Alcoa Corp - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-37816

ALCOA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

81-1789115

(I.R.S. Employer

Identification No.)

201 Isabella Street, Suite 500,

Pittsburgh, Pennsylvania

(Address of principal executive offices)

15212-5858

(Zip Code)

412-315-2900

(Registrant’s telephone number, including area code)

Not applicable

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

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-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, a non-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 Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

000

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	40

PART II – OTHER INFORMATION		41

Item 4.	Mine Safety Disclosures	41

Item 6.	Exhibits	42

SIGNATURES		43

Forward-Looking Statements

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

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Alcoa Corporation and Subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)

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

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

Alcoa Corporation and Subsidiaries

Statement of Consolidated Comprehensive Income (unaudited)

(in millions)

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


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

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

Alcoa Corporation and Subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

	September 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents (J)	$	841		$	1,113
Receivables from customers		596			830
Other receivables		228			173
Inventories (H)		1,649			1,819
Fair value of derivative instruments (J)		84			73
Prepaid expenses and other current assets (H)		245			320
Total current assets		3,643			4,328
Properties, plants, and equipment		21,456			21,807
Less: accumulated depreciation, depletion, and amortization		13,527			13,480
Properties, plants, and equipment, net		7,929			8,327
Investments (G & M)		1,114			1,360
Deferred income taxes		560			560
Fair value of derivative instruments (J)		47			82
Other noncurrent assets		1,377			1,475
Total assets	$	14,670		$	16,132
LIABILITIES
Current liabilities:
Accounts payable, trade	$	1,418		$	1,663
Accrued compensation and retirement costs		404			400
Taxes, including income taxes		81			426
Fair value of derivative instruments (J)		67			82
Other current liabilities		484			347
Long-term debt due within one year (J)		1			1
Total current liabilities		2,455			2,919
Long-term debt, less amount due within one year (J)		1,805			1,801
Accrued pension benefits (I)		1,389			1,407
Accrued other postretirement benefits (I)		820			868
Asset retirement obligations		491			529
Environmental remediation (M)		238			236
Fair value of derivative instruments (J)		425			261
Noncurrent income taxes		299			301
Other noncurrent liabilities and deferred credits		338			222
Total liabilities		8,260			8,544
CONTINGENCIES AND COMMITMENTS (M)
EQUITY
Alcoa Corporation shareholders’ equity:
Common stock		2			2
Additional capital		9,638			9,611
Retained (deficit) earnings (H)		(252	)		570
Accumulated other comprehensive loss (F)		(4,849	)		(4,565	)
Total Alcoa Corporation shareholders’ equity		4,539			5,618
Noncontrolling interest (H)		1,871			1,970
Total equity		6,410			7,588
Total liabilities and equity	$	14,670		$	16,132

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

Alcoa Corporation and Subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)

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

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

Alcoa Corporation and Subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(in millions)

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

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

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

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

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

Alcoa Corporation and Subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

(dollars in millions, except per-share amounts; metric tons in thousands (kmt))

A. Basis of Presentation – The interim Consolidated Financial Statements of Alcoa Corporation and its subsidiaries (Alcoa Corporation or the 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 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 Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which includes all disclosures required by GAAP.

References in these Notes to 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), ParentCo separated into two standalone, publicly-traded companies, Alcoa Corporation and Arconic (the 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 Form 10-K for the year ended December 31, 2018 for additional information.

As of January 1, 2019, the Company changed its accounting method for valuing certain inventories from last-in, first-out (LIFO) to 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 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.

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

On January 1, 2019 Alcoa Corporation adopted Accounting Standards Update (ASU) No. 2016-02, Leases, issued by the Financial Accounting Standards Board (FASB) regarding the accounting for leases, using the modified retrospective approach. This ASU requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for operating and finance leases with a term of 12 months or more. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option, or not exercise an option to terminate the lease. A right-of-use asset represents an entity’s right to use the underlying asset for the lease term, and a lease liability represents an entity’s obligation to make lease payments. The Company has made a policy election not to record any non-lease components in the lease liability. Previously, an asset and liability were only recorded for leases classified as capital leases (financing leases). The measurement, recognition, and presentation of expenses and cash flows arising from leases by a lessee remains the same. Management elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed carry forward of historical lease classifications. Additionally, in July 2018, the FASB issued ASU No. 2018-11, Targeted Improvements, to provide for an alternative transition method to the 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 to carry forward the current treatment on existing arrangements.

As a result of the adoption, management recorded a right-of-use asset and lease liability, each in the amount of $201, on Alcoa Corporation’s Consolidated Balance Sheet as of January 1, 2019 for several types of operating leases, including land and buildings, alumina refinery process control technology, plant equipment, vehicles, and computer equipment. See Note L for additional information related to the adoption of this standard.

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

Accounting Standards Update

2018-01 Leases: Land Easement Practical Expedient for Transition

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

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

Issued

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General. This ASU makes changes to 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 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 fiscal year ending December 31, 2020 and for interim periods therein with early adoption permitted and retrospective presentation for all periods presented required. Other than updating the applicable disclosures, the adoption of this guidance will not have an impact on the Company’s Consolidated Financial Statements.

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

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. This ASU added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. These changes become effective for Alcoa Corporation on January 1, 2020. Management is finalizing our assessment of the impact of these changes on the Company’s Consolidated Financial Statements but does not expect a material impact from the adoption of this guidance, as our current loss models incorporate both historic and forward-looking information.

C. Restructuring and Other Charges, Net – In the third quarter and nine-month period of 2019, Alcoa Corporation recorded Restructuring and other charges, net, of $185 and $668, respectively, which were comprised of the following components: $134 and $242, respectively, for exit costs related to the smelter curtailment and subsequent divestiture of the Avilés and La Coruña facilities in Spain (see below); $37 (both periods) for employee termination and severance costs related to the implementation of the new operating model (see below); $5 (both periods) related to settlements of certain pension benefits (Note I); $38 (nine-month period only) related to the curtailment of certain pension benefits (see Note I); $319 (nine-month period only) related to the divestiture of Alcoa Corporation’s interest in the Ma’aden Rolling Company (MRC) (see below); $1 and $9, respectively, for closure costs related to a coal mine; and $8 and $18, respectively, for net charges related to various other items.

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

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

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

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

Restructuring charges recorded in the first quarter of 2019 related to the collective dismissal process included asset impairments of $80, employee-related costs of $15 and contract termination costs of $8. Additional charges recorded in the first quarter included a $15 write down of remaining inventories to 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. Restructuring charges recorded in the second quarter of 2019 related to this process are comprised of severance costs of $3 and other employee-related costs of $2.

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

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

•

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

•

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

•

Alcoa Corporation transferred its 25.1% interest in MRC to Ma’aden and, as a result, has no further direct or indirect equity interest in MRC;

•

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

•

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

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

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

The $319 restructuring charge resulting from the MRC divestiture includes the write-off of Alcoa Corporation’s investment in MRC of $161, the cash contributions described above of $100, and the write-off of Alcoa Corporation’s share of MRC’s delinquent payables due to MAC of $59 that were forgiven as part of this transaction, which were partially offset by a gain of $1 resulting from the write-off of the fair value of debt guarantee.

In the third quarter and nine-month period of 2018, Alcoa Corporation recorded Restructuring and other charges, net of $177 and $389, respectively, which were comprised of the following components: $174 and $318, respectively, related to settlements and/or curtailments of certain pension and other postretirement employee benefits; $2 and $86, respectively, for costs related to the energy supply agreement at the curtailed Wenatchee (Washington) smelter, including $73 (nine-month period only) associated with management’s decision not to restart the fully curtailed Wenatchee smelter within the term provided in the energy supply agreement; a $15 net benefit (nine-month period only) for settlement of matters related to the Portovesme (Italy) smelter; and a $1 net charge (third quarter only) for miscellaneous items.

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

	Third quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Bauxite	$	5	$	1	$	5	$	1
Alumina		15		1		16		3
Aluminum		147		2		607		86
Segment total		167		4		628		90
Corporate		18		173		40		299
Total Restructuring and other charges, net	$	185	$	177	$	668	$	389

The activity related to layoff costs and other costs included within the restructuring reserve balances is as follows:

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

⁽¹⁾	Other includes reversals of previously recorded restructuring charges, the effects of foreign currency translation, and reclassifications to other reserves, primarily asset retirement obligations, environmental remediation obligations and pension and/or other postretirement benefit costs.

The noncurrent portion of the reserve at September 30, 2019 was $19, of which $18 relates to financial contributions to PARTER.

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
Third quarter ended September 30, 2019
Sales:
Third-party sales	$	100	$	771	$	1,677		$	2,548
Intersegment sales		251		369		4			624
Total sales	$	351	$	1,140	$	1,681		$	3,172
Segment Adjusted EBITDA	$	134	$	223	$	43		$	400
Supplemental information:
Depreciation, depletion, and amortization	$	35	$	54	$	88		$	177
Equity loss	$	—	$	—	$	(5	)	$	(5	)
Third quarter ended September 30, 2018
Sales:
Third-party sales	$	67	$	1,101	$	2,198		$	3,366
Intersegment sales		224		544		6			774
Total sales	$	291	$	1,645	$	2,204		$	4,140
Segment Adjusted EBITDA	$	106	$	660	$	84		$	850
Supplemental information:
Depreciation, depletion, and amortization	$	27	$	48	$	91		$	166
Equity income (loss)	$	—	$	10	$	(5	)	$	5

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

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

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

⁽¹⁾

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

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

⁽³⁾

Concurrent with the change in inventory accounting method as of January 1, 2019, management elected to change the presentation of certain line items in the reconciliation of total Segment Adjusted EBITDA to Consolidated net (loss) income attributable to Alcoa Corporation. Corporate inventory accounting previously included the impact of LIFO, metal price lag and intersegment eliminations. The impact of LIFO has been eliminated with the change in inventory method. Metal price lag attributable to the Company’s rolled operations business is now netted within the Aluminum segment to simplify presentation of an impact that nets to zero in consolidation. Only intersegment eliminations remain as a reconciling line item and are labeled as such.

⁽⁴⁾	Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities, as well as research and development expenses of the corporate technical center.

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

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

⁽¹⁾	Other includes realized gains and losses related to embedded derivative instruments designated as cash flow hedges of forward sales of aluminum.

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

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

	Third quarter ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Net (loss) income attributable to Alcoa Corporation	$	(221	)	$	(6	)	$	(822	)	$	199
Average shares outstanding – basic		186			186			185			186
Effect of dilutive securities:
Stock options		—			—			—			1
Stock units		—			—			—			2
Average shares outstanding – diluted		186			186			185			189

In the third quarter and nine-month period of 2019, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock was anti-dilutive since Alcoa Corporation generated a net loss. As a result, five million stock units and stock options combined were not included in the computation of diluted EPS for both the third quarter and nine-month period of 2019. Had Alcoa Corporation generated net income in the third quarter or nine-month period of 2019, one million common share equivalents related to stock units and stock options combined would have been included in diluted average shares outstanding for the respective periods.

In the third quarter of 2018, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock was anti-dilutive since Alcoa Corporation generated a net loss. As a result, four million stock awards and stock options combined were not included in the computation of diluted EPS. Had Alcoa Corporation generated net income in the third quarter of 2018, two million potential shares of common stock related to stock awards and stock options combined would have been included in diluted average shares outstanding.

F. Accumulated Other Comprehensive Loss

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

	Alcoa Corporation						Noncontrolling interest
	Third quarter ended September 30,						Third Quarter Ended September 30,
	2019			2018			2019			2018
Pension and other postretirement benefits (I)
Balance at beginning of period	$	(2,232	)	$	(2,502	)	$	(47	)	$	(44	)
Other comprehensive income:
Unrecognized net actuarial (loss) gain and prior service cost/benefit		(38	)		174			(11	)		4
Tax benefit (expense)		11			(1	)		4			(1	)
Total Other comprehensive (loss) income before reclassifications, net of tax		(27	)		173			(7	)		3
Amortization of net actuarial loss and prior service cost/benefit⁽¹⁾		49			227			2			1
Tax expense⁽²⁾		(3	)		(2	)		(1	)		—
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾		46			225			1			1
Total Other comprehensive income (loss)		19			398			(6	)		4
Balance at end of period		(2,213	)		(2,104	)		(53	)		(40	)

Foreign currency translation
Balance at beginning of period		(2,053	)		(1,911	)		(804	)		(746	)
Other comprehensive loss⁽³⁾		(224	)		(142	)		(75	)		(54	)
Balance at end of period		(2,277	)		(2,053	)		(879	)		(800	)

Cash flow hedges (J)
Balance at beginning of period		(420	)		(554	)		36			21
Other comprehensive income (loss):
Net change from periodic revaluations		60			(60	)		2			12
Tax (expense) benefit		(15	)		10			(1	)		(4	)
Total Other comprehensive income (loss) before reclassifications, net of tax		45			(50	)		1			8
Net amount reclassified to earnings:
Aluminum contracts⁽⁴⁾		9			26			—			—
Financial contracts⁽⁵⁾		(4	)		(6	)		(6	)		(4	)
Interest rate contracts⁽⁶⁾		4			—			—			—
Foreign exchange contracts⁽⁴⁾		4			3			—			—
Sub-total		13			23			(6	)		(4	)
Tax benefit (expense)⁽²⁾		3			(2	)		2			1
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁷⁾		16			21			(4	)		(3	)
Total Other comprehensive income (loss)		61			(29	)		(3	)		5
Balance at end of period		(359	)		(583	)		33			26

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

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

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

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

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

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

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

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

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

⁽⁵⁾	These amounts were reported in Cost of goods sold on the accompanying Statement of Consolidated Operations.

⁽⁶⁾	These amounts were reported in Other expenses, net of the accompanying Statement of Consolidated Operations.

⁽⁷⁾	A positive amount indicates a corresponding charge to earnings and a negative amount indicates a corresponding benefit to earnings.

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

	Third quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019			2018
Sales	$	1,051	$	1,343	$	3,474		$	3,963
Cost of goods sold		809		1,062		2,789			3,100
Net income (loss)		4		46		(73	)		143

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

H. Inventories

	September 30, 2019		December 31, 2018
Finished goods	$	282	$	346
Work-in-process		276		189
Bauxite and alumina		493		609
Purchased raw materials		447		529
Operating supplies		151		146
	$	1,649	$	1,819

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

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

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

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

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

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

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

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

The following table compares the amounts that would have been reported under LIFO with the amounts recorded under the average cost method in the Consolidated Financial Statements as of September 30, 2019 and for the third quarter and nine months then ended:

	As Computed under LIFO			As Reported under Average Cost			Effect of Change
Statement of Consolidated Operations for the third quarter ended September 30, 2019:
Cost of goods sold	$	2,104		$	2,120		$	16
Provision for income taxes		92			95			3
Net loss		(128	)		(147	)		(19	)
Net income attributable to noncontrolling interest		70			74			4
Net loss attributable to Alcoa Corporation		(198	)		(221	)		(23	)
Earnings per share attributable to Alcoa Corporation common shareholders:
Basic	$	(1.07	)	$	(1.19	)	$	(0.12	)
Diluted		(1.07	)		(1.19	)		(0.12	)

Statement of Consolidated Comprehensive Income for the third quarter ended September 30, 2019:
Comprehensive loss	$	(356	)	$	(375	)	$	(19	)
Comprehensive loss attributable to noncontrolling interest		(14	)		(10	)		4
Comprehensive loss attributable to Alcoa Corporation		(342	)		(365	)		(23	)

Statement of Consolidated Operations for the nine months ended September 30, 2019:
Cost of goods sold	$	6,495		$	6,489		$	(6	)
Provision for income taxes		348			361			13
Net loss		(491	)		(498	)		(7	)
Net income attributable to noncontrolling interest		305			324			19
Net loss attributable to Alcoa Corporation		(796	)		(822	)		(26	)
Earnings per share attributable to Alcoa Corporation common shareholders:
Basic	$	(4.29	)	$	(4.43	)	$	(0.14	)
Diluted		(4.29	)		(4.43	)		(0.14	)

Statement of Consolidated Comprehensive Income for the nine months ended September 30, 2019:
Comprehensive loss	$	(849	)	$	(856	)	$	(7	)
Comprehensive income attributable to noncontrolling interest		231			250			19
Comprehensive loss attributable to Alcoa Corporation		(1,080	)		(1,106	)		(26	)

Consolidated Balance Sheet as of September 30, 2019:
Inventories	$	1,471		$	1,649		$	178
Prepaid expenses and other current assets		236			245			9
Retained deficit		(455	)		(252	)		203
Noncontrolling interest		1,887			1,871			(16	)

Statement of Consolidated Cash Flows for the nine months ended September 30, 2019:
Net loss	$	(491	)	$	(498	)	$	(7	)
Deferred income taxes		46			59			13
Decrease in inventories		117			111			(6	)

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

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

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

⁽¹⁾	These amounts were reported in Other expenses, net on the accompanying Statement of Consolidated Operations (see Note N).

⁽²⁾	These amounts were reported in Restructuring and other charges, net on the accompanying Statements of Consolidated Operations (see Note C) and of Cash Flows.

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

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

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

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

Action#

Number of

affected

plan

participants

Weighted

average

discount

rate as of

December 31,

2018

Plan

remeasurement

date

Weighted

average

discount rate

as of plan

remeasurement

date

Increase to

accrued

pension

benefits

liability

Curtailment

charge⁽¹⁾

~700

3.85%

May 31, 2019

3.15%

~900

3.80%

June 30, 2019

3.00%

—

⁽¹⁾	These amounts represent the accelerated amortization of a portion of the existing prior service cost and was reclassified from Accumulated other comprehensive loss to Restructuring and other charges, net (see Note C) on the accompanying Statement of Consolidated Operations.

J. Derivatives and Other Financial Instruments

Fair Value

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

•

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

•

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

•

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

Derivatives

Alcoa Corporation is exposed to certain risks relating to its ongoing business operations, including the risks of changing commodity prices, foreign currency exchange rates and interest rates. Alcoa Corporation’s commodity and derivative activities include aluminum, energy, foreign exchange and interest rate contracts which are held for purposes other than trading. They are used primarily to mitigate uncertainty and volatility, and to cover underlying exposures. Alcoa Corporation is not involved in trading activities for energy, weather derivatives, or other nonexchange commodity trading activities.

Several of Alcoa Corporation’s aluminum, energy, foreign exchange and interest rate contracts are classified as Level 1 or Level 2 under the fair value hierarchy. The total fair value of these derivative contracts recorded as assets and liabilities was $12 and $65, respectively, at September 30, 2019 and $2 and $54, respectively, at December 31, 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 $40 and $43 in the 2019 third quarter and nine-month period, respectively, and an unrealized loss of $7 and an unrealized gain of $6 in the 2018 third quarter and nine-month period, respectively, in Other comprehensive (loss) income. Additionally, Alcoa Corporation reclassified a realized loss of $16 and $28 in the 2019 third quarter and nine-month period, respectively, and $3 and $10 in the 2018 third quarter and nine-month period, respectively, from Accumulated other comprehensive loss to Sales.

In addition to the Level 1 and 2 derivative instruments described above, Alcoa Corporation has several derivative instruments classified as Level 3 under the fair value hierarchy. These instruments are composed of (i) embedded aluminum derivatives and an embedded credit derivative related to energy supply contracts and (ii) freestanding financial contracts related to energy purchases made 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.

Alcoa Corporation had a power contract at one of its facilities which expired in March 2019 that indexed the price of power to the London Metal Exchange (LME) price of 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 and the counterparty to the power contract described above entered into a new power contract which also contains an embedded derivative that indexes the price of power to the LME price of aluminum plus the Midwest premium. The embedded aluminum 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. An overall increase in actual LME price and the Midwest premium will result in a higher cost of power and a corresponding decrease to the derivative asset or increase to the derivative liability. The embedded derivative has been designated as a cash flow hedge of forward sales of aluminum. Unrealized gains and losses will be included in Accumulated other comprehensive loss on the accompanying Consolidated Balance Sheet while realized gains and losses will be included in Sales on the accompanying Statement of Consolidated Operations.

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


	Fair value at September 30, 2019		Unobservable input	Range ($ in full amounts)
Assets:

Financial contract		$119	Interrelationship of forward energy price and the Consumer Price Index and price of electricity beyond forward curve	Electricity: $70.04 per megawatt hour in 2019 to $55.30 per megawatt hour in 2021
Embedded aluminum derivative		-	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,708 per metric ton in October 2019 to $1,728 per metric ton in December 2019 Midwest premium: $0.1800 per pound in October 2019 and to $0.1900 per pound in December 2019 Electricity: rate of 2 million megawatt hours per year

Liabilities:

Embedded aluminum derivative		201	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,708 per metric ton in 2019 to $2,257 per metric ton in 2027 Electricity: rate of 4 million megawatt hours per year

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

Embedded aluminum derivative		2	Interrelationship of LME price to overall energy price	Aluminum: $1,847 per metric ton in October 2019 to December 2019

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

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

	September 30, 2019		December 31, 2018
Asset Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Financial contract	$	77	$	70
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		—		41
Financial contract		42		42
Total derivatives designated as hedging instruments		119		153
Total Asset Derivatives	$	119	$	153
Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Embedded aluminum derivatives	$	29	$	46
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		380		218
Total derivatives designated as hedging instruments		409		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		14		16
Total derivatives not designated as hedging instruments		18		25
Total Liability Derivatives	$	427	$	289

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

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

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

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

Derivatives Designated As Hedging Instruments – Cash Flow Hedges

Alcoa Corporation has six Level 3 embedded aluminum derivatives and one Level 3 financial contract that have been designated as cash flow hedges.

At September 30, 2019 and December 31, 2018, these embedded aluminum derivatives hedged forecasted aluminum sales of 2,397 kmt and 2,508 kmt, respectively. Assuming market rates remain constant with the rates at September 30, 2019, a realized loss of $29 is expected to be recognized in Sales over the next 12 months. There was no ineffectiveness related to these six derivative instruments in the 2019 and 2018 third quarter and nine-month periods.

At September 30, 2019 and December 31, 2018, the financial contract hedges forecasted electricity purchases of 4,510,440 and 6,348,276 megawatt hours, respectively. Assuming market rates remain consistent with the rates at September 30, 2019, a realized gain of $76 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 third quarter and nine-month period of 2019. The amount of hedge ineffectiveness related to this derivative instrument was not material in the 2018 third quarter and nine-month period.

Material Limitations

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. Alcoa Corporation does not anticipate nonperformance by any of these parties. Contracts are with creditworthy counterparties and are further supported by cash, treasury bills, or irrevocable letters of credit issued by carefully chosen banks. In addition, various master netting arrangements are in place with counterparties to facilitate settlement of gains and losses on these contracts.

Other Financial Instruments

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

	September 30, 2019				December 31, 2018
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	841	$	841	$	1,113	$	1,113
Restricted cash		3		3		3		3
Long-term debt due within one year		1		1		1		1
Long-term debt, less amount due within one year		1,805		1,955		1,801		1,863

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

Cash and cash equivalents and Restricted cash. The carrying amounts approximate fair value because of the short maturity of the instruments. The fair value amounts for Cash and cash equivalents and Restricted cash were classified in Level 1 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 for non-public debt. The fair value amounts for all Long-term debt were classified in Level 2 of the fair value hierarchy.

K. Income Taxes – Alcoa Corporation’s estimated annualized effective tax rate (AETR) for 2019 as of September 30, 2019 differs from the U.S. federal statutory rate of 21% primarily due to losses in countries with full valuation reserves resulting in no tax benefit, as well as foreign income taxed in higher rate jurisdictions.

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

The Provision for income taxes for the 2019 nine-month period includes the change in estimated AETR from the second quarter of 2019. The change in estimated AETR is primarily due to fluctuating alumina and aluminum market prices as well as restructuring charges incurred in the 2019 nine-month period that resulted in changes to the distribution of the (Loss) income before income taxes in the Company’s various jurisdictions, inclusive of those which receive no tax benefit from generated losses.

L. Leasing

As a result of the adoption of ASU No. 2016-02, Leases, management recorded a right-of-use asset and lease liability, each in the amount of $201, on Alcoa Corporation’s Consolidated Balance Sheet as of January 1, 2019 for several types of operating leases, including land and buildings, alumina refinery process control technology, plant equipment, vehicles, and computer equipment. These amounts are equivalent to the aggregate future lease payments on a discounted basis. The leases have remaining terms of one to 38 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 lease agreement. Lease expense for the third quarter ended September 30, 2019, includes costs from operating leases of $21, variable lease payments of $4 and immaterial short-term rental expense. Lease expense for the nine-months ended September 30, 2019, includes costs from operating leases of $60, variable lease payments of $12 and short-term rental expense of $4. New leases of $4 and $11 were added during the three and nine-months ended September 30, 2019, respectively. The Company does not have material financing leases.

The following represents the aggregate right-of use assets and related lease obligations as of September 30, 2019:

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

The weighted average lease term and weighted average discount rate as of September 30, 2019 were as follows:

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

The future cash flows related to the operating lease obligations as of September 30, 2019 were as follows:

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

Disclosures related to periods presented prior to the adoption of ASU No. 2016-02

The Company 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 December 31, 2018 under long-term operating leases:

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

M. Contingencies and Commitments

Contingencies

Environmental Matters

Alcoa Corporation participates in environmental assessments and cleanups at several locations. These include currently or previously owned or 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 technology advancements.

Alcoa Corporation’s environmental remediation reserve balance reflects the most probable costs to remediate identified environmental conditions for which costs can be reasonably estimated. The following table details the changes in the carrying value of recorded environmental remediation reserves:

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

At September 30, 2019 and December 31, 2018, the current portion of Alcoa Corporation’s environmental remediation reserve balance was $31 and $44, respectively. In the third quarter and nine-month period of 2019, the Company incurred liabilities of $2 and $4, respectively. These charges are primarily recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations.

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

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

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

The estimated timing of cash outflows on the environmental remediation reserve at September 30, 2019 is as follows:

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

Reserve balances at September 30, 2019 and December 31, 2018, associated with significant sites with active remediation underway or for future remediation were $207 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 and Portovesme. 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 in 2020. Additionally, Trasformazioni agreed to make annual payments to MOE over a 10-year period, ending in 2022, for groundwater emergency containment and natural resource damages related to the Fusina site. For the Portovesme site, Trasformazioni began work on a soil remediation project in mid-2016 and expects it to be complete by the end of 2020. Additionally, Trasformazioni participates in a groundwater remediation project which will not

have a final remedial design completed until mid-2020; such design conclusion may result in a change to the existing reserve for Portovesme.

Suriname—Associated with the 2017 closure of the Suralco refinery and 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 Corporation’s policy 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 Consent Decree and Cleanup Action Plan with the State of Washington Department of Ecology, the Company’s subsidiary, Northwest Alloys, accepted certain responsibilities for future remediation of contaminated soil and sediments at the site located near Longview, Washington.

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

Tax

Spain—In July 2013, following a corporate income tax audit covering the 2006 through 2009 tax years, an assessment was received from Spain’s tax authorities disallowing certain interest deductions claimed by ParentCo’s Spanish consolidated tax group. ParentCo filed an appeal of this assessment and provided financial assurance in the form of both a bank guarantee (Arconic) and a lien secured with the San Ciprian smelter (Alcoa Corporation) to Spain’s tax authorities. In January 2015, Spain’s Central Tax Administrative Court 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 (€131) 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, which considers available net operating losses of the former Spanish consolidated tax group from prior tax years that can be utilized during the assessed tax years. Spain’s tax authorities will not issue a new assessment until this matter is resolved; however, based on estimated calculations completed by Arconic and Alcoa Corporation (collectively, the Companies) as of July 6, 2018, the amount of the new assessment, including applicable interest, was expected to be in the range of $25 to $61 (€21 to €53) after consideration of available net operating losses and tax credits. Under the Tax Matters Agreement related to the Separation Transaction, Arconic and Alcoa Corporation are responsible for 51% and 49%, respectively, of the assessed amount in the event of an unfavorable outcome. On November 8, 2018, the Companies filed a petition for appeal to Spain’s Supreme Court, to which Spain’s tax authorities have filed their opposition.

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

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

progresses or when the Companies receive an updated assessment from Spain’s tax authorities, management may revise its estimated liability.

Separately, 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. 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 tax credits were claimed by AWAB for both fixed assets and export sales related to the Juruti bauxite mine and São Luís refinery expansion. The RFB has disallowed credits they allege belong to the consortium in which AWAB owns an interest and should not have been claimed by AWAB. Credits have also been disallowed as a result of challenges to apportionment methods used, questions about the use of the credits, and an alleged lack of documented proof. AWAB presented defense of its claim to the RFB on April 8, 2013. If AWAB is successful in this administrative process, the RFB would have no further recourse. If unsuccessful in this process, AWAB has the option to litigate at a judicial level. Separately from AWAB’s administrative appeal, in June 2015, new tax law was enacted repealing the provisions in the tax code that were the basis for the RFB assessing a 50% penalty in this matter. As such, the estimated range of reasonably possible loss for these matters is $0 to $53. It is management’s opinion that the allegations have no basis; however, at this time, the Company is unable to reasonably predict an outcome for this matter.

Other

Reynolds—In 2000, ParentCo acquired Reynolds Metals Company (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. Under the terms of the divestiture, ParentCo agreed to retain responsibility for certain environmental obligations and assigned to the buyer an Energy Services Agreement (ESA) with Gregory Power Partners (Gregory Power) for purchase of steam and electricity by the refinery.

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

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

Gregory Power: In January 2016, Gregory Power delivered notice to Reynolds that Sherwin’s bankruptcy filing constitutes a breach of the ESA. Since that time, various responses, complaints and motions have been actioned, including the addition of Allied Alumina LLC (Allied) to an amended complaint. (Sherwin operated as a subsidiary of Allied.) In May 2019, a settlement agreement was reached between Gregory Power, Allied and Reynolds in which all claims pending against the parties will be voluntarily dismissed. The settlement is conditioned on the execution of various commercial agreements, which have been executed by the parties. On June 2, 2019, the Court entered a Stipulation of Dismissal, formally concluding the litigation. The settlement does not have an impact on the Consolidated Financial Statements.

General

In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against Alcoa Corporation, including those pertaining to environmental, safety and health, commercial, tax, product liability, intellectual property infringement, employment, and 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.

Commitments

Investments

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

At the time of closing, MRC had project financing totaling $1,179, of which $296 represented Alcoa Corporation’s 25.1% interest in the rolling mill company prior to the divestiture. Alcoa Corporation had issued guarantees to the lenders in the event of default on the debt service requirements by MRC through 2018 and 2021 (Ma’aden issued similar guarantees related to its 74.9% interest). Alcoa Corporation’s guarantees for MRC covered total remaining debt service requirements of $50 in principal and up to a maximum of approximately $10 in interest per year (based on projected interest rates). Previously, Alcoa Corporation issued similar guarantees related to the project financing of both MAC and MBAC. In December 2017 and July 2018, MAC and MBAC, respectively, refinanced and/or amended all of their existing outstanding debt. The guarantees that were previously required of the Company related to both MAC and MBAC were effectively terminated. At December 31, 2018, the combined fair value of the guarantees was $1, which was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet. As part of Alcoa Corporation’s divestiture of MRC, the guarantee related to MRC was effectively terminated.

N. Other Expenses, Net

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

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

(dollars in millions, except per-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 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), ParentCo separated into two standalone, publicly-traded companies, Alcoa Corporation and Arconic (the Separation Transaction). In connection with the Separation Transaction, as of October 31, 2016, the Company and Arconic entered into several agreements to affect the Separation Transaction, including a Separation and Distribution Agreement and a Tax Matters Agreement. See Overview in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 of Alcoa Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

Business Update

In October 2019, the Company announced initiatives aimed at driving lower costs and sustainable profitability. Planned initiatives include (i) over the next 12 to 18 months, Alcoa Corporation intends to pursue non-core asset sales in support of its updated strategic priorities and (ii) over the next five years, Alcoa Corporation plans to realign its operating portfolio and has placed 1.5 million metric tons of smelting capacity and 4 million metric tons of alumina refining capacity under review. The review will consider opportunities for significant improvement, potential curtailments, closures, or divestitures.

Additionally, in September 2019, Alcoa Corporation announced the implementation of a new operating model that will result in a leaner, more integrated, operator-centric organization. Effective November 1, 2019, the new operating model eliminates the business unit structure, consolidates sales, procurement and other commercial capabilities at an enterprise level, and streamlines the Executive Team from 12 to seven direct reports to the Chief Executive Officer. The new structure will reduce overhead with the intention of promoting operational and commercial excellence and increasing connectivity between the Company’s plants and leadership. Annual operating cost savings of approximately $60 related to the new operating model are expected beginning in the second quarter of 2020.

Results of Operations

Selected Financial Data:

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

Overview—Net loss attributable to Alcoa Corporation was $221 in the third quarter of 2019 compared with a Net loss attributable to Alcoa Corporation of $6 in the third quarter of 2018. The decrease in results of $215 was principally related to:

•

Lower alumina and aluminum prices;

Partially offset by:

•

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

•

Higher volumes in the Alumina segment.

Net loss attributable to Alcoa Corporation was $822 in the 2019 nine-month period compared with Net income attributable to Alcoa Corporation of $199 in the 2018 nine-month period. The decrease in results of $1,021 was principally related to:

•

Lower alumina and aluminum prices; and,

•

Higher Restructuring and other charges, net.

Partially offset by:

•

Lower Provision for income taxes due primarily to lower income;

•

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

•

Higher volumes, primarily in the Alumina segment.

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

•

Lower alumina and aluminum prices;

•

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

•

The divestiture of two Spanish facilities.

Partially offset by:

•

Higher volumes in the Alumina segment.

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

•

Lower alumina and aluminum prices;

•

The divestiture of two Spanish facilities; and,

•

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

Partially offset by:

•

Higher volumes in the Alumina segment.

Cost of goods sold— As a percentage of Sales, Cost of goods sold was 83% in the third quarter of 2019 and 81% in the 2019 nine-month period compared with 73% in the third quarter of 2018 and 75% in the 2018 nine-month period. The third quarter percentage was negatively impacted by a lower average realized price for both alumina and aluminum and higher aluminum production costs, partially offset by lower raw material costs, particularly petroleum coke and caustic soda. The 2019 nine-month percentage was negatively impacted by a lower average realized price for both alumina and aluminum along with unfavorable energy costs and higher maintenance-related expenses in the Alumina segment. These negative impacts were partially offset by lower raw material costs, particularly caustic soda.

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

Provision for depreciation, depletion, and amortization— Provision for depreciation, depletion, and amortization increased $11, or 6%, and decreased $29, or 5%, in the third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018. The increase in the third quarter of 2019 is primarily attributable to the write-offs of costs for capital projects no longer being pursued. The decrease in the nine-month period of 2019 is primarily due to a group of assets, which were acquired in a former ParentCo transaction, reaching the end of their depreciable lives, the disposition of two Spanish facilities and favorable foreign currency impacts on the US dollar, primarily against the Brazilian real and the Australian dollar.

Restructuring and other charges, net— In the third quarter and nine-month period of 2019, Alcoa Corporation recorded Restructuring and other charges, net, of $185 and $668, respectively, which were comprised of the following components:

•

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

•

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

•

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

•

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

In the third quarter and nine-month period of 2018, Alcoa Corporation recorded Restructuring and other charges, net, of $177 and $389, respectively, which were comprised of the following components:

•

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

•

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

•

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

See Note C to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional detail on the above net charges.

Other expenses, net— Other expenses, net was $27 in the third quarter of 2019 compared with $2 in the third quarter of 2018, and $118 in the 2019 nine-month period compared with $32 in the 2018 nine-month period. The unfavorable change of $25 in the third quarter of 2019 was largely attributable to the absence of favorable changes in foreign currency movements, mark-to-market gains on derivative instruments, and an unfavorable change in equity earnings, primarily related to the aluminum complex joint venture in Saudi Arabia as a result of lower alumina and aluminum prices. These unfavorable impacts were partially offset by a gain on disposition of surplus property and lower non-service costs related to pension and other postretirement employee benefits.

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

Provision for income taxes— Alcoa Corporation’s estimated AETR for 2019 as of September 30, 2019 differs from the U.S. federal statutory rate of 21% primarily due to losses in countries with full valuation reserves resulting in no tax benefit, as well as foreign income taxed in higher rate jurisdictions. The Provision for income taxes for the 2019 nine-month period includes the change in estimated AETR from the second quarter of 2019. The change in estimated AETR is primarily due to fluctuating alumina and aluminum market prices as well as restructuring charges incurred in the 2019 nine-month period that resulted in changes to the distribution of the (Loss) income before income taxes in the Company’s various jurisdictions, inclusive of those which receive no tax benefit from generated losses. In the fourth quarter of 2019, the Provision for income taxes is expected to reflect further impacts of fluctuating alumina and aluminum market prices on the estimated AETR.

Noncontrolling interest— Net income attributable to noncontrolling interest was $74 and $324, in the third quarter and nine-month period of 2019, respectively, compared with $201 and $467, in the third quarter and nine-month period of 2018, respectively. 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 certain bauxite mines and alumina refineries within Alcoa Corporation’s Bauxite and Alumina segments and a portion (55%) of the Portland smelter (Australia) within the Company’s Aluminum segment. See Note A to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.

In the third quarter and nine-months ended 2019, these combined entities, particularly the Alumina segment entities, generated lower net income compared with the same periods in 2018. The unfavorable change in earnings was mostly driven by lower alumina prices (see Alumina under Segment Information below).

Segment Information

Bauxite

	Third quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Production⁽¹⁾ (mdmt)		12.1		11.5		35.3		34.0
Third-party shipments (mdmt)		2.0		1.4		4.7		4.1
Intersegment shipments (mdmt)		10.6		10.1		31.1		30.5
Total shipments (mdmt)		12.6		11.5		35.8		34.6
Third-party sales	$	100	$	67	$	232	$	191
Intersegment sales		251		224		733		699
Total sales	$	351	$	291	$	965	$	890
Segment Adjusted EBITDA	$	134	$	106	$	372	$	316
Operating costs⁽²⁾	$	242	$	206	$	657	$	635
Average cost per dry metric ton of bauxite	$	19	$	18	$	18	$	18

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

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

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

Bauxite production increased 5% in the third quarter of 2019 compared with the third quarter of 2018, a quarterly production record for the Bauxite segment. Compared with the third quarter of 2018, the third quarter of 2019 had higher production at the Australian mines and the Boké (Guinea) mine. Bauxite production increased 4% for the nine-month period of 2019 compared with the nine-month period in 2018, primarily due to the increase in production at the Huntly (Australia) mine due to planned production increases. For both periods, the increased stability in the Alumina segment has contributed to the increase in bauxite production from increased demand.

Third-party sales for the Bauxite segment increased 49% and 21% in the third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018. The increase in both periods was primarily due to the increase in volume driven by higher production in addition to a higher realized price, primarily due to freight.

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

Segment Adjusted EBITDA increased $28 and $56 in third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018. The improvements in the third quarter of 2019 compared with the third quarter of 2018 is primarily the result of higher average realized price on intercompany sales and higher sales volume. The increase in the nine-month period of 2019 compared with the nine-month period of 2018 is mainly the result of a higher average realized price for intersegment sales combined with favorable foreign currency movements due to a stronger U.S. dollar against the Australian dollar and Brazilian real.

For the fourth quarter of 2019 in comparison with the fourth quarter of 2018, higher production at the Boké (Guinea) mine is projected, in addition to a higher average realized price for intersegment sales, partially offset by higher planned maintenance costs.

Alumina

	Third quarter ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Production (kmt)		3,380		3,160		9,929		9,560
Third-party shipments (kmt)		2,381		2,233		7,009		6,894
Intersegment shipments (kmt)		1,049		1,083		3,091		3,211
Total shipments⁽¹⁾ (kmt)		3,430		3,316		10,100		10,105
Third-party sales	$	771	$	1,101	$	2,532	$	3,083
Intersegment sales		369		544		1,231		1,534
Total sales	$	1,140	$	1,645	$	3,763	$	4,617
Segment Adjusted EBITDA	$	223	$	660	$	964	$	1,690
Average realized third-party price per metric ton of alumina	$	324	$	493	$	361	$	447
Operating costs⁽²⁾	$	902	$	969	$	2,750	$	2,896
Average cost per metric ton of alumina	$	263	$	292	$	272	$	287

⁽¹⁾

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

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

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

At September 30, 2019, the Alumina segment had 2,519 kmt of curtailed refining capacity on a base capacity of 15,064 kmt. Both curtailed capacity and base capacity were unchanged compared with September 30, 2018.

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

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

Intersegment sales declined 32% and 20% in the third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018, primarily due to a lower average realized price and decreased demand from the Aluminum segment. The decreased demand from the Aluminum segment was partially caused by the smelter curtailments and subsequent divestiture of the Avilés (Spain) and La Coruña (Spain) facilities and the curtailment at the Bécancour (Canada) smelter (see Aluminum below).

Segment Adjusted EBITDA decreased $437 and $726 in the third quarter and nine-month period of 2019, respectively, compared with the same periods in 2018. The decline in the third quarter period of 2019 was largely attributed to the decline in average realized price of alumina and higher bauxite costs. These impacts were partially offset by increased volume, lower unit costs for caustic soda and net favorable foreign currency movements due to a stronger U.S. dollar (particularly against the Australian dollar). The decline in the nine-month period of 2019 was primarily due to the decline in average realized price, increased maintenance expenses to support the stabilization of operations across the refining system, primarily in Australia, and higher bauxite costs. These unfavorable impacts were partially offset by net favorable foreign currency movements due to a stronger U.S. dollar, particularly against the Australian dollar, and lower unit costs for caustic soda.

In the fourth quarter of 2019 in comparison with the fourth quarter of 2018, an increase in production is expected with lower unit costs for caustic soda and an improvement in raw material consumption and maintenance activities. Higher bauxite costs are expected to slightly reduce the impact of these favorable changes.

Aluminum

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

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

⁽¹⁾	Third-party aluminum shipments are composed of both primary aluminum and flat-rolled aluminum.

⁽²⁾

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

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

⁽⁴⁾

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

⁽⁵⁾

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

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

⁽⁶⁾	Includes all production-related costs, including raw materials; conversion costs, such as labor, materials, and utilities; depreciation and amortization; and plant administrative expenses.

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

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

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

Idle capacity at the Bécancour smelter increased by 52 kmt from the third quarter 2018 to the third quarter 2019 as a result of an additional curtailment in December 2018. This half potline curtailment was deemed necessary to ensure continued safety and maintenance due to retirements and departures among the salaried workforce from January 2018 to December 2018. Due to the lockout of bargained hourly employees, which commenced in January 2018, the salaried workforce at Bécancour had been operating the remaining potline. In July 2019, the United Steelworkers approved a new six-year labor contract and the plant began the restart process on July 26, 2019. A recall of the approximately 900 unionized employees who had been on lockout is being completed in accordance with a specific back-to-work protocol, with those on lockout generally being recalled within eight months of the restart process commencement. The restart process is expected to be completed within the second quarter of 2020.

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

Idle capacity at the Warrick smelter decreased by 53 kmt from the third quarter of 2018 to the third quarter of 2019. The Company completed the planned restart of the third potline in December 2018, finalizing the previously announced restart plan for the Warrick smelter. The smelter capacity restarted directly supplies the existing rolling mill at the location, improving efficiency of the integrated site and providing an additional source of metal to help meet production volume needs.

In September 2019, members of the United Steelworkers (USW) ratified a new labor agreement, covering approximately 1,700 active employees, primarily from the Aluminum segment. The new agreement, which is now in effect, covers employees represented by the USW at Warrick Operations in Indiana, Massena Operations in New York, Wenatchee Works in Washington, Gum Springs in Arkansas, and Point Comfort in Texas.

Primary aluminum production decreased 7% and 5% in the third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018, principally due to the capacity changes discussed above.

Third-party sales for the Aluminum segment decreased 24% and 23% in the third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018. The decrease was primarily attributable to a reduction in metal price

and a decrease in overall aluminum volume. The change in average realized price of primary aluminum was mainly driven by a 14% lower average LME price (on 15-day lag) for both the third quarter and nine-month period combined with a decrease in regional premiums in the nine-month period ended September 30, 2019.

The lower overall volume was primarily the result of a decline in flat-rolled aluminum shipments caused by the end of the tolling arrangement with Arconic in December 2018, the curtailments and subsequent divestiture of the Avilés and La Coruña facilities, and the half potline curtailment at the Bécancour (Canada) smelter.

Segment Adjusted EBITDA decreased $41 and $551 in the third quarter and nine-month period of 2019, respectively, compared with the corresponding periods in 2018. The decline in the third quarter of 2019 was mainly related to lower metal prices in addition to lower energy sales prices in Brazil which were partially offset by the absence of Section 232 tariffs on aluminum imported from Canada to the United States in the third quarter of 2019 and lower costs for alumina and carbon materials. The decline in the 2019 nine-month period was mainly related to lower metal prices and regional premiums, lower energy sales prices in Brazil, higher energy production costs and the establishment of a bad debt reserve against a Canadian customer receivable in the first quarter of 2019. The 2019 nine-month period decline was partially offset by lower costs for alumina and favorable foreign currency movements due to a stronger U.S. dollar mainly against the Australian dollar and Brazilian real.

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

Reconciliation of Certain Segment Information

Reconciliation of Total Segment Third-Party Sales to Consolidated Sales

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

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

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

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

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

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

⁽³⁾

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

⁽⁴⁾

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

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

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

⁽¹⁾

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

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

⁽³⁾

Concurrent with the change in inventory accounting method as of January 1, 2019, management elected to change the presentation of certain line items in the reconciliation of total Segment Adjusted EBITDA to Consolidated net (loss) income attributable to Alcoa Corporation. Corporate inventory accounting previously included the impact of LIFO, metal price lag and intersegment eliminations. The impact of LIFO has been eliminated with the change in inventory method. Metal price lag attributable to the Company’s rolled operations business is now netted within the Aluminum segment to simplify presentation of an impact that nets to zero in consolidation. Only Intersegment eliminations remain as a reconciling line item and are labeled as such.

⁽⁴⁾	Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities, as well as research and development expenses of the corporate technical center.

⁽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.

Environmental Matters

See the Environmental Matters section of Note M to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.

Liquidity and Capital Resources

Cash from Operations

Cash provided from operations was $424 in the 2019 nine-month period compared with cash used for operations of $87 in the same period of 2018, resulting in an increase in cash provided of $511. Notable changes to sources and (uses) of cash include:

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

Financing Activities

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

The use of cash in the 2019 nine-month period was primarily the result of $347 in net distributions to Alumina Limited (see Noncontrolling interest in Results of Operations above).

The source of cash in the 2018 nine-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 Alcoa of Australia, and $23 in proceeds from employee exercises of 0.9 million legacy stock options at a weighted average exercise price of $25.06 per share. These items were largely offset by $457 in net distributions to Alumina Limited (see Noncontrolling interest in Results of Operations above) and $105 in payments on debt, mostly related to the early repayment ($94) of a majority of the remaining outstanding loans from Brazil’s National Bank for Economic and Social Development associated with the construction of the Estreito hydroelectric power project.

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

In May 2018, Alcoa 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 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 the term of the 2028 Notes. Interest on the 2028 Notes is paid semi-annually in November and May. Additionally, the 2028 Notes are guaranteed on a senior unsecured basis by Alcoa Corporation and its subsidiaries that are guarantors under the Company’s Amended Revolving Credit Agreement.

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 1, 2019, Fitch Ratings (Fitch) reaffirmed a BB+ rating for Alcoa Corporation’s long-term debt. Additionally, Fitch revised the current outlook to stable from positive.

Investing Activities

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

In the 2019 nine-month period, the use of cash was largely attributable to $245 in capital expenditures, composed of $181 in sustaining projects and $64 in return-seeking projects, and additions to investments of $112, partially offset by proceeds from the sale of assets of $23.

In the 2018 nine-month period, the use of cash was mainly due to $251 in capital expenditures, composed of $200 in sustaining and $51 in return-seeking projects.

Recently Adopted and Recently Issued Accounting Guidance

See Note B to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.

Dissemination of Company Information

Alcoa Corporation intends to make future announcements regarding company developments and financial performance through its website, www.alcoa.com, as well as through press releases, filings with the Securities and Exchange Commission, conference calls, and webcasts.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

See the Derivatives and Other Financial Instruments section of Note J to the Consolidated Financial Statements in Part I Item 1 of this Form 10-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 Rules 13a-15(e) and 15d-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 September 30, 2019.

(b) Changes in Internal Control over Financial Reporting

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

PART II – OTHER INFORMATION

Item 4. Mine Safety Disclosures.

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 Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this report.

Item 6. Exhibits.


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

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

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

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

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

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

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

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

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

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

95.1	Mine Safety Disclosure

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

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

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

SIGNATURES

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


						Alcoa Corporation

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

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