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Item 2. Management’s Discussion and Analysis

2024-07-24 compared with 2024-04-25 · 176 added, 141 removed, 399 unchanged (44% of the section changed)

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We believe it is important to read our Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, as well as other publicly available information.

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.

We are a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry.

We are vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing.

Headquartered in Cleveland, Ohio, we employ approximately 28,000 people across our operations in the United States and Canada.

Unless otherwise noted, discussion of our business and results of operations in this Quarterly Report on Form 10-Q refers to our continuing operations on a stand-alone basis without giving effect to the pending Stelco Acquisition.

FINANCIAL SUMMARY

The following is a summary of our consolidated results for the three months ended March 31, 2024 and 2023 (in millions, except for diluted EPS):

Total Revenue Net Loss Adjusted EBITDA Diluted EPS

See "— Non-GAAP Financial Measures" below for a reconciliation of our Net loss to Adjusted EBITDA.

The following is a summary of our consolidated results for the three and six months ended June 30, 2024 and 2023 (in millions, except for diluted EPS):

Total Revenue Net Income (Loss) Adjusted EBITDA Diluted EPS

See "— Non-GAAP Financial Measures" below for a reconciliation of our Net income (loss) to Adjusted EBITDA.

ECONOMIC OVERVIEW

STEEL MARKET OVERVIEW

Steel market conditions in the first quarter of 2024 were driven by continued strength in light vehicle production but also inconsistent service center buying behavior and higher import levels.

The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $941 per net ton for the first quarter of 2024, 8% higher than the first quarter of 2023, and significantly above the prior annual ten-year average of approximately $775 per net ton.

Import levels were elevated at the beginning of the year as HRC pricing spreads between the U.S.

Steel market conditions in the first half of 2024 have been driven by continued strength in light vehicle production but also inconsistent service center buying behavior and higher import levels.

The price for domestic HRC, the most significant index impacting our revenues and profitability, averaged $782 per net ton for the second quarter of 2024, 27% lower than the second quarter of 2023, and ended the quarter near multi-year low prices.

Import levels were elevated in the first half of 2024 as HRC pricing spreads between the U.S.

and other regions started increasing in the fourth quarter of 2023.

Demand for steel from automotive manufacturers remained strong throughout the first quarter of 2024 after 2023 North American light vehicle production of 15.7 million units was the highest level since 2019.

Steel demand from service centers was inconsistent during the first quarter of 2024, as service center inventory levels were reduced to 1.9 months on hand as the HRC price declined, after ending 2023 at 2.2 months of inventory on hand.

Looking forward, we expect domestic steel demand to grow as automotive production continues to remain strong, end-user demand for our service center customers remains healthy and incremental steel demand stimulated by recent government legislation is realized.

The Infrastructure and Jobs Act, the CHIPS Act and the Inflation Reduction Act should continue to provide meaningful support for overall domestic steel demand throughout the remainder of 2024 and in the coming years.

Steel demand from service centers remained inconsistent during the second quarter of 2024, as service center inventory levels were reduced to 1.8 months on hand as the HRC price declined, after ending 2023 at 2.2 months of inventory on hand.

Additionally, service centers remain hesitant to carry inventory as interest rates remain elevated.

Looking forward, we expect domestic steel demand to grow as automotive production continues to remain strong, steel imports are now unattractive, other end-user demand is healthy, and incremental steel demand stimulated by recent government legislation and manufacturing on-shoring is realized.

The Infrastructure and Jobs Act, the CHIPS Act and the Inflation Reduction Act should provide meaningful support for overall domestic steel demand throughout the remainder of 2024 and in the coming years.

Our extensive portfolio of products should result in increased steel demand from most of our end markets.

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The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand.

During the first quarter of 2024, North American light vehicle production was approximately 3.9 million units, up from 3.8 million units in the fourth quarter of 2023, which was adversely impacted by the United Auto Workers strike.

Full-year 2024 North American light vehicle production is estimated to exceed 16.0 million units, which would be the highest level since 2019.

North American light vehicle production in 2025 and beyond is also estimated to exceed 16.0 million units annually, implying continued strong demand for years to come.

During the first quarter of 2024, light vehicle sales in the U.S.

saw an average seasonally adjusted annualized rate of 15.4 million units sold, an increase from 15.1 million units sold rate for same period during 2023.

During the second quarter of 2024, North American light vehicle production was approximately 4.2 million units, up from 3.9 million units in the first quarter of 2024.

Full-year 2024 North American light vehicle production is estimated to be 15.8 million units, which would be the highest level since 2019.

North American light vehicle production in 2025 and beyond is expected to continue to increase from 2024 levels and is estimated to exceed 16.0 million units annually by 2026, implying continued strong demand for years to come.

During the second quarter of 2024, light vehicle sales in the U.S.

saw an average seasonally adjusted annualized rate of 15.6 million units sold, an increase from 15.4 million units sold rate in the first quarter of 2024.

Additionally, the average age of light vehicles on the road in the U.S.

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Since 2021, the price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has continued to average well above the prior annual ten-year average of approximately $400 per long ton.

The busheling price averaged $464 per long ton during the first quarter of 2024.

The busheling price averaged $429 per long ton during the second quarter of 2024.

We expect the supply of busheling scrap to further tighten due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., reduced metallics import availability, and a push for expanded scrap use globally.

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bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan.

As for iron ore, the Platts 62% price averaged $124 per metric ton in the first quarter of 2024, which is 30% higher than the prior annual ten-year average.

As for iron ore, the Platts 62% price averaged $112 per metric ton in the second quarter of 2024, which is 17% higher than the prior annual ten-year average.

While higher iron ore prices play a role in increased steel prices, we also directly benefit from higher iron ore prices for the portion of iron ore pellets we sell to third parties.

OTHER FACTORS

On July 10, 2024, the United States and Mexico announced key measures to protect the North American steel markets from unfair trade.

Both countries are expected to implement policies to jointly prevent tariff evasion on steel being exported from Mexico to the United States.

It will be required that steel imported from Mexico must be melted and poured in Mexico, Canada or the United States to be eligible for Section 232 exemptions.

This will effectively put a 25% tariff on any steel that is transshipped through Mexico that originated in China or other countries outside of North America.

We believe it is vital all members adhere to the USMCA and view this as a positive development to ensuring fair trade in the North American steel market.

On April 4, 2024, the DOE issued its final transformer efficiency standards rule that will provide for the continued utilization of GOES in virtually all of our distribution transformer end markets.

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The final rule provides clarity going forward on production requirements, allowing for increased investments in the transformer market, which should ultimately lead to increased GOES demand.

On February 15, 2024, we announced the indefinite idling of our tinplate production plant located in Weirton, West Virginia.

The idling of Weirton occurred in April 2024.

We produced tin mill products primarily used for canned food packaging at our Weirton facility and historically sold approximately 300,000 net tons per year, representing approximately 2% of our total steel sales volumes.

The need to idle our Weirton facility arose as a direct result of the unanimous decision of the U.S.

International Trade Commission negating the implementation of anti-dumping and countervailing duties on imported tin mill products calculated by the Department of Commerce.

In January 2023, we announced that we partnered with the USW and filed antidumping and countervailing duty petitions against eight countries related to unfairly traded tin and chromium coated sheet steel products.

After finding evidence of dumping and subsidization, on January 5, 2024, the Department of Commerce announced duties on four countries, including Canada, China, Germany and South Korea.

Despite these findings, the U.S.

International Trade Commission unanimously rejected these trade remedies on February 6, 2024, which ultimately led to the indefinite idling of our Weirton facility.

During 2023, we significantly reduced costs compared to the prior year, as we had higher production volume and normalized repair and maintenance spending, and inflationary pressures on input and energy costs eased.

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COMPETITIVE STRENGTHS

As the leading flat-rolled steel producer in North America, we benefit from having the size and scale necessary in a competitive, capital intensive business.

As a leading North America-based steel producer, we benefit from having the size and scale necessary in a competitive, capital intensive business.

Our sizeable operating footprint provides us with the operational leverage and flexibility to achieve competitive margins throughout the business cycle.

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Due to its demanding nature, the automotive steel business typically generates higher through-the-cycle margins, making it a desirable end market.

Demand for our automotive-grade steel is expected to remain strong in the coming years as a result of low unemployment, pent-up automotive demand arising out of supply chain issues and the replacement of older vehicles.

Demand for our automotive-grade steel is expected to remain strong in the coming years as a result of a healthy unemployment rate, pent-up automotive demand arising out of supply chain issues and the replacement of older vehicles.

Our footprint provides us with a competitive advantage in supplying automotive and other highly demanding end markets, as we are able to produce a wide range of high-quality products.

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We also possess the breadth and depth related to customer service, technical support, and research and development, which are necessary to supply the demanding needs of the automotive industry.

Since the acquisition of our steelmaking assets, we have dedicated significant resources to maintain and upgrade our facilities and equipment.

Since the acquisition of our steelmaking assets in 2020, we have dedicated significant resources to maintain and upgrade our facilities and equipment.

The quality of our assets gives us a unique advantage in product offerings and operational efficiencies.

After elevated spend in 2022 to perform overdue maintenance work at the facilities acquired as part of the 2020 acquisitions, we resumed normalized levels of maintenance capital and operating expenses in 2023.

After elevated spend in 2022 to perform overdue maintenance work at the facilities acquired as part of our 2020 acquisitions, we resumed normalized levels of maintenance capital and operating expenses in 2023, which has continued throughout 2024.

The necessary resources that we have invested in our footprint are expected to keep our assets at an automotive-grade level of quality and reliability for years to come.

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We are currently a leading producer of electrical steels referred to as GOES and NOES in the U.S.

In November 2021, the Infrastructure and Jobs Act was passed in the U.S., which provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased EV adoption, both of which require electrical steels.

Our electrical steel business is expected to achieve strong profitability in the coming years.

During 2023, we commissioned our NOES expansion at our Zanesville facility, which increased our annual capacity by approximately 70,000 net tons.

Infrastructure and Jobs Act provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased EV adoption, both of which require electrical steels.

Because of these incentives and our current customer base, our electrical steel business is expected to continue to achieve strong profitability in the coming years.

We are the first and the only producer of HBI in the Great Lakes region.

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These contracts reduce volatility and allow for more predictable through-the-cycle margins.

In addition to our fixed price contracts, we also sell significant volumes under index-linked contracts, which reduces our reliance on spot sales and allows us to improve our efficiency with more stable volumes.

In addition to our fixed price contracts, we also sell significant volumes under index-linked contracts.

Our unique capabilities, driven by our portfolio of assets and technical expertise, give us an advantage in our flat-rolled product offering.

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Our strategic use of HBI in our blast furnaces and maximizing scrap usage in our BOFs has allowed us to achieve the same steel production with one less blast furnace in our footprint.

During the second quarter of 2023, it was announced that we entered into long-term state mineral leases for more than 2,600 acres of iron ore at the Nashwauk mine site in Itasca County, Minnesota.

The award of these leases is expected to resolve years of uncertainty regarding Hibbing Taconite’s mine life.

This ore body is intended to serve as an extension of Hibbing Taconite, as the state’s mineral leases, combined with our own private mineral holdings at Nashwauk, are expected to provide more than two decades of additional ore reserves.

The necessary resources that we have invested in our footprint are expected to keep our assets at an automotive-grade level of quality and reliability for years to come, positioning us to benefit from operating efficiencies and improved capabilities in the coming years.

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We have a proven track record of successfully identifying undervalued assets and completing value-enhancing transactions through mergers and acquisitions.

We continue to be opportunistic in our pursuit of assets that would grow our business and offer opportunities to generate significant synergies.

With our strong balance sheet, proven ability to integrate acquired assets and capture synergies, along with our powerful partnership with both our union and non-union employees, we are confident in our ability to execute value-enhancing mergers and acquisitions.

Our strong partnership with our union-represented employees was crucial in prior mergers and acquisitions, as union support is necessary to successfully complete transactions that include union-represented assets.

We are also the only domestic steel company in recent years to successfully acquire steel producing assets with USW-represented employees.

With our strong balance sheet, proven ability to integrate acquired assets and capture synergies, along with our powerful partnership with our union and non-union employees, we are confident in our ability to identify and execute value-enhancing mergers and acquisitions.

We have remained active in our opportunistic pursuit of value-enhancing mergers and acquisitions and recently announced that we entered into the Arrangement Agreement to acquire Stelco.

On July 15, 2024, we announced that we had entered into the Arrangement Agreement pursuant to which we plan to acquire Stelco.

The Stelco Acquisition confirms our commitment and leadership in integrated steel production in North America and is expected to strengthen our cost position by incorporating one of the lowest cost flat-rolled steelmaking assets in North America within our footprint.

The Stelco Acquisition has the full endorsement of the USW and, when complete, will bring an additional 1,800 USW-represented employees into our workforce.

When complete, the Stelco Acquisition will expand our existing footprint in Canada and diversify our customer base across service centers, construction and other industrial end markets with higher volumes of spot sales.

As a result of the Stelco Acquisition, our exposure to the North American spot market is expected to double, giving us further insight into spot market dynamics and diversifying our customer base further toward spot customers.

We expect the Stelco Acquisition to close in the fourth quarter of 2024, subject to approval by Stelco shareholders and other customary closing conditions.

Going forward, we will continue to be opportunistic in our pursuit of assets that would grow our business and offer opportunities to generate significant synergies.

Our strong partnership with our union-represented employees was crucial in prior mergers and acquisitions as well as our recently announced entry into the Arrangement Agreement pursuant to which we will acquire Stelco.

We remain the only domestic steel company in recent years to successfully acquire steel producing assets with USW-represented employees.

EXPLORE ATTRACTIVE DOWNSTREAM OPPORTUNITIES

On July 22, 2024, we announced our investment plan for our new electrical distribution transformer production plant at our recently indefinitely idled Weirton, West Virginia facility.

We intend to invest approximately $150 million to repurpose a warehouse to commence production of three-phase distribution transformers used in electric power distribution transformers.

We expect to receive $50 million in support from the West Virginia Economic Development Authority in relation to the project, which reduces our net capital investment to approximately $100 million.

Our Weirton facility benefits from the ability to use existing building assets, infrastructure and re-employment opportunities for members of the workforce that were previously employed at our indefinitely idled Weirton tinplate mill.

This project is also expected to increase demand for American-made GOES produced at our Butler Works steel mill as well as for our carbon and stainless steel products used in the manufacturing of distribution transformers.

We believe that distribution transformers are critical to America’s electrical infrastructure maintenance and expansion, and we look to benefit from a market that is undersupplied in the United States and currently experiencing extended lead times with a strong demand outlook.

This project is expected to take approximately 18 months to complete.

ADVANCE OUR PARTICIPATION IN THE GREEN ECONOMY

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Our commitment to operating our business in a more environmentally responsible manner remains constant.

One of the most important issues impacting our industry, our stakeholders and our planet is climate change.

In early 2021, we announced our commitment to reduce GHG emissions 25% from 2017 levels by 2030.

This goal represents combined Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity or other forms of energy) GHG emission reductions across all of our operations.

In 2023 and 2022, our absolute Scope 1 and Scope 2 GHG emissions were below our reduction goal well ahead of our 2030 target year.

We have also made significant progress in reducing our emissions on a per ton basis.

A major issue impacting our industry, our stakeholders and our planet is climate change.

In May 2024, we announced our commitment to new GHG emissions reductions targets after we successfully achieved our prior commitment set in 2021 to reduce Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity or other forms of energy) GHG emissions by 25% by 2030, relative to 2017 levels, well ahead of our 2030 target year.

Our new goals set forth below, relative to 2023 levels, are all supported by ongoing and planned technological developments with respect to our ironmaking and steelmaking practices.

• A target to reduce Scope 1 and 2 GHG emissions intensity per metric ton of crude steel by 30% by 2035;

• A target to reduce material upstream Scope 3 GHG emissions intensity per metric ton of crude steel by 20% by 2035;

• A long-term target aligned with the Paris Agreement’s 1.5 degrees Celsius scenario to reduce Scope 1, 2 and material upstream 3 emissions intensity per metric ton of crude steel to near net zero by 2050.

Additionally, we have made significant progress in reducing our emissions on a per ton basis.

Since 2020, we have reduced our average Scope 1 and 2 emissions of integrated mills from 1.82 to 1.54 metric tons of CO 2 e per metric ton of crude steel produced in 2023, which is 28% lower than the global average.

Our future GHG emissions reductions are expected to be primarily driven by the use of direct reduced iron in electric melting furnaces, direct reduced iron in blast furnaces, the stretching of hot metal with additional scrap, enhancing productivity out of fewer blast furnaces, implementing hydrogen use where possible, adopting carbon capture and utilization, procuring more clean energy, electrification of process equipment and operating with higher energy efficiency.

In March 2024, we were selected by the DOE for award negotiations to receive up to $575 million in total funding for two projects to accelerate industrial decarbonization initiatives.

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As a result of both of these projects, we would anticipate generating in excess of $500 million in annual cost savings and yield improvements.

In October 2023, the DOE announced the intention to award funding under the Infrastructure and Jobs Act for seven regional hydrogen hubs, including the Midwest Alliance for Clean Hydrogen.

In October 2023, the DOE announced its intention to award funding under the Infrastructure and Jobs Act for seven regional hydrogen hubs, including the Midwest Alliance for Clean Hydrogen.

This hub covering Illinois, Indiana and Michigan was selected for $1 billion in funding and is near our two largest steel plants, Indiana Harbor and Burns Harbor.

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The use of hydrogen within our blast furnace is expected to partially reduce coke rate and displace the release of CO 2 with H 2 O, reducing our overall emissions.

Our future GHG emissions reductions are expected to be driven by the use of direct reduced iron in electric melting furnaces, direct reduced iron in blast furnaces, the stretching of hot metal with additional scrap, driving more productivity out of fewer blast furnaces, implementing hydrogen use where possible, adopting carbon capture and utilization, procuring more clean energy, electrification of process equipment and operating with higher energy efficiency.

IMPROVE FINANCIAL FLEXIBILITY

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Since the acquisition of our steelmaking assets in 2020, we have demonstrated our ability to generate healthy free cash flow and use it to reduce substantial amounts of debt, return capital to shareholders through share repurchases and make investments to both improve and grow our business.

During the first quarter of 2024, we returned $608 million of capital to shareholders via share repurchases.

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.

In 2023, we reduced the principal amount of outstanding long-term debt by $1.1 billion, demonstrating how quickly we can deleverage our balance sheet.

We have also historically shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount.

During the second quarter of 2024, we returned $124 million of capital to shareholders via share repurchases under our current $1.5 billion share repurchase program that was effective April 22, 2024.

We also reduced the principal amount of our outstanding long-term debt by $157 million in the second quarter of 2024.

We have a track record of demonstrating that we can quickly deleverage our balance sheet and have also historically shown our ability to take advantage of volatility in the debt markets and repurchase notes at a discount.

We expect to continue to use the financial levers available to us to both opportunistically reduce our debt and return capital to shareholders throughout the remainder of 2024 and beyond.

Going forward, our stated target will be to maintain a net debt ratio of less than two and a half times our trailing-twelve months Adjusted EBITDA, which should provide us ample opportunity and flexibility to execute any strategic, operational or financial opportunities we identify.

It is also important for us to maintain sufficient liquidity, which was above $4 billion as of March 31, 2024.

At the end of the second quarter of 2024, our net debt to trailing-twelve months Adjusted EBITDA leverage ratio was 2.1x, which provides us flexibility to execute additional attractive strategic, operational or financial opportunities we identify.

It is also important for us to maintain sufficient liquidity, which was $3.7 billion as of June 30, 2024.

On March 18, 2024, we issued $825 million aggregate principal amount of our 7.000% 2032 Senior Notes at par and used a portion of the net proceeds from the issuance to repurchase $640 million in aggregate principal amount of our 6.750% 2026 Senior Secured Notes pursuant to a tender offer.

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STEELMAKING RESULTS

The following is a summary of our Steelmaking segment operating results for the three months ended March 31, 2024 and 2023 (dollars in millions, except for average selling price and shipments in thousands of net tons):

The following is a summary of our Steelmaking segment operating results for the three and six months ended June 30, 2024 and 2023 (dollars in millions, except for average selling price, and shipments in thousands of net tons):

Total Revenue Gross Margin Adjusted EBITDA Steel Shipments (nt)

2024 2023 2024 2023 2024 2023 2024 2023

Q2 2024 Q2 2023 YTD 2024 YTD 2023 Q2 2024 Q2 2023 YTD 2024 YTD 2023 Q2 2024 Q2 2023 YTD 2024 YTD 2023 Q2 2024 Q2 2023 YTD 2024 YTD 2023

STEEL PRODUCT REVENUE:

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Three Months Ended

(In thousands of net tons) 2024 2023 % Change

June 30, Six Months Ended

(In thousands of net tons) 2024 2023 % Change 2024 2023 % Change

Steel shipments by product:

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Three Months Ended

(In millions) 2024 2023 % Change

June 30, Six Months Ended

(In millions) 2024 2023 % Change 2024 2023 % Change

Steelmaking revenues by market:

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Total Steelmaking revenues by market $ 4,915 $ 5,808 (15) % $ 9,942 $ 10,934 (9) %

Revenues decreased by 2% during the three months ended March 31, 2024, as compared to the prior-year period, primarily due to:

Revenues decreased by 15% during the three months ended June 30, 2024, as compared to the prior-year period, primarily due to:

• A decrease of $520 million, or 26%, in revenues from the direct automotive market, predominantly due to a decrease in shipments due to proactive customer diversification;

• A decrease of $95 million, or 14%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for busheling scrap and lower third-party iron ore sales.

• These decreases were partially offset by an increase of $154 million, or 12%, in revenues from the distributors and converters market, predominantly due to the average HRC price increase and an increase in shipments;

• An increase of $95 million, or 7%, in revenues from the infrastructure and manufacturing market, predominantly due to the average HRC price increase.

Gross margin increased by $176 million, or 187%, during the three months ended March 31, 2024, as compared to the prior-year period, primarily due to:

• An increase in selling prices (approximately $200 million impact), predominantly due to higher spot prices.

• This increase in gross margin was partially offset by a decrease in sales volume (approximately $60 million impact).

• A decrease of $170 million, or 11%, in revenues from the infrastructure and manufacturing market, predominantly due to a decrease in shipments;

• A decrease of $164 million, or 21%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

Revenues decreased by 9% during the six months ended June 30, 2024, as compared to the prior-year period, primarily due to:

• A decrease of $773 million, or 20%, in revenues from the direct automotive market, predominantly due to a decrease in shipments due to proactive customer diversification;

• A decrease of $259 million, or 17%, in revenues from the steel producers markets, predominantly due to the decrease in pricing indices for slabs and busheling scrap.

Gross margin decreased by $484 million, or 77%, during the three months ended June 30, 2024, as compared to the prior-year period, primarily due to:

• A decrease in average selling price (approximately $370 million impact), predominantly due to lower spot prices and lower direct automotive mix;

• A decrease in sales volume (approximately $125 million impact).

• These decreases were partially offset by a decrease in cost of production (approximately $40 million impact) driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap.

Gross margin decreased by $308 million, or 43%, during the six months ended June 30, 2024, as compared to the prior-year period, primarily due to:

• A decrease in sales volume (approximately $190 million impact);

• A decrease in average selling price (approximately $125 million impact), predominantly due to lower spot prices and lower direct automotive mix.

• These decreases were partially offset by a decrease in cost of production (approximately $15 million impact) driven by lower raw materials and utilities costs, including natural gas, coal, coke, alloys and scrap.

ADJUSTED EBITDA

Adjusted EBITDA from our Steelmaking segment for the three months ended March 31, 2024, increased by $155 million, as compared to the three months ended March 31, 2023, primarily due to the increased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $125 million and $119 million of Selling, general and administrative expenses for the three months ended March 31, 2024 and 2023, respectively.

Adjusted EBITDA from our Steelmaking segment for the three months ended June 30, 2024, decreased by $459 million, as compared to the three months ended June 30, 2023, primarily due to the decreased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $96 million and $141 million of Selling, general and administrative expenses for the three months ended June 30, 2024 and 2023, respectively.

Adjusted EBITDA from our Steelmaking segment for the six months ended June 30, 2024, decreased by $304 million, as compared to the six months ended June 30, 2023, primarily due to the decreased gross margin from our operations.

Additionally, our Steelmaking Adjusted EBITDA included $221 million and $260 million of Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023, respectively.

RESULTS OF OPERATIONS

REVENUES & GROSS MARGIN

During the three months ended March 31, 2024, our consolidated Revenues decreased by $96 million, and our consolidated gross margin increased by $186 million, as compared to the prior-year period.

During the three and six months ended June 30, 2024, our consolidated Revenues decreased by $892 million and $988 million, respectively, compared to the prior-year periods.

During the three and six months ended June 30, 2024, our consolidated gross margin decreased by $482 million and $296 million, respectively, as compared to the prior-year periods.

See "— Steelmaking Results" above for further detail on our operating results.

RESTRUCTURING AND OTHER CHARGES

During the three months ended March 31, 2024, we announced the indefinite idle of our Weirton tinplate production plant, resulting in $104 million of restructuring and other charges primarily related to severance, other employee-related benefits and asset retirement obligation charges.

ASSET IMPAIRMENTS

During the three months ended March 31, 2024, we announced the indefinite idle of our Weirton tinplate production plant, resulting in $64 million of asset impairments.

MISCELLANEOUS - NET

During the three months ended March 31, 2024, miscellaneous expense increased by $20 million, as compared to the prior-year period.

The increase in miscellaneous expense is primarily related to increased expenses associated with our indefinitely idled and closed operations.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

During the three and six months ended June 30, 2024, Selling, general and administrative expenses decreased by $46 million and $41 million, respectively.

The decreases primarily relate to lower employment-related costs.

RESTRUCTURING AND OTHER CHARGES & ASSET IMPAIRMENTS

On February 15, 2024, we announced the indefinite idle of our Weirton tinplate production plant.

This resulted in restructuring and other charges primarily related to severance, other employee-related benefits and asset retirement obligation charges of $25 million and $129 million for the three and six months ended June 30, 2024, respectively.

Additionally, this resulted in asset impairments of $15 million and $79 million for the three and six months ended June 30, 2024, respectively.

LOSS ON EXTINGUISHMENT OF DEBT

During the three months ended March 31, 2024, we used a portion of the net proceeds from the issuance of the 7.000% 2032 Senior Notes to repurchase $640 million in aggregate principal amount of our 6.750% 2026 Secured Senior Notes, resulting in a $21 million loss on extinguishment of debt.

During the six months ended June 30, 2024, we used a portion of the net proceeds from the issuance of the 7.000% 2032 Senior Notes to repurchase $829 million in aggregate principal amount of our 6.750% 2026 Secured Senior Notes.

This resulted in $6 million and $27 million of losses on extinguishment of debt for the three and six months ended June 30, 2024, respectively.

Refer to NOTE 7 - DEBT AND CREDIT FACILITIES for further information.

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It also is affected by discrete items that may occur in any given period but are not consistent from period to period.

The following represents a summary of our tax provision and corresponding effective rates:

The following represents a summary of our tax provision:

Three Months Ended

June 30, Six Months Ended

(In millions) 2024 2023 2024 2023

Income tax benefit $ 8 $ 13

Effective tax rate 13 % 23 %

The changes in income tax benefit and the effective tax rate for the three months ended March 31, 2024, as compared to the prior-year period, are primarily related to depletion in excess of state income tax expense and the impact of immaterial discrete items relative to pre-tax income.

Our 2024 estimated annual effective tax rate before discrete items as of March 31, 2024 is 18%.

This estimated annual effective tax rate is less than the U.S.

statutory rate of 21%, as state income tax expense is less than the percentage depletion in excess of cost depletion.

The 2023 estimated annual effective tax rate before discrete items as of March 31, 2023 was 22%.

Income tax benefit (expense) $ 15 $ (102) $ 23 $ (89)

The changes in income tax benefit for the three and six months ended June 30, 2024, as compared to the income tax expense for the prior-year periods, are primarily related to depletion in excess of state income tax expense and the impact of immaterial discrete items relative to changes in pre-tax income.

LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES

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The following table provides a summary of our cash flow:

Three Months Ended

Six Months Ended

(In millions) 2024 2023

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Free cash flow 1

$ (40) $ (227)

1 See "— Non-GAAP Financial Measures" for a reconciliation of our free cash flow.

During the first quarter of 2024, we took action in alignment with our capital allocation priorities, as follows:

• We issued $825 million aggregate principal amount of our 7.000% 2032 Senior Notes.

The recent market environment has provided us opportunities to reduce our debt and return capital to shareholders, as follows:

• During the first quarter of 2024, we issued $825 million aggregate principal amount of our 7.000% 2032 Senior Notes.

A portion of the net proceeds from the 7.000% 2032 Senior Notes issuance was used 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.

After this transaction, we no longer have any secured notes outstanding.

• Additionally, we returned capital to shareholders through our share repurchase program, repurchasing 30.4 million common shares at a cost of $608 million in the aggregate.

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.

After these transactions, we no longer have any secured notes outstanding.

• Additionally, during the six months ended June 30, 2024, we returned capital to shareholders through our share repurchase programs, repurchasing 37.9 million common shares at a cost of $733 million in the aggregate.

The debt transactions give us additional flexibility by eliminating our secured notes, along with extending our average debt maturity date, which will better prepare us to navigate more easily through potentially volatile industry conditions in the future.

We expect to continue to use the financial levers available to us to both opportunistically reduce our debt and return capital to shareholders throughout the remainder of 2024 and beyond.

Our financial flexibility has allowed us to remain active in our opportunistic pursuit of value-enhancing mergers and acquisitions.

On July 15, 2024, we announced that we had entered into the Arrangement Agreement pursuant to which we will acquire Stelco.

Going forward, we will continue to use the financial levers available to us in order to continue to pursue assets that would grow our business, reduce our debt and return capital to shareholders.

OPERATING ACTIVITIES

Three Months Ended

Six Months Ended

(In millions) 2024 2023 Variance

Net loss $ (53) $ (42) $ (11)

Non-cash adjustments to net loss 412 237 175

Net income (loss) $ (44) $ 314 $ (358)

Non-cash adjustments to net income (loss) 636 500 136

Working capital:

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Total working capital 69 34 35

Net cash provided (used) by operating activities $ 142 $ (39) $ 181

Net cash provided by operating activities $ 661 $ 848 $ (187)

The variance was primarily driven by:

• A $164 million increase in net income after non-cash adjustments primarily due to higher gross margins resulting from an increase in selling prices for our steel products, which was partially offset by a decrease in sales volumes.

• A $222 million decrease in net income after non-cash adjustments primarily due to lower gross margins resulting from a decrease in both volume and selling prices for our steel products.

See "— Steelmaking Results" above for further detail on our operating results.

INVESTING ACTIVITIES

Three Months Ended

Six Months Ended

(In millions) 2024 2023 Variance

Purchase of property, plant and equipment $ (339) $ (319) $ (20)

Other investing activities 8 9 (1)

Net cash used by investing activities $ (331) $ (310) $ (21)

Cash used for capital expenditures decreased $6 million in the first quarter of 2024, as compared to the prior-year period.

Included within cash used for capital expenditures was $4 million for the three months ended March 31, 2024, compared to $5 million for the three months ended March 31, 2023, related to our non-owned SunCoke Middletown VIE.

Our capital expenditures primarily relate to sustaining capital spend, which includes infrastructure, mobile equipment, fixed equipment, product quality, environmental, and health and safety spend.

We anticipate total cash used for capital expenditures during the next 12 months to be between $675 and $725 million, which primarily consists of sustaining capital spend.

As a result, our cash used for capital expenditures was consistent, as compared to the prior-year period.

Included within cash used for capital expenditures was $8 million for the three months ended June 30, 2024, compared to $7 million for the three months ended June 30, 2023, related to our non-owned SunCoke Middletown VIE.

We anticipate total cash used for capital expenditures during the next 12 months to be between $800 and $900 million, which primarily consists of sustaining capital spend as well as initial spend on our capital projects at Middletown Works, Butler Works and Weirton.

FINANCING ACTIVITIES

Three Months Ended

Six Months Ended

(In millions) 2024 2023 Variance

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Repurchase of common shares (733) (94) (639)

Other (38) (50) 12

Net cash provided (used) by financing activities $ (131) $ 257 $ (388)

Other financing activities (35) (155) 120

Net cash used by financing activities $ (418) $ (530) $ 112

The variance was primarily driven by:

• A $608 million use of cash during the three months ended March 31, 2024 to repurchase 30.4 million of our common shares on the open market.

• A $173 million increase in cash provided from the net proceeds of our $825 million 7.000% 2032 Senior Notes issuance, partially offset by the repurchase of $640 million in aggregate principal amount of our 6.750% 2026 Secured Senior Notes pursuant to a tender offer.

• A $631 million decrease in cash used resulting from higher net repayments of debt during the six months ended June 30, 2023, along with increased borrowings on our ABL Facility during the six months ended June 30, 2024, as compared to the prior-year period.

• A $639 million increase in cash used to repurchase 37.9 million of our common shares on the open market during the six months ended June 30, 2024, as compared to the prior-year period.

• A $120 million decrease in cash used for other financing activities during the six months ended June 30, 2024, as compared to the prior-year period, primarily driven by a decrease in both fixed asset financing payments and finance lease payments.

LIQUIDITY AND CAPITAL RESOURCES

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We generally maintain minimal cash balances and utilize our access to our ABL Facility to cover fluctuations in our cash requirements.

Cash and cash equivalents, which totaled $30 million as of March 31, 2024, include cash on hand and on deposit.

The combination of cash and availability under our ABL Facility gave us $4.03 billion in liquidity as of March 31, 2024.

During the first quarter of 2024, we issued $825 million in aggregate principal amount of 7.000% 2032 Senior Notes.

We used a portion of the net proceeds from the offering to repurchase $640 million in aggregate principal amount of our 6.750% 2026 Secured Senior Notes pursuant to a tender offer.

Cash and cash equivalents, which totaled $110 million as of June 30, 2024, include cash on hand and on deposit.

The combination of cash and availability under our ABL Facility gave us $3.74 billion in liquidity as of June 30, 2024.

During the first six months of 2024, we issued $825 million in aggregate principal amount of 7.000% 2032 Senior Notes.

We used a portion of the net proceeds from the offering and available liquidity to repurchase $829 million in aggregate principal amount of our 6.750% 2026 Secured Senior Notes pursuant to a tender offer and subsequent redemption.

We believe our liquidity and access to capital markets will be adequate to fund our cash requirements for the next 12 months and for the foreseeable future.

On July 14, 2024, we entered into the Arrangement Agreement, pursuant to which we will acquire all of the issued and outstanding common shares of Stelco from the holders thereof.

We expect to incur and/or assume $2.25-$2.75 billion of debt to complete the Stelco Acquisition.

Immediately following completion of the Stelco Acquisition, we expect to have $6.0-$6.5 billion of outstanding indebtedness.

Our ABL Facility, which matures in June 2028, has a maximum borrowing base of $4.75 billion.

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Our ABL Facility includes a $555 million sublimit for the issuance of letters of credit and a $200 million sublimit for swingline loans.

As of March 31, 2024, outstanding letters of credit totaled $56 million, which reduced availability under our ABL Facility.

As of June 30, 2024, outstanding letters of credit totaled $46 million, which reduced availability under our ABL Facility.

We issue standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, workers' compensation, operating agreements, employee severance, environmental obligations and insurance.

Our ABL Facility agreement contains various financial and other covenants.

As of March 31, 2024, we were in compliance with all of our ABL Facility covenants.

As of June 30, 2024, we were in compliance with all of our ABL Facility covenants.

We have the capability to issue additional unsecured notes and, subject to the limitations set forth in our existing senior notes indentures and ABL Facility, to issue secured notes, if we elect to access the debt capital markets.

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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.

The following table provides a reconciliation of our Net loss to Adjusted EBITDA:

The following table provides a reconciliation of our Net income (loss) to Adjusted EBITDA:

Three Months Ended

June 30, Six Months Ended

(In millions) 2024 2023 2024 2023

Net loss $ (53) $ (42)

Net income (loss) $ 9 $ 356 $ (44) $ 314

Interest expense, net (69) (79) (133) (156)

Income tax benefit 8 13

Income tax benefit (expense) 15 (102) 23 (89)

Depreciation, depletion and amortization (228) (247) (458) (489)

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EBITDA of noncontrolling interests 1

$ 15 $ 17 $ 36 $ 40

Weirton indefinite idle 2

(40) — (217) —

Loss on extinguishment of debt (6) — (27) —

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Three Months Ended

June 30, Six Months Ended

(In millions) 2024 2023 2024 2023

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The following table provides a reconciliation of our operating cash flow to free cash flow:

Three Months Ended

Six Months Ended

(In millions) 2024 2023

Net cash provided (used) by operating activities $ 142 $ (39)

Net cash provided by operating activities $ 661 $ 848

Purchase of property, plant and equipment (339) (319)

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The following table provides a reconciliation of our long-term debt to net debt:

(In millions) March 31,

(In millions) June 30,

2024 December 31,

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INFORMATION ABOUT OUR GUARANTORS AND THE ISSUER OF OUR GUARANTEED SECURITIES

The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") as of March 31, 2024 have fully and unconditionally, and jointly and severally, guaranteed the obligations under (a) the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes and the 7.000% 2032 Senior Notes issued by Cleveland-Cliffs Inc.

on a senior unsecured basis and (b) the 6.750% 2026 Senior Secured Notes issued by Cleveland-Cliffs Inc.

on a senior secured basis.

The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") as of June 30, 2024 have fully and unconditionally, and jointly and severally, guaranteed the obligations under the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes and the 7.000% 2032 Senior Notes issued by Cleveland-Cliffs Inc.

on a senior unsecured basis.

See NOTE 7 - DEBT AND CREDIT FACILITIES for further information.

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Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc.

as of March 31, 2024.

Refer to Exhibit 22 , incorporated herein by reference, for the detailed list of entities included within the obligated group as of March 31, 2024.

As of March 31, 2024, the guarantee of a Guarantor subsidiary with respect to Cliffs' 6.750% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes and the 7.000% 2032 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:

as of June 30, 2024.

Refer to Exhibit 22 , incorporated herein by reference, for the detailed list of entities included within the obligated group as of June 30, 2024.

As of June 30, 2024, the guarantee of a Guarantor subsidiary with respect to the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes, the 6.750% 2030 Senior Notes, the 4.875% 2031 Senior Notes and the 7.000% 2032 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:

(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company;

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The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:

(In millions) March 31, 2024 December 31, 2023

(In millions) June 30, 2024 December 31, 2023

Current assets $ 6,675 $ 7,150

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The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:

Three Months Ended

(In millions) March 31, 2024

Six Months Ended

(In millions) June 30, 2024

Revenues $ 10,131

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The obligated group had the following balances with non-Guarantor subsidiaries and other related parties:

(In millions) March 31, 2024 December 31, 2023

(In millions) June 30, 2024 December 31, 2023

Balances with non-Guarantor subsidiaries:

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Accounts payable (14) (11)

Additionally, for the three months ended March 31, 2024, the obligated group had Revenues of $25 million and Cost of goods sold of $19 million, in each case, with other related parties.

Additionally, for the six months ended June 30, 2024, the obligated group had Revenues of $46 million and Cost of goods sold of $36 million, in each case, with other related parties.

We are subject to a variety of risks, including those caused by changes in commodity prices and interest rates.

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However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs.

The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of March 31, 2024, due to a 10% and 25% change in the market price of each of the indicated commodities:

The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of June 30, 2024, due to a 10% and 25% change in the market price of each of the indicated commodities:

Commodity Derivative (In millions) 10% Change 25% Change

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We estimate fair value using a market approach, an income approach or a cost approach.

For the three months ended March 31, 2024, we concluded that there were no additional triggering events resulting in the need for an impairment assessment except for the announcement of the indefinite idle of our Weirton tinplate production plant, which resulted in a $46 million impairment charge to Property, plant and equipment, net for the three months ended March 31, 2024.

For the three and six months ended June 30, 2024, we concluded that there were no additional triggering events resulting in the need for an impairment assessment except for the announcement of the indefinite idle of our Weirton tinplate production plant, which resulted in a $46 million impairment charge to Property, plant and equipment, net for the six months ended June 30, 2024.

INTEREST RATE RISK

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Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability.

As of March 31, 2024, we had $342 million outstanding under our ABL Facility.

As of June 30, 2024, we had $370 million outstanding under our ABL Facility.

An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings under our ABL Facility.

For example, a 100 basis point change to interest rates under our ABL Facility at the March 31, 2024 borrowing level would result in a change of $3 million to interest expense on an annual basis.

For example, a 100 basis point change to interest rates under our ABL Facility at the June 30, 2024 borrowing level would result in a change of $4 million to interest expense on an annual basis.

SUPPLY CONCENTRATION RISKS

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• the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property-related matters, labor and employment matters, or suits involving legacy operations and other matters;

• supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, other alloys, coke and metallurgical coal, and critical manufacturing equipment and spare parts;

• supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, other alloys, coke and metallurgical coal, and critical manufacturing equipment and spare parts;

• problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us;

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• potential significant deficiencies or material weaknesses in our internal control over financial reporting;

• the risk that the Stelco Acquisition may not be consummated;

• the risk that the Stelco Acquisition may be less accretive than expected, or may be dilutive, to our earnings per share, which may negatively affect the market price of our common shares;

• the risk that adverse reactions or changes to business or regulatory relationships may result from the announcement or completion of the Stelco Acquisition;

• the possibility of the occurrence of any event, change or other circumstance that could give rise to the right of one or both of Cliffs or Stelco to terminate the Arrangement Agreement, including, but not limited to, the companies' inability to obtain necessary regulatory approvals;

• the risk of shareholder litigation relating to the Stelco Acquisition that could be instituted against Stelco, Cliffs or their respective directors and officers;

• the possibility that Cliffs and Stelco will incur significant transaction and other costs in connection with the Stelco Acquisition, which may be in excess of those we anticipate;

• the risk that the financing transactions to be undertaken in connection with the Stelco Acquisition may have a negative impact on the combined company's credit profile, financial condition or financial flexibility;

• the possibility that the anticipated benefits of the Stelco Acquisition are not realized to the same extent as projected and that the integration of the acquired business into our existing business, including uncertainties associated with maintaining relationships with customers, vendors and employees, is not as successful as expected;

• the risk that future synergies from the Stelco Acquisition may not be realized or may take longer than expected to achieve;

• the possibility that the business and management strategies currently in place or implemented in the future for the maintenance, expansion and growth of the combined company's operations may not be as successful as anticipated;

• the risk associated with the retention and hiring of key personnel, including those of Stelco;

• the risk that any announcements relating to, or the completion of, the Stelco Acquisition could have adverse effects on the market price of our common shares;

• the risk of any unforeseen liabilities and future capital expenditures related to the Stelco Acquisition.

For additional factors affecting our business, refer to Part II – Item 1A.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis