Company Quick10K Filing
Cleveland-Cliffs
Price7.13 EPS3
Shares288 P/E2
MCap2,052 P/FCF5
Net Debt1,839 EBIT862
TEV3,890 TEV/EBIT5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-10-23
10-Q 2019-06-30 Filed 2019-07-19
10-Q 2019-03-31 Filed 2019-04-25
10-K 2018-12-31 Filed 2019-02-08
10-Q 2018-09-30 Filed 2018-10-19
10-Q 2018-06-30 Filed 2018-07-24
10-Q 2018-03-31 Filed 2018-04-24
10-K 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-10-23
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-09
10-Q 2016-09-30 Filed 2016-10-27
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-24
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-29
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-25
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-07-24
10-Q 2014-03-31 Filed 2014-04-25
10-K 2013-12-31 Filed 2014-02-14
10-Q 2013-09-30 Filed 2013-10-25
10-Q 2013-06-30 Filed 2013-07-26
10-Q 2013-03-31 Filed 2013-04-25
10-K 2012-12-31 Filed 2013-02-12
10-Q 2012-09-30 Filed 2012-10-25
10-Q 2012-06-30 Filed 2012-07-26
10-Q 2012-03-31 Filed 2012-04-26
10-K 2011-12-31 Filed 2012-02-16
10-Q 2011-09-30 Filed 2011-11-01
10-Q 2011-06-30 Filed 2011-07-28
10-Q 2011-03-31 Filed 2011-04-29
10-K 2010-12-31 Filed 2011-02-17
10-Q 2010-09-30 Filed 2010-10-29
10-Q 2010-06-30 Filed 2010-07-29
10-Q 2010-03-31 Filed 2010-04-29
10-K 2009-12-31 Filed 2010-02-18
8-K 2020-05-11 Earnings, Exhibits
8-K 2020-04-24 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-04-22 Officers, Shareholder Vote, Exhibits
8-K 2020-04-21 Other Events, Exhibits
8-K 2020-04-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-04-15 Earnings, Regulation FD, Other Events, Exhibits
8-K 2020-04-15 Other Events, Exhibits
8-K 2020-03-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-03-16 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-03-13 Enter Agreement, M&A, Off-BS Arrangement, Officers, Other Events, Exhibits
8-K 2020-03-10 Shareholder Vote, Other Events, Exhibits
8-K 2020-03-02 Other Events, Exhibits
8-K 2020-03-02 Other Events, Exhibits
8-K 2020-02-26 Other Events, Exhibits
8-K 2020-02-26 Other Events, Exhibits
8-K 2020-02-20 Earnings, Exhibits
8-K 2019-12-03 Other Events, Exhibits
8-K 2019-12-02 Enter Agreement, Exhibits
8-K 2019-10-23 Earnings, Exhibits
8-K 2019-09-10 Other Events, Exhibits
8-K 2019-07-19 Earnings, Exhibits
8-K 2019-06-13 Other Events
8-K 2019-05-13 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-04-29 Other Events, Exhibits
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-04-24 Shareholder Vote
8-K 2019-03-27
8-K 2019-03-04 Officers
8-K 2019-02-12 Officers, Exhibits
8-K 2019-02-08 Earnings, Exhibits
8-K 2019-01-28 Officers, Exhibits
8-K 2018-12-11 Officers, Exhibits
8-K 2018-10-19 Earnings, Exhibits
8-K 2018-07-20 Earnings, Exhibits
8-K 2018-04-24 Shareholder Vote
8-K 2018-04-20 Earnings, Exhibits
8-K 2018-04-06 Exit Costs
8-K 2018-02-28 Enter Agreement, Off-BS Arrangement
8-K 2018-01-25 Earnings, Exhibits

CLF 10Q Quarterly Report

Part I
Item 1. Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
Note 2 - Supplementary Financial Statement Information
Note 3 - Acquisition of Ak Steel
Note 4 - Segment Reporting
Note 5 - Property, Plant and Equipment
Note 6 - Goodwill and Intangible Assets and Liabilities
Note 7 - Debt and Credit Facilities
Note 8 - Leases
Note 9 - Fair Value Measurements
Note 10 - Pensions and Other Postretirement Benefits
Note 11 - Stock Compensation Plans
Note 12 - Income Taxes
Note 13 - Asset Retirement Obligations
Note 14 - Derivative Instruments and Hedging Activities
Note 15 - Shareholders' Equity
Note 16 - Accumulated Other Comprehensive Loss
Note 17 - Related Parties
Note 18 - Variable Interest Entities
Note 19 - Earnings per Share
Note 20 - Commitments and Contingencies
Note 21 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-4.1 clf-202033110xqex41.htm
EX-4.2 clf-202033110xqex42.htm
EX-4.3 clf-202033110xqex43.htm
EX-4.4 clf-202033110xqex44.htm
EX-4.5 clf-202033110xqex45.htm
EX-4.6 clf-202033110xqex46.htm
EX-4.7 clf-202033110xqex47.htm
EX-4.8 clf-202033110xqex48.htm
EX-10.1 clf-202033110xqex101.htm
EX-10.2 clf-202033110xqex102.htm
EX-22.1 clf-202033110xqex221.htm
EX-31.1 clf-202033110xqex311.htm
EX-31.2 clf-202033110xqex312.htm
EX-32.1 clf-202033110xqex321.htm
EX-32.2 clf-202033110xqex322.htm
EX-95 clf-202033110xqex95.htm

Cleveland-Cliffs Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1511841-22012201420172020
Assets, Equity
1.6-0.7-3.0-5.4-7.7-10.02012201420172020
Rev, G Profit, Net Income
0.70.50.30.0-0.2-0.42012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             .
Commission File Number: 1-8944
clf-logoa01a01a11.jpg
CLEVELAND-CLIFFS INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Ohio
 
34-1464672
 
 
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
200 Public Square,
Cleveland,
Ohio
 
44114-2315
 
 
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code: (216694-5700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common shares, par value $0.125 per share
 
CLF
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes                                           No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes                                           No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                                          No  
The number of shares outstanding of the registrant’s common shares, par value $0.125 per share, was 398,609,923 as of May 8, 2020.





TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
Page Number
 
 
 
 
 
 
DEFINITIONS
 
 
 
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
Statements of Unaudited Condensed Consolidated Financial Position as of March 31, 2020 and December 31, 2019
 
 
 
 
Statements of Unaudited Condensed Consolidated Operations for the Three Months Ended March 31, 2020 and 2019
 
 
 
 
Statements of Unaudited Condensed Consolidated Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019
 
 
 
 
Statements of Unaudited Condensed Consolidated Cash Flows for the Three Months Ended March 31, 2020 and 2019
 
 
 
 
Statements of Unaudited Condensed Consolidated Changes in Equity for the Three Months Ended March 31, 2020 and 2019
 
 
 
 
Notes to Unaudited Condensed Consolidated Financial Statements
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
 
 
 
 
 
Signatures
 
 
 
 
 
 




DEFINITIONS
The following abbreviations or acronyms are used in the text. References in this report to the “Company,” “we,” “us,” “our” and “Cliffs” are to Cleveland-Cliffs Inc. and subsidiaries, collectively, unless stated otherwise or the context indicates otherwise.
Abbreviation or acronym
 
Term
A&R 2015 Equity Plan
 
Cliffs Natural Resources Inc. Amended and Restated 2015 Equity and Incentive Compensation Plan
ABL Facility
 
Asset-Based Revolving Credit Agreement, by and among Bank of America, N.A., as Agent, the Lenders that are parties thereto, as the Lenders, and Cleveland-Cliffs Inc., as Parent and a Borrower, dated as of March 13, 2020, as amended
Adjusted EBITDA
 
EBITDA excluding certain items such as EBITDA of noncontrolling interests, impacts of discontinued operations, extinguishment of debt, severance, acquisition costs, amortization of inventory step-up and intersegment corporate allocations of selling, general and administrative costs
AK Coal
 
AK Coal Resources, Inc., an indirect, wholly owned subsidiary of AK Steel, and related coal mining operations
AK Steel
 
AK Steel Holding Corporation and its consolidated subsidiaries, including AK Steel Corporation, its direct, wholly owned subsidiary, collectively, unless stated otherwise or the context indicates otherwise
AK Tube
 
AK Tube LLC, an indirect, wholly owned subsidiary of AK Steel
AMT
 
Alternative Minimum Tax
AOCI
 
Accumulated Other Comprehensive Income
ArcelorMittal USA
 
ArcelorMittal USA LLC (including many of its United States affiliates, subsidiaries and representatives. References to ArcelorMittal USA comprise all such relationships unless a specific ArcelorMittal USA entity is referenced)
ASC
 
Accounting Standards Codification
Atlantic Basin pellet premium
 
Platts Atlantic Basin Blast Furnace 65% Fe pellet premium
Board
 
The Board of Directors of Cleveland-Cliffs Inc.
CARES Act
 
Coronavirus Aid, Relief, and Economic Security Act
CECL
 
Current Expected Credit Losses
CERCLA
 
Comprehensive Environmental Response, Compensation and Liability Act
Compensation Committee
 
Compensation and Organization Committee of the Board
COVID-19
 
A novel strain of coronavirus that the World Health Organization declared a global pandemic in March 2020
Dodd-Frank Act
 
Dodd-Frank Wall Street Reform and Consumer Protection Act
DR-grade
 
Direct Reduction-grade
DRI
 
Direct Reduced Iron
EAF
 
Electric Arc Furnace
EBITDA
 
Earnings before interest, taxes, depreciation and amortization
Empire
 
Empire Iron Mining Partnership
EPA
 
U.S. Environmental Protection Agency
ERISA
 
Employee Retirement Income Security Act of 1974, as amended
ERM
 
Enterprise Risk Management
Exchange Act
 
Securities Exchange Act of 1934, as amended
Fe
 
Iron
Former ABL Facility
 
Amended and Restated Syndicated Facility Agreement by and among Bank of America, N.A., as Administrative Agent, the Lenders that are parties thereto, as the Lenders, Cleveland-Cliffs Inc., as Parent and a Borrower, and the Subsidiaries of Parent party thereto, as Borrowers, dated as of March 30, 2015, as amended and restated as of February 28, 2018, and as further amended
GAAP
 
Accounting principles generally accepted in the United States
HBI
 
Hot briquetted iron
Hibbing
 
Hibbing Taconite Company, an unincorporated joint venture
Hot-rolled coil steel price
 
Estimated average annual daily market price for hot-rolled coil steel
IRBs
 
Industrial Revenue Bonds
LIBOR
 
London Interbank Offered Rate
LIFO
 
Last-in, first-out
Long ton
 
2,240 pounds
Merger
 
The merger of Merger Sub with and into AK Steel, with AK Steel surviving the merger as a wholly owned subsidiary of Cliffs, subject to the terms and conditions set forth in the Merger Agreement, effective as of March 13, 2020
Merger Agreement
 
Agreement and Plan of Merger, dated as of December 2, 2019, among Cliffs, AK Steel and Merger Sub
Merger Sub
 
Pepper Merger Sub Inc., a direct, wholly owned subsidiary of Cliffs prior to the Merger
Metric ton
 
2,205 pounds
MMBtu
 
Million British Thermal Units
MSHA
 
U.S. Mine Safety and Health Administration
Net ton
 
2,000 pounds
Northshore
 
Northshore Mining Company
OPEB
 
Other postretirement benefits
Platts 62% Price
 
Platts IODEX 62% Fe Fines cost and freight North China
PPI
 
Producer Price Indices
Precision Partners
 
PPHC Holdings, LLC, an indirect, wholly owned subsidiary of AK Steel
RCRA
 
Resource Conservation and Recovery Act
SEC
 
U.S. Securities and Exchange Commission

1



Abbreviation or acronym
 
Term
Section 232
 
Section 232 of the Trade Expansion Act of 1962, as amended
Securities Act
 
Securities Act of 1933, as amended
SunCoke Middletown
 
Middletown Coke Company, LLC, a subsidiary of SunCoke Energy, Inc.
Tilden
 
Tilden Mining Company L.C.
Topic 805
 
ASC Topic 805, Business Combinations
Topic 815
 
ASC Topic 815, Derivatives and Hedging
TSR
 
Total shareholder return
United Taconite
 
United Taconite LLC
U.S.
 
United States of America
U.S. Steel
 
Ontario Hibbing Company, a subsidiary of United States Steel Corporation and a participant in Hibbing
USMCA
 
United States-Mexico-Canada Agreement
USW
 
United Steelworkers
VIE
 
Variable Interest Entity

2



PART I
Item 1.
Financial Statements

3



Statements of Unaudited Condensed Consolidated Financial Position
Cleveland-Cliffs Inc. and Subsidiaries
 
(In Millions)
 
March 31,
2020
 
December 31,
2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
186.9

 
$
352.6

Accounts receivable, net
560.8

 
94.0

Inventories
2,148.8

 
317.4

Income tax receivable, current
61.7

 
58.6

Other current assets
107.4

 
75.3

Total current assets
3,065.6

 
897.9

Non-current assets:
 
 
 
Property, plant and equipment, net
4,549.8

 
1,929.0

Goodwill
143.3

 
2.1

Intangible assets, net
210.0

 
48.1

Income tax receivable, non-current
4.1

 
62.7

Deferred income taxes
486.4

 
459.5

Right-of-use asset, operating lease
238.0

 
11.7

Other non-current assets
215.1

 
92.8

TOTAL ASSETS
$
8,912.3

 
$
3,503.8

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
825.3

 
$
193.2

Accrued liabilities
299.8

 
126.3

Other current liabilities
245.7

 
89.9

Total current liabilities
1,370.8

 
409.4

Non-current liabilities:
 
 
 
Long-term debt
4,357.1

 
2,113.8

Operating lease liability, non-current
201.2

 
10.5

Intangible liability, net
137.9

 

Pension and OPEB liabilities
1,171.6

 
311.5

Asset retirement obligations
179.2

 
163.2

Other non-current liabilities
263.5

 
137.5

TOTAL LIABILITIES
7,681.3

 
3,145.9

Commitments and contingencies (See Note 20)

 

Equity:
 
 
 
Common shares - par value $0.125 per share
 
 
 
Authorized - 600,000,000 shares (2019 - 600,000,000 shares);
 
 
 
Issued - 428,645,866 shares (2019 - 301,886,794 shares);
 
 
 
Outstanding - 398,587,083 shares (2019 - 270,084,005 shares)
53.6

 
37.7

Capital in excess of par value of shares
4,450.2

 
3,872.1

Retained deficit
(2,918.5
)
 
(2,842.4
)
Cost of 30,058,783 common shares in treasury (2019 - 31,802,789 shares)
(365.0
)
 
(390.7
)
Accumulated other comprehensive loss
(317.1
)
 
(318.8
)
Total Cliffs shareholders' equity
903.2

 
357.9

Noncontrolling interest
327.8

 

TOTAL EQUITY
1,231.0

 
357.9

TOTAL LIABILITIES AND EQUITY
$
8,912.3

 
$
3,503.8

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4



Statements of Unaudited Condensed Consolidated Operations
Cleveland-Cliffs Inc. and Subsidiaries
 
(In Millions, Except Per Share Amounts)
 
Three Months Ended
March 31,
 
2020
 
2019
Revenues
$
324.5

 
$
157.0

Realization of deferred revenue
34.6

 

Operating costs:
 
 
 
Cost of goods sold
(356.0
)
 
(126.1
)
Selling, general and administrative expenses
(26.1
)
 
(27.3
)
Acquisition-related costs
(42.5
)
 

Miscellaneous – net
(13.3
)
 
(4.4
)
Total operating costs
(437.9
)
 
(157.8
)
Operating loss
(78.8
)
 
(0.8
)
Other income (expense):
 
 
 
Interest expense, net
(31.0
)
 
(25.1
)
Other non-operating income
9.2

 
0.1

Total other expense
(21.8
)
 
(25.0
)
Loss from continuing operations before income taxes
(100.6
)
 
(25.8
)
Income tax benefit
51.4

 
3.7

Loss from continuing operations
(49.2
)
 
(22.1
)
Income from discontinued operations, net of tax
0.6

 

Net loss
(48.6
)
 
(22.1
)
Income attributable to noncontrolling interest
(3.5
)
 

Net loss attributable to Cliffs shareholders
$
(52.1
)
 
$
(22.1
)
 
 
 
 
Loss per common share attributable to Cliffs shareholders - basic
 
 
 
Continuing operations
$
(0.18
)
 
$
(0.08
)
Discontinued operations

 

 
$
(0.18
)
 
$
(0.08
)
Loss per common share attributable to Cliffs shareholders - diluted
 
 
 
Continuing operations
$
(0.18
)
 
$
(0.08
)
Discontinued operations

 

 
$
(0.18
)
 
$
(0.08
)
Average number of shares (in thousands)
 
 
 
Basic
297,515

 
289,525

Diluted
297,515

 
289,525

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5



Statements of Unaudited Condensed Consolidated Comprehensive Loss
Cleveland-Cliffs Inc. and Subsidiaries
 
(In Millions)
 
Three Months Ended
March 31,
 
2020
 
2019
Net loss
$
(48.6
)
 
$
(22.1
)
Other comprehensive income (loss):
 
 
 
Changes in pension and OPEB, net of tax
5.6

 
5.7

Changes in foreign currency translation
(0.9
)
 

Changes in derivative financial instruments, net of tax
(3.0
)
 
2.7

Total other comprehensive income
1.7

 
8.4

Comprehensive loss
(46.9
)
 
(13.7
)
Comprehensive income attributable to noncontrolling interests
(3.5
)
 

Comprehensive loss attributable to Cliffs shareholders
$
(50.4
)
 
$
(13.7
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6



Statements of Unaudited Condensed Consolidated Cash Flows
Cleveland-Cliffs Inc. and Subsidiaries
 
(In Millions)
 
Three Months Ended
March 31,
 
2020
 
2019
OPERATING ACTIVITIES
 
 
 
Net loss
$
(48.6
)
 
$
(22.1
)
Adjustments to reconcile net loss to net cash used by operating activities:
 
 
 
Depreciation, depletion and amortization
34.4

 
19.9

Deferred income taxes
(47.5
)
 
(4.1
)
Loss (gain) on derivatives
32.0

 
(5.7
)
Other
(31.6
)
 
13.9

Changes in operating assets and liabilities, net of business combination:
 
 
 
Receivables and other assets
254.1

 
204.0

Inventories
(244.1
)
 
(228.9
)
Payables, accrued expenses and other liabilities
(109.2
)
 
(88.2
)
Net cash used by operating activities
(160.5
)
 
(111.2
)
INVESTING ACTIVITIES
 
 
 
Purchase of property, plant and equipment
(138.1
)
 
(134.1
)
Acquisition of AK Steel, net of cash acquired
(869.3
)
 

Other investing activities
(0.1
)
 
8.5

Net cash used by investing activities
(1,007.5
)
 
(125.6
)
FINANCING ACTIVITIES
 
 
 
Repurchase of common shares

 
(124.3
)
Dividends paid
(16.9
)
 
(14.8
)
Proceeds from issuance of debt
716.2

 

Debt issuance costs
(44.4
)
 

Repurchase of debt
(429.9
)
 
(10.3
)
Borrowings under credit facilities
800.0

 

Other financing activities
(19.9
)
 
(8.4
)
Net cash provided (used) by financing activities
1,005.1

 
(157.8
)
Decrease in cash and cash equivalents, including cash classified within other current assets related to discontinued operations
(162.9
)
 
(394.6
)
Less: increase (decrease) in cash and cash equivalents from discontinued operations, classified within other current assets
2.8

 
(1.6
)
Net decrease in cash and cash equivalents
(165.7
)
 
(393.0
)
Cash and cash equivalents at beginning of period
352.6

 
823.2

Cash and cash equivalents at end of period
$
186.9

 
$
430.2

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7



Statements of Unaudited Condensed Consolidated Changes in Equity
Cleveland-Cliffs Inc. and Subsidiaries
 
(In Millions)
 
Number
of
Common
Shares Outstanding
 
Par Value of Common
Shares Issued
 
Capital in
Excess of
Par Value
of Shares
 
Retained
Deficit
 
Common
Shares
in
Treasury
 
AOCI
(Loss)
 
Non-controlling Interests
 
Total
December 31, 2019
270.1

 
$
37.7

 
$
3,872.1

 
$
(2,842.4
)
 
$
(390.7
)
 
$
(318.8
)
 
$

 
$
357.9

Comprehensive income (loss)

 

 

 
(52.1
)
 

 
1.7

 
3.5

 
(46.9
)
Stock and other incentive plans
1.7

 

 
(23.6
)
 

 
25.7

 

 

 
2.1

Acquisition of AK Steel
126.8

 
15.9

 
601.7

 

 

 

 
329.8

 
947.4

Common stock dividends ($0.06 per share)

 

 

 
(24.0
)
 

 

 

 
(24.0
)
Net distributions to noncontrolling interests

 

 

 

 

 

 
(5.5
)
 
(5.5
)
March 31, 2020
398.6

 
$
53.6

 
$
4,450.2

 
$
(2,918.5
)
 
$
(365.0
)
 
$
(317.1
)
 
$
327.8

 
$
1,231.0

 
(In Millions)
 
Number of
Common
Shares Outstanding
 
Par Value of Common
Shares Issued
 
Capital in
Excess of
Par Value
of Shares
 
Retained
Deficit
 
Common
Shares
in
Treasury
 
AOCI
(Loss)
 
Total
December 31, 2018
292.6

 
$
37.7

 
$
3,916.7

 
$
(3,060.2
)
 
$
(186.1
)
 
$
(283.9
)
 
$
424.2

Comprehensive income (loss)

 

 

 
(22.1
)
 

 
8.4

 
(13.7
)
Stock and other incentive plans
1.7

 

 
(56.5
)
 

 
46.5

 

 
(10.0
)
Common stock repurchases
(11.5
)
 

 

 

 
(124.3
)
 

 
(124.3
)
Common stock dividends ($0.05 per share)

 

 

 
(14.5
)
 

 

 
(14.5
)
March 31, 2019
282.8

 
$
37.7

 
$
3,860.2

 
$
(3,096.8
)
 
$
(263.9
)
 
$
(275.5
)
 
$
261.7


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8



Cleveland-Cliffs Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business, Consolidation and Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with SEC rules and regulations and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations, comprehensive income (loss), cash flows and changes in equity for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020 or any other future period. Due to the acquisition of AK Steel, certain balances have become material and are no longer being condensed in our Statements of Unaudited Condensed Consolidated Financial Position, such as balances for Right-of-use asset, operating lease and Operating lease liability, non-current. As a result, certain prior period amounts have been reclassified to conform with the current year presentation. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Acquisition of AK Steel
On March 13, 2020, we consummated the Merger, pursuant to which, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub was merged with and into AK Steel, with AK Steel surviving the Merger as a wholly owned subsidiary of Cliffs. Refer to NOTE 3 - ACQUISITION OF AK STEEL for further information.
AK Steel is a leading North American producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing markets. The acquisition of AK Steel has transformed us into a vertically integrated producer of value-added iron ore and steel products.
COVID-19
In response to the COVID-19 pandemic, we have made various operational changes to adjust to the demand for our products. Although steel and iron ore are considered “essential” by the states in which we operate, certain of our facilities, including Dearborn Works, all Precision Partners facilities and approximately 65% of AK Tube production, have been temporarily idled until market conditions improve. We have also temporarily shut down construction activities at the HBI production plant. On April 13, 2020, we announced the temporarily idling of two of our iron ore mining operations, Northshore in Minnesota and Tilden in Michigan, and we expect them to restart in July 2020 and August 2020, respectively. Mansfield Works is idled for an unknown, extended period of time, and AK Coal has been indefinitely idled and held for sale. We are also moving forward with the permanent idle of the Dearborn Works hot strip mill, anneal and temper operations. Finally, the Hibbing mine, of which we are a minority participant, has been idled by the joint venture.
Basis of Consolidation
The unaudited condensed consolidated financial statements consolidate our accounts and the accounts of our wholly owned subsidiaries, all subsidiaries in which we have a controlling interest and two variable interest entities for which we are the primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation.
Reportable Segments
The acquisition of AK Steel has transformed us into a vertically integrated producer of value-added iron ore and steel products and we are organized according to our differentiated products in two reportable segments - the new Steel and Manufacturing segment and the Mining and Pelletizing segment. Our new Steel and Manufacturing segment includes the assets acquired through the acquisition of AK Steel and our previously reported Metallics segment, and our Mining and Pelletizing segment includes our three active operating mines and our indefinitely idled mine.

9



Significant Accounting Policies
A detailed description of our significant accounting policies can be found in the audited financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K filed with the SEC. Due to the completion of our acquisition of AK Steel, there have been several changes in our significant accounting policies from those disclosed therein. The significant accounting policies requiring updates have been included within the disclosures below.
Revenue Recognition
Steel and Manufacturing
We generate our revenue through product sales, in which shipping terms generally indicate when we have fulfilled our performance obligations and transferred control of products to our customer. Our revenue transactions consist of a single performance obligation to transfer promised goods. We have contracts with a significant portion of our customers. These contracts usually define the mechanism for determining the sales price, which is normally fixed upon transfer of control, but the contracts do not impose a specific quantity on either party. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders or other written instructions we receive from the customer. Spot market sales are made through purchase orders or other written instructions. For sales with shipping terms that transfer control at the destination point, we consider our performance obligation is complete and recognize revenue when the customer receives the goods. For sales with shipping terms that transfer control at the shipping point with us bearing responsibility for freight costs to the destination, we determine that we fulfilled a single performance obligation and recognize revenue when we ship the goods.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring product. We reduce the amount of revenue recognized for estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets we serve. Sales taxes collected from customers are excluded from revenues.
Mining and Pelletizing
We sell a single product, iron ore pellets, in the North American market. Revenue is recognized generally when iron ore is delivered to our customers. Revenue is measured at the point that control transfers and represents the amount of consideration we expect to receive in exchange for transferring goods. We offer standard payment terms to our customers, generally requiring settlement within 30 days.
We enter into supply contracts of varying lengths to provide customers iron ore pellets to use in their blast furnaces. Blast furnaces must run continuously with a constant feed of iron ore in order to be most efficient. As a result, we ship iron ore in large quantities for storage and use by customers at a later date. Customers do not simultaneously receive and consume the benefits of the iron ore. Based on our assessment of the factors that indicate the pattern of satisfaction, we transfer control of the iron ore at a point in time upon shipment or delivery of the product. The customer is able to direct the use of, and obtain substantially all of the benefits from, the product at the time the product is delivered.
Most of our customer supply agreements specify a provisional price, which is used for initial billing and cash collection. Revenue is calculated using the expected revenue rate at the point when control transfers. The final settlement includes market inputs for a specified period of time, which may vary by customer, but typically include one or more of the following: Platts 62% Price, Atlantic Basin pellet premium and Platts international indexed freight rates. Changes in the expected revenue rate from the date control transfers through final settlement of contract terms is recorded in accordance with Topic 815. Refer to NOTE 14 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information on how our estimated and final revenue rates are determined.
A supply agreement with a customer provides for supplemental revenue or refunds based on the hot-rolled coil steel price in the year the iron ore is consumed in the customer’s blast furnaces. As control transfers prior to consumption, the supplemental revenue is recorded in accordance with Topic 815. Refer to NOTE 14 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information on supplemental revenue or refunds.
Included within Revenues related to Topic 815 is a derivative loss of $26.8 million and a derivative gain of $5.5 million for the three months ended March 31, 2020 and 2019, respectively.
Allowance for Doubtful Accounts
We establish provisions for expected lifetime losses on accounts receivable at the time a receivable is recorded based on historical experience, customer credit quality and forecasted economic conditions. We regularly review our accounts receivable balances and the allowance for credit loss and establish or adjust the allowance as necessary using

10



the specific identification method in accordance with CECL. We evaluate the aggregation and risk characteristics of receivable pools and develop loss rates that reflect historical collections, current forecasts of future economic conditions over the time horizon we are exposed to credit risk, and payment terms or conditions that may materially affect future forecasts. We expect credit losses associated with major auto companies to be lower than other customer pools.
Deferred Revenue
The table below summarizes our deferred revenue balances:
 
(In Millions)
 
Deferred Revenue (Current)
 
Deferred Revenue (Long-Term)
 
2020
 
2019
 
2020
 
2019
Opening balance as of January 1
$
22.1

 
$
21.0

 
$
25.7

 
$
38.5

Decrease
(21.8
)
 
(2.9
)
 
(25.7
)
 

Closing balance as of March 31
$
0.3

 
$
18.1

 
$

 
$
38.5


One of our iron ore pellet sales agreements required supplemental payments to be paid by a customer during the period from 2009 through 2013. Installment amounts received under this arrangement in excess of sales were classified as deferred revenue in the Statements of Consolidated Financial Position upon receipt of payment and the revenue was recognized over the life of the supply agreement, which had extended until 2022, in equal annual installments. As a result of the termination of the AK Steel iron ore pellet sales agreement, we realized $34.6 million of deferred revenue, which was recognized within Realization of deferred revenue in the Statements of Unaudited Condensed Consolidated Operations, during the three months ended March 31, 2020.
We have certain other sales agreements that require customers to pay in advance. Payments received on these agreements prior to revenue being recognized is recorded as deferred revenue in Other current liabilities.
Inventories
Steel and Manufacturing    
Inventories are stated at the lower of cost or net realizable value. The Steel and Manufacturing segment determines cost using average cost, excluding depreciation and amortization.
Mining and Pelletizing
Inventories are stated at the lower of cost or market. The Mining and Pelletizing segment determines cost using the LIFO method.
Property, Plant and Equipment
Our properties are stated at the lower of cost less accumulated depreciation or fair value. Depreciation of plant and equipment is computed principally by the straight-line method based on estimated useful lives. Depreciation continues to be recognized when operations are idled temporarily. Depreciation and depletion is recorded over the following estimated useful lives:
Asset Class
 
Basis
 
Life
Land, land improvements and mineral rights
 
 
 
 
Land and mineral rights
 
Units of production
 
Life of mine
Land improvements
 
Straight line
 
20 to 45 years
Buildings
 
Straight line
 
40 to 45 years
Mining and Pelletizing equipment
 
Straight line/Double declining balance
 
3 to 20 years
Steel and Manufacturing equipment
 
Straight line/Double declining balance
 
3 to 20 years

Refer to NOTE 5 - PROPERTY, PLANT AND EQUIPMENT for further information.

11



Goodwill
Goodwill represents the excess purchase price paid over the fair value of the net assets during an acquisition. Goodwill is not amortized but is assessed for impairment on an annual basis on October 1st (or more frequently if necessary).  
Other Intangible Assets and Liabilities
Intangible assets and liabilities are subject to periodic amortization on a straight-line basis over their estimated useful lives as follows:
Type
 
Basis
 
Useful Life
Intangible assets, net
 
 
 
 
Customer relationships
 
Straight line
 
18 years
Developed technology
 
Straight line
 
17 years
Trade names and trademarks
 
Straight line
 
10 years
Mining permits
 
Straight line
 
Life of mine
Intangible liability, net
 
 
 
 
Above-market supply contract
 
Straight line
 
13 years

We monitor conditions that may affect the carrying value of our long-lived tangible and intangible assets when events and circumstances indicate that the carrying value of the asset groups may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable, independent cash flows are available ("asset group"). An impairment loss exists when the carrying value of the asset group is greater than its fair value. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group. Fair value can be determined using a market approach, income approach or cost approach.
Refer to NOTE 6 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES for further information.
Leases
We determine if an arrangement contains a lease at inception. We recognize right-of-use assets and lease liabilities associated with leases based on the present value of the future minimum lease payments over the lease term at the commencement date. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that the option will be exercised. For short-term leases (leases with an initial lease term of 12 months or less), right-of-use assets and lease liabilities are not recognized in the consolidated balance sheet, and lease expense is recognized on a straight-line basis over the lease term. In addition, we have agreements with both lease and non-lease components for which we have elected the practical expedient, for each underlying class of asset, to not separate the components.
Refer to NOTE 8 - LEASES for further information.
Investments in Affiliates
We have investments in several businesses accounted for using the equity method of accounting. We review an investment for impairment when circumstances indicate that a loss in value below its carrying amount is other than temporary. Investees and equity ownership percentages are presented below:
Investee
 
Segment Reported Within
 
Equity Ownership Percentage
Combined Metals of Chicago, LLC
 
Steel and Manufacturing
 
40.0%
Hibbing Taconite Company
 
Mining and Pelletizing
 
23.0%
Spartan Steel Coating, LLC
 
Steel and Manufacturing
 
48.0%


12



Recent Accounting Pronouncements
Issued and Adopted
On March 2, 2020, the SEC issued a final rule that amended the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rule 3-10, which required separate financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The final rule replaces the previous requirement under Rule 3-10 to provide condensed consolidating financial information in the registrant’s financial statements with a requirement to provide alternative financial disclosures (which include summarized financial information of the parent and any issuers and guarantors, as well as other qualitative disclosures) in either the registrant’s Management's Discussion and Analysis of Financial Condition and Results of Operations or its financial statements, in addition to other simplifications. The final rule is effective for filings on or after January 4, 2021, and early adoption is permitted. We have elected to early adopt this disclosure update for the period ended March 31, 2020. As a result, we have excluded the footnote disclosures required under the previous Rule 3-10, and applied the final rule by including the summarized financial information and qualitative disclosures in Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Exhibit 22.1, filed herewith.
NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Revenues
The following table represents our consolidated Revenues (excluding intercompany revenues) by market:
 
(In Millions)
 
Three Months Ended
March 31,
 
2020
 
2019
Steel and Manufacturing:
 
 
 
Automotive
$
120.2

 
$

Infrastructure and manufacturing