CLEVELAND-CLIFFS INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL POSITION CLEVELAND-CLIFFS INC. AND SUBSIDIARIES (In millions, except share information) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 110 $ 198 Accounts receivable, net 1,773 1,840 Inventories 4,199 4,460 Other current assets 110 138 Total current assets 6,192 6,636 Non-current assets: Property, plant and equipment, net 8,728 8,895 Goodwill 1,005 1,005 Pension and OPEB assets 354 329 Other non-current assets 649 672 TOTAL ASSETS $ 16,928 $ 17,537 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 2,080 $ 2,099 Accrued employment costs 431 511 Accrued expenses 296 380 Other current liabilities 511 518 Total current liabilities 3,318 3,508 Non-current liabilities: Long-term debt 3,507 3,137 Pension and OPEB liabilities 757 821 Deferred income taxes 621 639 Other non-current liabilities 1,353 1,310 TOTAL LIABILITIES 9,556 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 - 468,038,839 shares (2023 - 504,886,773 shares) 66 66 Capital in excess of par value of shares 4,864 4,861 Retained earnings 1,668 1,733 Cost of 63,012,691 common shares in treasury (2023 - 26,164,757 shares) ( 1,154 ) ( 430 ) Accumulated other comprehensive income 1,666 1,657 Total Cliffs shareholders' equity 7,110 7,887 Noncontrolling interests 262 235 TOTAL EQUITY 7,372 8,122 TOTAL LIABILITIES AND EQUITY $ 16,928 $ 17,537 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Table of Contents STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED OPERATIONS CLEVELAND-CLIFFS INC. AND SUBSIDIARIES Three Months Ended June 30, Six Months Ended June 30, (In millions, except per share amounts) 2024 2023 2024 2023 Revenues $ 5,092 $ 5,984 $ 10,291 $ 11,279 Operating costs: Cost of goods sold ( 4,930 ) ( 5,340 ) ( 9,844 ) ( 10,536 ) Selling, general and administrative expenses ( 103 ) ( 149 ) ( 235 ) ( 276 ) Restructuring and other charges ( 25 ) — ( 129 ) — Asset impairments ( 15 ) — ( 79 ) — Miscellaneous – net ( 13 ) ( 12 ) ( 36 ) ( 15 ) Total operating costs ( 5,086 ) ( 5,501 ) ( 10,323 ) ( 10,827 ) Operating income (loss) 6 483 ( 32 ) 452 Other income (expense): Interest expense, net ( 69 ) ( 79 ) ( 133 ) ( 156 ) Loss on extinguishment of debt ( 6 ) — ( 27 ) — Net periodic benefit credits other than service cost component 62 50 122 100 Other non-operating income 1 4 3 6 Total other expense ( 12 ) ( 25 ) ( 35 ) ( 50 ) Income (loss) from continuing operations before income taxes ( 6 ) 458 ( 67 ) 402 Income tax benefit (expense) 15 ( 102 ) 23 ( 89 ) Income (loss) from continuing operations 9 356 ( 44 ) 313 Income from discontinued operations, net of tax — — — 1 Net income (loss) 9 356 ( 44 ) 314 Income attributable to noncontrolling interests ( 7 ) ( 9 ) ( 21 ) ( 24 ) Net income (loss) attributable to Cliffs shareholders $ 2 $ 347 $ ( 65 ) $ 290 Earnings (loss) per common share attributable to Cliffs shareholders - basic Continuing operations $ — $ 0.68 $ ( 0.13 ) $ 0.56 Discontinued operations — — — — $ — $ 0.68 $ ( 0.13 ) $ 0.56 Earnings (loss) per common share attributable to Cliffs shareholders - diluted Continuing operations $ — $ 0.67 $ ( 0.13 ) $ 0.56 Discontinued operations — — — — $ — $ 0.67 $ ( 0.13 ) $ 0.56 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Contents STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS) CLEVELAND-CLIFFS INC. AND SUBSIDIARIES Three Months Ended June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Net income (loss) $ 9 $ 356 $ ( 44 ) $ 314 Other comprehensive income (loss): Changes in pension and OPEB, net of tax ( 29 ) ( 26 ) ( 57 ) ( 53 ) Changes in derivative financial instruments, net of tax 47 18 67 ( 134 ) Changes in foreign currency translation — — ( 1 ) — Total other comprehensive income (loss) 18 ( 8 ) 9 ( 187 ) Comprehensive income (loss) 27 348 ( 35 ) 127 Comprehensive loss attributable to noncontrolling interests ( 7 ) ( 9 ) ( 21 ) ( 24 ) Comprehensive income (loss) attributable to Cliffs shareholders $ 20 $ 339 $ ( 56 ) $ 103 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Contents STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED CASH FLOWS CLEVELAND-CLIFFS INC. AND SUBSIDIARIES Six Months Ended June 30, (In millions) 2024 2023 OPERATING ACTIVITIES Net income (loss) $ ( 44 ) $ 314 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 458 489 Restructuring and other charges 129 — Asset impairments 79 — Pension and OPEB credits ( 104 ) ( 79 ) Loss on extinguishment of debt 27 — Other 47 90 Changes in operating assets and liabilities: Accounts receivable, net 67 ( 333 ) Inventories 227 403 Income taxes ( 12 ) 169 Pension and OPEB payments and contributions ( 62 ) ( 58 ) Payables, accrued employment and accrued expenses ( 176 ) ( 78 ) Other, net 25 ( 69 ) Net cash provided by operating activities 661 848 INVESTING ACTIVITIES Purchase of property, plant and equipment ( 339 ) ( 319 ) Other investing activities 8 9 Net cash used by investing activities ( 331 ) ( 310 ) FINANCING ACTIVITIES Repurchase of common shares ( 733 ) ( 94 ) Proceeds from issuance of senior notes 825 750 Repayments of senior notes ( 845 ) — Borrowings (repayments) under credit facilities, net 370 ( 1,031 ) Debt issuance costs ( 13 ) ( 34 ) Other financing activities ( 22 ) ( 121 ) Net cash used by financing activities ( 418 ) ( 530 ) Net increase (decrease) in cash and cash equivalents ( 88 ) 8 Cash and cash equivalents at beginning of period 198 26 Cash and cash equivalents at end of period $ 110 $ 34 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents 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 Comprehensive income — — — 2 — 18 7 27 Common stock repurchases, net of excise tax ( 7.5 ) — — — ( 125 ) — — ( 125 ) Stock and other incentive plans — — 13 — 1 — — 14 Net contributions to noncontrolling interests — — — — — — 14 14 June 30, 2024 468.0 $ 66 $ 4,864 $ 1,668 $ ( 1,154 ) $ 1,666 $ 262 $ 7,372 (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 Comprehensive income (loss) — — — 347 — ( 8 ) 9 348 Common stock repurchases ( 6.5 ) — — — ( 95 ) — — ( 95 ) Stock and other incentive plans 0.1 — 9 — 3 — — 12 Net distributions to noncontrolling interests — — — — — — ( 14 ) ( 14 ) June 30, 2023 508.7 $ 66 $ 4,841 $ 1,624 $ ( 372 ) $ 1,643 $ 242 $ 8,044 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 Table of Contents 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 income (loss), cash flows and changes in equity for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. The results of operations for the three and six months ended June 30, 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 a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. We are also a leading producer of electrical steels referred to as GOES and NOES in the U.S. 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. 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 June 30, 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. 7 Table of Contents 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 ) Decrease (increase) in allowance — ( 3 ) Allowance for credit losses as of June 30 $ ( 5 ) $ ( 7 ) INVENTORIES The following table presents the detail of our Inventories on the Statements of Unaudited Condensed Consolidated Financial Position: (In millions) June 30, 2024 December 31, 2023 Product inventories Finished and semi-finished goods $ 2,275 $ 2,573 Raw materials 1,508 1,476 Total product inventories 3,783 4,049 Manufacturing supplies and critical spares 416 411 Inventories $ 4,199 $ 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 June 30, 2024 and December 31, 2023, we had $ 27 million and $ 21 million, respectively, deemed as short-term financings that are classified in Other current liabilities . Additionally , as of June 30, 2024 and December 31, 2023, we had $ 80 million and $ 91 million, respectively, classified as Accounts payable. WEIRTON INDEFINITE IDLE On February 15, 2024, we announced the indefinite idle of our tinplate production plant located in Weirton, West Virginia. As of June 30, 2024, we have incurred $ 210 million of charges related to the idle and estimate that we will incur an additional $ 2 million in Restructuring and other charges, primarily related to employee related costs which are expected to be incurred by the end of 2024. The following table represents a reconciliation of our accrued liabilities related to the Weirton Indefinite Idle: (In millions) Employee- Related Costs Exit Costs Asset Impairment Total Balance as of December 31, 2023 $ — $ — $ — $ — Costs incurred 1 58 48 64 170 Cash payments — ( 2 ) — ( 2 ) Non-cash — — ( 64 ) ( 64 ) Balance as of March 31, 2024 $ 58 $ 46 $ — $ 104 Costs incurred 2 23 2 15 40 Cash payments ( 8 ) ( 10 ) — ( 18 ) Non-cash — — ( 15 ) ( 15 ) Balance as of June 30, 2024 $ 73 $ 38 $ — $ 111 1 Of the $ 170 million of cost incurred, $ 104 million was recorded in Restructuring and other charges, $ 64 million was recorded in Asset impairments and $ 2 million was recorded in Net periodic benefit credits other than service cost component . 2 Of the $ 40 million of costs incurred, $ 25 million was recorded in Restructuring and other charges and $ 15 million was recorded in Asset impairments. 8 Table of Contents CASH FLOW INFORMATION A reconciliation of capital additions to cash paid for capital expenditures is as follows: Six Months Ended June 30, (In millions) 2024 2023 Capital additions $ 346 $ 290 Less: Non-cash accruals ( 47 ) ( 89 ) Right-of-use assets - finance leases 54 60 Cash paid for capital expenditures including deposits $ 339 $ 319 Cash payments (receipts) for income taxes and interest are as follows: Six Months Ended June 30, (In millions) 2024 2023 Income taxes paid $ 10 $ 37 Income tax refunds ( 4 ) ( 138 ) Interest paid on debt obligations net of capitalized interest 1 134 142 1 Capitalized interest was $ 8 million and $ 6 million for the six months ended June 30, 2024 and 2023, respectively. 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 June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Steelmaking: Direct automotive $ 1,460 $ 1,980 $ 3,077 $ 3,850 Infrastructure and manufacturing 1,421 1,591 2,813 2,888 Distributors and converters 1,402 1,441 2,814 2,699 Steel producers 632 796 1,238 1,497 Total Steelmaking 4,915 5,808 9,942 10,934 Other Businesses: Direct automotive 148 143 288 282 Infrastructure and manufacturing 10 10 20 20 Distributors and converters 19 23 41 43 Total Other Businesses 177 176 349 345 Total revenues $ 5,092 $ 5,984 $ 10,291 $ 11,279 9 Table of Contents The following tables represent our Revenues by product line: Three Months Ended June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Steelmaking: Hot-rolled steel $ 1,115 $ 1,357 $ 2,243 $ 2,478 Cold-rolled steel 711 748 1,460 1,387 Coated steel 1,546 1,789 3,169 3,406 Stainless and electrical steel 480 615 941 1,189 Plate 317 399 650 730 Slab and other steel products 318 366 653 693 Other 428 534 826 1,051 Total Steelmaking 4,915 5,808 9,942 10,934 Other Businesses: Other 177 176 349 345 Total revenues $ 5,092 $ 5,984 $ 10,291 $ 11,279 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 a leading North America-based steel producer supported by being the largest iron ore pellet producer as well as a leading prime scrap processor, 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 June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Revenues: Steelmaking $ 4,915 $ 5,808 $ 9,942 $ 10,934 Other Businesses 177 176 349 345 Total revenues $ 5,092 $ 5,984 $ 10,291 $ 11,279 Adjusted EBITDA: Steelmaking $ 306 $ 765 $ 701 $ 1,005 Other Businesses 18 15 35 23 Eliminations ( 1 ) ( 5 ) 1 ( 10 ) Total Adjusted EBITDA $ 323 $ 775 $ 737 $ 1,018 10 Table of Contents The following table provides a reconciliation of our consolidated Net income (loss) to total Adjusted EBITDA: Three Months Ended June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Net income (loss) $ 9 $ 356 $ ( 44 ) $ 314 Less: Interest expense, net ( 69 ) ( 79 ) ( 133 ) ( 156 ) Income tax benefit (expense) 15 ( 102 ) 23 ( 89 ) Depreciation, depletion and amortization ( 228 ) ( 247 ) ( 458 ) ( 489 ) 291 784 524 1,048 Less: EBITDA of noncontrolling interests 1 15 17 36 40 Weirton indefinite idle 2 ( 40 ) — ( 217 ) — Loss on extinguishment of debt ( 6 ) — ( 27 ) — Other, net ( 1 ) ( 8 ) ( 5 ) ( 10 ) Total Adjusted EBITDA $ 323 $ 775 $ 737 $ 1,018 1 EBITDA of noncontrolling interests includes the following: Net income attributable to noncontrolling interests $ 7 $ 9 $ 21 $ 24 Depreciation, depletion and amortization 8 8 15 16 EBITDA of noncontrolling interests $ 15 $ 17 $ 36 $ 40 2 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for further information. The following table summarizes our depreciation, depletion and amortization and capital additions by segment: Three Months Ended June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Depreciation, depletion and amortization: Steelmaking $ ( 219 ) $ ( 239 ) $ ( 441 ) $ ( 470 ) Other Businesses ( 9 ) ( 8 ) ( 17 ) ( 19 ) Total depreciation, depletion and amortization $ ( 228 ) $ ( 247 ) $ ( 458 ) $ ( 489 ) Capital additions 1 : Steelmaking $ 187 $ 159 $ 343 $ 286 Other Businesses 2 2 3 3 Corporate — 1 — 1 Total capital additions $ 189 $ 162 $ 346 $ 290 1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information. The following summarizes our assets by segment: (In millions) June 30, 2024 December 31, 2023 Assets: Steelmaking $ 16,362 $ 16,880 Other Businesses 666 657 Intersegment eliminations ( 506 ) ( 507 ) Total segment assets 16,522 17,030 Corporate 406 507 Total assets $ 16,928 $ 17,537 11 Table of Contents 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) June 30, 2024 December 31, 2023 Land, land improvements and mineral rights $ 1,389 $ 1,389 Buildings 937 946 Equipment 9,822 9,680 Other 314 302 Construction in progress 645 590 Total property, plant and equipment 1 13,107 12,907 Allowance for depreciation and depletion ( 4,379 ) ( 4,012 ) Property, plant and equipment, net $ 8,728 $ 8,895 1 Includes right-of-use assets related to finance leases of $ 347 million and $ 306 million as of June 30, 2024 and December 31, 2023, respectively. We recorded depreciation and depletion expense of $ 227 million and $ 454 million for the three and six months ended June 30, 2024, respectively, and $ 246 million and $ 485 million for the three and six months ended June 30, 2023, respectively. During the first quarter of 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) June 30, 2024 December 31, 2023 Steelmaking $ 956 $ 956 Other Businesses 49 49 Total goodwill $ 1,005 $ 1,005 INTANGIBLE ASSETS AND LIABILITIES The following is a summary of our intangible assets and liabilities: June 30, 2024 December 31, 2023 (In millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Intangible assets 1 : Customer relationships $ 90 $ ( 21 ) $ 69 $ 90 $ ( 18 ) $ 72 Developed technology 60 ( 16 ) 44 60 ( 14 ) 46 Trade names and trademarks 18 ( 6 ) 12 18 ( 5 ) 13 Mining permits 72 ( 28 ) 44 72 ( 28 ) 44 Supplier relationships 29 ( 4 ) 25 29 ( 3 ) 26 Total intangible assets $ 269 $ ( 75 ) $ 194 $ 269 $ ( 68 ) $ 201 Intangible liabilities 2 : Above-market supply contracts $ ( 71 ) $ 27 $ ( 44 ) $ ( 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 $ 3 million for both the three months ended June 30, 2024 and 2023, and $ 7 million for both the six months ended June 30, 2024 and 2023. Estimated future amortization expense is $ 6 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 $ 2 million for both the three months ended June 30, 2024 and 2023, and $ 3 million for both the six months ended June 30, 2024 and 2023. Estimated future income from amortization is $ 2 million for the remainder of 2024 and $ 5 million annually for the years 2025 through 2029. 12 Table of Contents 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 June 30, 2024 December 31, 2023 Senior Secured Notes: 6.750 % 2026 Senior Secured Notes Cliffs 6.990 % $ — $ 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 3 370 — Total principal amount 3,558 3,192 Unamortized discounts and issuance costs ( 51 ) ( 55 ) Total long-term debt $ 3,507 $ 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 6.690 % as of June 30, 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. 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, 13 Table of Contents 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 June 30, 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) June 30, 2024 Available borrowing base on ABL Facility 1 $ 4,050 Borrowings ( 370 ) Letter of credit obligations 2 ( 46 ) Borrowing capacity available $ 3,634 1 As of June 30, 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 June 30, 2024 (in millions): 2024 2025 2026 2027 2028 Thereafter Total $ — $ — $ — $ 685 $ 370 $ 2,503 $ 3,558 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 June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Service cost $ 7 $ 8 $ 14 $ 16 Interest cost 54 58 109 117 Expected return on plan assets ( 80 ) ( 78 ) ( 160 ) ( 157 ) Amortization: Prior service costs 4 4 8 8 Net actuarial loss — 1 — 2 Net periodic benefit credits $ ( 15 ) $ ( 7 ) $ ( 29 ) $ ( 14 ) OPEB COSTS (CREDITS) Three Months Ended June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Service cost $ 2 $ 3 $ 4 $ 5 Interest cost 13 16 25 32 Expected return on plan assets ( 10 ) ( 10 ) ( 21 ) ( 21 ) Termination benefits 1 — — 2 — Amortization: Prior service credits ( 4 ) ( 4 ) ( 8 ) ( 8 ) Net actuarial gain ( 39 ) ( 37 ) ( 77 ) ( 73 ) Net periodic benefit credits $ ( 38 ) $ ( 32 ) $ ( 75 ) $ ( 65 ) 1 The termination benefits relate to the announcement of the indefinite idle of our Weirton tinplate production plant. 14 Table of Contents Based on funding requirements, we made $ 16 million of defined benefit pension contributions for both the three and six months ended June 30, 2024, respectively, and no defined benefit pension contributions for the three and six months ended June 30, 2023. Based on funding requirements, we made no contributions to our voluntary employee benefit association trust plans for both the three and six months ended June 30, 2024 and 2023. NOTE 9 - INCOME TAXES Our income tax benefit for the three and six months ended June 30, 2024 is $ 15 million and $ 23 million, respectively, compared to income tax expense of $ 102 million and $ 89 million for the three and six months ended June 30, 2023, respectively, primarily due to depletion in excess of state income tax expense and the impact of immaterial discrete items relative to changes in 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. The following is a summary of our asset retirement obligations: (In millions) June 30, 2024 December 31, 2023 Asset retirement obligations 1 $ 506 $ 459 Less: current portion 51 15 Long-term asset retirement obligations $ 455 $ 444 1 Includes $ 266 million and $ 259 million related to our active operations as of June 30, 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 11 13 Revision in estimated cash flows 50 1 Remediation payments ( 14 ) ( 9 ) Asset retirement obligations as of June 30 $ 506 $ 525 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: June 30, 2024 December 31, 2023 (In millions) Valuation Hierarchy Classification Carrying Value Fair Value Carrying Value Fair Value Senior notes Level 1 $ 3,137 $ 3,083 $ 3,137 $ 3,118 ABL Facility - outstanding balance Level 2 370 370 — — Total $ 3,507 $ 3,453 $ 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. 15 Table of Contents 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. 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 June 30, 2024 December 31, 2023 Natural Gas MMBtu July 2024 - May 2027 158,920,000 168,590,000 Electricity Megawatt hours July 2024 - July 2027 3,527,025 3,501,898 At June 30, 2024, we estimate $ 98 million of net losses related to our hedge contracts will reclassify from Accumulated other comprehensive income into Cost of goods sold during the next 12 months. These estimates are based on June 30, 2024 fair values, some of which will change before their actual reclassification into Cost of goods sold. 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) June 30, 2024 December 31, 2023 Other current assets $ 1 $ — Other non-current assets 1 1 Other current liabilities ( 69 ) ( 105 ) Other non-current liabilities ( 25 ) ( 52 ) NOTE 13 - CAPITAL STOCK SHARE REPURCHASE PROGRAM During the first quarter of 2024, we fully utilized the remaining portion of our prior $ 1 billion share repurchase program, which was approved by our Board of Directors on February 10, 2022. On April 22, 2024, our Board of Directors authorized a new program to repurchase our 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. We are not obligated to make any repurchases, and the program may be suspended or discontinued at any time. The share repurchase program does not have a specific expiration date. During the three and six months ended June 30, 2024, we repurchased 7.5 million and 37.9 million common shares, respectively, at a cost of $ 124 million and $ 733 million, respectively, excluding any excise tax due under the Inflation Reduction Act. During both the three and six months ended June 30, 2023, we repurchased 6.5 million common shares at a cost of $ 94 million. As of June 30, 2024, there was approximately $ 1.4 billion remaining authorization under our active share repurchase program. 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. 16 Table of Contents 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 June 30, Six Months Ended June 30, (In millions) 2024 2023 2024 2023 Foreign Currency Translation Beginning balance $ ( 1 ) $ ( 1 ) $ — $ ( 1 ) Other comprehensive loss before reclassifications — — ( 1 ) — Ending balance $ ( 1 ) $ ( 1 ) $ ( 1 ) $ ( 1 ) Derivative Instruments Beginning balance $ ( 150 ) $ ( 168 ) $ ( 170 ) $ ( 16 ) Other comprehensive gain (loss) before reclassifications 2 ( 31 ) ( 31 ) ( 208 ) Income tax benefit — 7 8 51 Other comprehensive gain (loss) before reclassifications, net of tax 2 ( 24 ) ( 23 ) ( 157 ) Losses reclassified from AOCI to net income (loss) 1 61 55 120 30 Income tax benefit 2 ( 16 ) ( 13 ) ( 30 ) ( 7 ) Net losses reclassified from AOCI to net income (loss) 45 42 90 23 Ending balance $ ( 103 ) $ ( 150 ) $ ( 103 ) $ ( 150 ) Pension and OPEB Beginning balance $ 1,799 $ 1,820 $ 1,827 $ 1,847 Gains reclassified from AOCI to net income (loss) 3 ( 39 ) ( 36 ) ( 77 ) ( 71 ) Income tax expense 2 10 10 20 18 Net gains reclassified from AOCI to net income (loss) ( 29 ) ( 26 ) ( 57 ) ( 53 ) Ending balance $ 1,770 $ 1,794 $ 1,770 $ 1,794 Total AOCI Ending Balance $ 1,666 $ 1,643 $ 1,666 $ 1,643 1 Amounts recognized in Cost of goods sold in the Statements of Unaudited Condensed Consolidated Operations. 2 Amounts recognized in Income tax benefit (expense) 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. 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 $ 9 million and $ 24 million for the three and six months ended June 30, 2024, respectively, compared to $ 10 million and $ 27 million for the three and six months ended June 30, 2023, respectively, that was included in our consolidated income before income taxes. Additionally, SunCoke Middletown had cash used for capital expenditures of $ 8 million and $ 12 million for the three and six months ended June 30, 2024, respectively, compared to $ 7 million and $ 12 million for the three and six months ended June 30, 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. 17 Table of Contents 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) June 30, 2024 December 31, 2023 Inventories $ 33 $ 29 Property, plant and equipment, net 291 288 Accounts payable ( 21 ) ( 26 ) Other assets (liabilities), net ( 24 ) ( 39 ) Noncontrolling interests ( 279 ) ( 252 ) NOTE 16 - EARNINGS PER SHARE The following table summarizes the computation of basic and diluted EPS: Three Months Ended June 30, Six Months Ended June 30, (In millions, except per share amounts) 2024 2023 2024 2023 Income (loss) from continuing operations $ 9 $ 356 $ ( 44 ) $ 313 Income from continuing operations attributable to noncontrolling interests ( 7 ) ( 9 ) ( 21 ) ( 24 ) Net income (loss) from continuing operations attributable to Cliffs shareholders 2 347 ( 65 ) 289 Income from discontinued operations, net of tax — — — 1 Net income (loss) attributable to Cliffs shareholders $ 2 $ 347 $ ( 65 ) $ 290 Weighted average number of shares: Basic 473 513 483 514 Employee stock plans 1 1 1 — 1 Diluted 474 514 483 515 Earnings (loss) per common share attributable to Cliffs shareholders - basic: Continuing operations $ — $ 0.68 $ ( 0.13 ) $ 0.56 Discontinued operations — — — — $ — $ 0.68 $ ( 0.13 ) $ 0.56 Earnings (loss) per common share attributable to Cliffs shareholders - diluted: Continuing operations $ — $ 0.67 $ ( 0.13 ) $ 0.56 Discontinued operations — — — — $ — $ 0.67 $ ( 0.13 ) $ 0.56 1 Excluded from the diluted EPS calculation are anti-dilutive shares related to employee stock plans. For the three and six months ended June 30, 2024, 2 million and 2 million shares, respectively, were excluded. For the three and six months ended June 30, 2023, 3 million and 2 million shares, respectively, were excluded. 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. 18 Table of Contents OTHER COMMERCIAL COMMITMENTS We use surety bonds and letters of credit to provide financial assurance for certain obligations and statutory requirements. As of June 30, 2024, we had $ 273 million of surety-backed letters of credit and surety bonds outstanding. Additionally, as of June 30, 2024, we had $ 46 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) June 30, 2024 December 31, 2023 Environmental obligations $ 131 $ 134 Less: current portion 21 21 Long-term environmental obligations $ 110 $ 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. 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 certain 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. 19 Table of Contents 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 We have evaluated subsequent events through the date of financial statement issuance. 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. Under the terms of the Arrangement Agreement, Stelco shareholders will receive CAD $ 60.00 per Stelco common share in cash and a fixed exchange ratio of 0.454 shares of Cliffs common stock per share of Stelco common stock (or CAD $ 10.00 per share as of July 12, 2024), representing a total consideration of CAD $ 70.00 per Stelco share. The Arrangement Agreement implies a total enterprise value of approximately $ 2.5 billion (CAD $ 3.4 billion) for Stelco as of July 12, 2024. Completion of the Stelco Acquisition is subject to various customary closing conditions, including, among others, approval by Stelco shareholders and the receipt of required regulatory clearances in both the U.S. and Canada, and it is possible that factors outside of our control could result in the Stelco Acquisition being completed at a later time or not at all. The Arrangement Agreement also contains certain termination rights that may be exercised by either us or Stelco. We expect to complete the Stelco Acquisition in the fourth quarter of 2024 following the satisfaction or waiver of all applicable conditions.