletion, and amortization; Equity loss (income); Loss (gain) on certain asset sales; and Income taxes. Alcoa Corporation’s Adjusted EBITDA may not be comparablewhich $18 relates to ~~similarly titled measures of other companies.~~financial contributions to PARTER.

business, into a new Aluminum business unit, as well as moving the financial results of previously closed operations, such as the Warrick smelter and Suriname refinery, into Corporate. The realignment was executed to align strategic, operational, and commercial activities, as well as to take advantage of synergies and reduce costs. The new Aluminum business unit is managed as a single operating segment. Prior to this change, each of these businesses were managed as individual operating segments and comprised the Aluminum, Cast Products, Energy, and Rolled Products segments. The existing Bauxite and Alumina segments and the new Aluminum segment represent Alcoa Corporation’s operating and reportable segments. The chief operating decision maker function regularly reviews the financial information, including Sales and Adjusted EBITDA, of these three operating segments to assess performance and allocate resources.

D. Segment ~~information for all prior periods presented was revised to reflect the new segment structure, as well as the new measure of profit and loss.~~

Information – The operating results of Alcoa Corporation’s reportable segments were as follows (differences between segment totals and ~~combined totals~~consolidated amounts are in Corporate):

												Bauxite		Alumina		Aluminum			Total
	Bauxite		Alumina			Aluminum			Total
Third quarter ended September 30, 2017
Third quarter ended September 30, 2019
Sales:
Third-party sales – unrelated party	$	104	$	713		$	1,851		$	2,668
Third-party sales – related party		—		—			239			239
Third-party sales												$	100	$	771	$	1,677		$	2,548
Intersegment sales		221		398			9			628			251		369		4			624

Total sales	$	325	$	1,111		$	2,099		$	3,535		$	351	$	1,140	$	1,681		$	3,172

Adjusted EBITDA	$	113	$	203		$	303		$	619
Segment Adjusted EBITDA												$	134	$	223	$	43		$	400
Supplemental information:
Depreciation, depletion, and amortization	$	24	$	53		$	106		$	183		$	35	$	54	$	88		$	177
Equity loss		—		(5	)		(7	)		(12	)	$	—	$	—	$	(5	)	$	(5	)
Third quarter ended September 30, 2016
Third quarter ended September 30, 2018
Sales:
Third-party sales – unrelated party	$	93	$	585		$	1,346		$	2,024
Third-party sales – related party		—		—			254			254
Third-party sales												$	67	$	1,101	$	2,198		$	3,366
Intersegment sales		192		317			2			511			224		544		6			774

Total sales	$	285	$	902		$	1,602		$	2,789		$	291	$	1,645	$	2,204		$	4,140

Adjusted EBITDA	$	97	$	78		$	183		$	358
Segment Adjusted EBITDA												$	106	$	660	$	84		$	850
Supplemental information:
Depreciation, depletion, and amortization	$	21	$	47		$	103		$	171		$	27	$	48	$	91		$	166
Equity loss		—		(9	)		(7	)		(16	)
Equity income (loss)												$	—	$	10	$	(5	)	$	5

	Bauxite		Alumina		Aluminum			Total
Nine months ended September 30, 2019
Sales:
Third-party sales	$	232	$	2,532	$	5,169		$	7,933
Intersegment sales		733		1,231		11			1,975
Total sales	$	965	$	3,763	$	5,180		$	9,908
Segment Adjusted EBITDA	$	372	$	964	$	(50	)	$	1,286
Supplemental information:
Depreciation, depletion, and amortization	$	90	$	157	$	262		$	509
Equity income (loss)		—		15		(44	)		(29	)
Nine months ended September 30, 2018
Sales:
Third-party sales	$	191	$	3,083	$	6,722		$	9,996
Intersegment sales		699		1,534		14			2,247
Total sales	$	890	$	4,617	$	6,736		$	12,243
Segment Adjusted EBITDA	$	316	$	1,690	$	501		$	2,507
Supplemental information:
Depreciation, depletion, and amortization	$	83	$	150	$	305		$	538
Equity income (loss)		—		23		(13	)		10

   Bauxite    Alumina    Aluminum Total
Nine months ended
September 30, 2017

Sales:

Third-party sales – unrelated party
   $ 254    $ 2,196    $ 5,243 $ 7,693
Third-party sales – related party
   —      —      641 641
Intersegment sales
   648    1,143    16 1,807






Total sales
   $ 902    $ 3,339    $ 5,900 $ 10,141






Adjusted EBITDA
   $ 321    $ 727    $ 730 $ 1,778
Supplemental information:

Depreciation, depletion, and amortization
   $ 61    $ 155    $ 315 $ 531
Equity loss
   —      (10 )    (11 ) (21 )
Nine months ended
September 30, 2016

Sales:

Third-party sales – unrelated party
   $ 224    $ 1,682    $ 3,996 $ 5,902
Third-party sales – related party
   —      —      753 753
Intersegment sales
   549    930    38 1,517






Total sales
   $ 773    $ 2,612    $ 4,787 $ 8,172






Adjusted EBITDA
   $ 273    $ 207    $ 528 $ 1,008
Supplemental information:

Depreciation, depletion, and amortization
   $ 57    $ 139    $ 310 $ 506
Equity loss
   —      (30 )    (24 ) (54 )

The following table reconciles total ~~segment~~Segment Adjusted EBITDA to consolidated net (loss) income ~~(loss)~~ attributable to Alcoa Corporation:

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017 2016
Total segment Adjusted EBITDA
   $ 619    $ 358    $ 1,778 $ 1,008
Unallocated amounts:

Impact of LIFO (I)
   (14 )    1    (36 ) 18
Metal price lag⁽¹⁾
   5    1    22 5
Corporate expense⁽²⁾
   (34 )    (47 )    (104 ) (133 )
Provision for depreciation, depletion, and amortization
   (194 )    (181 )    (563 ) (536 )
Restructuring and other charges (D)
   10    (17 )    (12 ) (109 )
Interest expense
   (26 )    (67 )    (77 ) (197 )
Other (expenses) income, net (N)
   (27 )    106    67 90
Other⁽³⁾
   (51 )    (52 )    (132 ) (185 )






Consolidated income (loss) before income taxes
   288    102    943 (39 )
Provision for income taxes
   (119 )    (92 )    (328 ) (178 )
Net income attributable to noncontrolling interest
   (56 )    (20 )    (202 ) (58 )






Consolidated net income (loss) attributable to Alcoa Corporation
   $ 113    $ (10 )    $ 413 $ (275 )

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total Segment Adjusted EBITDA⁽¹⁾	$	400		$	850		$	1,286		$	2,507
Unallocated amounts:
Transformation⁽²⁾		(6	)		1			(1	)		(2	)
Intersegment eliminations^(1),(3)		25			21			110			(55	)
Corporate expenses⁽⁴⁾		(27	)		(22	)		(79	)		(75	)
Provision for depreciation, depletion, and amortization		(184	)		(173	)		(530	)		(559	)
Restructuring and other charges, net (C)		(185	)		(177	)		(668	)		(389	)
Interest expense		(30	)		(33	)		(90	)		(91	)
Other expenses, net (N)		(27	)		(2	)		(118	)		(32	)
Other⁽⁵⁾		(18	)		(10	)		(47	)		(69	)
Consolidated (loss) income before income taxes		(52	)		455			(137	)		1,235
Provision for income taxes		(95	)		(260	)		(361	)		(569	)
Net income attributable to noncontrolling interest		(74	)		(201	)		(324	)		(467	)
Consolidated net (loss) income attributable to Alcoa Corporation	$	(221	)	$	(6	)	$	(822	)	$	199

⁽¹⁾

As of January 1, 2019, the Company changed its accounting method for valuing certain inventories from LIFO to average cost. The effects of the change in accounting principle have been retrospectively applied to all prior periods presented. As a result, in the third quarter and nine-month period of 2018, Total Segment Adjusted EBITDA increased $11 and $44, respectively, and Intersegment eliminations increased $38 and decreased $37, respectively.

⁽²⁾	Transformation includes, among other items, the Adjusted EBITDA of previously closed operations.

⁽³⁾

Concurrent with the change in inventory accounting method as of January 1, 2019, management elected to change the presentation of certain line items in the reconciliation of total Segment Adjusted EBITDA to Consolidated net (loss) income attributable to Alcoa Corporation. Corporate inventory accounting previously included the impact of LIFO, metal price lag and intersegment eliminations. The impact of LIFO has been eliminated with the change in inventory method. Metal price lag ~~describes~~attributable to the ~~timing difference created when~~Company’s rolled operations business is now netted within the ~~average price~~Aluminum segment to simplify presentation of ~~metal sold differs from the average cost of the metal when purchased by Alcoa Corporation’s rolled aluminum operations. In general, when the price of metal increases, metal price lag is favorable,~~an impact that nets to zero in consolidation. Only intersegment eliminations remain as a reconciling line item and ~~when the price of metal decreases, metal price lag is unfavorable.~~are labeled as such.

⁽²⁾⁽⁴⁾

Corporate ~~expense is primarily~~expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative ~~facilities.~~facilities, as well as research and development expenses of the corporate technical center.

⁽³⁾⁽⁵⁾

The following table details Alcoa Corporation’s Sales by product division:

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Primary aluminum	$	1,341		$	1,658		$	4,117		$	5,176
Alumina		770			1,098			2,529			3,079
Flat-rolled aluminum		294			472			933			1,417
Energy		71			115			225			261
Bauxite		95			63			216			179
Other⁽¹⁾		(4	)		(16	)		(23	)		(53	)
	$	2,567		$	3,390		$	7,997		$	10,059

⁽¹⁾	Other includes realized gains and losses related to embedded derivative instruments designated as ~~applicable, pension and other postretirement benefit expenses associated with closed and sold operations, and intersegment profit elimination.~~cash flow hedges of forward sales of aluminum.

F.E. Earnings Per Share– Basic earnings per share (EPS) amounts are computed by dividing earnings by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.

The information used to compute basic and diluted EPS attributable to Alcoa Corporation common shareholders was as follows (shares in millions):

											Third quarter ended September 30,						Nine months ended September 30,
	Third quarter ended September 30,					Nine months ended September 30,					2019			2018			2019			2018
	2017		2016			2017		2016
Net income (loss) attributable to Alcoa Corporation	$	113	$	(10	)	$	413	$	(275	)

Net (loss) income attributable to Alcoa Corporation											$	(221	)	$	(6	)	$	(822	)	$	199
Average shares outstanding – basic		185		182			184		182			186			186			185			186
Effect of dilutive securities:
Stock options		1		—			1		—			—			—			—			1
Stock and performance awards		1		—			2		—

Stock units												—			—			—			2
Average shares outstanding – diluted		187		182			187		182			186			186			185			189

In the ~~2016~~ third quarter and nine-month period of 2019, basic average shares outstanding and diluted average shares outstanding were the ~~EPS included on~~same because the ~~accompanying Statement~~effect of ~~Consolidated Operations was calculated based on the 182,471,195~~potential shares of common stock was anti-dilutive since Alcoa Corporation common stock distributed on the Separation Date in conjunction with the completion of the Separation Transaction and is considered pro forma in nature. Prior to November 1, 2016, Alcoa Corporation did not have any issued and outstanding publicly-traded common stock.

generated a net loss. As ~~of September 30, 2017, there were~~a result, 5 million ~~outstanding employee~~stock units and stock options ~~and stock awards (including performance), which resulted in 2 million and 3 million of dilutive securities~~combined were not included in the ~~2017~~computation of diluted EPS for both the third quarter and nine-month period ~~respectively. The following describes,~~of 2019. Had Alcoa Corporation generated net income in ~~general, how~~ the ~~dilutive securities are calculated. The calculation~~third quarter or nine-month period of ~~dilutive securities requires a company~~2019, 1 million common share equivalents related to ~~assume that it will purchase~~stock units and stock options combined would have been included in diluted average shares outstanding for the respective periods.

In the third quarter of 2018, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of ~~its own~~ common stock ~~from the stock market to offset the dilution that eventual vested employee stock compensation can create. This assumption is based on~~was anti-dilutive since Alcoa Corporation generated a predetermined formula and does not consider whether a company engages in a regular practice of purchasing its own common stock. The number of shares a company is presumed to have purchased of its own common stock is calculated based on the average market price of a company’s common stock during the respective period. The calculated number of shares presumed purchased by a company is then subtracted from the total number of shares issuable to the employees to derive the number of dilutive securities.net loss. As a result, ~~each~~4 million stock ~~option or~~awards and stock ~~award that impacts~~options combined were not included in the ~~number~~computation of ~~dilutive securities~~diluted EPS. Had Alcoa Corporation generated net income in ~~a given period is~~the third quarter of 2018, 2 million potential shares of common stock related to stock awards and stock options combined would have been included ~~on a less than full share basis.~~

in diluted average shares outstanding.

F. Accumulated Other Comprehensive Loss

The following table details the activity of the three components that comprise Accumulated other comprehensive loss for both Alcoa Corporation’s shareholders and ~~noncontrolling~~Noncontrolling interest:

													Alcoa Corporation						Noncontrolling interest
	Alcoa Corporation						Noncontrolling interest						Third quarter ended September 30,						Third Quarter Ended September 30,
	Third quarter ended September 30,						Third quarter ended September 30,						2019			2018			2019			2018
	2017			2016			2017			2016
Pension and other postretirement benefits (J)
Pension and other postretirement benefits (I)
Balance at beginning of period	$	(2,184	)	$	(353	)	$	(37	)	$	(53	)	$	(2,232	)	$	(2,502	)	$	(47	)	$	(44	)
Establishment of defined benefit plans		—			(2,704	)		—			—
Other comprehensive income (loss):
Unrecognized net actuarial loss and prior service cost/benefit		(6	)		(22	)		6			(1	)
Other comprehensive income:
Unrecognized net actuarial (loss) gain and prior service cost/benefit														(38	)		174			(11	)		4
Tax benefit (expense)		2			17			(2	)		—			11			(1	)		4			(1	)

Total Other comprehensive (loss) income before reclassifications, net of tax		(4	)		(5	)		4			(1	)		(27	)		173			(7	)		3
Amortization of net actuarial loss and prior service cost/benefit⁽¹⁾		50			38			1			1			49			227			2			1
Tax expense⁽²⁾		(2	)		(13	)		—			(1	)		(3	)		(2	)		(1	)		—

Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾		48			25			1			—			46			225			1			1

Total Other comprehensive income (loss)		44			20			5			(1	)		19			398			(6	)		4

Balance at end of period	$	(2,140	)	$	(3,037	)	$	(32	)	$	(54	)		(2,213	)		(2,104	)		(53	)		(40	)

Foreign currency translation
Balance at beginning of period	$	(1,515	)	$	(1,437	)	$	(600	)	$	(640	)		(2,053	)		(1,911	)		(804	)		(746	)
Other comprehensive income⁽³⁾		141			32			44			45

Other comprehensive loss⁽³⁾														(224	)		(142	)		(75	)		(54	)
Balance at end of period	$	(1,374	)	$	(1,405	)	$	(556	)	$	(595	)		(2,277	)		(2,053	)		(879	)		(800	)

Cash flow hedges (K)
Cash flow hedges (J)
Balance at beginning of period	$	(104	)	$	334		$	63		$	11			(420	)		(554	)		36			21
Other comprehensive loss:
Other comprehensive income (loss):
Net change from periodic revaluations		(545	)		(434	)		(2	)		20			60			(60	)		2			12
Tax benefit (expense)		109			95			1			(6	)

Total Other comprehensive (loss) income before reclassifications, net of tax		(436	)		(339	)		(1	)		14

Tax (expense) benefit														(15	)		10			(1	)		(4	)
Total Other comprehensive income (loss) before reclassifications, net of tax														45			(50	)		1			8
Net amount reclassified to earnings:
Aluminum contracts⁽⁴⁾		33			4			—			—			9			26			—			—
Energy contracts⁽⁵⁾		(8	)		(50	)		(5	)		(34	)
Financial contracts⁽⁵⁾														(4	)		(6	)		(6	)		(4	)
Interest rate contracts⁽⁶⁾		—			—			—			—			4			—			—			—

Foreign exchange contracts⁽⁴⁾														4			3			—			—
Sub-total		25			(46	)		(5	)		(34	)		13			23			(6	)		(4	)
Tax (expense) benefit⁽²⁾		(4	)		15			1			10

Total amount reclassified from Accumulated other comprehensive (loss) income, net of tax⁽⁷⁾		21			(31	)		(4	)		(24	)

Total Other comprehensive loss		(415	)		(370	)		(5	)		(10	)

Tax benefit (expense)⁽²⁾														3			(2	)		2			1
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾														16			21			(4	)		(3	)
Total Other comprehensive income (loss)														61			(29	)		(3	)		5
Balance at end of period	$	(519	)	$	(36	)	$	58		$	1			(359	)		(583	)		33			26

Total Accumulated other comprehensive loss													$	(4,849	)	$	(4,740	)	$	(899	)	$	(814	)

   Alcoa Corporation Noncontrolling interest
   Nine months ended
September 30, Nine months ended
September 30,
   2017 2016 2017 2016
Pension and other postretirement benefits (J)

Balance at beginning of period
   $ (2,330 ) $ (352 ) $ (56 ) $ (56 )
Establishment of defined benefit plans
   –   (2,704 ) –   –
Other comprehensive income:

Unrecognized net actuarial loss and prior service cost/benefit
   42 (44 ) 24 –
Tax benefit (expense)
   5 25 (2 ) –


Total Other comprehensive income (loss) before reclassifications, net of tax
   47 (19 ) 22 –


Amortization of net actuarial loss and prior service cost/benefit⁽¹⁾
   149 58 2 3
Tax expense⁽²⁾
   (6 ) (20 ) –   (1 )


Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾
   143 38 2 2


Total Other comprehensive income
   190 19 24 2


Balance at end of period
   $ (2,140 ) $ (3,037 ) $ (32 ) $ (54 )


Foreign currency translation

Balance at beginning of period
   $ (1,655 ) $ (1,851 ) $ (677 ) $ (779 )
Other comprehensive income⁽³⁾
   281 446 121 184


Balance at end of period
   $ (1,374 ) $ (1,405 ) $ (556 ) $ (595 )


Cash flow hedges (K)

Balance at beginning of period
   $ 210 $ 603 $ 1 $ (3 )
Other comprehensive (loss) income:

Net change from periodic revaluations
   (975 ) (779 ) 88 35
Tax benefit (expense)
   186 170 (26 ) (10 )


Total Other comprehensive (loss) income before reclassifications, net of tax
   (789 ) (609 ) 62 25


Net amount reclassified to earnings:

Aluminum contracts⁽⁴⁾
   82 (1 ) –   –
Energy contracts⁽⁵⁾
   (11 ) (50 ) (7 ) (34 )
Interest rate contracts⁽⁶⁾
   –   7 –   5


Sub-total
   71 (44 ) (7 ) (29 )
Tax (expense) benefit⁽²⁾
   (11 ) 14 2 8


Total amount reclassified from Accumulated other comprehensive income (loss), net of tax⁽⁷⁾
   60 (30 ) (5 ) (21 )


Total Other comprehensive (loss) income
   (729 ) (639 ) 57 4


Balance at end of period
   $ (519 ) $ (36 ) $ 58 $ 1

	Alcoa Corporation						Noncontrolling interest
	Nine months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Pension and other postretirement benefits (I)
Balance at beginning of period	$	(2,283	)	$	(2,786	)	$	(46	)	$	(47	)
Other comprehensive income:
Unrecognized net actuarial (loss) gain and prior service cost/benefit		(120	)		250			(14	)		7
Tax benefit (expense)		28			(3	)		4			(2	)
Total Other comprehensive (loss) income before reclassifications, net of tax		(92	)		247			(10	)		5
Amortization of net actuarial loss and prior service cost/benefit⁽¹⁾		177			487			4			2
Tax expense⁽²⁾		(15	)		(52	)		(1	)		—
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾		162			435			3			2
Total Other comprehensive income (loss)		70			682			(7	)		7
Balance at end of period		(2,213	)		(2,104	)		(53	)		(40	)

Foreign currency translation
Balance at beginning of period		(2,071	)		(1,467	)		(810	)		(581	)
Other comprehensive loss⁽³⁾		(206	)		(586	)		(69	)		(219	)
Balance at end of period		(2,277	)		(2,053	)		(879	)		(800	)

Cash flow hedges (J)
Balance at beginning of period		(211	)		(929	)		31			51
Other comprehensive (loss) income:
Net change from periodic revaluations		(212	)		344			35			(18	)
Tax benefit (expense)		39			(58	)		(11	)		5
Total Other comprehensive (loss) income before reclassifications, net of tax		(173	)		286			24			(13	)
Net amount reclassified to earnings:
Aluminum contracts⁽⁴⁾		34			87			—			—
Financial contracts⁽⁵⁾		(36	)		(26	)		(31	)		(17	)
Interest rate contracts⁽⁶⁾		4			—			—			—
Foreign exchange contracts⁽⁴⁾		12			2			—			—
Sub-total		14			63			(31	)		(17	)
Tax benefit (expense)⁽²⁾		11			(3	)		9			5
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾		25			60			(22	)		(12	)
Total Other comprehensive (loss) income		(148	)		346			2			(25	)
Balance at end of period		(359	)		(583	)		33			26

Total Accumulated other comprehensive loss	$	(4,849	)	$	(4,740	)	$	(899	)	$	(814	)

⁽¹⁾	These amounts were included in the computation of net periodic benefit cost for pension and other postretirement benefits (see Note J)I).

⁽²⁾	These amounts were ~~included~~reported in Provision for income taxes on the accompanying Statement of Consolidated Operations.

⁽³⁾	In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings.

⁽⁴⁾	These amounts were ~~included~~reported in Sales on the accompanying Statement of Consolidated Operations.

⁽⁵⁾	~~The~~ These amounts ~~for the third quarter and nine months ended September 30, 2017~~ were ~~included~~reported in Cost of goods sold on the accompanying Statement of Consolidated Operations. ~~The~~

⁽⁶⁾	These amounts ~~for the third quarter and nine months ended September 30, 2016~~ were ~~included~~reported in Other ~~income,~~expenses, net onof the accompanying Statement of Consolidated Operations.

⁽⁶⁾⁽⁷⁾

~~These amounts were included in Other expenses (income), net on the accompanying Statement of Consolidated Operations.~~

⁽⁷⁾	A positive amount indicates a corresponding charge to earnings and a negative amount indicates a corresponding benefit to earnings. ~~These amounts were reflected on the accompanying Statement of Consolidated Operations in the line items indicated in footnotes 1 through 6.~~

G. Investments – A summary of unaudited financial information for Alcoa Corporation’s equity investments is as follows (amounts represent 100% of investee financial information):


	Third quarter ended September 30,					Nine months ended September 30,				Third quarter ended September 30,				Nine months ended September 30,
	2017		2016			2017		2016		2019		2018		2019			2018
Sales	$	979	$	888		$	2,853	$	2,684	$	1,051	$	1,343	$	3,474		$	3,963
Cost of goods sold		792		840			2,186		2,200		809		1,062		2,789			3,100
Net income (loss)		55		(6	)		97		23		4		46		(73	)		143

In December 2009, Alcoa Corporation invested in a joint venture related to the ownership and operation of an integrated aluminum complex (bauxite mine, alumina refinery, aluminum smelter, and rolling mill) in the Kingdom of Saudi Arabia. The joint venture is owned 74.9% by Ma’aden and 25.1% by Alcoa Corporation, and originally consisted of three separate companies: MBAC, MAC, and MRC. Alcoa Corporation accounts for its investment in the joint venture under the equity method as one integrated investment asset, consistent with the terms of the joint venture agreement.

During the second quarter of 2019, Alcoa Corporation and Ma’aden amended the joint venture agreement that governs the operations of each of the three companies that comprise the joint venture. The amendment resulted in various changes (described in detail in Note C), effectively divesting the Company’s investment in MRC. The Company retained its 25.1% minority interest in MBAC and MAC, and Ma’aden will continue to own a 74.9% interest.

H. Inventories


	September 30, 2017			December 31, 2016			September 30, 2019		December 31, 2018
Finished goods	$	257		$	226		$	282	$	346
Work-in-process		264			220			276		189
Bauxite and alumina		429			429			493		609
Purchased raw materials		478			363			447		529
Operating supplies		146			137			151		146
LIFO reserve		(251	)		(215	)
							$	1,649	$	1,819
	$	1,323		$	1,160

As of January 1, 2019, the Company changed its method for valuing certain of its inventories held in the United States and Canada to the average cost method of accounting from the LIFO method. Inventories held by other subsidiaries of the parent company were previously, and continue to be, valued principally using the average cost method. Management believes that the change in accounting is preferable as it results in a consistent method to value inventory across all regions of the business, it improves comparability with industry peers, and it more closely resembles the physical flow of inventory.

The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to all periods presented. This change resulted in a favorable adjustment to Retained earnings of $205 and an unfavorable adjustment to Noncontrolling interest of $35 as of January 1, 2018. In addition, certain financial statement line items in the Company’s Statement of Consolidated Operations, Statement of Consolidated Comprehensive Income, and Statement of Consolidated Cash Flows for the third quarter and the nine months ended September 30, ~~2017~~2018 and Consolidated Balance Sheet as of December 31, ~~2016,~~2018 were adjusted as follows:

	As Originally Reported			Effect of Change			As Adjusted
Statement of Consolidated Operations for the third quarter ended September 30, 2018:
Cost of goods sold	$	2,534		$	(49	)	$	2,485
Provision for income taxes		251			9			260
Net income		155			40			195
Net income attributable to noncontrolling interest		196			5			201
Net loss attributable to Alcoa Corporation		(41	)		35			(6	)
Earnings per share attributable to Alcoa Corporation common shareholders:
Basic	$	(0.22	)	$	0.19		$	(0.03	)
Diluted		(0.22	)		0.19			(0.03	)

Statement of Consolidated Comprehensive Income for the third quarter ended September 30, 2018:
Comprehensive income	$	337		$	40		$	377
Comprehensive income attributable to noncontrolling interest		151			5			156
Comprehensive income attributable to Alcoa Corporation		186			35			221

Statement of Consolidated Operations for the nine months ended September 30, 2018:
Cost of goods sold	$	7,547		$	(7	)	$	7,540
Provision for income taxes		569			—			569
Net income		659			7			666
Net income attributable to noncontrolling interest		475			(8	)		467
Net income attributable to Alcoa Corporation		184			15			199
Earnings per share attributable to Alcoa Corporation common shareholders:
Basic	$	0.99		$	0.08		$	1.07
Diluted		0.97			0.09			1.06

Statement of Consolidated Comprehensive Income for the nine months ended September 30, 2018:
Comprehensive income	$	864		$	7		$	871
Comprehensive income attributable to noncontrolling interest		238			(8	)		230
Comprehensive income attributable to Alcoa Corporation		626			15			641

Consolidated Balance Sheet as of December 31, 2018:
Inventories	$	1,644		$	175		$	1,819
Prepaid expenses and other current assets		301			19			320
Retained earnings		341			229			570
Noncontrolling interest		2,005			(35	)		1,970

Statement of Consolidated Cash Flows for the nine months ended September 30, 2018:
Net income	$	659		$	7		$	666
Deferred income taxes		(16	)		—			(16	)
(Increase) in inventories		(279	)		(7	)		(286	)

The following table compares the ~~total amount of inventories valued on a~~amounts that would have been reported under LIFO ~~basis was $432, or 27%, and $393, or 29%, respectively, of total inventories before LIFO adjustments. The inventory values, prior to~~with the ~~application of LIFO, are generally determined~~amounts recorded under the average cost method ~~which approximates current cost.~~in the Consolidated Financial Statements as of September 30, 2019 and for the third quarter and nine months then ended:

As Computed under LIFO

As Reported under Average Cost

Effect of Change

Statement of Consolidated Operations for the third quarter ended September 30, 2019:

Cost of goods sold
$
2,104

$
2,120

$
16

Provision for income taxes

92

95

3

Net loss

(128
)

(147
)

(19
)
Net income attributable to noncontrolling interest

70

74

4

Net loss attributable to Alcoa Corporation

(198
)

(221
)

(23
)
Earnings per share attributable to Alcoa Corporation common shareholders:

Basic
$
(1.07
)

$
(1.19
)

$
(0.12
)
Diluted

(1.07
)

(1.19
)

(0.12
)

Statement of Consolidated Comprehensive Income for the third quarter ended
September 30, 2019:

Comprehensive loss
$
(356
)

$
(375
)

$
(19
)
Comprehensive loss attributable to noncontrolling interest

(14
)

(10
)

4

Comprehensive loss attributable to Alcoa Corporation

(342
)

(365
)

(23
)

Statement of Consolidated Operations for the nine months ended September 30, 2019:

Cost of goods sold
$
6,495

$
6,489

$
(6
)
Provision for income taxes

348

361

13

Net loss

(491
)

(498
)

(7
)
Net income attributable to noncontrolling interest

305

324

19

Net loss attributable to Alcoa Corporation

(796
)

(822
)

(26
)
Earnings per share attributable to Alcoa Corporation common shareholders:

Basic
$
(4.29
)

$
(4.43
)

$
(0.14
)
Diluted

(4.29
)

(4.43
)

(0.14
)

Statement of Consolidated Comprehensive Income for the nine months ended
September 30, 2019:

Comprehensive loss
$
(849
)

$
(856
)

$
(7
)
Comprehensive income attributable to noncontrolling interest

231

250

19

Comprehensive loss attributable to Alcoa Corporation

(1,080
)

(1,106
)

(26
)

Consolidated Balance Sheet as of September 30, 2019:

Inventories
$
1,471

$
1,649

$
178

Prepaid expenses and other current assets

236

245

9

Retained deficit

(455
)

(252
)

203

Noncontrolling interest

1,887

1,871

(16
)

Statement of Consolidated Cash Flows for the nine months ended September 30, 2019:

Net loss
$
(491
)

$
(498
)

$
(7
)
Deferred income taxes

46

59

13

Decrease in inventories

117

111

(6
)
17

I. Pension and Other Postretirement Benefits – The components of net periodic benefit cost were as follows:

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016**    2017 2016**
Pension benefits

Service cost
   $ 18    $ 18    $ 53 $ 42
Interest cost
   62    44    183 81
Expected return on plan assets
   (101 )    (80 )    (298 ) (140 )
Recognized net actuarial loss
   47    36    139 55
Amortization of prior service cost
   2    2    6 5
Settlements*
   3    13    3 13
Special termination benefits*
   –      –      3 1






Net periodic benefit cost
   $ 31    $ 33    $ 89 $ 57

	Third quarter ended September 30,						Nine months ended September 30,
Pension benefits	2019			2018			2019			2018
Service cost	$	12		$	13		$	36		$	41
Interest cost⁽¹⁾		55			56			167			170
Expected return on plan assets⁽¹⁾		(81	)		(84	)		(244	)		(256	)
Recognized net actuarial loss⁽¹⁾		43			47			127			154
Amortization of prior service cost⁽¹⁾		1			2			4			6
Settlements⁽²⁾		5			232			5			399
Curtailments⁽²⁾		—			—			38			5
Net periodic benefit cost	$	35		$	266		$	133		$	519

	Third quarter ended September 30,					Nine months ended September 30,
Other postretirement benefits	2019		2018			2019		2018
Service cost	$	1	$	2		$	3	$	4
Interest cost⁽¹⁾		10		8			28		26
Recognized net actuarial loss⁽¹⁾		2		3			7		10
Amortization of prior service benefit⁽¹⁾		—		—			—		(1	)
Settlements⁽²⁾		—		(56	)		—		(56	)
Curtailments⁽²⁾		—		—			—		(28	)
Net periodic benefit cost	$	13	$	(43	)	$	38	$	(45	)

⁽¹⁾

These amounts were ~~recorded~~reported in ~~Restructuring and other charges~~Other expenses, net on the accompanying Statement of Consolidated Operations (see Note D)N).

⁽²⁾

These amounts were reported in Restructuring and other charges, net on the ~~2016 third quarter~~accompanying Statements of Consolidated Operations (see Note C) and ~~nine-month period, Alcoa Corporation also recognized multiemployer expense related to pension benefits~~ of ~~$8 and $53, respectively.~~Cash Flows.

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016*    2017 2016*
Other postretirement benefits

Service cost
   $ 2    $ 1    $ 4 $ 1
Interest cost
   9    6    28 8
Recognized net actuarial loss
   3    3    10 3
Amortization of prior service benefit
   (1 )    (2 )    (4 ) (2 )






Net periodic benefit cost
   $ 13    $ 8    $ 38 $ 10

Plan Actions. In 2019, management initiated the following actions to certain pension plans:

Action# 1 – In June 2019, the Company entered into a new, six-year collective bargaining agreement with the National Union of Aluminum Employees of Baie-Comeau. Under the agreement, all Canadian union employees that are participants in one of the Company’s defined benefit pension plans will cease accruing retirement benefits for future service effective January 1, 2021. This change will affect approximately 700 employees, who are targeted to be transitioned to a target benefit plan, where the funding risk is assumed by the employees. The Company will contribute approximately 12% of these participants’ eligible earnings on an annual basis. The Company will also contribute additional contributions of approximately $2 spread over a three-year period to improve the financial position of the newly established target benefit plan. Participants already collecting benefits or who terminated with a vested benefit under the defined benefit pension plan are not affected by these changes.

Action# 2 – In July 2019, the Company entered into a new, six-year collective bargaining agreement with the United Steelworkers representing the employees of Aluminerie de Bécancour Inc. Under the agreement, all Canadian union employees that are participants in one of the Company’s defined benefit pension plans ceased accruing retirement benefits for future service effective July 21, 2019. This change affected approximately 900 employees, who were transitioned to a member-funded pension plan, where the funding risk is assumed by the employees. The Company will contribute approximately 12% of these participants’ eligible earnings on an annual basis. To improve the financial positions of both the existing defined benefit pension plan and newly established member-funded pension plan, the Company will contribute approximately $5 in 2020 to the existing defined benefit pension plan and approximately $2 spread over a five-year period to the newly established member-funded pension plan. Participants already collecting benefits or who terminated with a vested benefit under the defined benefit pension plan are not affected by these changes.

The above actions caused the respective plans to be remeasured, including an update to the discount rates used to determine the benefit obligations of the affected plans. The following table presents certain information and the financial impacts of these actions on the accompanying Consolidated Financial Statements:

Action#

Number of

affected

plan

participants

Weighted

average

discount

rate as of

December 31,

2018

Plan

remeasurement

date

Weighted

average

discount rate

as of plan

remeasurement

date

Increase to

accrued

pension

benefits

liability

Curtailment

charge⁽¹⁾

~700

3.85%

May 31, 2019

3.15%

~900

3.80%

June 30, 2019

3.00%

—

⁽¹⁾

These amounts represent the ~~2016 third quarter~~accelerated amortization of a portion of the existing prior service cost and ~~nine-month period, Alcoa Corporation also recognized multiemployer expense related~~was reclassified from Accumulated other comprehensive loss to Restructuring and other ~~postretirement benefits~~charges, net (see Note C) on the accompanying Statement of ~~$2 and $19, respectively.~~Consolidated Operations.

K.J. Derivatives and Other Financial Instruments

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

•

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

~~Level 3 - Inputs that are both significant to the fair value measurement and unobservable.~~

Derivatives

Alcoa Corporation is exposed to certain risks relating to its ongoing business operations, including ~~financial, market, political, and economic risks. The following discussion provides information regarding Alcoa Corporation’s exposure to~~ the risks of changing commodity prices, ~~interest rates, and~~ foreign currency exchange rates and interest rates.

Alcoa Corporation’s commodity and derivative activities are subject to the management, direction, and control of the Strategic Risk Management Committee (SRMC), which consists of at least three members, including the chief executive officer and the chief financial officer. The remaining member(s) are other officers and/or employees of the Company as the chief executive officer may designate from time to time. Currently, the only other member of the SRMC is Alcoa Corporation’s treasurer. The SRMC meets on a periodic basis to review derivative positions and strategy and reports to the Audit Committee of Alcoa Corporation’s Board of Directors on the scope of its activities.

~~Alcoa Corporation’s~~include aluminum, energy, ~~and~~ foreign exchange and interest rate contracts which are held for purposes other than trading. They are used primarily to mitigate uncertainty and volatility, and to cover underlying exposures. Alcoa Corporation is not involved in trading activities for energy, weather derivatives, or other nonexchange commodity trading activities.

Several of Alcoa Corporation’s aluminum, energy, ~~and~~ foreign exchange and interest rate contracts are classified as Level 1 or Level 2 under the fair value hierarchy. The total fair value of these derivative contracts recorded as assets and liabilities was ~~$43~~$12 and ~~$92,~~$65, respectively, at September 30, ~~2017~~2019 and $5$2 and ~~$2,~~$54, respectively, at December 31, ~~2016.~~2018. Certain of these contracts are designated as ~~hedging instruments,~~ either fair value or cash flow and the remaining are not designated as such. Combined, Alcoa Corporation recognized a gain of $1 and a loss of $23 in Other expenses (income), net on the accompanying Statement of Consolidated Operations in the 2017 third quarter and nine-month period, respectively. Additionally, forhedging instruments. For the contracts designated as cash flow hedges, Alcoa Corporation recognized an unrealized loss of ~~$39~~$40 and ~~$64 in Other comprehensive loss~~$43 in the ~~2017~~2019 third quarter and nine-month period, ~~respectively.~~respectively, and an unrealized loss of $7 and an unrealized gain of $6 in the 2018 third quarter and nine-month period, respectively, in Other comprehensive (loss) income. Additionally, Alcoa Corporation reclassified a realized loss of $16 and $28 in the 2019 third quarter and nine-month period, respectively, and $3 and $10 in the 2018 third quarter and nine-month period, respectively, from Accumulated other comprehensive loss to Sales.

In addition to the Level 1 and 2 derivative instruments described above, Alcoa Corporation has several derivative instruments classified as Level 3 under the fair value hierarchy. These instruments are composed of (i) embedded aluminum derivatives and an embedded credit derivative related to energy supply contracts and (ii) freestanding financial contracts related to energy purchases onmade in the spot market, all of which are associated with ~~nine~~9 smelters and ~~three~~3 refineries. Certain of the embedded aluminum derivatives and financial contracts ~~were~~are designated as cash flow hedging instruments. ~~All of these Level 3 derivative instruments are described below in detail and are enumerated as D1 through D11.~~

~~The following section describes the valuation methodologies used by~~ Alcoa Corporation ~~to measure~~had a power contract at 1 of its ~~Level 3 derivative instruments at fair value. Derivative instruments classified as Level 3~~facilities which expired in the fair value hierarchy represent those in which management has used at least one significant unobservable input in the valuation model. Alcoa Corporation uses a discounted cash flow model to fair value all Level 3 derivative instruments. Where appropriate, the description below includes the key inputs to those models and any significant assumptions. These valuation models are reviewed and tested at least on an annual basis.

~~Inputs in the valuation models for Level 3 derivative instruments are composed of the following: (i) quoted market prices (e.g., aluminum prices on the10-year~~ London Metal Exchange (LME) forward curve and energy prices), (ii) significant other observable inputs (e.g., information concerning time premiums and volatilities for certain option type embedded derivatives and regional premiums for aluminum contracts), and (iii) unobservable inputs (e.g., aluminum and energy prices beyond those quoted in the market). For periods beyond the term of quoted market prices for aluminum, Alcoa Corporation estimates the price of aluminum by extrapolating the~~10-year~~ LME forward curve. Additionally, for periods beyond the term of quoted market prices for energy, management has developed a forward curve based on independent consultant market research. Where appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads, and credit considerations. Such adjustments are generally based on available market evidence (Level 2). In the absence of such evidence, management’s best estimate is used (Level 3). If a significant inputMarch 2019 that is unobservable in one period becomes observable in a subsequent period, the related asset or liability would be transferred to the appropriate classification (Level 1 or 2) in the period of such change (there were no such transfers in the periods presented).

~~D1 through D5.~~ ~~Alcoa Corporation has two power contracts (D1 and D2), each of which contain an embedded derivative that indexes~~indexed the price of power to the ~~LME~~London Metal Exchange (LME) price of ~~aluminum. Additionally,~~aluminum plus the Midwest premium. Prior to its expiration, this embedded derivative

was valued using the interrelationship of future metal prices (LME base plus Midwest premium) and the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum at the smelter. Management elected not to qualify the embedded derivative for hedge accounting treatment.

In March 2019, Alcoa Corporation ~~has three~~and the counterparty to the power ~~contracts (D3 through D5), each of~~contract described above entered into a new power contract which ~~contain~~also contains an embedded derivative that indexes the price of power to the LME price of aluminum plus the Midwest premium. The embedded ~~derivatives in these five power contracts are primarily~~aluminum derivative is valued using ~~observable market prices; however, due~~the interrelationship of future metal prices (LME base plus Midwest premium) and the amount of megawatt hours of energy needed to produce the ~~length of the contracts, the valuation models also require management to estimate the long-term price~~forecasted metric tons of aluminum ~~based upon an extrapolation of~~at the~~10-year~~ LME forward curve (one of the contracts no longer requires the use of prices beyond this curve). Additionally, for three of the contracts, management also estimates the Midwest premium, generally, for the next twelve months based on recent transactions and then holds the premium estimated in that twelfth month constant for the remaining duration of the contract. Significant increases or decreases in the actual LME price beyond 10 years would result in a higher or lower fair value measurement. smelter. An overall increase in actual LME price ~~and/or~~and the Midwest premium ~~over the inputs used in the valuation models~~ will result in a higher cost of power and a corresponding decrease to the derivative asset or increase to the derivative liability. The embedded ~~derivatives have~~derivative has been designated as a cash flow ~~hedges~~hedge of forward sales of aluminum. Unrealized gains and losses ~~were~~will be included in ~~Other comprehensive (loss) income on the accompanying Consolidated Balance Sheet while realized gains and losses were included in Sales on the accompanying Statement of Consolidated Operations.~~

~~D6.~~ ~~Alcoa Corporation had a power contract (expired in October 2016 – see D10 below) separate from above that contains anLME-linked~~ embedded derivative. Prior to its expiration, the embedded derivative was valued using the probability and interrelationship of future LME prices, Australian dollar to U.S. dollar exchange rates, and the U.S. consumer price index. Significant increases or decreases in the LME price would result in a higher or lower fair value measurement. An increase in actual LME price over the inputs used in the valuation model will result in a higher cost of power and a corresponding decrease to the derivative asset. This embedded derivative did not qualify for hedge accounting treatment. Unrealized gains and losses from the embedded derivative were included in Other expenses (income), net on the accompanying Statement of Consolidated Operations while realized gains and losses were included in Cost of goods sold on the accompanying Statement of Consolidated Operations as electricity purchases were made under the contract. At the time this derivative asset was recognized, an equivalent amount was recognized as a deferred credit in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet. The amortization of this deferred credit was recognized in Other expenses (income), net on the accompanying Statement of Consolidated Operations as power was received over the life of the contract.

~~D7.~~ ~~Alcoa Corporation has a natural gas supply contract, which has anLME-linked~~ ceiling. This embedded derivative is valued using probabilities of future LME aluminum prices and the price of Brent crude oil (priced on Platts), including the interrelationships between the two commodities subject to the ceiling. Any change in the interrelationship would result in a higher or lower fair value measurement. An LME ceiling was embedded into the contract price to protect against an increase in the price of oil without a corresponding increase in the price of LME. An increase in oil prices with no similar increase in the LME price would limit the increase of the price paid for natural gas. This embedded derivative did not qualify for hedge accounting treatment. Unrealized gains and losses from the embedded derivative were included in Other expenses (income), net on the accompanying Statement of Consolidated Operations while realized gains and losses were included in Cost of goods sold on the accompanying Statement of Consolidated Operations as gas purchases were made under the contract.

~~D8.~~ In the second quarter of 2016, Alcoa Corporation and the related counterparty elected to modify the pricing of an existing power contract for a smelter in the United States. This amendment contains an embedded derivative that indexes the price of power to the LME price of aluminum plus the Midwest premium. The embedded derivative is valued using the interrelationship of future metal prices (LME base

plus Midwest premium) and the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum at the smelter. Significant increases or decreases in the metal price would result in a higher or lower fair value measurement. An increase in actual metal price over the inputs used in the valuation model will result in a higher cost of power and a corresponding increase to the derivative liability. Management elected not to qualify the embedded derivative for hedge accounting treatment. Unrealized gains and losses from the embedded derivative were included in Other expenses (income), net on the accompanying Statement of Consolidated Operations while realized gains and losses were included in Cost of goods sold on the accompanying Statement of Consolidated Operations as electricity purchases were made under the contract. At the time this derivative liability was recognized, an equivalent amount was recognized as a deferred charge in Other noncurrent assets on the accompanying Consolidated Balance Sheet. The amortization of this deferred charge is recognized in Other expenses (income), net on the accompanying Statement of Consolidated Operations as power is received over the life of the contract.

~~D9.~~ Alcoa Corporation has a power contract, which contains an embedded derivative that indexes the difference in the respective credit spread of Alcoa Corporation and the counterparty. Management uses market prices, historical relationships, and forecast services to determine fair value. Significant increases or decreases in any of these inputs would result in a lower or higher fair value measurement. A wider credit spread between Alcoa Corporation and the counterparty would result in a higher cost of power and a corresponding increase in the derivative liability. This embedded derivative did not qualify for hedge accounting treatment. Unrealized gains and losses were included in Other expenses (income), net on the accompanying Statement of Consolidated Operations while realized gains and losses were included in Cost of goods sold on the accompanying Statement of Consolidated Operations as electricity purchases were made under the contract.

~~D10 and D11.~~ Alcoa Corporation has a financial contract (D10) that hedges the anticipated power requirements at one of its smelters that began in November 2016. At that time, the energy supply contract related to this smelter had expired (see D6 above) and Alcoa Corporation began purchasing electricity directly from the spot market. Beyond the term where market information is available, management developed a forward curve, for valuation purposes, based on independent consultant market research. Significant increases or decreases in the power market may result in a higher or lower fair value measurement of the financial contract. Lower prices in the power market would cause a decrease in the derivative asset. The financial contract had been designated as a cash flow hedge of future purchases of electricity (this designation ceased in December 2016 – see below). Through November 2016, unrealized gains and losses on this contract were recorded in Other comprehensive (loss) income on the accompanying Consolidated Balance Sheet, while realized gains and losses were recorded in Cost of goods sold as electricity purchases were made from the spot market. In August 2016, Alcoa Corporation gave the required notice to terminate this financial contract one year from the date of notification. As a result, Alcoa Corporation decreased both the related derivative asset recorded in Other noncurrent assets and the unrealized gain recorded in Accumulated other comprehensive loss by $84, which related to the August 2017 through 2036 timeframe, resulting in no impact to Alcoa Corporation’s earnings. In December 2016, the smelter experienced an unplanned outage, resulting in a portion of the financial contract no longer qualifying for hedge accounting, at which point management elected to discontinue hedge accounting for all of the remainder of the contract (through August 2017). As a result, Alcoa Corporation reclassified an unrealized gain of $7 from Accumulated other comprehensive loss to Other income, net related to the portion of the contract that no longer qualified for hedge accounting. The remaining $6 unrealized gain in Accumulated other comprehensive loss related to the portion management elected to discontinue hedge accounting is reclassified to Cost of goods sold as electricity purchases are made from the spot market through the termination date of the financial contract. Additionally, from December 2016 through August 2017, unrealized gains and losses on this contract were recorded in Other expenses (income), net, and realized gains and losses were recorded in Other expenses (income), net as electricity purchases were made from the spot market.

In January 2017, Alcoa Corporation and the counterparty entered into a new financial contract (D11) to hedge the anticipated power requirements at this smelter for the period from August 2017 through July 2021 and amended the existing financial contract to both reduce the hedged amount of anticipated power requirements and to move up the effective termination date to July 31, 2017. The new financial contract has been designated as a cash flow hedge of future purchases of electricity. Unrealized gains and losses on the new financial contract were recorded in Other comprehensive loss on the accompanying Consolidated Balance Sheet while realized gains and losses ~~were recorded (began~~will be included in ~~August 2017) in Cost~~Sales on the accompanying Statement of ~~goods sold as electricity purchases were made from the spot market.~~

Consolidated Operations.

The following table presents quantitative information related to the significant unobservable inputs ~~described above~~ for Level 3 derivative ~~contracts:~~instruments:


		Fair value at September 30, ~~2017~~ 2019			Unobservable input		Range ($ in full amounts)
Assets:
~~Embedded aluminum derivative (D7)~~				~~$ —~~		~~Interrelationship of future aluminum and oil prices~~		~~Aluminum: $2,081 per metric ton in 2017 to $2,145 per metric ton in 2018~~ ~~Oil: $58 per barrel in 2017 to $56 per barrel in 2018~~
Financial contract ~~(D11)~~		~~222~~	$119		Interrelationship of forward energy price and the Consumer Price Index and price of electricity beyond forward curve		Electricity: ~~$76.44~~$70.04 per megawatt hour in ~~2017~~2019 to ~~$58.78~~$55.30 per megawatt hour in 2021
~~Liabilities:~~
Embedded aluminum derivative ~~(D1)~~		~~345~~	-		Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum		Aluminum: ~~$2,081~~$1,708 per metric ton in ~~2017~~October 2019 to ~~$2,496~~$1,728 per metric ton in ~~2027~~December 2019 Midwest premium: $0.1800 per pound in October 2019 and to $0.1900 per pound in December 2019 Electricity: rate of 42 million megawatt hours per year
~~Embedded aluminum derivatives (D3 through D5)~~				~~311~~		~~Price of aluminum beyond forward curve~~
Liabilities:	~~Aluminum: $2,512 per metric ton in 2028 to $2,604 per metric ton in 2029 (two contracts) and $2,899 per metric ton in 2036 (one contract)~~	~~Midwest premium: $0.0925 per pound in 2017 to $0.1050 per pound in 2029 (two contracts) and 2036 (one contract)~~

Embedded aluminum derivative ~~(D8)~~		34	201		Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum		Aluminum: ~~$2,081~~$1,708 per metric ton in ~~2017~~2019 to ~~$2,159~~$2,257 per metric ton in ~~2019~~ ~~Midwest premium: $0.0925 per pound in 2017 to $0.1050 per pound in 2019~~2027 Electricity: rate of 24 million megawatt hours per year

Embedded aluminum derivatives			206		Interrelationship of LME and Midwest premium price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum		Aluminum: $1,708 per metric ton in 2019 to $2,365 per metric ton in December 2029 (two contracts) and $2,660 per metric ton in 2036 (one contract) Midwest premium: $0.1800 per pound in 2019 to $0.1900 per pound in 2029 (two contracts) and 2036 (one contract) Electricity: rate of 11 million megawatt hours per year

Embedded aluminum derivative ~~(D2)~~		18	2		Interrelationship of LME price to overall energy price		Aluminum: ~~$2,038~~$1,847 per metric ton in ~~2017~~October 2019 to ~~$2,183 per metric ton in~~December 2019

Embedded credit derivative ~~(D9)~~		28	18		Estimated ~~credit~~ spread between the respective 30-year debt yield of Alcoa Corporation and the counterparty		~~3.51% (Alcoa~~3.08% (30-year debt yields: Alcoa Corporation – ~~8.07%~~6.44% (estimated) and counterparty – ~~4.56%~~3.36%)

The fair values of Level 3 derivative instruments recorded as assets and liabilities in the accompanying Consolidated Balance Sheet were as follows:

					September 30, 2019		December 31, 2018
Asset Derivatives	September 30, 2017		December 31, 2016
Derivatives designated as hedging instruments:
Fair value of derivative contracts – current:
Fair value of derivative instruments – current:
Financial contract					$	77	$	70
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives	$	—	$	29		—		41
Financial contract		93		—		42		42
Fair value of derivative contracts – noncurrent:
Embedded aluminum derivatives		—		468
Financial contract		129		—

Total derivatives designated as hedging instruments	$	222	$	497		119		153

Derivatives not designated as hedging instruments:
Fair value of derivative contracts – current:
Financial contract	$	—	$	17

Total derivatives not designated as hedging instruments	$	—	$	17

Total Asset Derivatives	$	222	$	514	$	119	$	153


Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative contracts – current:
Fair value of derivative instruments – current:
Embedded aluminum derivatives	$	81	$	17	$	29	$	46
Fair value of derivative contracts – noncurrent:
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		593		187		380		218

Total derivatives designated as hedging instruments	$	674	$	204		409		264

Derivatives not designated as hedging instruments:
Fair value of derivative contracts – current:
Fair value of derivative instruments – current:
Embedded aluminum derivative	$	23	$	10		—		5
Embedded credit derivative		4		5		4		4
Fair value of derivative contracts – noncurrent:
Embedded aluminum derivative		11		18
Fair value of derivative instruments – noncurrent:
Embedded credit derivative		24		30		14		16

Total derivatives not designated as hedging instruments	$	62	$	63		18		25

Total Liability Derivatives	$	736	$	267	$	427	$	289

The following tables present a reconciliation of activity for Level 3 derivative ~~contracts:~~instruments:

   Assets    Liabilities
Third quarter ended
September 30, 2017
   Embedded
aluminum
derivatives    Financial
contracts    Embedded
aluminum
derivatives Embedded
credit
derivative
Opening balance – July 1, 2017
   $ 94    $ 254    $ 326 $ 33
Total gains or losses (realized and unrealized) included in:

Sales
   20    —      (9 ) —
Cost of goods sold
   —      (13 )    —   (2 )
Other expenses, net
   1    (17 )    7 (3 )
Other comprehensive loss
   (114 )    (7 )    388 —
Purchases, sales, issuances, and settlements*
   —      —      —   —
Transfers into and/or out of Level 3*
   —      —      —   —
Other
   (1 )    5    (4 ) —






Closing balance – September 30, 2017
   $ —      $ 222    $ 708 $ 28






Change in unrealized gains or losses included in earnings for derivative contracts held at September 30, 2017:

Sales
   $ —      $ —      $ —   $ —
Cost of goods sold
   —      —      —   —
Other expenses, net
   1    (17 )    7 (3 )

*	In the 2017 third quarter, there were no purchases, sales, issuances or settlements of Level 3 derivative instruments. Additionally, there were no transfers of derivative instruments into or out of Level 3.

	Assets				Liabilities
Third quarter ended September 30, 2019		Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Balance at July 1, 2019		$	132		$	515		$	20
Total gains or losses (realized and unrealized) included in:
Sales			—			(9	)		—
Cost of goods sold			(19	)		—			(1	)
Other expenses, net			—			—			(1	)
Other comprehensive income (loss)			7			(97	)		—
Other			(1	)		—			—
Balance at September 30, 2019		$	119		$	409		$	18
Change in unrealized gains or losses included in earnings for derivative instruments held at September 30, 2019:
Other expenses, net		$	—		$	—		$	(1	)

   Assets    Liabilities
Nine months ended
September 30, 2017
   Embedded
aluminum
derivatives    Financial
contracts    Embedded
aluminum
derivatives Embedded
credit
derivative
Opening balance – January 1, 2017
   $ 497    $ 17    $ 232 $ 35
Total gains or losses (realized and unrealized) included in:

Sales
   50    —      (24 ) —
Cost of goods sold
   —      (18 )    —   (4 )
Other income, net
   1    (9 )    15 (3 )
Other comprehensive loss
   (547 )    100    496 —
Purchases, sales, issuances, and settlements*
   —      119    —   —
Transfers into and/or out of Level 3*
   —      —      —   —
Other
   (1 )    13    (11 ) —






Closing balance – September 30, 2017
   $ —      $ 222    $ 708 $ 28






Change in unrealized gains or losses included in earnings for derivative contracts held at September 30, 2017:

Sales
   $ —      $ —      $ —   $ —
Cost of goods sold
   —      —      —   —
Other income, net
   1    (9 )    15 (3 )

*	In January 2017, there was an issuance of a new financial contract (see D11 above). In the 2017 nine-month period, there were no purchases, sales or settlements of Level 3 derivative instruments. Additionally, there were no transfers of derivative instruments into or out of Level 3.

	Assets						Liabilities
Nine months ended September 30, 2019	Embedded aluminum derivatives			Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Opening balance – January 1, 2019	$	41		$	112		$	269		$	20
Total gains or losses (realized and unrealized) included in:
Sales		—			—			(34	)		—
Cost of goods sold		—			(78	)		—			(3	)
Other expenses, net		—			—			(2	)		1
Other comprehensive (loss) income		(41	)		89			181			—
Other		—			(4	)		(5	)		—
Closing balance – September 30, 2019	$	—		$	119		$	409		$	18
Change in unrealized gains or losses included in earnings for derivative instruments held at September 30, 2019:
Other expenses, net	$	—		$	—		$	(2	)	$	1

In the first quarter of 2019, there was an expiration of an existing and an issuance of a new embedded aluminum derivative (see above). In the 2019 nine-month period, there were no purchases, sales or settlements of Level 3 derivative instruments. Additionally, there were no transfers of derivative instruments into or out of Level 3.

Derivatives Designated As Hedging Instruments – Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of unrealized gains or losses on the derivative is reported as a component of other comprehensive income. Realized gains or losses on the derivative are reclassified from other comprehensive income into earnings in the same period or periods during which the hedged transaction impacts earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized directly in earnings immediately.

Alcoa Corporation has ~~five~~six Level 3 embedded aluminum derivatives and one Level 3 financial contract ~~(through November 2016 – see D10 above)~~ that have been designated as cash flow hedges as described below. Additionally, in January 2017, Alcoa Corporation entered into a new financial contract, which was designated as a cash flow hedging instrument and was classified as Level 3 under the fair value hierarchy (see D11 above), that replaced the existing financial contract in August 2017.hedges.

~~Embedded aluminum derivatives (D1 through D5).~~ ~~Alcoa Corporation has entered into energy supply contracts that contain pricing provisions related to the LME aluminum price. TheLME-linked~~ ~~pricing features are considered embedded derivatives. Five of these embedded derivatives have been designated as cash flow hedges of forward sales of aluminum.~~ At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, these embedded aluminum derivatives ~~hedge~~hedged forecasted aluminum sales of ~~2,926~~2,397 kmt and ~~3,127~~2,508 kmt, respectively.

Alcoa Corporation recognized a net unrealized loss of $502 and $1,043 in the 2017 third quarter and nine-month period, respectively, and $462 and $830 in the 2016 third quarter and nine-month period, respectively, in Other comprehensive loss related to these five derivative instruments. Additionally, Alcoa Corporation reclassified a realized loss of $29 and $74 in the 2017 third quarter and nine-month period, respectively, and a realized gain of $4 and a realized loss of $1 in the 2016 third quarter and nine-month period, respectively, from Accumulated other comprehensive loss to Sales. Assuming market rates remain constant with the rates at September 30, ~~2017,~~2019, a realized loss of ~~$61~~$29 is expected to be recognized in Sales over the next 12 months.

There was no ineffectiveness related to these ~~five~~six derivative instruments in the ~~2017~~2019 and 2018 third quarter and nine-month ~~period and the 2016 third quarter and nine-month period.~~periods.

~~Financial contracts (D10 and D11).~~ Alcoa Corporation has a financial contract that hedges the anticipated power requirements at one of its smelters that became effective when the existing power contract expired in October 2016. In August 2016, Alcoa Corporation elected to terminate most of the remaining term of this financial contract (see D10 above). Additionally, in December 2016, management elected to discontinue hedge accounting for this contract (see D10 above). This financial contract hedged forecasted electricity purchases of 1,969,544 megawatt hours prior to December 2016.

In the 2017 third quarter and nine-month period, Alcoa Corporation reclassified a realized gain of $1 and $6, respectively, from Accumulated other comprehensive loss to Cost of goods sold. In the 2016 third quarter and nine-month period, Alcoa Corporation recognized an unrealized gain of $49 and $88, respectively, in Other comprehensive loss. Additionally, Alcoa Corporation recognized a gain of $3 in Other expenses, net related to hedge ineffectiveness in the 2016 nine-month period. There was no ineffectiveness related to the financial contract in the 2016 third quarter.

In addition, in January 2017, Alcoa Corporation entered into a new financial contract that hedges the anticipated power requirements at this smelter for the period from August 2017 through July 2021 (see D11 above). At September 30, ~~2017, this~~2019 and December 31, 2018, the financial contract hedges forecasted electricity purchases of ~~9,424,800~~4,510,440 and 6,348,276 megawatt hours. In the 2017 third quarter and nine-month period, Alcoa Corporation recognized an unrealized loss of $7 and an unrealized gain of $100, respectively, in Other comprehensive loss. Additionally, Alcoa Corporation reclassified a realized gain of $12 in both the 2017 third quarter and nine-month period from Accumulated other comprehensive loss to Cost of goods sold.hours, respectively. Assuming market rates remain consistent with the rates at September 30, ~~2017,~~2019, a realized gain of ~~$65~~$76 is expected to be recognized in Cost of goods sold over the next 12 months. ~~Additionally, Alcoa Corporation recognized a loss of $6 and $2 in Other expenses (income), net~~There was no ineffectiveness related to ~~hedge ineffectiveness~~this derivative instrument in the ~~2017~~ third quarter and nine-month period ~~respectively.~~

~~Derivatives Not Designated As Hedging Instruments~~

~~Alcoa Corporation has two (three prior to October 2016) Level 3 embedded aluminum derivatives (D6 through D8) and one Level 3 embedded credit derivative (D9) that do not qualify for~~of 2019. The amount of hedge ~~accounting treatment and one Level 3 financial contract that management elected to discontinue hedge accounting treatment (see D10 above). As such, gains and losses~~ineffectiveness related to this derivative instrument was not material in the ~~changes in fair value of these instruments are recorded directly in earnings. In the 2017 and 2016~~2018 third quarter ~~Alcoa Corporation recognized a loss of $15~~ and a gain of $1, respectively, in Other expenses (income), net, of which a loss of $7 (both periods) related to the embedded aluminum derivatives, a gain of $3 and $8, respectively, related to the embedded credit derivative, and a loss of $11 (2017 third quarter) related to the financial contract. In the 2017 and 2016 nine-month period, Alcoa Corporation recognized a loss of $19 and $8, respectively, in Other income, net, of which a loss of $15 (both periods) related to the embedded aluminum derivatives, a gain of $3 and $7, respectively, related to the embedded credit derivative, and a loss of $7 (2017 nine-month period) related to the financial contract.

period.

Material Limitations

The disclosures with respect to commodity prices ~~interest rates,~~ and foreign currency exchange risk do not consider the underlying commitments or anticipated transactions. If the underlying items were included in the analysis, the gains or losses on the futures contracts may be offset. Actual results will be determined by several factors that are not under Alcoa Corporation’s control and could vary significantly from those factors disclosed.

Alcoa Corporation is exposed to credit loss in the event of nonperformance by counterparties on the above instruments, as well as credit or performance risk with respect to its hedged customers’ commitments. ~~Although nonperformance is possible,~~ Alcoa Corporation does not anticipate nonperformance by any of these parties. Contracts are with creditworthy counterparties and are further supported by cash, treasury bills, or irrevocable letters of credit issued by carefully chosen banks. In addition, various master netting arrangements are in place with counterparties to facilitate settlement of gains and losses on these contracts.

Other Financial Instruments

The carrying values and fair values of Alcoa Corporation’s other financial instruments were as follows:


	September 30, 2017				December 31, 2016				September 30, 2019				December 31, 2018
	Carrying value		Fair value		Carrying value		Fair value		Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,119	$	1,119	$	853	$	853	$	841	$	841	$	1,113	$	1,113
Restricted cash		8		8		6		6		3		3		3		3
Long-term debt due within one year		17		17		21		21		1		1		1		1
Long-term debt, less amount due within one year		1,384		1,565		1,424		1,573		1,805		1,955		1,801		1,863

The following methods were used to estimate the fair values of other financial instruments:

Cash and cash equivalents and Restricted cash.The carrying amounts approximate fair value because of the short maturity of the instruments. The fair value amounts for Cash and cash equivalents and Restricted cash were classified in Level 1.1 of the fair value hierarchy.

Long-term debt due within one year and Long-term debt, less amount due within one year. The fair value was based on quoted market prices for public debt and on interest rates that are currently available to Alcoa Corporation for issuance of debt with similar terms and maturities fornon-public debt. The fair value amounts for all Long-term debt were classified in Level 2 of the fair value hierarchy.

K. Income Taxes – ~~The~~Alcoa Corporation’s estimated annualized effective tax rate ~~was 41.3% (provision on income) and 90.2% (provision on income)~~(AETR) for ~~the 2017 and 2016 third quarters, respectively, and 34.8% (provision on income) and 456.4% (provision on a loss) for the 2017 and 2016 nine-month periods, respectively.~~

~~Alcoa Corporation’s estimated annual effective tax rate for 2017 was 34.2%~~2019 as of September 30, ~~2017. This rate~~2019 differs from the U.S. federal statutory rate of ~~35%~~21% primarily due to losses in countries with full valuation reserves resulting in 0 tax benefit, as well as foreign income taxed in ~~lower~~higher rate ~~jurisdictions, mostly offset by domestic losses not tax benefitted. The domestic losses are net of the gain on the sale of Yadkin (see Note C).~~jurisdictions.

~~For the 2017 nine-month period, the~~

	Nine-months ended September 30,
	2019				2018
(Loss) income before income taxes	$	(137	)		$	1,235
Estimated annualized effective tax rate		(686.2	)	%		43.6	%
Income tax expense	$	942			$	538
(Favorable) unfavorable tax impact related to losses in jurisdictions with no tax benefit		(590	)			5
Discrete tax charge		9				26
Provision for income taxes	$	361			$	569

The Provision for income taxes ~~was composed~~for the 2019 nine-month period includes the change in estimated AETR from the second quarter of ~~three components~~2019. The change in estimated AETR is primarily due to fluctuating alumina and aluminum market prices as ~~follows: (i)~~well as restructuring charges incurred in the ~~application~~2019 nine-month period that resulted in changes to the distribution of the ~~estimated annual effective tax rate for 2017~~(Loss) income before income taxes in the Company’s various jurisdictions, inclusive of 34.2% to pretax income of $943, (ii) a net discrete income tax charge of $11, including $10 related to a tax holiday (see below), and (iii) a favorable impact of $6 related to the interim period treatment of operational losses in certain jurisdictions forthose which receive no tax benefit ~~was recognized (expected~~from generated losses.

L. Leasing

As a result of the adoption of ASU No. 2016-02, Leases, management recorded a right-of-use asset and lease liability, each in the amount of $201, on Alcoa Corporation’s Consolidated Balance Sheet as of January 1, 2019 for several types of operating leases, including land and buildings, alumina refinery process control technology, plant equipment, vehicles, and computer equipment. These amounts are equivalent to ~~reverse by~~ the ~~end~~aggregate future lease payments on a discounted basis. The leases have remaining terms of ~~2017).~~

~~For~~one to 38 years. The discount rate applied to these leases is the ~~2017~~Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments, unless there is a rate implicit in the lease agreement. Lease expense for the third quarter ended September 30, 2019, includes costs from operating leases of $21, variable lease payments of $4 and immaterial short-term rental expense. Lease expense for the ~~Provision for income taxes is composed~~nine-months ended September 30, 2019, includes costs from operating leases of $60, variable lease payments of $12 and short-term rental expense of $4. New leases of $4 and $11 were added during the three ~~components~~and nine-months ended September 30, 2019, respectively. The Company does not have material financing leases.

The following represents the aggregate right-of use assets and related lease obligations as ~~follows: (i) the difference between the application~~ of ~~the estimated annual 2017 effective tax~~September 30, 2019:

Amounts recognized in the Consolidated Balance Sheet at September 30, 2019:
Properties, plants and equipment, net	$	158
Other current liabilities		62
Other noncurrent liabilities and deferred credits		96
Total operating lease liabilities	$	158

The weighted average lease term and weighted average discount rate as of September 30, ~~2017 of 34.2% to pretax income for the 2017 nine-month period of $943 and the application of the estimated annual 2017 effective tax rate~~2019 were as ~~of June 30, 2017 of 31.9% to pretax income for the 2017six-month~~ ~~period of $655, (ii) a net discrete income tax charge of $13, including $10 related to a tax holiday (see below), and (iii) a favorable impact of $8~~follows:

Weighted average lease term
Operating leases		4.1 years
Weighted average discount rate
Operating leases		5.3%

The future cash flows related to the ~~interim period treatment~~operating lease obligations as of ~~operational losses in certain jurisdictions for which no tax benefit was recognized (expected to reverse by the end of 2017).~~September 30, 2019 were as follows:

~~In the 2017 third quarter, AWAB received approval for a tax holiday~~

Year Ending December 31,	Operating leases
2019 (excluding the nine months ended September 30)	$	21
2020		68
2021		51
2022		19
2023		10
Thereafter		21
Total lease payments (undiscounted)		190
Less: discount to net present value		(32	)
Total	$	158

Disclosures related to periods presented prior to the ~~operation~~adoption of ~~the Juruti (Brazil) bauxite mine. This tax holiday is effective as of~~ASU No. 2016-02

The Company adopted ASU No. 2016-02, Leases, on January 1, ~~2017 (retroactively) and decreases AWAB’s income tax rate from 34%~~2019 using the modified retrospective approach which requires the following disclosure for periods presented prior to ~~15.25%, which will result in future cash tax savings over a10-year~~ ~~period.~~

As a result of this income tax rate change, AWAB’s existing deferred tax assets that are expected to reverse during the holiday period were required to be remeasured at the lower tax rate. This remeasurement resulted in both a decrease to AWAB’s deferred tax assets and a noncash charge to earnings of $10 ($6 after noncontrolling interest).

adoption. The rate for the 2016 third quarter differs from the U.S. federal statutory rate of 35% primarily due to U.S. losses and tax credits with no tax benefit realizable by Alcoa Corporation, somewhat offset by foreign income taxed in lower rate jurisdictions and tax benefits on interest expense eliminated to Parent Company net investment.

The rate for the 2016 nine-month period differs (by (491.4) percentage points) from the U.S. federal statutory rate of 35% primarily due to U.S. losses and tax credits with no tax benefit realizable by Alcoa Corporation, slightly offset by foreign income taxed in lower rate jurisdictions and tax benefits on interest expense eliminated to Parent Company net investment.

~~The composition of Alcoa Corporation’s net deferred tax asset by jurisdiction~~following table represents minimum annual lease commitments as of December 31, ~~2016 was as follows:~~2018 under long-term operating leases:

   Domestic    Foreign    Total
Deferred tax assets
   $ 1,346    $ 1,742    $ 3,088
Valuation allowance
   (1,057 )    (698 )    (1,755 )
Deferred tax liabilities
   (272 )    (612 )    (884 )






   $ 17    $ 432    $ 449

Year Ending December 31,	Operating leases
2019	$	74
2020		56
2021		42
2022		11
2023		5
Thereafter		21
Total lease payments	$	209

The Company has several income tax filers in various foreign countries. Of the $432 million net deferred tax asset included under the “Foreign” column in the table above, approximately 90% relates to four of the Company’s income tax filers as follows: a $259 million net deferred tax asset for Alcoa Alumínio S.A. (“Alumínio”) in Brazil; a $195 million net deferred tax asset for Alcoa World Alumina Brasil Ltda. (“AWAB”) in Brazil; a $108 million deferred tax asset for Alúmina Española, S.A. (“Española” and collectively with Alumínio and AWAB, the “Foreign Filers”) in Spain; and a $177 million net deferred tax liability for Alcoa of Australia Limited in Australia.

The future realization of the net deferred tax asset for each of the Foreign Filers was based on projections of the respective future taxable income (defined as the sum of pretax income, other comprehensive income, and permanent tax differences), exclusive of reversing temporary differences and carryforwards. The realization of the net deferred tax assets of the Foreign Filers is not dependent on any tax planning strategies. Historically, the Foreign Filers each generated taxable income in the three-year cumulative period ending December 31, 2016. Management has also forecasted taxable income for each of the Foreign Filers in 2017 and for the foreseeable future. This forecast is based on macroeconomic indicators and involves assumptions related to, among others: commodity prices; volume levels; and key inputs and raw materials, such as bauxite, caustic soda, alumina, calcined petroleum coke, liquid pitch, energy (fuel oil, natural gas, electricity), labor, and transportation costs. These are the same assumptions used by management to develop a financial and operating plan, which is used to run the Company and measure performance against actual results.

The majority of the Foreign Filers’ net deferred tax assets relate to tax loss carryforwards. The Foreign Filers do not have a history of tax loss carryforwards expiring unused. Additionally, tax loss carryforwards have an infinite life under the respective income tax codes in Brazil and Spain. That said, utilization of an existing tax loss carryforward is limited to 30% and 25% of taxable income in a particular year in Brazil and Spain, respectively.

Accordingly, management concluded that the net deferred tax assets of the Foreign Filers will more likely than not be realized in future periods, resulting in no need for a partial or full valuation allowance as of December 31, 2016.

As of September 30, 2017, Alcoa Corporation’s net deferred tax asset was $562, of which $554 relates to the Foreign Filers. There has not been a material change in the facts and circumstances underlying the analysis described above. As such, management concluded that the net deferred tax assets of the Foreign Filers will more likely than not be realized in future periods, resulting in no need for a partial or full valuation allowance as of September 30, 2017.

M. Contingencies and Commitments

~~Contingencies~~

Unless specifically described to the contrary, all matters within Note M are the full responsibility of Alcoa Corporation pursuant to the Separation and Distribution Agreement. Additionally, the Separation and Distribution Agreement provides for cross-indemnities between the Company and Arconic for claims subject to indemnification.

Contingencies

~~Litigation~~

On June 5, 2015, AWA and St. Croix Alumina, L.L.C. (“SCA”) filed a complaint in Delaware Chancery Court for a declaratory judgment and injunctive relief to resolve a dispute between ParentCo and Glencore Ltd. (“Glencore”) with respect to claimed obligations under a 1995 asset purchase agreement between ParentCo and Glencore. The dispute arose from Glencore’s demand that ParentCo indemnify it for liabilities it may have to pay to Lockheed Martin (“Lockheed”) related to the St. Croix alumina refinery. Lockheed had earlier filed suit against Glencore in federal court in New York seeking indemnity for liabilities it had incurred and would incur to the U.S. Virgin Islands to remediate certain properties at the refinery property and claimed that Glencore was required by an earlier, 1989 purchase agreement to indemnify it. Glencore had demanded that ParentCo indemnify and defend it in the Lockheed case and threatened to claim against ParentCo in the New York action despite exclusive jurisdiction for resolution of disputes under the 1995 purchase agreement being in Delaware. After Glencore conceded that it was not seeking to add ParentCo to the New York action, AWA and SCA dismissed their complaint in the Chancery Court case and on August 6, 2015 filed a complaint for declaratory judgment in Delaware Superior Court. AWA and SCA filed a motion for judgment on the pleadings on September 16, 2015. Glencore answered AWA’s and SCA’s complaint and asserted counterclaims on August 27, 2015, and on October 2, 2015 filed its own motion for judgment on the pleadings. Argument on the parties’ motions was held by the court on December 7, 2015, and by order dated February 8, 2016, the court granted ParentCo’s motion and denied Glencore’s motion, resulting in ParentCo not being liable to indemnify Glencore for the Lockheed action. The decision also leaves for pretrial discovery and possible summary judgment or trial Glencore’s claims for costs and fees it incurred in defending and settling an earlier Superfund action brought against Glencore by the Government of the Virgin Islands. On February 17, 2016, Glencore filed notice of its application for interlocutory appeal of the February 8, 2016 ruling. AWA and SCA filed an opposition to that application on February 29, 2016. On March 10, 2016, the court denied Glencore’s motion for interlocutory appeal and on the same day entered judgment on claims other than Glencore’s claims for costs and fees it incurred in defending and settling the earlier Superfund action brought against Glencore by the Government of the Virgin Islands. On March 29, 2016, Glencore filed a withdrawal of its notice of interlocutory appeal, and on April 6, 2016, Glencore filed an appeal of the court’s March 10, 2016 judgment to the Delaware Supreme Court, which set the appeal for argument for November 2, 2016. On November 4, 2016, the Delaware Supreme Court affirmed the judgment of the Delaware Superior Court granting ParentCo’s motion. Remaining in the case were Glencore’s claims for costs and fees it incurred related to the previously described Superfund action. On March 7, 2017, Alcoa Corporation and Glencore agreed in principle to settle these claims and on March 17, 2017 requested and were granted an adjournment of the court’s scheduled March 21, 2017 conference. On April 5, 2017, Alcoa and Glencore entered into a settlement agreement to resolve these remaining claims. Accordingly, on April 24, 2017, the court dismissed the case at the request of the parties. The amount of the proposed settlement was not material. This matter is now closed.

Before 2002, ParentCo purchased power in Italy in the regulated energy market and received a drawback of a portion of the price of power under a special tariff in an amount calculated in accordance with a published resolution of the Italian Energy Authority, Energy Authority Resolution n. 204/1999 (“204/1999”). In 2001, the Energy Authority published another resolution, which clarified that the drawback would be calculated in the same manner, and in the same amount, in either the regulated or unregulated market. At the beginning of 2002, ParentCo left the regulated energy market to purchase energy in the unregulated market. Subsequently, in 2004, the Energy Authority introduced regulation no. 148/2004, which set forth a different method for calculating the special tariff that would result in a different drawback for the regulated and unregulated markets. ParentCo challenged the new regulation in the Administrative Court of Milan and received a favorable judgment in 2006. Following this ruling, ParentCo continued to receive the power price drawback in accordance with the original calculation method, through 2009, when the European Commission declared all such special tariffs to be impermissible “state aid.” In 2010, the Energy Authority appealed the 2006 ruling to the Consiglio di Stato (final court of appeal). On December 2, 2011, the Consiglio di Stato ruled in favor of the Energy Authority and against ParentCo, thus presenting the opportunity for the energy regulators to seek reimbursement from ParentCo of an amount equal to the difference between the actual drawback amounts received over the relevant time period, and the drawback as it would have been calculated in accordance with regulation 148/2004. On February 23, 2012, ParentCo filed its appeal of the decision of the Consiglio di Stato (this appeal was subsequently withdrawn in March 2013). On March 26, 2012, ParentCo received a letter from the agency (Cassa Conguaglio per il Settore Eletrico (CCSE)) responsible for making and collecting

payments on behalf of the Energy Authority demanding payment in the amount of approximately $110 (€85), including interest. By letter dated April 5, 2012, ParentCo informed CCSE that it disputes the payment demand of CCSE since (i) CCSE was not authorized by the Consiglio di Stato decisions to seek payment of any amount, (ii) the decision of the Consiglio di Stato has been appealed (see above), and (iii) in any event, no interest should be payable. On April 29, 2012, Law No. 44 of 2012 (“44/2012”) came into effect, changing the method to calculate the drawback. On February 21, 2013, ParentCo received a revised request letter from CCSE demanding ParentCo’s subsidiary, Alcoa Trasformazioni S.r.l., make a payment in the amount of $97 (€76), including interest, which reflects a revised calculation methodology by CCSE and represents the high end of the range of reasonably possible loss associated with this matter of $0 to $97 (€76). ParentCo rejected that demand and formally challenged it through an appeal before the Administrative Court on April 5, 2013. The Administrative Court scheduled a hearing for December 19, 2013, which was subsequently postponed until April 17, 2014, and further postponed until June 19, 2014. On that date, the Administrative Court listened to ParentCo’s oral argument, and on September 2, 2014, rendered its decision. The Administrative Court declared the payment request of CCSE and the Energy Authority to ParentCo to be unsubstantiated based on the 148/2004 resolution with respect to the January 19, 2007 through November 19, 2009 timeframe. On December 18, 2014, the CCSE and the Energy Authority appealed the Administrative Court’s September 2, 2014 decision; a date for the hearing has been scheduled for May 2018. As a result of the conclusion of the European Commission Matter on January 26, 2016 (see Note R in Alcoa Corporation’s Annual Report on Form~~10-K~~ for the year ended December 31, 2016), ParentCo’s management modified its outlook with respect to a portion of the pending legal proceedings related to this matter. As such, a charge of $37 (€34) was recorded in Restructuring and other charges for the year ended December 31, 2015 to establish a partial reserve for this matter. At this time, Alcoa Corporation is unable to reasonably predict the ultimate outcome for this matter.

Environmental Matters

Alcoa Corporation participates in environmental assessments and cleanups at several locations. These include ~~owned~~currently or ~~operating facilities and adjoining properties,~~ previously owned or ~~operating~~operated facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)) sites.

A liability is recorded for environmental remediation when a cleanup program becomes probable and the costs can be reasonably estimated. As assessments and cleanups proceed, the liability is adjusted based on progress made in determining the extent of remedial actions and related costs. The liability can change substantially due to factors such as, among others, the nature and extent of contamination, changes in remedial requirements, and ~~technological changes.~~technology advancements.

Alcoa Corporation’s environmental remediation reserve balance ~~was $306 and $324 at September 30, 2017 and December 31, 2016 (of which $36 and $60 was classified as a current liability), respectively, and~~ reflects the most probable costs to remediate identified environmental conditions for which costs can be reasonably estimated. The following table details the changes in the carrying value of recorded environmental remediation reserves:

Balance at December 31, 2017	$	294
Liabilities incurred		19
Cash payments		(25	)
Reversals of previously recorded liabilities		(3	)
Foreign currency translation and other		(5	)
Balance at December 31, 2018		280
Liabilities incurred		4
Cash payments		(12	)
Reversals of previously recorded liabilities		(1	)
Foreign currency translation and other		(2	)
Balance at September 30, 2019	$	269

At September 30, 2019 and December 31, 2018, the current portion of Alcoa Corporation’s environmental remediation reserve balance was $31 and $44, respectively. In the ~~2017~~ third quarter and nine-month period of 2019, the ~~remediation reserve was decreased by $5 and $2, respectively. The change in both periods was due to a reversal of $4 related to the restart of the Warrick smelter (see Note D), a reduction~~Company incurred liabilities of $2 ~~related to the Mosjøen location (see below), and a charge of $1 (third quarter)~~ and $4, ~~(nine months) associated with several sites. Of the changes to the remediation reserve in both periods, the reversal of $4 was recorded in Restructuring and other~~respectively. These charges ~~while the remainder was~~are primarily recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations.

Payments related to remediation expenses applied against the reserve were ~~$10~~$2 and ~~$30~~$12 in the ~~2017~~2019 third quarter and nine-month period, respectively. These amounts include mandated expenditures ~~currently mandated,~~ as well as those not required by any regulatory authority or third party. The ~~respective change in the~~ reserve also reflects ~~an increase~~a decrease of $4$2 in both the third quarter and nine-month period of 2019, due to the effects of foreign currency ~~translation~~translation.

In the nine-month period of 2018, the remediation reserve was increased by $15 due to a charge of $9 related to the former Sherwin location (see below), a reversal of $2 related to the Portovesme location, and a net charge of $8 associated with several sites. Of the changes to the reserve in the ~~2017~~nine-month period of 2018, a charge of $15 was recorded in Cost of goods sold and both a charge of $2 and a reversal of $2 were recorded in Restructuring and other charges, net on the accompanying Statement of Consolidated Operations.

Payments related to remediation expenses applied against the reserve were $5 and $19 in the 2018 third quarter and ~~an increase~~nine-month period, respectively. These amounts include mandated expenditures as well as those not required by any regulatory authority or third party. The reserve also reflects both a decrease of ~~both $9~~$1 and $6 in the 2018 third quarter and nine-month period, respectively, due to the effects of foreign currency translation and $5an increase of $1 in the 2018 nine-month period for reclassifications made between this reserve and the ~~reclassification of an amount previously included in Alcoa Corporation’s~~Company’s liability for asset retirement ~~obligations~~obligations.

The estimated timing of cash outflows on the ~~Company’s Consolidated Balance Sheet~~environmental remediation reserve at September 30, 2019 is as offollows:

2019 (excluding the nine months ended September 30, 2019)	$	8
2020 - 2024		146
Thereafter		115
Total	$	269

Reserve balances at September 30, 2019 and December 31, ~~2016 in the 2017 nine-month period.~~

~~Included in annual operating expenses are the recurring costs of managing hazardous substances and environmental programs. These costs are estimated to be approximately 2% of cost of goods sold.~~

The Separation and Distribution Agreement includes provisions for the assignment or allocation of environmental liabilities between Alcoa Corporation and Arconic, including certain remediation obligations2018, associated with ~~environmental matters.~~significant sites with active remediation underway or for future remediation were $207 and $214, respectively. In ~~general,~~management’s judgment, the Company’s reserves are sufficient to satisfy the provisions of the respective ~~parties are responsible for~~action plans. Upon changes in facts or circumstances, a change to the ~~environmental matters associated with their operations, and~~reserve may be required. The Company’s significant sites include:

Pocos de Caldas, Brazil—Associated with the ~~properties and other assets assigned to each. Additionally, the Separation and Distribution Agreement lists environmental matters~~

with a shared responsibility between the two companies with an allocation of responsibility and the lead party responsible for management of each matter. For matters assigned to Alcoa Corporation (Arconic) under the Separation and Distribution Agreement, Alcoa Corporation (Arconic) has agreed to indemnify Arconic (Alcoa Corporation) in whole or in part for environmental liabilities arising from operations prior to the Separation Date. The following description provides details regarding the current status of certain significant reserves related to current or former Alcoa Corporation sites. With the exception of the Fusina, Italy matter, Alcoa Corporation assumed full responsibility of the matters described below.

~~Sherwin, TX—~~In connection with ParentCo’s sale of the Sherwin alumina refinery, which was required to be divested as part of ParentCo’s acquisition of Reynolds Metals Company in 2000, ParentCo agreed to retain responsibility for the remediation of the then existing environmental conditions, as well as a pro rata share of the final2015 closure of the ~~active bauxite residue waste~~Alcoa Alumínio S.A. smelter in Pocos de Caldas, Brazil, an environmental remediation reserve was established for remediation of historic spent potlining storage and disposal areas (known as the Copano facility). All ParentCo obligations regarding the Sherwin refinery and Copano facility were transferred from ParentCo to Alcoa Corporation as part of the Separation Transaction on November 1, 2016. In February 2017, the current owner of the Sherwin alumina refinery and Copano facility received court approval for reorganizationareas. The final remediation plan is currently under Chapter 11 of the U.S. Bankruptcy Code (see Other within Note M). Through the bankruptcy proceedings, the owner of Sherwin exercised its right under the U.S. Bankruptcy Code to reject the agreement from 2000 containing the previously mentioned retained responsibility, which had the effect of terminating all rights and responsibilities of the parties to the agreement. The Company continues to be involved in a legal dispute with the owner of Sherwin related to the allocation of responsibility for the environmental obligations at this site. At this time, it is unclear if the ultimate outcome of this matter will result in a change to Alcoa Corporation’s reserve. At September 30, 2017 and December 31, 2016,review; such review could require the reserve balance ~~associated with Sherwin was $30.~~to be adjusted.

~~Baie Comeau, Quebec, Canada—~~In August 2012, ParentCo presented an analysis of remediation alternatives to the Quebec Ministry of Sustainable Development, Environment, Wildlife and Parks (MDDEP), in response to a previous request, related to known polychlorinated biphenyls (PCBs) and polycyclic aromatic hydrocarbons (PAHs) contained in sediments of the Anse du Moulin bay. As such, ParentCo increased the reserve for Baie Comeau by $25 in 2012 to reflect the estimated cost of ParentCo’s recommended alternative, consisting of both dredging and capping of the contaminated sediments. In July 2013, ParentCo submitted the Environmental Impact Assessment for the project to the MDDEP. The MDDEP notified ParentCo that the project as it was submitted was approved and a final ministerial decree was issued in July 2015. As a result, no further adjustment to the reserve was required in 2015. The decree provided final approval for the project and ParentCo began work on the final project design at that time; Alcoa Corporation began construction on the project in April 2017 with an estimated completion in 2018. At September 30, 2017 and December 31, 2016, the reserve balance associated with this matter was $12 and $24, respectively.

Fusina and Portovesme, Italy—~~In 1996, ParentCo acquired the Fusina smelter and rolling operations and the Portovesme smelter, both of which were owned by ParentCo’s former~~Alcoa Corporation’s subsidiary Alcoa Trasformazioni S.r.l. ~~(“Trasformazioni”) (Trasformazioni is now a subsidiary of Alcoa Corporation and owns the Fusina smelter and Portovesme~~(Trasformazioni) has remediation projects underway for its closed smelter sites at Fusina and ~~Fusina Rolling S.r.l., a new ParentCo subsidiary, owns the Fusina rolling operations), from Alumix, an entity owned~~Portovesme. Cleanup plans at both sites have been approved by ~~the Italian Government. At the time of the acquisition, Alumix indemnified ParentCo forpre-existing~~ ~~environmental contamination at the sites. In 2004,~~ the Italian Ministry of Environment and Protection of Land and Sea (MOE) ~~issued orders~~. For the Fusina site, Trasformazioni began work on a soil remediation project in October 2017 and expects to ~~Trasformazioni and Alumix for~~complete the ~~development of aclean-up~~ ~~plan related to soil contamination~~project in excess of allowable limits under legislative decree and to institute emergency actions and pay natural resource damages. Trasformazioni appealed the orders and filed suit against Alumix, among others, seeking indemnification for these liabilities under the provisions of the acquisition agreement. In 2009, Ligestra S.r.l. (“Ligestra”), Alumix’s successor, and2020. Additionally, Trasformazioni agreed to make annual payments to MOE over a ~~stay of the court proceedings while investigations were conducted~~10-year period, ending in 2022, for groundwater emergency containment and ~~negotiations advanced towards a possible settlement.~~

~~In December 2009, Trasformazioni and Ligestra reached an initial agreement for settlement of the liabilities~~natural resource damages related to the Fusina operations while negotiations continued related to Portovesme (see below). The agreement outlined an allocation of payments to the MOE for emergency action and natural resource damages and the scope and costs for a proposed soil remediation project, which was formally presented to the MOE in~~mid-2010.~~ The agreement was contingent upon final acceptance of the remediation project by the MOE. As a result of entering into this agreement, ParentCo increased the reserve by $12 in 2009 for Fusina. Based on comments received from the MOE and local and regional environmental authorities, Trasformazioni submitted a revised remediation plan in the first half of 2012; however, such revisions did not require any change to the existing reserve. In October 2013, the MOE approved the project submitted by ParentCo, resulting in no adjustment to the reserve.

In January 2014, in anticipation of ParentCo reaching a final administrative agreement with the MOE, ParentCo and Ligestra entered into a final agreement related to Fusina for allocation of payments to the MOE for emergency action and natural resource damages and the costs for the approved soil remediation project. The agreement resulted in Ligestra assuming 50% to 80% of all payments and remediation costs. On February 27, 2014, ParentCo and the MOE reached a final administrative agreement for conduct of work. The agreement includes both a soil and groundwater remediation project estimated to cost $33 (€24) and requires payments of $25 (€18) to the MOE for emergency action and natural resource damages. Based on the final agreement with Ligestra, ParentCo’s share of all costs and payments was $17 (€12), of which $9 (€6) related to the damages will be paid annually over a~~10-year~~

period, which began in April 2014, and was previously fully reserved. On March 30, 2017, the MOE provided authorization to Trasformazioni to dispose of excavated waste into a third-party landfill; this work began on October 25, 2017. The responsibility for the execution of groundwater remediation project/emergency containment has been transferred to the MOE in accordance with the February 2014 settlement agreement and remediation is slated to begin in late 2017 or in 2018.

Effective with the Separation Transaction, Arconic retained the portion of this obligation related to the Fusina rolling operations. Specifically, under the Separation and Distribution Agreement, Trasformazioni, and with it the Fusina properties, were assigned to Alcoa Corporation. Fusina Rolling S.r.l., entered into a lease agreement for the portion of property that included the rolling operation. Pursuant to the Separation and Distribution Agreement, the liabilities at Fusina described above were allocated between Alcoa Corporation (Trasformazioni) and Arconic (Fusina Rolling S.r.l.). Arconic will pay $7 (€7) for the portion of remediation expenses associated with the section of property that includes the rolling operation as the project is completed.

Separately, in 2009, due to additional information derived from the site investigations conducted at Portovesme, ParentCo increased the reserve by $3. In November 2011, Trasformazioni and Ligestra reached an agreement for settlement of the liabilities related to Portovesme, similar to the one for Fusina. A proposed soil remediation project for Portovesme was formally presented to the MOE in June 2012. Neither the agreement with Ligestra nor the proposal to the MOE resulted in a change to the reserve for Portovesme. In November 2013, the MOE rejected the proposed soil remediation project and requested a revised project be submitted. In May 2014, Trasformazioni and Ligestra submitted a revised soil remediation project that addressed certain stakeholders’ concerns. ParentCo increased the reserve by $3 in 2014 to reflect the estimated higher costs associated with the revised soil remediation project, as well as current operating and maintenance costs ofsite. For the Portovesme ~~site.~~

~~In October 2014, the MOE required~~site, Trasformazioni began work on a further revised project be submitted to reflect the removal of a larger volume of contaminated soil than what had been proposed, as well as design changes for the cap related to the remaining contaminated soil left in place and the expansion of an emergency containment groundwater pump and treatment system that was previously installed. Trasformazioni and Ligestra submitted the further revised soil remediation project in February 2015. As a result, ParentCo increased the reserve by $7 in March 2015 to reflect the increase in the estimated costs of the project. In October 2015, ParentCo received a final ministerial decree approving the February 2015 revised soil remediation project. Work on the soil remediation project commenced inmid-2016 and ~~is expected~~expects it to be ~~completed~~complete by the end of 2020. Additionally, Trasformazioni participates in ~~2019. After further discussions with the MOE regarding the~~a groundwater remediation project ~~Alcoa Corporation and Ligestra are working to find~~which will not

have a ~~common remediation solution. The ultimate outcome of this matter~~final remedial design completed until mid-2020; such design conclusion may result in a change to the existing reserve for ~~Portovesme.~~Portovesme.

~~Mosjøen, Norway—~~~~In September 2012, ParentCo presented an analysis of remediation alternatives to~~Suriname—Associated with the Norwegian Environmental Agency (NEA) (formerly the Norwegian Climate and Pollution Agency, or “Klif”), in response to a previous request, related to known PAHs in the sediments located in the harbor and extending out into the fjord. As such, ParentCo increased the reserve for Mosjøen by $20 in 2012 to reflect the estimated cost2017 closure of the ~~baseline alternative~~Suralco refinery and bauxite mine, an environmental remediation reserve was established for ~~dredging~~treatment and disposal of ~~the contaminated sediments. A proposed project reflecting this alternative was formally presented to the NEA~~refinery waste and soil remediation. The work began in ~~June 2014, and was resubmitted in late 2014 to reflect changes by the NEA. The revised proposal did not result in a change to the reserve for Mosjøen.~~

In April 2015, the NEA notified ParentCo that the revised project was approved and required submission of the final project design before issuing a final order. ParentCo completed and submitted the final project design, which identified a need to stabilize the related wharf structure to allow for the sediment dredging in the harbor. As a result, ParentCo increased the reserve for Mosjøen by $11 in June 2015 to reflect the estimated cost of the wharf stabilization. Also in June 2015, the NEA issued a final order approving the project as well as the final project design. In September 2015, ParentCo increased the reserve by $1 to reflect the potential need (based on prior experience with similar projects) to perform additional dredging if the results of sampling, which is required by the order, don’t achieve the required cleanup levels. Project construction commenced in early 20162017 and is expected to be completed byat the end of ~~2017.~~2025.

Hurricane Creek, Arkansas—The Company, through its subsidiaries, operated two mining areas and refineries near Hurricane Creek, Arkansas, before their closure in 1990. In accordance with regulations, the ~~2017 third quarter,~~Company is responsible for ongoing monitoring and maintenance for water quality surrounding the mine areas and residue disposal areas. In instances where the Company has ongoing monitoring and maintenance responsibilities, it is Alcoa ~~Corporation reduced~~Corporation’s policy to maintain a reserve equal to five years of expected costs.

Massena, New York—Associated with the ~~reserve associated with this matter by $2 based on a revised cost estimate~~closure of the ~~remaining project work.~~Massena East smelter by the Company’s subsidiary, Reynolds Metals Company, in 2015, an environmental remediation reserve was established for subsurface soil remediation to be performed after demolition of the structures. Remediation work is expected to commence in 2020 and will take four to eight years to complete.

Sherwin, Texas—In connection with the 2018 settlement of a dispute related to the previously-owned Sherwin alumina refinery, the Company’s subsidiary, Copano Enterprises LLC, accepted responsibility for the final closure of four bauxite residue waste disposal areas (known as the Copano facility). Work commenced on the first residue bed in 2018 and will take eight to twelve years to complete, depending on the nature of its potential re-use. Work on the next three beds has not commenced but is expected to be completed by 2048, depending on its potential re-use. See Sherwin in the Other section below for a complete description of this matter.

Longview, Washington—In connection with a 2018 Consent Decree and Cleanup Action Plan with the State of Washington Department of Ecology, the Company’s subsidiary, Northwest Alloys, accepted certain responsibilities for future remediation of contaminated soil and sediments at the site located near Longview, Washington.

Other Sites—The Company is in the process of decommissioning various other plants in several countries. As a result, redeveloping these sites for reuse or returning the land to a natural state requires the performance of certain remediation activities. In aggregate, there are approximately 35 remediation projects at these other sites that are planned or underway. These activities will be completed at various times in the future with the latest expected to be in 2026, after which ongoing monitoring and other activities may be required. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the reserve balance associated with ~~this matter~~these activities was $4$62 and ~~$8,~~$66, respectively.

~~East St. Louis, IL—~~ParentCo had an ongoing remediation project related to an area used for the disposal of bauxite residue from former alumina refining operations. The project, which was selected by the EPA in a Record of Decision (ROD) issued inTax

Spain—In July ~~2012, is aimed at implementing a soil cover over the affected area. On November 1,~~ 2013, the U.S. Department of Justice lodged a consent decree on behalf of the U.S. Environmental Protection Agency (EPA) for ParentCo to conduct the work outlined in the ROD. This consent decree was entered as final in February 2014 by the U.S. Department of Justice. As a result, ParentCo began construction in March 2014; the fieldwork on a majority of this project was

completed by the end of June 2016. A completion report was approved by the EPA in September 2016 and this matter, for the completed portion of the project, transitioned into a long-term (approximately 30 years) inspection, maintenance, and monitoring program. Fieldwork for the remaining portion of the project is expected to be completed in 2018, at which time it would also transition into a long-term inspection, maintenance, and monitoring program. This obligation was transferred from ParentCo to Alcoa Corporation as part of the Separation Transaction on November 1, 2016. At September 30, 2017 and December 31, 2016, the reserve balance associated with this matter was $4.

~~Tax~~

~~In September 2010,~~ following a corporate income tax audit covering the ~~2003~~2006 through ~~2005~~2009 tax years, an assessment was received ~~as a result of~~from Spain’s tax authorities disallowing certain interest deductions claimed by aParentCo’s Spanish consolidated tax ~~group owned by ParentCo. An~~group. ParentCo filed an appeal of this assessment and provided financial assurance in the form of both a bank guarantee (Arconic) and a lien secured with the San Ciprian smelter (Alcoa Corporation) to Spain’s tax authorities. In January 2015, Spain’s Central Tax Administrative Court ~~by ParentCo was~~ denied ~~in October 2013. In December 2013,~~ParentCo’s appeal of this assessment. Two months later, ParentCo filed an appeal of the assessment in Spain’s National ~~Court.~~Court (the National Court). The amount of this assessment, including interest, was $152 (€131) as of June 30, 2018.

~~Additionally, following a corporate income tax audit~~On July 6, 2018, the National Court denied ParentCo’s appeal of the ~~same Spanish tax group for~~assessment; however, the ~~2006 through 2009 tax years,~~decision includes a requirement that Spain’s tax authorities ~~issued~~issue a new assessment, which considers available net operating losses of the former Spanish consolidated tax group from prior tax years that can be utilized during the assessed tax years. Spain’s tax authorities will not issue a new assessment until this matter is resolved; however, based on estimated calculations completed by Arconic and Alcoa Corporation (collectively, the Companies) as of July 6, 2018, the amount of the new assessment, including applicable interest, was expected to be in the range of $25 to $61 (€21 to €53) after consideration of available net operating losses and tax credits. Under the Tax Matters Agreement related to the Separation Transaction, Arconic and Alcoa Corporation are responsible for 51% and 49%, respectively, of the assessed amount in the event of an ~~assessment in July 2013 similarly disallowing certain interest deductions.~~ unfavorable outcome. On November 8, 2018, the Companies filed a petition for appeal to Spain’s Supreme Court, to which Spain’s tax authorities have filed their opposition.

In ~~August 2013, ParentCo filed~~March 2019, the Spanish Supreme Court accepted the Companies’ petition for appeal which allowed the Companies to prepare and submit an appeal on May 6, 2019.

Notwithstanding the appeal process, based on a review of the basis on which the National Court decided this ~~second~~matter, Alcoa Corporation management no longer believed that the Companies were more likely than not (greater than 50%) to prevail in this matter. Accordingly, in the third quarter of 2018, Alcoa Corporation recorded a charge of $30 (€26) in Provision for income taxes to establish a liability for its 49% share of the estimated loss in this matter, representing management’s best estimate at the time. As the appeal

progresses or when the Companies receive an updated assessment infrom Spain’s ~~Central Tax Administrative Court, which was denied~~tax authorities, management may revise its estimated liability.

Separately, in January ~~2015. ParentCo filed an appeal of this second assessment in Spain’s National Court in March 2015.~~

~~On January 16,~~ 2017, ~~Spain’s~~the National Court issued a decision in favor of the ~~Company~~former Spanish consolidated tax group related to ~~the~~a similar assessment ~~received in September 2010. On March 6, 2017, the Company was notified that Spain’s tax authorities did not file an appeal,~~ for ~~which the deadline has passed. As a result, the assessment related to~~ the 2003 through 2005 tax years, iseffectively making that assessment null and void. ~~Spain’s National Court has not yet rendered a decision related to the assessment received~~Additionally, in ~~July 2013 for the 2006 through 2009 tax years. The amount of this assessment on a standalone basis, including interest, was $152 (€129) as of September 30, 2017.~~

The Company believes it has meritorious arguments to support its tax position and intends to vigorously litigate the remaining assessment through Spain’s court system. However, in the event the Company is unsuccessful, a portion of the remaining assessment may be offset with existing tax loss carryforwards available to the Spanish consolidated tax group, which would be shared between the Company and Arconic as provided for in the Tax Matters Agreement related to the Separation Transaction. Additionally, it is possible that the Company may receive similar assessments for tax years subsequent to 2009 (see below). Despite the favorable decision received on the first assessment, at this time, the Company is unable to reasonably predict the ultimate outcome for this matter.

This Spanish consolidated tax group had been under audit (began in September 2015) for the 2010 through 2013 tax years. As Spain’s tax authorities neared the end of the audit, they informed both Alcoa Corporation and Arconic of their intent to issue an assessment similarly disallowing certain interest deductions as the two assessments described above. On August 3, 2017, in lieu of receiving a formal assessment, ~~all parties agreed to~~the Companies reached a settlement ~~related to~~with Spain’s tax authorities for the 2010 through 2013 tax ~~years. For~~years that had been under audit for a similar matter. Alcoa ~~Corporation,~~Corporation’s share of this settlement iswas not material to the Company’s Consolidated Financial Statements. ~~Given~~The ultimate outcomes related to the ~~stage~~2003 through 2005 and the 2010 through 2013 tax years are not indicative of the ~~appeal~~potential ultimate outcome of the assessment for the 2006 through 2009 tax years ~~in Spain’s National Court,~~due to procedural differences. Also, it is possible that the ~~settlement of the 2010 through 2013~~Companies may receive similar assessments for tax years ~~will~~subsequent to 2013; however, management does not ~~impact the ultimate outcome of that proceeding.~~expect any such assessment, if received, to be material to Alcoa Corporation’s Consolidated Financial Statements.

Brazil (AWAB)—In March 2013, AWAB was notified by the Brazilian Federal Revenue Office (RFB) that approximately $110 (R$220) of value added tax credits previously claimed are being disallowed and a penalty of 50% assessed. Of this amount, AWAB received $41 (R$82) in cash in May 2012. The ~~value added~~value-added tax credits were claimed by AWAB for both fixed assets and export sales related to the Juruti bauxite mine and São Luís refinery expansion. The RFB has disallowed credits they allege belong to the consortium in which AWAB owns an interest and should not have been claimed by AWAB. Credits have also been disallowed as a result of challenges to apportionment methods used, questions about the use of the credits, and an alleged lack of documented proof. AWAB presented defense of its claim to the RFB on April 8, 2013. If AWAB is successful in this administrative process, the RFB would have no further recourse. If unsuccessful in this process, AWAB has the option to litigate at a judicial level. Separately from AWAB’s administrative appeal, in June 2015, new tax law was enacted repealing the provisions in the tax code that were the basis for the RFB assessing a 50% penalty in this matter. As such, the estimated range of reasonably possible loss for these matters is $0 to $32 (R$103), whereby the maximum end of the range represents the portion of the disallowed credits applicable to the export sales and excludes the 50% penalty. Additionally, the estimated range of disallowed credits related to AWAB’s fixed assets is $0 to $37 (R$117), which would increase the net carrying value of AWAB’s fixed assets if ultimately disallowed.$53. It is management’s opinion that the allegations have no basis; however, at this time, the Company is unable to reasonably predict an outcome for this matter.

Between 2000 and 2002, Alcoa Alumínio (Alumínio), an indirect wholly-owned subsidiary of Alcoa Corporation, sold approximately 2,000 metric tons of metal per month from its Poços de Caldas facility, located in the State of Minas Gerais (the “State”), Brazil, to Alfio, a customer also located in the State. Sales in the State were exempted from value-added tax (VAT) requirements. Alfio subsequently sold metal to customers outside of the State, but did not pay the required VAT on those transactions. In July 2002, Alumínio received an assessment from State auditors on the theory that Alumínio should be jointly and severally liable with Alfio for the unpaid VAT. In June 2003, the administrative tribunal found Alumínio liable, and Alumínio filed a judicial case in the State in February 2004 contesting the finding. In May 2005, the Court of First Instance found Alumínio solely liable, and a panel of a State appeals court confirmed this finding in April 2006. Alumínio filed a special appeal to the Superior Tribunal of Justice (STJ) in Brasilia (the federal capital of Brazil) later in 2006. In 2011, the STJ (through one of its judges) reversed the judgment of the lower courts, finding that Alumínio should neither be solely nor jointly and severally liable with Alfio for the VAT, which ruling was then appealed by the State. In August 2012, the STJ agreed to have the case reheard before a five-judge panel. On February 21, 2017, the lead judge of the STJ issued a ruling confirming that Alumínio should be held liable in this matter. On March 16, 2017, Alumínio filed an appeal to have its case reheard before the five-judge panel as originally agreed to by the STJ in August 2012. Separately, in the 2017 second quarter, the State opened a tax amnesty program. At the end of August 2017, Alumínio elected to submit this matter for consideration into the amnesty program, which the State approved. As a result, under the terms of the amnesty program, this matter was settled for $8 (R$25). In the 2017 third quarter, a charge for the settlement amount was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. Prior to submitting this matter for consideration into the amnesty program, the assessment, including penalties and interest, totaled $46 (R$145). This matter is now closed.Other

~~Other~~

On January 11, 2016, Sherwin Alumina Company, LLC (“Sherwin”), the current owner of a refinery previously owned by ParentCo (see below), and one of its affiliate entities, filed bankruptcy petitions in Corpus Christi, Texas for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Sherwin informed the bankruptcy court that it intends to cease operations because it is not able to continue its bauxite supply agreement. On November 23, 2016, the bankruptcy court approved Sherwin’s plans for cessation of its operations. On February 16, 2017, Sherwin filed a bankruptcy Chapter 11 Plan (the “Plan”) and on February 17, 2017 the court approved that Plan.

Reynolds—In 2000, ParentCo acquired Reynolds Metals Company ~~(“Reynolds,”~~(Reynolds, a subsidiary of Alcoa Corporation), which included an alumina refinery in Gregory, Texas. As a condition of the Reynolds acquisition, ParentCo was required to divest this alumina refinery. ~~In accordance with~~Under the terms of the divestiture, ~~in 2000,~~ ParentCo agreed to retain responsibility for certain environmental obligations ~~(see Environmental Matters within Note M)~~ and assigned to the buyer an Energy Services Agreement ~~(“ESA”)~~(ESA) with Gregory Power Partners ~~(“Gregory Power”)~~(Gregory Power) for purchase of steam and electricity by the refinery.

In January 2016, Sherwin Alumina Company, LLC (Sherwin), a successor owner of the refinery previously owned by Reynolds, filed for bankruptcy due to its inability to continue its bauxite supply agreement. As a result of Sherwin’s ~~initial~~ bankruptcy filing, separate legal actions were initiated against Reynolds by Sherwin and Gregory ~~Power~~Power.

Sherwin: This matter sought to determine responsibility for remediation of environmental conditions at the Sherwin refinery site and related bauxite residue waste disposal areas (known as the Copano facility). In May 2018, Reynolds and Sherwin ~~as follows.~~concluded a settlement agreement, which was accepted by the bankruptcy court in June 2018, that assigned to Reynolds all environmental liabilities associated with the Copano facility and assigned to Sherwin all environmental liabilities associated with the Sherwin refinery site. At September 30, 2019 and December 31, 2018, the Company had a reserve of $38 for its share of environmental-related matters at Copano facility. (See Sherwin, Texas in Environmental Matters above.)

Gregory ~~Power—~~ OnPower: In January ~~26,~~ 2016, Gregory Power delivered notice to Reynolds that Sherwin’s bankruptcy filing constitutes a breach of the ~~ESA;~~ESA. Since that time, various responses, complaints and motions have been actioned, including the addition of Allied Alumina LLC (Allied) to an amended complaint. (Sherwin operated as a subsidiary of Allied.) In May 2019, a settlement agreement was reached between Gregory Power, Allied and Reynolds in which all claims pending against the parties will be voluntarily dismissed. The settlement is conditioned on ~~January 29, 2016, Reynolds responded that~~ the ~~filing~~execution of various commercial agreements, which have been executed by the parties. On June 2, 2019, the Court entered a Stipulation of Dismissal, formally concluding the litigation. The settlement does not constitute a breach. On September 16, 2016, Gregory Power filed a complaint in the bankruptcy case against Reynolds alleging breach of the ESA. In response to this complaint, on November 10, 2016, Reynolds filed both a motion to dismiss, including a jury demand, and a motion to withdraw the reference to the bankruptcy court basedhave an impact on the jury demand. On July 18, 2017, the district court ordered that any trial would be held to a jury in district court, but that the bankruptcy court would retain jurisdiction on all pre-trial matters. At this time, Alcoa Corporation is unable to reasonably predict the ultimate outcome of this matter.Consolidated Financial Statements.

~~Sherwin—~~On October 4, 2016, the state of Texas filed suit against Sherwin in the bankruptcy proceeding seeking to hold Sherwin responsible for remediation of alleged environmental conditions at the facility. On October 11, 2016, Sherwin filed a similar suit against Reynolds in the case. As provided in the Plan, Sherwin, including certain affiliated companies, and Reynolds are negotiating an allocation among them as to the ownership of and responsibility for certain areas of the refinery and related bauxite residue waste disposal areas. On October 10, 2017, the bankruptcy court entered a stipulation by the parties further extending the time to negotiate and file a settlement through October 27, 2017 (previous date was August 28, 2017). The parties are continuing to discuss a comprehensive settlement and, on October 25, 2017, filed a stipulation for a further extension through January 10, 2018. At this time, Alcoa Corporation is unable to reasonably predict the ultimate outcome of this matter.

General

In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against Alcoa Corporation, including those pertaining to environmental, ~~product liability,~~ safety and health, ~~contract dispute,~~commercial, tax, product liability, intellectual property infringement, employment, and ~~tax~~employee and retiree benefit matters, and other actions and claims arising out of the normal course of business. While the amounts claimed in these other matters may be substantial, the ultimate liability ~~cannot now be determined~~is not readily determinable because of the considerable

uncertainties that exist. ~~Therefore,~~Accordingly, it is possible that the Company’s liquidity or results of operations in a particular period could be materially affected by one or more of these other matters. However, based on facts currently

available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the financial position of the Company.

Commitments

Investments

In December 2009,Alcoa Corporation ~~has an investment~~invested in a joint venture related to the ownership and operation of an integrated aluminum complex (bauxite mine, alumina refinery, aluminum smelter, and rolling mill) in Saudi Arabia. The joint venture is owned 74.9% by ~~the Saudi Arabian Mining Company (known as “Ma’aden”)~~Ma’aden and 25.1% by Alcoa Corporation, and ~~consists~~originally consisted of three separate ~~companies~~companies: the MBAC, MAC, and MRC. Alcoa Corporation divested its ownership interest in MRC in the second quarter of 2019 as ~~follows: one each for the mine and refinery, the smelter, and the rolling mill.~~described in Note C. Alcoa Corporation accounts for its investment in the joint venture under the equity ~~method.~~method as one integrated investment asset, consistent with the terms of the joint venture agreement. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the carrying value of Alcoa Corporation’s investment in this joint venture was ~~$871~~$615 and ~~$853,~~$874, respectively.

~~Capital investment in~~At the ~~project is expected to total approximately $10,800 (SAR 40.5 billion) and has been funded through a combination~~time of equity contributions by the joint venture partners and project financing obtained by the joint venture companies, which has been partially guaranteed by both partners (see below). Both the equity contributions and the guarantees of the project financing are based on the joint venture’s partners’ ownership interests. Originally, it was estimated that Alcoa Corporation’s total equity contribution in the joint venture related to the capital investment in the project would be approximately $1,100, of which Alcoa Corporation has contributed $982. Based on changes to both the project’s capital investment and equity and debt structure from the initial plans, the estimated $1,100 equity contribution may be reduced. Separate from the capital investment in the project, Alcoa Corporation contributed $8 and $44 (Ma’aden contributed $23 and $131) to the joint venture in the 2017 third quarter and nine-month period, respectively, for short-term funding purposes in accordance with the terms of the joint venture companies’ financing arrangements. Both partners may be required to make such additional contributions in future periods.

~~The smelting and rolling mill companies have~~closing, MRC had project financing totaling ~~$4,012 (reflects principal repayments made through September 30, 2017),~~$1,179, of which ~~$1,007 represents Alcoa Corporation’s share (the equivalent of~~$296 represented Alcoa Corporation’s 25.1% interest in the ~~smelting and~~ rolling mill ~~companies).~~company prior to the divestiture. Alcoa Corporation ~~has~~had issued guarantees ~~(see below)~~ to the lenders in the event ~~that the smelting and rolling mill companies~~of default on ~~their~~the debt service requirements by MRC through ~~2017 and 2020 for the smelting company and~~ 2018 and 2021 ~~for the rolling mill company~~ (Ma’aden issued similar guarantees ~~for~~related to its 74.9% interest). Alcoa Corporation’s guarantees for ~~the smelting and rolling mill companies cover~~MRC covered total remaining debt service requirements of ~~$89~~$50 in principal and up to a maximum of approximately ~~$15~~$10 in interest per year (based on projected interest rates). ~~At September 30,~~Previously, Alcoa Corporation issued similar guarantees related to the project financing of both MAC and MBAC. In December 2017 and July 2018, MAC and MBAC, respectively, refinanced and/or amended all of their existing outstanding debt. The guarantees that were previously required of the Company related to both MAC and MBAC were effectively terminated. At December 31, ~~2016,~~2018, the combined fair value of the guarantees was ~~$2 and $3, respectively,~~$1, which was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet.

~~The mining and refining company has project financing totaling $2,181 (reflects principal repayments made through September 30, 2017),~~ As part of which $547 represents AWAC’s 25.1% interest in the mining and refining company. Alcoa Corporation, on behalf of AWAC, has issued guarantees (see below) to the lenders in the event that the mining and refining company defaults on its debt service requirements through 2019 and 2024 (Ma’aden issued similar guarantees for its 74.9% interest). Alcoa Corporation’s ~~guarantees for~~divestiture of MRC, the ~~mining and refining company cover total debt service requirements of $109 in principal and up~~guarantee related to ~~a maximum of approximately $20 in interest per year (based on projected interest rates). At both September 30, 2017 and December 31, 2016, the combined fair value of the guarantees~~MRC was $3, which was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet. In the event Alcoa Corporation would be required to make payments under the guarantees, 40% of such amount would be contributed to Alcoa Corporation by Alumina Limited, consistent with its ownership interest in AWAC.effectively terminated.

As a result of the Separation Transaction, the various lenders to the joint venture companies required Arconic to maintain joint and several guarantees with Alcoa Corporation. In the event of default by any of the joint venture companies, the lenders would make a claim against both Alcoa Corporation and Arconic. Accordingly, Alcoa Corporation would perform under its guarantee; however, if the Company failed to perform, Arconic would be required to perform under its own guarantee. Arconic would then subsequently seek indemnification from Alcoa Corporation under the terms of the Separation and Distribution Agreement.

N. Other Expenses, ~~(Income),~~ Net

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017 2016
Equity loss
   $ 13    $ 18    $ 23 $ 59
Foreign currency losses, net
   1    8    6 21
Net loss (gain) from asset sales
   1    (132 )    (115 ) (164 )
Net loss (gain) onmark-to-market derivative instruments (K)
   6    (4 )    22 5
Other, net
   6    4    (3 ) (11 )






   $ 27    $ (106 )    $ (67 ) $ (90 )

In the 2017 nine-month period, Net gain from asset sales included a $120 gain related to the sale of Yadkin (see Note C). In the 2016 third quarter and nine-month period, Net gain from asset sales included a $118 gain related to the sale of wharf property near the Intalco (Washington) smelter. Also in the 2016 nine-month period, Net gain from asset sales included a $27 gain related to the sale of an equity interest in a natural gas pipeline in Australia.

~~O. Subsequent Events~~ – Management evaluated all activity of Alcoa and concluded that no subsequent events have occurred that would require recognition in the Consolidated Financial Statements or disclosure in the Notes to the Consolidated Financial Statements, except as described below.

On October 10, 2017, Alcoa Corporation and Luminant Generation Company LLC (Luminant) executed an early termination agreement of a power contract, as well as other related fuel and lease agreements, effective October 1, 2017, related to the Company’s Rockdale (Texas) smelter, which has been fully curtailed since the end of 2008. In accordance with the terms of the early termination agreement, Alcoa made a payment of $238 and transferred approximately 2,200 acres of related land and other assets and liabilities to Luminant. The Company will record a charge of approximately $250~~(pre-~~ ~~andafter-tax)~~ ~~in the fourth quarter of 2017 associated with the early termination agreement.~~

Since the curtailment of the Rockdale smelter, the Company had been selling surplus electricity into the energy market. The power contract was set to expire no earlier than 2038, except for limited circumstances in which one or both parties could elect to early terminate without penalty for which conditions had never been met. In the 2017 nine-month period and full year 2016, Alcoa Corporation recognized $105 and $141, respectively, in Sales and $148 and $210, respectively, in Cost of goods sold related to the sale of the surplus electricity and the cost of the Luminant power contract.

As a result of the early termination of the power contract, Alcoa has initiated a strategic review of the remaining buildings and equipment associated with the smelter, casthouse, and the aluminum powder plant at the Rockdale location. Management expects to reach a decision on the future of these assets by the end of 2017. Separately, the Company continues to own more than 30,000 acres of land surrounding the Rockdale operations.

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Equity loss (income)	$	7		$	(1	)	$	34		$	(2	)
Foreign currency (gains) losses, net		(1	)		(22	)		16			(49	)
Net (gain) loss from asset sales		(5	)		3			(6	)		—
Net gain on mark-to-market derivative instruments (J)		—			(8	)		—			(19	)
Non-service costs – Pension & OPEB (I)		30			32			89			109
Other		(4	)		(2	)		(15	)		(7	)
	$	27		$	2		$	118		$	32

Report of Independent Registered Public Accounting Firm*

~~To the Shareholders and Board of Directors of Alcoa Corporation:~~

We have reviewed the accompanying consolidated balance sheetof Alcoa Corporation and its subsidiaries (Alcoa Corporation) as of September 30, 2017, and the related statements of consolidated operations, consolidated comprehensive (loss) income, and changes in consolidated equity for the three-month and nine-month periods ended September 30, 2017 and 2016 and the statement of consolidated cash flows for the nine-month periods ended September 30, 2017 and 2016. These consolidated interim financial statements are the responsibility of Alcoa Corporation’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related statements of consolidated operations, consolidated comprehensive (loss) income, changes in consolidated equity, and consolidated cash flows for the year then ended (not presented herein), and in our report dated March 15, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2016, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

~~/s/ PricewaterhouseCoopers LLP~~

~~PricewaterhouseCoopers LLP~~

~~Pittsburgh, Pennsylvania~~

~~October 27, 2017~~

*	This report should not be considered a “report” within the meanings of Sections 7 and 11 of the Securities Act of 1933, and the independent registered public accounting firm’s liability under Section 11 does not extend to it.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(dollars in millions, exceptper-share amounts, average realized prices, and average cost amounts; ~~bauxite production and shipments in millions of~~ dry metric tons in millions (mdmt); ~~alumina and aluminum production and shipments~~metric tons in thousands ~~of metric tons~~ (kmt))

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to ~~“ParentCo”~~ParentCo refer to Alcoa Inc., a Pennsylvania corporation, and its consolidated subsidiaries ~~(through~~through October 31, 2016, at which time it was renamed Arconic Inc. (Arconic)).

~~Separation Transaction~~

On November 1, 2016 (the ~~“Separation Date”)~~Separation Date), ParentCo separated into two standalone, publicly-traded companies, Alcoa Corporation ~~(or the “Company) separated from ParentCo into a standalone, publicly-traded company, effective at 12:01 a.m. Eastern Standard Time,~~and Arconic (the ~~“Separation Transaction”)~~Separation Transaction). Alcoa Corporation is comprised of the bauxite mining, alumina refining, aluminum smelting and casting, and energy operations of ParentCo’s former Alumina and Primary Metals segments, as well as the Warrick, Indiana rolling operations and the 25.1% equity interest in the rolling mill at the joint venture in Saudi Arabia, both of which were part of ParentCo’s Global Rolled Products segment. ParentCo, which later changed its name to Arconic, continues to own the operations within its Global Rolled Products (except for the aforementioned rolling operations that are owned by Alcoa Corporation), Engineered Products and Solutions, and Transportation and Construction Solutions segments.

To effect the Separation Transaction, ParentCo undertook a series of transactions to separate the net assets and certain legal entities of ParentCo, resulting in a cash payment of $1,072 to ParentCo by Alcoa Corporation (an additional $247 was paid to Arconic by Alcoa Corporation in the 2017 nine-month period, including $243 associated with the sale of certain of the Company’s energy operations – see Financing Activities in Liquidity and Capital Resources below) with the net proceeds of a previous debt offering. In conjunction with the Separation Transaction, 146,159,428 shares of Alcoa Corporation common stock were distributed to ParentCo shareholders. Additionally, Arconic retained 36,311,767 shares of Alcoa Corporation common stock representing its 19.9% retained interest (Arconic sold 23,353,000 of these shares on February 14, 2017 and the remaining 12,958,767 shares on May 4, 2017).~~“Regular-way”~~ trading of Alcoa Corporation’s common stock began with the opening of the New York Stock Exchange on November 1, 2016 under the ticker symbol “AA.” Alcoa Corporation’s common stock has a par value of $0.01 per share.

In connection with the Separation Transaction, as of October 31, 2016, ~~Alcoa Corporation~~the Company and Arconic entered into ~~certain~~several agreements ~~with Arconic~~ to ~~implement the legal and structural separation between the two companies, govern the relationship between Alcoa Corporation and Arconic after the completion of~~affect the Separation Transaction, ~~and allocate between Alcoa Corporation and Arconic various assets, liabilities and obligations,~~ including ~~among other things, employee benefits, environmental liabilities, intellectual property, andtax-related~~ ~~assets and liabilities. These agreements included~~ a Separation and Distribution Agreement and a Tax Matters ~~Agreement, Employee Matters Agreement, Transition Services Agreement,~~Agreement. See Overview in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 of Alcoa Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

As of January 1, 2019, the Company changed its accounting method for valuing certain ~~Patent,Know-How,~~ ~~Trade Secret License~~inventories from last-in, first-out (LIFO) to average cost. The effects of the change in accounting principle have been retrospectively applied to all prior periods presented.

Business Update

In October 2019, the Company announced initiatives aimed at driving lower costs and ~~Trademark License Agreements, and Stockholder and Registration Rights Agreement.~~

~~ParentCo incurred costs~~sustainable profitability. Planned initiatives include (i) over the next 12 to ~~evaluate, plan, and execute the Separation Transaction, and~~18 months, Alcoa Corporation ~~was allocated~~intends to pursue non-core asset sales in support of its updated strategic priorities and (ii) over the next five years, Alcoa Corporation plans to realign its operating portfolio and has placed 1.5 million metric tons of smelting capacity and 4 million metric tons of alumina refining capacity under review. The review will consider opportunities for significant improvement, potential curtailments, closures, or divestitures.

Additionally, in September 2019, Alcoa Corporation announced the implementation of a ~~pro rata portion~~new operating model that will result in a leaner, more integrated, operator-centric organization. Effective November 1, 2019, the new operating model eliminates the business unit structure, consolidates sales, procurement and other commercial capabilities at an enterprise level, and streamlines the Executive Team from 12 to seven direct reports to the Chief Executive Officer. The new structure will reduce overhead with the intention of ~~those costs based on segment revenue (see Cost Allocations below). ParentCo recognized $152 from January 2016 through October 2016~~promoting operational and ~~$24 in 2015 for costs~~commercial excellence and increasing connectivity between the Company’s plants and leadership. Annual operating cost savings of approximately $60 related to the ~~Separation Transaction, of which $68 and $12, respectively, was allocated to Alcoa Corporation. Accordingly,~~new operating model are expected beginning in the ~~2016 third~~second quarter ~~and nine-month period, an allocation~~ of ~~$23 and $54, respectively, was included in Selling, general administrative, and other expenses on Alcoa Corporation’s Statement~~2020.

Results of ~~Consolidated Operations.~~Operations

~~Basis of Presentation~~Selected Financial Data:

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Sales	$	2,567		$	3,390		$	7,997		$	10,059
Net (loss) income attributable to Alcoa Corporation	$	(221	)	$	(6	)	$	(822	)	$	199
Diluted (loss) earnings per share attributable to Alcoa Corporation common shareholders	$	(1.19	)	$	(0.03	)	$	(4.43	)	$	1.06
Third-party shipments of alumina (kmt)		2,381			2,233			7,009			6,894
Third-party shipments of aluminum products (kmt)		708			806			2,141			2,453
Average realized price per metric ton of alumina	$	324		$	493		$	361		$	447
Average realized price per metric ton of primary aluminum	$	2,138		$	2,465		$	2,175		$	2,526

In the 2016 third quarter and nine-month period, the earnings per share included on Alcoa Corporation’s Statement of Consolidated Operations was calculated based on the 182,471,195 shares of Alcoa Corporation common stock distributed on the Separation Date in conjunction with the completion of the Separation Transaction and is considered pro forma in nature. Prior to November 1, 2016, Alcoa Corporation did not have any issued and outstanding publicly-traded common stock.

~~Cost Allocations~~

~~The description and information on cost allocations is applicable for all periods included in Alcoa Corporation’s Consolidated Financial Statements prior to the Separation Date.~~

The Consolidated Financial Statements of Alcoa Corporation include general corporate expenses of ParentCo that were not historically charged to Alcoa Corporation for certain support functions that were provided on a centralized basis, such as expenses related to finance, audit, legal, information technology, human resources, communications, compliance, facilities, employee benefits and compensation, and research and development activities. These general corporate expenses were included in Alcoa Corporation’s Statement of Consolidated Operations within Cost of goods sold, Selling, general administrative and other expenses, and Research and development expenses. These expenses were allocated to Alcoa Corporation on the basis of direct usage when identifiable, with the remainder allocated based on Alcoa Corporation’s segment revenue as a percentage of ParentCo’s total segment revenue for both Alcoa Corporation and Arconic.

~~All external debt not directly~~Overview—Net loss attributable to Alcoa Corporation was excluded from Alcoa Corporation’s Consolidated Balance Sheet. Financing costs related to these debt obligations were allocated to Alcoa Corporation based on the ratio of capital invested in Alcoa Corporation to the total capital invested by ParentCo in both Alcoa Corporation and Arconic, and were included in Alcoa Corporation’s Statement of Consolidated Operations within Interest expense.

~~The following table reflects the allocations described above:~~

   Third
quarter
ended    Nine
months
ended
   September 30, 2016
Cost of goods sold⁽¹⁾
   $ 13    $ 39
Selling, general administrative, and other expenses⁽²⁾
   47    124
Research and development expenses
   —      2
Provision for depreciation, depletion, and amortization
   5    15
Restructuring and other charges⁽³⁾
   1    1
Interest expense
   59    178
Other expenses (income), net
   1    (8 )

⁽¹⁾	~~Allocation principally relates to expenses for ParentCo’s retained pension and other postretirement benefits associated with closed and sold operations.~~

⁽²⁾	~~Allocation includes costs incurred by ParentCo associated with the Separation Transaction (see above).~~

⁽³⁾	~~Allocation primarily relates to layoff programs for ParentCo corporate employees.~~

~~Management believes the assumptions regarding the allocation of ParentCo’s general corporate expenses and financing costs were reasonable.~~

Nevertheless, the Consolidated Financial Statements of Alcoa Corporation may not include all of the actual expenses that would have been incurred and may not reflect Alcoa Corporation’s consolidated results of operations, financial position, and cash flows had it been a standalone company during the periods prior to the Separation Date. Actual costs that would have been incurred if Alcoa Corporation had been a standalone company would depend on multiple factors, including organizational structure, capital structure, and strategic decisions made in various areas, including information technology and infrastructure. Transactions between Alcoa Corporation and ParentCo, including sales to Arconic, were included as related party transactions in Alcoa Corporation’s Consolidated Financial Statements and are considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these transactions is reflected in Alcoa Corporation’s Statement of Consolidated Cash Flows as a financing activity and$221 in the ~~Company’s Consolidated Balance Sheet as Parent Company net investment.~~

~~Results of Operations~~

~~Selected Financial Data~~:

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Sales
   $ 2,964    $ 2,329    $ 8,478    $ 6,781
Net income (loss) attributable to Alcoa Corporation
   113    (10 )    413    (275 )
Diluted earnings per share attributable to Alcoa Corporation common shareholders
   0.60    (0.06 )    2.21    (1.51 )








Shipments of alumina (kmt)
   2,271    2,361    6,914    6,795
Shipments of aluminum products (kmt)
   868    761    2,502    2,295








Alcoa Corporation’s average realized price per metric ton of alumina
   $ 314    $ 248    $ 318    $ 247
Alcoa Corporation’s average realized price per metric ton of primary aluminum
   2,237    1,873    2,175    1,847

~~Net income attributable to Alcoa Corporation was $113 in the 2017~~ third quarter ~~and $413 in the 2017 nine-month period~~of 2019 compared with a Net loss attributable to Alcoa Corporation of ~~$10~~$6 in the ~~2016~~ third quarter ~~and $275~~of 2018. The decrease in results of $215 was principally related to:

•

Lower alumina and aluminum prices;

Partially offset by:

•

Lower Provision for income taxes due primarily to lower income; and,

•

Higher volumes in the Alumina segment.

Net loss attributable to Alcoa Corporation was $822 in the ~~2016~~2019 nine-month period compared with Net income attributable to Alcoa Corporation of $199 in the 2018 nine-month period. The ~~improvement~~decrease in results of ~~$123 in the 2017 third quarter and $688 in the 2017 nine-month period~~$1,021 was principally related to:

•

Lower alumina and aluminum prices; and,

•

Higher Restructuring and other charges, net.

Partially offset by:

•

Lower Provision for income taxes due primarily to lower income;

•

Favorable currency impacts of the Australian dollar, the Brazilian real and euro against the US dollar; and,

•

Higher volumes, primarily in the Alumina segment.

Sales—Sales were $2,567 in the third quarter of 2019 compared with sales of $3,390 in the third quarter of 2018. The decline of $823, or 24%, was principally related to:

•

Lower alumina and aluminum prices;

•

Lower revenue from flat-rolled aluminum products due to the end of the tolling arrangement with Arconic in December 2018; and,

•

The divestiture of two Spanish facilities.

Partially offset by:

•

Higher volumes in the Alumina segment.

Sales were $7,997 in the nine-month period of 2019 compared with sales of $10,059 in the nine-month period of 2018. The decline of $2,062, or 21%, was principally related to:

•

Lower alumina and aluminum prices;

•

The divestiture of two Spanish facilities; and,

•

Lower revenue from flat-rolled aluminum products due to the end of the tolling arrangement with Arconic in December 2018.

Partially offset by:

•

Higher volumes in the Alumina segment.

Cost of goods sold— As a ~~higher~~percentage of Sales, Cost of goods sold was 83% in the third quarter of 2019 and 81% in the 2019 nine-month period compared with 73% in the third quarter of 2018 and 75% in the 2018 nine-month period. The third quarter percentage was negatively impacted by a lower average realized price for ~~each of primary~~both alumina and aluminum and higher aluminum production costs, partially offset by lower raw material costs, particularly petroleum coke and caustic soda. The 2019 nine-month percentage was negatively impacted by a lower average realized price for both alumina and aluminum along with unfavorable energy costs and higher maintenance-related expenses in the ~~absence of allocated interest expense and costs related to the Separation Transaction, and lower restructuring charges.~~Alumina segment. These ~~positive~~negative impacts were partially offset ~~in the 2017 third quarter and somewhat offset in the 2017 nine-month period~~ by ~~increased input and maintenance~~lower raw material costs, the absence of a gain on the sale of wharf property, net unfavorable foreign currency movements, a higher income tax provision, and higher net income attributable to a noncontrolling interest partner in certain of Alcoa Corporation’s operations. A gain on the sale of certain energy operations also contributed to the improvement in the 2017 nine-month period.particularly caustic soda.

Sales improved $635, or 27%, and $1,697, or 25%, in the 2017 third quarter and nine-month period, respectively, compared to the same periods in 2016. The increase in both periods was largely attributable to a higher average realized price for each of primary aluminum and alumina and higher overall volume. In the 2017 third quarter, the improvement in overall volume was primarily due to increased shipments for aluminum products and bauxite, partially offset by decreased shipments for alumina. The improvement in overall volume in the 2017 nine-month period was the result of increased shipments in aluminum products, bauxite, and alumina.

Cost of goods sold (COGS) as a percentage of Sales was 79.7% in the 2017 third quarter and 79.2% in the 2017 nine-month period compared with 84.5% in the 2016 third quarter and 85.2% in the 2016 nine-month period. In both periods, the percentage was positively impacted by a higher average realized price for each of primary aluminum and alumina, somewhat offset by several factors as follows: increased costs for energy (including $8 (third quarter) and $21 (nine months) related to a financial contract – see below), maintenance, and caustic soda; net unfavorable foreign currency movements due to a weaker U.S. dollar; an unfavorable LIFO (last in, first out) inventory adjustment (difference of $15 (third quarter) and $54 (nine months) – see Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net Income (Loss) Attributable to Alcoa Corporation in Segment Information below); costs related to the restart of the Warrick smelter ($17 – see Restructuring and other charges below); and a charge for the settlement of legacy tax matters in Brazil ($9). Higher costs for carbon (coke and pitch) also contributed to the referenced offset in the 2017 third quarter.

Selling, general administrative, and other expenses ~~(SG&A) decreased $22~~— Selling, general administrative, and ~~$53~~other expenses increased by $8, or 14%, and increased by $29, or 15%, in the ~~2017~~ third quarter and nine-month period of 2019, respectively. Both 2019 periods are higher compared with the corresponding periods of 2018 due primarily to higher consulting costs. Additionally, the nine-month period of 2019 includes the unfavorable impact of a bad debt reserve recorded against a Canadian customer receivable due to a 2019 bankruptcy filing.

Provision for depreciation, depletion, and amortization— Provision for depreciation, depletion, and amortization increased $11, or 6%, and decreased $29, or 5%, in the third quarter and nine-month period of 2019, respectively, compared towith the corresponding periods in ~~2016.~~2018. The ~~decline~~increase in ~~both periods was~~the third quarter of 2019 is primarily attributable to the write-offs of costs for capital projects no longer being pursued. The decrease in the nine-month period of 2019 is primarily due to a group of assets, which were acquired in a former ParentCo transaction, reaching the ~~absence~~end of ~~costs($23-third~~ ~~quarter~~their depreciable lives, the disposition of two Spanish facilities and~~$54-nine~~ ~~months) related to~~ favorable foreign currency impacts on the ~~Separation Transaction (see above). SG&A as a percentage of Sales decreased from 4.0% in~~US dollar, primarily against the ~~2016 third quarter to 2.4% in~~Brazilian real and the ~~2017 third quarter, and from 3.9% in the 2016 nine-month period to 2.5% in the 2017 nine-month period.~~Australian dollar.

Restructuring and other charges, innet— In the ~~2017~~ third quarter and nine-month period ~~were $10~~ of ~~income~~2019, Alcoa Corporation recorded Restructuring and ~~$12~~other charges, net, of ~~expense,~~$185 and $668, respectively, which were comprised of the following components: ~~$6 and $24, respectively, for additional contract~~

•

$134 and $242, respectively, for exit costs related to the Avilés and La Coruña Spanish facilities;

•

$37 (both periods) related to employee termination and severance costs related to the new operating model;

•

$38 (nine-month period only) related to the curtailment of certain pension benefits; and,

•

$319 (nine-month period only) related to the divestiture of Alcoa Corporation’s interest in MRC.

In the ~~curtailed Wenatchee (Washington) and São Luís~~

(Brazil) smelters; $4 and $17, respectively, for layoff costs, including the separation of approximately 10 and 120 (110 in the Aluminum segment) employees, respectively, and related pension costs of $3 and $6, respectively; $7 (both periods) for costs related to the relocation of the Company’s headquarters and principal executive office from New York, New York to Pittsburgh, Pennsylvania; a charge of $2 (both periods) for other miscellaneous items; and a reversal of $29 and $38, respectively, associated with several reserves related to prior periods (see below).

On July 11, 2017, Alcoa Corporation announced plans to restart three (161 kmt of capacity) of the five potlines (269 kmt of capacity) at the Warrick (Indiana) smelter, which is expected to be complete in the second quarter of 2018. This smelter was previously permanently closed in March 2016 by ParentCo. The capacity identified for restart will directly supply the existing rolling mill at the Warrick location to improve efficiency of the integrated site and provide an additional source of metal to help meet an anticipated increase in production volumes. As a result of the decision to reopen this smelter, in the 2017 third quarter, Alcoa Corporation reversed $29 in remaining liabilities related to the original closure decision. These liabilities consisted of $20 in asset retirement obligations and $4 in environmental remediation obligations, which were necessary due to the previous decision to demolish the smelter, and $5 in severance and contract termination costs. Additionally, the carrying value of the smelter and related assets was reduced to zero as the smelter ramped down between the permanent closure decision date (end of 2015) and the end of March 2016. Once these assets are placed back into service in conjunction with the restart, their carrying value will remain zero. As such, only newly acquired or constructed assets related to the Warrick smelter will be depreciated.

~~Restructuring and other charges were $17 and $109 in the 2016~~ third quarter and nine-month period ~~respectively.~~

~~In the 2016 third quarter,~~of 2018, Alcoa Corporation recorded Restructuring and other charges, ~~included $17 for layoff~~net, of $177 and $389, respectively, which were comprised of the following components:

•

$174 and $318, respectively, related to settlements and/or curtailments of certain pension and other postretirement employee benefits;

•

$2 and $86, respectively, for energy supply agreement costs related to the curtailed Wenatchee (Washington) smelter; and,

•

$15 net benefit (nine-month period only) for settlement of matters related to the Portovesme (Italy) smelter.

See Note C to ~~cost reduction initiatives, including~~ the ~~separation~~Consolidated Financial Statements in Part I Item 1 of approximately 30 employees in the Aluminum segment and related pension settlement costs; a net credit of $1 for other miscellaneous items; and a net charge of $1 related to corporate actions of ParentCo allocated to Alcoa Corporation.

~~In the 2016 nine-month period, Restructuring and other charges included $84~~this Form 10-Q for additional detail on the above net costs related to decisions made in late 2015 to permanently close and demolish the Warrick smelter (see above) and to curtail the Wenatchee smelter and Point Comfort (Texas) refinery (see below); $28 for layoff costs related to cost reduction initiatives, including the separation of approximately 60 employees in the Aluminum segment and related pension settlement costs; a net charge of $1 related to corporate actions of ParentCo allocated to Alcoa Corporation (see Cost Allocations in Separation Transaction above); and a reversal of $4 associated with several layoff reserves related to prior periods.

In the 2016 nine-month period, the additional net costs related to the closure and curtailment actions included accelerated depreciation of $70 related to the Warrick smelter as it continued to operate through March 2016; a reversal of $24 ($4 in the 2016 third quarter) associated with severance costs initially recorded in late 2015; and $38 ($2 in the 2016 third quarter) in other costs. Additionally in the 2016 nine-month period, remaining inventories, mostly operating supplies and raw materials, were written down to their net realizable value, resulting in a charge of $5, which was recorded in COGS. The other costs of $38 ($2 in the 2016 third quarter) represent $30 ($3 in the 2016 third quarter) for contract terminations, $4 (($3) in the 2016 third quarter) in asset retirement obligations for the rehabilitation of a coal mine related to the Warrick smelter, and $4 ($2 in the 2016 third quarter) in other related costs.

~~Alcoa Corporation does not include Restructuring and other charges in the results of its reportable segments. The impact of allocating such charges to segment results would have been as follows:~~charges.

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017 2016
Bauxite
   $ 1    $ —      $ 1 $ —
Alumina
   4    (1 )    4 1
Aluminum
   (22 )    17    (1 ) 107






Segment total
   (17 )    16    4 108
Corporate
   7    1    8 1






Total restructuring and other charges
   $ (10 )    $ 17    $ 12 $ 109

As of September 30, 2017, approximately 70 of the 120 employees associated with 2017 restructuring programs were separated. The remaining separations for 2017 restructuring programs are expected to be completed by the end of 2017. As of June 30, 2017, the separations associated with 2016 and 2015 restructuring programs were essentially complete.

In the 2017 third quarter and nine-month period, cash payments of $2 and $7, respectively, were made against layoff reserves related to 2017 restructuring programs, less than $1 and $2, respectively, were made against layoff reserves related to 2016 restructuring programs, and $4 and $16, respectively, were made against layoff reserves related to 2015 restructuring programs.

Interest expense declined $41, or 61%, in the 2017 third quarter and $120, or 61%, in the 2017 nine-month period compared to the corresponding periods in 2016. In both periods, the decrease was due to the absence of an allocation~~($59-third~~ ~~quarter and$178-nine~~ ~~months) to Alcoa Corporation of ParentCo’s interest expense related to the Separation Transaction (see above), somewhat offset by interest expense($20-third~~ ~~quarter and$63-nine~~ ~~months) associated with $1,250 of debt issued by Alcoa Corporation in September 2016.~~

Other expenses, net— Other expenses, net was $27 in the ~~2017~~ third quarter of 2019 compared with ~~Other income, net of $106~~$2 in the ~~2016~~ third quarter of 2018, and ~~Other income, net was $67~~$118 in the ~~2017~~2019 nine-month period compared ~~to Other income, net of $90~~with $32 in the ~~2016~~2018 nine-month period.

The unfavorable change of ~~$133~~$25 in the ~~2017~~ third quarter ~~was mostly related to the absence~~ of ~~both a gain on the sale of wharf property near the Intalco (Washington) smelter ($118) and gains on the sales of several parcels of land ($13).~~

~~In the 2017 nine-month period, the change of $23~~2019 was largely attributable to the absence of favorable changes in foreign currency movements, mark-to-market gains on ~~the sales of several assets as follows: wharf property near the Intalco smelter ($118),~~derivative instruments, and an ~~equity interest in a natural gas pipeline in Australia ($27), and several parcels of land ($19); a net~~ unfavorable change in~~mark-to-market~~ ~~derivative instruments ($17); and the absence of a benefit for an arbitration recovery~~ equity earnings, primarily related to a 2010 fire at the Iceland smelter ($14). These items were mostly offset by a gain ($120) on the sale of the Yadkin Hydroelectric Project (Yadkin – see Aluminum in Segment Information below), a smaller equity loss related to Alcoa Corporation’s share of the aluminum complex joint venture in Saudi Arabia ~~($36),~~as a result of lower alumina and ~~net favorable~~aluminum prices. These unfavorable impacts were partially offset by a gain on disposition of surplus property and lower non-service costs related to pension and other postretirement employee benefits.

The unfavorable change of $86 in the comparable nine-month periods was largely attributable to the unfavorable change in foreign currency movements, ~~($15).~~an unfavorable change in equity earnings, primarily related to the aluminum complex joint venture in Saudi Arabia as a result lower alumina and aluminum prices, and the absence of favorable changes in mark-to-market impacts on derivative instruments. The unfavorable impacts were partially offset by lower non-service costs related to pension and other postretirement employee benefits and a gain on disposition of surplus property.

~~The effective tax rate was 41.3% (provision on income) and 90.2% (provision on income)~~

Provision for ~~the 2017 and 2016 third quarters, respectively, and 34.8% (provision on income) and 456.4% (provision on a loss) for the 2017 and 2016 nine-month periods, respectively.~~

income taxes— Alcoa Corporation’s estimated ~~annual effective tax rate~~AETR for ~~2017 was 34.2%~~2019 as of September 30, ~~2017. This rate~~2019 differs from the U.S. federal statutory rate of ~~35%~~21% primarily due to losses in countries with full valuation reserves resulting in no tax benefit, as well as foreign income taxed in ~~lower~~higher rate ~~jurisdictions, mostly offset by domestic losses not tax benefitted.~~jurisdictions. The ~~domestic losses are net of the gain on the sale of Yadkin (see Aluminum in Segment Information below).~~

~~For the 2017 nine-month period, the~~ Provision for income taxes ~~was composed~~for the 2019 nine-month period includes the change in estimated AETR from the second quarter of ~~three components~~2019. The change in estimated AETR is primarily due to fluctuating alumina and aluminum market prices as ~~follows: (i)~~well as restructuring charges incurred in the ~~application~~2019 nine-month period that resulted in changes to the distribution of the ~~estimated annual effective tax rate for 2017~~(Loss) income before income taxes in the Company’s various jurisdictions, inclusive of 34.2% to pretax income of $943, (ii) a net discrete income tax charge of $11, including $10 related to a tax holiday (see below), and (iii) a favorable impact of $6 related to the interim period treatment of operational losses in certain jurisdictions forthose which receive no tax benefit ~~was recognized (expected to reverse by~~from generated losses. In the ~~end~~fourth quarter of ~~2017).~~

~~For the 2017 third quarter,~~2019, the Provision for income taxes is ~~composed~~expected to reflect further impacts of ~~three components as follows: (i) the difference between the application of~~fluctuating alumina and aluminum market prices on the estimated annual 2017 effective tax rate as of September 30, 2017 of 34.2% to pretax income for the 2017 nine-month period of $943 and the application of the estimated annual 2017 effective tax rate as of June 30, 2017 of 31.9% to pretax income for the 2017~~six-month~~ period of $655, (ii) a net discrete income tax charge of $13, including $10 related to a tax holiday (see below), and (iii) a favorable impact of $8 related to the interim period treatment of operational losses in certain jurisdictions for which no tax benefit was recognized (expected to reverse by the end of 2017).AETR.

In the 2017 third quarter, AWAB received approval for a tax holiday related to the operation of the Juruti (Brazil) bauxite mine. This tax holiday is effective as of January 1, 2017 (retroactively) and decreases AWAB’s income tax rate from 34% to 15.25%, which will result in future cash tax savings over a~~10-year~~ period. As a result of this income tax rate change, AWAB’s existing deferred tax assets that are expected to reverse during the holiday period were required to be remeasured at the lower tax rate. This remeasurement resulted in both a decrease to AWAB’s deferred tax assets and a noncash charge to earnings of $10 ($6 after noncontrolling interest).

The rate for the 2016 third quarter differs from the U.S. federal statutory rate of 35% primarily due to U.S. losses and tax credits with no tax benefit realizable by Alcoa Corporation, somewhat offset by foreign income taxed in lower rate jurisdictions and tax benefits onNoncontrolling interest ~~expense eliminated to Parent Company net investment.~~

— Net income attributable to noncontrolling interest was ~~$56~~$74 and $324, in the ~~2017~~ third quarter and ~~$202~~nine-month period of 2019, respectively, compared with $201 and $467, in the ~~2017 nine-month period compared with $20 in the 2016~~ third quarter and ~~$58 in the 2016~~ nine-month ~~period.~~period of 2018, respectively. These amounts are entirely related to Alumina ~~Limited of Australia’s (Alumina Limited)~~Limited’s 40% ownership interest in several affiliated operating entities, which own, or have an interest in, or operate ~~the~~certain bauxite mines and alumina refineries within Alcoa Corporation’s Bauxite and Alumina segments ~~(except for the Poços de Caldas mine and refinery~~ and a portion (55%) of ~~the São Luís refinery, all in Brazil) and~~ the Portland smelter ~~(Aluminum segment)~~(Australia) within the Company’s Aluminum segment. See Note A to the Consolidated Financial Statements in Australia. These individual entities comprise an unincorporated global joint venture between Alcoa Corporation and Alumina Limited known as Alcoa World Alumina and Chemicals (AWAC). Alcoa Corporation owns 60%Part I Item 1 of these individual entities, which are consolidated by the Company for financial reporting purposes and include Alcoa of Australia Limited, Alcoa World Alumina LLC, and Alcoa World Alumina Brasil Ltda. Alumina Limited’s 40% interest in the earnings of such entities is reflected as Noncontrolling interest on Alcoa Corporation’s Statement of Consolidated Operations.this Form 10-Q.

In the ~~2017~~ third quarter and ~~nine-month period,~~nine-months ended 2019, these combined entities, particularly the Alumina segment entities, generated ~~higher~~lower net income compared towith the same periods in ~~2016.~~2018. The ~~favorable~~unfavorable change in earnings ~~in both periods~~ was ~~mainly~~mostly driven by ~~an improvement in operating results, due mostly to a higher average realized price for~~lower alumina ~~somewhat offset by higher costs for caustic soda and maintenance and net unfavorable foreign currency movements~~prices (see ~~Bauxite and~~ Alumina inunder Segment Information below). In the 2017 nine-month period, the improvement in operating results was slightly offset by the absence of a $27 ($8 was noncontrolling interest’s share) gain on the sale of an equity interest in a natural gas pipeline in Australia and $34 ($10 was noncontrolling interest’s share) in combined higher energy costs and~~mark-to-market~~ ~~losses (see below).~~

Alcoa Corporation has purchased electricity in the spot market for one of its smelters since the Company’s contract with a local energy provider expired in October 2016, as a new energy contract was not able to be negotiated. In order to manage the Company’s exposure against the variable energy rates that occur in the spot market, Alcoa Corporation had previously entered into a financial contract with a counterparty to effectively convert the Company’s variable power price to a fixed power price. At the beginning of 2017, Alcoa Corporation held a favorable position in the financial contract, which was scheduled to early terminate in August 2017, as a result of a decision made by management in August 2016.

In January 2017, Alcoa Corporation began the process of restarting capacity at this smelter, which was halted due to an unexpected power outage that occurred in December 2016. As a result, Alcoa Corporation and the same counterparty to the existing financial contract entered into a new financial contract to effectively convert the Company’s variable power price to a fixed power price from August 2017 through July 2021. Additionally, the effective termination of the existing financial contract was moved up to July 31, 2017. In order to obtain the most favorable terms under the new financial contract that could be negotiated, Alcoa Corporation conceded a portion of the existing financial contract that was favorable to the Company for the April through July 2017 period.

As a result of this concession, Alcoa Corporation sought an additional financial contract to cover the exposure to variable power rates for the April through July 2017 period. In March 2017, Alcoa Corporation secured such a contract with a different counterparty; however, the price of power in the spot market rose significantly between January and March 2017. Consequently, the fixed power price secured by this additional financial contract was significantly higher than the fixed power price previously secured by the existing financial contract described above. Accordingly, Alcoa Corporation realized higher energy costs (included in COGS) of $8 and $21 in the 2017 third quarter and nine-month period, respectively, and~~mark-to-market~~ ~~losses (included in Other income, net) related to the financial contracts of $13 in the 2017 nine-month period.~~

Segment Information

~~Effective in the first quarter of 2017, management elected to change the profit and loss measure of Alcoa Corporation’s reportable segments fromAfter-tax~~ operating income (ATOI) to Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) for internal reporting and performance measurement purposes. This change was made to enhance the transparency and visibility of the underlying operating performance of each segment. Alcoa Corporation calculates Adjusted EBITDA as Total sales (third-party and intersegment) minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; and Research and development expenses. Previously, Alcoa Corporation calculated ATOI as Adjusted EBITDA minus (plus) the following items: Provision for depreciation, depletion, and amortization; Equity loss (income); Loss (gain) on certain asset sales; and Income taxes. Alcoa Corporation’s Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Also effective in the first quarter of 2017, management initiated a realignment of the Company’s internal business and organizational structure. This realignment consisted of combining Alcoa Corporation’s aluminum smelting, casting, and rolling businesses, along with the majority of the energy business, into a new Aluminum business unit, as well as moving the financial results of previously closed operations, such as the Warrick smelter and Suriname refinery, into Corporate. The realignment was executed to align strategic, operational, and commercial activities, as well as to take advantage of synergies and reduce costs. The new Aluminum business unit is managed as a single operating segment. Prior to this change, each of these businesses were managed as individual operating segments and comprised the Aluminum, Cast Products, Energy, and Rolled Products segments. The existing Bauxite and Alumina segments and the new Aluminum segment represent Alcoa Corporation’s operating and reportable segments. The chief operating decision maker function regularly reviews the financial information, including Sales and Adjusted EBITDA, of these three operating segments to assess performance and allocate resources.

~~Segment information for all prior periods presented was revised to reflect the new segment structure, as well as the new measure of profit and loss.~~

Bauxite

									Third quarter ended September 30,				Nine months ended September 30,
	Third quarter ended September 30,				Nine months ended September 30,				2019		2018		2019		2018
	2017		2016		2017		2016
Production^(1),(2) (mdmt)		11.6		11.4		33.7		33.2
Production⁽¹⁾ (mdmt)										12.1		11.5		35.3		34.0
Third-party shipments (mdmt)		2.1		1.8		5.1		4.7		2.0		1.4		4.7		4.1

Alcoa Corporation’s average cost per dry metric ton of bauxite⁽³⁾	$	19	$	18	$	18	$	16

Intersegment shipments (mdmt)										10.6		10.1		31.1		30.5
Total shipments (mdmt)										12.6		11.5		35.8		34.6
Third-party sales	$	104	$	93	$	254	$	224	$	100	$	67	$	232	$	191
Intersegment sales		221		192		648		549		251		224		733		699

Total sales	$	325	$	285	$	902	$	773	$	351	$	291	$	965	$	890

Adjusted EBITDA	$	113	$	97	$	321	$	273
Segment Adjusted EBITDA									$	134	$	106	$	372	$	316
Operating costs⁽²⁾									$	242	$	206	$	657	$	635
Average cost per dry metric ton of bauxite									$	19	$	18	$	18	$	18

⁽¹⁾	The production amounts do not include additional bauxite (approximately 3 ~~million metric tons~~mdmt per annum) that ~~Alcoa Corporation~~AWAC is entitled to receive (i.e. an amount in excess of its equity ownership interest) from certain other partners at the mine in Guinea.

⁽²⁾

In the second quarter of 2017, Alcoa Corporation revised the respective production amount for the 2016 first, second, and third quarters to reflect refinements to individual mine data. As a result, the production reflected in this table for the 2016 third quarter was revised from prior period reports. Total bauxite production for annual 2016 remains unchanged at 45.0 mdmt.

⁽³⁾	Includes all production-related costs, including conversion costs, such as labor, materials, and utilities; depreciation, depletion, and amortization; and plant administrative expenses.

In October 2019, the Company and representatives of the Australian Workers’ Union (AWU) reached agreement on the terms of a proposed new AWU Enterprise Agreement (EA) for employees at Alcoa’s Western Australian Operations. The proposed EA will be subject to an employee vote in November 2019.

Bauxite production increased 2%5% in ~~both~~ the ~~2017~~ third quarter ~~and nine-month period~~of 2019 compared with the ~~corresponding periods in 2016. In both periods,~~third quarter of 2018, a quarterly production record for the ~~improvement was primarily~~Bauxite segment. Compared with the ~~result~~third quarter of ~~a planned increase in~~2018, the third quarter of 2019 had higher production at the ~~Juruti (Brazil) mine~~Australian mines and ~~higher~~the Boké (Guinea) mine. Bauxite production increased 4% for the nine-month period of 2019 compared with the nine-month period in 2018, primarily due to the increase in production at the Huntly (Australia) mine ~~somewhat offset by lower~~due to planned production atincreases. For both periods, the ~~Boké (Guinea) mine and the Trombetas (Brazil) mine. The Boké mine has experienced disruption to its normal operations as a result of separate force majeure events (civil unrest)~~increased stability in the ~~2017 second and third quarters. The Trombetas mine~~Alumina segment has ~~experienced disruption~~contributed to ~~its normal operations due to separate weather events that have impacted~~ the ~~tailing ponds (bauxite waste storage areas) and the washing plant~~increase in ~~the 2017 first (heavy rain) and third (drought conditions) quarters, respectively.~~bauxite production from increased demand.

Third-party sales for the Bauxite segment ~~improved 12%~~increased 49% and 21% in the ~~2017~~ third quarter and ~~13% in the 2017~~ nine-month period of 2019, respectively, compared towith the ~~same~~corresponding periods in ~~2016.~~2018. The increase in both periods was primarily due to the increase in volume driven by higher ~~volume as this segment continues~~production in addition to ~~expand its third-party bauxite portfolio.~~a higher realized price, primarily due to freight.

Intersegment sales increased ~~15%~~12% and ~~18%~~5% in the ~~2017~~ third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in ~~2016 virtually all due to~~2018. The increase in both periods of 2019 was primarily driven by a higher average realized ~~price.~~price in addition to higher volumes driven by higher production.

Segment Adjusted EBITDA ~~for this segment~~ increased ~~$16~~$28 and $56 in ~~the 2017~~ third quarter and ~~$48~~nine-month period of 2019, respectively, compared with the corresponding periods in 2018. The improvements in the ~~2017~~third quarter of 2019 compared with the third quarter of 2018 is primarily the result of higher average realized price on intercompany sales and higher sales volume. The increase in the nine-month period of 2019 compared towith the ~~same periods in 2016.~~

Innine-month period of 2018 is mainly the ~~2017 third quarter, the improvement was mostly driven by the previously mentioned~~result of a higher average realized price for intersegment sales ~~somewhat offset by higher costs for maintenance, transportation (exports from Western Australia to third-party customers), and royalties (higher third-party sales).~~

The increase in the 2017 nine-month period was principally the result of the previously mentioned higher average realized price for intersegment sales and increased third-party shipments. These positive impacts were partially offset by unfavorable impacts from the previously mentioned disruptions in Guinea and Brazil; higher costs for maintenance (including planned overhauls in Western Australia), transportation (exports from Western Australia to third-party customers), and royalties (higher third-party sales); and net unfavorablecombined with favorable foreign currency movements due to a ~~weaker~~stronger U.S. dollar against the Australian dollar and Brazilian real.

For the ~~2017~~ fourth quarter ~~(comparison~~of 2019 in comparison with the ~~2016~~ fourth ~~quarter),~~quarter of 2018, higher production at the ~~Huntly and Juruti mines and increased total shipments are anticipated.~~Boké (Guinea) mine is projected, in addition to a higher average realized price for intersegment sales, partially offset by higher planned maintenance costs.

Alumina


	Third quarter ended September 30,				Nine months ended September 30,				Third quarter ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Production (kmt)		3,305		3,310		9,765		9,956		3,380		3,160		9,929		9,560
Third-party shipments (kmt)		2,271		2,361		6,914		6,795		2,381		2,233		7,009		6,894

Alcoa Corporation’s average realized third-party price per metric ton of alumina	$	314	$	248	$	318	$	247
Alcoa Corporation’s average cost per metric ton of alumina*	$	261	$	230	$	253	$	230

Intersegment shipments (kmt)										1,049		1,083		3,091		3,211
Total shipments⁽¹⁾ (kmt)										3,430		3,316		10,100		10,105
Third-party sales	$	713	$	585	$	2,196	$	1,682	$	771	$	1,101	$	2,532	$	3,083
Intersegment sales		398		317		1,143		930		369		544		1,231		1,534

Total sales	$	1,111	$	902	$	3,339	$	2,612	$	1,140	$	1,645	$	3,763	$	4,617

Adjusted EBITDA	$	203	$	78	$	727	$	207
Segment Adjusted EBITDA									$	223	$	660	$	964	$	1,690
Average realized third-party price per metric ton of alumina									$	324	$	493	$	361	$	447
Operating costs⁽²⁾									$	902	$	969	$	2,750	$	2,896
Average cost per metric ton of alumina									$	263	$	292	$	272	$	287

⁽¹⁾

Total shipments include metric tons that were not produced by the Alumina segment. Such alumina was purchased by this segment to satisfy certain customer commitments. The Alumina segment bears the risk of loss of the purchased alumina until control of the product has been transferred to this segment’s customer.

⁽²⁾	Includes all production-related costs, including raw ~~materials consumed;~~materials; conversion costs, such as labor, materials, and utilities; depreciation and amortization; and plant administrative expenses.

In October 2019, the Company and representatives of the AWU reached agreement on the terms of a proposed new AWU Enterprise Agreement for employees at Alcoa’s Western Australian Operations. The proposed EA will be subject to an employee vote in November 2019.

At September 30, ~~2017, Alcoa Corporation~~2019, the Alumina segment had ~~2,305~~2,519 kmt of ~~idle~~curtailed refining capacity on a base capacity of 15,064 kmt. Both ~~idle~~curtailed capacity and base capacity were unchanged compared ~~to June~~with September 30, ~~2017.~~2018.

Alumina production ~~was flat~~increased by 7% in the ~~2017~~third quarter of 2019 compared with the third quarter of 2018, a quarterly production record for the Alumina segment, and increased 4% in the 2019 nine-month period compared with the 2018 nine-month period. Both increases were principally due to stabilization of operations across the refining system.

Third-party sales for the Alumina segment decreased 30% in the third quarter of 2019 and 18% in the 2019 nine-month period compared with the corresponding periods in 2018. The decrease in both periods was primarily related to a decline in average realized price which was principally driven by a lower average alumina index price (on 30-day lag). In third quarter of 2019, the decline in average realized price was partially offset by a 7% increase in volume.

Intersegment sales declined 32% and 20% in the third quarter and ~~decreased 2% in the 2017~~ nine-month period of 2019, respectively, compared with the corresponding periods in ~~2016. In the 2017 nine-month period, the decline was largely attributable to the absence of production from the remaining operating capacity at the Point Comfort (Texas) refinery (2,305kmt-per-year),~~ ~~which was fully curtailed by the end of June 2016 (670 kmt was curtailed at the end of 2015).~~

Third-party sales for the Alumina segment improved 22% in the 2017 third quarter and 31% in the 2017 nine-month period compared to the same periods in 2016. The increase in both periods was mostly related2018, primarily due to a ~~27% (third quarter) and 29% (nine months) rise in average realized price. This positive impact in the 2017 third quarter was slightly offset by a 4% decrease in volume. In both periods, the change in~~lower average realized price and decreased demand from the Aluminum segment. The decreased demand from the Aluminum segment was ~~principally driven~~partially caused by the smelter curtailments and subsequent divestiture of the Avilés (Spain) and La Coruña ~~30% (third quarter)~~(Spain) facilities and ~~37% (nine months) higher average alumina index price (on30-day~~ ~~lag)~~the curtailment at the Bécancour (Canada) smelter (see Aluminum below). In

Segment Adjusted EBITDA decreased $437 and $726 in the ~~2017~~ third quarter and nine-month period ~~85% and 86%, respectively,~~ of ~~smelter-grade third-party shipments were based on the alumina index price, compared with 87% and 86% in the 2016 third quarter and nine-month period, respectively.~~

~~Intersegment sales increased 26% and 23% in the 2017 third quarter and nine-month period,~~2019, respectively, compared with the corresponding periods in 2016 primarily due to a higher average realized price. This positive impact in the 2017 nine-month period was somewhat offset by lower demand from the Aluminum segment, including as a result of a power outage at a smelter in Australia (see Aluminum below).

~~Adjusted EBITDA for this segment climbed $125 in the 2017 third quarter and $520 in the 2017 nine-month period compared to the~~ same periods in ~~2016.~~2018. The ~~improvement~~decline in ~~both periods~~the third quarter period of 2019 was ~~mainly related~~largely attributed to the ~~previously mentioned higher~~decline in average realized price ~~somewhat~~of alumina and higher bauxite costs. These impacts were partially offset by ~~higher~~increased volume, lower unit costs for ~~bauxite and~~ caustic soda and net ~~unfavorable~~favorable foreign currency movements due to a ~~weaker~~stronger U.S. dollar ~~especially~~(particularly against the Australian dollar). The decline in the nine-month period of 2019 was primarily due to the decline in average realized price, increased maintenance expenses to support the stabilization of operations across the refining system, primarily in Australia, and higher bauxite costs. These unfavorable impacts were partially offset by net favorable foreign currency movements due to a stronger U.S. dollar, particularly against the Australian dollar, and lower unit costs for caustic soda.

In the fourth quarter of 2019 in comparison with the fourth quarter of 2018, an increase in ~~maintenance expense (including outages in Western Australia).~~

~~In the 2017 fourth quarter (comparison~~production is expected with ~~the 2016 fourth quarter), higher~~lower unit costs for ~~both~~ caustic soda and an improvement in raw material consumption and maintenance activities. Higher bauxite costs are ~~expected.~~expected to slightly reduce the impact of these favorable changes.

Aluminum

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Primary aluminum production (kmt)
   596    586    1,730    1,781
Third-party aluminum shipments (kmt)
   868    761    2,502    2,295
Alcoa Corporation’s average realized third-party price per metric ton of primary aluminum*
   $ 2,237    $ 1,873    $ 2,175    $ 1,847
Alcoa Corporation’s average cost per metric ton of primary aluminum**
   $ 1,987    $ 1,759    $ 1,964    $ 1,748
Third-party sales
   $ 2,090    $ 1,600    $ 5,884    $ 4,749
Intersegment sales
   9    2    16    38








Total sales
   $ 2,099    $ 1,602    $ 5,900    $ 4,787








Adjusted EBITDA
   $ 303    $ 183    $ 730    $ 528

	Third quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019			2018
Third-party aluminum shipments⁽¹⁾ (kmt)		708		806		2,141			2,453
Third-party sales	$	1,677	$	2,198	$	5,169		$	6,722
Intersegment sales		4		6		11			14
Total sales	$	1,681	$	2,204	$	5,180		$	6,736
Segment Adjusted EBITDA⁽²⁾	$	43	$	84	$	(50	)	$	501

Primary aluminum information⁽³⁾
Production (kmt)		530		567		1,600			1,686
Third-party shipments⁽⁴⁾ (kmt)		627		673		1,893			2,049
Third-party sales	$	1,341	$	1,658	$	4,117		$	5,176
Average realized third-party price per metric ton⁽⁵⁾	$	2,138	$	2,465	$	2,175		$	2,526
Total shipments⁽⁴⁾ (kmt)		651		696		1,946			2,137
Operating costs⁽⁶⁾	$	1,425	$	1,754	$	4,505		$	5,169
Average cost per metric ton⁽²⁾	$	2,189	$	2,520	$	2,315		$	2,419

⁽¹⁾

Third-party aluminum shipments are composed of both primary aluminum and flat-rolled aluminum.

⁽²⁾

As of January 1, 2019, the Company changed its accounting method for valuing certain inventories from LIFO to average cost. The effects of the change in accounting principle have been retrospectively applied to all prior periods presented. As a result, Segment Adjusted EBITDA for Aluminum increased $11 and $44 for the third quarter and nine-month period of 2018, respectively, with the Average cost per metric ton of primary aluminum decreasing by $20 and $22 for the third quarter and nine-month period of 2018, respectively.

⁽³⁾	The primary aluminum information presented does not include flat-rolled aluminum.

⁽⁴⁾

Third-party and Total primary aluminum shipments include metric tons that were not produced by the Aluminum segment. Such aluminum was purchased by this segment to satisfy certain customer commitments. The Aluminum segment bears the risk of loss of the purchased aluminum until control of the product has been transferred to this segment’s customers.

⁽⁵⁾

Average realized price per metric ton of primary aluminum includes three elements: a) the underlying base metal component, based on quoted prices from the LME; b) the regional premium, which represents the incremental price over the base LME component that is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for metal sold

in the United States); and c) the product premium, which represents the incremental price for ~~receiving~~producing physical metal ininto a particular shape (e.g., billet, rod, slab, ~~rod,~~ etc.) or adding an alloy.

⁽⁶⁾

Includes all production-related costs, including raw ~~materials consumed;~~materials; conversion costs, such as labor, materials, and utilities; depreciation and amortization; and plant administrative expenses.

The following table provides annual consolidated base and idle capacity (each in kmt) for each smelter owned by Alcoa Corporation:

		September 30, 2019				September 30, 2018
Facility	Country	Base Capacity		Idle Capacity		Base Capacity		Idle Capacity		Base Change			Idle Change
Portland⁽¹⁾	Australia		197		30		197		30		—			—
São Luís (Alumar)⁽¹⁾	Brazil		268		268		268		268		—			—
Baie Comeau	Canada		280		—		280		—		—			—
Bécancour⁽¹⁾	Canada		310		259		310		207		—			52
Deschambault	Canada		260		—		260		—		—			—
Fjarðaál	Iceland		344		—		344		—		—			—
Lista	Norway		94		—		94		—		—			—
Mosjøen	Norway		188		—		188		—		—			—
San Ciprián	Spain		228		—		228		—		—			—
Avilés	Spain		—		—		93		32		(93	)		(32	)
La Coruña	Spain		—		—		87		24		(87	)		(24	)
Intalco	U.S.		279		49		279		49		—			—
Massena West	U.S.		130		—		130		—		—			—
Warrick	U.S.		269		108		269		161		—			(53	)
Wenatchee	U.S.		146		146		146		146		—			—
			2,993		860		3,173		917		(180	)		(57	)

⁽¹⁾	These figures represent Alcoa Corporation’s share of the facility capacity based on its ownership interest in the respective smelter.

Idle capacity at the Bécancour smelter increased by 52 kmt from the third quarter 2018 to the third quarter 2019 as a result of an additional curtailment in December 2018. This half potline curtailment was deemed necessary to ensure continued safety and maintenance due to retirements and departures among the salaried workforce from January 2018 to December 2018. Due to the lockout of bargained hourly employees, which commenced in January 2018, the salaried workforce at Bécancour had been operating the remaining potline. In ~~February 2017, Alcoa Corporation’s wholly-owned subsidiary, Alcoa Power Generating Inc., completed~~July 2019, the ~~sale of~~United Steelworkers approved a~~215-megawatt~~ hydroelectric project, Yadkin, to Cube Hydro Carolinas, LLC (see Other expenses (income), net in Results of Operations above). Yadkin encompasses four hydroelectric power developments (reservoirs, dams, new six-year labor contract and ~~powerhouses), known as High Rock, Tuckertown, Narrows, and Falls, situated along a38-mile~~ ~~stretch~~the plant began the restart process on July 26, 2019. A recall of the ~~Yadkin River through the central part of North Carolina. Prior to the divestiture, the power generated by Yadkin was primarily sold into the open market. Yadkin generated sales of $29~~approximately 900 unionized employees who had been on lockout is being completed in ~~2016, and had approximately 30 employees as of December 31, 2016.~~

~~On July 11, 2017, Alcoa Corporation announced plans to restart three (161 kmt of capacity)~~accordance with a specific back-to-work protocol, with those on lockout generally being recalled within eight months of the ~~five potlines (269 kmt of capacity) at the Warrick (Indiana) smelter, which~~restart process commencement. The restart process is expected to be ~~complete in~~completed within the second quarter of ~~2018. This~~2020.

Base and idle capacity at the Avilés and La Coruña facilities decreased from the third quarter of 2018 to the third quarter of 2019 as a result of the curtailment (February 2019) and subsequent divestiture (July 2019) of these smelters. In addition to the smelters at these locations, the casthouse at each facility and the paste plant at La Coruña were also divested. See Note C to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional information related to the curtailment and divestiture of these facilities.

Idle capacity at the Warrick smelter ~~was~~decreased by 53 kmt from the third quarter of 2018 to the third quarter of 2019. The Company completed the planned restart of the third potline in December 2018, finalizing the previously ~~permanently closed in March 2016.~~announced restart plan for the Warrick smelter. The smelter capacity ~~identified for restart will~~restarted directly ~~supply~~supplies the existing rolling mill at the ~~Warrick~~ location, ~~to improve~~improving efficiency of the integrated site and ~~provide~~providing an additional source of metal to help meet ~~an anticipated increase in~~ production ~~volumes. See COGS and Restructuring and other charges in Results of Operations above.~~volume needs.

In September 30, 2017, Alcoa Corporation had 1,047 kmt of idle capacity on a base capacity of 3,402 kmt. In the 2017 third quarter, both idle capacity and base capacity increased by 269 kmt compared to June 30, 2017 due to the previously mentioned decision to reopen the Warrick smelter. Once the partial restart2019, members of the United Steelworkers (USW) ratified a new labor agreement, covering approximately 1,700 active employees, primarily from the Aluminum segment. The new agreement, which is now in effect, covers employees represented by the USW at Warrick ~~smelter occurs, idle capacity will decrease by 161 kmt.~~Operations in Indiana, Massena Operations in New York, Wenatchee Works in Washington, Gum Springs in Arkansas, and Point Comfort in Texas.

Primary aluminum production ~~increased 2%~~decreased 7% and 5% in the ~~2017~~ third quarter and ~~decreased 3% in the 2017~~ nine-month period of 2019, respectively, compared with the corresponding periods in ~~2016.~~

~~In the 2017 third quarter, the improvement was primarily due to higher production at the Iceland smelter~~2018, principally due to the ~~absence of process instability that prevented full operation of the potlines in the 2016 third quarter.~~capacity changes discussed above.

The decline in the 2017 nine-month period was principally the result of lower production at the Portland (Australia) smelter due to an unexpected power outage that occurred in December 2016 as a result of a fault in the Victorian transmission network. This event resulted in management halting production of one of the potlines at that time; ramp up to full production was completed in the 2017 third quarter.

Third-party sales for the Aluminum segment ~~improved 31%~~decreased 24% and 23% in the ~~2017~~ third quarter and ~~24% in the 2017~~ nine-month period of 2019, respectively, compared towith the ~~same~~corresponding periods in ~~2016. In both periods, the increase~~2018. The decrease was ~~mainly~~primarily attributable to a ~~19% (third quarter) and 18% (nine months) rise~~reduction in ~~average realized~~metal price ~~of primary aluminum~~

and a ~~14% (third quarter) and 9% (nine months) improvement~~decrease in overall aluminum volume. ~~Higher energy sales in Brazil also contributed to the improvement in the 2017 third quarter.~~

The change in average realized price of primary aluminum was ~~largely~~mainly driven by a ~~22% (third quarter and nine months) higher~~14% lower average LME price (on15-day lag). for both the third quarter and nine-month period combined with a decrease in regional premiums in the nine-month period ended September 30, 2019.

The ~~higher~~lower overall ~~aluminum~~ volume was ~~related to this segment’s rolling operations,~~ primarily ~~due to~~the result of a decline in flat-rolled aluminum shipments caused by the end of the tolling arrangement with Arconic ~~(began on November 1, 2016). In~~in December 2018, the ~~2017~~curtailments and subsequent divestiture of the Avilés and La Coruña facilities, and the half potline curtailment at the Bécancour (Canada) smelter.

Segment Adjusted EBITDA decreased $41 and $551 in the third quarter and nine-month period ~~the increased shipments in the rolling operations were slightly offset by lower demand for primary aluminum, including from Arconic.~~

~~Intersegment sales declined 58% in the 2017 nine-month period~~of 2019, respectively, compared with the corresponding ~~period~~periods in ~~2016 due~~2018. The decline in the third quarter of 2019 was mainly related to lower metal prices in addition to lower energy sales prices in Brazil which were partially offset by the absence of Section 232 tariffs on aluminum imported from Canada to the United States in the third quarter of 2019 and lower costs for alumina and carbon materials. The decline in the 2019 nine-month period was mainly related to lower metal prices and regional premiums, lower energy sales to prices in Brazil, higher energy production costs and the ~~Warrick smelter (included in Corporate – see description~~establishment of ~~segment realignment above), which was permanently closed at the end of March 2016 (see above).~~

~~Adjusted EBITDA for this segment rose $120~~a bad debt reserve against a Canadian customer receivable in the ~~2017 third~~first quarter ~~and $202 in the 2017~~of 2019. The 2019 nine-month period ~~compared to the same periods in 2016. The improvement in both periods~~decline was ~~mostly related to the previously mentioned higher average realized price of primary aluminum, somewhat~~partially offset by ~~higher~~lower costs for ~~both~~ alumina and ~~energy. Additionally, in the 2017 third quarter, higher energy sales in Brazil contributed to the referenced improvement and both higher costs for carbon (coke and pitch) and net unfavorable~~favorable foreign currency movements ~~especially~~due to a stronger U.S. dollar mainly against the Australian dollar ~~contributed to the referenced offset.~~and Brazilian real.

In the ~~2017~~ fourth quarter ~~(comparison~~of 2019 compared with the ~~2016~~ fourth ~~quarter), higher~~quarter of 2018, lower production costs ~~for both~~are anticipated, mainly driven by lower alumina and carbon ~~materials are~~prices, partially offset by lower metal prices. Additionally, a positive impact resulting from the elimination of Section 232 tariffs on Canadian imports is expected.

Reconciliation of Certain Segment Information

Reconciliation of Total Segment Third-Party Sales to Consolidated Sales

	Third quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Bauxite	$	100	$	67	$	232	$	191
Alumina		771		1,101		2,532		3,083
Aluminum:
Primary aluminum		1,341		1,658		4,117		5,176
Other⁽¹⁾		336		540		1,052		1,546
Total segment third-party sales		2,548		3,366		7,933		9,996
Other		19		24		64		63
Consolidated sales	$	2,567	$	3,390	$	7,997	$	10,059

⁽¹⁾	Other includes third-party sales of flat-rolled aluminum and energy, as well as realized gains and losses related to embedded derivative instruments designated as cash flow hedges of forward sales of aluminum.

Reconciliation of Total Segment Operating Costs to Consolidated Cost of Goods Sold

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Bauxite	$	242		$	206		$	657		$	635
Alumina		902			969			2,750			2,896
Primary aluminum		1,425			1,754			4,505			5,169
Other⁽¹⁾		333			485			1,060			1,438
Total segment operating costs		2,902			3,414			8,972			10,138
Eliminations⁽²⁾		(649	)		(795	)		(2,035	)		(2,192	)
Provision for depreciation, depletion, amortization⁽³⁾		(177	)		(165	)		(507	)		(536	)
Other⁽⁴⁾		44			31			59			130
Consolidated cost of goods sold	$	2,120		$	2,485		$	6,489		$	7,540

⁽¹⁾	Other largely relates to the Aluminum segment’s flat-rolled aluminum product division.

⁽²⁾	This line item represents the elimination of cost of goods sold related to intersegment sales between Bauxite and Alumina and between Alumina and Aluminum.

⁽³⁾

Depreciation, depletion, and amortization is included in the operating costs used to calculate average cost for each of the bauxite, alumina, and primary aluminum product divisions (see Bauxite, Alumina, and Aluminum above). However, for financial reporting purposes, depreciation, depletion, and amortization is presented as a separate line item on Alcoa Corporation’s Statement of Consolidated Operations.

⁽⁴⁾

Other includes costs related to Transformation and certain other items that impact Cost of goods sold on Alcoa Corporation’s Statement of Consolidated Operations that are not included in the operating costs of segments (see footnotes 2 and 5 in the Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net (Loss) Income Attributable to Alcoa Corporation below).

Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net (Loss) Income ~~(Loss)~~ Attributable to Alcoa Corporation

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total segment Adjusted EBITDA⁽¹⁾	$	400		$	850		$	1,286		$	2,507
Unallocated amounts:
Transformation⁽²⁾		(6	)		1			(1	)		(2	)
Intersegment eliminations^(1),(3)		25			21			110			(55	)
Corporate expenses⁽⁴⁾		(27	)		(22	)		(79	)		(75	)
Provision for depreciation, depletion, and amortization		(184	)		(173	)		(530	)		(559	)
Restructuring and other charges, net		(185	)		(177	)		(668	)		(389	)
Interest expense		(30	)		(33	)		(90	)		(91	)
Other expenses, net		(27	)		(2	)		(118	)		(32	)
Other⁽⁵⁾		(18	)		(10	)		(47	)		(69	)
Consolidated (loss) income before income taxes		(52	)		455			(137	)		1,235
Provision for income taxes		(95	)		(260	)		(361	)		(569	)
Net income attributable to noncontrolling interest		(74	)		(201	)		(324	)		(467	)
Consolidated net (loss) income attributable to Alcoa Corporation	$	(221	)	$	(6	)	$	(822	)	$	199

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017 2016
Total segment Adjusted EBITDA
   $ 619    $ 358    $ 1,778 $ 1,008
Unallocated amounts:

Impact of LIFO
   (14 )    1    (36 ) 18
Metal price lag⁽¹⁾
   5    1    22 5
Corporate expense⁽²⁾
   (34 )    (47 )    (104 ) (133 )
Provision for depreciation, depletion, and amortization
   (194 )    (181 )    (563 ) (536 )
Restructuring and other charges
   10    (17 )    (12 ) (109 )
Interest expense
   (26 )    (67 )    (77 ) (197 )
Other (expenses) income, net
   (27 )    106    67 90
Other⁽³⁾
   (51 )    (52 )    (132 ) (185 )






Consolidated income (loss) before income taxes
   288    102    943 (39 )
Provision for income taxes
   (119 )    (92 )    (328 ) (178 )
Net income attributable to noncontrolling interest
   (56 )    (20 )    (202 ) (58 )






Consolidated net income (loss) attributable to Alcoa Corporation
   $ 113    $ (10 )    $ 413 $ (275 )

⁽¹⁾

As of January 1, 2019, the Company changed its accounting method for valuing certain inventories from LIFO to average cost. The effects of the change in accounting principle have been retrospectively applied to all prior periods presented. As a result, in the third quarter and nine-month period of 2018, Total Segment Adjusted EBITDA increased $11 and increased $44, respectively, and Intersegment eliminations increased $38 and decreased $37, respectively.

⁽²⁾	Transformation includes, among other items, the Adjusted EBITDA of previously closed operations.

⁽³⁾

Concurrent with the change in inventory accounting method as of January 1, 2019, management elected to change the presentation of certain line items in the reconciliation of total Segment Adjusted EBITDA to Consolidated net (loss) income attributable to Alcoa Corporation. Corporate inventory accounting previously included the impact of LIFO, metal price lag and intersegment eliminations. The impact of LIFO has been eliminated with the change in inventory method. Metal price lag ~~describes~~attributable to the ~~timing difference created when~~Company’s rolled operations business is now netted within the ~~average price~~Aluminum segment to simplify presentation of ~~metal sold differs from the average cost of the metal when purchased by Alcoa Corporation’s rolled aluminum operations. In general, when the price of metal increases, metal price lag is favorable,~~an impact that nets to zero in consolidation. Only Intersegment eliminations remain as a reconciling line item and ~~when the price of metal decreases, metal price lag is unfavorable.~~are labeled as such.

⁽²⁾⁽⁴⁾

⁽³⁾⁽⁵⁾

Other includes ~~among~~certain items that impact Cost of goods sold and Selling, general administrative, and other ~~items,~~expenses on Alcoa Corporation’s Statement of Consolidated Operations that are not included in the Adjusted EBITDA of ~~previously closed operations as applicable, pension and other postretirement benefit expenses associated with closed and sold operations, and intersegment profit elimination.~~the reportable segments.

The changes in the Impact of LIFO, Metal price lag, Corporate expense, and Other reconciling items (see Results of Operations above for significant changes in the remaining reconciling items) for the 2017 third quarter and nine-month period compared with the corresponding periods in 2016 (unless otherwise noted) consisted of:

a change in the Impact of LIFO, mostly due to an increase in the price of alumina at September 30, 2017 indexed to December 31, 2016 compared to a decrease in the price of alumina at September 30, 2016 indexed to December 31, 2015;

a change in Metal price lag, the result of a higher increase in the price of aluminum at September 30, 2017 indexed to December 31, 2016 compared to the price of aluminum at September 30, 2016 indexed to December 31, 2015 (the increase in the price of aluminum in both periods was mostly driven by higher base metal prices (LME));

~~a decline in Corporate expense, largely attributable to the absence of expenses related to the Separation Transaction($23-third~~ ~~quarter and$54-nine~~ ~~months); and~~

a change in Other, principally the result of the permanent closure of the Warrick smelter (March 2016 – see Restructuring and other charges in Results of Operations above) and the Suriname refinery (December 2016) and a smaller negative impact from a long-term power contract related to the Rockdale smelter (see Results of Operations above), virtually offset in the 2017 third quarter and partially offset in the 2017 nine-month period by costs related to the restart of the Warrick smelter ($17-both periods – see Restructuring and other charges in Results of Operations above), a charge for the settlement of legacy tax matters in Brazil ($9-both periods), and an unfavorable impact due to the near-term power market exposure as a result of renegotiating a hedging contract related to forecasted future spot market power purchases for the Portland smelter ($8-third quarter and $21-nine months – see Results of Operations above).

Environmental Matters

See the Environmental Matters section of Note M to the Consolidated Financial Statements in Part I Item 1 of this Form10-Q.

Liquidity and Capital Resources

Cash ~~From~~from Operations

Cash provided from operations was ~~$769~~$424 in the ~~2017~~2019 nine-month period compared with cash used for operations of ~~$550~~$87 in the same period of ~~2016. The improvement~~2018, resulting in an increase in cash ~~from operations~~provided of ~~$1,319 was mostly due~~$511. Notable changes to ~~higher operating results (net income (loss) plus netadd-back~~ ~~for noncash transactions in earnings); a positive change associated with working capital~~sources and (uses) of $377; and a favorable change in noncurrent assets of $100, which was mainly the result of the absence of a $200 prepayment made in April 2016 under a natural gas supply agreement in Australia. These items were slightly offset by higher pension contributions of $37, as the U.S. defined benefit plans were sponsored by ParentCo through July 31, 2016, and an unfavorable change in noncurrent liabilities of $14.cash include:

•

$669 in certain working capital accounts (receivables, inventories, and accounts payable, trade);

~~On October 10, 2017, Alcoa Corporation paid $238 to early terminate a power contract related to the Company’s Rockdale smelter (see Results of Operations above).~~37

•

$873 from lower pension contributions, including the absence of $705 in unscheduled, discretionary payments made in the nine-month period 2018 which were primarily funded with a combination of net proceeds from the May 2018 debt issuance discussed below and cash on hand;

•

$93 related to current value-added tax at foreign locations;

•

$74 resulting from the non-recurrence of a payment made in the first quarter of 2018 related to a legacy legal matter with the U.S. government assumed by the Company in the Separation Transaction;

•

$62 resulting from the non-recurrence of a payment made in the second quarter of 2018 related to the energy supply agreement for the Wenatchee (Washington) smelter;

•

$28 resulting from the decrease in other postretirement benefit payments in the 2019 nine-month period compared with the 2018 nine-month period;

•

$18 resulting from the non-recurrence of a payment made in the second quarter of 2018 for the settlement of a legal matter in Italy; and,

•

($592) relating to changes in taxes, including income taxes. The use of cash includes changes related to higher tax payments made in the 2019 nine-month period compared with the 2018 nine-month period, primarily payments on income taxes, and changes in the underlying tax accounts.

Financing Activities

Cash used for financing activities was ~~$453~~$351 in the ~~2017~~2019 nine-month period ~~an increase of $668~~ compared with cash provided from financing activities of ~~$215~~$6 in the corresponding period of ~~2016.~~2018, resulting in an unfavorable change of $357.

The use of cash in the ~~2017~~2019 nine-month period was ~~principally driven by a cash payment~~primarily the result of $247 (see Investing Activities below) to Arconic related to the Separation Transaction, mostly representing the net proceeds from the sale of Yadkin (see Aluminum in Segment Information above) in accordance with the Separation and Distribution Agreement; $188$347 in net ~~cash paid~~distributions to Alumina Limited (see Noncontrolling interest in Results of Operations above)~~; and $55~~.

The source of cash in ~~payments on~~the 2018 nine-month period was primarily the result of $553 in additions to debt, ~~most~~virtually all of which was related to $492 in net proceeds from the ~~early repayment~~issuance of ~~the remaining outstanding balance ($41)~~new senior debt securities (see below) and $60 in borrowings under an existing term loan by Alcoa of ~~a loan from Brazil’s National Bank for Economic~~Australia, and ~~Social Development (BNDES) associated with the construction of the Estreito hydroelectric power project. These items were slightly offset by $38~~$23 in proceeds from employee exercises of ~~1.5~~0.9 million legacy stock options at a weighted average exercise price of ~~$25.79~~$25.06 per share.

~~In the 2016 nine-month period, the source of cash was primarily the result of $407~~ These items were largely offset by $457 in net ~~transfers from Parent Company, partially offset by $176 in cash paid~~distributions to Alumina Limited (see Noncontrolling interest in Results of Operations above). and $105 in payments on debt, mostly related to the early repayment ($94) of a majority of the remaining outstanding loans from Brazil’s National Bank for Economic and Social Development associated with the construction of the Estreito hydroelectric power project.

In ~~August 2017,~~October 2019, Alcoa Norway ANS, a wholly-owned subsidiary of Alcoa Corporation, entered into aone-year, ~~standby letter of~~ multicurrency revolving credit facility agreement ~~with three financial institutions. The agreement provides~~ for ~~a $150 facility,~~NOK 1.3 billion (approximately $143) which ~~will be used~~is guaranteed on an unsecured basis by Alcoa Corporation. Additionally, in October 2019, a wholly-owned subsidiary of the Company entered into a $120 three-year revolving credit facility agreement secured by certain customer receivables. Alcoa Corporation ~~for matters~~guarantees the performance obligations of the wholly-owned subsidiaries under the facility. These two facilities, along with our existing Revolving Credit Facility, provide the Company with additional liquidity options to utilize in the ordinary course of business.

In May 2018, Alcoa ~~Corporation’s obligations under this facility will be secured~~Nederland Holding B.V. (ANHBV), a wholly-owned subsidiary of Alcoa Corporation, completed a Rule 144A (U.S. Securities Act of 1933, as amended) debt offering for $500 of 6.125% Senior Notes due 2028 (the “2028 Notes”). ANHBV received $492 in net proceeds from the ~~same manner~~debt offering reflecting a discount to the initial purchasers of the 2028 Notes. The net proceeds, along with available cash on hand, were used to make discretionary contributions to certain U.S. defined benefit pension plans (see Cash from Operations above). The discount to the initial purchasers, as ~~obligations~~well as costs to complete the financing, was deferred and is being amortized to interest expense over the term of the 2028 Notes. Interest on the 2028 Notes is paid semi-annually in November and May. Additionally, the 2028 Notes are guaranteed on a senior unsecured basis by Alcoa Corporation and its subsidiaries that are guarantors under the Company’s Revolving Credit Agreement (see Financing Activities in Liquidity and Capital Resources included in Part II Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alcoa Corporation’s Annual Report on Form~~10-K~~ ~~for the year ended December 31, 2016). Additionally, this facility contains similar representations and warranties and affirmative, negative, and financial covenants as the Company’s~~Amended Revolving Credit Agreement. ~~As of September 30, 2017, letters of credit aggregating $43 were issued under this facility. These letters of credit were previously issued in March 2017 on a standalone basis.~~

Alcoa Corporation’s cost of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short- and long-term debt ratings assigned to Alcoa Corporation’s debt by the major credit rating agencies.

On ~~April 24, 2017,~~May 1, 2019, Fitch Ratings (Fitch) ~~assigned~~reaffirmed a BB+ rating for Alcoa Corporation’s long-term debt. Additionally, Fitch ~~assigned the current outlook as stable.~~

~~On June 20, 2017, Standard and Poor’s Global Ratings (S&P) affirmed aBB-~~ ~~rating for Alcoa Corporation’s long-term debt. Additionally, S&P raised~~revised the current outlook to ~~positive~~stable from ~~stable.~~positive.

~~On September 5, 2017, Moody’s Investor Service (Moody’s) upgraded its ratings for Alcoa Corporation’s long-term debt to Ba2 from Ba3 and short-term debt to Speculative Grade LiquidityRating-1~~ ~~from Speculative Grade LiquidityRating-2.~~ ~~Additionally, Moody’s affirmed the current outlook as stable.~~38

Investing Activities

Cash used for investing activities was ~~$56~~$334 in the ~~2017~~2019 nine-month period compared with $5$257 in the ~~2016~~2018 nine-month period, resulting in an increase in cash used of ~~$51.~~$77.

In the ~~2017~~2019 nine-month period, the use of cash was largely attributable to ~~$255~~$245 in capital expenditures, composed of $181 in sustaining projects and ~~$44~~$64 in ~~equity contributions related~~return-seeking projects, and additions to ~~the aluminum complex joint venture in Saudi Arabia, mostly~~investments of $112, partially offset by ~~$243 in net proceeds received (see Financing Activities above) from the sale of Yadkin (see Aluminum in Segment Information above).~~

The use of cash in the 2016 nine-month period was mainly due to $258 in capital expenditures and a $13 payment as a result of a post-closing adjustment associated with the December 2014 divestiture of an ownership stake in a smelter in the United States. These items were virtually offset by $265 in proceeds from the sale of ~~an equity interest~~assets of $23.

In the 2018 nine-month period, the use of cash was mainly due to $251 in ~~a natural gas pipeline~~capital expenditures, composed of $200 in ~~Australia ($145)~~sustaining and ~~the sale of wharf property next to the Intalco, WA smelter ($120).~~$51 in return-seeking projects.

Recently Adopted and Recently Issued Accounting Guidance

See Note B to the Consolidated Financial Statements in Part I Item 1 of this Form10-Q.

~~Forward-Looking Statements~~

This report contains statements that relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. All statements by Alcoa Corporation that reflect expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts concerning global demand growth for bauxite, alumina, and aluminum, and supply/demand balances; statements, projections or forecasts of future financial results or operating performance; and statements about strategies, outlook, business and financial prospects. These statements reflect beliefs and assumptions that are based on Alcoa Corporation’s perception of historical trends, current conditions and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and changes in circumstances that are difficult to predict. Although Alcoa Corporation believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by Alcoa Corporation; (d) the impact of changes in foreign currency exchange rates on costs and results; (e) increases in energy costs; (f) declines in the discount rates used to measure pension liabilities or lower-than-expected investment returns on pension assets, or unfavorable changes in laws or regulations that govern pension plan funding; (g) the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated from restructuring programs and productivity improvement, cash sustainability, technology advancements, and other initiatives; (h) the inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, restarts, expansions, or joint ventures; (i) political, economic, and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (j) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation; (k) the impact of cyberattacks and potential information technology or data security breaches; and (l) the other risk factors described in Alcoa Corporation’s Form~~10-K~~ for the year ended December 31, 2016, including under Part I, Item 1A thereof, and in other reports filed by Alcoa Corporation with the United States Securities and Exchange Commission, including in the following sections of this report: Note K (Derivatives section) and Note M to the Consolidated Financial Statements and the discussion included above under Segment Information. Alcoa Corporation disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Market projections are subject to the risks discussed above and other risks in the market.

Dissemination of Company Information

Alcoa Corporation intends to make future announcements regarding company developments and financial performance through its website, atwww.alcoa.com.

, as well as through press releases, filings with the Securities and Exchange Commission, conference calls, and webcasts.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

See the Derivatives and Other Financial Instruments section of Note KJ to the Consolidated Financial Statements in Part I Item 1 of this Form10-Q.

~~Item 4.~~

~~Controls and Procedures.~~

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Alcoa Corporation’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules13a-15(e) and15d-15(e) of the U.S. Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report, and they have concluded that these controls and procedures are ~~effective.~~effective as of September 30, 2019.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the third quarter of ~~2017,~~2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

~~Item 4.~~

~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of U.S. Securities and Exchange Commission RegulationS-K (17 CFR 229.104) is included in Exhibit ~~95 of~~95.1 to this ~~report, which is incorporated herein by reference.~~

report.

Item 6. Exhibits.

~~Item 6.~~

~~Exhibits.~~


~~15.~~ 10.1		~~Letter regarding unaudited interim financial information~~Amendment No. 1 dated as of August 16, 2019 to the Revolving Credit Agreement dated as of September 16, 2016, as amended as of October 26, 2016, as amended and restated as of November 14, 2017 and as amended and restated as of November 21, 2018, among Alcoa Corporation, Alcoa Nederland Holding B.V., the lenders and issuers from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent for the lenders and issuers (filed herewith)⁽¹⁾

~~31.~~ 10.2	Terms and Conditions for Employee Restricted Share Units, effective October 1, 2019 (filed herewith)⁽¹⁾

10.3	~~Certifications~~Terms and Conditions for Employee Stock Option Awards, effective October 1, 2019 (filed herewith)⁽¹⁾

10.4	Terms and Conditions for Employee Special Retention Awards, effective October 1, 2019 (filed herewith)⁽¹⁾

10.5	Amended and Restated Change in Control Severance Plan dated July 30, 2019 (filed herewith)⁽¹⁾

10.6	Form of Amended and Restated Executive Severance Agreement for the Chief Executive Officer and the Chief Financial Officer, effective as of July 30, 2019 (filed herewith)⁽¹⁾

10.7	Form of Amended and Restated Executive Severance Agreement for Corporate Officers, effective as of July 30, 2019 (filed herewith)⁽¹⁾

31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.~~ 31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~95.~~ 32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

95.1	Mine Safety Disclosure

101.INS		Inline XBRL Instance Document– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

⁽¹⁾Certain appendices have been omitted pursuant to Item 601(a)(5) of Regulation S-K promulgated by the Securities and Exchange Commission (SEC). The Company agrees to furnish a supplemental copy of any omitted appendix to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Alcoa Corporation

	October 31, 2019	~~October 27, 2017~~		By /s/ WILLIAM F. OPLINGER
Date		~~Date~~	William F. Oplinger
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)

	October 31, 2019	~~October 27, 2017~~		By /s/ MOLLY S. BEERMAN
Date		~~Date~~	Molly S. Beerman
			Vice President and Controller
			(Principal Accounting Officer)

5743