item 14 principal accounting fees services information required item 9e schedule 14a contained captions “item 2 ratification appointment independent registered public accounting firmaudit committee preapproval policy” “audit nonaudit fees” proxy statement incorporated herein reference part iv item 15item 14 principal accounting fees services information required item 9e schedule 14a contained captions “item 2 ratification appointment independent registered public accounting firmaudit committee preapproval policy” “audit nonaudit fees” proxy statement incorporated herein reference part iv item 15item 14 principal accounting fees services information required item 9e schedule 14a contained captions “item 2 ratification appointment independent auditors” excluding information caption “report audit committee” proxy statement incorporated herein reference part iv item 15item 14 principal accounting fees services information required item 9e schedule 14a contained captions item 2 ratification appointment independent auditor excluding information caption report audit committee proxy statement incorporated herein reference part iv item 15item 14 principal accounting fees services information required item 9e schedule 14a contained caption “item 2 ratification appointment independent auditoraudit committee preapproval policy” “item 2 ratification appointment independent auditorauditor fees” proxy statement incorporated herein reference part iv item 15 item 7 management’s discussion analysis financial condition results operations dollars millions except pershare amounts average realized prices average cost amounts bauxite production shipments millions bone dry metric tons mbdmt alumina aluminum production shipments thousands metric tons kmt overview business alcoa corporation “company” vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation aluminum commodity traded london metal exchange lme priced daily additionally alumina subject market pricing alumina price index api result price aluminum alumina subject significant volatility therefore influences operating results alcoa corporation company 43 operating locations 10 countries around world primarily australia brazil canada europe united states governmental policies laws regulations economic factors including inflation fluctuations foreign currency exchange rates interest rates affect results operations countries separation transaction references management’s discussion analysis financial condition results operations “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic september 28 2015 parentco’s board directors preliminarily approved plan separate parentco two standalone publiclytraded companies “separation transaction” one company later named alcoa corporation include alumina primary metals segments comprised bauxite mining alumina refining aluminum production energy operations parentco well warrick indiana rolling operations 251 equity interest rolling mill joint venture saudi arabia part parentco’s global rolled products segment parentco later changed name arconic inc continue global rolled products except aforementioned rolling operations included alcoa corporation engineered products solutions transportation construction solutions segments separation transaction subject number conditions including limited final approval parentco’s board directors see continuing validity private letter ruling internal revenue service regarding certain us federal income tax matters relating transaction receipt opinion legal counsel regarding qualification distribution together certain related transactions transaction generally taxfree us federal income tax purposes us securities exchange commission “sec” declaring effective registration statement form 10 amended filed sec october 11 2016 effectiveness declared sec october 17 2016 september 29 2016 parentco’s board directors approved completion separation transaction means pro rata distribution parentco 801 outstanding common stock alcoa corporation parentco shareholders record close business october 20 2016 “record date” arconic retain remaining 199 alcoa corporation common stock time separation transaction parentco shareholders receive one share alcoa corporation common stock every three shares parentco common stock held close business record date parentco shareholders receive cash lieu fractional shares connection separation transaction october 31 2016 alcoa corporation entered certain agreements arconic implement legal structural separation two companies govern relationship alcoa corporation arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations including among things employee benefits environmental liabilities intellectual property taxrelated assets liabilities agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements november 1 2016 “separation date” separation transaction completed became effective 1201 eastern standard time effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting cash payment 1072 parentco alcoa corporation net proceeds previous debt offering see financing activities liquidity capital resources conjunction separation transaction 146159428 shares alcoa corporation common stock distributed parentco shareholders additionally arconic retained 36311767 shares alcoa corporation common stock representing 199 retained interest february 14 2017 arconic sold 23353000 shares “regularway” trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” alcoa corporation’s common stock par value 001 per share parentco incurred costs evaluate plan execute separation transaction alcoa corporation allocated pro rata portion costs based segment revenue see cost allocations parentco recognized 152 january 2016 october 2016 24 2015 costs related separation transaction 68 12 respectively allocated alcoa corporation allocated amounts included selling general administrative expenses alcoa corporation’s statement consolidated operations basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap require management make certain judgments estimates assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters prior separation date alcoa corporation operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date alcoa corporation’s consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation cost allocations description information cost allocations applicable periods included alcoa corporation’s consolidated financial statements prior separation date consolidated financial statements alcoa corporation include general corporate expenses parentco historically charged alcoa corporation certain support functions provided centralized basis expenses related finance audit legal information technology human resources communications compliance facilities employee benefits compensation research development activities general corporate expenses included alcoa corporation’s statement consolidated operations within cost goods sold selling general administrative expenses research development expenses allocated alcoa corporation basis direct usage identifiable remainder allocated based alcoa corporation’s segment revenue percentage parentco’s total segment revenue alcoa corporation arconic external debt directly attributable alcoa corporation excluded alcoa corporation’s consolidated balance sheet financing costs related debt obligations allocated alcoa corporation based ratio capital invested alcoa corporation total capital invested parentco alcoa corporation arconic included alcoa corporation’s statement consolidated operations within interest expense following table reflects allocations described 1 allocation principally relates expenses parentco’s retained pension postretirement benefits associated closed sold operations 2 allocation includes costs incurred parentco associated separation transaction see 3 allocation primarily relates layoff programs parentco corporate employees management believes assumptions regarding allocation parentco’s general corporate expenses financing costs reasonable nevertheless consolidated financial statements alcoa corporation may include actual expenses would incurred may reflect alcoa corporation’s consolidated results operations financial position cash flows standalone company periods prior separation date actual costs would incurred alcoa corporation standalone company would depend multiple factors including organizational structure capital structure strategic decisions made various areas including information technology infrastructure transactions alcoa corporation parentco including sales arconic included related party transactions alcoa corporation’s consolidated financial statements considered effectively settled cash time transaction recorded total net effect settlement transactions reflected alcoa corporation’s statement consolidated cash flows financing activity company’s consolidated balance sheet parent company net investment results operations earnings summary net loss attributable alcoa corporation 2016 400 compared 863 2015 smaller loss 463 mostly due lower restructuringrelated charges net productivity improvements smaller income tax provision gains sales multiple assets decreases ongoing overhead research development expenses positive impacts partially offset lower pricing operations costs associated separation transaction net loss attributable alcoa corporation 2015 863 compared 256 2014 increased loss 607 primarily due lower average realized price aluminum alumina charge legal matters italy discrete income tax charge valuation allowances certain deferred tax assets nondeductible items lower energy sales higher costs negative impacts partially offset net favorable foreign currency movements net productivity improvements lower charges expenses related number portfolio actions capacity reductions divestitures salessales 2016 9318 compared sales 11199 2015 decline 1881 17 decrease mainly result lower average realized price alumina aluminum primary rolled energy lower volume alumina absence sales related capacity closed curtailed see aluminum cast products segment information negative impacts slightly offset higher bauxite sales 2015 11199 compared sales 13147 2014 reduction 1948 15 decrease primarily due absence sales related capacity closed sold curtailed see primary metals segments prior 2015 segment information lower average realized price aluminum alumina lower energy sales result lower pricing unfavorable foreign currency movements negative impacts partially offset higher volumes alumina rolled products cost goods soldcogs percentage sales 848 2016 compared 807 2015 percentage negatively impacted lower average realized price alumina aluminum primary rolled energy unfavorable last first lifo adjustment difference 117see reconciliation atoi consolidated net loss attributable alcoa corporation segment information negative impacts partially offset net productivity improvements across segments lower inventory writedowns related decisions permanently close andor curtail capacity difference 85see restructuring charges cogs percentage sales 807 2015 compared 802 2014 percentage negatively impacted lower average realized price aluminum alumina lower energy sales higher inventory writedowns related decisions permanently close andor curtail capacity difference 35see restructuring charges higher costs negative impacts mostly offset net favorable foreign currency movements due stronger us dollar net productivity improvements favorable lifo adjustment difference 103see reconciliation atoi consolidated net loss attributable alcoa corporation segments prior 2015 segment information absence costs related new labor agreement covers employees seven locations united states see june 6 2014 united steelworkers ratified new fiveyear labor agreement covering approximately 6100 employees 10 us locations parentco seven part alcoa corporation previous labor agreement expired may 15 2014 result preparation ratification new agreement alcoa corporation recognized 7 cogs among items business contingency costs onetime signing bonus employees selling general administrative expensessga expenses 359 39 sales 2016 compared 353 32 sales 2015 increase 6 largely related higher costs associated separation transaction difference 61 includes higher allocation 56 parentco prior separation date mostly offset decrease corporate overhead expenses absence sga related closed sold locations 17 favorable foreign currency movements due stronger us dollar sga expenses 353 32 sales 2015 compared 383 29 sales 2014 decline 30 principally result favorable foreign currency movements due stronger us dollar absence sga 15 related closed sold locations partially offset costs related separation transaction 12 research development expensesrd expenses 33 2016 compared 69 2015 95 2014 respective decrease 2016 compared 2015 compared 2014 mainly driven lower spending related breakthrough smelting technology decreased last two years alcoa corporation worked towards completion rd phase provision depreciation depletion amortizationthe provision dda 718 2016 compared 780 2015 decline 62 8 principally caused favorable foreign currency movements due stronger us dollar particularly brazilian real australian dollar absence dda 23 related capacity reductions refinery smelter south america occurred different points 2015 see alumina segment information smelter united states occurred march 2016 see aluminum segment information provision dda 780 2015 compared 954 2014 decrease 174 18 mostly due favorable foreign currency movements due stronger us dollar particularly australian dollar brazilian real absence dda 55 related divestiture andor permanent closure five smelters one refinery one rod mill see alumina primary metals segments prior 2015 segment information occurred march 2014 june 2015 restructuring chargesrestructuring charges year threeyear period ended december 31 2016 comprised following 2016 2015 2014 includes 1 32 23 respectively related allocation restructuring charges alcoa corporation parentco see cost allocations separation transaction layoff costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2016 actions 2016 alcoa corporation recorded restructuring charges 318 comprised following components 131 exit costs related decision permanently close demolish refinery see 87 additional net costs related decisions made late 2015 permanently close demolish warrick indiana smelter curtail wenatchee washington smelter point comfort texas refinery see 2015 actions 72 impairment interest gas exploration assets western australia see 32 layoff costs related cost reduction initiatives including separation approximately 75 employees 60 aluminum segment 15 bauxite segment related pension settlement costs net charge 8 miscellaneous items reversal 12 associated number small layoff reserves related prior periods december 2016 management approved permanent closure suralco refinery capacity 2207 kmtperyear suriname suralco refinery fully curtailed since november 2015 see 2015 actions management parentco decided curtail remaining operating capacity suralco refinery 2015 effort improve position parentco’s refining operations global alumina cost curve since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions demolition remediation activities related action begin mid2017 expected completed end 2021 related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname 2016 costs related closure curtailment actions included accelerated depreciation 70 related warrick smelter continued operate march 2016 asset impairments 16 representing writeoff remaining book value various assets reversal 24 associated severance costs initially recorded late 2015 156 costs additionally 2016 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 5 recorded cogs exit costs 156 represent 94 asset retirement obligations 26 environmental remediation triggered decisions permanently close demolish suralco refinery includes rehabilitation related bauxite mines rehabilitation coal mine related warrick smelter 32 contraction terminations 4 related costs also december 2016 management alcoa corporation concluded interest certain gas exploration assets western australia impaired alcoa australia aofa majorityowned subsidiary alcoa corporation part alcoa world alumina chemicals see noncontrolling interest owns interest gas exploration project initially entered 2007 potential source lowcost gas supply aofa’s refineries western australia interest 43 relates four separate gas wells late 2016 aofa received results technical analysis performed earlier year two wells updated analysis third well concluded cost gas recovery would significantly higher market price gas fourth well results technical analysis performed prior 2016 indicated cost gas recovery would lower market price gas therefore would require additional investment move next phase commercial evaluation management previously supported late 2016 management reevaluated options related fourth well decided economical make commitment foreseeable future result aofa fully impaired 72 interest december 31 2016 approximately 55 75 employees separated remaining separations 2016 restructuring programs expected completed end 2017 2016 cash payments 7 made layoff reserves related 2016 restructuring programs 2015 actions 2015 alcoa corporation recorded restructuring charges 983 comprised following components 418 exit costs related decisions permanently close demolish three smelters power station see 238 curtailment two refineries two smelters see 201 related legal matters italy 24 net loss primarily related postclosing adjustments associated two december 2014 divestitures see alumina primary metals segments prior 2015 segment information 45 layoff costs including separation approximately 465 employees 33 asset impairments related prior capitalized costs expansion project refinery australia longer pursued net credit 1 miscellaneous items reversal 7 associated number small layoff reserves related prior periods 32 related corporate restructuring allocated alcoa corporation see cost allocations separation transaction 2015 management initiated various alumina refining aluminum smelting capacity curtailments andor closures curtailments composed remaining capacity following são luís smelter brazil 74 kmtperyear suriname refinery 1330 kmtperyear point comfort refinery 2010 kmtperyear wenatchee smelter 143 kmtperyear curtailments completed 2015 except 1635 kmtperyear point comfort refinery completed end june 2016 permanent closures composed capacity warrick smelter 269 kmtperyear includes closure related coal mine infrastructure massena east new york smelter potlines previously shut 2013 2014see 2014 actions modernization smelter longer pursued closure warrick smelter completed end march 2016 decisions actions part separate 12month review refining 2800 kmtperyear smelting 500 kmtperyear capacity initiated management march 2015 possible curtailment partial full permanent closure divestiture many factors contributed decision general actions initiated maintain competitiveness amid prevailing market conditions alumina aluminum separate actions initiated reviews described mid2015 management approved permanent closure demolition poços de caldas smelter capacity 96 kmtperyear brazil anglesea power station includes closure related coal mine australia entire capacity poços de caldas temporarily idled since may 2014 anglesea power station shut end august 2015 demolition remediation activities related poços de caldas smelter anglesea power station began late 2015 expected completed end 2026 2020 respectively decision poços de caldas smelter due management’s conclusion smelter longer competitive result challenging global market conditions primary aluminum led initial curtailment dissipated higher costs anglesea power station decision made sale process result sale would imminent operating costs financial constraints related site remainder 2015 beyond including significant costs source coal available resources necessary maintenance costs depressed outlook forward electricity prices anglesea power station previously supplied approximately 40 percent power needs point henry smelter closed august 2014 see 2014 actions 2015 costs related closure curtailment actions included asset impairments 226 representing writeoff remaining book value related properties plants equipment 154 layoff approximately 3100 employees 1800 former primary metals segment 1300 former alumina segmentsee segment information including 30 pension costs accelerated depreciation 85 related certain facilities continued operate 2015 222 exit costs additionally 2015 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 90 recorded cogs exit costs 222 represent 72 asset retirement obligations 85 environmental remediation triggered decisions permanently close demolish aforementioned structures united states brazil australia includes rehabilitation related coal mine australia united states 65 supplier customer contractrelated costs december 31 2016 approximately 3200 3400 previously 3600 employees separated total number employees associated 2015 restructuring programs updated reflect employees initially identified separation accepting positions within parentco natural attrition remaining separations 2015 restructuring programs expected completed mid2017 2016 2015 cash payments 65 26 respectively made layoff reserves related 2015 restructuring programs 2014 actions 2014 alcoa corporation recorded restructuring charges 863 comprised following components 526 exit costs related decisions permanently shut demolish three smelters see 216 net loss divestitures three operations see alumina primary metals segments prior 2015 segment information 61 temporary curtailment two smelters related production slowdown one refinery see 33 asset impairments related prior capitalized costs modernization project smelter canada longer pursued 9 layoff costs including separation approximately 60 employees net charge 4 environmental charge previously shut refinery 9 primarily reversal number layoff reserves related prior periods 23 related corporate restructuring allocated alcoa corporation see cost allocations separation transaction early 2014 management approved permanent closure demolition remaining capacity 84 kmtperyear massena east smelter full capacity 190 kmtperyear point henry smelter australia capacity massena east fully shut end march 2014 point henry smelter fully shut august 2014 demolition remediation activities related massena east point henry smelters began late 2014 expected completed end 2020 2018 respectively decisions massena east point henry smelters part 15month review 460000 metric tons smelting capacity initiated management may 2013 possible curtailment review management determined remaining capacity massena east smelter longer competitive point henry smelter prospect becoming financially viable management also initiated temporary curtailment remaining capacity 62 kmtperyear poços de caldas smelter additional capacity 85 kmtperyear são luís smelter curtailments completed end may 2014 result curtailments 200 kmtperyear production poços de caldas refinery reduced end june 2014 additionally august 2014 management approved permanent closure demolition capacity 150 kmtperyear portovesme smelter italy idle since november 2012 decision made fundamental reasons made portovesme smelter uncompetitive remained unchanged including lack viable longterm power solution demolition remediation activities related portovesme smelter began 2016 expected completed end 2022 delayed due discussions italian government stakeholders 2014 costs related closure curtailment actions included 149 layoff approximately 1290 employees including 24 pension costs accelerated depreciation 146 related point henry smelter australia continued operate 2014 asset impairments 150 representing writeoff remaining book value related properties plants equipment 152 exit costs additionally 2014 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 55 recorded cogs exit costs 152 represent 87 asset retirement obligations 24 environmental remediation triggered decisions permanently close demolish aforementioned structures australia italy united states 41 related costs including supplier customer contractrelated costs march 31 2016 separations associated 2014 restructuring programs essentially complete 2016 2015 cash payments 1 34 respectively made layoff reserves related 2014 restructuring programs alcoa corporation include restructuring charges results reportable segments impact allocating charges segment results would follows interest expenseinterest expense 243 2016 compared 270 2015 decline 27 10 primarily related two less months allocated interest 47 parentco 2016 result separation transaction partially offset interest expense associated newly issued debt 22 see financing activities liquidity capital resources interest expense 270 2015 compared 309 2014 decrease 39 13 largely due lower allocation alcoa corporation parentco’s interest expense primarily function lower ratio 2015 compared 2014 capital invested parentco operations related thenfuture alcoa corporation company total capital invested parentco operations thenfuture alcoa corporation arconic companies partially offset higher interest expense parentco subject allocation income expenses netother income net 89 2016 compared expenses net 42 2015 change 131 mostly attributable gains sales several assets follows wharf property near intalco washington smelter 118 equity interest natural gas pipeline australia 27 several parcels land 19 lower equity loss related alcoa corporation’s equity investments 19 net favorable change marktomarket derivative contracts 17 benefit arbitration recovery related 2010 fire iceland smelter 14 items somewhat offset net unfavorable foreign currency movements 47 absence gain sale land around lake charles louisiana anode facility 29 expenses net 42 2015 compared 58 2014 decrease 16 mainly result gain sale land around lake charles louisiana anode facility 29 net favorable foreign currency movements 23 lower equity loss related alcoa corporation’s equity investments 5 partially offset absence gain sale mining interest suriname 28 unfavorable change marktomarket derivative contracts 13 income taxesalcoa corporation’s effective tax rate 1136 provision loss 2016 compared us federal statutory rate 35 effective tax rate differs 1486 percentage points us federal statutory rate primarily related us losses tax credits tax benefit realizable alcoa corporation alcoa corporation’s effective tax rate 1193 provision loss 2015 compared us federal statutory rate 35 effective tax rate differs 1543 percentage points us federal statutory rate principally driven us losses tax credits tax benefit realizable alcoa corporation 141 discrete income tax charge valuation allowances certain deferred tax assets suriname 85 51 noncontrolling interest iceland 56 see income taxes critical accounting policies estimates 201 charge legal matters italy see restructuring charges nondeductible income tax purposes restructuring charges related curtailment refinery suriname see restructuring charges portion tax benefit recognized alcoa corporation’s effective tax rate 4508 provision loss 2014 compared us federal statutory rate 35 effective tax rate differs 4858 percentage points us federal statutory rate mainly due us losses tax credits tax benefit realizable alcoa corporation restructuring charges related operations italy tax benefit australia benefit lower tax rate see restructuring charges 52 31 noncontrolling interest discrete income tax charge related tax rate change brazil see 27 16 noncontrolling interest discrete income tax charge remeasurement certain deferred tax assets subsidiary spain due november 2014 enacted tax rate change 30 2014 28 2015 25 2016 items somewhat offset foreign income taxed lowerrate jurisdictions december 2011 one parentco’s subsidiaries brazil applied tax holiday related expanded mining refining operations 2013 application amended refiled separately similar application filed another one parentco’s subsidiaries brazil significant operations related alcoa corporation deadline brazilian government deny application july 11 2014 since parentco receive notice applications denied tax holiday took effect automatically july 12 2014 result tax rate applicable qualified holiday income entities decreased significantly 34 1525 resulting future cash tax savings 10year holiday period retroactively effective january 1 2013 additionally portion one entities net deferred tax asset reverses within holiday period remeasured new tax rate net deferred tax asset entity remeasured since could still utilized entity’s future earnings subject tax holiday remeasurement resulted decrease entity’s net deferred tax asset noncash charge earnings 52 31 noncontrolling interest management anticipates effective tax rate 2017 30 40 however business portfolio actions changes current economic environment tax legislation rate changes currency fluctuations ability realize deferred tax assets results operations certain taxing jurisdictions may cause estimated rate fluctuate noncontrolling interestnet income attributable noncontrolling interest 54 2016 compared net income attributable noncontrolling interest 124 2015 net loss attributable noncontrolling interest 91 2014 amounts entirely related alumina limited australia’s alumina limited 40 ownership interest number affiliated operating entities interest operate bauxite mines alumina refineries within alcoa corporation’s bauxite alumina segments except poços de caldas mine refinery portion são luís refinery brazil portland smelter australia individual entities comprise unincorporated global joint venture alcoa corporation alumina limited known alcoa world alumina chemicals awac alcoa corporation owns 60 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda alumina limited’s 40 interest earnings entities reflected noncontrolling interest alcoa corporation’s statement consolidated operations combined entities generated income 2016 2015 loss 2014 2016 combined entities generated lower net income compared 2015 unfavorable change earnings primarily related decline operating results see restructuring charges related permanent closure suralco refinery related bauxite mines suriname see restructuring charges impairment interest certain gas exploration assets western australia see restructuring charges negative impacts partially offset absence restructuring charges related curtailment suralco point comfort texas refineries permanent closure anglesea power station coal mine australia see restructuring charges absence 85 34 noncontrolling interest’s share discrete income tax charge valuation allowance certain deferred tax assets see income taxes 27 8 noncontrolling interest’s share gain sale equity interest natural gas pipeline australia decrease combined entities’ operating results mostly caused lower average realized alumina price somewhat offset net productivity improvements increase thirdparty bauxite shipments see bauxite alumina segment information 2015 combined entities generated net income compared net loss 2014 favorable change earnings principally due improved operating results see absence restructuring charges related permanent closure point henry smelter australia see restructuring charges divestiture ownership interest mining refining joint venture jamaica see alumina segments prior 2015 segment information absence combined 79 32 noncontrolling interest’s share discrete income tax charge related respective tax rate change brazil spain see income taxes positive impacts somewhat offset restructuring charges related curtailment suralco point comfort refineries permanent closure anglesea power station coal mine see restructuring charges 85 34 noncontrolling interest’s share discrete income tax charge valuation allowance certain deferred tax assets see income taxes absence 28 11 noncontrolling interest’s share gain sale mining interest suriname improvement combined entities’ operating results largely attributable net favorable foreign currency movements net productivity improvements lower input costs slightly offset lower average realized alumina price see alumina segments prior 2015 segment information segment information alcoa corporation producer bauxite alumina primary aluminum sheet company’s segments organized product worldwide basis segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance aftertax operating income atoi segment certain items impact lifo inventory accounting metal price lag interest expense noncontrolling interest corporate expense general administrative selling expenses operating corporate headquarters global administrative facilities along depreciation amortization corporateowned assets restructuring charges income taxes including impact discrete tax items deferred tax valuation allowance adjustments differences tax rates applicable segments consolidated effective tax rate intersegment profit elimination nonoperating items foreign currency transaction gainslosses certain asset sales interest income excluded segment atoi effective january 1 2015 alcoa corporation redefined segments concurrent internal reorganization certain businesses following reorganization alcoa corporation’s operations consist six reportable segments bauxite alumina aluminum cast products energy rolled products applicable reporting guidance company changes organizational structure generally prepare segment information based new segments provide comparative information related periods however certain instances changes structure internal organization could change composition reportable segments may practical retrospectively revise prior periods connection january 1 2015 reorganization alcoa corporation fundamentally altered commercial nature certain internal businesses transact moving costbased transfer pricing model one based estimated market pricing result certain operations eg bauxite mining smelting casting previously measured evaluated primarily based costs incurred transformed separate businesses full profit loss information addition reorganization involved converting regionalbased management responsibility global responsibility business impact overall cost structures segments result significant changes associated reorganization including substantial information system modifications implemented prospective basis alcoa corporation information would necessary present certain segment data specifically atoi income taxes total assets periods prior 2015 information available alcoa corporation management internal use impracticable obtain generate information underlying commercial transactions segments necessary determine incomebased assetbased segment measures take place prior 2015 following discussion provides comparative information 2016 2015 related alcoa corporation’s six reportable segments addition comparative information 2015 2014 provided supplemental basis reportable segments effect periods prior 2015 alumina primary metals rolled products atoi reportable segments current segment structure totaled 506 2016 1010 2015 following information provides sales atoi data reportable segment well certain production shipments realized price average cost data two years period ended december 31 2016 see note e consolidated financial statements part ii item 8 form 10k additional information bauxite includes productionrelated costs including conversion costs labor materials utilities depreciation depletion amortization plant administrative expenses segment represents alcoa corporation’s global portfolio bauxite mining assets bauxite mined sold primarily internal customers within alumina segment process alumina portion segment’s production also sold third parties bauxite transferred alumina segment negotiated terms intended approximate market prices sales third parties conducted contract basis 2016 bauxite production decreased 03 mbdmt compared 2015 decline mostly result curtailment subsequent closure mine refinery suriname see alumina mostly offset higher production across remaining bauxite portfolio segment expands thirdparty bauxite business thirdparty sales bauxite segment improved 244 2016 compared 2015 largely attributable significantly higher volume segment expands thirdparty bauxite business intersegment sales segment declined 35 2016 compared 2015 primarily driven lower demand alumina segment lower average realized price atoi bauxite segment decreased 46 2016 compared 2015 mainly caused lower average realized price intersegment sales partially offset net productivity improvements previously mentioned higher thirdparty volume 2017 total bauxite shipments expected 475 485 mbdmt driven incremental volumes juruti brazil huntly australia mines december 2016 alcoa secured first major thirdparty contract supply bauxite huntly mine western australia state government also granted approval alcoa export 2500 kmt per annum bauxite five years thirdparty customers alumina includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses segment represents alcoa corporation’s worldwide refining system processes bauxite alumina mainly sold directly internal external smelter customers worldwide sold customers process industrial chemical products half alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors december 31 2016 alcoa corporation 2305 kmt idle capacity base capacity 15064 kmt 2016 idle capacity decreased 572 kmt compared 2015 due permanent closure suralco refinery suriname 2207 kmtperyear partially offset curtailment 1635 kmt point comfort texas refinery base capacity declined 2207 kmt december 31 2016 2015 due previously mentioned permanent closure suralco refinery march 2015 management initiated 12month review 2800 kmt refining capacity possible curtailment partial full permanent closure divestiture review part management’s target lower alcoa corporation’s refining operations global alumina cost curve 21st percentile currently 17th end 2016 part review 2015 management decided curtail remaining operating capacity suralco 1330 kmtperyear point comfort 2010 kmtperyear refineries curtailment capacity suralco point comfort completed end november 2015 june 2016 375 kmtperyear completed end december 2015 respectively point comfort nameplate capacity 2305 kmtperyear 295 kmt curtailed prior review management completed specific review alcoa corporation’s refining capacity analysis portfolio optimization light changes marketplace may occur given time ongoing december 2016 management approved permanent closure suralco refinery effective immediately previously mentioned suralco refinery fully curtailed since november 2015 since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname see restructuring charges results operations description associated charges related actions 2016 2015 2016 alumina production declined 2469 kmt compared 2015 mostly result lower production point comfort refinery absence production suralco refinery due actions described thirdparty sales alumina segment decreased 31 2016 compared 2015 largely attributable 18 drop average realized price 16 decline volume change average realized price mainly driven 23 lower average alumina index price decrease volume primarily due lower demand intersegment sales segment declined 23 2016 compared 2015 principally caused lower demand aluminum segment result closure curtailment three smelters see aluminum occurred different points 2016 2015 lower average realized price atoi alumina segment decreased 374 2016 compared 2015 primarily due previously mentioned lower average realized alumina price higher costs caustic inputs including labor somewhat offset net productivity improvements lower cost bauxite 2017 alumina production reflect absence approximately 200 kmt due curtailment point comfort refinery additionally net productivity improvements anticipated aluminum includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses segment represents alcoa corporation’s worldwide smelter system aluminum receives alumina mostly alumina segment produces molten primary aluminum virtually aluminum’s production sold internally cast products rolled products segment transferred prevailing market prices december 31 2016 alcoa corporation 778 kmt idle capacity base capacity 3132 kmt idle capacity unchanged compared 2015 base capacity declined 269 kmt december 31 2016 2015 due permanent closure warrick indiana smelter march 2015 management initiated 12month review 500 kmt smelting capacity possible curtailment partial full permanent closure divestiture review part management’s target lower alcoa corporation’s smelting operations global aluminum cost curve 38th percentile currently 38th end 2016 summary review management approved curtailment 447 kmtperyear closure 269 kmtperyear following description action time review initiated management decided curtail remaining capacity 74 kmtperyear são luís smelter brazil action completed april 2015 2013 2014 combined alcoa corporation curtailed capacity 194 kmtperyear são luís smelter prior management review additionally november 2015 management decided curtail remaining capacity intalco 230 kmtperyear wenatchee 143 kmtperyear smelters washington two smelters previously curtailed capacity 90 kmtperyear combined curtailment remaining capacity wenatchee completed end december 2015 curtailment remaining capacity intalco expected completed end june 2016 however may 2016 alcoa corporation reached agreement new power contract help improve competitiveness smelter resulting termination planned curtailment furthermore december 2015 management approved permanent closure warrick smelter 269 kmtperyear decision made smelter longer competitive light prevailing market conditions price aluminum time closure warrick smelter completed end march 2016 management completed specific review alcoa corporation’s smelting capacity analysis portfolio optimization light changes marketplace may occur given time ongoing separate 2015 smelting capacity review described june 2015 management approved permanent closure poços de caldas smelter brazil effective immediately poços de caldas smelter temporarily idle since may 2014 due challenging global market conditions primary aluminum higher operating costs made smelter uncompetitive decision permanently close poços de caldas smelter based fact underlying conditions improved see restructuring charges results operations description associated charges related actions 2016 2015 2016 aluminum production declined 388 kmt compared 2015 mostly result absence production combined three smelters warrick wenatchee são luís impacted 2015 capacity review described intersegment sales primary metals segment declined 26 2016 compared 2015 mainly due decrease average realized price lower sales approximately 415 warrick smelter closed early 2016 absence sales approximately 300 wenatchee são luís smelters 2015 atoi primary metals segment decreased 20 2016 compared 2015 primarily caused previously mentioned lower average realized aluminum price mostly offset following lower costs major inputs alumina energy carbon net productivity improvements net favorable foreign currency movements due stronger us dollar especially icelandic króna norwegian krone 2017 aluminum production reflect absence approximately 50 kmt due closure warrick smelter additionally net productivity improvements anticipated described segments subsequent 2016 section segment combined cast products rolled products segments along majority energy segment one operating segment 2017 cast products average realized price per metric ton aluminum includes three elements underlying base metal component based quoted prices lme b regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states c product premium represents incremental price receiving physical metal particular shape eg billet slab rod etc alloy includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses segment represents alcoa corporation’s worldwide cast house system cast products made molten aluminum purchased primarily alcoa corporation’s aluminum segment formed various valueadd ingot products including billet slab use fabrication operations variety industries results sale aluminum powder scrap also included segment majority segment’s products sold third parties including arconic’s aluminum fabrication businesses remaining portion sold rolled products segment prevailing market prices thirdparty sales cast products segment declined 16 2016 compared 2015 primarily related 11 drop average realized price 6 decrease volume change average realized price mainly driven lower regional premiums dropped average 40 united states canada 44 europe 53 pacific region 5 lower average lme price 15day lag intersegment sales segment increased 270 2016 compared 2015 largely attributable higher demand rolled products segment warrick rolling mill converted hot metal plant cold metal plant see rolled products due permanent closure warrick smelter march 2016 see aluminum atoi cast products segment improved 66 2016 compared 2015 principally result decrease cost molten aluminum net productivity improvements smaller equity loss related casthouse portion investment saudi arabia partially offset previously mentioned decrease average realized aluminum price including product premiums 2017 thirdparty sales reflect impact restarting capacity portland aluminum smelter following december 2016 power outage additionally net productivity improvements anticipated impact long markets despite strong demand expected pressure valueadded product pricing described segments subsequent 2016 section segment combined aluminum rolled products segments along majority energy segment one operating segment 2017 energy segment represents alcoa corporation’s portfolio energy assets power production capacity approximately 1685 megawatts power sold internal customers within aluminum segment external customers provides operational flexibility maximize operating results market cyclicality july 2016 alcoa corporation’s whollyowned subsidiary alcoa power generating inc reached agreement sell 215megawatt yadkin hydroelectric project yadkin cube hydro carolinas llc yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina transaction closed february 2017 power generated yadkin primarily sold open market yadkin generated sales 29 2016 approximately 30 employees december 31 2016 thirdparty sales energy segment decreased 34 2016 compared 2015 primarily driven lower energy prices brazil significant portion sales brazil relate energy previously consumed alcoa’s two smelters brazil são luís fully curtailed since early 2015 poços de caldas fully curtailed since mid2014 permanently closed mid2015 intersegment sales segment declined 43 2016 compared 2015 principally result lower demand aluminum alumina segments due permanent closure warrick smelter march 2016 full curtailment portions capacity curtailed throughout 2015 suralco refinery november 2015 respectively atoi energy segment decreased 69 2016 compared 2015 mainly due previously mentioned lower energy prices brazil lower demand internal consumers 2017 energy prices brazil expected remain depressed thirdparty sales reflect absence sales related yadkin described segments subsequent 2016 section majority segment combined aluminum cast products rolled products segments one operating segment 2017 rolled products generally average realized price per metric ton aluminum includes two elements price metal underlying base metal component plus regional premium see footnote table cast products description two components b conversion price represents incremental price metal price component associated converting primary aluminum sheet plate metal price component passthrough segment’s customers segment represents alcoa corporation’s rolling mill warrick indiana produces aluminum sheet primarily sold directly customers packaging end market production aluminum cans beverage food pet food additionally alcoa corporation tolling arrangement arconic whereby arconic’s rolling mill tennessee produces sheet products certain segment’s customers alcoa corporation supplies raw materials tennessee facility pays arconic tolling service depending certain factors arrangement concludes end 2018 seasonal increases sheet sales generally experienced second third quarters year segment also includes alcoa corporation’s investment rolling mill saudi arabia thirdparty sales rolled products segment increased 8 2016 compared 2015 primarily driven higher volume result tolling arrangement arconic partially offset lower pricing unfavorable product mix ie higher ratio body stock sold compared end tab stock atoi segment declined 61 2016 compared 2015 primarily attributable higher costs 53 operating warrick rolling mill cold metal plant previously hot metal plant due permanent closure warrick smelter march 2016 see aluminum previously mentioned unfavorable product mix 2017 thirdparty sales expected increase result operating full year tolling arrangement arconic additionally net productivity improvements anticipated described segments subsequent 2016 section segment combined aluminum cast products segments along majority energy segment one operating segment 2017 reconciliation atoi consolidated net loss attributable alcoa corporation items required reconcile total segment atoi consolidated net loss attributable alcoa corporation include impact lifo inventory accounting metal price lag interest expense noncontrolling interest corporate expense general administrative selling expenses operating corporate headquarters global administrative facilities along depreciation amortization corporateowned assets restructuring charges income taxes including impact discrete tax items deferred tax valuation allowance adjustments differences tax rates applicable segments consolidated effective tax rate intersegment profit elimination nonoperating items foreign currency transaction gainslosses certain asset sales interest income following table reconciles total segment atoi consolidated net loss attributable alcoa corporation see restructuring charges interest expense noncontrolling interest earnings summary description changes restructuring charges interest expense noncontrolling interest reconciling items respectively table changes remaining reconciling items total segment atoi consolidated net loss attributable alcoa corporation 2016 compared 2015 consisted • change impact lifo mostly due increase price alumina december 31 2016 indexed december 31 2015 compared decrease price alumina december 31 2015 indexed december 31 2014 overall price alumina 2016 lower compared 2015 • change metal price lag result increase price aluminum driven higher base metal prices lme partially offset lower regional premiums december 31 2016 indexed december 31 2015 compared decrease price aluminum lower base metal prices lme regional premiums december 31 2015 indexed december 31 2014 overall price aluminum 2016 lower compared 2015 metal price lag describes timing difference created average price metal sold differs average cost metal purchased alcoa corporation’s rolled products segment general price metal increases metal price lag favorable price metal decreases metal price lag unfavorable • increase corporate expense largely attributable higher costs associated separation transaction 61 includes allocation 56 parentco prior separation date mostly offset decrease corporate overhead expenses • increase income taxes principally caused us losses tax credits tax benefit realizable alcoa corporation • change primarily related gain sale wharf property near intalco washington smelter 118 lower inventory writedowns related decisions permanently close andor curtail capacity difference 85see restructuring charges earnings summary gain sale equity interest natural gas pipeline australia 27 segments prior 2015 described following information regarding alcoa corporation’s segments effect prior january 2015 alumina primary metals rolled products provided supplemental basis atoi reportable segments current segment structure totaled 902 2015 1018 2014 following information provides sales atoi data reportable segment well certain production shipments realized price average cost data two years period ended december 31 2015 see note e consolidated financial statements part ii item 8 form 10k additional information alumina includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation depletion amortization plant administrative expenses segment represents portion alcoa corporation’s upstream operations consists company’s worldwide refining system alumina mines bauxite alumina produced sold directly external smelter customers well primary metals segment see primary metals customers process industrial chemical products half alumina’s production sold supply contracts third parties worldwide remainder used internally primary metals segment alumina produced segment used internally transferred primary metals segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors generally sales segment transacted us dollars costs expenses segment transacted local currency respective operations australian dollar brazilian real us dollar euro december 2014 alcoa corporation’s majorityowned subsidiary 60 alcoa minerals jamaica llc amj part awac completed sale 55 ownership stake bauxite mine alumina refinery joint venture jamaica noble group ltd owned amj 55 operating results assets liabilities joint venture included former alumina segment see note e relates amj’s previous 55 ownership stake refinery amj’s share capacity 779 kmtperyear generated sales thirdparty intersegment approximately 200 2013 refinery mine combined time divestiture approximately 500 employees see restructuring charges results operations 2015 alumina production decreased 886 kmt compared 2014 decline mostly result absence production jamalco refinery see lower production suralco surinamesee poços de caldas brazilsee refineries slightly offset higher production san ciprian spain point comfort texas refineries march 2015 management initiated 12month review 2800 kmt refining capacity possible curtailment partial full permanent closure divestiture review part management’s target lower alcoa corporation’s refining operations global alumina cost curve 21st percentile end 2016 part review 2015 management decided curtail remaining operating capacity suralco 1330 kmtperyear point comfort 2010 kmtperyear refineries curtailment capacity suralco point comfort completed end november 2015 june 2016 375 kmtperyear completed end december 2015 respectively point comfort nameplate capacity 2305 kmtperyear 295 kmt curtailed prior review see restructuring charges results operations description associated charges related actions management completed specific review alcoa corporation’s refining capacity analysis portfolio optimization light changes marketplace may occur given time ongoing thirdparty sales alumina segment decreased 2 2015 compared 2014 largely attributable 2 decline average realized price somewhat offset 1 increase volume change average realized price mostly driven decrease average alumina indexspot price average lmebased price somewhat offset higher percentage 75 compared 68 smeltergrade alumina shipments linked alumina indexspot price instead lmebased price intersegment sales segment declined 13 2015 compared 2014 decrease mostly result lower demand primary metals segment result closure curtailment divestiture number smelters see primary metals lower average realized price atoi alumina segment increased 376 2015 compared 2014 mainly caused net favorable foreign currency movements due stronger us dollar especially australian dollar brazilian real net productivity improvements lower input costs including natural gas fuel oil transportation slightly offset higher labor maintenance costs positive impacts slightly offset previously mentioned lower average realized price absence gain sale mining interest suriname 18 primary metals average realized price per metric ton aluminum includes three elements underlying base metal component based quoted prices lme b regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states c product premium represents incremental price receiving physical metal particular shape eg billet slab rod etc alloy includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses segment represents portion alcoa corporation’s upstream operations consists worldwide smelting system primary metals purchases alumina mostly alumina segment see alumina primary aluminum produced sold directly external customers traders well arconic results sale aluminum powder scrap excess energy also included segment primary aluminum produced alcoa corporation sold arconic sold prevailing market prices sale primary aluminum represents approximately 90 segment’s thirdparty sales generally sales segment transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian kroner icelandic krona canadian dollar brazilian real australian dollar november 2014 alcoa corporation completed sale aluminum rod plant located bécancour québec canada sural laminated products facility takes molten aluminum shapes form rod used customers primarily transportation electricity owned alcoa corporation operating results assets liabilities plant included primary metals segment conjunction transaction alcoa corporation entered multiyear agreement sural laminated products supply molten aluminum rod plant aluminum rod plant generated sales approximately 200 2013 time divestiture approximately 60 employees see restructuring charges results operations december 2014 alcoa corporation completed sale 5033 ownership stake mt holly smelter located goose creek south carolina century aluminum company owned alcoa corporation 5033 operating results assets liabilities related smelter included primary metals segment relates alcoa corporation’s previous 5033 ownership stake smelter alcoa corporation’s share capacity 115 kmtperyear generated sales approximately 280 2013 time divestiture approximately 250 employees see restructuring charges results operations december 31 2015 alcoa corporation 778 kmt idle capacity base capacity 3401 kmt 2015 idle capacity increased 113 kmt compared 2014 mostly due curtailment 217 kmt combined smelter united states brazil partially offset permanent closure poços de caldas smelter brazil 96 kmtperyear base capacity declined 96 kmt december 31 2015 2014 due previously mentioned permanent closure poços de caldas smelter detailed description actions follows march 2015 management initiated 12month review 500 kmt smelting capacity possible curtailment partial full permanent closure divestiture review part management’s target lower alcoa corporation’s smelting operations global aluminum cost curve 38th percentile end 2016 summary review management approved curtailment 447 kmtperyear closure 269 kmtperyear following description action time review initiated management decided curtail remaining capacity 74 kmtperyear são luís smelter brazil action completed april 2015 2013 2014 combined alcoa corporation curtailed capacity 194 kmtperyear são luís smelter prior management review additionally november 2015 management decided curtail remaining capacity intalco 230 kmtperyear wenatchee 143 kmtperyear smelters washington two smelters previously curtailed capacity 90 kmtperyear combined curtailment remaining capacity wenatchee completed end december 2015 curtailment remaining capacity intalco expected completed end june 2016 however may 2016 alcoa corporation reached agreement new power contract help improve competitiveness smelter resulting termination planned curtailment furthermore december 2015 management approved permanent closure warrick indiana smelter 269 kmtperyear decision made smelter longer competitive light prevailing market conditions price aluminum closure warrick smelter completed end march 2016 separate 2015 smelting capacity review described june 2015 management approved permanent closure poços de caldas smelter effective immediately poços de caldas smelter temporarily idle since may 2014 due challenging global market conditions primary aluminum higher operating costs made smelter uncompetitive decision permanently close poços de caldas smelter based fact underlying conditions improved see restructuring charges results operations description associated charges related actions 2015 2014 2015 aluminum production declined 314 kmt mainly result absence andor lower production combined four smelters point henry são luís massena east poços de caldas impacted 2014 2015 capacity reviews smelter divested 2014 mt holly thirdparty sales primary metals segment declined 22 2015 compared 2014 primarily due 13 drop average realized price lower sales arconic locations approximately 700 following divestiture closure several rolling mills december 2014 absence sales approximately 585 five smelters rod mill closed curtailed divested 2014 lower energy sales brazil due decrease energy prices weaker brazilian real negative impacts slightly offset higher volume remaining smelter portfolio change average realized price largely attributable 10 lower average lme price 15day lag lower regional premiums dropped average 39 united states canada 44 europe atoi primary metals segment decreased 491 2015 compared 2014 primarily caused previously mentioned lower average realized aluminum price lower energy sales higher energy costs mostly spain 2014 interruptibility rights favorable 2015 structure unfavorable impact related curtailment são luís smelter negative impacts somewhat offset net favorable foreign currency movements due stronger us dollar major currencies net productivity improvements absence writeoff inventory related permanent closure portovesme point henry massena east smelters 44 lower equity loss related joint venture saudi arabia including absence restart costs one potlines previously shut due period instability rolled products generally average realized price per metric ton aluminum includes two elements price metal underlying base metal component plus regional premiumsee footnote table primary metals description two components b conversion price represents incremental price metal price component associated converting primary aluminum sheet plate circumstance metal price component passthrough segment’s customers segment represents alcoa corporation’s rolling mill warrick indiana produces aluminum sheet primarily sold directly customers packaging end market production aluminum cans beverage food pet food seasonal increases sheet sales generally experienced second third quarters year segment also includes alcoa corporation’s investment rolling mill saudi arabia thirdparty sales rolled products segment declined 4 2015 compared 2014 primarily driven unfavorable pricing mostly due decrease metal prices lme regional premium components atoi segment decreased 1 2015 compared 2014 primarily attributable unfavorable priceproduct mix largely result overall pricing pressure global sheet packaging end market segments subsequent 2016 march 2 2017 alcoa corporation announced consolidating certain business units reduce complexity aluminum smelting cast products rolled products businesses along majority energy business combined new aluminum business unit new business unit managed single operating segment result beginning first quarter 2017 company’s operating reportable segments bauxite alumina aluminum segments use adjusted ebitda earnings interest taxes depreciation amortization measure report segment profitability alcoa corporation’s definition adjusted ebitda net margin plus addback depreciation depletion amortization net margin equivalent sales minus following items cost goods sold selling general administrative expenses research development expenses provision depreciation depletion amortization adjusted ebitda may comparable similarly titled measures companies reconciliation atoi consolidated net loss attributable alcoa corporation items required reconcile total segment atoi consolidated net loss attributable alcoa corporation include impact lifo inventory accounting metal price lag interest expense noncontrolling interest corporate expense general administrative selling expenses operating corporate headquarters global administrative facilities along depreciation amortization corporateowned assets restructuring charges income taxes including impact discrete tax items deferred tax valuation allowance adjustments differences tax rates applicable segments consolidated effective tax rate intersegment profit elimination nonoperating items foreign currency transaction gainslosses certain asset sales interest income following table reconciles total segment atoi consolidated net loss attributable alcoa corporation see restructuring charges interest expense noncontrolling interest earnings summary description changes restructuring charges interest expense noncontrolling interest reconciling items respectively table changes remaining reconciling items total segment atoi consolidated net loss attributable alcoa corporation 2015 compared 2014 consisted • change impact lifo mostly due lower prices aluminum driven lower base metal prices lme regional premiums alumina decrease price december 31 2015 indexed december 31 2014 compared increase price december 31 2014 indexed december 31 2013 • change metal price lag result decrease price aluminum driven lower base metal prices lme regional premiums december 31 2015 indexed december 31 2014 compared increase price aluminum lower base metal prices lme regional premiums december 31 2014 indexed december 31 2013 metal price lag describes timing difference created average price metal sold differs average cost metal purchased alcoa corporation’s rolled products segment general price metal increases metal price lag favorable price metal decreases metal price lag unfavorable • decline corporate expense largely attributable decreases various expenses partially offset expenses related separation transaction 12 • increase income taxes mostly result reversal 2015 income tax benefit us operating losses reflected atoi compared reversal 2014 income tax cost us operating income reflected atoi higher discrete tax charges 62 compared 2014 primarily associated valuation allowance adjustments certain deferred tax assets suriname iceland higher 2014’s discrete tax charges associated tax rate changes brazil spain • change primarily due writedowns inventories related various shutdown curtailment actions 90 environmental matters see environmental matters section note r consolidated financial statements part ii item 8 form 10k liquidity capital resources alcoa corporation’s primary future cash needs centered operating activities including working capital well recurring strategic capital expenditures company’s ability fund cash needs depends alcoa corporation’s ongoing ability generate raise cash future although management believes alcoa corporation’s future cash operations together company’s access capital markets provide adequate resources fund alcoa corporation’s operating investing needs company’s access availability financing acceptable terms future affected many factors including alcoa corporation’s credit rating ii liquidity overall capital markets iii current state economy commodity markets assurances alcoa corporation continue access capital markets terms acceptable company periods prior separation date parentco provided capital cash management treasury services alcoa corporation cash amounts specifically attributable alcoa corporation reflected company’s consolidated financial statements transfers cash parentco’s centralized cash management system reflected component parent company net investment alcoa corporation’s consolidated financial statements cash provided operations financing activities expected adequate cover alcoa corporation’s operational business needs next 12 months analysis longterm liquidity see contractual obligations offbalance sheet arrangements december 31 2016 cash equivalents alcoa corporation 853 818 held outside united states alcoa corporation number commitments obligations related company’s operations various foreign jurisdictions resulting need cash outside united states alcoa corporation currently evaluating local global cash needs future business operations anticipated debt facilities may influence future repatriation decisions cash operations cash used operations 2016 311 compared cash provided operations 875 2015 decrease 1186 due lower operating results net loss plus net addback noncash transactions earnings negative change associated working capital 648 items slightly offset positive change noncurrent assets 172 noncurrent liabilities 60 lower pension contributions 3 favorable change noncurrent assets mainly result 100 smaller prepayment made natural gas supply agreement australia see cash provided operations 2015 875 compared 842 2014 increase 33 due positive change associated working capital 500 lower pension contributions 85 positive change noncurrent liabilities 7 mostly offset negative change noncurrent assets 324 lower operating results net loss plus net addback noncash transactions earnings unfavorable change noncurrent assets mostly related 300 prepayment made natural gas supply agreement australia see lower pension contributions due absence special termination benefits paid 2014 employees affected 2013 shutdown capacity smelter canada april 8 2015 aofa secured new 12year gas supply agreement power three alumina refineries western australia beginning july 2020 agreement conditional completion thirdparty acquisition related energy assets thencurrent owner occurred june 2015 terms gas supply agreement required aofa make prepayment 500 two installments first installment 300 made time completion thirdparty acquisition june 2015 second installment 200 made april 2016 financing activities cash used financing activities 483 2016 compared 162 2015 444 2014 use cash 2016 principally result 1072 cash provided parentco conjunction completion separation transaction 185 net cash paid alumina limited see noncontrolling interest earnings summary 34 payments debt items partially offset 802 net transfers parentco prior separation date use cash 2015 2014 due net transfers parentco 34 332 respectively net cash paid alumina limited see noncontrolling interest earnings summary 104 77 respectively payments debt 24 36 respectively credit facility september 16 2016 alcoa corporation alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation entered revolving credit agreement syndicate lenders issuers named therein amended “revolving credit agreement” revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” proceeds may used transaction costs related separation transaction provide working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries revolving credit facility scheduled mature november 1 2021 unless extended earlier terminated accordance provisions revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth revolving credit agreement provisions revolving credit agreement anhbv pay quarterly commitment fee ranging 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal anhbv’s option either adjusted libor rate b base rate determined reference highest 1 prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum plus case applicable margin applicable margin loans vary based alcoa corporation’s leverage ratio range 175 250 libor loans 075 150 base rate loans outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility revolving credit agreement includes number customary affirmative covenants additionally revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness entering restrictive agreements restricted payments including shareholder dividends repurchases common stock see investments loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 225 100 december 31 2016 alcoa corporation compliance covenants reference restricted payments covenant mentioned alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period annual 2018 50 annual 2019 2020 75 january 1 2021 november 1 2021 time period see except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period also alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events amounts outstanding december 31 2016 amounts borrowed 2016 september 16th december 31st revolving credit facility 144a debt september 2016 anhbv completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds see debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commencing march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” subsidiary guarantors released notes guarantees upon occurrence certain events including release guarantor obligations guarantor revolving credit agreement notes indenture contains various restrictive covenants similar described revolving credit agreement including limitation restricted payments among exceptions capacity pay annual dividends generally consistent provided revolving credit agreement annual capacity pay 75 year within 2021 2024 timeframe conjunction debt offering net proceeds 1228 plus additional 81 parentco cash hand required placed escrow contingent completion separation transaction 81 represented necessary cash fund redemption notes pay regularly scheduled interest notes specified date defined indenture premium principal notes separation transaction completed certain time defined indenture result 1228 escrowed cash recorded restricted cash issuance notes increase restricted cash amount 1228 reflected alcoa corporation’s statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 preparation separation transaction decrease restricted cash reflected alcoa corporation’s statement consolidated cash flows cash inflow net change restricted cash line item ratings alcoa corporation’s cost borrowing ability access capital markets affected market conditions also short longterm debt ratings assigned alcoa corporation’s debt major credit rating agencies september 20 2016 moody’s investor service moody’s assigned following ratings alcoa corporation longterm debt ba3 shortterm debt speculative grade liquidity rating2 additionally moody’s assigned current outlook stable also september 20 2016 standard poor’s global ratings sp assigned bb rating alcoa corporation’s longterm debt additionally sp assigned current outlook stable investing activities cash provided investing activities 1077 2016 compared cash used investing activities 2015 2014 384 338 respectively source cash 2016 primarily due 1228 net proceeds newly issued debt see financing activities released escrow 265 proceeds sale equity interest natural gas pipeline australia 145 sale wharf property near intalco washington smelter 120 items somewhat offset 404 capital expenditures includes costs related environmental control new expanded facilities 83 use cash 2015 due 391 capital expenditures includes costs related environmental control new expanded facilities 122 63 additions investments including equity contributions 29 related aluminum complex joint venture saudi arabia items slightly offset 70 proceeds sale assets businesses including sale land around lake charles louisiana anode facility postclosing adjustments related ownership stake smelter ownership stake bauxite minealumina refinery divested 2014 use cash 2014 due 444 capital expenditures includes costs related environmental control new expanded facilities 120 145 additions investments including equity contributions 120 related aluminum complex joint venture saudi arabia items somewhat offset 223 proceeds sale assets businesses largely attributable sale ownership stake bauxite mine refinery jamaica see alumina segments prior 2015 segment information ownership stake smelter united states see primary metals segments prior 2015 segment information rod plant canada see primary metals segments prior 2015 segment information 28 sales investments related sale mining interest suriname noncash financing investing activities september 2016 anhbv issued 1250 new senior notes see financing activities preparation separation transaction net proceeds 1228 debt issuance required placed escrow contingent completion separation transaction result 1228 escrowed cash recorded restricted cash issuance new senior notes increase restricted cash amount 1228 reflected alcoa corporation’s statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 decrease restricted cash reflected alcoa corporation’s statement consolidated cash flows cash inflow net change restricted cash line item contractual obligations offbalance sheet arrangements contractual obligations alcoa corporation required make future payments various contracts including longterm purchase obligations financing arrangements lease agreements alcoa corporation also commitments fund pension plans provide payments postretirement benefit plans fund capital projects december 31 2016 summary alcoa corporation’s outstanding contractual obligations follows contractual obligations grouped manner classified statement consolidated cash flows order provide better understanding nature obligations provide basis comparison historical information obligations operating activities energyrelated purchase obligations consist primarily electricity natural gas contracts expiration dates ranging 1 year 31 years raw material obligations consist mostly bauxite relates alcoa corporation’s bauxite mine interests guinea brazil caustic soda alumina aluminum fluoride calcined petroleum coke cathode blocks expiration dates ranging less 1 year 16 years purchase obligations consist principally freight bauxite alumina expiration dates ranging 1 15 years many purchase obligations contain variable pricing components result actual cash payments may differ estimates provided preceding table operating leases represent multiyear obligations certain land buildings alumina refinery process control technology plant equipment vehicles computer equipment interest related total debt based interest rates effect december 31 2016 calculated debt maturities extend 2029 contractual interest rates certain debt variable actual cash payments may differ estimates provided preceding table estimated minimum required pension funding postretirement benefit payments based actuarial estimates using current assumptions discount rates longterm rate return plan assets rate compensation increases health care cost trend rates among others minimum required contributions pension funding estimated 115 2017 300 2018 250 2019 275 2020 250 2021 us portion expected pension contributions reflect impacts pension protection act 2006 worker retiree employer recovery act 2008 moving ahead progress 21st century act 2012 highway transportation funding act 2015 bipartisan budget act 2016 postretirement benefit payments expected approximate 115 130 annually years 2017 2021 99 annually years 2022 2026 payments slightly offset subsidy receipts related medicare part estimated approximately 10 annually years 2017 2026 alcoa corporation determined practicable present pension funding postretirement benefit payments beyond 2021 2026 respectively layoff restructuring payments expected paid within one year primarily relate severance costs amounts scheduled paid beyond one year related contract termination special layoff benefit payments deferred revenue arrangements require alcoa corporation deliver alumina certain customer specified contract period 2027 obligation expected result cash payments represents contractual obligation company would obligated specified product deliveries could made uncertain tax positions taken expected taken income tax return may result additional payments tax authorities amount preceding table includes interest penalties accrued related positions december 31 2016 total amount uncertain tax positions included “thereafter” column company able reasonably estimate timing potential future payments tax authority agrees tax position taken expected taken applicable statute limitations expires additional payments necessary early 2014 parentco one alcoa’s corporation’s current subsidiaries awa resolved violations certain provisions foreign corrupt practices act 1977 us department justice us securities exchange commission resolution parentco awa agreed pay combined 384 fouryear timeframe prior separation transaction parentco awa paid 236 total amount part separation distribution agreement alcoa corporation assumed parentco’s portion 148 remaining obligation 148 paid equal installments 74 january 2017 paid january 9th january 2018 obligations financing activities total debt amounts preceding table represent principal amounts outstanding longterm debt maturities extend 2029 december 31 2016 alcoa corporation 182930995 issued outstanding shares common stock dividends common stock subject authorization alcoa corporation’s board directors alcoa corporation declare dividends november 1 2016 december 31 2016 effective november 1 2016 certain documents govern awac joint venture relationship alcoa corporation alumina limited revised one provisions revised documents relates required cash distributions entities comprise joint venture two partners quarterly basis certain identified entities comprise awac joint venture must distribute 50 entity’s net income based previous quarter’s results ii available cash entity subject certain thresholds entities must maintain minimum cash hand ranges 5 85 depending entity available cash defined entity’s cash equivalents less projected negative free cash flow entity upcoming quarter free cash flow defined cash flow operating activities less sustaining capital expenditures estimates potential cash distributions alumina limited included preceding table since would require alcoa corporation provide proprietary information related forecasted results entities comprise awac joint venture 2016 2015 2014 alumina limited received distributions 233 106 120 respectively entities comprise awac based prior agreements’ provisions obligations investing activities capital projects preceding table include amounts approved management december 31 2016 funding levels may vary future years based anticipated construction schedules projects expected significant expansion projects funded various sources including cash provided operations total capital expenditures anticipated approximately 450 2017 equity contributions represent alcoa corporation’s committed investment related joint venture saudi arabia alcoa corporation participant joint venture related integrated aluminum complex saudi arabia comprised bauxite mine alumina refinery aluminum smelter rolling mill requires company contribute approximately 1100 december 31 2016 alcoa corporation made equity contributions 982 based changes project’s capital investment equity debt structure initial plans estimated 1100 equity contribution may reduced alcoa corporation anticipate making additional equity contributions initial 1100 plan although formal determination yet made contribution amounts included preceding table offbalance sheet arrangements december 31 2016 alcoa corporation maximum potential future payments guarantees issued behalf third party 354 guarantees expire various times 2017 2024 relate project financing aluminum complex saudi arabia alcoa corporation outstanding bank guarantees letters credit related energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties among others total amount committed instruments automatically renew expire various dates 2017 2021 444 december 31 2016 additionally arconic outstanding bank guarantees letters credit related alcoa corporation amount 115 december 31 2016 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise alcoa corporation outstanding bank guarantees letters credit related arconic amount 26 december 31 2016 event alcoa corporation would required perform instruments alcoa corporation would indemnified arconic accordance separation distribution agreement alcoa corporation also outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2017 159 december 31 2016 additionally arconic outstanding surety bonds related alcoa corporation amount 22 december 31 2016 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement critical accounting policies estimates preparation consolidated financial statements accordance accounting principles generally accepted united states america requires management make certain judgments estimates assumptions regarding uncertainties affect amounts reported consolidated financial statements disclosed notes consolidated financial statements areas require significant judgments estimates assumptions include review properties plants equipment equity investments goodwill impairment accounting following asset retirement obligations environmental litigation matters stockbased compensation pension plans postretirement benefits obligations derivatives hedging activities income taxes management uses historical experience available information make judgments estimates assumptions actual results may differ used prepare company’s consolidated financial statements given time despite inherent limitations management believes management’s discussion analysis financial condition results operations consolidated financial statements including notes consolidated financial statements provide meaningful fair perspective company summary company’s significant accounting policies included note b consolidated financial statements part ii item 8 form 10k management believes application policies consistent basis enables company provide users consolidated financial statements useful reliable information company’s operating results financial condition prior separation date alcoa corporation operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date alcoa corporation’s consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation critical accounting policies described reflect incremental judgments estimates assumptions made management preparation alcoa’s consolidated financial statements prior separation date see separation transaction overview additional information properties plants equipment properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds estimated undiscounted net cash flows amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments equity investments alcoa corporation invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations alcoa corporation ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable analysis requires significant amount judgment management identify events circumstances indicating equity investment impaired following items examples impairment indicators significant sustained declines investee’s revenue earnings cash flow trends adverse market conditions investee’s industry geographic area investee’s ability continue operations measured several items including liquidity factors impairment indicator identified management uses considerable judgment determine impairment temporary case equity investment written estimated fair value impairment temporary could significantly adversely impact reported results operations goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business significant amount judgment involved determining indicator impairment occurred indicators may include deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods among others fair value could realized actual transaction may differ used evaluate impairment goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment alcoa corporation six reporting units follows bauxite alumina aluminum cast products energy rolled products six reporting units bauxite alumina contain goodwill december 31 2016 carrying value goodwill bauxite alumina 52 103 respectively amounts include allocation goodwill held corporate level reviewing goodwill impairment entity option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount entity elects perform qualitative assessment determines impairment likely entity required perform existing twostep quantitative impairment test described otherwise analysis required entity also may elect perform qualitative assessment instead proceed directly twostep quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether entity chooses perform qualitative assessment proceeds directly twostep quantitative impairment test alcoa corporation’s policy annual review goodwill perform qualitative assessment reporting units subjected directly twostep quantitative impairment test generally management proceed directly twostep quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill qualitative assessment various events circumstances factors would affect estimated fair value reporting unit identified similar impairment indicators factors classified type impact would estimated fair value using positive neutral adverse categories based current business conditions additionally assessment level impact particular factor would estimated fair value determined using high medium low weighting furthermore management considers results recent twostep quantitative impairment test completed reporting unit compares weighted average cost capital wacc current prior years reporting unit 2016 annual review goodwill management performed qualitative assessment bauxite reporting unit management concluded likely estimated fair value reporting unit less carrying value analysis required twostep quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill alcoa corporation uses dcf model estimate current fair value reporting units testing impairment management believes forecasted cash flows best indicator fair value number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes certain assumptions vary significantly among reporting units cash flow forecasts generally based approved business unit operating plans early years historical relationships later years betas used calculating individual reporting units’ wacc rate estimated business assistance valuation experts event estimated fair value reporting unit per dcf model less carrying value additional analysis would required additional analysis would compare carrying amount reporting unit’s goodwill implied fair value goodwill may involve use valuation experts implied fair value goodwill excess fair value reporting unit fair value amounts assigned assets liabilities unit reporting unit acquired business combination fair value reporting unit represented purchase price carrying value goodwill exceeds implied fair value impairment loss equal excess would recognized 2016 annual review goodwill management proceeded directly twostep quantitative impairment test alumina reporting unit estimated fair value reporting unit substantially excess carrying value resulting impairment goodwill impairment tests prior years presented indicated goodwill impaired alcoa corporation’s reporting units triggering events since time necessitated impairment test asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated normal operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks polychlorinated biphenyls various process residuals solid wastes electronic equipment waste various materials amounts may material consolidated financial statements period recorded alcoa corporation required demolish structures immediately estimated caro december 31 2016 ranges 3 29 per structure 24 structures today’s dollars environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss stockbased compensation periods prior separation date employees attributable alcoa corporation operations participated parentco’s stockbased compensation plans compensation expense recorded alcoa corporation included expense associated employees well expense associated allocation stockbased compensation expense parentco’s corporate employees separation date december 31 2016 alcoa corporation recorded stockbased compensation expense company’s employees following accounting policy describes stockbased compensation expense initially determined alcoa corporation parentco compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time 2016 2015 2014 alcoa corporation recognized stockbased compensation expense 28 35 39 respectively amounts 16 21 relates allocation expense parentco’s corporate employees 2016 2015 2014 respectively part parentco’s stockbased compensation plan design individuals retirementeligible sixmonth requisite service period year grant result larger portion expense recognized first half year retirementeligible employees total pretax stockbased compensation expense recognized 2016 2015 2014 7 6 8 respectively pertains acceleration expense related retirementeligible employees plan participants choose whether receive award form stock options stock awards combination choice made grant issued irrevocable pension postretirement benefits periods prior august 1 2016 see certain employees attributable alcoa corporation operations participated defined benefit pension postretirement benefit plans “shared plans” sponsored parentco also included participants attributable nonalcoa corporation operations alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans however related expense recorded alcoa corporation based primarily pensionable compensation estimated interest costs related employees attributable alcoa corporation operations prior separation date certain plans entirely attributable employees alcoa corporationrelated operations “direct plans” accounted defined benefit pension postretirement benefit plans accordingly funded unfunded position direct plan recorded consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive income net taxes amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions see preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation “new direct plans” parentco additionally certain remaining shared plans assumed alcoa corporation “additional new direct plans” accordingly august 1 2016 december 31 2016 standalone plans assumed plans accounted defined benefit pension postretirement plans additionally direct plans continued accounted defined benefit pension postretirement plans december 31 2016 liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality interest rate used discount future estimated liabilities determined using companyspecific yield curve model abovemedian developed assistance external actuary cash flows plans’ projected benefit obligations discounted using single equivalent rate derived yields high quality corporate bonds represent broad diversification issuers various sectors yield curve model parallels plans’ projected cash flows average duration ranging 11 15 years underlying cash flows bonds included model exceed cash flows needed satisfy company’s plans’ obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used 2016 2015 weighted average discount rate used determine benefit obligations pension plans 412 403 respectively postretirement benefit plans 393 407 respectively impact combined pension postretirement liabilities change weighted average discount rate 14 1 would approximately 200 either charge credit approximately 5 aftertax earnings following year expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking returns asset class management incorporates expected future returns current planned asset allocations using information various external investment managers consultants well management’s judgment 2016 2015 2014 management used 731 691 weightedaverage expected longterm rate return based prevailing planned strategic asset allocations well estimates future returns asset class 2017 management anticipates 747 weightedaverage expected longterm rate return change assumption weighted average expected longterm rate return plan assets 14 1 would impact aftertax earnings approximately 8 2017 december 31 2015 alcoa corporation net liability direct plans 407 described august 1 2016 certain shared plans either separated standalone plans preparation separation transaction fully assumed alcoa corporation accordingly alcoa corporation began accounting new direct plans additional new direct plans defined benefit plans therefore recorded net liability 2528 time accordance alcoa corporation’s policy direct plans new direct plans additional new direct plans remeasured december 31 2016 result remeasurement reflects updated assumptions well actual performance plan assets alcoa corporation net liability 3104 december 31 2016 increase net liability largely result unfavorable performance plan assets derivatives hedging derivatives held purposes trading part formally documented risk management program derivatives designated fair value hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly historical high correlation changes fair value hedged item derivative hedging instrument derivatives designated cash flow hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly probable high correlation expected future cash flows hedged item derivative hedging instrument ineffective portions types hedges recorded sales income expense current period hedging relationship ceases highly effective becomes probable expected transaction longer occur future gains losses derivative instrument recorded income expense alcoa corporation accounts hedges firm customer commitments aluminum fair value hedges result fair values derivatives changes fair values underlying hedged items reported current noncurrent assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item alcoa corporation accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded current noncurrent assets liabilities consolidated balance sheet effective portions changes fair values derivatives recorded comprehensive income reclassified sales cost goods sold income expense period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market earnings cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes separation date december 31 2016 provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa corporation’s assets liabilities adjusted changes tax rates tax laws enacted periods prior separation date alcoa corporation’s operations included income tax filings parentco provision income taxes alcoa corporation’s statement consolidated operations determined manner described separate return methodology company standalone taxpayer filing hypothetical income tax returns applicable additional accrued tax liability refund arising result approach assumed immediately settled parentco component parent company net investment deferred tax assets also determined manner described reflected consolidated balance sheet net operating losses credits attributes extent attributes expected transfer alcoa corporation upon separation transaction difference attributes generated hypothetical return separate return basis adjusted component parent company net investment valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income certain jurisdictions deferred tax assets related cumulative losses exist without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude deferred tax assets valuation allowance currently recorded may realized resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays 2013 alcoa corporation recognized 128 discrete income tax charge valuation allowance full value deferred tax assets related spanish consolidated tax group deferred tax assets expiration period ranging 2017 certain credits unlimited life operating losses weighing available positive negative evidence described management determined longer likely alcoa corporation realize tax benefit deferred tax assets mainly driven decline outlook former primary metals business 2013 realized prices lowest since 2009 combined prior year cumulative losses spanish consolidated tax group 2014 underlying value deferred tax assets decreased due remeasurement result enactment new tax rates spain beginning 2016 change foreign currency exchange rates result valuation allowance decreased amount december 31 2016 2015 amount valuation allowance 76 91 respectively valuation allowance reevaluated december 31 2016 change allowance deemed necessary based available evidence need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2015 alcoa corporation recognized additional 141 discrete income tax charge valuation allowances certain deferred tax assets iceland suriname amount 85 valuation allowance established full value deferred tax assets suriname related mostly employee benefits tax loss carryforwards deferred tax assets expiration period ranging 2017 2022 remaining 56 charge relates valuation allowance established portion deferred tax assets recorded iceland deferred tax assets expiration period ranging 2017 2023 weighing available positive negative evidence described management determined longer likely alcoa corporation realize tax benefit either deferred tax assets mainly driven decline outlook former primary metals business combined prior year cumulative losses short expiration period december 31 2016 2015 amount combined valuation allowance remained 141 valuation allowance reevaluated december 31 2016 change allowance deemed necessary based available evidence need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented transactions alcoa corporation arconic presented related party transactions accompanying consolidated financial statements sales arconic alcoa corporation 958 1078 1783 2016 2015 2014 respectively december 31 2016 outstanding receivables arconic material alcoa corporation’s consolidated balance sheet recently adopted accounting guidance see recently adopted accounting guidance section note b consolidated financial statements part ii item 8 form 10k recently issued accounting guidance see recently issued accounting guidance section note b consolidated financial statements part ii item 8 form 10k item 7aitem 7 management’s discussion analysis financial condition results operations dollars millions except pershare amounts average realized prices average cost amounts dry metric tons millions mdmt metric tons thousands kmt overview business alcoa corporation “company” vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation aluminum commodity traded london metal exchange lme priced daily additionally alumina subject market pricing alumina price index api calculated company based spot prices result price aluminum alumina subject significant volatility therefore influences operating results alcoa corporation company 40 operating locations direct indirect ownership 10 countries around world situated primarily australia brazil canada europe united states governmental policies laws regulations economic factors including inflation fluctuations foreign currency exchange rates interest rates affect results operations countries separation transaction references management’s discussion analysis financial condition results operations “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic september 28 2015 parentco’s board directors preliminarily approved plan separate parentco two standalone publiclytraded companies “separation transaction” one company later named alcoa corporation include alumina primary metals segments comprised bauxite mining alumina refining aluminum production energy operations parentco well warrick indiana rolling operations 251 equity interest rolling mill joint venture saudi arabia part parentco’s global rolled products segment parentco continue operations comprise global rolled products except aforementioned rolling operations included alcoa corporation engineered products solutions transportation construction solutions segments separation transaction subject number conditions including limited final approval parentco’s board directors see continuing validity private letter ruling internal revenue service regarding certain us federal income tax matters relating transaction receipt opinion legal counsel regarding qualification distribution together certain related transactions transaction generally taxfree us federal income tax purposes us securities exchange commission “sec” declaring effective registration statement form 10 amended filed sec october 11 2016 effectiveness declared sec october 17 2016 september 29 2016 parentco’s board directors approved completion separation transaction means pro rata distribution parentco 801 outstanding common stock alcoa corporation parentco shareholders record close business october 20 2016 “record date” arconic retain remaining 199 alcoa corporation common stock time separation transaction parentco shareholders receive one share alcoa corporation common stock every three shares parentco common stock held close business record date parentco shareholders receive cash lieu fractional shares connection separation transaction october 31 2016 alcoa corporation entered certain agreements arconic implement legal structural separation two companies govern relationship alcoa corporation arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations including among things employee benefits environmental liabilities intellectual property taxrelated assets liabilities agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement november 1 2016 “separation date” separation transaction completed became effective 1201 eastern standard time effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting cash payment 1072 parentco alcoa corporation additional 247 paid arconic alcoa corporation 2017 see financing activities liquidity capital resources net proceeds previous debt offering see financing activities liquidity capital resources conjunction separation transaction 146159428 shares alcoa corporation common stock distributed parentco shareholders additionally arconic retained 36311767 shares alcoa corporation common stock representing 199 retained interest arconic sold shares 2017 “regularway” trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” alcoa corporation’s common stock par value 001 per share parentco incurred costs evaluate plan execute separation transaction alcoa corporation allocated pro rata portion costs based segment revenue see cost allocations parentco recognized 152 january 2016 october 2016 24 2015 costs related separation transaction 68 12 respectively allocated alcoa corporation allocated amounts included selling general administrative expenses alcoa corporation’s statement consolidated operations basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap require management make certain judgments estimates assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters prior separation date alcoa corporation operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date alcoa corporation’s consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation cost allocations description information cost allocations applicable periods included alcoa corporation’s consolidated financial statements prior separation date consolidated financial statements alcoa corporation include general corporate expenses parentco historically charged alcoa corporation certain support functions provided centralized basis expenses related finance audit legal information technology human resources communications compliance facilities employee benefits compensation research development activities general corporate expenses included alcoa corporation’s statement consolidated operations within cost goods sold selling general administrative expenses research development expenses allocated alcoa corporation basis direct usage identifiable remainder allocated based alcoa corporation’s segment revenue percentage parentco’s total segment revenue alcoa corporation arconic external debt directly attributable alcoa corporation excluded alcoa corporation’s consolidated balance sheet financing costs related debt obligations allocated alcoa corporation based ratio capital invested alcoa corporation total capital invested parentco alcoa corporation arconic included alcoa corporation’s statement consolidated operations within interest expense following table reflects allocations described 1 allocation principally relates expenses parentco’s retained pension postretirement benefits associated closed sold operations 2 allocation includes costs incurred parentco associated separation transaction see 3 allocation primarily relates layoff programs parentco corporate employees management believes assumptions regarding allocation parentco’s general corporate expenses financing costs reasonable nevertheless consolidated financial statements alcoa corporation may include actual expenses would incurred may reflect alcoa corporation’s consolidated results operations financial position cash flows standalone company periods prior separation date actual costs would incurred alcoa corporation standalone company would depend multiple factors including organizational structure capital structure strategic decisions made various areas including information technology infrastructure transactions alcoa corporation parentco including sales arconic included related party transactions alcoa corporation’s consolidated financial statements considered effectively settled cash time transaction recorded total net effect settlement transactions reflected alcoa corporation’s statement consolidated cash flows financing activity company’s consolidated balance sheet parent company net investment results operations earnings summary net income attributable alcoa corporation 2017 217 compared net loss attributable alcoa corporation 400 2016 change 617 primarily due higher average realized price primary aluminum alumina absence allocated interest expense costs related separation transaction positive impacts partially offset higher income tax provision net income attributable noncontrolling interest partner certain alcoa corporation’s operations increased raw materials maintenance transportation costs net unfavorable foreign currency movements net loss attributable alcoa corporation 2016 400 compared 863 2015 change 463 mostly due lower restructuringrelated charges net productivity improvements smaller income tax provision gains sales multiple assets decreases ongoing overhead research development expenses positive impacts partially offset lower pricing operations costs associated separation transaction salessales 2017 11652 compared sales 9318 2016 improvement 2334 25 increase primarily due higher average realized price primary aluminum alumina increased shipments aluminum products alumina bauxite positive impacts slightly offset realized losses embedded derivatives designated cash flow hedges forward aluminum sales energy supply contracts due rise lme aluminum prices sales 2016 9318 compared sales 11199 2015 decline 1881 17 decrease mainly result lower average realized price alumina aluminum primary rolled energy lower volume alumina absence sales related capacity curtailed negative impacts slightly offset higher bauxite sales cost goods soldcogs percentage sales 779 2017 compared 848 2016 percentage positively impacted higher average realized price primary aluminum alumina somewhat offset several factors follows higher input costs particularly energy including 21 related financial contractsee caustic soda net unfavorable foreign currency movements due weaker us dollar increased maintenance transportation expenses unfavorable last first lifo inventory adjustment difference 81see reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation segment information costs related partial restart warrick indiana smelter 46see aluminum segment information cogs percentage sales 848 2016 compared 807 2015 percentage negatively impacted lower average realized price alumina aluminum primary rolled energy unfavorable lifo inventory adjustment difference 117see reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation segment information negative impacts partially offset net productivity improvements across segments lower inventory writedowns related decisions permanently close andor curtail capacity difference 85see restructuring charges alcoa corporation purchased electricity spot market one smelters since company’s contract local energy provider expired october 2016 new energy contract able negotiated order manage company’s exposure variable energy rates occur spot market alcoa corporation previously entered financial contract counterparty effectively convert company’s variable power price fixed power price beginning 2017 alcoa corporation held favorable position financial contract scheduled early terminate august 2017 result decision made management august 2016 january 2017 alcoa corporation began process restarting capacity smelter halted due unexpected power outage occurred december 2016 result alcoa corporation counterparty existing financial contract entered new financial contract effectively convert company’s variable power price fixed power price august 2017 july 2021 additionally effective termination existing financial contract moved july 31 2017 order obtain favorable terms new financial contract could negotiated alcoa corporation conceded portion existing financial contract favorable company april july 2017 period result concession alcoa corporation sought additional financial contract cover exposure variable power rates april july 2017 period march 2017 alcoa corporation secured contract different counterparty however price power spot market rose significantly january march 2017 consequently fixed power price secured additional financial contract significantly higher fixed power price previously secured existing financial contract described accordingly alcoa corporation realized higher energy costs included cogs 21 marktomarket losses included income net related financial contracts 13 2017 selling general administrative expensessga expenses 284 24 sales 2017 compared 359 39 sales 2016 decrease 75 mostly attributable absence costs related separation transaction 73 includes allocation 68 parentco prior separation date sga expenses 359 39 sales 2016 compared 353 32 sales 2015 increase 6 largely related higher costs associated separation transaction 61 includes higher allocation 56 parentco prior separation date mostly offset decrease corporate overhead expenses absence sga related closed sold locations 17 favorable foreign currency movements due stronger us dollar research development expensesrd expenses 32 2017 compared 33 2016 69 2015 decrease 2016 compared 2015 mainly driven lower spending related breakthrough smelting technology alcoa corporation worked towards completion rd phase provision depreciation depletion amortizationthe provision dda 750 2017 compared 718 2016 increase 32 4 mostly due unfavorable foreign currency movements due weaker us dollar particularly brazilian real australian dollar incremental expense due capitalization 2017 new bauxite residue storage areas provision dda 718 2016 compared 780 2015 decline 62 8 principally caused favorable foreign currency movements due stronger us dollar particularly brazilian real australian dollar absence dda 23 related capacity reductions refinery smelter south america occurred different points 2015 see 2015 actions restructuring charges smelter united states occurred march 2016 see 2016 actions restructuring charges restructuring chargesrestructuring charges year threeyear period ended december 31 2017 comprised following 2016 2015 includes 1 32 respectively related allocation restructuring charges alcoa corporation parentco see cost allocations separation transaction layoff costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2017 actions 2017 alcoa corporation recorded restructuring charges 309 comprised following components 244 related early termination power contract see 49 exit costs related decision permanently close demolish smelter see 41 additional contract costs related curtailed wenatchee washington são luís brazil smelters 22 layoff costs including separation approximately 130 employees 115 aluminum segment mostly voluntary separation programs reversal 22 reduce reserve previously established end 2015 related legal matter italy net charge 18 miscellaneous items including relocation company’s headquarters principal executive office new york new york pittsburgh pennsylvania reversal 43 associated several reserves related prior periods see october 2017 alcoa corporation luminant generation company llc luminant executed early termination agreement power contract well related fuel lease agreements effective october 1 2017 related company’s rockdale texas smelter fully curtailed since end 2008 accordance terms early termination agreement alcoa made cash payment 238 transferred approximately 2200 acres related land assets liabilities luminant net asset carrying value 6 since curtailment rockdale smelter company selling surplus electricity energy market power contract set expire earlier 2038 except limited circumstances one parties could elect early terminate without penalty conditions never met 2017 september 30 2016 2015 alcoa corporation recognized 105 141 147 respectively sales 148 210 201 respectively cost goods sold accompanying statement consolidated operations related sale surplus electricity cost luminant power contract result early termination power contract alcoa initiated strategic review remaining buildings equipment associated smelter casthouse aluminum powder plant rockdale location parentco previously decided curtail operating capacity rockdale smelter 2008 result uncompetitive power supply thenoverall unfavorable market conditions review completed december 2017 management determined rockdale operations limited economic prospects consequently management approved permanent closure demolition rockdale smelter capacity 191 kmtperyear related operations effective immediately demolition remediation activities related action begin 2018 expected completed end 2022 separately company continues 30000 acres land surrounding rockdale operations 2017 costs related decision included asset impairments 32 representing writeoff remaining book value related properties plants equipment 1 layoff approximately 10 employees corporate 16 costs additionally 2017 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 6 recorded cost goods sold accompanying statement consolidated operations costs 16 represent 8 asset retirement obligations 8 environmental remediation triggered decisions permanently close demolish rockdale facilities july 2017 alcoa corporation announced plans restart three 161400 metric tons capacity five potlines 268800 metric tons capacity warrick indiana smelter expected complete second quarter 2018 smelter previously permanently closed march 2016 parentco see 2016 actions capacity identified restart directly supply existing rolling mill warrick location improve efficiency integrated site provide additional source metal help meet anticipated increase production volumes result decision reopen smelter 2017 alcoa corporation reversed 33 remaining liabilities related original closure decision liabilities consisted 20 asset retirement obligations 4 environmental remediation obligations necessary due previous decision demolish smelter 9 severance contract termination costs additionally carrying value smelter related assets reduced zero smelter ramped permanent closure decision date end 2015 end march 2016 assets placed back service conjunction restart carrying value remain zero newly acquired constructed assets related warrick smelter depreciated december 31 2017 approximately 90 140 employees separated remaining separations 2017 restructuring programs expected completed end 2018 2017 cash payments 9 made layoff reserves related 2017 restructuring programs 2016 actions 2016 alcoa corporation recorded restructuring charges 318 comprised following components 131 exit costs related decision permanently close demolish refinery see 87 additional net costs related decisions made late 2015 permanently close demolish warrick smelter curtail wenatchee smelter point comfort texas refinery see 2015 actions 72 impairment interest gas exploration assets western australia see 32 layoff costs related cost reduction initiatives including separation approximately 75 employees 60 aluminum segment 15 bauxite segment related pension settlement costs net charge 8 miscellaneous items reversal 12 associated number small layoff reserves related prior periods december 2016 management approved permanent closure suralco refinery capacity 2207 kmtperyear suriname suralco refinery fully curtailed since november 2015 see 2015 actions management parentco decided curtail remaining operating capacity suralco refinery 2015 effort improve position parentco’s refining operations global alumina cost curve since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions demolition remediation activities related action began 2017 expected completed end 2021 related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname 2016 costs related closure curtailment actions included accelerated depreciation 70 related warrick smelter continued operate march 2016 asset impairments 16 representing writeoff remaining book value various assets reversal 24 associated severance costs initially recorded late 2015 156 costs additionally 2016 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 5 recorded cost goods sold accompanying statement consolidated operations costs 156 represent 94 asset retirement obligations 26 environmental remediation triggered decisions permanently close demolish suralco refinery includes rehabilitation related bauxite mines rehabilitation coal mine related warrick smelter 32 contract terminations 4 related costs also december 2016 management alcoa corporation concluded interest certain gas exploration assets western australia impaired aofa owns interest gas exploration project initially entered 2007 potential source lowcost gas supply aofa’s refineries western australia interest 43 december 31 2016 relates four separate gas wells late 2016 aofa received results technical analysis performed earlier year two wells updated analysis third well concluded cost gas recovery would significantly higher market price gas fourth well results technical analysis performed prior 2016 indicated cost gas recovery would lower market price gas therefore would require additional investment move next phase commercial evaluation management previously supported late 2016 management reevaluated options related fourth well decided economical make commitment foreseeable future result aofa fully impaired 72 interest june 30 2017 separations associated 2016 restructuring programs essentially complete 2017 2016 cash payments 2 7 respectively made layoff reserves related 2016 restructuring programs 2015 actions 2015 alcoa corporation recorded restructuring charges 983 comprised following components 418 exit costs related decisions permanently close demolish three smelters power station see 238 curtailment two refineries two smelters see 201 related legal matters italy 24 net loss primarily related postclosing adjustments associated two december 2014 divestitures 45 layoff costs including separation approximately 465 employees 33 asset impairments related prior capitalized costs expansion project refinery australia longer pursued net credit 1 miscellaneous items reversal 7 associated number small layoff reserves related prior periods 32 related corporate restructuring allocated alcoa corporation see cost allocations separation transaction 2015 management initiated various alumina refining aluminum smelting capacity curtailments andor closures curtailments composed remaining capacity following são luís smelter brazil 74 kmtperyear suriname refinery 1330 kmtperyear point comfort refinery 2010 kmtperyear wenatchee smelter 143 kmtperyear curtailments completed 2015 except 1635 kmtperyear point comfort refinery completed end june 2016 permanent closures composed capacity warrick smelter 269 kmtperyear includes closure related coal mine infrastructure massena east new york smelter potlines previously shut 2013 2014 modernization smelter longer pursued closure warrick smelter completed end march 2016 see 2017 actions decisions actions part separate 12month review refining 2800 kmtperyear smelting 500 kmtperyear capacity initiated management march 2015 possible curtailment partial full permanent closure divestiture many factors contributed decision general actions initiated maintain competitiveness amid prevailing market conditions alumina aluminum separate actions initiated reviews described mid2015 management approved permanent closure demolition poços de caldas smelter capacity 96 kmtperyear brazil anglesea power station includes closure related coal mine australia entire capacity poços de caldas temporarily idled since may 2014 anglesea power station shut end august 2015 demolition remediation activities related poços de caldas smelter anglesea power station began late 2015 expected completed end 2026 2020 respectively decision poços de caldas smelter due management’s conclusion smelter longer competitive result challenging global market conditions primary aluminum led initial curtailment dissipated higher costs anglesea power station decision made sale process result sale would imminent operating costs financial constraints related site remainder 2015 beyond including significant costs source coal available resources necessary maintenance costs depressed outlook forward electricity prices anglesea power station previously supplied approximately 40 percent power needs point henry smelter closed august 2014 2015 costs related closure curtailment actions included asset impairments 226 representing writeoff remaining book value related properties plants equipment 154 layoff approximately 3100 employees 1800 aluminum segment 1300 alumina segment including 30 pension costs accelerated depreciation 85 related certain facilities continued operate 2015 222 exit costs additionally 2015 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 90 recorded cost goods sold accompanying statement combined operations exit costs 222 represent 72 asset retirement obligations 85 environmental remediation triggered decisions permanently close demolish aforementioned structures united states brazil australia includes rehabilitation related coal mine australia united states 65 supplier customer contractrelated costs june 30 2017 separations associated 2015 restructuring programs essentially complete 2017 2016 2015 cash payments 18 65 26 respectively made layoff reserves related 2015 restructuring programs alcoa corporation include restructuring charges results reportable segments impact allocating charges segment results would follows interest expenseinterest expense 104 2017 compared 243 2016 decline 139 57 primarily related absence allocation 198 alcoa corporation parentco’s interest expense related separation transaction somewhat offset higher interest expense 64 associated 1250 debt issued alcoa corporation september 2016 see financing activities liquidity capital resources interest expense 243 2016 compared 270 2015 decline 27 10 primarily related two less months allocated interest 47 parentco 2016 result separation transaction partially offset interest expense 22 associated 1250 debt issued alcoa corporation september 2016 see financing activities liquidity capital resources income expenses netother income net 58 2017 compared 89 2016 change 31 mostly attributable absence gains sales several assets follows wharf property near intalco washington smelter 118 equity interest natural gas pipeline australia 27 several parcels land 19 net unfavorable change marktomarket derivative instruments 15 see cost goods sold absence benefit arbitration recovery related 2010 fire iceland smelter 14 items mostly offset gain 122 sale yadkin hydroelectric project yadkin see aluminum segment information smaller equity loss related alcoa corporation’s share aluminum complex joint venture saudi arabia 42 income net 89 2016 compared expenses net 42 2015 change 131 mostly attributable gains sales several assets follows wharf property near intalco smelter 118 equity interest natural gas pipeline australia 27 several parcels land 19 lower equity loss related alcoa corporation’s equity investments 19 net favorable change marktomarket derivative instruments 17 benefit arbitration recovery related 2010 fire iceland smelter 14 items somewhat offset net unfavorable foreign currency movements 47 absence gain sale land around lake charles louisiana anode facility 29 income taxesalcoa corporation’s effective tax rate 518 provision income 2017 compared us federal statutory rate 35 effective tax rate differs 168 percentage points us federal statutory rate mainly due domestic losses tax benefitted including 244 charge early termination power contract see restructuring charges 60 discrete income tax charge valuation allowance remaining deferred tax assets iceland see income taxes critical accounting policies estimates 26 discrete income charge remeasurement certain deferred tax assets brazil due tax rate change see 22 discrete income charge associated us tax legislation enacted december 2017 see us tax cuts jobs act domestic losses tax benefitted net 122 gain sale yadkin see income expenses net aluminum segment information mid2017 awab received approval tax holiday related operation juruti brazil bauxite mine tax holiday effective january 1 2017 retroactively decreases awab’s tax rate income generated juruti mine 34 1525 result future cash tax savings 10year period result income tax rate change awab’s existing deferred tax assets expected reverse holiday period remeasured lower tax rate remeasurement resulted decrease awab’s deferred tax assets discrete income tax charge 26 15 noncontrolling interest alcoa corporation’s effective tax rate 1136 provision loss 2016 compared us federal statutory rate 35 effective tax rate differs 1486 percentage points us federal statutory rate primarily related us losses tax credits tax benefit realizable alcoa corporation alcoa corporation’s effective tax rate 1193 provision loss 2015 compared us federal statutory rate 35 effective tax rate differs 1543 percentage points us federal statutory rate principally driven us losses tax credits tax benefit realizable alcoa corporation 141 discrete income tax charge valuation allowances certain deferred tax assets suriname 85 51 noncontrolling interest iceland 56 see income taxes critical accounting policies estimates 201 charge legal matters italy see restructuring charges nondeductible income tax purposes restructuring charges related curtailment refinery suriname see restructuring charges portion tax benefit recognized management anticipates effective tax rate 2018 35 40 however business portfolio actions changes current economic environment tax legislation rate changes currency fluctuations ability realize deferred tax assets results operations certain taxing jurisdictions may cause estimated rate fluctuate us tax cuts jobs act 2017 december 22 2017 us tax legislation known us tax cuts jobs act 2017 “tcja” enacted corporations tcja amends existing us internal revenue code reducing corporate income tax rate modifying several business deduction international tax provisions specifically corporate income tax rate reduced 21 35 significant changes general include following among others mandatory onetime deemed repatriation accumulated foreign earnings either 8 155 tax rate ii dividends received foreign subsidiaries deducted full regardless ownership interest previously dividends fully taxable however foreign withholding tax foreign earnings asserted indefinitely reinvested december 31 2017 must accrued iii 105 tax effective 2018 new category income referred global intangible low tax income related earnings taxed low rate foreign entities without significant fixed asset base iv 5 10 tax effective 2018 base erosion payments deductible crossborder payments related parties exceed 3 company’s deductible expenses v net operating losses unlimited carryforward period previously 20 years carryback period previously 2 years deductions losses limited 80 taxable income previously 100 taxable income beginning 2018 tax year result close proximity enactment date tcja relation company’s calendar yearend management elected january 17 2018 cutoff date purposes recognizing impacts tcja alcoa corporation’s 2017 consolidated financial statements date coincided company’s public release preliminary financial results fourth quarter year ended december 31 2017 accordingly company’s preliminary analysis provisions tcja resulted charge 22 reflected provision income taxes alcoa corporation’s statement consolidated operations 2017 described company expects finalize analyses tcja provisions 2018 22 charge relates specifically management’s reasonable estimate corporate income tax rate change resulted remeasurement company’s deferred income tax accounts gross basis company reduced deferred tax assets valuation allowance deferred tax liabilities 506 433 51 respectively management also completed preliminary analysis remaining provisions tcja including specifically described order make reasonable estimate cutoff date resulted additional impact company’s 2017 consolidated financial statements specifically reasonable estimate tcja provisions described based following ii iii company’s existing tax profile includes significant current us tax losses would applied taxable income well significant foreign tax credits applied taxes iv management estimates company 3 threshold v company’s deferred income tax assets related us net operating losses fully reserved december 31 2017 company’s preliminary analyses provisional estimates financial statement impacts tcja completed accordance guidance issued sec staff accounting bulletin 118 income tax accounting implications tax cuts jobs act noncontrolling interestnet income attributable noncontrolling interest 342 2017 compared 54 2016 124 2015 amounts entirely related alumina limited australia’s alumina limited 40 ownership interest several affiliated operating entities interest operate bauxite mines alumina refineries within alcoa corporation’s bauxite alumina segments except poços de caldas mine refinery portion são luís refinery brazil portland smelter aluminum segment australia individual entities comprise unincorporated global joint venture alcoa corporation alumina limited known alcoa world alumina chemicals awac alcoa corporation owns 60 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alumina limited’s 40 interest earnings entities reflected noncontrolling interest alcoa corporation’s statement consolidated operations combined entities generated income 2017 2016 2015 2017 combined entities generated higher net income compared 2016 favorable change earnings principally due improvement operating results see bauxite alumina segment information absence restructuring charges related permanent closure suralco refinery related bauxite mines see restructuring charges charge impairment interest certain gas exploration assets western australia see restructuring charges positive impacts somewhat offset higher income tax provision result improved operating results 34 10 noncontrolling interest’s share combined higher energy costs marktomarket losses see cost goods sold absence 27 8 noncontrolling interest’s share gain sale equity interest natural gas pipeline australia discrete income tax charge 26 15 noncontrolling interest’s share remeasurement certain deferred tax assets see income taxes 2016 combined entities generated lower net income compared 2015 unfavorable change earnings primarily related decline operating results see bauxite alumina segment information restructuring charges related permanent closure suralco refinery related bauxite mines see restructuring charges charge impairment interest certain gas exploration assets western australia see restructuring charges negative impacts partially offset absence restructuring charges related curtailment suralco point comfort refineries permanent closure anglesea power station coal mine see restructuring charges absence 85 34 noncontrolling interest’s share discrete income tax charge valuation allowance certain deferred tax assets see income taxes 27 8 noncontrolling interest’s share gain sale equity interest natural gas pipeline australia segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company’s operations consist three worldwide reportable segments segment performance company’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization see segment effective first quarter 2017 management elected change profit loss measure alcoa corporation’s reportable segments aftertax operating income atoi adjusted ebitda internal reporting performance measurement purposes change made enhance transparency visibility underlying operating performance segment alcoa corporation calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses previously alcoa corporation calculated segment atoi segment adjusted ebitda minus plus following items provision depreciation depletion amortization equity loss income loss gain certain asset sales income taxes alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies also effective first quarter 2017 management initiated realignment company’s internal business organizational structure realignment consisted combining alcoa corporation’s aluminum smelting casting rolling businesses along majority energy business new aluminum business unit well moving financial results previously closed operations warrick smelter suriname refinery corporate realignment executed align strategic operational commercial activities well take advantage synergies reduce costs new aluminum business unit managed single operating segment prior change businesses managed individual operating segments comprised aluminum cast products energy rolled products segments existing bauxite alumina segments new aluminum segment represent alcoa corporation’s operating reportable segments chief operating decision maker function regularly reviews financial information including sales adjusted ebitda three operating segments assess performance allocate resources segment information prior periods presented revised reflect new segment structure well new measure profit loss adjusted ebitda reportable segments totaled 2680 2017 1433 2016 2179 2015 following information provides production shipments sales adjusted ebitda data reportable segment well certain realized price average cost data three years period ended december 31 2017 see note e consolidated financial statements part ii item 8 form 10k additional information bauxite 1 production amounts include additional bauxite approximately 3 million dry metric tons per annum alcoa corporation entitled receive ie amount excess equity ownership interest certain partners mine guinea 2 includes productionrelated costs including conversion costs labor materials utilities depreciation depletion amortization plant administrative expenses segment represents company’s global bauxite mining operations portion segment’s production represents offtake certain equity method investments brazil guinea saudi arabia bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally sales segment transacted us dollars costs expenses segment transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see noncontrolling interest earnings summary 2017 bauxite production increased 08 mdmt compared 2016 improvement principally due planned increase production juruti brazil mine higher production huntly australia mine somewhat offset lower production trombetas brazil mine boké guinea mine trombetas mine experienced disruption normal operations due separate weather events impacted tailing ponds bauxite waste storage areas washing plant first half heavy rain second half drought conditions 2017 respectively boké mine experienced disruption normal operations result two separate force majeure events civil unrest 2017 2016 bauxite production increased 13 mdmt compared 2015 improvement mostly result higher production across bauxite portfolio segment expands thirdparty bauxite business thirdparty sales bauxite segment increased 18 2017 compared 2016 mainly due higher volume segment expands thirdparty bauxite business thirdparty sales segment improved 244 2016 compared 2015 largely attributable significantly higher volume segment expands thirdparty bauxite business intersegment sales bauxite segment increased 17 2017 compared 2016 principally result higher average realized price intersegment sales segment declined 30 2016 compared 2015 primarily driven lower demand alumina segment lower average realized price adjusted ebitda bauxite segment improved 52 2017 compared 2016 mainly related previously mentioned higher average realized price intersegment sales increased thirdparty shipments positive impacts partially offset higher costs energy including absence onetime tax credit transportation exports western australia thirdparty customers royalties higher thirdparty sales unfavorable impacts previously mentioned disruptions brazil guinea net unfavorable foreign currency movements due weaker us dollar australian dollar brazilian real adjusted ebitda segment declined 79 2016 compared 2015 mainly caused lower average realized price intersegment sales partially offset net productivity improvements previously mentioned higher thirdparty volume 2018 higher production huntly juruti mines increased total shipments anticipated alumina includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors generally sales segment transacted us dollars costs expenses segment transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see noncontrolling interest earnings summary segment also includes awac’s 251 share results mining refining joint venture company saudi arabia december 31 2017 alumina segment 2305 kmt idle capacity base capacity 15064 kmt idle base capacity unchanged compared december 31 2016 december 31 2016 segment 2305 kmt idle capacity base capacity 15064 kmt 2016 idle capacity increased 1635 kmt compared 2015 due curtailment remaining capacity point comfort texas refinery 2305 kmtperyear base capacity unchanged december 31 2016 2015 2017 alumina production declined 155 kmt compared 2016 mostly result absence production remaining operating capacity point comfort refinery fully curtailed end june 2016 670 kmt curtailed end 2015 described 2016 alumina production declined 1689 kmt compared 2015 mostly result lower production point comfort refinery due curtailment action described thirdparty sales alumina segment improved 36 2017 compared 2016 largely attributable 34 rise average realized price 2 increase volume change average realized price mainly driven 44 higher average alumina index price 30day lag 2017 86 smeltergrade thirdparty shipments based alumina indexspot price compared 84 2016 thirdparty sales segment decreased 31 2016 compared 2015 largely attributable 18 drop average realized price 16 decline volume change average realized price mainly driven 23 lower average alumina index price intersegment sales alumina segment increased 32 2017 compared 2016 principally caused higher average realized price slightly offset lower demand aluminum segment including result power outage smelter australia see aluminum intersegment sales segment declined 24 2016 compared 2015 principally caused lower demand aluminum segment result closure curtailment three smelters see aluminum occurred different points 2016 2015 lower average realized price adjusted ebitda alumina segment improved 911 2017 compared 2016 primarily due previously mentioned higher average realized price somewhat offset higher costs bauxite caustic soda net unfavorable foreign currency movements due weaker us dollar especially australian dollar increase maintenance expense including outages western australia adjusted ebitda segment decreased 580 2016 compared 2015 primarily due previously mentioned lower average realized alumina price higher costs caustic soda inputs including labor somewhat offset net productivity improvements lower cost bauxite 2018 higher costs caustic soda bauxite expected aluminum 1 thirdparty aluminum shipments composed primary aluminum flatrolled aluminum 2 average realized price per metric ton primary aluminum includes three elements underlying base metal component based quoted prices lme b regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states c product premium represents incremental price receiving physical metal particular shape eg billet slab rod etc alloy 3 includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses segment consists company’s worldwide smelting casthouse system ii portfolio energy assets brazil united states iii rolling mill united states segment’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders small portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products including foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets energy assets supply power external customers brazil segment’s rolling mill united states rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally alcoa corporation tolling arrangement arconic whereby arconic’s rolling mill tennessee produces sheet products certain customers company’s rolling operations alcoa corporation supplies raw materials tennessee facility pays arconic tolling service depending certain factors arrangement concludes end 2018 seasonal increases sheet sales generally experienced second third quarters year results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives related energy supply contracts generally segment’s sales aluminum transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic krona canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 share results smelting rolling mill joint venture company saudi arabia february 2017 alcoa corporation’s whollyowned subsidiary alcoa power generating inc completed sale 215megawatt hydroelectric project yadkin cube hydro carolinas llc see income expenses net earnings summary yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina prior divestiture power generated yadkin primarily sold open market yadkin generated sales 29 2016 approximately 30 employees december 31 2016 july 11 2017 alcoa corporation announced plans restart three 161 kmt capacity five potlines 269 kmt capacity warrick indiana smelter expected complete second quarter 2018 smelter permanently closed march 2016 capacity identified restart directly supply existing rolling mill warrick location improve efficiency integrated site provide additional source metal help meet anticipated increase production volumes see cogs restructuring charges earnings summary december 31 2017 aluminum segment 856 kmt idle capacity base capacity 3211 kmt 2017 idle base capacity increased 269 kmt compared 2016 related warrick smelter end march 2016 capacity warrick smelter removed segment’s base capacity due permanent closure facility time result decision partially restart smelter capacity warrick smelter included base capacity december 31 2017 additionally partial restart completed capacity warrick smelter included idle capacity december 31 2017 partial restart warrick smelter occurs 161 kmt removed idle capacity december 31 2016 segment 587 kmt idle capacity base capacity 2942 kmt idle base capacity unchanged compared december 31 2015 2017 aluminum production declined 40 kmt compared 2016 mostly result lower production portland australia smelter due unexpected power outage occurred december 2016 result fault victorian transmission network event resulted management halting production one potlines time ramp full production completed mid2017 2016 aluminum production declined 184 kmt compared 2015 mostly result absence production wenatchee washington são luís brazil smelters due decisions 2015 curtail facilities thirdparty sales aluminum segment improved 23 2017 compared 2016 primarily related 19 rise average realized price primary aluminum 7 increase overall aluminum volume slightly offset realized losses embedded derivatives designated cash flow hedges forward aluminum sales energy supply contracts due rise lme aluminum prices change average realized price primary aluminum mainly driven 22 higher average lme price 15day lag higher overall aluminum volume related segment’s rolling operations largely due tolling arrangement arconic began november 1 2016 thirdparty sales segment declined 14 2016 compared 2015 primarily related 11 drop average realized price primary aluminum 2 decrease overall aluminum volume lower energy sales brazil due lower prices change average realized price primary aluminum mainly driven lower regional premiums dropped average 40 united states canada 44 europe 53 pacific region 5 lower average lme price 15day lag lower overall aluminum volume mostly due decreased demand primary aluminum slightly offset higher shipments related segment’s rolling operations due tolling arrangement arconic began november 1 2016 intersegment sales aluminum segment declined 50 2017 compared 2016 mainly due absence energy sales warrick smelter included corporatesee description segment realignment permanently closed end march 2016 see intersegment sales segment declined 76 2016 compared 2015 mainly due decreased energy sales related warrick smelter suriname refinery included corporatesee description segment realignment fully curtailed november 2015 portions capacity curtailed throughout 2015 adjusted ebitda aluminum segment improved 284 2017 compared 2016 primarily caused previously mentioned higher average realized price primary aluminum partially offset higher costs alumina energy adjusted ebitda segment decreased 87 2016 compared 2015 primarily caused previously mentioned lower average realized price primary aluminum higher costs 53 operating warrick rolling mill cold metal plant previously hot metal plant due permanent closure warrick smelter march 2016 see negative impacts mostly offset following lower costs major inputs alumina energy carbon net productivity improvements net favorable foreign currency movements due stronger us dollar especially icelandic króna norwegian krone 2018 higher costs alumina carbon materials expected also partial restart warrick smelter expected complete second quarter 2018 reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation 1 metal price lag describes timing difference created average price metal sold differs average cost metal purchased alcoa corporation’s rolled aluminum operations general price metal increases metal price lag favorable price metal decreases metal price lag unfavorable 2 corporate expense primarily composed general administrative expenses operating corporate headquarters global administrative facilities 3 includes among items adjusted ebitda previously closed operations applicable pension postretirement benefit expenses associated closed sold operations intersegment profit elimination changes impact lifo metal price lag corporate expense reconciling items see earnings summary significant changes remaining reconciling items 2017 compared 2016 consisted • change impact lifo mostly due increase price alumina december 31 2017 indexed december 31 2016 compared increase price alumina december 31 2016 indexed december 31 2015 • change metal price lag result increase price aluminum december 31 2017 indexed december 31 2016 compared increase price aluminum december 31 2016 indexed december 31 2015 increase price aluminum periods mostly driven higher base metal prices lme • decrease corporate expense largely attributable absence costs related separation transaction 73 includes allocation 68 parentco prior separation date mostly offset decrease corporate overhead expenses changes impact lifo metal price lag corporate expense reconciling items see earnings summary significant changes remaining reconciling items 2016 compared 2015 consisted • change impact lifo mostly due increase price alumina december 31 2016 indexed december 31 2015 compared decrease price alumina december 31 2015 indexed december 31 2014 overall price alumina 2016 lower compared 2015 • change metal price lag result increase price aluminum driven higher base metal prices lme partially offset lower regional premiums december 31 2016 indexed december 31 2015 compared decrease price aluminum lower base metal prices lme regional premiums december 31 2015 indexed december 31 2014 overall price aluminum 2016 lower compared 2015 • increase corporate expense largely attributable higher costs associated separation transaction 61 includes allocation 56 parentco prior separation date mostly offset decrease corporate overhead expenses environmental matters see environmental matters section note r consolidated financial statements part ii item 8 form 10k liquidity capital resources alcoa corporation’s primary future cash needs centered operating activities particularly working capital well sustaining returnseeking capital expenditures company’s ability fund cash needs depends alcoa corporation’s ongoing ability generate raise cash future although management believes alcoa corporation’s future cash operations together company’s access capital markets provide adequate resources fund alcoa corporation’s operating investing needs company’s access availability financing acceptable terms future affected many factors including alcoa corporation’s credit rating ii liquidity overall capital markets iii current state economy commodity markets assurances alcoa corporation continue access capital markets terms acceptable company periods prior separation date parentco provided capital cash management treasury services alcoa corporation cash amounts specifically attributable alcoa corporation reflected company’s consolidated financial statements transfers cash parentco’s centralized cash management system reflected component parent company net investment alcoa corporation’s consolidated financial statements cash provided operations financing activities expected adequate cover alcoa corporation’s operational business needs next 12 months analysis longterm liquidity see contractual obligations offbalance sheet arrangements december 31 2017 cash equivalents alcoa corporation 1358 1309 held outside united states alcoa corporation number commitments obligations related company’s operations various foreign jurisdictions resulting need cash outside united states alcoa corporation continuously evaluates local global cash needs future business operations may influence future repatriation decisions cash operations cash provided operations 2017 1224 compared cash used operations 311 2016 improvement 1535 due higher operating results net income loss plus net addback noncash transactions earnings positive change associated working capital 359 favorable change noncurrent assets 85 items slightly offset unfavorable change noncurrent liabilities 119 higher pension plan contributions 40 us defined benefit plans sponsored parentco july 31 2016 favorable change noncurrent assets mainly result absence 200 prepayment made natural gas supply agreement australia see october 10 2017 alcoa corporation paid 238 early terminate power contract related company’s rockdale smelter see restructuring charges earnings summary cash used operations 2016 311 compared cash provided operations 875 2015 decrease 1186 due lower operating results net loss plus net addback noncash transactions earnings negative change associated working capital 648 items slightly offset positive change noncurrent assets 172 noncurrent liabilities 60 lower pension contributions 3 favorable change noncurrent assets mainly result 100 smaller prepayment made natural gas supply agreement australia see april 8 2015 aofa secured new 12year gas supply agreement power three alumina refineries western australia beginning july 2020 agreement conditional completion thirdparty acquisition related energy assets thencurrent owner occurred june 2015 terms gas supply agreement required aofa make prepayment 500 two installments first installment 300 made time completion thirdparty acquisition june 2015 second installment 200 made april 2016 financing activities cash used financing activities 506 2017 compared 483 2016 162 2015 use cash 2017 largely attributable cash payment 247 arconic related separation transaction mostly representing 243 net proceeds see investing activities sale yadkin see aluminum segment information accordance separation distribution agreement 262 net cash paid alumina limited see noncontrolling interest earnings summary use cash 2016 principally result 1072 cash provided parentco conjunction completion separation transaction 185 net cash paid alumina limited see noncontrolling interest earnings summary 34 payments debt items partially offset 802 net transfers parentco prior separation date use cash 2015 due net cash paid alumina limited see noncontrolling interest earnings summary 104 net transfers parentco 34 payments debt 24 credit facility september 16 2016 alcoa corporation alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation entered revolving credit agreement syndicate lenders issuers named therein amended “revolving credit agreement” november 14 2017 parties two additional lenders entered amendment restatement agreement revise certain terms provisions revolving credit agreement revolving credit agreement revised amendment restatement agreement “amended revolving credit agreement” unless noted otherwise terms provisions described amended revolving credit agreement applicable revolving credit agreement prior november 14 2017 amended revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” used working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions amended revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries additionally anhbv may time request lenders provide one additional tranches term loans andor increase aggregate amount revolving commitments together aggregate principal amount 500 previously 0 revolving credit facility scheduled mature november 14 2022 previously november 1 2021 unless extended earlier terminated accordance provisions amended revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth amended revolving credit agreement provisions amended revolving credit agreement anhbv pay quarterly commitment fee ranging 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal applicable margin plus anhbv’s option either adjusted libor rate b base rate determined reference highest 1 prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum applicable margin loans vary based alcoa corporation’s leverage ratio range 175 250 libor loans 075 150 base rate loans outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility amended revolving credit agreement includes number customary affirmative covenants additionally amended revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness see entering restrictive agreements restricted payments see including repurchases common stock shareholder dividends see investments see loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level amended revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 225 100 may increased level higher 250 100 december 31 2017 2016 alcoa corporation compliance covenants indebtedness restricted payments investments negative covenants include general exceptions allow potential future transactions incremental specifically provided amended revolving credit agreement indebtedness negative covenant provides incremental amount exceed greater 1000 previously 500 60 previously 30 alcoa corporation’s consolidated total assets additionally restricted payments negative covenant provides aggregate amount exceed 100 previously 0 investments negative covenant provides aggregate amount exceed 400 previously 250 contain two conditions limits may increase first fiscal year thresholds restricted payments investments negative covenants increase 250 previously 0 200 previously 0 respectively consolidated net leverage ratio greater 120 100 130 100 respectively end prior fiscal year secondly regards 100 250 restricted payments 200 investments 50 unused amount base amounts fiscal year may used next succeeding fiscal year following describes specific restricted payment negative covenant share repurchases application restricted payments general exception described share repurchases ordinary dividend payments alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year additionally described amended revolving credit agreement provides general exceptions restricted payments negative covenant would allow alcoa corporation exceed specified threshold share repurchases fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit also amended revolving credit agreement rescinded specific terms included revolving credit agreement related ordinary dividend payments previously alcoa corporation able declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period dividends made annual 2018 50 annual 2019 2020 75 january 1 2021 november 1 2021 time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period amended revolving credit agreement ordinary dividend payments made alcoa corporation subject general exception restricted payments described accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit limits restricted payments negative covenant notes indenture see 144a debt would govern amount ordinary dividend payments company could make given timeframe allowed amount less limits restricted payments negative covenant amended revolving credit agreement amended revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events amounts outstanding december 31 2017 2016 amounts borrowed 2017 2016 september 16th december 31st revolving credit facility 144a debt september 2016 anhbv completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds see debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commenced march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” subsidiary guarantors released notes guarantees upon occurrence certain events including release guarantor obligations guarantor revolving credit agreement notes indenture contains various restrictive covenants similar described amended revolving credit agreement including limitation restricted payments among exceptions capacity pay annual ordinary dividends indenture alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period dividends made annual 2018 50 annual 2019 2020 75 january 1 2021 september 30 2026 maturity date 2026 notes time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period additionally restricted payments negative covenant includes general exception allow potential future transactions incremental specifically provided notes indenture general exception provides aggregate amount restricted payment exceed greater 250 15 alcoa corporation’s consolidated total assets accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 250 assuming restricted payments reduced part whole available limit limits restricted payments negative covenant amended revolving credit agreement see credit facility would govern amount ordinary dividend payments company could make given timeframe allowed amount less limits restricted payments negative covenant notes indenture conjunction debt offering net proceeds 1228 plus additional 81 parentco cash hand required placed escrow contingent completion separation transaction 81 represented necessary cash fund redemption notes pay regularly scheduled interest notes specified date defined indenture premium principal notes separation transaction completed certain time defined indenture result 1228 escrowed cash recorded restricted cash issuance notes increase restricted cash amount 1228 reflected alcoa corporation’s statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 preparation separation transaction decrease restricted cash reflected alcoa corporation’s statement consolidated cash flows cash inflow net change restricted cash line item ratings alcoa corporation’s cost borrowing ability access capital markets affected market conditions also short longterm debt ratings assigned alcoa corporation’s debt major credit rating agencies april 24 2017 fitch ratings fitch assigned bb rating alcoa corporation’s longterm debt additionally fitch assigned current outlook stable june 20 2017 standard poor’s global ratings sp affirmed bb rating alcoa corporation’s longterm debt additionally sp raised current outlook positive stable december 5 2017 sp upgraded ratings alcoa corporation’s longterm debt bb additionally sp affirmed current outlook positive september 5 2017 moody’s investor service moody’s upgraded ratings alcoa corporation’s longterm debt ba2 ba3 shortterm debt speculative grade liquidity rating1 speculative grade liquidity rating2 additionally moody’s affirmed current outlook stable investing activities cash used investing activities 226 2017 compared cash provided investing activities 1077 2016 cash used investing activities 384 2015 use cash 2017 due 405 capital expenditures includes spend related environmental control 92 66 contributions related aluminum complex joint venture saudi arabia items partially offset 245 net proceeds received see financing activities sale yadkin see aluminum segment information source cash 2016 primarily due 1228 net proceeds newly issued debt see financing activities released escrow 265 combined proceeds sale equity interest natural gas pipeline australia 145 sale wharf property near intalco washington smelter 120 items somewhat offset 404 capital expenditures includes spend related environmental control 83 use cash 2015 due 391 capital expenditures includes spend related environmental control 122 63 additions investments including equity contributions 29 related aluminum complex joint venture saudi arabia items slightly offset 70 proceeds sale assets businesses including sale land around lake charles louisiana anode facility postclosing adjustments related ownership stake smelter ownership stake bauxite minealumina refinery divested 2014 noncash financing investing activities september 2016 anhbv issued 1250 new senior notes see financing activities preparation separation transaction net proceeds 1228 debt issuance required placed escrow contingent completion separation transaction result 1228 escrowed cash recorded restricted cash issuance new senior notes increase restricted cash amount 1228 reflected alcoa corporation’s statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 decrease restricted cash reflected alcoa corporation’s statement consolidated cash flows cash inflow net change restricted cash line item contractual obligations offbalance sheet arrangements contractual obligations alcoa corporation required make future payments various contracts including longterm purchase obligations lease agreements financing arrangements alcoa corporation also commitments fund pension plans provide payments postretirement benefit plans fund capital projects december 31 2017 summary alcoa corporation’s outstanding contractual obligations follows contractual obligations grouped manner classified statement consolidated cash flows order provide better understanding nature obligations provide basis comparison historical information obligations operating activities energyrelated purchase obligations consist primarily electricity natural gas contracts expiration dates ranging 1 year 30 years raw material obligations consist mostly bauxite relates alcoa corporation’s bauxite mine interests guinea brazil caustic soda alumina aluminum fluoride calcined petroleum coke cathode blocks expiration dates ranging less 1 year 17 years purchase obligations consist principally freight bauxite alumina expiration dates ranging 1 14 years many purchase obligations contain variable pricing components result actual cash payments may differ estimates provided preceding table accordance terms several supply contracts obligations may reduced result interruption operations plant curtailment force majeure event operating leases represent multiyear obligations certain land buildings alumina refinery process control technology plant equipment vehicles computer equipment interest related total debt based interest rates effect december 31 2017 calculated debt maturities extend 2029 contractual interest rates certain debt variable actual cash payments may differ estimates provided preceding table estimated minimum required pension funding postretirement benefit payments based actuarial estimates using current assumptions among others discount rates longterm rate return plan assets rate compensation increases health care cost trend rates minimum required contributions pension funding estimated 290 2018 285 2019 350 2020 315 2021 300 2022 us portion expected pension contributions reflect impacts pension protection act 2006 worker retiree employer recovery act 2008 moving ahead progress 21st century act 2012 highway transportation funding act 2015 bipartisan budget act 2016 also company expects make discretionary contributions approximately 300 combined us canadian pension plans 2018 see pension postretirement benefits critical accounting policies estimates included preceding table postretirement benefit payments expected approximate 115 125 annually years 2018 2022 85 annually years 2023 2027 payments slightly offset subsidy receipts related medicare part estimated approximate 5 10 annually years 2018 2027 alcoa corporation determined practicable present pension funding postretirement benefit payments beyond 2022 2027 respectively layoff restructuring payments expected paid within one year primarily relate takeorpay provisions supply contracts associated curtailed facilities severance costs amounts scheduled paid beyond one year relate termination office lease contract expected paid later end 2020 deferred revenue arrangements require alcoa corporation deliver alumina certain customer specified contract period 2027 obligation expected result cash payments included preceding table company would obligation specified product deliveries could made uncertain tax positions taken expected taken income tax return may result additional payments tax authorities amount preceding table includes interest penalties accrued related positions december 31 2017 total amount uncertain tax positions included “thereafter” column company able reasonably estimate timing potential future payments tax authority agrees tax position taken expected taken applicable statute limitations expires additional payments necessary early 2014 parentco one alcoa’s corporation’s current subsidiaries awa resolved violations certain provisions foreign corrupt practices act 1977 us department justice us securities exchange commission resolution parentco awa agreed pay combined 384 fouryear timeframe prior separation transaction parentco awa paid 236 total amount part separation distribution agreement alcoa corporation assumed parentco’s portion 148 remaining obligation 148 paid equal installments 74 january 2017 january 2018 obligations financing activities total debt amounts preceding table represent principal amounts outstanding longterm debt maturities extend 2029 december 31 2017 alcoa corporation 185200713 issued outstanding shares common stock dividends common stock subject authorization alcoa corporation’s board directors alcoa corporation declare pay dividends 2017 effective november 1 2016 certain documents govern awac joint venture relationship alcoa corporation alumina limited revised one provisions revised documents relates required cash distributions entities comprise joint venture two partners quarterly basis certain identified entities comprise awac joint venture must distribute 50 entity’s net income based previous quarter’s results ii available cash entity subject certain thresholds entities must maintain minimum cash hand ranges 5 85 depending entity available cash defined entity’s cash equivalents less projected negative free cash flow entity upcoming quarter free cash flow defined cash flow operating activities less sustaining capital expenditures estimates potential cash distributions alumina limited included preceding table since would require alcoa corporation provide proprietary information related forecasted results entities comprise awac joint venture 2017 2016 2015 alumina limited received distributions 342 233 106 respectively entities comprise awac based provisions respective current prior agreement applicable years obligations investing activities capital projects preceding table include amounts approved management december 31 2017 funding levels may vary future years based anticipated construction schedules projects expected significant expansion projects funded various sources including cash provided operations total capital expenditures anticipated approximately 450 2018 comprised 300 sustaining projects 150 returnseeking projects alcoa corporation participant joint venture related integrated aluminum complex saudi arabia comprised bauxite mine alumina refinery aluminum smelter rolling mill requires company contribute approximately 1100 estimate initial investment december 31 2017 alcoa corporation made equity contributions 982 based changes project’s capital investment equity debt structure initial plans estimated 1100 equity contribution may reduced alcoa corporation anticipate making additional equity contributions initial 1100 plan although formal determination yet made accordingly contribution amounts included preceding table separate capital investment project alcoa corporation contributed 66 joint venture 2017 shortterm funding purposes accordance terms joint venture companies’ financing arrangements company may required make additional contributions future periods offbalance sheet arrangements december 31 2017 alcoa corporation maximum potential future payments guarantees issued behalf third party 177 guarantees expire various times 2018 2024 relate project financing aluminum complex saudi arabia borrowers three companies comprise joint venture alcoa corporation participant december 2017 smelting company refinanced andor amended existing outstanding debt guarantees previously required company effectively terminated remaining issued guarantees relate existing outstanding debt rolling mill company mining refining company alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties total amount committed instruments automatically renew expire various dates 2018 2022 543 includes 112 issued oneyear agreement see december 31 2017 additionally arconic outstanding bank guarantees letters credit related alcoa corporation amount 29 december 31 2017 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise alcoa corporation outstanding bank guarantees letters credit related arconic amount 18 december 31 2017 event alcoa corporation would required perform instruments alcoa corporation would indemnified arconic accordance separation distribution agreement august 2017 alcoa corporation entered oneyear standby letter credit agreement three financial institutions agreement provides 150 facility used alcoa corporation matters ordinary course business alcoa corporation’s obligations facility secured manner obligations company’s amended revolving credit agreement see financing activities liquidity capital resources additionally facility contains similar representations warranties affirmative negative financial covenants company’s amended revolving credit agreement see financing activities liquidity capital resources december 31 2017 letters credit aggregating 112 issued facility letters credit previously issued 2017 standalone basis alcoa corporation also outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2018 122 december 31 2017 additionally arconic outstanding surety bonds related alcoa corporation amount 14 december 31 2017 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement critical accounting policies estimates preparation consolidated financial statements accordance accounting principles generally accepted united states america requires management make certain judgments estimates assumptions regarding uncertainties affect amounts reported consolidated financial statements disclosed notes consolidated financial statements areas require significant judgments estimates assumptions include review properties plants equipment equity investments goodwill impairment accounting following asset retirement obligations environmental litigation matters stockbased compensation pension plans postretirement benefits obligations derivatives hedging activities income taxes management uses historical experience available information make judgments estimates assumptions actual results may differ used prepare company’s consolidated financial statements given time despite inherent limitations management believes management’s discussion analysis financial condition results operations consolidated financial statements including notes consolidated financial statements provide meaningful fair perspective company summary company’s significant accounting policies included note b consolidated financial statements part ii item 8 form 10k management believes application policies consistent basis enables company provide users consolidated financial statements useful reliable information company’s operating results financial condition prior separation date alcoa corporation operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date alcoa corporation’s consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation critical accounting policies described reflect incremental judgments estimates assumptions made management preparation alcoa’s consolidated financial statements prior separation date see separation transaction overview additional information properties plants equipment properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds estimated undiscounted net cash flows amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments equity investments alcoa corporation invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations alcoa corporation ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable analysis requires significant amount judgment management identify events circumstances indicating equity investment impaired following items examples impairment indicators significant sustained declines investee’s revenue earnings cash flow trends adverse market conditions investee’s industry geographic area investee’s ability continue operations measured several items including liquidity factors impairment indicator identified management uses considerable judgment determine impairment temporary case equity investment written estimated fair value impairment temporary could significantly adversely impact reported results operations goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business significant amount judgment involved determining indicator impairment occurred indicators may include among others deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods fair value could realized actual transaction may differ used evaluate goodwill impairment goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment alcoa corporation five reporting units three included aluminum segment smeltingcasting energy generation rolling operations remaining two reporting units bauxite alumina segments five reporting units bauxite alumina contain goodwill december 31 2017 carrying value goodwill bauxite alumina 51 103 respectively amounts include allocation goodwill held corporate level 49 bauxite 99 alumina prior 2017 company six reporting units equivalent six operating segments follows bauxite alumina aluminum cast products energy rolled products early 2017 management initiated realignment company’s internal business organizational structure resulting change alcoa corporation’s operating segments reporting units see segment information results operations previous six reporting units bauxite alumina contained goodwill reviewing goodwill impairment entity option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount entity elects perform qualitative assessment determines impairment likely entity required perform existing twostep quantitative impairment test described otherwise analysis required entity also may elect perform qualitative assessment instead proceed directly twostep quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether entity chooses perform qualitative assessment proceeds directly twostep quantitative impairment test alcoa corporation’s policy annual review goodwill perform qualitative assessment reporting units subjected directly twostep quantitative impairment test generally management proceed directly twostep quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill qualitative assessment various events circumstances factors would affect estimated fair value reporting unit identified similar impairment indicators factors classified type impact would estimated fair value using positive neutral adverse categories based current business conditions additionally assessment level impact particular factor would estimated fair value determined using high medium low weighting furthermore management considers results recent twostep quantitative impairment test completed reporting unit compares weighted average cost capital wacc current prior years reporting unit 2017 annual review goodwill management performed qualitative assessment bauxite alumina reporting units management concluded likely respective estimated fair value reporting units less respective carrying value analysis required twostep quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill alcoa corporation uses dcf model estimate current fair value reporting units testing impairment management believes forecasted cash flows best indicator fair value number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes certain assumptions vary significantly among reporting units cash flow forecasts generally based approved business unit operating plans early years historical relationships later years betas used calculating individual reporting units’ wacc rate estimated business assistance valuation experts event estimated fair value reporting unit per dcf model less carrying value additional analysis would required additional analysis would compare carrying amount reporting unit’s goodwill implied fair value goodwill may involve use valuation experts implied fair value goodwill excess fair value reporting unit fair value amounts assigned assets liabilities unit reporting unit acquired business combination fair value reporting unit represented purchase price carrying value goodwill exceeds implied fair value impairment loss equal excess would recognized management last proceeded directly twostep quantitative impairment test alumina reporting unit 2016 bauxite reporting unit 2018 2016 estimated fair value alumina reporting unit substantially excess carrying value resulting impairment additionally prior years presented triggering events necessitated impairment test either bauxite alumina reporting units asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks polychlorinated biphenyls various process residuals solid wastes electronic equipment waste various materials amounts may material consolidated financial statements period recorded alcoa corporation required demolish structures immediately estimated caro december 31 2017 ranges 3 28 per structure 24 structures today’s dollars environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss stockbased compensation periods prior separation date employees attributable alcoa corporation operations participated parentco’s stockbased compensation plans compensation expense recorded alcoa corporation included expense associated employees well expense associated allocation stockbased compensation expense parentco’s corporate employees beginning separation date forward alcoa corporation recorded stockbased compensation expense company’s employees following accounting policy describes stockbased compensation expense initially determined alcoa corporation parentco compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time 2017 2016 2015 alcoa corporation recognized stockbased compensation expense 24 28 35 respectively amounts 2016 2015 16 21 respectively relates allocation expense parentco’s corporate employees part alcoa corporation’s parentco’s stockbased compensation plan design respective periods individuals retirementeligible sixmonth requisite service period year grant result larger portion expense recognized first half year retirementeligible employees total pretax stockbased compensation expense recognized 2017 2016 2015 4 7 6 respectively pertains acceleration expense related retirementeligible employees plan participants choose whether receive award form stock options stock awards combination choice made grant issued irrevocable pension postretirement benefits periods prior august 1 2016 see certain employees attributable alcoa corporation operations participated defined benefit pension postretirement benefit plans “shared plans” sponsored parentco also included participants attributable nonalcoa corporation operations alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans however related expense recorded alcoa corporation based primarily pensionable compensation estimated interest costs related employees attributable alcoa corporation operations prior separation date certain plans entirely attributable employees alcoa corporationrelated operations “direct plans” accounted defined benefit pension postretirement benefit plans accordingly funded unfunded position direct plan recorded consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive income net taxes amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions see preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation “new direct plans” parentco additionally certain remaining shared plans assumed alcoa corporation “additional new direct plans” accordingly beginning august 1 2016 forward standalone plans assumed plans accounted defined benefit pension postretirement plans additionally direct plans continued accounted defined benefit pension postretirement plans liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality interest rate used discount future estimated liabilities determined using companyspecific yield curve model abovemedian developed assistance external actuary cash flows plans’ projected benefit obligations discounted using single equivalent rate derived yields high quality corporate bonds represent broad diversification issuers various sectors yield curve model parallels plans’ projected cash flows weighted average duration 12 years underlying cash flows bonds included model exceed cash flows needed satisfy company’s plans’ obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used 2017 2016 weighted average discount rate used determine benefit obligations pension plans 368 412 respectively postretirement benefit plans 354 393 respectively impact combined pension postretirement liabilities change weighted average discount rate 14 1 would approximately 220 either charge credit approximately 5 pretax earnings following year decline discount rate 2017 compared 2016 pension postretirement benefit plans due decrease effective yields bonds duration greater 10 years included model average duration plans’ projected cash flows greater 10 years changes discount rate tend parallel changes effective yields bonds duration greater 10 years result effective yields bonds duration 10 years less included model minimal impact change discount rate expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment see 2017 2016 2015 management used 747 731 691 weightedaverage expected longterm rate return based prevailing planned strategic asset allocations well estimates future returns asset class 2018 management anticipates 689 weighted average expected longterm rate return change assumption weighted average expected longterm rate return plan assets 14 1 would impact pretax earnings approximately 15 2018 january 17 2018 company communicated retirement benefit changes certain us canadian employees effective january 1 2021 salaried us canadian employees participants company’s defined benefit pension plans cease accruing retirement benefits future service change affect approximately 800 employees transitioned countryspecific defined contribution plans company contribute 3 participants’ eligible earnings annual basis contributions incremental employer savings match employees may receive existing defined contribution plans participants already collecting benefits defined benefit pension plans well currently covered collective bargaining agreements affected changes also effective january 1 2021 alcoa corporation longer contribute premedicare retiree medical coverage us salaried employees retirees result changes alcoa corporation expects record curtailment gain approximately 20 pretax 2018 reduction company’s net pension postretirement benefits liability approximately 35 separately alcoa expects make discretionary contributions approximately 300 combined us canadian defined benefit pension plans 2018 company intends contributions used purchase annuity contracts approximately 9000 retirees instruments allow company transfer risk lower costs related defined benefit pension plans times annuity contracts purchased alcoa corporation record settlement charge part net periodic benefit cost defined benefit pension plans derivatives hedging derivatives held purposes trading part formally documented risk management program derivatives designated fair value hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly historical high correlation changes fair value hedged item derivative hedging instrument derivatives designated cash flow hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly probable high correlation expected future cash flows hedged item derivative hedging instrument ineffective portions types hedges recorded sales income expenses net current period hedging relationship ceases highly effective becomes probable expected transaction longer occur future gains losses derivative instrument recorded income expenses net alcoa corporation accounts hedges firm customer commitments aluminum fair value hedges result fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item alcoa corporation accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet effective portions changes fair values derivatives recorded comprehensive loss income reclassified sales cost goods sold income expenses net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market income expenses net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes beginning separation date forward provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa corporation’s assets liabilities adjusted changes tax rates tax laws enacted periods prior separation date alcoa corporation’s operations included income tax filings parentco provision income taxes alcoa corporation’s statement consolidated operations determined manner described separate return methodology company standalone taxpayer filing hypothetical income tax returns applicable additional accrued tax liability refund arising result approach assumed immediately settled parentco component parent company net investment deferred tax assets also determined manner described reflected consolidated balance sheet net operating losses credits attributes extent attributes expected transfer alcoa corporation upon separation transaction difference attributes generated hypothetical return separate return basis adjusted component parent company net investment valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income certain jurisdictions deferred tax assets related cumulative losses exist without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude deferred tax assets valuation allowance currently recorded may realized resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays composition alcoa corporation’s net deferred tax asset jurisdiction december 31 2017 follows company several income tax filers various foreign countries 511 net deferred tax asset included “foreign” column table comprised following income tax filer 252 net deferred tax asset alumínio brazil 153 net deferred tax asset awab brazil 112 deferred tax asset alúmina española sa “española” collectively alumínio awab “foreign filers” spain combined 6 net deferred tax liability several foreign income tax filers future realization net deferred tax asset foreign filers based projections respective future taxable income defined sum pretax income comprehensive income permanent tax differences exclusive reversing temporary differences carryforwards realization net deferred tax assets foreign filers dependent tax planning strategies foreign filers generated taxable income threeyear cumulative period ending december 31 2017 management also forecasted taxable income foreign filers 2018 foreseeable future forecast based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials bauxite caustic soda alumina calcined petroleum coke liquid pitch energy fuel oil natural gas electricity labor transportation costs assumptions used management develop financial operating plan used run company measure performance actual results majority foreign filers’ net deferred tax assets relate tax loss carryforwards foreign filers history tax loss carryforwards expiring unused additionally tax loss carryforwards infinite life respective income tax codes brazil spain said utilization existing tax loss carryforward limited 30 25 taxable income particular year brazil spain respectively accordingly management concluded net deferred tax assets foreign filers likely realized future periods resulting need partial full valuation allowance december 31 2017 alcoa corporation established valuation allowance 94 related remaining deferred tax assets iceland see amount comprised 60 discrete income charge recognized provision income taxes company’s consolidated statement operations 34 charge accumulated comprehensive loss alcoa corporation’s consolidated balance sheet deferred tax assets relate tax loss carryforwards expiration period ranging 2017 2026 deferred losses associated derivative hedging activities weighing available positive negative evidence management determined longer likely alcoa corporation realize tax benefit deferred tax assets conclusion based existing cumulative losses short expiration period losses generated result intercompany interest expense company’s global treasury cash management system realization deferred losses associated lmelinked embedded derivative power contract interest expense expected continue additional deferred losses associated embedded derivative realized future years result management estimates sufficient taxable income available utilize operating losses expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2015 alcoa corporation recognized 141 discrete income tax charge valuation allowances certain deferred tax assets suriname iceland amount 85 valuation allowance established full value deferred tax assets suriname deferred tax assets relate tax loss carryforwards employee benefits expiration period ranging 2016 2022 remaining 56 charge relates valuation allowance established portion deferred tax assets iceland related tax loss carryforwards expiration period ranging 2017 2019 weighing available positive negative evidence management determined longer likely alcoa corporation realize tax benefit deferred tax assets conclusion mainly driven decline outlook former primary metals business refers smelting casting operations included currently aluminum segment combined prior year cumulative losses short expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented transactions alcoa corporation arconic presented related party transactions company’s consolidated financial statements sales arconic alcoa corporation 864 958 1078 2017 2016 2015 respectively december 31 2017 2016 outstanding receivables arconic 84 67 respectively included receivables customers alcoa corporation’s consolidated balance sheet recently adopted accounting guidance see recently adopted accounting guidance section note b consolidated financial statements part ii item 8 form 10k recently issued accounting guidance see recently issued accounting guidance section note b consolidated financial statements part ii item 8 form 10k item 7aitem 7 management’s discussion analysis financial condition results operations dollars millions except pershare amounts average realized prices average cost amounts dry metric tons millions mdmt metric tons thousands kmt overview business alcoa corporation “company” vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation aluminum commodity traded london metal exchange lme priced daily additionally alumina subject market pricing alumina price index api calculated company based weighted average prior month’s daily spot prices published following three indices cru metallurgical grade alumina price platts metals daily alumina pax price metal bulletin nonferrous metals alumina index result price aluminum alumina subject significant volatility therefore influences operating results alcoa corporation company 40 operating locations direct indirect ownership 10 countries around world situated primarily australia brazil canada iceland norway spain united states governmental policies laws regulations economic factors including inflation fluctuations foreign currency exchange rates interest rates affect results operations countries references management’s discussion analysis financial condition results operations “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic separation transaction november 1 2016 “separation date” parentco separated two standalone publiclytraded companies alcoa corporation arconic effective 1201 eastern standard time “separation transaction” alcoa corporation includes alumina primary metals segments comprised bauxite mining alumina refining aluminum smelting casting energy operations parentco well warrick indiana rolling operations 251 equity interest rolling mill joint venture saudi arabia part parentco’s global rolled products segment arconic includes operations comprise global rolled products except aforementioned rolling operations included alcoa corporation engineered products solutions transportation construction solutions segments parentco shareholders record close business october 20 2016 “record date” received one share alcoa corporation common stock representing aggregate 801 common stock company every three shares parentco common stock held close business record date cash paid parentco its’ shareholders lieu fractional shares arconic retained remaining 199 alcoa corporation common stock arconic sold retained interest 2017 effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting cash payment 1072 parentco alcoa corporation additional 247 paid arconic company 2017 see financing activities liquidity capital resources net proceeds previous debt offering see financing activities liquidity capital resources additionally 146159428 shares 36311767 shares company’s common stock distributed parentco shareholders retained arconic respectively “regularway” trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” company’s common stock par value 001 per share connection separation transaction alcoa corporation arconic entered certain agreements implement legal structural separation two companies govern relationship company arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations including among things employee benefits environmental liabilities intellectual property taxrelated assets liabilities agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement parentco incurred costs evaluate plan execute separation transaction alcoa corporation allocated pro rata portion costs based segment revenue see cost allocations parentco recognized 152 january 2016 october 2016 costs related separation transaction 68 allocated alcoa corporation allocated amounts included selling general administrative expenses company’s statement consolidated operations basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap accordance gaap certain situations require management make estimates based judgments assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters prior separation date company operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date alcoa corporation’s consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation cost allocations description information cost allocations applicable periods included alcoa corporation’s consolidated financial statements prior separation date consolidated financial statements alcoa corporation include general corporate expenses parentco historically charged alcoa corporation certain support functions provided centralized basis expenses related finance audit legal information technology human resources communications compliance facilities employee benefits compensation research development activities general corporate expenses included company’s statement consolidated operations within cost goods sold selling general administrative expenses research development expenses allocated alcoa corporation basis direct usage identifiable remainder allocated based alcoa corporation’s segment revenue percentage parentco’s total segment revenue alcoa corporation arconic external debt directly attributable alcoa corporation excluded company’s consolidated balance sheet financing costs related debt obligations allocated alcoa corporation based ratio capital invested alcoa corporation total capital invested parentco alcoa corporation arconic included company’s statement consolidated operations within interest expense following table reflects allocations described 1 allocation principally relates expenses parentco’s retained pension postretirement benefits associated closed sold operations 2 allocation includes costs incurred parentco associated separation transaction see management believes assumptions regarding allocation parentco’s general corporate expenses financing costs reasonable nevertheless consolidated financial statements alcoa corporation may include actual expenses would incurred may reflect alcoa corporation’s consolidated results operations financial position cash flows standalone company periods prior separation date actual costs would incurred alcoa corporation standalone company would depend multiple factors including organizational structure capital structure strategic decisions made various areas including information technology infrastructure transactions alcoa corporation parentco considered effectively settled cash time transaction recorded total net effect settlement transactions reflected alcoa corporation’s statement consolidated cash flows financing activity company’s consolidated balance sheet parent company net investment results operations earnings summary net income attributable alcoa corporation 2018 227 compared 217 2017 change 10 primarily due improved pricing aluminum products alumina mostly offset several factors follows increased input costs operational expenses net charge several actions associated employee retirement benefit plans higher income tax provision higher net income attributable noncontrolling interest partner certain alcoa corporation’s operations charge establish allowance certain valueadded tax credits net income attributable alcoa corporation 2017 217 compared net loss attributable alcoa corporation 400 2016 change 617 mainly result higher average realized price primary aluminum alumina absence allocated interest expense costs related separation transaction positive impacts partially offset higher income tax provision higher net income attributable noncontrolling interest partner certain alcoa corporation’s operations increased raw materials maintenance transportation costs net unfavorable foreign currency movements salessales 2018 13403 compared 11652 2017 improvement 1751 15 increase largely attributable higher average realized price alumina primary aluminum flatrolled aluminum positive impact slightly offset decreased shipments aluminum products bauxite absence surplus energy sales 105 related closed rockdale texas smelter due early termination power contract october 2017 sales 2017 11652 compared 9318 2016 improvement 2334 25 increase principally driven higher average realized price primary aluminum alumina increased shipments aluminum products alumina bauxite positive impacts slightly offset realized losses embedded derivatives designated cash flow hedges forward aluminum sales energy supply contracts due rise lme aluminum prices cost goods soldcogs percentage sales 752 2018 compared 772 2017 percentage positively impacted higher average realized price alumina aluminum products favorable last first lifo inventory adjustment difference 91see reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation segment information net favorable foreign currency movements due stronger us dollar positive impacts partially offset higher input costs carbon materials energy caustic soda increased maintenance transportation expenses tariffs aluminum imports 84see aluminum segment information cogs percentage sales 772 2017 compared 845 2016 percentage positively impacted higher average realized price primary aluminum alumina somewhat offset several factors follows higher input costs particularly energy including 21 related financial contractsee caustic soda net unfavorable foreign currency movements due weaker us dollar increased maintenance transportation expenses unfavorable lifo inventory adjustment difference 81see reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation segment information costs related partial restart warrick indiana smelter 46see aluminum segment information alcoa corporation purchased electricity spot market one smelters since company’s contract local energy provider expired october 2016 new energy contract able negotiated order manage company’s exposure variable energy rates occur spot market alcoa corporation previously entered financial contract counterparty effectively convert company’s variable power price fixed power price beginning 2017 alcoa corporation held favorable position financial contract scheduled early terminate august 2017 result decision made management august 2016 january 2017 alcoa corporation began process restarting capacity smelter halted due unexpected power outage occurred december 2016 result alcoa corporation counterparty existing financial contract entered new financial contract effectively convert company’s variable power price fixed power price august 2017 july 2021 additionally effective termination existing financial contract moved july 31 2017 order obtain favorable terms new financial contract could negotiated alcoa corporation conceded portion existing financial contract favorable company april july 2017 period result concession alcoa corporation sought additional financial contract cover exposure variable power rates april july 2017 period march 2017 alcoa corporation secured contract different counterparty however price power spot market rose significantly january march 2017 consequently fixed power price secured additional financial contract significantly higher fixed power price previously secured existing financial contract described accordingly alcoa corporation realized higher energy costs included cogs 21 marktomarket losses included income net related financial contracts 13 2017 selling general administrative expensessga expenses 248 19 sales 2018 compared 280 24 sales 2017 decline 32 primarily related decreases various expenses including employee transfer relocation costs legal consulting fees net favorable foreign currency movements largely due stronger us dollar brazilian real positive impacts partially offset higher stockbased compensation expense related corporate employees 10 sga expenses 280 24 sales 2017 compared 356 38 sales 2016 decrease 76 mostly attributable absence costs related separation transaction 73 includes allocation 68 parentco prior separation date provision depreciation depletion amortizationthe provision dda 733 2018 compared 750 2017 decline 17 2 principally caused net favorable foreign currency movements largely due stronger us dollar brazilian real lower expense related group assets parentco’s 1998 acquisition alumax reaching end depreciable lives positive impacts partially offset higher amortization deferred mining costs 23 increase writeoffs previously capitalized costs projects longer pursued 4 provision dda 750 2017 compared 718 2016 increase 32 4 mainly caused unfavorable foreign currency movements due weaker us dollar particularly brazilian real australian dollar incremental expense due capitalization 2017 new bauxite residue storage areas restructuring chargesrestructuring charges year threeyear period ended december 31 2018 comprised following 2016 includes 1 related allocation restructuring charges alcoa corporation parentco see cost allocations separation transaction layoff costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2018 actions 2018 alcoa corporation recorded restructuring charges 527 comprised following components 331 net related settlements curtailments certain pension postretirement employee benefits see pension postretirement benefits critical accounting policies estimates 107 establish allowance state valueadded tax credits related company’s operations brazil 86 additional costs related curtailed wenatchee washington smelter including 73 associated 2018 management decisions see 15 net benefit related portovesme italy smelter composed 38 reversal 23 charge 18 net charge items june 2018 management decided restart fully curtailed wenatchee smelter within term provided related electricity supply agreement alcoa corporation therefore required make 62 payment energy supplier provisions agreement additionally management decided permanently close one 38 kmt four potlines smelter potline operated since 2001 investments needed restart line cost prohibitive remaining three curtailed potlines capacity 146 kmt connection decisions company recognized charge 73 composed 62 payment 10 asset impairments 1 asset retirement obligations triggered decision decommission potline 2017 actions 2017 alcoa corporation recorded restructuring charges 309 comprised following components 244 related early termination power contract see 49 exit costs related decision permanently close demolish smelter see 41 additional contract costs related curtailed wenatchee são luís brazil smelters 22 layoff costs including separation approximately 130 employees 115 aluminum segment mostly voluntary separation programs 22 reversal reduce reserve previously established end 2015 related legal matter italy 18 net charge items including relocation company’s headquarters principal executive office new york new york pittsburgh pennsylvania 43 reversal associated several reserves related prior periods see october 2017 alcoa corporation luminant generation company llc luminant executed early termination agreement power contract well related fuel lease agreements effective october 1 2017 related company’s rockdale texas smelter fully curtailed since end 2008 accordance terms early termination agreement alcoa made cash payment 238 transferred approximately 2200 acres related land assets liabilities luminant net asset carrying value 6 since curtailment rockdale smelter company selling surplus electricity energy market power contract set expire earlier 2038 except limited circumstances one parties could elect early terminate without penalty conditions never met 2017 september 30 2016 alcoa corporation recognized 105 141 respectively sales 148 210 respectively cost goods sold company’s statement consolidated operations related sale surplus electricity cost luminant power contract result early termination power contract alcoa initiated strategic review remaining buildings equipment associated smelter casthouse aluminum powder plant rockdale location parentco previously decided curtail operating capacity rockdale smelter 2008 result uncompetitive power supply thenoverall unfavorable market conditions review completed december 2017 management determined rockdale operations limited economic prospects consequently management approved permanent closure demolition rockdale smelter capacity 191 kmtperyear related operations effective immediately demolition remediation activities related action began 2018 expected completed end 2022 separately company continues 30000 acres land surrounding rockdale operations 2017 costs related decision included asset impairments 32 representing writeoff remaining book value related properties plants equipment 1 layoff approximately 10 employees corporate 16 costs additionally 2017 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 6 recorded cost goods sold company’s statement consolidated operations costs 16 represent 8 asset retirement obligations 8 environmental remediation triggered decisions permanently close demolish rockdale facilities july 2017 alcoa corporation announced plans restart three capacity 161 kmtperyear five potlines capacity 269 kmtperyear warrick indiana smelter previously permanently closed march 2016 parentco see 2016 actions capacity identified restart directly supply existing rolling mill warrick location improve efficiency integrated site provide additional source metal help meet anticipated increase production volumes result decision reopen smelter 2017 alcoa corporation reversed 33 remaining liabilities related original closure decision liabilities consisted 20 asset retirement obligations 4 environmental remediation obligations necessary due previous decision demolish smelter 9 severance contract termination costs additionally carrying value smelter related assets reduced zero smelter ramped permanent closure decision date end 2015 end march 2016 assets placed back service conjunction restart carrying value remain zero newly acquired constructed assets related warrick smelter depreciated december 31 2018 separations associated 2017 restructuring programs essentially complete 2018 2017 cash payments 3 9 respectively made layoff reserves related 2017 restructuring programs 2016 actions 2016 alcoa corporation recorded restructuring charges 318 comprised following components 131 exit costs related decision permanently close demolish refinery see 87 additional net costs related decisions made late 2015 permanently close demolish warrick smelter curtail wenatchee smelter point comfort texas refinery 72 impairment interest gas exploration assets western australia see 32 layoff costs related cost reduction initiatives including separation approximately 75 employees 60 aluminum segment 15 bauxite segment related pension settlement costs 8 net charge items 12 reversal associated number small layoff reserves related prior periods december 2016 management approved permanent closure suralco refinery capacity 2207 kmtperyear suriname suralco refinery fully curtailed since november 2015 management parentco decided curtail remaining operating capacity suralco refinery 2015 effort improve position parentco’s refining operations global alumina cost curve since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions demolition remediation activities related action began 2017 expected completed end 2022 related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname 2016 costs related closure curtailment actions included accelerated depreciation 70 related warrick smelter continued operate march 2016 asset impairments 16 representing writeoff remaining book value various assets reversal 24 associated severance costs initially recorded late 2015 156 costs additionally 2016 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 5 recorded cost goods sold company’s statement consolidated operations costs 156 represent 94 asset retirement obligations 26 environmental remediation triggered decisions permanently close demolish suralco refinery includes rehabilitation related bauxite mines rehabilitation coal mine related warrick smelter 32 contract terminations 4 related costs also december 2016 management alcoa corporation concluded interest certain gas exploration assets western australia impaired alcoa australia aofa see noncontrolling interest owns interest gas exploration project relinquished june 2018 initially entered 2007 potential source lowcost gas supply aofa’s refineries western australia interest 43 december 31 2016 relates four separate gas wells late 2016 aofa received results technical analysis performed earlier year two wells updated analysis third well concluded cost gas recovery would significantly higher market price gas fourth well results technical analysis performed prior 2016 indicated cost gas recovery would lower market price gas therefore would require additional investment move next phase commercial evaluation management previously supported late 2016 management reevaluated options related fourth well decided economical make commitment foreseeable future result aofa fully impaired 72 interest june 30 2017 separations associated 2016 restructuring programs essentially complete 2017 2016 cash payments 2 7 respectively made layoff reserves related 2016 restructuring programs alcoa corporation include restructuring charges results reportable segments impact allocating charges segment results would follows interest expenseinterest expense 122 2018 compared 104 2017 increase 18 17 primarily driven interest expense 19 associated 500 debt issuance may 2018 see financing activities liquidity capital resources interest expense 104 2017 compared 243 2016 decline 139 57 largely related absence allocation 198 alcoa corporation parentco’s interest expense related separation transaction somewhat offset higher interest expense 64 associated 1250 debt issuance september 2016 see financing activities liquidity capital resources expenses income netother expenses net 64 2018 compared 27 2017 change 37 mostly due absence gain 122 sale yadkin hydroelectric project yadkin see aluminum segment information higher nonservice costs related pension postretirement employee benefit plans 54 items partially offset net favorable change following foreign currency movements 65 marktomarket derivative instruments 49 alcoa corporation’s share earnings aluminum complex joint venture saudi arabia 11 expenses net 27 2017 compared income net 65 2016 change 92 principally caused absence gains sales several assets follows wharf property near intalco washington smelter 118 equity interest natural gas pipeline australia 27 several parcels land 19 higher nonservice costs related pension postretirement employee benefit plans 61 net unfavorable change marktomarket derivative instruments 15 see cost goods sold absence benefit arbitration recovery related 2010 fire iceland smelter 14 items partially offset gain sale yadkin 122 smaller equity loss related alcoa corporation’s share earnings aluminum complex joint venture saudi arabia 42 income taxesalcoa corporation’s effective tax rate 455 provision income 2018 compared us federal statutory rate 21 see us tax cuts jobs act effective tax rate differs 245 percentage points us federal statutory rate principally driven foreign income taxed higher rate jurisdictions domestic losses tax benefitted including net settlementcurtailment charge associated several changes us retirement benefit plans see pension postretirement benefits critical accounting policies estimates alcoa corporation’s effective tax rate 518 provision income 2017 compared us federal statutory rate 35 effective tax rate differs 168 percentage points us federal statutory rate mainly due domestic losses tax benefitted including 244 charge early termination power contract see restructuring charges 60 discrete income tax charge valuation allowance remaining deferred tax assets iceland see income taxes critical accounting policies estimates 26 discrete income charge remeasurement certain deferred tax assets brazil due tax rate change see 22 discrete income charge associated us tax legislation enacted december 2017 see us tax cuts jobs act domestic losses tax benefitted net 122 gain sale yadkin see expenses income net aluminum segment information mid2017 awab received approval tax holiday related operation juruti brazil bauxite mine tax holiday made effective january 1 2017 retroactively decreases awab’s tax rate income generated juruti mine 34 1525 result future cash tax savings 10year period result income tax rate change awab’s existing deferred tax assets expected reverse holiday period remeasured lower tax rate remeasurement resulted decrease awab’s deferred tax assets discrete income tax charge 26 15 noncontrolling interest alcoa corporation’s effective tax rate 1136 provision loss 2016 compared us federal statutory rate 35 effective tax rate differs 1486 percentage points us federal statutory rate primarily related us losses tax credits tax benefit realizable alcoa corporation management anticipates effective tax rate 2019 65 70 however business portfolio actions changes current economic environment tax legislation rate changes currency fluctuations ability realize deferred tax assets results operations certain taxing jurisdictions may cause estimated rate fluctuate us tax cuts jobs act 2017 december 22 2017 us tax legislation known us tax cuts jobs act 2017 “tcja” enacted corporations tcja amends us internal revenue code reducing corporate income tax rate modifying several business deduction international tax provisions specifically corporate income tax rate reduced 21 35 significant changes general include following among others mandatory onetime deemed repatriation accumulated foreign earnings either 8 155 tax rate depending circumstances ii dividends received foreign subsidiaries deducted full regardless ownership interest previously dividends fully taxable iii 21 105 tax effective 2018 depending circumstances new category income referred global intangible low tax income gilti related earnings foreign entities prescribed return associated fixed asset base iv 5 10 tax effective 2018 base erosion payments deductible crossborder payments related parties exceed 3 company’s deductible expenses v net operating losses unlimited carryforward period previously 20 years carryback period previously 2 years deductions losses limited 80 taxable income previously 100 taxable income beginning 2018 tax year result close proximity enactment date tcja relation alcoa corporation’s 2017 calendar yearend management elected january 17 2018 cutoff date purposes recognizing impacts tcja company’s 2017 consolidated financial statements date coincided alcoa corporation’s public release preliminary financial results fourth quarter year ended december 31 2017 accordingly company’s preliminary analysis provisions tcja resulted discrete income tax charge 22 reflected provision income taxes accompanying statement consolidated operations 2017 described 22 charge relates specifically management’s reasonable estimate corporate income tax rate change resulted remeasurement alcoa corporation’s deferred income tax accounts gross basis company reduced deferred tax assets valuation allowance deferred tax liabilities 506 433 51 respectively management also completed preliminary analysis remaining provisions tcja including specifically described order make reasonable estimate cutoff date resulted additional impact company’s 2017 consolidated financial statements specifically reasonable estimate tcja provisions described based following ii iii alcoa corporation’s existing tax profile includes significant current us tax losses would applied taxable income well significant foreign tax credits applied taxes iv management estimates company 3 threshold v alcoa corporation’s deferred income tax assets related us net operating losses fully reserved december 31 2017 company’s preliminary analyses provisional estimates financial statement impacts tcja completed accordance guidance issued sec staff accounting bulletin 118 income tax accounting implications tax cuts jobs act throughout majority 2018 management continued gather information perform additional analysis tcja provisions related alcoa corporation’s 2017 consolidated financial statements upon completion analysis management concluded material impact company’s 2017 consolidated financial statements related reduced corporate income tax rate applicable provisions tcja also 2018 management completed analysis impact tax law changes including gilti became effective january 1 2018 tcja related alcoa corporation’s 2018 consolidated financial statements company made accounting policy election include period cost tax impact generated including gilti us taxable income inclusion gilti 2018 us taxable income fully offset current us tax losses net operating loss carryforwards expected none remaining provisions tcja material impact alcoa corporation’s 2018 consolidated financial statements noncontrolling interestnet income attributable noncontrolling interest 644 2018 compared 342 2017 54 2016 amounts entirely related alumina limited’s 40 ownership interest several affiliated operating entities interest operate bauxite mines alumina refineries within alcoa corporation’s bauxite alumina segments except poços de caldas mine refinery portion são luís refinery brazil portion 55 portland smelter australia within company’s aluminum segment individual entities comprise unincorporated global joint venture alcoa corporation alumina limited known alcoa world alumina chemicals awac alcoa corporation owns 60 individual entities consolidated company financial reporting purposes include aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alúmina española sa española alumina limited’s 40 interest earnings entities reflected noncontrolling interest alcoa corporation’s statement consolidated operations 2018 combined entities generated higher net income compared 2017 favorable change earnings mainly attributable improvement operating results see alumina segment information increased earnings mining refining company saudi arabia joint venture absence 34 10 noncontrolling interest’s share combined higher energy costs marktomarket losses see cost goods sold 26 15 noncontrolling interest’s share remeasurement certain deferred tax assets see income taxes positive impacts somewhat offset higher income tax provision result improved operating results 77 31 noncontrolling interest’s share charge awab’s share establish allowance state valueadded tax credits brazil see restructuring charges 2017 combined entities generated higher net income compared 2016 favorable change earnings primarily result improvement operating results see bauxite alumina segment information absence restructuring charges related permanent closure suralco refinery related bauxite mines see restructuring charges charge impairment interest certain gas exploration assets western australia see restructuring charges positive impacts somewhat offset higher income tax provision result improved operating results 34 10 noncontrolling interest’s share combined higher energy costs marktomarket losses see cost goods sold absence 27 8 noncontrolling interest’s share gain sale equity interest natural gas pipeline australia discrete income tax charge 26 15 noncontrolling interest’s share remeasurement certain deferred tax assets see income taxes segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company’s operations consist three worldwide reportable segments bauxite alumina aluminum segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization segment company calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies adjusted ebitda reportable segments totaled 3203 2018 2725 2017 1453 2016 following information provides production shipments sales adjusted ebitda data reportable segment well certain realized price average cost data three years period ended december 31 2018 see note e consolidated financial statements part ii item 8 form 10k additional information bauxite 1 production amounts include additional bauxite approximately 3 mdmt per annum awac entitled receive ie amount excess equity ownership interest certain partners mine guinea 2 includes productionrelated costs including conversion costs labor materials utilities depreciation depletion amortization plant administrative expenses overview segment represents company’s global bauxite mining operations portion segment’s production represents offtake equity method investments brazil guinea well awac’s share production related equity investment saudi arabia bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see noncontrolling interest earnings summary business update august 2018 bauxite segment’s two mines australia experienced nearly eightweek strike unionized labor force two mines continued operate strike minimal disruption resulting immaterial impact segment’s production financial results labor force returned work negotiations company union continue production 2018 bauxite production flat compared 2017 higher production four segment’s seven mine operations completely offset lower production trombetas brazil boke guinea mines higher production largely result planned increases huntly australia al ba’itha saudi arabia juruti brazil mines lower production trombetas mine due consortium’s decision reduce production response partial curtailment thirdparty alumina refinery brazil 2017 bauxite production increased 08 mdmt compared 2016 improvement principally related planned increase production juruti mine higher production huntly mine somewhat offset lower production trombetas boké mines trombetas mine experienced disruption normal operations due separate weather events impacted tailing ponds bauxite waste storage areas washing plant first half heavy rain second half drought conditions 2017 respectively boké mine experienced disruption normal operations result two separate force majeure events civil unrest 2017 sales thirdparty sales bauxite segment decreased 19 2018 compared 2017 largely attributable 14 decline volume thirdparty sales segment increased 6 2017 compared 2016 mainly due 3 improvement volume segment expands thirdparty bauxite business intersegment sales bauxite segment increased 8 2018 compared 2017 17 2017 compared 2016 primarily driven higher average realized price adjusted ebitda adjusted ebitda bauxite segment increased 2 2018 compared 2017 principally result previously mentioned higher average realized price intersegment sales net favorable foreign currency movements due stronger us dollar brazilian real australian dollar positive impacts mostly offset higher operating costs including maintenance fuel oil price transportation adjusted ebitda segment improved 50 2017 compared 2016 mainly related previously mentioned higher average realized price intersegment sales increased thirdparty shipments positive impacts partially offset higher costs energy including absence onetime tax credit transportation exports western australia thirdparty customers royalties higher thirdparty sales unfavorable impacts previously mentioned disruptions brazil guinea net unfavorable foreign currency movements due weaker us dollar australian dollar brazilian real forwardlook 2019 higher production huntly mine increased total shipments anticipated alumina 1 total shipments include metric tons produced alumina segment alumina purchased segment satisfy certain customer commitments alumina segment bears risk loss purchased alumina control product transferred segment’s customer 2 includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses overview segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see noncontrolling interest earnings summary segment also includes awac’s 251 ownership interest mining refining joint venture company saudi arabia business update august 2018 alumina segment’s three refineries australia experienced nearly eightweek strike unionized labor force three plants continued operate strike minimal disruption resulting immaterial impact segment’s production financial results labor force returned work negotiations company union continue capacity december 31 2018 2017 alumina segment 2519 kmt curtailed refining capacity idle assets process slowdowns base capacity 15064 kmt curtailed base capacity unchanged compared december 31 2016 production 2018 alumina production decreased 239 kmt compared 2017 principally caused equipment process issues three refineries australia são luís brazil refinery 2017 alumina production declined 155 kmt compared 2016 primarily related absence production remaining operating capacity point comfort texas refinery fully curtailed end june 2016 670 kmt curtailed end 2015 sales thirdparty sales alumina segment rose 35 2018 compared 2017 largely attributable 34 improvement average realized price change average realized price mainly driven 36 higher average alumina index price 30day lag 2018 96 smeltergrade thirdparty shipments based alumina indexspot price compared 86 2017 thirdparty sales segment improved 36 2017 compared 2016 mostly result 34 rise average realized price 2 increase volume change average realized price principally related 44 higher average alumina index price 30day lag 2017 86 smeltergrade thirdparty shipments based alumina indexspot price compared 84 2016 intersegment sales alumina segment increased 22 2018 compared 2017 32 2017 compared 2016 primarily driven higher average realized price slightly offset lower demand aluminum segment see aluminum adjusted ebitda adjusted ebitda alumina segment rose 1084 2018 compared 2017 largely attributable previously mentioned higher average realized prices positive contributions improvement favorable mix net favorable foreign currency movements due stronger us dollar particularly australian dollar brazilian real positive impacts somewhat offset higher costs direct materials including caustic soda bauxite energy lower total volume increased maintenance expenses partly due previously mentioned operational issues adjusted ebitda segment improved 913 2017 compared 2016 mostly due previously mentioned higher average realized prices somewhat offset higher costs bauxite caustic soda net unfavorable foreign currency movements due weaker us dollar especially australian dollar increase maintenance expense including outages western australia forwardlook 2019 higher costs bauxite energy expected lower costs caustic soda anticipated aluminum 1 thirdparty aluminum shipments composed primary aluminum flatrolled aluminum 2 primary aluminum information presented include flatrolled aluminum 3 thirdparty total primary aluminum shipments include metric tons produced aluminum segment aluminum purchased segment satisfy certain customer commitments aluminum segment bears risk loss purchased aluminum control product transferred segment’s customer 4 average realized price per metric ton primary aluminum includes three elements underlying base metal component based quoted prices lme b regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states c product premium represents incremental price receiving physical metal particular shape eg billet slab rod etc alloy 5 includes productionrelated costs including raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses overview segment consists company’s worldwide smelting casthouse system processes alumina primary aluminum ii portfolio energy assets brazil canada united states iii rolling mill united states aluminum’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products eg foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives related energy supply contracts energy assets supply power external customers brazil lesser extent united states internal customers aluminum canadian smelters warrick indiana smelter rolling mill alumina segments brazilian refineries rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally separation date end 2018 alcoa corporation tolling arrangement contractually ended december 31 2018 arconic whereby arconic’s rolling mill tennessee produced sheet products certain customers company’s rolling operations alcoa corporation supplied raw materials tennessee facility paid arconic tolling service seasonal increases sheet sales generally experienced second third quarters calendar year generally segment’s aluminum sales transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic krona canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 ownership interest smelting rolling mill joint venture company saudi arabia business update january 2018 lockout bargained hourly employees commenced bécancour canada smelter labor negotiations reached impasse accordingly management initiated curtailment two 207 kmt alcoa’s share three potlines smelter additionally december 2018 half 52 kmt alcoa’s share one operating potline bécancour smelter curtailed additional curtailment deemed necessary ensure continued safety maintenance due recent retirements departures among salaried workforce june 2018 management approved permanent closure one 38 kmt four potlines wenatchee washington smelter potline operated since 2001 investments needed restart line cost prohibitive three potlines 146 kmt smelter remain curtailed see restructuring charges earnings summary description charges associated closure october 2018 alcoa corporation initiated formal 30day consultation process collective dismissal employees two smelters spain avilés 317 employees la coruña 369 employees workers’ representatives action result internal analysis determined organizational improvements could achieved company ceased aluminum production two smelters reorganized production alcoa corporation’s san ciprian plant spain january 22 2019 workforce avilés la coruña aluminum plants ratified agreement previously reached january 16 2019 company workers’ representatives related process result alcoa corporation curtailed two smelters’ remaining combined operating capacity 124 kmt completed february 14 2019 casthouse plant paste facility la coruña remain operation accordance ratified agreement company maintain smelters restart condition event agreement sell plants reached june 30 2019 depending ultimate outcome sale process alcoa corporation may record restructuringrelated charges first half 2019 employee severance actions closure two smelters february 2017 alcoa corporation’s whollyowned subsidiary alcoa power generating inc completed sale 215megawatt hydroelectric project yadkin cube hydro carolinas llc see expenses income net earnings summary yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina prior divestiture power generated yadkin primarily sold open market yadkin generated sales 29 2016 approximately 30 employees december 31 2016 july 2017 alcoa corporation announced plans restart three 161 kmt capacity five potlines 269 kmt capacity warrick indiana smelter previously permanently closed march 2016 parentco capacity identified restart directly supply existing rolling mill warrick location improve efficiency integrated site provide additional source metal help meet anticipated increase production volumes see cogs restructuring charges earnings summary description financial impacts decision alcoa completed restart two potlines 108 kmt june 2018 third potline december 2018 53 kmt restart third potline previously delayed may 2018 due pot instability turn caused temporary power outage capacity december 31 2018 aluminum segment 916 kmt idle smelting capacity base capacity 3173 kmt 2018 idle capacity increased 60 kmt base capacity decreased 38 kmt compared 2017 increase idle capacity due curtailment 259 kmt bécancour smelter partially offset restart 161 kmt warrick smelter permanent closure 38 kmt wenatchee smelter decrease base capacity 2018 due permanent closure 38 kmt wenatchee smelter december 31 2017 segment 856 kmt idle smelting capacity base capacity 3211 kmt 2017 idle base capacity increased 269 kmt compared 2016 related warrick smelter end march 2016 capacity warrick smelter removed segment’s base capacity due permanent closure facility time result decision partially restart smelter capacity warrick smelter included idle base capacity december 31 2017 production 2018 primary aluminum production decreased 69 kmt compared 2017 primarily due lower production bécancour smelter result previously mentioned curtailment partially offset new production warrick smelter due previously mentioned restart capacity higher production portland australia smelter result completed restart mid2017 capacity curtailed december 2016 see 2017 primary aluminum production declined 40 kmt compared 2016 mainly result lower production portland smelter due unexpected power outage occurred december 2016 result fault victorian transmission network event resulted management halting production one potlines time ramp full production completed mid2017 sales thirdparty sales aluminum segment increased 10 2018 compared 2017 principally related 12 rise average realized price primary aluminum higher pricing flatrolled aluminum slightly offset 3 decrease overall aluminum volume change average realized price primary aluminum largely attributable 9 higher average lme price 15day lag increased regional premiums particularly midwest premium united states canada rose average 111 since march 2018 midwest premium significantly increased result imposition 10 tariff aluminum imports us government’s section 232 action lower overall aluminum volume mostly caused decline flatrolled aluminum shipments accordance targeted volumes defined tolling arrangement arconic decreased primary aluminum shipments thirdparty sales segment improved 23 2017 compared 2016 primarily driven 19 rise average realized price primary aluminum 7 increase overall aluminum volume slightly offset realized losses embedded derivatives designated cash flow hedges forward aluminum sales energy supply contracts due rise lme aluminum prices change average realized price primary aluminum mainly attributable 22 higher average lme price 15day lag higher overall aluminum volume related segment’s rolling operations largely due tolling arrangement arconic adjusted ebitda adjusted ebitda aluminum segment decreased 608 2018 compared 2017 principally caused higher costs alumina carbon materials energy tariffs imports segment’s foreign operations primarily canada subjected us section 232 tariffs effective june 1 2018 increased transportation maintenance expenses lower overall aluminum volume realized losses embedded derivatives energy supply contracts due rise lme aluminum prices net unfavorable foreign currency movements due weaker us dollar particularly euro negative impacts somewhat offset previously mentioned higher pricing primary aluminum flatrolled aluminum adjusted ebitda segment improved 309 2017 compared 2016 mostly result previously mentioned higher average realized price primary aluminum partially offset higher costs alumina energy forwardlook 2019 higher production warrick smelter offset lower production avilés la coruña bécancour smelters also lower costs alumina anticipated higher costs energy expected additionally increased direct costs related payment section 232 tariffs us aluminum imports expected first half year reconciliations certain segment information reconciliation total segment thirdparty sales consolidated sales 1 includes thirdparty sales flatrolled aluminum energy well realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum reconciliation total segment operating costs consolidated cost goods sold 1 largely relates aluminum segment’s flatrolled aluminum product division 2 line item represents elimination cost goods sold related intersegment sales bauxite alumina aluminum 3 depreciation depletion amortization included operating costs used calculate average cost bauxite alumina primary aluminum product divisions see bauxite alumina aluminum however financial reporting purposes depreciation depletion amortization presented separate line item alcoa corporation’s statement consolidated operations 4 includes costs related transformation impacts lifo inventory accounting metal price lag certain items impact cost goods sold alcoa corporation’s statement consolidated operations included operating costs segments see footnotes 2 3 5 reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation 1 effective first quarter 2018 management elected change presentation certain line items reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation provide additional transparency nature reconciling items accordingly transformation see footnote 2 previously reported within presented separate line item additionally impact lifo metal price lag previously reported separate line items combined reported new line item labeled corporate inventory accounting see footnote 3 also impact intersegment profit eliminations previously reported within reported new corporate inventory accounting line item applicable information prior periods presented recast reflect changes 2 transformation includes among items adjusted ebitda previously closed operations 3 corporate inventory accounting composed impacts lifo inventory accounting metal price lag intersegment profit eliminations metal price lag describes timing difference created average price metal sold differs average cost metal purchased alcoa corporation’s rolled aluminum operations general price metal increases metal price lag favorable price metal decreases metal price lag unfavorable 4 corporate expenses composed general administrative expenses operating corporate headquarters global administrative facilities well research development expenses corporate technical center 5 includes certain items impact cost goods sold selling general administrative expenses alcoa corporation’s statement consolidated operations included adjusted ebitda reportable segments 6 notable changes reconciling items described results operations notable changes reconciling items described results operations see footnote 6 table directly 2018 compared 2017 consisted • change transformation largely attributable absence loss power contract terminated october 2017 associated closed rockdale texas smelter ie cost power contract exceeded price surplus electricity sold energy market • change corporate inventory accounting principally driven favorable lifo inventory adjustment 91 result decrease price alumina december 31 2018 indexed december 31 2017 compared increase price alumina december 31 2017 indexed december 31 2016 • decline corporate expenses primarily due decreases across several corporate overhead costs notable changes reconciling items described results operations see footnote 6 table directly 2017 compared 2016 consisted • change transformation mainly result smaller loss associated following thenclosed warrick smelter holding costs sale energy thencurtailed rockdale smelter ie cost power contract exceeded price surplus electricity sold energy market closed refinery suriname holding costs well higher energy sales suriname • change corporate inventory accounting mostly caused unfavorable lifo inventory adjustment 81 result increase price alumina december 31 2017 indexed december 31 2016 compared increase price alumina december 31 2016 indexed december 31 2015 • decline corporate expenses largely attributable absence costs related separation transaction 73 includes allocation 68 parentco prior separation date mostly offset decrease corporate overhead expenses environmental matters see environmental matters section note r consolidated financial statements part ii item 8 form 10k liquidity capital resources alcoa corporation’s primary future cash needs centered operating activities particularly working capital well sustaining returnseeking capital expenditures company’s ability fund cash needs depends company’s ongoing ability generate raise cash future although management believes alcoa corporation’s future cash operations together company’s access capital markets provide adequate resources fund alcoa corporation’s operating investing needs company’s access availability financing acceptable terms future affected many factors including alcoa corporation’s credit rating ii liquidity overall capital markets iii current state economy commodity markets assurances company continue access capital markets terms acceptable alcoa corporation periods prior separation date parentco provided capital cash management treasury services alcoa corporation cash amounts specifically attributable alcoa corporation reflected company’s consolidated financial statements transfers cash parentco’s centralized cash management system reflected component parent company net investment alcoa corporation’s consolidated financial statements cash provided operations financing activities expected adequate cover alcoa corporation’s operational business needs next 12 months analysis longterm liquidity see contractual obligations offbalance sheet arrangements december 31 2018 company’s cash equivalents 1113 1056 held outside united states alcoa corporation number commitments obligations related company’s operations various foreign jurisdictions resulting need cash outside united states alcoa corporation continuously evaluates local global cash needs future business operations may influence future repatriation decisions cash operations cash provided operations 448 2018 compared cash provided operations 1224 2017 cash used operations 311 2016 2018 cash provided operations comprised positive addback noncash transactions earnings 1363 net income 871 mostly offset pension contributions 992 unfavorable change working capital 596 combined negative change noncurrent assets noncurrent liabilities 198 pension contributions reflect 725 unscheduled payments made 2018 including combined 620 three company’s us defined benefit pension plans combined 105 two company’s canadian defined benefit pension plans additional payments us plans discretionary nature funded 492 net proceeds may 2018 debt issuance see financing activities 128 available cash hand primary purpose issuing debt fund portion discretionary contributions us plans reduce nearterm pension funding risk fixedrate 10year maturity instrument additional payments canadian plans 89 made april 2018 facilitate annuitization portion future obligations plans maintain funding level remaining plan obligations components unfavorable change working capital follows • negative change 43 receivables primarily due higher pricing alumina aluminum product shipments • unfavorable change 278 inventories mainly caused increased costs raw materials • negative change 32 prepaid expenses current assets • unfavorable change 165 accounts payable trade largely attributable reduction restart costs related warrick smelter see aluminum segment information fewer purchases raw materials • negative change 319 accrued expenses principally driven payments following 133 postretirement employee benefit plans 105 related asset retirement obligations environmental remediation 102 restructuringrelated actions includes 62 provisions electricity supply agreement wenatchee washington smelter see restructuring charges earnings summary 101 interest related company’s outstanding notes due 2024 2026 2028 see 144a debt financing activities 74 final payment related legacy legal matter us government assumed company separation transaction 18 settlement legal matter italy • favorable change 241 taxes including income taxes mostly related increase income tax provision operations australia 2017 cash provided operations comprised positive addback noncash transactions earnings 1297 net income 559 somewhat offset unfavorable change working capital 388 pension contributions 106 combined negative change noncurrent assets noncurrent liabilities 138 components unfavorable change working capital follows • negative change 118 receivables mostly related higher sales • unfavorable change 238 inventories primarily due increased costs raw materials • positive change 43 prepaid expenses current assets principally driven decline prepayments aluminum inventory joint venture saudi arabia • favorable change 377 accounts payable trade mainly result increased costs raw materials timing payments • negative change 563 accrued expenses largely attributable payments following 238 early terminate power supply contract related rockdale texas smelter see restructuring charges earnings summary 117 related asset retirement obligations environmental remediation 116 postretirement employee benefit plans 86 interest related company’s outstanding notes due 2024 2026 see 144a debt financing activities 74 related legacy legal matter us government assumed company separation transaction 73 restructuringrelated actions • positive change 111 taxes including income taxes primarily related increase income tax provision result improved results 2016 cash used operations comprised unfavorable change working capital 747 net loss 346 negative change noncurrent assets 184 see pension contributions 66 negative impacts partially offset positive addback noncash transactions earnings 952 favorable change noncurrent liabilities 80 aofa gas supply agreement power three alumina refineries western australia beginning july 2020 12year period terms agreement required aofa make prepayment 500 two installments first made june 2015 300 second installment 200 made april 2016 financing activities cash used financing activities 288 2018 compared cash used financing activities 506 2017 cash provided financing activities 749 2016 use cash 2018 primarily caused 678 net cash paid alumina limited see noncontrolling interest earnings summary 135 payments debt mostly related early repayment 122 remaining outstanding loans brazil’s national bank economic social development associated construction estreito hydroelectric power project 50 repurchase shares company’s common stock see common stock repurchase program items partially offset 560 additions debt virtually related 492 net proceeds issuance new senior debt securities see 144a debt 68 borrowings existing term loan aofa use cash 2017 mainly driven cash payment 247 arconic related separation transaction mostly representing 243 net proceeds see investing activities sale yadkin see aluminum segment information accordance separation distribution agreement 262 net cash paid alumina limited see noncontrolling interest earnings summary source cash 2016 principally result 1228 additions debt representing net proceeds issuance new senior debt securities see 144a debt 806 net transfers parentco prior separation date items partially offset 1072 cash provided parentco conjunction completion separation transaction 185 net cash paid alumina limited see noncontrolling interest earnings summary 34 payments debt credit facility november 21 2018 alcoa corporation alcoa nederland holding bv anhbv whollyowned subsidiary company entered second amendment restatement agreement revolving credit agreement dated september 16 2016 amendment restatement agreement dated november 14 2017 revolving credit agreement revised amendment restatement agreement “amended revolving credit agreement” case syndicate lenders issuers named therein revise certain terms provisions amended revolving credit agreement amended revolving credit agreement revised second amendment restatement agreement “second amended revolving credit agreement” unless noted otherwise terms provisions described second amended revolving credit agreement applicable amended revolving credit agreement november 14 2017 november 20 2018 see “financing activities” liquidity capital resources management’s discussion analysis financial condition results operations included part ii item 7 company’s annual report form 10k year ended december 31 2017 notable terms provisions revolving credit agreement september 16 2016 november 13 2017 second amended revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” used working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions second amended revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries additionally anhbv may time request lenders provide one additional tranches term loans andor increase aggregate amount revolving commitments together aggregate principal amount 500 revolving credit facility scheduled mature november 21 2023 previously november 14 2022 unless extended earlier terminated accordance provisions second amended revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth second amended revolving credit agreement provisions second amended revolving credit agreement anhbv pay quarterly commitment fee ranging 0200 0425 previously 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal applicable margin plus anhbv’s option either adjusted libor rate b base rate determined reference highest 1 us prime rate published wall street journal previously prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum applicable margin loans vary based alcoa corporation’s leverage ratio range 150 225 previously 175 250 libor loans 050 125 previously 075 150 base rate loans subject case reduction 25 basis points alcoa corporation attains least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility second amended revolving credit agreement mentioned companies shall released obligations first priority lien andor first priority security interest upon alcoa corporation attaining least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings case stable outlook better ii anhbv delivering required written notice iii default event default defined second amended revolving credit agreement occurred continuing date conditions met “collateral release date” second amended revolving credit agreement includes number customary affirmative covenants additionally second amended revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness see entering restrictive agreements restricted payments see including repurchases common stock shareholder dividends see investments see loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level second amended revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 250 100 200 100 beginning subsequent collateral release date may increased level higher 225 100 certain circumstances december 31 2018 2017 alcoa corporation compliance covenants indebtedness restricted payments investments negative covenants include general exceptions allow potential future transactions incremental specifically provided second amended revolving credit agreement indebtedness negative covenant provides incremental amount exceed greater 1000 60 alcoa corporation’s consolidated total assets additionally restricted payments negative covenant provides aggregate amount exceed 100 investments negative covenant provides aggregate amount exceed 400 contain two conditions limits may increase first fiscal year thresholds restricted payments investments negative covenants increase 250 200 respectively consolidated net leverage ratio greater 150 previously 120 100 150 previously130 100 respectively end prior fiscal year secondly regards 100 250 restricted payments 200 investments 50 unused amount base amounts fiscal year may used next succeeding fiscal year following describes specific restricted payment negative covenant share repurchases application restricted payments general exception described share repurchases ordinary dividend payments alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year additionally described second amended revolving credit agreement provides general exceptions restricted payments negative covenant would allow alcoa corporation execute share repurchases purpose fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit also ordinary dividend payments made alcoa corporation subject general exception restricted payments described accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit limits restricted payments negative covenant notes indenture see 144a debt would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant second amended revolving credit agreement second amended revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events amounts outstanding december 31 2018 2017 amounts borrowed 2018 2017 revolving credit facility 144a debt may 2018 anhbv completed rule 144a us securities act 1933 amended debt offering 500 6125 senior notes due 2028 “2028 notes” anhbv received 492 net proceeds debt offering reflecting discount initial purchasers 2028 notes net proceeds along available cash hand used make discretionary contributions certain us defined benefit pension plans see cash operations discount initial purchasers well costs complete financing deferred amortized interest expense term 2028 notes interest 2028 notes paid semiannually november may commenced november 15 2018 anhbv option redeem 2028 notes least 30 days 60 days prior notice holders 2028 notes multiple scenarios including whole part time may 2023 redemption price specified indenture 103063 principal amount plus accrued unpaid interest case also 2028 notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount 2028 notes repurchased plus accrued unpaid interest 2028 notes repurchased 2028 notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer 2028 notes 2028 notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors second amended revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” see credit facility subsidiary guarantors released 2028 notes guarantees upon occurrence certain events including release guarantor obligations guarantor second amended revolving credit agreement 2028 notes indenture includes several customary affirmative covenants additionally 2028 notes indenture contains several negative covenants subject certain exceptions include limitations liens limitations sale leaseback transactions prohibition reduction ownership awac entities agreed level negative covenants 2028 notes indenture less extensive 2024 notes 2026 notes see indenture second amended revolving credit agreement example 2028 notes indenture include limitation restricted payments repurchases common stock shareholder dividends 2028 notes rank equally right payment anhbv’s existing future senior indebtedness including 2024 notes 2026 notes rank senior right payment future subordinated obligations anhbv effectively subordinated anhbv’s existing future secured indebtedness including second amended revolving credit agreement extent value property assets securing indebtedness september 2016 anhbv completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commenced march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors second amended revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” see credit facility subsidiary guarantors released notes guarantees upon occurrence certain events including release guarantor obligations guarantor second amended revolving credit agreement notes indenture contains various restrictive covenants similar described second amended revolving credit agreement including limitation restricted payments among exceptions capacity pay annual ordinary dividends indenture alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period annual 2018 dividends made 50 annual 2019 2020 75 january 1 2021 september 30 2026 maturity date 2026 notes time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period additionally restricted payments negative covenant includes general exception allow potential future transactions incremental specifically provided notes indenture general exception provides aggregate amount restricted payments exceed greater 250 15 alcoa corporation’s consolidated total assets accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 250 assuming restricted payments reduced part whole available limit limits restricted payments negative covenant second amended revolving credit agreement see credit facility would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant notes indenture ratings alcoa corporation’s cost borrowing ability access capital markets affected market conditions also short longterm debt ratings assigned alcoa corporation’s debt major credit rating agencies may 2 2018 fitch ratings fitch affirmed bb rating alcoa corporation’s longterm debt additionally fitch raised current outlook positive stable may 14 2018 moody’s investor service moody’s upgraded rating alcoa corporation’s longterm debt ba1 ba2 additionally moody’s affirmed current outlook stable may 14 2018 standard poor’s global ratings sp upgraded rating alcoa corporation’s longterm debt bb additionally sp assigned current outlook stable common stock repurchase program october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending cash availability market conditions factors repurchases program may made using variety methods may include open market purchases privately negotiated transactions pursuant rule 10b51 plan program predetermined expiration date alcoa corporation intends retire repurchased shares common stock december 2018 company repurchased 1723800 shares common stock 50 shares immediately retired investing activities cash used investing activities 405 2018 compared 226 2017 149 2016 use cash 2018 largely attributable 399 capital expenditures includes spend related environmental control 145 composed 307 sustaining 92 returnseeking use cash 2017 due 405 capital expenditures includes spend related environmental control 92 composed 287 sustaining 118 returnseeking 66 contributions related aluminum complex joint venture saudi arabia items partially offset 245 net proceeds received see financing activities sale yadkin see aluminum segment information use cash 2016 primarily due 404 capital expenditures includes spend related environmental control 83 composed 322 sustaining 82 returnseeking item partially offset 265 combined proceeds sale equity interest natural gas pipeline australia 145 sale wharf property near intalco washington smelter 120 contractual obligations offbalance sheet arrangements contractual obligations alcoa corporation required make future payments various contracts including longterm purchase obligations lease agreements financing arrangements company also commitments fund pension plans provide payments postretirement benefit plans fund capital projects december 31 2018 summary alcoa corporation’s outstanding contractual obligations follows contractual obligations grouped manner classified statement consolidated cash flows order provide better understanding nature obligations provide basis comparison historical information obligations operating activities energyrelated purchase obligations consist primarily electricity natural gas contracts expiration dates ranging 1 year 29 years raw material obligations consist mostly bauxite relates awac’s bauxite mine interests guinea brazil caustic soda alumina aluminum fluoride calcined petroleum coke cathode blocks expiration dates ranging less 1 year 16 years purchase obligations consist principally freight bauxite alumina expiration dates ranging 1 14 years many purchase obligations contain variable pricing components result actual cash payments may differ estimates provided preceding table accordance terms several supply contracts obligations may reduced result interruption operations plant curtailment force majeure event operating leases represent multiyear obligations certain land buildings alumina refinery process control technology plant equipment vehicles computer equipment interest related total debt based interest rates effect december 31 2018 calculated debt maturities extend 2028 contractual interest rates certain debt variable actual cash payments may differ estimates provided preceding table estimated minimum required pension funding postretirement benefit payments based actuarial estimates using current assumptions among others discount rates longterm rate return plan assets rate compensation increases andor health care cost trend rates minimum required contributions pension funding estimated 310 2019 455 2020 355 2021 300 2022 280 2023 erisa employee retirement income security act 1974 regulations plan sponsor establishes prefunding balance making discretionary contributions us defined benefit pension plan may elect apply portion balance toward minimum required contribution obligations related plan future years 2019 management consider making election related company’s us plans postretirement benefit payments expected approximate 105 110 annually years 2019 2023 68 annually years 2024 2028 payments slightly offset subsidy receipts related medicare part estimated approximate 5 10 annually years 2019 2028 alcoa corporation determined practicable present pension funding postretirement benefit payments beyond 2023 2028 respectively layoff restructuring payments expected paid within one year relate takeorpay provisions supply contracts associated curtailed facilities contractual commitment italian government agency related transfer portovesme smelter severance costs termination office lease contract amounts scheduled paid beyond one year largely relate previously mentioned commitment italy expected paid 2020 deferred revenue arrangements require alcoa corporation deliver alumina certain customer specified contract period 2027 obligation expected result cash payments included preceding table company would obligation specified product deliveries could made uncertain tax positions taken expected taken income tax return may result additional payments tax authorities amount preceding table includes interest penalties accrued related positions december 31 2018 total amount uncertain tax positions included “thereafter” column company able reasonably estimate timing potential future payments tax authority agrees tax position taken expected taken applicable statute limitations expires additional payments necessary obligations financing activities total debt amounts preceding table represent principal amounts outstanding longterm debt maturities extend 2028 december 31 2018 alcoa corporation 184770249 issued outstanding shares common stock dividends common stock subject authorization company’s board directors alcoa corporation declare pay dividends 2018 october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending cash availability market conditions factors additionally program predetermined expiration date accordingly amounts included preceding table december 2018 company repurchased 1723800 shares common stock 50 effective november 1 2016 certain documents govern awac joint venture relationship alcoa corporation alumina limited revised one provisions revised documents relates required cash distributions entities comprise joint venture two partners quarterly basis certain identified entities comprise awac joint venture must distribute 50 entity’s net income based previous quarter’s results ii available cash entity subject certain thresholds entities must maintain minimum cash hand ranges 5 85 depending entity available cash defined entity’s cash equivalents less projected negative free cash flow entity upcoming quarter free cash flow defined cash flow operating activities less sustaining capital expenditures estimates potential cash distributions alumina limited included preceding table since would require alcoa corporation provide proprietary information related forecasted results entities comprise awac joint venture 2018 2017 2016 alumina limited received distributions 827 342 233 respectively entities comprise awac based provisions respective current prior agreement applicable years obligations investing activities capital projects preceding table include amounts approved management december 31 2018 funding levels may vary future years based anticipated construction schedules projects expected significant expansion projects funded various sources including cash provided operations total capital expenditures anticipated approximately 450 2019 comprised 300 sustaining projects 150 returnseeking projects alcoa corporation participant joint venture related integrated aluminum complex saudi arabia comprised bauxite mine alumina refinery aluminum smelter rolling mill requires company contribute approximately 1100 estimate initial investment december 31 2018 alcoa corporation made equity contributions 982 based changes project’s capital investment equity debt structure initial plans estimated 1100 equity contribution may reduced company anticipate making additional equity contributions initial 1100 plan although formal determination yet made accordingly contribution amounts included preceding table separate capital investment project alcoa corporation contributed 66 joint venture 2017 shortterm funding purposes accordance terms joint venture companies’ financing arrangements company may required make additional contributions future periods june 2018 alcoa corporation rio tinto plc provincial government quebec canada launched new joint venture elysis limited partnership elysis purpose partnership advance larger scale development commercialization company’s patentprotected technology produces oxygen eliminates direct greenhouse gas emissions traditional aluminum smelting process joint venture requires alcoa corporation invest 21 c28 next three years 2018 company contributed 5 c6 toward initial investment commitment elysis offbalance sheet arrangements december 31 2018 company maximum potential future payments guarantees issued behalf third party 60 guarantees expire various times 2018 2021 relate project financing aluminum complex saudi arabia borrower rolling mill company part joint venture alcoa corporation participant december 2017 july 2018 smelting company mining refining company respectively refinanced andor amended existing outstanding debt guarantees previously required company related smelting company mining refining company effectively terminated alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties total amount committed instruments automatically renew expire various dates 2019 2022 373 includes 136 issued standby letter credit agreementsee december 31 2018 additionally arconic outstanding bank guarantees letters credit related company amount 29 december 31 2018 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding bank guarantees letters credit related arconic amount 15 december 31 2018 event alcoa corporation would required perform instruments company would indemnified arconic accordance separation distribution agreement august 2017 alcoa corporation entered standby letter credit agreement expires august 17 2019 extended august 2018 three financial institutions agreement provides 150 facility used company matters ordinary course business alcoa corporation’s obligations facility secured manner obligations company’s second amended revolving credit agreement see financing activities liquidity capital resources additionally facility contains similar representations warranties affirmative negative financial covenants company’s second amended revolving credit agreement see financing activities liquidity capital resources december 31 2018 letters credit aggregating 136 issued facility alcoa corporation also outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2019 40 december 31 2018 additionally arconic outstanding surety bonds related company amount 16 december 31 2018 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding surety bonds related arconic amount 2 december 31 2018 event alcoa corporation would required perform instruments company would indemnified arconic accordance separation distribution agreement critical accounting policies estimates preparation company’s consolidated financial statements accordance accounting principles generally accepted united states america requires management make certain estimates based judgments assumptions regarding uncertainties affect amounts reported consolidated financial statements disclosed notes consolidated financial statements areas require estimates include review properties plants equipment equity investments goodwill impairment accounting following asset retirement obligations environmental litigation matters stockbased compensation pension plans postretirement benefits obligations derivatives hedging activities income taxes management uses historical experience available information make estimates actual results may differ used prepare company’s consolidated financial statements given time despite inherent limitations management believes management’s discussion analysis financial condition results operations consolidated financial statements including notes consolidated financial statements provide meaningful fair perspective alcoa corporation summary company’s significant accounting policies included note b consolidated financial statements part ii item 8 form 10k management believes application policies consistent basis enables alcoa corporation provide users consolidated financial statements useful reliable information company’s operating results financial condition prior separation date company operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date company’s consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation critical accounting policies described reflect incremental judgments assumptions made management preparation company’s consolidated financial statements prior separation date see separation transaction overview additional information properties plants equipment properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds estimated undiscounted net cash flows amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments equity investments alcoa corporation invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations alcoa corporation ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable analysis requires significant amount judgment management identify events circumstances indicating equity investment impaired following items examples impairment indicators significant sustained declines investee’s revenue earnings cash flow trends adverse market conditions investee’s industry geographic area investee’s ability continue operations measured several items including liquidity factors impairment indicator identified management uses considerable judgment determine impairment temporary case equity investment written estimated fair value impairment temporary could significantly adversely impact reported results operations goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business significant amount judgment involved determining indicator impairment occurred indicators may include among others deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods fair value could realized actual transaction may differ used evaluate goodwill impairment goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment alcoa corporation five reporting units three included aluminum segment smeltingcasting energy generation rolling operations remaining two reporting units bauxite alumina segments five reporting units bauxite alumina contain goodwill december 31 2018 carrying value goodwill bauxite alumina 51 100 respectively amounts include allocation goodwill held corporate level 49 bauxite 97 alumina reviewing goodwill impairment entity option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount entity elects perform qualitative assessment determines impairment likely entity required perform quantitative impairment test described otherwise analysis required entity also may elect perform qualitative assessment instead proceed directly quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether entity chooses perform qualitative assessment proceeds directly quantitative impairment test alcoa corporation’s policy annual review goodwill perform qualitative assessment reporting units subjected directly quantitative impairment test generally management proceed directly quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill qualitative assessment various events circumstances factors would affect estimated fair value reporting unit identified similar impairment indicators factors classified type impact would estimated fair value using positive neutral adverse categories based current business conditions additionally assessment level impact particular factor would estimated fair value determined using high medium low weighting furthermore management considers results recent quantitative impairment test completed reporting unit compares weighted average cost capital wacc current prior years reporting unit 2018 annual review goodwill management performed qualitative assessment alumina reporting unit management concluded likely respective estimated fair value reporting unit less respective carrying value analysis required quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill alcoa corporation uses dcf model estimate current fair value reporting units testing impairment management believes forecasted cash flows best indicator fair value number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes certain assumptions vary significantly among reporting units cash flow forecasts generally based approved business unit operating plans early years historical relationships later years betas used calculating individual reporting units’ wacc rate estimated business assistance valuation experts event estimated fair value reporting unit per dcf model less carrying value impairment loss equal excess reporting units carrying value fair value exceed total amount goodwill applicable reporting unit would recognized 2018 annual review goodwill management proceeded directly quantitative impairment test bauxite reporting unit estimated fair value reporting unit substantially excess carrying value resulting impairment management last proceeded directly quantitative impairment test alumina reporting unit 2016 time estimated fair value alumina reporting unit substantially excess carrying value resulting impairment additionally prior years presented triggering events necessitated impairment test either bauxite alumina reporting units asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks polychlorinated biphenyls various process residuals solid wastes electronic equipment waste various materials amounts may material consolidated financial statements period recorded alcoa corporation required demolish structures immediately estimated caro december 31 2018 ranges 3 28 per structure 24 structures today’s dollars environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss stockbased compensation periods prior separation date eligible employees attributable alcoa corporation operations participated parentco’s stockbased compensation plans compensation expense recorded alcoa corporation included expense associated employees well expense associated allocation stockbased compensation expense parentco’s corporate employees beginning separation date forward alcoa corporation recorded stockbased compensation expense eligible company employees following accounting policy describes stockbased compensation expense initially determined alcoa corporation parentco compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time 2018 2017 2016 alcoa corporation recognized stockbased compensation expense 35 24 28 16 relates allocation expense parentco’s corporate employees respectively part alcoa corporation’s parentco’s stockbased compensation plan design respective periods individuals retirementeligible sixmonth requisite service period year grant result larger portion expense recognized first half year retirementeligible employees total pretax stockbased compensation expense recognized 2018 2017 2016 5 4 7 respectively pertains acceleration expense related retirementeligible employees plan participants choose whether receive award form stock options stock units combination choice made grant issued irrevocable pension postretirement benefits periods prior august 1 2016 see certain employees attributable alcoa corporation operations participated defined benefit pension postretirement benefit plans “shared plans” sponsored parentco also included participants attributable nonalcoa corporation operations alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans however related expense recorded alcoa corporation based primarily pensionable compensation estimated interest costs related employees attributable alcoa corporation operations prior separation date certain plans entirely attributable employees alcoa corporationrelated operations “direct plans” accounted defined benefit pension postretirement benefit plans accordingly funded unfunded position direct plan recorded consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive income net taxes amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions see preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation “new direct plans” parentco additionally certain remaining shared plans assumed alcoa corporation “additional new direct plans” accordingly beginning august 1 2016 forward standalone plans assumed plans accounted defined benefit pension postretirement plans additionally direct plans continued accounted defined benefit pension postretirement plans liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality interest rate used discount future estimated liabilities determined using companyspecific yield curve model abovemedian developed assistance external actuary cash flows plans’ projected benefit obligations discounted using single equivalent rate derived yields high quality corporate bonds represent broad diversification issuers various sectors yield curve model parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows bonds included model exceed cash flows needed satisfy company’s plans’ obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used 2018 2017 weighted average discount rate used determine benefit obligations pension plans 421 368 respectively postretirement benefit plans 425 354 respectively impact combined pension postretirement liabilities change weighted average discount rate 14 1 would approximately 160 either charge credit approximately 5 pretax earnings following year expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment 2018 2017 2016 management used 689 747 731 respectively weightedaverage expected longterm rate return based prevailing planned strategic asset allocations well estimates future returns asset class 2019 management anticipates 659 weightedaverage expected longterm rate return change assumption weighted average expected longterm rate return plan assets 14 1 would impact pretax earnings approximately 15 2019 plan actionsin 2018 management initiated several actions certain pension postretirement benefit plans follows • action 1in january 2018 alcoa corporation notified us canadian salaried employees participants three company’s defined benefit pension plans cease accruing retirement benefits future service effective january 1 2021 change affect approximately 800 employees transitioned countryspecific defined contribution plans alcoa corporation contribute 3 participants’ eligible earnings annual basis contributions incremental employer savings match employees may receive existing defined contribution plans participants already collecting benefits defined benefit pension plans affected changes • action 2in january 2018 company notified us salaried employees retirees longer contribute premedicare retiree medical coverage effective january 1 2021 change affects approximately 700 participants one plan • action 3in april 2018 alcoa corporation signed group annuity contracts transfer obligation pay remaining retirement benefits approximately 2100 retirees two canadian defined benefit pension plans three insurance companies transfer 560 plan obligations plan assets well transaction fee 23 completed april 13 2018 company contributed 89 two plans facilitate transaction maintain funding level remaining plan obligations prior transactions two canadian pension plans combined approximately 3500 participants • action 4in august 2018 alcoa corporation signed group annuity contract transfer obligation pay remaining retirement benefits approximately 10500 retirees three us defined benefit pension plans one insurance company transfer 287 plan obligations plan assets well transaction fee 10 completed august 7 2018 additionally approximately 1000 plan participants elected receive lump sum settlements representing 75 plan obligations 85 plan assets prior two transactions three us pension plans combined approximately 43400 participants • action 5in august 2018 company notified certain us salaried retirees life insurance longer provided effective september 1 2018 change affects approximately 5500 participants one plan part change alcoa corporation made onetime transition payment affected retirees totaling 23 september 2018 actions resulted curtailment settlement benefits thereby requiring remeasurement including update discount rates used determine benefit obligations affected plans following table presents certain information financial impacts actions company’s consolidated financial statements 1 negative amount indicates corresponding decrease accumulated comprehensive loss positive amount indicates corresponding increase accumulated comprehensive loss 2 amounts represent accelerated amortization portion existing prior service cost benefit curtailments net actuarial loss settlements reclassified accumulated comprehensive loss restructuring charges see caption earnings summary company’s statement consolidated operations eight plans affected curtailment settlement actions described represented 65 combined net unfunded status company’s pension postretirement benefit plans december 31 2017 derivatives hedging derivatives held purposes trading part formally documented risk management program alcoa corporation accounts hedges firm customer commitments aluminum fair value hedges fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item company accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet changes fair values derivatives recorded comprehensive income loss reclassified sales cost goods sold expenses income net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years april 1 2018 alcoa corporation adopted new accounting guidance hedging activities see recently adopted accounting guidance included elimination concept ineffectiveness effective january 1 2018 accordingly longer requirement separately measure report ineffectiveness therefore following policy description effectiveness applicable periods prior january 1 2018 derivatives designated fair value hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly historical high correlation changes fair value hedged item derivative hedging instrument derivatives designated cash flow hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly probable high correlation expected future cash flows hedged item derivative hedging instrument ineffective portions types hedges recorded sales expenses income net current period hedging relationship ceases highly effective becomes probable expected transaction longer occur future gains losses derivative instrument recorded expenses income net hedging relationship designated derivative marked market expenses income net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes beginning separation date forward provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa corporation’s assets liabilities adjusted changes tax rates tax laws enacted periods prior separation date alcoa corporation’s operations included income tax filings parentco provision income taxes alcoa corporation’s statement consolidated operations determined manner described separate return methodology company standalone taxpayer filing hypothetical income tax returns applicable additional accrued tax liability refund arising result approach assumed immediately settled parentco component parent company net investment deferred tax assets also determined manner described reflected consolidated balance sheet net operating losses credits attributes extent attributes expected transfer alcoa corporation upon separation transaction difference attributes generated hypothetical return separate return basis adjusted component parent company net investment valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income certain jurisdictions deferred tax assets related cumulative losses exist without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude deferred tax assets valuation allowance currently recorded may realized resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays composition alcoa corporation’s net deferred tax asset jurisdiction december 31 2018 follows company several income tax filers various foreign countries 291 net deferred tax asset included “foreign” column table approximately 80 relates four alcoa corporation’s income tax filers follows 209 deferred tax asset alumínio brazil 140 net deferred tax asset awab brazil 94 deferred tax asset española collectively alumínio awab “foreign filers” spain 220 net deferred tax liability aofa future realization net deferred tax asset foreign filers based projections respective future taxable income defined sum pretax income comprehensive income permanent tax differences exclusive reversing temporary differences carryforwards realization net deferred tax assets foreign filers dependent tax planning strategies foreign filers generated taxable income threeyear cumulative period ending december 31 2018 management also forecasted taxable income foreign filers 2019 foreseeable future forecast based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials bauxite caustic soda energy labor transportation costs assumptions utilized management develop financial operating plan used manage company measure performance actual results majority foreign filers’ net deferred tax assets relate tax loss carryforwards foreign filers history tax loss carryforwards expiring unused additionally tax loss carryforwards infinite life respective income tax codes brazil spain said utilization existing tax loss carryforward limited 30 25 taxable income particular year brazil spain respectively accordingly management concluded net deferred tax assets foreign filers likely realized future periods resulting need partial full valuation allowance december 31 2018 alcoa corporation immediately established full valuation allowance 86 related initial deferred tax asset associated company’s equity interest elysis limited partnership “elysis” june 2018 alcoa corporation contributed certain intellectual property patents made initial cash investment 5 elysis deferred tax asset relates outside basis difference created excess tax basis ie fair value assets carrying value investment elysis recorded company initial purpose elysis advance development aluminum smelter technology ultimate goal commercialization weighing available positive negative evidence management determined likely alcoa corporation realize tax benefit deferred tax asset conclusion based fact elysis expected generate losses foreseeable future elysis incurs expenses development stage without committed future revenue stream need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2017 company established valuation allowance 94 related remaining deferred tax assets iceland initial allowance previously established 2015 amount comprised 60 discrete income charge recognized provision income taxes accompanying consolidated statement operations 34 charge accumulated comprehensive loss accompanying consolidated balance sheet deferred tax assets relate tax loss carryforwards expiration period ranging 2017 2026 deferred losses associated derivative hedging activities weighing available positive negative evidence management determined longer likely alcoa corporation realize tax benefit deferred tax assets conclusion based existing cumulative losses short expiration period losses generated result intercompany interest expense company’s global treasury cash management system realization deferred losses associated lmelinked embedded derivative power contract interest expense expected continue additional deferred losses associated embedded derivative realized future years result management estimates sufficient taxable income available utilize operating losses expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented recently adopted accounting guidance see recently adopted accounting guidance section note b consolidated financial statements part ii item 8 form 10k recently issued accounting guidance see recently issued accounting guidance section note b consolidated financial statements part ii item 8 form 10k item 7aitem 7 management’s discussion analysis financial condition results operations dollars millions except pershare amounts average realized prices average cost amounts dry metric tons millions mdmt metric tons thousands kmt overview business alcoa corporation alcoa company vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation aluminum commodity traded london metal exchange lme priced daily additionally alumina subject market pricing alumina price index api calculated company based weighted average prior month’s daily spot prices published following three indices cru metallurgical grade alumina price platts metals daily alumina pax price metal bulletin nonferrous metals alumina index result price aluminum alumina subject significant volatility therefore influences operating results alcoa corporation direct indirect ownership alcoa corporation 30 operating locations nine countries around world situated primarily australia brazil canada iceland norway spain united states governmental policies laws regulations economic factors including inflation fluctuations foreign currency exchange rates interest rates affect results operations countries business update september 2019 alcoa corporation announced implementation new operating model result leaner integrated operatorcentric organization effective november 1 2019 new operating model eliminates business unit structure consolidates sales procurement commercial capabilities enterprise level streamlines executive team reports chief executive officer new structure reduce overhead intention promoting operational commercial excellence increasing connectivity company’s operations leadership result new operating model charge 37 recorded related employee termination severance costs annual operating cost savings approximately 60 related new operating model expected beginning second quarter 2020 october 2019 company announced initiatives drive lower costs sustainable profitability planned initiatives include next 12 18 months pursuing noncore asset sales expected generate estimated 500 1000 net proceeds support updated strategic priorities ii next five years realigning operating portfolio review company placed 15 million metric tons smelting capacity 4 million metric tons alumina refining capacity review consider opportunities significant improvement potential curtailments closures divestitures december 2019 company announced permanent closure alumina refinery point comfort texas first action multiyear portfolio review site’s 23 million metric tons refining capacity fully curtailed since 2016 result decision close refinery 274 charge recorded restructuring charges net see note consolidated financial statements part ii item 8 form 10k beginning 2020 closure expected result annual net income improvement approximately 15 aftertax noncontrolling interest cash savings approximately 10 alcoa’s share compared ongoing spend curtailment exclusive closure costs december 31 2019 alcoa completed transfer afobaka hydroelectric dam government republic suriname according definitive agreements approved parliament curtailment alcoa’s operations suriname 2015 permanent closure early 2017 alcoa continued operate dam selling electricity government subsequent sale customers suriname alcoa expects annual net income reduction related loss electricity sales approximately 20 aftertax noncontrolling interest based 2019 results january 2020 company announced sale elemental environmental solutions llc ees whollyowned alcoa subsidiary operates waste processing facility gum springs arkansas global environmental firm transaction valued 250 transaction closed january 31 2020 whereby company received 200 another 50 held escrow paid alcoa certain postclosing conditions satisfied result transaction company expects recognize gain approximately 175 first quarter 2020 annual net income improvement approximately 10 separation transaction references parentco refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic november 1 2016 separation date parentco separated two standalone publiclytraded companies alcoa corporation arconic effective 1201 eastern time separation transaction regularway trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” company’s common stock par value 001 per share effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting initial cash payment 1072 parentco alcoa corporation net proceeds previous debt offering see note l consolidated financial statements part ii item 8 form 10k additionally 247 paid arconic company 2017 including 243 proceeds associated sale certain energy operations see note c consolidated financial statements part ii item 8 form 10k connection separation transaction alcoa corporation arconic entered certain agreements implement legal structural separation two companies govern relationship company arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap accordance gaap certain situations require management make estimates based judgments assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters certain amounts previously issued financial statements reclassified conform current period presentation january 1 2019 company changed accounting method valuing certain inventories lastin firstout lifo average cost effects change accounting principle retrospectively applied prior periods presented discussion follows includes comparison results operations liquidity capital resources fiscal years ended december 31 2019 2018 discussion changes fiscal year ended december 31 2017 fiscal year ended december 31 2018 refer management’s discussion analysis financial condition results operation part ii item 7 alcoa corporation’s annual report form 10k year ended december 31 2018 filed february 26 2019 results operations earnings summary net loss attributable alcoa corporation 2019 1125 compared net income 250 2018 change 1375 primarily due lower margin declining alumina aluminum prices higher restructuring costs partially offset favorable currency impacts lower income tax provision higher volume lower net income attributable noncontrolling interest salessales 2019 10433 compared 13403 2018 change 2970 22 decrease largely attributed lower average realized price alumina primary aluminum end flat rolled products tolling arrangement tennessee reduced sales divestiture two aluminum facilities spain cost goods soldcost goods sold percentage sales 82 2019 compared 75 2018 percentage negatively impacted lower average realized price alumina aluminum products unfavorable impacts partially offset higher alumina shipments net favorable foreign currency movements due stronger us dollar primarily australian dollar euro brazilian real improvements due divestiture two aluminum facilities spain partial exemption tariffs certain aluminum imports 2019 see aluminum segment information selling general administrative expensesselling general administrative expenses 280 3 sales 2019 compared 248 2 sales 2018 change 32 primarily related unfavorable impact bad debt reserve recorded canadian customer receivable due 2019 bankruptcy filing provision depreciation depletion amortizationthe provision dda 713 2019 compared 733 2018 decrease 20 3 principally caused net favorable foreign currency movements largely due stronger us dollar brazilian real australian dollar canadian dollar divestiture two aluminum facilities spain favorable changes partially offset higher depreciation shortened lives certain residue disposal areas brazil result regulatory changes occurred 2019 restructuring charges netrestructuring charges net 1031 2019 compared 527 2018 2019 management took several actions strengthen company significant impact restructuring charges net actions include divesting alcoa’s equity investment ma’aden rolling company curtailment subsequent divestiture avilés la coruña spain aluminum facilities additional actions taken reduce overall pension postretirement benefit opeb liabilities announcing new operating model streamline reporting assist operational effectiveness deciding permanently close point comfort alumina refinery increase charges 2018 mainly attributed factors partially offset lower settlements curtailments related retirement benefits absence charge related valueadded tax credits recorded 2018 see note part ii item 8 form 10k detailed description restructuring action expenses netother expenses net 162 2019 compared 64 2018 change 98 mostly due unfavorable changes foreign currency movements 73 unfavorable change equity earnings 32 primarily related joint venture saudi arabia result lower alumina aluminum prices slightly offset partial year absence rolling mill losses reduced gains related marktomarket derivative instruments items partially offset lower nonservice costs related pension postretirement benefit plans 22 primarily due actions taken management reduce overall pension opeb liabilities income taxesalcoa corporation’s effective tax rate 949 provision loss 2019 compared us federal statutory rate 21 alcoa’s effective tax rate federal statutory rate 2018 45 provision income 21 respectively effective tax rate differs us federal statutory rate primarily due losses countries full valuation reserves resulting tax benefit well foreign income taxed higher rate jurisdictions 2019 effective tax rate also impacted restructuring expenses related divestitures foreign jurisdictions deductible tax purposes addition reviewing effective tax rate management utilizes adjusted effective tax rate operational tax rate assess tax operations exclusive special items management reviews operating results company exclusive special items therefore believes measure meaningful assessing impact special items effective tax rate management anticipates operational tax rate 2020 70 80 however business portfolio actions changes current economic environment tax legislation rate changes currency fluctuations ability realize deferred tax assets results operations certain tax jurisdictions may cause actual rate fall outside estimated range noncontrolling interestnet income attributable noncontrolling interest 272 2019 compared 643 2018 amounts entirely related alumina limited’s 40 ownership interest several affiliated operating entities interest operate bauxite mines alumina refineries within alcoa’s bauxite alumina segments except poços de caldas mine refinery portions são luís refinery investment mineração rio norte sa brazil portion 55 portland smelter australia within company’s aluminum segment individual entities comprise unincorporated global joint venture alcoa corporation alumina limited known alcoa world alumina chemicals awac alcoa corporation owns 60 individual entities consolidated company financial reporting purposes include alcoa australia ltd aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alúmina española sa española alumina limited’s 40 interest earnings entities reflected noncontrolling interest alcoa corporation’s statement consolidated operations 2019 combined entities generated lower net income compared 2018 primarily driven lower alumina prices segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company’s operations consist three worldwide reportable segments bauxite alumina aluminum segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization segment company calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies segment adjusted ebitda totaled 1626 2019 3250 2018 2739 2017 following information provides production shipments sales segment adjusted ebitda data reportable segment well certain realized price average cost data three years period ended december 31 2019 see note e consolidated financial statements part ii item 8 form 10k additional information bauxite operating costs table includes productionrelated costs conversion costs labor materials utilities depreciation depletion amortization plant administrative expenses overview segment represents company’s global bauxite mining operations portion segment’s production represents offtake equity method investments brazil guinea well awac’s share production related equity investment saudi arabia production table vary total shipments due primarily differences equity allocation production offtake agreements respective equity investment bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see noncontrolling interest earnings summary business update bauxite segment record annual production 2019 included annual production records willowdale huntly juruti mines record annual production contributed record annual adjusted ebitda segment additionally november 2019 employees western australian eligible coverage australian workers union awu enterprise agreement ea voted support agreement proposed company representatives awu october 2019 agreement ratified fair works counsel effect approximately 1500 employees across bauxite alumina segments combined mining operations relocated periodically support optimizing value extracted bauxite reserves 2019 company began process moving willowdale mining operations next planned location darling range began preparing movement juruti mining operations expected start 2020 result movements additional capital expenditures anticipated 2020 compared 2019 production 2019 bauxite production increased 3 compared 2018 higher production five segment’s seven mines sales thirdparty sales bauxite segment increased 10 2019 compared 2018 primarily attributed 9 increase thirdparty shipments intersegment sales bauxite segment increased 4 2019 compared 2018 primarily driven higher average realized price segment adjusted ebitda bauxite segment adjusted ebitda improved 78 2019 compared 2018 principally result previously mentioned higher average realized price intersegment sales net favorable foreign currency movements due stronger us dollar australian dollar brazilian real forwardlook 2020 lower intersegment thirdparty prices anticipated addition higher capital expenditures result previously mentioned willowdale juruti mining location moves alumina table total shipments include metric tons produced alumina segment alumina purchased satisfy certain customer commitments alumina segment bears risk loss purchased alumina control product transferred segment’s customer additionally operating costs table includes productionrelated costs raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses overview segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use alumina traders generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see noncontrolling interest earnings summary segment also includes awac’s 251 ownership interest mining refining joint venture company saudi arabia business update alumina segment record annual production 2019 included annual production records wagerup pinjarra san ciprián alumina refineries november 2019 employees western australian eligible coverage awu ea voted support agreement proposed company representatives awu october 2019 agreement ratified fair works counsel effect approximately 1500 employees across bauxite alumina segments combined additionally december 2019 company announced closure point comfort alumina refinery fully curtailed since 2016 2019 average api 30day lag continued decrease alumina segment improved stability across refining system realized benefit declining prices caustic soda capacity december 31 2019 alumina segment base capacity 12759 kmt 214 kmt curtailed refining capacity 2018 due announcement permanent closure previously curtailed point comfort alumina refinery changes curtailed base capacity 2019 production 2019 alumina production increased 445 kmt compared 2018 principally due stabilization operations across refining system sales thirdparty sales alumina segment decreased 23 2019 compared 2018 primarily attributable decline average realized price principally driven lower average api 30day lag intersegment sales alumina segment decreased 26 2019 compared 2018 primarily driven lower average realized price segment adjusted ebitda alumina segment adjusted ebitda decreased 1276 2019 compared 2018 largely attributed previously mentioned lower average realized prices higher costs bauxite energy increased maintenance expenses negative impacts partially offset net favorable foreign currency movements due stronger us dollar particularly australian dollar brazilian real lower costs caustic soda forwardlook 2020 higher natural gas costs australia expected offset lower costs bauxite caustic soda additionally approximately 10 alumina segment’s intercompany shipments move api based price percentage lme price aluminum table total aluminum thirdparty shipments total primary aluminum shipments include metric tons produced aluminum segment aluminum purchased segment satisfy certain customer commitments aluminum segment bears risk loss purchased aluminum control product transferred segment’s customer total aluminum information incudes flatrolled aluminum primary aluminum information operating costs includes productionrelated costs raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses average realized thirdparty price per metric ton primary aluminum includes three elements underlying base metal component based quoted prices lme b regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states c product premium represents incremental price receiving physical metal particular shape eg billet slab rod etc alloy overview segment consists company’s worldwide smelting casthouse system processes alumina primary aluminum ii portfolio energy assets brazil canada united states iii rolling mill united states aluminum’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products eg foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives related energy supply contracts energy assets supply power external customers brazil lesser extent united states well internal customers aluminum canadian smelters warrick indiana smelter rolling mill alumina segments brazilian refineries rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally separation date end 2018 alcoa corporation tolling arrangement contractually ended december 31 2018 arconic whereby arconic’s rolling mill tennessee produced sheet products certain customers company’s rolling operations alcoa supplied raw materials tennessee facility paid arconic tolling service seasonal increases sheet sales generally experienced second third quarters calendar year generally segment’s aluminum sales transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic króna canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 ownership interest smelting rolling mill joint venture company saudi arabia rolling mill divested june 2019 business update 2019 significant labor agreements united states canada modernized extended six years result competitive longterm labor agreement process restart bécancour canada smelter began july 2019 previously january 2018 lockout bargained hourly employees commenced bécancour smelter labor negotiations reached impasse accordingly management initiated curtailment two three potlines smelter additionally december 2018 half one operating potline bécancour smelter curtailed additional curtailment deemed necessary ensure continued safety maintenance due recent retirements departures among salaried workforce may 2019 canada mexico received exemption tariffs imposed aluminum produced imported countries section 232 trade expansion act 1962 tariffs originally enacted march 2018 june 2019 alcoa saudi arabian mining company known ma’aden amended joint venture agreement governs operations three companies comprise joint venture amendment among items transferred alcoa’s 251 interest rolling mill ma’aden result alcoa direct indirect equity interest ma’aden rolling company see note c consolidated financial statements part ii item 8 form 10k additional information february 2019 alcoa curtailed smelters avilés la coruña spain reaching agreement workers’ representatives collective dismissal process july 2019 alcoa divested company’s interest avilés la coruña aluminum facilities parter capital group ag see note c consolidated financial statements part ii item 8 form 10k capacity december 31 2019 aluminum segment 766 kmt idle smelting capacity base capacity 2993 kmt 2019 idle capacity decreased 150 kmt base capacity decreased 180 kmt compared december 31 2018 due curtailment february 2019 subsequent divestiture july 2019 avilés la coruña facilities restart 94 kmt bécancour canada smelter due aforementioned new labor agreement production 2019 primary aluminum production decreased 124 kmt compared 2018 primarily due lower production bécancour smelter result previously mentioned curtailment subsequent divestiture avilés la coruña facilities partially offset full year restarted production warrick smelter sales thirdparty sales aluminum segment decreased 23 2019 compared 2018 primarily attributed reduction metal price decrease flatrolled aluminum shipments due end tolling arrangement arconic december 2018 decreased primary aluminum shipments mainly resulting curtailment subsequent divesture avilés la coruña facilities decreased production bécancour canada smelter resulting previously mentioned curtailments reduction metal price mainly driven 15 lower average lme price 15day lag combined decrease midwest regional premium 5 segment adjusted ebitda aluminum segment adjusted ebitda decreased 426 2019 compared 2018 decrease mainly attributable lower metal prices unfavorable energy pricing higher labor costs establishment bad debt reserve canadian customer receivable unfavorable impacts partially offset lower alumina carbon costs favorable foreign currency impacts due stronger us dollar primarily euro norwegian kroner icelandic kròna partial exemption section 232 tariffs united states forwardlook 2020 benefits bécancour canada smelter restart lower raw material costs expected offset volatility energy exposures covered long term contracts additionally segment experience impact approximately 10 intercompany alumina receipts moving api based price percentage lme price reconciliations certain segment information reconciliation total segment thirdparty sales consolidated sales 1 includes thirdparty sales flatrolled aluminum energy well realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum reconciliation total segment operating costs consolidated cost goods sold 1 largely relates aluminum segment’s flatrolled aluminum product division 2 line item represents elimination cost goods sold related intersegment sales bauxite alumina aluminum 3 depreciation depletion amortization included operating costs used calculate average cost bauxite alumina primary aluminum product divisions see bauxite alumina aluminum however financial reporting purposes depreciation depletion amortization presented separate line item alcoa corporation’s statement consolidated operations 4 includes costs related transformation certain items impact cost goods sold alcoa corporation’s statement consolidated operations included operating costs segments see footnotes 2 5 reconciliation total segment adjusted ebitda consolidated net loss income attributable alcoa corporation reconciliation total segment adjusted ebitda consolidated net loss income attributable alcoa corporation 1 january 1 2019 company changed accounting method valuing certain inventories lifo average cost effects change accounting principle retrospectively applied prior periods presented result years ended december 31 2018 2017 total segment adjusted ebitda increased 47 14 respectively intersegment eliminations value decreased 19 increased 27 respectively 2 transformation includes among items adjusted ebitda previously closed operations 3 concurrent change inventory accounting method january 1 2019 management elected change presentation certain line items reconciliation total segment adjusted ebitda consolidated net loss income attributable alcoa corporation corporate inventory accounting previously included impact lifo metal price lag intersegment eliminations impact lifo eliminated change inventory method metal price lag attributable company’s rolled operations business netted within aluminum segment simplify presentation impact nets zero consolidation intersegment eliminations remain reconciling line item labeled 4 corporate expenses composed general administrative expenses operating corporate headquarters global administrative facilities well research development expenses corporate technical center 5 includes certain items impact cost goods sold selling general administrative expenses alcoa corporation’s statement consolidated operations included adjusted ebitda reportable segments environmental matters see environmental matters section note r consolidated financial statements part ii item 8 form 10k liquidity capital resources alcoa corporation’s primary future cash flows centered operating activities particularly working capital well sustaining returnseeking capital expenditures alcoa’s ability fund cash needs depends company’s ongoing ability generate raise cash future although management believes alcoa’s future cash operations together company’s access capital markets provide adequate resources fund operating investing needs company’s access availability financing acceptable terms future affected many factors including alcoa corporation’s credit rating ii liquidity overall capital markets iii current state economy commodity markets assurances company continue access capital markets terms acceptable alcoa corporation cash provided operations financing activities expected adequate cover alcoa’s operational business needs next 12 months analysis longterm liquidity see contractual obligations offbalance sheet arrangements december 31 2019 company’s cash equivalents 879 755 held outside united states alcoa corporation number commitments obligations related company’s operations various foreign jurisdictions resulting need cash outside united states alcoa corporation continuously evaluates local global cash needs future business operations may influence future repatriation decisions cash operations cash provided operations 686 2019 compared cash provided operations 448 2018 notable changes sources uses cash 2019 include • 781 improvement certain working capital accounts receivables inventories accounts payable trade • 819 lower pension contributions including absence 725 unscheduled discretionary payments made 2018 primarily funded combination net proceeds may 2018 debt issuance cash hand • 108 related lower current valueadded tax receivables foreign locations • 74 resulting nonrecurrence payment made 2018 related legacy legal matter us government assumed company separation transaction • 62 resulting nonrecurrence payment made 2018 related energy supply agreement wenatchee washington smelter • 18 resulting nonrecurrence payment made 2018 settlement legal matter italy • 571 relating changes taxes including income taxes use cash includes changes related higher tax payments made 2019 compared 2018 primarily payments income taxes changes underlying tax accounts financing activities cash used financing activities 444 2019 compared cash used financing activities 288 2018 increased use cash primarily attributed nonrecurrence cash sources 560 due 2018 issuance debt 21 lower proceeds exercise employee stock options 12 financial contributions paid parter part avilés la coruña divestiture unfavorable changes partially offset 257 lower net cash paid alumina limited 128 lower payments debt 50 nonrecurrence common stock repurchases made 2018 credit facilities alcoa corporation access various sources liquidity outside cash generated operations included sources second amended revolving credit facility revolving credit facility entered alcoa corporation alcoa nederland holding bv anhbv revolving credit facility entered october 2019 alcoa norway ans threeyear revolving credit facility agreement also entered october 2019 secured certain customer receivables revolving credit facility provides 1500 senior secured revolving credit facility used working capital andor general corporate purposes alcoa corporation subsidiaries revolving credit agreement includes number covenants including financial covenants require maintenance specified interest expense coverage ratio leverage ratio leverage ratio compares total indebtedness calculated earnings metric defined credit facility agreement determine compliance financial covenant calculation also determines maximum indebtedness company based defined earnings metric based leverage ratio calculation december 31 2019 maximum additional borrowing capacity available company remain compliance covenant 1200 lower capacity primarily resulting impact restructuringrelated charges recorded 2019 earnings metric calculation however company still ability access full 1500 credit facility combination maximum additional borrowing capacity issuances letters credit december 31 2019 company believes cash hand future operating cash flows borrowing capacity december 31 2019 adequate fund operating investing needs december 31 2019 2018 alcoa compliance covenants revolving credit facility scheduled mature november 21 2023 unless extended earlier terminated accordance provisions second amended revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth second amended revolving credit agreement october 2 2019 alcoa norway ans whollyowned subsidiary alcoa corporation entered oneyear multicurrency revolving credit facility agreement nok 13 billion approximately 147 guaranteed unsecured basis alcoa corporation revolving credit facility scheduled mature october 2 2020 unless extended terminated early accordance provisions agreement october 25 2019 whollyowned subsidiary company entered 120 threeyear revolving credit facility agreement secured certain customer receivables alcoa corporation guarantees performance obligations whollyowned subsidiaries facility however assets receivables pledged collateral december 31 2019 alcoa’s combined additional borrowing capacity 1200 drawn combination alcoa’s credit facilities amounts borrowed relating facilities 2019 see note l consolidated financial statements part ii item 8 form 10k additional information related credit facilities debt december 31 2019 alcoa corporation three outstanding notes maturing varying times summary notes debt shown see note l consolidated financial statement part ii item 8 form 10k additional information related company’s debt ratings alcoa corporation’s cost borrowing ability access capital markets affected market conditions also short longterm debt ratings assigned alcoa corporation’s debt major credit rating agencies may 1 2019 fitch ratings fitch reaffirmed bb rating alcoa corporation’s longterm debt additionally fitch revised current outlook stable positive common stock repurchase program october 2018 alcoa corporation’s board directors authorized common stock repurchase program aggregate transactional value 200 depending cash availability market conditions factors program predetermined expiration date alcoa corporation intends retire repurchased shares common stock december 2018 company repurchased 1723800 shares common stock 50 shares immediately retired amounts repurchased 2019 investing activities cash used investing activities 468 2019 compared 405 2018 increase use cash 2019 largely attributed cash expenditures related divestiture alcoa’s investment ma’aden rolling company partially offset proceeds sale excess land lower capital expenditures 2020 alcoa expects capital expenditures approximately 400 related sustaining capital projects approximately 75 related growth projects timing amount capital expenditures may fluctuate result company’s normal operations contractual obligations offbalance sheet arrangements contractual obligations alcoa corporation required make future payments various contracts including longterm purchase obligations financing arrangements company also commitments fund pension plans provide payments postretirement benefit plans december 31 2019 summary alcoa corporation’s outstanding contractual obligations follows obligations operating activities energyrelated purchase obligations consist primarily electricity natural gas contracts expiration dates ranging 1 year 28 years raw material obligations consist mostly bauxite relates awac’s bauxite mine interests guinea brazil caustic soda alumina aluminum fluoride calcined petroleum coke cathode blocks expiration dates ranging less 1 year 15 years purchase obligations consist principally freight bauxite alumina expiration dates ranging 1 13 years many purchase obligations contain variable pricing components result actual cash payments may differ estimates provided preceding table accordance terms several supply contracts obligations may reduced result interruption operations plant curtailment force majeure event interest related total debt based interest rates effect december 31 2019 calculated debt maturities extend 2028 contractual interest rates certain debt variable actual cash payments may differ estimates provided preceding table estimated minimum required pension funding postretirement benefit payments based actuarial estimates using current assumptions among others discount rates longterm rate return plan assets rate compensation increases andor health care cost trend rates actual payments may differ based changes assumptions postretirement benefit payments slightly offset subsidy receipts related medicare part estimated approximate 5 10 annually years 2020 2029 alcoa corporation determined practicable present pension funding postretirement benefit payments beyond 2024 2029 respectively layoff restructuring payments expected paid within one year relate financial contributions resulted share purchase agreement parter divestiture two spanish aluminum facilities takeorpay provisions supply contracts associated curtailed facilities contractual commitment italian government agency related transfer portovesme smelter severance costs termination office lease contract amounts scheduled paid beyond one year largely relate previously mentioned financial contributions parter deferred revenue arrangements require alcoa corporation deliver alumina certain customer specified contract period 2027 obligation expected result cash payments included preceding table company would obligation specified product deliveries could made uncertain tax positions taken expected taken income tax return may result additional payments tax authorities amount preceding table includes interest penalties accrued related positions december 31 2019 total amount uncertain tax positions included thereafter column company able reasonably estimate timing potential future payments tax authority agrees tax position taken expected taken applicable statute limitations expires additional payments necessary obligations financing activities total debt amounts preceding table represent principal amounts outstanding longterm debt maturities extend 2028 october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending various factors program predetermined expiration date accordingly amounts included preceding table december 2018 company repurchased 1723800 shares common stock 50 weighted average share price 2901 includes 002 broker commission shares repurchased 2019 obligations investing activities equity contributions related joint venture elysistm limited partnership elysistm joint venture requires alcoa corporation invest total 21 c28 2021 2018 company contributed 5 c6 toward initial investment commitment elysistm offbalance sheet arrangements alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties alcoa corporation also outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties see note r consolidated financial statements part ii item 8 form 10k additional information critical accounting policies estimates preparation company’s consolidated financial statements accordance accounting principles generally accepted united states america requires management make certain estimates based judgments assumptions regarding uncertainties affect amounts reported consolidated financial statements disclosed notes consolidated financial statements areas require estimates include review properties plants equipment goodwill impairment accounting following asset retirement obligations environmental litigation matters pension plans postretirement benefits obligations derivatives hedging activities income taxes management uses historical experience available information make estimates actual results may differ used prepare company’s consolidated financial statements given time despite inherent limitations management believes amounts recorded financial statements related items based best estimates judgments using relevant information available time summary company’s significant accounting policies included note b consolidated financial statements part ii item 8 form 10k properties plants equipment properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds fair value amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business management test goodwill qualitative quantitative basis significant amount judgment involved determining indicator impairment occurred indicators may include among others deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods fair value could realized actual transaction may differ used evaluate goodwill impairment reviewing goodwill impairment qualitative assessment entity consider existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount determined impairment likely entity required perform quantitative impairment test otherwise analysis required quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill management uses dcf model estimate current fair value reporting units number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes event estimated fair value reporting unit per dcf model less carrying value impairment loss equal excess reporting unit’s carrying value fair value exceed total amount goodwill applicable reporting unit would recognized management performed quantitative assessment alumina reporting unit 2019 estimated fair value alumina reporting unit substantially excess carrying value resulting impairment management performed qualitative assessment bauxite reporting unit 2019 determined likely fair value reporting unit less carrying value management last performed quantitative impairment test bauxite reporting unit 2018 time estimated fair value bauxite reporting unit substantially excess carrying value resulting impairment additionally prior years presented triggering events necessitated impairment test either bauxite alumina reporting units asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro amounts may material consolidated financial statements environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss pension postretirement benefits liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality yield curve model used develop discount rate parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows high quality corporate bonds included model exceed cash flows needed satisfy company’s plan obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used impact combined pension postretirement liabilities change weighted average discount rate ¼ 1 would approximately 175 either charge credit approximately 1 pretax earnings following year expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment change assumption weighted average expected longterm rate return plan assets ¼ 1 would impact pretax earnings approximately 15 2020 mortality rate assumptions based mortality tables future improvement scales published third parties society actuaries consider available information including historical data well studies publications reputable sources derivatives hedging derivatives held purposes trading part formally documented risk management program alcoa accounts hedges firm customer commitments aluminum fair value hedges fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item company accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet changes fair values derivatives recorded comprehensive loss income reclassified sales cost goods sold expenses net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market expenses net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases assets liabilities adjusted changes tax rates tax laws enacted valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management applies judgment assessing available positive negative evidence considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income certain jurisdictions deferred tax assets related cumulative losses exist without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude deferred tax assets valuation allowance currently recorded may realized resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitations expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented recently adopted accounting guidance see recently adopted accounting guidance section note b consolidated financial statements part ii item 8 form 10k recently issued accounting guidance see recently issued accounting guidance section note b consolidated financial statements part ii item 8 form 10k item 7aitem 7 management’s discussion analysis financial condition results operations dollars millions except pershare amounts average realized prices average cost amounts dry metric tons millions mdmt metric tons thousands kmt forwardlooking statements report contains statements relate future events expectations constitute forwardlooking statements within meaning private securities litigation reform act 1995 forwardlooking statements include containing words “anticipates” “believes” “could” “estimates” “expects” “forecasts” “goal” “intends” “may” “outlook” “plans” “projects” “seeks” “sees” “should” “targets” “will” “would” words similar meaning statements alcoa corporation reflect expectations assumptions projections future statements historical fact forwardlooking statements including without limitation forecasts concerning global demand growth bauxite alumina aluminum supplydemand balances statements projections forecasts future targeted financial results operating sustainability performance statements strategies outlook business financial prospects statements return capital statements reflect beliefs assumptions based alcoa corporation’s perception historical trends current conditions expected future developments well factors management believes appropriate circumstances forwardlooking statements guarantees future performance subject known unknown risks uncertainties changes circumstances difficult predict although alcoa corporation believes expectations reflected forwardlooking statements based reasonable assumptions give assurance expectations attained possible actual results may differ materially indicated forwardlooking statements due variety risks uncertainties risks uncertainties include limited current potential future impacts coronavirus covid19 pandemic global economy business financial condition results operations cash flows judgments assumptions used estimates b material adverse changes aluminum industry conditions including global supply demand conditions fluctuations london metal exchangebased prices premiums applicable primary aluminum products fluctuations indexedbased spot prices alumina c deterioration global economic financial market conditions generally may also affect alcoa corporation’s ability obtain credit financing upon acceptable terms unfavorable changes markets served alcoa corporation e impact changes foreign currency exchange tax rates costs results f increases energy raw material costs uncertainty energy supply raw materials g declines discount rates used measure pension postretirement benefit liabilities lowerthanexpected investment returns pension assets unfavorable changes laws regulations govern pension plan funding h inability achieve improvement profitability margins cost savings cash generation revenue growth fiscal discipline sustainability targets strengthening competitiveness operations anticipated portfolio actions operational productivity improvements technology advancements initiatives inability realize expected benefits case planned targeted completion dates acquisitions divestitures restructuring activities facility closures curtailments restarts expansions joint ventures j political economic trade legal public health safety regulatory risks countries alcoa corporation operates sells products k labor disputes andor work stoppages l outcome contingencies including legal tax proceedings government regulatory investigations environmental remediation impact cyberattacks potential information technology data security breaches n risk factors discussed part item 1a form 10k reports filed alcoa corporation us securities exchange commission including described report alcoa corporation disclaims obligation update publicly forwardlooking statements whether response new information future events otherwise except required applicable law market projections subject risks described risks market overview business alcoa corporation alcoa company vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation aluminum commodity traded london metal exchange lme priced daily additionally alumina subject market pricing alumina price index api calculated company based weighted average prior month’s daily spot prices published following three indices cru metallurgical grade alumina price platts metals daily alumina pax price metal bulletin nonferrous metals alumina index result price aluminum alumina subject significant volatility therefore influences operating results alcoa corporation direct indirect ownership alcoa corporation 28 operating locations nine countries around world situated primarily australia brazil canada iceland norway spain united states governmental policies laws regulations economic factors including inflation fluctuations foreign currency exchange rates interest rates affect results operations countries business update coronavirus response ongoing coronavirus covid19 pandemic alcoa implemented comprehensive measures remain place protect health company’s workforce prevent infection locations mitigate impacts safeguard business continuity result measures aluminum industry classified essential business alcoa’s bauxite mines alumina refineries aluminum manufacturing facilities remained operation 2020 continue remain operation location implemented extensive preparedness response plans include social distancing protocols protective actions aligned guidance us centers disease control prevention world health organization relevant government agencies countries operate actions remain effect include • adjusted shift schedules work patterns create separation workforce ensure redundancy critical resources • developed implemented additional hygiene protocols cleaning routines location • deployed communications suppliers vendors customers delivery personnel comprehensive actions including health safety protocols • issued global communications educate update employees public health practices mitigate potential spread virus communities • implemented access restrictions everyone must free signs symptoms covid19 entering alcoa sites • implemented remote work procedures practical mandated law • eliminated nonessential travel 2020 covid19 pandemic resulted certain negative impacts company’s business financial condition operating results cash flows example restart bécancour canada smelter slowed end first quarter 2020 safely successfully completed third quarter 2020 additionally covid19 pandemic negatively impacted customer demand valueadd aluminum products customers reduced production levels response economic impacts pandemic resulted lower margins aluminum products sales shifted valueadd products commoditygrade products primarily second quarter 2020 however third fourth quarters 2020 valueadd sales volume increased 11 13 percent respectively sequential basis primarily due solid demand recovery particularly automotive sector alcoa experienced challenges low metal prices mid2020 however metal prices increased stabilized second half 2020 company experienced significant interruption supply sources company’s locations minimal contractor employeerelated disruptions date company continues operations leadership team global crisis response team ensure location’s preparedness response plans date company could experience negative impacts increase covid19 cases alcoa foundation continue support communities near operating locations special focus brazilian communities adversely affected pandemic alcoa foundation pledged 1 support covid19 relief efforts communities alcoa operates humanitarian aid program used provide needed support medical supplies equipment food addition almost 3 foundation already committed grantmaking communities operate ultimate impact covid19 global economy continues evolve company constantly evaluating broad impact pandemic macroeconomic environment including specific regions end markets company operates result pandemic’s impact macroeconomic environment management evaluated future recoverability company’s assets including goodwill longlived assets realizability deferred tax assets considering company’s current market capitalization management concluded asset impairments additional valuation allowances required year ended december 31 2020 pandemic continuing ultimate magnitude duration covid19 pandemic unknown uncertainty around global public health crisis cause instability global markets economies affecting business although unable predict ultimate impact covid19 pandemic business financial condition results operations global health threat persists could adversely affect • global demand aluminum negatively impacting ability generate cash flows operations • operations including causing interruptions reductions closures operations due decreased demand products government regulations andor fewer workers facilities due illness public health restrictions • commercial sustainability key vendors transportation disruptions within supply chain could result higher inventory costs andor inability obtain key raw materials fulfill customer orders • liquidity customers could negatively impact collectability outstanding receivables cash flows • alcoa’s ability fund capital expenditures required maintenance facilities could negatively impact results operations profitability • global financial credit markets ability obtain additional credit financing upon acceptable terms could negatively affect liquidity financial condition • company’s ability meet covenants outstanding debt credit facility agreements • investment return pension assets interest rates contribution deferrals resulting increased required company contributions unfavorable contribution timing negatively impacting future cash flows • alcoa’s ability generate income certain jurisdictions negatively impacting realizability deferred tax assets • recoverability certain longlived intangible assets including goodwill • financial condition investments key joint venture partners negatively impacting results operations cash flows recoverability investment balances • effectiveness hedging instruments • legal obligations resulting employee claims related health safety • ability efficiently manage certain corporate functions activities result employees working remotely preceding list potential adverse effects covid19 pandemic allinclusive necessarily order importance magnitude potential impacts pandemic company’s business financial condition operating results cash flows andor market capitalization difficult predict continue monitored subsequent periods adverse conditions prolonged deterioration conditions could negatively impact financial condition result asset impairment charges including longlived assets goodwill affect realizability deferred tax assets addition utilizing preventative mitigation options available ensure continuity operations company implemented various cash preservation initiatives results follows • reduced noncritical capital expenditures planned 2020 122 excess 100 target • deferred nonregulated environmental asset retirement obligations payments 38 excess 25 target • initially deferred approximately 200 pension contributions provisions us governments coronavirus aid relief economic security cares act ample cash hand achieved objective hold cash uncertain times 2020 company made 250 pension contribution us pension plans late december cover 197 deferred contributions due january 4 2021 53 discretionary prepayment • deferred employer payroll taxes approximately 14 2021 2022 us also permitted us government’s cares act • implemented hiring restrictions outside critical production roles restricted travel throughout organization utilized appropriate government support programs save 30 slightly short 35 target strategic actions late 2019 alcoa corporation announced strategic actions drive lower costs sustainable profitability • implementation new operating model resulted leaner integrated operatorcentric organization reduced overhead costs • pursuit noncore asset sales early 2021 goal generating 500 1000 net proceeds support updated strategic priorities • realignment operating portfolio next five years placing 15 million metric tons smelting capacity 4 million metric tons alumina refining capacity review consider opportunities significant improvement potential curtailments closures divestitures new operating model implemented 2020 addition approximately 260 employees terminated connection implementation new operating model 60 positions eliminated open roles retirements replaced january 2020 company announced sale elemental environmental solutions llc ees whollyowned alcoa subsidiary operated waste processing facility gum springs arkansas global environmental firm transaction valued 250 transaction closed january 31 2020 related transaction company received 200 cash recorded gain 181 pre aftertax additional 50 held escrow paid alcoa certain postclosing conditions satisfied would result additional gain recorded november 30 2020 company entered agreement sell rolling mill located warrick operations warrick rolling mill integrated aluminum manufacturing site near evansville indiana warrick operations kaiser aluminum corporation kaiser total consideration approximately 670 includes 587 cash assumption 83 postretirement benefit liabilities sale expected close end first quarter 2021 subject customary closing conditions alcoa retain ownership site’s 269 kmt aluminum smelter electricity generating units warrick operations marketbased metal supply agreement kaiser closing alcoa expects annual decreases sales approximately 800 net income pre aftertax 45 55 based last 12month pricing december 2020 alcoa expects spend approximately 100 site separation transaction costs approximately half spent 2021 remainder 2022 2023 october 2020 company made decision curtail 228 kmt uncompetitive annual smelting capacity san ciprián smelter spain prior decision company completed four month collective dismissal consultation process workers’ representatives followed informal process discuss significant unsustainable circumstances facility process included formal 30day consultation period workers’ representatives goal achieving best possible outcome company workforce included proposals alcoa discuss restructuring plan aluminum facility end persistent recurring financial losses aluminum facility incurred 56 70 58 pre aftertax losses 2018 2019 2020 respectively agreement could reached within initial period workers’ representatives company agreed extend formal consultation period evaluate potential sale aluminum facility endorsement spanish national regional governments comprehensive negotiation process potential buyer alcoa agree terms subsequently alcoa workers’ representatives made one attempt agree upon social plan would include governmentsupported unemployment benefits erte implementation permanent collective dismissal workers’ representatives declined discuss social plan alcoa announced decision initiate collective dismissal curtail smelter following alcoa’s announcement workers’ representatives challenged collective dismissal process legal proceeding high court justice galicia ruled favor workers december 17 2020 result company suspended plans curtail san ciprián smelter filed appeal ruling spanish supreme court company continues believe acted good faith full compliance law additionally fourth quarter 2020 company incur approximately 35 40 previously announced expected charge employee related costs associated curtailment collective dismissal process although san ciprián alumina refinery included formal consultation process october 4 2020 labor force refinery aluminum facilities initiated strike reduced refinery production metal shipments january 22 2021 company workers’ representatives reached agreement suspend strike part agreement company agreed conduct sale process sociedad estatal de participaciones industriales sepi spanish government owned entity expressed interest acquiring smelter facility alcoa expects incur additional charges 2021 agreement reached sale smelter april 2020 alcoa announced curtailment remaining 230 kmt uncompetitive smelting capacity intalco smelter ferndale washington amid declining market conditions full curtailment 279 kmt included 49 kmt earliercurtailed capacity completed third quarter 2020 company recorded restructuring charges net 28 see part ii item 8 form 10k note consolidated financial statements employeerelated costs contract termination costs cashbased charges december 31 2020 separation employees related severance employee termination cost payments associated program essentially complete december 2019 company announced permanent closure alumina refinery point comfort texas first action multiyear portfolio review site’s 23 million metric tons refining capacity fully curtailed since 2016 result decision close refinery 274 charge recorded restructuring charges net 2019 see part ii item 8 form 10k note consolidated financial statements 2020 programs early 2020 alcoa announced programs drive leaner working capital improved productivity 2020 company met combined 175 200 full year working capital reduction productivity savings target 111 working capital 73 productivity cost savings achievement would 82 higher without impact workers’ strike san ciprián increased yearend inventory balances facility liquidity levers 2020 alcoa exceeded 900 target cash actions combination covid19 response initiatives strategic actions 2020 programs discussed addition cash actions programs throughout 2020 management took several measures improve maintain alcoa’s liquidity levers included amending company’s revolving credit facility see liquidity capital resources temporarily provide favorable leverage ratio calculation april 1 2021 permanently adjusting calculation consolidated ebitda defined revolving credit facility temporarily adjusting manner consolidated cash interest expense total indebtedness calculated december 31 2020 temporary adjustments calculations consolidated cash interest expense total indebtedness apply march 31 2021 anhbv may option extend adjustments june 30 2021 second quarter 2020 company also amended threeyear revolving credit facility agreement one whollyowned subsidiaries secured certain customer receivables converting receivables purchase agreement provides option faster liquidation certain customer receivables april 8 2020 company’s whollyowned subsidiary alcoa norway ans drew 100 oneyear multicurrency revolving credit facility may time future ordinary course business repayment drawn amount including interest accrued 293 occurred upon maturity june 29 2020 july 3 2020 alcoa norway ans amended revolving credit facility agreement align terms agreement amendments revolving credit facility discussed september 30 2020 alcoa norway ans entered amendment restatement agreement ar agreement multicurrency revolving credit facility agreement ar agreement extended maturity one year original maturity date october 2 2021 unless extended terminated early accordance provisions ar agreement ar agreement also amended certain financial ratio covenants specifying calculations based upon results alcoa norway ans rather calculations outlined revolving credit facility july 2020 alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation issued 750 aggregate principal amount 5500 senior notes due 2027 notes private transaction exempt registration requirements securities act 1933 amended securities act net proceeds issuance approximately 736 reflecting discount initial purchasers 2027 notes well issuance costs see credit facilities liquidity capital resources section management’s discussion analysis additional details described liquidity measures section 232 tariffs august 2020 us government reinstated 10 percent tariffs certain aluminum imports canada section 232 trade expansion act 1962 section 232 september 2020 us government announced would impose tariff september 2020 december 2020 total aluminum imports nonalloyed unwrought aluminum canada met certain conditions october 2020 us government fully reinstated exemption aluminum imports canada retroactive september 1 2020 company recorded net expense 3 related section 232 tariffs 2020 see aluminum segment information separation transaction references “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic since subsequently renamed howmet aerospace inc november 1 2016 separation date parentco separated two standalone publiclytraded companies alcoa corporation parentco effective 1201 eastern time separation transaction regularway trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” company’s common stock par value 001 per share connection separation transaction alcoa corporation parentco entered certain agreements implement legal structural separation two companies govern relationship company parentco completion separation transaction allocate alcoa corporation parentco various assets liabilities obligations agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap accordance gaap certain situations require management make estimates based judgments assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters certain amounts previously issued financial statements reclassified conform current period presentation discussion follows includes comparison results operations liquidity capital resources fiscal years ended december 31 2020 2019 discussion changes fiscal year ended december 31 2018 fiscal year ended december 31 2019 refer management’s discussion analysis financial condition results operation part ii item 7 alcoa corporation’s annual report form 10k year ended december 31 2019 filed february 21 2020 results operations earnings summary net loss attributable alcoa corporation 2020 170 compared 1125 2019 favorable change 955 primarily due lower restructuring costs favorable foreign currency movements lower income tax provision favorable impacts portfolio actions lower net income attributable noncontrolling interest partially offset lower margin declining alumina aluminum prices salessales 2020 9286 compared 10433 2019 change 1147 11 decrease largely attributed lower average realized price alumina aluminum reduced sales july 2019 divestiture two aluminum facilities spain curtailment intalco washington smelter completed second half 2020 partially offset higher sales resulting restart bécancour canada smelter completed second half 2020 cost goods soldcost goods sold percentage sales 86 2020 compared 82 2019 percentage negatively impacted lower average realized price alumina aluminum products unfavorable impacts partially offset lower raw material costs net favorable foreign currency movements due stronger us dollar primarily australian dollar euro brazilian real improvements due july 2020 divestiture two aluminum facilities spain curtailment intalco washington smelter completed second half 2020 restart bécancour canada smelter completed second half 2020 absence unfavorable impacts tariffs certain aluminum imports 2019 see aluminum segment information selling general administrative expensesselling general administrative expenses 206 2 sales 2020 compared 280 3 sales 2019 favorable change 74 primarily related cost savings company’s strategic actions covid19 response initiatives lower fees professional services nonrecurrence bad debt reserve recorded canadian customer receivable due 2019 bankruptcy filing provision depreciation depletion amortizationthe provision dda 653 2020 compared 713 2019 decrease 60 8 principally caused favorable foreign currency movements brazilian real canadian dollar nonrecurrence write offs assets 2019 projects longer pursued restructuring charges netrestructuring charges net 104 2020 compared 1031 2019 2020 management executed several actions impacted restructuring charges net included 59 related settlements curtailments certain pension postretirement benefits 28 net costs related curtailment intalco washington smelter 20 additional contract costs related curtailed wenatchee washington smelter 2019 management took several actions strengthen company totaled 1031 restructuring charges net actions included 319 divest alcoa’s equity investment ma’aden rolling company 274 related decision permanently close point comfort alumina refinery 235 curtail subsequently divest avilés la coruña spain aluminum facilities 119 additional actions taken reduce overall pension postretirement benefit opeb liabilities 37 associated new operating model streamlined reporting assist operational effectiveness see part ii item 8 form 10k note consolidated financial statements detailed description restructuring action expenses netother expenses net 8 2020 compared 162 2019 change 154 primarily due gain divestiture waste processing facility gum springs arkansas partially offset losses related marktomarket derivative instruments income taxesalcoa corporation’s effective tax rate 1081 2020 compared us federal statutory rate 21 alcoa’s effective tax rate federal statutory rate 2019 949 provision loss 21 respectively effective tax rate differs us federal statutory rate primarily due losses countries full valuation reserves resulting tax benefit well foreign income taxed higher rate jurisdictions 2019 effective tax rate also impacted restructuring expenses related divestitures foreign jurisdictions deductible tax purposes addition reviewing effective tax rate management utilizes adjusted effective tax rate operational tax rate assess tax operations exclusive special items management reviews operating results company exclusive special items therefore believes measure meaningful assessing impact special items effective tax rate beginning first quarter 2021 company revise way operational tax provision calculated interim basis operational tax provision begin include interim tax impacts required gaap previously excluded operational tax provision calculation periods volatility profit tax jurisdiction moves considerably periods inclusion gaap interim tax impacts reduce fluctuations interim operational tax provision change impact full year forecasted operational tax provision used future periods change also impact gaap tax provision period summary 2021 future periods calculation company’s operational tax calculated full year basis manner consistent gaap tax provision except exclusion following items • tax cost benefit attributable special items based applicable statutory rates jurisdictions special items occurred • discrete tax items generally unusual infrequently occurring items changes law items associated uncertain tax positions effects measurementperiod adjustments noncontrolling interestnet income attributable noncontrolling interest 156 2020 compared 272 2019 amounts entirely related alumina limited’s 40 ownership interest several affiliated operating entities interest operate bauxite mines alumina refineries within alcoa’s bauxite alumina segments except poços de caldas mine refinery portions são luís refinery investment mineração rio norte sa brazil portion 55 portland smelter australia within company’s aluminum segment individual entities comprise unincorporated global joint venture alcoa corporation alumina limited known alcoa world alumina chemicals awac alcoa corporation owns 60 individual entities consolidated company financial reporting purposes include alcoa australia ltd aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alúmina española sa española alumina limited’s 40 interest earnings entities reflected noncontrolling interest alcoa corporation’s statement consolidated operations 2020 combined entities generated lower net income compared 2019 primarily driven lower alumina prices partially offset favorable foreign currency movements segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company’s operations consist three worldwide reportable segments bauxite alumina aluminum segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization segment company calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies segment adjusted ebitda totaled 1317 2020 1626 2019 3250 2018 following information provides production shipments sales segment adjusted ebitda data reportable segment well certain realized price average cost data three years period ended december 31 2020 see part ii item 8 form 10k note e consolidated financial statements additional information bauxite operating costs table includes productionrelated costs conversion costs labor materials utilities depreciation depletion amortization plant administrative expenses overview segment represents company’s global bauxite mining operations portion segment’s production represents offtake equity method investments brazil guinea well awac’s share production related equity investment saudi arabia production table vary total shipments due primarily differences equity allocation production offtake agreements respective equity investment bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see noncontrolling interest earnings summary business update bauxite segment record annual production 2020 included annual production records willowdale australia juruti brazil mines record annual production result stable mining conditions increased focus operating efficiencies part company’s 2020 strategic initiatives mining operations relocated periodically support optimizing value extracted bauxite reserves 2019 company began process moving willowdale mining operations next planned location darling range began preparing movement juruti mining operations began 2020 company incurred 82 1 capital expenditures related willowdale juruti mining operation relocations respectively result movements approximately 37 16 additional capital expenditures related willowdale juruti respectively anticipated 2021 relocation willowdale mining operations expected completed first quarter 2021 relocation juruti mining operations expected completed first quarter 2022 production 2020 bauxite production increased 1 compared 2019 higher production four segment’s seven mines sales thirdparty sales bauxite segment decreased 8 2020 compared 2019 due primarily lower average realized price decrease partially offset 5 increase thirdparty shipments 2020 compared 2019 intersegment sales bauxite segment decreased 4 2020 compared 2019 due primarily lower average realized price decrease partially offset 2 increase intersegment shipments 2020 compared 2019 segment adjusted ebitda bauxite segment adjusted ebitda decreased 9 2020 compared 2019 principally result previously mentioned lower average realized price thirdparty intersegment sales partially offset net favorable foreign currency movements due stronger us dollar brazilian real forwardlook 2021 lower intersegment thirdparty prices anticipated along additional capital expenditures related previously mentioned willowdale juruti mining location moves lower intersegment bauxite price provide corresponding benefit alumina segment discussed company projects total bauxite shipments range 490 500 million dry metric tons improvement 2020 alumina table total shipments include metric tons produced alumina segment alumina purchased satisfy certain customer commitments requirements alumina segment bears risk loss purchased alumina control product transferred segment’s customer additionally operating costs table includes productionrelated costs raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses overview segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use alumina traders generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see noncontrolling interest earnings summary segment also includes awac’s 251 ownership interest mining refining joint venture company saudi arabia business update alumina segment record annual production 2020 included annual production records wagerup pinjarra kwinana australia alumina refineries são luís brazil alumina refinery operating efficiencies gained across refining system 2020 average api 30day lag reached low may 2020 trended favorably throughout remainder year alumina segment gained efficiencies across refining system additional operations focus support critical component company’s new operating model realized benefit declining prices caustic soda lower prices bauxite october 4 2020 labor force refinery aluminum facilities san ciprián spain initiated strike reduced refinery production metal shipments january 22 2021 company workers’ representatives reached agreement suspend strike company expect impact strike material impact alumina segment adjusted ebitda 2021 capacity december 31 2020 alumina segment base capacity 12759 kmt 214 kmt curtailed refining capacity changes curtailed base capacity 2020 production 2020 alumina production increased 173 kmt compared 2019 principally due operating efficiencies gained across refining system 2020 annual production record exceeded previous annual record set 2019 sales thirdparty sales alumina segment decreased 19 2020 compared 2019 primarily attributable decline average realized price principally driven lower average api 30day lag price decrease partially offset 2 increase thirdparty shipments 2020 compared 2019 intersegment sales alumina segment decreased 19 2020 compared 2019 primarily due lower average realized price partially offset increased demand aluminum segment increased demand aluminum segment primarily driven restart bécancour canada smelter partially offset curtailment intalco smelter see aluminum segment adjusted ebitda alumina segment adjusted ebitda decreased 600 2020 compared 2019 largely attributed decline average realized price alumina higher energy costs australia negative impacts partially offset lower costs bauxite caustic soda increased total shipments net favorable foreign currency movements due stronger us dollar particularly australian dollar brazilian real forwardlook 2021 lower intersegment bauxite price benefit alumina segment higher natural gas costs australia expected offset lower costs bauxite caustic soda company projects total alumina shipments range 139 140 million metric tons stable comparison 2020 aluminum table total aluminum thirdparty shipments total primary aluminum shipments include metric tons produced aluminum segment aluminum purchased segment satisfy certain customer commitments requirements aluminum segment bears risk loss purchased aluminum control product transferred segment’s customer total aluminum information includes flatrolled aluminum primary aluminum information operating costs includes productionrelated costs raw materials consumed conversion costs labor materials utilities depreciation amortization plant administrative expenses average realized thirdparty price per metric ton primary aluminum includes three elements underlying base metal component based quoted prices lme b regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states c product premium represents incremental price receiving physical metal particular shape eg billet slab rod etc alloy overview segment consists company’s worldwide smelting casthouse system processes alumina primary aluminum ii portfolio energy assets brazil canada united states iii rolling mill united states aluminum’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products eg foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives related energy supply contracts energy assets supply power external customers brazil lesser extent united states well internal customers aluminum canadian smelters warrick indiana smelter rolling mill alumina segments brazilian refineries rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally separation date end 2018 alcoa corporation tolling arrangement contractually ended december 31 2018 parentco whereby parentco’s rolling mill tennessee produced sheet products certain customers company’s rolling operations alcoa supplied raw materials tennessee facility paid parentco tolling service seasonal increases sheet sales generally experienced second third quarters calendar year generally segment’s aluminum sales transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic króna canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 ownership interest smelting joint venture company saudi arabia alcoa’s interest rolling mill joint venture divested june 2019 business update october 4 2020 labor force refinery aluminum facilities san ciprián spain initiated strike reduced refinery production metal shipments strike remained place december 31 2020 prevented smelter shipping finished product customers january 22 2021 company reached agreement workers’ representatives suspend strike part agreement company agreed conduct sale process sociedad estatal de participaciones industriales sepi spanish government owned entity expressed interest acquiring smelter facility november 30 2020 company entered agreement sell warrick rolling mill kaiser aluminum corporation total consideration approximately 670 includes 587 cash assumption 83 postretirement benefit liabilities sale expected close end first quarter 2021 subject customary closing conditions see part ii item 8 form 10k note c consolidated financial statements additional information result competitive longterm labor agreement reached 2019 process restart bécancour canada smelter began july 2019 completed third quarter 2020 restart process favorable impacts aluminum segment 2020 increased production resulted higher shipments adjusted segment ebitda compared 2019 august 2020 us government reinstated 10 percent tariffs certain aluminum imports canada section 232 trade expansion act 1962 section 232 september 2020 us government announced would impose tariff september 2020 december 2020 total aluminum imports nonalloyed unwrought aluminum canada met certain conditions october 2020 us government fully reinstated exemption aluminum imports canada retroactive september 1 2020 company recorded net expense 3 related section 232 tariffs 2020 april 2020 alcoa announced curtailment remaining 230 kmt smelting capacity intalco washington smelter full curtailment 279 kmt includes 49 kmt earliercurtailed capacity completed third quarter 2020 see part ii item 8 form 10k note consolidated financial statements additional information capacity december 31 2020 aluminum segment 831 kmt idle smelting capacity base capacity 2993 kmt 2020 curtailment intalco smelter increased idle capacity 230 kmt partially offset remainder restart process bécancour smelter begun july 2019 decreased idle capacity 165 kmt production 2020 primary aluminum production increased 128 kmt compared 2019 primarily due higher production bécancour smelter result restart process partially offset curtailment intalco smelter sales thirdparty sales aluminum segment decreased 6 2020 compared 2019 primarily attributed lower average realized price primary aluminum change average realized price primary aluminum mainly driven 6 lower average lme price 15day lag combined decreases regional product premiums reduced demand valueadd aluminum products unfavorable impact lower metal prices product premiums partially offset increase sales volume driven primarily restart bécancour smelter exceeded volume decrease intalco curtailment midyear 2020 segment adjusted ebitda aluminum segment adjusted ebitda increased 300 2020 compared 2019 increase attributable lower alumina carbon energy costs outweighing negative impact lower metal prices unfavorable mix valueadd products 95 net adjusted ebitda improved 126 company’s combined portfolio actions include divestiture avilés la coruña facilities third quarter 2019 restart bécancour smelter curtailment intalco smelter favorable impacts adjusted ebitda 2020 include favorable foreign currency changes nonrecurrence bad debt reserve recorded 2019 canadian customer receivable due bankruptcy additionally impacts section 232 tariffs favorable impact adjusted ebitda 21 forwardlook 2021 expect favorable impacts bécancour smelter operating full capacity intalco curtailment partially offset increased raw materials energy costs unfavorable impacts sale warrick rolling mill total aluminum shipments expected range 27 28 million metric tons decrease 2020 related changes portfolio well positioned benefit recovery valueadd products reconciliations certain segment information reconciliation total segment thirdparty sales consolidated sales 1 includes thirdparty sales flatrolled aluminum energy well realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum reconciliation total segment operating costs consolidated cost goods sold 1 largely relates aluminum segment’s flatrolled aluminum product division 2 line item represents elimination cost goods sold related intersegment sales bauxite alumina aluminum 3 depreciation depletion amortization included operating costs used calculate average cost bauxite alumina primary aluminum product divisions see bauxite alumina aluminum however financial reporting purposes depreciation depletion amortization presented separate line item alcoa corporation’s statement consolidated operations 4 includes costs related transformation certain items impact cost goods sold alcoa corporation’s statement consolidated operations included operating costs segments see footnotes 1 3 reconciliation total segment adjusted ebitda consolidated net loss income attributable alcoa corporation reconciliation total segment adjusted ebitda consolidated net loss income attributable alcoa corporation 1 transformation includes among items adjusted ebitda previously closed operations 2 corporate expenses composed general administrative expenses operating corporate headquarters global administrative facilities well research development expenses corporate technical center 3 includes certain items impact cost goods sold expenses alcoa corporation’s statement consolidated operations included adjusted ebitda reportable segments environmental matters see part ii item 8 form 10k note consolidated financial statements caption contingenciesenvironmental matters liquidity capital resources alcoa corporation’s primary future cash flows centered operating activities particularly working capital well sustaining returnseeking capital expenditures alcoa’s ability fund cash needs depends company’s ongoing ability generate raise cash future although management believes alcoa’s future cash operations together company’s access capital markets provide adequate resources fund operating investing needs company’s access availability financing acceptable terms future affected many factors including alcoa corporation’s credit rating ii liquidity overall capital markets iii current state economy commodity markets assurances company continue access capital markets terms acceptable alcoa corporation changes market conditions caused covid19 pandemic could adverse effects alcoa’s ability obtain additional financing cost borrowing inability generate sufficient earnings could impact company’s ability meet financial covenants outstanding debt revolving credit facility agreements limit ability access sources liquidity refinance renegotiate outstanding debt credit agreements terms acceptable company additionally impact market conditions covid19 pandemic could adversely affect liquidity alcoa’s customers suppliers joint venture partners equity method investments could negatively impact collectability outstanding receivables cash flows addition utilizing preventative mitigation options available ensure continuity operations covid19 pandemic alcoa instituted measures manage cash global health crisis taking advantage strategic actions already underway well active working capital productivity programs alcoa added covid19 response initiatives overall cash action program targeted save defer 900 2020 alcoa exceeded 900 target cash actions combination covid19 response initiatives strategic actions 2020 programs discussed business update 2021 company anticipates cash inflows previously announced sale rolling mill business kaiser aluminum corporation total consideration approximately 670 includes 587 cash assumption 83 postretirement benefit liabilities sale expected close end first quarter 2021 subject customary closing conditions company’s liquidity options discussed including credit facilities receivables purchase agreement provide flexibility managing cash flows management believes company’s cash hand future operating cash flows liquidity options combined strategic actions cash preservation initiatives adequate fund near term operating investing needs analysis longterm liquidity see contractual obligations offbalance sheet arrangements december 31 2020 company’s cash equivalents 1607 1521 held outside united states alcoa corporation number commitments obligations related company’s operations various foreign jurisdictions resulting need cash outside united states alcoa corporation continuously evaluates local global cash needs future business operations may influence future repatriation decisions cash operations cash provided operations 394 2020 compared cash provided operations 686 2019 notable changes sources uses cash 2020 include • 104 certain working capital accounts receivables inventories accounts payable trade including 82 use cash related finished goods inventory san ciprián could shipped year end due workers’ strike • 170 higher pension contributions including 250 pension contribution company’s us pension plans late december cover 197 deferred contributions due january 4 2021 53 discretionary prepayment • 35 due timing collection value added tax receivable • 74 included change noncurrent assets related tax payment aofa tax matter see • 449 relating changes taxes including income taxes source cash includes changes related lower tax payments made 2020 compared 2019 primarily payments income taxes changes underlying tax accounts also includes 169 impact interest deductions 2020 cash tax payments related aofa tax matter see remaining change cash provided operations primarily attributable changes related statement consolidated operations amounts third quarter 2020 aofa paid approximately 74 a107 ato related tax dispute described note consolidated financial statements part ii item 8 form 10k upon payment aofa recorded noncurrent tax assessment deposit company continues believe likely aofa’s tax position sustained therefore recognizing tax expense relation matter accordance australian tax laws initial interest assessment additional interest deductible aofa’s 2020 taxable income resulted 169 a219 lower cash tax payments 2020 interest compounded future years also deductible aofa’s income respective periods aofa ultimately successful interest deduction would become taxable income year dispute resolved addition ato decide interim reduce interest already assessed reduction would taxable income point time 2020 aofa continued record tax provision tax liability without effect ato assessment since expects prevail 2020 tax payable remains aofa’s balance sheet noncurrent accrued tax liability increased tax effect subsequent periods’ interest deductions dispute resolution expected take several years december 31 2020 noncurrent accrued tax liability resulting cumulative interest deductions approximately 169 a219 financing activities cash provided financing activities 514 2020 compared cash used financing activities 444 2019 primary source cash 2020 issuance 750 aggregate principal amount 2027 notes anhbv july 2020 resulting net proceeds 736 net proceeds partially offset 183 net cash paid alumina limited 38 financial contributions related divested spanish facilities use cash 2019 primarily due 421 net cash paid alumina limited 12 financial contributions related divested spanish facilities credit facilities alcoa corporation access various sources liquidity outside cash generated operations included sources second amended revolving credit agreement “revolving credit facility” “the facility” entered alcoa corporation alcoa nederland holding bv anhbv multicurrency revolving credit facility entered alcoa norway ans additionally company receivables purchase agreement also provides flexibility managing cash needs revolving credit facility provides 1500 senior secured revolving credit facility used working capital andor general corporate purposes alcoa corporation subsidiaries revolving credit facility includes number covenants including financial covenants require maintenance specified interest expense coverage ratio leverage ratio leverage ratio compares total indebtedness consolidated ebitda earnings metric defined revolving credit facility determine compliance financial covenant calculation also determines maximum indebtedness permitted revolving credit facility based leverage ratio calculation december 31 2020 maximum additional borrowing capacity available company remain compliance covenant 1322 full capacity based insufficient 2020 earnings levels defined earnings metric based leverage ratio calculation december 31 2019 maximum additional borrowing capacity available company remain compliance covenant 1200 lower capacity 2019 primarily resulting impact restructuringrelated charges considered earnings metric however company still ability access full 1500 credit facility combination maximum additional borrowing capacity issuances letters credit december 31 2020 april 21 2020 company anhbv entered amendment 2 revolving credit facility temporarily adjusts leverage ratio requirement 300 100 250 100 subsequent four consecutive fiscal quarters beginning second quarter 2020 amendment period leverage ratio requirement return 250 100 starting second quarter 2021 amendment period company anhbv restricted subsidiaries restricted making certain restricted payments incurring incremental secured loans revolving credit facility june 24 2020 company anhbv entered additional amendment 3 revolving credit facility permanently adjusted calculation consolidated ebitda defined revolving credit facility allowing add back certain additional noncash costs ii temporarily adjusted remaining fiscal quarters 2020 manner consolidated cash interest expense total indebtedness defined revolving credit facility calculated respect certain senior notes issuances fiscal year ended december 31 2020 inclusive july 2020 issuance described anhbv option extend periods amendment 3 apply either fiscal quarters ending march 31 2021 june 30 2021 however would also reduce borrowing availability revolving credit facility respective fiscal quarters onethird net proceeds note issuances fiscal year ending december 31 2020 fourth quarter 2020 anhbv elected extend period amendment 3 quarter ending march 31 2021 anhbv elects extend period june 30 2021 request extension must provided prior april 1 2021 result election 2027 notes issued july 2020 reduce aggregate amount commitments revolving credit facility approximately 245 applicable fiscal quarters revolving credit facility scheduled mature november 21 2023 unless extended earlier terminated accordance provisions facility anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth facility december 31 2020 alcoa corporation compliance covenants borrowings outstanding december 31 2020 amounts borrowed 2020 related facility october 2 2019 alcoa norway ans whollyowned subsidiary alcoa corporation entered oneyear multicurrency revolving credit facility agreement nok 13 billion approximately 152 fully unconditionally guaranteed unsecured basis alcoa corporation april 8 2020 alcoa norway ans drew 100 facility may time future ordinary course business repayment drawn amount including interest accrued 293 occurred upon maturity june 29 2020 july 3 2020 alcoa norway ans amended revolving credit facility agreement align terms agreement amendment 2 amendment 3 revolving credit facility discussed september 30 2020 alcoa norway ans entered amendment restatement agreement ar agreement multicurrency revolving credit facility agreement extended maturity one year original maturity date october 2 2021 unless extended terminated early accordance provisions ar agreement ar agreement also amended certain financial ratio covenants specifying calculations based upon results alcoa norway ans rather calculations outlined revolving credit facility december 31 2020 alcoa norway ans compliance covenants december 31 2020 amounts outstanding facility october 25 2019 whollyowned subsidiary company entered 120 threeyear revolving credit facility agreement secured certain customer receivables april 20 2020 company amended agreement converting receivables purchase agreement sell 120 receivables previously secured credit facility without recourse revolving basis unsold portion specified receivable pool pledged collateral purchasing bank secure sold receivables year ended december 31 2020 receivables sold agreement alcoa’s maximum additional borrowing capacity discussed used combination alcoa’s two credit facilities additional indebtedness company may draw facilities periodically ensure working capital needs met see part ii item 8 form 10k note consolidated financial statements additional information related credit facilities debt december 31 2020 alcoa corporation four outstanding notes maturing varying times summary notes longterm debt shown see part ii item 8 form 10k note consolidated financial statements additional information related company’s debt ratings alcoa corporation’s cost borrowing ability access capital markets affected market conditions also short longterm debt ratings assigned alcoa corporation’s debt major credit rating agencies april 9 2020 moody’s investor service moody’s affirmed ba1 rating alcoa’s longterm debt additionally moody’s affirmed current outlook stable july 7 2020 moody’s reaffirmed ba1 rating alcoa’s longterm debt well stable outlook april 29 2020 fitch ratings fitch affirmed bb rating alcoa corporation’s longterm debt additionally fitch affirmed current outlook stable july 7 2020 fitch reaffirmed bb rating alcoa’s longterm debt well stable outlook june 26 2020 standard poor’s global ratings sp affirmed bb rating alcoa’s longterm debt revised outlook negative december 21 2020 sp affirmed bb rating alcoa’s longterm debt revised outlook stable negative common stock repurchase program october 2018 alcoa corporation’s board directors authorized common stock repurchase program aggregate transactional value 200 depending cash availability market conditions factors program predetermined expiration date alcoa corporation intends retire repurchased shares common stock december 2018 company repurchased 1723800 shares common stock 50 shares immediately retired amounts repurchased 2020 2019 investing activities cash used investing activities 167 2020 compared 468 2019 decrease use cash 2020 largely attributed nonrecurrence cash expenditures made 2019 related divestiture alcoa’s investment ma’aden rolling company well higher proceeds 2020 sale assets primarily gum springs waste treatment facility lower capital expenditures 2021 alcoa expects capital expenditures approximately 375 related sustaining capital projects approximately 50 related growth projects timing amount capital expenditures may fluctuate result company’s normal operations contractual obligations offbalance sheet arrangements contractual obligations alcoa corporation required make future payments various contracts including longterm purchase obligations financing arrangements company also commitments fund pension plans provide payments postretirement benefit plans december 31 2020 summary alcoa corporation’s outstanding contractual obligations follows obligations operating activities energyrelated purchase obligations consist primarily electricity natural gas contracts expiration dates ranging 1 year 27 years raw material obligations consist mostly bauxite relates awac’s bauxite mine interests guinea brazil caustic soda alumina aluminum fluoride calcined petroleum coke cathode blocks expiration dates ranging less 1 year 15 years purchase obligations consist principally freight bauxite alumina expiration dates ranging 1 12 years many purchase obligations contain variable pricing components result actual cash payments may differ estimates provided preceding table accordance terms several supply contracts obligations may reduced result interruption operations plant curtailment force majeure event interest related total debt based interest rates effect december 31 2020 calculated debt maturities extend 2028 contractual interest rates certain debt variable actual cash payments may differ estimates provided preceding table estimated minimum required pension funding postretirement benefit payments based actuarial estimates using current assumptions among others discount rates longterm rate return plan assets rate compensation increases andor health care cost trend rates actual payments may differ based changes assumptions alcoa corporation determined practicable present pension funding postretirement benefit payments beyond 2025 2030 respectively layoff restructuring payments expected paid within one year relate financial contributions share purchase agreement related divestiture two spanish aluminum facilities takeorpay provisions supply contracts associated curtailed facilities contractual commitment italian government agency related transfer portovesme smelter severance costs termination office lease contract deferred revenue arrangements require alcoa corporation deliver alumina certain customer specified contract period 2027 obligation expected result cash payments included preceding table company would obligation specified product deliveries could made uncertain tax positions taken expected taken income tax return may result additional payments tax authorities amount preceding table includes interest penalties accrued related positions december 31 2020 total amount uncertain tax positions included thereafter column company able reasonably estimate timing potential future payments tax authority agrees tax position taken expected taken applicable statute limitations expires additional payments necessary obligations financing activities total debt amounts preceding table represent principal amounts outstanding longterm debt maturities extend 2028 october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending various factors program predetermined expiration date accordingly amounts included preceding table december 2018 company repurchased 1723800 shares common stock 50 weighted average share price 2901 includes 002 broker commission shares repurchased 2020 2019 obligations investing activities equity contributions related joint venture elysistm limited partnership elysistm joint venture requires alcoa corporation invest total 21 c28 2021 2018 company contributed 5 c6 toward initial investment commitment elysistm 2020 company contributed additional 9 c11 offbalance sheet arrangements alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties alcoa corporation also outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties see part ii item 8 form 10k note consolidated financial statements additional information critical accounting policies estimates preparation company’s consolidated financial statements accordance accounting principles generally accepted united states america requires management make certain estimates based judgments assumptions regarding uncertainties affect amounts reported consolidated financial statements disclosed notes consolidated financial statements areas require estimates include review properties plants equipment goodwill impairment accounting following asset retirement obligations environmental litigation matters pension plans postretirement benefits obligations derivatives hedging activities income taxes management uses historical experience available information make estimates including considerations impact coronavirus covid19 pandemic macroeconomic environment actual results may differ used prepare company’s consolidated financial statements given time company experienced certain negative impacts result covid19 pandemic date however ultimate magnitude duration covid19 pandemic continues unknown pandemic’s ultimate future impact company’s business financial condition operating results cash flows market capitalization uncertain addition covid19 pandemic could adversely impact estimates made december 31 2020 regarding future results recoverability goodwill longlived assets realizability deferred tax assets despite inherent limitations management believes amounts recorded financial statements related items based best estimates judgments using relevant information available time summary company’s significant accounting policies included part ii item 8 form 10k note b consolidated financial statements properties plants equipment properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable including period assets met criteria classified held sale recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds fair value amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business management test goodwill qualitative quantitative basis significant amount judgment involved determining indicator impairment occurred indicators may include among others deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods fair value could realized actual transaction may differ used evaluate goodwill impairment reviewing goodwill impairment qualitative assessment entity consider existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount determined impairment likely entity required perform quantitative impairment test otherwise analysis required quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill management uses dcf model estimate current fair value reporting units number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes event estimated fair value reporting unit per dcf model less carrying value impairment loss equal excess reporting unit’s carrying value fair value exceed total amount goodwill applicable reporting unit would recognized management performed qualitative assessments bauxite alumina reporting units 2020 determined likely fair value either reporting unit less carrying value management last performed quantitative impairment test bauxite reporting unit 2018 alumina reporting unit 2019 time quantitative assessment estimated fair value respective reporting unit substantially excess carrying value resulting impairment additionally prior years presented triggering events necessitated impairment test either bauxite alumina reporting units asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro amounts may material consolidated financial statements environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss pension postretirement benefits liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality yield curve model used develop discount rate parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows highquality corporate bonds included model exceed cash flows needed satisfy company’s plan obligations multiple times deep market highquality corporate bonds exist country yield government bonds plus corporate bond yield spread used impact combined pension postretirement liabilities change weighted average discount rate ¼ 1 would approximately 205 either charge credit approximately 3 pretax earnings following year expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment change assumption weighted average expected longterm rate return plan assets ¼ 1 would impact pretax earnings approximately 11 2021 mortality rate assumptions based mortality tables future improvement scales published third parties society actuaries consider available information including historical data well studies publications reputable sources derivatives hedging derivatives held purposes trading part formally documented risk management program alcoa accounts hedges firm customer commitments aluminum fair value hedges fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item company accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet changes fair values derivatives recorded comprehensive loss income reclassified sales cost goods sold expenses net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market expenses net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases assets liabilities adjusted changes tax rates tax laws enacted valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management applies judgment assessing available positive negative evidence considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income certain jurisdictions deferred tax assets related cumulative losses exist without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude deferred tax assets valuation allowance currently recorded may realized resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitations expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented recently adopted accounting guidance see part ii item 8 form 10k note b consolidated financial statements caption recently adopted accounting guidance recently issued accounting guidance see part ii item 8 form 10k note b consolidated financial statements caption recently issued accounting guidance item 7a item 7a quantitative qualitative disclosures market risk see derivatives section note consolidated financial statements part ii item 8item 7a quantitative qualitative disclosures market risk see derivatives section note consolidated financial statements part ii item 8item 7a quantitative qualitative disclosures market risk see derivatives section note consolidated financial statements part ii item 8item 7a quantitative qualitative disclosures market risk see derivatives section note consolidated financial statements part ii item 8item 7a quantitative qualitative disclosures market risk see part ii item 8 item 8 financial statements supplementary data report independent registered public accounting firm shareholders board directors alcoa corporation opinion accompanying consolidated balance sheets related statements consolidated operations consolidated comprehensive loss income changes consolidated equity consolidated cash flows present fairly material respects financial position alcoa corporation subsidiaries december 31 2016 2015 results operations cash flows three years period ended december 31 2016 conformity accounting principles generally accepted united states america financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits financial statements accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation believe audits provide reasonable basis opinion pricewaterhousecoopers llp pricewaterhousecoopers llp pittsburgh pennsylvania march 15 2017 alcoa corporation subsidiaries statement consolidated operations millions except pershare amounts accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated comprehensive loss income millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries consolidated balance sheet millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated cash flows millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement changes consolidated equity millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries notes consolidated financial statements dollars millions except pershare amounts basis presentation alcoa corporation “company” vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation company 43 operating locations 10 countries around world primarily australia brazil canada europe united states references notes “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic separation transaction september 28 2015 parentco’s board directors preliminarily approved plan separate parentco two standalone publiclytraded companies “separation transaction” one company later named alcoa corporation include alumina primary metals segments comprised bauxite mining alumina refining aluminum production energy operations parentco well warrick indiana rolling operations 251 equity interest rolling mill joint venture saudi arabia part parentco’s global rolled products segment parentco later changed name arconic inc continue global rolled products except aforementioned rolling operations included alcoa corporation engineered products solutions transportation construction solutions segments separation transaction subject number conditions including limited final approval parentco’s board directors see continuing validity private letter ruling internal revenue service regarding certain us federal income tax matters relating transaction receipt opinion legal counsel regarding qualification distribution together certain related transactions transaction generally taxfree us federal income tax purposes us securities exchange commission “sec” declaring effective registration statement form 10 amended filed sec october 11 2016 effectiveness declared sec october 17 2016 september 29 2016 parentco’s board directors approved completion separation transaction means pro rata distribution parentco 801 outstanding common stock alcoa corporation parentco shareholders record close business october 20 2016 “record date” arconic retain remaining 199 alcoa corporation common stock time separation transaction parentco shareholders receive one share alcoa corporation common stock every three shares parentco common stock held close business record date parentco shareholders receive cash lieu fractional shares connection separation transaction october 31 2016 alcoa corporation entered certain agreements arconic implement legal structural separation two companies govern relationship alcoa corporation arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations including among things employee benefits environmental liabilities intellectual property taxrelated assets liabilities agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements november 1 2016 “separation date” separation transaction completed became effective 1201 eastern standard time effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting cash payment 1072 parentco alcoa corporation net proceeds previous debt offering see note l conjunction separation transaction 146159428 shares alcoa corporation common stock distributed parentco shareholders additionally arconic retained 36311767 shares alcoa corporation common stock representing 199 retained interest february 14 2017 arconic sold 23353000 shares “regularway” trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” alcoa corporation’s common stock par value 001 per share parentco incurred costs evaluate plan execute separation transaction alcoa corporation allocated pro rata portion costs based segment revenue see cost allocations parentco recognized 152 january 2016 october 2016 24 2015 costs related separation transaction 68 12 respectively allocated alcoa corporation allocated amounts included selling general administrative expenses accompanying statement consolidated operations basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap require management make certain judgments estimates assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters principles consolidation consolidated financial statements alcoa corporation include accounts alcoa corporation companies alcoa corporation controlling interest including comprise alcoa world alumina chemicals awac joint venture see intercompany transactions eliminated equity method accounting used investments affiliates joint ventures alcoa corporation significant influence effective control investments affiliates alcoa corporation cannot exercise significant influence accounted cost method awac unincorporated global joint venture alcoa corporation alumina limited australia alumina limited consists number affiliated operating entities interest operate bauxite mines alumina refineries within alcoa corporation’s bauxite alumina segments except poços de caldas mine refinery portion são luís refinery brazil portland smelter australia alcoa corporation owns 60 alumina limited owns 40 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alumina limited’s interest equity entities reflected noncontrolling interest accompanying consolidated balance sheet 2016 2015 2014 awac received 48 2 43 respectively contributions alumina limited management evaluates whether alcoa corporation entity interest variable interest entity whether alcoa corporation primary beneficiary consolidation required criteria met alcoa corporation variable interest entities requiring consolidation prior separation date alcoa corporation operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date accompanying consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation parentco’s net investment operations reflected parent company net investment accompanying consolidated balance sheet significant transactions accounts within alcoa corporation eliminated significant intercompany transactions parentco alcoa corporation included within parent company net investment accompanying consolidated financial statements cost allocations description information cost allocations applicable periods included consolidated financial statements prior separation date consolidated financial statements alcoa corporation include general corporate expenses parentco historically charged alcoa corporation certain support functions provided centralized basis expenses related finance audit legal information technology human resources communications compliance facilities employee benefits compensation research development activities general corporate expenses included accompanying statement consolidated operations within cost goods sold selling general administrative expenses research development expenses allocated alcoa corporation basis direct usage identifiable remainder allocated based alcoa corporation’s segment revenue percentage parentco’s total segment revenue alcoa corporation arconic external debt directly attributable alcoa corporation excluded accompanying consolidated balance sheet alcoa corporation financing costs related debt obligations allocated alcoa corporation based ratio capital invested alcoa corporation total capital invested parentco alcoa corporation arconic included accompanying statement consolidated operations within interest expense following table reflects allocations described 1 allocation principally relates expenses parentco’s retained pension postretirement benefits associated closed sold operations 2 allocation includes costs incurred parentco associated separation transaction see separation transaction 3 allocation primarily relates layoff programs parentco corporate employees management believes assumptions regarding allocation parentco’s general corporate expenses financing costs reasonable nevertheless consolidated financial statements alcoa corporation may include actual expenses would incurred may reflect alcoa corporation’s consolidated results operations financial position cash flows standalone company periods prior separation date actual costs would incurred alcoa corporation standalone company would depend multiple factors including organizational structure capital structure strategic decisions made various areas including information technology infrastructure transactions alcoa corporation parentco including sales arconic included related party transactions consolidated financial statements considered effectively settled cash time transaction recorded total net effect settlement transactions reflected accompanying statement consolidated cash flows financing activity accompanying consolidated balance sheet parent company net investment cash management description information cash management applicable periods included consolidated financial statements prior separation date cash managed centrally certain net earnings reinvested locally working capital requirements met existing liquid funds accordingly cash equivalents held parentco corporate level attributed alcoa corporation periods prior separation date cash amounts specifically attributable alcoa corporation reflected accompanying consolidated balance sheet transfers cash parentco’s centralized cash management system reflected component parent company net investment accompanying consolidated balance sheet financing activity accompanying consolidated statement cash flows parentco arrangement several financial institutions sell certain customer receivables without recourse revolving basis sale receivables completed use bankruptcyremote specialpurpose entity consolidated subsidiary parentco connection arrangement certain alcoa corporation’s customer receivables sold revolving basis bankruptcyremote subsidiary parentco sales reflected component parent company net investment accompanying consolidated balance sheet parentco participated several accounts payable settlement arrangements certain vendors thirdparty intermediaries arrangements provided vendor’s request thirdparty intermediary advance amount scheduled payment vendor less appropriate discount scheduled payment date parentco made payment thirdparty intermediary date stipulated accordance commercial terms negotiated vendors connection arrangements certain alcoa corporation’s accounts payable settled vendor’s request scheduled payment date settlements reflected component parent company net investment accompanying consolidated balance sheet related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented transactions alcoa corporation arconic presented related party transactions accompanying consolidated financial statements sales arconic alcoa corporation 958 1078 1783 2016 2015 2014 respectively december 31 2016 outstanding receivables arconic material accompanying consolidated balance sheet b summary significant accounting policies cash equivalents cash equivalents highly liquid investments purchased original maturity three months less inventory valuation inventories carried lower cost market cost substantial portion us canadian inventories determined lastin firstout lifo method cost inventories principally determined averagecost method properties plants equipment properties plants equipment recorded cost depreciation recorded principally straightline method rates based estimated useful lives assets greenfield assets refer construction new assets undeveloped land units production method used record depreciation assets require significant period generally greater oneyear rampup full production capacity result units production method deemed systematic rational method recognizing depreciation assets depreciation recorded temporarily idled facilities time management approves permanent closure following table details weightedaverage useful lives structures machinery equipment reporting segment numbers years gains losses sale assets generally recorded income expenses repairs maintenance charged expense incurred interest related construction qualifying assets capitalized part construction costs properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds estimated undiscounted net cash flows amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments equity investments alcoa corporation invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations alcoa corporation ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable analysis requires significant amount judgment management identify events circumstances indicating equity investment impaired following items examples impairment indicators significant sustained declines investee’s revenue earnings cash flow trends adverse market conditions investee’s industry geographic area investee’s ability continue operations measured several items including liquidity factors impairment indicator identified management uses considerable judgment determine impairment temporary case equity investment written estimated fair value impairment temporary could significantly adversely impact reported results operations deferred mining costs alcoa corporation recognizes deferred mining costs development stage mine life cycle costs include construction access haul roads detailed drilling geological analysis define grade quality known bauxite overburden removal costs relate sections related mines alcoa corporation either currently extracting bauxite preparing production near term sections outlined planned incrementally generally mined periods ranging one five years depending mine specifics amount geological drilling testing necessary determine economic viability bauxite deposit mined reserves considered proven mining costs amortized based level reserves deferred mining costs included noncurrent assets accompanying consolidated balance sheet goodwill intangible assets goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business significant amount judgment involved determining indicator impairment occurred indicators may include deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods among others fair value could realized actual transaction may differ used evaluate impairment goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment alcoa corporation six reporting units follows bauxite alumina aluminum cast products energy rolled products six reporting units bauxite alumina contain goodwill december 31 2016 carrying value goodwill bauxite alumina 52 103 respectively amounts include allocation goodwill held corporate level see note k reviewing goodwill impairment entity option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount entity elects perform qualitative assessment determines impairment likely entity required perform existing twostep quantitative impairment test described otherwise analysis required entity also may elect perform qualitative assessment instead proceed directly twostep quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether entity chooses perform qualitative assessment proceeds directly twostep quantitative impairment test alcoa corporation’s policy annual review goodwill perform qualitative assessment reporting units subjected directly twostep quantitative impairment test generally management proceed directly twostep quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill qualitative assessment various events circumstances factors would affect estimated fair value reporting unit identified similar impairment indicators factors classified type impact would estimated fair value using positive neutral adverse categories based current business conditions additionally assessment level impact particular factor would estimated fair value determined using high medium low weighting furthermore management considers results recent twostep quantitative impairment test completed reporting unit compares weighted average cost capital wacc current prior years reporting unit 2016 annual review goodwill management performed qualitative assessment bauxite reporting unit management concluded likely estimated fair value reporting unit less carrying value analysis required twostep quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill alcoa corporation uses dcf model estimate current fair value reporting units testing impairment management believes forecasted cash flows best indicator fair value number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes certain assumptions vary significantly among reporting units cash flow forecasts generally based approved business unit operating plans early years historical relationships later years betas used calculating individual reporting units’ wacc rate estimated business assistance valuation experts event estimated fair value reporting unit per dcf model less carrying value additional analysis would required additional analysis would compare carrying amount reporting unit’s goodwill implied fair value goodwill may involve use valuation experts implied fair value goodwill excess fair value reporting unit fair value amounts assigned assets liabilities unit reporting unit acquired business combination fair value reporting unit represented purchase price carrying value goodwill exceeds implied fair value impairment loss equal excess would recognized 2016 annual review goodwill management proceeded directly twostep quantitative impairment test alumina reporting unit estimated fair value reporting unit substantially excess carrying value resulting impairment goodwill impairment tests prior years presented indicated goodwill impaired alcoa corporation’s reporting units triggering events since time necessitated impairment test intangible assets finite useful lives amortized generally straightline basis periods benefited following table details weightedaverage useful lives software intangible assets reporting segment numbers years asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated normal operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks polychlorinated biphenyls pcbs various process residuals solid wastes electronic equipment waste various materials amounts may material consolidated financial statements period recorded environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss revenue recognition alcoa corporation recognizes revenue title ownership risk loss pass customer occurs upon shipment delivery product based applicable shipping terms shipping terms vary across businesses depend product country origin type transportation truck train vessel alcoa corporation periodically enters longterm supply contracts alumina aluminum customers receives advance payments product delivered future periods advance payments recorded deferred revenue recognized shipments made title ownership risk loss pass customer term contracts deferred revenue included current liabilities noncurrent liabilities deferred credits accompanying consolidated balance sheet stockbased compensation periods prior separation date see note employees attributable alcoa corporation operations participated parentco’s stockbased compensation plans compensation expense recorded alcoa corporation included expense associated employees well expense associated allocation stockbased compensation expense parentco’s corporate employees separation date december 31 2016 alcoa corporation recorded stockbased compensation expense company’s employees following accounting policy describes stockbased compensation expense initially determined alcoa corporation parentco compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time plan participants choose whether receive award form stock options stock awards combination choice made grant issued irrevocable pension postretirement benefit plans periods prior august 1 2016 see certain employees attributable alcoa corporation operations participated defined benefit pension postretirement benefit plans “shared plans” sponsored parentco also included participants attributable nonalcoa corporation operations alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans however related expense recorded alcoa corporation based primarily pensionable compensation estimated interest costs related employees attributable alcoa corporation operations prior separation date see note certain plans entirely attributable employees alcoa corporationrelated operations “direct plans” accounted defined benefit pension postretirement benefit plans accordingly funded unfunded position direct plan recorded consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive income net taxes amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions major assumptions primarily relate discount rates longterm expected rates return plan assets future compensation increases parentco’s management developed assumption using relevant company experience conjunction marketrelated data individual location plans exist preparation separation transaction see note effective august 1 2016 certain shared plans separated standalone plans alcoa corporation parentco see note n additionally certain remaining shared plans assumed alcoa corporation see note n accordingly august 1 2016 december 31 2016 standalone plans assumed plans accounted defined benefit pension postretirement plans additionally direct plans continued accounted defined benefit pension postretirement plans december 31 2016 derivatives hedging derivatives held purposes trading part formally documented risk management program derivatives designated fair value hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly historical high correlation changes fair value hedged item derivative hedging instrument derivatives designated cash flow hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly probable high correlation expected future cash flows hedged item derivative hedging instrument ineffective portions types hedges recorded sales income expense current period hedging relationship ceases highly effective becomes probable expected transaction longer occur future gains losses derivative instrument recorded income expense alcoa corporation accounts hedges firm customer commitments aluminum fair value hedges result fair values derivatives changes fair values underlying hedged items reported current noncurrent assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item alcoa corporation accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded current noncurrent assets liabilities consolidated balance sheet effective portions changes fair values derivatives recorded comprehensive income reclassified sales cost goods sold income expense period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market earnings cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes separation date see note december 31 2016 provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa corporation’s assets liabilities adjusted changes tax rates tax laws enacted periods prior separation date alcoa corporation’s operations included income tax filings parentco provision income taxes alcoa corporation’s statement consolidated operations determined manner described separate return methodology company standalone taxpayer filing hypothetical income tax returns applicable additional accrued tax liability refund arising result approach assumed immediately settled parentco component parent company net investment deferred tax assets also determined manner described reflected consolidated balance sheet net operating losses credits attributes extent attributes expected transfer alcoa corporation upon separation transaction see note difference attributes generated hypothetical return separate return basis adjusted component parent company net investment valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income deferred tax assets valuation allowance recorded may realized upon changes facts circumstances resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized foreign currency local currency functional currency alcoa corporation’s significant operations outside united states except certain operations canada iceland us dollar used functional currency determination functional currency alcoa corporation’s operations made based appropriate economic management indicators recently adopted accounting guidance january 1 2016 alcoa corporation adopted changes issued financial accounting standards board fasb presentation extraordinary items defined transactions events unusual nature infrequent occurrence previously required presented separately entity’s income statement net income tax income continuing operations changes eliminate concept extraordinary item therefore presentation items longer required notwithstanding change entity still required present disclose transaction event unusual nature infrequent occurrence notes financial statements adoption changes impact consolidated financial statements january 1 2016 alcoa corporation adopted changes issued fasb analysis entity must perform determine whether consolidate certain types legal entities changes modify evaluation whether limited partnerships similar legal entities variable interest entities voting interest entities ii eliminate presumption general partner consolidate limited partnership iii affect consolidation analysis reporting entities involved variable interest entities particularly fee arrangements related party relationships iv provide scope exception consolidation guidance reporting entities interests legal entities required comply operate accordance requirements similar rule 2a7 investment company act 1940 registered money market funds adoption changes impact consolidated financial statements january 1 2016 alcoa corporation adopted changes issued fasb presentation debt issuance costs previously costs required presented noncurrent asset entity’s balance sheet amortized interest expense term related debt instrument changes require debt issuance costs presented entity’s balance sheet direct deduction carrying value related debt liability amortization debt issuance costs remains unchanged fasb issued update changes based announcement staff sec update provides exception fasb changes allowing requiring debt issuance costs related lineofcredit arrangements continue presented asset regardless whether outstanding borrowings arrangement additional change also adopted alcoa corporation january 1 2016 adoption changes immaterial impact consolidated financial statements january 1 2016 alcoa corporation adopted changes issued fasb presentation fair value hierarchy fair value certain investments entity permitted measure fair value certain investments using net asset value per share practical expedient previously investments categorized fair value hierarchy basis whether investment redeemable investee net asset value measurement date never redeemable investee net asset value redeemable investee net asset value future date however application criteria determine proper category investments included fair value hierarchy differed criteria used categorize fair value measurements within hierarchy result remove inconsistency changes eliminate requirement categorize investments fair value hierarchy instead entity required present investments outside fair value hierarchy separate category investments accordance changes alcoa corporation removed significant amount investments related pension plans fair value hierarchy presented separate category see note n change disclosure investments adoption changes impact consolidated financial statements 2016 alcoa corporation adopted changes issued fasb disclosure uncertainties entity’s ability continue going concern gaap continuation reporting entity going concern presumed basis preparing financial statements unless entity’s liquidation becomes imminent even entity’s liquidation imminent may conditions events raise substantial doubt entity’s ability continue going concern guidance gaap management’s responsibility evaluate whether substantial doubt entity’s ability continue going concern provide related note disclosures diversity practice whether entity discloses relevant conditions events financial statements result changes require entity’s management evaluate whether conditions events considered aggregate raise substantial doubt entity’s ability continue going concern within one year date financial statements issued substantial doubt defined indication probable entity unable meet obligations become due within one year date financial statements issued management concluded substantial doubt exists following disclosures made financial statements principal conditions events raised substantial doubt ii management’s evaluation significance conditions events relation entity’s ability meet obligations iii management’s plans alleviated initial substantial doubt substantial doubt alleviated management’s plans intended least mitigate conditions events raise substantial doubt iv latter iii disclosed explicit statement substantial doubt entity’s ability continue going concern adoption changes impact consolidated financial statements going forward guidance need continue applied management end annual period interim period therein determine impact may consolidated financial statements given reporting period recently issued accounting guidance january 2016 fasb issued changes accounting reporting certain equity investments changes require equity investments except accounted equity method accounting result consolidation investee measured fair value changes fair value recognized net income however entity may choose measure equity investments readily determinable fair values cost minus impairment plus minus changes resulting observable price changes orderly transactions identical similar investment issuer additionally impairment assessment equity investments without readily determinable fair values simplified requiring qualitative assessment identify impairment changes become effective alcoa corporation january 1 2018 management determined adoption changes impact consolidated financial statements alcoa corporation’s equity investments accounted equity method accounting february 2016 fasb issued changes accounting presentation leases changes require lessees recognize right use asset lease liability balance sheet leases terms longer 12 months leases term 12 months less lessee permitted make accounting policy election class underlying asset recognize right use asset lease liability additionally measuring assets liabilities arising lease optional payments included lessee reasonably certain exercise option extend lease exercise purchase option exercise option terminate lease changes become effective alcoa corporation january 1 2019 upon adoption changes management expect record right use asset lease liability alcoa corporation’s consolidated balance sheet precise amount asset liability known closer adoption date based alcoa corporation’s consolidated balance sheet lease portfolio december 31 2016 amount expected less 5 total assets total liabilities march 2016 fasb issued changes derivative instruments designated hedging instruments changes clarify change counterparty derivative instrument designated hedging instrument require dedesignation hedging relationship provided hedge accounting criteria continue met changes become effective alcoa corporation january 1 2017 management determined adoption changes immediate impact consolidated financial statements guidance need considered event existing counterparty alcoa corporation’s derivative instruments changes new counterparty march 2016 fasb issued changes eliminating requirement investor adjust equity method investment results operations retained earnings retroactively stepbystep basis equity method effect previous periods investment held result increase level ownership interest degree influence additionally entity availableforsale equity security becomes qualified equity method accounting must recognize earnings unrealized holding gain loss accumulated comprehensive income date investment becomes qualified use equity method changes become effective alcoa corporation january 1 2017 management determined adoption changes immediate impact consolidated financial statements guidance need considered event alcoa corporation’s investments undergo change previously described march 2016 fasb issued changes employee sharebased payment accounting currently entity must determine sharebased payment award whether difference deduction tax purposes compensation cost recognized financial reporting purposes results either excess tax benefit tax deficiency excess tax benefits recognized additional paidin capital tax deficiencies recognized either offset accumulated excess tax benefits income statement excess tax benefits recognized deduction reduces taxes payable changes require excess tax benefits tax deficiencies related sharebased payment awards recognized income tax expense benefit income statement tax effects exercised vested awards treated discrete items reporting period occur entity also recognize excess tax benefits regardless whether benefit reduces taxes payable current period additionally presentation excess tax benefits related sharebased payment awards statement cash flows changed currently excess tax benefits must separated income tax cash flows classified financing activity changes require excess tax benefits classified along income tax cash flows operating activity also changes require cash paid employer directly withholding shares taxwithholding purposes classified financing activity currently specific guidance classification statement cash flows cash paid employer tax authorities directly withholding shares taxwithholding purposes additionally sharebased award qualify equity classification cannot partially settle cash excess employer’s minimum statutory withholding requirements changes permit equity classification sharebased awards withholdings maximum statutory tax rates applicable jurisdictions changes become effective alcoa corporation january 1 2017 management determined adoption changes material impact consolidated financial statements june 2016 fasb added new impairment model known current expected credit loss cecl model based expected losses rather incurred losses new guidance entity recognizes allowance estimate expected credit losses cecl model applies debt instruments trade receivables lease receivables financial guarantee contracts loan commitments cecl model minimum threshold recognition impairment losses entities need measure expected credit losses assets low risk loss changes become effective alcoa corporation january 1 2020 management currently evaluating potential impact changes consolidated financial statements august october 2016 fasb issued changes presentation number items statement cash flows specifically changes identify nine specific cash flow items sections must presented within statement cash flows including distributions received equity method investees proceeds settlement insurance claims restricted cash changes become effective alcoa corporation january 1 2018 management determined adoption changes material impact consolidated financial statements october 2016 fasb issued changes accounting intraentity transactions inventory currently immediate tax impact recognized entity’s financial statements result intraentity transfers assets entity precluded reflecting tax benefit expense intraentity asset transfer entities file separate tax returns whether entities different tax jurisdictions asset sold third party otherwise recovered buyer asset prohibited recognizing deferred tax asset temporary difference arising excess buyer’s tax basis cost seller changes require current deferred income tax consequences intraentity transfer recorded transaction occurs exception defer tax consequences inventory transactions maintained changes became effective alcoa corporation january 1 2017 management determined adoption changes material impact consolidated financial statements october 2016 fasb issued changes consolidation accounting prior changes entity required consider indirect economic interests variable interest entity held related parties common control direct interests entirety entity’s assessment whether primary beneficiary variable interest entity changes result entity considering indirect economic interests proportionate basis indirect interests instead direct interests entirety changes became effective alcoa corporation january 1 2017 management determined adoption changes impact consolidated financial statements guidance need considered future assessments whether alcoa corporation primary beneficiary variable interest entity july 2015 fasb issued changes subsequent measurement inventory currently entity required measure inventory lower cost market whereby market replacement cost net realizable value net realizable value less approximately normal profit margin changes require inventory measured lower cost net realizable value thereby eliminating use two market methodologies net realizable value defined estimated selling prices ordinary course business less reasonably predictable costs completion disposal transportation changes apply inventories measured using lifo lastin firstout retail inventory method currently alcoa corporation applies net realizable value market option measure nonlifo inventories lower cost market changes became effective alcoa corporation january 1 2017 management determined adoption changes impact consolidated financial statements may 2014 fasb issued changes recognition revenue contracts customers changes created comprehensive framework entities industries apply determination recognize revenue therefore supersede virtually existing revenue recognition requirements guidance framework expected result less complex guidance application providing consistent comparable methodology revenue recognition core principle guidance entity recognize revenue depict transfer promised goods services customers amount reflects consideration entity expects entitled exchange goods services achieve principle entity apply following steps identify contracts customer ii identify performance obligations contracts iii determine transaction price iv allocate transaction price performance obligations contracts v recognize revenue entity satisfies performance obligation august 2015 fasb deferred effective date one year making changes effective alcoa corporation january 1 2018 management yet finalized assessment potential impact changes consolidated financial statements currently expect adoption changes material impact consolidated financial statements c acquisitions divestitures 2016 divestitures july 2016 alcoa corporation’s whollyowned subsidiary alcoa power generating inc reached agreement sell 215megawatt yadkin hydroelectric project yadkin cube hydro carolinas llc yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina transaction expected close first half 2017 subject customary federal state regulatory approvals see note upon completion transaction alcoa corporation pay arconic aftertax proceeds receives accordance separation distribution agreement entered companies conjunction separation transaction see note result alcoa corporation recorded liability 243 reflected current liabilities accompanying consolidated balance sheet december 31 2016 representing estimated future payment arconic power generated yadkin primarily sold open market yadkin generated sales 29 2016 approximately 30 employees december 31 2016 carrying value net assets sold 125 127 december 31 2016 2015 respectively consists mostly properties plants equipment 2015 divestitures 2015 alcoa corporation postclosing adjustments provided respective purchase agreements related two divestitures completed december 2014 see 2014 divestitures combined postclosing adjustments resulted net cash received 41 net loss 24 recorded restructuring charges see note accompanying statement consolidated operations two divestitures longer subject postclosing adjustments 2014 divestitures 2014 alcoa corporation completed divestiture three operations described combined transactions yielded net cash proceeds 223 resulted net loss 216 recorded restructuring charges see note accompanying statement consolidated operations two three transactions subject certain postclosing adjustments defined respective purchase agreements december 31 2014 see 2015 divestitures november 2014 alcoa corporation completed sale aluminum rod plant located bécancour québec canada sural laminated products facility takes molten aluminum shapes form rod used customers primarily transportation electricity owned alcoa corporation operating results assets liabilities plant included former primary metals segment see note e conjunction transaction alcoa corporation entered multiyear agreement sural laminated products supply molten aluminum rod plant aluminum rod plant generated sales approximately 200 2013 time divestiture approximately 60 employees december 2014 alcoa corporation’s majorityowned subsidiary 60 alcoa minerals jamaica llc amj part awac completed sale 55 ownership stake bauxite mine alumina refinery joint venture jamaica noble group ltd owned amj 55 operating results assets liabilities joint venture included former alumina segment see note e relates amj’s previous 55 ownership stake refinery amj’s share capacity 779 kmtperyear generated sales thirdparty intersegment approximately 200 2013 refinery mine combined time divestiture approximately 500 employees also december 2014 alcoa corporation completed sale 5033 ownership stake mt holly smelter located goose creek south carolina century aluminum company owned alcoa corporation 5033 operating results assets liabilities related smelter included former primary metals segment see note e relates alcoa corporation’s previous 5033 ownership stake smelter alcoa corporation’s share capacity 115 kmtperyear generated sales approximately 280 2013 time divestiture approximately 250 employees restructuring charges restructuring charges year threeyear period ended december 31 2016 comprised following 2016 2015 2014 includes 1 32 23 respectively related allocation restructuring charges alcoa corporation parentco see note layoff costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2016 actions 2016 alcoa corporation recorded restructuring charges 318 comprised following components 131 exit costs related decision permanently close demolish refinery see 87 additional net costs related decisions made late 2015 permanently close demolish warrick indiana smelter curtail wenatchee washington smelter point comfort texas refinery see 2015 actions 72 impairment interest gas exploration assets western australia see 32 layoff costs related cost reduction initiatives including separation approximately 75 employees 60 aluminum segment 15 bauxite segment related pension settlement costs see note n net charge 8 miscellaneous items reversal 12 associated number small layoff reserves related prior periods december 2016 management approved permanent closure suralco refinery capacity 2207 kmtperyear suriname suralco refinery fully curtailed since november 2015 see 2015 actions management parentco decided curtail remaining operating capacity suralco refinery 2015 effort improve position parentco’s refining operations global alumina cost curve since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions demolition remediation activities related action begin mid2017 expected completed end 2021 related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname 2016 costs related closure curtailment actions included accelerated depreciation 70 related warrick smelter continued operate march 2016 asset impairments 16 representing writeoff remaining book value various assets reversal 24 associated severance costs initially recorded late 2015 156 costs additionally 2016 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 5 recorded cost goods sold accompanying statement consolidated operations exit costs 156 represent 94 asset retirement obligations 26 environmental remediation triggered decisions permanently close demolish suralco refinery includes rehabilitation related bauxite mines rehabilitation coal mine related warrick smelter 32 contraction terminations 4 related costs also december 2016 management alcoa corporation concluded interest certain gas exploration assets western australia impaired aofa owns interest gas exploration project initially entered 2007 potential source lowcost gas supply aofa’s refineries western australia interest 43 relates four separate gas wells late 2016 aofa received results technical analysis performed earlier year two wells updated analysis third well concluded cost gas recovery would significantly higher market price gas fourth well results technical analysis performed prior 2016 indicated cost gas recovery would lower market price gas therefore would require additional investment move next phase commercial evaluation management previously supported late 2016 management reevaluated options related fourth well decided economical make commitment foreseeable future result aofa fully impaired 72 interest december 31 2016 approximately 55 75 employees separated remaining separations 2016 restructuring programs expected completed end 2017 2016 cash payments 7 made layoff reserves related 2016 restructuring programs 2015 actions 2015 alcoa corporation recorded restructuring charges 983 comprised following components 418 exit costs related decisions permanently close demolish three smelters power station see 238 curtailment two refineries two smelters see 201 related legal matters italy see note r 24 net loss primarily related postclosing adjustments associated two december 2014 divestitures see note c 45 layoff costs including separation approximately 465 employees 33 asset impairments related prior capitalized costs expansion project refinery australia longer pursued net credit 1 miscellaneous items reversal 7 associated number small layoff reserves related prior periods 32 related corporate restructuring allocated alcoa corporation see note 2015 management initiated various alumina refining aluminum smelting capacity curtailments andor closures curtailments composed remaining capacity following são luís smelter brazil 74 kmtperyear suriname refinery 1330 kmtperyear point comfort refinery 2010 kmtperyear wenatchee smelter 143 kmtperyear curtailments completed 2015 except 1635 kmtperyear point comfort refinery completed end june 2016 permanent closures composed capacity warrick smelter 269 kmtperyear includes closure related coal mine infrastructure massena east new york smelter potlines previously shut 2013 2014see 2014 actions modernization smelter longer pursued closure warrick smelter completed end march 2016 decisions actions part separate 12month review refining 2800 kmtperyear smelting 500 kmtperyear capacity initiated management march 2015 possible curtailment partial full permanent closure divestiture many factors contributed decision general actions initiated maintain competitiveness amid prevailing market conditions alumina aluminum separate actions initiated reviews described mid2015 management approved permanent closure demolition poços de caldas smelter capacity 96 kmtperyear brazil anglesea power station includes closure related coal mine australia entire capacity poços de caldas temporarily idled since may 2014 anglesea power station shut end august 2015 demolition remediation activities related poços de caldas smelter anglesea power station began late 2015 expected completed end 2026 2020 respectively decision poços de caldas smelter due management’s conclusion smelter longer competitive result challenging global market conditions primary aluminum led initial curtailment dissipated higher costs anglesea power station decision made sale process result sale would imminent operating costs financial constraints related site remainder 2015 beyond including significant costs source coal available resources necessary maintenance costs depressed outlook forward electricity prices anglesea power station previously supplied approximately 40 percent power needs point henry smelter closed august 2014 see 2014 actions 2015 costs related closure curtailment actions included asset impairments 226 representing writeoff remaining book value related properties plants equipment 154 layoff approximately 3100 employees 1800 former primary metals segment 1300 former alumina segmentsee note e including 30 pension costs see note n accelerated depreciation 85 related certain facilities continued operate 2015 222 exit costs additionally 2015 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 90 recorded cost goods sold accompanying statement combined operations exit costs 222 represent 72 asset retirement obligations 85 environmental remediation triggered decisions permanently close demolish aforementioned structures united states brazil australia includes rehabilitation related coal mine australia united states 65 supplier customer contractrelated costs december 31 2016 approximately 3200 3400 previously 3600 employees separated total number employees associated 2015 restructuring programs updated reflect employees initially identified separation accepting positions within parentco natural attrition remaining separations 2015 restructuring programs expected completed mid2017 2016 2015 cash payments 65 26 respectively made layoff reserves related 2015 restructuring programs 2014 actions 2014 alcoa corporation recorded restructuring charges 863 comprised following components 526 exit costs related decisions permanently shut demolish three smelters see 216 net loss divestitures three operations see note c 61 temporary curtailment two smelters related production slowdown one refinery see 33 asset impairments related prior capitalized costs modernization project smelter canada longer pursued 9 layoff costs including separation approximately 60 employees net charge 4 environmental charge previously shut refinery 9 primarily reversal number layoff reserves related prior periods 23 related corporate restructuring allocated alcoa corporation see note early 2014 management approved permanent closure demolition remaining capacity 84 kmtperyear massena east smelter full capacity 190 kmtperyear point henry smelter australia capacity massena east fully shut end march 2014 point henry smelter fully shut august 2014 demolition remediation activities related massena east point henry smelters began late 2014 expected completed end 2020 2018 respectively decisions massena east point henry smelters part 15month review 460000 metric tons smelting capacity initiated management may 2013 possible curtailment review management determined remaining capacity massena east smelter longer competitive point henry smelter prospect becoming financially viable management also initiated temporary curtailment remaining capacity 62 kmtperyear poços de caldas smelter additional capacity 85 kmtperyear são luís smelter curtailments completed end may 2014 result curtailments 200 kmtperyear production poços de caldas refinery reduced end june 2014 additionally august 2014 management approved permanent closure demolition capacity 150 kmtperyear portovesme smelter italy idle since november 2012 decision made fundamental reasons made portovesme smelter uncompetitive remained unchanged including lack viable longterm power solution demolition remediation activities related portovesme smelter began 2016 expected completed end 2022 delayed due discussions italian government stakeholders 2014 costs related closure curtailment actions included 149 layoff approximately 1290 employees including 24 pension costs see note n accelerated depreciation 146 related point henry smelter australia continued operate 2014 asset impairments 150 representing writeoff remaining book value related properties plants equipment 152 exit costs additionally 2014 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 55 recorded cost goods sold accompanying statement combined operations exit costs 152 represent 87 asset retirement obligations 24 environmental remediation triggered decisions permanently close demolish aforementioned structures australia italy united states 41 related costs including supplier customer contractrelated costs march 31 2016 separations associated 2014 restructuring programs essentially complete 2016 2015 cash payments 1 34 respectively made layoff reserves related 2014 restructuring programs alcoa corporation include restructuring charges results reportable segments impact allocating charges segment results would follows activity reserve balances restructuring charges follows includes reversals previously recorded restructuring charges effects foreign currency translation 2016 2015 2014 layoff costs also included reclassification 16 35 24 respectively pension andor postretirement benefits costs obligations included alcoa corporation’s separate liability pension postretirement benefits obligations see note n additionally 2016 2015 2014 exit costs also included reclassification following restructuring charges 97 76 87 respectively asset retirement 26 86 28 respectively environmental obligations liabilities included alcoa corporation’s separate reserves asset retirement obligations see note q environmental remediation see note r remaining reserves expected paid cash 2017 exception approximately 5 expected paid later end 2019 contract termination special layoff benefit payments e segment geographic area information segment information alcoa corporation producer bauxite alumina primary aluminum sheet company’s segments organized product worldwide basis segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance aftertax operating income atoi segment certain items impact lifo inventory accounting metal price lag interest expense noncontrolling interest corporate expense general administrative selling expenses operating corporate headquarters global administrative facilities along depreciation amortization corporateowned assets restructuring charges income taxes including impact discrete tax items deferred tax valuation allowance adjustments differences tax rates applicable segments consolidated effective tax rate intersegment profit elimination nonoperating items foreign currency transaction gainslosses certain asset sales interest income excluded segment atoi segment assets exclude among others cash equivalents lifo reserves corporate fixed assets goodwill allocated businesses segment reporting purposes deferred income taxes certain derivative contracts accounting policies segments described summary significant accounting policies see note b transactions among segments established based negotiation among parties differences segment totals alcoa corporation’s consolidated totals line items reconciled corporate effective january 1 2015 alcoa corporation redefined segments concurrent internal reorganization certain businesses following reorganization alcoa corporation’s operations consist six reportable segments follows bauxite segment represents alcoa corporation’s global portfolio bauxite mining assets bauxite mined sold primarily internal customers within alumina segment process alumina portion segment’s production also sold third parties bauxite transferred alumina segment negotiated terms intended approximate market prices sales third parties conducted contract basis alumina segment represents alcoa corporation’s worldwide refining system processes bauxite alumina mainly sold directly internal external smelter customers worldwide sold customers process industrial chemical products half alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors aluminum segment represents alcoa corporation’s worldwide smelter system aluminum receives alumina mostly alumina segment produces molten primary aluminum virtually aluminum’s production sold internally cast products rolled products segment transferred prevailing market prices cast products segment represents alcoa corporation’s worldwide cast house system cast products made molten aluminum purchased primarily alcoa corporation’s aluminum segment formed various valueadd ingot products including billet slab use fabrication operations variety industries results sale aluminum powder scrap also included segment majority segment’s products sold third parties including arconic’s aluminum fabrication businesses remaining portion sold rolled products segment prevailing market prices energy segment represents alcoa corporation’s portfolio energy assets power production capacity approximately 1685 megawatts power sold internal customers within aluminum segment external customers provides operational flexibility maximize operating results market cyclicality rolled products segment represents alcoa corporation’s rolling mill warrick indiana produces aluminum sheet primarily sold directly customers packaging end market production aluminum cans beverage food pet food additionally alcoa corporation tolling arrangement arconic whereby arconic’s rolling mill tennessee produces sheet products certain segment’s customers alcoa corporation supplies raw materials tennessee facility pays arconic tolling service depending certain factors arrangement concludes end 2018 seasonal increases sheet sales generally experienced second third quarters year segment also includes alcoa corporation’s investment rolling mill saudi arabia see note h applicable reporting guidance company changes organizational structure generally prepare segment information based new segments provide comparative information related periods however certain instances changes structure internal organization could change composition reportable segments may practical retrospectively revise prior periods connection january 1 2015 reorganization alcoa corporation fundamentally altered commercial nature certain internal businesses transact moving costbased transfer pricing model one based estimated market pricing result certain operations eg bauxite mining smelting casting previously measured evaluated primarily based costs incurred transformed separate businesses full profit loss information addition reorganization involved converting regionalbased management responsibility global responsibility business impact overall cost structures segments result significant changes associated reorganization including substantial information system modifications implemented prospective basis alcoa corporation information would necessary present certain segment data specifically atoi income taxes total assets periods prior 2015 information available alcoa corporation management internal use impracticable obtain generate information underlying commercial transactions segments necessary determine incomebased assetbased segment measures take place prior 2015 operating results assets alcoa corporation’s reportable segments follows 1 amounts estimated alcoa corporation’s management effort provide comparable revenue information 2014 information available periods prior 2015 impracticable obtain following tables reconcile certain segment information consolidated totals 2 amounts estimated alcoa corporation’s management effort provide comparable revenue information 2014 3 segment atoi information available periods prior 2015 impracticable obtain result impracticability providing required disclosures alcoa corporation’s current six segments following information regarding alcoa corporation’s historical segments provided supplemental basis prior january 1 2015 alcoa corporation’s operations consisted three reportable segments follows alumina segment represented alcoa corporation’s worldwide refining system primarily comprised combined bauxite alumina segments established january 1 2015 described segment encompassed mining bauxite alumina produced sold directly external smelter customers well previous primary metals segment see customers process industrial chemical products half alumina’s production sold supply contracts third parties worldwide remainder used internally primary metals segment alumina produced segment used internally transferred primary metals segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors primary metals segment represented alcoa corporation’s worldwide smelting system associated cast houses primarily comprised aluminum cast products segments established january 1 2015 described majority power generation assets energy segment established january 1 2015 also included primary metals primary metals segment purchased alumina mostly former alumina segment primary aluminum produced sold directly external customers traders well rolled products segment parentco’s aluminum fabrication businesses results sale aluminum powder scrap excess energy also included segment primary aluminum produced segment used rolled products segment parentco’s aluminum fabrication businesses transferred prevailing market prices sale primary aluminum represented approximately 90 segments thirdparty sales rolled products segment represents alcoa corporation’s rolling mill warrick indiana produces aluminum sheet primarily sold directly customers packaging end market production aluminum cans beverage food pet food seasonal increases sheet sales generally experienced second third quarters year segment also includes alcoa corporation’s investment rolling mill saudi arabia see note h operating results assets alcoa corporation’s reportable segments historical presentation format follows following tables reconcile certain segment information historical presentation format consolidated totals geographic area information geographic information sales follows based upon country point sale occurred 1 sales portion alumina alcoa corporation’s refineries suriname brazil australia jamaica prior divestituresee note c aluminum alcoa corporation’s smelters canada occurred united states 2 periods presented sales aluminum produced alcoa corporation’s smelters iceland norway well alcoa corporation’s offtake related interest saudi arabia joint venture see note h occurred spain geographic information longlived assets follows based upon physical location assets f earnings per share basic earnings per share eps amounts computed dividing earnings average number common shares outstanding diluted eps amounts assume issuance common stock potentially dilutive share equivalents outstanding information used compute basic diluted eps attributable alcoa corporation common shareholders follows shares millions 2016 basic average shares outstanding diluted average shares outstanding effect potential shares common stock antidilutive since alcoa corporation generated net loss result 1 million stock awards stock options combined included computation diluted eps alcoa corporation generated net income 2016 1 million potential shares common stock related stock awards stock options combined would included diluted average shares outstanding 2015 2014 eps included accompanying statement consolidated operations calculated based 182471195 shares alcoa corporation common stock distributed separation date conjunction completion separation transaction see note considered pro forma nature prior november 1 2016 alcoa corporation issued outstanding common stock options purchase 1 million shares common stock weighted average exercise price 3305 per share outstanding december 31 2016 included computation diluted eps antidilutive exercise prices options greater average market price alcoa corporation’s common stock g accumulated comprehensive loss following table details activity three components comprise accumulated comprehensive loss alcoa corporation’s shareholders noncontrolling interest 1 amounts included computation net periodic benefit cost pension postretirement benefits see note n 2 amounts included provision income taxes accompanying statement consolidated operations 3 periods presented tax impacts related rate changes amounts reclassified earnings 4 amounts included sales accompanying statement consolidated operations 5 amounts included income expenses net accompanying statement consolidated operations 6 positive amount indicates corresponding charge earnings negative amount indicates corresponding benefit earnings amounts reflected accompanying statement consolidated operations line items indicated footnotes 1 5 h investments equity investments following table summarizes information equity investments december 31 2016 2015 except interest dampier bunbury natural gas pipeline dbngp trust sold april 2016 see dbngp trust 1 see saudi arabia joint venture additional information 2 halco mining inc owns 100 boké investment company owns 51 compagnie des bauxites de guinée 3 pechiney reynolds quebec inc owns 501 interest bécancour smelter quebec canada thereby entitling alcoa corporation 2505 interest smelter two whollyowned canadian subsidiaries alcoa corporation also owns 499 bécancour smelter 4 see dbngp trust additional information 5 investees either owns facility listed ownership interest entity owns facility listed 6 portion ownership interests held whollyowned subsidiaries part awac 2016 2015 2014 alcoa corporation received 74 152 86 respectively dividends equity investments financial information equity investments follows amounts represent 100 investee’s financial information saudi arabia joint venturealcoa corporation saudi arabian mining company known “ma’aden” 30year december 2009 joint venture shareholders’ agreement automatic extension additional 20 years unless parties agree otherwise unless earlier terminated setting forth terms development construction ownership operation integrated aluminum complex saudi arabia specifically project developed joint venture consists bauxite mine extraction approximately 4000 kmt bauxite al ba’itha bauxite deposit near quiba northern part saudi arabia ii alumina refinery initial capacity 1800 kmt iii primary aluminum smelter initial capacity 740 kmt iv rolling mill initial capacity 380 kmt refinery smelter rolling mill constructed industrial area ras al khair east coast saudi arabia facilities use critical infrastructure including power generation derived reserves natural gas well port rail facilities developed government saudi arabia first production smelter rolling mill mine refinery occurred december 2012 2013 2014 respectively 2012 alcoa corporation ma’aden agreed expand capabilities rolling mill include capacity 100 kmt dedicated supplying aluminum automotive building construction foil stock sheet first production related expanded capacity occurred 2014 expansion result additional equity investment see due significant savings change project execution strategy initial 380 kmt capacity rolling mill joint venture owned 749 ma’aden 251 alcoa corporation consists three separate companies follows one mine refinery smelter rolling mill alcoa corporation affiliates hold alcoa corporation’s interests smelting company rolling mill company indirectly wholly owned alcoa corporation alcoa corporation affiliate holds alcoa corporation’s interests mining refining company wholly owned awac except limited circumstances alcoa corporation may sell transfer otherwise dispose encumber enter agreement respect votes rights attached interests joint venture without ma’aden’s prior written consent ma’aden alcoa corporation put call options respectively whereby ma’aden require alcoa corporation purchase ma’aden alcoa corporation require ma’aden sell alcoa corporation 149 interest joint venture fair market value options may exercised sixmonth window opens five years commercial production date defined joint venture shareholders’ agreement exercised must exercised full 149 interest commercial production date declared september 1 2014 smelting company october 1 2016 mining refining company similar declaration yet rolling mill company ma’aden alcoa corporation also may sell transfer otherwise dispose pledge encumber interests joint venture five years commercial production date joint venture shareholders’ agreement upon occurrence unremedied event default alcoa corporation ma’aden may purchase upon occurrence unremedied event default ma’aden alcoa corporation may sell interest consideration varies depending time default number alcoa corporation employees perform various types services smelting rolling mill refining mining companies part operation fullyintegrated aluminum complex december 31 2016 2015 alcoa corporation outstanding receivable 11 19 respectively smelting rolling mill refining mining companies labor employeerelated expenses capital investment project expected total approximately 10800 sar 405 billion funded combination equity contributions joint venture partners project financing joint venture guaranteed partners see equity contributions guarantees project financing based joint venture’s partners’ ownership interests originally estimated alcoa corporation’s total equity contribution joint venture would approximately 1100 alcoa corporation contributed 982 including 1 29 2016 2015 respectively based changes project’s capital investment equity debt structure initial plans estimated 1100 equity contribution may reduced december 31 2016 2015 carrying value alcoa corporation’s investment project 853 928 respectively smelting rolling mill companies project financing totaling 4133 reflects principal payments made december 31 2016 1037 represents alcoa corporation’s share equivalent alcoa corporation’s 251 interest smelting rolling mill companies alcoa corporation issued guarantees see behalf smelting rolling mill companies lenders event companies default debt service requirements 2017 2020 smelting company 2018 2021 rolling mill company ma’aden issued similar guarantees 749 interest alcoa corporation’s guarantees smelting rolling mill companies cover total debt service requirements 100 principal maximum approximately 35 interest per year based projected interest rates december 31 2016 2015 combined fair value guarantees 3 7 respectively included noncurrent liabilities deferred credits accompanying consolidated balance sheet mining refining company project financing totaling 2232 560 represents awac’s 251 interest mining refining company alcoa corporation behalf awac issued guarantees see lenders event mining refining company defaults debt service requirements 2019 2024 ma’aden issued similar guarantees 749 interest alcoa corporation’s guarantees mining refining company cover total debt service requirements 120 principal maximum approximately 30 interest per year based projected interest rates december 31 2016 2015 combined fair value guarantees 3 included noncurrent liabilities deferred credits accompanying consolidated balance sheet event alcoa corporation would required make payments guarantees 40 amount would contributed alcoa corporation alumina limited consistent ownership interest awac result separation transaction various lenders joint venture companies required arconic maintain joint several guarantees alcoa corporation event default joint venture companies lenders would make claim alcoa corporation arconic accordingly alcoa corporation would perform guarantee however company failed perform arconic would required perform guarantee arconic would subsequently seek indemnification alcoa corporation terms separation distribution agreement june 2013 three joint venture companies entered 20year gas supply agreement saudi aramco gas supply agreement provides sufficient fuel meet manufacturing process requirements well fuel adjacent combined water power plant constructed saline water conversion corporation owned government saudi arabia responsible desalinating sea water producing electricity saudi arabia combined water power plant converts three joint venture companies’ gas electricity water cost supplied refinery smelter rolling mill 60 letter credit previously provided ministry petroleum mineral resources saudi arabia ma’aden alcoa corporation responsible pro rata share gas allocation terminated june 2015 due completion certain auxiliary rolling facilities dbngp trustin 2004 aofa acquired 20 interest consortium subsequently purchased dbngp western australia exchange initial cash investment 17 a24 investment dbngp made order secure competitively priced longterm supply natural gas aofa’s refineries western australia aofa made additional contributions 141 a176 share pipeline capacity expansion operational purposes consortium september 2011 late 2011 consortium initiated threeyear equity call plan improve capitalization structure plan required aofa contribute 39 a40 made december 31 2014 following completion threeyear equity call plan december 2014 consortium initiated new equity call plan improve capitalization structure plan required aofa contribute 30 a36 mid2016 20 a27 made march 31 2016 including 3 a5 16 a21 2016 2015 respectively april 2016 aofa sold 20 interest consortium effectively terminating remaining obligation make contributions recent equity call plan member consortium duet group aofa received 145 a192 cash included sales investments accompanying statement consolidated cash flows recorded gain 27 a35 11 a15 aftertax noncontrolling interest income net accompanying statement consolidated operations part sale transaction aofa maintain current access approximately 30 dbngp transmission capacity gas supply three alumina refineries western australia existing agreement purchase gas transmission services dbngp december 31 2016 2015 aofa asset 270 a375 268 a368 respectively representing prepayments made agreement future gas transmission services inventories december 31 2016 2015 total amount inventories valued lifo basis 393 361 respectively 29 27 respectively total inventories lifo adjustments inventory values prior application lifo generally determined average cost method approximates current cost j properties plants equipment net december 31 2016 2015 net carrying value temporarily idled smelting assets 314 324 respectively representing 778 kmt idle capacity periods also december 31 2016 2015 net carrying value temporarily idled refining assets 158 53 representing 2305 kmt 2801 kmt idle capacity respectively end 2016 alcoa corporation permanently closed 2207 kmt refining capacity 2131 kmt included 2801 kmt idle capacity december 31 2015 k goodwill intangible assets following table details changes carrying amount goodwill december 31 2016 149 goodwill reflected corporate allocated two alcoa corporation’s six reportable segments 50 bauxite 99 alumina included table purposes impairment testing see note b goodwill reflected corporate segment reporting purposes included management’s assessment performance two reportable segments goodwill associated alcoa corporation’s four reportable segments intangible assets included noncurrent assets accompanying consolidated balance sheet follows december 31 2016 computer software includes amounts related establishment alcoa corporation’s enterprise business solution ebs separate parentco december 31 2016 patents licenses include amounts related capitalization costs associated renewal alcoa corporation’s ferc federal energy regulatory commission license yadkin hydroelectric project see note c computer software consists primarily software costs associated ebs within alcoa corporation drive common systems among businesses amortization expense related intangible assets tables years ended december 31 2016 2015 2014 7 10 13 respectively expected approximately 10 annually 2017 2021 l debt longterm debt loan repaid early parentco october 2016 without penalty principal amount longterm debt maturing next five years 21 2017 19 2018 18 2019 2020 2021 144a debtin september 2016 alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds see debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction see note remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commencing march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors revolving credit agreement described “subsidiary guarantors” together alcoa corporation “guarantors” subsidiary guarantors released notes guarantees upon occurrence certain events including release guarantor obligations guarantor revolving credit agreement notes indenture contains various restrictive covenants similar described revolving credit agreement including limitation restricted payments among exceptions capacity pay annual dividends generally consistent provided revolving credit agreement annual capacity pay 75 year within 2021 2024 timeframe conjunction debt offering net proceeds 1228 plus additional 81 parentco cash hand required placed escrow contingent completion separation transaction 81 represented necessary cash fund redemption notes pay regularly scheduled interest notes specified date defined indenture premium principal notes separation transaction completed certain time defined indenture result 1228 escrowed cash recorded restricted cash issuance notes increase restricted cash amount 1228 reflected accompanying statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 preparation separation transaction decrease restricted cash reflected accompanying statement consolidated cash flows cash inflow net change restricted cash line item bndes loansprior july 5 2016 alcoa alumínio indirect whollyowned subsidiary alcoa corporation loan agreement brazil’s national bank economic social development bndes provided financing commitment 397 r687 divided three subloans used pay certain expenditures estreito hydroelectric power project july 5 2016 loan agreement amended change borrower alumínio whollyowned subsidiary alumínio interest three subloans brazil real rate interest equal bndes’ longterm interest rate 750 700 december 31 2016 2015 respectively plus weightedaverage margin 267 148 respectively principal interest payable monthly began october 2011 end september 2029 two subloans totaling r667 began july 2012 end june 2018 subloan r20 loan may repaid early without penalty approval bndes december 31 2016 2015 outstanding borrowings 150 r490 136 r522 respectively weightedaverage interest rate 1022 849 respectively 2016 2015 alumínio’s subsidiary andor alumínio repaid 14 r48 15 r48 respectively outstanding borrowings additionally alumínio borrowed less 1 r1 loan 2015 alumínio loan agreement bndes provides financing commitment 85 r177 also used pay certain expenditures estreito hydroelectric power project interest loan brazil real rate interest equal bndes’ longterm interest rate plus margin 155 principal interest payable monthly began january 2013 end september 2029 loan may repaid early without penalty approval bndes december 31 2016 2015 alumínio’s outstanding borrowings 42 r137 38 r146 respectively interest rate 905 855 respectively 2016 2015 alumínio repaid 3 r11 3 r10 respectively outstanding borrowings credit facility september 16 2016 alcoa corporation anhbv entered revolving credit agreement syndicate lenders issuers named therein amended “revolving credit agreement” revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” proceeds may used transaction costs related separation transaction see note provide working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries revolving credit facility scheduled mature november 1 2021 unless extended earlier terminated accordance provisions revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth revolving credit agreement provisions revolving credit agreement anhbv pay quarterly commitment fee ranging 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal anhbv’s option either adjusted libor rate b base rate determined reference highest 1 prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum plus case applicable margin applicable margin loans vary based alcoa corporation’s leverage ratio range 175 250 libor loans 075 150 base rate loans outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility revolving credit agreement includes number customary affirmative covenants additionally revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness entering restrictive agreements restricted payments including shareholder dividends repurchases common stock see investments loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 225 100 december 31 2016 alcoa corporation compliance covenants reference restricted payments covenant mentioned alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period annual 2018 50 annual 2019 2020 75 january 1 2021 november 1 2021 time period see except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period also alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events amounts outstanding december 31 2016 amounts borrowed 2016 september 16th december 31st revolving credit facility preferred common stock preferred stock alcoa corporation authorized issue 100000000 shares preferred stock par value 001 per share december 31 2016 alcoa corporation issued preferred stock common stock alcoa corporation authorized issue 750000000 shares common stock par value 001 per share november 1 2016 conjunction separation transaction see note alcoa corporation distributed 182471195 shares common stock amount 146159428 shares distributed parentco’s shareholders 36311767 shares retained parentco february 14 2017 arconic sold 23353000 shares november 1 2016 december 31 2016 alcoa corporation issued 459800 shares employee stockbased compensation plans december 31 2016 alcoa corporation 182930995 issued outstanding shares common stock dividends common stock subject authorization alcoa corporation’s board directors alcoa corporation declare dividends november 1 2016 december 31 2016 december 31 2016 18540200 shares common stock available issuance alcoa corporation’s employee stockbased compensation plan alcoa corporation issues new shares satisfy exercise stock options conversion stock awards stockbased compensation periods prior separation date see note alcoa corporation’s employees participated parentco’s stockbased compensation plan stockbased compensation expense recorded alcoa corporation referenced periods includes expense associated employees historically attributable alcoa corporation’s operations allocation expense see note related parentco’s corporate employees last two months 2016 alcoa corporation employees participated company’s stockbased compensation plan effective november 1 2016 outstanding stock options vested nonvested stock awards originally granted parentco’s stockbased compensation plan related alcoa corporation employees replaced similar stock options stock awards alcoa corporation’s stockbased compensation plan order preserve intrinsic value stock options stock awards originally granted parentco’s stockbased compensation plan number stock options stock awards issued alcoa corporation’s stockbased compensation plan increased ratio 134 developed dividing october 31 2016 closing market price parentco’s common stock 2872 october 31 2016 closing market price alcoa corporation’s “when issued” common stock 2144 resulted beginning balance outstanding stock options stock awards alcoa corporation’s stockbased compensation plan 4673829 2605423 respectively november 1 2016 following description alcoa corporation’s stockbased compensation plan materially different description parentco’s stockbased compensation plan prior separation transaction see note alcoa corporation stockbased compensation plan stock options stock awards generally granted february year eligible employees alcoa corporation’s board directors also receive certain stock awards however amounts material plan participants choose whether receive award form stock options stock awards combination choice made grant issued irrevocable stock options granted closing market price alcoa corporation’s common stock date grant vest threeyear service period 13 year tenyear contractual term stock awards vest threeyear service period date grant certain awards also include performance conditions 2016 2015 2014 final number performance stock awards earned based alcoa corporation’s achievement sales profitability targets respective threeyear period onethird award earned year based performance preestablished targets year performance stock awards earned threeyear period vest end third year 2016 2015 2014 alcoa corporation recognized stockbased compensation expense 28 35 39 respectively approximately 80 related stock awards period stockbased compensation expense capitalized 2016 2015 2014 total pretax stockbased compensation expense recognized 2016 2015 2014 16 21 respectively relates allocation expense parentco’s corporate employees part parentco’s stockbased compensation plan design individuals retirementeligible sixmonth requisite service period year grant result larger portion expense recognized first half year retirementeligible employees total pretax stockbased compensation expense recognized 2016 2015 2014 7 6 8 respectively pertains acceleration expense related retirementeligible employees stockbased compensation expense based grant date fair value applicable equity grant stock awards fair value equivalent closing market price either parentco’s alcoa corporation’s common stock date grant stock options fair value estimated date grant using latticepricing model generated result 212 447 284 per option 2016 2015 2014 respectively latticepricing model uses number assumptions estimate fair value stock option including average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior contractual life following paragraph describes detail assumptions used parentco alcoa corporation grant stock options november 1 2016 december 31 2016 estimate fair value stock options granted 2016 assumptions used estimate fair value stock options granted 2015 2014 materially different riskfree interest rate 206 based yield curve interest rates time grant based contractual life option dividend yield 11 based oneyear average volatility 445 based historical implied volatilities term option parentco utilized historical option forfeiture data estimate annual pre postvesting forfeitures 7 exercise behavior 60 based weighted average exercise ratio exercise patterns grants issued number years contractual option term option’s intrinsic value resulting historical employee exercise behavior based upon assumptions used determination fair value life option 57 years output latticepricing model stock options outstanding october 31 2016 originally granted parentco’s stockbased compensation plan alcoa corporation employees previouslymentioned fair values adjusted reflect impact parentco’s 1for3 reverse stock split occurred october 5 2016 maintain intrinsic value stock options result separation transaction see note result fair value stock options originally granted 2016 2015 2014 adjusted 475 1001 636 respectively alcoa corporation recognize incremental stockbased compensation expense result adjustment activity stock options stock awards november 1 2016 december 31 2016 timeframe follows december 31 2016 number stock options outstanding weighted average remaining contractual life 574 years total intrinsic value 21 additionally 2786416 stock options outstanding fully vested exercisable weighted average remaining contractual life 444 years weighted average exercise price 2692 total intrinsic value 9 december 31 2016 cash received stock option exercises 10 total intrinsic value stock options exercised 2016 4 december 31 2016 17 pretax unrecognized compensation expense related nonvested stock option grants nonvested stock award grants expense expected recognized weighted average period 15 years n pension postretirement benefits alcoa maintains pension plans covering us employees certain employees foreign locations pension benefits generally depend length service job grade remuneration substantially benefits paid pension trusts sufficiently funded ensure plans pay benefits retirees become due salaried nonbargaining hourly us employees hired march 1 2006 participate defined contribution plan instead defined benefit plan parentco also maintains health care life insurance postretirement benefit plans covering eligible us retired employees certain retirees foreign locations generally medical plans unfunded pay percentage medical expenses reduced deductibles coverage life benefits generally provided insurance contracts parentco retains right subject existing agreements change eliminate benefits salaried certain nonbargaining hourly us employees hired january 1 2002 certain bargaining hourly us employees hired july 1 2010 eligible postretirement health care benefits salaried certain hourly us employees retire april 1 2008 eligible postretirement life insurance benefits periods prior august 1 2016 see eligible employees attributable alcoa corporation operations participated us defined benefit pension postretirement benefit plans sponsored parentco “shared plans” included arconic parentco corporate participants alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans multiemployer contribution expense attributable employees alcoa corporationrelated operations based primarily pensionable compensation employees pension plans estimated interest costs postretirement benefit plans multiemployer contribution expenses attributable alcoa corporation shared plans 28 64 related pension plans 12 32 39 related postretirement benefit plans 2016 july 31 2016 2015 2014 respectively additionally periods prior august 1 2016 alcoa corporation recorded allocation expenses shared plans attributable parentco corporate participants well closed sold operations see cost allocations note including multiemployer expenses described total expenses associated shared plans reflected accompanying consolidated statement operations 73 191 183 2016 july 31 2016 2015 2014 respectively furthermore certain parentco plans described specific employees attributable alcoa corporation operations nonus entirety “direct plans” alcoa corporation accounted direct plans defined benefit pension postretirement benefit plans accordingly funded status direct plans recorded accompanying consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive loss amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions major assumptions primarily relate discount rates longterm expected rates return plan assets future compensation increases management develops assumption using relevant company experience conjunction marketrelated data plans preparation separation transaction see note effective august 1 2016 certain shared plans separated standalone plans alcoa corporation “new direct plans” arconic accordingly new direct plans alcoa corporation measured august 1 2016 one primary assumptions used measure new direct plans weighted average discount rate 348 measurement yielded combined net unfunded status 2348 recognized alcoa corporation’s consolidated balance sheet time consisting current liability 131 noncurrent liability 2217 additionally alcoa corporation recognized 2498 accumulated comprehensive loss additionally certain shared plans assumed alcoa corporation “additional new direct plans” require separated andor remeasured additional new direct plans combined net unfunded status 180 recognized alcoa corporation’s consolidated balance sheet consisting current liability 5 noncurrent liability 175 additionally alcoa corporation recognized 206 accumulated comprehensive loss net periodic benefit cost direct plans new direct plans andor additional new direct plans 83 106 101 related pensions plans 21 12 2 related postretirement benefit plans respective periods 2016 2015 2014 respectively including total expenses associated shared plans described alcoa corporation recognized total expenses related pension postretirement benefits 177 285 286 2016 2015 2014 respectively funded status alcoa corporation’s direct plans new direct plans additional new direct plans measured december 31 calendar year information follows pension postretirement benefit plans applicable direct plans new direct plans additional new direct plans respective periods obligations funded status december 31 2016 benefit obligation fair value plan assets funded status us pension plans 4977 3504 1473 respectively december 31 2015 benefit obligation fair value plan assets funded status related nonus pension plans pension plan benefit obligations components net periodic benefit cost 1 2016 net periodic benefit cost us pension plans 21 2 2016 net periodic benefit cost postretirement benefits reflects reduction 6 related recognition federal subsidy awarded medicare part 3 2016 2014 settlements due workforce reductions see note 2015 settlements due workforce reductions see note payment lump sum benefits 4 2015 curtailments due elimination benefits workforce reductions see note 5 2016 2015 special termination benefits due workforce reductions see note 6 amounts attributed joint venture partners included amounts expected recognized net periodic benefit cost assumptions weighted average assumptions used determine benefit obligations pension postretirement benefit plans follows discount rate determined using companyspecific yield curve model abovemedian developed assistance external actuary cash flows plans’ projected benefit obligations discounted using single equivalent rate derived yields high quality corporate bonds represent broad diversification issuers various sectors yield curve model parallels plans’ projected cash flows average duration ranging 11 15 years underlying cash flows bonds included model exceed cash flows needed satisfy company’s plans’ obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used rate compensation increase based upon anticipated compensation increases estimated inflation 2017 rate compensation increase 35 weighted average assumptions used determine net periodic benefit cost pension postretirement benefit plans follows periods presented respective discount rates used determine net periodic benefit cost plans full annual period however discount rates limited number plans updated 2016 2015 2014 reflect remeasurement plans due settlements andor curtailments updated discount rates used significantly different discount rates presented expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment 2016 2015 2014 expected longterm rate return used management based prevailing planned strategic asset allocations well estimates future returns asset class 2017 management anticipates 747 weightedaverage expected longterm rate return assumed health care cost trend rates us postretirement benefit plans follows nonus plans material assumed health care cost trend rate used measure expected cost gross eligible charges covered alcoa corporation’s postretirement benefit plans 2017 55 trend rate used reflecting management’s best estimate change future health care costs covered plans’ actual annual health care cost trend experience based parentco’s plans previously included alcoa corporation participants past three years ranged 36 96 management believe threeyear range indicative expected increases future health care costs longterm assumed health care cost trend rates effect amounts reported health care plan onepercentage point change assumed rates would following effects plan assets alcoa corporation’s pension plan investment policy weighted average asset allocations december 31 2016 2015 asset class follows principal objectives underlying investment pension plans’ assets ensure alcoa corporation properly fund benefit obligations become due broad range potential economic financial scenarios maximize longterm investment return acceptable level risk based obligations broadly diversify investments across within various asset classes protect asset values adverse movements specific objectives longterm investment strategy include reducing volatility pension assets relative pension liabilities achieving risk factor diversification across balance asset portfolio portion assets matched interest rate profile benefit obligation long duration fixed income investments fixed income derivative instruments exposure broad equity risk decreased diversified investments discretionary systematic macro hedge funds longshort equity hedge funds global emerging market equities investments diversified strategy asset class geography sector enhance returns mitigate downside risk large number external investment managers used gain broad exposure financial markets mitigate managerconcentration risk investment practices comply requirements applicable laws regulations respective jurisdictions including employee retirement income security act 1974 erisa united states use derivative instruments external investment managers permitted appropriate necessary achieving overall investment policy objectives mitigating interest rate asset class risks following section describes valuation methodologies used trustees measure fair value pension plan assets including applicable indication level fair value hierarchy type asset generally classified see note definition fair value description fair value hierarchy january 1 2016 alcoa corporation adopted changes issued fasb related certain investments fair value measured net asset value practical expedient see recently adopted accounting guidance note b changes remove requirement categorize within fair value hierarchy investments additionally entity required remove investments fair value hierarchy prior periods presented information table updated conform changes references net asset value means net asset value shares equivalent held december 31 practical expedient equities securities consist direct investments stock publicly traded us nonus companies valued based closing price reported active market individual securities traded generally classified level 1 ii plans’ share commingled funds invested stock publicly traded companies valued net asset value iii direct investments longshort equity hedge funds private equity limited partnerships venture capital partnerships valued net asset value fixed income securities consist us government debt generally valued using quoted prices included level 1 ii cash equivalents invested publiclytraded funds valued based closing price reported active market individual securities traded generally classified level 1 iii publicly traded us nonus fixed interest obligations principally corporate bonds debentures valued consultation evaluation brokers institutional market using quoted prices observable market data included level 2 iv fixed income derivatives generally valued using industry standard models marketbased observable inputs included level 2 v cash equivalents invested institutional funds valued net asset value investments include among others exchange traded funds real estate investment trusts gold valued based closing price reported active market investments traded included level 1 ii plans’ share commingled funds invested real estate investment trusts valued net asset value iii direct investments discretionary systematic macro hedge funds private real estate includes limited partnerships valued net asset value iv absolute return hedge funds valued net asset value fair value methods described may indicative net realizable value reflective future fair values additionally alcoa corporation believes valuation methods used plans’ trustees appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different fair value measurement reporting date following table presents fair value pension plan assets classified either appropriate level fair value hierarchy net asset value december 31 2016 total fair value pension plan assets excludes net payable 15 represents amount due arconic pension plans alcoa corporation pension plans result certain plans separated two companies funding cash flows alcoa corporation’s policy fund amounts pension plans sufficient meet minimum requirements set forth applicable country benefits laws tax laws including pension protection act 2006 worker retiree employer recovery act 2008 moving ahead progress 21st century act 2012 highway transportation funding act 2015 bipartisan budget act 2016 us plans time alcoa corporation contributes additional amounts deemed appropriate 2016 2015 cash contributions alcoa corporation’s pension plans 66 69 minimum required contribution pension plans 2017 estimated 115 60 us plans benefit payments expected paid pension postretirement benefit plan participants expected medicare part subsidy receipts follows defined contribution plans alcoa corporation sponsors savings investment plans several countries including united states australia prior separation date see note employees attributable alcoa corporation operations participated parentcosponsored plans alcoa corporation’s expenses related plans 57 2016 59 2015 68 2014 united states employees may contribute portion compensation plans alcoa corporation parentco prior separation date matches portion contributions equivalent form investments elected employee derivatives financial instruments fair value fair value defined price would received sell asset paid transfer liability orderly transaction market participants measurement date fair value hierarchy distinguishes market participant assumptions developed based market data obtained independent sources observable inputs ii entity’s assumptions market participant assumptions developed based best information available circumstances unobservable inputs fair value hierarchy consists three broad levels gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 lowest priority unobservable inputs level 3 three levels fair value hierarchy described • level 1unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities • level 2inputs quoted prices included within level 1 observable asset liability either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability eg interest rates inputs derived principally corroborated observable market data correlation means • level 3inputs significant fair value measurement unobservable derivatives alcoa corporation exposed certain risks relating ongoing business operations including financial market political economic risks following discussion provides information regarding alcoa corporation’s exposure risks changing commodity prices interest rates foreign currency exchange rates alcoa corporation’s commodity derivative activities subject management direction control strategic risk management committee srmc composed chief executive officer chief financial officer officers employees chief executive officer selects srmc meets periodic basis review derivative positions strategy reports alcoa corporation’s board directors scope activities aluminum energy interest rate foreign exchange contracts held purposes trading used primarily mitigate uncertainty volatility cover underlying exposures alcoa corporation involved trading activities energy weather derivatives nonexchange commodity trading activities number alcoa corporation’s aluminum energy foreign exchange contracts classified level 1 level 2 fair value hierarchy aluminum energy foreign exchange contracts material alcoa corporation’s consolidated financial statements periods presented addition level 1 2 derivative instruments described alcoa corporation nine ten prior october 2016 derivative instruments classified level 3 fair value hierarchy instruments composed seven eight prior october 2016 embedded aluminum derivatives energy contract embedded credit derivative relate energy supply contracts associated nine smelters three refineries five embedded aluminum derivatives energy contract november 2016 see designated cash flow hedging instruments two three prior october 2016 embedded aluminum derivatives embedded credit derivative energy contract december 2016 see designated hedging instruments following section describes valuation methodologies used alcoa corporation measure level 3 derivative instruments fair value derivative instruments classified level 3 fair value hierarchy represent management used least one significant unobservable input valuation model alcoa corporation uses discounted cash flow model fair value level 3 derivative instruments appropriate description includes key inputs models significant assumptions valuation models reviewed tested least annual basis inputs valuation models level 3 derivative instruments composed following quoted market prices eg aluminum prices 10year london metal exchange lme forward curve energy prices ii significant observable inputs eg information concerning time premiums volatilities certain option type embedded derivatives regional premiums aluminum contracts iii unobservable inputs eg aluminum energy prices beyond quoted market periods beyond term quoted market prices aluminum alcoa corporation estimates price aluminum extrapolating 10year lme forward curve additionally periods beyond term quoted market prices energy management developed forward curve based independent consultant market research appropriate valuations adjusted various factors liquidity bidoffer spreads credit considerations adjustments generally based available market evidence level 2 absence evidence management’s best estimate used level 3 significant input unobservable one period becomes observable subsequent period related asset liability would transferred appropriate classification level 1 2 period change transfers periods presented alcoa corporation two power contracts contain embedded derivative indexes price power lme price aluminum additionally alcoa corporation three power contracts contain embedded derivative indexes price power lme price aluminum plus midwest premium embedded derivatives five power contracts primarily valued using observable market prices however due length contracts valuation models also require management estimate longterm price aluminum based upon extrapolation 10year lme forward curve additionally three contracts management also estimates midwest premium generally next twelve months based recent transactions holds premium estimated twelfth month constant remaining duration contract significant increases decreases actual lme price beyond 10 years would result higher lower fair value measurement increase actual lme price andor midwest premium inputs used valuation models result higher cost power corresponding decrease derivative asset increase derivative liability embedded derivatives designated cash flow hedges forward sales aluminum unrealized gains losses included comprehensive loss accompanying consolidated balance sheet realized gains losses included sales accompanying statement consolidated operations also alcoa corporation power contract expired september 2016 see separate contains lmelinked embedded derivative prior expiration embedded derivative valued using probability interrelationship future lme prices australian dollar us dollar exchange rates us consumer price index significant increases decreases lme price would result higher lower fair value measurement increase actual lme price inputs used valuation model result higher cost power corresponding decrease derivative asset embedded derivative qualify hedge accounting treatment unrealized gains losses embedded derivative included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract time derivative asset recognized equivalent amount recognized deferred credit noncurrent liabilities deferred credits accompanying consolidated balance sheet see note deferred credit recognized expenses income net accompanying statement consolidated operations power received life contract additionally alcoa corporation natural gas supply contract lmelinked ceiling embedded derivative valued using probabilities future lme aluminum prices price brent crude oil priced platts including interrelationships two commodities subject ceiling change interrelationship would result higher lower fair value measurement lme ceiling embedded contract price protect increase price oil without corresponding increase price lme increase oil prices similar increase lme price would limit increase price paid natural gas embedded derivative qualify hedge accounting treatment unrealized gains losses embedded derivative included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations gas purchases made contract mid2016 alcoa corporation related counterparty elected modify pricing existing power contract smelter united states amendment contains embedded derivative indexes price power lme price aluminum plus midwest premium embedded derivative valued using interrelationship future metal prices lme base plus midwest premium amount megawatt hours energy needed produce forecasted metric tons aluminum smelter significant increases decreases metal price would result higher lower fair value measurement increase actual metal price inputs used valuation model result higher cost power corresponding increase derivative liability management elected qualify embedded derivative hedge accounting treatment unrealized gains losses embedded derivative included income expenses net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract time derivative liability recognized equivalent amount recognized deferred charge noncurrent assets accompanying consolidated balance sheet deferred charge recognized income expenses net accompanying statement consolidated operations power received life contract furthermore alcoa corporation power contract contains embedded derivative indexes difference longterm debt ratings alcoa corporation counterparty three major credit rating agencies management uses market prices historical relationships forecast services determine fair value significant increases decreases inputs would result lower higher fair value measurement wider credit spread alcoa corporation counterparty would result higher cost power corresponding increase derivative liability embedded derivative qualify hedge accounting treatment unrealized gains losses included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract finally alcoa corporation derivative contract hedges anticipated power requirements one smelters began previous power contract expired september 2016 see beyond term market information available management developed forward curve valuation purposes based independent consultant market research significant increases decreases power market may result higher lower fair value measurement lower prices power market would cause decrease derivative asset derivative contract designated cash flow hedge future purchases electricity designation ceased december 2016 see november 2016 unrealized gains losses contract recorded comprehensive loss accompanying consolidated balance sheet realized gains losses recorded cost goods sold electricity purchases made power contract august 2016 alcoa corporation gave required notice terminate derivative contract one year date notification result alcoa corporation decreased related derivative asset recorded noncurrent assets unrealized gain recorded accumulated comprehensive loss 84 related august 2017 2036 timeframe resulting impact alcoa corporation’s earnings december 2016 portion contract longer qualified hedge accounting treatment due outage smelter point management elected discontinue hedge accounting entire contract result alcoa corporation reclassified unrealized gain 7 accumulated comprehensive loss income net related portion contract longer qualified hedge accounting remaining unrealized gain accumulated comprehensive loss reclassified income net electricity purchases made power contract termination date following table presents quantitative information related significant unobservable inputs described level 3 derivative contracts fair values level 3 derivative instruments recorded assets liabilities accompanying consolidated balance sheet follows following table shows net fair values level 3 derivative instruments december 31 2016 effect amounts hypothetical change increase decrease 10 market prices rates existed december 31 2016 following tables present reconciliation activity level 3 derivative contracts august 2016 alcoa corporation elected terminate energy contract accordance provisions agreement see result alcoa corporation decreased derivative asset recorded charge income net 84 reflected table additionally alcoa corporation also decreased related unrealized gain included accumulated comprehensive loss recorded benefit income net 84 termination specified term derivative contract described impact alcoa corporation’s earnings 2016 issuance new embedded derivative contained amendment existing power contract see purchases sales settlements level 3 derivative instruments additionally transfers derivative instruments level 3 2015 purchases sales issuances settlements level 3 derivative instruments additionally transfers derivative instruments level 3 derivatives designated hedging instrumentscash flow hedges derivative instruments designated qualify cash flow hedges effective portion unrealized gains losses derivative reported component comprehensive income oci realized gains losses derivative reclassified oci earnings period periods hedged transaction impacts earnings gains losses derivative representing either hedge ineffectiveness hedge components excluded assessment effectiveness recognized directly earnings immediately alcoa corporation five level 3 embedded aluminum derivatives one level 3 energy contract november 2016 see designated cash flow hedges follows embedded aluminum derivatives alcoa corporation entered energy supply contracts contain pricing provisions related lme aluminum price lmelinked pricing features considered embedded derivatives five embedded derivatives designated cash flow hedges forward sales aluminum three new derivatives contained three power contracts renewed late 2014 december 31 2016 2015 embedded aluminum derivatives hedge forecasted aluminum sales 3127 kmt 3307 kmt respectively 2016 2015 2014 alcoa corporation recognized unrealized loss 615 unrealized gain 1155 unrealized gain 78 respectively comprehensive loss related five derivative instruments additionally alcoa corporation reclassified realized loss 7 21 28 accumulated comprehensive loss sales 2016 2015 2014 respectively assuming market rates remain constant rates december 31 2016 realized gain 8 expected recognized sales next 12 months ineffectiveness related five derivative instruments 2016 2015 2014 energy contract alcoa corporation derivative contract hedges anticipated power requirements one smelters became effective existing power contract expired september 2016 august 2016 alcoa corporation elected terminate remaining term derivative contract see additionally december 2016 management elected discontinue hedge accounting contract see energy contract hedged forecasted electricity purchases 1969544 megawatt hours prior december 2016 59409328 megawatt hours december 31 2015 2016 2015 2014 alcoa corporation recognized unrealized gain 96 unrealized loss 2 unrealized loss 4 respectively comprehensive loss additionally alcoa corporation recognized gain 3 loss 3 expenses net related hedge ineffectiveness 2016 2015 respectively ineffectiveness related energy contract 2014 derivatives designated hedging instruments alcoa corporation two three prior october 2016 level 3 embedded aluminum derivatives one level 3 embedded credit derivative qualify hedge accounting treatment one level 3 energy contract management elected discontinue hedge accounting treatment see gains losses related changes fair value instruments recorded directly earnings 2016 2015 2014 alcoa corporation recognized loss 17 25 13 respectively expenses income net loss 15 8 15 respectively related embedded aluminum derivatives loss 5 loss 17 gain 2 respectively related embedded credit derivative 2016 gain 3 related energy contract material limitations disclosures respect commodity prices interest rates foreign currency exchange risk take account underlying commitments anticipated transactions underlying items included analysis gains losses futures contracts may offset actual results determined number factors alcoa corporation’s control could vary significantly factors disclosed alcoa corporation exposed credit loss event nonperformance counterparties instruments well credit performance risk respect hedged customers’ commitments although nonperformance possible alcoa corporation anticipate nonperformance parties contracts creditworthy counterparties supported cash treasury bills irrevocable letters credit issued carefully chosen banks addition various master netting arrangements place counterparties facilitate settlement gains losses contracts financial instruments carrying values fair values alcoa corporation’s financial instruments follows following methods used estimate fair values financial instruments cash equivalents restricted cash carrying amounts approximate fair value short maturity instruments fair value amounts cash equivalents restricted cash classified level 1 longterm debt due within one year longterm debt less amount due within one year fair value based quoted market prices public debt interest rates currently available alcoa corporation issuance debt similar terms maturities nonpublic debt fair value amounts longterm debt classified level 2 fair value hierarchy p income taxes components loss income taxes follows provision income taxes consisted following includes us taxes related foreign income reconciliation us federal statutory rate alcoa corporation’s effective tax rate follows effective tax rate periods presented provision loss 1 2014 noncontrolling interest’s impact alcoa corporation’s effective tax rate mostly due noncontrolling interest’s share loss divestiture ownership interest mining refining joint venture jamaica see note c 2 november 2014 spain enacted corporate tax reform changed corporate tax rate 30 2014 28 2015 25 2016 result alcoa corporation remeasured certain deferred tax assets related spanish operations 3 2014 tax holiday brazilian entity alcoa corporation became effective see 4 hypothetical net operating losses tax credits determined separate return basis likely tax benefit realized related deferred tax asset offsetting valuation allowance adjusted parent company net investment reflected subsequent deferred tax valuation allowance tables components net deferred tax assets liabilities follows following table details expiration periods deferred tax assets presented deferred tax assets expiration may still annual limitations utilization represents deferred tax assets whose expiration dependent upon reversal underlying temporary difference total deferred tax asset net valuation allowance supported projections future taxable income exclusive reversing temporary differences taxable temporary differences reverse within carryforward period valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income certain jurisdictions deferred tax assets related cumulative losses exist without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude deferred tax assets valuation allowance currently recorded may realized resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays 2013 alcoa corporation recognized 128 discrete income tax charge valuation allowance full value deferred tax assets related spanish consolidated tax group deferred tax assets expiration period ranging 2017 certain credits unlimited life operating losses weighing available positive negative evidence described management determined longer likely alcoa corporation realize tax benefit deferred tax assets mainly driven decline outlook former primary metals business 2013 realized prices lowest since 2009 combined prior year cumulative losses spanish consolidated tax group 2014 underlying value deferred tax assets decreased due remeasurement result enactment new tax rates spain beginning 2016 change foreign currency exchange rates result valuation allowance decreased amount december 31 2016 2015 amount valuation allowance 76 91 respectively valuation allowance reevaluated december 31 2016 change allowance deemed necessary based available evidence need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2015 alcoa corporation recognized additional 141 discrete income tax charge valuation allowances certain deferred tax assets iceland suriname amount 85 valuation allowance established full value deferred tax assets suriname related mostly employee benefits tax loss carryforwards deferred tax assets expiration period ranging 2017 2022 remaining 56 charge relates valuation allowance established portion deferred tax assets recorded iceland deferred tax assets expiration period ranging 2017 2023 weighing available positive negative evidence described management determined longer likely alcoa corporation realize tax benefit either deferred tax assets mainly driven decline outlook former primary metals business combined prior year cumulative losses short expiration period december 31 2016 2015 amount combined valuation allowance remained 141 valuation allowance reevaluated december 31 2016 change allowance deemed necessary based available evidence need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances december 2011 one alcoa corporation’s subsidiaries brazil applied tax holiday related expanded mining refining operations 2013 application amended refiled separately similar application filed one parentco’s subsidiaries brazil significant operations related alcoa corporation deadline brazilian government deny application july 11 2014 since alcoa corporation receive notice applications denied tax holiday took effect automatically july 12 2014 result tax rate entities decreased significantly 34 1525 resulting future cash tax savings 10year holiday period retroactively effective january 1 2013 additionally portion alcoa corporation subsidiary’s net deferred tax asset reverses within holiday period remeasured new tax rate net deferred tax asset subsidiary remeasured since could still utilized subsidiary’s future earnings subject tax holiday 2014 remeasurement resulted decrease entity’s net deferred tax asset noncash charge earnings 52 31 noncontrolling interest alcoa corporation’s statement consolidated operations following table details changes valuation allowance cumulative amount alcoa corporation’s foreign undistributed net earnings deferred taxes provided approximately 790 december 31 2016 amount relates foreign undistributed net earnings generated prior separation date alcoa corporation number commitments obligations related company’s operations various foreign jurisdictions management plans distribute earnings foreseeable future therefore determined practicable determine related deferred tax liability alcoa corporation currently evaluating local global cash needs future business operations anticipated debt facilities may influence future repatriation decisions reconciliation beginning ending amount unrecognized tax benefits excluding interest penalties follows periods presented portion balance end year pertains state tax liabilities presented offset federal tax benefits effect unrecognized tax benefits recorded would impact annual effective tax rate 2016 2015 2014 would 10 4 17 respectively pretax book loss alcoa corporation anticipate changes unrecognized tax benefits material impact statement consolidated operations 2017 see tax note r matter reserve recognized alcoa corporation’s policy recognize interest penalties related income taxes component provision income taxes accompanying statement consolidated operations 2016 2015 2014 alcoa corporation recognized 1 7 1 respectively interest penalties due expiration statute limitations settlements tax authorities refunded overpayments alcoa corporation also recognized interest income 2 1 5 2016 2015 2014 respectively december 31 2016 2015 amount accrued payment interest penalties 6 7 respectively q asset retirement obligations alcoa corporation recorded aros related legal obligations associated normal operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities addition aros certain caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks pcbs various process residuals solid wastes electronic equipment waste various materials alcoa corporation required demolish structures immediately estimated caro december 31 2016 ranges 3 29 per structure 24 structures today’s dollars following table details carrying value recorded aros major category 104 96 classified current liability december 31 2016 2015 respectively 2016 2015 aros recorded result management’s decision permanently close demolish certain structures see note following table details changes total carrying value recorded aros r contingencies commitments unless specifically described contrary matters within note r full responsibility alcoa corporation pursuant separation distribution agreement see note additionally separation distribution agreement provides crossindemnities company arconic claims subject indemnification contingencies litigation june 5 2015 awa st croix alumina llc “sca” filed complaint delaware chancery court declaratory judgment injunctive relief resolve dispute parentco glencore ltd “glencore” respect claimed obligations 1995 asset purchase agreement parentco glencore dispute arose glencore’s demand parentco indemnify liabilities may pay lockheed martin “lockheed” related st croix alumina refinery lockheed earlier filed suit glencore federal court new york seeking indemnity liabilities incurred would incur us virgin islands remediate certain properties refinery property claimed glencore required earlier 1989 purchase agreement indemnify glencore demanded parentco indemnify defend lockheed case threatened claim parentco new york action despite exclusive jurisdiction resolution disputes 1995 purchase agreement delaware glencore conceded seeking add parentco new york action awa sca dismissed complaint chancery court case august 6 2015 filed complaint declaratory judgment delaware superior court awa sca filed motion judgment pleadings september 16 2015 glencore answered awa’s sca’s complaint asserted counterclaims august 27 2015 october 2 2015 filed motion judgment pleadings argument parties’ motions held court december 7 2015 order dated february 8 2016 court granted parentco’s motion denied glencore’s motion resulting parentco liable indemnify glencore lockheed action decision also leaves pretrial discovery possible summary judgment trial glencore’s claims costs fees incurred defending settling earlier superfund action brought glencore government virgin islands february 17 2016 glencore filed notice application interlocutory appeal february 8 2016 ruling awa sca filed opposition application february 29 2016 march 10 2016 court denied glencore’s motion interlocutory appeal day entered judgment claims glencore’s claims costs fees incurred defending settling earlier superfund action brought glencore government virgin islands march 29 2016 glencore filed withdrawal notice interlocutory appeal april 6 2016 glencore filed appeal court’s march 10 2016 judgment delaware supreme court set appeal argument november 2 2016 november 4 2016 delaware supreme court affirmed judgment delaware superior court granting parentco’s motion remaining case glencore’s claims costs fees incurred related previously described superfund action march 7 2017 alcoa corporation glencore agreed principle settle claims expect request court dismiss case prior court’s scheduled march 21 2017 conference amount proposed settlement material 2002 parentco purchased power italy regulated energy market received drawback portion price power special tariff amount calculated accordance published resolution italian energy authority energy authority resolution n 2041999 “2041999” 2001 energy authority published another resolution clarified drawback would calculated manner amount either regulated unregulated market beginning 2002 parentco left regulated energy market purchase energy unregulated market subsequently 2004 energy authority introduced regulation 1482004 set forth different method calculating special tariff would result different drawback regulated unregulated markets parentco challenged new regulation administrative court milan received favorable judgment 2006 following ruling parentco continued receive power price drawback accordance original calculation method 2009 european commission declared special tariffs impermissible “state aid” 2010 energy authority appealed 2006 ruling consiglio di stato final court appeal december 2 2011 consiglio di stato ruled favor energy authority parentco thus presenting opportunity energy regulators seek reimbursement parentco amount equal difference actual drawback amounts received relevant time period drawback would calculated accordance regulation 1482004 february 23 2012 parentco filed appeal decision consiglio di stato appeal subsequently withdrawn march 2013 march 26 2012 parentco received letter agency cassa conguaglio per il settore eletrico ccse responsible making collecting payments behalf energy authority demanding payment amount approximately 110 85 including interest letter dated april 5 2012 parentco informed ccse disputes payment demand ccse since ccse authorized consiglio di stato decisions seek payment amount ii decision consiglio di stato appealed see iii event interest payable april 29 2012 law 44 2012 “442012” came effect changing method calculate drawback february 21 2013 parentco received revised request letter csse demanding parentco’s former subsidiary alcoa trasformazioni srl trasformazioni subsidiary alcoa corporation make payment amount 97 76 including interest reflects revised calculation methodology ccse represents high end range reasonably possible loss associated matter 0 97 76 parentco rejected demand formally challenged appeal administrative court april 5 2013 administrative court scheduled hearing december 19 2013 subsequently postponed april 17 2014 postponed june 19 2014 date administrative court listened parentco’s oral argument september 2 2014 rendered decision administrative court declared payment request ccse energy authority parentco unsubstantiated based 1482004 resolution respect january 19 2007 november 19 2009 timeframe december 18 2014 ccse energy authority appealed administrative court’s september 2 2014 decision however date hearing scheduled result conclusion european commission matter january 26 2016 see parentco’s management modified outlook respect portion pending legal proceedings related matter charge 37 34 recorded restructuring charges year ended december 31 2015 alcoa corporation’s accompanying statement consolidated operations establish partial reserve matter time alcoa corporation unable reasonably predict ultimate outcome matter european commission matter july 2006 european commission ec announced opened investigation establish whether extension regulated electricity tariff granted italy energyintensive industries complied european union eu state aid rules italian power tariff extended tariff force december 31 2005 november 19 2009 parentco incurring higher power costs smelters italy subsequent tariff end date end 2012 extension originally 2010 date changed legislation adopted italian parliament effective august 15 2009 prior expiration tariff 2005 parentco operating italy 10 years power supply structure approved ec 1996 measure provided competitive power supply primary aluminum industry considered state aid italian government ec’s announcement expressed concerns whether italy’s extension tariff beyond 2005 compatible eu legislation potentially distorted competition european market primary aluminum energy important part production costs november 19 2009 ec announced decision matter stating extension tariff italy constituted unlawful state aid part therefore italian government recover portion benefit parentco received since january 2006 including interest amount recovery based calculation prepared italian government see late 2009 discussions legal counsel reviewing bases ec decided including different considerations cited ec decision regarding parentco’s two smelters italy parentco recorded charge 250 173 included 20 14 write receivable italian government amounts due expired tariff structure 230 159 establish reserve april 19 2010 parentco filed appeal decision general court eu see prior 2012 parentco involved legal proceedings related matter separately sought annulment ec’s july 2006 decision open investigation alleging decision follow applicable procedural rules requested injunctive relief suspend effectiveness ec’s november 19 2009 decision however decisions general court subsequent appeals european court justice resulted denial remedies june 2012 parentco received formal notification italian government calculated recovery amount 375 303 amount reduced 65 53 amounts owed italian government parentco resulting net payment request 310 250 notice published official journal european union september 22 2012 ec announced filed action italian government july 18 2012 compel collect recovery amount october 17 2013 european court justice ordered italy collect september 27 2012 parentco received request payment full 310 250 october 31 2012 following discussions italian government regarding timing payment parentco paid requested amount five quarterly installments 69 50 beginning october 2012 december 2013 october 16 2014 parentco received notice general court eu april 19 2010 appeal ec’s november 19 2009 decision denied december 27 2014 parentco filed appeal general court’s october 16 2014 ruling european court justice ecj following submission ec’s response appeal june 10 2015 parentco filed request oral hearing ecj decision request received january 26 2016 parentco informed ecj dismissed parentco’s december 27 2014 appeal general court’s october 16 2014 ruling dismissal parentco’s appeal represents conclusion legal proceedings matter prior dismissal parentco noncurrent asset 100 91 reflecting excess total five payments made italian government reserve recorded 2009 result noncurrent asset along 58 53 amounts owed italian government parentco mentioned plus 6 6 interest previously paid writtenoff charge 164 150 recorded restructuring charges year ended december 31 2015 alcoa corporation’s accompanying statement consolidated operations see note result ec’s november 19 2009 decision parentco’s management contemplated ceasing operations italian smelters due uneconomical power costs february 2010 parentco’s management agreed continue operate smelters italy six months longterm solution address increased power costs could negotiated portion time longterm solution able reached related fusina smelter therefore may 2010 parentco italian government agreed temporary idling fusina smelter september 30 2010 fusina smelter fully curtailed 44000 metrictonsperyear portovesme smelter parentco executed new power agreement effective september 1 2010 december 31 2012 replacing shortterm marketbased power contract effect since early 2010 new agreement along interruptibility rights ie compensation power interruptions grids overloaded granted parentco portovesme smelter provided additional time negotiate longterm solution ec previously determined interruptibility rights considered state aid end 2011 part restructuring parentco’s global smelting system parentco’s management decided curtail operations portovesme smelter 2012 due uncertain prospects viable longterm power along rising raw materials costs falling global aluminum prices mid2011 late 2011 december 31 2012 portovesme smelter fully curtailed 150000 metrictonsperyear june 2013 august 2014 parentco decided permanently shut demolish fusina portovesme smelters respectively due persistent uneconomical conditions see note environmental matters alcoa corporation participates environmental assessments cleanups number locations include owned operating facilities adjoining properties previously owned operating facilities adjoining properties waste sites including superfund comprehensive environmental response compensation liability act cercla sites liability recorded environmental remediation cleanup program becomes probable costs reasonably estimated assessments cleanups proceed liability adjusted based progress made determining extent remedial actions related costs liability change substantially due factors among others nature extent contamination changes remedial requirements technological changes alcoa corporation’s remediation reserve balance 324 235 december 31 2016 2015 60 28 classified current liability respectively reflects probable costs remediate identified environmental conditions costs reasonably estimated 2016 remediation reserve increased 39 due charge 26 related planned demolition suriname refinery permanent closure related bauxite mines see note net charge 13 associated number sites 2015 remediation reserve increased 107 due charge 52 related planned demolition remaining structures massena east smelter location see note charge 29 related planned demolition poços de caldas smelter anglesea power station see note charge 12 related mosjøen location see charge 7 related portovesme location see net charge 7 associated number sites changes remediation reserve 2016 2015 26 86 respectively recorded restructuring charges remainder recorded cost goods sold accompanying statement consolidated operations payments related remediation expenses applied reserve 32 24 2016 2015 respectively amounts include expenditures currently mandated well required regulatory authority third party 2016 change reserve also reflects increase following 60 obligations transferred parentco connection separation transaction see note november 1 2016 including sherwin east st louis described 17 reclassification amounts included reserves within noncurrent liabilities deferred credits alcoa corporation’s consolidated balance sheet december 31 2015 5 due effects foreign currency translation 2015 change reserve also reflects decrease 13 due effects foreign currency translation included annual operating expenses recurring costs managing hazardous substances environmental programs costs estimated approximately 2 cost goods sold separation distribution agreement see note includes provisions assignment allocation environmental liabilities alcoa corporation arconic including certain remediation obligations associated environmental matters general respective parties responsible environmental matters associated operations properties assets assigned additionally separation distribution agreement lists environmental matters shared responsibility two companies allocation responsibility lead party responsible management matter matters assigned alcoa corporation separation distribution agreement alcoa corporation agreed indemnify arconic whole part environmental liabilities arising operations prior separation date following discussion provides details regarding current status certain significant reserves related current former alcoa corporation sites exception fusina italy matter alcoa corporation assumed full responsibility matters described sherwin txin connection parentco’s sale sherwin alumina refinery required divested part parentco’s reynolds merger 2000 parentco agreed retain responsibility remediation existing environmental conditions well pro rata share final closure active bauxite residue waste disposal areas known copano facility obligation transferred parentco alcoa corporation part separation transaction see note november 1 2016 alcoa corporation’s share closure costs proportional total period operation active waste disposal areas december 31 2016 reserve balance associated sherwin 30 approximately half project funding expected spent 2019 balance dependent schedule complete closure waste disposal areas baie comeau quebec canadain august 2012 parentco presented analysis remediation alternatives quebec ministry sustainable development environment wildlife parks mddep response previous request related known polychlorinated biphenyls pcbs polycyclic aromatic hydrocarbons pahs contained sediments anse du moulin bay parentco increased reserve baie comeau 25 2012 reflect estimated cost parentco’s recommended alternative consisting dredging capping contaminated sediments july 2013 parentco submitted environmental impact assessment project mddep notified parentco project submitted approved final mistrial decree issued july 2015 result adjustment reserve required 2015 decree provided final approval project parentco began work final project design construction project expected begin april 2017 december 31 2016 2015 reserve balance associated matter 24 26 respectively fusina portovesme italyin 1996 parentco acquired fusina smelter rolling operations portovesme smelter owned parentco’s former subsidiary alcoa trasformazioni srl “trasformazioni” trasformazioni subsidiary alcoa corporation owns fusina smelter portovesme smelter sites fusina rolling srl new parentco subsidiary owns fusina rolling operations alumix entity owned italian government time acquisition alumix indemnified parentco preexisting environmental contamination sites 2004 italian ministry environment protection land sea moe issued orders trasformazioni alumix development cleanup plan related soil contamination excess allowable limits legislative decree institute emergency actions pay natural resource damages trasformazioni appealed orders filed suit alumix among others seeking indemnification liabilities provisions acquisition agreement 2009 ligestra srl “ligestra” alumix’s successor trasformazioni agreed stay court proceedings investigations conducted negotiations advanced towards possible settlement december 2009 trasformazioni ligestra reached initial agreement settlement liabilities related fusina operations negotiations continued related portovesme see agreement outlined allocation payments moe emergency action natural resource damages scope costs proposed soil remediation project formally presented moe mid2010 agreement contingent upon final acceptance remediation project moe result entering agreement parentco increased reserve 12 2009 fusina based comments received moe local regional environmental authorities trasformazioni submitted revised remediation plan first half 2012 however revisions require change existing reserve october 2013 moe approved project submitted parentco resulting adjustment reserve january 2014 anticipation parentco reaching final administrative agreement moe parentco ligestra entered final agreement related fusina allocation payments moe emergency action natural resource damages costs approved soil remediation project agreement resulted ligestra assuming 50 80 payments remediation costs february 27 2014 parentco moe reached final administrative agreement conduct work agreement includes soil groundwater remediation project estimated cost 33 24 requires payments 25 18 moe emergency action natural resource damages based final agreement ligestra parentco’s share costs payments 17 12 9 6 related damages paid annually 10year period began april 2014 previously fully reserved soil remediation project begin authorization dispose excavated waste thirdparty landfill received moe expected point remainder 2017 responsibility execution groundwater remediation projectemergency containment transferred moe accordance february 2014 settlement agreement remediation slated begin late 2017 2018 effective separation transaction see note arconic retained portion obligation related fusina rolling operations specifically separation distribution agreement trasformazioni fusina properties assigned alcoa corporation fusina rolling srl entered lease agreement portion property included rolling operation pursuant separation distribution agreement liabilities fusina described allocated alcoa corporation trasformazioni arconic fusina rolling srl arconic pay 7 7 portion remediation expenses associated section property includes rolling operation separately 2009 due additional information derived site investigations conducted portovesme parentco increased reserve 3 november 2011 trasformazioni ligestra reached agreement settlement liabilities related portovesme similar one fusina proposed soil remediation project portovesme formally presented moe june 2012 neither agreement ligestra proposal moe resulted change reserve portovesme november 2013 moe rejected proposed soil remediation project requested revised project submitted may 2014 trasformazioni ligestra submitted revised soil remediation project addressed certain stakeholders’ concerns parentco increased reserve 3 2014 reflect estimated higher costs associated revised soil remediation project well current operating maintenance costs portovesme site october 2014 moe required revised project submitted reflect removal larger volume contaminated soil proposed well design changes cap related remaining contaminated soil left place expansion emergency containment groundwater pump treatment system previously installed trasformazioni ligestra submitted revised soil remediation project february 2015 result parentco increased reserve 7 march 2015 reflect increase estimated costs project october 2015 parentco received final ministerial decree approving february 2015 revised soil remediation project work soil remediation project commenced mid2016 expected completed 2019 discussions moe regarding groundwater remediation project alcoa corporation ligestra working find common remediation solution ultimate outcome matter may result change existing reserve portovesme mosjøen norwayin september 2012 parentco presented analysis remediation alternatives norwegian environmental agency nea formerly norwegian climate pollution agency “klif” response previous request related known pahs sediments located harbor extending fjord parentco increased reserve mosjøen 20 2012 reflect estimated cost baseline alternative dredging contaminated sediments proposed project reflecting alternative formally presented nea june 2014 resubmitted late 2014 reflect changes nea revised proposal result change reserve mosjøen april 2015 nea notified parentco revised project approved required submission final project design issuing final order parentco completed submitted final project design identified need stabilize related wharf structure allow sediment dredging harbor result parentco increased reserve mosjøen 11 june 2015 reflect estimated cost wharf stabilization also june 2015 nea issued final order approving project well final project design september 2015 parentco increased reserve 1 reflect potential need based prior experience similar projects perform additional dredging results sampling required order don’t achieve required cleanup levels project construction commenced early 2016 expected completed end 2017 december 31 2016 2015 reserve balance associated matter 8 20 respectively east st louis ilparentco ongoing remediation project related area used disposal bauxite residue former alumina refining operations project selected epa record decision rod issued july 2012 aimed implementing soil cover affected area november 1 2013 us department justice lodged consent decree behalf us environmental protection agency epa parentco conduct work outlined rod consent decree entered final february 2014 us department justice result parentco began construction march 2014 fieldwork project completed end june 2016 completion report approved epa september 2016 matter transitioned longterm approximately 30 years inspection maintenance monitoring program obligation transferred parentco alcoa corporation part separation transaction see note november 1 2016 december 31 2016 reserve balance associated matter 4 tax september 2010 following corporate income tax audit covering 2003 2005 tax years assessment received result spain’s tax authorities disallowing certain interest deductions claimed spanish consolidated tax group owned parentco appeal assessment spain’s central tax administrative court parentco denied october 2013 december 2013 parentco filed appeal assessment spain’s national court additionally following corporate income tax audit spanish tax group 2006 2009 tax years spain’s tax authorities issued assessment july 2013 similarly disallowing certain interest deductions august 2013 parentco filed appeal second assessment spain’s central tax administrative court denied january 2015 parentco filed appeal second assessment spain’s national court march 2015 december 31 2016 combined assessments including interest total 258 246 january 16 2017 spain’s national court issued decision favor company related assessment received september 2010 march 6 2017 company notified spain’s tax authorities file appeal deadline passed result assessment related 2003 2005 tax years null void spain’s national court yet rendered decision related assessment received july 2013 2006 2009 tax years amount assessment standalone basis including interest 136 130 december 31 2016 company believes meritorious arguments support tax position intends vigorously litigate remaining assessment spain’s court system however event company unsuccessful portion remaining assessment may offset existing net operating losses available spanish consolidated tax group would shared company arconic provided tax matters agreement related separation transaction additionally possible company may receive similar assessments tax years subsequent 2009 despite favorable decision received first assessment time company unable reasonably predict ultimate outcome matter march 2013 awab notified brazilian federal revenue office rfb approximately 110 r220 value added tax credits previously claimed disallowed penalty 50 assessed amount awab received 41 r82 cash may 2012 value added tax credits claimed awab fixed assets export sales related juruti bauxite mine são luís refinery expansion rfb disallowed credits allege belong consortium awab owns interest claimed awab credits also disallowed result challenges apportionment methods used questions use credits alleged lack documented proof awab presented defense claim rfb april 8 2013 awab successful administrative process rfb would recourse unsuccessful process awab option litigate judicial level separately awab’s administrative appeal june 2015 new tax law enacted repealing provisions tax code basis rfb assessing 50 penalty matter estimated range reasonably possible loss 0 32 r103 whereby maximum end range represents portion disallowed credits applicable export sales excludes 50 penalty additionally estimated range disallowed credits related awab’s fixed assets 0 36 r117 would increase net carrying value awab’s fixed assets ultimately disallowed alcoa corporation’s management’s opinion allegations basis however time management unable reasonably predict ultimate outcome matter 2000 2002 alumínio sold approximately 2000 metric tons metal per month poços de caldas facility located state minas gerais “state” alfio customer also located state sales state exempted valueadded tax vat requirements alfio subsequently sold metal customers outside state pay required vat transactions july 2002 alumínio received assessment state auditors theory alumínio jointly severally liable alfio unpaid vat june 2003 administrative tribunal found alumínio liable alumínio filed judicial case state february 2004 contesting finding may 2005 court first instance found alumínio solely liable panel state appeals court confirmed finding april 2006 alumínio filed special appeal superior tribunal justice stj brasilia federal capital brazil later 2006 2011 stj one judges reversed judgment lower courts finding alumínio neither solely jointly severally liable alfio vat ruling appealed state august 2012 stj agreed case reheard fivejudge panel february 21 2017 lead judge stj issued ruling confirming alumínio held liable matter alumínio process filing appeal case reheard fivejudge panel originally agreed stj august 2012 december 31 2016 assessment totaled 43 r142 including penalties interest alcoa corporation believes meritorious defenses company unable reasonably predict ultimate outcome matter connection parentco’s sale 2001 reynolds metals company’s “reynolds” subsidiary alcoa corporation alumina refinery gregory texas reynolds assigned energy services agreement “esa” gregory power partners “gregory power” purchase steam electricity refinery january 11 2016 sherwin alumina company llc “sherwin” current owner refinery one affiliate entities filed bankruptcy petitions corpus christi texas reorganization chapter 11 bankruptcy code january 26 2016 gregory power delivered notice reynolds sherwin’s bankruptcy filing constitutes breach esa january 29 2016 reynolds responded filing constitute breach sherwin informed bankruptcy court intends cease operations able continue bauxite supply agreement thereafter gregory power filed complaint bankruptcy case reynolds alleging breach esa matter neither estimable probable therefore time alcoa corporation unable reasonably predict ultimate outcome october 4 2016 state texas filed suit sherwin bankruptcy proceeding seeking hold sherwin responsible remediation alleged environmental conditions facility october 11 2016 sherwin filed similar suit reynolds case november 10 2016 reynolds filed motions dismiss gregory power complaint withdraw case bankruptcy court november 23 2016 bankruptcy court approved sherwin’s plans cessation operations february 16 2017 sherwin filed bankruptcy chapter 11 plan february 17 2017 court approved plan provided plan sherwin including certain affiliated companies reynolds negotiating settlement allocate among ownership responsibility certain areas refinery definitive agreement anticipated prior april 30 2017 would resolve outstanding claims made sherwin reynolds general addition matters discussed various lawsuits claims proceedings may instituted asserted alcoa corporation including pertaining environmental product liability safety health tax matters amounts claimed matters may substantial ultimate liability cannot determined considerable uncertainties exist therefore possible company’s liquidity results operations particular period could materially affected one matters however based facts currently available management believes disposition matters pending asserted material adverse effect individually aggregate financial position company commitments purchase obligations alcoa corporation party unconditional purchase obligations energy expire 2028 2037 commitments related contracts total 169 2017 223 2018 231 2019 237 2020 245 2021 3286 thereafter expenditures contracts totaled 181 2016 125 2015 172 2014 additionally alcoa corporation entered purchase commitments energy raw materials goods services total 1934 2017 1560 2018 1528 2019 1309 2020 1237 2021 8961 thereafter april 8 2015 aofa secured new 12year gas supply agreement power three alumina refineries western australia beginning july 2020 agreement conditional completion thirdparty acquisition related energy assets thencurrent owner occurred june 2015 terms gas supply agreement required aofa make prepayment 500 two installments first installment 300 made time completion thirdparty acquisition june 2015 second installment 200 made april 2016 amounts included increase noncurrent assets accompanying statement consolidated cash flows respective periods december 31 2016 2015 alcoa corporation asset 471 a654 288 a395 respectively representing respective prepayments made agreement included noncurrent assets see note accompanying consolidated balance sheet operating leases certain land buildings alumina refinery process control technology plant equipment vehicles computer equipment operating lease agreements total expense leases 90 2016 98 2015 115 2014 longterm operating leases minimum annual rentals 98 2017 78 2018 62 2019 47 2020 39 2021 35 thereafter guarantees third parties december 31 2016 alcoa corporation maximum potential future payments guarantees issued behalf third party 354 guarantees expire various times 2017 2024 relate project financing aluminum complex saudi arabia see note h bank guarantees letters credit alcoa corporation outstanding bank guarantees letters credit related energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties among others total amount committed instruments automatically renew expire various dates 2017 2021 444 december 31 2016 additionally arconic outstanding bank guarantees letters credit related alcoa corporation amount 115 december 31 2016 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise alcoa corporation outstanding bank guarantees letters credit related arconic amount 26 december 31 2016 event alcoa corporation would required perform instruments alcoa corporation would indemnified arconic accordance separation distribution agreement surety bonds alcoa corporation outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2017 159 december 31 2016 additionally arconic outstanding surety bonds related alcoa corporation amount 22 december 31 2016 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement financial information interest cost components income expenses net 2016 net gain asset sales included 118 gain related sale wharf property near intalco washington smelter 27 gain related sale equity interest natural gas pipeline australia see note h 2015 net gain asset sales included 29 gain related sale land around lake charles louisiana anode facility 2014 net gain asset sales included 28 gain related sale mining interest suriname noncurrent assets december 31 2016 amount reflects asset impairment 72 see note noncurrent liabilities deferred credits early 2014 parentco one alcoa’s corporation’s current subsidiaries awa resolved violations certain provisions foreign corrupt practices act 1977 us department justice us securities exchange commission resolution parentco awa agreed pay combined 384 fouryear timeframe prior separation transaction parentco awa paid 236 total amount part separation distribution agreement alcoa corporation assumed parentco’s portion 148 remaining obligation 148 paid equal installments 74 january 2017 paid january 9th january 2018 cash flow information cash paid interest income taxes follows noncash financing investing activities september 2016 anhbv issued 1250 new senior notes see note l preparation separation transaction see note net proceeds 1228 debt issuance required placed escrow contingent completion separation transaction result 1228 escrowed cash recorded restricted cash issuance new senior notes increase restricted cash amount 1228 reflected accompanying statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 decrease restricted cash reflected accompanying statement consolidated cash flows cash inflow net change restricted cash line item subsequent events management evaluated activity alcoa corporation concluded subsequent events occurred would require recognition consolidated financial statements disclosure notes consolidated financial statements except described february 1 2017 sale yadkin closed see note c alcoa corporation received 241 net proceeds 238 remitted arconic additional 5 expected received buyer remitted arconic later date postclosing adjustment part separation distribution agreement see note first quarter 2017 alcoa corporation recognize pretax gain approximately 120 supplemental financial information unaudited quarterly data millions except pershare amounts 1 preparing combined financial statements nine months ended september 30 2016 2015 management discovered amounts research development expenses previously reported six months ended june 30 2016 2015 included immaterial error due overallocation expenses 10 18 respectively amounts research development expenses accompanying statement consolidated operations years ended december 31 2016 2015 correctly stated additionally preparing consolidated financial statements year ended december 31 2016 management discovered amounts cost goods sold previously reported three months ended march 31 2016 six months ended june 30 2016 nine months ended september 30 2016 included immaterial error due underallocation lifo expense 7 10 14 respectively amount cost goods sold accompanying statement consolidated operations year ended december 31 2016 correctly stated quarterly data revised correct periods impacted two immaterial errors additionally financial information referenced prior periods presented herein revised applicable future filings 2 fourth quarter 2016 alcoa corporation recorded restructuring charges 209 pretax primarily related closure suriname refinery related bauxite mines impairment interest gas exploration field australia see note fourth quarter 2015 alcoa corporation recorded restructuring charges 686 pretax primarily related closures andor curtailments number smelters refineries see note charge legal matters italy see note r 3 per share amounts calculated independently period presented therefore sum quarterly per share amounts may equal per share amounts year item 9item 8 financial statements supplementary data management’s reports alcoa corporation stockholders management’s report financial statements practices accompanying consolidated financial statements alcoa corporation subsidiaries “company” prepared management responsible integrity objectivity accordance accounting principles generally accepted united states america gaap include amounts based management’s best judgments estimates financial information included company’s annual report form 10k year ended december 31 2017 consistent financial statements management recognizes responsibility conducting company’s affairs according highest standards personal corporate conduct responsibility characterized reflected key policy statements issued time regarding among things conduct business activities within laws host countries company operates potentially conflicting outside business interests employees company maintains systematic program assess compliance policies management’s report internal control financial reporting management responsible establishing maintaining adequate internal control financial reporting defined rules 13a15f 15d15f us securities exchange act 1934 amended company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance gaap company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance gaap receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate management conducted assessment evaluate effectiveness company’s internal control financial reporting december 31 2017 using criteria internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission based assessment management concluded company maintained effective internal control financial reporting december 31 2017 pricewaterhousecoopers llp independent registered public accounting firm audited effectiveness company’s internal control financial reporting december 31 2017 stated report included herein roy c harvey roy c harvey president chief executive officer william f oplinger william f oplinger executive vice president chief financial officer february 23 2018 report independent registered public accounting firm shareholders board directors alcoa corporation opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets alcoa corporation subsidiaries december 31 2017 2016 related consolidated statements operations comprehensive loss income changes equity cash flows three years period ended december 31 2017 including related notes collectively referred “consolidated financial statements” also audited company’s internal control financial reporting december 31 2017 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company december 31 2017 2016 results operations cash flows three years period ended december 31 2017 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 31 2017 based criteria established internal controlintegrated framework 2013 issued coso basis opinions company’s management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinions company’s consolidated financial statements company’s internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states “pcaob” required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp pricewaterhousecoopers llp pittsburgh pennsylvania february 23 served company’s auditor since 2015 alcoa corporation subsidiaries statement consolidated operations millions except pershare amounts accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated comprehensive loss income millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries consolidated balance sheet millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated cash flows millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement changes consolidated equity millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries notes consolidated financial statements dollars millions except pershare amounts metric tons thousands kmt basis presentation alcoa corporation “company” vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation company 40 operating locations direct indirect ownership 10 countries around world situated primarily australia brazil canada europe united states references notes “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic separation transaction september 28 2015 parentco’s board directors preliminarily approved plan separate parentco two standalone publiclytraded companies “separation transaction” one company later named alcoa corporation include alumina primary metals segments comprised bauxite mining alumina refining aluminum production energy operations parentco well warrick indiana rolling operations 251 equity interest rolling mill joint venture saudi arabia part parentco’s global rolled products segment parentco continue operations comprise global rolled products except aforementioned rolling operations included alcoa corporation engineered products solutions transportation construction solutions segments separation transaction subject number conditions including limited final approval parentco’s board directors see continuing validity private letter ruling internal revenue service regarding certain us federal income tax matters relating transaction receipt opinion legal counsel regarding qualification distribution together certain related transactions transaction generally taxfree us federal income tax purposes us securities exchange commission “sec” declaring effective registration statement form 10 amended filed sec october 11 2016 effectiveness declared sec october 17 2016 september 29 2016 parentco’s board directors approved completion separation transaction means pro rata distribution parentco 801 outstanding common stock alcoa corporation parentco shareholders record close business october 20 2016 “record date” arconic retain remaining 199 alcoa corporation common stock time separation transaction parentco shareholders receive one share alcoa corporation common stock every three shares parentco common stock held close business record date parentco shareholders receive cash lieu fractional shares connection separation transaction october 31 2016 alcoa corporation entered certain agreements arconic implement legal structural separation two companies govern relationship alcoa corporation arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations including among things employee benefits environmental liabilities intellectual property taxrelated assets liabilities agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement november 1 2016 “separation date” separation transaction completed became effective 1201 eastern standard time effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting cash payment 1072 parentco alcoa corporation additional 247 paid arconic alcoa corporation 2017 including 243 associated sale certain company’s energy operations see note c net proceeds previous debt offering see note l conjunction separation transaction 146159428 shares alcoa corporation common stock distributed parentco shareholders additionally arconic retained 36311767 shares alcoa corporation common stock representing 199 retained interest arconic sold shares 2017 “regularway” trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” alcoa corporation’s common stock par value 001 per share parentco incurred costs evaluate plan execute separation transaction alcoa corporation allocated pro rata portion costs based segment revenue see cost allocations parentco recognized 152 january 2016 october 2016 24 2015 costs related separation transaction 68 12 respectively allocated alcoa corporation allocated amounts included selling general administrative expenses accompanying statement consolidated operations basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap require management make certain judgments estimates assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters principles consolidation consolidated financial statements alcoa corporation include accounts alcoa corporation companies alcoa corporation controlling interest including comprise alcoa world alumina chemicals awac joint venture see intercompany transactions eliminated equity method accounting used investments affiliates joint ventures alcoa corporation significant influence effective control investments affiliates alcoa corporation cannot exercise significant influence accounted cost method awac unincorporated global joint venture alcoa corporation alumina limited australia alumina limited consists several affiliated operating entities interest operate bauxite mines alumina refineries within alcoa corporation’s bauxite alumina segments except poços de caldas mine refinery portion são luís refinery brazil portland smelter australia alcoa corporation owns 60 alumina limited owns 40 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alumina limited’s interest equity entities reflected noncontrolling interest accompanying consolidated balance sheet 2017 2016 2015 awac received 80 48 2 respectively contributions alumina limited management evaluates whether alcoa corporation entity interest variable interest entity whether alcoa corporation primary beneficiary consolidation required criteria met alcoa corporation variable interest entities requiring consolidation prior separation date alcoa corporation operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date accompanying consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation parentco’s net investment operations reflected parent company net investment accompanying consolidated financial statements significant transactions accounts within alcoa corporation eliminated significant intercompany transactions parentco alcoa corporation included within parent company net investment accompanying consolidated financial statements cost allocations description information cost allocations applicable periods included accompanying consolidated financial statements prior separation date consolidated financial statements alcoa corporation include general corporate expenses parentco historically charged alcoa corporation certain support functions provided centralized basis expenses related finance audit legal information technology human resources communications compliance facilities employee benefits compensation research development activities general corporate expenses included accompanying statement consolidated operations within cost goods sold selling general administrative expenses research development expenses allocated alcoa corporation basis direct usage identifiable remainder allocated based alcoa corporation’s segment revenue percentage parentco’s total segment revenue alcoa corporation arconic external debt directly attributable alcoa corporation excluded alcoa corporation’s consolidated balance sheet financing costs related debt obligations allocated alcoa corporation based ratio capital invested alcoa corporation total capital invested parentco alcoa corporation arconic included accompanying statement consolidated operations within interest expense following table reflects allocations described 1 allocation principally relates expenses parentco’s retained pension postretirement benefits associated closed sold operations 2 allocation includes costs incurred parentco associated separation transaction see separation transaction 3 allocation primarily relates layoff programs parentco corporate employees management believes assumptions regarding allocation parentco’s general corporate expenses financing costs reasonable nevertheless consolidated financial statements alcoa corporation may include actual expenses would incurred may reflect alcoa corporation’s consolidated results operations financial position cash flows standalone company periods prior separation date actual costs would incurred alcoa corporation standalone company would depend multiple factors including organizational structure capital structure strategic decisions made various areas including information technology infrastructure transactions alcoa corporation parentco including sales arconic included related party transactions consolidated financial statements considered effectively settled cash time transaction recorded total net effect settlement transactions reflected accompanying statement consolidated cash flows financing activity alcoa corporation’s consolidated balance sheet parent company net investment cash management description information cash management applicable periods included consolidated financial statements prior separation date cash managed centrally certain net earnings reinvested locally working capital requirements met existing liquid funds accordingly cash equivalents held parentco corporate level attributed alcoa corporation periods prior separation date cash amounts specifically attributable alcoa corporation reflected company’s consolidated balance sheet transfers cash parentco’s centralized cash management system reflected component parent company net investment alcoa corporation’s consolidated balance sheet financing activity accompanying consolidated statement cash flows parentco arrangement several financial institutions sell certain customer receivables without recourse revolving basis sale receivables completed use bankruptcyremote specialpurpose entity consolidated subsidiary parentco connection arrangement certain alcoa corporation’s customer receivables sold revolving basis bankruptcyremote subsidiary parentco sales reflected component parent company net investment alcoa corporation’s consolidated balance sheet parentco participated several accounts payable settlement arrangements certain vendors thirdparty intermediaries arrangements provided vendor’s request thirdparty intermediary advance amount scheduled payment vendor less appropriate discount scheduled payment date parentco made payment thirdparty intermediary date stipulated accordance commercial terms negotiated vendors connection arrangements certain alcoa corporation’s accounts payable settled vendor’s request scheduled payment date settlements reflected component parent company net investment alcoa corporation’s consolidated balance sheet related party transactions alcoa corporation buys products sells products various related companies consisting entities alcoa corporation retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented transactions alcoa corporation arconic presented related party transactions accompanying consolidated financial statements sales arconic alcoa corporation 864 958 1078 2017 2016 2015 respectively december 31 2017 2016 outstanding receivables arconic 84 67 respectively included receivables customers accompanying consolidated balance sheet b summary significant accounting policies cash equivalents cash equivalents highly liquid investments purchased original maturity three months less inventory valuation inventories carried lower cost market cost substantial portion us inventories small portion canadian inventories determined lastin firstout lifo method cost inventories principally determined averagecost method properties plants equipment properties plants equipment recorded cost also interest related construction qualifying assets capitalized part construction costs depreciation recorded principally straightline method rates based estimated useful lives assets greenfield assets refer construction new assets undeveloped land units production method used record depreciation assets require significant period generally greater oneyear rampup full production capacity result units production method deemed systematic rational method recognizing depreciation assets depreciation recorded temporarily idled facilities time management approves permanent closure following table details weightedaverage useful lives structures machinery equipment type operation numbers years repairs maintenance charged expense incurred gains losses sale assets generally recorded income expenses net properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds estimated undiscounted net cash flows amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments equity investments alcoa corporation invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations alcoa corporation ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable analysis requires significant amount judgment management identify events circumstances indicating equity investment impaired following items examples impairment indicators significant sustained declines investee’s revenue earnings cash flow trends adverse market conditions investee’s industry geographic area investee’s ability continue operations measured several items including liquidity factors impairment indicator identified management uses considerable judgment determine impairment temporary case equity investment written estimated fair value impairment temporary could significantly adversely impact reported results operations deferred mining costs alcoa corporation recognizes deferred mining costs development stage mine life cycle costs include construction access haul roads detailed drilling geological analysis define grade quality known bauxite overburden removal costs relate sections related mines alcoa corporation either currently extracting bauxite preparing production near term sections outlined planned incrementally generally mined periods ranging one five years depending mine specifics amount geological drilling testing necessary determine economic viability bauxite deposit mined reserves considered proven mining costs amortized based level reserves deferred mining costs included noncurrent assets accompanying consolidated balance sheet goodwill intangible assets goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business significant amount judgment involved determining indicator impairment occurred indicators may include among others deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods fair value could realized actual transaction may differ used evaluate goodwill impairment goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment alcoa corporation five reporting units three included aluminum segment smeltingcasting energy generation rolling operations remaining two reporting units bauxite alumina segments five reporting units bauxite alumina contain goodwill december 31 2017 carrying value goodwill bauxite alumina 51 103 respectively amounts include allocation goodwill held corporate level see note k prior 2017 company six reporting units equivalent six operating segments follows bauxite alumina aluminum cast products energy rolled products early 2017 management initiated realignment company’s internal business organizational structure resulting change alcoa corporation’s operating segments reporting units see note e previous six reporting units bauxite alumina contained goodwill reviewing goodwill impairment entity option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount entity elects perform qualitative assessment determines impairment likely entity required perform existing twostep quantitative impairment test described otherwise analysis required entity also may elect perform qualitative assessment instead proceed directly twostep quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether entity chooses perform qualitative assessment proceeds directly twostep quantitative impairment test alcoa corporation’s policy annual review goodwill perform qualitative assessment reporting units subjected directly twostep quantitative impairment test generally management proceed directly twostep quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill qualitative assessment various events circumstances factors would affect estimated fair value reporting unit identified similar impairment indicators factors classified type impact would estimated fair value using positive neutral adverse categories based current business conditions additionally assessment level impact particular factor would estimated fair value determined using high medium low weighting furthermore management considers results recent twostep quantitative impairment test completed reporting unit compares weighted average cost capital wacc current prior years reporting unit 2017 annual review goodwill management performed qualitative assessment bauxite alumina reporting units management concluded likely respective estimated fair value reporting units less respective carrying value analysis required twostep quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill alcoa corporation uses dcf model estimate current fair value reporting units testing impairment management believes forecasted cash flows best indicator fair value number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes certain assumptions vary significantly among reporting units cash flow forecasts generally based approved business unit operating plans early years historical relationships later years betas used calculating individual reporting units’ wacc rate estimated business assistance valuation experts event estimated fair value reporting unit per dcf model less carrying value additional analysis would required additional analysis would compare carrying amount reporting unit’s goodwill implied fair value goodwill may involve use valuation experts implied fair value goodwill excess fair value reporting unit fair value amounts assigned assets liabilities unit reporting unit acquired business combination fair value reporting unit represented purchase price carrying value goodwill exceeds implied fair value impairment loss equal excess would recognized management last proceeded directly twostep quantitative impairment test alumina reporting unit 2016 bauxite reporting unit 2018 2016 estimated fair value alumina reporting unit substantially excess carrying value resulting impairment additionally prior years presented triggering events necessitated impairment test either bauxite alumina reporting units intangible assets finite useful lives amortized generally straightline basis periods benefited following table details weightedaverage useful lives software intangible assets type operation numbers years asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks polychlorinated biphenyls pcbs various process residuals solid wastes electronic equipment waste various materials amounts may material consolidated financial statements period recorded environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss revenue recognition alcoa corporation recognizes revenue title ownership risk loss pass customer occurs upon shipment delivery product based applicable shipping terms shipping terms vary across businesses depend product country origin type transportation truck train vessel alcoa corporation periodically enters longterm supply contracts alumina aluminum customers receives advance payments product delivered future periods advance payments recorded deferred revenue recognized shipments made title ownership risk loss pass customer term contracts deferred revenue included current liabilities noncurrent liabilities deferred credits accompanying consolidated balance sheet stockbased compensation periods prior separation date employees attributable alcoa corporation operations participated parentco’s stockbased compensation plans compensation expense recorded alcoa corporation included expense associated employees well expense associated allocation stockbased compensation expense parentco’s corporate employees beginning separation date forward alcoa corporation recorded stockbased compensation expense company’s employees following accounting policy describes stockbased compensation expense initially determined alcoa corporation parentco compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time plan participants choose whether receive award form stock options stock awards combination choice made grant issued irrevocable pension postretirement benefit plans periods prior august 1 2016 see certain employees attributable alcoa corporation operations participated defined benefit pension postretirement benefit plans “shared plans” sponsored parentco also included participants attributable nonalcoa corporation operations alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans however related expense recorded alcoa corporation based primarily pensionable compensation estimated interest costs related employees attributable alcoa corporation operations prior separation date certain plans entirely attributable employees alcoa corporationrelated operations “direct plans” accounted defined benefit pension postretirement benefit plans accordingly funded unfunded position direct plan recorded consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive income net taxes amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions major assumptions primarily relate discount rates longterm expected rates return plan assets future compensation increases parentco’s management developed assumption using relevant company experience conjunction marketrelated data individual location plans exist preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation parentco see note n additionally certain remaining shared plans assumed alcoa corporation see note n accordingly beginning august 1 2016 forward standalone plans assumed plans accounted defined benefit pension postretirement plans additionally direct plans continued accounted defined benefit pension postretirement plans derivatives hedging derivatives held purposes trading part formally documented risk management program derivatives designated fair value hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly historical high correlation changes fair value hedged item derivative hedging instrument derivatives designated cash flow hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly probable high correlation expected future cash flows hedged item derivative hedging instrument ineffective portions types hedges recorded sales income expenses net current period hedging relationship ceases highly effective becomes probable expected transaction longer occur future gains losses derivative instrument recorded income expenses net alcoa corporation accounts hedges firm customer commitments aluminum fair value hedges result fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item alcoa corporation accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet effective portions changes fair values derivatives recorded comprehensive loss income reclassified sales cost goods sold income expenses net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market income expenses net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes beginning separation date forward provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa corporation’s assets liabilities adjusted changes tax rates tax laws enacted periods prior separation date alcoa corporation’s operations included income tax filings parentco provision income taxes alcoa corporation’s statement consolidated operations determined manner described separate return methodology company standalone taxpayer filing hypothetical income tax returns applicable additional accrued tax liability refund arising result approach assumed immediately settled parentco component parent company net investment deferred tax assets also determined manner described reflected consolidated balance sheet net operating losses credits attributes extent attributes expected transfer alcoa corporation upon separation transaction difference attributes generated hypothetical return separate return basis adjusted component parent company net investment valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income deferred tax assets valuation allowance recorded may realized upon changes facts circumstances resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized foreign currency local currency functional currency alcoa corporation’s significant operations outside united states except certain operations canada iceland us dollar used functional currency determination functional currency alcoa corporation’s operations made based appropriate economic management indicators recently adopted accounting guidance january 1 2017 alcoa corporation adopted changes issued financial accounting standards board fasb subsequent measurement inventory prior changes entity required measure inventory lower cost market whereby market replacement cost net realizable value net realizable value less approximately normal profit margin changes require inventory measured lower cost net realizable value thereby eliminating use two market methodologies net realizable value defined estimated selling prices ordinary course business less reasonably predictable costs completion disposal transportation changes apply inventories measured using lifo lastin firstout retail inventory method prior changes alcoa corporation already applied net realizable value market option measure nonlifo inventories lower cost market adoption changes impact consolidated financial statements january 1 2017 alcoa corporation adopted changes issued fasb derivative instruments designated hedging instruments changes clarify change counterparty derivative instrument designated hedging instrument require dedesignation hedging relationship provided hedge accounting criteria continue met adoption changes immediate impact consolidated financial statements however guidance need considered event existing counterparty alcoa corporation’s derivative instruments changes new counterparty january 1 2017 alcoa corporation adopted changes issued fasb equity method investments changes eliminate requirement investor adjust equity method investment results operations retained earnings retroactively stepbystep basis equity method effect previous periods investment held result increase level ownership interest degree influence additionally entity availableforsale equity security becomes qualified equity method accounting must recognize earnings unrealized holding gain loss accumulated comprehensive income date investment becomes qualified use equity method adoption changes immediate impact consolidated financial statements however guidance need considered event alcoa corporation’s investments undergo change previously described january 1 2017 alcoa corporation adopted changes issued fasb employee sharebased payment accounting prior changes entity must determine sharebased payment award whether difference deduction tax purposes compensation cost recognized financial reporting purposes results either excess tax benefit tax deficiency excess tax benefits recognized additional paidin capital tax deficiencies recognized either offset accumulated excess tax benefits income statement excess tax benefits recognized deduction reduces taxes payable changes require excess tax benefits tax deficiencies related sharebased payment awards recognized income tax expense benefit income statement tax effects exercised vested awards treated discrete items reporting period occur entity also recognize excess tax benefits regardless whether benefit reduces taxes payable current period additionally presentation excess tax benefits related sharebased payment awards statement cash flows changed prior changes excess tax benefits must separated income tax cash flows classified financing activity changes require excess tax benefits classified along income tax cash flows operating activity also changes require cash paid employer directly withholding shares taxwithholding purposes classified financing activity prior changes specific guidance classification statement cash flows cash paid employer tax authorities directly withholding shares taxwithholding purposes additionally sharebased award qualify equity classification cannot partially settle cash excess employer’s minimum statutory withholding requirements changes permit equity classification sharebased awards withholdings maximum statutory tax rates applicable jurisdictions adoption changes immaterial impact consolidated financial statements january 1 2017 alcoa corporation adopted changes issued fasb consolidation accounting prior changes entity required consider indirect economic interests variable interest entity held related parties common control direct interests entirety entity’s assessment whether primary beneficiary variable interest entity changes result entity considering indirect economic interests proportionate basis indirect interests instead direct interests entirety adoption changes impact consolidated financial statements however guidance need considered future assessments whether alcoa corporation primary beneficiary variable interest entity recently issued accounting guidance january 2017 fasb issued changes accounting business combinations changes clarify definition business purposes evaluating whether particular transaction accounted acquisition disposal business asset generally business integrated set assets activities contain inputs processes outputs although outputs required changes provide “screen” determine whether integrated set assets activities qualifies business substantially fair value gross assets concentrated single identifiable asset group similar identifiable assets definition business met transaction accounted acquisition disposal asset otherwise entity required evaluate whether integrated set assets activities include minimum input substantive process together significantly contribute ability create output longer consider whether market participant could replace missing elements changes also narrow definition output currently output defined ability provide return form dividends lower costs economic benefits directly investors owners members participants output would defined ability provide goods services customers investment income revenues changes become effective alcoa corporation january 1 2018 management determined adoption changes immediate impact consolidated financial statements guidance need considered event alcoa corporation acquires disposes integrated set assets activities january 2017 fasb issued changes assessment goodwill impairment relates quantitative test currently two steps performing quantitative impairment test first step requires entity compare current fair value reporting unit carrying value event reporting unit’s estimated fair value less carrying value entity performs second step compare carrying amount reporting unit’s goodwill implied fair value goodwill implied fair value goodwill excess fair value reporting unit fair value amounts assigned assets liabilities unit reporting unit acquired business combination fair value reporting unit represented purchase price carrying value goodwill exceeds implied fair value impairment loss equal excess would recognized changes eliminate second step quantitative impairment test accordingly entity would recognize impairment goodwill reporting unit currently referred first step estimated fair value reporting unit less carrying value impairment would equal excess reporting unit’s carrying value fair value exceed total amount goodwill applicable reporting unit changes become effective alcoa corporation january 1 2020 management determined adoption changes immediate impact consolidated financial statements guidance need considered time alcoa corporation performs assessment goodwill impairment quantitative test march 2017 fasb issued changes presentation net periodic benefit cost related pension postretirement benefit plans changes require entity report service cost component net periodic benefit cost line items statement operations compensation costs arising services rendered pertinent employees reporting period components net periodic benefit cost see note n required presented separately service cost component words components may aggregated presented separate line item may included existing line items statement operations line items include service cost component currently alcoa corporation includes components net periodic benefit cost except certain settlements curtailments special termination benefits related severance programs cost goods sold business employees selling general administrative expenses corporate employees consistent location compensation costs related respective employees nonservice cost components noted exceptions included restructuring charges applicable additionally changes allow service cost component capitalized applicable eg cost internally manufactured inventory changes become effective alcoa corporation january 1 2018 changing presentation nonservice cost components net periodic benefit cost statement operations providing additional disclosure management determined adoption changes material impact consolidated financial statements upon adoption changes management intends classify nonservice cost components net periodic benefit cost except certain settlements curtailments special termination benefits related severance programs continue reported restructuring charges income expenses net company’s statement consolidated operations change adopted 2017 cost goods sold selling general administrative expenses would lower 81 4 respectively income net 58 would change expenses net 27 accompanying statement consolidated operations may 2017 fasb issued changes accounting stockbased compensation modification terms conditions sharebased payment award changes require entity account modification substantive change terms conditions sharebased payment award substantive change occurs fair value vesting conditions balance sheet classification liability equity sharebased payment award isare different immediately modification currently entity required account modification terms conditions sharebased payment award changes become effective alcoa corporation january 1 2018 management determined adoption changes immediate impact consolidated financial statements additionally company longer account future nonsubstantive change terms conditions sharebased payment award modification august 2017 fasb issued changes accounting hedging activities changes permit hedge accounting risk components hedging relationships involving nonfinancial risk interest rate risk reduce current limitations designation measurement hedged item fair value hedge interest rate risk remove requirement separately measure report hedge ineffectiveness provide election systematically rationally recognize earnings initial value amount excluded assessment hedge effectiveness types hedges ease requirements effectiveness testing additionally modifications existing disclosures well additional disclosures required reflect changes regarding measurement recording hedging activities changes become effective alcoa corporation january 1 2019 early adoption permitted management currently evaluating early adopting changes potential impact changes consolidated financial statements january 2016 fasb issued changes accounting reporting certain equity investments changes require equity investments except accounted equity method accounting result consolidation investee measured fair value changes fair value recognized net income however entity may choose measure equity investments readily determinable fair values cost minus impairment plus minus changes resulting observable price changes orderly transactions identical similar investment issuer additionally impairment assessment equity investments without readily determinable fair values simplified requiring qualitative assessment identify impairment changes become effective alcoa corporation january 1 2018 management determined adoption changes impact consolidated financial statements alcoa corporation’s equity investments accounted equity method accounting february 2016 fasb issued changes accounting presentation leases changes require lessees recognize right use asset lease liability balance sheet leases terms longer 12 months leases term 12 months less lessee permitted make accounting policy election class underlying asset recognize right use asset lease liability additionally measuring assets liabilities arising lease optional payments included lessee reasonably certain exercise option extend lease exercise purchase option exercise option terminate lease changes become effective alcoa corporation january 1 2019 company established crossfunctional project team lead implementation effort team determined company requires information systems updates incremental software effectively implement changes accordingly company selected software vendor early stages implementing lease management software upon adoption changes management expect record right use asset lease liability alcoa corporation’s consolidated balance sheet precise amount asset liability known closer adoption date management estimates amount less 5 total assets total liabilities estimate based alcoa corporation’s consolidated balance sheet lease portfolio december 31 2017 june 2016 fasb added new impairment model known current expected credit loss cecl model based expected losses rather incurred losses new guidance entity recognizes allowance estimate expected credit losses cecl model applies debt instruments trade receivables lease receivables financial guarantee contracts loan commitments cecl model minimum threshold recognition impairment losses entities need measure expected credit losses assets low risk loss changes become effective alcoa corporation january 1 2020 management currently evaluating potential impact changes consolidated financial statements august november 2016 fasb issued changes presentation number items statement cash flows specifically changes identify nine specific cash flow items sections must presented within statement cash flows including distributions received equity method investees proceeds settlement insurance claims restricted cash changes become effective alcoa corporation january 1 2018 management determined adoption changes material impact consolidated financial statements october 2016 fasb issued changes accounting intraentity transactions inventory currently immediate tax impact recognized entity’s financial statements result intraentity transfers assets entity precluded reflecting tax benefit expense intraentity asset transfer entities file separate tax returns whether entities different tax jurisdictions asset sold third party otherwise recovered buyer asset prohibited recognizing deferred tax asset temporary difference arising excess buyer’s tax basis cost seller changes require current deferred income tax consequences intraentity transfer recorded transaction occurs exception defer tax consequences inventory transactions maintained changes become effective alcoa corporation january 1 2018 management determined adoption changes material impact consolidated financial statements may 2014 fasb issued changes recognition revenue contracts customers changes created comprehensive framework entities industries apply determination recognize revenue therefore supersede virtually existing revenue recognition requirements guidance framework expected result less complex guidance application providing consistent comparable methodology revenue recognition core principle guidance entity recognize revenue depict transfer promised goods services customers amount reflects consideration entity expects entitled exchange goods services achieve principle entity apply following steps identify contracts customer ii identify performance obligations contracts iii determine transaction price iv allocate transaction price performance obligations contracts v recognize revenue entity satisfies performance obligation august 2015 fasb deferred effective date one year making changes effective alcoa corporation january 1 2018 previously established project team company completed detailed review terms provisions customer contracts mid2017 project team evaluated contracts new guidance throughout remainder 2017 concluded alcoa corporation’s revenue recognition practices compliance changes alcoa corporation recognizes revenue title ownership risk loss pass customer occurs upon shipment delivery product based applicable shipping terms additionally sale alcoa corporation’s products customers represent single performance obligations said company make minor modifications internal accounting policies internal control structure ensure future customer contracts may different terms conditions company today properly evaluated new guidance result management determined adoption changes material impact consolidated financial statements c acquisitions divestitures february 2017 alcoa corporation’s whollyowned subsidiary alcoa power generating inc completed sale 215megawatt yadkin hydroelectric project yadkin cube hydro carolinas llc 249 cash 8 received june november 2017 combined postclosing adjustments 2017 alcoa corporation recognized gain 122 pre aftertax income net accompanying statement consolidated operations accordance separation distribution agreement see note alcoa corporation remitted 243 proceeds arconic december 31 2016 alcoa corporation liability 243 included current liabilities accompanying consolidated balance sheet sale yadkin subject postclosing adjustments related potential earnouts january 31 2027 unless provisions earnouts met earlier adjustment would result alcoa corporation receiving additional cash none would remitted arconic recognizing nonoperating income yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina prior divestiture power generated yadkin primarily sold open market yadkin generated sales 29 2016 approximately 30 employees december 31 2016 december 2014 alcoa corporation’s majorityowned subsidiary 60 alcoa minerals jamaica llc part awac completed sale 55 ownership stake bauxite mine alumina refinery joint venture jamaica noble group ltd also december 2014 alcoa corporation completed sale 5033 ownership stake mt holly smelter located goose creek south carolina century aluminum company combined transactions yielded net cash proceeds 185 resulted net loss 240 recorded restructuring charges 2014 statement consolidated operations 2015 alcoa corporation postclosing adjustments provided respective purchase agreements related two divestitures combined postclosing adjustments resulted net cash received 41 net loss 24 recorded restructuring charges see note accompanying statement consolidated operations two divestitures longer subject postclosing adjustments restructuring charges restructuring charges year threeyear period ended december 31 2017 comprised following 2016 2015 includes 1 32 respectively related allocation restructuring charges alcoa corporation parentco see note layoff costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2017 actions 2017 alcoa corporation recorded restructuring charges 309 comprised following components 244 related early termination power contract see 49 exit costs related decision permanently close demolish smelter see 41 additional contract costs related curtailed wenatchee washington são luís brazil smelters 22 layoff costs including separation approximately 130 employees 115 aluminum segment mostly voluntary separation programs reversal 22 reduce reserve previously established end 2015 related legal matter italy see litigation note r net charge 18 miscellaneous items including relocation company’s headquarters principal executive office new york new york pittsburgh pennsylvania reversal 43 associated several reserves related prior periods see october 2017 alcoa corporation luminant generation company llc luminant executed early termination agreement power contract well related fuel lease agreements effective october 1 2017 related company’s rockdale texas smelter fully curtailed since end 2008 accordance terms early termination agreement alcoa made cash payment 238 transferred approximately 2200 acres related land assets liabilities luminant net asset carrying value 6 since curtailment rockdale smelter company selling surplus electricity energy market power contract set expire earlier 2038 except limited circumstances one parties could elect early terminate without penalty conditions never met 2017 september 30 2016 2015 alcoa corporation recognized 105 141 147 respectively sales 148 210 201 respectively cost goods sold accompanying statement consolidated operations related sale surplus electricity cost luminant power contract result early termination power contract alcoa initiated strategic review remaining buildings equipment associated smelter casthouse aluminum powder plant rockdale location parentco previously decided curtail operating capacity rockdale smelter 2008 result uncompetitive power supply thenoverall unfavorable market conditions review completed december 2017 management determined rockdale operations limited economic prospects consequently management approved permanent closure demolition rockdale smelter capacity 191 kmtperyear related operations effective immediately demolition remediation activities related action begin 2018 expected completed end 2022 separately company continues 30000 acres land surrounding rockdale operations 2017 costs related decision included asset impairments 32 representing writeoff remaining book value related properties plants equipment 1 layoff approximately 10 employees corporate 16 costs additionally 2017 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 6 recorded cost goods sold accompanying statement consolidated operations costs 16 represent 8 asset retirement obligations 8 environmental remediation triggered decisions permanently close demolish rockdale facilities july 2017 alcoa corporation announced plans restart three 161400 metric tons capacity five potlines 268800 metric tons capacity warrick indiana smelter expected complete second quarter 2018 smelter previously permanently closed march 2016 parentco see 2016 actions capacity identified restart directly supply existing rolling mill warrick location improve efficiency integrated site provide additional source metal help meet anticipated increase production volumes result decision reopen smelter 2017 alcoa corporation reversed 33 remaining liabilities related original closure decision liabilities consisted 20 asset retirement obligations 4 environmental remediation obligations necessary due previous decision demolish smelter 9 severance contract termination costs additionally carrying value smelter related assets reduced zero smelter ramped permanent closure decision date end 2015 end march 2016 assets placed back service conjunction restart carrying value remain zero newly acquired constructed assets related warrick smelter depreciated december 31 2017 approximately 90 140 employees separated remaining separations 2017 restructuring programs expected completed end 2018 2017 cash payments 9 made layoff reserves related 2017 restructuring programs 2016 actions 2016 alcoa corporation recorded restructuring charges 318 comprised following components 131 exit costs related decision permanently close demolish refinery see 87 additional net costs related decisions made late 2015 permanently close demolish warrick smelter curtail wenatchee smelter point comfort texas refinery see 2015 actions 72 impairment interest gas exploration assets western australia see 32 layoff costs related cost reduction initiatives including separation approximately 75 employees 60 aluminum segment 15 bauxite segment related pension settlement costs see note n net charge 8 miscellaneous items reversal 12 associated number small layoff reserves related prior periods december 2016 management approved permanent closure suralco refinery capacity 2207 kmtperyear suriname suralco refinery fully curtailed since november 2015 see 2015 actions management parentco decided curtail remaining operating capacity suralco refinery 2015 effort improve position parentco’s refining operations global alumina cost curve since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions demolition remediation activities related action began 2017 expected completed end 2021 related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname 2016 costs related closure curtailment actions included accelerated depreciation 70 related warrick smelter continued operate march 2016 asset impairments 16 representing writeoff remaining book value various assets reversal 24 associated severance costs initially recorded late 2015 156 costs additionally 2016 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 5 recorded cost goods sold accompanying statement consolidated operations costs 156 represent 94 asset retirement obligations 26 environmental remediation triggered decisions permanently close demolish suralco refinery includes rehabilitation related bauxite mines rehabilitation coal mine related warrick smelter 32 contract terminations 4 related costs also december 2016 management alcoa corporation concluded interest certain gas exploration assets western australia impaired aofa owns interest gas exploration project initially entered 2007 potential source lowcost gas supply aofa’s refineries western australia interest 43 december 31 2016 relates four separate gas wells late 2016 aofa received results technical analysis performed earlier year two wells updated analysis third well concluded cost gas recovery would significantly higher market price gas fourth well results technical analysis performed prior 2016 indicated cost gas recovery would lower market price gas therefore would require additional investment move next phase commercial evaluation management previously supported late 2016 management reevaluated options related fourth well decided economical make commitment foreseeable future result aofa fully impaired 72 interest june 30 2017 separations associated 2016 restructuring programs essentially complete 2017 2016 cash payments 2 7 respectively made layoff reserves related 2016 restructuring programs 2015 actions 2015 alcoa corporation recorded restructuring charges 983 comprised following components 418 exit costs related decisions permanently close demolish three smelters power station see 238 curtailment two refineries two smelters see 201 related legal matters italy see litigation european commission matter note r 24 net loss primarily related postclosing adjustments associated two december 2014 divestitures see note c 45 layoff costs including separation approximately 465 employees 33 asset impairments related prior capitalized costs expansion project refinery australia longer pursued net credit 1 miscellaneous items reversal 7 associated number small layoff reserves related prior periods 32 related corporate restructuring allocated alcoa corporation see note 2015 management initiated various alumina refining aluminum smelting capacity curtailments andor closures curtailments composed remaining capacity following são luís smelter brazil 74 kmtperyear suriname refinery 1330 kmtperyear point comfort refinery 2010 kmtperyear wenatchee smelter 143 kmtperyear curtailments completed 2015 except 1635 kmtperyear point comfort refinery completed end june 2016 permanent closures composed capacity warrick smelter 269 kmtperyear includes closure related coal mine infrastructure massena east new york smelter potlines previously shut 2013 2014 modernization smelter longer pursued closure warrick smelter completed end march 2016 see 2017 actions decisions actions part separate 12month review refining 2800 kmtperyear smelting 500 kmtperyear capacity initiated management march 2015 possible curtailment partial full permanent closure divestiture many factors contributed decision general actions initiated maintain competitiveness amid prevailing market conditions alumina aluminum separate actions initiated reviews described mid2015 management approved permanent closure demolition poços de caldas smelter capacity 96 kmtperyear brazil anglesea power station includes closure related coal mine australia entire capacity poços de caldas temporarily idled since may 2014 anglesea power station shut end august 2015 demolition remediation activities related poços de caldas smelter anglesea power station began late 2015 expected completed end 2026 2020 respectively decision poços de caldas smelter due management’s conclusion smelter longer competitive result challenging global market conditions primary aluminum led initial curtailment dissipated higher costs anglesea power station decision made sale process result sale would imminent operating costs financial constraints related site remainder 2015 beyond including significant costs source coal available resources necessary maintenance costs depressed outlook forward electricity prices anglesea power station previously supplied approximately 40 percent power needs point henry smelter closed august 2014 2015 costs related closure curtailment actions included asset impairments 226 representing writeoff remaining book value related properties plants equipment 154 layoff approximately 3100 employees 1800 aluminum segment 1300 alumina segment including 30 pension costs see note n accelerated depreciation 85 related certain facilities continued operate 2015 222 exit costs additionally 2015 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 90 recorded cost goods sold accompanying statement combined operations exit costs 222 represent 72 asset retirement obligations 85 environmental remediation triggered decisions permanently close demolish aforementioned structures united states brazil australia includes rehabilitation related coal mine australia united states 65 supplier customer contractrelated costs june 30 2017 separations associated 2015 restructuring programs essentially complete 2017 2016 2015 cash payments 18 65 26 respectively made layoff reserves related 2015 restructuring programs alcoa corporation include restructuring charges results reportable segments impact allocating charges segment results would follows activity reserve balances restructuring charges follows includes reversals previously recorded restructuring charges effects foreign currency translation 2017 2016 2015 layoff costs also included reclassification 8 16 35 respectively pension andor postretirement benefits costs obligations included alcoa corporation’s separate liability pension postretirement benefits obligations see note n additionally 2017 2016 2015 costs also included reclassification following restructuring charges 10 97 76 respectively asset retirement 8 26 86 respectively environmental obligations liabilities included alcoa corporation’s separate reserves asset retirement obligations see note q environmental remediation see note r remaining reserves expected paid cash 2018 exception 4 relates termination office lease contract expected paid later end 2020 e segment geographic area information segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled segment performance company’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization see segment assets include among others customer receivables thirdparty intersegment inventories excluding lifo adjustments properties plants equipment equity investments accounting policies segments described summary significant accounting policies see note b transactions among segments established based negotiation among parties differences segment totals alcoa corporation’s consolidated totals line items reconciled corporate effective first quarter 2017 management elected change profit loss measure alcoa corporation’s reportable segments aftertax operating income atoi adjusted ebitda internal reporting performance measurement purposes change made enhance transparency visibility underlying operating performance segment alcoa corporation calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses previously alcoa corporation calculated segment atoi segment adjusted ebitda minus plus following items provision depreciation depletion amortization equity loss income loss gain certain asset sales income taxes alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies also effective first quarter 2017 management initiated realignment company’s internal business organizational structure realignment consisted combining alcoa corporation’s aluminum smelting casting rolling businesses along majority energy business new aluminum business unit well moving financial results previously closed operations warrick smelter suriname refinery corporate realignment executed align strategic operational commercial activities well take advantage synergies reduce costs new aluminum business unit managed single operating segment prior change businesses managed individual operating segments comprised aluminum cast products energy rolled products segments existing bauxite alumina segments new aluminum segment represent alcoa corporation’s operating reportable segments chief operating decision maker function regularly reviews financial information including sales adjusted ebitda three operating segments assess performance allocate resources segment information prior periods presented revised reflect new segment structure well new measure profit loss following detailed descriptions alcoa corporation’s reportable segments bauxite segment represents company’s global bauxite mining operations portion segment’s production represents offtake certain equity method investments brazil guinea saudi arabia bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally sales segment transacted us dollars costs expenses segment transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see principles consolidation note alumina segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors generally sales segment transacted us dollars costs expenses segment transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see principles consolidation note segment also includes awac’s 251 share results mining refining joint venture company saudi arabia see note h aluminum segment consists company’s worldwide smelting casthouse system ii portfolio energy assets brazil united states iii rolling mill united states segment’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders small portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products including foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets energy assets supply power external customers brazil segment’s rolling mill united states rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally alcoa corporation tolling arrangement arconic whereby arconic’s rolling mill tennessee produces sheet products certain customers company’s rolling operations alcoa corporation supplies raw materials tennessee facility pays arconic tolling service depending certain factors arrangement concludes end 2018 seasonal increases sheet sales generally experienced second third quarters year results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives see note related energy supply contracts generally segment’s sales aluminum transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic krona canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 share results smelting rolling mill joint venture company saudi arabia see note h operating results capital expenditures assets alcoa corporation’s reportable segments follows following tables reconcile certain segment information consolidated totals 1 metal price lag describes timing difference created average price metal sold differs average cost metal purchased alcoa corporation’s rolled aluminum operations general price metal increases metal price lag favorable price metal decreases metal price lag unfavorable 2 corporate expense primarily composed general administrative expenses operating corporate headquarters global administrative facilities 3 includes among items adjusted ebitda previously closed operations applicable pension postretirement benefit expenses associated closed sold operations intersegment profit elimination sales major product grouping follows includes realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum see note geographic area information geographic information sales follows based upon country point sale originated 1 sales portion alumina refineries australia brazil suriname prior closure december 2016 aluminum smelters canada occurred united states 2 sales aluminum produced smelters iceland norway well offtake related interest saudi arabia joint venture see note h occurred spain geographic information longlived assets follows based upon physical location assets f earnings per share basic earnings per share eps amounts computed dividing earnings average number common shares outstanding diluted eps amounts assume issuance common stock potentially dilutive share equivalents outstanding information used compute basic diluted eps attributable alcoa corporation common shareholders follows shares millions 2016 basic average shares outstanding diluted average shares outstanding effect potential shares common stock antidilutive options purchase 1 million shares common stock outstanding december 31 2016 weighted average exercise price 3305 per share included computation diluted eps exercise prices options greater average market price alcoa corporation’s common stock additionally 1 million stock awards stock options combined included computation diluted eps alcoa corporation generated net loss alcoa corporation generated net income 2016 1 million potential shares common stock related stock awards stock options combined would included diluted average shares outstanding 2015 eps included accompanying statement consolidated operations calculated based 182471195 shares alcoa corporation common stock distributed separation date conjunction completion separation transaction considered pro forma nature prior november 1 2016 alcoa corporation issued outstanding publiclytraded common stock g accumulated comprehensive loss following table details activity three components comprise accumulated comprehensive loss alcoa corporation’s shareholders noncontrolling interest 1 amounts included computation net periodic benefit cost pension postretirement benefits see note n 2 amounts included provision income taxes accompanying statement consolidated operations 3 periods presented tax impacts related rate changes amounts reclassified earnings 4 amounts included sales accompanying statement consolidated operations 5 2017 amounts included cost goods sold accompanying statement consolidated operations 2016 2015 amounts included income expenses net accompanying statement consolidated operations 6 amounts included income expenses net accompanying statement consolidated operations 7 positive amount indicates corresponding charge earnings negative amount indicates corresponding benefit earnings amounts reflected accompanying statement consolidated operations line items indicated footnotes 1 6 h investments equity investments following table summarizes information equity investments december 31 2017 2016 aofa sold interest dampier bunbury natural gas pipeline dbngp trust april 2016 see dbngp trust 1 see saudi arabia joint venture additional information 2 halco mining inc owns 100 boké investment company owns 51 compagnie des bauxites de guinée 3 pechiney reynolds quebec inc owns 501 interest bécancour smelter quebec canada thereby entitling alcoa corporation 2505 interest smelter two whollyowned canadian subsidiaries alcoa corporation also owns 499 bécancour smelter 4 investees either owns facility listed ownership interest entity owns facility listed 5 portion ownership interests held majorityowned subsidiaries part awac 2017 2016 2015 alcoa corporation received 71 74 152 respectively dividends equity investments financial information equity investments follows amounts represent 100 investee’s financial information 1 amounts included column represent combined financial information related ma’aden aluminum company ma’aden bauxite alumina company ma’aden rolling company 2 aofa sold interest dbngp trust april 2016 saudi arabia joint venturealcoa corporation saudi arabian mining company known “ma’aden” 30year december 2009 joint venture shareholders’ agreement automatic extension additional 20 years unless parties agree otherwise unless earlier terminated setting forth terms development construction ownership operation integrated aluminum complex saudi arabia specifically project developed joint venture consists bauxite mine extraction approximately 4000 kmt bauxite al ba’itha bauxite deposit near quiba northern part saudi arabia ii alumina refinery initial capacity 1800 kmt iii primary aluminum smelter initial capacity 740 kmt iv aluminum rolling mill initial capacity 380 kmt refinery smelter rolling mill constructed industrial area ras al khair east coast saudi arabia facilities use critical infrastructure including power generation derived reserves natural gas well port rail facilities developed government saudi arabia first production smelter rolling mill mine refinery occurred december 2012 2013 2014 respectively 2012 alcoa corporation ma’aden agreed expand capabilities rolling mill include capacity 100 kmt dedicated supplying automotive building construction foil packaging markets aluminum sheet first production related expanded capacity occurred 2014 expansion result additional equity investment see due significant savings change project execution strategy initial 380 kmt capacity rolling mill joint venture owned 749 ma’aden 251 alcoa corporation consists three separate companies follows one mine refinery smelter rolling mill alcoa corporation affiliates hold company’s interests smelting company rolling mill company whollyowned alcoa corporation alcoa corporation affiliate holds company’s interests mining refining company majorityowned part awac alcoa corporation except limited circumstances alcoa corporation may sell transfer otherwise dispose encumber enter agreement respect votes rights attached interests joint venture without ma’aden’s prior written consent ma’aden alcoa corporation put call options respectively whereby ma’aden require alcoa corporation purchase ma’aden alcoa corporation require ma’aden sell alcoa corporation 149 interest joint venture fair market value options may exercised sixmonth window opens five years last commercial production date defined joint venture shareholders’ agreement three joint venture companies exercised must exercised full 149 interest commercial production date declared september 1 2014 smelting company october 1 2016 mining refining company similar declaration yet rolling mill company ma’aden alcoa corporation also may sell transfer otherwise dispose pledge encumber interests joint venture five years commercial production date joint venture shareholders’ agreement upon occurrence unremedied event default alcoa corporation ma’aden may purchase upon occurrence unremedied event default ma’aden alcoa corporation may sell interest consideration varies depending time default number alcoa corporation employees perform various types services smelting rolling mill mining refining companies part operation fullyintegrated aluminum complex december 31 2017 2016 alcoa corporation outstanding receivable 13 11 respectively smelting rolling mill mining refining companies labor employeerelated expenses capital investment project expected total approximately 10800 sar 405 billion funded combination equity contributions joint venture partners project financing obtained joint venture companies partially guaranteed partners see equity contributions guarantees project financing based joint venture’s partners’ ownership interests originally estimated alcoa corporation’s total equity contribution joint venture related capital investment project would approximately 1100 alcoa corporation contributed 982 including 1 2016 based changes project’s capital investment equity debt structure initial plans estimated 1100 equity contribution may reduced separate capital investment project alcoa corporation contributed 66 ma’aden contributed 199 joint venture 2017 shortterm funding purposes accordance terms joint venture companies’ financing arrangements partners may required make additional contributions future periods december 31 2017 2016 carrying value alcoa corporation’s investment joint venture 887 853 respectively rolling mill mining refining companies project financing totaling 3334 reflects principal repayments made december 31 2017 combined 837 represents alcoa corporation’s awac’s respective 251 interest rolling mill company mining refining company alcoa corporation behalf awac issued guarantees see lenders event default debt service requirements rolling mill company 2018 2021 mining refining company 2019 2024 ma’aden issued similar guarantees related 749 interest alcoa corporation’s guarantees rolling mill mining refining companies cover total debt service requirements 132 principal maximum approximately 25 interest per year based projected interest rates previously alcoa corporation issued similar guarantees related project financing smelting company december 2017 smelting company refinanced andor amended existing outstanding debt guarantees previously required company effectively terminated december 31 2017 2016 combined fair value guarantees 3 6 respectively included noncurrent liabilities deferred credits accompanying consolidated balance sheet event alcoa corporation would required make payments guarantees related mining refining company 40 amount would contributed alcoa corporation alumina limited consistent ownership interest awac result separation transaction various lenders joint venture companies required arconic maintain joint several guarantees alcoa corporation event default joint venture companies lenders would make claim alcoa corporation arconic accordingly alcoa corporation would perform guarantee however company failed perform arconic would required perform guarantee arconic would subsequently seek indemnification alcoa corporation terms separation distribution agreement dbngp trustin 2004 aofa acquired 20 interest consortium subsequently purchased dbngp western australia investment dbngp made secure competitivelypriced longterm supply natural gas aofa’s refineries western australia since 2004 aofa made several contributions share pipeline capacity expansion operational purposes consortium well equity call plans improve consortium’s capitalization structure including plan initiated december 2014 plan required aofa contribute 30 a36 mid2016 20 a27 made march 31 2016 including 3 a5 16 a21 2016 2015 respectively april 2016 aofa sold 20 interest consortium effectively terminating remaining obligation make contributions recent equity call plan member consortium duet group aofa received 145 a192 cash included sales investments accompanying statement consolidated cash flows recorded gain 27 a35 11 a15 aftertax noncontrolling interest income net accompanying statement consolidated operations part sale transaction aofa maintain current access approximately 30 dbngp transmission capacity gas supply three alumina refineries western australia existing agreement purchase gas transmission services dbngp december 31 2017 2016 aofa asset 300 a385 270 a375 respectively representing prepayments made agreement future gas transmission services inventories december 31 2017 2016 total amount inventories valued lifo basis 516 29 393 29 respectively total inventories lifo adjustments inventory values prior application lifo generally determined average cost method approximates current cost j properties plants equipment net december 31 2017 2016 net carrying value temporarily idled refining assets 141 158 respectively representing 2305 kmt idle capacity periods also december 31 2017 2016 net carrying value temporarily idled smelting assets 248 314 respectively representing 856 kmt 778 kmt respectively idle capacity july 2017 alcoa corporation recategorized 269 kmt smelting capacity idle capacity due decision partially restart 161 kmt previously permanently closed smelter carrying value zero see 2017 actions note expected completed second quarter 2018 additionally december 2017 alcoa corporation permanently closed 191 kmt smelting capacity included 778 kmt idle capacity december 31 2016 k goodwill intangible assets goodwill included noncurrent assets accompanying consolidated balance sheet follows 1 carrying value aluminum’s goodwill zero comprised goodwill 989 accumulated impairment losses 989 december 31 2017 2016 additionally carrying value corporate’s goodwill net accumulated impairment losses 742 december 31 2017 2016 2 december 31 2017 148 goodwill reflected corporate allocated two alcoa corporation’s three reportable segments 49 bauxite 99 alumina purposes impairment testing see note b goodwill reflected corporate segment reporting purposes included management’s assessment performance two reportable segments intangible assets included noncurrent assets accompanying consolidated balance sheet follows december 31 2016 patents licenses include amounts related capitalization costs associated renewal alcoa corporation’s ferc federal energy regulatory commission license yadkin hydroelectric project divested february 2017 see note c computer software consists primarily software costs associated enterprise business solution within alcoa corporation drive common systems among businesses amortization expense related intangible assets tables years ended december 31 2017 2016 2015 12 7 10 respectively expected approximately 10 annually 2018 2022 l debt longterm debt principal amount longterm debt maturing next five years 16 2018 30 2019 15 2020 2021 2022 144a debtin september 2016 alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds see debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commenced march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors revolving credit agreement described “subsidiary guarantors” together alcoa corporation “guarantors” subsidiary guarantors released notes guarantees upon occurrence certain events including release guarantor obligations guarantor revolving credit agreement notes indenture contains various restrictive covenants similar described amended revolving credit agreement including limitation restricted payments among exceptions capacity pay annual ordinary dividends indenture alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period dividends made annual 2018 50 annual 2019 2020 75 january 1 2021 september 30 2026 maturity date 2026 notes time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period additionally restricted payments negative covenant includes general exception allow potential future transactions incremental specifically provided notes indenture general exception provides aggregate amount restricted payment exceed greater 250 15 alcoa corporation’s consolidated total assets accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 250 assuming restricted payments reduced part whole available limit limits restricted payments negative covenant amended revolving credit agreement see credit facility would govern amount ordinary dividend payments company could make given timeframe allowed amount less limits restricted payments negative covenant notes indenture conjunction debt offering net proceeds 1228 plus additional 81 parentco cash hand required placed escrow contingent completion separation transaction 81 represented necessary cash fund redemption notes pay regularly scheduled interest notes specified date defined indenture premium principal notes separation transaction completed certain time defined indenture result 1228 escrowed cash recorded restricted cash issuance notes increase restricted cash amount 1228 reflected accompanying statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 preparation separation transaction decrease restricted cash reflected accompanying statement consolidated cash flows cash inflow net change restricted cash line item bndes loansprior july 5 2016 alcoa alumínio indirect whollyowned subsidiary alcoa corporation loan agreement brazil’s national bank economic social development bndes provided financing commitment 397 r687 divided three subloans used pay certain expenditures estreito hydroelectric power project july 5 2016 loan agreement amended change borrower alumínio whollyowned subsidiary alumínio interest three subloans brazil real rate interest equal bndes’ longterm interest rate 700 750 december 31 2017 2016 respectively plus weightedaverage margin 274 principal interest payable monthly began october 2011 end september 2029 two subloans totaling r667 began july 2012 end june 2018 subloan r20 loan may repaid early without penalty approval bndes december 31 2017 2016 outstanding borrowings 137 r454 150 r490 respectively weightedaverage interest rate 974 1022 respectively 2017 2016 alumínio’s subsidiary andor alumínio repaid 15 r49 14 r48 respectively outstanding borrowings additionally alumínio loan agreement bndes provided financing commitment 85 r177 also used pay certain expenditures estreito hydroelectric power project interest loan brazil real rate interest equal bndes’ longterm interest rate plus margin 155 principal interest payable monthly began january 2013 originally scheduled end september 2029 2017 2016 alumínio repaid 44 r138 3 r11 respectively outstanding borrowings repayments 2017 include early repayment 41 r131 made august representing remaining outstanding loan balance early repayment made without penalty approval bndes full repayment loan commitment effectively terminated december 31 2016 alumínio’s outstanding borrowings 42 r137 interest rate 905 credit facility september 16 2016 alcoa corporation anhbv entered revolving credit agreement syndicate lenders issuers named therein amended “revolving credit agreement” november 14 2017 parties two additional lenders entered amendment restatement agreement revise certain terms provisions revolving credit agreement revolving credit agreement revised amendment restatement agreement “amended revolving credit agreement” unless noted otherwise terms provisions described amended revolving credit agreement applicable revolving credit agreement prior november 14 2017 amended revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” used working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions amended revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries additionally anhbv may time request lenders provide one additional tranches term loans andor increase aggregate amount revolving commitments together aggregate principal amount 500 previously 0 revolving credit facility scheduled mature november 14 2022 previously november 1 2021 unless extended earlier terminated accordance provisions amended revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth amended revolving credit agreement provisions amended revolving credit agreement anhbv pay quarterly commitment fee ranging 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal applicable margin plus anhbv’s option either adjusted libor rate b base rate determined reference highest 1 prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum applicable margin loans vary based alcoa corporation’s leverage ratio range 175 250 libor loans 075 150 base rate loans outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility amended revolving credit agreement includes number customary affirmative covenants additionally amended revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness see entering restrictive agreements restricted payments see including repurchases common stock shareholder dividends see investments see loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level amended revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 225 100 may increased level higher 250 100 december 31 2017 2016 alcoa corporation compliance covenants indebtedness restricted payments investments negative covenants include general exceptions allow potential future transactions incremental specifically provided amended revolving credit agreement indebtedness negative covenant provides incremental amount exceed greater 1000 previously 500 60 previously 30 alcoa corporation’s consolidated total assets additionally restricted payments negative covenant provides aggregate amount exceed 100 previously 0 investments negative covenant provides aggregate amount exceed 400 previously 250 contain two conditions limits may increase first fiscal year thresholds restricted payments investments negative covenants increase 250 previously 0 200 previously 0 respectively consolidated net leverage ratio greater 120 100 130 100 respectively end prior fiscal year secondly regards 100 250 restricted payments 200 investments 50 unused amount base amounts fiscal year may used next succeeding fiscal year following describes specific restricted payment negative covenant share repurchases application restricted payments general exception described share repurchases ordinary dividend payments alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year additionally described amended revolving credit agreement provides general exceptions restricted payments negative covenant would allow alcoa corporation exceed specified threshold share repurchases fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit also amended revolving credit agreement rescinded specific terms included revolving credit agreement related ordinary dividend payments previously alcoa corporation able declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period dividends made annual 2018 50 annual 2019 2020 75 january 1 2021 november 1 2021 time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period amended revolving credit agreement ordinary dividend payments made alcoa corporation subject general exception restricted payments described accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit limits restricted payments negative covenant notes indenture see 144a debt would govern amount ordinary dividend payments company could make given timeframe allowed amount less limits restricted payments negative covenant amended revolving credit agreement amended revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events amounts outstanding december 31 2017 2016 amounts borrowed 2017 2016 september 16th december 31st revolving credit facility preferred common stock preferred stock alcoa corporation authorized issue 100000000 shares preferred stock par value 001 per share december 31 2017 2016 alcoa corporation issued preferred stock common stock alcoa corporation authorized issue 750000000 shares common stock par value 001 per share november 1 2016 conjunction separation transaction alcoa corporation distributed 182471195 shares common stock amount 146159428 shares distributed parentco’s shareholders 36311767 shares retained parentco arconic sold shares 2017 december 31 2017 2016 alcoa corporation 185200713 182930995 respectively issued outstanding shares common stock 2017 november 1 2016 december 31 2016 alcoa corporation issued 2269718 459800 respectively shares company’s employee stockbased compensation plan dividends common stock subject authorization alcoa corporation’s board directors alcoa corporation declare dividends 2017 november 1 2016 december 31 2016 december 31 2017 27270482 shares common stock available issuance alcoa corporation’s employee stockbased compensation plan alcoa corporation issues new shares satisfy exercise stock options conversion stock awards stockbased compensation periods prior separation date alcoa corporation’s employees participated parentco’s stockbased compensation plan stockbased compensation expense recorded alcoa corporation referenced periods includes expense associated employees historically attributable alcoa corporation’s operations allocation expense see note related parentco’s corporate employees 2017 last two months 2016 alcoa corporation employees participated company’s stockbased compensation plan effective november 1 2016 outstanding stock options vested nonvested stock awards originally granted parentco’s stockbased compensation plan related alcoa corporation employees replaced similar stock options stock awards alcoa corporation’s stockbased compensation plan order preserve intrinsic value stock options stock awards originally granted parentco’s stockbased compensation plan number stock options stock awards issued alcoa corporation’s stockbased compensation plan increased ratio 134 developed dividing october 31 2016 closing market price parentco’s common stock 2872 october 31 2016 closing market price alcoa corporation’s “when issued” common stock 2144 resulted beginning balance outstanding stock options stock awards alcoa corporation’s stockbased compensation plan 4673829 2605423 respectively november 1 2016 following description alcoa corporation’s stockbased compensation plan materially different description parentco’s stockbased compensation plan prior separation transaction alcoa corporation stockbased compensation plan stock options stock awards generally granted either january february year eligible employees company’s board directors also receive certain stock awards however amounts material plan participants choose whether receive award form stock options stock awards combination choice made grant issued irrevocable stock options granted closing market price alcoa corporation’s common stock date grant vest threeyear service period 13 year tenyear contractual term stock awards vest threeyear service period date grant certain awards also include either market 2017 performance 2017 2016 2015 condition final number marketbased performancebased stock awards earned based alcoa corporation’s achievement certain targets threeyear measurement period marketbased stock awards granted 2017 award earned end vesting period based company’s total shareholder return measured total shareholder return standard poor’s 500® index january 1 2017 december 31 2019 performancebased stock awards granted 2017 award earned end vesting period based company’s performance preestablished returnoncapital target measured january 1 2017 december 31 2019 performancebased stock awards granted 2016 2015 onethird award earned year vesting period based company’s performance preestablished returnoncapital target year measured january 1st december 31st second tranche 2016 performance awards third tranche 2015 performance awards earned 2017 marketbased performancebased stock awards earned threeyear service period vest third anniversary award grant date 2017 2016 2015 alcoa corporation recognized stockbased compensation expense 24 28 35 respectively 80 90 related stock awards period stockbased compensation expense capitalized 2017 2016 2015 total pretax stockbased compensation expense recognized 2016 2015 16 21 respectively relates allocation expense parentco’s corporate employees part alcoa corporation’s parentco’s stockbased compensation plan design respective periods individuals retirementeligible sixmonth requisite service period year grant result larger portion expense recognized first half year retirementeligible employees total pretax stockbased compensation expense recognized 2017 2016 2015 4 7 6 respectively pertains acceleration expense related retirementeligible employees stockbased compensation expense based grant date fair value applicable equity grant stock awards performance market condition stock awards performance condition fair value equivalent closing market price either alcoa corporation’s parentco’s common stock date grant respective periods stock awards market condition fair value estimated date grant using monte carlo simulation model generated result 5201 per award 2017 monte carlo simulation model uses certain assumptions estimate fair value marketbased stock award including volatility 3698 alcoa corporation 1144 standard poor’s 500® index riskfree interest rate 144 stock options fair value estimated date grant using latticepricing model generated result 1245 212 447 per option 2017 2016 2015 respectively see updated fair value amounts 2016 2015 grants latticepricing model uses several assumptions estimate fair value stock option including average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior contractual life following describes detail assumptions used alcoa corporation estimate fair value stock options granted 2017 assumptions used estimate fair value stock options granted parentco 2016 2015 materially different company standalone publiclytraded company twomonth period 2016 assumptions used estimate fair value stock options granted february 2017 largely based historical parentco information applicable alcoa corporation grant stock options november 1 2016 december 31 2016 riskfree interest rate 248 based yield curve interest rates time grant contractual life option dividend yield 00 based fact company pay dividends months november december 2016 immediate plans pay dividends 2017 volatility 4068 based historical implied volatilities term option alcoa corporation utilized historical option forfeiture data estimate annual pre postvesting forfeitures 6 exercise behavior 59 based weighted average exercise ratio exercise patterns grants issued number years contractual option term option’s intrinsic value resulting historical employee exercise behavior based upon assumptions used determination fair value life option 57 years output latticepricing model stock options outstanding october 31 2016 originally granted parentco’s stockbased compensation plan alcoa corporation employees previouslymentioned fair values adjusted reflect impact parentco’s 1for3 reverse stock split occurred october 5 2016 maintain intrinsic value stock options result separation transaction accordingly fair value stock options originally granted 2016 2015 adjusted 475 1001 respectively alcoa corporation recognize incremental stockbased compensation expense result adjustment activity stock options stock awards 2017 follows december 31 2017 number stock options outstanding weighted average remaining contractual life 582 years total intrinsic value 76 additionally 1704299 stock options outstanding fully vested exercisable weighted average remaining contractual life 447 years weighted average exercise price 2619 total intrinsic value 47 december 31 2017 cash received stock option exercises 43 10 2017 2016 respectively total intrinsic value stock options exercised 2017 2016 24 4 respectively december 31 2017 24 pretax unrecognized compensation expense related nonvested stock option grants nonvested stock award grants expense expected recognized weighted average period 175 years n pension postretirement benefits alcoa corporation maintains pension plans covering us employees certain employees foreign locations see note pension benefits generally depend length service job grade remuneration substantially benefits paid pension trusts sufficiently funded ensure plans pay benefits retirees become due salaried nonbargaining hourly us employees hired march 1 2006 participate defined contribution plan instead defined benefit plan company also maintains health care life insurance postretirement benefit plans covering eligible us retired employees certain retirees foreign locations see note generally medical plans unfunded pay percentage medical expenses reduced deductibles coverage life benefits generally provided insurance contracts alcoa corporation retains right subject existing agreements change eliminate benefits salaried certain nonbargaining hourly us employees hired january 1 2002 certain bargaining hourly us employees hired july 1 2010 eligible postretirement health care benefits salaried certain hourly us employees retire april 1 2008 eligible postretirement life insurance benefits descriptions retirement benefits alcoa corporation participants also describe retirement benefits provided parentco employees retirees prior separation date periods prior august 1 2016 see eligible employees attributable alcoa corporation operations participated us defined benefit pension postretirement benefit plans sponsored parentco “shared plans” included arconic parentco corporate participants alcoa corporation accounted portion shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans multiemployer contribution expense attributable employees alcoa corporationrelated operations based primarily pensionable compensation employees pension plans estimated interest costs postretirement benefit plans additionally periods prior august 1 2016 alcoa corporation recorded allocation expenses shared plans attributable parentco corporate participants well closed sold operations see cost allocations note also certain parentco plans described specific employees attributable alcoa corporation operations nonus entirety “direct plans” alcoa corporation accounted direct plans defined benefit pension postretirement benefit plans accordingly funded status direct plans recorded alcoa corporation’s consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive loss amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions major assumptions primarily relate discount rates longterm expected rates return plan assets future compensation increases management develops assumption using relevant company experience conjunction marketrelated data plans preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation “new direct plans” arconic accordingly new direct plans alcoa corporation measured august 1 2016 one primary assumptions used measure new direct plans weighted average discount rate 348 measurement yielded combined net unfunded status 2348 additionally certain shared plans assumed alcoa corporation “additional new direct plans” collectively direct plans new direct plans “cumulative direct plans” require separated andor remeasured additional new direct plans combined net unfunded status 180 aggregate combined net unfunded status new direct plans additional new direct plans recognized alcoa corporation’s consolidated balance sheet time consisting current liability 136 noncurrent liability 2392 additionally alcoa corporation recognized 2704 accumulated comprehensive loss following table summarizes total expenses recognized alcoa corporation related pension postretirement benefits funded status alcoa corporation’s cumulative direct plans measured december 31 calendar year information follows pension postretirement benefit plans applicable cumulative direct plans appropriate obligations funded status december 31 2017 benefit obligation fair value plan assets funded status us pension plans 5093 3195 1898 respectively december 31 2016 benefit obligation fair value plan assets funded status us pension plans 4977 3504 1473 respectively pension plan benefit obligations components net periodic benefit cost 1 2017 2016 net periodic benefit cost us pension plans 74 21 respectively 2 2017 2016 net periodic benefit cost postretirement benefits reflects reduction 8 6 respectively related recognition federal subsidy awarded medicare part 3 2017 2016 settlements due workforce reductions see note 2015 settlements due workforce reductions see note payment lump sum benefits 4 2015 curtailments due elimination benefits workforce reductions see note 5 2017 2016 2015 special termination benefits due workforce reductions see note 6 amounts attributed joint venture partners included amounts expected recognized net periodic benefit cost assumptions weighted average assumptions used determine benefit obligations pension postretirement benefit plans follows discount rate determined using companyspecific yield curve model abovemedian developed assistance external actuary cash flows plans’ projected benefit obligations discounted using single equivalent rate derived yields high quality corporate bonds represent broad diversification issuers various sectors yield curve model parallels plans’ projected cash flows weighted average duration 12 years underlying cash flows bonds included model exceed cash flows needed satisfy company’s plans’ obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used rate compensation increase based upon anticipated compensation increases estimated inflation 2018 rate compensation increase 328 weighted average assumptions used determine net periodic benefit cost pension postretirement benefit plans follows periods presented respective discount rates used determine net periodic benefit cost plans full annual period however discount rates limited number plans updated 2017 2016 2015 reflect remeasurement plans due settlements andor curtailments updated discount rates used significantly different discount rates presented expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment see plan assets 2017 2016 2015 expected longterm rate return used management based prevailing planned strategic asset allocations well estimates future returns asset class 2018 management anticipates 689 weightedaverage expected longterm rate return assumed health care cost trend rates us postretirement benefit plans follows nonus plans material assumed health care cost trend rate used measure expected cost gross eligible charges covered alcoa corporation’s postretirement benefit plans 2018 55 trend rate used reflecting management’s best estimate change future health care costs covered plans’ actual annual health care cost trend experience based parentco’s plans previously included alcoa corporation participants past three years ranged 08 90 management believe threeyear range indicative expected increases future health care costs longterm assumed health care cost trend rates effect amounts reported health care plan onepercentage point change assumed rates would following effects plan assets alcoa corporation’s pension plan investment policy weighted average asset allocations december 31 2017 2016 asset class follows principal objectives underlying investment pension plans’ assets ensure alcoa corporation properly fund benefit obligations become due broad range potential economic financial scenarios maximize longterm investment return acceptable level risk based obligations broadly diversify investments across within various asset classes protect asset values adverse movements 2017 specific objectives longterm investment strategy included reducing volatility pension assets relative pension liabilities achieving risk factor diversification across balance asset portfolio portion assets matched interest rate profile benefit obligation long duration fixed income investments fixed income derivative instruments exposure broad equity risk decreased diversified investments discretionary systematic macro hedge funds longshort equity hedge funds global emerging market equities investments diversified strategy asset class geography sector effort enhance returns mitigate downside risk several external investment managers used gain broad exposure financial markets mitigate managerconcentration risk investment strategy defined prior separation date parentco management maintained alcoa corporation management however strategy resulted investment returns less expected since separation date accordingly 2018 management plans implement lesscomplex peerlike investment strategy result restructure asset portfolio new strategy result investing higher percentage portfolio assets match interest rate credit risk profiles benefit obligations well investing assets returns expected exceed actual returns previous asset mix achieve new strategy portfolio longer include investments discretionary systematic macro hedge funds longshort equity hedge funds instead portfolio include larger concentration investments long duration government debt longduration corporate credit real estate well new investments high yield emerging sovereign debt globallisted infrastructure result expected asset class mix approximately 30 equities approximately 50 fixed income approximately 20 investments additionally number asset managers changed company expects new strategy fully implemented end 2018 investment practices comply requirements applicable laws regulations respective jurisdictions including employee retirement income security act 1974 erisa united states use derivative instruments external investment managers permitted appropriate necessary achieving overall investment policy objectives mitigating interest rate asset class risks following section describes valuation methodologies used trustees measure fair value pension plan assets including applicable indication level fair value hierarchy type asset generally classified see note definition fair value description fair value hierarchy equities securities consist direct investments stock publicly traded us nonus companies valued based closing price reported active market individual securities traded generally classified level 1 ii plans’ share commingled funds invested stock publicly traded companies valued net asset value iii direct investments longshort equity hedge funds private equity limited partnerships venture capital partnerships valued net asset value fixed income securities consist us government debt generally valued using quoted prices included level 1 ii cash equivalents invested publiclytraded funds valued based closing price reported active market individual securities traded generally classified level 1 iii publicly traded us nonus fixed interest obligations principally corporate bonds debentures valued consultation evaluation brokers institutional market using quoted prices observable market data included level 2 iv fixed income derivatives generally valued using industry standard models marketbased observable inputs included level 2 v cash equivalents invested institutional funds valued net asset value investments include among others exchange traded funds real estate investment trusts gold valued based closing price reported active market investments traded included level 1 ii plans’ share commingled funds invested real estate investment trusts valued net asset value iii direct investments discretionary systematic macro hedge funds private real estate includes limited partnerships valued net asset value iv absolute return hedge funds valued net asset value fair value methods described may indicative net realizable value reflective future fair values additionally alcoa corporation believes valuation methods used plans’ trustees appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different fair value measurement reporting date following table presents fair value pension plan assets classified either appropriate level fair value hierarchy net asset value 1 december 31 2017 total fair value pension plan assets excludes net receivable 2 represents securities yet settled plus interest dividends earned various investments less amount due arconic pension plans alcoa corporation pension plans related separation certain plans two companies 2 december 31 2016 total fair value pension plan assets excludes net payable 15 represents amount due arconic pension plans alcoa corporation pension plans related separation certain plans two companies funding cash flows alcoa corporation’s policy fund amounts defined benefit pension plans sufficient meet minimum requirements set forth applicable country benefits laws tax laws including pension protection act 2006 worker retiree employer recovery act 2008 moving ahead progress 21st century act 2012 highway transportation funding act 2015 bipartisan budget act 2016 us plans time alcoa corporation contributes additional amounts deemed appropriate 2017 2016 2015 cash contributions alcoa corporation’s defined benefit pension plans 106 66 69 minimum required contribution defined benefit pension plans 2018 estimated 290 250 us plans additionally company expects make discretionary contributions approximately 300 combined us canadian defined benefit pension plans 2018 see note benefit payments expected paid pension postretirement benefit plan participants expected medicare part subsidy receipts follows defined contribution plans alcoa corporation sponsors savings investment plans several countries including australia united states prior separation date employees attributable alcoa corporation operations participated parentcosponsored plans united states employees may contribute portion compensation plans alcoa corporation parentco prior separation date matches specified percentage contributions equivalent form investments elected employee also company makes contributions retirement savings account based percentage eligible compensation certain us employees hired march 1 2006 able participate alcoa corporation’s defined benefit pension plans see note alcoa corporation’s expenses related defined contribution plans 65 2017 57 2016 59 2015 derivatives financial instruments fair value fair value defined price would received sell asset paid transfer liability orderly transaction market participants measurement date fair value hierarchy distinguishes market participant assumptions developed based market data obtained independent sources observable inputs ii entity’s assumptions market participant assumptions developed based best information available circumstances unobservable inputs fair value hierarchy consists three broad levels gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 lowest priority unobservable inputs level 3 three levels fair value hierarchy described • level 1unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities • level 2inputs quoted prices included within level 1 observable asset liability either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability eg interest rates inputs derived principally corroborated observable market data correlation means • level 3inputs significant fair value measurement unobservable derivatives alcoa corporation exposed certain risks relating ongoing business operations including financial market political economic risks following discussion provides information regarding alcoa corporation’s exposure risks changing commodity prices foreign currency exchange rates alcoa corporation’s commodity derivative activities subject management direction control strategic risk management committee srmc consists least three members including chief executive officer chief financial officer remaining members officers andor employees company chief executive officer may designate time currently member srmc alcoa corporation’s treasurer srmc meets periodic basis review derivative positions strategy reports audit committee alcoa corporation’s board directors scope activities alcoa corporation’s aluminum energy foreign exchange contracts held purposes trading used primarily mitigate uncertainty volatility cover underlying exposures alcoa corporation involved trading activities energy weather derivatives nonexchange commodity trading activities several alcoa corporation’s aluminum energy foreign exchange contracts classified level 1 level 2 fair value hierarchy total fair value derivative contracts recorded assets liabilities 44 117 respectively december 31 2017 5 2 respectively december 31 2016 certain contracts designated either fair value cash flow hedging instruments combined 2017 2016 2015 alcoa corporation recognized loss 22 loss less 1 gain 4 respectively income expenses net accompanying statement consolidated operations related contracts additionally contracts designated cash flow hedges alcoa corporation recognized unrealized loss 92 unrealized gain 2 unrealized loss 13 comprehensive loss 2017 2016 2015 respectively addition level 1 2 derivative instruments described alcoa corporation derivative instruments classified level 3 fair value hierarchy instruments composed embedded aluminum derivatives embedded credit derivative related energy supply contracts ii freestanding financial contracts related energy purchases spot market associated nine smelters three refineries certain embedded aluminum derivatives financial contracts designated cash flow hedging instruments level 3 derivative instruments described detail enumerated d1 d11 following section describes valuation methodologies used alcoa corporation measure level 3 derivative instruments fair value derivative instruments classified level 3 fair value hierarchy represent management used least one significant unobservable input valuation model alcoa corporation uses discounted cash flow model fair value level 3 derivative instruments appropriate description includes key inputs models significant assumptions valuation models reviewed tested least annual basis inputs valuation models level 3 derivative instruments composed following quoted market prices eg aluminum prices 10year london metal exchange lme forward curve energy prices ii significant observable inputs eg information concerning time premiums volatilities certain option type embedded derivatives regional premiums aluminum contracts iii unobservable inputs eg aluminum energy prices beyond quoted market periods beyond term quoted market prices aluminum alcoa corporation estimates price aluminum extrapolating 10year lme forward curve additionally periods beyond term quoted market prices energy management developed forward curve based independent consultant market research appropriate valuations adjusted various factors liquidity bidoffer spreads credit considerations adjustments generally based available market evidence level 2 absence evidence management’s best estimate used level 3 significant input unobservable one period becomes observable subsequent period related asset liability would transferred appropriate classification level 1 2 period change transfers periods presented d1 d5alcoa corporation two power contracts d1 d2 contain embedded derivative indexes price power lme price aluminum additionally alcoa corporation three power contracts d3 d5 contain embedded derivative indexes price power lme price aluminum plus midwest premium embedded derivatives five power contracts primarily valued using observable market prices however due length contracts valuation models also require management estimate longterm price aluminum based upon extrapolation 10year lme forward curve one contracts longer requires use prices beyond curve additionally three contracts management also estimates midwest premium generally next twelve months based recent transactions holds premium estimated twelfth month constant remaining duration contract significant increases decreases actual lme price beyond 10 years would result higher lower fair value measurement increase actual lme price andor midwest premium inputs used valuation models result higher cost power corresponding decrease derivative asset increase derivative liability embedded derivatives designated cash flow hedges forward sales aluminum unrealized gains losses included comprehensive loss accompanying consolidated balance sheet realized gains losses included sales accompanying statement consolidated operations d6alcoa corporation power contract expired october 2016 see d10 separate contains lmelinked embedded derivative prior expiration embedded derivative valued using probability interrelationship future lme prices australian dollar us dollar exchange rates us consumer price index significant increases decreases lme price would result higher lower fair value measurement increase actual lme price inputs used valuation model result higher cost power corresponding decrease derivative asset embedded derivative qualify hedge accounting treatment unrealized gains losses embedded derivative included income expenses net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract time derivative asset recognized equivalent amount recognized deferred credit noncurrent liabilities deferred credits consolidated balance sheet amortization deferred credit recognized income expenses net accompanying statement consolidated operations power received life contract d7additionally alcoa corporation natural gas supply contract lmelinked ceiling embedded derivative valued using probabilities future lme aluminum prices price brent crude oil priced platts including interrelationships two commodities subject ceiling change interrelationship would result higher lower fair value measurement lme ceiling embedded contract price protect increase price oil without corresponding increase price lme increase oil prices similar increase lme price would limit increase price paid natural gas embedded derivative qualify hedge accounting treatment unrealized gains losses embedded derivative included income expenses net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations gas purchases made contract d8in mid2016 alcoa corporation related counterparty elected modify pricing existing power contract smelter united states amendment contains embedded derivative indexes price power lme price aluminum plus midwest premium embedded derivative valued using interrelationship future metal prices lme base plus midwest premium amount megawatt hours energy needed produce forecasted metric tons aluminum smelter significant increases decreases metal price would result higher lower fair value measurement increase actual metal price inputs used valuation model result higher cost power corresponding increase derivative liability management elected qualify embedded derivative hedge accounting treatment unrealized gains losses embedded derivative included income expenses net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract time derivative liability recognized equivalent amount recognized deferred charge noncurrent assets accompanying consolidated balance sheet amortization deferred charge recognized income expenses net accompanying statement consolidated operations power received life contract d9alcoa corporation power contract contains embedded derivative indexes difference respective credit spread alcoa corporation counterparty 10year us treasury rate difference increased twice negotiated multiplier currently based sum arconic’s credit spread 10year 20year us treasury rates accordance terms power contract calculation may changed january calendar year management uses market prices historical relationships forecast services determine fair value significant increases decreases inputs would result lower higher fair value measurement wider credit spread alcoa corporation counterparty would result higher cost power corresponding increase derivative liability embedded derivative qualify hedge accounting treatment unrealized gains losses included income expenses net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract d10 d11alcoa corporation financial contract d10 hedged anticipated power requirements one smelters began november 2016 time energy supply contract related smelter expired see d6 alcoa corporation began purchasing electricity directly spot market beyond term market information available management developed forward curve valuation purposes based independent consultant market research significant increases decreases power market may result higher lower fair value measurement financial contract lower prices power market would cause decrease derivative asset financial contract designated cash flow hedge future purchases electricity designation ceased december 2016 see november 2016 unrealized gains losses contract recorded comprehensive loss accompanying consolidated balance sheet realized gains losses recorded cost goods sold electricity purchases made spot market august 2016 alcoa corporation gave required notice terminate financial contract one year date notification result alcoa corporation decreased related derivative asset recorded noncurrent assets unrealized gain recorded accumulated comprehensive loss 84 related august 2017 2036 timeframe resulting impact alcoa corporation’s earnings december 2016 smelter experienced unplanned outage resulting portion financial contract longer qualifying hedge accounting point management elected discontinue hedge accounting remainder contract august 2017 result alcoa corporation reclassified unrealized gain 7 accumulated comprehensive loss income net related portion contract longer qualified hedge accounting remaining 6 unrealized gain accumulated comprehensive loss related portion management elected discontinue hedge accounting reclassified cost goods sold electricity purchases made spot market termination date financial contract additionally december 2016 august 2017 unrealized gains losses contract recorded income expenses net realized gains losses recorded income expenses net electricity purchases made spot market january 2017 alcoa corporation counterparty entered new financial contract d11 hedge anticipated power requirements smelter period august 2017 july 2021 amended existing financial contract reduce hedged amount anticipated power requirements move effective termination date july 31 2017 new financial contract designated cash flow hedge future purchases electricity unrealized gains losses new financial contract recorded comprehensive loss accompanying consolidated balance sheet realized gains losses recorded began august 2017 cost goods sold electricity purchases made spot market following table presents quantitative information related significant unobservable inputs described level 3 derivative contracts fair values level 3 derivative instruments recorded assets liabilities accompanying consolidated balance sheet follows following table shows net fair values level 3 derivative instruments december 31 2017 effect amounts hypothetical change increase decrease 10 market prices rates existed december 31 2017 following tables present reconciliation activity level 3 derivative contracts january 2017 issuance new financial contract see d11 purchases sales settlements level 3 derivative instruments additionally transfers derivative instruments level 3 august 2016 alcoa corporation elected terminate energy contract accordance provisions agreement see d10 result alcoa corporation decreased derivative asset recorded charge income net 84 reflected table additionally alcoa corporation also decreased related unrealized gain included accumulated comprehensive loss recorded benefit income net 84 termination specified term derivative contract described impact alcoa corporation’s earnings 2016 issuance new embedded derivative contained amendment existing power contract see d8 purchases sales settlements level 3 derivative instruments additionally transfers derivative instruments level 3 derivatives designated hedging instrumentscash flow hedges derivative instruments designated qualify cash flow hedges effective portion unrealized gains losses derivative reported component comprehensive income realized gains losses derivative reclassified comprehensive income earnings period periods hedged transaction impacts earnings gains losses derivative representing either hedge ineffectiveness hedge components excluded assessment effectiveness recognized directly earnings immediately alcoa corporation five level 3 embedded aluminum derivatives one level 3 financial contract november 2016 see d10 designated cash flow hedges described additionally january 2017 alcoa corporation entered new financial contract designated cash flow hedging instrument classified level 3 fair value hierarchy see d11 replaced existing financial contract august 2017 embedded aluminum derivatives d1 d5 alcoa corporation entered energy supply contracts contain pricing provisions related lme aluminum price lmelinked pricing features considered embedded derivatives five embedded derivatives designated cash flow hedges forward sales aluminum december 31 2017 2016 embedded aluminum derivatives hedge forecasted aluminum sales 2859 kmt 3127 kmt respectively 2017 2016 2015 alcoa corporation recognized net unrealized loss 1521 net unrealized loss 615 net unrealized gain 1155 respectively comprehensive loss related five derivative instruments additionally alcoa corporation reclassified realized loss 113 7 21 accumulated comprehensive loss sales 2017 2016 2015 respectively assuming market rates remain constant rates december 31 2017 realized loss 120 expected recognized sales next 12 months ineffectiveness related five derivative instruments 2017 2016 2015 financial contracts d10 d11 alcoa corporation financial contract hedges anticipated power requirements one smelters became effective existing power contract expired october 2016 august 2016 alcoa corporation elected terminate remaining term financial contract see d10 additionally december 2016 management elected discontinue hedge accounting contract see d10 financial contract hedged forecasted electricity purchases 1969544 megawatt hours prior december 2016 2017 alcoa corporation reclassified realized gain 6 accumulated comprehensive loss cost goods sold 2016 2015 alcoa corporation recognized unrealized gain 96 unrealized loss 2 respectively comprehensive loss additionally alcoa corporation recognized gain 3 loss 3 income expenses net related hedge ineffectiveness 2016 2015 respectively addition january 2017 alcoa corporation entered new financial contract hedges anticipated power requirements smelter period august 2017 july 2021 see d11 december 31 2017 financial contract hedges forecasted electricity purchases 8805456 megawatt hours 2017 alcoa corporation recognized unrealized gain 88 comprehensive loss additionally alcoa corporation reclassified realized gain 25 2017 accumulated comprehensive loss cost goods sold assuming market rates remain consistent rates december 31 2017 realized gain 96 expected recognized cost goods sold next 12 months additionally alcoa corporation recognized loss less 1 income net related hedge ineffectiveness 2017 derivatives designated hedging instruments alcoa corporation two three prior october 2016 level 3 embedded aluminum derivatives d6 d8 one level 3 embedded credit derivative d9 qualify hedge accounting treatment one level 3 financial contract management elected discontinue hedge accounting treatment see d10 gains losses related changes fair value instruments recorded directly earnings 2017 2016 2015 alcoa corporation recognized loss 22 17 25 respectively income expenses net loss 18 15 8 respectively related embedded aluminum derivatives gain 3 loss 5 loss 17 respectively related embedded credit derivative loss 7 gain 3 amount 2015 respectively related financial contract material limitations disclosures respect commodity prices foreign currency exchange risk consider underlying commitments anticipated transactions underlying items included analysis gains losses futures contracts may offset actual results determined several factors alcoa corporation’s control could vary significantly factors disclosed alcoa corporation exposed credit loss event nonperformance counterparties instruments well credit performance risk respect hedged customers’ commitments although nonperformance possible alcoa corporation anticipate nonperformance parties contracts creditworthy counterparties supported cash treasury bills irrevocable letters credit issued carefully chosen banks addition various master netting arrangements place counterparties facilitate settlement gains losses contracts financial instruments carrying values fair values alcoa corporation’s financial instruments follows following methods used estimate fair values financial instruments cash equivalents restricted cash carrying amounts approximate fair value short maturity instruments fair value amounts cash equivalents restricted cash classified level 1 longterm debt due within one year longterm debt less amount due within one year fair value based quoted market prices public debt interest rates currently available alcoa corporation issuance debt similar terms maturities nonpublic debt fair value amounts longterm debt classified level 2 fair value hierarchy p income taxes provision income taxes components income loss income taxes follows provision income taxes consisted following includes us income taxes related foreign income reconciliation us federal statutory rate alcoa corporation’s effective tax rate follows effective tax rate provision income 2017 provision loss 2016 2015 1 december 31 2017 income certain operations several company’s subsidiaries brazil taxed lower rate result approved tax holidays difference respective holiday rates statutory rates resulted benefit 20 011 per diluted share 2017 majority tax holidays expire end 2022 one tax holiday expires end 2026 see 2017 line item also includes charge 26 remeasurement certain deferred tax assets holiday rate see 2 2016 2015 hypothetical net operating losses tax credits determined separate return basis likely tax benefit realized related deferred tax asset offsetting valuation allowance adjusted parent company net investment reflected subsequent deferred tax valuation allowance tables mid2017 awab received approval tax holiday related operation juruti brazil bauxite mine tax holiday effective january 1 2017 retroactively decreases awab’s tax rate income generated juruti mine 34 1525 result future cash tax savings 10year period result income tax rate change awab’s existing deferred tax assets expected reverse holiday period remeasured lower tax rate remeasurement resulted decrease awab’s deferred tax assets discrete income tax charge 26 15 noncontrolling interest deferred income taxes components deferred tax assets liabilities based underlying attribute without regard jurisdiction follows following table details expiration periods deferred tax assets presented deferred tax assets expiration may still annual limitations utilization represents deferred tax assets whose expiration dependent upon reversal underlying temporary difference total deferred tax asset net valuation allowance supported projections future taxable income exclusive reversing temporary differences taxable temporary differences reverse within carryforward period composition alcoa corporation’s net deferred tax asset jurisdiction december 31 2017 follows company several income tax filers various foreign countries 511 net deferred tax asset included “foreign” column table comprised following income tax filer 252 net deferred tax asset alumínio brazil 153 net deferred tax asset awab brazil 112 deferred tax asset alúmina española sa “española” collectively alumínio awab “foreign filers” spain combined 6 net deferred tax liability several foreign income tax filers future realization net deferred tax asset foreign filers based projections respective future taxable income defined sum pretax income comprehensive income permanent tax differences exclusive reversing temporary differences carryforwards realization net deferred tax assets foreign filers dependent tax planning strategies foreign filers generated taxable income threeyear cumulative period ending december 31 2017 management also forecasted taxable income foreign filers 2018 foreseeable future forecast based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials bauxite caustic soda alumina calcined petroleum coke liquid pitch energy fuel oil natural gas electricity labor transportation costs assumptions used management develop financial operating plan used run company measure performance actual results majority foreign filers’ net deferred tax assets relate tax loss carryforwards foreign filers history tax loss carryforwards expiring unused additionally tax loss carryforwards infinite life respective income tax codes brazil spain said utilization existing tax loss carryforward limited 30 25 taxable income particular year brazil spain respectively accordingly management concluded net deferred tax assets foreign filers likely realized future periods resulting need partial full valuation allowance december 31 2017 following table details changes valuation allowance 1 line item reflects valuation allowances initially established result change management’s judgment regarding realizability deferred tax assets 2 line item reflects movements previously established valuation allowances increase decrease related deferred tax assets increase decrease movements occur result remeasurement due tax rate change changes underlying attributes deferred tax assets including expiration attribute reversal temporary difference gave rise deferred tax asset 2017 alcoa corporation established valuation allowance 94 related remaining deferred tax assets iceland see amount comprised 60 discrete income charge recognized provision income taxes accompanying consolidated statement operations 34 charge accumulated comprehensive loss accompanying consolidated balance sheet deferred tax assets relate tax loss carryforwards expiration period ranging 2017 2026 deferred losses associated derivative hedging activities weighing available positive negative evidence management determined longer likely alcoa corporation realize tax benefit deferred tax assets conclusion based existing cumulative losses short expiration period losses generated result intercompany interest expense company’s global treasury cash management system realization deferred losses associated lmelinked embedded derivative power contract see note interest expense expected continue additional deferred losses associated embedded derivative realized future years result management estimates sufficient taxable income available utilize operating losses expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2015 alcoa corporation recognized 141 discrete income tax charge valuation allowances certain deferred tax assets suriname iceland amount 85 valuation allowance established full value deferred tax assets suriname deferred tax assets relate tax loss carryforwards employee benefits expiration period ranging 2016 2022 remaining 56 charge relates valuation allowance established portion deferred tax assets iceland related tax loss carryforwards expiration period ranging 2017 2019 weighing available positive negative evidence management determined longer likely alcoa corporation realize tax benefit deferred tax assets conclusion mainly driven decline outlook former primary metals business refers smelting casting operations included currently aluminum segment combined prior year cumulative losses short expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances undistributed net earnings cumulative amount alcoa corporation’s foreign undistributed net earnings deemed permanently reinvested approximately 940 december 31 2017 amount relates foreign undistributed net earnings generated prior separation date well approximately 150 certain earnings generated 2017 alcoa corporation several commitments obligations related company’s operations various foreign jurisdictions therefore management plans distribute earnings foreseeable future company continuously evaluates local global cash needs future business operations anticipated debt facilities may influence future repatriation decisions described see us tax cuts jobs act 2017 beginning january 1 2018 dividends received foreign subsidiaries longer subject us federal income tax however mandatory onetime deemed repatriation existing foreign undistributed net earnings 2017 subject either 8 155 tax rate appropriate based preliminary analysis management estimated company sufficient us tax losses foreign tax credits apply tax resulting impact alcoa corporation’s consolidated financial statements accordingly exception potential foreign currency exchange rate differences earnings described subject residual us income tax repatriated future unrecognized tax benefits alcoa corporation subsidiaries file income tax returns us federal jurisdiction various foreign us state jurisdictions exceptions company subject income tax examinations tax authorities years prior 2013 us federal income tax purposes company’s us operations included income tax filings parentco’s us consolidated tax group prior separation date since time company’s us consolidated tax group comprised referenced us operations filed twomonth us federal income tax return examined internal revenue service us federal income tax filings parentco’s us consolidated tax group examined prior years separation date foreign jurisdiction tax authorities process examining income tax returns several company’s subsidiaries various tax years including 2006 2015 us state income tax purposes alcoa corporation subsidiaries remain subject income tax examinations 2013 tax year forward december 31 2017 active examinations reconciliation beginning ending amount unrecognized tax benefits excluding interest penalties follows periods presented portion balance end year pertains state tax liabilities presented offset federal tax benefits effect unrecognized tax benefits recorded would impact annual effective tax rate 2017 2016 2015 would 1 10 4 respectively pretax book income loss alcoa corporation anticipate changes unrecognized tax benefits material impact statement consolidated operations 2018 see tax spain note r matter reserve recognized alcoa corporation’s policy recognize interest penalties related income taxes component provision income taxes accompanying statement consolidated operations 2017 2016 2015 alcoa corporation recognized 1 7 respectively interest penalties due expiration statute limitations settlements tax authorities refunded overpayments alcoa corporation also recognized interest income 6 2 1 2017 2016 2015 respectively december 31 2017 2016 amount accrued payment interest penalties 2 6 respectively us tax cuts jobs act 2017 december 22 2017 us tax legislation known us tax cuts jobs act 2017 “tcja” enacted corporations tcja amends existing us internal revenue code reducing corporate income tax rate modifying several business deduction international tax provisions specifically corporate income tax rate reduced 21 35 significant changes general include following among others mandatory onetime deemed repatriation accumulated foreign earnings see undistributed net earnings either 8 155 tax rate ii dividends received foreign subsidiaries deducted full regardless ownership interest previously dividends fully taxable however foreign withholding tax foreign earnings asserted indefinitely reinvested december 31 2017 must accrued iii 105 tax effective 2018 new category income referred global intangible low tax income related earnings taxed low rate foreign entities without significant fixed asset base iv 5 10 tax effective 2018 base erosion payments deductible crossborder payments related parties exceed 3 company’s deductible expenses v net operating losses unlimited carryforward period previously 20 years carryback period previously 2 years deductions losses limited 80 taxable income previously 100 taxable income beginning 2018 tax year result close proximity enactment date tcja relation company’s calendar yearend management elected january 17 2018 cutoff date purposes recognizing impacts tcja alcoa corporation’s 2017 consolidated financial statements date coincided company’s public release preliminary financial results fourth quarter year ended december 31 2017 accordingly company’s preliminary analysis provisions tcja resulted charge 22 reflected provision income taxes accompanying statement consolidated operations 2017 described company expects finalize analyses tcja provisions 2018 22 charge relates specifically management’s reasonable estimate corporate income tax rate change resulted remeasurement company’s deferred income tax accounts gross basis company reduced deferred tax assets valuation allowance deferred tax liabilities 506 433 51 respectively management also completed preliminary analysis remaining provisions tcja including specifically described order make reasonable estimate cutoff date resulted additional impact company’s 2017 consolidated financial statements specifically reasonable estimate tcja provisions described based following ii iii company’s existing tax profile includes significant current us tax losses would applied taxable income well significant foreign tax credits applied taxes iv management estimates company 3 threshold v company’s deferred income tax assets related us net operating losses fully reserved december 31 2017 company’s preliminary analyses provisional estimates financial statement impacts tcja completed accordance guidance issued sec staff accounting bulletin 118 income tax accounting implications tax cuts jobs act q asset retirement obligations alcoa corporation recorded aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities addition aros certain caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks pcbs various process residuals solid wastes electronic equipment waste various materials alcoa corporation required demolish structures immediately estimated caro december 31 2017 ranges 3 28 per structure 24 structures today’s dollars following table details carrying value recorded aros major category 108 104 classified current liability december 31 2017 2016 respectively 2017 2016 2015 aros recorded result management’s decision permanently close demolish certain structures see note following table details changes total carrying value recorded aros r contingencies commitments unless specifically described contrary matters within note r full responsibility alcoa corporation pursuant separation distribution agreement additionally separation distribution agreement provides crossindemnities company arconic claims subject indemnification contingencies litigation glencoreon june 5 2015 awa st croix alumina llc “sca” filed complaint delaware chancery court declaratory judgment injunctive relief resolve dispute parentco glencore ltd “glencore” respect claimed obligations 1995 asset purchase agreement parentco glencore dispute arose glencore’s demand parentco indemnify liabilities may pay lockheed martin “lockheed” related st croix alumina refinery lockheed earlier filed suit glencore federal court new york seeking indemnity liabilities incurred would incur us virgin islands remediate certain properties refinery property claimed glencore required earlier 1989 purchase agreement indemnify glencore demanded parentco indemnify defend lockheed case threatened claim parentco new york action despite exclusive jurisdiction resolution disputes 1995 purchase agreement delaware glencore conceded seeking add parentco new york action awa sca dismissed complaint chancery court case august 6 2015 filed complaint declaratory judgment delaware superior court awa sca filed motion judgment pleadings september 16 2015 glencore answered awa’s sca’s complaint asserted counterclaims august 27 2015 october 2 2015 filed motion judgment pleadings argument parties’ motions held court december 7 2015 order dated february 8 2016 court granted parentco’s motion denied glencore’s motion resulting parentco liable indemnify glencore lockheed action decision also leaves pretrial discovery possible summary judgment trial glencore’s claims costs fees incurred defending settling earlier superfund action brought glencore government virgin islands february 17 2016 glencore filed notice application interlocutory appeal february 8 2016 ruling awa sca filed opposition application february 29 2016 march 10 2016 court denied glencore’s motion interlocutory appeal day entered judgment claims glencore’s claims costs fees incurred defending settling earlier superfund action brought glencore government virgin islands march 29 2016 glencore filed withdrawal notice interlocutory appeal april 6 2016 glencore filed appeal court’s march 10 2016 judgment delaware supreme court set appeal argument november 2 2016 november 4 2016 delaware supreme court affirmed judgment delaware superior court granting parentco’s motion remaining case glencore’s claims costs fees incurred related previously described superfund action march 7 2017 alcoa corporation glencore agreed principle settle claims march 17 2017 requested granted adjournment court’s scheduled march 21 2017 conference april 5 2017 alcoa glencore entered settlement agreement resolve remaining claims accordingly april 24 2017 court dismissed case request parties amount settlement material matter closed italy 148before 2002 parentco purchased power italy regulated energy market received drawback portion price power special tariff amount calculated accordance published resolution italian energy authority energy authority resolution n 2041999 “2041999” 2001 energy authority published another resolution clarified drawback would calculated manner amount either regulated unregulated market beginning 2002 parentco left regulated energy market purchase energy unregulated market subsequently 2004 energy authority introduced regulation 1482004 set forth different method calculating special tariff would result different drawback regulated unregulated markets parentco challenged new regulation administrative court milan received favorable judgment 2006 following ruling parentco continued receive power price drawback accordance original calculation method 2009 european commission declared special tariffs impermissible “state aid” 2010 energy authority appealed 2006 ruling consiglio di stato final court appeal december 2 2011 consiglio di stato ruled favor energy authority parentco thus presenting opportunity energy regulators seek reimbursement parentco amount equal difference actual drawback amounts received relevant time period drawback would calculated accordance regulation 1482004 february 23 2012 parentco filed appeal decision consiglio di stato appeal subsequently withdrawn march 2013 march 26 2012 parentco received letter agency cassa conguaglio per il settore eletrico ccse responsible making collecting payments behalf energy authority demanding payment amount approximately 110 85 including interest letter dated april 5 2012 parentco informed ccse disputes payment demand ccse since ccse authorized consiglio di stato decisions seek payment amount ii decision consiglio di stato appealed see iii event interest payable april 29 2012 law 44 2012 “442012” came effect changing method calculate drawback february 21 2013 parentco received revised request letter csse demanding parentco’s former subsidiary alcoa trasformazioni srl trasformazioni subsidiary alcoa corporation make payment amount 97 76 including interest reflects revised calculation methodology ccse represents high end range reasonably possible loss associated matter 0 97 76 parentco rejected demand formally challenged appeal administrative court april 5 2013 administrative court scheduled hearing december 19 2013 subsequently postponed april 17 2014 postponed june 19 2014 date administrative court listened parentco’s oral argument september 2 2014 rendered decision administrative court declared payment request ccse energy authority parentco unsubstantiated based 1482004 resolution respect january 19 2007 november 19 2009 timeframe december 18 2014 ccse energy authority appealed administrative court’s september 2 2014 decision date hearing scheduled may 2018 result conclusion european commission matter january 26 2016 see parentco’s management modified outlook respect portion pending legal proceedings related matter charge 37 34 recorded restructuring charges year ended december 31 2015 alcoa corporation’s accompanying statement consolidated operations establish partial reserve matter december 2017 agreement invitalia italian government agency responsible managing economic development alcoa corporation settled matter ccse energy authority 18 15 paid january 2018 accordingly company recorded reduction 22 19 us dollar amount reflects effects foreign currency movements since 2015 previously established reserve restructuring charges see note accompanying statement consolidated operations january 2018 subsequent making previously referenced payment alcoa corporation respective state attorney italy filed joint request administrative court matter formally dismissed parties awaiting notice additional terms agreement include transfer ownership portovesme smelter permanently closed 2014 company invitalia settlement groundwater remediation project see fusina portovesme italy environmental matters also alcoa retain previously accrued asset retirement obligations related parentco’s previous decision demolish portovesme smelter however liabilities may reduced upon invitalia achieving certain milestones related future smelter carrying value assets related portovesme site previously written zero result parentco’s decision 2014 permanently close smelter european commission matter july 2006 european commission ec announced opened investigation establish whether extension regulated electricity tariff granted italy energyintensive industries complied european union eu state aid rules italian power tariff extended tariff force december 31 2005 november 19 2009 parentco incurring higher power costs smelters italy subsequent tariff end date end 2012 extension originally 2010 date changed legislation adopted italian parliament effective august 15 2009 prior expiration tariff 2005 parentco operating italy 10 years power supply structure approved ec 1996 measure provided competitive power supply primary aluminum industry considered state aid italian government ec’s announcement expressed concerns whether italy’s extension tariff beyond 2005 compatible eu legislation potentially distorted competition european market primary aluminum energy important part production costs november 19 2009 ec announced decision matter stating extension tariff italy constituted unlawful state aid part therefore italian government recover portion benefit parentco received since january 2006 including interest amount recovery based calculation prepared italian government see late 2009 discussions legal counsel reviewing bases ec decided including different considerations cited ec decision regarding parentco’s two smelters italy parentco recorded charge 250 173 included 20 14 write receivable italian government amounts due expired tariff structure 230 159 establish reserve april 19 2010 parentco filed appeal decision general court eu see prior 2012 parentco involved legal proceedings related matter separately sought annulment ec’s july 2006 decision open investigation alleging decision follow applicable procedural rules requested injunctive relief suspend effectiveness ec’s november 19 2009 decision however decisions general court subsequent appeals european court justice resulted denial remedies june 2012 parentco received formal notification italian government calculated recovery amount 375 303 amount reduced 65 53 amounts owed italian government parentco resulting net payment request 310 250 notice published official journal european union september 22 2012 ec announced filed action italian government july 18 2012 compel collect recovery amount october 17 2013 european court justice ordered italy collect september 27 2012 parentco received request payment full 310 250 october 31 2012 following discussions italian government regarding timing payment parentco paid requested amount five quarterly installments 69 50 beginning october 2012 december 2013 october 16 2014 parentco received notice general court eu april 19 2010 appeal ec’s november 19 2009 decision denied december 27 2014 parentco filed appeal general court’s october 16 2014 ruling european court justice ecj following submission ec’s response appeal june 10 2015 parentco filed request oral hearing ecj decision request received january 26 2016 parentco informed ecj dismissed parentco’s december 27 2014 appeal general court’s october 16 2014 ruling dismissal parentco’s appeal represents conclusion legal proceedings matter prior dismissal parentco noncurrent asset 100 91 reflecting excess total five payments made italian government reserve recorded 2009 result noncurrent asset along 58 53 amounts owed italian government parentco mentioned plus 6 6 interest previously paid writtenoff charge 164 150 recorded restructuring charges year ended december 31 2015 alcoa corporation’s accompanying statement consolidated operations see note result ec’s november 19 2009 decision parentco’s management contemplated ceasing operations italian smelters due uneconomical power costs february 2010 parentco’s management agreed continue operate smelters italy six months longterm solution address increased power costs could negotiated portion time longterm solution able reached related fusina smelter therefore may 2010 parentco italian government agreed temporary idling fusina smelter september 30 2010 fusina smelter fully curtailed 44000 metrictonsperyear portovesme smelter parentco executed new power agreement effective september 1 2010 december 31 2012 replacing shortterm marketbased power contract effect since early 2010 new agreement along interruptibility rights ie compensation power interruptions grids overloaded granted parentco portovesme smelter provided additional time negotiate longterm solution ec previously determined interruptibility rights considered state aid end 2011 part restructuring parentco’s global smelting system parentco’s management decided curtail operations portovesme smelter 2012 due uncertain prospects viable longterm power along rising raw materials costs falling global aluminum prices mid2011 late 2011 december 31 2012 portovesme smelter fully curtailed 150000 metrictonsperyear june 2013 august 2014 parentco decided permanently shut demolish fusina portovesme smelters respectively due persistent uneconomical conditions environmental matters alcoa corporation participates environmental assessments cleanups several locations include owned operating facilities adjoining properties previously owned operating facilities adjoining properties waste sites including superfund comprehensive environmental response compensation liability act cercla sites liability recorded environmental remediation cleanup program becomes probable costs reasonably estimated assessments cleanups proceed liability adjusted based progress made determining extent remedial actions related costs liability change substantially due factors among others nature extent contamination changes remedial requirements technological changes alcoa corporation’s remediation reserve balance 294 324 december 31 2017 2016 36 60 classified current liability respectively reflects probable costs remediate identified environmental conditions costs reasonably estimated 2017 remediation reserve increased 1 due charge 8 related planned demolition rockdale smelter see note combined reduction 6 related baie comeau mosjøen locations see reversal 4 related restart warrick smelter see note net charge 3 associated several sites 2016 remediation reserve increased 39 due charge 26 related planned demolition suriname refinery permanent closure related bauxite mines see note net charge 13 associated several sites 2015 remediation reserve increased 107 due charge 52 related planned demolition remaining structures massena east smelter location see note charge 29 related planned demolition poços de caldas smelter anglesea power station see note charge 12 related mosjøen location see charge 7 related portovesme location see net charge 7 associated several sites changes remediation reserve 2017 2016 2015 4 26 86 respectively recorded restructuring charges remainder recorded cost goods sold accompanying statement consolidated operations payments related remediation expenses applied reserve 48 32 24 2017 2016 2015 respectively amounts include expenditures currently mandated well required regulatory authority third party 2017 change reserve also reflects increase 17 including 11 due effects foreign currency translation 5 reclassification amount previously included asset retirement obligations alcoa corporation’s consolidated balance sheet december 31 2016 change reserve also reflects increase following 60 obligations transferred parentco connection separation transaction november 1 2016 including sherwin east st louis described 17 reclassification amounts included reserves within noncurrent liabilities deferred credits alcoa corporation’s consolidated balance sheet december 31 2015 5 due effects foreign currency translation 2015 change reserve also reflects decrease 13 due effects foreign currency translation separation distribution agreement includes provisions assignment allocation environmental liabilities alcoa corporation arconic including certain remediation obligations associated environmental matters general respective parties responsible environmental matters associated operations properties assets assigned additionally separation distribution agreement lists environmental matters shared responsibility two companies allocation responsibility lead party responsible management matter matters assigned alcoa corporation arconic separation distribution agreement alcoa corporation arconic agreed indemnify arconic alcoa corporation whole part environmental liabilities arising operations prior separation date following description provides details regarding current status certain significant reserves related current former alcoa corporation sites exception fusina italy matter alcoa corporation assumed full responsibility matters described generalthe company process decommissioning various plants several countries result redeveloping sites reuse returning land natural state requires performance certain remediation activities aggregate majority activities completed various times future latest expected 2026 afterwhich ongoing monitoring activities required december 31 2017 2016 reserve balance associated activities 150 141 respectively sherwin txin connection parentco’s sale sherwin alumina refinery required divested part parentco’s acquisition reynolds metals company 2000 parentco agreed retain responsibility remediation existing environmental conditions well pro rata share final closure active bauxite residue waste disposal areas known copano facility parentco obligations regarding sherwin refinery copano facility transferred parentco alcoa corporation part separation transaction november 1 2016 february 2017 current owner sherwin alumina refinery copano facility received court approval reorganization chapter 11 us bankruptcy code see bankruptcy proceedings owner sherwin exercised right us bankruptcy code reject agreement 2000 containing previously mentioned retained responsibility effect terminating rights responsibilities parties agreement company continues involved legal dispute owner sherwin related allocation responsibility environmental obligations site time unclear ultimate outcome matter result change alcoa corporation’s reserve december 31 2017 2016 reserve balance associated sherwin 29 30 respectively baie comeau quebec canadain august 2012 parentco presented analysis remediation alternatives quebec ministry sustainable development environment wildlife parks mddep response previous request related known polychlorinated biphenyls pcbs polycyclic aromatic hydrocarbons pahs contained sediments anse du moulin bay parentco increased reserve baie comeau 25 2012 reflect estimated cost parentco’s recommended alternative consisting dredging capping contaminated sediments july 2013 parentco submitted environmental impact assessment project mddep notified parentco project submitted approved final ministerial decree issued july 2015 result adjustment reserve required 2015 decree provided final approval project parentco began work final project design time alcoa corporation began construction project april 2017 completed work december 2017 end 2017 company decreased reserve baie comeau 4 reflect final cost estimate remaining project work december 31 2017 2016 reserve balance associated matter 5 24 respectively fusina portovesme italyin 1996 parentco acquired fusina smelter rolling operations portovesme smelter owned parentco’s former subsidiary alcoa trasformazioni srl “trasformazioni” trasformazioni subsidiary alcoa corporation owns fusina smelter portovesme smelter sites fusina rolling srl new parentco subsidiary owns fusina rolling operations alumix entity owned italian government time acquisition alumix indemnified parentco preexisting environmental contamination sites 2004 italian ministry environment protection land sea moe issued orders trasformazioni alumix development cleanup plan related soil contamination excess allowable limits legislative decree institute emergency actions pay natural resource damages trasformazioni appealed orders filed suit alumix among others seeking indemnification liabilities provisions acquisition agreement 2009 ligestra srl “ligestra” alumix’s successor trasformazioni agreed stay court proceedings investigations conducted negotiations advanced towards possible settlement december 2009 trasformazioni ligestra reached initial agreement settlement liabilities related fusina operations negotiations continued related portovesme see agreement outlined allocation payments moe emergency action natural resource damages scope costs proposed soil remediation project formally presented moe mid2010 agreement contingent upon final acceptance remediation project moe result entering agreement parentco increased reserve 12 2009 fusina based comments received moe local regional environmental authorities trasformazioni submitted revised remediation plan first half 2012 however revisions require change existing reserve october 2013 moe approved project submitted parentco resulting adjustment reserve january 2014 anticipation parentco reaching final administrative agreement moe parentco ligestra entered final agreement related fusina allocation payments moe emergency action natural resource damages costs approved soil remediation project agreement resulted ligestra assuming 50 80 payments remediation costs february 27 2014 parentco moe reached final administrative agreement conduct work agreement includes soil groundwater remediation project estimated cost 33 24 requires payments 25 18 moe emergency action natural resource damages based final agreement ligestra parentco’s share costs payments 17 12 9 6 related damages paid annually 10year period began april 2014 previously fully reserved march 30 2017 moe provided authorization trasformazioni dispose excavated waste thirdparty landfill work began october 25 2017 responsibility execution groundwater remediation projectemergency containment transferred moe accordance february 2014 settlement agreement remediation slated begin 2019 december 31 2017 2016 reserve balance associated matters 8 7 respectively effective separation transaction arconic retained portion obligation related fusina rolling operations specifically separation distribution agreement trasformazioni fusina properties assigned alcoa corporation fusina rolling srl entered lease agreement portion property included rolling operation pursuant separation distribution agreement liabilities fusina described allocated alcoa corporation trasformazioni arconic fusina rolling srl arconic pay 7 7 portion remediation expenses associated section property includes rolling operation project completed separately 2009 due additional information derived site investigations conducted portovesme parentco increased reserve 3 november 2011 trasformazioni ligestra reached agreement settlement liabilities related portovesme similar one fusina proposed soil remediation project portovesme formally presented moe june 2012 neither agreement ligestra proposal moe resulted change reserve portovesme november 2013 moe rejected proposed soil remediation project requested revised project submitted may 2014 trasformazioni ligestra submitted revised soil remediation project addressed certain stakeholders’ concerns parentco increased reserve 3 2014 reflect estimated higher costs associated revised soil remediation project well current operating maintenance costs portovesme site october 2014 moe required revised project submitted reflect removal larger volume contaminated soil proposed well design changes cap related remaining contaminated soil left place expansion emergency containment groundwater pump treatment system previously installed trasformazioni ligestra submitted revised soil remediation project february 2015 result parentco increased reserve 7 march 2015 reflect increase estimated costs project october 2015 parentco received final ministerial decree approving february 2015 revised soil remediation project work soil remediation project commenced mid2016 expected completed 2019 groundwater remediation project part recent settlement outstanding matters italy see italy 148 litigation moe confirmed percentage project costs among responsible parties including alcoa corporation although total cost determined final remedial design completed late 2018 ultimate outcome matter may result change existing reserve portovesme mosjøen norwayin september 2012 parentco presented analysis remediation alternatives norwegian environmental agency nea formerly norwegian climate pollution agency “klif” response previous request related known pahs sediments located harbor extending fjord parentco increased reserve mosjøen 20 2012 reflect estimated cost baseline alternative dredging contaminated sediments proposed project reflecting alternative formally presented nea june 2014 resubmitted late 2014 reflect changes nea revised proposal result change reserve mosjøen april 2015 nea notified parentco revised project approved required submission final project design issuing final order parentco completed submitted final project design identified need stabilize related wharf structure allow sediment dredging harbor result parentco increased reserve mosjøen 11 june 2015 reflect estimated cost wharf stabilization also june 2015 nea issued final order approving project well final project design september 2015 parentco increased reserve 1 reflect potential need based prior experience similar projects perform additional dredging results sampling required order don’t achieve required cleanup levels project construction commenced early 2016 expected completed 2018 second half 2017 alcoa corporation reduced reserve associated matter 2 based revised cost estimate remaining project work december 31 2017 2016 reserve balance associated matter 2 8 respectively east st louis ilparentco ongoing remediation project related area used disposal bauxite residue former alumina refining operations project selected epa record decision rod issued july 2012 aimed implementing soil cover affected area november 1 2013 us department justice lodged consent decree behalf us environmental protection agency epa parentco conduct work outlined rod consent decree entered final february 2014 us department justice result parentco began construction march 2014 fieldwork majority project completed end june 2016 completion report approved epa september 2016 matter completed portion project transitioned longterm approximately 30 years inspection maintenance monitoring program fieldwork remaining portion project expected completed 2019 time would also transition longterm inspection maintenance monitoring program obligation transferred parentco alcoa corporation part separation transaction november 1 2016 december 31 2017 2016 reserve balance associated matter 4 tax spainin september 2010 following corporate income tax audit covering 2003 2005 tax years assessment received result spain’s tax authorities disallowing certain interest deductions claimed spanish consolidated tax group owned parentco appeal assessment spain’s central tax administrative court parentco denied october 2013 december 2013 parentco filed appeal assessment spain’s national court additionally following corporate income tax audit spanish tax group 2006 2009 tax years spain’s tax authorities issued assessment july 2013 similarly disallowing certain interest deductions august 2013 parentco filed appeal second assessment spain’s central tax administrative court denied january 2015 parentco filed appeal second assessment spain’s national court march 2015 january 16 2017 spain’s national court issued decision favor company related assessment received september 2010 march 6 2017 company notified spain’s tax authorities file appeal deadline passed result assessment related 2003 2005 tax years null void spain’s national court yet rendered decision related assessment received july 2013 2006 2009 tax years amount assessment standalone basis including interest 155 130 december 31 2017 company believes meritorious arguments support tax position intends vigorously litigate remaining assessment spain’s court system however event company unsuccessful portion remaining assessment may offset existing tax loss carryforwards available spanish consolidated tax group would shared company arconic provided tax matters agreement related separation transaction additionally possible company may receive similar assessments tax years subsequent 2009 see despite favorable decision received first assessment time company unable reasonably predict ultimate outcome matter spanish consolidated tax group audit began september 2015 2010 2013 tax years spain’s tax authorities neared end audit informed alcoa corporation arconic intent issue assessment similarly disallowing certain interest deductions two assessments described august 3 2017 lieu receiving formal assessment parties agreed settlement related 2010 2013 tax years alcoa corporation settlement material company’s consolidated financial statements given stage appeal assessment 2006 2009 tax years spain’s national court settlement 2010 2013 tax years impact ultimate outcome proceeding brazil awabin march 2013 awab notified brazilian federal revenue office rfb approximately 110 r220 value added tax credits previously claimed disallowed penalty 50 assessed amount awab received 41 r82 cash may 2012 value added tax credits claimed awab fixed assets export sales related juruti bauxite mine são luís refinery expansion rfb disallowed credits allege belong consortium awab owns interest claimed awab credits also disallowed result challenges apportionment methods used questions use credits alleged lack documented proof awab presented defense claim rfb april 8 2013 awab successful administrative process rfb would recourse unsuccessful process awab option litigate judicial level separately awab’s administrative appeal june 2015 new tax law enacted repealing provisions tax code basis rfb assessing 50 penalty matter estimated range reasonably possible loss 0 31 r103 whereby maximum end range represents portion disallowed credits applicable export sales excludes 50 penalty additionally estimated range disallowed credits related awab’s fixed assets 0 35 r117 would increase net carrying value awab’s fixed assets ultimately disallowed management’s opinion allegations basis however time company unable reasonably predict ultimate outcome matter brazil alumíniobetween 2000 2002 alumínio sold approximately 2000 metric tons metal per month poços de caldas facility located state minas gerais “state” brazil alfio customer also located state sales state exempted valueadded tax vat requirements alfio subsequently sold metal customers outside state pay required vat transactions july 2002 alumínio received assessment state auditors theory alumínio jointly severally liable alfio unpaid vat june 2003 administrative tribunal found alumínio liable alumínio filed judicial case state february 2004 contesting finding may 2005 court first instance found alumínio solely liable panel state appeals court confirmed finding april 2006 alumínio filed special appeal superior tribunal justice stj brasilia federal capital brazil later 2006 2011 stj one judges reversed judgment lower courts finding alumínio neither solely jointly severally liable alfio vat ruling appealed state august 2012 stj agreed case reheard fivejudge panel february 21 2017 lead judge stj issued ruling confirming alumínio held liable matter march 16 2017 alumínio filed appeal case reheard fivejudge panel originally agreed stj august 2012 separately june 2017 state opened tax amnesty program end august 2017 alumínio elected submit matter consideration amnesty program state approved result terms amnesty program matter settled 8 r25 2017 charge settlement amount recorded cost goods sold accompanying statement consolidated operations prior submitting matter consideration amnesty program assessment including penalties interest totaled 46 r145 matter closed january 11 2016 sherwin alumina company llc “sherwin” current owner refinery previously owned parentco see one affiliate entities filed bankruptcy petitions corpus christi texas reorganization chapter 11 us bankruptcy code sherwin informed bankruptcy court intends cease operations able continue bauxite supply agreement november 23 2016 bankruptcy court approved sherwin’s plans cessation operations february 16 2017 sherwin filed bankruptcy chapter 11 plan “plan” february 17 2017 court approved plan 2000 parentco acquired reynolds metals company “reynolds” subsidiary alcoa corporation included alumina refinery gregory texas condition reynolds acquisition parentco required divest alumina refinery accordance terms divestiture 2000 parentco agreed retain responsibility certain environmental obligations see environmental matters assigned buyer energy services agreement “esa” gregory power partners “gregory power” purchase steam electricity refinery result sherwin’s initial bankruptcy filing separate legal actions initiated reynolds gregory power sherwin follows gregory poweron january 26 2016 gregory power delivered notice reynolds sherwin’s bankruptcy filing constitutes breach esa january 29 2016 reynolds responded filing constitute breach september 16 2016 gregory power filed complaint bankruptcy case reynolds alleging breach esa response complaint november 10 2016 reynolds filed motion dismiss including jury demand motion withdraw reference bankruptcy court based jury demand july 18 2017 district court ordered trial would held jury district court bankruptcy court would retain jurisdiction pretrial matters time alcoa corporation unable reasonably predict ultimate outcome matter sherwinon october 4 2016 state texas filed suit sherwin bankruptcy proceeding seeking hold sherwin responsible remediation alleged environmental conditions facility october 11 2016 sherwin filed similar suit reynolds case provided plan sherwin including certain affiliated companies reynolds negotiating allocation among ownership responsibility certain areas refinery related bauxite residue waste disposal areas upon agreed stipulations filed parties bankruptcy court extended deadline negotiate file settlement several times currently scheduled march 12 2018 time alcoa corporation unable reasonably predict ultimate outcome matter general addition matters discussed various lawsuits claims proceedings may instituted asserted alcoa corporation including pertaining environmental product liability safety health contract dispute tax matters actions claims arising normal course business amounts claimed matters may substantial ultimate liability cannot determined considerable uncertainties exist therefore possible company’s liquidity results operations particular period could materially affected one matters however based facts currently available management believes disposition matters pending asserted material adverse effect individually aggregate financial position company commitments purchase obligations alcoa corporation party unconditional purchase obligations energy expire 2028 2037 commitments related contracts total 176 2018 180 2019 186 2020 192 2021 199 2022 2824 thereafter expenditures contracts totaled 199 2017 181 2016 125 2015 additionally alcoa corporation entered purchase commitments energy raw materials goods services total 2296 2018 1946 2019 1498 2020 1343 2021 1302 2022 11433 thereafter april 8 2015 aofa secured new 12year gas supply agreement power three alumina refineries western australia beginning july 2020 agreement conditional completion thirdparty acquisition related energy assets thencurrent owner occurred june 2015 terms gas supply agreement required aofa make prepayment 500 two installments first installment 300 made time completion thirdparty acquisition june 2015 second installment 200 made april 2016 amounts included increase noncurrent assets accompanying statement consolidated cash flows respective periods december 31 2017 2016 alcoa corporation asset 510 a654 471 a654 respectively included noncurrent assets see note accompanying consolidated balance sheet operating leases certain land buildings alumina refinery process control technology plant equipment vehicles computer equipment operating lease agreements total expense leases 101 2017 90 2016 98 2015 longterm operating leases minimum annual rentals 94 2018 73 2019 58 2020 47 2021 15 2022 21 thereafter guarantees third parties december 31 2017 alcoa corporation maximum potential future payments guarantees issued behalf third party 177 guarantees expire various times 2018 2024 relate project financing aluminum complex saudi arabia see note h bank guarantees letters credit alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties total amount committed instruments automatically renew expire various dates 2018 2022 543 includes 112 issued oneyear agreement see december 31 2017 additionally arconic outstanding bank guarantees letters credit related alcoa corporation amount 29 december 31 2017 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise alcoa corporation outstanding bank guarantees letters credit related arconic amount 18 december 31 2017 event alcoa corporation would required perform instruments alcoa corporation would indemnified arconic accordance separation distribution agreement august 2017 alcoa corporation entered oneyear standby letter credit agreement three financial institutions agreement provides 150 facility used alcoa corporation matters ordinary course business alcoa corporation’s obligations facility secured manner obligations company’s amended revolving credit agreement see note l additionally facility contains similar representations warranties affirmative negative financial covenants company’s amended revolving credit agreement see note l december 31 2017 letters credit aggregating 112 issued facility letters credit previously issued 2017 standalone basis surety bonds alcoa corporation outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2018 122 december 31 2017 additionally arconic outstanding surety bonds related alcoa corporation amount 14 december 31 2017 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement financial information interest cost components income expenses net 2017 net gain asset sales included 122 gain related sale yadkin see note c 2016 net gain asset sales included 118 gain related sale wharf property near intalco washington smelter 27 gain related sale equity interest natural gas pipeline australia see note h 2015 net gain asset sales included 29 gain related sale land around lake charles louisiana anode facility noncurrent assets 1 valueadded tax credits relate two company’s subsidiaries brazil awab alumínio 2 december 31 2016 amount reflects asset impairment 72 see note noncurrent liabilities deferred credits early 2014 parentco one alcoa’s corporation’s current subsidiaries awa resolved violations certain provisions foreign corrupt practices act 1977 us department justice us securities exchange commission resolution parentco awa agreed pay combined 384 fouryear timeframe prior separation transaction parentco awa paid 236 total amount part separation distribution agreement alcoa corporation assumed parentco’s portion 148 remaining obligation 148 paid equal installments 74 january 2017 january 2018 cash flow information cash paid interest income taxes follows noncash financing investing activities september 2016 anhbv issued 1250 new senior notes see note l preparation separation transaction net proceeds 1228 debt issuance required placed escrow contingent completion separation transaction result 1228 escrowed cash recorded restricted cash issuance new senior notes increase restricted cash amount 1228 reflected accompanying statement consolidated cash flows represent noncash financing investing activities respectively subsequent release 1228 escrow occurred october 31 2016 decrease restricted cash reflected accompanying statement consolidated cash flows cash inflow net change restricted cash line item subsequent events management evaluated activity alcoa corporation concluded subsequent events occurred would require recognition consolidated financial statements disclosure notes consolidated financial statements except described january 17 2018 company communicated retirement benefit changes certain us canadian employees effective january 1 2021 salaried us canadian employees participants company’s defined benefit pension plans cease accruing retirement benefits future service change affect approximately 800 employees transitioned countryspecific defined contribution plans company contribute 3 participants’ eligible earnings annual basis contributions incremental employer savings match employees may receive existing defined contribution plans participants already collecting benefits defined benefit pension plans well currently covered collective bargaining agreements affected changes also effective january 1 2021 alcoa corporation longer contribute premedicare retiree medical coverage us salaried employees retirees result changes alcoa corporation expects record curtailment gain approximately 20 pretax 2018 reduction company’s net pension postretirement benefits liability approximately 35 separately alcoa expects make discretionary contributions approximately 300 combined us canadian defined benefit pension plans 2018 company intends contributions used purchase annuity contracts approximately 9000 retirees instruments allow company transfer risk lower costs related defined benefit pension plans times annuity contracts purchased alcoa corporation record settlement charge part net periodic benefit cost defined benefit pension plans supplemental financial information unaudited quarterly data millions except pershare amounts 1 per share amounts calculated independently period presented therefore sum quarterly per share amounts may equal per share amounts year 2 fourth quarter 2017 alcoa corporation recorded restructuring charges 297 pretax primarily related termination power contract associated permanent closure rockdale texas smelter see note discrete income tax charges 98 valuation allowance certain nonus deferred tax assets remeasurement certain nonus deferred tax assets due tax rate change remeasurement us deferred tax assets liabilities new corporate income tax rate 21 2017 tax cuts jobs act signed law december 22 2017 see note p fourth quarter 2016 alcoa corporation recorded restructuring charges 209 pretax primarily related closure suriname refinery related bauxite mines impairment interest gas exploration field australia see note item 9item 8 financial statements supplementary data management’s reports alcoa corporation stockholders management’s report financial statements practices accompanying consolidated financial statements alcoa corporation subsidiaries “company” prepared management responsible integrity objectivity accordance accounting principles generally accepted united states america gaap include amounts based management’s best judgments estimates financial information included company’s annual report form 10k year ended december 31 2018 consistent financial statements management recognizes responsibility conducting company’s affairs according highest standards personal corporate conduct responsibility characterized reflected key policy statements issued time regarding among things conduct business activities within laws host countries company operates potentially conflicting outside business interests employees company maintains systematic program assess compliance policies management’s report internal control financial reporting management responsible establishing maintaining adequate internal control financial reporting defined rules 13a15f 15d15f us securities exchange act 1934 amended company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance gaap company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance gaap receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate management conducted assessment evaluate effectiveness company’s internal control financial reporting december 31 2018 using criteria internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission based assessment management concluded company maintained effective internal control financial reporting december 31 2018 pricewaterhousecoopers llp independent registered public accounting firm audited effectiveness company’s internal control financial reporting december 31 2018 stated report included herein roy c harvey roy c harvey president chief executive officer william f oplinger william f oplinger executive vice president chief financial officer february 25 2019 report independent registered public accounting firm shareholders board directors alcoa corporation opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets alcoa corporation subsidiaries “company” december 31 2018 2017 related consolidated statements operations comprehensive income loss changes equity cash flows three years period ended december 31 2018 including related notes collectively referred “consolidated financial statements” also audited company’s internal control financial reporting december 31 2018 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company december 31 2018 2017 results operations cash flows three years period ended december 31 2018 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 31 2018 based criteria established internal controlintegrated framework 2013 issued coso change accounting principle discussed note b heading “recently adopted accounting guidance” company changed manner presents restricted cash statement consolidated cash flows 2018 basis opinions company’s management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinions company’s consolidated financial statements company’s internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp pricewaterhousecoopers llp pittsburgh pennsylvania february 25 2019 served company’s auditor since 2015 alcoa corporation subsidiaries statement consolidated operations millions except pershare amounts accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated comprehensive income loss millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries consolidated balance sheet millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated cash flows millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement changes consolidated equity millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries notes consolidated financial statements dollars millions except pershare amounts metric tons thousands kmt basis presentation alcoa corporation “company” vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation company 40 operating locations direct indirect ownership 10 countries around world situated primarily australia brazil canada iceland norway spain united states references notes “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic separation transaction november 1 2016 “separation date” parentco separated two standalone publiclytraded companies alcoa corporation arconic effective 1201 eastern standard time “separation transaction” alcoa corporation includes alumina primary metals segments comprised bauxite mining alumina refining aluminum smelting casting energy operations parentco well warrick indiana rolling operations 251 equity interest rolling mill joint venture saudi arabia part parentco’s global rolled products segment arconic includes operations comprise global rolled products except aforementioned rolling operations included alcoa corporation engineered products solutions transportation construction solutions segments parentco shareholders record close business october 20 2016 “record date” received one share alcoa corporation common stock representing aggregate 801 common stock company every three shares parentco common stock held close business record date cash paid parentco its’ shareholders lieu fractional shares arconic retained remaining 199 alcoa corporation common stock arconic sold retained interest 2017 effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting cash payment 1072 parentco alcoa corporation additional 247 paid arconic company 2017 including 243 associated sale certain alcoa corporation’s energy operations see note c net proceeds previous debt offering see note l additionally 146159428 shares 36311767 shares company’s common stock distributed parentco shareholders retained arconic respectively “regularway” trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” company’s common stock par value 001 per share connection separation transaction alcoa corporation arconic entered certain agreements implement legal structural separation two companies govern relationship company arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations including among things employee benefits environmental liabilities intellectual property taxrelated assets liabilities agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement parentco incurred costs evaluate plan execute separation transaction alcoa corporation allocated pro rata portion costs based segment revenue see cost allocations parentco recognized 152 january 2016 october 2016 costs related separation transaction 68 allocated alcoa corporation allocated amounts included selling general administrative expenses accompanying statement consolidated operations basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap accordance gaap certain situations require management make estimates based judgments assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters certain amounts previously issued financial statements reclassified conform current period presentation see recently adopted accounting guidance note b principles consolidation consolidated financial statements company include accounts alcoa corporation companies alcoa corporation controlling interest including comprise alcoa world alumina chemicals awac joint venture see intercompany transactions eliminated equity method accounting applied investments affiliates joint ventures company significant influence effective control investments affiliates alcoa corporation cannot exercise significant influence accounted cost method awac unincorporated global joint venture alcoa corporation alumina limited consists several affiliated operating entities interest operate bauxite mines alumina refineries within company’s bauxite alumina segments except poços de caldas mine refinery portion são luís refinery brazil portion 55 portland smelter australia within company’s aluminum segment alcoa corporation owns 60 alumina limited owns 40 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alúmina española sa española alumina limited’s interest equity entities reflected noncontrolling interest accompanying consolidated balance sheet 2018 2017 2016 awac received 149 80 48 respectively contributions alumina limited management evaluates whether alcoa corporation entity interest variable interest entity whether company primary beneficiary consolidation required criteria met alcoa corporation variable interest entities requiring consolidation prior separation date company operate separate standalone entity alcoa corporation’s operations included parentco’s financial results accordingly periods prior separation date accompanying consolidated financial statements prepared parentco’s historical accounting records presented standalone basis alcoa corporation’s operations conducted independently parentco consolidated financial statements include historical operations considered comprise alcoa corporation’s businesses well certain assets liabilities historically held parentco’s corporate level specifically identifiable otherwise attributable alcoa corporation parentco’s net investment operations reflected parent company net investment accompanying consolidated financial statements significant transactions accounts within alcoa corporation eliminated significant intercompany transactions parentco alcoa corporation included within parent company net investment accompanying consolidated financial statements cost allocations description information cost allocations applicable periods included accompanying consolidated financial statements prior separation date consolidated financial statements alcoa corporation include general corporate expenses parentco historically charged alcoa corporation certain support functions provided centralized basis expenses related finance audit legal information technology human resources communications compliance facilities employee benefits compensation research development activities general corporate expenses included accompanying statement consolidated operations within cost goods sold selling general administrative expenses research development expenses allocated alcoa corporation basis direct usage identifiable remainder allocated based alcoa corporation’s segment revenue percentage parentco’s total segment revenue alcoa corporation arconic external debt directly attributable alcoa corporation excluded company’s consolidated balance sheet financing costs related debt obligations allocated alcoa corporation based ratio capital invested alcoa corporation total capital invested parentco alcoa corporation arconic included accompanying statement consolidated operations within interest expense following table reflects allocations described 1 allocation principally relates expenses parentco’s retained pension postretirement benefits associated closed sold operations 2 allocation includes costs incurred parentco associated separation transaction see separation transaction management believes assumptions regarding allocation parentco’s general corporate expenses financing costs reasonable nevertheless consolidated financial statements alcoa corporation may include actual expenses would incurred may reflect company’s consolidated results operations financial position cash flows standalone company periods prior separation date actual costs would incurred alcoa corporation standalone company would depend multiple factors including organizational structure capital structure strategic decisions made various areas including information technology infrastructure transactions alcoa corporation parentco considered effectively settled cash time transaction recorded total net effect settlement transactions reflected accompanying statement consolidated cash flows financing activity alcoa corporation’s consolidated balance sheet parent company net investment cash management description information cash management applicable periods included consolidated financial statements prior separation date cash managed centrally certain net earnings reinvested locally working capital requirements met existing liquid funds accordingly cash equivalents held parentco corporate level attributed alcoa corporation periods prior separation date cash amounts specifically attributable alcoa corporation reflected company’s consolidated balance sheet transfers cash parentco’s centralized cash management system reflected component parent company net investment alcoa corporation’s consolidated balance sheet financing activity accompanying consolidated statement cash flows parentco arrangement several financial institutions sell certain customer receivables without recourse revolving basis sale receivables completed use bankruptcyremote specialpurpose entity consolidated subsidiary parentco connection arrangement certain alcoa corporation’s customer receivables sold revolving basis bankruptcyremote subsidiary parentco sales reflected component parent company net investment alcoa corporation’s consolidated balance sheet parentco participated several accounts payable settlement arrangements certain vendors thirdparty intermediaries arrangements provided vendor’s request thirdparty intermediary advance amount scheduled payment vendor less appropriate discount scheduled payment date parentco made payment thirdparty intermediary date stipulated accordance commercial terms negotiated vendors connection arrangements certain alcoa corporation’s accounts payable settled vendor’s request scheduled payment date settlements reflected component parent company net investment alcoa corporation’s consolidated balance sheet related party transactions alcoa corporation buys products sells products various related companies consisting entities company retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented b summary significant accounting policies cash equivalents cash equivalents highly liquid investments purchased original maturity three months less inventory valuation inventories carried lower cost market cost substantial portion us inventories small portion canadian inventories determined lastin firstout lifo method cost inventories principally determined averagecost method effective january 1 2019 alcoa corporation discontinue use lifo method referenced inventories cost inventories determined averagecost method accordance gaap prior periods presented company’s consolidated financial statements recast retroactively apply inventory costing change alcoa corporation still finalizing change accounting principle however management expect inventory costing change material impact company’s statement consolidated operations year ended december 31 2018 properties plants equipment properties plants equipment recorded cost also interest related construction qualifying assets capitalized part construction costs depreciation recorded principally straightline method rates based estimated useful lives assets greenfield assets ie construction new assets undeveloped land units production method used record depreciation assets require significant period generally greater oneyear rampup full production capacity result units production method deemed systematic rational method recognizing depreciation assets depreciation recorded temporarily idled facilities time management approves permanent closure following table details weightedaverage useful lives structures machinery equipment type operation numbers years repairs maintenance charged expense incurred gains losses sale assets generally recorded expenses income net properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable recoverability assets determined comparing estimated undiscounted net cash flows operations related assets asset group carrying amount impairment loss would recognized carrying amount assets asset group exceeds estimated undiscounted net cash flows amount impairment loss recorded calculated excess carrying value assets asset group fair value fair value determined using best information available generally discounted cash flow dcf model determination constitutes asset group associated estimated undiscounted net cash flows estimated useful lives assets also require significant judgments equity investments alcoa corporation invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations alcoa corporation ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable analysis requires significant amount judgment management identify events circumstances indicating equity investment impaired following items examples impairment indicators significant sustained declines investee’s revenue earnings cash flow trends adverse market conditions investee’s industry geographic area investee’s ability continue operations measured several items including liquidity factors impairment indicator identified management uses considerable judgment determine impairment temporary case equity investment written estimated fair value impairment temporary could significantly adversely impact reported results operations deferred mining costs alcoa corporation recognizes deferred mining costs development stage mine life cycle costs include construction access haul roads detailed drilling geological analysis define grade quality known bauxite overburden removal costs relate sections related mines alcoa corporation either currently extracting bauxite preparing production near term sections outlined planned incrementally generally mined periods ranging one five years depending mine specifics amount geological drilling testing necessary determine economic viability bauxite deposit mined reserves considered proven mining costs amortized based level reserves deferred mining costs included noncurrent assets accompanying consolidated balance sheet goodwill intangible assets goodwill amortized instead reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business significant amount judgment involved determining indicator impairment occurred indicators may include among others deterioration general economic conditions negative developments equity credit markets adverse changes markets entity operates increases input costs negative effect earnings cash flows trend negative declining cash flows multiple periods fair value could realized actual transaction may differ used evaluate goodwill impairment goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment alcoa corporation five reporting units three included aluminum segment smeltingcasting energy generation rolling operations remaining two reporting units bauxite alumina segments five reporting units bauxite alumina contain goodwill december 31 2018 carrying value goodwill bauxite alumina 51 100 respectively amounts include allocation goodwill held corporate level see note k reviewing goodwill impairment entity option first assess qualitative factors determine whether existence events circumstances leads determination likely greater 50 estimated fair value reporting unit less carrying amount entity elects perform qualitative assessment determines impairment likely entity required perform quantitative impairment test described otherwise analysis required entity also may elect perform qualitative assessment instead proceed directly quantitative impairment test ultimate outcome goodwill impairment review reporting unit whether entity chooses perform qualitative assessment proceeds directly quantitative impairment test alcoa corporation’s policy annual review goodwill perform qualitative assessment reporting units subjected directly quantitative impairment test generally management proceed directly quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill qualitative assessment various events circumstances factors would affect estimated fair value reporting unit identified similar impairment indicators factors classified type impact would estimated fair value using positive neutral adverse categories based current business conditions additionally assessment level impact particular factor would estimated fair value determined using high medium low weighting furthermore management considers results recent quantitative impairment test completed reporting unit compares weighted average cost capital wacc current prior years reporting unit 2018 annual review goodwill management performed qualitative assessment alumina reporting unit management concluded likely respective estimated fair value reporting unit less respective carrying value analysis required quantitative impairment test evaluation impairment involves comparing current fair value reporting unit carrying value including goodwill alcoa corporation uses dcf model estimate current fair value reporting units testing impairment management believes forecasted cash flows best indicator fair value number significant assumptions estimates involved application dcf model forecast operating cash flows including markets market share sales volumes prices production costs tax rates capital spending discount rate working capital changes certain assumptions vary significantly among reporting units cash flow forecasts generally based approved business unit operating plans early years historical relationships later years betas used calculating individual reporting units’ wacc rate estimated business assistance valuation experts event estimated fair value reporting unit per dcf model less carrying value impairment loss equal excess reporting units carrying value fair value exceed total amount goodwill applicable reporting unit would recognized 2018 annual review goodwill management proceeded directly quantitative impairment test bauxite reporting unit estimated fair value reporting unit substantially excess carrying value resulting impairment management last proceeded directly quantitative impairment test alumina reporting unit 2016 time estimated fair value alumina reporting unit substantially excess carrying value resulting impairment additionally prior years presented triggering events necessitated impairment test either bauxite alumina reporting units intangible assets finite useful lives amortized generally straightline basis periods benefited following table details weightedaverage useful lives software intangible assets type operation numbers years asset retirement obligations alcoa corporation recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally alcoa corporation capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date caro legal obligation perform asset retirement activity timing andor method settlement conditional future event may within alcoa corporation’s control uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks polychlorinated biphenyls pcbs various process residuals solid wastes electronic equipment waste various materials amounts may material consolidated financial statements period recorded environmental matters expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated liability may include costs site investigations consultant fees feasibility studies outside contractors monitoring expenses estimates generally discounted reduced potential claims recovery recognized agreements reached third parties estimates also include costs related potentially responsible parties extent alcoa corporation reason believe parties fully pay proportionate share liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable management determines likelihood unfavorable outcome based many factors among others nature matter available defenses case strategy progress matter views opinions legal counsel advisors applicability success appeals processes outcome similar historical matters unfavorable outcome deemed probable management weighs probability estimated losses reasonable loss estimate recorded unfavorable outcome matter deemed reasonably possible matter disclosed liability recorded respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss revenue recognition company recognizes revenue satisfies performance obligations accordance provisions customer order contract achieved control product transferred customer generally determined title ownership risk loss pass customer occurs upon shipment delivery product shipping terms vary across businesses depend product country origin type transportation commercial delivery truck train vessel accordingly except sale electricity sale alcoa corporation’s products customers represent single performance obligations revenue recognized point time based foregoing significant judgment required determine control product transferred customer company measures revenue based consideration expects entitled receive exchange products standard terms conditions customer orders contracts include general rights return product warranty provisions related nonconforming “outofspec” product depending circumstances product either replaced quality adjustment issued historically returns adjustments material alcoa corporation’s consolidated financial statements company considers shipping handling activities costs fulfill promise transfer related products result customer payments shipping handling costs recorded component revenue also alcoa corporation may collect various taxes eg sales use valueadded excise customers related sale products remit amounts governmental authorities amounts paid company types taxes excluded transaction price used determine proper measurement revenue stockbased compensation periods prior separation date eligible employees attributable alcoa corporation operations participated parentco’s stockbased compensation plans compensation expense recorded alcoa corporation included expense associated employees well expense associated allocation stockbased compensation expense parentco’s corporate employees beginning separation date forward alcoa corporation recorded stockbased compensation expense eligible company employees following accounting policy describes stockbased compensation expense initially determined alcoa corporation parentco compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time plan participants choose whether receive award form stock options stock units combination choice made grant issued irrevocable pension postretirement benefit plans periods prior august 1 2016 see certain employees attributable alcoa corporation operations participated defined benefit pension postretirement benefit plans “shared plans” sponsored parentco also included participants attributable nonalcoa corporation operations alcoa corporation accounted shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans however related expense recorded alcoa corporation based primarily pensionable compensation estimated interest costs related employees attributable alcoa corporation operations prior separation date certain plans entirely attributable employees alcoa corporationrelated operations “direct plans” accounted defined benefit pension postretirement benefit plans accordingly funded unfunded position direct plan recorded consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive income net taxes amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions major assumptions primarily relate discount rates longterm expected rates return plan assets future compensation increases parentco’s management developed assumption using relevant company experience conjunction marketrelated data individual location plans exist preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation parentco see note n additionally certain remaining shared plans assumed alcoa corporation see note n accordingly beginning august 1 2016 forward standalone plans assumed plans accounted defined benefit pension postretirement plans additionally direct plans continued accounted defined benefit pension postretirement plans derivatives hedging derivatives held purposes trading part formally documented risk management program alcoa corporation accounts hedges firm customer commitments aluminum fair value hedges fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item company accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet changes fair values derivatives recorded comprehensive income loss reclassified sales cost goods sold expenses income net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years april 1 2018 alcoa corporation adopted new accounting guidance hedging activities see recently adopted accounting guidance included elimination concept ineffectiveness effective january 1 2018 accordingly longer requirement separately measure report ineffectiveness therefore following policy description effectiveness applicable periods prior january 1 2018 derivatives designated fair value hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly historical high correlation changes fair value hedged item derivative hedging instrument derivatives designated cash flow hedges alcoa corporation measures hedge effectiveness formally assessing inception least quarterly probable high correlation expected future cash flows hedged item derivative hedging instrument ineffective portions types hedges recorded sales expenses income net current period hedging relationship ceases highly effective becomes probable expected transaction longer occur future gains losses derivative instrument recorded expenses income net hedging relationship designated derivative marked market expenses income net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes beginning separation date forward provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa corporation’s assets liabilities adjusted changes tax rates tax laws enacted periods prior separation date alcoa corporation’s operations included income tax filings parentco provision income taxes alcoa corporation’s statement consolidated operations determined manner described separate return methodology company standalone taxpayer filing hypothetical income tax returns applicable additional accrued tax liability refund arising result approach assumed immediately settled parentco component parent company net investment deferred tax assets also determined manner described reflected consolidated balance sheet net operating losses credits attributes extent attributes expected transfer alcoa corporation upon separation transaction difference attributes generated hypothetical return separate return basis adjusted component parent company net investment valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies well available positive negative evidence positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa corporation’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income deferred tax assets valuation allowance recorded may realized upon changes facts circumstances resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized foreign currency local currency functional currency alcoa corporation’s significant operations outside united states except certain operations canada iceland us dollar used functional currency determination functional currency alcoa corporation’s operations made based appropriate economic management indicators recently adopted accounting guidance january 1 2018 alcoa corporation adopted changes issued financial accounting standards board fasb recognition revenue contracts customers guidance created comprehensive framework entities industries apply determination recognize revenue therefore supersedes virtually existing revenue recognition requirements guidance framework expected result less complex guidance application providing consistent comparable methodology revenue recognition core principle guidance entity recognize revenue depict transfer promised goods services customers amount reflects consideration entity expects entitled exchange goods services achieve principle entity apply following steps identify contracts customer ii identify performance obligations contracts iii determine transaction price iv allocate transaction price performance obligations contracts v recognize revenue entity satisfies performance obligation management’s assessment guidance applied customer contracts open date adoption modified retrospective method previously established project team company completed detailed review terms provisions customer contracts well evaluated contracts new guidance throughout 2017 concluded alcoa corporation’s revenue recognition practices compliance framework said company make minor modifications internal accounting policies internal control structure ensure future customer contracts may different terms conditions company today properly evaluated new guidance providing additional disclosure see revenue recognition product information section note e adoption guidance impact consolidated financial statements january 1 2018 alcoa corporation adopted guidance issued fasb accounting reporting certain equity investments guidance requires equity investments except accounted equity method accounting result consolidation investee measured fair value changes fair value recognized net income however entity may choose measure equity investments readily determinable fair values cost minus impairment plus minus changes resulting observable price changes orderly transactions identical similar investment issuer additionally impairment assessment equity investments without readily determinable fair values simplified requiring qualitative assessment identify impairment adoption guidance impact consolidated financial statements alcoa corporation’s equity investments accounted equity method accounting january 1 2018 alcoa corporation adopted guidance issued fasb presentation several items statement cash flows specifically guidance identifies nine cash flow items sections must presented within statement cash flows including distributions received equity method investees proceeds settlement insurance claims restricted cash relates restricted cash adoption guidance impact consolidated financial statements guidance requires restricted cash aggregated cash equivalents beginningofperiod endofperiod line items bottom statement cash flows previously change restricted cash beginningofperiod endof period reflected either investing financing operating noncash activity based underlying nature transaction accordingly accompanying statement consolidated cash flows year ended december 31 2018 cash equivalents restricted cash beginning year cash equivalents restricted cash end year line items include restricted cash 7 3 respectively additionally company’s statement consolidated cash flows years ended december 31 2017 2016 recast reflect change presentation follows line items impacted reflected table september 2016 subsidiary company issued 1250 new senior notes see note l preparation separation transaction net proceeds 1228 debt issuance required placed escrow contingent completion separation transaction result 1228 escrowed cash recorded restricted cash prior adoption new guidance previously issued reports issuance new senior notes increase restricted cash properly excluded alcoa corporation’s statement consolidated cash flows year ended december 31 2016 noncash financing investing activities respectively however report adoption new accounting guidance results issuance debt included company’s statement consolidated cash flows year ended december 31 2016 cash transaction see note reconciliation cash equivalents restricted cash reported accompanying consolidated balance sheet sum cash equivalents restricted cash beginning year end year presented accompanying statement consolidated cash flows year ended december 31 2018 january 1 2018 alcoa corporation adopted guidance issued fasb accounting intraentity transactions inventory guidance requires current deferred income tax consequences intraentity transfer recorded immediately transaction occurs exception defer tax consequences inventory transactions maintained prior guidance immediate tax impact permitted recognized entity’s financial statements result intraentity transfers assets entity precluded reflecting tax benefit expense intraentity asset transfer entities file separate tax returns whether entities different tax jurisdictions asset sold third party otherwise recovered buyer asset prohibited recognizing deferred tax asset temporary difference arising excess buyer’s tax basis cost seller adoption guidance immaterial impact consolidated financial statements january 1 2018 alcoa corporation adopted guidance issued fasb accounting business combinations guidance clarifies definition business purposes evaluating whether particular transaction accounted acquisition disposal business asset generally business integrated set assets activities contain inputs processes outputs although outputs required guidance provides “screen” determine whether integrated set assets activities qualifies business substantially fair value gross assets concentrated single identifiable asset group similar identifiable assets definition business met transaction accounted acquisition disposal asset otherwise entity required evaluate whether integrated set assets activities include minimum input substantive process together significantly contribute ability create output longer consider whether market participant could replace missing elements guidance also narrows definition output previously output defined ability provide return form dividends lower costs economic benefits directly investors owners members participants output defined ability provide goods services customers investment income revenues adoption guidance immediate impact consolidated financial statements however guidance need considered event alcoa corporation acquires disposes integrated set assets activities january 1 2018 alcoa corporation early adopted guidance issued fasb assessment goodwill impairment relates quantitative test prior guidance two steps performing quantitative impairment test first step required entity compare current fair value reporting unit carrying value event reporting unit’s estimated fair value less carrying value entity performed second step compare carrying amount reporting unit’s goodwill implied fair value goodwill implied fair value goodwill excess fair value reporting unit fair value amounts assigned assets liabilities unit reporting unit acquired business combination fair value reporting unit represented purchase price carrying value goodwill exceeded implied fair value impairment loss equal excess recognized guidance eliminates second step quantitative impairment test accordingly entity would recognize impairment goodwill reporting unit previously referred first step estimated fair value reporting unit less carrying value impairment would equal excess reporting unit’s carrying value fair value exceed total amount goodwill applicable reporting unit adoption guidance immediate impact consolidated financial statements however guidance need considered time company performs assessment goodwill impairment quantitative test see goodwill intangible assets january 1 2018 alcoa corporation adopted guidance issued fasb presentation net periodic benefit cost related pension postretirement benefit plans guidance requires entity report service cost component net periodic benefit cost line items income statement compensation costs arising services rendered pertinent employees reporting period components net periodic benefit cost see note n required reported separately service cost component words components may aggregated presented separate line item may reported existing line items income statement line items include service cost component previously alcoa corporation reported components net periodic benefit cost except certain settlements curtailments special termination benefits cost goods sold business employees selling general administrative expenses corporate employees consistent location compensation costs related respective employees nonservice cost components noted exceptions reported restructuring charges applicable additionally guidance permits service cost component capitalized applicable eg cost internally manufactured inventory upon adoption guidance management began reporting nonservice cost components net periodic benefit cost except certain settlements curtailments special termination benefits continue reported restructuring charges expenses income net accompanying statement consolidated operations see note n year ended december 31 2018 nonservice cost components reported expenses net 139 additionally statement consolidated operations years ended december 31 2017 2016 recast reflect reclassification nonservice cost components net periodic benefit cost expense income net cost goods sold selling general administrative expenses follows practical expedient option provided guidance company used previously disclosed amounts nonservice cost components recast line items years ended december 31 2017 2016 furthermore alcoa corporation longer capitalizes nonservice cost components part cost inventory prospectively beginning january 1 2018 january 1 2018 alcoa corporation adopted guidance issued fasb accounting stockbased compensation modification terms conditions sharebased payment award guidance requires entity account modification substantive change terms conditions sharebased payment award substantive change occurs fair value vesting conditions balance sheet classification liability equity sharebased payment award isare different immediately modification previously entity required account modification terms conditions sharebased payment award adoption guidance immediate impact consolidated financial statements however guidance need considered company initiates modification determined substantive change outstanding sharebased award additionally company longer account future nonsubstantive change terms conditions sharebased payment awards modification april 1 2018 alcoa corporation early adopted guidance issued fasb accounting hedging activities retroactive january 1 2018 guidance permits hedge accounting risk components hedging relationships involving nonfinancial risk interest rate risk reduces current limitations designation measurement hedged item fair value hedge interest rate risk removes requirement separately measure report hedge ineffectiveness provides election systematically rationally recognize earnings initial value amount excluded assessment hedge effectiveness types hedges eases requirements effectiveness testing additionally modifications existing disclosures well additional disclosures required applicable reflect changes regarding measurement recognition hedging activities guidance initially applied hedging instruments exist adoption date using modified retrospective method words financial statement impact application changes open hedging instruments adoption date related periods prior adoption year recognized cumulative effect adjustment beginning retained earnings adoption year accordingly upon adoption guidance alcoa corporation recognized immaterial cumulative effect adjustment within equity effective january 1 2018 related open level 1 hedging instruments adoption date company open level 2 hedging instruments adoption date financial statement impact alcoa corporation’s open level 3 hedging instruments adoption date guidance also applied prospectively upon company entering new hedging instruments see derivatives section note additional information recently issued accounting guidance january 2018 fasb issued guidance regarding assessment land easements rights way pending lease accounting requirements adopted january 1 2019 see guidance provides entity option evaluate existing expired land easements leases preparation adoption new lease accounting requirements long land easements recorded something leases current accounting requirements said new land easement acquired existing land easement modified january 1 2019 later must assessed lease accounting new requirements guidance becomes effective alcoa corporation january 1 2019 management plans elect option evaluate existing expired land easements currently accounted something leases new lease accounting requirements company’s land easements currently accounted fixed assets immaterial alcoa corporation’s consolidated financial statements accordingly management determined adoption guidance immediate impact company’s consolidated financial statements new lease accounting requirements need considered company acquires new land easement modifies existing land easement january 1 2019 later february 2018 fasb issued guidance regarding reclassification certain income tax effects reported accumulated comprehensive income loss response us tax legislation enacted december 22 2017 known us tax cuts jobs act 2017 “tcja” corporations one main provisions tcja reduction corporate income tax rate 21 35 current income tax accounting requirements entity required remeasure applicable us deferred tax assets deferred tax liabilities 21 tax rate effective tcja enactment date remeasurement required recognized entity’s income tax provision income statement however certain deferred tax assets deferred tax liabilities relate income tax effects initially recognized 35 tax rate comprehensive income loss items reported within accumulated comprehensive income loss entity’s balance sheet consequently entity’s financial statements reflect inconsistency deferred tax assets deferred tax liabilities measured 21 related income tax effects accumulated comprehensive income loss recorded 35 accordingly guidance provides onetime option remeasure income tax effects within accumulated comprehensive income loss 21 income tax rate impact remeasurement recorded directly retained earnings entity’s balance sheet guidance becomes effective alcoa corporation january 1 2019 early adoption permitted management concluded analysis decided elect option permitted new guidance june 2018 fasb issued guidance regarding accounting nonemployee sharebased payment transactions guidance effectively changes accounting transactions consistent accounting employee sharebased payment transactions nonemployee sharebased payment transactions subject guidance grantor acquires goods services used consumed grantor’s operations issuing sharebased payment awards guidance applied nonemployee sharebased payment transactions used effectively provide 1 financing issuer 2 awards granted conjunction selling goods services customers part contract accounted revenue recognition principles guidance becomes effective alcoa corporation january 1 2019 early adoption permitted nonemployees receive sharebased payments alcoa corporation members company’s board directors accordingly management expect adoption guidance material impact consolidated financial statements august 2018 fasb issued separate guidance regarding respective disclosure requirements associated fair value measurements defined benefit plans guidance makes changes disclosures fair value measurements defined benefit plans several removals modifications additions andor clarifications existing requirements following changes immediate disclosure impact alcoa corporation upon adoption guidance fair value measurements disclosure valuation processes level 3 fair value measurements longer required ii changes unrealized gains losses reporting period included comprehensive income loss recurring level 3 fair value measurements held end reporting period new disclosure requirement iii range weighted average reasonable rational method significant unobservable inputs used develop level 3 fair value measurements new disclosure requirement following changes immediate disclosure impact alcoa corporation upon adoption guidance defined benefit plans disclosure amounts accumulated comprehensive income loss expected recognized components net periodic benefit cost next fiscal year longer required ii disclosure effects onepercentagepoint change assumed health care cost trend rates aggregate service interest cost components net periodic benefit costs benefit obligation postretirement health care benefits longer required iii explanation reasons significant gains losses related changes benefit obligation reporting period new disclosure requirement guidance fair value measurements defined benefit plans becomes effective alcoa corporation january 1 2020 december 31 2020 respectively early adoption permitted updating applicable disclosures adoption guidance impact company’s consolidated financial statements august 2018 fasb issued guidance regarding accounting implementation costs incurred cloud computing arrangement service contract words contain software license guidance aligns accounting cloud computing implementation costs develop obtain internaluse software meaning costs part application development stage capitalized asset amortized term arrangement otherwise costs expensed incurred additionally guidance requires applying existing impairment guidance longlived assets capitalized implementation costs furthermore guidance requires following presentation entity’s financial statements payments capitalized implementation costs classified cash flows statement manner payments service fees associated arrangement ii capitalized implementation costs presented asset line item balance sheet prepayment service fees associated arrangement iii amortization capitalized implementation costs reflected expense line item income statement service fees associated arrangement guidance becomes effective alcoa corporation january 1 2020 early adoption permitted management currently evaluating potential impact guidance consolidated financial statements february 2016 fasb issued guidance regarding accounting leases guidance requires lessees recognize rightofuse asset lease liability balance sheet leases classified operating leases term 12 months less lessee permitted make accounting policy election class underlying asset recognize right use asset lease liability additionally measuring assets liabilities arising lease optional payments included lessee reasonably certain exercise option extend lease exercise purchase option exercise option terminate lease rightofuse asset represents entity’s right use underlying asset lease term lease liability represents entity’s obligation make lease payments currently asset liability recorded leases classified capital leases financing leases measurement recognition presentation expenses cash flows arising leases lessee remains guidance becomes effective alcoa corporation january 1 2019 previously established crossfunctional project team company completed accumulation leases lease management system validated information accuracy completeness additionally project team finished system implementation system primary source company’s lease information related accounting upon adoption new lease guidance management expects record rightofuse asset lease liability amount 181 alcoa corporation’s consolidated balance sheet several types operating leases including land buildings alumina refinery process control technology plant equipment vehicles computer equipment amount equivalent aggregate future minimum lease payments discounted basis additionally july 2018 fasb issued guidance provide alternative transition method new lease guidance whereby entity choose reflect impact new lease guidance prior periods included financial statements company intends elect alternative transition method january 1 2019 adoption date june 2016 fasb added new impairment model known current expected credit loss cecl model based expected losses rather incurred losses new guidance entity recognizes allowance estimate expected credit losses cecl model applies debt instruments trade receivables lease receivables financial guarantee contracts loan commitments cecl model minimum threshold recognition impairment losses entities need measure expected credit losses assets low risk loss changes become effective alcoa corporation january 1 2020 management currently evaluating potential impact changes consolidated financial statements c acquisitions divestitures february 2017 alcoa corporation’s whollyowned subsidiary alcoa power generating inc completed sale 215megawatt yadkin hydroelectric project yadkin cube hydro carolinas llc 249 cash 8 received june november 2017 combined postclosing adjustments 2017 alcoa corporation recognized gain 122 pre aftertax expenses net accompanying statement consolidated operations accordance separation distribution agreement see note alcoa corporation remitted 243 proceeds arconic december 31 2016 alcoa corporation liability 243 included current liabilities company’s consolidated balance sheet sale yadkin subject postclosing adjustments related potential earnouts january 31 2027 unless provisions earnouts met earlier adjustment would result alcoa corporation receiving additional cash none would remitted arconic recognizing nonoperating income yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina prior divestiture power generated yadkin primarily sold open market yadkin generated sales 29 2016 approximately 30 employees december 31 2016 restructuring charges restructuring charges year threeyear period ended december 31 2018 comprised following 2016 includes 1 related allocation restructuring charges alcoa corporation parentco see note layoff costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2018 actions 2018 alcoa corporation recorded restructuring charges 527 comprised following components 331 net related settlements curtailments certain pension postretirement employee benefits see note n 107 establish allowance certain valueadded tax credits related company’s operations brazil see note 86 additional costs related curtailed wenatchee washington smelter including 73 associated 2018 management decisions see 15 net benefit related portovesme italy smelter composed 38 reversal 23 charge see “italy 148” litigation section note r 18 net charge items june 2018 management decided restart fully curtailed wenatchee smelter within term provided related electricity supply agreement alcoa corporation therefore required make 62 payment energy supplier provisions agreement additionally management decided permanently close one 38 kmt four potlines smelter potline operated since 2001 investments needed restart line cost prohibitive remaining three curtailed potlines capacity 146 kmt connection decisions company recognized charge 73 composed 62 payment 10 asset impairments 1 asset retirement obligations triggered decision decommission potline 2017 actions 2017 alcoa corporation recorded restructuring charges 309 comprised following components 244 related early termination power contract see 49 exit costs related decision permanently close demolish smelter see 41 additional contract costs related curtailed wenatchee são luís brazil smelters 22 layoff costs including separation approximately 130 employees 115 aluminum segment mostly voluntary separation programs 22 reversal reduce reserve previously established end 2015 related legal matter italy see “italy 148” litigation section note r 18 net charge items including relocation company’s headquarters principal executive office new york new york pittsburgh pennsylvania 43 reversal associated several reserves related prior periods see october 2017 alcoa corporation luminant generation company llc luminant executed early termination agreement power contract well related fuel lease agreements effective october 1 2017 related company’s rockdale texas smelter fully curtailed since end 2008 accordance terms early termination agreement alcoa made cash payment 238 transferred approximately 2200 acres related land assets liabilities luminant net asset carrying value 6 since curtailment rockdale smelter company selling surplus electricity energy market power contract set expire earlier 2038 except limited circumstances one parties could elect early terminate without penalty conditions never met 2017 september 30 2016 alcoa corporation recognized 105 141 respectively sales 148 210 respectively cost goods sold accompanying statement consolidated operations related sale surplus electricity cost luminant power contract result early termination power contract alcoa initiated strategic review remaining buildings equipment associated smelter casthouse aluminum powder plant rockdale location parentco previously decided curtail operating capacity rockdale smelter 2008 result uncompetitive power supply thenoverall unfavorable market conditions review completed december 2017 management determined rockdale operations limited economic prospects consequently management approved permanent closure demolition rockdale smelter capacity 191 kmtperyear related operations effective immediately demolition remediation activities related action began 2018 expected completed end 2022 separately company continues 30000 acres land surrounding rockdale operations 2017 costs related decision included asset impairments 32 representing writeoff remaining book value related properties plants equipment 1 layoff approximately 10 employees corporate 16 costs additionally 2017 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 6 recorded cost goods sold accompanying statement consolidated operations costs 16 represent 8 asset retirement obligations 8 environmental remediation triggered decisions permanently close demolish rockdale facilities july 2017 alcoa corporation announced plans restart three capacity 161 kmtperyear five potlines capacity 269 kmtperyear warrick indiana smelter previously permanently closed march 2016 parentco see 2016 actions capacity identified restart directly supply existing rolling mill warrick location improve efficiency integrated site provide additional source metal help meet anticipated increase production volumes result decision reopen smelter 2017 alcoa corporation reversed 33 remaining liabilities related original closure decision liabilities consisted 20 asset retirement obligations 4 environmental remediation obligations necessary due previous decision demolish smelter 9 severance contract termination costs additionally carrying value smelter related assets reduced zero smelter ramped permanent closure decision date end 2015 end march 2016 assets placed back service conjunction restart carrying value remain zero newly acquired constructed assets related warrick smelter depreciated december 31 2018 separations associated 2017 restructuring programs essentially complete 2018 2017 cash payments 3 9 respectively made layoff reserves related 2017 restructuring programs 2016 actions 2016 alcoa corporation recorded restructuring charges 318 comprised following components 131 exit costs related decision permanently close demolish refinery see 87 additional net costs related decisions made late 2015 permanently close demolish warrick smelter curtail wenatchee smelter point comfort texas refinery 72 impairment interest gas exploration assets western australia see 32 layoff costs related cost reduction initiatives including separation approximately 75 employees 60 aluminum segment 15 bauxite segment related pension settlement costs see note n 8 net charge items 12 reversal associated number small layoff reserves related prior periods december 2016 management approved permanent closure suralco refinery capacity 2207 kmtperyear suriname suralco refinery fully curtailed since november 2015 management parentco decided curtail remaining operating capacity suralco refinery 2015 effort improve position parentco’s refining operations global alumina cost curve since time management parentco october 31 2016 separately management alcoa corporation november 1 2016 end 2016 discussions government republic suriname determine best longterm solution suralco due limited bauxite reserves absence longterm energy alternative decision permanently close suralco refinery based ultimate conclusion discussions demolition remediation activities related action began 2017 expected completed end 2022 related bauxite mines suriname also permanently closed hydroelectric facility supplied power suralco refinery known afobaka continue operate supply power government republic suriname 2016 costs related closure curtailment actions included accelerated depreciation 70 related warrick smelter continued operate march 2016 asset impairments 16 representing writeoff remaining book value various assets reversal 24 associated severance costs initially recorded late 2015 156 costs additionally 2016 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 5 recorded cost goods sold accompanying statement consolidated operations costs 156 represent 94 asset retirement obligations 26 environmental remediation triggered decisions permanently close demolish suralco refinery includes rehabilitation related bauxite mines rehabilitation coal mine related warrick smelter 32 contract terminations 4 related costs also december 2016 management alcoa corporation concluded interest certain gas exploration assets western australia impaired aofa owns interest gas exploration project relinquished june 2018 initially entered 2007 potential source lowcost gas supply aofa’s refineries western australia interest 43 december 31 2016 relates four separate gas wells late 2016 aofa received results technical analysis performed earlier year two wells updated analysis third well concluded cost gas recovery would significantly higher market price gas fourth well results technical analysis performed prior 2016 indicated cost gas recovery would lower market price gas therefore would require additional investment move next phase commercial evaluation management previously supported late 2016 management reevaluated options related fourth well decided economical make commitment foreseeable future result aofa fully impaired 72 interest june 30 2017 separations associated 2016 restructuring programs essentially complete 2017 2016 cash payments 2 7 respectively made layoff reserves related 2016 restructuring programs alcoa corporation include restructuring charges results reportable segments impact allocating charges segment results would follows activity reserve balances restructuring charges follows includes reversals previously recorded restructuring charges effects foreign currency translation 2017 2016 layoff costs also included reclassification 8 16 pension andor postretirement benefits costs obligations included alcoa corporation’s separate liability pension postretirement benefits obligations see note n additionally 2018 2017 2016 costs also included reclassification following restructuring charges 5 10 97 respectively asset retirement 2 8 26 respectively environmental obligations liabilities included alcoa corporation’s separate reserves asset retirement obligations see note q environmental remediation see note r remaining reserves expected paid cash 2019 exception 9 8 expected paid 2020 related portovesme smelter see “italy 148” litigation section note r e segment related information segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company three operating reportable segments organized product global basis bauxite alumina aluminum segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization segment company calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies chief operating decision maker function regularly reviews financial information including sales adjusted ebitda three operating segments assess performance allocate resources segment assets include among others customer receivables thirdparty intersegment inventories excluding lifo adjustments properties plants equipment equity investments accounting policies segments described summary significant accounting policies see note b transactions among segments established based negotiation among parties differences segment totals alcoa corporation’s consolidated totals line items reconciled corporate following detailed descriptions alcoa corporation’s reportable segments bauxite segment represents company’s global bauxite mining operations portion segment’s production represents offtake equity method investments brazil guinea well awac’s share production related equity investment saudi arabia bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see principles consolidation note alumina segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use agents alumina traders distributors generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see principles consolidation note segment also includes awac’s 251 ownership interest mining refining joint venture company saudi arabia see note h aluminum segment consists company’s worldwide smelting casthouse system processes alumina primary aluminum ii portfolio energy assets brazil canada united states iii rolling mill united states aluminum’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products eg foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives see note related energy supply contracts energy assets supply power external customers brazil lesser extent united states internal customers aluminum canadian smelters warrick indiana smelter rolling mill alumina segments brazilian refineries rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally separation date end 2018 alcoa corporation tolling arrangement contractually ended december 31 2018 arconic whereby arconic’s rolling mill tennessee produced sheet products certain customers company’s rolling operations alcoa corporation supplied raw materials tennessee facility paid arconic tolling service seasonal increases sheet sales generally experienced second third quarters calendar year generally segment’s aluminum sales transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic krona canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 ownership interest smelting rolling mill joint venture company saudi arabia see note h operating results capital expenditures assets alcoa corporation’s reportable segments follows following tables reconcile certain segment information consolidated totals 1 effective first quarter 2018 management elected change presentation certain line items reconciliation total segment adjusted ebitda consolidated net income loss attributable alcoa corporation provide additional transparency nature reconciling items accordingly transformation see footnote 2 previously reported within presented separate line item additionally impact lifo metal price lag previously reported separate line items combined reported new line item labeled corporate inventory accounting see footnote 3 also impact intersegment profit eliminations previously reported within reported new corporate inventory accounting line item applicable information prior periods presented recast reflect changes 2 transformation includes among items adjusted ebitda previously closed operations 3 corporate inventory accounting composed impacts lifo inventory accounting metal price lag intersegment profit eliminations metal price lag describes timing difference created average price metal sold differs average cost metal purchased alcoa corporation’s rolled aluminum operations general price metal increases metal price lag favorable price metal decreases metal price lag unfavorable 4 corporate expenses composed general administrative expenses operating corporate headquarters global administrative facilities well research development expenses corporate technical center 5 includes certain items impact cost goods sold selling general administrative expenses alcoa corporation’s statement consolidated operations included adjusted ebitda reportable segments product information alcoa corporation five product divisions follows bauxitebauxite reddish clay rock mined surface earth’s terrain ore basic raw material used produce alumina primary source aluminum aluminaalumina oxide extracted bauxite basic raw material used produce primary aluminum product also consumed nonmetallurgical purposes industrial chemical products primary aluminumprimary aluminum metal form common alloy ingot eg tbar sow standard ingot valueadd ingot eg billet rod slab products sold primarily customers produce products transportation building construction packaging wire industrial markets flatrolled aluminumflatrolled aluminum metal form sheet sold primarily customers produce beverage food cans including body tab end stock energyenergy generation electricity sold wholesale market traders large industrial consumers distribution companies generation companies following table represents general commercial profile company’s bauxite alumina primary aluminum flatrolled aluminum product divisions see text table energy 1 api alumina price index pricing mechanism calculated company based weighted average prior month’s daily spot prices published following three indices cru metallurgical grade alumina price platts metals daily alumina pax price metal bulletin nonferrous metals alumina index 2 lme london metal exchange globally recognized exchange commodity trading including aluminum lme pricing component represents underlying base metal component based quoted prices aluminum exchange regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states product premium represents incremental price receiving physical metal particular shape eg billet rod slab etc alloy 3 metal represents underlying base metal component plus regional premium see footnote 2 conversion represents incremental price metal price component associated converting primary scrap aluminum sheet 4 cif cost insurance freight means company pays items product reaches buyer’s designated destination point related transportation vessel dap delivered place means cif related methods transportation fob free board means company pays costs insurance freight product reaches seller’s designated shipping point 5 net number days means customer required remit payment company invoice amount within designated number days lc sight letter credit payable immediately usually within five ten business days seller meets requirements letter credit ie shipping documents evidence seller performed obligations agreed buyer cad cash documents payment arrangement seller instructs bank provide shipping title documents buyer time buyer pays full accompanying bill exchange company’s energy product division sales electricity based current market prices electricity provided customers demand national regional power grid customer simultaneously receives consumes electricity payment terms generally within 10 days related previous 30 days electricity consumption following table details alcoa corporation’s sales product division includes realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum see note geographic area information geographic information sales follows based upon country point sale originated 1 sales portion alumina refineries australia brazil suriname prior closure december 2016 aluminum smelters canada occurred united states 2 sales aluminum produced smelters iceland norway well offtake related interest saudi arabia joint venture see note h occurred spain geographic information longlived assets follows based upon physical location assets f earnings per share basic earnings per share eps amounts computed dividing net income loss attributable alcoa corporation average number common shares outstanding diluted eps amounts assume issuance common stock potentially dilutive share equivalents outstanding share information used compute basic diluted eps attributable alcoa corporation common shareholders follows millions options purchase 1 million shares common stock outstanding december 31 2018 weighted average exercise price 3867 per share included computation diluted eps exercise prices options greater average market price alcoa corporation’s common stock 2016 basic average shares outstanding diluted average shares outstanding effect potential shares common stock antidilutive options purchase 1 million shares common stock outstanding december 31 2016 weighted average exercise price 3305 per share included computation diluted eps exercise prices options greater average market price alcoa corporation’s common stock additionally 1 million stock units stock options combined included computation diluted eps alcoa corporation generated net loss alcoa corporation generated net income 2016 1 million potential shares common stock related stock units stock options combined would included diluted average shares outstanding g accumulated comprehensive loss following table details activity three components comprise accumulated comprehensive loss alcoa corporation’s shareholders noncontrolling interest 1 amounts included computation net periodic benefit cost pension postretirement benefits see note n 2018 amounts alcoa corporation include 330 net noncontrolling interest include 1 related settlements andor curtailments certain pension postretirement employee benefits see note n 2 amounts reported provision income taxes accompanying statement consolidated operations 3 periods presented tax impacts related rate changes amounts reclassified earnings 4 amounts reported sales accompanying statement consolidated operations 5 2018 2017 amounts reported cost goods sold 2016 amounts reported expenses income net accompanying statement consolidated operations 6 amounts included expenses income net accompanying statement consolidated operations 7 positive amount indicates corresponding charge earnings negative amount indicates corresponding benefit earnings amounts reflected accompanying statement consolidated operations line items indicated footnotes 1 6 h investments equity investments following table summarizes information alcoa corporation’s equity investments december 31 2018 2017 elysis limited partnership began june 2018 see 1 see saudi arabia joint venture additional information 2 halco mining inc owns 100 boké investment company owns 51 compagnie des bauxites de guinée 3 pechiney reynolds quebec inc owns 501 interest bécancour smelter quebec canada thereby entitling alcoa corporation 2505 interest smelter two whollyowned canadian subsidiaries alcoa corporation also owns 499 bécancour smelter 4 investees either owns facility listed ownership interest entity owns facility listed 5 portion ownership interests held majorityowned subsidiaries part awac june 2018 alcoa corporation rio tinto plc provincial government quebec canada launched new joint venture elysis limited partnership elysis purpose partnership advance larger scale development commercialization company’s patentprotected technology produces oxygen eliminates direct greenhouse gas emissions traditional aluminum smelting process alcoa corporation rio tinto plc general partners 48235 stake elysis quebec provincial government limited partner owns 353 stake federal government canada apple inc well quebec provincial government provide initial financing partnership total planned combined investment equity debt five participants joint venture 145 c188 alcoa corporation rio tinto plc invest combined 42 c55 next three years well contribute license certain intellectual property patents elysis 2018 company contributed 5 c6 toward initial investment commitment elysis 2018 2017 2016 alcoa corporation received 45 71 74 respectively dividends equity investments financial information equity investments follows amounts represent 100 investee’s financial information 1 amounts included column represent combined financial information related ma’aden aluminum company ma’aden bauxite alumina company ma’aden rolling company 2 aofa sold interest dampier bunbury natural gas pipeline dbngp trust april 2016 see dbngp trust saudi arabia joint venturealcoa corporation saudi arabian mining company known “ma’aden” 30year december 2009 joint venture shareholders agreement automatic extension additional 20 years unless parties agree otherwise unless earlier terminated setting forth terms development construction ownership operation integrated aluminum complex saudi arabia specifically project developed joint venture consists bauxite mine extraction approximately 4000 kmt bauxite al ba’itha bauxite deposit near quiba northern part saudi arabia ii alumina refinery initial capacity 1800 kmt iii primary aluminum smelter initial capacity 740 kmt iv aluminum rolling mill initial capacity 380 kmt refinery smelter rolling mill constructed industrial area ras al khair east coast saudi arabia facilities use critical infrastructure including power generation derived reserves natural gas well port rail facilities developed government saudi arabia first production smelter rolling mill mine refinery occurred december 2012 2013 2014 respectively 2012 alcoa corporation ma’aden agreed expand capabilities rolling mill include capacity 100 kmt dedicated supplying automotive building construction foil packaging markets aluminum sheet first production related expanded capacity occurred 2014 expansion result additional equity investment see due significant savings change project execution strategy initial 380 kmt capacity rolling mill joint venture owned 749 ma’aden 251 alcoa corporation consists three separate companies follows one mine refinery smelter rolling mill alcoa corporation affiliates hold company’s interests smelting company rolling mill company whollyowned alcoa corporation alcoa corporation affiliate holds company’s interests mining refining company majorityowned part awac alcoa corporation except limited circumstances alcoa corporation may sell transfer otherwise dispose encumber enter agreement respect votes rights attached interests joint venture without ma’aden’s prior written consent ma’aden alcoa corporation put call options respectively whereby ma’aden require alcoa corporation purchase ma’aden alcoa corporation require ma’aden sell alcoa corporation 149 interest joint venture fair market value options may exercised sixmonth window opens five years last commercial production date defined joint venture shareholders agreement three joint venture companies exercised must exercised full 149 interest commercial production date declared september 1 2014 smelting company october 1 2016 mining refining company similar declaration yet rolling mill company ma’aden alcoa corporation also may sell transfer otherwise dispose pledge encumber interests joint venture five years last commercial production date joint venture shareholders agreement upon occurrence unremedied event default alcoa corporation ma’aden may purchase upon occurrence unremedied event default ma’aden alcoa corporation may sell interest consideration varies depending time default number alcoa corporation employees perform various types services smelting rolling mill mining refining companies part operation fullyintegrated aluminum complex december 31 2018 2017 company aggregate outstanding receivable 11 13 respectively smelting rolling mill mining refining companies labor employeerelated expenses capital investment project expected total approximately 10800 sar 405 billion funded combination equity contributions joint venture partners project financing obtained joint venture companies partially guaranteed partners see equity contributions guarantees project financing based joint venture partners’ ownership interests originally estimated alcoa corporation’s total equity contribution joint venture related capital investment project would approximately 1100 alcoa corporation contributed 982 including 1 2016 based changes project’s capital investment equity debt structure initial plans estimated 1100 equity contribution may reduced separate capital investment project alcoa corporation contributed 66 ma’aden contributed 199 joint venture 2017 shortterm funding purposes accordance terms joint venture companies’ financing arrangements partners may required make additional contributions future periods december 31 2018 2017 carrying value alcoa corporation’s investment joint venture 874 887 respectively rolling mill company project financing totaling 1179 reflects principal repayments made december 31 2018 296 represents alcoa corporation’s 251 interest rolling mill company alcoa corporation issued guarantees see lenders event default debt service requirements rolling mill company 2018 2021 ma’aden issued similar guarantees related 749 interest alcoa corporation’s guarantees rolling mill company cover total debt service requirements 50 principal maximum approximately 10 interest per year based projected interest rates previously alcoa corporation issued similar guarantees related project financing smelting company mining refining company december 2017 july 2018 smelting company mining refining company respectively refinanced andor amended existing outstanding debt guarantees previously required alcoa corporation related smelting company mining refining company effectively terminated december 31 2018 2017 combined fair value guarantees 1 3 respectively included noncurrent liabilities deferred credits accompanying consolidated balance sheet result separation transaction various lenders joint venture companies required arconic maintain joint several guarantees alcoa corporation event default joint venture companies lenders would make claim alcoa corporation arconic accordingly alcoa corporation would perform guarantee however company failed perform arconic would required perform guarantee arconic would subsequently seek indemnification alcoa corporation terms separation distribution agreement dbngp trustin april 2016 aofa sold 20 interest consortium owned dbngp western australia member consortium duet group aofa received 145 a192 cash included sales investments accompanying statement consolidated cash flows recorded gain 27 a35 11 a15 aftertax noncontrolling interest income net accompanying statement consolidated operations part sale transaction aofa maintain current access approximately 30 dbngp transmission capacity gas supply three alumina refineries western australia existing agreement purchase gas transmission services dbngp december 31 2018 2017 aofa asset 275 a393 300 a385 respectively representing prepayments made agreement future gas transmission services 2016 prior sale transaction aofa made contributions 3 a5 consortium equity call plan inventories december 31 2018 2017 total amount inventories valued lifo basis 501 26 516 29 respectively total inventories lifo adjustments inventory values prior application lifo generally determined average cost method approximates current cost j properties plants equipment net december 31 2018 2017 net carrying value temporarily idled refining assets 132 141 respectively representing 2305 kmt idle capacity periods also december 31 2018 2017 net carrying value temporarily idled smelting assets 427 248 respectively representing 916 kmt 856 kmt respectively idle capacity k goodwill intangible assets goodwill included noncurrent assets accompanying consolidated balance sheet follows 1 carrying value aluminum’s goodwill zero comprised goodwill 989 accumulated impairment losses 989 december 31 2018 2017 additionally carrying value corporate’s goodwill net accumulated impairment losses 742 december 31 2018 2017 2 december 31 2018 146 goodwill reflected corporate allocated two alcoa corporation’s three reportable segments 49 bauxite 97 alumina purposes impairment testing see note b goodwill reflected corporate segment reporting purposes included management’s assessment performance two reportable segments intangible assets included noncurrent assets accompanying consolidated balance sheet follows computer software consists primarily software costs associated enterprise business solution within alcoa corporation drive common systems among businesses amortization expense related intangible assets tables years ended december 31 2018 2017 2016 12 7 respectively expected approximately 10 annually 2019 2023 l debt longterm debt principal amount longterm debt maturing next five years 1 2019 84 2020 1 2021 2022 2023 144a debtin may 2018 alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation completed rule 144a us securities act 1933 amended debt offering 500 6125 senior notes due 2028 “2028 notes” anhbv received 492 net proceeds debt offering reflecting discount initial purchasers 2028 notes net proceeds along available cash hand used make discretionary contributions certain us defined benefit pension plans see note n discount initial purchasers well costs complete financing deferred amortized interest expense term 2028 notes interest 2028 notes paid semiannually november may commenced november 15 2018 anhbv option redeem 2028 notes least 30 days 60 days prior notice holders 2028 notes multiple scenarios including whole part time may 2023 redemption price specified indenture 103063 principal amount plus accrued unpaid interest case also 2028 notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount 2028 notes repurchased plus accrued unpaid interest 2028 notes repurchased 2028 notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer 2028 notes 2028 notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors second amended revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” see credit facility subsidiary guarantors released 2028 notes guarantees upon occurrence certain events including release guarantor obligations guarantor second amended revolving credit agreement 2028 notes indenture includes several customary affirmative covenants additionally 2028 notes indenture contains several negative covenants subject certain exceptions include limitations liens limitations sale leaseback transactions prohibition reduction ownership awac entities agreed level negative covenants 2028 notes indenture less extensive 2024 notes 2026 notes see indenture second amended revolving credit agreement example 2028 notes indenture include limitation restricted payments repurchases common stock shareholder dividends 2028 notes rank equally right payment anhbv’s existing future senior indebtedness including 2024 notes 2026 notes rank senior right payment future subordinated obligations anhbv effectively subordinated anhbv’s existing future secured indebtedness including second amended revolving credit agreement extent value property assets securing indebtedness september 2016 anhbv completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commenced march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors second amended revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” see credit facility subsidiary guarantors released notes guarantees upon occurrence certain events including release guarantor obligations guarantor second amended revolving credit agreement notes indenture contains various restrictive covenants similar described second amended revolving credit agreement including limitation restricted payments among exceptions capacity pay annual ordinary dividends indenture alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period annual 2018 dividends made 50 annual 2019 2020 75 january 1 2021 september 30 2026 maturity date 2026 notes time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period additionally restricted payments negative covenant includes general exception allow potential future transactions incremental specifically provided notes indenture general exception provides aggregate amount restricted payments exceed greater 250 15 alcoa corporation’s consolidated total assets accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 250 assuming restricted payments reduced part whole available limit limits restricted payments negative covenant second amended revolving credit agreement see credit facility would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant notes indenture bndes loansprior july 5 2016 alcoa alumínio indirect whollyowned subsidiary alcoa corporation loan agreement brazil’s national bank economic social development bndes provided financing commitment 397 r687 divided three subloans used pay certain expenditures estreito hydroelectric power project july 5 2016 loan agreement amended change borrower alumínio whollyowned subsidiary alumínio interest three subloans brazil real rate interest equal bndes’ longterm interest rate 700 december 31 2017 plus weightedaverage margin 274 principal interest payable monthly began october 2011 originally scheduled end september 2029 two subloans totaling r667 began july 2012 ended june 2018 subloan r20 2018 2017 alumínio’s subsidiary repaid 132 r539 15 r49 respectively outstanding borrowings andor deferred interest repayments 2018 include early repayments combined 122 r500 made september december representing remaining outstanding loan balance deferred interest early repayments made without penalty approval bndes full repayment loan commitment effectively terminated december 31 2017 outstanding borrowings 137 r454 weightedaverage interest rate 974 deferred interest related borrowings 25 r82 additionally alumínio loan agreement bndes provided financing commitment 85 r177 also used pay certain expenditures estreito hydroelectric power project interest loan brazil real rate interest equal bndes’ longterm interest rate plus margin 155 principal interest payable monthly began january 2013 originally scheduled end september 2029 2017 alumínio repaid 44 r138 outstanding borrowings include early repayment 41 r131 made august representing remaining outstanding loan balance early repayment made without penalty approval bndes full repayment loan commitment effectively terminated credit facility november 21 2018 alcoa corporation anhbv entered second amendment restatement agreement revolving credit agreement dated september 16 2016 amendment restatement agreement dated november 14 2017 revolving credit agreement revised amendment restatement agreement “amended revolving credit agreement” case syndicate lenders issuers named therein revise certain terms provisions amended revolving credit agreement amended revolving credit agreement revised second amendment restatement agreement “second amended revolving credit agreement” unless noted otherwise terms provisions described second amended revolving credit agreement applicable amended revolving credit agreement november 14 2017 november 20 2018 see “credit facility” note l consolidated financial statements included part ii item 8 company’s annual report form 10k year ended december 31 2017 notable terms provisions revolving credit agreement september 16 2016 november 13 2017 second amended revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” used working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions second amended revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries additionally anhbv may time request lenders provide one additional tranches term loans andor increase aggregate amount revolving commitments together aggregate principal amount 500 revolving credit facility scheduled mature november 21 2023 previously november 14 2022 unless extended earlier terminated accordance provisions second amended revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth second amended revolving credit agreement provisions second amended revolving credit agreement anhbv pay quarterly commitment fee ranging 0200 0425 previously 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal applicable margin plus anhbv’s option either adjusted libor rate b base rate determined reference highest 1 us prime rate published wall street journal previously prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum applicable margin loans vary based alcoa corporation’s leverage ratio range 150 225 previously 175 250 libor loans 050 125 previously 075 150 base rate loans subject case reduction 25 basis points alcoa corporation attains least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility second amended revolving credit agreement mentioned companies shall released obligations first priority lien andor first priority security interest upon alcoa corporation attaining least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings case stable outlook better ii anhbv delivering required written notice iii default event default defined second amended revolving credit agreement occurred continuing date conditions met “collateral release date” second amended revolving credit agreement includes number customary affirmative covenants additionally second amended revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness see entering restrictive agreements restricted payments see including repurchases common stock shareholder dividends see investments see loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level second amended revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 250 100 200 100 beginning subsequent collateral release date may increased level higher 225 100 certain circumstances december 31 2018 2017 alcoa corporation compliance covenants indebtedness restricted payments investments negative covenants include general exceptions allow potential future transactions incremental specifically provided second amended revolving credit agreement indebtedness negative covenant provides incremental amount exceed greater 1000 60 alcoa corporation’s consolidated total assets additionally restricted payments negative covenant provides aggregate amount exceed 100 investments negative covenant provides aggregate amount exceed 400 contain two conditions limits may increase first fiscal year thresholds restricted payments investments negative covenants increase 250 200 respectively consolidated net leverage ratio greater 150 previously 120 100 150 previously130 100 respectively end prior fiscal year secondly regards 100 250 restricted payments 200 investments 50 unused amount base amounts fiscal year may used next succeeding fiscal year following describes specific restricted payment negative covenant share repurchases application restricted payments general exception described share repurchases ordinary dividend payments alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year additionally described second amended revolving credit agreement provides general exceptions restricted payments negative covenant would allow alcoa corporation execute share repurchases purpose fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit also ordinary dividend payments made alcoa corporation subject general exception restricted payments described accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit limits restricted payments negative covenant notes indenture see 144a debt would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant second amended revolving credit agreement second amended revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events amounts outstanding december 31 2018 2017 amounts borrowed 2018 2017 revolving credit facility preferred common stock preferred stock alcoa corporation authorized issue 100000000 shares preferred stock par value 001 per share december 31 2018 2017 company issued preferred stock common stock alcoa corporation authorized issue 750000000 shares common stock par value 001 per share november 1 2016 conjunction separation transaction company distributed 182471195 shares common stock amount 146159428 shares distributed parentco’s shareholders 36311767 shares retained parentco arconic sold shares 2017 december 31 2018 2017 alcoa corporation 184770249 185200713 respectively issued outstanding shares common stock employee stockbased compensation plan company issued shares 1293336 2018 2269718 2017 459800 november 1 2016 december 31 2016 also december 31 2018 25977146 shares common stock available issuance alcoa corporation’s employee stockbased compensation plan company issues new shares satisfy exercise stock options conversion stock units october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending cash availability market conditions factors repurchases program may made using variety methods may include open market purchases privately negotiated transactions pursuant rule 10b51 plan program predetermined expiration date alcoa corporation intends retire repurchased shares common stock december 2018 company repurchased 1723800 shares common stock 50 shares immediately retired dividends common stock subject authorization alcoa corporation’s board directors company declare dividends 2018 2017 november 1 2016 december 31 2016 stockbased compensation 2018 2017 last two months 2016 eligible alcoa corporation employees participated company’s stockbased compensation plan periods prior separation date eligible alcoa corporation employees participated parentco’s stockbased compensation plan stockbased compensation expense recorded company referenced periods includes expense associated employees historically attributable alcoa corporation’s operations allocation expense see note related parentco’s corporate employees effective november 1 2016 outstanding stock options vested nonvested stock units originally granted parentco’s stockbased compensation plan related company’s employees replaced similar stock options stock units alcoa corporation’s stockbased compensation plan order preserve intrinsic value stock options stock units originally granted parentco’s stockbased compensation plan number stock options stock units issued company’s stockbased compensation plan increased ratio 134 developed dividing october 31 2016 closing market price parentco’s common stock 2872 october 31 2016 closing market price alcoa corporation’s “when issued” common stock 2144 resulted beginning balance outstanding stock options stock units company’s stockbased compensation plan 4673829 2605423 respectively november 1 2016 following description alcoa corporation’s stockbased compensation plan materially different description parentco’s stockbased compensation plan prior separation transaction stock options stock units generally granted either january february calendar year eligible employees company’s board directors also receive certain stock units however amounts material plan participants choose whether receive award form stock options stock units combination choice made grant issued irrevocable stock options granted closing market price alcoa corporation’s common stock date grant grade vest threeyear service period 13 year tenyear contractual term stock units cliff vest third anniversary award grant date certain units also include either market 2018 2017 2016 third tranche onlysee performance 2018 2017 2016 condition final number marketbased performancebased stock units earned dependent alcoa corporation’s achievement certain targets threeyear measurement period 2018 2017 grants oneyear measurement period three tranches 2016 grants marketbased stock units granted 2018 2017 award earned end measurement period based company’s total shareholder return measured total shareholder return standard poor’s 500® index january 1 grant year december 31 third year service period performancebased stock units granted 2018 2017 award earned end measurement period based company’s performance preestablished returnoncapital target measured january 1 grant year december 31 third year service period performancebased stock units granted 2016 onethird award earned year respective measurement period based company’s performance preestablished returnoncapital target year measured january 1 december 31 majority third tranche entire second tranche 2016 performance units earned 2018 2017 respectively january 2018 portion third tranche 2016 performancebased stock units changed marketbased stock units would earned end measurement period based company’s total shareholder return measured total shareholder return standard poor’s 500® index january 1 2018 december 31 2018 none 2016 marketbased stock units earned 2018 2017 2016 alcoa corporation recognized stockbased compensation expense 35 24 28 respectively approximately 80 90 related stock units period stockbased compensation expense capitalized 2018 2017 2016 total pretax stockbased compensation expense recognized 2016 16 relates allocation expense parentco’s corporate employees part alcoa corporation’s parentco’s stockbased compensation plan design respective periods individuals retirementeligible sixmonth requisite service period year grant result larger portion expense recognized first half year retirementeligible employees total pretax stockbased compensation expense recognized 2018 2017 2016 5 4 7 respectively pertains acceleration expense related retirementeligible employees stockbased compensation expense based grant date fair value applicable equity grant stock units performance market condition stock units performance condition fair value equivalent closing market price either alcoa corporation’s parentco’s common stock date grant respective periods stock units market condition fair value estimated date grant using monte carlo simulation model generated result 7313 5201 per unit 2018 2017 respectively monte carlo simulation model uses certain assumptions estimate fair value marketbased stock unit including volatility 3847 company 1212 standard poor’s 500® index riskfree interest rate 217 assumptions used estimate fair value stock units granted 2017 materially different stock options fair value estimated date grant using latticepricing model generated result 2132 1245 212 per option 2018 2017 2016 respectively see updated fair value amount 2016 grants latticepricing model uses several assumptions estimate fair value stock option including average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior contractual life following describes detail assumptions used company estimate fair value stock options granted 2018 assumptions used estimate fair value stock options granted 2017 alcoa corporation 2016 parentco materially different riskfree interest rate 263 based yield curve interest rates time grant contractual life option dividend yield 00 based fact company pay dividends separation date 2017 immediate plans pay dividends 2018 volatility 4332 based historical implied volatilities term option alcoa corporation utilized historical option forfeiture data estimate annual pre postvesting forfeitures 4 exercise behavior 63 based weighted average exercise ratio exercise patterns grants issued number years contractual option term option’s intrinsic value resulting historical employee exercise behavior based upon assumptions used determination fair value life option 60 years output latticepricing model alcoa corporation standalone publiclytraded company twomonth period 2016 assumptions used estimate fair value stock options granted february 2017 largely based historical parentco information applicable alcoa corporation grant stock options november 1 2016 december 31 2016 respective fair value stock options outstanding october 31 2016 originally granted parentco’s stockbased compensation plan alcoa corporation employees adjusted reflect impact parentco’s 1for3 reverse stock split occurred october 5 2016 maintain intrinsic value stock options result separation transaction accordingly fair value stock options originally granted 2016 adjusted 475 alcoa corporation recognize incremental stockbased compensation expense result adjustment activity stock options stock units 2018 follows number converted units includes 109239 shares “withheld” meet company’s statutory tax withholding requirements related income earned employees result vesting units december 31 2018 1959927 outstanding stock options weighted average remaining contractual life 550 years total intrinsic value 8 additionally 1298021 total outstanding stock options fully vested exercisable weighted average remaining contractual life 435 years weighted average exercise price 2618 total intrinsic value 5 december 31 2018 cash received stock option exercises 23 43 10 2018 2017 2016 respectively total intrinsic value stock options exercised 2018 2017 2016 26 24 4 respectively december 31 2018 32 pretax combined unrecognized compensation expense related nonvested grants stock options stock units expense expected recognized weighted average period 165 years n pension postretirement benefits defined benefit plans alcoa corporation sponsors several defined benefit pension plans covering us employees certain employees foreign locations see plan actions pension benefits generally depend length service job grade remuneration substantially benefits paid pension trusts sufficiently funded ensure plans pay benefits retirees become due salaried nonbargaining hourly us employees hired march 1 2006 participate defined contribution plan instead defined benefit plan company also maintains health care life insurance postretirement employee benefit plans covering eligible us retired employees certain retirees foreign locations see plan actions generally medical plans unfunded pay percentage medical expenses reduced deductibles coverage life benefits generally provided insurance contracts alcoa corporation retains right subject existing agreements change eliminate benefits salaried certain nonbargaining hourly us employees hired january 1 2002 certain bargaining hourly us employees hired july 1 2010 eligible postretirement health care benefits salaried certain hourly us employees retire april 1 2008 eligible postretirement life insurance benefits january 1 2018 pension benefit plans postretirement benefit plans cover aggregate approximately 54000 approximately 48000 participants respectively plan actions 2018 management initiated several actions certain pension postretirement benefit plans follows • action 1in january 2018 alcoa corporation notified us canadian salaried employees participants three company’s defined benefit pension plans cease accruing retirement benefits future service effective january 1 2021 change affect approximately 800 employees transitioned countryspecific defined contribution plans alcoa corporation contribute 3 participants’ eligible earnings annual basis contributions incremental employer savings match employees may receive existing defined contribution plans participants already collecting benefits defined benefit pension plans affected changes • action 2in january 2018 company notified us salaried employees retirees longer contribute premedicare retiree medical coverage effective january 1 2021 change affects approximately 700 participants one plan • action 3in april 2018 alcoa corporation signed group annuity contracts transfer obligation pay remaining retirement benefits approximately 2100 retirees two canadian defined benefit pension plans three insurance companies transfer 560 plan obligations plan assets well transaction fee 23 completed april 13 2018 company contributed 89 two plans facilitate transaction maintain funding level remaining plan obligations prior transactions two canadian pension plans combined approximately 3500 participants • action 4in august 2018 alcoa corporation signed group annuity contract transfer obligation pay remaining retirement benefits approximately 10500 retirees three us defined benefit pension plans one insurance company transfer 287 plan obligations plan assets well transaction fee 10 completed august 7 2018 additionally approximately 1000 plan participants elected receive lump sum settlements representing 75 plan obligations 85 plan assets prior two transactions three us pension plans combined approximately 43400 participants • action 5in august 2018 company notified certain us salaried retirees life insurance longer provided effective september 1 2018 change affects approximately 5500 participants one plan part change alcoa corporation made onetime transition payment affected retirees totaling 23 september 2018 actions resulted curtailment settlement benefits thereby requiring remeasurement including update discount rates used determine benefit obligations affected plans following table presents certain information financial impacts actions accompanying consolidated financial statements 1 negative amount indicates corresponding decrease accumulated comprehensive loss positive amount indicates corresponding increase accumulated comprehensive loss 2 amounts represent accelerated amortization portion existing prior service cost benefit curtailments net actuarial loss settlements reclassified accumulated comprehensive loss restructuring charges see note accompanying statement consolidated operations eight plans affected curtailment settlement actions described represented 65 combined net unfunded status company’s pension postretirement benefit plans december 31 2017 separation transaction descriptions retirement benefits alcoa corporation participants also describe retirement benefits provided parentco employees retirees prior separation date periods prior august 1 2016 see eligible employees attributable alcoa corporation operations participated us defined benefit pension postretirement benefit plans sponsored parentco “shared plans” included arconic parentco corporate participants company accounted portion shared plans multiemployer benefit plans accordingly alcoa corporation record asset liability recognize funded status shared plans multiemployer contribution expense attributable employees alcoa corporationrelated operations based primarily pensionable compensation employees pension plans estimated interest costs postretirement benefit plans additionally periods prior august 1 2016 alcoa corporation recorded allocation expenses shared plans attributable parentco corporate participants well closed sold operations see cost allocations note also certain parentco plans described specific employees attributable alcoa corporation operations nonus entirety “direct plans” company accounted direct plans defined benefit pension postretirement benefit plans accordingly funded status direct plans recorded alcoa corporation’s consolidated balance sheet actuarial gains losses yet recognized earnings recorded accumulated comprehensive loss amortized component net periodic benefit cost determination benefit obligations recognition expenses related direct plans dependent various assumptions major assumptions primarily relate discount rates longterm expected rates return plan assets future compensation increases management develops assumption using relevant company experience conjunction marketrelated data plans preparation separation transaction effective august 1 2016 certain shared plans separated standalone plans alcoa corporation “new direct plans” arconic accordingly new direct plans company measured august 1 2016 one primary assumptions used measure new direct plans weighted average discount rate 348 measurement yielded combined net unfunded status 2348 additionally certain shared plans assumed alcoa corporation “additional new direct plans” collectively direct plans new direct plans “cumulative direct plans” require separated andor remeasured additional new direct plans combined net unfunded status 180 aggregate combined net unfunded status new direct plans additional new direct plans recognized company’s consolidated balance sheet time consisting current liability 136 noncurrent liability 2392 additionally alcoa corporation recognized 2704 accumulated comprehensive loss following table summarizes total expenses recognized company related pension postretirement benefits funded status alcoa corporation’s cumulative direct plans measured december 31 calendar year information follows pension postretirement benefit plans applicable cumulative direct plans appropriate obligations funded status december 31 2018 benefit obligation fair value plan assets funded status us pension plans 4246 3160 1086 respectively december 31 2017 benefit obligation fair value plan assets funded status us pension plans 5093 3195 1898 respectively pension plan benefit obligations components net periodic benefit cost 1 2018 2017 2016 net periodic benefit cost us pension plans 358 74 21 respectively 2 2018 2017 2016 net periodic benefit cost postretirement benefits reflects reduction 8 6 respectively related recognition federal subsidy awarded medicare part 3 amounts reported expenses income net accompanying statement consolidated operations see notes b recently adopted accounting guidance 4 amounts reported restructuring charges accompanying statement consolidated operations see note 2018 settlements due management actions see plan actions 341 payment lump sum benefits 13 2017 settlements due payment lump sum benefits 2016 settlements due workforce reductions payment lump sum benefits 5 amounts reported restructuring charges accompanying statement consolidated operations see note 2018 curtailments due management actions see plan actions 6 amounts reported restructuring charges accompanying statement consolidated operations see note 2017 2016 special termination benefits due workforce reductions 7 amounts attributed joint venture partners included amounts expected recognized net periodic benefit cost assumptions weighted average assumptions used determine benefit obligations pension postretirement benefit plans follows discount rate determined using companyspecific yield curve model abovemedian developed assistance external actuary cash flows plans’ projected benefit obligations discounted using single equivalent rate derived yields high quality corporate bonds represent broad diversification issuers various sectors yield curve model parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows bonds included model exceed cash flows needed satisfy alcoa corporation’s plan obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used rate compensation increase based upon anticipated compensation increases estimated inflation 2019 rate compensation increase 326 weighted average assumptions used determine net periodic benefit cost pension postretirement benefit plans follows expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment see plan assets 2018 2017 2016 expected longterm rate return used management based prevailing planned strategic asset allocations well estimates future returns asset class 2019 management anticipates 659 weightedaverage expected longterm rate return assumed health care cost trend rates us postretirement benefit plans follows nonus plans material assumed health care cost trend rate used measure expected cost gross eligible charges covered company’s postretirement benefit plans 2019 55 trend rate used reflecting management’s best estimate change future health care costs covered plans’ actual annual health care cost trend experience separation date end 2018 ranged 05 08 management believe threeyear range indicative expected increases future health care costs longterm assumed health care cost trend rates effect amounts reported health care plan onepercentage point change assumed rates would following effects plan assets alcoa corporation’s pension plan investment policy weighted average asset allocations december 31 2018 2017 asset class follows principal objectives underlying investment pension plan assets ensure company properly fund benefit obligations become due broad range potential economic financial scenarios maximize longterm investment return acceptable level risk based obligations broadly diversify investments across within various asset classes protect asset values adverse movements 2017 specific objectives longterm investment strategy included reducing volatility pension assets relative pension liabilities achieving risk factor diversification across balance asset portfolio portion assets matched interest rate profile benefit obligation long duration fixed income investments fixed income derivative instruments exposure broad equity risk decreased diversified investments discretionary systematic macro hedge funds longshort equity hedge funds global emerging market equities investments diversified strategy asset class geography sector effort enhance returns mitigate downside risk several external investment managers used gain broad exposure financial markets mitigate managerconcentration risk investment strategy defined prior separation date parentco management maintained alcoa corporation management however strategy resulted investment returns less expected since separation date accordingly 2018 management implemented lesscomplex peerlike investment strategy result restructured asset portfolio new strategy resulted investing higher percentage portfolio assets match interest rate credit risk profiles benefit obligations well investing assets expected generate favorable riskadjusted returns longterm investment horizon achieve new strategy portfolio longer includes investments discretionary systematic macro hedge funds includes minimal amount investments longshort equity hedge funds expected eliminated 2019 instead portfolio includes larger allocation investments longduration government debt longduration corporate credit real estate occurred late 2017 well new investments high yield emerging market sovereign debt globallisted infrastructure additionally number asset managers decreased company’s new strategy substantially implemented end 2018 result actual asset class mix noted line expected asset class mix approximately 30 equities approximately 50 fixed income approximately 20 investments investment practices comply requirements applicable laws regulations respective jurisdictions including employee retirement income security act 1974 erisa united states use derivative instruments external investment managers permitted appropriate necessary achieving overall investment policy objectives mitigating interest rate asset class risks following section describes valuation methodologies used trustees measure fair value pension plan assets plan assets measured net asset value refers net asset value investment per share basis equivalent practical expedient otherwise indication level fair value hierarchy type asset generally classified provided see note definition fair value description fair value hierarchy equitiesthese securities consist direct investments stock publicly traded us nonus companies valued based closing price reported active market individual securities traded generally classified level 1 ii plans’ share commingled funds invested stock publicly traded companies valued net asset value iii direct investments longshort equity hedge funds private equity limited partnerships venture capital partnerships valued net asset value fixed incomethese securities consist us government debt generally valued using quoted prices included level 1 ii cash equivalents invested publiclytraded funds valued based closing price reported active market individual securities traded generally classified level 1 iii publicly traded us nonus fixed interest obligations principally corporate bonds debentures valued consultation evaluation brokers institutional market using quoted prices observable market data included level 2 iv cash equivalents invested institutional funds valued net asset value investmentsthese investments include among others real estate investment trusts valued based closing price reported active market investments traded included level 1 ii plans’ share commingled funds invested real estate partnerships valued net asset value iii direct investments discretionary systematic macro hedge funds private real estate includes limited partnerships valued net asset value iv absolute return strategy funds valued net asset value fair value methods described may indicative net realizable value reflective future fair values additionally alcoa corporation believes valuation methods used plans’ trustees appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different fair value measurement reporting date following table presents fair value pension plan assets classified either appropriate level fair value hierarchy net asset value 1 december 31 2018 total fair value pension plan assets excludes net receivable 19 represents securities yet settled plus interest dividends earned various investments 2 december 31 2017 total fair value pension plan assets excludes net receivable 2 represents securities yet settled plus interest dividends earned various investments less amount due arconic pension plans alcoa corporation pension plans related separation certain plans two companies funding cash flows alcoa corporation’s policy fund amounts defined benefit pension plans sufficient meet minimum requirements set forth applicable country benefits laws tax laws including erisa us plans time company contributes additional amounts deemed appropriate 2018 2017 2016 cash contributions alcoa corporation’s defined benefit pension plans 992 106 66 contributions made 2018 include combined 725 unscheduled contributions several defined benefit pension plans including combined 620 three company’s us defined benefit pension plans combined 105 two company’s canadian defined benefit pension plans inclusive 89 action 3 plan actions additional payments us plans discretionary nature funded 492 net proceeds may 2018 debt issuance see note l 128 available cash hand primary purpose issuing debt fund portion discretionary contributions us plans reduce nearterm pension funding risk fixed rate 10year maturity instrument alcoa corporation’s minimum required contribution defined benefit pension plans 2019 estimated 310 270 us plans erisa regulations plan sponsor establishes prefunding balance making discretionary contributions us defined benefit pension plan may elect apply portion balance toward minimum required contribution obligations related plan future years 2019 management consider making election related company’s us plans benefit payments expected paid pension postretirement benefit plan participants expected medicare part subsidy receipts follows defined contribution plans company sponsors savings investment plans several countries including australia united states prior separation date employees attributable alcoa corporation operations participated parentcosponsored plans united states employees may contribute portion compensation plans alcoa corporation parentco prior separation date matches specified percentage contributions equivalent form investments elected employee also company makes contributions retirement savings account based percentage eligible compensation certain us employees hired march 1 2006 able participate alcoa corporation’s defined benefit pension plans company’s expenses related defined contribution plans 69 2018 65 2017 57 2016 derivatives financial instruments fair value fair value defined price would received sell asset paid transfer liability orderly transaction market participants measurement date fair value hierarchy distinguishes market participant assumptions developed based market data obtained independent sources observable inputs ii entity’s assumptions market participant assumptions developed based best information available circumstances unobservable inputs fair value hierarchy consists three broad levels gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 lowest priority unobservable inputs level 3 three levels fair value hierarchy described • level 1unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities • level 2inputs quoted prices included within level 1 observable asset liability either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability eg interest rates inputs derived principally corroborated observable market data correlation means • level 3inputs significant fair value measurement unobservable derivatives alcoa corporation exposed certain risks relating ongoing business operations including financial market political economic risks following discussion provides information regarding alcoa corporation’s exposure risks changing commodity prices foreign currency exchange rates alcoa corporation’s commodity derivative activities subject management direction control strategic risk management committee srmc consists least three members including chief executive officer chief financial officer remaining members officers andor employees company chief executive officer may designate time currently member srmc alcoa corporation’s treasurer srmc meets periodic basis review derivative positions strategy reports audit committee alcoa corporation’s board directors scope activities alcoa corporation’s aluminum energy foreign exchange contracts held purposes trading used primarily mitigate uncertainty volatility cover underlying exposures alcoa corporation involved trading activities energy weather derivatives nonexchange commodity trading activities several alcoa corporation’s aluminum energy foreign exchange contracts classified level 1 level 2 fair value hierarchy total fair value derivative contracts recorded assets liabilities 2 54 respectively december 31 2018 44 117 respectively december 31 2017 2016 alcoa corporation recognized loss 22 less 1 respectively expenses income net accompanying statement consolidated operations related contracts certain contracts designated either fair value cash flow hedging instruments contracts designated cash flow hedges alcoa corporation recognized unrealized gain 24 unrealized loss 92 unrealized gain 2 comprehensive income loss 2018 2017 2016 respectively additionally alcoa corporation reclassified realized loss 14 15 2018 2017 respectively accumulated comprehensive loss sales addition level 1 2 derivative instruments described alcoa corporation several derivative instruments classified level 3 fair value hierarchy instruments composed embedded aluminum derivatives embedded credit derivative related energy supply contracts ii freestanding financial contracts related energy purchases made spot market associated nine smelters three refineries certain embedded aluminum derivatives financial contracts designated cash flow hedging instruments level 3 derivative instruments described detail enumerated d1 d11 following section describes valuation methodologies used alcoa corporation measure level 3 derivative instruments fair value derivative instruments classified level 3 fair value hierarchy represent management used least one significant unobservable input valuation model alcoa corporation uses discounted cash flow model fair value level 3 derivative instruments appropriate description includes key inputs models significant assumptions valuation models reviewed tested least annual basis inputs valuation models level 3 derivative instruments composed following quoted market prices eg aluminum prices 10year london metal exchange lme forward curve energy prices ii significant observable inputs eg information concerning time premiums volatilities certain option type embedded derivatives regional premiums aluminum contracts iii unobservable inputs eg aluminum energy prices beyond quoted market periods beyond term quoted market prices aluminum alcoa corporation estimates price aluminum extrapolating 10year lme forward curve additionally periods beyond term quoted market prices energy management developed forward curve based independent consultant market research appropriate valuations adjusted various factors liquidity bidoffer spreads credit considerations adjustments generally based available market evidence level 2 absence evidence management’s best estimate used level 3 significant input unobservable one period becomes observable subsequent period related asset liability would transferred appropriate classification level 1 2 period change transfers periods presented d1 d5 alcoa corporation two power contracts d1 d2 contain embedded derivative indexes price power lme price aluminum additionally alcoa corporation three power contracts d3 d5 contain embedded derivative indexes price power lme price aluminum plus midwest premium embedded derivatives five power contracts primarily valued using observable market prices however due length contracts valuation models also require management estimate longterm price aluminum based upon extrapolation 10year lme forward curve one contracts longer requires use prices beyond curve additionally three contracts management also estimates midwest premium generally next twelve months based recent transactions holds constant premium estimated twelfth month constant remaining duration contract significant increases decreases actual lme price beyond 10 years would result higher lower fair value measurement increase actual lme price andor midwest premium inputs used valuation models result higher cost power corresponding decrease derivative asset increase derivative liability embedded derivatives designated cash flow hedges forward sales aluminum unrealized gains losses included accumulated comprehensive loss accompanying consolidated balance sheet realized gains losses included sales accompanying statement consolidated operations d6 alcoa corporation power contract expired october 2016 see d10 separate contains lmelinked embedded derivative prior expiration embedded derivative valued using probability interrelationship future lme prices australian dollar us dollar exchange rates us consumer price index significant increases decreases lme price would result higher lower fair value measurement increase actual lme price inputs used valuation model result higher cost power corresponding decrease derivative asset embedded derivative qualify hedge accounting treatment unrealized gains losses embedded derivative included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract time derivative asset recognized equivalent amount recognized deferred credit noncurrent liabilities deferred credits consolidated balance sheet amortization deferred credit recognized expenses income net accompanying statement consolidated operations power received life contract d7 alcoa corporation natural gas supply contract expired october 2018 lmelinked ceiling prior expiration embedded derivative valued using probabilities future lme aluminum prices price brent crude oil priced platts including interrelationships two commodities subject ceiling change interrelationship would result higher lower fair value measurement lme ceiling embedded contract price protect increase price oil without corresponding increase price lme increase oil prices similar increase lme price would limit increase price paid natural gas embedded derivative qualify hedge accounting treatment unrealized gains losses embedded derivative included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations gas purchases made contract d8 2016 alcoa corporation related counterparty elected modify pricing existing power contract smelter united states amendment contains embedded derivative indexes price power lme price aluminum plus midwest premium embedded derivative valued using interrelationship future metal prices lme base plus midwest premium amount megawatt hours energy needed produce forecasted metric tons aluminum smelter significant increases decreases metal price would result higher lower fair value measurement increase actual metal price inputs used valuation model result higher cost power corresponding increase derivative liability management elected qualify embedded derivative hedge accounting treatment unrealized gains losses embedded derivative included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract time derivative liability recognized equivalent amount recognized deferred charge noncurrent assets accompanying consolidated balance sheet amortization deferred charge recognized expenses income net accompanying statement consolidated operations power received life contract d9 alcoa corporation power contract contains embedded derivative indexes spread company’s estimated 30year debt yield counterparty’s 30year debt yield alcoa corporation outstanding 30year debt company’s estimated 30year debt yield represented sum excess yield alcoa’s outstanding notes due 2026 yield babbrated company debt included barclays high yield index intermediate 10year credits ii yield babbrated company debt included barclays high yield index long 30year credits accordance terms power contract calculation may changed january calendar year management uses market prices historical relationships forecast services determine fair value significant increases decreases inputs would result lower higher fair value measurement wider credit spread alcoa corporation counterparty would result higher cost power corresponding increase derivative liability embedded derivative qualify hedge accounting treatment unrealized gains losses included expenses income net accompanying statement consolidated operations realized gains losses included cost goods sold accompanying statement consolidated operations electricity purchases made contract d10 d11 alcoa corporation financial contract d10 hedged anticipated power requirements one smelters began november 2016 time energy supply contract related smelter expired see d6 alcoa corporation began purchasing electricity directly spot market beyond term market information available management developed forward curve valuation purposes based independent consultant market research significant increases decreases power market may result higher lower fair value measurement financial contract lower prices power market would cause decrease derivative asset financial contract designated cash flow hedge future purchases electricity designation ceased december 2016 see november 2016 unrealized gains losses contract recorded accumulated comprehensive loss accompanying consolidated balance sheet realized gains losses recorded cost goods sold electricity purchases made spot market august 2016 alcoa corporation gave required notice terminate financial contract one year date notification result alcoa corporation decreased related derivative asset recorded noncurrent assets unrealized gain recorded accumulated comprehensive loss 84 related august 2017 2036 timeframe resulting impact alcoa corporation’s earnings december 2016 smelter experienced unplanned outage resulting portion financial contract longer qualifying hedge accounting point management elected discontinue hedge accounting remainder contract august 2017 result alcoa corporation reclassified unrealized gain 7 accumulated comprehensive loss expenses net related portion contract longer qualified hedge accounting remaining 6 unrealized gain accumulated comprehensive loss related portion management elected discontinue hedge accounting reclassified cost goods sold electricity purchases made spot market termination date financial contract additionally december 2016 august 2017 unrealized gains losses contract recorded expenses income net realized gains losses recorded expenses income net electricity purchases made spot market january 2017 alcoa corporation counterparty entered new financial contract d11 hedge anticipated power requirements smelter period august 2017 july 2021 amended existing financial contract reduce hedged amount anticipated power requirements move effective termination date july 31 2017 new financial contract designated cash flow hedge future purchases electricity unrealized gains losses new financial contract recorded accumulated comprehensive loss accompanying consolidated balance sheet realized gains losses recorded began august 2017 cost goods sold electricity purchases made spot market following table presents quantitative information related significant unobservable inputs described level 3 derivative instruments fair value embedded aluminum derivatives d3 d5 reflected asset table lower 21 compared respective amount reflected level 3 tables presented due fact contracts asset position noncurrent portion liability position current portion reflected accompanying consolidated balance sheet however derivatives reflected net asset table purposes presenting assumptions utilized measure fair value derivative instrument entirety fair values level 3 derivative instruments recorded assets liabilities accompanying consolidated balance sheet follows following table shows net fair values level 3 derivative instruments december 31 2018 effect amounts hypothetical change increase decrease 10 market prices rates existed december 31 2018 following tables present reconciliation activity level 3 derivative instruments 2018 purchases sales issuances settlements level 3 derivative instruments additionally transfers derivative instruments level 3 january 2017 issuance new financial contract see d11 purchases sales settlements level 3 derivative instruments additionally transfers derivative instruments level 3 derivatives designated hedging instrumentscash flow hedges derivative instruments designated qualify cash flow hedges effective january 1 2018 entire amount unrealized gains losses derivative reported component comprehensive income prior january 1 2018 effective portion unrealized gains losses derivative reported component comprehensive income ineffective portion unrealized gains losses recognized directly earnings immediately april 1 2018 alcoa corporation adopted guidance issued fasb accounting hedging activities see recently adopted accounting guidance note b included elimination concept ineffectiveness accordingly longer requirement separately measure report ineffectiveness periods presented realized gains losses derivative reclassified comprehensive income earnings period periods hedged transaction impacts earnings additionally gains losses derivative representing hedge components excluded assessment effectiveness recognized directly earnings immediately alcoa corporation five level 3 embedded aluminum derivatives one level 3 financial contract november 2016 see d10 designated cash flow hedges described additionally january 2017 alcoa corporation entered new financial contract see d11 designated cash flow hedging instrument classified level 3 fair value hierarchy replaced existing financial contract see d10 august 2017 embedded aluminum derivatives d1 d5 alcoa corporation entered energy supply contracts contain pricing provisions related lme aluminum price lmelinked pricing features considered embedded derivatives five embedded derivatives designated cash flow hedges forward sales aluminum december 31 2018 2017 embedded aluminum derivatives hedge forecasted aluminum sales 2508 kmt 2859 kmt respectively 2018 2017 2016 alcoa corporation recognized net unrealized gain 785 net unrealized loss 1521 net unrealized loss 615 respectively comprehensive income loss related five derivative instruments additionally alcoa corporation reclassified realized loss 100 113 7 accumulated comprehensive loss sales 2018 2017 2016 respectively assuming market rates remain constant rates december 31 2018 realized loss 46 expected recognized sales next 12 months ineffectiveness related five derivative instruments 2017 2016 financial contracts d10 d11 alcoa corporation financial contract hedge anticipated power requirements one smelters became effective existing power contract expired october 2016 august 2016 alcoa corporation elected terminate remaining term financial contract see d10 additionally december 2016 management elected discontinue hedge accounting contract see d10 financial contract hedged forecasted electricity purchases 1969544 megawatt hours prior december 2016 2017 alcoa corporation reclassified realized gain 6 accumulated comprehensive loss cost goods sold 2016 alcoa corporation recognized unrealized gain 96 comprehensive loss additionally alcoa corporation recognized gain 3 income net related hedge ineffectiveness 2016 addition january 2017 alcoa corporation entered new financial contract hedges anticipated power requirements smelter period august 2017 july 2021 see d11 december 31 2018 2017 financial contract hedges forecasted electricity purchases 6348276 8805456 respectively megawatt hours 2018 2017 alcoa corporation recognized unrealized loss 11 unrealized gain 88 respectively comprehensive income loss additionally alcoa corporation reclassified realized gain 62 25 2018 2017 respectively accumulated comprehensive loss cost goods sold assuming market rates remain consistent rates december 31 2018 realized gain 70 expected recognized cost goods sold next 12 months amount hedge ineffectiveness related derivative instrument material 2017 derivatives designated hedging instruments alcoa corporation two three prior october 2016 level 3 embedded aluminum derivatives d6 d8 one level 3 embedded credit derivative d9 qualify hedge accounting treatment one level 3 financial contract management elected discontinue hedge accounting treatment see d10 gains losses related changes fair value instruments recorded directly earnings 2018 2017 2016 alcoa corporation recognized gain 23 loss 22 loss 17 respectively expenses income net gain 19 loss 18 loss 15 respectively related embedded aluminum derivatives gain 4 gain 3 loss 5 respectively related embedded credit derivative loss 7 2017 gain 3 2016 related financial contract material limitations disclosures respect commodity prices foreign currency exchange risk consider underlying commitments anticipated transactions underlying items included analysis gains losses futures contracts may offset actual results determined several factors alcoa corporation’s control could vary significantly factors disclosed alcoa corporation exposed credit loss event nonperformance counterparties instruments well credit performance risk respect hedged customers’ commitments alcoa corporation anticipate nonperformance parties contracts creditworthy counterparties supported cash treasury bills irrevocable letters credit issued carefully chosen banks addition various master netting arrangements place counterparties facilitate settlement gains losses contracts financial instruments carrying values fair values alcoa corporation’s financial instruments follows following methods used estimate fair values financial instruments cash equivalents restricted cash carrying amounts approximate fair value short maturity instruments fair value amounts cash equivalents restricted cash classified level 1 fair value hierarchy longterm debt due within one year longterm debt less amount due within one year fair value based quoted market prices public debt interest rates currently available alcoa corporation issuance debt similar terms maturities nonpublic debt fair value amounts longterm debt classified level 2 fair value hierarchy p income taxes provision income taxes components income loss income taxes follows provision income taxes consisted following includes us income taxes related foreign income reconciliation us federal statutory rate alcoa corporation’s effective tax rate follows effective tax rate provision income 2018 2017 provision loss 2016 1 noted us tax cuts jobs act 2017 impact global intangible lowtaxed income provisions reflected table fully offset utilization majority company’s 2018 loss united states reflected us federal statutory rate change line item well utilization portion company’s us tax loss carryforwards reflected changes valuation allowance line item applicable us deferred tax assets full valuation allowance 2 2018 2017 income certain operations several company’s subsidiaries brazil taxed lower rate result approved tax holidays difference respective holiday rates statutory rates resulted benefit 46 20 024 011 per diluted share 2018 2017 respectively majority tax holidays expire end 2022 one tax holiday expires end 2026 see 2018 2017 line item also includes benefit 5 charge 26 respectively remeasurement certain deferred tax assets related tax holidays brazil see 3 2016 hypothetical net operating losses tax credits determined separate return basis likely tax benefit realized related deferred tax asset offsetting valuation allowance adjusted parent company net investment reflected subsequent deferred tax valuation allowance tables mid2017 awab received approval tax holiday related operation juruti brazil bauxite mine tax holiday made effective january 1 2017 retroactively decreases awab’s tax rate income generated juruti mine 34 1525 result future cash tax savings 10year period result income tax rate change awab’s existing deferred tax assets expected reverse holiday period remeasured lower tax rate 2017 remeasurement resulted decrease awab’s deferred tax assets discrete income tax charge 26 15 noncontrolling interest updated analysis deferred tax assets expected reverse holiday period resulted increase awab’s deferred tax assets discrete income tax benefit 5 3 noncontrolling interest 2018 deferred income taxes components deferred tax assets liabilities based underlying attributes without regard jurisdiction follows following table details expiration periods deferred tax assets presented deferred tax assets expiration may still annual limitations utilization represents deferred tax assets whose expiration dependent upon reversal underlying temporary difference total deferred tax asset net valuation allowance supported projections future taxable income exclusive reversing temporary differences taxable temporary differences reverse within carryforward period composition alcoa corporation’s net deferred tax asset jurisdiction december 31 2018 follows company several income tax filers various foreign countries 291 net deferred tax asset included “foreign” column table approximately 80 relates four alcoa corporation’s income tax filers follows 209 deferred tax asset alumínio brazil 140 net deferred tax asset awab brazil 94 deferred tax asset española collectively alumínio awab “foreign filers” spain 220 net deferred tax liability aofa future realization net deferred tax asset foreign filers based projections respective future taxable income defined sum pretax income comprehensive income permanent tax differences exclusive reversing temporary differences carryforwards realization net deferred tax assets foreign filers dependent tax planning strategies foreign filers generated taxable income threeyear cumulative period ending december 31 2018 management also forecasted taxable income foreign filers 2019 foreseeable future forecast based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials bauxite caustic soda energy labor transportation costs assumptions utilized management develop financial operating plan used manage company measure performance actual results majority foreign filers’ net deferred tax assets relate tax loss carryforwards foreign filers history tax loss carryforwards expiring unused additionally tax loss carryforwards infinite life respective income tax codes brazil spain said utilization existing tax loss carryforward limited 30 25 taxable income particular year brazil spain respectively accordingly management concluded net deferred tax assets foreign filers likely realized future periods resulting need partial full valuation allowance december 31 2018 following table details changes valuation allowance 1 line item reflects valuation allowances initially established result change management’s judgment regarding realizability deferred tax assets 2 line item reflects movements previously established valuation allowances increase decrease related deferred tax assets increase decrease movements occur result remeasurement due tax rate change changes underlying attributes deferred tax assets including expiration attribute reversal temporary difference gave rise deferred tax asset 2018 alcoa corporation immediately established full valuation allowance 86 related initial deferred tax asset associated company’s equity interest elysis see note h inception alcoa corporation contributed certain intellectual property patents made initial cash investment 5 elysis deferred tax asset relates outside basis difference created excess tax basis ie fair value assets carrying value investment elysis recorded company initial purpose elysis advance development aluminum smelter technology ultimate goal commercialization weighing available positive negative evidence management determined likely alcoa corporation realize tax benefit deferred tax asset conclusion based fact elysis expected generate losses foreseeable future elysis incurs expenses development stage without committed future revenue stream need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2017 company established valuation allowance 94 related remaining deferred tax assets iceland initial allowance previously established 2015 amount comprised 60 discrete income charge recognized provision income taxes accompanying consolidated statement operations 34 charge accumulated comprehensive loss accompanying consolidated balance sheet deferred tax assets relate tax loss carryforwards expiration period ranging 2017 2026 deferred losses associated derivative hedging activities weighing available positive negative evidence management determined longer likely alcoa corporation realize tax benefit deferred tax assets conclusion based existing cumulative losses short expiration period losses generated result intercompany interest expense company’s global treasury cash management system realization deferred losses associated lmelinked embedded derivative power contract see note interest expense expected continue additional deferred losses associated embedded derivative realized future years result management estimates sufficient taxable income available utilize operating losses expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances undistributed net earnings cumulative amount alcoa corporation’s foreign undistributed net earnings deemed permanently reinvested approximately 1010 december 31 2018 amount relates foreign undistributed net earnings generated prior separation date well approximately 230 certain earnings generated 2018 2017 alcoa corporation several commitments obligations related company’s operations various foreign jurisdictions therefore management plans distribute earnings foreseeable future alcoa corporation continuously evaluates local global cash needs future business operations anticipated debt facilities may influence future repatriation decisions described see us tax cuts jobs act 2017 beginning january 1 2018 dividends received foreign subsidiaries longer subject us federal income tax however mandatory onetime deemed repatriation existing foreign undistributed net earnings 2017 may resulted tax obligation company based analysis completed 2018 management determined alcoa corporation sufficient us tax losses foreign tax credits apply tax resulting impact company’s consolidated financial statements accordingly exception potential foreign currency exchange rate differences earnings described subject residual us income tax repatriated future additionally repatriation subject foreign income tax exception withholding tax certain jurisdictions management expect withholding tax material company’s consolidated financial statements unrecognized tax benefits alcoa corporation subsidiaries file income tax returns us federal jurisdiction various foreign us state jurisdictions exceptions company subject income tax examinations tax authorities years prior 2014 us federal income tax purposes virtually alcoa corporation’s us operations included income tax filings parentco’s us consolidated tax group prior separation date since time company’s us consolidated tax group comprised referenced us operations filed twomonth related 2016 2017 us federal income tax return examined internal revenue service us federal income tax filings parentco’s us consolidated tax group examined prior periods separation date foreign jurisdiction tax authorities process examining income tax returns several alcoa corporation’s subsidiaries various tax years including 2006 2017 us state income tax purposes alcoa corporation subsidiaries remain subject income tax examinations 2014 tax year forward december 31 2018 active examinations reconciliation beginning ending amount unrecognized tax benefits excluding interest penalties follows periods presented portion balance end year pertains state tax liabilities presented offset federal tax benefits effect unrecognized tax benefits recorded would impact annual effective tax rate 2018 2017 2016 would 2 1 10 respectively pretax book income loss 2018 company recorded charge 30 €26 including 10 €9 interest provision income taxes accompanying statement consolidated operations establish liability 49 share estimated loss disputed income tax matter see “spain” tax section note r alcoa corporation anticipate changes unrecognized tax benefits material impact statement consolidated operations 2019 company’s policy recognize interest penalties related income taxes component provision income taxes accompanying statement consolidated operations 2018 2017 2016 alcoa corporation recognized 10 1 respectively interest penalties due expiration statute limitations settlements tax authorities refunded overpayments company also recognized interest income 1 6 2 2018 2017 2016 respectively december 31 2018 2017 amount accrued payment interest penalties 12 2 respectively us tax cuts jobs act 2017 december 22 2017 us tax legislation known us tax cuts jobs act 2017 “tcja” enacted corporations tcja amends us internal revenue code reducing corporate income tax rate modifying several business deduction international tax provisions specifically corporate income tax rate reduced 21 35 significant changes general include following among others mandatory onetime deemed repatriation accumulated foreign earnings see undistributed net earnings either 8 155 tax rate depending circumstances ii dividends received foreign subsidiaries deducted full regardless ownership interest previously dividends fully taxable iii 21 105 tax effective 2018 depending circumstances new category income referred global intangible low tax income gilti related earnings foreign entities prescribed return associated fixed asset base iv 5 10 tax effective 2018 base erosion payments deductible crossborder payments related parties exceed 3 company’s deductible expenses v net operating losses unlimited carryforward period previously 20 years carryback period previously 2 years deductions losses limited 80 taxable income previously 100 taxable income beginning 2018 tax year result close proximity enactment date tcja relation alcoa corporation’s 2017 calendar yearend management elected january 17 2018 cutoff date purposes recognizing impacts tcja company’s 2017 consolidated financial statements date coincided alcoa corporation’s public release preliminary financial results fourth quarter year ended december 31 2017 accordingly company’s preliminary analysis provisions tcja resulted discrete income tax charge 22 reflected provision income taxes accompanying statement consolidated operations 2017 described 22 charge relates specifically management’s reasonable estimate corporate income tax rate change resulted remeasurement alcoa corporation’s deferred income tax accounts gross basis company reduced deferred tax assets valuation allowance deferred tax liabilities 506 433 51 respectively management also completed preliminary analysis remaining provisions tcja including specifically described order make reasonable estimate cutoff date resulted additional impact company’s 2017 consolidated financial statements specifically reasonable estimate tcja provisions described based following ii iii alcoa corporation’s existing tax profile includes significant current us tax losses would applied taxable income well significant foreign tax credits applied taxes iv management estimates company 3 threshold v alcoa corporation’s deferred income tax assets related us net operating losses fully reserved december 31 2017 company’s preliminary analyses provisional estimates financial statement impacts tcja completed accordance guidance issued sec staff accounting bulletin 118 income tax accounting implications tax cuts jobs act throughout majority 2018 management continued gather information perform additional analysis tcja provisions related alcoa corporation’s 2017 consolidated financial statements upon completion analysis management concluded material impact company’s 2017 consolidated financial statements related reduced corporate income tax rate applicable provisions tcja also 2018 management completed analysis impact tax law changes including gilti became effective january 1 2018 tcja related alcoa corporation’s 2018 consolidated financial statements company made accounting policy election include period cost tax impact generated including gilti us taxable income inclusion gilti 2018 us taxable income fully offset current us tax losses net operating loss carryforwards expected none remaining provisions tcja material impact alcoa corporation’s 2018 consolidated financial statements q asset retirement obligations alcoa corporation recorded aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure alcoa corporation also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities addition aros certain caros related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date uncertainties exist result perpetual nature structures maintenance upgrade programs factors date reasonable estimate ultimate settlement date made eg planned demolition alcoa corporation would record aro removal treatment transportation storage andor disposal various regulated assets hazardous materials asbestos underground aboveground storage tanks pcbs various process residuals solid wastes electronic equipment waste various materials alcoa corporation required demolish structures immediately estimated caro december 31 2018 ranges 3 28 per structure 24 structures today’s dollars following table details carrying value recorded aros major category 122 108 classified current liability december 31 2018 2017 respectively 2018 2017 2016 aros recorded result management’s decision permanently close demolish certain structures see note following table details changes total carrying value recorded aros 2018 2017 reversals previously recorded liabilities include 36 20 related portovesme italy warrick indiana smelters respectively see note r contingencies commitments unless specifically described contrary matters within note r full responsibility alcoa corporation pursuant separation distribution agreement additionally separation distribution agreement provides crossindemnities company arconic claims subject indemnification contingencies litigation italy 148beginning 2006 parentco italian energy authority autorità di regolazione per energia reti e ambiente formerly l’autorità per l’energia elettrica il gas e il sistema idrico “energy authority” dispute regarding calculation drawback applied portion price power special tariff received alcoa trasformazioni srl “trasformazioni” previously subsidiary parentco subsidiary alcoa corporation dispute arose result resolution 1482004 issued 2004 energy authority changed method calculating drawback 2009 trasformazioni continued receive power price drawback portovesme fusina smelters accordance original resolution 2041999 time european commission declared special tariffs impermissible “state aid” 2006 2014 several judicial hearings occurred related continuous appeals filed parentco energy authority regarding dispute calculation drawback hearing latest appeal scheduled may 2018 see additionally 2012 2013 trasformazioni received multiple letters agency responsible making collecting payments behalf energy authority demanding payment difference drawback calculation two resolutions latest demand 97 €76 including interest allegedly included consideration third resolution 442012 issued 2012 calculation drawback trasformazioni rejected demand meantime result conclusion european commission matter january 2016 see note r consolidated financial statements part ii item 8 alcoa corporation’s annual report form 10k year ended december 31 2017 parentco’s management modified outlook respect portion thenpending legal proceedings related drawback dispute charge 37 €34 recorded restructuring charges year ended december 31 2015 establish partial reserve matter december 2017 agreement energy authority alcoa corporation settled matter 18 €15 paid january 2018 accordingly company recorded reduction 22 €19 us dollar amount reflects effects foreign currency movements since 2015 previously established reserve restructuring charges see note accompanying statement consolidated operations january 2018 subsequent making previously referenced payment alcoa corporation respective state attorney italy filed joint request regional administrative court lombardy matter formally dismissed october 9 2018 court formally dismissed case matter closed also december 2017 part separate related agreement company agreed transfer ownership portovesme smelter permanently closed 2014 invitalia italian government agency responsible managing economic development provisions agreement company retain responsibility environmentalrelated obligations associated decommissioning portovesme smelter see agreement provides company may relieved obligations upon invitalia exercising option receive cash payment 23 €20 company additionally agreement included framework future settlement groundwater remediation project related portovesme site see fusina portovesme italy environmental matters february 2018 company completed transfer ownership portovesme smelter invitalia carrying value assets related portovesme site previously written zero direct result parentco’s decision 2014 decommission facility mid2018 invitalia sold portovesme smelter sideralloys international sa switzerland company intends restart facility june 2018 invitalia gave notice company exercising option december 2017 agreement receive cash payment thereby releasing company responsibility environmentalrelated obligations associated future decommissioning portovesme smelter cash payment made three installments one 2018 paid 8 €7 june 18 2019 2020 accordingly alcoa corporation recognized 15 net benefit restructuring charges see note accompanying statement consolidated operations comprised 38 reversal previously accrued asset retirement obligations 36 environmental reserves 2 related company’s former decommissioning plan portovesme smelter ii 23 charge establish liability planned cash payment invitalia environmental matters alcoa corporation participates environmental assessments cleanups several locations include owned operating facilities adjoining properties previously owned operating facilities adjoining properties waste sites including superfund comprehensive environmental response compensation liability act cercla sites liability recorded environmental remediation cleanup program becomes probable costs reasonably estimated assessments cleanups proceed liability adjusted based progress made determining extent remedial actions related costs liability change substantially due factors among others nature extent contamination changes remedial requirements technological changes alcoa corporation’s remediation reserve balance 280 294 december 31 2018 2017 44 36 classified current liability respectively reflects probable costs remediate identified environmental conditions costs reasonably estimated 2018 remediation reserve increased 16 due increase 9 related former sherwin location see reversal 2 recorded restructuring charges related portovesme location unrelated matter see italy 148 litigation net charge 9 7 2 recorded cost goods sold restructuring charges respectively associated several sites 2017 remediation reserve increased 1 due charge 8 related planned demolition rockdale smelter see note combined reduction 6 related baie comeau mosjøen locations see reversal 4 related restart warrick smelter see note net charge 3 associated several sites 2016 remediation reserve increased 39 due charge 26 related planned demolition suriname refinery permanent closure related bauxite mines see note net charge 13 associated several sites changes remediation reserve 2017 2016 4 26 respectively recorded restructuring charges remainder recorded cost goods sold accompanying statement consolidated operations payments related remediation expenses applied reserve 25 48 32 2018 2017 2016 respectively amounts include expenditures currently mandated well required regulatory authority third party 2018 change reserve also reflects decrease 6 due effects foreign currency translation increase 1 reclassifications made reserve company’s liability asset retirement obligations 2017 change reserve also reflects increase 17 including 11 due effects foreign currency translation 5 reclassification amount previously included asset retirement obligations alcoa corporation’s consolidated balance sheet december 31 2016 change reserve also reflects increase following 60 obligations transferred parentco connection separation transaction november 1 2016 including sherwin east st louis described 17 reclassification amounts included reserves within noncurrent liabilities deferred credits alcoa corporation’s consolidated balance sheet december 31 2015 5 due effects foreign currency translation separation distribution agreement includes provisions assignment allocation environmental liabilities alcoa corporation arconic including certain remediation obligations associated environmental matters general respective parties responsible environmental matters associated operations properties assets assigned additionally separation distribution agreement lists environmental matters shared responsibility two companies allocation responsibility lead party responsible management matter matters assigned alcoa corporation arconic separation distribution agreement companies agreed indemnify whole part environmental liabilities arising operations prior separation date following description provides details regarding current status certain significant reserves related current former alcoa corporation sites exception fusina italy matter alcoa corporation assumed full responsibility matters described generalthe company process decommissioning various plants several countries result redeveloping sites reuse returning land natural state requires performance certain remediation activities aggregate majority activities completed various times future latest expected 2026 ongoing monitoring activities required december 31 2018 2017 reserve balance associated activities 132 150 respectively sherwin txin connection parentco’s sale sherwin alumina refinery required divested part parentco’s acquisition reynolds metals company 2000 parentco agreed retain responsibility remediation thenexisting environmental conditions well pro rata share final closure active bauxite residue waste disposal areas known copano facility parentco obligations regarding sherwin refinery copano facility transferred parentco alcoa corporation part separation transaction november 1 2016 since october 2016 reynolds metals company subsidiary alcoa corporation involved legal dispute owner sherwin related allocation responsibility environmental obligations site april 2018 reynolds metals company reached settlement agreement owner sherwin well separate agreement texas commission environmental quality revised environmental responsibilities obligations related sherwin refinery site copano facility agreements became effective may 21 2018 accordingly company increased reserve associated matter 9 reflect certain incremental obligations agreements december 31 2018 2017 reserve balance associated matter 38 29 respectively management’s judgment company’s reserve december 31 2018 sufficient satisfy provisions settlement agreements upon changes facts circumstances change reserve may required see “sherwin” section complete description matter baie comeau quebec canadaalcoa corporation remediation project related known polychlorinated biphenyls pcbs polycyclic aromatic hydrocarbons pahs contained sediments anse du moulin bay near company’s baie comeau smelter project approved quebec ministry sustainable development environment wildlife parks final ministerial decree issued july 2015 aimed dredging capping contaminated sediments project work began april 2017 virtually completed december 2017 end 2017 company decreased reserve baie comeau 4 reflect final cost estimate remaining work subsequent monitoring program expected last 2023 december 31 2018 2017 reserve balance associated matter 3 5 respectively fusina portovesme italythe following matters regards order issued 2004 alcoa trasformazioni srl “trasformazioni” trasformazioni subsidiary alcoa corporation owns fusina smelter portovesme smelter february 2017 see italy 148 litigation sites fusina rolling srl new parentco subsidiary owns fusina rolling operations italian ministry environment protection land sea “moe” development cleanup plan related soil groundwater contamination excess allowable limits legislative decree fusina site institute emergency actions pay natural resource damages fusina site trasformazioni soil groundwater remediation project approved moe final ministerial decree issued august 2014 additionally administrative agreement reached february 2014 moe trasformazioni required make annual payments 10year period groundwater emergency containment natural resource damages related fusina site trasformazioni began work soil remediation project october 2017 expects complete project end 2019 moe assumed responsibility execution groundwater remediationemergency containment accordance february 2014 settlement agreement part regional effort moe project work slated begin 2020 december 31 2018 2017 reserve balance associated foregoing fusinarelated matters excluding portion related rolling operations see 5 8 respectively effective separation transaction arconic retained portion trasformazioni’s obligation related fusina rolling operations specifically separation distribution agreement trasformazioni fusina properties assigned alcoa corporation fusina rolling srl entered lease agreement portion property included rolling operations pursuant separation distribution agreement liabilities fusina described allocated alcoa corporation trasformazioni arconic fusina rolling srl portovesme site trasformazioni soil remediation project approved moe final ministerial decree issued october 2015 project work soil remediation project commenced mid2016 expected completed end 2019 additionally trasformazioni along four entities operated industrial park submitted groundwater remediation project preliminarily approved 2010 moe since time parties performed additional studies work incorporated final remedial design december 2017 framework future settlement groundwater remediation project included within agreement transfer ownership portovesme smelter italian government agency see italy 148 litigation moe confirmed acceptance proposal set framework however total cost groundwater remediation project determined final remedial design completed mid2019 ultimate outcome matter may result change existing reserve portovesme december 31 2018 2017 reserve balance associated foregoing portovesmerelated matters 12 16 respectively mosjøen norwayalcoa corporation remediation project related known pahs sediments located harbor extending fjord near company’s mosjøen smelter project approved norwegian environmental agency final order issued june 2015 aimed dredging capping contaminated sediments order allow sediment dredging harbor project also includes stabilization wharf project work commenced early 2016 main portion work completed second half 2017 time company reexamined cost estimate remaining project work resulting reduction reserve associated matter 2 mid2018 remaining project work completed december 31 2018 small reserve balance required ongoing reporting monitoring activities december 31 2017 reserve balance associated matter 2 east st louis ilalcoa corporation ongoing remediation project related area used disposal bauxite residue parentco’s former alumina refining operations project selected us environmental protection agency epa record decision issued july 2012 approved consent decree entered final february 2014 us department justice aimed implementing soil cover affected area result parentco began project work march 2014 fieldwork majority project completed end june 2016 completion report approved epa september 2016 matter completed portion project transitioned longterm approximately 30 years inspection maintenance monitoring program fieldwork remaining portion project expected completed 2020 time would also transition longterm inspection maintenance monitoring program obligation transferred parentco alcoa corporation part separation transaction november 1 2016 december 31 2018 2017 reserve balance associated matter 3 4 respectively tax spainin july 2013 following corporate income tax audit covering 2006 2009 tax years assessment received result spain’s tax authorities disallowing certain interest deductions claimed former spanish consolidated tax group previously owned parentco following month parentco filed appeal assessment spain’s central tax administrative court conjunction appeal required spanish tax law parentco provided financial assurance matter form bank guarantee arconic lien secured san ciprian smelter alcoa corporation spain’s tax authorities january 2015 spain’s central tax administrative court denied parentco’s appeal assessment two months later parentco filed appeal assessment spain’s national court “national court” amount assessment including interest 152 €131 june 30 2018 july 6 2018 national court denied parentco’s appeal assessment however decision includes requirement spain’s tax authorities issue new assessment considers available net operating losses former spanish consolidated tax group prior tax years utilized assessed tax years spain’s tax authorities issue new assessment matter resolved however based estimated calculations completed arconic alcoa corporation collectively “companies” amount new assessment including applicable interest expected range 25 61 €21 €53 consideration available net operating losses tax credits tax matters agreement related separation transaction arconic alcoa corporation responsible 51 49 respectively assessed amount event unfavorable outcome july 12 2018 companies sent letter national court seeking clarification one part decision response received national court october 1 2018 resulting change july 6 2018 decision november 8 2018 companies filed petition appeal spain’s supreme court spain’s tax authorities filed opposition notwithstanding petition appeal based review bases national court decided matter alcoa corporation management longer believes companies likely greater 50 prevail matter accordingly alcoa corporation recorded charge 30 €26 provision income taxes accompanying statement consolidated operations establish liability 49 share estimated loss matter representing management’s best estimate time indicated future point time companies receive updated assessment spain’s tax authorities may result change management’s estimate following analysis separately january 2017 national court issued decision favor former spanish consolidated tax group related similar assessment 2003 2005 tax years effectively making assessment null void additionally august 2017 lieu receiving formal assessment companies reached settlement spain’s tax authorities 2010 2013 tax years audit similar matter alcoa corporation’s share settlement material company’s consolidated financial statements ultimate outcomes related 2003 2005 2010 2013 tax years indicative potential ultimate outcome assessment 2006 2009 tax years due procedural differences also possible companies may receive similar assessments tax years subsequent 2013 however management expect assessment received material alcoa corporation’s consolidated financial statements brazil awabin march 2013 awab notified brazilian federal revenue office rfb approximately 110 r220 value added tax credits previously claimed disallowed penalty 50 assessed amount awab received 41 r82 cash may 2012 valueadded tax credits claimed awab fixed assets export sales related juruti bauxite mine são luís refinery expansion rfb disallowed credits allege belong consortium awab owns interest claimed awab credits also disallowed result challenges apportionment methods used questions use credits alleged lack documented proof awab presented defense claim rfb april 8 2013 awab successful administrative process rfb would recourse unsuccessful process awab option litigate judicial level separately awab’s administrative appeal june 2015 new tax law enacted repealing provisions tax code basis rfb assessing 50 penalty matter estimated range reasonably possible loss 0 27 r103 whereby maximum end range represents portion disallowed credits applicable export sales excludes 50 penalty additionally estimated range disallowed credits related awab’s fixed assets 0 30 r117 would increase net carrying value awab’s fixed assets ultimately disallowed management’s opinion allegations basis however time company unable reasonably predict outcome matter brazil alumíniobetween 2000 2002 alumínio sold approximately 2000 metric tons metal per month poços de caldas facility located state minas gerais “state” brazil alfio customer also located state sales state exempted valueadded tax vat requirements alfio subsequently sold metal customers outside state pay required vat transactions july 2002 alumínio received assessment state auditors theory alumínio jointly severally liable alfio unpaid vat june 2003 administrative tribunal found alumínio liable alumínio filed judicial case state february 2004 contesting finding may 2005 court first instance found alumínio solely liable panel state appeals court confirmed finding april 2006 alumínio filed special appeal superior tribunal justice stj brasilia federal capital brazil later 2006 2011 stj one judges reversed judgment lower courts finding alumínio neither solely jointly severally liable alfio vat ruling appealed state august 2012 stj agreed case reheard five judge panel february 21 2017 lead judge stj issued ruling confirming alumínio held liable matter march 16 2017 alumínio filed appeal case reheard fivejudge panel originally agreed stj august 2012 separately june 2017 state opened tax amnesty program end august 2017 alumínio elected submit matter consideration amnesty program state approved result terms amnesty program matter settled 8 r25 2017 charge settlement amount recorded cost goods sold accompanying statement consolidated operations prior submitting matter consideration amnesty program assessment including penalties interest totaled 46 r145 matter closed reynoldson january 11 2016 sherwin alumina company llc “sherwin” current owner refinery previously owned parentco see one affiliate entities filed bankruptcy petitions corpus christi texas reorganization chapter 11 us bankruptcy code sherwin informed bankruptcy court intends cease operations able continue bauxite supply agreement november 23 2016 bankruptcy court approved sherwin’s plans cessation operations february 16 2017 sherwin filed bankruptcy chapter 11 plan “plan” february 17 2017 court approved plan 2000 parentco acquired reynolds metals company “reynolds” subsidiary alcoa corporation included alumina refinery gregory texas condition reynolds acquisition parentco required divest alumina refinery accordance terms divestiture 2000 parentco agreed retain responsibility certain environmental obligations see sherwin tx environmental matters assigned buyer energy services agreement “esa” gregory power partners “gregory power” purchase steam electricity refinery bankruptcy proceedings owner sherwin exercised right us bankruptcy code reject agreement 2000 containing previously mentioned retained responsibility effect terminating rights responsibilities parties agreement result sherwin’s initial bankruptcy filing separate legal actions initiated reynolds gregory power sherwin described gregory power january 26 2016 gregory power delivered notice reynolds sherwin’s bankruptcy filing constitutes breach esa january 29 2016 reynolds responded filing constitute breach september 16 2016 gregory power filed complaint bankruptcy case reynolds alleging breach esa response complaint november 10 2016 reynolds filed motion dismiss including jury demand motion withdraw reference bankruptcy court based jury demand july 18 2017 district court ordered trial would held jury district court bankruptcy court would retain jurisdiction pretrial matters since time gregory power filed amended complaint include allied alumina llc “allied” successor original purchaser refinery reynolds september 2018 reynolds allied filed respective answers amended complaint allied filed cross complaint reynolds answered reynolds october 15 2018 court yet rule several pending pretrial matters time alcoa corporation unable reasonably predict ultimate outcome matter sherwin october 4 2016 texas commission environmental quality tceq filed suit sherwin bankruptcy proceeding seeking hold sherwin responsible remediation alleged environmental conditions sherwin refinery site related bauxite residue waste disposal areas known copano facility october 11 2016 sherwin filed similar suit reynolds case provided plan sherwin including certain affiliated companies reynolds negotiating allocation among ownership responsibility certain areas refinery copano facility march 2018 reynolds sherwin reached settlement agreement assigns reynolds environmental liabilities associated copano facility assigns sherwin environmental liabilities associated sherwin refinery site additionally reynolds tceq reached agreement defines operating environmental steps required copano facility reynolds intends operate purpose managing materials bauxite residue waste including thirdparty dredge material effectiveness enforceability two agreements preconditioned accepted bankruptcy court public notice comment period agreements expired april 26 2018 without material affect documents june 5 2018 bankruptcy court accepted entered agreements judicial record submitted may 21 2018 serves “effective date” agreements june 5 2018 transaction sherwin reynolds completed agreement sherwin exchange assuming full responsibility environmentalrelated liabilities see related company’s existing reserve associated copano facility reynolds assumed ownership land comprises copano facility well land serves buffer around copano facility related assets thirdparty appraisal estimated fair value land assets 16 agreement tceq portion copano facility must closed within 10 years remaining portion must closed within 30 years timeframes began effective date also reynolds required install upgrades certain dust control systems repair certain structures drainage systems copano facility prepare submit tceq preliminary groundwater assessment report submitted november 5 2018 drinking water survey report waived due evidence contaminant release related copano facility within 180 days effective date accordingly company recognized 16 properties plants equipment 9 environmental remediation liabilities 7 related liabilities additionally company paid 12 trust managed state texas financial assurance company’s performance completing required obligations amount returned company upon satisfactory completion future closure copano facility accordance applicable laws regulations june 7 2018 sherwin filed notice dismissal suit reynolds dismissal immediately effective court order required time agreements signed parties company reserve 29 proportionate share environmentalrelated matters sherwin refinery site copano facility based terms divestiture sherwin refinery 2000 see sherwin tx environmental matters reynolds longer responsibility environmentalrelated matters sherwin refinery site assumed additional responsibility environmentalrelated matters copano facility 9 see management’s judgment 38 reserve december 31 2018 sufficient satisfy company’s revised responsibilities obligations settlement agreements upon changes facts circumstances change reserve may required suralcoon december 16 2016 boskalis international bv boskalis initiated binding arbitration proceeding suriname aluminum company llc suralco awac company seeking 47 plus prejudgment interest associated taxes connection dispute arising contract mining services suriname boskalis suralco boskalis asserted four separate claims contract february 2018 arbitration hearing held threeperson panel rules international chamber commerce panel issued decision may 29 2018 finding favor boskalis two claims boskalis two claims two claims boskalis prevailed panel awarded boskalis 29 including prejudgment interest 3 award final cannot appealed accordingly alcoa corporation recorded charge 29 17 noncontrolling interest including 26 cost goods sold 3 interest expense accompanying statement consolidated operations june 6 2018 company made 29 cash payment boskalis closing matter claim represented majority arbitration award centered around contract provision requiring suralco make “true up” payment end contract event suralco unable receive delivery full contract quantity thus allowing boskalis recover fixed production costs suitable return investment suralco argued required deliveries made amended contract term “true up” payment required “true up” would amount double payment bauxite deliveries initial contract term boskalis argued deliveries made within original contract term thus “true up” payment required basis analysis facts applicable law management concluded likelihood unfavorable decision boskalis’ claims remote 25 less throughout course proceeding even conclusion hearing management’s judgment likelihood unfavorable outcome remained general addition matters discussed various lawsuits claims proceedings may instituted asserted alcoa corporation including pertaining environmental safety health commercial tax product liability intellectual property infringement employment employee retiree benefit matters actions claims arising normal course business amounts claimed matters may substantial ultimate liability readily determinable considerable uncertainties exist accordingly possible company’s liquidity results operations particular period could materially affected one matters however based facts currently available management believes disposition matters pending asserted material adverse effect individually aggregate financial position company commitments purchase obligations alcoa corporation party unconditional purchase obligations energy expire 2028 2037 commitments related contracts total 151 2019 209 2020 213 2021 217 2022 223 2023 2718 thereafter expenditures contracts totaled 169 2018 199 2017 181 2016 additionally company entered purchase commitments energy raw materials goods services total 1886 2019 1312 2020 1229 2021 1313 2022 1315 2023 11302 thereafter aofa gas supply agreement power three alumina refineries western australia beginning july 2020 12year period terms agreement required aofa make prepayment 500 two installments first made june 2015 300 second installment 200 made april 2016 included increase noncurrent assets accompanying statement consolidated cash flows december 31 2018 2017 alcoa corporation asset 458 a654 510 a654 respectively included noncurrent assets see note accompanying consolidated balance sheet operating leases certain land buildings alumina refinery process control technology plant equipment vehicles computer equipment operating lease agreements total expense leases 102 2018 101 2017 90 2016 longterm operating leases minimum annual lease payments undiscounted 74 2019 56 2020 42 2021 11 2022 5 2023 21 thereafter guarantees third parties december 31 2018 company maximum potential future payments guarantees issued behalf third party 60 guarantees expire various times 2018 2021 relate project financing aluminum complex saudi arabia see note h bank guarantees letters credit alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties total amount committed instruments automatically renew expire various dates 2019 2022 373 includes 136 issued standby letter credit agreement see december 31 2018 additionally arconic outstanding bank guarantees letters credit related company amount 29 december 31 2018 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding bank guarantees letters credit related arconic amount 15 december 31 2018 event alcoa corporation would required perform instruments company would indemnified arconic accordance separation distribution agreement august 2017 alcoa corporation entered standby letter credit agreement expires august 17 2019 extended august 2018 three financial institutions agreement provides 150 facility used company matters ordinary course business alcoa corporation’s obligations facility secured manner obligations company’s second amended revolving credit agreement see note l additionally facility contains similar representations warranties affirmative negative financial covenants company’s second amended revolving credit agreement see note l december 31 2018 letters credit aggregating 136 issued facility surety bonds alcoa corporation outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2019 40 december 31 2018 additionally arconic outstanding surety bonds related company amount 16 december 31 2018 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding surety bonds related arconic amount 2 december 31 2018 event alcoa corporation would required perform instruments company would indemnified arconic accordance separation distribution agreement financial information interest cost components expenses income net 2017 net gain asset sales included 122 gain related sale yadkin see note c 2016 net gain asset sales included 118 gain related sale wharf property near intalco washington smelter 27 gain related sale equity interest natural gas pipeline australia see note h noncurrent assets valueadded tax vat credits federal state relate two company’s subsidiaries brazil awab alumínio concerning são luís refinery pays vat purchase goods services used alumina production process instead expensing paid vat amounts capitalized credits generally utilized offset vat charged domestic sales alumina aluminum however domestic market brazil sale alumina são luís smelter fully curtailed since april 2015 said federal vat credits used reduce types federal tax obligations conversely available opportunity monetize state vat credits significant portion time including 2017 2018 since são luís smelter curtailment management negotiated multiple electricity providers obtain economical power supply facilitate potential restart são luís smelter event persistent favorable market conditions develop avail fourth quarter 2018 management performed updated assessment future realizability state vat credits amid unfavorable market conditions eg declining lme aluminum price perceived inability obtain favorable power contract nearterm são luís smelter result analysis management determined necessary stop recording additional state vat credits instead state vat expensed cost goods sold incurred são luís refinery additionally company recorded 107 charge restructuring charges see note accompanying statement consolidated operations establish allowance accumulated state vat balances company retains ability utilize state credits future restart são luís smelter provides opportunity monetize credits allowance established federal vat credits monetized without restart são luís smelter management continues believe são luís smelter assets valuable future company continues maintain assets noncurrent liabilities deferred credits cash equivalents restricted cash amounts reported prepaid expenses current assets accompanying consolidated balance sheet cash flow information cash paid interest income taxes follows subsequent events management evaluated activity alcoa corporation concluded subsequent events occurred would require recognition consolidated financial statements disclosure notes consolidated financial statements except described january 22 2019 workforce company’s avilés la coruña aluminum plants spain ratified agreement previously reached january 16 2019 alcoa corporation workers’ representatives related company’s initiation collective dismissal process october 2018 result alcoa corporation curtailed two smelters’ remaining combined operating capacity 124 kmt completed february 14 2019 casthouse plant paste facility la coruña remain operation action result internal analysis determined organizational improvements could achieved company ceased aluminum production two smelters reorganized production alcoa corporation’s san ciprián aluminum plant spain accordance ratified agreement company maintain smelters restart condition event agreement sell plants reached june 30 2019 depending ultimate outcome sale process alcoa corporation may record restructuringrelated charges first half 2019 employee severance actions closure two smelters charges estimated range 215 250 pre aftertax 114 135 per diluted share approximately 40 would noncash remaining 60 result cash outlays paid remainder 2019 supplemental financial information unaudited quarterly data millions except pershare amounts 1 per share amounts calculated independently period presented therefore sum quarterly per share amounts may equal per share amounts year 2 fourth quarter 2018 alcoa corporation recorded restructuring charges 138 pretax primarily result charge establish allowance certain nonus valueadded tax credits see notes fourth quarter 2017 alcoa corporation recorded restructuring charges 297 pretax primarily related termination power contract associated permanent closure rockdale texas smelter see note discrete income tax charges 98 valuation allowance certain nonus deferred tax assets ii remeasurement certain nonus deferred tax assets due tax rate change iii remeasurement us deferred tax assets liabilities new corporate income tax rate 21 35 2017 tax cuts jobs act signed law december 22 2017 see note p item 9item 8 financial statements supplementary data management’s reports alcoa corporation stockholders management’s report financial statements practices accompanying consolidated financial statements alcoa corporation subsidiaries company prepared management responsible integrity objectivity accordance accounting principles generally accepted united states america gaap include amounts based management’s best judgments estimates financial information included company’s annual report form 10k year ended december 31 2019 consistent consolidated financial statements management recognizes responsibility conducting company’s affairs according highest standards personal corporate conduct responsibility characterized reflected key policy statements issued time regarding among things conduct business activities within laws host countries company operates potentially conflicting outside business interests employees company maintains systematic program assess compliance policies management’s report internal control financial reporting management responsible establishing maintaining adequate internal control financial reporting defined rules 13a15f 15d15f us securities exchange act 1934 amended company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance gaap company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance gaap receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate management conducted assessment evaluate effectiveness company’s internal control financial reporting december 31 2019 using criteria internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission based assessment management concluded company maintained effective internal control financial reporting december 31 2019 pricewaterhousecoopers llp independent registered public accounting firm audited effectiveness company’s internal control financial reporting december 31 2019 stated report included herein roy c harvey roy c harvey president chief executive officer william f oplinger william f oplinger executive vice president chief financial officer february 21 2020 report independent registered public accounting firm shareholders board directors alcoa corporation opinions financial statements internal control financial reporting audited accompanying consolidated balance sheet alcoa corporation subsidiaries “company” december 31 2019 2018 related consolidated statements operations comprehensive income changes consolidated equity cash flows three years period ended december 31 2019 including related notes collectively referred “consolidated financial statements” also audited company’s internal control financial reporting december 31 2019 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company december 31 2019 2018 results operations cash flows three years period ended december 31 2019 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 31 2019 based criteria established internal controlintegrated framework 2013 issued coso changes accounting principles described notes b consolidated financial statements company changed manner accounts certain inventories lastin first lifo average cost manner accounts leases respectively 2019 basis opinions company’s management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinions company’s consolidated financial statements company’s internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate critical audit matters critical audit matter communicated matter arising current period audit consolidated financial statements communicated required communicated audit committee relates accounts disclosures material consolidated financial statements ii involved especially challenging subjective complex judgments communication critical audit matters alter way opinion consolidated financial statements taken whole communicating critical audit matter providing separate opinion critical audit matter accounts disclosures relates realization net deferred tax assets alcoa canada company described notes b p consolidated financial statements company 410 million net deferred tax assets december 31 2019 including 137 million net deferred tax assets alcoa canada company significantly related pension obligations derivatives alcoa canada company threeyear cumulative loss position december 31 2019 valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized management applies judgment assessing available positive negative evidence history profitable operations projections taxable income evaluating whether likely net deferred tax assets realized future projections taxable income based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials alumina calcined petroleum coke liquid pitch energy labor transportation costs principal considerations determination performing procedures relating realization net deferred tax assets alcoa canada company critical audit matter significant judgment management determining whether net deferred tax assets likely realized future alcoa canada company threeyear cumulative loss position turn led high degree auditor judgment subjectivity effort performing procedures evaluating audit evidence relating management’s assessment realization net deferred tax assets management’s assumption projected taxable income including commodity prices costs relating alumina calcined petroleum coke liquid pitch energy addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating management’s assessment realization net deferred tax assets alcoa canada company including controls projected taxable income procedures also included among others evaluating positive negative evidence available management’s assessment realization net deferred tax assets alcoa canada company testing completeness accuracy underlying data used management’s assessment evaluating reasonableness management’s assumption related projected taxable income evaluating management’s assumption related projected taxable income including commodity prices costs relating alumina calcined petroleum coke liquid pitch energy involved evaluating whether assumptions used management reasonable considering current past performance alcoa canada company ii consistency external market industry data iii whether assumption consistent evidence obtained areas audit pricewaterhousecoopers llp pricewaterhousecoopers llp pittsburgh pennsylvania february 21 2020 served company’s auditor since 2015 alcoa corporation subsidiaries statement consolidated operations millions except pershare amounts accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated comprehensive income millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries consolidated balance sheet millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated cash flows millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement changes consolidated equity millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries notes consolidated financial statements dollars millions except pershare amounts metric tons thousands kmt basis presentation alcoa corporation company vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation direct indirect ownership company 30 operating locations nine countries around world situated primarily australia brazil canada iceland norway spain united states references notes “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic separation transaction november 1 2016 separation date parentco separated two standalone publiclytraded companies alcoa corporation arconic effective 1201 eastern time separation transaction regularway trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” company’s common stock par value 001 per share effect separation transaction parentco undertook series transactions separate net assets certain legal entities parentco resulting initial cash payment 1072 parentco alcoa corporation net proceeds previous debt offering see note l additionally 247 paid arconic company 2017 including 243 proceeds associated sale certain energy operations see note c connection separation transaction alcoa corporation arconic entered certain agreements implement legal structural separation two companies govern relationship company arconic completion separation transaction allocate alcoa corporation arconic various assets liabilities obligations agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap accordance gaap certain situations require management make estimates based judgments assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods actual results could differ estimates upon subsequent resolution identified matters certain amounts previously issued financial statements reclassified conform current period presentation january 1 2019 company changed accounting method valuing certain inventories lastin firstout lifo average cost effects change accounting principle retrospectively applied prior periods presented see note additional information principles consolidation consolidated financial statements company include accounts alcoa corporation companies alcoa corporation controlling interest including comprise alcoa world alumina chemicals awac joint venture see intercompany transactions eliminated equity method accounting applied investments affiliates joint ventures company significant influence effective control investments affiliates alcoa corporation cannot exercise significant influence accounted cost method awac unincorporated global joint venture alcoa corporation alumina limited consists several affiliated operating entities interest operate bauxite mines alumina refineries within company’s bauxite alumina segments except poços de caldas mine refinery portions são luís refinery investment mineração rio norte sa brazil portion 55 portland smelter australia within company’s aluminum segment alcoa corporation owns 60 alumina limited owns 40 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alúmina española sa española alumina limited’s interest equity entities reflected noncontrolling interest accompanying consolidated balance sheet management evaluates whether alcoa corporation entity interest variable interest entity whether company primary beneficiary consolidation required criteria met alcoa corporation variable interest entities requiring consolidation related party transactions alcoa corporation buys products sells products various related companies consisting entities company retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented b summary significant accounting policies cash equivalents cash equivalents highly liquid investments purchased original maturity three months less inventory valuation inventories carried lower cost market cost inventories principally determined average cost method effective january 1 2019 company changed accounting method valuing certain inventories lastin firstout lifo average cost method effects change accounting principle retrospectively applied prior periods presented company’s consolidated financial statements see note additional information properties plants equipment properties plants equipment recorded cost interest related construction qualifying assets capitalized part construction costs depreciation recorded principally straightline method estimated useful lives assets depreciation recorded temporarily idled facilities time management approves permanent closure following table details weightedaverage useful lives structures machinery equipment type operation numbers years repairs maintenance charged expense incurred costs significant improvements add productive capacity extend useful life capitalized gains losses sale assets generally recorded expenses net properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable leases company determines whether arrangement lease inception arrangement based terms conditions contract contains lease identified asset company right control operating financing lease rightofuse rou assets included properties plants equipment corresponding operating lease liabilities included within current liabilities noncurrent liabilities deferred credits financing lease liabilities included longterm debt due within one year longterm debt less amount due within one year consolidated balance sheet operating lease rou assets liabilities recognized commencement date based present value lease payments lease term company uses incremental borrowing rate commencement date determining present value lease payments unless rate implicit lease terms include options extend lease reasonably certain options exercised leases initial term 12 months less including anticipated renewals recorded balance sheet company made policy election record nonlease components lease agreement lease liability variable lease payments presented part initial rou asset liability recorded inception contract lease expense operating lease payments recognized straightline basis lease term finance leases interest expense recognized lease liability rou asset amortized lease term equity investments alcoa invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations company ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable deferred mining costs alcoa recognizes deferred mining costs development stage mine life cycle costs include construction access haul roads detailed drilling geological analysis define grade quality known bauxite overburden removal costs relate sections related mines company currently extracting bauxite preparing production near term sections outlined planned incrementally generally mined periods ranging one five years depending mine specifics amount geological drilling testing necessary determine economic viability bauxite deposit mined reserves considered proven mining costs amortized based level reserves deferred mining costs included noncurrent assets accompanying consolidated balance sheet goodwill intangible assets goodwill amortized reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment company five reporting units three included aluminum segment smeltingcasting energy generation rolling operations remaining two reporting units bauxite alumina segments five reporting units bauxite alumina contain goodwill december 31 2019 carrying value goodwill bauxite alumina 50 100 respectively amounts include allocation goodwill held corporate level see note k goodwill tested impairment assessing qualitative factors determine whether likely fair value reporting unit less carrying amount performing quantitative assessment using discounted cash flow method qualitative assessment considers factors general economic conditions equity credit markets industry market conditions earnings cash flow trends qualitative assessment indicates possible impairment quantitative impairment test performed determine fair value reporting unit using discounted cash flow method otherwise analysis required alcoa’s policy annual review goodwill perform quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill intangible assets finite useful lives amortized generally straightline basis periods benefited following table details weightedaverage useful lives software intangible assets type operation numbers years asset retirement obligations alcoa recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining regulated waste materials disposal landfill closure additionally costs recorded aros upon management’s decision permanently close demolish certain structures significant lease restoration obligations fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally company capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date fair value asset retirement obligations recorded reasonable estimate ultimate settlement date made environmental matters environmental related expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated estimates also include costs related potentially responsible parties extent alcoa reason believe parties fully pay proportionate share instances company ongoing monitoring maintenance responsibilities alcoa’s policy maintain reserve equal five years expected costs liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss legal costs primarily general litigation environmental compliance tax disputes general corporate matters expensed incurred revenue recognition company recognizes revenue satisfies performance obligations accordance provisions customer order contract achieved control product transferred customer generally determined title ownership risk loss pass customer occurs upon shipment delivery product shipping terms vary across businesses depend product country origin type transportation accordingly sale alcoa’s products customers represent single performance obligations revenue recognized point time revenue based consideration expects receive exchange products returns adjustments material based foregoing significant judgment required determine control product transferred customer company considers shipping handling activities costs fulfill promise transfer related products result customer payments shipping handling costs recorded component revenue taxes collected eg sales use valueadded excise customers related sale products remitted governmental authorities excluded revenue stockbased compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time plan participants choose whether receive award form stock options stock units combination choice made grant issued irrevocable pension postretirement benefits liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality yield curve model used develop discount rate parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows high quality corporate bonds included model exceed cash flows needed satisfy company’s plan obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment mortality rate assumptions based mortality tables future improvement scales published third parties society actuaries consider available information including historical data well studies publications reputable sources derivatives hedging derivatives held purposes trading part formally documented risk management program alcoa accounts hedges firm customer commitments aluminum fair value hedges fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item company accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet changes fair values derivatives recorded comprehensive loss income reclassified sales cost goods sold expenses net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market expenses net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa’s assets liabilities adjusted changes tax rates tax laws enacted valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management applies judgement assessing available positive negative evidence considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income deferred tax assets valuation allowance recorded may realized upon changes facts circumstances resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized foreign currency local currency functional currency alcoa’s significant operations outside united states except certain operations canada iceland us dollar used functional currency determination functional currency alcoa’s operations made based appropriate economic management indicators local currency functional currency assets liabilities translated us dollars using yearend exchange rates income expenses translated using average exchange rates reporting period unrealized foreign currency translation gains losses deferred accumulated comprehensive loss consolidated balance sheet recently adopted accounting guidance january 1 2019 company adopted accounting standards update asu 201602 leases issued financial accounting standards board fasb regarding accounting leases using modified retrospective approach asu requires lessees recognize rightofuse asset lease liability balance sheet operating finance leases term 12 months additionally measuring assets liabilities arising lease optional payments included lessee reasonably certain exercise option extend lease exercise purchase option exercise option terminate lease rightofuse asset represents entity’s right use underlying asset lease term lease liability represents entity’s obligation make lease payments company made policy election record nonlease components lease liability previously asset liability recorded leases classified capital leases financing leases measurement recognition presentation expenses cash flows arising leases lessee remains management elected package practical expedients permitted transition guidance within new standard among things allowed carry forward historical lease classifications additionally july 2018 fasb issued asu 201811 targeted improvements provide alternative transition method new lease guidance whereby entity choose reflect impact new lease guidance prior periods included financial statements company elected alternative transition method upon adoption january 1 2019 management also elected practical expedient related land easements allowing company carry forward current treatment existing arrangements result adoption management recorded rightofuse asset lease liability amount 201 alcoa’s consolidated balance sheet january 1 2019 several types operating leases including land buildings alumina refinery process control technology plant equipment vehicles computer equipment see note additional information related adoption standard alcoa’s adoption following accounting guidance 2019 material impact company’s consolidated financial statements accounting standards update 201801 leases land easement practical expedient transition 201802 reclassification certain tax effects accumulated comprehensive income 201807 stock compensation improvements nonemployee sharebased payment accounting recently issued accounting guidance december 2019 fasb issued asu 201912 income taxes topic 740 intended simply accounting income taxes eliminating certain exceptions simplifying certain requirements topic 740 updates related intraperiod tax allocation deferred tax liabilities equity method investments interim period tax calculations tax laws rate changes interim periods income taxes related employee stock ownership plans guidance asu 201912 becomes effective alcoa january 1 2021 management currently evaluating impact changes consolidated financial statements november 2019 fasb issued asu 201908 compensationstock compensation topic 718 revenue contracts customers topic 606 june 2018 fasb issued asu 201807 stock compensation improvements nonemployee sharebased payment accounting asu 201807 effectively changed accounting nonemployee sharebased payment transactions consistent accounting employee sharebased payments provide guidance measuring sharebased payment awards granted customer amendments asu 201908 clarify entity must measure classify sharebased payment awards granted customer applying guidance topic 718 company adopted asu 201807 effective january 1 2019 asu 201908 effective company january 1 2020 adoption guidance material impact company’s consolidated financial statements company utilize sharebased payments customers august 2018 fasb issued separate guidance regarding respective disclosure requirements associated fair value measurements defined benefit plans guidance makes changes disclosures fair value measurements defined benefit plans several removals modifications additions andor clarifications existing requirements following changes immediate disclosure impact alcoa upon adoption guidance fair value measurements disclosure valuation processes level 3 fair value measurements longer required ii changes unrealized gains losses reporting period included comprehensive income loss recurring level 3 fair value measurements held end reporting period new disclosure requirement iii range weighted average reasonable rational method significant unobservable inputs used develop level 3 fair value measurements new disclosure requirement following changes immediate disclosure impact company upon adoption guidance defined benefit plans disclosure amounts accumulated comprehensive income loss expected recognized components net periodic benefit cost next fiscal year longer required ii disclosure effects onepercentagepoint change assumed health care cost trend rates aggregate service interest cost components net periodic benefit costs benefit obligation postretirement health care benefits longer required iii explanation reasons significant gains losses related changes benefit obligation reporting period new disclosure requirement guidance fair value measurements defined benefit plans becomes effective company january 1 2020 december 31 2020 respectively early adoption permitted updating applicable disclosures adoption guidance impact company’s consolidated financial statements august 2018 fasb issued asu 201815 intangibles goodwill internaluse software asu aligns accounting cloud computing implementation costs develop obtain internaluse software meaning costs part application development stage capitalized asset amortized term arrangement otherwise costs expensed incurred also clarifies classification amounts related capitalized implementation costs financial statements guidance becomes effective company january 1 2020 early adoption permitted management completed assessment impact related guidance concluded adoption guidance material impact company’s consolidated financial statements june 2016 fasb issued asu 201613 financial instruments credit losses asu added new impairment model known current expected credit loss cecl model based expected losses rather incurred losses new guidance entity recognizes allowance estimate expected credit losses applies debt instruments trade receivables lease receivables financial guarantee contracts loan commitments cecl model minimum threshold recognition impairment losses entities need measure expected credit losses assets low risk loss changes become effective company january 1 2020 management completed assessment impact related guidance concluded adoption guidance material impact company’s consolidated financial statements c acquisitions divestitures gum springs waste treatment business january 2020 company announced sale elemental environmental solutions llc ees whollyowned alcoa subsidiary operates waste processing facility gum springs arkansas global environmental firm transaction valued 250 transaction closed january 31 2020 whereby company received 200 another 50 held escrow paid alcoa certain postclosing conditions satisfied afobaka hydroelectric dam december 31 2019 alcoa completed transfer afobaka hydroelectric dam government republic suriname according definitive agreements approved parliament curtailment alcoa’s operations suriname 2015 permanent closure early 2017 alcoa continued operate dam selling electricity government subsequent sale customers suriname time transfer fixed assets related dam fully depreciated outstanding amounts due alcoa electricity sales settled avilés la coruña aluminum facilities july 2019 alcoa completed divestiture avilés la coruña spain aluminum facilities parter capital group ag parter charges related curtailment employee dismissal process divestiture totaled 253 recorded restructuring charges net cost goods sold selling general administrative expenses outlined related divestiture company recorded restructuring charges net 127 year ended december 31 2019 resulting financial contributions 95 parter per agreement net charge 32 meet working capital commitment writeoff remaining net book value plants’ assets year ended december 31 2019 net cash outflows related close transaction 47 remaining financial contributions 68 paid quarterly installments second quarter 2021 financial contributions closing date classified cash used financing activities company’s statement consolidated cash flows smelters avilés la coruña curtailed february 2019 charges recorded prior completion divestiture included statement consolidated operations include restructuring charges net asset impairments 80 severance employee related costs 20 contract termination costs 8 cost goods sold primarily write remaining inventories net realizable value 16 selling general administrative expenses miscellaneous charges 2 see note additional detail ma’aden rolling company december 2009 alcoa invested joint venture related ownership operation integrated aluminum complex bauxite mine alumina refinery aluminum smelter rolling mill kingdom saudi arabia joint venture owned 749 saudi arabian mining company known ma’aden 251 alcoa originally consisted three separate companies follows ma’aden bauxite alumina company mbac bauxite mine alumina refinery ma’aden aluminium company mac aluminum smelter casthouse ma’aden rolling company mrc rolling mill june 2019 alcoa ma’aden amended joint venture agreement governs operations three companies comprise joint venture amendment among items transferred alcoa’s 251 interest mrc ma’aden result alcoa direct indirect equity interest mrc prior amendment partners contributed 100 mrc meet current cash requirements result divestiture alcoa recorded restructuring charges net 319 writeoff investment mrc 161 cash contributions described 100 writeoff company’s share mrc’s delinquent payables due mac 59 forgiven part transaction partially offset gain resulting writeoff fair value debt guarantee 1 see note additional detail yadkin hydroelectric project february 2017 alcoa’s whollyowned subsidiary alcoa power generating inc completed sale 215megawatt yadkin hydroelectric project yadkin cube hydro carolinas llc 249 cash 8 received june november 2017 combined postclosing adjustments 2017 alcoa corporation recognized gain 122 pre aftertax expenses net accompanying statement consolidated operations accordance separation distribution agreement see note company remitted 243 proceeds arconic sale yadkin subject postclosing adjustments related potential earnouts january 31 2027 unless provisions earnouts met earlier adjustment would result company receiving additional cash none would remitted arconic recognizing nonoperating income yadkin encompasses four hydroelectric power developments reservoirs dams powerhouses known high rock tuckertown narrows falls situated along 38mile stretch yadkin river central part north carolina prior divestiture power generated yadkin primarily sold open market restructuring charges net restructuring charges net year threeyear period ended december 31 2019 comprised following severance employee termination costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2019 actions 2019 alcoa corporation recorded restructuring charges net 1031 comprised following components 319 related divestiture alcoa corporation’s interest ma’aden rolling company see 274 exits costs related decision permanently close demolish point comfort alumina refinery see 235 costs related smelter curtailment subsequent divestiture avilés la coruña aluminum facilities spain see 119 related settlement andor curtailment certain pension postretirement benefits 37 employee termination severance costs related implementation new operating model see 9 closure costs related coal mine 38 net charges related various items december 2019 alcoa corporation announced permanent closure point comfort texas alumina refinery restructuring charges recorded 2019 related closure included asset impairments 129 asset retirement obligations 72 environmental remediation costs 69 severance costs 4 layoff approximately 40 employees additionally charge 2 write remaining inventories net realizable value recorded cost goods sold accompanying statement consolidated operations september 2019 alcoa corporation announced implementation new operating model result leaner integrated operatorcentric organization effective november 1 2019 new operating model eliminates business unit structure consolidates sales procurement commercial capabilities enterprise level streamlines executive team new structure reduce overhead intention promoting operational commercial excellence increasing connectivity company’s plants leadership result new operating model alcoa corporation recorded charge 37 related employee termination severance costs approximately 260 employees companywide restructuring actions related cash outlays anticipated substantially complete end first quarter 2020 january 2019 alcoa corporation reached agreement workers’ representatives avilés la coruña spain aluminum facilities part collective dismissal process announced october 2018 curtailed smelters two locations combined remaining operating capacity 124 kmt february 2019 part agreement company agreed conduct sale process identify third parties interest acquiring facilities maintain smelters restart condition june 30 2019 sale process parter private equity investment firm identified potential buyer spanish facilities inclusive smelters casthouses facilities paste plant la coruña prior june 30 2019 deadline alcoa corporation agreed workers’ representatives extend timeline potential buyer meet financial conditions draft share purchase agreement one week july 5 2019 alcoa corporation signed conditional share purchase agreement parter purchase two facilities subject parter meeting certain financial conditions prior july 31 2019 support facilities future operations prior signing conditional share purchase agreement parter alcoa corporation reached agreement workers’ representatives related potential transaction parter able meet financial conditions prior july 31 2019 company would proceeded collective dismissal social plan august 1 2019 july 31 2019 parter met financial conditions transaction closed restructuring charges net related curtailment collective dismissal process spanish facilities included asset impairments 80 severance employeerelated costs 20 contract termination costs 8 additional charges included 16 recorded cost goods sold primarily write remaining inventories net realizable value 2 miscellaneous charges recorded selling general administrative expenses accompanying statement consolidated operations restructuring charges net related divestiture spanish facilities totaled 127 year ended december 31 2019 financial contributions 95 parter per agreement net charge 32 meet working capital commitment writeoff remaining net book value plants’ assets year ended december 31 2019 net cash outflows related close transaction 47 remaining financial contributions 68 paid quarterly installments second quarter 2021 december 2009 alcoa corporation invested joint venture related ownership operation integrated aluminum complex bauxite mine alumina refinery aluminum smelter rolling mill kingdom saudi arabia joint venture owned 749 ma’aden 251 alcoa corporation originally consisted three separate companies follows mbac mac mrc alcoa corporation accounts investment joint venture equity method one integrated investment asset consistent terms joint venture agreement june 2019 alcoa corporation ma’aden amended joint venture agreement governs operations three companies comprise joint venture terms amended agreement • alcoa corporation made contribution mrc amount 100 along ma’aden’s earlier capital contribution 100 meet current mrc cash requirements including paying certain amounts owed mrc mac alcoa corporation • alcoa corporation ma’aden consented writeoff 235 mrc’s delinquent payables mac • alcoa corporation transferred 251 interest mrc ma’aden result direct indirect equity interest mrc • alcoa corporation released future mrc obligations including alcoa corporation’s sponsor support 296 mrc debt see note r share future mrc cash requirements • alcoa corporation ma’aden defined mbac mac shareholder rights including timing determination amount dividend payments excess cash joint venture partners following required distributions commercial lenders mbac mac among matters amendment also defines october 1 2021 date alcoa corporation permitted sell shares mbac mac collectively ma’aden right first refusal agreement outlines alcoa corporation’s call option ma’aden’s put option relating additional interests joint venture exercisable period sixmonths october 1 2021 parties maintain commercial relationship part agreement alcoa corporation provided sales logistics customer technical services support mrc products north american sheet market december 2019 company retain 251 minority interest mbac mac ma’aden continue 749 interest 319 restructuring charge resulting mrc divestiture included writeoff alcoa corporation’s investment mrc 161 cash contributions described 100 writeoff alcoa corporation’s share mrc’s delinquent payables due mac 59 forgiven part transaction partially offset gain 1 writeoff fair value debt guarantee 2018 actions 2018 alcoa corporation recorded restructuring charges net 527 comprised following components 331 net related settlements curtailments certain pension postretirement benefits see note n 107 establish allowance certain valueadded tax credits related company’s operations brazil see note 86 costs related energy supply agreement curtailed wenatchee washington smelter including 73 associated 2018 management decision restart fully curtailed wenatchee smelter within term provided energy supply agreement 15 net benefit settlement matters related portovesme italy smelter 18 net charge items june 2018 management decided restart fully curtailed wenatchee smelter within term provided related electricity supply agreement alcoa corporation therefore required make 62 payment energy supplier provisions agreement additionally management decided permanently close one 38 kmt four potlines smelter potline operated since 2001 investments needed restart line cost prohibitive remaining three curtailed potlines capacity 146 kmt connection decisions company recognized charge 73 composed 62 payment 10 asset impairments 1 asset retirement obligations triggered decision decommission potline 2017 actions 2017 alcoa corporation recorded restructuring charges net 309 comprised following components 244 related early termination power contract see 49 exit costs related decision permanently close demolish smelter see 41 additional contract costs related curtailed wenatchee são luís brazil smelters 22 layoff costs including separation approximately 130 employees 115 aluminum segment mostly voluntary separation programs 22 reversal reduce reserve previously established end 2015 related legal matter italy 18 net charge items including relocation company’s headquarters principal executive office new york new york pittsburgh pennsylvania 43 reversal associated several reserves related prior periods see october 2017 alcoa corporation luminant generation company llc luminant executed early termination agreement power contract well related fuel lease agreements effective october 1 2017 related company’s rockdale texas smelter fully curtailed since end 2008 accordance terms early termination agreement alcoa made cash payment 238 transferred approximately 2200 acres related land assets liabilities luminant net asset carrying value 6 since curtailment rockdale smelter company selling surplus electricity energy market 2017 september 30 alcoa corporation recognized 105 sales 148 cost goods sold accompanying statement consolidated operations related sale surplus electricity cost luminant power contract december 2017 management approved permanent closure demolition rockdale smelter capacity 191 kmtperyear related operations effective immediately demolition remediation activities related action began 2018 expected completed end 2022 separately company continues 30000 acres land surrounding rockdale operations 2017 costs related decision included asset impairments 32 representing writeoff remaining book value related properties plants equipment 1 layoff approximately 10 employees corporate 16 costs additionally 2017 remaining inventories mostly operating supplies raw materials written net realizable value resulting charge 6 recorded cost goods sold accompanying statement consolidated operations costs 16 represent 8 asset retirement obligations 8 environmental remediation triggered decisions permanently close demolish rockdale facilities july 2017 alcoa corporation announced plans restart three capacity 161 kmtperyear five potlines capacity 269 kmtperyear warrick indiana smelter previously permanently closed march 2016 parentco result decision reopen smelter 2017 alcoa corporation reversed 33 remaining liabilities related original closure decision liabilities consisted 20 asset retirement obligations 4 environmental remediation obligations necessary due previous decision demolish smelter 9 severance contract termination costs additionally carrying value smelter related assets reduced zero smelter ramped permanent closure decision date end 2015 end march 2016 separations associated 2017 restructuring programs essentially completed 2018 fiscal year 2018 2017 cash payments 3 9 respectively made layoff reserves related 2017 restructuring programs alcoa corporation include restructuring charges net results reportable segments impact allocating charges segment results would follows activity reserve balances restructuring charges follows activity reserve balances include restructuring charges net impact reserves severance employee termination costs restructuring charges net affected liability accounts environmental obligations see note r asset retirement obligations see note q pension postretirement reserves see note n excluded activity balances reversals include reversals previously recorded liabilities foreign currency translation impacts current portion reserve balance reflected current liabilities consolidated balance sheet noncurrent portion reserve december 31 2019 13 12 relates financial contributions parter e segment related information segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company three operating reportable segments organized product global basis bauxite alumina aluminum segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization segment company calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies chief operating decision maker function regularly reviews financial information including sales adjusted ebitda three operating segments assess performance allocate resources segment assets include among others customer receivables thirdparty intersegment inventories properties plants equipment equity investments accounting policies segments described summary significant accounting policies see note b transactions among segments established based negotiation among parties differences segment totals alcoa corporation’s consolidated totals line items reconciled corporate following detailed descriptions alcoa corporation’s reportable segments bauxite segment represents company’s global bauxite mining operations portion segment’s production represents offtake equity method investments brazil guinea well awac’s share bauxite production related equity investment saudi arabia bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see principles consolidation note alumina segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use alumina traders generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see principles consolidation note segment also includes awac’s 251 ownership interest mining refining joint venture company saudi arabia see note h aluminum segment consists company’s worldwide smelting casthouse system processes alumina primary aluminum ii portfolio energy assets brazil canada united states iii rolling mill united states aluminum’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products eg foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives see note related energy supply contracts energy assets supply power external customers brazil lesser extent united states internal customers aluminum canadian smelters warrick indiana smelter rolling mill alumina segments brazilian refineries rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally separation date end 2018 alcoa corporation tolling arrangement contractually ended december 31 2018 arconic whereby arconic’s rolling mill tennessee produced sheet products certain customers company’s rolling operations alcoa corporation supplied raw materials tennessee facility paid arconic tolling service generally segment’s aluminum sales transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic króna canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 ownership interest smelting full year rolling mill second quarter 2019 joint venture company saudi arabia see note h operating results capital expenditures assets alcoa corporation’s reportable segments follows following tables reconcile certain segment information consolidated totals 1 january 1 2019 company changed accounting method valuing certain inventories lifo average cost effects change accounting principle retrospectively applied prior periods presented see note result years ended december 31 2018 2017 total segment adjusted ebitda increased 47 14 respectively intersegment eliminations value decreased 19 increased 27 respectively 2 transformation includes among items adjusted ebitda previously closed operations 3 concurrent change inventory accounting method january 1 2019 management elected change presentation certain line items reconciliation total segment adjusted ebitda consolidated net loss income attributable alcoa corporation corporate inventory accounting previously included impact lifo metal price lag intersegment eliminations impact lifo eliminated change inventory method metal price lag attributable company’s rolled operations business netted within aluminum segment simplify presentation impact nets zero consolidation intersegment eliminations remain reconciling line item labeled 4 corporate expenses composed general administrative expenses operating corporate headquarters global administrative facilities well research development expenses corporate technical center 5 includes certain items impact cost goods sold selling general administrative expenses alcoa corporation’s statement consolidated operations included adjusted ebitda reportable segments product information alcoa corporation five product divisions follows bauxitebauxite reddish clay rock mined surface earth’s terrain ore basic raw material used produce alumina primary source aluminum aluminaalumina oxide extracted bauxite basic raw material used produce primary aluminum product also consumed nonmetallurgical purposes industrial chemical products primary aluminumprimary aluminum metal form common alloy ingot eg tbar sow standard ingot valueadd ingot eg billet rod slab products sold primarily customers produce products transportation building construction packaging wire industrial markets flatrolled aluminumflatrolled aluminum metal form sheet sold primarily customers produce beverage food cans including body tab end stock energyenergy generation electricity sold wholesale market traders large industrial consumers distribution companies generation companies following table represents general commercial profile company’s bauxite alumina primary aluminum flatrolled aluminum product divisions see text table energy 1 api alumina price index pricing mechanism calculated company based weighted average prior month’s daily spot prices published following three indices cru metallurgical grade alumina price platts metals daily alumina pax price metal bulletin nonferrous metals alumina index 2 lme london metal exchange globally recognized exchange commodity trading including aluminum lme pricing component represents underlying base metal component based quoted prices aluminum exchange regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states product premium represents incremental price receiving physical metal particular shape eg billet rod slab etc alloy 3 metal represents underlying base metal component plus regional premium see footnote 2 conversion represents incremental price metal price component associated converting primary scrap aluminum sheet 4 cif cost insurance freight means company pays items product reaches buyer’s designated destination point related transportation vessel dap delivered place means cif related methods transportation fob free board means company pays costs insurance freight product reaches seller’s designated shipping point 5 net number days means customer required remit payment company invoice amount within designated number days lc sight letter credit payable immediately usually within five ten business days seller meets requirements letter credit ie shipping documents evidence seller performed obligations agreed buyer cad cash documents payment arrangement seller instructs bank provide shipping title documents buyer time buyer pays full accompanying bill exchange company’s energy product division sales electricity based current market prices electricity provided customers demand national regional power grid customer simultaneously receives consumes electricity payment terms generally within 10 days related previous 30 days electricity consumption following table details alcoa corporation’s thirdparty sales product division includes realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum see note geographic area information geographic information thirdparty sales follows based upon country point sale originated 1 sales portion alumina refineries australia brazil aluminum smelters canada occurred united states 2 sales aluminum produced smelters iceland norway well offtake related interest saudi arabia joint venture see note h occurred spain geographic information longlived assets follows based upon physical location assets f earnings per share basic earnings per share eps amounts computed dividing net loss income attributable alcoa corporation average number common shares outstanding diluted eps amounts assume issuance common stock potentially dilutive share equivalents outstanding share information used compute basic diluted eps attributable alcoa corporation common shareholders follows millions 2019 basic average shares outstanding diluted average shares outstanding effect potential shares common stock antidilutive alcoa generated net income 2019 one million common share equivalents related four million outstanding stock units stock options combined would included diluted average shares outstanding respective period options purchase two million shares common stock outstanding december 31 2019 weighted average exercise price 3266 per share greater average market price alcoa corporation’s common stock options purchase one million shares common stock outstanding december 31 2018 weighted average exercise price 3867 per share included computation diluted eps exercise prices options greater average market price alcoa corporation’s common stock g accumulated comprehensive loss following table details activity three components comprise accumulated comprehensive loss alcoa corporation’s shareholders noncontrolling interest 1 amounts included computation net periodic benefit cost pension postretirement benefits 2019 amounts alcoa corporation include 116 noncontrolling interest include 3 related settlements andor curtailments certain pension postretirement benefits 2018 amounts alcoa corporation include 330 net noncontrolling interest include 1 related settlements andor curtailments certain pension postretirement benefits see note n 2 amounts reported provision income taxes accompanying statement consolidated operations 3 periods presented tax impacts related rate changes amounts reclassified earnings 4 amounts reported sales accompanying statement consolidated operations 5 amounts reported cost goods sold accompanying statement consolidated operations 6 amounts included expenses net accompanying statement consolidated operations 7 positive amount indicates corresponding charge earnings negative amount indicates corresponding benefit earnings h investments equity investments following table summarizes information alcoa corporation’s equity investments december 31 2019 2018 2019 2018 2017 alcoa corporation received 39 45 71 respectively dividends equity investments company divested interest ma’aden rolling company june 2019 see investees either owns facility listed ownership interest entity owns facility listed saudi arabia joint venturealcoa corporation ma’aden 30year december 2009 joint venture shareholders agreement automatic extension additional 20 years unless parties agree otherwise unless earlier terminated setting forth terms development construction ownership operation integrated aluminum complex saudi arabia project developed joint venture consists bauxite mine al ba’itha bauxite deposit northern part saudi arabia alumina refinery primary aluminum smelter aluminum rolling mill joint venture owned 749 ma’aden 251 alcoa corporation originally consisted three separate companies follows bauxite mine alumina refinery mbac smelter mac rolling mill mrc june 2019 alcoa corporation ma’aden amended joint venture agreement governs operations three companies comprise joint venture terms agreement alcoa corporation transferred 251 interest mrc ma’aden result direct indirect equity interest mrc refer note additional information related agreement amendment number alcoa corporation employees perform various types services smelting rolling mill mining refining companies part operation fullyintegrated aluminum complex december 31 2019 2018 company aggregate outstanding receivable 8 11 respectively smelting rolling mill mining refining companies labor employeerelated expenses december 31 2019 2018 carrying value alcoa’s investment joint venture 603 874 respectively elysistm limited partnershipin june 2018 alcoa corporation rio tinto plc provincial government québec canada launched new joint venture elysistm limited partnership elysistm purpose partnership advance larger scale development commercialization patentprotected technology produces oxygen eliminates direct greenhouse gas emissions traditional aluminum smelting process alcoa rio tinto plc general partners 48235 stake elysistm québec provincial government limited partner owns 353 stake federal government canada apple inc well québec provincial government provide initial financing partnership total planned combined investment equity debt five participants joint venture 144 c188 alcoa rio tinto plc invest combined 42 c55 joint venture well contribute license certain intellectual property patents elysistm date company contributed 5 c6 toward initial investment commitment elysistm addition cash contributions alcoa contributing 3 research development expenses annually company’s basis investment reduced zero share losses incurred date result company 17 unrecognized losses december 31 2019 recognized upon additional contributions partnership following table summarizes profit loss data respective periods ended december 31 relates alcoa corporation’s equity investments 2019 information shown saudi arabia joint venture includes full period mac mbac data mrc divestiture date investments grouped based nature investment mining investments part bauxite segment energy investments parimarily part aluminum segment following table summarizes balance sheet data alcoa corporation’s equity investments information shown saudi arabia joint venture 2019 includes combined balances mac mbac inventories january 1 2019 company changed method valuing certain inventories held united states canada average cost method accounting lifo method inventories held subsidiaries parent company previously continue valued principally using average cost method management believes change accounting preferable results consistent method value inventory across regions business improves comparability industry peers closely resembles physical flow inventory effects change accounting principle lifo average cost retrospectively applied periods presented change resulted favorable adjustment retained deficit earnings 143 unfavorable adjustment noncontrolling interest 22 january 1 2017 addition certain financial statement line items company’s statement consolidated operations statement consolidated comprehensive income statement consolidated cash flows years ended december 31 2018 2017 consolidated balance sheet december 31 2018 adjusted follows following table compares amounts would reported lifo amounts recorded average cost method consolidated financial statements december 31 2019 year ended j properties plants equipment net k goodwill intangible assets goodwill included noncurrent assets accompanying consolidated balance sheet follows 1 carrying value corporate’s goodwill net accumulated impairment losses 742 december 31 2019 2018 december 31 2019 145 goodwill reflected corporate allocated two alcoa corporation’s three reportable segments 48 bauxite 97 alumina purposes impairment testing see note b goodwill reflected corporate segment reporting purposes included management’s assessment performance two reportable segments management performed quantitative assessment alumina reporting unit 2019 estimated fair value alumina reporting unit substantially excess carrying value resulting impairment management performed qualitative assessment bauxite reporting unit 2019 determined likely fair value reporting unit less carrying value management last performed quantitative impairment test bauxite reporting unit 2018 time estimated fair value bauxite reporting unit substantially excess carrying value resulting impairment intangible assets included noncurrent assets accompanying consolidated balance sheet follows computer software consists primarily software costs associated enterprise business solution within alcoa drive common systems among businesses amortization expense related intangible assets tables years ended december 31 2019 2018 2017 19 12 respectively expected approximately 10 annually 2020 2024 l debt longterm debt principal amount longterm debt maturing next five years 1 2020 79 2021 1 2022 2023 751 2024 144a debt may 2018 alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation completed rule 144a us securities act 1933 amended debt offering 500 6125 senior notes due 2028 “2028 notes” anhbv received 492 net proceeds debt offering reflecting discount initial purchasers 2028 notes net proceeds along available cash hand used make discretionary contributions certain us defined benefit pension plans see note n discount initial purchasers well costs complete financing deferred amortized interest expense term 2028 notes interest 2028 notes paid semiannually november may commenced november 15 2018 anhbv option redeem 2028 notes least 30 days 60 days prior notice holders 2028 notes multiple scenarios including whole part time may 2023 redemption price specified indenture 103063 principal amount plus accrued unpaid interest case also 2028 notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount 2028 notes repurchased plus accrued unpaid interest 2028 notes repurchased 2028 notes indenture includes several customary affirmative covenants additionally 2028 notes indenture contains several negative covenants subject certain exceptions include limitations liens limitations sale leaseback transactions prohibition reduction ownership awac entities agreed level negative covenants 2028 notes indenture less extensive 2024 notes 2026 notes see indenture second amended revolving credit agreement example 2028 notes indenture include limitation restricted payments repurchases common stock shareholder dividends 2028 notes rank equally right payment anhbv’s existing future senior indebtedness including 2024 notes 2026 notes rank senior right payment future subordinated obligations anhbv effectively subordinated anhbv’s existing future secured indebtedness including second amended revolving credit agreement extent value property assets securing indebtedness september 2016 anhbv completed rule 144a us securities act 1933 amended debt offering 750 675 senior notes due 2024 “2024 notes” 500 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commenced march 31 2017 anbhv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 105063 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes 2028 notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes 2028 notes 2028 notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors second amended revolving credit agreement “subsidiary guarantors” together alcoa corporation “guarantors” see credit facility subsidiary guarantors released guarantees upon occurrence certain events including release guarantor obligations guarantor second amended revolving credit agreement notes indenture contains various restrictive covenants similar described second amended revolving credit agreement including limitation restricted payments among exceptions capacity pay annual ordinary dividends indenture alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period annual 2018 dividends made 50 annual 2019 2020 dividends made 2019 75 january 1 2021 september 30 2026 maturity date 2026 notes time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period additionally restricted payments negative covenant includes general exception allow potential future transactions incremental specifically provided notes indenture general exception provides aggregate amount restricted payments exceed greater 250 15 alcoa corporation’s consolidated total assets accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 250 assuming restricted payments reduced part whole available limit limits restricted payments negative covenant second amended revolving credit agreement see credit facility would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant notes indenture credit facilities october 2 2019 alcoa norway ans whollyowned subsidiary alcoa corporation entered oneyear multicurrency revolving credit facility agreement nok 13 billion approximately 147 fully unconditionally guaranteed unsecured basis alcoa corporation revolving credit facility scheduled mature october 2 2020 unless extended terminated early accordance provisions agreement alcoa norway ans pay quarterly commitment fee 0465 unused portion revolving credit facility starting january 2 2020 interest rate outstanding nok loan balances 155 per annum plus norwegian interbank offered rate nibor interest rate outstanding us dollar loans 165 per annum plus libor december 31 2019 amounts drawn outstanding related credit facility october 25 2019 whollyowned subsidiary company entered 120 threeyear revolving credit facility agreement secured certain customer receivables alcoa corporation guarantees performance obligations whollyowned subsidiaries facility however assets receivables pledged collateral fees paid upon closure agreement approximately 1 fees associated unused portion facility range 25 35 basis points unused commitment 360 day base year fees applied used portions facility 85 basis points used commitment 360 day base year december 31 2019 amounts drawn outstanding related credit facility november 21 2018 alcoa corporation anhbv entered second amendment restatement agreement revolving credit agreement dated september 16 2016 amendment restatement agreement dated november 14 2017 revolving credit agreement revised amendment restatement agreement “amended revolving credit agreement” case syndicate lenders issuers named therein revise certain terms provisions amended revolving credit agreement amended revolving credit agreement revised second amendment restatement agreement “second amended revolving credit agreement” unless noted otherwise terms provisions described second amended revolving credit agreement applicable amended revolving credit agreement november 14 2017 november 20 2018 second amended revolving credit agreement provides 1500 senior secured revolving credit facility “revolving credit facility” used working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions second amended revolving credit agreement anhbv may time request issuance letters credit 750 revolving credit facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries additionally anhbv may time request lenders provide one additional tranches term loans andor increase aggregate amount revolving commitments together aggregate principal amount 500 december 31 2019 2018 letters credit issued revolving credit facility 17 21 respectively revolving credit facility scheduled mature november 21 2023 unless extended earlier terminated accordance provisions second amended revolving credit agreement anhbv may make extension requests term revolving credit facility subject lender consent requirements set forth second amended revolving credit agreement provisions second amended revolving credit agreement anhbv pay quarterly commitment fee ranging 0200 0425 previously 0225 0450 based alcoa corporation’s leverage ratio unused portion revolving credit facility maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal applicable margin plus anhbv’s option either adjusted libor rate b base rate determined reference highest 1 us prime rate published wall street journal previously prime rate jpmorgan chase bank na 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum applicable margin loans vary based alcoa corporation’s leverage ratio range 150 225 previously 175 250 libor loans 050 125 previously 075 150 base rate loans subject case reduction 25 basis points alcoa corporation attains least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway switzerland including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility second amended revolving credit agreement mentioned companies shall released obligations first priority lien andor first priority security interest upon alcoa corporation attaining least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings case stable outlook better ii anhbv delivering required written notice iii default event default defined second amended revolving credit agreement occurred continuing date conditions met “collateral release date” second amended revolving credit agreement includes number customary affirmative covenants additionally second amended revolving credit agreement contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness see entering restrictive agreements restricted payments see including repurchases common stock shareholder dividends see investments see loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level second amended revolving credit agreement also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 250 100 200 100 beginning subsequent collateral release date may increased level higher 225 100 certain circumstances december 31 2019 maximum additional borrowing capacity remain compliance covenants 1200 december 31 2019 2018 alcoa corporation compliance covenants indebtedness restricted payments investments negative covenants include general exceptions allow potential future transactions incremental specifically provided second amended revolving credit agreement indebtedness negative covenant provides incremental amount exceed greater 1000 60 alcoa corporation’s consolidated total assets additionally restricted payments negative covenant provides aggregate amount exceed 100 investments negative covenant provides aggregate amount exceed 400 contain two conditions limits may increase first fiscal year thresholds restricted payments investments negative covenants increase 250 200 respectively consolidated net leverage ratio greater 150 previously 120 100 150 previously130 100 respectively end prior fiscal year secondly regards 100 250 restricted payments 200 investments 50 unused amount base amounts fiscal year may used next succeeding fiscal year following describes specific restricted payment negative covenant share repurchases application restricted payments general exception described share repurchases ordinary dividend payments alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year additionally described second amended revolving credit agreement provides general exceptions restricted payments negative covenant would allow alcoa corporation execute share repurchases purpose fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit also ordinary dividend payments made alcoa corporation subject general exception restricted payments described accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit limits restricted payments negative covenant notes indenture see 144a debt would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant second amended revolving credit agreement second amended revolving credit agreement contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events borrowings outstanding december 31 2019 2018 amounts borrowed 2019 2018 revolving credit facility preferred common stock preferred stock alcoa corporation authorized issue 100000000 shares preferred stock par value 001 per share december 31 2019 2018 company issued preferred stock common stock alcoa corporation authorized issue 750000000 shares common stock par value 001 per share december 31 2019 2018 alcoa corporation 185580166 184770249 respectively issued outstanding shares common stock employee stockbased compensation plan company issued shares 809917 2019 1293336 2018 2269718 2017 also 25167229 shares common stock available issuance december 31 2019 alcoa corporation’s employee stockbased compensation plan company issues new shares satisfy exercise stock options conversion stock units october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending cash availability market conditions factors repurchases program may made using variety methods may include open market purchases privately negotiated transactions pursuant rule 10b51 plan program predetermined expiration date alcoa corporation intends retire repurchased shares common stock december 2018 company repurchased 1723800 shares common stock 50 shares immediately retired shares repurchased 2019 dividends common stock subject authorization alcoa corporation’s board directors company declare dividends 2019 2018 2017 stockbased compensation stock options stock units generally granted either january february calendar year eligible employees company’s board directors also receive certain stock units however amounts material stock options granted closing market price alcoa corporation’s common stock date grant grade vest threeyear service period 13 year tenyear contractual term stock units cliff vest third anniversary award grant date certain units also include either market performance condition final number marketbased performancebased stock units earned dependent alcoa corporation’s achievement certain targets threeyear measurement period grants marketbased stock units award earned end measurement period based company’s total shareholder return measured total shareholder return standard poor’s 500® index january 1 grant year december 31 third year service period performancebased stock units award earned end measurement period based company’s performance preestablished returnoncapital target measured january 1 grant year december 31 third year service period 2019 2018 2017 alcoa corporation recognized stockbased compensation expense 30 35 24 respectively approximately 80 90 related stock units period stockbased compensation expense capitalized 2019 2018 2017 stockbased compensation expense based grant date fair value applicable equity grant stock units performance market condition stock units performance condition fair value equivalent closing market price alcoa corporation’s common stock date grant respective periods stock units market condition fair value estimated date grant using monte carlo simulation model generated result 3570 7313 per unit 2019 2018 respectively monte carlo simulation model uses certain assumptions estimate fair value marketbased stock unit including volatility 4204 company 1264 standard poor’s 500® index riskfree interest rate 257 assumptions used estimate fair value stock units granted 2018 materially different stock options fair value estimated date grant using latticepricing model generated result 1086 2132 1245 per option 2019 2018 2017 respectively latticepricing model uses several assumptions estimate fair value stock option including average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior contractual life assumptions used company estimate fair value stock options granted 2019 follows • risk free rate 277 based yield curve interest rates time grant life option • dividend yield 0 based historical dividends paid separation date company immediate plans pay dividends • volatility 4174 based historical implied volatilities term option • pre postvesting forfeitures 4 based historical option forfeiture data • exercise behavior 61 based weighted average exercise ratio based upon assumptions used determination fair value latticepricing model resulted option life 59 years assumptions option life output 2019 materially different 2018 2017 activity stock options stock units 2019 follows number converted units includes 209550 shares “withheld” meet company’s statutory tax withholding requirements related income earned employees result vesting units december 31 2019 2246563 outstanding stock options weighted average remaining contractual life 540 years total intrinsic value 3 additionally 1559040 total outstanding stock options fully vested exercisable weighted average remaining contractual life 398 years weighted average exercise price 2619 total intrinsic value 3 december 31 2019 cash received stock option exercises 2 23 43 2019 2018 2017 respectively total intrinsic value stock options exercised 2019 2018 2017 1 26 24 respectively december 31 2019 29 pretax combined unrecognized compensation expense related nonvested grants stock options stock units expense expected recognized weighted average period 160 years n pension postretirement benefits defined benefit plans alcoa sponsors several defined benefit pension plans covering certain employees us foreign locations pension benefits generally depend length service job grade remuneration substantially benefits paid pension trusts sufficiently funded ensure plans pay benefits retirees become due salaried nonbargaining hourly us employees hired march 1 2006 participate defined contribution plan instead defined benefit plan company also maintains health care life insurance postretirement benefit plans covering certain eligible us retired employees certain retirees foreign locations generally medical plans unfunded pay percentage medical expenses reduced deductibles coverage life benefits generally provided insurance contracts company retains right subject existing agreements change eliminate benefits salaried certain nonbargaining hourly us employees hired january 1 2002 certain bargaining hourly us employees hired july 1 2010 eligible postretirement health care benefits salaried certain hourly us employees retire april 1 2008 eligible postretirement life insurance benefits january 1 2019 pension benefit plans postretirement benefit plans cover aggregate approximately 40000 approximately 39000 participants respectively 2019 plan actions 2019 management initiated following actions certain pension postretirement benefit plans action 1 june 2019 company entered new sixyear collective bargaining agreement national union aluminum employees baiecomeau canada agreement canadian union employees participants one company’s defined benefit pension plans cease accruing retirement benefits future service effective january 1 2021 change affect approximately 700 employees targeted transitioned target benefit plan funding risk assumed employees company contribute approximately 12 participants’ eligible earnings new plan annual basis company also contribute additional contributions approximately 2 spread threeyear period improve financial position newly established target benefit plan participants already collecting benefits terminated vested benefit defined benefit pension plan affected changes action 2 july 2019 company entered new sixyear collective bargaining agreement united steelworkers representing employees aluminerie de bécancour inc canada agreement canadian union employees participants one company’s defined benefit pension plans ceased accruing retirement benefits future service effective july 21 2019 change affected approximately 900 employees transitioned memberfunded pension plan funding risk assumed employees company contribute approximately 12 participants’ eligible earnings new plan annual basis improve financial positions existing defined benefit pension plan newly established memberfunded pension plan company contribute approximately 5 2020 existing defined benefit pension plan approximately 2 spread fiveyear period newly established memberfunded pension plan participants already collecting benefits terminated vested benefit defined benefit pension plan affected changes action 3 october 2019 company offered lump sum buyouts specific participants us defined benefit pension plans result company paid approximately 112 plan assets november 30 2019 1700 participants relieved corresponding pension obligation 138 action 4 december 2019 company notified certain us retirees transitioned medicare exchange plan companyprovided contribution effective january 1 2021 change affects approximately 6000 participants change improve cost predictability allow participants elect coverage choice available options action 5 december 2019 company notified certain us retirees life insurance longer provided effective december 31 2019 change affects approximately 8900 participants part change alcoa made onetime transition payment affected retirees totaling 14 december 2019 following table presents certain information financial impacts actions accompanying consolidated financial statements 1 actions 1 2 caused interim plan remeasurements including update discount rates used determine benefit obligations affected plans amounts include impacts due interim plan remeasurements 2 amounts represent accelerated amortization portion existing prior service cost curtailments net actuarial loss settlements reclassified accumulated comprehensive loss restructuring charges net see note accompanying statement consolidated operations 2018 plan actions 2018 management initiated following actions certain pension postretirement benefit plans action 1in january 2018 alcoa notified us canadian salaried employees participants three company’s defined benefit pension plans cease accruing retirement benefits future service effective january 1 2021 change affect approximately 800 employees transitioned countryspecific defined contribution plans alcoa contribute 3 participants’ eligible earnings annual basis contributions incremental employer savings match employees may receive existing defined contribution plans participants already collecting benefits defined benefit pension plans affected changes action 2in january 2018 company notified us salaried employees retirees longer contribute premedicare retiree medical coverage effective january 1 2021 change affects approximately 700 participants one plan action 3in april 2018 company signed group annuity contracts transfer obligation pay remaining retirement benefits approximately 2100 retirees two canadian defined benefit pension plans three insurance companies transfer 560 plan obligations plan assets well transaction fee 23 completed april 13 2018 company contributed 89 two plans facilitate transaction maintain funding level remaining plan obligations prior transactions two canadian pension plans combined approximately 3500 participants action 4in august 2018 company signed group annuity contract transfer obligation pay remaining retirement benefits approximately 10500 retirees three us defined benefit pension plans one insurance company transfer 287 plan obligations plan assets well transaction fee 10 completed august 7 2018 additionally approximately 1000 plan participants elected receive lump sum settlements representing 75 plan obligations 85 plan assets prior two transactions three us pension plans combined approximately 43400 participants action 5in august 2018 company notified certain us salaried retirees life insurance longer provided effective september 1 2018 change affects approximately 5500 participants one plan part change alcoa made onetime transition payment affected retirees totaling 23 september 2018 actions caused respective plans remeasured including update discount rates used determine benefit obligations affected plans following table presents certain information financial impacts actions accompanying consolidated financial statements 1 amounts represent accelerated amortization portion existing prior service cost benefit curtailments net actuarial loss settlements reclassified accumulated comprehensive loss restructuring charges net see note accompanying statement consolidated operations obligations funded status december 31 2019 benefit obligation fair value plan assets funded status us pension plans 4532 3429 1103 respectively december 31 2018 benefit obligation fair value plan assets funded status us pension plans 4246 3160 1086 respectively pension plan benefit obligations components net periodic benefit cost 1 2019 2018 2017 net periodic benefit cost us pension plans 155 358 74 respectively 2 2019 2018 2017 net periodic benefit cost postretirement benefits reflects reduction 7 8 respectively related recognition federal subsidy awarded medicare part 3 amounts reported expenses net accompanying statement consolidated operations 4 amounts reported restructuring charges net accompanying statement consolidated operations see note 2019 settlements due management actions see plan actions 74 payment additional lump sum benefits 7 2018 settlements due management actions see plan actions 341 payment lump sum benefits 13 2017 settlements due payment lump sum benefits 5 amounts reported restructuring charges net accompanying statement consolidated operations see note 2019 2018 curtailments due management actions see plan actions 6 amounts reported restructuring charges net accompanying statement consolidated operations see note 2017 special termination benefits due workforce reductions 7 amounts attributed joint venture partners included amounts expected recognized net periodic benefit cost assumptions weighted average assumptions used determine benefit obligations pension postretirement benefit plans follows yield curve model used develop discount rate parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows high quality corporate bonds included model exceed cash flows needed satisfy company’s plan obligations multiple times deep market high quality corporate bonds exist country yield government bonds plus corporate bond yield spread used rate compensation increase based upon actual experience 2020 rate compensation increase 325 approximates fiveyear average weighted average assumptions used determine net periodic benefit cost pension postretirement benefit plans follows 2019 2018 2017 expected longterm rate return used management based prevailing planned strategic asset allocations well estimates future returns asset class 2020 management anticipates 628 weightedaverage expected longterm rate return october 2019 society actuaries soa issued updated base mortality tables pri2012 annual update mortality improvement scale mp2019 considered developing company’s updated mortality assumptions us pension postretirement benefit obligations recorded december 31 2019 connection experience study performed approximately every five years study resulted use pri2012 base tables adjustment reflect alcoa’s experience modified version mp2019 improvement scales assumed health care cost trend rates us postretirement benefit plans follows nonus plans material assumed health care cost trend rate used measure expected cost gross eligible charges covered company’s postretirement benefit plans 2020 55 trend rate used reflecting management’s best estimate change future health care costs covered plans company’s postretirement benefit plan costs largely subject medical inflation due implementation pre post65 fixed companyprovided contributions large portion eligible population 2015 medicare eligible us retirees primarily nonbargained moved medicare marketplace fixed companyprovided contribution similarly effective january 1 2021 alcoa longer offer companysponsored postretirement health care plan certain us bargained medicareeligible retirees qualifying retirees current future transitioned medicare marketplace fixed companyprovided contribution result actions effect one percentage point change assumed health care cost trend rate would significant company plan assets alcoa’s pension plan investment policy weighted average asset allocations december 31 2019 2018 asset class follows principal objectives underlying investment pension plan assets ensure company properly fund benefit obligations become due broad range potential economic financial scenarios maximize longterm investment return acceptable level risk based obligations broadly diversify investments across within various asset classes protect asset values adverse movements investment risk controlled rebalancing target allocations periodic basis ongoing monitoring investment manager performance portfolio includes allocation investments longduration government debt longduration corporate credit real estate high yield bonds emerging market debt globallisted infrastructure public private market equities target asset allocation approximately 30 equities approximately 50 fixed income approximately 20 investments investment practices comply requirements applicable laws regulations respective jurisdictions including employee retirement income security act 1974 erisa united states following section describes valuation methodologies used trustees measure fair value pension plan assets plan assets measured net asset value refers net asset value investment per share basis equivalent practical expedient otherwise indication level fair value hierarchy type asset generally classified provided see note definition fair value description fair value hierarchy equitiesthese securities consist direct investments stock publicly traded us nonus companies valued based closing price reported active market individual securities traded generally classified level 1 ii plans’ share commingled funds invested stock publicly traded companies valued net asset value iii direct investments longshort equity hedge funds private equity limited partnerships venture capital partnerships valued net asset value fixed incomethese securities consist us government debt generally valued using quoted prices included level 1 ii cash equivalents invested publiclytraded funds valued based closing price reported active market individual securities traded generally classified level 1 iii publicly traded us nonus fixed interest obligations principally corporate bonds debentures valued consultation evaluation brokers institutional market using quoted prices observable market data included level 2 iv cash equivalents invested institutional funds valued net asset value investmentsthese investments include among others real estate investment trusts valued based closing price reported active market investments traded included level 1 ii plans’ share commingled funds invested real estate partnerships valued net asset value iii direct investments private real estate includes limited partnerships valued net asset value iv absolute return strategy funds valued net asset value fair value methods described may indicative net realizable value reflective future fair values additionally alcoa believes valuation methods used plans’ trustees appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different fair value measurement reporting date following table presents fair value pension plan assets classified either appropriate level fair value hierarchy net asset value 1 december 31 2019 total fair value pension plan assets excludes net receivable 8 represents securities yet settled plus interest dividends earned various investments 2 december 31 2018 total fair value pension plan assets excludes net receivable 19 represents securities yet settled plus interest dividends earned various investments funding cash flows alcoa’s policy fund amounts defined benefit pension plans sufficient meet minimum requirements set forth applicable country benefits laws tax laws including erisa us plans time company contributes additional amounts deemed appropriate 2019 2018 2017 cash contributions alcoa’s defined benefit pension plans 173 992 106 contributions made 2018 include combined 725 unscheduled contributions several defined benefit pension plans including combined 620 three company’s us defined benefit pension plans combined 105 two company’s canadian defined benefit pension plans inclusive 89 action 3 plan actions additional payments us plans discretionary nature funded 492 net proceeds may 2018 debt issuance see note l 128 available cash hand primary purpose issuing debt fund portion discretionary contributions us plans reduce nearterm pension funding risk fixed rate 10year maturity instrument alcoa’s minimum required contribution defined benefit pension plans 2020 estimated 295 250 us plans erisa regulations plan sponsor establishes prefunding balance making discretionary contributions us defined benefit pension plan may elect apply portion balance toward minimum required contribution obligations related plan future years 2020 management consider making election related company’s us plans benefit payments expected paid pension postretirement benefit plan participants expected medicare part subsidy receipts follows defined contribution plans company sponsors savings investment plans several countries primarily australia united states united states employees may contribute portion compensation plans alcoa matches specified percentage contributions equivalent form investments elected employee also company makes contributions retirement savings account based percentage eligible compensation certain us employees hired march 1 2006 able participate alcoa’s defined benefit pension plans company’s expenses related defined contribution plans 68 2019 69 2018 65 2017 memberfunded pension plan effective july 22 2019 company contributes memberfunded pension plan sponsored united steelworkers employees aluminerie de bécancour inc canada see plan actions alcoa makes contributions plan based percentage employees’ eligible compensation company’s expenses related memberfunded pension plan 4 2019 derivatives financial instruments fair value fair value defined price would received sell asset paid transfer liability orderly transaction market participants measurement date fair value hierarchy distinguishes market participant assumptions developed based market data obtained independent sources observable inputs ii entity’s assumptions market participant assumptions developed based best information available circumstances unobservable inputs fair value hierarchy consists three broad levels gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 lowest priority unobservable inputs level 3 three levels fair value hierarchy described • level 1unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities • level 2inputs quoted prices included within level 1 observable asset liability either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability eg interest rates inputs derived principally corroborated observable market data correlation means • level 3inputs significant fair value measurement unobservable derivatives alcoa corporation exposed certain risks relating ongoing business operations including risks changing commodity prices foreign currency exchange rates interest rates alcoa corporation’s commodity derivative activities include aluminum energy foreign exchange interest rate contracts held purposes trading used primarily mitigate uncertainty volatility cover underlying exposures alcoa corporation involved trading activities energy weather derivatives nonexchange commodity trading activities alcoa corporation’s commodity derivative activities subject management direction control strategic risk management committee srmc consists least three members including chief executive officer chief financial officer remaining members officers andor employees company chief executive officer may designate time currently member srmc alcoa corporation’s treasurer srmc meets periodic basis review derivative positions strategy reports audit committee alcoa corporation’s board directors scope activities several alcoa corporation’s aluminum energy foreign exchange contracts classified level 1 level 2 fair value hierarchy contracts designated either fair value cash flow hedging instruments alcoa corporation also several derivative instruments classified level 3 fair value hierarchy either designated cash flow hedges undesignated following tables present detail level 1 2 3 derivatives see additional level 3 information tables 2019 realized loss 26 level 1 2 cash flow hedges comprised 18 loss recognized sales 8 loss recognized cost goods sold 2018 realized loss 14 level 1 2 cash flow hedges recognized sales 2017 alcoa recognized realized loss 15 level 1 2 cash flow hedges sales addition alcoa recognized realized loss 82 level 3 cash flow hedges comprised loss 113 recognized sales gain 31 recognized cost goods sold alcoa also recognized loss 24 expenses net related marktomarket derivative instruments loss 27 related level 1 2 instruments loss 17 related level 3 power contracts gain 3 related level 3 embedded credit derivative gain 17 related level 3 financial contract derivative instruments classified level 3 fair value hierarchy represent management used least one significant unobservable input valuation model alcoa corporation uses discounted cash flow model fair value level 3 derivative instruments valuation models reviewed tested least annual basis inputs valuation models level 3 derivative instruments composed following quoted market prices eg aluminum prices 10year london metal exchange lme forward curve energy prices ii significant observable inputs eg information concerning time premiums volatilities certain option type embedded derivatives regional premiums aluminum contracts iii unobservable inputs eg aluminum energy prices beyond quoted market periods beyond term quoted market prices aluminum alcoa corporation estimates price aluminum extrapolating 10year lme forward curve periods beyond term quoted market prices midwest premium management estimates midwest premium based recent transactions additionally periods beyond term quoted market prices energy management developed forward curve based independent consultant market research appropriate valuations adjusted various factors liquidity bidoffer spreads credit considerations adjustments generally based available market evidence level 2 absence evidence management’s best estimate used level 3 significant input unobservable one period becomes observable subsequent period related asset liability would transferred appropriate classification level 1 2 period change transfers periods presented purchases sales settlements level 3 derivative instruments periods presented level 3 derivative instruments outstanding december 31 2019 described table description designation contract termination unobservable inputs impacting valuation sensitivity inputs power contracts embedded derivative indexes price power lme price aluminum plus midwest premium cash flow hedge forward sales aluminum march 2026 december 2029 february 2036 lme price midwest premium mwh per year increase lme price andor midwest premium results higher cost power decrease derivative asset increase derivative liability embedded derivative indexes price power lme price aluminum cash flow hedge forward sales aluminum september 2027 december 2019 lme price mwh per year increase lme price results higher cost power increase derivative liability embedded derivative indexes price power credit spread company counterparty designated october 2028 estimated credit spread wider credit spread results higher cost power increase derivative liability financial contract hedge power prices cash flow hedge future purchases electricity july 2021 power price lower power prices result lower derivative asset addition instruments presented alcoa corporation three instruments designated cash flow fair value hedges expired prior december 31 2019 alcoa corporation financial contract expired august 2017 hedged anticipated power requirements one smelters also alcoa corporation natural gas supply contract lmelinked ceiling expired october 2018 additionally alcoa corporation power contract expired march 31 2019 containing embedded derivative indexed price power lme price aluminum plus midwest premium time derivative liability recognized equivalent amount recognized deferred charge noncurrent assets accompanying consolidated balance sheet amortization deferred charge recognized expenses net accompanying statement consolidated operations power received life contract alcoa counterparty entered new power contract also contains embedded derivative expiring march 2026 see realized unrealized gains losses three contracts included expenses net december 31 2019 outstanding level 3 instruments associated seven smelters december 31 2019 2018 power contracts embedded derivatives designated cash flow hedges hedge forecasted aluminum sales 2347 kmt 2508 kmt respectively december 31 2019 2018 financial contract hedges forecasted electricity purchases 3891096 6348276 megawatt hours respectively following table presents quantitative information related significant unobservable inputs described level 3 derivative instruments megawatt hours mwh fair values level 3 derivative instruments recorded accompanying consolidated balance sheet follows following table shows net fair values level 3 derivative instruments december 31 2019 effect amounts hypothetical change increase decrease 10 market prices rates existed december 31 2019 following tables present reconciliation activity level 3 derivative instruments derivatives designated hedging instrumentscash flow hedges derivative instruments designated qualify cash flow hedges effective january 1 2018 entire amount unrealized gains losses derivative reported component comprehensive loss income prior january 1 2018 effective portion unrealized gains losses derivative reported component comprehensive loss income ineffective portion unrealized gains losses recognized directly earnings immediately april 1 2018 alcoa corporation adopted guidance issued fasb accounting hedging activities included elimination concept ineffectiveness accordingly longer requirement separately measure report ineffectiveness periods presented realized gains losses derivative reclassified comprehensive loss income earnings period periods hedged transaction impacts earnings additionally gains losses derivative representing hedge components excluded assessment effectiveness recognized directly earnings immediately assuming market rates remain constant rates december 31 2019 realized loss 47 related power contracts realized gain 57 related financial contract expected recognized sales cost goods sold respectively next 12 months material limitations disclosures respect commodity prices foreign currency exchange risk consider underlying commitments anticipated transactions underlying items included analysis gains losses futures contracts may offset actual results determined several factors alcoa corporation’s control could vary significantly factors disclosed alcoa corporation exposed credit loss event nonperformance counterparties instruments well credit performance risk respect hedged customers’ commitments alcoa corporation anticipate nonperformance parties contracts creditworthy counterparties supported cash treasury bills irrevocable letters credit issued carefully chosen banks addition various master netting arrangements place counterparties facilitate settlement gains losses contracts financial instruments carrying values fair values alcoa corporation’s financial instruments follows following methods used estimate fair values financial instruments cash equivalents restricted cash carrying amounts approximate fair value short maturity instruments fair value amounts cash equivalents restricted cash classified level 1 fair value hierarchy longterm debt including amounts due within one year fair value based quoted market prices public debt interest rates currently available alcoa corporation issuance debt similar terms maturities nonpublic debt fair value amounts longterm debt classified level 2 fair value hierarchy p income taxes provision income taxes components loss income taxes follows provision income taxes consisted following federal includes us income taxes related foreign income reconciliation us federal statutory rate alcoa’s effective tax rate follows effective tax rate provision loss 2019 provision income 2018 2017 certain components 2019 restructuring charges resulting mrc divestiture avilés la coruña facilities curtailment subsequent divestiture deductible tax purposes amounts 65 mrc 35 avilés la coruña combined included nondeductible losses foreign divestitures table see note c additional information divestiture charges late 2019 awab received extension tax holiday related production alumar refinery holiday due end december 31 2022 extended december 31 2027 holiday decreases awab’s tax rate income generated alumar refinery 34 1525 result future cash tax savings result extension holiday well updated analysis deferred tax assets expected reverse described respect juruti holiday awab’s existing deferred tax assets expected reverse holiday period remeasured lower tax rate 2019 remeasurement resulted decrease awab’s deferred tax assets discrete income tax charge 7 4 noncontrolling interest mid2017 awab received approval tax holiday related operation juruti brazil bauxite mine tax holiday made effective january 1 2017 retroactively decreased awab’s tax rate income generated juruti mine 34 1525 results future cash tax savings december 31 2026 result income tax rate change awab’s existing deferred tax assets expected reverse holiday period remeasured lower tax rate 2017 remeasurement resulted decrease awab’s deferred tax assets discrete income tax charge 26 15 noncontrolling interest updated analysis deferred tax assets expected reverse holiday period resulted increase awab’s deferred tax assets discrete income tax benefit 5 3 noncontrolling interest 2018 deferred income taxes components deferred tax assets liabilities based underlying attributes without regard jurisdiction follows following table details expiration periods deferred tax assets presented deferred tax assets expiration may still annual limitations utilization represents deferred tax assets whose expiration dependent upon reversal underlying temporary difference total deferred tax asset net valuation allowance supported projections future taxable income exclusive reversing temporary differences taxable temporary differences reverse within carryforward period composition alcoa’s net deferred tax asset jurisdiction december 31 2019 follows company several income tax filers various foreign countries 403 net deferred tax asset included foreign column table approximately 90 relates five alcoa’s income tax filers follows 205 deferred tax asset alcoa alumínio sa brazil 137 deferred tax asset alcoa canada company 130 net deferred tax asset awab brazil 89 deferred tax asset española collectively alcoa canada company alumínio awab foreign filers spain 197 net deferred tax liability aofa future realization net deferred tax asset foreign filers based projections respective future taxable income defined sum pretax income comprehensive income permanent tax differences exclusive reversing temporary differences carryforwards realization net deferred tax assets foreign filers dependent tax planning strategies alcoa canada company threeyear cumulative loss position period ended december 31 2019 without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude alcoa canada company’s deferred tax assets may realized resulting future charge establish valuation allowance management forecasted taxable income foreign filers foreseeable future forecast based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials bauxite alumina caustic soda calcined petroleum coke liquid pitch energy labor transportation costs assumptions utilized management develop financial operating plan used manage company measure performance actual results majority alcoa canada company net deferred tax assets relate pension obligations derivatives majority foreign filers’ net deferred tax assets relate tax loss carryforwards foreign filers history tax loss carryforwards expiring unused additionally tax loss carryforwards infinite life respective income tax codes brazil spain however utilization existing tax loss carryforward limited 30 25 taxable income particular year brazil spain respectively accordingly management concluded net deferred tax assets foreign filers likely realized future periods resulting need partial full valuation allowance december 31 2019 following table details changes valuation allowance 1 line item reflects valuation allowances initially established result change management’s judgment regarding realizability deferred tax assets 2 line item reflects movements previously established valuation allowances increase decrease related deferred tax assets increase decrease movements occur result remeasurement due tax rate change changes underlying attributes deferred tax assets including expiration attribute reversal temporary difference gave rise deferred tax asset 2018 alcoa immediately established full valuation allowance 86 related initial deferred tax asset associated company’s equity interest elysistm see note h inception company contributed certain intellectual property patents made initial cash investment 5 elysistm deferred tax asset relates outside basis difference created excess tax basis ie fair value assets carrying value investment elysistm recorded company initial purpose elysistm advance development aluminum smelter technology ultimate goal commercialization weighing available positive negative evidence management determined likely company realize tax benefit deferred tax asset conclusion based fact elysistm expected generate losses foreseeable future elysistm incurs expenses development stage without committed future revenue stream need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances 2017 company established valuation allowance 94 related remaining deferred tax assets iceland initial allowance previously established 2015 amount comprised 60 discrete income charge recognized provision income taxes accompanying consolidated statement operations 34 charge accumulated comprehensive loss deferred tax assets relate tax loss carryforwards expiration period 2026 deferred losses associated derivative hedging activities weighing available positive negative evidence management determined longer likely alcoa realize tax benefit deferred tax assets conclusion based existing cumulative losses short expiration period losses generated result intercompany interest expense company’s global treasury cash management system realization deferred losses associated lmelinked embedded derivative power contract see note interest expense expected continue additional deferred losses associated embedded derivative realized future years result management estimates sufficient taxable income available utilize operating losses expiration period need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances undistributed net earnings cumulative amount alcoa’s foreign undistributed net earnings deemed permanently reinvested approximately 1792 december 31 2019 alcoa corporation several commitments obligations related company’s operations various foreign jurisdictions therefore management plans distribute earnings foreseeable future alcoa corporation continuously evaluates local global cash needs future business operations anticipated debt facilities may influence future repatriation decisions practicable estimate tax liability might incurred earnings remitted us unrecognized tax benefits alcoa subsidiaries file income tax returns us federal jurisdiction various foreign us state jurisdictions exceptions company subject income tax examinations tax authorities years prior 2014 us federal income tax purposes virtually company’s us operations included income tax filings parentco’s us consolidated tax group prior separation date since time company’s us consolidated tax group comprised referenced us operations filed us federal income tax returns twomonth 2016 postseparation period well tax years 2017 2018 none examined internal revenue service us federal income tax filings parentco’s us consolidated tax group examined prior periods separation date foreign jurisdiction tax authorities process examining income tax returns several alcoa’s subsidiaries various tax years excluding matter discussed period foreign examination includes income tax years 2006 2017 us state income tax purposes company subsidiaries remain subject income tax examinations 2015 tax year forward december 31 2019 active examinations december 2019 aofa received statement audit position soap australian taxation office ato related pricing certain historic thirdparty alumina sales soap proposed adjustments would result additional income tax payable aofa approximately 144 a212 exclusive interest penalties soap currently subject independent review process within ato conclusion process ato may issue tax assessment issued accordance ato dispute procedures expected aofa would pay 50 disputed tax amount ato aofa could pursue available dispute resolution methods including filing proceedings australian courts without ato seeking payment prior final resolution aofa ultimately successful amounts paid ato would refunded management agree ato’s position believes likely company’s tax position sustained therefore recognized tax liabilities relation matter resolution matter uncertain time company cannot predict outcome may materially affect financial results aofa part company’s joint venture alumina limited australian public company listed australian securities exchange company alumina limited 60 40 respectively joint venture entities including aofa reconciliation beginning ending amount unrecognized tax benefits excluding interest penalties follows periods presented portion balance end year pertains state tax liabilities presented offset federal tax benefits effect unrecognized tax benefits recorded would impact annual effective tax rate 2019 2018 2017 would 7 2 1 respectively pretax book loss income 2018 company recorded charge 30 €26 including 10 €9 interest provision income taxes accompanying statement consolidated operations establish liability 49 share estimated loss disputed income tax matter see spain tax section note r alcoa anticipate changes unrecognized tax benefits material impact statement consolidated operations 2020 company’s policy recognize interest penalties related income taxes component provision income taxes accompanying statement consolidated operations 2019 2018 2017 alcoa recognized 2 10 1 respectively interest penalties due expiration statute limitations settlements tax authorities refunded overpayments company also recognized interest income 1 6 2019 2018 2017 respectively december 31 2019 2018 amount accrued payment interest penalties 14 12 respectively us tax cuts jobs act 2017 december 22 2017 us tax legislation known us tax cuts jobs act 2017 tcja enacted corporations tcja amends us internal revenue code reducing corporate income tax rate modifying several business deduction international tax provisions specifically corporate income tax rate reduced 21 35 significant changes general include following among others mandatory onetime deemed repatriation accumulated foreign earnings either 8 155 tax rate depending circumstances ii dividends received foreign subsidiaries deducted full regardless ownership interest previously dividends fully taxable iii 21 105 tax effective 2018 depending circumstances new category income referred global intangible low tax income gilti related earnings foreign entities prescribed return associated fixed asset base iv 5 10 tax effective 2018 base erosion payments deductible crossborder payments related parties exceed 3 company’s deductible expenses v net operating losses unlimited carryforward period previously 20 years carryback period previously 2 years deductions losses limited 80 taxable income previously 100 taxable income beginning 2018 tax year company’s preliminary analysis provisions tcja resulted discrete income tax charge company’s 2017 consolidated financial statements 22 reflected provision income taxes accompanying statement consolidated operations 2017 22 charge relates specifically management’s reasonable estimate corporate income tax rate change resulted remeasurement alcoa’s deferred income tax accounts gross basis company reduced deferred tax assets valuation allowance deferred tax liabilities 506 433 51 respectively upon completion analysis around tcja provision management concluded material impact company’s 2017 consolidated financial statements related reduced corporate income tax rate applicable provisions tcja 2018 management completed analysis impact tax law changes including gilti became effective january 1 2018 tcja related alcoa’s 2018 consolidated financial statements company made accounting policy election include period cost tax impact generated including gilti us taxable income inclusion gilti 2018 us taxable income fully offset current us tax losses net operating loss carryforwards expected none remaining provisions tcja material impact company’s 2018 consolidated financial statements q asset retirement obligations alcoa records aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure company also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities following table details carrying value recorded aros major category 111 122 classified current liability december 31 2019 2018 respectively following table details changes total carrying value recorded aros 2019 reversals previously recorded liabilities primarily related divestiture avilés la coruña spain facilities 2018 reversals previously recorded liabilities includes 36 related portovesme italy smelters see note liabilities incurred 2019 includes 72 related closure point comfort alumina refinery recorded restructuring charges net accompanying statement consolidated operations see note additional information r contingencies commitments unless specifically described contrary matters within note r full responsibility alcoa corporation pursuant separation distribution agreement additionally separation distribution agreement provides crossindemnities company arconic claims subject indemnification contingencies environmental matters alcoa corporation participates environmental assessments cleanups several locations include owned operating facilities adjoining properties previously owned operating facilities adjoining properties waste sites including superfund comprehensive environmental response compensation liability act cercla sites following table details changes carrying value recorded environmental remediation reserves december 31 2019 2018 current portion remediation reserve balance 39 44 respectively 2019 company incurred liabilities 73 primarily related closure point comfort alumina refinery recorded restructuring charges net accompanying statement consolidated operations see note remaining amount recorded cost goods sold 2018 2017 changes liability result ongoing remediation work various sites additional accruals recorded cost goods sold except 2 8 2018 2017 respectively recorded restructuring charges net accompanying statement consolidated operations see note estimated timing cash outflows environmental remediation reserve december 31 2019 follows separation distribution agreement includes provisions assignment allocation environmental liabilities alcoa corporation arconic general respective parties responsible environmental matters associated operations properties assigned well certain environmental matters shared responsibility two companies reserve balances december 31 2019 2018 associated significant sites active remediation underway future remediation 274 214 respectively management’s judgment company’s reserves sufficient satisfy provisions respective action plans company’s significant sites include poços de caldas brazilthe reserve associated 2015 closure alcoa alumínio sa smelter poços de caldas brazil remediation historic spent potlining storage disposal areas final remediation plan currently review could require reserve balance adjusted fusina portovesme italyalcoa corporation’s subsidiary alcoa trasformazioni srl remediation projects underway closed smelter sites fusina portovesme approved italian ministry environment protection land sea moe work ongoing soil remediation sites expected completion 2020 additionally annual payments made moe 10year period 2022 groundwater emergency containment natural resource damages fusina site groundwater remediation project portovesme final remedial design completed 2020 may result change existing reserve surinamethe reserve associated 2017 closure suralco refinery bauxite mine treatment disposal refinery waste soil remediation work began 2017 expected completed end 2025 hurricane creek arkansasthe reserve associated 1990 closure two mining areas refineries near hurricane creek arkansas ongoing monitoring maintenance water quality surrounding mine areas residue disposal areas massena new yorkthe reserve associated 2015 closure massena east smelter company’s subsidiary reynolds metals company subsurface soil remediation performed demolition structures remediation work expected commence 2020 take four eight years complete point comfort texasthe reserve associated 2019 closure point comfort alumina refinery disposal industrial wastes contained site subsurface remediation postclosure monitoring maintenance final remediation plan currently review could require reserve balance adjusted sherwin texasin connection 2018 settlement dispute related previouslyowned sherwin alumina refinery company’s subsidiary copano enterprises llc accepted responsibility final closure four bauxite residue waste disposal areas known copano facility work commenced first residue 2018 take eight twelve years complete depending nature potential reuse work next three areas commenced expected completed 2048 depending potential reuse see sherwin section complete description matter longview washingtonin connection 2018 consent decree cleanup action plan state washington department ecology company’s subsidiary northwest alloys accepted certain responsibilities future remediation contaminated soil sediments site located near longview washington sitesthe company process decommissioning various plants remediating sites several countries potential redevelopment return land natural state aggregate approximately 35 remediation projects sites planned underway activities completed various times future latest expected 2026 ongoing monitoring activities may required december 31 2019 2018 reserve balance associated activities 61 66 respectively tax matters spain july 2013 following corporate income tax audit covering 2006 2009 tax years assessment received spain’s tax authorities disallowing certain interest deductions claimed parentco’s spanish consolidated tax group 2015 parentco filed appeal assessment spain’s central tax administrative court denied two months later parentco filed appeal spain’s national court national court amount assessment including interest 152 €131 june 30 2018 july 2018 national court denied parentco’s appeal assessment however required spain’s tax authorities issue new assessment considers available net operating losses former spanish consolidated tax group prior tax years utilized assessed tax years subsequently arconic alcoa corporation collectively companies estimated amount new assessment including applicable interest range 24 59 €21 €53 consideration available net operating losses tax credits tax matters agreement related separation transaction unfavorable tax outcomes split arconic alcoa corporation 51 49 respectively based review basis national court decided matter alcoa corporation management longer believed companies likely greater 50 prevail matter accordingly third quarter 2018 alcoa corporation recorded charge 30 €26 provision income taxes establish liability 49 share estimated loss matter representing management’s best estimate time november 8 2018 companies filed petition appeal spain’s supreme court accepted march 2019 appeal submitted may 6 2019 separately january 2017 national court issued decision favor former spanish consolidated tax group related similar assessment 2003 2005 tax years effectively making assessment null void additionally august 2017 lieu receiving formal assessment companies reached settlement spain’s tax authorities 2010 2013 tax years audit similar matter alcoa corporation’s share settlement material company’s consolidated financial statements ultimate outcomes related 2003 2005 2010 2013 tax years indicative potential ultimate outcome assessment 2006 2009 tax years due procedural differences also possible companies may receive similar assessments tax years subsequent 2013 however management expect assessment received material alcoa corporation’s consolidated financial statements brazil awabin march 2013 awab notified brazilian federal revenue office rfb approximately 110 r220 value added tax credits previously claimed disallowed penalty 50 assessed amount awab received 41 r82 cash may 2012 valueadded tax credits claimed awab fixed assets export sales related juruti bauxite mine são luís refinery expansion rfb disallowed credits allege belong consortium awab owns interest claimed awab credits also disallowed result challenges apportionment methods used questions use credits alleged lack documented proof awab presented defense claim rfb april 8 2013 awab successful administrative process rfb would recourse unsuccessful process awab option litigate judicial level separately awab’s administrative appeal june 2015 new tax law enacted repealing provisions tax code basis rfb assessing 50 penalty matter estimated range reasonably possible loss matters 0 54 r220 management’s opinion allegations basis however time company unable reasonably predict outcome matter matters reynoldsin 2000 parentco acquired reynolds metals company reynolds subsidiary alcoa corporation included alumina refinery gregory texas condition reynolds acquisition parentco required divest alumina refinery terms divestiture parentco agreed retain responsibility certain environmental obligations assigned buyer energy services agreement esa gregory power partners gregory power purchase steam electricity refinery january 2016 sherwin alumina company llc sherwin successor owner refinery previously owned reynolds filed bankruptcy due inability continue bauxite supply agreement result sherwin’s bankruptcy filing separate legal actions initiated reynolds sherwin gregory power sherwin matter sought determine responsibility remediation environmental conditions sherwin refinery site related bauxite residue waste disposal areas known copano facility may 2018 reynolds sherwin concluded settlement agreement accepted bankruptcy court june 2018 assigned reynolds environmental liabilities associated copano facility assigned sherwin environmental liabilities associated sherwin refinery site see sherwin texas environmental matters gregory power january 2016 gregory power delivered notice reynolds sherwin’s bankruptcy filing constitutes breach esa since time various responses complaints motions actioned including addition allied alumina llc allied amended complaint sherwin operated subsidiary allied may 2019 settlement agreement reached gregory power allied reynolds claims pending parties voluntarily dismissed settlement conditioned execution various commercial agreements executed parties june 2 2019 court entered stipulation dismissal formally concluding litigation settlement impact consolidated financial statements general addition matters discussed various lawsuits claims proceedings may instituted asserted alcoa corporation including pertaining environmental safety health commercial tax product liability intellectual property infringement employment employee retiree benefit matters actions claims arising normal course business amounts claimed matters may substantial ultimate liability readily determinable considerable uncertainties exist accordingly possible company’s liquidity results operations particular period could materially affected one matters however based facts currently available management believes disposition matters pending asserted material adverse effect individually aggregate financial position company commitments purchase obligations alcoa corporation party unconditional purchase obligations energy expire 2028 2037 commitments related contracts total 153 2020 211 2021 216 2022 221 2023 227 2024 2463 thereafter expenditures contracts totaled 146 2019 169 2018 199 2017 additionally company entered purchase commitments energy raw materials goods services total 2123 2020 1583 2021 1565 2022 1429 2023 1276 2024 10393 thereafter aofa gas supply agreement power three alumina refineries western australia beginning july 2020 12year period terms agreement required aofa make prepayment 500 two installments first made june 2015 300 second installment 200 made april 2016 december 31 2019 alcoa corporation total asset 458 a654 included prepaid expenses current assets 21 noncurrent assets 437 note accompanying consolidated balance sheet december 31 2018 alcoa corporation asset 458 a654 included noncurrent assets see note accompanying consolidated balance sheet related prepayments guarantees third parties december 31 2019 company outstanding potential future payments guarantees issued behalf third party december 31 2018 company maximum potential future payment guarantees issued behalf third party 60 guarantees related project financing rolling mill kingdom saudi arabia 2019 alcoa corporation divested interest mrc dissolving guarantee related project financing bank guarantees letters credit alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties total amount committed instruments automatically renew expire various dates 2020 2023 332 includes 100 issued standby letter credit agreement see december 31 2019 additionally arconic outstanding bank guarantees letters credit related company amount 20 december 31 2019 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding bank guarantees letters credit related arconic amount 14 december 31 2019 event alcoa corporation would required perform instruments company would indemnified arconic accordance separation distribution agreement august 2017 alcoa corporation entered standby letter credit agreement expires may 3 2021 extended originally august 2018 may 2019 three financial institutions agreement provides 150 facility used company matters ordinary course business alcoa corporation’s obligations facility secured manner obligations company’s second amended revolving credit agreement additionally facility contains similar representations warranties affirmative negative financial covenants company’s second amended revolving credit agreement see note l december 31 2019 letters credit aggregating 100 issued facility surety bonds alcoa corporation outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2020 52 december 31 2019 additionally arconic outstanding surety bonds related company amount 14 december 31 2019 event arconic would required perform instruments arconic would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding surety bonds related arconic amount 4 december 31 2019 event alcoa corporation would required perform instruments company would indemnified arconic accordance separation distribution agreement leasing result adoption asu 201602 leases management recorded rightofuse asset lease liability amount 201 alcoa’s consolidated balance sheet january 1 2019 several types operating leases including land buildings alumina refinery process control technology plant equipment vehicles computer equipment amounts equivalent aggregate future lease payments discounted basis leases remaining terms one 38 years lease expense operating cash flows year ended december 31 2019 includes costs operating leases 78 variable lease payments 16 shortterm rental expense 6 new leases 30 added 2019 rightofuse assets totaling 6 impaired 2019 conjunction permanent closure point comfort alumina refinery see note company material financing leases following represents aggregate rightof use assets related lease obligations december 31 2019 weighted average lease term weighted average discount rate december 31 2019 follows future cash flows related operating lease obligations december 31 2019 follows disclosures related periods presented prior adoption asu 201602 company adopted asu 201602 leases january 1 2019 using modified retrospective approach requires following disclosure periods presented prior adoption following table represents minimum annual lease commitments december 31 2018 longterm operating leases financial information interest cost components expenses net 2017 net gain asset sales included 122 gain related sale yadkin see note c noncurrent assets part previous sale transaction equity investment alcoa maintained access approximately 30 dampier bunbury natural gas pipeline transmission capacity western australia gas supply three alumina refineries december 31 2019 2018 aofa asset 281 275 respectively representing prepayments made agreement future gas transmission services valueadded tax vat credits federal state relate two company’s subsidiaries brazil awab alumínio concerning são luís refinery pays vat purchase goods services used alumina production process credits generally utilized offset vat charged domestic sales alumina aluminum however domestic market brazil sale alumina company’s são luís smelter fully curtailed since april 2015 fourth quarter 2018 management performed updated assessment future realizability state vat credits amid unfavorable market conditions lack favorable power contract são luís smelter result management determined necessary establish allowance accumulated state vat balances recorded 107 charge restructuring charges net see note accompanying statement consolidated operations company retains ability utilize state credits future practically restart são luís smelter provides opportunity monetize credits allowance established federal vat credits used reduce types federal tax obligations state vat amounts expensed cost goods sold incurred management continues maintain são luís smelter assets future case potential restart noncurrent liabilities deferred credits deferred energy credits relate cash received 2019 carbon dioxide emission credits governmental agency terms credits require company comply certain conditions period three years deferred credits recognized reduction cost goods sold determined probable company satisfy conditions company meet conditions threeyear period credits repaid governmental agency cash equivalents restricted cash restricted cash amounts reported prepaid expenses current assets accompanying consolidated balance sheet cash flow information cash paid interest income taxes follows item 8a supplemental financial information unaudited quarterly data millions except pershare amounts 1 per share amounts calculated independently period presented therefore sum quarterly per share amounts may equal per share amounts year item 9item 8 financial statements supplementary data management’s reports alcoa corporation stockholders management’s report financial statements practices accompanying consolidated financial statements alcoa corporation subsidiaries company prepared management responsible integrity objectivity accordance accounting principles generally accepted united states america gaap include amounts based management’s best judgments estimates financial information included company’s annual report form 10k year ended december 31 2020 consistent consolidated financial statements management recognizes responsibility conducting company’s affairs according highest standards personal corporate conduct responsibility characterized reflected key policy statements issued time regarding among things conduct business activities within laws host countries company operates potentially conflicting outside business interests employees company maintains systematic program assess compliance policies management’s report internal control financial reporting management responsible establishing maintaining adequate internal control financial reporting defined rules 13a15f 15d15f us securities exchange act 1934 amended company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance gaap company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance gaap receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate management conducted assessment evaluate effectiveness company’s internal control financial reporting december 31 2020 using criteria internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission based assessment management concluded company maintained effective internal control financial reporting december 31 2020 pricewaterhousecoopers llp independent registered public accounting firm audited company’s financial statements included annual report form 10k year ended december 31 2020 audited company’s internal control financial reporting december 31 2020 issued attestation report included herein roy c harvey roy c harvey president chief executive officer william f oplinger william f oplinger executive vice president chief financial officer february 25 2021 report independent registered public accounting firm shareholders board directors alcoa corporation opinions financial statements internal control financial reporting audited accompanying consolidated balance sheet alcoa corporation subsidiaries “company” december 31 2020 2019 related consolidated statements operations comprehensive income changes consolidated equity cash flows three years period ended december 31 2020 including related notes collectively referred “consolidated financial statements” also audited company’s internal control financial reporting december 31 2020 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company december 31 2020 2019 results operations cash flows three years period ended december 31 2020 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 31 2020 based criteria established internal controlintegrated framework 2013 issued coso change accounting principle described note b consolidated financial statements company changed manner accounts leases 2019 basis opinions company’s management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinions company’s consolidated financial statements company’s internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate critical audit matters critical audit matter communicated matter arising current period audit consolidated financial statements communicated required communicated audit committee relates accounts disclosures material consolidated financial statements ii involved especially challenging subjective complex judgments communication critical audit matters alter way opinion consolidated financial statements taken whole communicating critical audit matter providing separate opinion critical audit matter accounts disclosures relates realization net deferred tax assets alcoa canada company described notes b q consolidated financial statements company 451 million net deferred tax assets december 31 2020 including 148 million net deferred tax assets alcoa canada company significantly related pension obligations derivatives alcoa canada company threeyear cumulative loss position december 31 2020 valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized management applies judgment assessing available positive negative evidence history profitable operations projections taxable income evaluating whether likely net deferred tax assets realized future projections taxable income based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials alumina calcined petroleum coke liquid pitch energy labor transportation costs principal considerations determination performing procedures relating realization net deferred tax assets alcoa canada company critical audit matter significant judgment management determining whether net deferred tax assets likely realized future alcoa canada company threeyear cumulative loss position ii high degree auditor judgment subjectivity effort performing procedures evaluating audit evidence relating management’s assessment realization net deferred tax assets management’s assumption projected taxable income related commodity prices costs relating alumina addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating management’s assessment realization net deferred tax assets alcoa canada company including controls projected taxable income procedures also included among others evaluating positive negative evidence available management’s assessment realization net deferred tax assets alcoa canada company testing completeness accuracy underlying data used management’s assessment evaluating reasonableness management’s assumption projected taxable income evaluating management’s assumption projected taxable income related commodity prices costs relating alumina involved evaluating whether assumptions used management reasonable considering current past performance alcoa canada company ii consistency external market industry data iii whether assumption consistent evidence obtained areas audit pricewaterhousecoopers llp pricewaterhousecoopers llp pittsburgh pennsylvania february 25 2021 served company’s auditor since 2015 alcoa corporation subsidiaries statement consolidated operations millions except pershare amounts accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated comprehensive income millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries consolidated balance sheet millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement consolidated cash flows millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries statement changes consolidated equity millions accompanying notes integral part consolidated financial statements alcoa corporation subsidiaries notes consolidated financial statements dollars millions except pershare amounts metric tons thousands kmt basis presentation alcoa corporation company vertically integrated aluminum company comprised bauxite mining alumina refining aluminum production smelting casting rolling energy generation direct indirect ownership company 28 operating locations nine countries around world situated primarily australia brazil canada iceland norway spain united states references notes “parentco” refer alcoa inc pennsylvania corporation consolidated subsidiaries october 31 2016 time renamed arconic inc arconic since subsequently renamed howmet aerospace inc separation transaction november 1 2016 separation date parentco separated two standalone publiclytraded companies alcoa corporation parentco effective 1201 eastern time separation transaction regularway trading alcoa corporation’s common stock began opening new york stock exchange november 1 2016 ticker symbol “aa” company’s common stock par value 001 per share connection separation transaction alcoa corporation parentco entered certain agreements implement legal structural separation two companies govern relationship company parentco completion separation transaction allocate alcoa corporation parentco various assets liabilities obligations agreements included separation distribution agreement tax matters agreement employee matters agreement transition services agreement certain patent knowhow trade secret license trademark license agreements stockholder registration rights agreement basis presentation consolidated financial statements alcoa corporation prepared conformity accounting principles generally accepted united states america gaap accordance gaap certain situations require management make estimates based judgments assumptions may affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements also may affect reported amounts revenues expenses reporting periods management uses historical experience available information make estimates including considerations impact coronavirus covid19 pandemic macroeconomic environment company experienced certain negative impacts result covid19 pandemic date however ultimate magnitude duration covid19 pandemic continues unknown pandemic’s ultimate future impact company’s business financial condition operating results cash flows market capitalization uncertain addition covid19 pandemic could adversely impact estimates made december 31 2020 regarding future results recoverability goodwill longlived assets realizability deferred tax assets despite inherent limitations management believes amounts recorded financial statements related items based best estimates judgments using relevant information available time management regularly evaluates judgments assumptions used estimates results could differ estimates upon future events effects new information certain amounts previously issued financial statements reclassified conform current period presentation principles consolidation consolidated financial statements company include accounts alcoa corporation companies alcoa corporation controlling interest including comprise alcoa world alumina chemicals awac joint venture see intercompany transactions eliminated equity method accounting applied investments affiliates joint ventures company significant influence effective control investments affiliates alcoa corporation cannot exercise significant influence accounted cost method awac unincorporated global joint venture alcoa corporation alumina limited consists several affiliated operating entities interest operate bauxite mines alumina refineries within company’s bauxite alumina segments except poços de caldas mine refinery portions são luís refinery investment mineração rio norte sa brazil portion 55 portland smelter australia within company’s aluminum segment alcoa corporation owns 60 alumina limited owns 40 individual entities consolidated company financial reporting purposes include alcoa australia limited aofa alcoa world alumina llc awa alcoa world alumina brasil ltda awab alúmina española sa española alumina limited’s interest equity entities reflected noncontrolling interest accompanying consolidated balance sheet management evaluates whether alcoa corporation entity interest variable interest entity whether company primary beneficiary consolidation required criteria met alcoa corporation variable interest entities requiring consolidation related party transactions alcoa corporation buys products sells products various related companies consisting entities company retains 50 less equity interest negotiated prices two parties transactions material financial position results operations alcoa corporation periods presented b summary significant accounting policies cash equivalents cash equivalents highly liquid investments purchased original maturity three months less inventory valuation inventories carried lower cost market cost inventories principally determined average cost method properties plants equipment properties plants equipment recorded cost interest related construction qualifying assets capitalized part construction costs depreciation recorded principally straightline method estimated useful lives assets depreciation recorded temporarily idled facilities time management approves permanent closure following table details weighted average useful lives structures machinery equipment type operation numbers years repairs maintenance charged expense incurred costs significant improvements add productive capacity extend useful life capitalized gains losses sale assets generally recorded expenses net properties plants equipment reviewed impairment whenever events changes circumstances indicate carrying amount assets asset group may recoverable assets held sale upon determining longlived asset disposal group meets criteria classified held sale company ceases depreciation reports longlived assets andor assets liabilities disposal group material line items assets held sale liabilities held sale respectively consolidated balance sheet current noncurrent classification determined based planned use proceeds timing transaction company measure longlived asset disposal group classified held sale lower carrying value fair value less costs sell loss resulting measurement recognized period fair value less costs sell less carrying value longlived asset disposal group conversely gains recognized sale longlived asset disposal group date sale see note c leases january 1 2019 company adopted accounting standards update 201602 leases issued financial accounting standards board regarding accounting leases using modified retrospective approach company determines whether arrangement lease inception arrangement based terms conditions contract contains lease identified asset company right control operating financing lease rightofuse rou assets included properties plants equipment corresponding operating lease liabilities included within current liabilities noncurrent liabilities deferred credits financing lease liabilities included longterm debt due within one year longterm debt less amount due within one year consolidated balance sheet operating lease rou assets liabilities recognized commencement date based present value lease payments lease term company uses incremental borrowing rate commencement date determining present value lease payments unless rate implicit lease terms include options extend lease reasonably certain options exercised leases initial term 12 months less including anticipated renewals recorded balance sheet company made policy election record nonlease components lease agreement lease liability variable lease payments presented part initial rou asset liability recorded inception contract lease expense operating lease payments recognized straightline basis lease term finance leases interest expense recognized lease liability rou asset amortized lease term equity investments alcoa invests number privatelyheld companies primarily joint ventures consortia accounted using equity method equity method applied situations company ability exercise significant influence control investee management reviews equity investments impairment whenever certain indicators present suggesting carrying value investment recoverable deferred mining costs alcoa recognizes deferred mining costs development stage mine life cycle costs include construction access haul roads detailed drilling geological analysis define grade quality known bauxite overburden removal costs relate sections related mines company currently extracting bauxite preparing production near term sections outlined planned incrementally generally mined periods ranging one five years depending mine specifics amount geological drilling testing necessary determine economic viability bauxite deposit mined reserves considered proven mining costs amortized based level reserves deferred mining costs included noncurrent assets accompanying consolidated balance sheet goodwill intangible assets goodwill amortized reviewed impairment annually fourth quarter frequently indicators impairment exist decision made sell exit business goodwill allocated among evaluated impairment reporting unit level defined operating segment one level operating segment company five reporting units three included aluminum segment smeltingcasting energy generation rolling operations remaining two reporting units bauxite alumina segments five reporting units bauxite alumina contain goodwill december 31 2020 carrying value goodwill bauxite alumina 49 96 respectively amounts include allocation goodwill held corporate level see note l goodwill tested impairment assessing qualitative factors determine whether likely fair value reporting unit less carrying amount performing quantitative assessment using discounted cash flow method qualitative assessment considers factors general economic conditions equity credit markets industry market conditions earnings cash flow trends qualitative assessment indicates possible impairment quantitative impairment test performed determine fair value reporting unit using discounted cash flow method otherwise analysis required alcoa’s policy annual review goodwill perform quantitative impairment test two reporting units contain goodwill least every threeyear period part annual review goodwill intangible assets finite useful lives amortized generally straightline basis periods benefited following table details weighted average useful lives software intangible assets type operation numbers years asset retirement obligations alcoa recognizes asset retirement obligations aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining regulated waste materials disposal landfill closure additionally costs recorded aros upon management’s decision permanently close demolish certain structures significant lease restoration obligations fair values aros recorded discounted basis time obligation incurred accreted time change present value additionally company capitalizes asset retirement costs increasing carrying amount related longlived assets depreciating assets remaining useful life certain conditional asset retirement obligations related alumina refineries aluminum smelters rolling mills energy generation facilities recorded consolidated financial statements due uncertainties surrounding ultimate settlement date fair value asset retirement obligations recorded reasonable estimate ultimate settlement date made environmental matters environmental related expenditures current operations expensed capitalized appropriate expenditures relating existing conditions caused past operations contribute future revenues expensed liabilities recorded remediation costs probable reasonably estimated estimates also include costs related potentially responsible parties extent alcoa reason believe parties fully pay proportionate share instances company ongoing monitoring maintenance responsibilities alcoa’s policy maintain reserve equal five years expected costs liability continuously reviewed adjusted reflect current remediation progress prospective estimates required activity factors may relevant including changes technology regulations litigation matters asserted claims assessments liabilities recorded unfavorable outcome matter deemed probable loss reasonably estimable respect unasserted claims assessments management must first determine probability assertion made likely determination likelihood unfavorable outcome ability reasonably estimate potential loss made legal matters reviewed continuous basis determine change management’s judgment regarding likelihood unfavorable outcome estimate potential loss legal costs primarily general litigation environmental compliance tax disputes general corporate matters expensed incurred revenue recognition company recognizes revenue satisfies performance obligations accordance provisions customer order contract achieved control product transferred customer generally determined title ownership risk loss pass customer occurs upon shipment delivery product shipping terms vary across businesses depend product country origin type transportation accordingly sale alcoa’s products customers represent single performance obligations revenue recognized point time revenue based consideration expects receive exchange products returns adjustments material based foregoing significant judgment required determine control product transferred customer company considers shipping handling activities costs fulfill promise transfer related products result customer payments shipping handling costs recorded component revenue taxes collected eg sales use valueadded excise customers related sale products remitted governmental authorities excluded revenue stockbased compensation expense employee equity grants recognized using nonsubstantive vesting period approach expense net estimated forfeitures recognized ratably requisite service period based grant date fair value fair value new stock options estimated date grant using latticepricing model determining fair value stock options grant date requires judgment including estimates average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior assumptions may differ significantly grant dates changes actual results inputs occur time plan participants choose whether receive award form stock options stock units combination choice made grant issued irrevocable pension postretirement benefits liabilities expenses pension postretirement benefits determined using actuarial methodologies incorporate significant assumptions including interest rate used discount future estimated liability expected longterm rate return plan assets several assumptions relating employee workforce salary increases health care cost trend rates retirement age mortality yield curve model used develop discount rate parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows highquality corporate bonds included model exceed cash flows needed satisfy company’s plan obligations multiple times deep market highquality corporate bonds exist country yield government bonds plus corporate bond yield spread used expected longterm rate return plan assets generally applied fiveyear marketrelated value plan assets fouryear average fair value plan measurement date used certain nonus plans process used management develop assumption one relies forwardlooking investment returns asset class management incorporates expected future investment returns current planned asset allocations using information various external investment managers consultants well management’s judgment mortality rate assumptions based mortality tables future improvement scales published third parties society actuaries consider available information including historical data well studies publications reputable sources derivatives hedging derivatives held purposes trading part formally documented risk management program alcoa accounts hedges firm customer commitments aluminum fair value hedges fair values derivatives changes fair values underlying hedged items reported assets liabilities consolidated balance sheet changes fair values derivatives underlying hedged items generally offset recorded period sales consistent underlying hedged item company accounts hedges foreign currency exposures certain forecasted transactions cash flow hedges fair values derivatives recorded assets liabilities consolidated balance sheet changes fair values derivatives recorded comprehensive loss income reclassified sales cost goods sold expenses net period earnings impacted hedged items period transaction longer qualifies cash flow hedge contracts cover periods known expected exposures generally exceeding five years hedging relationship designated derivative marked market expenses net cash flows derivatives recognized statement consolidated cash flows manner consistent underlying transactions income taxes provision income taxes determined using asset liability approach accounting income taxes approach provision income taxes represents income taxes paid payable received receivable current year plus change deferred taxes year deferred taxes represent future tax consequences expected occur reported amounts assets liabilities recovered paid result differences financial tax bases alcoa’s assets liabilities adjusted changes tax rates tax laws enacted valuation allowances recorded reduce deferred tax assets likely greater 50 tax benefit realized evaluating need valuation allowance management applies judgement assessing available positive negative evidence considers potential sources taxable income including income available carryback periods future reversals taxable temporary differences projections taxable income tax planning strategies positive evidence includes factors history profitable operations projections future profitability within carryforward period including tax planning strategies alcoa’s experience similar operations existing favorable contracts ability sell products established markets additional positive evidence negative evidence includes items cumulative losses projections future losses carryforward periods long enough allow utilization deferred tax asset based existing projections income deferred tax assets valuation allowance recorded may realized upon changes facts circumstances resulting future charge establish valuation allowance existing valuation allowances reexamined standards positive negative evidence determined likely deferred tax asset realized appropriate amount valuation allowance released deferred tax assets liabilities also remeasured reflect changes underlying tax rates due law changes granting lapse tax holidays tax benefits related uncertain tax positions taken expected taken tax return recorded benefits meet likely threshold otherwise tax benefits recorded tax position effectively settled means statute limitation expired appropriate taxing authority completed examination even though statute limitations remains open interest penalties related uncertain tax positions recognized part provision income taxes accrued beginning period interest penalties would applicable relevant tax law time related tax benefits recognized foreign currency local currency functional currency alcoa’s significant operations outside united states except certain operations canada iceland us dollar used functional currency determination functional currency alcoa’s operations made based appropriate economic management indicators local currency functional currency assets liabilities translated us dollars using yearend exchange rates income expenses translated using average exchange rates reporting period unrealized foreign currency translation gains losses deferred accumulated comprehensive loss consolidated balance sheet recently adopted accounting guidance january 1 2020 company adopted following accounting standard updates asu issued financial accounting standard board fasb none material impact company’s consolidated financial statements •asu 201908 compensationstock compensation topic 718 revenue contracts customers topic 606 •asu 201815 intangibles goodwill internaluse software •asu 201814 compensationretirement benefitsdefined benefit plansgeneral subtopic 71520 •asu 201813 fair value measurement topic 820 •asu 201613 financial instruments credit losses recently issued accounting guidance march 2020 fasb issued asu 202004 provide optional guidance limited period time ease potential burden accounting recognizing effects reference rate reform financial reporting management currently evaluating impact replacement london interbank offered rate libor well impact expected adoption applicable provisions within optional guidance consolidated financial statements adoption applicable provisions coincide modifications affected contracts december 2019 fasb issued asu 201912 income taxes topic 740 intended simplify accounting income taxes eliminating certain exceptions simplifying certain requirements topic 740 updates related intraperiod tax allocation deferred tax liabilities equity method investments interim period tax calculations tax laws rate changes interim periods income taxes related employee stock ownership plans guidance asu 201912 becomes effective alcoa january 1 2021 adopted provision eliminate requirement make intraperiod allocation loss continuing operations income outside continuing operations management completed assessment impact related guidance concluded adoption guidance material impact company’s consolidated financial statements c divestitures held sale divestitures gum springs waste treatment business first quarter 2020 company sold elemental environmental solutions llc ees whollyowned alcoa subsidiary operated waste processing facility gum springs arkansas global environmental firm transaction valued 250 related transaction company received 200 cash recorded gain 181 pre aftertax see note u additional 50 held escrow paid alcoa certain postclosing conditions satisfied would result additional gain recorded afobaka hydroelectric dam december 31 2019 alcoa completed transfer afobaka hydroelectric dam government republic suriname according definitive agreements approved parliament curtailment alcoa’s operations suriname 2015 permanent closure early 2017 alcoa continued operate dam selling electricity government subsequent sale customers suriname time transfer fixed assets related dam fully depreciated outstanding amounts due alcoa electricity sales settled avilés la coruña aluminum facilities july 2019 alcoa completed divestiture avilés la coruña spain aluminum facilities parter capital group ag parter sale process endorsed spanish government supported workers’ representatives 2020 parter sold majority stake facilities unrelated party hereafter referred collectively buyer company knowledge subsequent transaction filed lawsuit claiming sale breach sale agreement alcoa parter charges related curtailment employee dismissal process divestiture totaled 253 recorded restructuring charges net cost goods sold selling general administrative expenses outlined related divestiture company recorded restructuring charges net 127 year ended december 31 2019 resulting financial contributions 95 buyer per agreement net charge 32 meet working capital commitment writeoff remaining net book value facilities’ net assets net cash outflows related transaction 38 47 years ended december 31 2020 2019 respectively financial contributions made closing date classified cash used financing activities company’s statement consolidated cash flows accordance terms agreement payments restructuring reserve could made fourth quarter 2021 portion remaining payments could offset carbon emission credits monetized buyer smelters avilés la coruña curtailed february 2019 charges recorded prior completion divestiture statement consolidated operations include restructuring charges net asset impairments 80 severance employee related costs 20 contract termination costs 8 cost goods sold primarily write remaining inventories net realizable value 16 selling general administrative expenses miscellaneous charges 2 see note additional detail ma’aden rolling company december 2009 alcoa invested joint venture related ownership operation integrated aluminum complex bauxite mine alumina refinery aluminum smelter rolling mill saudi arabia joint venture owned 749 saudi arabian mining company known ma’aden 251 alcoa originally consisted three separate companies follows ma’aden bauxite alumina company mbac bauxite mine alumina refinery ma’aden aluminium company mac aluminum smelter casthouse ma’aden rolling company mrc rolling mill june 2019 alcoa ma’aden amended joint venture agreement governs operations three companies comprise joint venture amendment among items transferred alcoa’s 251 interest mrc ma’aden result alcoa direct indirect equity interest mrc prior amendment partners contributed 100 mrc meet current cash requirements result divestiture alcoa recorded restructuring charges net 319 writeoff investment mrc 161 cash contributions described 100 writeoff company’s share mrc’s delinquent payables due mac 59 forgiven part transaction partially offset gain resulting writeoff fair value debt guarantee 1 see note additional detail held sale warrick rolling mill november 30 2020 alcoa entered agreement sell rolling mill located warrick operations warrick rolling mill integrated aluminum manufacturing site near evansville indiana warrick operations kaiser aluminum corporation kaiser total consideration approximately 670 includes 587 cash assumption 83 postretirement employee benefit liabilities upon announcement assets liabilities related transaction became classified held sale part transaction alcoa enter marketbased metal supply agreement kaiser closing alcoa also enter ground lease agreement kaiser property alcoa continue warrick operations approximately 1170 employees warrick rolling mill includes casthouse hot mill cold mills coating slitting lines become employees kaiser transaction complete sale expected close end first quarter 2021 subject customary closing conditions alcoa expects spend approximately 100 site separation transaction costs approximately half spent 2021 remainder 2022 2023 upon closure transaction company expects recognize gain expenses net pre aftertax statement consolidated operations alcoa continue operate site’s 269000 metric ton per year aluminum smelter power plant together employ approximately 660 people integrated site results included within aluminum segment assets liabilities warrick rolling mill classified held sale company’s consolidated balance sheet december 31 2020 consisted following restructuring charges net restructuring charges net year threeyear period ended december 31 2020 comprised following severance employee termination costs recorded based approved detailed action plans submitted operating locations specified positions eliminated benefits paid existing severance plans union contracts statutory requirements expected timetable completion plans 2020 actions 2020 alcoa corporation recorded restructuring charges net 104 comprised following components 59 related settlements curtailments certain pension postretirement benefits see note 28 net costs related curtailment intalco washington smelter 20 additional contract costs related curtailed wenatchee washington smelter several insignificant items april 2020 part company’s portfolio review alcoa corporation announced curtailment remaining 230 kmt uncompetitive smelting capacity intalco washington smelter amid declining market conditions full curtailment included 49 kmt earliercurtailed capacity completed third quarter 2020 28 net restructuring charge recorded 2020 comprised 13 severance employee termination costs separation approximately 685 employees 16 contract termination costs net curtailment gain 1 related us hourly defined benefit pension retiree life plans see note december 31 2020 separation employees related severance employee termination cost payments associated program essentially complete approximately 11 payments made severance employee termination cost reserve payments related contract termination costs 5 2020 additional contract termination costs related takeorpay agreements may recur curtailment period october 2020 company made decision curtail 228 kmt uncompetitive annual smelting capacity san ciprián smelter spain following alcoa’s announcement curtail san ciprián smelter workers’ representatives challenged collective dismissal process legal proceeding high court justice galicia ruled favor workers december 17 2020 result company suspended plans curtail san ciprián smelter filed appeal ruling evaluating next steps smelter result fourth quarter 2020 company incur approximately 35 40 previously announced expected charge employee related costs associated curtailment collective dismissal process 2019 actions 2019 alcoa corporation recorded restructuring charges net 1031 comprised following components 319 related divestiture alcoa corporation’s interest ma’aden rolling company see 274 exits costs related decision permanently close demolish point comfort alumina refinery see 235 costs related smelter curtailment subsequent divestiture avilés la coruña aluminum facilities spain see 119 related settlement andor curtailment certain pension postretirement benefits 37 employee termination severance costs related implementation new operating model see 9 closure costs related coal mine 38 net charges related various items december 2019 alcoa corporation announced permanent closure point comfort texas alumina refinery restructuring charges recorded 2019 related closure included asset impairments 129 asset retirement obligations 72 environmental remediation costs 69 severance costs 4 layoff approximately 40 employees additionally charge 2 write remaining inventories net realizable value recorded cost goods sold accompanying statement consolidated operations changes severance reserve 2020 included reduction cash payments 2 reversal 1 resulting changes employee severance benefit elections december 31 2020 separations associated program essentially complete september 2019 alcoa corporation announced implementation new operating model resulted leaner integrated operatorcentric organization effective november 1 2019 new operating model eliminated business unit structure consolidated sales procurement commercial capabilities enterprise level streamlined executive team new structure reduced overhead intention promoting operational commercial excellence increasing connectivity company’s plants leadership result new operating model alcoa corporation recorded charge 37 related employee termination severance costs approximately 260 employees companywide severance employee termination cost reserve 27 remained december 31 2019 addition employees separated program company eliminated 60 positions open roles retirements replaced december 31 2020 separations associated program essentially complete related cash payments 25 made 2020 january 2019 alcoa corporation reached agreement workers’ representatives avilés la coruña spain aluminum facilities part collective dismissal process announced october 2018 curtailed smelters two locations combined remaining operating capacity 124 kmt february 2019 july 2019 alcoa completed divestiture avilés la coruña aluminum facilities buyer see note c restructuring charges net related curtailment collective dismissal process spanish facilities included asset impairments 80 severance employeerelated costs 20 contract termination costs 8 additional charges included 16 recorded cost goods sold primarily write remaining inventories net realizable value 2 miscellaneous charges recorded selling general administrative expenses accompanying statement consolidated operations restructuring charges net related divestiture spanish facilities totaled 127 year ended december 31 2019 financial contributions 95 buyer per agreement net charge 32 meet working capital commitment writeoff remaining net book value facilities’ assets year ended december 31 2019 net cash outflows related transaction 47 total financial contributions 68 remaining december 31 2019 2020 financial contributions 38 made buyer classified cash used financing activities company’s statement consolidated cash flows accordance terms agreement payments restructuring reserve could made fourth quarter 2021 portion remaining payments could offset carbon emission credits monetized buyer december 2009 alcoa corporation invested joint venture related ownership operation integrated aluminum complex bauxite mine alumina refinery aluminum smelter rolling mill saudi arabia joint venture owned 749 ma’aden 251 alcoa corporation originally consisted three separate companies follows mbac mac mrc alcoa corporation accounts investment joint venture equity method one integrated investment asset consistent terms joint venture agreement june 2019 alcoa corporation ma’aden amended joint venture agreement governs operations three companies comprise joint venture terms amended agreement • alcoa corporation made contribution mrc amount 100 along ma’aden’s earlier capital contribution 100 meet current mrc cash requirements including paying certain amounts owed mrc mac alcoa corporation • alcoa corporation ma’aden consented writeoff 235 mrc’s delinquent payables mac • alcoa corporation transferred 251 interest mrc ma’aden result direct indirect equity interest mrc • alcoa corporation released future mrc obligations including alcoa corporation’s sponsor support 296 mrc debt see note share future mrc cash requirements • alcoa corporation ma’aden defined mbac mac shareholder rights including timing determination amount dividend payments excess cash joint venture partners following required distributions commercial lenders mbac mac among matters amendment also defines october 1 2021 date alcoa corporation permitted sell shares mbac mac collectively ma’aden right first refusal agreement outlines alcoa corporation’s call option ma’aden’s put option relating additional interests joint venture exercisable period sixmonths october 1 2021 parties maintain commercial relationship part agreement alcoa corporation provided sales logistics customer technical services support mrc products north american sheet market december 2020 company retain 251 minority interest mbac mac ma’aden continue 749 interest 319 restructuring charge resulting mrc divestiture included writeoff alcoa corporation’s investment mrc 161 cash contributions described 100 writeoff alcoa corporation’s share mrc’s delinquent payables due mac 59 forgiven part transaction partially offset gain 1 writeoff fair value debt guarantee 2018 actions 2018 alcoa corporation recorded restructuring charges net 527 comprised following components 331 net related settlements curtailments certain pension postretirement benefits see note 107 establish allowance certain valueadded tax credits related company’s operations brazil see note u 86 costs related energy supply agreement curtailed wenatchee washington smelter including 73 associated 2018 management decision restart fully curtailed wenatchee smelter within term provided energy supply agreement 15 net benefit settlement matters related portovesme italy smelter 18 net charge items june 2018 management decided restart fully curtailed wenatchee smelter within term provided related electricity supply agreement alcoa corporation therefore required make 62 payment energy supplier provisions agreement additionally management decided permanently close one 38 kmt four potlines smelter potline operated since 2001 investments needed restart line cost prohibitive remaining three curtailed potlines capacity 146 kmt connection decisions company recognized charge 73 composed 62 payment 10 asset impairments 1 asset retirement obligations triggered decision decommission potline alcoa corporation include restructuring charges net results reportable segments impact allocating charges segment results would follows activity reserve balances restructuring charges follows activity reserve balances include restructuring charges net impact reserves severance employee termination costs restructuring charges net affected liability accounts environmental obligations see note asset retirement obligations see note r pension postretirement reserves see note excluded activity balances reversals include reversals previously recorded liabilities foreign currency translation impacts current portion reserve balance reflected current liabilities consolidated balance sheet noncurrent portion reserve balance reflect noncurrent liabilities deferred credits consolidated balance sheet noncurrent portion reserve december 31 2020 1 noncurrent portion reserve december 31 2019 13 12 related financial contributions buyer spanish facilities e segment related information segment information alcoa corporation producer bauxite alumina aluminum products primary flatrolled company three operating reportable segments organized product global basis bauxite alumina aluminum segment performance alcoa corporation’s management reporting system evaluated based number factors however primary measure performance adjusted ebitda earnings interest taxes depreciation amortization segment company calculates segment adjusted ebitda total sales thirdparty intersegment minus following items cost goods sold selling general administrative expenses research development expenses alcoa corporation’s adjusted ebitda may comparable similarly titled measures companies chief operating decision maker function regularly reviews financial information including sales adjusted ebitda three operating segments assess performance allocate resources segment assets include among others customer receivables thirdparty intersegment inventories properties plants equipment equity investments accounting policies segments described summary significant accounting policies see note b transactions among segments established based negotiation among parties differences segment totals alcoa corporation’s consolidated totals line items reconciled corporate following detailed descriptions alcoa corporation’s reportable segments bauxite segment represents company’s global bauxite mining operations portion segment’s production represents offtake equity method investments brazil guinea well awac’s share bauxite production related equity investment saudi arabia bauxite mined segment sold primarily internal customers within alumina segment portion bauxite sold external customers bauxite mined segment used internally transferred alumina segment negotiated terms intended approximate market prices sales thirdparties conducted contract basis generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real operations comprise bauxite segment part awac see principles consolidation note alumina segment represents company’s worldwide refining system processes bauxite alumina produced segment sold primarily internal external aluminum smelter customers portion alumina sold external customers process industrial chemical products approximately twothirds alumina’s production sold supply contracts third parties worldwide remainder used internally aluminum segment alumina produced segment used internally transferred aluminum segment prevailing market prices portion segment’s thirdparty sales completed use alumina traders generally segment’s sales transacted us dollars costs expenses transacted local currency respective operations australian dollar brazilian real us dollar euro operations comprise alumina segment part awac see principles consolidation note segment also includes awac’s 251 ownership interest mining refining joint venture company saudi arabia see note h aluminum segment consists company’s worldwide smelting casthouse system processes alumina primary aluminum ii portfolio energy assets brazil canada united states iii rolling mill united states aluminum’s combined smelting casting operations produce primary aluminum products virtually sold external customers traders portion primary aluminum consumed rolling mill smelting operations produce molten primary aluminum formed casting operations either common alloy ingot eg tbar sow standard ingot valueadd ingot products eg foundry billet rod slab variety external customers purchase primary aluminum products use fabrication operations produce products primarily transportation building construction packaging wire industrial markets results sale aluminum powder scrap also included segment well impacts embedded aluminum derivatives see note p related energy supply contracts energy assets supply power external customers brazil lesser extent united states internal customers aluminum canadian smelters warrick indiana smelter rolling mill alumina segments brazilian refineries rolling mill produces aluminum sheet primarily sold directly customers packaging market production aluminum cans beverage food additionally separation date end 2018 alcoa corporation tolling arrangement contractually ended december 31 2018 parentco whereby parentco’s rolling mill tennessee produced sheet products certain customers company’s rolling operations alcoa corporation supplied raw materials tennessee facility paid parentco tolling service november 30 2020 alcoa announced agreement sell rolling mill kaiser sale expected close end first quarter 2021 subject customary closing conditions see note c generally segment’s aluminum sales transacted us dollars costs expenses segment transacted local currency respective operations us dollar euro norwegian krone icelandic króna canadian dollar brazilian real australian dollar segment also includes alcoa corporation’s 251 ownership interest smelting full year 2020 rolling mill second quarter 2019 joint venture company saudi arabia see note h operating results capital expenditures assets alcoa corporation’s reportable segments follows following tables reconcile certain segment information consolidated totals 1 transformation includes among items adjusted ebitda previously closed operations 2 corporate expenses composed general administrative expenses operating corporate headquarters global administrative facilities well research development expenses corporate technical center 3 includes certain items impact cost goods sold expenses alcoa corporation’s statement consolidated operations included adjusted ebitda reportable segments product information alcoa corporation five product divisions follows bauxitebauxite reddish clay rock mined surface earth’s terrain ore basic raw material used produce alumina primary source aluminum aluminaalumina oxide extracted bauxite basic raw material used produce primary aluminum product also consumed nonmetallurgical purposes industrial chemical products primary aluminumprimary aluminum metal form common alloy ingot eg tbar sow standard ingot valueadd ingot eg billet rod slab products sold primarily customers produce products transportation building construction packaging wire industrial markets flatrolled aluminumflatrolled aluminum metal form sheet sold primarily customers produce beverage food cans including body tab end stock energyenergy generation electricity sold wholesale market traders large industrial consumers distribution companies generation companies following table represents general commercial profile company’s bauxite alumina primary aluminum flatrolled aluminum product divisions see text table energy 1 api alumina price index pricing mechanism calculated company based weighted average prior month’s daily spot prices published following three indices cru metallurgical grade alumina price platts metals daily alumina pax price metal bulletin nonferrous metals alumina index 2 lme london metal exchange globally recognized exchange commodity trading including aluminum lme pricing component represents underlying base metal component based quoted prices aluminum exchange regional premium represents incremental price base lme component associated physical delivery metal particular region eg midwest premium metal sold united states product premium represents incremental price receiving physical metal particular shape eg billet rod slab etc alloy 3 metal represents underlying base metal component plus regional premium see footnote 2 conversion represents incremental price metal price component associated converting primary scrap aluminum sheet 4 cif cost insurance freight means company pays items product reaches buyer’s designated destination point related transportation vessel dap delivered place means cif related methods transportation fob free board means company pays costs insurance freight product reaches seller’s designated shipping point 5 net number days means customer required remit payment company invoice amount within designated number days lc sight letter credit payable immediately usually within five ten business days seller meets requirements letter credit ie shipping documents evidence seller performed obligations agreed buyer cad cash documents payment arrangement seller instructs bank provide shipping title documents buyer time buyer pays full accompanying bill exchange company’s energy product division sales electricity based current market prices electricity provided customers demand national regional power grid customer simultaneously receives consumes electricity payment terms generally within 10 days related previous 30 days electricity consumption following table details alcoa corporation’s thirdparty sales product division includes realized gains losses related embedded derivative instruments designated cash flow hedges forward sales aluminum see note p geographic area information geographic information thirdparty sales follows based upon country point sale originated 1 sales portion alumina refineries australia brazil aluminum smelters canada occurred united states 2 sales aluminum produced smelters iceland norway well offtake related interest saudi arabia joint venture see note h occurred spain geographic information longlived assets follows based upon physical location assets f earnings per share basic earnings per share eps amounts computed dividing net loss income attributable alcoa corporation average number common shares outstanding diluted eps amounts assume issuance common stock potentially dilutive share equivalents outstanding share information used compute basic diluted eps attributable alcoa corporation common shareholders follows millions 2020 basic average shares outstanding diluted average shares outstanding effect potential shares common stock antidilutive alcoa generated net income 2020 one million common share equivalents related five million outstanding stock units stock options combined would included diluted average shares outstanding respective period options purchase two million shares common stock outstanding december 31 2020 weighted average exercise price 2685 per share greater average market price per share alcoa corporation’s common stock 2019 basic average shares outstanding diluted average shares outstanding effect potential shares common stock antidilutive alcoa generated net income 2019 one million common share equivalents related four million outstanding stock units stock options combined would included diluted average shares outstanding respective period options purchase two million shares common stock outstanding december 31 2019 weighted average exercise price 3266 per share greater average market price per share alcoa corporation’s common stock options purchase one million shares common stock outstanding december 31 2018 weighted average exercise price 3867 per share included computation diluted eps exercise prices options greater average market price per share alcoa corporation’s common stock g accumulated comprehensive loss following table details activity three components comprise accumulated comprehensive loss alcoa corporation’s shareholders noncontrolling interest 1 amounts included computation net periodic benefit cost pension postretirement benefits amounts related settlements andor curtailments certain pension postretirement benefits alcoa corporation include 55 116 330 years ended december 31 2020 2019 2018 respectively amounts related settlements andor curtailments certain pension postretirement benefits noncontrolling interest include 3 1 years ended december 31 2020 2019 2018 respectively see note 2 amounts reported provision income taxes accompanying statement consolidated operations 3 periods presented tax impacts related rate changes amounts reclassified earnings 4 amounts reported sales accompanying statement consolidated operations 5 amounts reported cost goods sold accompanying statement consolidated operations 6 amounts included expenses net accompanying statement consolidated operations 7 positive amount indicates corresponding charge earnings negative amount indicates corresponding benefit earnings h investments equity investments following table summarizes information alcoa corporation’s equity investments december 31 2020 2019 2020 2019 2018 alcoa corporation received 44 39 45 respectively dividends equity investments company divested interest ma’aden rolling company june 2019 see investees either owns facility listed ownership interest entity owns facility listed saudi arabia joint venturealcoa corporation ma’aden 30year december 2009 joint venture shareholders agreement automatic extension additional 20 years unless parties agree otherwise unless earlier terminated setting forth terms development construction ownership operation integrated aluminum complex saudi arabia project developed joint venture consists bauxite mine al ba’itha bauxite deposit northern part saudi arabia alumina refinery primary aluminum smelter aluminum rolling mill joint venture owned 749 ma’aden 251 alcoa corporation originally consisted three separate companies follows bauxite mine alumina refinery mbac smelter mac rolling mill mrc june 2019 alcoa corporation ma’aden amended joint venture agreement governs operations three companies comprise joint venture terms agreement alcoa corporation transferred 251 interest mrc ma’aden result direct indirect equity interest mrc refer note additional information related agreement amendment number alcoa corporation employees perform various types services smelting rolling mill mining refining companies part operation fullyintegrated aluminum complex december 31 2020 2019 company aggregate outstanding receivable 5 8 respectively smelting rolling mill mining refining companies labor employeerelated expenses december 31 2020 2019 carrying value alcoa’s investment joint venture 559 603 respectively elysistm limited partnershipin june 2018 alcoa corporation rio tinto plc provincial government québec canada launched new joint venture elysistm limited partnership elysistm purpose partnership advance larger scale development commercialization patentprotected technology produces oxygen eliminates direct greenhouse gas emissions traditional aluminum smelting process alcoa rio tinto plc general partners 48235 stake elysistm québec provincial government limited partner owns 353 stake federal government canada apple inc well québec provincial government provide initial financing partnership total planned combined investment equity debt five participants joint venture 147 c188 alcoa rio tinto plc invest combined 43 c55 joint venture well contribute license certain intellectual property patents elysistm date company contributed 14 c18 toward initial investment commitment elysistm addition cash contributions alcoa contributing 3 research development expenses annually company’s basis investment reduced zero share losses incurred date result company 32 unrecognized losses december 31 2020 recognized upon additional contributions partnership following table summarizes profit loss data respective periods ended december 31 relates alcoa corporation’s equity investments information shown saudi arabia joint venture 2020 includes combined balances mac mbac 2019 information shown saudi arabia joint venture includes full period mac mbac data mrc divestiture date investments grouped based nature investment mining investments part bauxite segment energy investments primarily part aluminum segment following table summarizes balance sheet data alcoa corporation’s equity investments information shown saudi arabia joint venture 2020 2019 includes combined balances mac mbac receivables october 25 2019 whollyowned subsidiary company entered 120 threeyear revolving credit facility agreement secured certain customer receivables alcoa corporation guaranteed performance obligations whollyowned subsidiary facility however assets receivables pledged collateral fees paid upon closure agreement approximately 1 december 31 2019 amounts drawn outstanding related credit facility april 20 2020 company amended agreement converting receivables purchase agreement sell 120 receivables previously secured credit facility without recourse revolving basis unsold portion specified receivable pool pledged collateral purchasing bank secure sold receivables year ended december 31 2020 receivables sold agreement j inventories related warrick rolling mill excluded december 31 2020 balances table due announced sale rolling mill reclassified assets held sale see note c k properties plants equipment net properties plants equipment related warrick rolling mill excluded december 31 2020 balances table due announced sale rolling mill reclassified assets held sale see note c l goodwill intangible assets goodwill included noncurrent assets accompanying consolidated balance sheet follows 1 carrying value corporate’s goodwill net accumulated impairment losses 742 december 31 2020 2019 december 31 2020 141 goodwill reflected corporate allocated two alcoa corporation’s three reportable segments 47 bauxite 94 alumina purposes impairment testing see note b goodwill reflected corporate segment reporting purposes included management’s assessment performance two reportable segments management performed qualitative assessments bauxite alumina reporting units 2020 determined likely fair value either reporting unit less carrying value management last performed quantitative impairment test bauxite reporting unit 2018 alumina reporting unit 2019 time quantitative assessment estimated fair value respective reporting unit substantially excess carrying value resulting impairment intangible assets included noncurrent assets accompanying consolidated balance sheet follows computer software consists primarily software costs associated enterprise business solution within alcoa drive common systems among businesses amortization expense related intangible assets tables years ended december 31 2020 2019 2018 9 19 12 respectively expected approximately 10 annually 2021 2025 debt longterm debt principal amount longterm debt maturing next five years 2 2021 1 2022 2023 751 2024 1 2025 2019 includes 77 classified longterm debt due option extend 2020 instrument reclassified shortterm borrowings due expected maturity 2021 included current liabilities accompanying consolidated balance sheet 144a debt july 2020 alcoa nederland holding bv anhbv whollyowned subsidiary alcoa corporation completed rule 144a us securities act 1933 amended debt issuance 750 aggregate principal amount 5500 senior notes due 2027 “2027 notes” net proceeds issuance approximately 736 reflecting discount initial purchasers 2027 notes well issuance costs net proceeds used general corporate purposes including adding cash balance sheet discount initial purchasers well costs complete financing deferred amortized interest expense term 2027 notes interest 2027 notes paid semiannually june december commenced december 15 2020 indenture contains customary affirmative negative covenants similar included indenture 2028 notes described limitations liens limitations sale leaseback transactions prohibition reduction ownership awac entities agreed level anhbv option redeem 2027 notes least 15 days 60 days prior notice holders 2027 notes multiple scenarios including whole part time june 15 2023 redemption price specified indenture 102750 principal amount plus accrued unpaid interest case also 2027 notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount 2027 notes repurchased plus accrued unpaid interest 2027 notes repurchased may 2018 anhbv completed rule 144a us securities act 1933 amended debt offering 500 aggregate principal amount 6125 senior notes due 2028 “2028 notes” anhbv received 492 net proceeds debt offering reflecting discount initial purchasers 2028 notes net proceeds along available cash hand used make discretionary contributions certain us defined benefit pension plans see note discount initial purchasers well costs complete financing deferred amortized interest expense term 2028 notes interest 2028 notes paid semiannually november may commenced november 15 2018 anhbv option redeem 2028 notes least 30 days 60 days prior notice holders 2028 notes multiple scenarios including whole part time may 2023 redemption price specified indenture 103063 principal amount plus accrued unpaid interest case also 2028 notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount 2028 notes repurchased plus accrued unpaid interest 2028 notes repurchased 2028 notes indenture includes several customary affirmative covenants additionally 2028 notes indenture contains several negative covenants subject certain exceptions include limitations liens limitations sale leaseback transactions prohibition reduction ownership awac entities agreed level negative covenants 2028 notes indenture less extensive 2024 notes 2026 notes see indenture revolving credit facility see example 2028 notes indenture include limitation restricted payments repurchases common stock shareholder dividends september 2016 anhbv completed rule 144a us securities act 1933 amended debt offering 750 aggregate principal amount 675 senior notes due 2024 “2024 notes” 500 aggregate principal amount 700 senior notes due 2026 “2026 notes” collectively 2024 notes “notes” anhbv received 1228 net proceeds debt offering reflecting discount initial purchasers notes net proceeds used make payment parentco fund transfer certain assets parentco alcoa corporation connection separation transaction remaining net proceeds used general corporate purposes discount initial purchasers well costs complete financing deferred amortized interest expense respective terms notes interest notes paid semiannually march september commenced march 31 2017 anhbv option redeem notes least 30 days 60 days prior notice holders notes multiple scenarios including whole part time september 2019 case 2024 notes september 2021 case 2026 notes redemption price specified indenture 103375 principal amount 2024 notes 103500 principal amount 2026 notes plus accrued unpaid interest case also notes subject repurchase upon occurrence change control repurchase event defined indenture repurchase price cash equal 101 aggregate principal amount notes repurchased plus accrued unpaid interest notes repurchased notes indenture contains various restrictive covenants similar described revolving credit facility including limitation restricted payments among exceptions capacity pay annual ordinary dividends indenture alcoa corporation may declare make annual ordinary dividends aggregate amount exceed 38 november 1 2016 december 31 2017 time period annual 2018 dividends made 50 annual 2019 2020 dividends made 2019 2020 75 january 1 2021 september 30 2026 maturity date 2026 notes time period except 50 unused amount base amount specified time periods may used next succeeding period following use base amount said time period additionally restricted payments negative covenant includes general exception allow potential future transactions incremental specifically provided notes indenture general exception provides aggregate amount restricted payments exceed greater 250 15 alcoa corporation’s consolidated total assets accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 250 assuming restricted payments reduced part whole available limit limits restricted payments negative covenant revolving credit facility would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant notes indenture notes 2027 notes 2028 notes senior unsecured obligations anhbv entitle holders registration rights pursuant registration rights agreement anhbv intend file registration statement respect resales exchange offer notes 2027 notes 2028 notes 2027 notes 2028 notes guaranteed senior unsecured basis alcoa corporation subsidiaries guarantors revolving credit facility “subsidiary guarantors” together alcoa corporation “guarantors” subsidiary guarantors released guarantees upon occurrence certain events including release guarantor obligations guarantor revolving credit facility notes 2027 notes 2028 notes rank equally right payment anhbv’s existing future senior unsecured indebtedness rank senior right payment future subordinated obligations anhbv effectively subordinated anhbv’s existing future secured indebtedness including revolving credit facility extent value property assets securing indebtedness guarantees notes 2027 notes 2028 notes rank equally right payment guarantors’ existing future senior unsecured indebtedness rank senior right payment future subordinated obligations guarantors effectively subordinated guarantors’ existing future secured indebtedness including revolving credit facility extent value property assets securing indebtedness credit facilities alcoa norway ans october 2 2019 alcoa norway ans whollyowned subsidiary alcoa corporation entered oneyear multicurrency revolving credit facility agreement nok 13 billion approximately 152 fully unconditionally guaranteed unsecured basis alcoa corporation alcoa norway ans pays quarterly commitment fee 0465 unused portion revolving credit facility interest rate outstanding nok loan balances 155 per annum plus norwegian interbank offered rate nibor interest rate outstanding us dollar loans 165 per annum plus libor april 8 2020 alcoa norway ans drew 100 facility may time future ordinary course business repayment drawn amount including interest accrued 293 occurred upon maturity june 29 2020 2019 amounts drawn related credit facility july 3 2020 alcoa norway ans amended multicurrency revolving credit facility agreement align terms agreement amendment 2 amendment 3 revolving credit facility discussed september 30 2020 alcoa norway ans entered amendment restatement agreement ar agreement multicurrency revolving credit facility agreement extended maturity one year original maturity date october 2 2021 unless extended terminated early accordance provisions ar agreement ar agreement also amended certain financial ratio covenants specifying calculations based upon results alcoa norway ans rather calculations outlined revolving credit facility additionally quarterly commitment fee unused portion multicurrency revolving credit facility modified 0465 062 december 31 2020 2019 alcoa norway ans compliance covenants december 31 2020 2019 amounts outstanding related credit facility revolving credit facility november 21 2018 alcoa corporation anhbv entered second amendment restatement agreement revolving credit agreement dated september 16 2016 amendment restatement agreement dated november 14 2017 case syndicate lenders issuers named therein revise certain terms provisions original agreement amendment restatement agreement revised second amendment restatement agreement hereafter referred “revolving credit facility” “the facility” april 21 2020 company anhbv entered amendment 2 revolving credit facility temporarily adjusts leverage ratio requirement 300 100 25 100 subsequent four consecutive fiscal quarters beginning second quarter 2020 amendment period leverage ratio requirement return 250 100 starting second quarter 2021 amendment period company anhbv restricted subsidiaries restricted making certain restricted payments incurring incremental secured loans revolving credit facility june 24 2020 company anhbv entered additional amendment 3 revolving credit facility permanently adjusts calculation consolidated ebitda defined revolving credit facility allowing add back certain additional noncash costs ii temporarily adjusted remaining fiscal quarters 2020 manner consolidated cash interest expense defined revolving credit facility total indebtedness calculated respect certain senior notes issuances fiscal year ended december 31 2020 inclusive july 2020 issuance discussed anhbv option extend periods amendment 3 apply either fiscal quarters ending march 31 2021 june 30 2021 however would also reduce borrowing availability revolving credit facility respective fiscal quarters onethird net proceeds note issuances fiscal year ended december 31 2020 fourth quarter 2020 anhbv elected extend period amendment 3 quarter ending march 31 2021 anhbv elects extend period june 30 2021 request extension must provided prior april 1 2021 election anhbv extend temporary amendments results 2027 notes reducing aggregate amount commitments revolving credit facility approximately 245 applicable fiscal quarters revolving credit facility provides 1500 senior secured revolving credit facility used working capital andor general corporate purposes alcoa corporation subsidiaries subject terms conditions revolving credit facility anhbv may time request issuance letters credit 750 facility subject sublimit 400 letters credit issued account alcoa corporation domestic subsidiaries additionally anhbv may time request lenders provide one additional tranches term loans andor increase aggregate amount revolving commitments together aggregate principal amount 500 december 31 2020 2019 letters credit issued revolving credit facility 14 17 respectively revolving credit facility scheduled mature november 21 2023 unless extended earlier terminated accordance provisions facility anhbv may make extension requests term facility subject lender consent requirements specifically set forth revolving credit facility provisions revolving credit facility anhbv pay quarterly commitment fee ranging 0200 0425 based alcoa corporation’s leverage ratio unused portion maximum 750 outstanding borrowings revolving credit facility may denominated euros loans bear interest rate per annum equal applicable margin plus anhbv’s option either adjusted libor rate b base rate determined reference highest 1 us prime rate published wall street journal 2 greater federal funds effective rate overnight bank funding rate plus 05 3 one month adjusted libor rate plus 1 per annum applicable margin loans vary based alcoa corporation’s leverage ratio range 150 225 libor loans 050 125 base rate loans subject case reduction 25 basis points alcoa corporation attains least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings outstanding borrowings may prepaid without premium penalty subject customary breakage costs obligations alcoa corporation domestic entity revolving credit facility secured subject certain exceptions including limitation pledges equity interests certain foreign subsidiaries 65 certain thresholds respect real property first priority lien substantially assets alcoa corporation material domestic whollyowned subsidiaries alcoa corporation certain equity interests specified nonus subsidiaries obligations revolving credit facility secured subject certain exceptions including certain thresholds respect real property first priority security interest substantially assets alcoa corporation anhbv material domestic whollyowned subsidiaries alcoa corporation material foreign whollyowned subsidiaries alcoa corporation located australia brazil canada luxembourg netherlands norway switzerland including equity interests certain subsidiaries directly hold equity interests awac entities however awac entity guarantor obligation revolving credit facility asset awac entity equity interests awac entity pledged secure obligations revolving credit facility provided revolving credit facility mentioned companies shall released obligations first priority lien andor first priority security interest upon alcoa corporation attaining least baa3 rating either moody’s investor service bbb rating standard poor’s global ratings case stable outlook better ii anhbv delivering required written notice iii default event default defined revolving credit facility occurred continuing date conditions met “collateral release date” revolving credit facility includes number customary affirmative covenants additionally revolving credit facility contains number negative covenants applicable alcoa corporation certain subsidiaries described restricted subject certain exceptions include limitations among things liens fundamental changes sales assets indebtedness see entering restrictive agreements restricted payments see including repurchases common stock shareholder dividends see investments see loans advances guarantees acquisitions transactions affiliates amendment certain material documents covenant prohibiting reductions ownership awac entities certain specified restricted subsidiaries alcoa corporation agreed level revolving credit facility also includes financial covenants requiring maintenance specified interest expense coverage ratio less 500 100 leverage ratio period four consecutive fiscal quarters greater 250 100 200 100 beginning subsequent collateral release date may increased level higher 225 100 certain circumstances accordance amendment 2 leverage ratio amendment period 300 100 december 31 2020 2019 maximum additional borrowing capacity remain compliance covenants 1322 1200 respectively december 31 2020 2019 alcoa corporation compliance covenants indebtedness restricted payments investments negative covenants include general exceptions allow potential future transactions incremental specifically provided revolving credit facility indebtedness negative covenant provides incremental amount exceed greater 1000 60 alcoa corporation’s consolidated total assets additionally restricted payments negative covenant provides aggregate amount exceed 100 investments negative covenant provides aggregate amount exceed 400 contain two conditions limits may increase first fiscal year thresholds restricted payments investments negative covenants increase 250 200 respectively consolidated net leverage ratio greater 150 100 150 100 respectively end prior fiscal year secondly regards 100 250 restricted payments 200 investments 50 unused amount base amounts fiscal year may used next succeeding fiscal year following describes specific restricted payment negative covenant share repurchases application restricted payments general exception described share repurchases ordinary dividend payments subject restrictions applicable amendment period alcoa corporation may repurchase shares common stock pursuant stock option exercises benefit plans aggregate amount exceed 25 fiscal year except 50 unused amount base amount fiscal year may used next succeeding fiscal year following use base amount said fiscal year additionally described revolving credit facility provides general exceptions restricted payments negative covenant would allow alcoa corporation execute share repurchases purpose fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit also ordinary dividend payments made alcoa corporation subject general exception restricted payments described accordingly alcoa corporation may make annual ordinary dividends fiscal year aggregate amount 100 see conditions provide limit increase assuming restricted payments reduced part whole available limit limits restricted payments negative covenant notes indenture see 144a debt would govern amount ordinary dividend payments alcoa corporation could make given timeframe allowed amount less limits restricted payments negative covenant revolving credit facility revolving credit facility contains customary events default including respect failure make payments revolving credit facility crossdefault crossjudgment default certain bankruptcy insolvency events borrowings outstanding december 31 2020 2019 amounts borrowed 2020 2019 revolving credit facility n preferred common stock preferred stock alcoa corporation authorized issue 100000000 shares preferred stock par value 001 per share december 31 2020 2019 company issued preferred stock common stock alcoa corporation authorized issue 750000000 shares common stock par value 001 per share december 31 2020 2019 alcoa corporation 185978069 185580166 respectively issued outstanding shares common stock employee stockbased compensation plan company issued shares 397903 2020 809917 2019 1293336 2018 company issues new shares satisfy exercise stock options conversion stock units december 31 2020 24769326 shares common stock available issuance october 2018 alcoa corporation’s board directors authorized common stock repurchase program company may purchase shares outstanding common stock aggregate transactional value 200 depending cash availability market conditions factors repurchases program may made using variety methods may include open market purchases privately negotiated transactions pursuant rule 10b51 plan program predetermined expiration date alcoa corporation intends retire repurchased shares common stock december 2018 company repurchased 1723800 shares common stock 50 shares immediately retired shares repurchased 2020 2019 dividends common stock subject authorization alcoa corporation’s board directors company declare dividends 2020 2019 2018 stockbased compensation stock options stock units generally granted either january february calendar year eligible employees company’s board directors also receive certain stock units however amounts material stock options granted closing market price alcoa corporation’s common stock date grant grade vest threeyear service period 13 year tenyear contractual term stock units cliff vest third anniversary award grant date certain units also include either market performance condition final number marketbased performancebased stock units earned dependent alcoa corporation’s achievement certain targets threeyear measurement period grants marketbased stock units granted 2019 2018 award earned end measurement period based company’s total shareholder return measured total shareholder return standard poor’s 500® index january 1 grant year december 31 third year service period performancebased stock units granted 2019 2018 award earned end measurement period based company’s performance preestablished returnoncapital target measured january 1 grant year december 31 third year service period marketbased stock units granted 2020 award earned end measurement period based company’s total shareholder return measured total shareholder return standard poor’s metals mining select industry index january 1 grant year december 31 third year service period performancebased stock units granted 2020 award measured january 1 grant year december 31 third year service period based company’s performance three measures 1 preestablished returnonequity target 2 improvement proportional net debt 3 reduction carbon intensity refining smelting operations 2020 2019 2018 alcoa corporation recognized stockbased compensation expense 25 30 35 respectively approximately 80 90 related stock units period stockbased compensation expense capitalized 2020 2019 2018 stockbased compensation expense based grant date fair value applicable equity grant stock units performance market condition stock units performance condition fair value equivalent closing market price alcoa corporation’s common stock date grant respective periods stock units market condition fair value estimated date grant using monte carlo simulation model generated result 2143 3570 per unit 2020 2019 respectively monte carlo simulation model uses certain assumptions estimate fair value marketbased stock unit including volatility 4165 company riskfree interest rate 138 estimate probability satisfying market conditions assumptions used estimate fair value stock units granted 2019 materially different stock options fair value estimated date grant using latticepricing model generated result 612 1086 2132 per option 2020 2019 2018 respectively latticepricing model uses several assumptions estimate fair value stock option including average riskfree interest rate dividend yield volatility annual forfeiture rate exercise behavior contractual life assumptions used company estimate fair value stock options granted 2020 follows • risk free rate 183 based yield curve interest rates time grant life option • dividend yield 0 based historical dividends paid since separation date company immediate plans pay dividends • volatility 4112 based historical implied volatilities term option • pre postvesting forfeitures 4 based historical option forfeiture data • exercise behavior 61 based weighted average exercise ratio based upon assumptions used determination fair value latticepricing model resulted option life 60 years assumptions option life output 2020 materially different 2019 2018 activity stock options stock units 2020 follows number converted units includes 101447 shares “withheld” meet company’s statutory tax withholding requirements related income earned employees result vesting units december 31 2020 2036625 outstanding stock options weighted average remaining contractual life 553 years total intrinsic value 5 additionally 1416986 total outstanding stock options fully vested exercisable weighted average remaining contractual life 431 years weighted average exercise price 2779 total intrinsic value 3 december 31 2020 cash received stock option exercises 1 2 23 2020 2019 2018 respectively total intrinsic value stock options exercised 2020 2019 2018 0 1 26 respectively december 31 2020 26 pretax combined unrecognized compensation expense related nonvested grants stock options stock units expense expected recognized weighted average period 162 years pension postretirement benefits defined benefit plans alcoa sponsors several defined benefit pension plans covering certain employees us foreign locations pension benefits generally depend length service job grade remuneration substantially benefits paid pension trusts sufficiently funded ensure plans pay benefits retirees become due salaried nonbargaining hourly us employees hired march 1 2006 participate defined contribution plan instead defined benefit plan company also maintains health care life insurance postretirement benefit plans covering certain eligible us retired employees certain retirees foreign locations generally medical plans unfunded pay percentage medical expenses reduced deductibles coverage life benefits generally provided insurance contracts company retains right subject existing agreements change eliminate benefits salaried certain nonbargaining hourly us employees hired january 1 2002 certain bargaining hourly us employees hired july 1 2010 eligible postretirement health care benefits salaried certain hourly us employees retire april 1 2008 eligible postretirement life insurance benefits january 1 2020 pension benefit plans postretirement benefit plans covered aggregate approximately 38000 approximately 30000 participants respectively 2020 plan actions 2020 management initiated following actions certain pension postretirement benefit plans action 1 february 2020 company entered new sixyear collective bargaining agreement union professional office workers alcoa smelter baiecomeau canada agreement unionized office employees participants one company’s defined benefit pension plans ceased accruing retirement benefits future service effective january 1 2021 change affected approximately 20 employees transitioned target benefit plan funding risk assumed employees company contribute approximately 12 participants’ eligible earnings new plan annual basis participants already collecting benefits terminated vested benefit defined benefit pension plan affected changes action 2 february 2020 company notified nonunionized hourly employees aluminerie de deschambault participants one company’s defined benefit pension plans cease accruing retirement benefits future service effective january 1 2021 change affected approximately 430 employees transitioned memberfunded pension plan funding risk assumed employees company contribute approximately 12 participants’ eligible earnings new plan annual basis participants already collecting benefits terminated vested benefit defined benefit pension plan affected changes action 3 april 2020 part company’s portfolio review alcoa announced curtail remaining capacity intalco smelter ferndale washington amid declining market conditions full curtailment completed third quarter 2020 workforce reduced approximately 685 people result curtailment accounting triggered us hourly defined benefit pension retiree life plans 3a 3b table respectively action 4 september 2020 company united steelworkers jointly notified certain us retirees medical prescription drug coverage provided insured group medicare advantage prescription drug plan include increase participant contributions effective january 1 2021 changes affected approximately 8600 participants although plan change related remeasurement increased postretirement benefit liability 74 plan change lowered company’s expected cash requirements program next five years action 5 october 2020 company offered lump sum buyouts specific participants us defined benefit pension plans result company paid approximately 33 plan assets december 31 2020 approximately 430 participants relieved corresponding pension obligation 35 recognized settlement charge 44 action 6 november 30 2020 alcoa announced agreement sell warrick rolling mill kaiser sale expected close end first quarter 2021 subject customary closing conditions approximately 1170 employees rolling operations includes casthouse hot mill cold mills coating slitting lines become employees kaiser transaction complete result alcoa recognized pension curtailment charge 5 following table presents certain information financial impacts actions accompanying consolidated financial statements 1 actions 14 caused interim plan remeasurements including update discount rates used determine benefit obligations affected plans amounts include impacts due interim plan remeasurements 2 amounts primarily represent accelerated amortization portion existing prior service cost benefit curtailments net actuarial loss settlements reclassified accumulated comprehensive loss restructuring charges net see note accompanying statement consolidated operations 2019 plan actions 2019 management initiated following actions certain pension postretirement benefit plans action 1 june 2019 company entered new sixyear collective bargaining agreement national union aluminum employees baiecomeau canada agreement canadian union employees participants one company’s defined benefit pension plans ceased accruing retirement benefits future service effective january 1 2021 change affected approximately 700 employees transitioned target benefit plan funding risk assumed employees company contribute approximately 12 participants’ eligible earnings new plan annual basis company also contribute additional contributions approximately 2 spread threeyear period improve financial position newly established target benefit plan participants already collecting benefits terminated vested benefit defined benefit pension plan affected changes action 2 july 2019 company entered new sixyear collective bargaining agreement united steelworkers representing employees aluminerie de bécancour inc canada agreement canadian union employees participants one company’s defined benefit pension plans ceased accruing retirement benefits future service effective july 21 2019 change affected approximately 900 employees transitioned memberfunded pension plan funding risk assumed employees company contribute approximately 12 participants’ eligible earnings new plan annual basis improve financial positions existing defined benefit pension plan newly established memberfunded pension plan company contributed approximately 5 2020 existing defined benefit pension plan contribute approximately 2 spread fiveyear period newly established memberfunded pension plan participants already collecting benefits terminated vested benefit defined benefit pension plan affected changes action 3 october 2019 company offered lump sum buyouts specific participants us defined benefit pension plans result company paid approximately 112 plan assets november 30 2019 approximately 1700 participants relieved corresponding pension obligation 138 action 4 december 2019 company notified certain us retirees transitioned medicare exchange plan companyprovided contribution effective january 1 2021 change affected approximately 6000 participants change improves cost predictability allowed participants elect coverage choice available options action 5 december 2019 company notified certain us retirees life insurance longer provided effective december 31 2019 change affected approximately 8900 participants part change alcoa made onetime transition payment affected retirees totaling 14 december 2019 following table presents certain information financial impacts actions accompanying consolidated financial statements 1 actions 1 2 caused interim plan remeasurements including update discount rates used determine benefit obligations affected plans amounts include impacts due interim plan remeasurements 2 amounts represent accelerated amortization portion existing prior service cost curtailments net actuarial loss settlements reclassified accumulated comprehensive loss restructuring charges net see note accompanying statement consolidated operations obligations funded status december 31 2020 benefit obligation fair value plan assets funded status us pension plans 4695 3676 1019 respectively december 31 2019 benefit obligation fair value plan assets funded status us pension plans 4532 3429 1103 respectively pension plan benefit obligations components net periodic benefit cost 1 2020 2019 2018 net periodic benefit cost us pension plans 154 155 358 respectively 2 2020 2019 2018 net periodic benefit cost postretirement benefits reflects reduction 4 7 8 respectively related recognition federal subsidy awarded medicare part 3 amounts reported expenses net accompanying statement consolidated operations 4 amounts reported restructuring charges net accompanying statement consolidated operations see note 2020 settlements due management actions see plan actions 44 payment additional lump sum benefits 7 2019 settlements due management actions see plan actions 74 payment additional lump sum benefits 7 2018 settlements due management actions 341 payment lump sum benefits 13 5 amounts reported restructuring charges net accompanying statement consolidated operations see note 2020 2019 2018 curtailments due management actions see plan actions 6 amounts attributed joint venture partners included assumptions weighted average assumptions used determine benefit obligations pension postretirement benefit plans follows yield curve model used develop discount rate parallels plans’ projected cash flows weighted average duration 11 years underlying cash flows highquality corporate bonds included model exceed cash flows needed satisfy company’s plan obligations multiple times deep market highquality corporate bonds exist country yield government bonds plus corporate bond yield spread used weighted average assumptions used determine net periodic benefit cost pension postretirement benefit plans follows 2020 2019 2018 expected longterm rate return used management based prevailing planned strategic asset allocations well estimates future returns asset class 2021 management anticipates 566 weighted average expected longterm rate return october 2019 society actuaries soa issued updated base mortality tables pri2012 annual update mortality improvement scale mp2019 considered developing company’s updated mortality assumptions us pension postretirement benefit obligations recorded december 31 2019 connection experience study performed approximately every five years study resulted use pri2012 base tables adjustment reflect alcoa’s experience modified version mp2019 improvement scales assumed health care cost trend rates us postretirement benefit plans follows nonus plans material assumed health care cost trend rate used measure expected cost gross eligible charges covered company’s postretirement benefit plans 2021 55 trend rate used reflecting management’s best estimate change future health care costs covered plans plan assets alcoa’s pension plan investment policy weighted average asset allocations december 31 2020 2019 asset class follows principal objectives underlying investment pension plan assets ensure company properly fund benefit obligations become due broad range potential economic financial scenarios maximize longterm investment return acceptable level risk based obligations broadly diversify investments across within various asset classes protect asset values adverse movements investment risk controlled rebalancing target allocations periodic basis ongoing monitoring investment manager performance portfolio includes allocation investments longduration government debt longduration corporate credit real estate highyield bonds emerging market debt globallisted infrastructure public private market equities target asset allocation approximately 30 equities approximately 50 fixed income approximately 20 investments investment practices comply requirements applicable laws regulations respective jurisdictions including employee retirement income security act 1974 erisa united states following section describes valuation methodologies used trustees measure fair value pension plan assets plan assets measured net asset value refers net asset value investment per share basis equivalent practical expedient otherwise indication level fair value hierarchy type asset generally classified provided see note p definition fair value description fair value hierarchy equitiesthese securities consist direct investments stock publicly traded us nonus companies valued based closing price reported active market individual securities traded generally classified level 1 ii plans’ share commingled funds invested stock publicly traded companies valued net asset value iii direct investments longshort equity hedge funds private equity limited partnerships venture capital partnerships valued net asset value fixed incomethese securities consist us government debt generally valued using quoted prices included level 1 ii cash equivalents invested publiclytraded funds valued based closing price reported active market individual securities traded generally classified level 1 iii publicly traded us nonus fixed interest obligations principally corporate bonds debentures valued consultation evaluation brokers institutional market using quoted prices observable market data included level 2 iv cash equivalents invested institutional funds valued net asset value investmentsthese investments include among others real estate investment trusts valued based closing price reported active market investments traded included level 1 ii plans’ share commingled funds invested real estate partnerships valued net asset value iii direct investments private real estate includes limited partnerships valued net asset value iv absolute return strategy funds valued net asset value fair value methods described may indicative net realizable value reflective future fair values additionally alcoa believes valuation methods used plans’ trustees appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different fair value measurement reporting date following table presents fair value pension plan assets classified either appropriate level fair value hierarchy net asset value 1 december 31 2020 total fair value pension plan assets excludes net receivable 8 represents securities yet settled plus interest dividends earned various investments 2 december 31 2019 total fair value pension plan assets excludes net receivable 8 represents securities yet settled plus interest dividends earned various investments funding cash flows alcoa’s policy fund amounts defined benefit pension plans sufficient meet minimum requirements set forth applicable country benefits laws tax laws including erisa us plans time company contributes additional amounts deemed appropriate 2020 2019 2018 cash contributions alcoa’s defined benefit pension plans 343 173 992 contributions made 2018 include combined 725 unscheduled contributions several defined benefit pension plans including combined 620 three company’s us defined benefit pension plans combined 105 two company’s canadian defined benefit pension plans additional payments us plans discretionary nature funded 492 net proceeds may 2018 debt issuance see note 128 available cash hand primary purpose issuing debt fund portion discretionary contributions us plans reduce nearterm pension funding risk fixed rate 10year maturity instrument 2020 company initially deferred approximately 200 pension contributions provisions us government’s coronavirus aid relief economic security cares act ample cash hand achieved objective hold cash uncertain times 2020 company made 250 pension contribution us pension plans late december cover deferred contributions due january 4 2021 discretionary prepayment alcoa’s minimum required contribution defined benefit pension plans 2021 estimated 255 approximately 220 us plans erisa regulations plan sponsor establishes prefunding balance making discretionary contributions us defined benefit pension plan may elect apply portion balance toward minimum required contribution obligations related plan future years 2021 management consider making election related company’s us plans benefit payments expected paid pension postretirement benefit plan participants follows defined contribution plans company sponsors savings investment plans several countries primarily australia united states united states employees may contribute portion compensation plans alcoa matches specified percentage contributions equivalent form investments elected employee also company makes contributions retirement savings account based percentage eligible compensation certain us employees hired march 1 2006 able participate alcoa’s defined benefit pension plans company’s expenses related defined contribution plans 73 2020 68 2019 69 2018 memberfunded pension plan effective july 22 2019 company contributes memberfunded pension plan sponsored united steelworkers employees aluminerie de bécancour inc canada see plan actions alcoa makes contributions plan based percentage employees’ eligible compensation company’s expenses related memberfunded pension plan 10 2020 4 2019 p derivatives financial instruments fair value fair value defined price would received sell asset paid transfer liability orderly transaction market participants measurement date fair value hierarchy distinguishes market participant assumptions developed based market data obtained independent sources observable inputs ii entity’s assumptions market participant assumptions developed based best information available circumstances unobservable inputs fair value hierarchy consists three broad levels gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 lowest priority unobservable inputs level 3 three levels fair value hierarchy described • level 1unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities • level 2inputs quoted prices included within level 1 observable asset liability either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets liabilities markets active inputs quoted prices observable asset liability eg interest rates inputs derived principally corroborated observable market data correlation means • level 3inputs significant fair value measurement unobservable derivatives alcoa corporation exposed certain risks relating ongoing business operations including risks changing commodity prices foreign currency exchange rates interest rates alcoa corporation’s commodity derivative activities include aluminum energy foreign exchange interest rate contracts held purposes trading used primarily mitigate uncertainty volatility cover underlying exposures alcoa corporation involved trading activities energy weather derivatives nonexchange commodity trading activities alcoa corporation’s commodity derivative activities subject management direction control strategic risk management committee srmc consists least three members including chief executive officer chief financial officer remaining members officers andor employees company chief executive officer may designate time currently member srmc alcoa corporation’s treasurer srmc meets periodic basis review derivative positions strategy reports audit committee alcoa corporation’s board directors scope activities several alcoa corporation’s aluminum energy foreign exchange contracts classified level 1 level 2 fair value hierarchy contracts designated either fair value cash flow hedging instruments alcoa corporation also several derivative instruments classified level 3 fair value hierarchy either designated cash flow hedges undesignated following tables present detail level 1 2 3 derivatives see additional level 3 information tables 2020 realized loss 19 level 1 2 cash flow hedges comprised 9 loss recognized sales 10 loss recognized cost goods sold 2019 realized loss 26 level 1 2 cash flow hedges comprised 18 loss recognized sales 8 loss recognized cost goods sold 2018 alcoa recognized realized loss 14 level 1 2 cash flow hedges sales derivative instruments classified level 3 fair value hierarchy represent management used least one significant unobservable input valuation model alcoa corporation uses discounted cash flow model fair value level 3 derivative instruments valuation models reviewed tested least annual basis inputs valuation models level 3 derivative instruments composed following quoted market prices eg aluminum prices 10year london metal exchange lme forward curve energy prices ii significant observable inputs eg information concerning time premiums volatilities certain option type embedded derivatives regional premiums aluminum contracts iii unobservable inputs eg aluminum energy prices beyond quoted market periods beyond term quoted market prices aluminum alcoa corporation estimates price aluminum extrapolating 10year lme forward curve periods beyond term quoted market prices midwest premium management estimates midwest premium based recent transactions additionally periods beyond term quoted market prices energy management developed forward curve based independent consultant market research appropriate valuations adjusted various factors liquidity bidoffer spreads credit considerations adjustments generally based available market evidence level 2 absence evidence management’s best estimate used level 3 significant input unobservable one period becomes observable subsequent period related asset liability would transferred appropriate classification level 1 2 period change transfers periods presented purchases sales settlements level 3 derivative instruments periods presented level 3 derivative instruments outstanding december 31 2020 described table description designation contract termination unobservable inputs impacting valuation sensitivity inputs power contracts embedded derivative indexes price power lme price aluminum plus midwest premium cash flow hedge forward sales aluminum march 2026 december 2029 february 2036 lme price midwest premium mwh per year increase lme price andor midwest premium results higher cost power decrease derivative asset increase derivative liability embedded derivative indexes price power lme price aluminum cash flow hedge forward sales aluminum september 2027 lme price mwh per year increase lme price results higher cost power increase derivative liability embedded derivative indexes price power credit spread company counterparty designated october 2028 estimated credit spread wider credit spread results higher cost power increase derivative liability financial contract hedge power prices cash flow hedge future purchases electricity july 2021 power price lower power prices result lower derivative asset addition instruments presented alcoa corporation power contract expired december 31 2019 containing embedded derivative indexed price power lme price aluminum designated cash flow hedge forward sales aluminum december 31 2020 outstanding level 3 instruments associated six smelters december 31 2020 2019 power contracts embedded derivatives designated cash flow hedges hedge forecasted aluminum sales 2130 kmt 2347 kmt respectively december 31 2020 2019 financial contract hedges forecasted electricity purchases 1427184 3891096 megawatt hours respectively following table presents quantitative information related significant unobservable inputs described level 3 derivative instruments megawatt hours mwh fair values level 3 derivative instruments recorded accompanying consolidated balance sheet follows following table shows net fair values level 3 derivative instruments december 31 2020 effect amounts hypothetical change increase decrease 10 market prices rates existed december 31 2020 following tables present reconciliation activity level 3 derivative instruments derivatives designated hedging instrumentscash flow hedges assuming market rates remain constant rates december 31 2020 realized loss 94 related power contracts realized loss 1 related financial contract expected recognized sales cost goods sold respectively next 12 months material limitations disclosures respect commodity prices foreign currency exchange risk consider underlying commitments anticipated transactions underlying items included analysis gains losses futures contracts may offset actual results determined several factors alcoa corporation’s control could vary significantly factors disclosed alcoa corporation exposed credit loss event nonperformance counterparties instruments well credit performance risk respect hedged customers’ commitments alcoa corporation anticipate nonperformance parties contracts creditworthy counterparties supported cash treasury bills irrevocable letters credit issued carefully chosen banks addition various master netting arrangements place counterparties facilitate settlement gains losses contracts financial instruments carrying values fair values alcoa corporation’s financial instruments follows following methods used estimate fair values financial instruments cash equivalents restricted cash carrying amounts approximate fair value short maturity instruments fair value amounts cash equivalents restricted cash classified level 1 fair value hierarchy shortterm borrowings longterm debt including amounts due within one year fair value based quoted market prices public debt interest rates currently available alcoa corporation issuance debt similar terms maturities nonpublic debt fair value amounts shortterm borrowings longterm debt classified level 2 fair value hierarchy q income taxes provision income taxes components income loss income taxes follows provision income taxes consisted following federal includes us income taxes related foreign income reconciliation us federal statutory rate alcoa’s effective tax rate follows fourth quarter 2020 supreme court spain ruled favor alcoa regarding 2006 2009 tax year assessment result reserve uncertain tax positions established 2018 released refer tax matters section note information december 22 2017 us tax legislation known us tax cuts jobs act 2017 tcja enacted 2018 management completed analysis impact tax law changes including introduction global intangible lowtaxed income provisions gilti became effective january 1 2018 tcja related alcoa’s 2018 consolidated financial statements company made accounting policy election include period cost tax impact generated including gilti us taxable income inclusion gilti 2018 us taxable income fully offset current us tax losses net operating loss carryforwards expected none remaining provisions tcja material impact company’s 2018 consolidated financial statements 2020 us treasury department finalized regulations implementing gilti provisions tcja included regulations exclusion gilti income subject high rate foreign tax permits taxpayers elect apply exception previously filed tax returns management intends file amended 2018 tax return make election result company recorded tax benefit 138 2020 reflect reestablishment certain us federal net operating loss carryforwards corresponding tax charge 138 record full valuation allowance increased deferred tax asset certain income earned awab eligible tax holiday decreases tax rate income 34 1525 result future cash tax savings holiday related production alumar refinery end december 31 2027 holiday related operation juruti brazil bauxite mine end december 31 2026 addition deferred tax assets expected reverse holiday period revalued holiday rate resulted discrete income tax charge 15 7 2020 2019 respectively income tax benefit 5 2018 certain components 2019 restructuring charges resulting mrc divestiture avilés la coruña facilities curtailment subsequent divestiture deductible tax purposes amounts 65 mrc 35 avilés la coruña combined included nondeductible losses foreign divestitures table see note c additional information divestiture charges deferred income taxes components deferred tax assets liabilities based underlying attributes without regard jurisdiction follows following table details expiration periods deferred tax assets presented deferred tax assets expiration may still annual limitations utilization represents deferred tax assets whose expiration dependent upon reversal underlying temporary difference total deferred tax asset net valuation allowance supported projections future taxable income exclusive reversing temporary differences taxable temporary differences reverse within carryforward period composition alcoa’s net deferred tax asset jurisdiction december 31 2020 follows company several income tax filers various foreign countries 444 net deferred tax asset included foreign column table approximately 90 relates seven alcoa’s income tax filers follows 166 net deferred tax asset alcoa alumínio sa brazil 148 net deferred tax asset alcoa canada company canada 104 deferred tax asset española spain 80 net deferred tax asset awab brazil 38 net deferred tax asset alcoa lauralco management company canada 38 net deferred tax asset alcoa wolinbec company canada 170 net deferred tax liability aofa australia future realization net deferred tax asset foreign filers based projections respective future taxable income defined sum pretax income comprehensive income permanent tax differences exclusive reversing temporary differences carryforwards realization net deferred tax assets foreign filers dependent future tax planning strategies alcoa canada company alcoa wolinbec company threeyear cumulative loss position period ended december 31 2020 without valuation allowance management’s judgment weight positive evidence offsets negative evidence cumulative losses upon changes facts circumstances management may conclude alcoa canada company alcoa wolinbec company’s deferred tax assets may realized resulting future charge establish valuation allowance management forecasted taxable income foreign filers foreseeable future forecast based macroeconomic indicators involves assumptions related among others commodity prices volume levels key inputs raw materials bauxite alumina caustic soda calcined petroleum coke liquid pitch energy labor transportation costs assumptions utilized management develop financial operating plan used manage company measure performance actual results majority alcoa canada company portion alcoa wolinbec company net deferred tax assets relate pension obligations derivatives majority foreign filers’ remaining portion alcoa canada company’s alcoa wolinbec company’s net deferred tax assets relate tax loss carryforwards foreign filers history tax loss carryforwards expiring unused additionally tax loss carryforwards infinite life respective income tax codes brazil spain however utilization existing tax loss carryforward limited 30 25 taxable income particular year brazil spain respectively accordingly management concluded net deferred tax assets foreign filers likely realized future periods resulting need partial full valuation allowance december 31 2020 following table details changes valuation allowance 1 line item reflects valuation allowances initially established result change management’s judgment regarding realizability deferred tax assets 2 line item reflects movements previously established valuation allowances increase decrease related deferred tax assets increase decrease movements occur result remeasurement due tax rate change changes underlying attributes deferred tax assets including expiration attribute reversal temporary difference gave rise deferred tax asset 2018 alcoa immediately established full valuation allowance 86 related initial deferred tax asset associated company’s equity interest elysistm see note h inception company contributed certain intellectual property patents made initial cash investment 5 elysistm deferred tax asset relates outside basis difference created excess tax basis ie fair value assets carrying value investment elysistm recorded company since 2018 gross outside basis difference decreased 102 due tax depreciation based fair value contributed assets inception resulting valuation allowance related company’s equity interest elysistm 58 december 31 2020 initial purpose elysistm advance development aluminum smelter technology ultimate goal commercialization weighing available positive negative evidence management determined likely company realize tax benefit deferred tax asset conclusion based fact elysistm expected generate losses foreseeable future elysistm incurs expenses development stage without committed future revenue stream need valuation allowance assessed continuous basis future periods result portion allowance may reversed based changes facts circumstances undistributed net earnings cumulative amount alcoa’s foreign undistributed net earnings deemed permanently reinvested approximately 1915 december 31 2020 alcoa corporation several commitments obligations related company’s operations various foreign jurisdictions therefore management plans distribute earnings foreseeable future alcoa corporation continuously evaluates local global cash needs future business operations anticipated debt facilities may influence future repatriation decisions practicable estimate tax liability might incurred earnings remitted us unrecognized tax benefits alcoa subsidiaries file income tax returns us federal jurisdiction various foreign us state jurisdictions exceptions company subject income tax examinations tax authorities years prior 2014 us federal income tax purposes virtually company’s us operations included income tax filings parentco’s us consolidated tax group prior separation date since time company’s us consolidated tax group comprised referenced us operations filed us federal income tax returns twomonth 2016 postseparation period well tax years 2017 2018 2019 tax years 2017 2018 currently examination internal revenue service us federal income tax filings parentco’s us consolidated tax group examined prior periods separation date foreign jurisdiction tax authorities process examining income tax returns several alcoa’s subsidiaries various tax years excluding australia tax matter discussed note period foreign examination includes income tax years 2006 2019 us state income tax purposes company subsidiaries remain subject income tax examinations 2015 tax year forward december 31 2020 two active limited scope examinations third quarter 2020 aofa paid approximately 74 a107 ato related tax dispute described note upon payment aofa recorded noncurrent tax assessment deposit company continues believe likely aofa’s tax position sustained therefore recognizing tax expense relation matter accordance australian tax laws initial interest assessment additional interest deductible aofa’s 2020 taxable income resulting 169 a219 lower cash tax payments second half 2020 interest compounded future years also deductible aofa’s income respective periods aofa ultimately successful interest deduction would become taxable income year dispute resolved addition ato decide interim reduce interest already assessed reduction would taxable income point time 2020 aofa continued record tax provision tax liability without effect ato assessment since expects prevail 2020 tax payable remains aofa’s balance sheet noncurrent accrued tax liability increased tax effect subsequent periods’ interest deductions dispute resolution expected take several years december 31 2020 noncurrent accrued tax liability resulting cumulative interest deductions approximately 169 a219 reconciliation beginning ending amount unrecognized tax benefits excluding interest penalties follows periods presented portion balance end year pertains state tax liabilities presented offset federal tax benefits effect unrecognized tax benefits recorded would impact annual effective tax rate 2020 2019 2018 would 3 7 2 respectively pretax book loss income 2018 company recorded charge 30 €26 including 10 €9 interest provision income taxes accompanying statement consolidated operations establish liability 49 share estimated loss disputed income tax matter see spain tax section note 2020 company received favorable final ruling supreme court spain tax matter recorded income 32 €26 reversal 2018 entry interest expense accrued 2019 change reflected table reductions tax positions prior years amount 21 €17 exclusive interest previously charged expense remainder change reductions tax positions prior years primarily related changes brazil income tax positions alcoa anticipate changes unrecognized tax benefits material impact statement consolidated operations 2021 company’s policy recognize interest penalties related income taxes component provision income taxes accompanying statement consolidated operations 2020 2019 2018 alcoa recognized 0 2 10 respectively interest penalties due expiration statute limitations settlements tax authorities refunded overpayments company also recognized interest income 13 1 2020 2019 2018 respectively december 31 2020 2019 amount accrued payment interest penalties 2 14 respectively r asset retirement obligations alcoa records aros related legal obligations associated standard operation bauxite mines alumina refineries aluminum smelters aros consist primarily costs associated mine reclamation closure bauxite residue areas spent pot lining disposal landfill closure company also recognizes aros significant lease restoration obligation required lease agreement disposal regulated waste materials related demolition certain power facilities following table details carrying value recorded aros major category 128 111 classified current liability december 31 2020 2019 respectively following table details changes total carrying value recorded aros 2020 reversals previously recorded liabilities primarily related sale gum springs see note u completion demolition projects numerous sites 2019 reversals previously recorded liabilities primarily related divestiture avilés la coruña spain facilities see note liabilities incurred 2020 include accruals new mine areas opened year higher estimated mine reclamation costs accruals bauxite residue areas opened year accruals related spent pot lining treatment disposals additional accruals primarily recorded corresponding capitalized asset retirement costs see note b except 2 recorded restructuring charges net accompanying statement consolidated operations see note liabilities incurred 2019 includes 72 related closure point comfort alumina refinery recorded restructuring charges net accompanying statement consolidated operations see note contingencies commitments unless specifically described contrary matters within note full responsibility alcoa corporation pursuant separation distribution agreement additionally separation distribution agreement provides crossindemnities company parentco claims subject indemnification contingencies environmental matters alcoa corporation participates environmental assessments cleanups several locations include currently previously owned operated facilities adjoining properties waste sites including superfund comprehensive environmental response compensation liability act cercla sites following table details changes carrying value recorded environmental remediation reserves december 31 2020 2019 current portion remediation reserve balance 29 39 respectively 2020 company incurred liabilities 7 primarily related ongoing remediation work various sites additional accruals recorded cost goods sold except 1 recorded restructuring charges net accompanying statement consolidated operations see note 2019 company incurred liabilities 73 primarily related closure point comfort alumina refinery recorded restructuring charges net accompanying statement consolidated operations see note remaining amount recorded cost goods sold 2018 changes liability result ongoing remediation work various sites additional accruals recorded cost goods sold except 2 recorded restructuring charges net accompanying statement consolidated operations see note estimated timing cash outflows environmental remediation reserve december 31 2020 follows separation distribution agreement includes provisions assignment allocation environmental liabilities alcoa corporation parentco general respective parties responsible environmental matters associated operations properties assigned well certain environmental matters shared responsibility two companies reserve balances december 31 2020 2019 associated significant sites active remediation underway future remediation 259 274 respectively management’s judgment company’s reserves sufficient satisfy provisions respective action plans company’s significant sites include poços de caldas brazilthe reserve associated 2015 closure alcoa alumínio sa smelter poços de caldas brazil remediation historic spent potlining storage disposal areas final remediation plan currently review could require reserve balance adjusted fusina portovesme italyalcoa corporation’s subsidiary alcoa trasformazioni srl remediation projects underway closed smelter sites fusina portovesme approved italian ministry environment protection land sea moe work ongoing soil remediation fusina site expected completion 2022 portovesme site expected completion first half 2021 additionally annual payments made moe 10year period 2022 groundwater emergency containment natural resource damages fusina site groundwater remediation project portovesme final remedial design completed 2020 awaiting approval moe surinamethe reserve associated 2017 closure suralco refinery bauxite mine treatment disposal refinery waste soil remediation work began 2017 expected completed end 2025 hurricane creek arkansasthe reserve associated 1990 closure two mining areas refineries near hurricane creek arkansas ongoing monitoring maintenance water quality surrounding mine areas residue disposal areas massena new yorkthe reserve associated 2015 closure massena east smelter company’s subsidiary reynolds metals company subsurface soil remediation performed demolition structures remediation work expected commence 2021 take four eight years complete point comfort texasthe reserve associated 2019 closure point comfort alumina refinery disposal industrial wastes contained site subsurface remediation postclosure monitoring maintenance final remediation plan currently review may result change existing reserve sherwin texasin connection 2018 settlement dispute related previouslyowned sherwin alumina refinery company’s subsidiary copano enterprises llc accepted responsibility final closure four bauxite residue waste disposal areas known copano facility work commenced first residue 2018 take eight twelve years complete depending nature potential reuse work next three areas commenced expected completed 2048 depending potential reuse longview washingtonin connection 2018 consent decree cleanup action plan state washington department ecology company’s subsidiary northwest alloys landowner accepted certain responsibilities future remediation contaminated soil sediments site located near longview washington december 2020 lessee land partner remediation site filed bankruptcy december 31 2020 reserve related site deemed sufficient sitesthe company process decommissioning various plants remediating sites several countries potential redevelopment return land natural state aggregate approximately 35 remediation projects sites planned underway activities completed various times future latest expected 2026 ongoing monitoring activities may required december 31 2020 2019 reserve balance associated activities 63 61 respectively tax matters spain july 2013 following corporate income tax audit covering 2006 2009 tax years assessment received spain’s tax authorities disallowing certain interest deductions claimed parentco’s spanish consolidated tax group various stages subsequent appeal denial reassessment third quarter 2018 alcoa corporation management came believe longer likely greater 50 prevail matter accordingly third quarter 2018 alcoa corporation recorded charge 30 €26 provision income taxes establish liability portion estimated loss matter representing management’s best estimate time november 8 2018 alcoa filed petition appeal supreme court spain fourth quarter 2020 supreme court spain met ruled favor alcoa 2006 2009 tax year assessment ruling final cannot appealed result final ruling alcoa reversed 32 €26 reserve established 2018 matter considered closed additionally lien secured san ciprián smelter spain’s tax authorities provided relation matter authorized release brazil awab march 2013 awab notified brazilian federal revenue office rfb approximately 110 r220 value added tax credits previously claimed disallowed penalty 50 assessed amount awab received 41 r82 cash may 2012 valueadded tax credits claimed awab fixed assets export sales related juruti bauxite mine são luís refinery expansion rfb disallowed credits allege belong consortium awab owns interest claimed awab credits also disallowed result challenges apportionment methods used questions use credits alleged lack documented proof awab presented defense claim rfb april 8 2013 awab successful administrative process rfb would recourse unsuccessful process awab option litigate judicial level separately awab’s administrative appeal june 2015 new tax law enacted repealing provisions tax code basis rfb assessing 50 penalty matter estimated range reasonably possible loss matters 0 42 r220 management’s opinion allegations basis however time company unable reasonably predict outcome matter australia aofa december 2019 aofa received statement audit position soap australian taxation office ato related pricing certain historic thirdparty alumina sales soap proposed adjustments would result additional income tax payable aofa 2020 soap subject independent review process within ato conclusion process ato determined continue proposed adjustments issued notices assessment notices received aofa july 7 2020 notices asserted claims income tax payable aofa approximately 165 a214 notices also include claims compounded interest tax amount totaling approximately 544 a707 september 17 2020 ato issued position paper preliminary view imposition administrative penalties related tax assessment issued aofa paper proposed penalties approximately 99 a128 aofa disagrees ato’s proposed position penalties submitted response position paper fourth quarter 2020 reviewing aofa’s response ato could issue penalty assessment company agree ato’s positions aofa continue defend matter pursue available dispute resolution methods including filing proceedings australian courts process could last several years could involve significant expenses company maintains sales subject ato’s review ultimately sold aluminium bahrain bsc result arm’s length transactions aofa two decades made arm’s length prices consistent prices paid thirdparty alumina customers accordance ato’s dispute resolution practices aofa paid 50 assessed income tax amount exclusive interest penalties approximately 74 a107 third quarter 2020 ato expected seek payment prior final resolution matter aofa ultimately successful amounts paid ato part 50 payment would refunded aofa funded payment cash hand recorded payment within noncurrent assets tax assessment deposit related december 31 2020 balance 82 a107 interest unpaid tax interest amounts continue accrue dispute initial interest assessment additional interest accrued deductible taxable income aofa would taxable income year dispute resolved aofa ultimately successful aofa applied deduction beginning third quarter 2020 reduced current year cash tax payments approximately 169 a219 amount reflected within noncurrent liabilities deferred credits noncurrent accrued tax liability december 31 2020 see note u company continues believe likely aofa’s tax position sustained therefore recognizing tax expense relation matter however ultimate resolution matter uncertain time company cannot predict potential loss range loss associated outcome may materially affect results operations financial condition references assessed us dollar amounts presented connection matter converted us dollars australian dollars based exchange rate effect december 31 2020 aofa part company’s joint venture alumina limited australian public company listed australian securities exchange company alumina limited 60 40 respectively joint venture entities including aofa general addition matters discussed various lawsuits claims proceedings may instituted asserted alcoa corporation including pertaining environmental safety health commercial tax product liability intellectual property infringement employment employee retiree benefit matters actions claims arising normal course business amounts claimed matters may substantial ultimate liability readily determinable considerable uncertainties exist accordingly possible company’s liquidity results operations particular period could materially affected one matters however based facts currently available management believes disposition matters pending asserted material adverse effect individually aggregate financial position company commitments purchase obligations alcoa corporation party unconditional purchase obligations energy expire 2028 2036 commitments related contracts total 53 2021 113 2022 115 2023 117 2024 118 2025 948 thereafter expenditures contracts totaled 79 2020 146 2019 169 2018 additionally company entered purchase commitments energy raw materials goods services total 2279 2021 1818 2022 1576 2023 1456 2024 1447 2025 9935 thereafter aofa gas supply agreement power three alumina refineries western australia began july 2020 12year period terms agreement required aofa make prepayment 500 two installments first made june 2015 300 second installment 200 made april 2016 december 31 2020 alcoa corporation total asset 481 a625 included prepaid expenses current assets 42 noncurrent assets 439 see note u accompanying consolidated balance sheet related prepayments december 31 2019 alcoa corporation total asset 458 a654 included prepaid expenses current assets 21 noncurrent assets 437 see note u accompanying consolidated balance sheet guarantees third parties december 31 2020 2019 company outstanding potential future payments guarantees issued behalf third party 2019 alcoa corporation divested interest mrc dissolving previous guarantee related project financing rolling mill saudi arabia bank guarantees letters credit alcoa corporation outstanding bank guarantees letters credit related among others energy contracts environmental obligations legal tax matters outstanding debt leasing obligations workers compensation customs duties total amount committed instruments automatically renew expire various dates 2021 2023 320 includes 110 issued standby letter credit agreement see december 31 2020 additionally parentco outstanding bank guarantees letters credit related company amount 20 december 31 2020 event parentco would required perform instruments parentco would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding bank guarantees letters credit related parentco amount 11 december 31 2020 event alcoa corporation would required perform instruments company would indemnified parentco accordance separation distribution agreement august 2017 alcoa corporation entered standby letter credit agreement expires may 3 2021 extended originally august 2018 may 2019 three financial institutions agreement provides 150 facility used company matters ordinary course business alcoa corporation’s obligations facility secured manner obligations company’s revolving credit facility additionally facility contains similar representations warranties affirmative negative financial covenants company’s revolving credit facility see note december 31 2020 letters credit aggregating 110 issued facility surety bonds alcoa corporation outstanding surety bonds primarily related tax matters contract performance workers compensation environmentalrelated matters customs duties total amount committed bonds automatically renew expire various dates mostly 2021 122 december 31 2020 additionally parentco outstanding surety bonds related company amount 15 december 31 2020 event parentco would required perform instruments parentco would indemnified alcoa corporation accordance separation distribution agreement likewise company outstanding surety bonds related parentco amount 3 december 31 2020 event alcoa corporation would required perform instruments company would indemnified parentco accordance separation distribution agreement leasing alcoa records rightofuse asset lease liability several types operating leases including land buildings alumina refinery process control technology plant equipment vehicles computer equipment amounts equivalent aggregate future lease payments discounted basis leases remaining terms one 37 years discount rate applied leases company’s incremental borrowing rate based information available commencement date determining present value lease payments unless rate implicit lease agreement company material financing leases lease expense operating cash flows include rightofuse assets totaling 6 impaired 2019 conjunction permanent closure point comfort texas alumina refinery see note weighted average lease term weighted average discount rate follows following represents aggregate rightofuse assets related lease obligations recognized consolidated balance sheet rightofuse assets lease liabilities related warrick rolling mill excluded december 31 2020 balances table due announced sale rolling mill reclassified assets held sale see note c new leases 54 30 added years ended december 31 2020 2019 respectively future cash flows related operating lease obligations december 31 2020 follows u financial information interest cost components expenses net 2020 net gain asset sales included 181 gain related sale ees see note c noncurrent assets part previous sale transaction equity investment alcoa maintained access approximately 30 dampier bunbury natural gas pipeline transmission capacity western australia gas supply three alumina refineries december 31 2020 2019 aofa asset 315 281 respectively representing prepayments made agreement future gas transmission services valueadded tax vat credits federal state relate two company’s subsidiaries brazil awab alumínio concerning são luís refinery pays vat purchase goods services used alumina production process credits generally utilized offset vat charged domestic sales alumina aluminum however domestic market brazil sale alumina company’s são luís smelter fully curtailed since april 2015 fourth quarter 2018 management performed updated assessment future realizability state vat credits amid unfavorable market conditions lack favorable power contract são luís smelter result management determined necessary establish allowance accumulated state vat balances recorded 107 charge restructuring charges net see note accompanying statement consolidated operations company retains ability utilize state credits future practically restart são luís smelter provides opportunity monetize credits allowance established federal vat credits used reduce types federal tax obligations state vat amounts expensed cost goods sold incurred management continues maintain são luís smelter assets future case potential restart noncurrent liabilities deferred credits noncurrent liabilities related warrick rolling mill excluded december 31 2020 balances table due announced sale rolling mill reclassified liabilities held sale see note c deferred energy credits relate cash received 2019 carbon dioxide emission credits governmental agency terms credits require company comply certain conditions period three years deferred credits recognized reduction cost goods sold determined probable company satisfy conditions company meet conditions threeyear period credits repaid governmental agency cash equivalents restricted cash restricted cash amounts reported prepaid expenses current assets accompanying consolidated balance sheet cash flow information cash paid interest income taxes follows item 8a supplemental financial information unaudited quarterly data millions except pershare amounts 1 per share amounts calculated independently period presented therefore sum quarterly per share amounts may equal per share amounts year item 9 item 15 exhibits financial statement schedules consolidated financial statements exhibits listed filed part report 1 company’s consolidated financial statements notes thereto report independent registered public accounting firm pages 96 172 report 2 financial statement schedules omitted applicable required information included consolidated financial statements notes thereto 3 exhibits exhibit nos 107 109 1023 1035 management contracts compensatory plans required filed exhibits form 10k amendments modifications exhibits previously filed omitted opinion registrant exhibits amended modified longer material certain instances longer required filed exhibits instruments defining rights holders longterm debt registrant subsidiaries filed exhibits instruments met threshold materiality requirements regulation sk registrant agrees however furnish copy instruments commission upon request item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date roy c harvey roy c harvey chief executive officer director principal executive officer director march 15 2017 william f oplinger william f oplinger executive vice president chief financial officer principal financial officer march 15 2017 mary anne citrino timothy p flynn kathryn fuller james hughes michael g morris james e nevels james w owens carol l roberts suzanne sitherwood steven w williams ernesto zedillo director march 15 2017 molly beerman attorneyinfact molly beerman molly beerman attorneyinfactitem 15 exhibits financial statement schedules consolidated financial statements exhibits listed filed part report 1 company’s consolidated financial statements notes thereto report independent registered public accounting firm pages 96 172 report 2 financial statement schedules omitted applicable required information included consolidated financial statements notes thereto 3 exhibits schedules exhibits omitted pursuant item 601b2 regulation sk company hereby undertakes furnish copies omitted schedules exhibits upon request commission denotes management contracts compensatory plans arrangements required filed exhibits form 10k amendments modifications exhibits previously filed omitted opinion registrant exhibits amended modified longer material certain instances longer required filed exhibits instruments defining rights holders longterm debt registrant subsidiaries filed exhibits instruments met threshold materiality requirements regulation sk registrant agrees however furnish copy instruments commission upon request item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities indicated february 23 2018 roy c harvey william f oplinger roy c harvey president chief executive officer director principal executive officer director william f oplinger executive vice president chief financial officer principal financial officer molly beerman molly beerman vice president controller principal accounting officer michael g morris michael g morris director chairman board directors mary anne citrino mary anne citrino director timothy p flynn timothy p flynn director kathryn fuller kathryn fuller director james hughes james hughes director james e nevels james e nevels director james w owens james w owens director carol l roberts carol l roberts director suzanne sitherwood suzanne sitherwood director steven w williams steven w williams director ernesto zedillo ernesto zedillo directoritem 15 exhibits financial statement schedules consolidated financial statements exhibits listed filed part report 1 company’s consolidated financial statements notes thereto report independent registered public accounting firm included part ii item 8 report 2 financial statement schedules omitted applicable required information included consolidated financial statements notes thereto 3 exhibits exhibit description exhibit 1024 alcoa corporation amended restated change control severance plan dated july 31 2017 incorporated reference exhibit 104 company’s quarterly report form 10q filed august 3 2017 file 137816 1025 form alcoa corporation chief executive officer chief financial officer severance agreement effective december 1 2016 incorporated reference exhibit 1028 company’s registration statement form s1 filed january 18 2017 file 333215606 1026 form alcoa corporation corporate officer severance agreement effective december 1 2016 incorporated reference exhibit 1027 company’s registration statement form s1 filed january 18 2017 file 333215606 1027 terms conditions employee restricted share units incorporated reference exhibit 1029 company’s registration statement form s1 filed january 18 2017 file 333215606 1028 terms conditions employee stock option awards incorporated reference exhibit 1030 company’s registration statement form s1 filed january 18 2017 file 333215606 1029 terms conditions employee special retention awards incorporated reference exhibit 1031 company’s registration statement form s1 filed january 18 2017 file 333215606 1030 terms conditions employee restricted share units dated january 24 2018 incorporated reference exhibit 1029 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1031 terms conditions employee stock option awards dated january 24 2018 incorporated reference exhibit 1030 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1032 terms conditions employee special retention awards restricted share units dated january 24 2018 incorporated reference exhibit 1031 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1033 alcoa corporation nonemployee director compensation policy effective november 1 2016 incorporated reference exhibit 1032 company’s registration statement form s1 filed january 18 2017 file 333215606 1034 terms conditions deferred fee restricted share units director awards effective december 1 2016 incorporated reference exhibit 1034 company’s registration statement form s1 filed january 18 2017 file 333215606 1035 terms conditions restricted share units annual director awards effective december 1 2016 incorporated reference exhibit 1035 company’s registration statement form s1 filed january 18 2017 file 333215606 1036 terms conditions restricted share units annual director awards effective may 9 2017 incorporated reference exhibit 103 company’s quarterly report form 10q filed august 3 2017 file 137816 1037 alcoa corporation 2016 deferred fee plan directors effective november 1 2016 amended restated december 5 2018 filed herewith 211 list subsidiaries filed herewith 231 consent pricewaterhousecoopers llp filed herewith 311 certification chief executive officer required securities exchange commission rule 13a14a 15d14a filed herewith 312 certification principal financial officer required securities exchange commission rule 13a14a 15d14a filed herewith 321 certification pursuant 18 usc section 1350 filed herewith 951 mine safety disclosure filed herewith 991 amended restated grantor trust agreement alcoa corporation wells fargo bank national association effective october 24 2017 incorporated reference exhibit 991 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 exhibit description exhibit 101ins xbrl instance document filed herewith 101sch xbrl taxonomy extension schema document filed herewith 101cal xbrl taxonomy extension calculation linkbase document filed herewith 101def xbrl taxonomy extension definition linkbase document filed herewith 101lab xbrl taxonomy extension label linkbase document filed herewith 101pre xbrl taxonomy extension presentation linkbase document filed herewith schedules exhibits omitted pursuant item 601b2 regulation sk company hereby undertakes furnish copies omitted schedules exhibits upon request commission denotes management contracts compensatory plans arrangements required filed exhibits form 10k amendments modifications exhibits previously filed omitted opinion registrant exhibits amended modified longer material certain instances longer required filed exhibits instruments defining rights holders longterm debt registrant subsidiaries filed exhibits instruments met threshold materiality requirements regulation sk registrant agrees however furnish copy instruments commission upon request item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities indicated february 25 2019 roy c harvey william f oplinger roy c harvey president chief executive officer director principal executive officer director william f oplinger executive vice president chief financial officer principal financial officer molly beerman molly beerman vice president controller principal accounting officer michael g morris michael g morris director chairman board directors mary anne citrino mary anne citrino director timothy p flynn timothy p flynn director kathryn fuller kathryn fuller director james hughes james hughes director james e nevels james e nevels director james w owens james w owens director carol l roberts carol l roberts director suzanne sitherwood suzanne sitherwood director steven w williams steven w williams director ernesto zedillo ernesto zedillo directoritem 15 exhibits financial statement schedules consolidated financial statements exhibits listed filed part report 1 company’s consolidated financial statements notes thereto report independent registered public accounting firm included part ii item 8 report 2 financial statement schedules omitted applicable required information included consolidated financial statements notes thereto 3 exhibits exhibit description exhibit 31 amended restated certificate incorporation alcoa corporation incorporated reference exhibit 31 company’s current report form 8k filed november 3 2016 file 137816 32 amended restated bylaws alcoa corporation adopted december 6 2017 incorporated reference exhibit 31 company’s current report form 8k filed december 8 2017 file 137816 41 indenture dated september 27 2016 among alcoa nederland holding bv alcoa upstream corporation bank new york mellon trust company na incorporated reference exhibit 1019 amendment 4 company’s registration statement form 10 filed september 29 2016 file 137816 42 supplemental indenture dated november 1 2016 among entities listed annex thereto subsidiaries alcoa corporation alcoa corporation alcoa nederland holding bv bank new york mellon trust company na incorporated reference exhibit 43 company’s current report form 8k filed november 4 2016 file 137816 43 second supplemental indenture dated december 9 2019 among alcoa corporation alcoa treasury sà rl alcoa nederland holding bv bank new york mellon trust company na indenture dated september 27 2016 filed herewith 44 indenture dated may 17 2018 among alcoa nederland holding bv alcoa corporation certain subsidiaries alcoa corporation bank new york mellon trust company na trustee incorporated reference exhibit 41 company’s current report form 8k filed may 17 2018 file 137816 45 supplemental indenture dated december 9 2019 among alcoa corporation alcoa treasury sà rl alcoa nederland holding bv bank new york mellon trust company na indenture dated may 17 2018 filed herewith 46 description securities filed herewith 101 separation distribution agreement dated october 31 2016 arconic inc alcoa corporation incorporated reference exhibit 21 company’s current report form 8k filed november 4 2016 file 137816 102 tax matters agreement dated october 31 2016 arconic inc alcoa corporation incorporated reference exhibit 23 company’s current report form 8k filed november 4 2016 file 137816 103 alcoa corporation arconic inc patent knowhow trade secret license agreement dated october 31 2016 alcoa usa corp arconic inc incorporated reference exhibit 25 company’s current report form 8k filed november 4 2016 file 137816 104 arconic inc alcoa corporation patent knowhow trade secret license agreement dated october 31 2016 arconic inc alcoa usa corp incorporated reference exhibit 26 company’s current report form 8k filed november 4 2016 file 137816 105 amended restated alcoa corporation arconic inc trademark license agreement dated june 25 2017 alcoa usa corp arconic inc incorporated reference exhibit 2 company’s quarterly report form 10q filed august 3 2017 file 137816 exhibit description exhibit 106 second amendment restatement agreement dated november 21 2018 includes exhibit thereto revolving credit agreement dated september 16 2016 amended october 26 2016 amended restated november 14 2017 among alcoa corporation alcoa nederland holding bv lenders issuers time party thereto jpmorgan chase bank na administrative agent lenders issuers incorporated reference exhibit 101 company’s current report form 8k filed november 26 2018 file 137816 107 amendment 1 dated august 16 2019 revolving credit agreement dated september 16 2016 amended october 26 2016 amended restated november 14 2017 amended restated november 21 2018 among alcoa corporation alcoa nederland holding bv lenders issuers time party thereto jpmorgan chase bank na administrative agent lenders issuers incorporated reference exhibit 101 company’s quarterly report form 10q filed october 31 2019 file 137816 108 amended restated charter strategic council awac joint venture incorporated reference exhibit 101 company’s current report form 8k filed november 4 2016 file 137816 109 side letter november 1 2016 alcoa corporation alumina limited clarifying transfer restrictions incorporated reference exhibit 103 company’s current report form 8k filed november 4 2016 file 137816 1010 third amended restated limited liability company agreement alcoa world alumina llc dated november 1 2016 among alcoa usa corp asc alumina international holdings pty ltd alumina usa inc reynolds metals company llc reynolds metals exploration inc incorporated reference exhibit 102 company’s current report form 8k filed november 4 2016 file 137816 1011 amended restated limited liability company agreement alcoa alumina chemicals llc dated december 31 1994 incorporated reference exhibit 994 alcoa inc’s current report form 8k filed november 28 2001 file 103610 1012 shareholders’ agreement alcoa australia limited alcoa australian pty ltd alumina limited originally dated may 10 1996 incorporated reference exhibit 1013 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1013 kwinana state agreement 1961 incorporated reference exhibit 107 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1014 pinjarra state agreement 1969 incorporated reference exhibit 108 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1015 wagerup state agreement 1978 incorporated reference exhibit 109 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1016 alumina refinery agreement 1987 incorporated reference exhibit 1010 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1017 framework agreement dated june 26 2019 saudi arabian mining company ma’aden alcoa corporation incorporated reference exhibit 101 company’s quarterly report form 10q filed july 31 2019 file 137816 1018 amendment restatement deed dated june 26 2019 relating aluminium project framework shareholders’ agreement originally dated december 20 2009 saudi arabian mining company ma’aden alcoa corporation incorporated reference exhibit 102 company’s quarterly report form 10q filed july 31 2019 file 137816 1019 alcoa corporation 2016 stock incentive plan amended restated may 9 2018 incorporated reference exhibit 991 company’s current report form 8k filed may 15 2018 file 137816 1020 alcoa usa corp deferred compensation plan incorporated reference exhibit 102 amendment 1 company’s registration statement form 10 filed august 12 2016 file 137816 1021 alcoa usa corp nonqualified supplemental retirement plan c incorporated reference exhibit 103 amendment 1 company’s registration statement form 10 filed august 12 2016 file 137816 exhibit description exhibit 1022 amendment 1 alcoa usa corp nonqualified supplemental retirement plan c effective january 1 2021 incorporated reference exhibit 109 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1023 form amended restated indemnification agreement alcoa corporation individual directors officers effective august 1 2017 incorporated reference exhibit 105 company’s quarterly report form 10q filed august 3 2017 file 137816 1024 alcoa corporation annual cash incentive compensation plan amended restated effective february 21 2018 incorporated referenced exhibit 10 company’s quarterly report form 10q filed may 9 2018 file 137816 1025 alcoa corporation amended restated change control severance plan dated july 30 2019 incorporated reference exhibit 105 company’s quarterly report form 10q filed october 31 2019 file 137816 1026 amended restated form alcoa corporation chief executive officer chief financial officer executive severance agreement effective july 30 2019 incorporated reference exhibit 106 company’s quarterly report form 10q filed october 31 2019 file 137816 1027 amended restated form alcoa corporation corporate officer executive severance agreement effective july 30 2019 incorporated reference exhibit 107 company’s quarterly report form 10q filed october 31 2019 file 137816 1028 terms conditions employee stock option awards incorporated reference exhibit 1030 company’s registration statement form s1 filed january 18 2017 file 333215606 1029 terms conditions employee restricted share units dated january 24 2018 incorporated reference exhibit 1029 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1030 terms conditions employee stock option awards dated january 24 2018 incorporated reference exhibit 1030 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1031 terms conditions employee special retention awards restricted share units dated january 24 2018 incorporated reference exhibit 1031 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1032 terms conditions employee restricted share units effective october 1 2019 incorporated reference exhibit 102 company’s quarterly report form 10q filed october 31 2019 file 137816 1033 terms conditions employee stock option awards effective october 1 2019 incorporated reference exhibit 103 company’s quarterly report form 10q filed october 31 2019 file 137816 1034 terms conditions employee special retention awards effective october 1 2019 incorporated reference exhibit 104 company’s quarterly report form 10q filed october 31 2019 file 137816 1035 letter agreement dated july 3 2019 tómas sigurðsson alcoa corporation incorporated reference exhibit 105 company’s quarterly report form 10q filed july 31 2019 file 137816 1036 letter agreement dated december 17 2018 john slaven alcoa corporation filed herewith 1037 alcoa corporation nonemployee director compensation policy effective november 1 2016 incorporated reference exhibit 1032 company’s registration statement form s1 filed january 18 2017 file 333215606 1038 terms conditions deferred fee restricted share units director awards effective december 1 2016 incorporated reference exhibit 1034 company’s registration statement form s1 filed january 18 2017 file 333215606 exhibit description exhibit 1039 terms conditions restricted share units annual director awards effective december 1 2016 incorporated reference exhibit 1035 company’s registration statement form s1 filed january 18 2017 file 333215606 1040 terms conditions restricted share units annual director awards effective may 9 2017 incorporated reference exhibit 103 company’s quarterly report form 10q filed august 3 2017 file 137816 1041 alcoa corporation 2016 deferred fee plan directors effective november 1 2016 amended restated december 5 2018 incorporated reference exhibit 1037 company’s annual report form 10k fiscal year ended december 31 2019 filed february 26 2019 137816 211 list subsidiaries filed herewith 231 consent pricewaterhousecoopers llp filed herewith 311 certification chief executive officer required securities exchange commission rule 13a14a 15d14a filed herewith 312 certification principal financial officer required securities exchange commission rule 13a14a 15d14a filed herewith 321 certification roy c harvey president chief executive officer required rule 13a14b rule 15d14b section 1350 chapter 63 title 18 united states code filed herewith 322 certification william f oplinger executive vice president chief financial officer required rule 13a14b rule 15d14b section 1350 chapter 63 title 18 united states code filed herewith 951 mine safety disclosure filed herewith 991 amended restated grantor trust agreement alcoa corporation wells fargo bank national association effective october 24 2017 incorporated reference exhibit 991 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 101ins inline xbrl instance document 101sch inline xbrl taxonomy extension schema document 101cal inline xbrl taxonomy extension calculation linkbase document 101def inline xbrl taxonomy extension definition linkbase document 101lab inline xbrl taxonomy extension label linkbase document 101pre inline xbrl taxonomy extension presentation linkbase document cover page interactive data file embedded within inline xbrl document certain schedules exhibits appendices omitted pursuant item 601a5 regulation sk company hereby undertakes furnish copies omitted schedule exhibit appendix commission upon request denotes management contracts compensatory plans arrangements required filed exhibits form 10k item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities indicated february 21 2020 roy c harvey william f oplinger roy c harvey president chief executive officer director principal executive officer director william f oplinger executive vice president chief financial officer principal financial officer molly beerman molly beerman senior vice president controller principal accounting officer michael g morris michael g morris director chairman board directors mary anne citrino mary anne citrino director timothy p flynn timothy p flynn director kathryn fuller kathryn fuller director james hughes james hughes director james e nevels james e nevels director james w owens james w owens director carol l roberts carol l roberts director suzanne sitherwood suzanne sitherwood director steven w williams steven w williams director ernesto zedillo ernesto zedillo directoritem 15 exhibit financial statement schedules consolidated financial statements exhibits listed filed part report 1 company’s consolidated financial statements notes thereto report independent registered public accounting firm included part ii item 8 report 2 financial statement schedules omitted applicable required information included consolidated financial statements notes thereto 3 exhibits exhibit description exhibit 31 amended restated certificate incorporation alcoa corporation incorporated reference exhibit 31 company’s current report form 8k filed november 3 2016 file 137816 32 amended restated bylaws alcoa corporation adopted december 6 2017 incorporated reference exhibit 31 company’s current report form 8k filed december 8 2017 file 137816 41 indenture dated september 27 2016 among alcoa nederland holding bv alcoa upstream corporation bank new york mellon trust company na incorporated reference exhibit 1019 amendment 4 company’s registration statement form 10 filed september 29 2016 file 137816 42 supplemental indenture dated november 1 2016 among entities listed annex thereto subsidiaries alcoa corporation alcoa corporation alcoa nederland holding bv bank new york mellon trust company na incorporated reference exhibit 43 company’s current report form 8k filed november 4 2016 file 137816 43 second supplemental indenture dated december 9 2019 among alcoa corporation alcoa treasury sà rl alcoa nederland holding bv bank new york mellon trust company na indenture dated september 27 2016 incorporated reference exhibit 43 company’s annual report form 10k year ended december 31 2019 filed february 21 2020 file 1137816 44 indenture dated may 17 2018 among alcoa nederland holding bv alcoa corporation certain subsidiaries alcoa corporation bank new york mellon trust company na trustee incorporated reference exhibit 41 company’s current report form 8k filed may 17 2018 file 137816 45 supplemental indenture dated december 9 2019 among alcoa corporation alcoa treasury sà rl alcoa nederland holding bv bank new york mellon trust company na indenture dated may 17 2018 incorporated reference exhibit 45 company’s annual report form 10k year ended december 31 2019 filed february 21 2020 file 1137816 46 indenture dated july 13 2020 among alcoa nederland holding bv alcoa corporation certain subsidiaries alcoa corporation bank new york mellon trust company national association trustee incorporated reference exhibit 41 company’s current report form 8k filed july 13 2020 file 137816 47 description securities incorporated reference exhibit 46 company’s annual report form 10k year ended december 31 2019 filed february 21 2020 file 1137816 101 separation distribution agreement dated october 31 2016 arconic inc alcoa corporation incorporated reference exhibit 21 company’s current report form 8k filed november 4 2016 file 137816 102 tax matters agreement dated october 31 2016 arconic inc alcoa corporation incorporated reference exhibit 23 company’s current report form 8k filed november 4 2016 file 137816 103 alcoa corporation arconic inc patent knowhow trade secret license agreement dated october 31 2016 alcoa usa corp arconic inc incorporated reference exhibit 25 company’s current report form 8k filed november 4 2016 file 137816 exhibit description exhibit 104 arconic inc alcoa corporation patent knowhow trade secret license agreement dated october 31 2016 arconic inc alcoa usa corp incorporated reference exhibit 26 company’s current report form 8k filed november 4 2016 file 137816 105 amended restated alcoa corporation arconic inc trademark license agreement dated june 25 2017 alcoa usa corp arconic inc incorporated reference exhibit 2 company’s quarterly report form 10q filed august 3 2017 file 137816 106 second amendment restatement agreement dated november 21 2018 includes exhibit thereto revolving credit agreement dated september 16 2016 amended october 26 2016 amended restated november 14 2017 among alcoa corporation alcoa nederland holding bv lenders issuers time party thereto jpmorgan chase bank na administrative agent lenders issuers incorporated reference exhibit 101 company’s current report form 8k filed november 26 2018 file 137816 107 amendment 1 dated august 16 2019 revolving credit agreement dated september 16 2016 amended october 26 2016 amended restated november 14 2017 amended restated november 21 2018 among alcoa corporation alcoa nederland holding bv lenders issuers time party thereto jpmorgan chase bank na administrative agent lenders issuers incorporated reference exhibit 101 company’s quarterly report form 10q filed october 31 2019 file 137816 108 amendment 2 dated april 21 2020 revolving credit agreement dated september 16 2016 amended october 26 2016 amended restated november 14 2017 amended restated november 21 2018 amended august 16 2019 among alcoa corporation alcoa nederland holding bv lenders issuers time party thereto jpmorgan chase bank na administrative agent lenders issuers incorporated reference exhibit 101 company’s quarterly report form 10q filed april 29 2020 file 137816 109 amendment 3 dated june 24 2020 revolving credit agreement dated september 16 2016 amended october 26 2016 amended restated november 14 2017 amended restated november 21 2018 amended august 16 2019 amended april 21 2020 among alcoa corporation alcoa nederland holding bv lenders issuers time party thereto jpmorgan chase bank na administrative agent lenders issuers incorporated reference exhibit 101 company’s current report form 8k filed june 25 2020 file 137816 1010 amended restated charter strategic council awac joint venture incorporated reference exhibit 101 company’s current report form 8k filed november 4 2016 file 137816 1011 side letter november 1 2016 alcoa corporation alumina limited clarifying transfer restrictions incorporated reference exhibit 103 company’s current report form 8k filed november 4 2016 file 137816 1012 third amended restated limited liability company agreement alcoa world alumina llc dated november 1 2016 among alcoa usa corp asc alumina international holdings pty ltd alumina usa inc reynolds metals company llc reynolds metals exploration inc incorporated reference exhibit 102 company’s current report form 8k filed november 4 2016 file 137816 1013 shareholders’ agreement alcoa australia limited alcoa australian pty ltd alumina limited originally dated may 10 1996 incorporated reference exhibit 1013 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1014 kwinana state agreement 1961 incorporated reference exhibit 107 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1015 pinjarra state agreement 1969 incorporated reference exhibit 108 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1016 wagerup state agreement 1978 incorporated reference exhibit 109 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 1017 alumina refinery agreement 1987 incorporated reference exhibit 1010 amendment 2 company’s registration statement form 10 filed september 1 2016 file 137816 exhibit description exhibit 1018 framework agreement dated june 26 2019 saudi arabian mining company ma’aden alcoa corporation incorporated reference exhibit 101 company’s quarterly report form 10q filed july 31 2019 file 137816 1019 amendment restatement deed dated june 26 2019 relating aluminium project framework shareholders’ agreement originally dated december 20 2009 saudi arabian mining company ma’aden alcoa corporation incorporated reference exhibit 102 company’s quarterly report form 10q filed july 31 2019 file 137816 1020 alcoa corporation 2016 stock incentive plan amended restated may 9 2018 incorporated reference exhibit 991 company’s current report form 8k filed may 15 2018 file 137816 1021 alcoa usa corp deferred compensation plan incorporated reference exhibit 102 amendment 1 company’s registration statement form 10 filed august 12 2016 file 137816 1022 alcoa usa corp nonqualified supplemental retirement plan c incorporated reference exhibit 103 amendment 1 company’s registration statement form 10 filed august 12 2016 file 137816 1023 amendment 1 alcoa usa corp nonqualified supplemental retirement plan c effective january 1 2021 incorporated reference exhibit 109 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1024 form amended restated indemnification agreement alcoa corporation individual directors officers effective august 1 2017 incorporated reference exhibit 105 company’s quarterly report form 10q filed august 3 2017 file 137816 1025 alcoa corporation annual cash incentive compensation plan amended restated effective february 21 2018 incorporated referenced exhibit 10 company’s quarterly report form 10q filed may 9 2018 file 137816 1026 alcoa corporation amended restated change control severance plan dated july 30 2019 incorporated reference exhibit 105 company’s quarterly report form 10q filed october 31 2019 file 137816 1027 amended restated form alcoa corporation chief executive officer chief financial officer executive severance agreement effective july 30 2019 incorporated reference exhibit 106 company’s quarterly report form 10q filed october 31 2019 file 137816 1028 amended restated form alcoa corporation corporate officer executive severance agreement effective july 30 2019 incorporated reference exhibit 107 company’s quarterly report form 10q filed october 31 2019 file 137816 1029 terms conditions employee stock option awards incorporated reference exhibit 1030 company’s registration statement form s1 filed january 18 2017 file 333215606 1030 terms conditions employee stock option awards dated january 24 2018 incorporated reference exhibit 1030 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 1031 terms conditions employee restricted share units effective october 1 2019 incorporated reference exhibit 102 company’s quarterly report form 10q filed october 31 2019 file 137816 1032 terms conditions employee stock option awards effective october 1 2019 incorporated reference exhibit 103 company’s quarterly report form 10q filed october 31 2019 file 137816 1033 terms conditions employee special retention awards effective october 1 2019 incorporated reference exhibit 104 company’s quarterly report form 10q filed october 31 2019 file 137816 1034 letter agreement dated december 17 2018 john slaven alcoa corporation incorporated reference exhibit 1036 company’s annual report form 10k fiscal year ended december 31 2019 filed february 21 2020 137816 exhibit description exhibit 1035 alcoa corporation nonemployee director compensation policy effective september 24 2020 incorporated reference exhibit 101 company’s quarterly report form 10q filed october 30 2020 file 137816 1036 terms conditions deferred fee restricted share units director awards effective december 1 2016 incorporated reference exhibit 1034 company’s registration statement form s1 filed january 18 2017 file 333215606 1037 terms conditions restricted share units annual director awards effective december 1 2016 incorporated reference exhibit 1035 company’s registration statement form s1 filed january 18 2017 file 333215606 1038 terms conditions restricted share units annual director awards effective may 9 2017 incorporated reference exhibit 103 company’s quarterly report form 10q filed august 3 2017 file 137816 1039 alcoa corporation 2016 deferred fee plan directors effective november 1 2016 amended restated december 5 2018 incorporated reference exhibit 1037 company’s annual report form 10k fiscal year ended december 31 2019 filed february 26 2019 137816 211 list subsidiaries 231 consent pricewaterhousecoopers llp 311 certification principal executive officer required securities exchange commission rule 13a14a 15d14a 312 certification principal financial officer required securities exchange commission rule 13a14a 15d14a 321 certification principal executive officer required rule 13a14b rule 15d14b section 1350 chapter 63 title 18 united states code 322 certification principal financial officer required rule 13a14b rule 15d14b section 1350 chapter 63 title 18 united states code 951 mine safety disclosure 991 amended restated grantor trust agreement alcoa corporation wells fargo bank national association effective october 24 2017 incorporated reference exhibit 991 company’s annual report form 10k year ended december 31 2017 filed february 23 2018 file 137816 101ins inline xbrl instance document 101sch inline xbrl taxonomy extension schema document 101cal inline xbrl taxonomy extension calculation linkbase document 101def inline xbrl taxonomy extension definition linkbase document 101lab inline xbrl taxonomy extension label linkbase document 101pre inline xbrl taxonomy extension presentation linkbase document cover page interactive data file formatted inline xbrl contained exhibit 101 certain schedules exhibits appendices omitted accordance item 601a5 regulation sk company hereby undertakes furnish copies omitted schedule exhibit appendix commission upon request denotes management contracts compensatory plans arrangements required filed exhibits form 10k item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities indicated february 25 2021 roy c harvey william f oplinger roy c harvey president chief executive officer director principal executive officer director william f oplinger executive vice president chief financial officer principal financial officer molly beerman molly beerman senior vice president controller principal accounting officer steven w williams steven w williams director chairman board directors mary anne citrino mary anne citrino director pasquale fiore pasquale fiore director timothy p flynn timothy p flynn director kathryn fuller kathryn fuller director james hughes james hughes director michael g morris michael g morris director james e nevels james e nevels director carol l roberts carol l roberts director suzanne sitherwood suzanne sitherwood director ernesto zedillo ernesto zedillo director