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

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 every Interactive Data File required to be submitted 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 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.

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 ~~July 27, 2018, 186,473,040~~May 3, 2019, 185,534,704 shares of common stock, par value $0.01 per share, of the registrant were outstanding.

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, and business and financial ~~prospects.~~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;~~generally and which may also affect Alcoa Corporation’s ability to obtain credit or financing under 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;~~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 orand 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 described in Part I Item 1A of Alcoa Corporation’s Form 10-K for the year ended December ~~31, 2017 and Part II Item 1A of Alcoa Corporation’s Form 10-Q for the quarter ended March~~ 31, 2018 and in 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 ~~discussed~~described above and other risks in the market.

											First quarter ended March 31,
	Second quarter ended June 30,				Six months ended June 30,						2019			2018
	2018		2017		2018			2017
Sales (C & E)	$	3,579	$	2,859	$	6,669		$	5,514
Cost of goods sold (exclusive of expenses below)		2,632		2,289		5,013			4,312
Sales (D)											$	2,719		$	3,090
Cost of goods sold (exclusive of expenses below) (H)												2,180			2,302
Selling, general administrative, and other expenses		64		70		131			141			84			67
Research and development expenses		9		8		17			15			7			8
Provision for depreciation, depletion, and amortization		192		190		386			369			172			194
Restructuring and other charges (D)		231		12		212			22
Restructuring and other charges, net (C)												113			(19	)
Interest expense		32		25		58			51			30			26
Other expenses (income), net (O)		9		28		30			(51	)

Other expenses, net (N)												41			21
Total costs and expenses		3,169		2,622		5,847			4,859			2,627			2,599
Income before income taxes		410		237		822			655			92			491
Provision for income taxes		180		99		318			209			150			151

Net income		230		138		504			446
Net (loss) income												(58	)		340
Less: Net income attributable to noncontrolling interest		155		63		279			146			141			145

NET INCOME ATTRIBUTABLE TO ALCOA CORPORATION	$	75	$	75	$	225		$	300

EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS (F):
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION											$	(199	)	$	195
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS (E):
Basic	$	0.40	$	0.41	$	1.21		$	1.63		$	(1.07	)	$	1.05

Diluted	$	0.39	$	0.40	$	1.19	��	$	1.61		$	(1.07	)	$	1.04

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

	Alcoa Corporation					Noncontrolling interest					Total
	First quarter ended March 31,					First quarter ended March 31,					First quarter ended March 31,
	2019			2018		2019		2018			2019			2018
Net (loss) income (H)	$	(199	)	$	195	$	141	$	145		$	(58	)	$	340
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		41			101		1		1			42			102
Foreign currency translation adjustments		(22	)		1		2		(14	)		(20	)		(13	)
Net change in unrecognized gains/losses on cash flow hedges		(288	)		550		6		(20	)		(282	)		530
Total Other comprehensive (loss) income, net of tax		(269	)		652		9		(33	)		(260	)		619
Comprehensive (loss) income	$	(468	)	$	847	$	150	$	112		$	(318	)	$	959

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


	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents (L)	$	1,089		$	1,358
Cash and cash equivalents (J)							$	1,017		$	1,113
Receivables from customers		1,025			811			758			830
Other receivables		170			232			184			173
Inventories (I)		1,668			1,453
Fair value of derivative instruments (L)		46			113
Prepaid expenses and other current assets		283			271

Inventories (H)								1,799			1,819
Fair value of derivative instruments (J)								71			73
Prepaid expenses and other current assets (H)								285			320
Total current assets		4,281			4,238			4,114			4,328

Properties, plants, and equipment		22,079			23,046			22,015			21,807
Less: accumulated depreciation, depletion, and amortization		13,523			13,908			13,687			13,480

Properties, plants, and equipment, net		8,556			9,138			8,328			8,327

Investments (H & N)		1,390			1,410
Investments (G & M)								1,362			1,360
Deferred income taxes		612			814			604			560
Fair value of derivative instruments (L)		44			128
Fair value of derivative instruments (J)								68			82
Other noncurrent assets		1,635			1,719			1,480			1,475

Total assets	$	16,518		$	17,447		$	15,956		$	16,132

LIABILITIES
Current liabilities:
Accounts payable, trade	$	1,752		$	1,898		$	1,503		$	1,663
Accrued compensation and retirement costs		421			459			383			400
Taxes, including income taxes		323			282			395			426
Fair value of derivative instruments (L)		151			185
Fair value of derivative instruments (J)								84			82
Other current liabilities		353			412			437			347
Long-term debt due within one year (L)		13			16

Long-term debt due within one year (J)								1			1
Total current liabilities		3,013			3,252			2,803			2,919

Long-term debt, less amount due within one year (J & L)		1,916			1,388
Accrued pension benefits (K)		1,580			2,341
Accrued other postretirement benefits (K)		1,025			1,100
Long-term debt, less amount due within one year (J)								1,802			1,801
Accrued pension benefits (I)								1,387			1,407
Accrued other postretirement benefits (I)								851			868
Asset retirement obligations		560			617			543			529
Environmental remediation (N)		237			258
Fair value of derivative instruments (L)		580			1,105
Environmental remediation (M)								243			236
Fair value of derivative instruments (J)								580			261
Noncurrent income taxes		256			309			300			301
Other noncurrent liabilities and deferred credits		243			279			364			222

Total liabilities		9,410			10,649			8,873			8,544

CONTINGENCIES AND COMMITMENTS (N)
CONTINGENCIES AND COMMITMENTS (M)
EQUITY
Alcoa Corporation shareholders’ equity:
Common stock		2			2			2			2
Additional capital		9,650			9,590			9,618			9,611
Retained earnings		339			113
Accumulated other comprehensive loss (G)		(4,967	)		(5,182	)

Retained earnings (H)								371			570
Accumulated other comprehensive loss (F)								(4,834	)		(4,565	)
Total Alcoa Corporation shareholders’ equity		5,024			4,523			5,157			5,618

Noncontrolling interest		2,084			2,275

Noncontrolling interest (H)								1,926			1,970
Total equity		7,108			6,798			7,083			7,588

Total liabilities and equity	$	16,518		$	17,447		$	15,956		$	16,132

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

	Three Months Ended March 31,
	2019			2018
CASH FROM OPERATIONS
Net (loss) income (H)	$	(58	)	$	340
Adjustments to reconcile net (loss) income to cash from operations:
Depreciation, depletion, and amortization		172			194
Deferred income taxes (H)		33			2
Equity earnings, net of dividends		(3	)		(6	)
Restructuring and other charges, net (C)		113			(19	)
Net gain from investing activities – asset sales (N)		(8	)		(5	)
Net periodic pension benefit cost (I)		30			40
Stock-based compensation		10			10
Provision for bad debt expense		20			—
Other		23			(14	)
Changes in assets and liabilities, excluding effects of foreign currency translation adjustments:
Decrease in receivables		42			43
Decrease (Increase) in inventories (H)		17			(248	)
Decrease in prepaid expenses and other current assets		13			2
(Decrease) in accounts payable, trade		(159	)		(106	)
(Decrease) in accrued expenses		(18	)		(186	)
(Decrease) Increase in taxes, including income taxes		(43	)		84
Pension contributions (I)		(7	)		(40	)
(Increase) in noncurrent assets		(10	)		(13	)
Increase (Decrease) in noncurrent liabilities		1			(23	)
CASH PROVIDED FROM OPERATIONS		168			55
FINANCING ACTIVITIES
Additions to debt (original maturities greater than three months)		—			61
Payments on debt (original maturities greater than three months)		—			(4	)
Proceeds from the exercise of employee stock options		1			15
Contributions from noncontrolling interest		20			53
Distributions to noncontrolling interest		(214	)		(267	)
Other		(6	)		(5	)
CASH USED FOR FINANCING ACTIVITIES		(199	)		(147	)
INVESTING ACTIVITIES
Capital expenditures		(69	)		(74	)
Proceeds from the sale of assets		11			—
Additions to investments		(1	)		—
CASH USED FOR INVESTING ACTIVITIES		(59	)		(74	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(6	)		4
Net change in cash and cash equivalents and restricted cash		(96	)		(162	)
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	$	1,020		$	1,203

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

																		Alcoa Corporation shareholders
	Alcoa Corporation shareholders																	Common stock		Additional capital			Retained earnings			Accumulated other comprehensive loss			Non- controlling interest			Total equity
	Common stock		Additional capital			Retained earnings (deficit)			Accumulated other comprehensive loss			Non- controlling interest			Total equity
Balance at March 31, 2017	$	2	$	9,553		$	121		$	(3,800	)	$	2,287		$	8,163
Balance at December 31, 2017																		$	2	$	9,590		$	318		$	(5,182	)	$	2,240		$	6,968
Net income		—		—			75			—			63			138			—		—			195			—			145			340
Other comprehensive loss (G)		—		—			—			(3	)		(38	)		(41	)
Other comprehensive income (loss) (F)																			—		—			—			652			(33	)		619
Stock-based compensation		—		7			—			—			—			7			—		10			—			—			—			10
Common stock issued: compensation plans		—		2			—			—			—			2			—		15			—			—			—			15
Contributions		—		—			—			—			32			32			—		—			—			—			53			53
Distributions		—		—			—			—			(98	)		(98	)		—		—			—			—			(267	)		(267	)
Other		—		(3	)		—			—			(1	)		(4	)		—		18			—			—			(3	)		15
Balance at March 31, 2018																		$	2	$	9,633		$	513		$	(4,530	)	$	2,135		$	7,753

Balance at June 30, 2017	$	2	$	9,559		$	196		$	(3,803	)	$	2,245		$	8,199

Balance at March 31, 2018	$	2	$	9,633		$	263		$	(4,530	)	$	2,149		$	7,517
Net income		—		—			75			—			155			230
Other comprehensive loss (G)		—		—			—			(437	)		(159	)		(596	)
Balance at December 31, 2018																		$	2	$	9,611		$	570		$	(4,565	)	$	1,970		$	7,588
Net (loss) income																			—		—			(199	)		—			141			(58	)
Other comprehensive (loss) income (F)																			—		—			—			(269	)		9			(260	)
Stock-based compensation		—		10			—			—			—			10			—		10			—			—			—			10
Common stock issued: compensation plans		—		7			—			—			—			7			—		1			—			—			—			1
Contributions		—		—			—			—			56			56			—		—			—			—			20			20
Distributions		—		—			—			—			(118	)		(118	)		—		—			—			—			(214	)		(214	)
Other		—		—			1			—			1			2			—		(4	)		—			—			—			(4	)

Balance at June 30, 2018	$	2	$	9,650		$	339		$	(4,967	)	$	2,084		$	7,108

Balance at December 31, 2016	$	2	$	9,531		$	(104	)	$	(3,775	)	$	2,043		$	7,697
Net income		—		—			300			—			146			446
Other comprehensive (loss) income (G)		—		—			—			(28	)		158			130
Stock-based compensation		—		14			—			—			—			14
Common stock issued: compensation plans		—		17			—			—			—			17
Contributions		—		—			—			—			56			56
Distributions		—		—			—			—			(155	)		(155	)
Other		—		(3	)		—			—			(3	)		(6	)

Balance at June 30, 2017	$	2	$	9,559		$	196		$	(3,803	)	$	2,245		$	8,199

Balance at December 31, 2017	$	2	$	9,590		$	113		$	(5,182	)	$	2,275		$	6,798
Net income		—		—			225			—			279			504
Other comprehensive income (loss) (G)		—		—			—			215			(192	)		23
Stock-based compensation		—		20			—			—			—			20
Common stock issued: compensation plans		—		22			—			—			—			22
Contributions		—		—			—			—			109			109
Distributions		—		—			—			—			(385	)		(385	)
Other		—		18			1			—			(2	)		17

Balance at June 30, 2018	$	2	$	9,650		$	339		$	(4,967	)	$	2,084		$	7,108

Balance at March 31, 2019																		$	2	$	9,618		$	371		$	(4,834	)	$	1,926		$	7,083

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

(dollars in millions, exceptper-share 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 ~~2017~~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 the Company’s Annual Report on Form10-K for the year ended December 31, ~~2017,~~2018, which includes all disclosures required by GAAP. ~~Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation (see Note B).~~

References in these Notes to ~~“ParentCo”~~ParentCo refer to Alcoa Inc., a Pennsylvania corporation, and its consolidated subsidiaries (through October 31, 2016, at which time it was renamed Arconic Inc. (Arconic)). On November 1, 2016 (the ~~“Separation Date”)~~Separation Date), ParentCo separated into two standalone, publicly-traded companies, Alcoa Corporation and Arconic (the ~~“Separation Transaction”)~~Separation Transaction). In connection with the Separation Transaction, as of October 31, 2016, the Company and Arconic entered into several agreements to effect the Separation Transaction, including a Separation and Distribution Agreement and a Tax Matters Agreement. See Note A to the Consolidated Financial Statements in Part II Item 8 of Alcoa Corporation’s Annual Report on Form10-K for the year ended December 31, ~~2017~~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 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 change in 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 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.

On January 1, ~~2018,~~2019 Alcoa Corporation adopted ~~guidance~~Accounting Standards Update (ASU) No. 2016-02, Leases, issued by the Financial Accounting Standards Board (FASB) toregarding the ~~recognition of revenue from contracts with customers. This guidance created a comprehensive framework~~accounting for all entities in all industries to apply in the determination of when to recognize revenue, and, therefore, supersedes 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. Management’s assessment of this guidance was applied only to those customer contracts that were open on the date of adoption underleases, using the modified retrospective ~~method. Through~~approach. This ASU requires lessees to recognize a ~~previously established project team,~~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. Additionally, in July 2018, the FASB issued ASU No. 2018-11, Targeted Improvements, to provide for an alternative transition method to the new lease guidance, whereby an entity can choose to not reflect the impact of the new lease guidance in the 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 ~~completed~~to carry forward the current treatment on existing arrangements.

As a ~~detailed review~~result of the ~~terms~~adoption, management recorded a right-of-use asset and ~~provisions~~lease liability, each in the amount of ~~its~~

~~customer contracts, as well as evaluated these contracts under the new guidance, throughout 2017 and concluded that~~$201, on Alcoa Corporation’s ~~revenue recognition practices were~~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. See Note L for additional information related to the adoption of this standard.

Alcoa Corporation’s adoption of the following accounting guidance in ~~compliance~~2019 did not have a material impact on the Company’s consolidated financial statements:

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

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

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General. This ASU makes changes to the disclosures of fair value measurements and defined benefit plans through several removals, modifications, additions, and/or clarifications of the existing requirements. Certain disclosures associated with ~~this framework. That said, the Company did make some minor modifications~~accumulated other comprehensive income, valuation of Level 3 assets, and sensitivities in assumed health care trend rates and interest rates have been eliminated. New disclosures have been added to explain significant gains and losses related to changes in benefit obligations, changes included in other comprehensive income for recurring Level 3 fair value measurements, and information on significant unobservable inputs used to develop Level 3 fair value measurements. These changes become effective for Alcoa Corporation for its ~~internal accounting policies~~fiscal year ending December 31, 2020 and ~~internal control structure to ensure that any future customer contracts that may have different terms~~for interim periods therein with early adoption permitted and ~~conditions of those that the Company has today are properly evaluated under the new guidance.~~retrospective presentation for all periods presented required. Other than ~~providing additional disclosure (see Note C),~~updating the applicable disclosures, the adoption of this guidance ~~had no~~will not have an impact on the Company’s Consolidated Financial Statements.

On January 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to the accounting and reporting of certain equity investments. This guidance requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Additionally, the impairment assessment of equity investments without readily determinable fair values has been simplified by requiring a qualitative assessment to identify impairment. The adoption of this guidance had no impact on the Consolidated Financial Statements, as all of Alcoa Corporation’s equity investments are accounted for under the equity method of accounting.

On January 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to the presentation of several items in the statement of cash flows. Specifically, the guidance identifies nine cash flow items and the sections where they must be presented within the statement of cash flows, including distributions received from equity method investees, proceeds from the settlement of insurance claims, and restricted cash. Other than as it relates to restricted cash, the adoption of this guidance had no impact on the Consolidated Financial Statements. This guidance requires that restricted cash be aggregated with cash and cash equivalents in both the~~beginning-of-period~~ ~~andend-of-period~~ ~~line items at the bottom of the statement of cash flows. Previously, the change in restricted cash between thebeginning-of-period~~ ~~andend-of~~ ~~period was reflected as either an investing, financing, operating, ornon-cash~~ activity based on the underlying nature of the transaction. Accordingly, for the accompanying Statement of Consolidated Cash Flows for the six months ended June 30, 2018, the Cash and cash equivalents and restricted cash at beginning of year and Cash and cash equivalents and restricted cash at end of period line items include restricted cash of $7 and $6, respectively. Additionally, the Company’s Statement of Consolidated Cash Flows for the six months ended June 30, 2017 was recast to reflect this change in presentation. As a result, the Cash and cash equivalents and restricted cash at beginning of year and Cash and cash equivalents and restricted cash at end of period line items include restricted cash of $6 and $11 respectively. Of the $5 increase in restricted cash for the six months ended June 30, 2017, $4 was previously presented as a cash outflow in the investing activities section of the Company’s Statement of Consolidated Cash Flows for the six months ended June 30, 2017. The remaining change of $1 is now reflected in the Effect of exchange rate changes on cash and cash equivalents and restricted cash line item. The following table provides a reconciliation of Cash and cash equivalents and Restricted cash reported in the accompanying Consolidated Balance Sheet that sum to the Cash and cash equivalents and restricted cash at both the beginning of year and end of period presented on the accompanying Statement of Consolidated Cash Flows for the six months ended June 30, 2018:

On January 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to the accounting for intra-entity transactions, other than inventory. The guidance requires the current and deferred income tax consequences of an intra-entity transfer to be recorded immediately when the transaction occurs; the exception to defer the tax consequences of inventory transactions is maintained. Prior to this guidance, no immediate tax impact was permitted to be recognized in an entity’s financial statements as a result of intra-entity transfers of assets. An entity was 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 had been sold to a third party or otherwise recovered. The buyer of such asset was 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 adoption of this guidance had an immaterial impact on the Consolidated Financial Statements.

On January 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to accounting for business combinations. This guidance clarifies 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. This guidance provides a “screen” to determine whether an integrated set of assets and activities qualifies as a business. If substantially all of the 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 and the transaction should be accounted for as an acquisition or disposal of an asset. Otherwise, an entity is required 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. This guidance also narrows the definition of an output. Previously, an output was 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 is now defined as the ability to provide goods or services to customers, investment income, or other revenues. The adoption of this guidance had no immediate impact on the Consolidated Financial Statements; however, this guidance will need to be considered in the event Alcoa Corporation acquires or disposes of an integrated set of assets and activities.

On January 1, 2018, Alcoa Corporation early adopted guidance issued by the FASB to the assessment of goodwill for impairment as it relates to the quantitative test. Prior to this guidance, there were two steps when performing a quantitative impairment test. The first step required 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 was less than its carrying value, an entity performed the second step, which was 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 exceeded its implied fair value, an impairment loss equal to such excess was recognized. This guidance eliminates the second step of the quantitative impairment test. Accordingly, an entity would recognize an impairment of goodwill for a reporting unit, if under what was previously 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. The adoption of this guidance had no immediate impact on the Consolidated Financial Statements; however, this guidance will need to be considered each time the Company performs an assessment of goodwill for impairment under the quantitative test.

On January 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to the presentation of net periodic benefit cost related to pension and other postretirement benefit plans. This guidance requires that an entity report the service cost component of net periodic benefit cost in the same line item(s) on its income statement 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 K) are required to be reported 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 reported in existing line items on the income statement other than such line items that include the service cost component. Previously, Alcoa Corporation reported all components of net periodic benefit cost, except for certain settlements, curtailments, and special termination benefits, 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. The~~non-service~~ cost components noted as exceptions are reported in Restructuring and other charges, as applicable. Additionally, this guidance only permits the service cost component to be capitalized as applicable (e.g., as a cost of internally manufactured inventory). Upon adoption of this guidance, management began reporting the~~non-service~~ cost components of net periodic benefit cost, except for certain settlements, curtailments, and special termination benefits that will continue to be reported in Restructuring and other charges, in Other expenses (income), net on the accompanying Statement of Consolidated Operations (see Note K). For the second quarter and six months ended June 30, 2018, the~~non-service~~ cost components reported in Other expenses, net was $39 and $77, respectively. Additionally, the Statement of Consolidated Operations for the second quarter and six months ended June 30, 2017 was recast to reflect the reclassification of the~~non-service~~ cost components of net periodic benefit cost to Other expense (income), net from both Cost of goods sold and Selling, general administrative, and other expenses. As a result, for the second quarter and six months ended June 30, 2017, Cost of goods sold decreased by $20 and $40, respectively, Selling, general administrative, and other expenses decreased by $2 and $3, respectively, and Other expenses (income), net changed by $22 and $43, respectively,

~~from previously reported amounts. Under the practical expedient option provided for in the guidance, the Company used previously disclosed amounts fornon-service~~ ~~cost components to recast these line items for the second quarter and six months ended June 30, 2017. Furthermore, Alcoa Corporation no longer capitalizes anynon-service~~ ~~cost components as part of the cost of inventory prospectively beginning January 1, 2018.~~

On January 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to the accounting for stock-based compensation when there has been a modification to the terms or conditions of a share-based payment award. This guidance requires 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. Previously, an entity was required to account for any modification in the terms or conditions of a share-based payment award. The adoption of this guidance had no immediate impact on the Consolidated Financial Statements; however, this guidance will need to be considered if the Company initiates a modification that is determined to be a substantive change to an outstanding share-based award. Additionally, the Company will no longer account for any future~~non-substantive~~ ~~change to the terms or conditions of a share-based payment awards as a modification.~~

On April 1, 2018, Alcoa Corporation early adopted guidance issued by the FASB to the accounting for hedging activities retroactive to January 1, 2018. This guidance permits hedge accounting for risk components in hedging relationships involving nonfinancial risk and interest rate risk; reduces current limitations on the designation and measurement of a hedged item in a fair value hedge of interest rate risk; removes the requirement to separately measure and report hedge ineffectiveness; provides 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 eases the requirements of effectiveness testing. Additionally, modifications to existing disclosures, as well as additional disclosures, are required, as applicable, to reflect these changes regarding the measurement and recognition of hedging activities. This guidance is to be initially applied only to hedging instruments that exist as of the adoption date using the modified retrospective method. In other words, any financial statement impact from application of these changes to open hedging instruments as of the adoption date related to periods prior to the adoption year is to be recognized through a cumulative effect adjustment in beginning retained earnings of the adoption year. Accordingly, upon adoption of this guidance, Alcoa Corporation recognized an immaterial cumulative effect adjustment within equity effective January 1, 2018 related to open Level 1 hedging instruments as of the adoption date. The Company had no open Level 2 hedging instruments as of the adoption date and there was no financial statement impact from Alcoa Corporation’s open Level 3 hedging instruments as of the adoption date. This guidance will also be applied prospectively upon the Company entering into any new hedging instruments. See the Derivatives section of Note L for additional information.

~~In January~~August 2018, the FASB issued ~~guidance regarding~~ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software. This ASU aligns the ~~assessment~~accounting for cloud computing implementation costs with that of ~~land easements (or rights of way) under the pending lease accounting requirements~~costs to ~~be adopted on January 1, 2019 (see Recently Issued Accounting Guidance in Note B to the Consolidated Financial Statements in Part II Item 8 of Alcoa Corporation’s Annual Report on Form10-K~~ ~~for the year ended December 31, 2017). This guidance provides an entity an option to not evaluate existing~~develop or ~~expired land easements as leases in preparation for the adoption~~obtain internal-use software, meaning such costs that are part of the ~~new lease accounting requirements,~~application development stage are capitalized as ~~long~~an asset and amortized over the term of the arrangement, otherwise, such costs are expensed as such land easements were recorded as something other than leases under current accounting requirements. That said, any new land easement acquired or existing land easement modified on January 1, 2019 or later must be assessed for lease accounting underincurred. It also clarifies the ~~new requirements.~~classification of amounts related to capitalized implementation costs in the financial statements. This guidance becomes effective for Alcoa Corporation on January 1, 2019. Management plans to elect the option to not evaluate existing or expired land easements that are currently accounted for as something other than leases under the new lease accounting requirements. The Company’s land easements are currently accounted for as fixed assets and are immaterial to Alcoa Corporation’s Consolidated Financial Statements. Accordingly, management has determined that the adoption of this guidance will not have an immediate impact on the Company’s Consolidated Financial Statements. The new lease accounting requirements will need to be considered if the Company acquires a new land easement or modifies an existing land easement on January 1, 2019 or later.

In February 2018, the FASB issued guidance regarding the reclassification of certain income tax effects reported in accumulated comprehensive income (loss) in response to U.S. tax legislation enacted on December 22, 2017 known as the U.S. Tax Cuts and Jobs Act of 2017 (the “TCJA”). For corporations, one of the main provisions of the TCJA was the reduction in the corporate income tax rate to 21% from 35%. Under current income tax accounting requirements, an entity was required to remeasure applicable

U.S. deferred tax assets and deferred tax liabilities at the 21% tax rate effective on the TCJA enactment date. This remeasurement was required to be recognized in an entity’s income tax provision in its income statement. However, certain of these deferred tax assets and deferred tax liabilities relate to income tax effects initially recognized at the 35% tax rate through other comprehensive income (loss) on items reported within accumulated other comprehensive income (loss) on an entity’s balance sheet. Consequently, an entity’s financial statements will reflect an inconsistency between the deferred tax assets and deferred tax liabilities measured at 21% and the related income tax effects in accumulated other comprehensive income (loss) recorded at 35%. Accordingly, this guidance provides a~~one-time~~ option to remeasure the income tax effects within accumulated other comprehensive income (loss) at the 21% income tax rate. The impact from this remeasurement is to be recorded directly in retained earnings on an entity’s balance sheet. This guidance becomes effective for Alcoa Corporation on January 1, 2019,2020, with early adoption permitted. Management is currently evaluating ~~whether to elect this option, as well as whether to early adopt~~ the ~~guidance. If management elects to apply~~potential impact of this guidance ~~the impact~~ on the ~~Company’s~~ Consolidated ~~Balance Sheet is estimated to be an increase of approximately $350 to both Retained earnings and Accumulated other comprehensive loss.~~Financial Statements.

In June ~~2018,~~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, ~~regarding the accounting~~an entity recognizes an allowance for ~~nonemployee share-based payment transactions. This guidance effectively~~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 measure expected credit losses on assets that have a low risk of loss. These changes the accounting for such transactions to be consistent with the accounting for employee share-based payment transactions. The nonemployee share-based payment transactions subject to this guidance are those in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This guidance is not to be applied to other nonemployee share-based payment transactions, such as those used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under revenue recognition principles. This guidance becomesbecome effective for Alcoa Corporation on January 1, ~~2019, with early adoption permitted. The only nonemployees to receive share-based payments from Alcoa Corporation are~~2020. Management is currently evaluating the ~~members~~potential impact of ~~the Company’s Board of Directors. Accordingly, management does not expect the adoption of this guidance to have a material impact~~these changes on the Consolidated Financial Statements.

~~C. Revenue~~– The Company recognizes revenue when it satisfies a performance obligation(s) in accordance with the provisions of a customer order or contract. This is achieved when control of the product has been transferred to the customer, which is generally determined when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product. The shipping terms vary across all businesses and depend on the product, the country of origin, and the type of transportation (commercial delivery truck, train, or vessel). Accordingly, except for the sale of electricity, the sale of Alcoa Corporation’s products to its customers represent single performance obligations for which revenue is recognized at a point in time. Based on the foregoing, no significant judgment is required to determine when control of a product has been transferred to a customer.

The Company measures revenue based on the consideration it expects to be entitled to receive in exchange for its products. The standard terms and conditions of customer orders and contracts include general rights of return and product warranty provisions related to nonconforming or~~“out-of-spec”~~ product. Depending on the circumstances, the product is either replaced or a quality adjustment is issued. Historically, such returns and adjustments have not been material to Alcoa Corporation’s Consolidated Financial Statements.

The Company considers shipping and handling activities as costs to fulfill the promise to transfer the related products. As a result, customer payments of shipping and handling costs are recorded as a component of revenue. Also, Alcoa Corporation may collect various taxes (e.g., sales, use, value-added, excise) from its customers related to the sale of its products and remit such amounts to governmental authorities. As such, amounts paid to the Company for these types of taxes are excluded from the transaction price used to determine the proper measurement of revenue.

~~Bauxite—~~~~Bauxite is a reddish clay rock that is mined from the surface of the earth’s terrain. This ore is the basic raw material used to produce alumina and is the primary source of aluminum.~~

~~Alumina—~~~~Alumina is an oxide that is extracted from bauxite and is the basic raw material used to produce primary aluminum. This product can also be consumed fornon-metallurgical~~ ~~purposes, such as industrial chemical products.~~

~~Primary aluminum—~~~~Primary aluminum is metal in the form of a common alloy ingot (e.g.,t-bar,~~ ~~sow, standard ingot) or avalue-add~~ ingot (e.g., billet, rod, and slab). These products are sold primarily to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets.

~~Flat-rolled aluminum—~~~~Flat-rolled aluminum is metal in the form of sheet, which is sold primarily to customers that produce beverage and food cans, including body, tab, and end stock.~~

~~Energy—~~~~Energy is the generation of electricity, which is sold in the wholesale market to traders, large industrial consumers, distribution companies, and other generation companies.~~

~~The following table represents the general commercial profile of the Company’s Bauxite, Alumina, Primary aluminum, and Flat-rolled aluminum product divisions (see text below table for Energy):~~

For the Company’s Energy product division, sales of electricity are based on current market prices. Electricity is provided to customers on demand through a national or regional power grid; the customer simultaneously receives and consumes the electricity. Payment terms are generally within 10 days related to the previous 30 days of electricity consumption.

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

D.C. Restructuring and Other Charges, Net – In the ~~second~~first quarter ~~andsix-month~~ ~~period~~ of ~~2018,~~2019, Alcoa Corporation recorded Restructuring and other charges, net of ~~$231 and $212, respectively,~~$113, which were comprised of the following components: ~~$167 and $144 (net), respectively,~~$103 for exit costs related to ~~settlements and/~~the curtailment of the Avilés and La Coruña smelters in Spain (see below); $7 for closure costs related to a coal mine; and a $3 net charge for various items.

On January 22, 2019, the workforce at the Company’s Avilés and La Coruña aluminum facilities in Spain ratified an agreement between Alcoa Corporation and the workers’ representatives related to the Company’s initiation of a collective dismissal process in October 2018. As part of the agreement, the two facilities’ smelters, with a combined remaining operating capacity of 124 kmt, were curtailed in February 2019 and are being maintained in restart condition through June 30, 2019, in the event that third parties have interest in acquiring the facilities. The casthouse at each facility and the paste plant at La Coruña remain in operation. Restructuring charges recorded in the first quarter related to this 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 their net realizable value, which was recorded in Cost of goods sold, and $2 in miscellaneous charges recorded in Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations.

Alcoa Corporation expects to incur additional charges to fulfill the agreement’s social plan, which includes severance plans, early retirement benefits, and potential employee relocation to the Company’s San Ciprián (Spain) facility, or ~~curtailments~~to execute a third-party acquisition of the facilities. Such charges are expected to be recorded in the second quarter of 2019 and are estimated to range from $70 to $125 (pre- and after-tax), depending on the outcome of the collective dismissal process. Approximately 75 percent would be cash outlays in 2019.

In the first quarter of 2018, Alcoa Corporation recorded a net benefit of $19 in Restructuring and other charges, net, which was comprised of a $23 net gain related to the curtailment of certain pension and other postretirement employee benefits (see Note K); $80 and $84, respectively, for additional costs related to the curtailed Wenatchee (Washington) smelter, including $73 in both periods associated with recent management decisions (see below); a $15 net benefit in both periods related to the Portovesme (Italy) smelter (see “Italy 148” in the Litigation section of Note N); and a ~~$1 net benefit in both periods for miscellaneous items.~~

In June 2018, management decided not to restart the fully curtailed Wenatchee smelter within the term provided in the related electricity supply agreement. Alcoa Corporation was therefore required to make a $62 payment to the energy supplier under the provisions of the agreement. Additionally, management decided to permanently close one (38 kmt) of the four potlines at this smelter. This potline has not operated since 2001 and the investments needed to restart this line are cost prohibitive. The remaining three curtailed potlines have a capacity of 146 kmt. In connection with these decisions, the Company recognized a$4 charge ~~of $73, composed of the $62 payment, $10 for asset impairments, and $1 for asset retirement obligations triggered by the decision to decommission the potline.~~

~~In the second quarter andsix-month~~ ~~period of 2017, Alcoa Corporation recorded Restructuring and other charges of $12 and $22, respectively, which were comprised of the following components: $5 and $18, respectively,~~ for additional contract costs related to the curtailed Wenatchee smelter; $11 and $13, respectively, for layoff costs related to cost reduction initiatives, including the separation of approximately 110 employees in the Aluminum segment; and a reversal of $4 and $9, respectively, associated with several reserves related to prior periods.(Washington) smelter.

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:

~~As of June 30, 2018, approximately 125 of the 140 employees associated with 2017 restructuring programs were separated.~~

The ~~remaining separations for the 2017 restructuring programs are expected to be completed by the end of 2018.~~

~~In the 2018six-month~~ ~~period, cash payments of $2 were made against layoff reserves~~activity related to ~~2017~~layoff costs and other costs included within the restructuring ~~programs.~~

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

The ~~remaining reserves are~~noncurrent portion of the reserve at March 31, 2019 is $11, of which $8 is expected to be paid in ~~cash during the remainder of 2018, with the exception of $19, of which $15 relates~~2020 related to the Portovesme smelter (see “Italy 148” in the Litigation section of Note N) and $4 relates to the termination of an office lease contract. Half of these amounts are scheduled to be paid in each of 2019 and 2020.smelter.

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

												Bauxite		Alumina			Aluminum			Total
	Bauxite		Alumina			Aluminum			Total
Second quarter ended June 30, 2018
First quarter ended March 31, 2019
Sales:
Third-party sales	$	77	$	1,068		$	2,413		$	3,558		$	65	$	897		$	1,735		$	2,697
Intersegment sales		226		536			4			766			236		417			3			656

Total sales	$	303	$	1,604		$	2,417		$	4,324		$	301	$	1,314		$	1,738		$	3,353

Adjusted EBITDA	$	100	$	638		$	231		$	969
Segment Adjusted EBITDA												$	126	$	372		$	(96	)	$	402
Supplemental information:
Depreciation, depletion, and amortization	$	27	$	49		$	108		$	184		$	28	$	48		$	89		$	165
Equity income (loss)		—		14			(8	)		6		$	—	$	12		$	(22	)	$	(10	)
Second quarter ended June 30, 2017
First quarter ended March 31, 2018
Sales:
Third-party sales	$	80	$	749		$	1,988		$	2,817		$	47	$	914		$	2,111		$	3,072
Intersegment sales		208		384			3			595			249		454			4			707

Total sales	$	288	$	1,133		$	1,991		$	3,412		$	296	$	1,368		$	2,115		$	3,779

Adjusted EBITDA	$	97	$	227		$	234		$	558
Segment Adjusted EBITDA												$	110	$	392		$	187		$	689
Supplemental information:
Depreciation, depletion, and amortization	$	19	$	53		$	108		$	180		$	29	$	53		$	106		$	188
Equity (loss) income		—		(6	)		3			(3	)

	Bauxite		Alumina			Aluminum			Total
Six months ended June 30, 2018
Sales:
Third-party sales	$	124	$	1,982		$	4,524		$	6,630
Intersegment sales		475		990			8			1,473

Total sales	$	599	$	2,972		$	4,532		$	8,103

Adjusted EBITDA	$	210	$	1,030		$	384		$	1,624
Supplemental information:
Depreciation, depletion, and amortization	$	56	$	102		$	214		$	372
Equity income (loss)		—		13			(8	)		5
Equity loss												$	—	$	(1	)	$	—		$	(1	)

Six months ended June 30, 2017

Sales:

Third-party sales
   $ 150    $ 1,483    $ 3,794    $ 5,427
Intersegment sales
   427    745    7    1,179








Total sales
   $ 577    $ 2,228    $ 3,801    $ 6,606








Adjusted EBITDA
   $ 207    $ 524    $ 451    $ 1,182
Supplemental information:

Depreciation, depletion, and amortization
   $ 37    $ 102    $ 209    $ 348
Equity loss
   —      (5 )    (4 )    (9 )

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

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

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):

   Second quarter ended
June 30,    Six months ended
June 30,
   2018    2017    2018    2017
Net income attributable to Alcoa Corporation
   $ 75    $ 75    $ 225    $ 300








Average shares outstanding – basic
   186    184    186    184
Effect of dilutive securities:

Stock options
   1    1    1    1
Stock and performance awards
   2    1    2    1








Average shares outstanding – diluted
   189    186    189    186

~~Options to purchase 1 million~~In the first quarter of 2019, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock atwas anti-dilutive since Alcoa Corporation generated a ~~weighted average exercise price of $36.28 were outstanding as of June 30, 2017, but~~net loss. As a result, five million stock units and stock options combined were not included in the computation of diluted ~~EPS because they were anti-dilutive, as~~EPS. Had Alcoa Corporation generated net income in the ~~exercise prices~~first quarter of ~~the~~2019, one million common share equivalents related to stock units and stock options ~~were greater than the~~combined would have been included in diluted average ~~market price of Alcoa Corporation’s common stock.~~shares outstanding.

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

													Alcoa Corporation						Noncontrolling interest
	Alcoa Corporation						Noncontrolling interest						First quarter ended March 31,						First quarter ended March 31,
	Six months ended June 30,						Six months ended June 30,						2019			2018			2019			2018
	2018			2017			2018			2017
Pension and other postretirement benefits (K)
Pension and other postretirement benefits (I)
Balance at beginning of period	$	(2,786	)	$	(2,330	)	$	(47	)	$	(56	)	$	(2,283	)	$	(2,786	)	$	(46	)	$	(47	)
Other comprehensive income:
Unrecognized net actuarial loss and prior service cost/benefit		76			48			3			18
Tax (expense) benefit		(2	)		3			(1	)		—

Total Other comprehensive income before reclassifications, net of tax		74			51			2			18

Unrecognized net actuarial (loss) gain and prior service cost/benefit														(4	)		75			—			1
Tax benefit (expense)														1			(8	)		—			(1	)
Total Other comprehensive (loss) income before reclassifications, net of tax														(3	)		67			—			—
Amortization of net actuarial loss and prior service cost/benefit⁽¹⁾		260			99			1			1			45			36			1			1
Tax expense⁽²⁾		(50	)		(4	)		—			—			(1	)		(2	)		—			—

Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁶⁾		210			95			1			1			44			34			1			1

Total Other comprehensive income		284			146			3			19			41			101			1			1

Balance at end of period	$	(2,502	)	$	(2,184	)	$	(44	)	$	(37	)		(2,242	)		(2,685	)		(45	)		(46	)

Foreign currency translation
Balance at beginning of period	$	(1,467	)	$	(1,655	)	$	(581	)	$	(677	)		(2,071	)		(1,467	)		(810	)		(581	)
Other comprehensive (loss) income⁽³⁾		(444	)		140			(165	)		77			(22	)		1			2			(14	)

Balance at end of period	$	(1,911	)	$	(1,515	)	$	(746	)	$	(600	)		(2,093	)		(1,466	)		(808	)		(595	)

Cash flow hedges (L)
Cash flow hedges (J)
Balance at beginning of period	$	(929	)	$	210		$	51		$	1			(211	)		(929	)		31			51
Other comprehensive income (loss):
Other comprehensive (loss) income:
Net change from periodic revaluations		404			(430	)		(30	)		90			(352	)		635			27			(20	)
Tax (expense) benefit		(68	)		77			9			(27	)

Total Other comprehensive income (loss) before reclassifications, net of tax		336			(353	)		(21	)		63

Tax benefit (expense)														66			(99	)		(8	)		6
Total Other comprehensive (loss) income before reclassifications, net of tax														(286	)		536			19			(14	)
Net amount reclassified to earnings:
Aluminum contracts⁽⁴⁾		61			49			—			—			13			27			—			—
Financial contracts⁽⁵⁾		(20	)		(3	)		(13	)		(2	)		(26	)		(13	)		(18	)		(9	)
Foreign exchange contracts⁽⁴⁾		(1	)		—			—			—			4			(1	)		—			—

Sub-total		40			46			(13	)		(2	)		(9	)		13			(18	)		(9	)
Tax (expense) benefit⁽²⁾		(1	)		(7	)		4			1

Tax benefit⁽²⁾														7			1			5			3
Total amount reclassified from Accumulated other comprehensive (loss) income, net of tax⁽⁶⁾		39			39			(9	)		(1	)		(2	)		14			(13	)		(6	)

Total Other comprehensive income (loss)		375			(314	)		(30	)		62

Total Other comprehensive (loss) income														(288	)		550			6			(20	)
Balance at end of period	$	(554	)	$	(104	)	$	21		$	63			(499	)		(379	)		37			31

Total Accumulated other comprehensive loss													$	(4,834	)	$	(4,530	)	$	(816	)	$	(610	)

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

In June 2018, Alcoa Corporation, Rio Tinto plc, and the provincial government of Quebec, Canada launched a new joint venture, Elysis Limited Partnership (Elysis). The purpose of this partnership is to advance larger scale development and commercialization of the Company’s patent-protected technology that produces oxygen and eliminates all direct greenhouse gas emissions from the traditional aluminum smelting process. Alcoa Corporation and Rio Tinto plc, as general partners, each own a 48.235% stake in Elysis and the Quebec provincial government, as a limited partner, owns a 3.53% stake. The federal government of Canada and Apple Inc., as well as the Quebec provincial government, will provide initial financing to the partnership. The total combined investment (equity and debt) of the five participants in the joint venture is $145 (C$188). Alcoa Corporation and Rio Tinto plc will invest a combined $44 (C$55) over the next three years, as well as contribute and license certain intellectual property and patents to Elysis. Alcoa Corporation’s investment in Elysis is accounted for under the equity method. In the second quarter of 2018, the Company made an initial investment of $5 (C$6).

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 three months ended March 31, 2018 and Consolidated Balance Sheet as of December 31, ~~2017,~~2018 were adjusted as follows:

	As Originally Reported			Effect of Change			As Adjusted
Statement of Consolidated Operations for the first quarter ended March 31, 2018:
Cost of goods sold	$	2,381		$	(79	)	$	2,302
Provision for income taxes		138			13			151
Net income		274			66			340
Net income attributable to noncontrolling interest		124			21			145
Net income attributable to Alcoa Corporation		150			45			195
Earnings per share attributable to Alcoa Corporation common shareholders:
Basic	$	0.81		$	0.24		$	1.05
Diluted		0.80			0.24			1.04

Statement of Consolidated Comprehensive Income for the first quarter ended March 31, 2018:
Comprehensive income	$	893		$	66		$	959
Comprehensive income attributable to Alcoa Corporation		802			45			847
Comprehensive income attributable to noncontrolling interest		91			21			112

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 three months ended March 31, 2018:
Net income	$	274		$	66		$	340
Deferred income taxes		(11	)		13			2
(Increase) in inventories		(169	)		(79	)		(248	)

The following table compares the ~~total amount of inventories valued on a~~amounts that would have been reported under LIFO ~~basis was $607, or 31%, and $516, 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.~~

~~J. Debt~~ – In May 2018, Alcoa 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 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 Note K). The discount to the initial purchasers, as 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 will be paid semi-annually in November and May, commencing on November 15, 2018.

ANHBV has the option to redeem the 2028 Notes on at least 30 days, but not more than 60 days, prior notice to the holders of the 2028 Notes under multiple scenarios, including, in whole or in part, at any time or from time to time after May 2023 at a redemption price specified in the indenture (up to 103.063% of the principal amount plus any accrued and unpaid interest in each case). Also, the 2028 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2028 Notes repurchased, plus any accrued and unpaid interest on the 2028 Notes repurchased.

~~The 2028 Notes are senior unsecured obligations of ANHBV and do not entitle the holders to any registration rights pursuant to a registration rights agreement. ANHBV does not intend to file a~~

registration statement with respect to resales of or an exchange offer for the 2028 Notes. The 2028 Notes are guaranteed on a senior unsecured basis by Alcoa Corporation and its subsidiaries that are guarantors under the Company’s Amended Revolving Credit Agreement (the “subsidiary guarantors” and, together with Alcoa Corporation, the “guarantors”) (see Note L to the Consolidated Financial Statements ~~included in Part II Item 8~~as of ~~the Company’s Annual Report on Form10-K~~March 31, 2019 and for the year ended December 31, 2017). Each of the subsidiary guarantors will be released from their 2028 Notes guarantees upon the occurrence of certain events, including the release of such guarantor from its obligations as a guarantor under the Revolving Credit Agreement.three months then ended:

The 2028 Notes indenture includes several customary affirmative covenants. Additionally, the 2028 Notes indenture contains several negative covenants, that, subject to certain exceptions, include limitations on liens, limitations on sale and leaseback transactions, and a prohibition on a reduction in the ownership of AWAC entities below an agreed level. The negative covenants in the 2028 Notes indenture are less extensive than those in the 2024 Notes and 2026 Notes (see Note L to the Consolidated Financial Statements included in Part II Item 8 of the Company’s Annual Report on Form~~10-K~~ for the year ended December 31, 2017) indenture and the Amended Revolving Credit Agreement. For example, the 2028 Notes indenture does not include a limitation on restricted payments, such as repurchases of common stock and shareholder dividends.

The 2028 Notes rank equally in right of payment with all of ANHBV’s existing and future senior indebtedness, including the 2024 Notes and 2026 Notes; rank senior in right of payment to any future subordinated obligations of ANHBV; and are effectively subordinated to ANHBV’s existing and future secured indebtedness, including under the Amended Revolving Credit Agreement, to the extent of the value of property and assets securing such indebtedness.

As Computed under LIFO

As Reported under Average Cost

Effect of Change

Statement of Consolidated Operations for the first quarter ended March 31, 2019:

Cost of goods sold
$
2,228

$
2,180

$
(48
)
Provision for income taxes

137

150

13

Net loss

(93
)

(58
)

35

Net income attributable to noncontrolling interest

127

141

14

Net loss attributable to Alcoa Corporation

(220
)

(199
)

21

Earnings per share attributable to Alcoa Corporation common shareholders:

Basic
$
(1.19
)

$
(1.07
)

$
0.12

Diluted

(1.19
)

(1.07
)

0.12

Statement of Consolidated Comprehensive Income for the first quarter ended
March 31, 2019:

Comprehensive loss
$
(353
)

$
(318
)

$
35

Comprehensive income attributed to noncontrolling interest

136

150

14

Comprehensive loss attributable to Alcoa Corporation
$
(489
)

$
(468
)

$
21

Consolidated Balance Sheet as of March 31, 2019:

Inventories
$
1,579

$
1,799

$
220

Prepaid expenses and other current assets

276

285

9

Retained earnings

121

371

250

Noncontrolling interest

1,947

1,926

(21
)

Statement of Consolidated Cash Flows for the three months ended March 31, 2019:

Net loss
$
(93
)

$
(58
)

$
35

Deferred income taxes

20

33

13

Decrease (Increase) in inventories

65

17

(48
)

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

Alcoa Corporation sponsors several defined benefit pension and other postretirement employee benefit plans, primarily in the United States and Canada. As of January 1, 2018, the pension benefit plans and the other postretirement benefit plans cover an aggregate of approximately 54,000 and approximately 48,000 participants, respectively.

~~In January 2018, the Company communicated retirement benefit changes to certain U.S. and Canadian plan participants.~~

Effective January 1, 2021, all U.S. and Canadian salaried employees that are participants in three of the Company’s defined benefit pension plans will cease accruing retirement benefits for future service. This change will affect approximately 800 employees, who will be transitioned to country-specific defined contribution plans, in which the Company will contribute 3% of these participants’ eligible earnings on an annual basis. Such contributions will be incremental to any employer savings match the employees may receive under existing defined contribution plans. Participants already collecting benefits under these defined benefit pension plans are not affected by these changes.

This change resulted in the adoption of a significant plan amendment by the three defined benefit pension plans in January 2018. Accordingly, these plans were required to be remeasured, and through this process, the discount rate (weighted-average for these three plans) was updated from 3.65% at December 31, 2017 to 3.80% at January 31, 2018. The remeasurement of these plans resulted in a decrease of $57 to both Alcoa’s pension benefits liability and Accumulated other comprehensive loss. The remeasurement of these plans also resulted in a curtailment charge of $5 in the first quarter of 2018, representing accelerated amortization of a portion of the existing prior service cost associated with these plans. This amount was reclassified to earnings through Restructuring and other charges from Accumulated other comprehensive loss.

~~Also, effective January 1, 2021, Alcoa Corporation will no longer contribute topre-Medicare~~ retiree medical coverage for U.S. salaried employees and retirees, affecting approximately 700 participants in one plan. This change resulted in the adoption of a significant plan amendment by this other postretirement benefits plan in January 2018. Accordingly, this plan was required to be remeasured, and through this process, the discount rate was updated from 3.29% at December 31, 2017 to 3.43% at January 31, 2018. The remeasurement of this plan resulted in a decrease of $7 to both Alcoa’s other postretirement benefits liability and Accumulated other comprehensive loss. The remeasurement of this plan also resulted in a curtailment gain of $28 in the first quarter of 2018, representing accelerated amortization of a portion of the existing prior service benefit associated with this plan. This amount was reclassified to earnings through Restructuring and other charges from Accumulated other comprehensive loss.

In April 2018, Alcoa Corporation signed group annuity contracts to transfer the obligation to pay the remaining retirement benefits of approximately 2,100 retirees from two Canadian defined benefit pension plans to three insurance companies. The transfer of $560 in both plan obligations and plan assets, as well as a transaction fee of $23, was completed on April 13, 2018. The Company contributed $89 between the two plans to facilitate the transaction and maintain the funding level of the remaining plan obligations. Prior to this transaction, these two Canadian pension plans combined had approximately 3,500 participants.

Accordingly, these plans were required to be remeasured, and through this process, the discount rate (weighted-average for these two plans) was updated from 3.43% at December 31, 2017 to 3.60% at March 31, 2018. The remeasurement of these plans resulted in an increase of $24 to both Alcoa’s pension benefits liability and Accumulated other comprehensive loss. The remeasurement of these plans also resulted in a settlement charge of $167 in the second quarter of 2018, representing accelerated amortization of a portion of the existing net actuarial loss associated with these plans. This amount was reclassified to earnings through Restructuring and other charges from Accumulated other comprehensive loss.

The five plans affected by the curtailment and settlement actions described above represented 36% of the combined net unfunded status of Alcoa Corporation’s pension and other postretirement benefit plans as of December 31, 2017.

In the second quarter of 2018, Alcoa Corporation made a combined $605 in unscheduled contributions to several defined benefit pension plans, including a combined $500 to three of the Company’s U.S. defined benefit pension plans and a combined $105 to two of the Company’s Canadian defined benefit pension plans (inclusive of $89 above). The additional payments to the U.S. plans were discretionary in nature and were funded with $492 in net proceeds from a May 2018 debt issuance (see Note J) plus available cash on hand. The primary purpose of the U.S. discretionary funding was to reduce near-term pension funding risk with a fixed-rate,~~10-year~~ ~~maturity instrument.~~

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~~

(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:

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 and foreign currency exchange 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 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 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 $7$2 and ~~$67,~~$49, respectively, at ~~June 30, 2018~~March 31, 2019 and ~~$44~~$2 and ~~$117,~~$54, respectively, at December 31, ~~2017. In the 2017 second quarter andsix-month~~ ~~period, Alcoa Corporation recognized a loss of $2 and $24, respectively, in Other expenses (income), net on the accompanying Statement of Consolidated Operations related to these contracts.~~2018. Certain of these contracts are designated as either fair value or cash flow hedging instruments. For the contracts designated as cash flow hedges, Alcoa Corporation recognized an unrealized loss of ~~$55~~$8 in the first quarter of 2019 and an unrealized gain of ~~$13~~$68 in the ~~2018 second~~first quarter ~~andsix-month~~ ~~period, respectively, and an unrealized gain~~ of ~~$25 and an unrealized loss of $25 in the 2017 second quarter andsix-month~~ ~~period, respectively,~~2018 in Other comprehensive (loss) income. Additionally, Alcoa Corporation reclassified a realized loss of ~~$6 and $7 in the 2018 second quarter andsix-month~~ ~~period, respectively, and~~ $4 and $5$1 in ~~the 2017 second quarter~~2019 and~~six-month~~ ~~period,~~ 2018, respectively, from Accumulated other comprehensive ~~loss~~(loss) income 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 smelters and three refineries. Certain of the embedded aluminum derivatives and financial contracts 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 one 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 valued using observable market prices; however, due to the length of the contracts, the valuation models also require management to estimate the long-term price of aluminum ~~based upon an extrapolation of the10-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. An increase in actual LME price and/or 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 been designated as cash flow hedges of forward sales of aluminum. Unrealized gains and losses were 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.

~~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 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 overall increase in actual ~~metal~~LME price ~~over~~and the ~~inputs used in the valuation model~~Midwest premium will result in a higher cost of power and a corresponding decrease to the derivative asset or increase to the derivative liability. ~~Management elected not to qualify the~~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 spread between the Company’s estimated30-year~~ ~~debt yield and the counterparty’s30-year~~ ~~debt yield. As Alcoa Corporation does not have outstanding30-year~~ ~~debt, the Company’s estimated30-year~~ ~~debt yield is represented by the sum of (i) the excess of the yield on Alcoa’s outstanding notes due 2026 over the yield on only theBa/BB-rated~~ ~~company debt included in Barclays High Yield Index for intermediate~~

~~(10-year)~~ ~~credits and (ii) the yield on only theBa/BB-rated~~ ~~company debt included in Barclays High Yield Index for long(30-year)~~ credits. In accordance with the terms of the power contract, this calculation may be changed in January of each calendar year. 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 had a financial contract (D10) to hedge 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 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 Company’s 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 was reclassified to Cost of goods sold as electricity purchases were 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~~forward sales of ~~electricity.~~aluminum. Unrealized gains and losses ~~on the new financial contract were recorded~~will be included in Other comprehensive (loss) income 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.~~

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

Fair value at
~~June 30, 2018~~
March 31,
2019

Unobservable

input

Range

($ in full amounts)

Assets:

~~Embedded aluminum derivative (D7)~~

—

~~Interrelationship of future aluminum and oil prices~~

~~Aluminum: $2,164 per metric ton in July 2018 to $2,135 per metric ton in October 2018~~

~~Oil: $79 per barrel in July 2018 to $79 per barrel in October 2018~~

Financial contract ~~(D11)~~

137

Interrelationship of forward energy price and the Consumer Price Index and price of electricity beyond forward curve

Electricity: ~~$60.70~~$73.13 per megawatt hour in ~~2018~~2019 to ~~$48.35~~$55.02 per megawatt hour in 2021

Liabilities:

Embedded aluminum derivative ~~(D1)~~

~~305~~

267

Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum

Aluminum: ~~$2,164~~$1,900 per metric ton in ~~2018~~2019 to ~~$2,452~~$2,445 per metric ton in 2027

Electricity: rate of 4 million megawatt hours per year

Embedded aluminum derivatives ~~(D3 through D5)~~

~~301~~

320

Price of aluminum beyond forward curve

Aluminum: ~~$2,504~~$2,533 per metric ton in ~~2028~~July 2029 to ~~$2,560~~$2,553 per metric ton in December 2029 (two contracts) and ~~$2,855~~$2,850 per metric ton in 2036 (one contract)

Midwest premium: ~~$0.2100~~$0.1900 per pound in ~~2018~~2019 to ~~$0.2000~~$0.1850 per pound in 2029 (two contracts) and 2036 (one contract)

Embedded aluminum derivative ~~(D8)~~

Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum

Aluminum: ~~$2,164~~$1,900 per metric ton in ~~2018~~April 2019 to ~~$2,145~~$1,911 per metric ton in June 2019

Midwest premium: ~~$0.2100~~$0.1900 per pound in ~~2018 to $0.2000 per pound in~~April 2019 and June 2019

Electricity: rate of 2 million megawatt hours per year

Embedded aluminum derivative ~~(D2)~~

Interrelationship of LME price to overall energy price

Aluminum: ~~$2,174~~$1,857 per metric ton in ~~2018~~April 2019 to ~~$2,157~~$1,954 per metric ton in December 2019

Embedded credit derivative ~~(D9)~~

Estimated spread between the respective30-year debt yield of Alcoa Corporation and the counterparty

~~2.81%(30-year~~3.25% (30-year debt yields: Alcoa Corporation – ~~6.93%~~7.21% (estimated) and counterparty – ~~4.12%~~3.96%)

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


	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Asset Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Financial contract	$	41	$	96	$	69	$	70
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives						—		41
Financial contract		42		101		68		42

Total derivatives designated as hedging instruments	$	83	$	197		137		153

Total Asset Derivatives	$	83	$	197	$	137	$	153

Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Embedded aluminum derivatives					$	59	$	46
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives						535		218
Total derivatives designated as hedging instruments						594		264
Derivatives not designated as hedging instruments:
Fair value of derivative instruments – current:
Embedded aluminum derivative						—		5
Embedded credit derivative						4		4
Fair value of derivative instruments – noncurrent:
Embedded credit derivative						17		16
Total derivatives not designated as hedging instruments						21		25
Total Liability Derivatives					$	615	$	289

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

	Assets						Liabilities
First quarter ended March 31, 2019	Embedded aluminum derivatives			Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Balance at January 1, 2019	$	41		$	112		$	269		$	20
Total gains or losses (realized and unrealized) included in:
Sales		—			—			(13	)		—
Cost of goods sold		—			(42	)		—			—
Other expenses, net		—			—			(2	)		1
Other comprehensive (loss) income		(41	)		68			344			—
Other					(1	)		(4	)		—
Balance at March 31, 2019	$	—		$	137		$	594		$	21
Change in unrealized gains or losses included in earnings for derivative instruments held at March 31, 2019:
Other expenses, net	$	—		$	—		$	(2	)	$	1

   Assets Liabilities
Six months ended
June 30, 2018
   Financial
contracts Embedded
aluminum
derivatives Embedded
credit
derivative
Opening balance – January 1, 2018
   $ 197 $ 1,146 $ 27
Total gains or losses (realized and unrealized) included in:

Sales
   —   (54 ) —
Cost of goods sold
   (34 ) —   (2 )
Other expenses, net
   —   (6 ) (5 )
Other comprehensive income
   (75 ) (435 ) —
Purchases, sales, issuances, and settlements*
   —   —   —
Transfers into and/or out of Level 3*
   —   —   —
Other
   (5 ) (7 ) —


Closing balance — June 30, 2018
   $ 83 $ 644 $ 20


Change in unrealized gains or losses included in earnings for derivative instruments held at June 30, 2018:

Sales
   $ —   $ —   $ —
Cost of goods sold
   —   —   —
Other expenses, net
   —   (6 ) (5 )

For derivative instruments that are designated and qualify as cash flow hedges, effective on January 1, 2018, the entire amount of unrealized gains or losses on the derivative is reported as a component of other comprehensive income. Prior to January 1, 2018, only the effective portion of unrealized gains or losses on the derivative is reported as a component of other comprehensive income while the ineffective portion of unrealized gains or losses is recognized directly in earnings immediately. On April 1, 2018, Alcoa Corporation adopted guidance issued by the FASB to the accounting for hedging activities (see Note B), which included the elimination of the concept of ineffectiveness. Accordingly, there is no longer a requirement to separately measure and report ineffectiveness. In all periods presented, 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. Additionally, gains and losses on the derivative representing 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 (see D11 above), which was designated as a cash flow hedging instrument and was classified as Level 3 under the fair value hierarchy, that replaced the existing financial contract (see D10 above) 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. The~~17

~~LME-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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, these embedded aluminum derivatives hedge forecasted aluminum sales of ~~2,693~~2,496 kmt and ~~2,859~~2,508 kmt, respectively.

~~Alcoa Corporation recognized a net unrealized loss of $162 and a net unrealized gain of $435 in the 2018 second quarter andsix-month~~ ~~period, respectively, and a net unrealized loss of $43 and $541 in the 2017 second quarter andsix-month~~ period, respectively, in Other comprehensive (loss) income related to these five derivative instruments. Additionally, Alcoa Corporation reclassified a realized loss of $29 and $54 in the 2018 second quarter and~~six-month~~ ~~period, respectively, and $27 and $45 in the 2017 second quarter andsix-month~~ ~~period, respectively, from Accumulated other comprehensive loss to Sales.~~ Assuming market rates remain constant with the rates at ~~June 30, 2018,~~March 31, 2019, a realized loss of ~~$99~~$59 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 second~~first quarter of 2019 and~~six-month~~ 2018. ~~period.~~

~~Financial contracts (D10 and D11).~~ Alcoa Corporation had a financial contract to hedge 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 second quarter and~~six-month~~ ~~period, Alcoa Corporation reclassified a realized gain of $3 and $5, respectively, from Accumulated other comprehensive loss to Cost of goods sold.~~

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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017, this~~2018, the financial contract hedges forecasted electricity purchases of ~~7,586,964~~5,742,396 and ~~8,805,456, respectively,~~6,348,276 megawatt ~~hours. Alcoa Corporation recognized an unrealized loss of $24 and $75 in the 2018 second andsix-month~~ ~~period, respectively, and an unrealized loss of $62 and an unrealized gain of $107 in the 2017 second quarter andsix-month~~ ~~period, respectively, in Other comprehensive (loss) income. Additionally, Alcoa Corporation reclassified a realized gain of $12 and $34 in the 2018 second quarter andsix-month~~ ~~period, respectively, from Accumulated other comprehensive loss to Cost of goods sold.~~hours, respectively. Assuming market rates remain consistent with the rates at ~~June 30, 2018,~~March 31, 2019, a realized gain of ~~$41~~$69 is expected to be recognized in Cost of goods sold over the next 12 months. There was no ineffectiveness related to this derivative instrument in the first quarter of 2019. The amount of hedge ineffectiveness related to this derivative instrument was not material in ~~both~~ the ~~2017 second~~first quarter ~~andsix-month~~ ~~period.~~of 2018.

Alcoa Corporation has two Level 3 embedded aluminum derivatives (D7 and D8) and one Level 3 embedded credit derivative (D9) that do not qualify for hedge accounting treatment and one Level 3 financial contract for which management elected to discontinue hedge accounting treatment (see D10 above). As such, gains and losses related to the changes in fair value of these instruments are recorded directly in earnings. In the 2018 second quarter and~~six-month~~ ~~period, Alcoa Corporation recognized a loss of $6 and a gain of $11, respectively, in Other expenses, net, of which a gain of $6 (2018six-month~~ ~~period) related to the embedded aluminum derivatives and a loss of $6 and a gain of $5, respectively, related to the embedded credit derivative. In the 2017 second quarter andsix-month~~ period, Alcoa Corporation recognized a loss of $29 and $4, respectively, in Other expenses (income), net, of which a gain of $6 and a loss of $8, respectively, related to the embedded aluminum derivatives a loss of $5 and $1, respectively, related to the embedded credit derivative, and a loss of $30 and a gain of $4, respectively, related to the financial contract.

The disclosures with respect to commodity prices 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.

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

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 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.

M.K. Income Taxes – ~~On December 22, 2017, U.S.~~The effective tax ~~legislation known~~rate was 162.4% and 30.9% for the first quarter of 2019 and 2018, respectively. Alcoa Corporation’s estimated annual effective tax rate for 2019 was 72.2% as of March 31, 2019. This rate differs from the U.S. ~~Tax Cuts~~federal statutory rate of 21% primarily due to foreign income taxed in higher rate jurisdictions, as well as by domestic losses and ~~Jobs Act~~foreign losses in countries with full valuation reserves resulting in no tax benefit.

For the first quarter of ~~2017 (the “TCJA”) was enacted. For corporations,~~2019, the ~~TCJA amends~~Provision for income taxes of $150 included two components: (i) the ~~U.S. Internal Revenue Code by reducing~~application of the ~~corporate income~~estimated annual tax rate ~~(to 21% from 35%)~~of 72.2% to pre-tax income of $92 ($67), and ~~modifying several business deduction and international~~(ii) an unfavorable tax ~~provisions, including a tax on each of the following: (i) a mandatoryone-time~~ ~~deemed repatriation of accumulated foreign earnings, (ii) a new category of income, referred to as global intangible low tax income,~~impact related to ~~earnings taxed at a low rate~~the interim period treatment of ~~foreign entities without a significant fixed asset base; and (iii) base erosion payments (deductible cross-border payments to related parties) that exceed 3% of a company’s deductible expenses.~~operational losses in certain jurisdictions for which no tax benefit was recognized ($83).

Based on management’s preliminary analysis of the TCJA, the Company recorded a $22 discrete income tax charge in its Consolidated Financial Statements for the year ended December 31, 2017. This amount was provisional in nature in accordance with guidance issued by the U.S. Securities and Exchange Commission under Staff Accounting Bulletin No. 118,~~Income Tax Accounting Implications of the Tax Cuts and Jobs Act~~~~. In the 2018six-month~~ ~~period, management continued to gather information and perform additional analysis of the TCJA provisions. In~~For the first quarter of 2018, the ~~Company completed its analysis~~Provision for income taxes of $151 included two components: (i) the application of the estimated annual tax rate of 30.5% to pre-tax income of $491 ($150), and (ii) an unfavorable tax impact related to the ~~reduced corporate~~interim period

treatment of operational losses in certain jurisdictions for which no tax benefit was recognized ($1). The rate for the first quarter of 2018 differs from the U.S. federal statutory rate of 21% primarily due to foreign income ~~tax~~taxed in higher rate jurisdictions, as well as by domestic losses and foreign losses in countries with full valuation reserves resulting in no ~~further impact to~~tax benefit.

As a result of 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 ~~Financial Statements. Management’s assessment of the other provisions of the TCJA remain provisional~~Balance Sheet as of ~~June 30, 2018 (no additional impact was recorded~~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 the aggregate future lease payments on a discounted basis. The leases have remaining terms of one to 39 years. The discount rate applied to these leases is the 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 ~~2018six-month~~ ~~period). Several items are in~~lease agreement. Lease expense for the ~~process~~three months ended March 31, 2019, includes costs from operating leases of ~~being completed by~~$19, short-term rental expense of $3 and variable lease payments of $3. New leases added during the three months ended March 31, 2019 were not material. The Company ~~including~~does not have material financing leases.

The following represents the ~~calculation~~aggregate right-of use assets and related lease obligations as of ~~earnings~~March 31, 2019:

The weighted average lease term and ~~profits~~weighted average discount rate as of ~~relevant subsidiaries~~March 31, 2019 were as follows:

The future cash flows related to ~~(i) above,~~ the ~~calculation~~operating lease obligations as of ~~the interest expense allocation, which is subject to future guidance to be issued by the U.S. Treasury Department,~~March 31, 2019 were as follows:

Disclosures related to ~~(ii) above, and an analysis~~periods presented prior to the adoption of the characterization of amounts paid or accrued to determine if they qualify as base erosion payments, which is subject to future guidance to be issued by the U.S. Treasury Department and U.S. Internal Revenue Service, related to (iii) above. ASU No. 2016-02

The Company ~~will finalize its analyses~~adopted ASU No. 2016-02, Leases, on January 1, 2019 using the modified retrospective approach which requires the following disclosure for periods presented prior to adoption. The following table represents minimum annual lease commitments as of ~~the TCJA provisions later in 2018.~~

~~See Note P to the Consolidated Financial Statements in Part II Item 8 of Alcoa Corporation’s Annual Report on Form10-K~~ ~~for the year ended~~ December 31, ~~2017 for additional information.~~2018 under long-term operating leases:

Unless specifically described to the contrary, all matters within Note N 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

~~Italy 148—~~Beginning in 2006, ParentCo and the Italian Energy Authority (Autorità di Regolazione per Energia Reti e Ambiente, formerly l’Autorità per l’Energia Elettrica, il Gas e il Sistema Idrico, the “Energy Authority”) had been in a dispute regarding the calculation of a drawback applied to a portion of the price of power under a special tariff received by Alcoa Trasformazioni S.r.l. (“Trasformazioni,” previously a subsidiary of ParentCo; now a subsidiary of Alcoa Corporation). This dispute arose as a result of a resolution (148/2004) issued in 2004 by the Energy Authority that changed the method for calculating the drawback. Through 2009, Trasformazioni continued to receive the power price drawback for its Portovesme and Fusina smelters in accordance with the original resolution (204/1999), at which time the European Commission declared all such special tariffs to be impermissible “state aid.” Between 2006 and 2014, several judicial hearings occurred related to continuous appeals filed by both ParentCo and the Energy Authority regarding the dispute on the calculation of the drawback; a hearing on the latest appeal was scheduled for May 2018 (see below). Additionally, between 2012 and 2013, Trasformazioni received multiple letters from the agency responsible for making and collecting payments on behalf of the Energy Authority demanding payment for the difference in the drawback calculation between the two resolutions. The latest such demand was for $97 (€76), including interest, and allegedly included consideration of a third resolution (44/2012) issued in 2012 on the calculation of the drawback; Trasformazioni rejected this demand.

In the meantime, as a result of the conclusion of the European Commission Matter in January 2016 (see Note R to the Consolidated Financial Statements in Part II Item 8 of Alcoa Corporation’s Annual Report on Form~~10-K~~ for the year ended December 31, 2017), ParentCo’s management modified its outlook with respect to a portion of the then-pending legal proceedings related to the drawback dispute. 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.

In December 2017, through an agreement with the Energy Authority, Alcoa Corporation settled this matter for $18 (€15) (paid in January 2018). Accordingly, the Company recorded a reduction of $22 (€19) (the U.S. dollar amount reflects the effects of foreign currency movements since 2015) to its previously established reserve in Restructuring and other charges on the Statement of Consolidated Operations for the year ended December 31, 2017. In January 2018, subsequent to making the previously referenced payment, Alcoa Corporation and the respective state attorney in Italy filed a joint request with the Regional Administrative Court for Lombardy to have this matter formally dismissed. The parties have yet to receive notice of the court’s formal recognition of the dismissal request.

Also in December 2017, as part of a separate but related agreement to the above, the Company agreed to transfer ownership of the Portovesme smelter (permanently closed in 2014) to Invitalia, an Italian government agency responsible for managing economic development. Under the provisions of the agreement, the Company will retain the responsibility for environmental-related obligations associated with decommissioning the Portovesme smelter. The agreement further provides that the Company may be relieved of such obligations upon Invitalia exercising an option to receive a cash payment of $23 (€20) from the Company. Additionally, this agreement included a framework for the future settlement of a groundwater remediation project related to the Portovesme site (see Fusina and Portovesme, Italy in Environmental Matters below). In February 2018, the Company completed the transfer of ownership of the Portovesme smelter to Invitalia. The carrying value of the assets related to the Portovesme site were previously written down to zero as a direct result of ParentCo’s decision in 2014 to decommission the facility.

In the second quarter of 2018, Invitalia sold the Portovesme smelter to SiderAlloys International S.A., a Switzerland company, which intends to restart the facility. In June 2018, Invitalia gave notice to the Company that it was exercising its option under the December 2017 agreement to receive the cash payment thereby releasing the Company from responsibility of all environmental-related obligations associated with a future decommissioning of the Portovesme smelter. The cash payment will be made in three installments, one in each of 2018 (paid $8 (€7) on June 18), 2019, and 2020. Accordingly, Alcoa Corporation recognized a $15 net benefit in Restructuring and other charges on the accompanying Statement of Consolidated Operations for the second quarter and~~six-month~~ period of 2018 (see Note D), comprised of (i) a $38 reversal of previously accrued asset retirement obligations ($36) and environmental reserves ($2) related to the Company’s former decommissioning plan for the Portovesme smelter, and (ii) a $23 charge to establish a liability for the planned cash payment to Invitalia.

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 $291 and $294 at June 30, 2018 and December 31, 2017 (of which $54 and $36 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:

At March 31, 2019 and December 31, 2018, the current portion of Alcoa Corporation’s environmental remediation reserve balance was $33 and $44, respectively. In the ~~2018 second~~first quarter ~~andsix-month~~ ~~period,~~of 2018, the remediation reserve was increased by ~~$15.~~an immaterial amount. The changes to the remediation reserve ~~in both periods~~ were due to a charge of $9 related to the former Sherwin location (see below), a reversal of $2 related to the Portovesme location (unrelated to the matter below – see Italy 148 in Litigation above), and a net charge of $8 associated with several sites. Of the changes to the remediation reserve in the 2018 second quarter and~~six-month~~ ~~period, a net 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~~ on the accompanying Statement of Consolidated Operations.

The estimated timing of cash outflows on the environmental remediation reserve at March 31, 2019 is as follows:

Reserve balances at March 31, 2019 and December 31, 2018 associated with significant sites with active remediation underway or for future remediation were $212 and $214, respectively. In management’s judgment, the Company’s reserves are sufficient to satisfy the provisions of the respective action plans. Upon changes in facts or circumstances, a change to the reserve may be required. The Company’s significant sites include:

Pocos de Caldas, Brazil—Associated with the 2015 closure of the 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. The final remediation plan is currently under review; such review could require the reserve balance to be adjusted.

Fusina and Portovesme, Italy—Alcoa Corporation’s subsidiary Alcoa Trasformazioni S.r.l. (Trasformazioni) has remediation projects underway for its closed smelter sites at Fusina (Italy) and Portovesme (Italy). Cleanup plans at both sites have been approved by the Italian Ministry of Environment and Protection of Land and Sea (MOE). For the Fusina site, Trasformazioni began work on a soil remediation project in October 2017 and expects to complete the project by the end of 2019. Additionally, Trasformazioni agreed to make annual payments to MOE over a 10-year period, ending in 2024, for groundwater emergency containment and natural resource damages related to the Fusina site. For the Portovesme site, Trasformazioni began work on a soil remediation ~~expenses applied against~~project in mid-2016 and expects it to be complete by the end of 2019. Additionally, Trasformazioni participates in a groundwater remediation project which will not have a final remedial design completed until mid-2019; such design conclusion may result in a change to the existing reserve ~~were $8~~for Portovesme.

Suriname—Associated with the 2017 closure of the Suralco refinery and ~~$14~~bauxite mine, an environmental remediation reserve was established for treatment and disposal of refinery waste and soil remediation. The work began in 2017 and is expected to be completed at the end of 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 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’s policy is to maintain a reserve equal to five years of expected costs.

Massena, New York—Associated with the closure of the 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 ~~second quarter~~Consent Decree and~~six-month~~ ~~period, respectively. These amounts include expenditures currently mandated, as well as those not required by any regulatory authority or third party. In~~ Cleanup Action Plan with the ~~2018 second quarter andsix-month~~ ~~period, the reserve also reflects both a decrease~~State of ~~$6 and $5, respectively, due to the effects~~Washington Department of ~~foreign currency translation and an increase of $6 and $1, respectively, for reclassifications made between this reserve and~~Ecology, the Company’s ~~liability~~subsidiary, Northwest Alloys, accepted certain responsibilities for ~~asset retirement obligations.~~

On July 6, 2018, the National Court denied ParentCo’s appeal of the assessment; however, the decision includes a requirement that Spain’s tax authorities 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”)~~Companies), the amount of the new assessment, including applicable interest, is 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 unfavorable outcome. On ~~July 12,~~November 8, 2018, the Companies ~~sent~~filed a ~~letter to the National Court seeking clarification on one part of the decision. Once the National Court provides the clarification to the Companies, a30-business~~ ~~day period to~~ petition for appeal to Spain’s Supreme Court, ~~begins.~~to which Spain’s tax authorities have filed their opposition.

~~Based~~In 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 ~~bases~~basis on which the National Court decided this matter, Alcoa Corporation management no longer ~~believes~~believed that the Companies ~~are~~were more likely than not (greater than 50%) to prevail in this ~~matter if an appeal to Spain’s Supreme Court is pursued.~~matter. Accordingly, in the ~~2018~~ third quarter of 2018, Alcoa Corporation ~~expects to record~~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 ~~this~~the time. As ~~indicated above,~~the appeal progresses or when the Companies ~~are awaiting clarification on a part of the National Court’s decision and, at a future point in time, will~~ receive an updated assessment from Spain’s tax authorities, ~~both of which~~management may ~~result~~revise its estimated liability.

Separately, in ~~a change to management’s estimate following further analysis.~~

In January 2017, the National Court issued a decision in favor of the former Spanish consolidated tax group related to a similar assessment for the 2003 through 2005 tax years, effectively making that assessment null and void. Additionally, in August 2017, in lieu of receiving a formal assessment, the Companies reached a settlement with Spain’s tax authorities for the 2010 through 2013 tax years that had been under audit for a similar matter. Alcoa Corporation’s share of this settlement was not material to the Company’s Consolidated Financial Statements. The ultimate outcomes related to the 2003 through 2005 and the 2010 through 2013 tax years are not indicative of the potential ultimate outcome of the assessment for the 2006 through 2009 tax years due to procedural differences. ~~Additionally,~~Also, it is possible that the Companies may receive similar assessments for tax years subsequent to 2013; however, management does not 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 is $0 to $27 (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 $30 (R$117), which would increase the net carrying value of AWAB’s fixed assets if ultimately disallowed. 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.

Reynolds—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.

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 Sherwin, TX in Environmental Matters above)~~ 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.

~~Through the bankruptcy proceedings, the~~In January 2016, Sherwin Alumina Company, LLC (Sherwin), a successor owner of ~~Sherwin exercised~~the refinery previously owned by Reynolds, filed for bankruptcy due to its ~~right under the U.S. Bankruptcy Code~~inability 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~~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 and Sherwin as described below.~~Power.

~~Gregory Power:~~~~On January 26, 2016, Gregory Power delivered notice~~Sherwin: This matter sought to Reynolds that Sherwin’s bankruptcy filing constitutes a breach of the ESA; on January 29, 2016, Reynolds responded that the filing 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 based 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.~~

~~Sherwin:~~ ~~On October 4, 2016, the Texas Commission on Environmental Quality (TCEQ) filed suit against Sherwin in the bankruptcy proceeding seeking to hold Sherwin responsible~~determine responsibility for remediation of ~~alleged~~ environmental conditions at the Sherwin refinery site and related bauxite residue waste disposal areas (known as the Copano 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 had been negotiating an allocation among them as to the ownership of and responsibility for certain areas of the refinery and the Copano facility. In ~~March~~May 2018, Reynolds and Sherwin ~~reached~~concluded a settlement agreement, which was accepted by the bankruptcy court in June 2018, that ~~assigns~~assigned to Reynolds all environmental liabilities associated with the Copano facility and ~~assigns~~assigned to Sherwin all environmental liabilities associated with the Sherwin refinery site. Additionally, Reynolds and TCEQ reached an agreement that defines the operating and environmental steps required for the Copano facility, which Reynolds intends to operate for the purpose of managing materials other than bauxite residue waste, including third-party dredge material. The effectiveness and enforceability of each of these two agreements are~~pre-conditioned~~ on the other being accepted by the bankruptcy court. A public notice and comment period on these agreements expired on April 26, 2018 without material affect to the documents. On June 5, 2018, the bankruptcy court accepted and entered the agreements into the judicial record as submitted. This date serves as the “effective date” for both agreements.

On June 5, 2018, the transaction between Sherwin and Reynolds was completed. Under the agreement with Sherwin, in exchange for assuming full responsibility for the environmental-related liabilities (see below related to the Company’s existing reserve) associated with the Copano facility, Reynolds assumed ownership of the land that comprises the Copano facility, as well as land that serves as a buffer around the Copano facility and other related assets. A third-party appraisal estimated the fair value of the land and other assets to be $16. Under the agreement with TCEQ, a portion of the Copano facility must be closed within 10 years and the remaining portion must be closed within 30 years, both timeframes began on the effective date. Also, Reynolds is required to install upgrades to certain dust control systems and repair certain structures and drainage systems at the Copano facility, and prepare and submit to TCEQ a preliminary groundwater assessment report and a drinking water survey report related to the Copano facility within 180 days of the effective date. Accordingly, the Company recognized $16 in properties, plants, and equipment, $9 in environmental remediation liabilities, and $7 in other related liabilities. Additionally, the Company paid $12 into a trust managed by the state of Texas as financial assurance of the Company’s performance in completing the required obligations. This amount will be returned to the Company upon satisfactory completion of the future closure of the Copano facility in accordance with all applicable laws and regulations. On June 7, 2018, Sherwin filed a notice of dismissal in the suit against Reynolds; the dismissal was immediately effective as no court order was required.

At ~~the time the agreements were signed by all parties,~~March 31, 2019, the Company had a reserve of ~~$29~~$38 for its ~~proportionate~~ share of environmental-related matters at ~~both the~~Copano facility. (See Sherwin, ~~refinery site and the Copano facility based on the terms of the divestiture of the Sherwin refinery in 2000 (see Sherwin, TX~~Texas in Environmental Matters ~~above). While~~above.)

Gregory Power: In January 2016, Gregory Power delivered notice to Reynolds no longer has any responsibility for environmental-related matters at the Sherwin refinery site, it assumed additional responsibility for environmental-related matters at the Copano facility ($9 – see above). In management’s judgment, the $38 reserve as of June 30, 2018 is sufficient to satisfy the Company’s revised responsibilities and obligations under the settlement agreements. Upon changes in facts or circumstances,that Sherwin’s bankruptcy filing constitutes a ~~change to the reserve may be required.~~

~~Suralco—~~On December 16, 2016, Boskalis International B.V. (Boskalis) initiated a binding arbitration proceeding against Suriname Aluminum Company, LLC (Suralco), an AWAC company, seeking $47 plus prejudgment interest and associated taxes in connection with a dispute arising under a contract for mining services in Suriname between Boskalis and Suralco. Boskalis asserted four separate claims under the contract.

~~In February 2018, the arbitration hearing was held before a three-person panel under the rules~~breach of the ~~International Chamber~~ESA. Since that time, various responses, complaints and motions have been actioned, including the addition of ~~Commerce.~~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 panel issued its decision on May 29, 2018, finding in favor of Boskalis on two claims and against Boskalis on two claims. For the two claims on which Boskalis prevailed, the panel awarded Boskalis $29, including prejudgment interest of $3. The awardsettlement is final and cannot be appealed. Accordingly, in the 2018 second quarter, Alcoa Corporation recorded a charge of $29 ($17 after noncontrolling interest), including $26 in Cost of goods sold and $3 in Interest expenseconditioned on the ~~accompanying Statement~~execution of various commercial agreements, which are being finalized at this time. The settlement does not have an impact on the Consolidated ~~Operations. On June 6, 2018, the Company made the $29 cash payment to Boskalis closing this matter.~~Financial Statements.

The claim that represented the majority of the arbitration award centered around a contract provision requiring Suralco to make a “true up” payment at the end of the contract in the event that Suralco was unable to receive delivery of the full contract quantity, thus allowing Boskalis to recover its fixed production costs and a suitable return on its investment. While Suralco argued that all required deliveries had been made during the amended contract term and that no “true up” payment was required because a “true up” would amount to a double payment for bauxite deliveries after the initial contract term, Boskalis argued that the deliveries were not made within the original contract term and thus, a “true up” payment was required. On the basis of its analysis of the facts and applicable law, management concluded that the likelihood of an unfavorable decision on Boskalis’ claims was remote (25% or less). Throughout the course of the proceeding, and even after the conclusion of the hearing, management’s judgment of the likelihood of an unfavorable outcome remained the same.

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 is not readily determinable because of the considerable uncertainties that exist. 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.

Alcoa Corporation has an investment 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 of three separate companies as follows: one each for the mine and refinery, the smelter, and the rolling mill. Alcoa Corporation accounts for its investment in the joint venture under the equity method. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the carrying value of Alcoa Corporation’s investment in this joint venture was ~~$889~~$863 and ~~$887,~~$874, respectively.

Capital investment in the project is expected to total approximately $10,800 (SAR 40.5 billion) and has been funded through a combination 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 $66 (Ma’aden contributed $199) to the joint venture in 2017 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 rolling mill ~~and mining and refining companies have~~company has project financing totaling ~~$3,246~~$1,179 (reflects principal repayments made through ~~June 30, 2018)~~March 31, 2019), of which ~~a combined $815~~$296 represents Alcoa Corporation’s ~~and AWAC’s respective~~ 25.1% interest in the rolling mill ~~company and the mining and refining~~ company. Alcoa Corporation ~~itself and on behalf of AWAC,~~ has issued guarantees (see below) to the lenders in the event of default on the debt service requirements by the rolling mill company through 2018 and 2021 ~~and by the mining and refining company through 2019 and 2024~~ (Ma’aden issued similar

guarantees related to its 74.9% interest). Alcoa Corporation’s guarantees for the rolling mill ~~and mining and refining companies~~ cover total remaining debt service requirements of ~~$107~~$50 in principal and up to a maximum of approximately ~~$35~~$10 in interest per year (based on projected interest rates). Previously, Alcoa Corporation issued similar guarantees related to the project financing of both the smelting company and the mining and refining company. In December 2017 and July 2018, the smelting company and the mining and refining company, respectively, refinanced and/or amended all of ~~its~~their existing outstanding debt. The guarantees that were previously required of the Company related to both the smelting company and the mining and refining company were effectively terminated. At ~~June 30, 2018~~both March 31, 2019 and December 31, ~~2017,~~2018, the combined fair value of the guarantees was ~~$3,~~$1, 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 related to the mining and refining company, 40% of such amount would be contributed to Alcoa Corporation by Alumina Limited, consistent with its ownership interest in AWAC.

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.

~~In the 2017six-month~~ ~~period, Net gain from asset sales included a $120 gain related to the sale of certain energy operations in the United States.~~

~~P. Subsequent Events~~ – Management evaluated all activity of Alcoa Corporation 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.24

On July 6, 2018, Alcoa Corporation, along with Arconic, received notice of a court decision related to an outstanding appeal of an income tax matter associated with a former Spanish consolidated tax group previously owned by ParentCo (see “Spain” in the Tax section of Note N).

We have reviewed the accompanying consolidated balance sheetof Alcoa Corporation and its subsidiaries (the “Company”) as of June 30, 2018, and the related statements of consolidated operations, consolidated comprehensive (loss) income, and changes in consolidated equity for the three-month and ~~six-month~~ ~~periods ended June 30, 2018 and 2017 and the statement of consolidated cash flows for thesix-month~~ periods ended June 30, 2018 and 2017, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2017, 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 February 23, 2018, 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, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. 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 PCAOB, 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.

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; dry metric tons in millions (mdmt); metric tons in thousands (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 October 31, 2016, at which time it was renamed Arconic Inc. (Arconic)). On November 1, 2016 (the ~~“Separation Date”)~~Separation Date), ParentCo separated into two standalone, publicly-traded companies, Alcoa Corporation and Arconic (the ~~“Separation Transaction”)~~Separation Transaction). In connection with the Separation Transaction, as of October 31, 2016, the Company and Arconic entered into several agreements to effect the Separation Transaction, including a Separation and Distribution Agreement and a Tax Matters Agreement. See Overview in ~~the~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 of Alcoa Corporation’s Annual Report on Form10-K for the year ended December 31, ~~2017~~2018 for additional information.

Net ~~income~~loss attributable to Alcoa Corporation was ~~$75, or $0.39 per diluted share,~~$199 in the ~~2018 second~~first quarter of 2019 compared with ~~$75, or $0.40 per share,~~net income of $195 in the ~~2017 second~~first quarter ~~and $225, or $1.19 per share, in the 2018six-month~~ ~~period compared to $300, or $1.61 per share, in the 2017six-month~~ ~~period.~~

The results in the 2018 second quarter compared to the 2017 second quarter were mainly driven by improved pricing for both aluminum products and alumina. This positive impact was offset by a charge associated with the settlement of ~~certain employee retirement benefit obligations, higher raw materials and maintenance costs, and charges related to operational decisions on a U.S. smelter.~~

~~In the 2018six-month~~ ~~period, the~~2018. The decrease in results of ~~$75~~$394 was principally related to ~~a net charge for several actions associated with employee retirement benefit plans,~~lower metal prices, higher energy costs in the ~~absence of a gain on the sale of certain energy operations,~~Aluminum segment, higher ~~raw materials and~~ maintenance costs in the Alumina segment, and ~~charges~~costs related to ~~operational decisions on a U.S. smelter. These negative impacts were mostly offset by improved pricing for both aluminum products and alumina.~~curtailing two smelters in Spain.

~~Sales—~~Sales—Sales ~~improved $720,~~declined $371, or ~~25%, and $1,155, or 21%~~12%, in the ~~2018 second~~first quarter ~~andsix-month~~ ~~period, respectively,~~of 2019 compared towith the same ~~periods~~period in ~~2017. In both periods, the increase~~2018. The decrease was largely attributable to a ~~higher average realized~~lower metal price, ~~for each~~lower shipments of alumina and primary aluminum, and lower revenue from flat-rolled ~~aluminum.~~aluminum products due to the end of the tolling arrangement with Arconic in December 2018.

Cost of goods ~~sold—~~~~COGS as~~sold—As a percentage of Sales, Cost of goods sold was ~~73.5%~~80.2% in the ~~2018 second~~first quarter ~~and 75.2%~~of 2019 compared with 74.5% in the ~~2018six-month~~ ~~period compared with 80.0% in the 2017 second~~first quarter ~~and 78.2% in the 2017six-month~~ ~~period.~~of 2018. The 2019 percentage ~~in both periods~~ was ~~positively~~negatively impacted by ~~a higher average realized price~~lower sales for ~~both~~ aluminum products ~~and alumina, somewhat offset by~~along with higher costs for carbon materials, energy and ~~caustic soda,~~maintenance related expenses.

Selling, general administrative, and other expenses—Selling, general administrative, and other expenses increased ~~maintenance expenses,~~by $17, or 25%, in the first quarter of 2019 compared with the corresponding period in 2018 primarily due to the recording of a bad debt reserve against a Canadian customer receivable caused by bankruptcy and ~~net unfavorable~~higher costs to support the Spanish collective dismissal process, partially offset by favorable foreign currency ~~movements due to~~impact from a ~~weaker~~strengthening U.S. dollar.

Provision for depreciation, depletion, ~~amortization—~~~~The provision~~and amortization—Provision for ~~DD&A increased $2,~~depreciation, depletion, and amortization decreased $22, or ~~1%, and $17, or 5%~~11%, in the ~~2018 second~~first quarter ~~andsix-month~~ ~~period, respectively,~~of 2019 compared with the corresponding ~~periods~~period in ~~2017. In both periods, the increase was~~2018 primarily due to ~~higher amortization~~a group of ~~deferred mining costs($5-second~~ ~~quarter and$12-six~~ ~~months) and awrite-off~~assets related to ParentCo’s 1998 acquisition of ~~costs for projects no longer being pursued($3-second~~ ~~quarter and$6-six~~ ~~months). The negative impact in~~Alumax reaching the ~~2018 second quarter was partially offset by net~~end of their depreciable lives along with favorable foreign currency ~~movements, due mostly to a stronger U.S. dollar~~impacts primarily against the Brazilian ~~real.~~

~~Restructuring and other charges—~~Restructuring and other charges, net—Restructuring and other charges, net in the ~~2018~~first quarter of 2019 was a net charge of $113 which is primarily comprised of $103 for exit costs related to the curtailment of the Avilés and La Coruña aluminum facilities in Spain; $7 for closure costs related to a coal mine; and a $3 net charge for various items.

Alcoa Corporation expects to incur additional charges to fulfill the agreement’s social plan, which includes severance plans, early retirement benefits and potential employee relocation to the Company’s San Ciprián (Spain) facility, or to execute a third-party acquisition of the facilities. Such charges are expected to be recorded in the second quarter ~~andsix-month~~ ~~period were $231~~of 2019 and ~~$212, respectively,~~are estimated to range from $70 to $125 (pre- and after-tax), depending on the outcome of the collective dismissal process. Approximately 75 percent would be cash outlays in 2019.

In the first quarter of 2018, Alcoa Corporation recorded a net benefit of $19 in Restructuring and other charges, net, which ~~were~~was comprised of ~~the following components: $167 and $144 (net), respectively,~~a $23 net gain related to ~~settlements and/or curtailments~~the curtailment of certain pension and other postretirement employee benefits; $80 and $84, respectively, for additional costs related to the curtailed Wenatchee (Washington) smelter, including $73 in both periods associated with recent management decisions (see below); a $15 net benefit in both periods related to the Portovesme (Italy) smelter;benefits and a ~~$1 net benefit in both periods for miscellaneous items.~~

~~Restructuring and other charges in the 2017 second quarter andsix-month~~ ~~period were $12 and $22, respectively, which were comprised of the following components: $5 and $18, respectively,~~ for additional contract costs related to the curtailed Wenatchee smelter; $11 and $13, respectively, for layoff costs related to cost reduction initiatives, including the separation of approximately 110 employees in the Aluminum segment; and a reversal of $4 and $9, respectively, associated with several reserves related to prior periods.(Washington) smelter.

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:

As of June 30, 2018, approximately 125 of the 140 employees associated with 2017 restructuring programs were separated. The remaining separations for the 2017 restructuring programs are expected to be completed by the end of 2018.

~~In the 2018six-month~~ ~~period, cash payments of $2 were made against layoff reserves related to 2017 restructuring programs.~~

Other expenses, ~~(income), net—~~net— Other expenses, net was $9$41 in the ~~2018 second~~first quarter of 2019 compared with ~~$28~~$21 in the ~~2017 second~~first quarter ~~and Other expenses, net was $30 in the 2018six-month~~ ~~period compared to Other income, net~~ of ~~$51 in the 2017six-month~~ ~~period.~~

2018. The ~~positive~~ change of ~~$19~~$20 was largely attributable to the unfavorable change in mark-to-market impacts on derivative instruments ($17), the ~~2018 second quarter was principally~~unfavorable change in Alcoa Corporation’s share of the ~~result of net favorable~~earnings from equity method investments ($10), and unfavorable foreign currency movements ($~~19) and a smaller net loss onmark-to-market~~ ~~derivative instruments ($13)~~9), partially offset by ~~higher~~lower non-service costs related to pension and other postretirement employee benefit plans ($~~17).~~

~~In the 2018six-month~~ ~~period, the negative change of $81 was largely attributable to the absence of~~9) and a higher gain on the sale of ~~certain energy operations in the United States~~assets ($~~120) and highernon-service~~3). ~~costs related to pension and other postretirement employee benefit plans ($34). These items were partially offset by a net favorable change in each of the following: foreign currency movements ($32),mark-to-market~~ ~~derivative instruments ($27), and Alcoa Corporation’s share of the earnings of the aluminum complex joint venture in Saudi Arabia ($11).~~

Noncontrolling ~~interest—~~interest—Net income attributable to noncontrolling interest was ~~$155~~$141 in the ~~2018 second~~first quarter ~~and $279~~of 2019 compared with $145 in the ~~2018six-month~~ ~~period compared with $63 in the 2017 second~~first quarter ~~and $146 in the 2017six-month~~ ~~period.~~of 2018. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities, which own, 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 (Aluminum segment) 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% of these individual entities, which are consolidated by the Company for financial reporting purposes and include Alcoa of Australia Limited (AofA), 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.

In the ~~2018 second~~first quarter ~~andsix-month~~ ~~period,~~of 2019, these combined entities, particularly the Alumina segment entities, generated ~~higher~~lower net income compared towith the same ~~periods~~period in ~~2017.~~2018. The ~~favorable~~unfavorable change in earnings was ~~mainly~~mostly driven by ~~an improvement in operating results~~higher costs (see ~~Bauxite and~~ Alumina inunder Segment Information below).

Bauxite production increased 3%6% in the ~~2018 second~~first quarter ~~and 2% in the 2018six-month~~ ~~period~~of 2019 compared with the ~~corresponding periods in 2017.~~first quarter of 2018. The improvement ~~in both periods~~ was ~~primarily due~~largely attributable to higher production at ~~six~~five of ~~this~~the segment’s seven mines, ~~including Boké (Guinea), due to~~primarily at the ~~absence of a force majeure event (civil unrest) that disrupted normal operations in the 2017 second quarter,~~Huntly (Australia) and ~~Huntly~~Willowdale (Australia)~~, Al Ba’itha (Saudi Arabia), and Juruti (Brazil), each of which due to planned increases. In both periods, the higher production was somewhat~~ mines, offset by ~~a decline~~slightly lower production at the Boké (Guinea) and Trombetas (Brazil) ~~mine due to the consortium’s decision to reduce production in response to a partial curtailment of a third-party alumina refinery in Brazil.~~mining operations.

Third-party sales for the Bauxite segment ~~declined 4%~~increased 38% in the first quarter of 2019, compared with the first quarter of 2018. The increase was principally caused by an increase in the realized price, primarily due to freight, combined with a 9% increase in volume.

Intersegment sales decreased 5% in the first quarter of 2019 compared with the corresponding period in 2018, primarily driven by a reduction in volume.

Segment Adjusted EBITDA increased $16 in the first quarter of 2019 compared with the same period in 2018. The improvement was mainly the result of the increase in third-party realized price and ~~17%~~favorable foreign currency movements due to a stronger U.S. dollar against the Australian dollar and Brazilian real, offset by lower average realized price and volume for intersegment sales.

For the 2019 second quarter in comparison with the 2018 second quarter, ~~andsix-month~~ ~~period, respectively, compared~~a production increase at the Juruti (Brazil) mine is planned to cover an expected decrease in production at the ~~same periods in 2017. In the 2018 second quarter, the decrease was mostly driven by a drop in average realized price. The decline in the 2018six-month~~ ~~period was principally caused by lower volume and a drop in average realized price.~~

~~Intersegment sales increased 9% in the 2018 second quarter and 11% in the 2018six-month~~ ~~period compared with the corresponding periods in 2017, mainly the result of a higher average realized price.~~

~~Adjusted EBITDA for this segment increased $3 in both the 2018 second quarter andsix-month~~ period, respectively, compared to the same periods in 2017. The increase in both periods was largely attributable to the previously mentioned higher average realized price for intersegment sales mostly offset by higher maintenance and transportation expenses.

~~In the 2018 third quarter (comparison with the 2017 third quarter),~~Trombetas (Brazil) mining operations. Additionally, higher production at the ~~Juruti (Brazil) and~~ Huntly (Australia) ~~mines are anticipated as this segment expands its mining areas.~~mine is projected.

At ~~June 30, 2018,~~March 31, 2019, the Alumina segment had 2,519 kmt of curtailed refining capacity ~~(idle assets and process slowdowns)~~ on a base capacity of 15,064 kmt. Both curtailed capacity and base capacity were unchanged compared towith March 31, 2018.

Alumina production ~~decreased~~increased by 1%2% in ~~both~~ the ~~2018 second~~first quarter ~~andsix-month~~ ~~period~~of 2019 compared with the corresponding ~~periods~~period in ~~2017,~~2018, principally ~~caused by equipment and process issues at~~due to stabilization of operations across the ~~Pinjarra (Australia) and São Luís (Brazil) refineries, mostly offset by higher production at nearly all other refineries within this segment’s global~~ refining system.

Third-party sales for the Alumina segment ~~improved 43%~~decreased 2% in the ~~2018 second~~first quarter ~~and 34% in the 2018six-month~~ ~~period~~of 2019 compared towith the same ~~periods~~period in ~~2017. The increase in both periods was mostly related~~2018, due primarily to ~~a 49% (second quarter) and 33% (six months) rise in average realized price. The positive impact in the 2018 second quarter was slightly offset by a 4% decrease in~~decreased volume. In ~~both periods,~~ the ~~change in average realized price was principally driven by a 64% (second quarter) and 37% (six months) higher average alumina index price (on30-day~~ ~~lag). In the 2018 second~~first quarter ~~andsix-month~~ ~~period, 94% and 95%, respectively,~~of 2019, 93% of smelter-grade third-party shipments were based on the alumina index/spot price, compared with ~~86%~~96% in ~~both~~ the ~~2017 second~~first quarter ~~andsix-month~~ ~~period.~~of 2018.

Intersegment sales ~~improved 40% and 33%~~declined 8% in the ~~2018 second~~first quarter ~~andsix-month~~ ~~period, respectively,~~of 2019 compared with the corresponding ~~periods~~period in ~~2017,~~2018. The decline was primarily due to a ~~higher average realized price. The positive impact in the 2018 second quarter was slightly offset by~~ decreased ~~shipments to the Aluminum segment. The lower~~ demand from the Aluminum segment which was partially caused by the curtailments of the Avilés (Spain) and La Coruña (Spain) smelters (see Aluminum below).

Segment Adjusted EBITDA decreased $20 in the first quarter of 2019 compared with the same period in 2018. The decline was largely attributable to ~~the absence of shipments to a smelter in Canada~~higher costs for direct materials including bauxite and energy, as well as increased maintenance expenses due to equipment and process issues in Australia and the ~~curtailment of two potlines in January 2018 (see Aluminum below),~~São Luís (Brazil) refinery. These impacts were partially offset by ~~increased shipments related~~net favorable foreign currency movements due to ~~both~~a stronger U.S. dollar, particularly against the ~~partial restart of a U.S. smelter in~~Australian dollar.

For the 2019 second quarter ~~of 2018 and capacity restarted inmid-2017~~ ~~that was curtailed~~ in ~~December 2016 at a smelter in Australia (see Aluminum below).~~

~~Adjusted EBITDA for this segment climbed $411 in~~comparison with the 2018 second quarter, ~~and $506~~an increase in ~~the 2018six-month~~ ~~period compared to the same periods in 2017. In both periods, the improvement was mainly the result of the previously mentioned higher average realized prices, slightly offset by a higher cost~~production is expected with lower unit costs for caustic soda ~~increased maintenance and transportation expenses, and~~but higher usage due to the anticipation of lower ~~total volume.~~

bauxite quality. In addition, the ~~2018 third quarter (comparison~~Alumina segment projects higher bauxite costs, along with ~~the 2017 third quarter), higher costs for both caustic soda and energy and~~ an increase in maintenance ~~expenses are expected.~~expense due to planned outages.

In January 2018, a lockout of the bargained hourly employees commenced at the Bécancour (Canada) smelter, as labor negotiations reached an impasse. Accordingly, management initiated a curtailment of two (207 ~~kmt)~~kmt (Alcoa’s share)) of the three potlines at the smelter. Additionally, in December 2018, half (52 kmt (Alcoa’s share)) of the remaining operating potline being operated by salaried employees was curtailed. This additional curtailment was deemed necessary to ensure continued safety and maintenance due to recent retirements and departures among the salaried workforce.

In accordance with the ~~2018 second quarter,~~previously announced plan of restarting three (161 kmt) of the five potlines at the Warrick (Indiana) smelter, Alcoa ~~Corporation~~ completed the restart of two potlines (108 kmt) in June 2018 and one other (53 kmt) in December 2018. The smelter capacity restarted directly supplies the existing rolling mill at the location improving efficiency of the ~~three potlines included~~integrated site and providing additional source of metal to help meet an anticipated increase in production volumes.

In February 2019, the Company’s Avilés and La Coruña smelters, with a combined remaining operating capacity of 124 kmt, were curtailed and are being maintained in restart condition through June 30, 2019, in the ~~partial restart plan (announced~~event that third parties have interest in ~~July 2017) for~~acquiring the ~~Warrick (Indiana) smelter. In May 2018, the third line (53 kmt) scheduled for restart had been shut down due to pot instability, which caused a temporary power outage.~~facilities. The ~~Company now expects to complete the restart of the third potline by the end of 2018; costs to restart this line are not expected to be material.~~

~~In June 2018, management approved the permanent closure of one (38 kmt) of the four potlines~~casthouse at ~~the Wenatchee (Washington) smelter. This potline has not operated since 2001,~~each facility and the ~~investments needed to restart that line are cost prohibitive. The other three potlines (146 kmt)~~paste plant at ~~this smelter~~La Coruña remain ~~curtailed. See Restructuring and other charges~~ in ~~Results of Operations above for a description of charges associated with this closure.~~operation.

At ~~June 30, 2018,~~March 31, 2019, the Aluminum segment had ~~917~~1,040 kmt of idle smelting capacity on a base smelting capacity of 3,173 kmt. ~~Idle capacity decreased by 146 kmt and base capacity decreased by 38 kmt compared to~~In comparison with March 31, ~~2018. The decrease in~~2018, idle capacity ~~during the 2018 second quarter was~~increased 124 kmt due to the curtailments at the Spanish smelters, and increased 52 kmt due to the half potline curtailment at the Bécancour (Canada) smelter. The idle increases were offset by decreases of 161 kmt due to the partial restart of ~~108~~Warrick (Indiana) smelting capacity, and 38 kmt due to the removal of ~~capacity at the Warrick smelter and the permanent closure~~a permanently closed potline (one of ~~38 kmt~~four) at the Wenatchee ~~smelter. The decrease~~(Washington) smelter in June 2018. Correspondingly, base smelting capacity ~~during the 2018 second quarter was~~ also decreased 38 kmt due to the permanent closure of ~~38 kmt~~the one potline at the Wenatchee smelter.

Primary aluminum production decreased ~~2% and 1%~~3% in the ~~2018 second~~first quarter ~~andsix-month~~ ~~period, respectively,~~of 2019 compared with the corresponding ~~periods~~period in ~~2017. The decline in both periods was~~2018 principally due to ~~lower~~the production at the Bécancour smelter as a result of the previously mentioned curtailment, mostly offset by new production at the Warrick smelter due to the partial restart of capacity in the 2018 second quarter and higher production at the Portland (Australia) smelter due to the completed restart in~~mid-2017~~ ~~of capacity that was curtailed in December 2016 as a result of an unexpected power outage caused by a fault in the Victorian transmission network.~~changes discussed above.

Third-party sales for the Aluminum segment ~~improved 21%~~decreased 18% in the ~~2018 second~~first quarter ~~and 19% in the 2018six-month~~ ~~period~~of 2019 compared towith the same ~~periods~~period in ~~2017. In both periods, the increase~~2018. The decrease was ~~largely~~primarily attributable to a ~~19% rise~~reduction in ~~average realized~~metal price ~~of primary aluminum, higher pricing for flat-rolled aluminum,~~ and a ~~2% (second quarter) and 1% (six months) increase~~decrease in overall aluminum volume.

The change in average realized price of primary aluminum was mainly driven by a ~~16% (second quarter) and 18% (six months) higher~~14% lower average LME price (on15-day lag) ~~and~~offset by increased regional premiums, particularly the Midwest premium (United States and Canada), which rose by an average of ~~140% (second quarter) and 92% (six months) in~~37%. Since the ~~United~~

~~States and Canada and 42% (second quarter) and 27% (six months) in Europe.~~first quarter of 2018, the Midwest premium has significantly increased as a result of the imposition of a 10% tariff on aluminum imports under the U.S. government’s Section 232 action. The ~~higher~~lower overall ~~aluminum~~ volume was primarily the result of ~~increased primary aluminum shipments, mostly offset by~~ a decline in flat-rolled aluminum shipments ~~in accordance with~~caused by the ~~targeted volumes defined in~~end of the tolling arrangement with ~~Arconic.~~Arconic in December 2018. Additionally, primary aluminum shipments were lower in the first quarter due to the curtailments at the Spanish smelters (Avilés and La Coruña) and the half potline curtailment at the Bécancour (Canada) smelter.

Segment Adjusted EBITDA ~~for this segment~~ decreased ~~$3 and $67~~$283 in the ~~2018 second~~first quarter ~~andsix-month~~ ~~period, respectively,~~of 2019 compared with the corresponding ~~periods~~period in ~~2017.~~2018. The decline ~~in both periods~~ was largely related to ~~higher costs for alumina, carbon materials, and energy; net unfavorable foreign currency movements due to a weaker U.S. dollar, particularly against~~ the ~~euro; realized losses from embedded derivatives in energy supply contracts due to the rise in~~lower LME aluminum prices; increased maintenance and transportation expenses; and costs for tariffs on imports from this segment’s foreign operations, primarily from Canada, which was subjected to U.S. Section 232 tariffs effective June 1, 2018. These negative impacts were mostly offset by the previously mentioned higher average realized price, ~~of primary aluminum.~~

In the 2018 third quarter (comparison with the 2017 third quarter), primary aluminum production is expected to be lower due to the absence of production from the two curtailed potlines at the Bécancour smelter partially offset by production from the partial restart of the Warrick smelter. Also, higher costs for alumina, carbon materials and energy, ~~are expected.~~as well as Section 232 tariffs for Canadian metal imported to the U.S. In addition, the lower results include a $20 charge to establish a bad debt reserve against a Canadian customer receivable due to bankruptcy.

In the second quarter of 2019, Alcoa expects lower alumina costs to the Aluminum segment and improved results related to the Spanish smelter curtailments.

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

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

⁽⁵⁾	Other includes certain items that impact Cost of goods sold and Selling, general administrative, and other expenses on Alcoa Corporation’s Statement of Consolidated Operations that are not included in the Adjusted EBITDA of the reportable segments.

The changes in the Transformation, Corporate inventory accounting, Corporate expenses, and Other reconciling items (see Results of Operations above for significant changes in the remaining reconciling items) for the 2018 second quarter and~~six-month~~ ~~period compared with the corresponding periods in 2017 (unless otherwise noted) consisted of:~~

a change in Transformation, largely attributable to the absence of (i) a loss on a power contract (terminated in October 2017) associated with the closed Rockdale (Texas) smelter (i.e. the cost of power under the contract exceeded the price of the surplus electricity sold into the energy market) and (ii) holding costs related to the Warrick smelter prior to the July 2017 decision to partially restart the facility;

~~a change in Corporate inventory accounting, the result of~~

an unfavorable impact related to intersegment profit eliminations, principally caused by an increase (from December 31, 2017 to June 30, 2018) in the cost of alumina compared to a decrease (from December 31, 2016 to June 30, 2017) in the cost of alumina held in inventory by the Aluminum segment at June 30, 2018 and 2017, respectively,

a higher benefit related to the impact of metal price lag, due to a higher increase in the price of aluminum at June 30, 2018 indexed to December 31, 2017 compared to the price of aluminum at June 30, 2017 indexed to December 31, 2016 (the increase in the price of aluminum in both periods was mostly driven by higher base metal prices (LME) and U.S. regional premiums), and

~~a lower charge related to the impact of LIFO, mostly due to~~

~~lower levels ofon-hand~~ ~~aluminum inventory held by the rolling operations, principally related to targeted volumes defined in the tolling arrangement with Arconic, partially offset by~~

higher aluminum prices (both base metal prices (LME) and U.S. regional premiums) – a higher forecasted increase in the price of aluminum for full year 2018 at June 30, 2018 indexed to December 31, 2017 compared to the then-forecasted increase in the price of aluminum for full year 2017 at June 30, 2017 indexed to December 31, 2016;

~~a decline in Corporate expenses, primarily due to decreases across several corporate overhead costs; and~~

~~a change in Other, mainly driven by a loss on a contractor arbitration matter($26-both~~ ~~periods) and costs related to the partial restart of the Warrick smelter($2-second~~ ~~quarter and$18-six~~ ~~months).~~

Environmental Matters

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

Liquidity and Capital Resources

Cash from Operations

Cash ~~used for~~provided from operations was ~~$375~~$168 in the ~~2018six-month~~2019 three-month period compared with ~~cash provided from operations of $385~~$55 in the same period of ~~2017,~~2018, resulting in an increase in cash ~~used~~provided of ~~$760.~~

~~In the 2018six-month~~ ~~period, the use of~~$113. The increase in cash from operations was due to ~~an unfavorable~~the following:

a favorable change of $211 in certain working capital ~~of $731, pension contributions of $692 (see below),~~accounts (receivables, inventories, and ~~a combined negative change in noncurrent assets and noncurrent liabilities of $79, partially offset by a positiveadd-back~~ ~~fornon-cash~~ ~~transactions in earnings of $623 and net income of $504. The components of the unfavorable change in working capital were as follows:~~accounts payable, trade);

a ~~negative~~positive change of ~~$209~~$74 resulting from the non-recurrence of a payment made in ~~receivables, primarily due to higher pricing for alumina and aluminum product customer shipments;~~

~~an unfavorable change~~the first quarter of ~~$267 in inventories, mainly caused by increased costs for caustic soda and carbon materials and a build of inventory for the partial restart of the Warrick smelter;~~

~~a negative change of $8 in prepaid expenses and other current assets;~~

an unfavorable change of $105 in accounts payable, trade, largely attributable to the timing of payments and lower purchases at a smelter in Canada due to 207 kmt of capacity curtailed in January 2018;

a negative change of $243 in accrued expenses, principally driven by $93 in payments for restructuring-related actions (includes $62 under the provisions of the electricity supply agreement for the Wenatchee smelter – see Restructuring and other charges in Results of Operations above), $74 for the final payment2018 related to a legacy legal matter with the U.S. government assumed by the Company in the Separation Transaction, $56 in payments under other postretirement employee benefit plans, $53 in payments for asset retirement obligations and environmental remediation, a $43 interest payment related to the Company’s outstanding notes due in 2024 and 2026, and an $18 payment for the settlement of a legal matter in Italy;Transaction; and

a favorable change of ~~$101 in taxes, including income taxes, mostly related to an increase in the income tax provision for the operations in Australia.~~

~~The~~$33 from lower pension contributions reflect $605 of unscheduled payments made in the 2018 second quarter, including a combined $500 to three of the Company’s U.S. defined benefit pension plans and a combined $105 to two of the Company’s Canadian defined benefit pension plans. The additional payments to the U.S. plans were discretionary in nature and were funded with $492 in net proceeds from a May 2018 debt issuance (see Financing Activities below) plus available cash on hand. The primary purpose of the U.S. discretionary funding was to reduce near-term pension funding risk with a fixed-rate,~~10-year~~ maturity instrument. Of the additional payments to the Canadian plans, $89 was made in April 2018 to facilitate the annuitization of a portion of the future obligations under these plans and maintain the funding level of the remaining plan obligations.

~~The source of cash in the 2017six-month~~ ~~period was due to net income of $446 and a positiveadd-back~~ ~~fornon-cash~~ ~~transactions in earnings of $405, partially~~contributions; offset by, an unfavorable change in working capital of $372, a combined negative change in noncurrent assets and noncurrent liabilities of $47, and pension contributions of $47. The components of the unfavorable change in working capital were as follows:

~~a negative change of $75 in receivables, mostly related to higher sales;~~

an unfavorable change of ~~$86~~$210 from the reduction in ~~inventories,~~net income ($398) net of the change in non-cash items ($188). The increase in non-cash items are primarily ~~due~~attributable to ~~a seasonal build in flat-rolled aluminum products and an increased cost for caustic soda;~~

~~a positive change of $52 in prepaid expenses~~Restructuring and other ~~current assets, principally driven by~~charges, net for the curtailment of the two Spanish smelters and the provision for bad debt expense recorded as a ~~decline in prepayments for aluminum inventory from the joint venture in Saudi Arabia;~~

~~a favorable change of $19 in accounts payable, trade, mainly the~~ result of ~~timing~~a Canadian customer filing for bankruptcy during the first quarter of ~~payments;~~2019.

~~a negative change~~In the second quarter of ~~$238 in accrued expenses, largely attributable~~2019, AofA expects to ~~a $74~~make the final true-up tax payment for a legacy legal matter with the U.S. government assumed by the Company in the Separation Transaction, $53 in payments under other postretirement employee benefit plans, $50 in payments for asset retirement obligations and environmental remediation, $45 in payments for restructuring-related actions, and a $43 interest paymentof approximately $310 related to the ~~Company’s outstanding notes due in 2024~~2018 tax year. Annually, AofA elects the income tax installment plan which produces the best cash flow results. During periods of

increasing profitability, large adjusting payments can result from the difference between elected monthly installment payments and ~~2026; and~~the actual tax liability calculated for the full tax year.

~~an unfavorable change of $44 in taxes, including income taxes.~~

Financing Activities

Cash ~~provided from~~used for financing activities was ~~$286~~$199 in the ~~2018six-month~~2019 three-month period, an increase in cash used of ~~$624~~$52 compared with cash used ~~for financing activities~~ of ~~$338~~$147 in the corresponding period of ~~2017.~~2018.

The ~~source~~use of cash in the ~~2018six-month~~2019 three-month period was primarily the result of $553 in additions to debt, virtually all of which was related to $492 in net proceeds from the issuance of new senior debt securities (see below) and $60 in borrowings under an existing term loan by AofA, partially offset by $276$194 in net cash paid to Alumina Limited (see Noncontrolling interest in Results of Operations above).

~~In the 2017six-month~~ ~~period, the~~The use of cash ~~was principally driven by a cash payment of $247 to Arconic, mostly representing the net proceeds from the sale of certain energy operations~~ in the ~~United States (see Investing Activities below), in accordance with~~2018 three-month period was primarily the ~~Separation and Distribution Agreement, and $99~~result of $214 in net cash paid to Alumina Limited (see Noncontrolling interest in Results of Operations above).

~~In May 2018, Alcoa 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 $492somewhat offset by $60 in net proceeds from the 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 well as costs to complete the financing, was deferred and is being amortized to interest expense over theborrowings under an existing term ~~of the 2028 Notes. Interest on the 2028 Notes will be paid semi-annually in November and May, commencing on November 15, 2018.~~

The 2028 Notes are senior unsecured obligations of ANHBV and do not entitle the holders to any registration rights pursuant to a registration rights agreement. ANHBV does not intend to file a registration statement with respect to resales of or an exchange offer for the 2028 Notes. The 2028 Notes are guaranteed on a senior unsecured basisloan by Alcoa Corporation and its subsidiaries that are guarantors under the Company’s Amended Revolving Credit Agreement (the “subsidiary guarantors” and, together with Alcoa Corporation, the “guarantors”) (see Financing Activities in Liquidity and Capital Resources included in Part II Item 7 of the Company’s Annual Report on FormAofA~~10-K~~. for the year ended December 31, 2017). Each of the subsidiary guarantors will be released from their 2028 Notes guarantees upon the occurrence of certain events, including the release of such guarantor from its obligations as a guarantor under the Revolving Credit Agreement.

The 2028 Notes indenture includes several customary affirmative covenants. Additionally, the 2028 Notes indenture contains several negative covenants, that, subject to certain exceptions, include limitations on liens, limitations on sale and leaseback transactions, and a prohibition on a reduction in the ownership of AWAC entities below an agreed level. The negative covenants in the 2028 Notes indenture are less extensive than those in the 2024 Notes and 2026 Notes (see Financing Activities in Liquidity and Capital Resources included in Part II Item 7 of the Company’s Annual Report on Form~~10-K~~ for the year ended December 31, 2017) indenture and the Amended Revolving Credit Agreement. For example, the 2028 Notes indenture does not include a limitation on restricted payments, such as repurchases of common stock and shareholder dividends.

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 May 2, 2018, Fitch Ratings (Fitch) affirmed a BB+ rating for Alcoa Corporation’s long-term debt. Additionally, Fitch raised the current outlook to positive from stable.~~

~~On May 14, 2018, Moody’s Investor Service (Moody’s) upgraded its rating for Alcoa Corporation’s long-term debt to Ba1 from Ba2. Additionally, Moody’s affirmed the current outlook as stable.~~

~~On May 14, 2018, Standard and Poor’s Global Ratings (S&P) upgraded its rating for Alcoa Corporation’s long-term debt to BB+ from BB. Additionally, S&P assigned the current outlook as stable.~~

Investing Activities

Cash used for investing activities was ~~$174~~$59 in the ~~2018six-month~~2019 three-month period compared with ~~cash provided from investing activities of $48~~$74 in the ~~2017six-month~~2018 three-month period, resulting in ~~an increase~~a decrease in cash used of ~~$222.~~$15.

In the ~~2018six-month~~2019 three-month period, the use of cash was ~~mainly due~~largely attributable to ~~$169~~$69 in capital expenditures, composed of ~~$130~~$51 in sustaining projects and ~~$39~~$18 in ~~return-seeking.~~

~~The source of cash in the 2017six-month~~ ~~period was largely attributable to $243 in net~~return-seeking projects, partially offset by proceeds ~~received (see Financing Activities above)~~ from the sale of ~~certain energy operations in~~assets of $11.

In the ~~United States, mostly offset by $159 in~~2018 three-month period, the use of cash was all due to capital expenditures, ~~($113~~composed of $56 in sustaining projects and ~~$46~~$18 in ~~return-seeking) and $36 in equity contributions related to the aluminum complex joint venture in Saudi Arabia.~~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.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures about Market Risk.

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

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 as of ~~June 30, 2018.~~March 31, 2019.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the ~~second~~first quarter of ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – ~~OTHER~~OTHER INFORMATION

Item 1.Legal Proceedings.

The following represents certain matters previously reported in Alcoa Corporation’s Annual Report on Form10-K for the year ended December 31, ~~2017.~~2018. Please reference said Form10-K for a full description of ~~each~~the matter presented below.

Gregory Power: In January 2016, Gregory Power Partners (Gregory Power) delivered notice to Reynolds Metals Company (Reynolds, a subsidiary of Alcoa Corporation) that Sherwin Alumina Company, LLC’s (Sherwin) bankruptcy filing constitutes a breach of the ~~matters presented below.~~

~~Litigation~~

~~Other Matters~~

~~Tax~~

~~As previously reported, in July 2013, following a corporate income tax audit covering~~Energy Services Agreement (ESA). Since that time, various responses, complaints and motions have been actioned, including the ~~2006 through 2009 tax years,~~addition of Allied Alumina LLC (Allied) to an ~~assessment was received~~amended complaint. (Sherwin operated as a ~~result~~subsidiary of ~~Spain’s tax authorities disallowing certain interest deductions claimed by~~Allied.) In May 2019, a ~~former Spanish consolidated tax group previously owned by ParentCo.~~settlement agreement was reached between Gregory Power, Allied and Reynolds in which all claims pending against the parties will be voluntarily dismissed. The ~~following month, ParentCo filed an appeal~~settlement is conditioned on the execution of this assessment in Spain’s Central Tax Administrative Court. In conjunction with this appeal, as required under Spanish tax law, ParentCo provided financial assurance in this matter 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 denied ParentCo’s appeal of this assessment. Two months later, ParentCo filed an appeal of the assessment in Spain’s National Court (the “National Court”). The amount of this assessment, including interest, was $152 million (€131 million) as of June 30, 2018.

~~On July 6, 2018, the National Court denied ParentCo’s appeal of the assessment; however, the decision includes a requirement that Spain’s tax authorities issue a new assessment,~~various commercial agreements, 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”), the amount of the new assessment, including applicable interest, is expected to be in the range of $25 million to $61 million (€21 million to €53 million) 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 unfavorable outcome. On July 12, 2018, the Companies sent a letter to the National Court seeking clarification on one part of the decision. Once the National Court provides the clarification to the Companies, a~~30-business~~ ~~day period to petition for appeal to Spain’s Supreme Court begins.~~

Based on a review of the bases on which the National Court decided this matter, Alcoa Corporation management no longer believes that the Companies are more likely than not (greater than 50%) to prevail in this matter if an appeal to Spain’s Supreme Court is pursued. Accordingly, in the 2018 third quarter, Alcoa Corporation expects to record a charge of $30 million (€26 million) to establish a liability for its 49% share of the estimated loss in this matter, representing management’s best estimatebeing finalized at this time. As indicated above, the Companies are awaiting clarification on a part of the National Court’s decision and, at a future point in time, will receive an updated assessment from Spain’s tax authorities, both of which may result in a change to management’s estimate following further analysis.

See the ~~Tax~~Other section of Note NM to the Consolidated Financial Statements in Part I Item 1I of this Form10-Q for additional information.

~~Other Contingencies~~

As previously reported, on October 11, 2016, Sherwin Alumina Company, LLC (“Sherwin”) filed suit against Reynolds Metals Company (“Reynolds,” a subsidiary of Alcoa Corporation) related to responsibility for remediation of alleged environmental conditions at the Sherwin alumina refinery site and related bauxite residue waste disposal areas (known as the Copano facility). In March 2018, Reynolds and Sherwin reached a settlement agreement that assigns to Reynolds all environmental liabilities associated with the Copano facility and assigns to Sherwin all environmental liabilities associated with the Sherwin refinery site. Additionally, Reynolds and the Texas Commission on Environmental Quality (TCEQ) reached an agreement that defines the operating and environmental steps required for the Copano facility, which Reynolds intends to operate for the purpose of managing materials other than bauxite residue waste, including third-party dredge material. The effectiveness and enforceability of each of these two agreements are~~pre-conditioned~~ on the other being accepted by the bankruptcy court. A public notice and comment period on these agreements expired on April 26, 2018 without material affect to the documents. On June 5, 2018, the bankruptcy court accepted and entered the agreements into the judicial record as submitted. This date serves as the “effective date” for both agreements.

On June 5, 2018, the transaction between Sherwin and Reynolds was completed. Under the agreement with Sherwin, in exchange for assuming full responsibility for the environmental-related liabilities (see below related to the Company’s existing reserve) associated with the Copano facility, Reynolds assumed ownership of the land that comprises the Copano facility, as well as land that serves as a buffer around the Copano facility and other related assets. A third-party appraisal estimated the fair value of the land and other assets to be $16 million. Under the agreement with TCEQ, a portion of the Copano facility must be closed within 10 years and the remaining portion must be closed within 30 years, both timeframes began on the effective date. Also, Reynolds is required to install upgrades to certain dust control systems and repair certain structures and drainage systems at the Copano facility, and prepare and submit to TCEQ a preliminary groundwater assessment report and a drinking water survey report related to the Copano facility within 180 days of the effective date. Accordingly, the Company recognized $16 million in properties, plants, and equipment, $9 million in environmental remediation liabilities, and $7 million in other related liabilities. Additionally, the Company paid $12 million into a trust managed by the state of Texas as financial assurance of the Company’s performance in completing the required obligations. This amount will be returned to the Company upon satisfactory completion of the future closure of the Copano facility in accordance with all applicable laws and regulations. On June 7, 2018, Sherwin filed a notice of dismissal in the suit against Reynolds; the dismissal was immediately effective as no court order was required.

At the time the agreements were signed by all parties, the Company had a reserve of $29 million for its proportionate share of environmental-related matters at both the Sherwin refinery site and the Copano facility based on the terms of the divestiture of the Sherwin refinery in 2000. While Reynolds no longer has any responsibility for environmental-related matters at the Sherwin refinery site, it assumed additional responsibility for environmental-related matters at the Copano facility ($9 million – see above). In management’s judgment, the $38 million reserve as of June 30, 2018 is sufficient to satisfy the Company’s revised responsibilities and obligations under the settlement agreements. Upon changes in facts or circumstances, a change to the reserve may be required.

~~See the Other section of Note N to the Consolidated Financial Statements in Part I Item 1 of this Form10-Q~~ ~~for additional information.~~

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.~~Exhibits.


4. 18.1		~~Indenture, dated May~~ 17, 2018, among Alcoa Nederland Holding B.V., Alcoa Corporation, certain subsidiaries of Alcoa Corporation, and the Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form~~8-K~~ ~~filed May~~ ~~17, 2018)~~Preferability Letter for Change in Accounting Principle

~~10.~~ 31.1		~~Alcoa Corporation 2016 Stock Incentive Plan (as Amended and Restated), effective May~~ ~~9, 2018 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form8-K~~ ~~filed May~~ ~~15, 2018)~~

~~15.~~		~~Letter regarding unaudited interim financial information~~

~~31.~~		~~Certifications~~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		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

~~SIGNATURES~~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

~~August 2, 2018~~ May 9, 2019						By /s/ WILLIAM F. OPLINGER
Date						William F. Oplinger
						Executive Vice President and
						Chief Financial Officer
						(Principal Financial Officer)

~~August 2, 2018~~ May 9, 2019						By /s/ MOLLY S. BEERMAN
Date						Molly S. Beerman
						Vice President and Controller
						(Principal Accounting Officer)

5236


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

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


~~Product division~~	~~Pricing components~~	~~Shipping terms~~⁽⁴⁾	~~Payment terms~~⁽⁵⁾
~~Bauxite~~	~~Negotiated~~	~~FOB/CIF~~	~~LC Sight~~
~~Alumina:~~
~~Smelter-grade~~	~~API~~⁽¹⁾~~/spot~~	~~FOB~~	~~LC Sight/CAD/Net 30 days~~
~~Non-metallurgical~~	~~Negotiated~~	~~FOB/CIF~~	~~Net 30 days~~
~~Primary aluminum:~~
~~Common alloy ingot~~	~~LME + Regional premium~~⁽²⁾	~~DAP/CIF~~	~~Net 30 to 45 days~~
~~Value-add~~ ~~ingot~~	~~LME + Regional premium + Product premium~~⁽²⁾	~~DAP/CIF~~	~~Net 30 to 45 days~~
~~Flat-rolled aluminum~~	~~Metal + Conversion~~⁽³⁾	~~DAP~~	~~Negotiated~~


	June 30, 2018			December 31, 2017			March 31, 2019		December 31, 2018
Finished goods	$	325		$	296		$	304	$	346
Work-in-process		286			258			297		189
Bauxite and alumina		651			585			525		609
Purchased raw materials		578			473			528		529
Operating supplies		143			147			145		146
LIFO reserve		(315	)		(306	)
							$	1,799	$	1,819
	$	1,668		$	1,453

Weighted average lease term
Operating leases	4.2 years
Weighted average discount rate
Operating leases		6.1	%

									First quarter ended March 31,
	Second quarter ended June 30,				Six months ended June 30,				2019			2018
	2018		2017		2018		2017
Primary aluminum production (kmt)		565		575		1,119		1,134
Third-party aluminum shipments⁽¹⁾ (kmt)		853		833		1,647		1,634		709			794
Average realized third-party price per metric ton of primary aluminum⁽²⁾	$	2,623	$	2,199	$	2,556	$	2,141
Average cost per metric ton of primary aluminum⁽³⁾	$	2,409	$	2,000	$	2,394	$	1,944
Third-party sales	$	2,413	$	1,988	$	4,524	$	3,794	$	1,735		$	2,111
Intersegment sales		4		3		8		7		3			4
Total sales									$	1,738		$	2,115
Segment Adjusted EBITDA⁽²⁾									$	(96	)	$	187

Total sales	$	2,417	$	1,991	$	4,532	$	3,801

Adjusted EBITDA	$	231	$	234	$	384	$	451
Primary aluminum information⁽³⁾
Production (kmt)									537			554
Third-party shipments⁽⁴⁾ (kmt)										628			663
Third-party sales									$	1,394		$	1,647
Average realized third-party price per metric ton⁽⁵⁾									$	2,219		$	2,483
Total shipments⁽⁴⁾ (kmt)									639			698
Operating costs⁽⁶⁾									$	1,568		$	1,626
Average cost per metric ton⁽²⁾									$	2,454		$	2,328


Large accelerated filer	☒	☑	Accelerated filer	☐

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

Emerging growth company	☐	☐


PART I –FINANCIAL INFORMATION				1

Item 1.	Financial Statements		1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		46	33

Item 4.	Controls and Procedures		47
		33

PART II –OTHER INFORMATION			34

Item 1.	Legal Proceedings		48	34

Item 4.	Mine Safety Disclosures		50	34

Item 6.	Exhibits		51	35

SIGNATURES				52	36


	June 30, 2018		December 31, 2017
Cash and cash equivalents	$	1,089	$	1,358
Restricted cash*		6		7

	$	1,095	$	1,365


	Layoff costs			Other costs			Total
Reserve balances at December 31, 2016	$	38		$	28		$	66

2017:
Cash payments		(30	)		(43	)		(73	)
Restructuring charges		23			67			90
Other*		(20	)		(18	)		(38	)

Reserve balances at December 31, 2017		11			34			45

2018:
Cash payments		(5	)		(88	)		(93	)
Restructuring charges		1			100			101
Other*		(1	)		(7	)		(8	)

Reserve balances at June 30, 2018	$	6		$	39		$	45

	Layoff costs			Other costs			Total
Balance at December 31, 2017	$	11		$	34		$	45
Cash payments		(7	)		(95	)		(102	)
Restructuring and other charges, net		2			117			119
Other⁽¹⁾		(1	)		(14	)		(15	)
Balance at December 31, 2018		5			42			47
Cash payments		(3	)		(11	)		(14	)
Restructuring and other charges, net		2			28			30
Other⁽¹⁾		—			(2	)		(2	)
Balance at March 31, 2019	$	4		$	57		$	61


Six months ended June 30, 2017
Sales:
Third-party sales	$	150	$	1,483		$	3,794		$	5,427
Intersegment sales		427		745			7			1,179

Total sales	$	577	$	2,228		$	3,801		$	6,606

Adjusted EBITDA	$	207	$	524		$	451		$	1,182
Supplemental information:
Depreciation, depletion, and amortization	$	37	$	102		$	209		$	348
Equity loss		—		(5	)		(4	)		(9	)


	Second quarter ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Net income attributable to Alcoa Corporation	$	75	$	75	$	225	$	300

Average shares outstanding – basic		186		184		186		184
Effect of dilutive securities:
Stock options		1		1		1		1
Stock and performance awards		2		1		2		1

Average shares outstanding – diluted		189		186		189		186

	As Computed under LIFO			As Reported under Average Cost			Effect of Change
Statement of Consolidated Operations for the first quarter ended March 31, 2019:
Cost of goods sold	$	2,228		$	2,180		$	(48	)
Provision for income taxes		137			150			13
Net loss		(93	)		(58	)		35
Net income attributable to noncontrolling interest		127			141			14
Net loss attributable to Alcoa Corporation		(220	)		(199	)		21
Earnings per share attributable to Alcoa Corporation common shareholders:
Basic	$	(1.19	)	$	(1.07	)	$	0.12
Diluted		(1.19	)		(1.07	)		0.12

Statement of Consolidated Comprehensive Income for the first quarter ended March 31, 2019:
Comprehensive loss	$	(353	)	$	(318	)	$	35
Comprehensive income attributed to noncontrolling interest		136			150			14
Comprehensive loss attributable to Alcoa Corporation	$	(489	)	$	(468	)	$	21

Consolidated Balance Sheet as of March 31, 2019:
Inventories	$	1,579		$	1,799		$	220
Prepaid expenses and other current assets		276			285			9
Retained earnings		121			371			250
Noncontrolling interest		1,947			1,926			(21	)

Statement of Consolidated Cash Flows for the three months ended March 31, 2019:
Net loss	$	(93	)	$	(58	)	$	35
Deferred income taxes		20			33			13
Decrease (Increase) in inventories		65			17			(48	)

													Pension benefits						Other postretirement benefits
	Second quarter ended June 30,						Six months ended June 30,
Pension benefits	2018			2017			2018			2017
First quarter ended March 31,													2019			2018			2019		2018
Service cost	$	14		$	17		$	28		$	35		$	12		$	14		$	1	$	1
Interest cost⁽¹⁾		55			60			114			121			56			59			8		9
Expected return on plan assets⁽¹⁾		(82	)		(98	)		(172	)		(197	)		(81	)		(90	)		—		—
Recognized net actuarial loss⁽¹⁾		52			46			107			92			42			55			3		3
Amortization of prior service cost⁽¹⁾		2			2			4			4			1			2			—		—
Settlements⁽²⁾		167			—			167			—
Curtailments⁽²⁾		—			—			5			—			—			5			—		(28	)
Special termination benefits⁽²⁾		—			3			—			3

Net periodic benefit cost	$	208		$	30		$	253		$	58		$	30		$	45		$	12	$	(15	)


Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments — current:
Embedded aluminum derivatives	$	99	$	120
Fair value of derivative instruments — noncurrent:
Embedded aluminum derivatives		522		992

Total derivatives designated as hedging instruments	$	621	$	1,112

Derivatives not designated as hedging instruments:
Fair value of derivative instruments — current:
Embedded aluminum derivative	$	23	$	28
Embedded credit derivative		3		4
Fair value of derivative instruments — noncurrent:
Embedded aluminum derivative		—		6
Embedded credit derivative		17		23

Total derivatives not designated as hedging instruments	$	43	$	61

Total Liability Derivatives	$	664	$	1,173


	Assets			Liabilities
Second quarter ended June 30, 2018	Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Opening balance – April 1, 2018	$	124		$	515		$	16
Total gains or losses (realized and unrealized) included in:
Sales		—			(29	)		—
Cost of goods sold		(12	)		—			(2	)
Other expenses, net		—			—			6
Other comprehensive loss		(24	)		162			—
Purchases, sales, issuances, and settlements*		—			—			—
Transfers into and/or out of Level 3*		—			—			—
Other		(5	)		(4	)		—

Closing balance – June 30, 2018	$	83		$	644		$	20

Change in unrealized gains or losses included in earnings for derivative instruments held at June 30, 2018:
Sales	$	—		$	—		$	—
Cost of goods sold		—			—			—
Other expenses, net		—			—			6


	Assets			Liabilities
Six months ended June 30, 2018	Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Opening balance – January 1, 2018	$	197		$	1,146		$	27
Total gains or losses (realized and unrealized) included in:
Sales		—			(54	)		—
Cost of goods sold		(34	)		—			(2	)
Other expenses, net		—			(6	)		(5	)
Other comprehensive income		(75	)		(435	)		—
Purchases, sales, issuances, and settlements*		—			—			—
Transfers into and/or out of Level 3*		—			—			—
Other		(5	)		(7	)		—

Closing balance — June 30, 2018	$	83		$	644		$	20

Change in unrealized gains or losses included in earnings for derivative instruments held at June 30, 2018:
Sales	$	—		$	—		$	—
Cost of goods sold		—			—			—
Other expenses, net		—			(6	)		(5	)


	June 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Carrying value		Fair value		Carrying value		Fair value		Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,089	$	1,089	$	1,358	$	1,358	$	1,017	$	1,017	$	1,113	$	1,113
Restricted cash		6		6		7		7		3		3		3		3
Long-term debt due within one year		13		13		16		16		1		1		1		1
Long-term debt, less amount due within one year		1,916		2,030		1,388		1,555		1,802		1,939		1,801		1,863

Amounts recognized in the Consolidated Balance Sheet at March 31, 2019:
Properties, plants and equipment, net	$	185
Other current liabilities		66
Other noncurrent liabilities and deferred credits		119
Total operating lease liabilities	$	185

Year Ending December 31,	Operating leases
2019 (excluding the three months ended March 31)	$	59
2020		64
2021		48
2022		17
2023		9
Thereafter		20
Total lease payments (undiscounted)		217
Less: discount to net present value		(32	)
Total	$	185

Balance at December 31, 2017	$	294
Cash payments		(25	)
Liabilities incurred		19
Reversals of previously recorded liabilities		(3	)
Foreign currency translation and other		(5	)
Balance at December 31, 2018		280
Cash payments		(3	)
Liabilities incurred		1
Reversals of previously recorded liabilities		(1	)
Foreign currency translation and other		(1	)
Balance at March 31, 2019	$	276