Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL POSITION
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
(In millions, except share information) March 31,
2024 December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents $ 30 $ 198
Accounts receivable, net 1,868 1,840
Inventories 4,449 4,460
Other current assets 122 138
Total current assets 6,469 6,636
Non-current assets:
Property, plant and equipment, net 8,771 8,895
Goodwill 1,005 1,005
Pension and OPEB assets 344 329
Other non-current assets 647 672
TOTAL ASSETS $ 17,236 $ 17,537
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 2,051 $ 2,099
Accrued employment costs 449 511
Accrued expenses 318 380
Other current liabilities 578 518
Total current liabilities 3,396 3,508
Non-current liabilities:
Long-term debt 3,664 3,137
Pension and OPEB liabilities 791 821
Deferred income taxes 628 639
Other non-current liabilities 1,315 1,310
TOTAL LIABILITIES 9,794 9,415
Commitments and contingencies (See Note 17)
Equity:
Common shares - par value $ 0.125 per share
Authorized - 1,200,000,000 shares (2023 - 1,200,000,000 shares);
Issued - 531,051,530 shares (2023 - 531,051,530 shares);
Outstanding - 475,472,486 shares (2023 - 504,886,773 shares)
66 66
Capital in excess of par value of shares 4,851 4,861
Retained earnings 1,666 1,733
Cost of 55,579,044 common shares in treasury (2023 - 26,164,757 shares)
( 1,030 ) ( 430 )
Accumulated other comprehensive income 1,648 1,657
Total Cliffs shareholders' equity 7,201 7,887
Noncontrolling interests 241 235
TOTAL EQUITY 7,442 8,122
TOTAL LIABILITIES AND EQUITY $ 17,236 $ 17,537
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED OPERATIONS
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
Three Months Ended
March 31,
(In millions, except per share amounts) 2024 2023
Revenues $ 5,199 $ 5,295
Operating costs:
Cost of goods sold ( 4,914 ) ( 5,196 )
Selling, general and administrative expenses ( 132 ) ( 127 )
Restructuring and other charges ( 104 ) —
Asset impairments ( 64 ) —
Miscellaneous – net ( 23 ) ( 3 )
Total operating costs ( 5,237 ) ( 5,326 )
Operating loss ( 38 ) ( 31 )
Other income (expense):
Interest expense, net ( 64 ) ( 77 )
Loss on extinguishment of debt ( 21 ) —
Net periodic benefit credits other than service cost component 60 50
Other non-operating income 2 2
Total other expense ( 23 ) ( 25 )
Loss from continuing operations before income taxes ( 61 ) ( 56 )
Income tax benefit 8 13
Loss from continuing operations ( 53 ) ( 43 )
Income from discontinued operations, net of tax — 1
Net loss ( 53 ) ( 42 )
Income attributable to noncontrolling interests ( 14 ) ( 15 )
Net loss attributable to Cliffs shareholders $ ( 67 ) $ ( 57 )
Loss per common share attributable to Cliffs shareholders - basic
Continuing operations $ ( 0.14 ) $ ( 0.11 )
Discontinued operations — —
$ ( 0.14 ) $ ( 0.11 )
Loss per common share attributable to Cliffs shareholders - diluted
Continuing operations $ ( 0.14 ) $ ( 0.11 )
Discontinued operations — —
$ ( 0.14 ) $ ( 0.11 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED COMPREHENSIVE LOSS
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
Three Months Ended
March 31,
(In millions) 2024 2023
Net loss $ ( 53 ) $ ( 42 )
Other comprehensive income (loss):
Changes in pension and OPEB, net of tax ( 28 ) ( 27 )
Changes in derivative financial instruments, net of tax 20 ( 152 )
Changes in foreign currency translation ( 1 ) —
Total other comprehensive loss ( 9 ) ( 179 )
Comprehensive loss ( 62 ) ( 221 )
Comprehensive income attributable to noncontrolling interests ( 14 ) ( 15 )
Comprehensive loss attributable to Cliffs shareholders $ ( 76 ) $ ( 236 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED CASH FLOWS
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
Three Months Ended
March 31,
(In millions) 2024 2023
OPERATING ACTIVITIES
Net loss $ ( 53 ) $ ( 42 )
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation, depletion and amortization 230 242
Restructuring and other charges 104 —
Asset impairments 64 —
Pension and OPEB credits ( 51 ) ( 40 )
Loss on extinguishment of debt 21 —
Other 44 35
Changes in operating assets and liabilities:
Accounts receivable, net ( 27 ) ( 257 )
Inventories ( 8 ) 207
Income taxes ( 1 ) 15
Pension and OPEB payments and contributions ( 32 ) ( 30 )
Payables, accrued employment and accrued expenses ( 170 ) ( 90 )
Other, net 21 ( 79 )
Net cash provided (used) by operating activities 142 ( 39 )
INVESTING ACTIVITIES
Purchase of property, plant and equipment ( 182 ) ( 188 )
Other investing activities 3 3
Net cash used by investing activities ( 179 ) ( 185 )
FINANCING ACTIVITIES
Repurchase of common shares ( 608 ) —
Proceeds from issuance of senior notes 825 —
Repayments of senior notes ( 652 ) —
Borrowings under credit facilities, net 342 307
Debt issuance costs ( 13 ) —
Other financing activities ( 25 ) ( 50 )
Net cash provided (used) by financing activities ( 131 ) 257
Net increase (decrease) in cash and cash equivalents ( 168 ) 33
Cash and cash equivalents at beginning of period 198 26
Cash and cash equivalents at end of period $ 30 $ 59
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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
Earnings Common
Shares
in
Treasury AOCI Non-controlling Interests Total
December 31, 2023 504.9 $ 66 $ 4,861 $ 1,733 $ ( 430 ) $ 1,657 $ 235 $ 8,122
Comprehensive income (loss) — — — ( 67 ) — ( 9 ) 14 ( 62 )
Common stock repurchases, net of excise tax ( 30.4 ) — — — ( 615 ) — — ( 615 )
Stock and other incentive plans 1.0 — ( 10 ) — 15 — — 5
Net distributions to noncontrolling interests — — — — — — ( 8 ) ( 8 )
March 31, 2024 475.5 $ 66 $ 4,851 $ 1,666 $ ( 1,030 ) $ 1,648 $ 241 $ 7,442
(In millions) Number
of
Common
Shares Outstanding Par Value of Common
Shares Issued Capital in
Excess of
Par Value
of Shares Retained
Earnings Common
Shares
in
Treasury AOCI Non-controlling Interests Total
December 31, 2022 513.3 $ 66 $ 4,871 $ 1,334 $ ( 310 ) $ 1,830 $ 251 $ 8,042
Comprehensive income (loss) — — — ( 57 ) — ( 179 ) 15 ( 221 )
Stock and other incentive plans 1.8 — ( 39 ) — 30 — — ( 9 )
Net distributions to noncontrolling interests — — — — — — ( 19 ) ( 19 )
March 31, 2023 515.1 $ 66 $ 4,832 $ 1,277 $ ( 280 ) $ 1,651 $ 247 $ 7,793
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
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 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, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024 or any other future period. 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, 2023.
NATURE OF BUSINESS
We are the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, we are also the largest manufacturer of iron ore pellets in North America. We are vertically integrated from mined raw materials, direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are the largest supplier of steel to the automotive industry in North America and serve a diverse range of other markets due to our comprehensive offering of flat-rolled steel products. Headquartered in Cleveland, Ohio, we employ approximately 28,000 people across our operations in the United States and Canada.
BUSINESS OPERATIONS
We are organized into four operating segments based on differentiated products – Steelmaking, Tubular, Tooling and Stamping, and European Operations. We primarily operate through one reportable segment – the Steelmaking segment.
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 VIEs for which we are the primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation.
INVESTMENTS IN AFFILIATES
We have investments in several businesses accounted for using the equity method of accounting. These investments are included within our Steelmaking segment. Our investment in affiliates of $ 118 million and $ 123 million as of March 31, 2024 and December 31, 2023, respectively, was classified in Other non-current assets.
SIGNIFICANT ACCOUNTING POLICIES
A detailed description of our significant accounting policies can be found in the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein.
RECENT ACCOUNTING PRONOUNCEMENTS AND LEGISLATION
In September 2022, the FASB issued ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations . This guidance requires annual and interim disclosure of the key terms of outstanding supplier finance programs and a roll-forward of the related obligations. The new standard does not affect the recognition, measurement or financial statement presentation of the supplier finance program obligations. We have adopted this standard, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for further information.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . This guidance requires additional annual and interim disclosures for reportable segments. This new standard does not affect the recognition, measurement or financial statement presentation. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . This guidance requires additional annual and interim disclosures for income taxes. This new standard does not affect the recognition, measurement or financial statement presentation. The amendments are effective for fiscal years beginning after December 15, 2024.
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NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
ALLOWANCE FOR CREDIT LOSSES
The following is a roll-forward of our allowance for credit losses associated with Accounts receivable, net :
(In millions) 2024 2023
Allowance for credit losses as of January 1 $ ( 5 ) $ ( 4 )
Increase in allowance — ( 1 )
Allowance for credit losses as of March 31 $ ( 5 ) $ ( 5 )
INVENTORIES
The following table presents the detail of our Inventories on the Statements of Unaudited Condensed Consolidated Financial Position:
(In millions) March 31,
2024 December 31,
2023
Product inventories
Finished and semi-finished goods $ 2,500 $ 2,573
Raw materials 1,535 1,476
Total product inventories 4,035 4,049
Manufacturing supplies and critical spares 414 411
Inventories $ 4,449 $ 4,460
SUPPLY CHAIN FINANCE PROGRAMS
We negotiate payment terms directly with our suppliers for the purchase of goods and services. We currently offer voluntary supply chain finance programs that enable our suppliers to sell their Cliffs receivables to financial intermediaries, at the sole discretion of both the suppliers and financial intermediaries. No guarantees are provided by us or our subsidiaries under the supply chain finance programs. The supply chain finance programs allow our suppliers to be paid by the financial intermediaries earlier than the due date on the applicable invoice. Supply chain finance programs that extend terms or provide us an economic benefit are classified as short-term financings. As of March 31, 2024 and December 31, 2023, we had $ 25 million and $ 21 million, respectively, deemed as short-term financings that are classified in Other current liabilities . Additionally , as of March 31, 2024 and December 31, 2023, we had $ 89 million and $ 91 million, respectively, classified as Accounts payable.
WEIRTON INDEFINITE IDLE
During the first quarter of 2024, we announced the indefinite idle of our tinplate production plant located in Weirton, West Virginia. As a result of the announcement of the indefinite idle, we recorded Restructuring and other charges of $ 104 million for severance, other employee-related benefits and asset retirement obligation charges and Asset impairments of $ 64 million during the three months ended March 31, 2024.
CASH FLOW INFORMATION
A reconciliation of capital additions to cash paid for capital expenditures is as follows:
Three Months Ended
March 31,
(In millions) 2024 2023
Capital additions $ 157 $ 128
Less:
Non-cash accruals ( 45 ) ( 76 )
Right-of-use assets - finance leases 20 16
Cash paid for capital expenditures including deposits $ 182 $ 188
Cash payments (receipts) for income taxes and interest are as follows:
Three Months Ended
March 31,
(In millions) 2024 2023
Income taxes paid $ 1 $ 1
Income tax refunds ( 2 ) ( 26 )
Interest paid on debt obligations net of capitalized interest 1
53 79
1 Capitalized interest was $ 4 million and $ 3 million for the three months ended March 31, 2024 and 2023, respectively.
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NOTE 3 - REVENUES
We generate our revenue through product sales, in which shipping terms 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. Our contracts with customers define the mechanism for determining the sales price, which is generally fixed upon transfer of control, but the contracts generally 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. We consider our performance obligation to be complete and recognize revenue when control transfers in accordance with shipping terms.
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.
The following table represents our Revenues by market:
Three Months Ended
March 31,
(In millions) 2024 2023
Steelmaking:
Direct automotive $ 1,617 $ 1,870
Infrastructure and manufacturing 1,392 1,297
Distributors and converters 1,412 1,258
Steel producers
606 701
Total Steelmaking 5,027 5,126
Other Businesses:
Direct automotive 140 139
Infrastructure and manufacturing 10 10
Distributors and converters 22 20
Total Other Businesses 172 169
Total revenues $ 5,199 $ 5,295
The following tables represent our Revenues by product line:
Three Months Ended
March 31,
(In millions) 2024 2023
Steelmaking:
Hot-rolled steel $ 1,128 $ 1,121
Cold-rolled steel 749 639
Coated steel 1,623 1,617
Stainless and electrical steel 461 574
Plate 333 331
Slab and other steel products 335 327
Other 398 517
Total Steelmaking 5,027 5,126
Other Businesses:
Other 172 169
Total revenues $ 5,199 $ 5,295
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NOTE 4 - SEGMENT REPORTING
We are vertically integrated from mined raw materials and direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are organized into four operating segments based on our differentiated products – Steelmaking, Tubular, Tooling and Stamping, and European Operations. We have one reportable segment – Steelmaking. The operating segment results of our Tubular, Tooling and Stamping, and European Operations that do not constitute reportable segments are combined and disclosed in the Other Businesses category. Our Steelmaking segment operates as the largest flat-rolled steel producer supported by being the largest iron ore pellet producer as well as a leading prime scrap processor in North America, primarily serving the automotive, distributors and converters, and infrastructure and manufacturing markets. Our Other Businesses primarily include the operating segments that provide customer solutions with carbon and stainless steel tubing products, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components, and complex assemblies. All intersegment transactions were eliminated in consolidation. We allocate Corporate Selling, general and administrative expenses to our operating segments.
We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
Our results by segment are as follows:
Three Months Ended
March 31,
(In millions) 2024 2023
Revenues:
Steelmaking $ 5,027 $ 5,126
Other Businesses 172 169
Total revenues $ 5,199 $ 5,295
Adjusted EBITDA:
Steelmaking $ 395 $ 240
Other Businesses 17 8
Eliminations 2 ( 5 )
Total Adjusted EBITDA $ 414 $ 243
The following table provides a reconciliation of our consolidated Net loss to total Adjusted EBITDA:
Three Months Ended
March 31,
(In millions) 2024 2023
Net loss $ ( 53 ) $ ( 42 )
Less:
Interest expense, net ( 64 ) ( 77 )
Income tax benefit 8 13
Depreciation, depletion and amortization ( 230 ) ( 242 )
233 264
Less:
EBITDA of noncontrolling interests 1
21 23
Weirton indefinite idle 2
( 177 ) —
Loss on extinguishment of debt ( 21 ) —
Other, net ( 4 ) ( 2 )
Total Adjusted EBITDA $ 414 $ 243
1 EBITDA of noncontrolling interests includes the following:
Net income attributable to noncontrolling interests $ 14 $ 15
Depreciation, depletion and amortization 7 8
EBITDA of noncontrolling interests $ 21 $ 23
2 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for further information.
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The following table summarizes our depreciation, depletion and amortization and capital additions by segment:
Three Months Ended
March 31,
(In millions) 2024 2023
Depreciation, depletion and amortization:
Steelmaking $ ( 222 ) $ ( 231 )
Other Businesses ( 8 ) ( 11 )
Total depreciation, depletion and amortization $ ( 230 ) $ ( 242 )
Capital additions 1 :
Steelmaking $ 156 $ 127
Other Businesses 1 1
Total capital additions $ 157 $ 128
1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.
The following summarizes our assets by segment:
(In millions) March 31,
2024 December 31,
2023
Assets:
Steelmaking $ 16,738 $ 16,880
Other Businesses 658 657
Intersegment eliminations ( 505 ) ( 507 )
Total segment assets 16,891 17,030
Corporate 345 507
Total assets $ 17,236 $ 17,537
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
The following table indicates the carrying value of each of the major classes of our depreciable assets:
(In millions) March 31,
2024 December 31,
2023
Land, land improvements and mineral rights $ 1,388 $ 1,389
Buildings 935 946
Equipment 9,701 9,680
Other 314 302
Construction in progress 625 590
Total property, plant and equipment 1
12,963 12,907
Allowance for depreciation and depletion ( 4,192 ) ( 4,012 )
Property, plant and equipment, net $ 8,771 $ 8,895
1 Includes right-of-use assets related to finance leases of $ 315 million and $ 306 million as of March 31, 2024 and December 31, 2023, respectively.
We recorded depreciation and depletion expense of $ 227 million and $ 239 million for the three months ended March 31, 2024 and 2023, respectively.
During the three months ended March 31, 2024, we announced the indefinite idle of our Weirton tinplate production plant, which resulted in a $ 46 million impairment charge to Property, plant and equipment, net .
NOTE 6 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES
GOODWILL
The following is a summary of Goodwill by segment:
(In millions) March 31,
2024 December 31,
2023
Steelmaking $ 956 $ 956
Other Businesses 49 49
Total goodwill $ 1,005 $ 1,005
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INTANGIBLE ASSETS AND LIABILITIES
The following is a summary of our intangible assets and liabilities:
March 31, 2024
December 31, 2023
(In millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount
Intangible assets 1 :
Customer relationships $ 90 $ ( 20 ) $ 70 $ 90 $ ( 18 ) $ 72
Developed technology 60 ( 15 ) 45 60 ( 14 ) 46
Trade names and trademarks 18 ( 5 ) 13 18 ( 5 ) 13
Mining permits 72 ( 28 ) 44 72 ( 28 ) 44
Supplier relationships 29 ( 4 ) 25 29 ( 3 ) 26
Total intangible assets $ 269 $ ( 72 ) $ 197 $ 269 $ ( 68 ) $ 201
Intangible liabilities 2 :
Above-market supply contracts $ ( 71 ) $ 25 $ ( 46 ) $ ( 71 ) $ 24 $ ( 47 )
1 Intangible assets are classified as Other non-current assets. Amortization related to mining permits is recognized in Cost of goods sold . Amortization of all other intangible assets is recognized in Selling, general and administrative expenses.
2 Intangible liabilities are classified as Other non-current liabilities. Amortization of all intangible liabilities is recognized in Cost of goods sold .
Amortization expense related to intangible assets was $ 4 million for both the three months ended March 31, 2024 and 2023. Estimated future amortization expense is $ 9 million for the remainder of 2024 and $ 13 million annually for the years 2025 through 2029.
Income from amortization related to the intangible liabilities was $ 1 million for both the three months ended March 31, 2024 and 2023. Estimated future income from amortization is $ 4 million for the remainder of 2024 and $ 5 million annually for the years 2025 through 2029.
NOTE 7 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt:
(In millions)
Debt Instrument Issuer 1
Annual Effective
Interest Rate March 31,
2024 December 31,
2023
Senior Secured Notes:
6.750 % 2026 Senior Secured Notes
Cliffs 6.990 % $ 189 $ 829
Senior Unsecured Notes:
7.000 % 2027 Senior Notes
Cliffs 9.240 % 73 73
7.000 % 2027 AK Senior Notes
AK Steel 9.240 % 56 56
5.875 % 2027 Senior Notes
Cliffs 6.490 % 556 556
4.625 % 2029 Senior Notes
Cliffs 4.625 % 368 368
6.750 % 2030 Senior Notes
Cliffs 6.750 % 750 750
4.875 % 2031 Senior Notes
Cliffs 4.875 % 325 325
7.000 % 2032 Senior Notes
Cliffs 7.000 % 825 —
6.250 % 2040 Senior Notes
Cliffs 6.340 % 235 235
ABL Facility Cliffs 2
Variable 3
342 —
Total principal amount 3,719 3,192
Unamortized discounts and issuance costs ( 55 ) ( 55 )
Total long-term debt $ 3,664 $ 3,137
1 Unless otherwise noted, references in this column and throughout this NOTE 7 - DEBT AND CREDIT FACILITIES to "Cliffs" are to Cleveland-Cliffs Inc., and references to "AK Steel" are to AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation).
2 Refers to Cleveland-Cliffs Inc. as borrower under our ABL Facility.
3 Our ABL Facility annual effective interest rate was 6.776 % as of March 31, 2024.
7.000% 2032 SENIOR NOTES OFFERING
On March 18, 2024, we entered into an indenture among Cliffs, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, relating to the issuance of $ 825 million aggregate principal amount of our 7.000 % 2032 Senior Notes, which were issued at par. The 7.000 % 2032 Senior Notes were issued in a private placement transaction exempt from the registration requirements of the Securities Act.
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The 7.000% 2032 Senior Notes bear interest at a rate of 7.000 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2024. The 7.000% 2032 Senior Notes mature on March 15, 2032.
The 7.000% 2032 Senior Notes are unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The 7.000% 2032 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries. The 7.000% 2032 Senior Notes are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 7.000% 2032 Senior Notes.
The 7.000% 2032 Senior Notes may be redeemed, in whole or in part, at any time at our option not less than 10 days nor more than 60 days after prior notice is sent to the holders of the 7.000% 2032 Senior Notes. The 7.000% 2032 Senior Notes are redeemable prior to March 15, 2027, at a redemption price equal to 100 % of the principal amount thereof plus a "make-whole" premium set forth in the indenture. We may also redeem up to 35 % of the aggregate principal amount of the 7.000% 2032 Senior Notes prior to March 15, 2027, at a redemption price equal to 107.000 % of the principal amount thereof with the net cash proceeds of one or more equity offerings. The 7.000% 2032 Senior Notes are redeemable beginning on March 15, 2027, at a redemption price equal to 103.500 % of the principal amount thereof, decreasing to 101.750 % on March 15, 2028, and are redeemable at par beginning on March 15, 2029. In each case, we pay the applicable redemption or "make-whole" premiums plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
In addition, if a change in control triggering event, as defined in the indenture, occurs with respect to the 7.000% 2032 Senior Notes, we will be required to offer to repurchase the notes at a purchase price equal to 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
The terms of the 7.000% 2032 Senior Notes contain certain customary covenants; however, there are no financial covenants.
DEBT EXTINGUISHMENTS
On March 18, 2024, we used a portion of the net proceeds from the 7.000% 2032 Senior Notes issuance to repurchase $ 640 million in aggregate principal amount of our 6.750% 2026 Senior Secured Notes pursuant to a tender offer. On April 3, 2024, we redeemed the remaining $ 189 million in aggregate principal amount of our then-outstanding 6.750% 2026 Senior Secured Notes with the remaining portion of the net proceeds from the 7.000% 2032 Senior Notes issuance and available liquidity.
ABL FACILITY
As of March 31, 2024, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.
The following represents a summary of our borrowing capacity under the ABL Facility:
(In millions) March 31,
2024
Available borrowing base on ABL Facility 1
$ 4,398
Borrowings ( 342 )
Letter of credit obligations 2
( 56 )
Borrowing capacity available $ 4,000
1 As of March 31, 2024, the ABL Facility has a maximum available borrowing base of $ 4.75 billion. The borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
2 We issued standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, operating agreements, employee severance, environmental obligations, workers' compensation and insurance obligations.
DEBT MATURITIES
The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at March 31, 2024 (in millions):
2024 2025 2026 2027 2028 Thereafter Total
$ — $ — $ 189 $ 685 $ 342 $ 2,503 $ 3,719
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NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We offer defined benefit pension plans, defined contribution pension plans and OPEB plans to a significant portion of our employees and retirees. Benefits are also provided through multiemployer plans for certain union members.
The following are the components of defined benefit pension and OPEB costs (credits):
DEFINED BENEFIT PENSION COSTS (CREDITS)
Three Months Ended
March 31,
(In millions) 2024 2023
Service cost $ 7 $ 8
Interest cost 55 59
Expected return on plan assets ( 80 ) ( 79 )
Amortization:
Prior service costs 4 4
Net actuarial loss — 1
Net periodic benefit credits $ ( 14 ) $ ( 7 )
OPEB COSTS (CREDITS)
Three Months Ended
March 31,
(In millions) 2024 2023
Service cost $ 2 $ 2
Interest cost 12 16
Expected return on plan assets ( 11 ) ( 11 )
Termination benefits 1
2 —
Amortization:
Prior service credits ( 4 ) ( 4 )
Net actuarial gain ( 38 ) ( 36 )
Net periodic benefit credits $ ( 37 ) $ ( 33 )
1 The termination benefits relate to the announcement of the indefinite idle of our Weirton tinplate production plant.
Based on funding requirements, we made nominal defined benefit pension contributions for both the three months ended March 31, 2024 and 2023. Based on funding requirements, we made no contributions to our voluntary employee benefit association trust plans for both the three months ended March 31, 2024 and 2023.
NOTE 9 - INCOME TAXES
Our effective tax rate for the three months ended March 31, 2024 is 13 %, compared to 23 % for the three months ended March 31, 2023. The change in the effective tax rate, as compared to the prior comparable period, is primarily related to depletion in excess of state income tax expense and the impact of immaterial discrete items relative to pre-tax income.
NOTE 10 - ASSET RETIREMENT OBLIGATIONS
The accrued closure obligation provides for contractual and legal obligations related to our indefinitely idled and closed operations and for the eventual closure of our active operations. The closure date for each of our active mine sites was determined based on the exhaustion date of the remaining mineral reserves, and the amortization of the related asset and accretion of the liability is recognized over the estimated mine lives. The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines is determined based on the unique circumstances of each property. For indefinitely idled or closed mines, the accretion of the liability is recognized over the anticipated timing of remediation. Asset retirement obligations at our active steelmaking operations primarily include the closure and post-closure care for on-site landfills and other waste containment facilities. Asset retirement obligations have been recorded at present values using settlement dates based on when we expect these facilities to reach capacity and close.
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The following is a summary of our asset retirement obligations:
(In millions) March 31,
2024 December 31,
2023
Asset retirement obligations 1
$ 510 $ 459
Less: current portion 61 15
Long-term asset retirement obligations $ 449 $ 444
1 Includes $ 263 million and $ 259 million related to our active operations as of March 31, 2024 and December 31, 2023, respectively.
The following is a roll-forward of our asset retirement obligations:
(In millions) 2024 2023
Asset retirement obligations as of January 1 $ 459 $ 520
Accretion expense 5 8
Revision in estimated cash flows 48 —
Remediation payments ( 2 ) ( 4 )
Asset retirement obligations as of March 31 $ 510 $ 524
During the first quarter of 2024, we announced the indefinite idle of our Weirton tinplate production plant, resulting in an increase to our asset retirement obligations as a result of acceleration of the timing and refinement in the cost of required remediation.
NOTE 11 - FAIR VALUE MEASUREMENTS
The carrying values of certain financial instruments (e.g., Accounts receivable, net , Accounts payable and Other current liabilities ) approximate fair value and, therefore, have been excluded from the table below. See NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING for information on our derivative instruments, which are accounted for at fair value on a recurring basis.
A summary of the carrying value and fair value of other financial instruments were as follows:
March 31, 2024 December 31, 2023
(In millions) Valuation Hierarchy Classification Carrying
Value Fair
Value Carrying
Value Fair
Value
Senior notes Level 1 $ 3,322 $ 3,323 $ 3,137 $ 3,118
ABL Facility - outstanding balance Level 2 342 342 — —
Total $ 3,664 $ 3,665 $ 3,137 $ 3,118
The valuation of the financial asset classified in Level 2 was determined using a market approach based upon quoted prices for similar assets in active markets or other inputs that were observable.
NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING
We are exposed to fluctuations in market prices of raw materials and energy sources. We may use cash-settled commodity swaps to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. Our hedging strategy is to reduce the effect on earnings from the price volatility of these various commodity exposures, including timing differences between when we incur raw material commodity costs and when we receive sales surcharges from our customers based on those raw materials.
Our commodity contracts are designated as cash flow hedges for accounting purposes, and we record the gains and losses for the derivatives in Accumulated other comprehensive income until we reclassify them into Cost of goods sold when we recognize the associated underlying operating costs. Refer to NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE INCOME for further information.
Our commodity contracts are classified as Level 2 as values were determined using a market approach based upon quoted prices for similar assets in active markets or other inputs that were observable.
The following table presents the notional amount of our outstanding hedge contracts:
Notional Amount
Commodity Contracts Unit of Measure Maturity Dates March 31,
2024 December 31,
2023
Natural Gas MMBtu April 2024 - November 2026 167,430,000 168,590,000
Electricity Megawatt hours April 2024 - April 2027 3,634,635 3,501,898
As of March 31, 2024, we expect to reclassify $ 149 million of net losses related to our hedge contracts from Accumulated other comprehensive income into Cost of goods sold during the next 12 months.
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The following table presents the fair value of our outstanding cash flow hedges and the classification in the Statements of Unaudited Condensed Consolidated Financial Position:
Balance Sheet Location (In millions) March 31,
2024 December 31,
2023
Other current assets $ 1 $ —
Other non-current assets 4 1
Other current liabilities ( 102 ) ( 105 )
Other non-current liabilities ( 32 ) ( 52 )
NOTE 13 - CAPITAL STOCK
SHARE REPURCHASE PROGRAM
On February 10, 2022, our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchases, up to a maximum of $ 1 billion. As of March 31, 2024, we have fully utilized the $ 1 billion share repurchase authorization. During the three months ended March 31, 2024, we repurchased 30.4 million common shares at a cost of $ 608 million, excluding any excise tax due under the Inflation Reduction Act. During the three months ended March 31, 2023, we had no share buybacks.
PREFERRED STOCK
We have 3 million shares of Serial Preferred Stock, Class A, without par value, authorized and 4 million shares of Serial Preferred Stock, Class B, without par value, authorized. No preferred shares are issued or outstanding.
NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of Accumulated other comprehensive income within Cliffs shareholders’ equity and related tax effects allocated to each are shown below:
Three Months Ended
March 31,
(In millions) 2024 2023
Foreign Currency Translation
Beginning balance $ — $ ( 1 )
Other comprehensive loss before reclassifications ( 1 ) —
Ending balance $ ( 1 ) $ ( 1 )
Derivative Instruments
Beginning balance $ ( 170 ) $ ( 16 )
Other comprehensive loss before reclassifications ( 33 ) ( 177 )
Income tax 8 44
Other comprehensive loss before reclassifications, net of tax ( 25 ) ( 133 )
Losses (gains) reclassified from AOCI to net loss 1
59 ( 25 )
Income tax expense (benefit) 2
( 14 ) 6
Net losses (gains) reclassified from AOCI to net loss 45 ( 19 )
Ending balance $ ( 150 ) $ ( 168 )
Pension and OPEB
Beginning balance $ 1,827 $ 1,847
Gains reclassified from AOCI to net loss 3
( 38 ) ( 35 )
Income tax expense 2
10 8
Net gains reclassified from AOCI to net loss ( 28 ) ( 27 )
Ending balance $ 1,799 $ 1,820
Total AOCI Ending Balance $ 1,648 $ 1,651
1 Amounts recognized in Cost of goods sold in the Statements of Unaudited Condensed Consolidated Operations.
2 Amounts recognized in Income tax benefit in the Statements of Unaudited Condensed Consolidated Operations.
3 Amounts recognized in Net periodic benefit credits other than service cost component in the Statements of Unaudited Condensed Consolidated Operations.
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NOTE 15 - VARIABLE INTEREST ENTITIES
SUNCOKE MIDDLETOWN
We purchase all the coke and electrical power generated from SunCoke Middletown’s plant under long-term supply agreements and have committed to purchase all the expected production from the facility through 2032. We consolidate SunCoke Middletown as a VIE because we are the primary beneficiary despite having no ownership interest in SunCoke Middletown. SunCoke Middletown had income before income taxes of $ 15 million and $ 17 million for the three months ended March 31, 2024 and 2023, respectively, that was included in our consolidated income before income taxes. Additionally, SunCoke Middletown had cash used for capital expenditures of $ 4 million and $ 5 million for the three months ended March 31, 2024 and 2023, respectively. Cash used for capital expenditures are included in our consolidated Purchase of property, plant and equipment on the Statements of Unaudited Condensed Consolidated Cash Flows.
The assets of the consolidated VIE can only be used to settle the obligations of the consolidated VIE and not obligations of the Company. The creditors of SunCoke Middletown do not have recourse to the assets or general credit of the Company to satisfy liabilities of the VIE. The Statements of Unaudited Condensed Consolidated Financial Position includes the following amounts for SunCoke Middletown:
(In millions) March 31,
2024 December 31,
2023
Inventories $ 32 $ 29
Property, plant and equipment, net 286 288
Accounts payable ( 18 ) ( 26 )
Other assets (liabilities), net ( 41 ) ( 39 )
Noncontrolling interests ( 259 ) ( 252 )
NOTE 16 - EARNINGS PER SHARE
The following table summarizes the computation of basic and diluted EPS:
Three Months Ended
March 31,
(In millions, except per share amounts) 2024 2023
Loss from continuing operations $ ( 53 ) $ ( 43 )
Income from continuing operations attributable to noncontrolling interests ( 14 ) ( 15 )
Net loss from continuing operations attributable to Cliffs shareholders ( 67 ) ( 58 )
Income from discontinued operations, net of tax — 1
Net loss attributable to Cliffs shareholders $ ( 67 ) $ ( 57 )
Weighted average number of shares:
Basic 492 515
Employee stock plans 1
— —
Diluted 492 515
Loss per common share attributable to Cliffs shareholders - basic:
Continuing operations $ ( 0.14 ) $ ( 0.11 )
Discontinued operations — —
$ ( 0.14 ) $ ( 0.11 )
Loss per common share attributable to Cliffs shareholders - diluted:
Continuing operations $ ( 0.14 ) $ ( 0.11 )
Discontinued operations — —
$ ( 0.14 ) $ ( 0.11 )
1 For the three months ended March 31, 2024 and 2023, we had 2 million and 1 million shares, respectively, related to employee stock plans that were excluded from the diluted EPS calculation as they were anti-dilutive.
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NOTE 17 - COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
We purchase portions of the principal raw materials required for our steel manufacturing operations under annual and multi-year agreements, some of which have minimum quantity requirements. We also use large volumes of natural gas, electricity and industrial gases in our steel manufacturing operations. We negotiate most of our purchases of chrome, industrial gases and a portion of our electricity under multi-year agreements. Our purchases of coke are made under annual or multi-year agreements with periodic price adjustments. We typically purchase coal under annual fixed-price agreements. We also purchase certain transportation services under multi-year contracts with minimum quantity requirements.
OTHER COMMERCIAL COMMITMENTS
We use surety bonds and letters of credit to provide financial assurance for certain obligations and statutory requirements. As of March 31, 2024, we had $ 258 million of surety-backed letters of credit and surety bonds outstanding. Additionally, as of March 31, 2024, we had $ 56 million of outstanding letters of credit issued under our ABL Facility.
CONTINGENCIES
We are currently the subject of, or party to, various claims and legal proceedings incidental to our current and historical operations. These claims and legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, additional funding requirements or an injunction. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on our financial position and results of operations for the period in which the ruling occurs or future periods. However, based on currently available information, we do not believe that any pending claims or legal proceedings will result in a material adverse effect in relation to our consolidated financial statements.
ENVIRONMENTAL CONTINGENCIES
Although we believe our operating practices have been consistent with prevailing industry standards, hazardous materials may have been released at operating sites or third-party sites in the past, including operating sites that we no longer own. If we reasonably can, we estimate potential remediation expenditures for those sites where future remediation efforts are probable based on identified conditions, regulatory requirements, or contractual obligations arising from the sale of a business or facility. For sites involving government required investigations, we typically make an estimate of potential remediation expenditures only after the investigation is complete and when we better understand the nature and scope of the remediation. In general, the material factors in these estimates include the costs associated with investigations, delineations, risk assessments, remedial work, governmental response and oversight, site monitoring, and preparation of reports to the appropriate environmental agencies.
The following is a summary of our environmental obligations:
(In millions) March 31,
2024 December 31,
2023
Environmental obligations $ 134 $ 134
Less: current portion 21 21
Long-term environmental obligations $ 113 $ 113
We cannot predict the ultimate costs for each site with certainty because of the evolving nature of the investigation and remediation process. Rather, to estimate the probable costs, we must make certain assumptions. The most significant of these assumptions is for the nature and scope of the work that will be necessary to investigate and remediate a particular site and the cost of that work. Other significant assumptions include the cleanup technology that will be used, whether and to what extent any other parties will participate in paying the investigation and remediation costs, reimbursement of past response costs and future oversight costs by governmental agencies, and the reaction of the governing environmental agencies to the proposed work plans. Costs for future investigation and remediation are not discounted to their present value, unless the amount and timing of the cash disbursements are readily known. To the extent that we have been able to reasonably estimate future liabilities, we do not believe that there is a reasonable possibility that we will incur a loss or losses that exceed the amounts we accrued for the environmental matters discussed below that would, either individually or in the aggregate, have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, since we recognize amounts in the consolidated financial statements in accordance with GAAP that exclude potential losses that are not probable or that may not be currently estimable, the ultimate costs of these environmental matters may be higher than the liabilities we currently have recorded in our consolidated financial statements.
Pursuant to the Resource Conservation and Recovery Act, which governs the treatment, handling and disposal of hazardous waste, the EPA and authorized state environmental agencies may conduct inspections of Resource Conservation and Recovery Act-regulated facilities to identify areas where there have been releases of hazardous waste or hazardous constituents into the environment and may order the facilities to take corrective action to remediate such releases. Likewise, the EPA or the states may require closure or post-closure care of residual, industrial and hazardous waste management units. Environmental regulators have the authority to inspect all of our facilities. While we cannot predict the future actions of these regulators, it is possible that they may identify conditions in future inspections of these facilities that they believe require corrective action.
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Pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the EPA and state environmental authorities have conducted site investigations at some of our facilities and other third-party facilities, portions of which previously may have been used for disposal of materials that are currently regulated. The results of these investigations are still pending, and we could be directed to spend funds for remedial activities at the former disposal areas. Because of the uncertain status of these investigations, however, we cannot reasonably predict whether or when such spending might be required or its magnitude.
In addition to the foregoing matters, we are or may be involved in proceedings with various regulatory authorities that may require us to pay fines, comply with more rigorous standards or other requirements or incur capital and operating expenses for environmental compliance. We believe that the ultimate disposition of any such proceedings will not have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.
TAX MATTERS
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our liabilities, our effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash and result in an increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year of resolution.
OTHER CONTINGENCIES
In addition to the matters discussed above, there are various pending and potential claims against us and our subsidiaries involving product liability, personal injury, commercial, employee benefits and other matters arising in the ordinary course of business. Because of the considerable uncertainties that exist for any claim, it is difficult to reliably or accurately estimate what the amount of a loss would be if a claimant prevails. If material assumptions or factual understandings we rely on to evaluate exposure for these contingencies prove to be inaccurate or otherwise change, we may be required to record a liability for an adverse outcome. If, however, we have reasonably evaluated potential future liabilities for all of these contingencies, including those described more specifically above, it is our opinion, unless we otherwise noted, that the ultimate liability from these contingencies, individually or in the aggregate, should not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
NOTE 18 - SUBSEQUENT EVENTS
On April 3, 2024, we redeemed the remaining $ 189 million in aggregate principal amount of our then-outstanding 6.750% 2026 Senior Secured Notes with the remaining portion of the net proceeds from the 7.000% 2032 Senior Notes issuance and available liquidity.
Effective April 22, 2024, our Board of Directors authorized a new program to repurchase outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchases, up to a maximum of $ 1.5 billion.