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Item 1. Financial Statements

2024-11-05 compared with 2024-07-24 · 158 added, 92 removed, 648 unchanged (28% of the section changed)

3 unchanged sentences

AND SUBSIDIARIES

(In millions, except share information) June 30,

(In millions, except share information) September 30,

2024 December 31,

43 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions, except per share amounts) 2024 2023 2024 2023

3 unchanged sentences

Selling, general and administrative expenses ( 112 ) ( 139 ) ( 347 ) ( 415 )

Acquisition-related costs ( 14 ) ( 5 ) ( 14 ) ( 5 )

Restructuring and other charges ( 2 ) — ( 131 ) —

7 unchanged sentences

Net periodic benefit credits other than service cost component 62 50 184 150

Other non-operating income 1 4 3 6

Changes in fair value of foreign currency contracts, net ( 7 ) — ( 7 ) —

Other non-operating income (expense) — ( 2 ) 3 4

Total other expense ( 47 ) ( 22 ) ( 82 ) ( 72 )

19 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

6 unchanged sentences

Comprehensive income (loss) ( 256 ) 279 ( 291 ) 406

Comprehensive loss attributable to noncontrolling interests ( 7 ) ( 9 ) ( 21 ) ( 24 )

Comprehensive income attributable to noncontrolling interests ( 12 ) ( 11 ) ( 33 ) ( 35 )

Comprehensive income (loss) attributable to Cliffs shareholders $ ( 268 ) $ 268 $ ( 324 ) $ 371

3 unchanged sentences

AND SUBSIDIARIES

Six Months Ended

Nine Months Ended

September 30,

(In millions) 2024 2023

34 unchanged sentences

AND SUBSIDIARIES

(In millions) Number

Shares Outstanding Par Value of

(In millions) Number of

Common Shares Outstanding Par Value of Common

Shares Issued Capital in

1 unchanged sentence

Earnings Common

Treasury AOCI Non-controlling Interests Total

Treasury AOCI Non-Controlling Interest Total

December 31, 2023 504.9 $ 66 $ 4,861 $ 1,733 $ ( 430 ) $ 1,657 $ 235 $ 8,122

7 unchanged sentences

Stock and other incentive plans — — 13 — 1 — — 14

Net contributions to noncontrolling interests — — — — — — 14 14

Net distributions 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

Shares Outstanding Par Value of Common

Comprehensive income (loss) — — — ( 242 ) — ( 26 ) 12 ( 256 )

Stock and other incentive plans 0.1 — 11 — 1 — — 12

Net distributions to noncontrolling interests — — — — — — ( 33 ) ( 33 )

September 30, 2024 468.1 $ 66 $ 4,875 $ 1,426 $ ( 1,153 ) $ 1,640 $ 241 $ 7,095

(In millions) Number of

Common Shares Outstanding Par Value of Common

Shares Issued Capital in

1 unchanged sentence

Earnings Common

Treasury AOCI Non-controlling Interests Total

Treasury AOCI Non-Controlling Interest Total

December 31, 2022 513.3 $ 66 $ 4,871 $ 1,334 $ ( 310 ) $ 1,830 $ 251 $ 8,042

4 unchanged sentences

Comprehensive income (loss) — — — 347 — ( 8 ) 9 348

Common stock repurchases ( 6.5 ) — — — ( 95 ) — — ( 95 )

Common stock repurchases, net of excise tax ( 6.5 ) — — — ( 95 ) — — ( 95 )

Stock and other incentive plans 0.1 — 9 — 3 — — 12

1 unchanged sentence

June 30, 2023 508.7 $ 66 $ 4,841 $ 1,624 $ ( 372 ) $ 1,643 $ 242 $ 8,044

Comprehensive income — — — 264 — 4 11 279

Common stock repurchases, net of excise tax ( 3.9 ) — — — ( 59 ) — — ( 59 )

Stock and other incentive plans — — 9 — — — — 9

Net distributions to noncontrolling interests — — — — — — ( 9 ) ( 9 )

September 30, 2023 504.8 $ 66 $ 4,850 $ 1,888 $ ( 431 ) $ 1,647 $ 244 $ 8,264

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

8 unchanged sentences

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.

The results of operations for the three and nine months ended September 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.

4 unchanged sentences

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.

Headquartered in Cleveland, Ohio, with the closing of the Stelco Acquisition, we employ approximately 30,000 people across our operations in the United States and Canada.

ACQUISITION OF STELCO

On November 1, 2024, pursuant to the terms of the Arrangement Agreement announced on July 15, 2024, we completed the Stelco Acquisition.

In connection with closing, Stelco shareholders received CAD $ 60.00 in cash and 0.454 shares of Cliffs common stock per share of Stelco common stock.

BUSINESS OPERATIONS

7 unchanged sentences

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.

Our investment in affiliates of $ 117 million and $ 123 million as of September 30, 2024 and December 31, 2023, respectively, was classified in Other non-current assets.

SIGNIFICANT ACCOUNTING POLICIES

19 unchanged sentences

This guidance requires additional annual and interim disclosures for income taxes.

This new standard does not affect the recognition, measurement or financial statement presentation.

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.

5 unchanged sentences

Decrease (increase) in allowance 1 ( 3 )

Allowance for credit losses as of June 30 $ ( 5 ) $ ( 7 )

Allowance for credit losses as of September 30 $ ( 4 ) $ ( 7 )

The following table presents the detail of our Inventories on the Statements of Unaudited Condensed Consolidated Financial Position:

(In millions) June 30,

(In millions) September 30,

2024 December 31,

11 unchanged sentences

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.

As of September 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 September 30, 2024 and December 31, 2023, we had $ 71 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.

As of September 30, 2024, we have incurred $ 212 million of charges related to the idle and estimate that we will incur nominal future charges to 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:

9 unchanged sentences

Balance as of June 30, 2024 $ 73 $ 38 $ — $ 111

Costs incurred 3

Cash payments ( 10 ) ( 11 ) — ( 21 )

Balance as of September 30, 2024 $ 63 $ 29 $ — $ 92

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.

3 Costs incurred of $ 2 million were recorded in Restructuring and other charges.

CASH FLOW INFORMATION

A reconciliation of capital additions to cash paid for capital expenditures is as follows:

Six Months Ended

Nine Months Ended

September 30,

(In millions) 2024 2023

1 unchanged sentence

Non-cash accruals ( 58 ) ( 98 )

Equipment financed with seller 50 47

Right-of-use assets - finance leases 75 78

1 unchanged sentence

Cash payments (receipts) for income taxes and interest are as follows:

Six Months Ended

Nine Months Ended

September 30,

(In millions) 2024 2023

2 unchanged sentences

Interest paid on debt obligations net of capitalized interest 1

1 Capitalized interest was $ 8 million and $ 6 million for the six months ended June 30, 2024 and 2023, respectively.

1 Capitalized interest was $ 11 million and $ 8 million for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 3 - REVENUES

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

20 unchanged sentences

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.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

3 unchanged sentences

Depreciation, depletion and amortization ( 235 ) ( 249 ) ( 693 ) ( 738 )

291 784 524 1,048

Total EBITDA 31 623 555 1,671

EBITDA of noncontrolling interests 1

2 unchanged sentences

Loss on extinguishment of debt — — ( 27 ) —

Acquisition-related costs ( 14 ) ( 3 ) ( 14 ) ( 5 )

Changes in fair value of foreign currency contracts, net ( 7 ) — ( 7 ) —

Arbitration decision ( 71 ) — ( 71 ) —

Other, net ( 19 ) ( 8 ) ( 24 ) ( 16 )

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

10 unchanged sentences

The following summarizes our assets by segment:

(In millions) June 30,

(In millions) September 30,

2024 December 31,

7 unchanged sentences

The following table indicates the carrying value of each of the major classes of our depreciable assets:

(In millions) June 30,

(In millions) September 30,

2024 December 31,

8 unchanged sentences

Property, plant and equipment, net $ 8,687 $ 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.

1 Includes right-of-use assets related to finance leases of $ 358 million and $ 306 million as of September 30, 2024 and December 31, 2023, respectively.

We recorded depreciation and depletion expense of $ 233 million and $ 687 million for the three and nine months ended September 30, 2024, respectively, and $ 247 million and $ 732 million for the three and nine months ended September 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 .

1 unchanged sentence

The following is a summary of Goodwill by segment:

(In millions) June 30,

(In millions) September 30,

2024 December 31,

4 unchanged sentences

The following is a summary of our intangible assets and liabilities:

June 30, 2024

September 30, 2024

December 31, 2023

14 unchanged sentences

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.

Amortization expense related to intangible assets was $ 3 million for both the three months ended September 30, 2024 and 2023, and $ 10 million for both the nine months ended September 30, 2024 and 2023.

Estimated future amortization expense is $ 3 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.

Income from amortization related to the intangible liabilities was $ 1 million for both the three months ended September 30, 2024 and 2023, and $ 4 million for both the nine months ended September 30, 2024 and 2023.

Estimated future income from amortization is $ 1 million for the remainder of 2024 and $ 5 million annually for the years 2025 through 2029.

4 unchanged sentences

Annual Effective

Interest Rate June 30,

Interest Rate September 30,

2024 December 31,

26 unchanged sentences

as borrower under our ABL Facility.

3 Our ABL Facility annual effective interest rate was 6.690 % as of June 30, 2024.

3 Our ABL Facility annual effective interest rate was 8.25 % as of September 30, 2024.

Any incremental borrowings on our ABL Facility, as of September 30, 2024, would have had an interest rate between 5.63 % and 8.25 %.

7.000% 2032 SENIOR NOTES OFFERING

2 unchanged sentences

The 7.000 % 2032 Senior Notes were issued in a private placement transaction exempt from the registration requirements of the Securities Act.

On August 16, 2024, we issued an additional $ 600 million aggregate principal amount of our 7.000% 2032 Senior Notes in a private placement transaction exempt from the registration requirements of the Securities Act.

These additional notes were issued at a price of 99.25 % of their principal amount.

Furthermore, the additional notes are treated as the same class and series as the initial notes issued on March 18, 2024, other than with respect to the date of issuance and issue price.

The net proceeds from the transaction were used to finance a portion of the cash consideration paid in connection with the Stelco Acquisition, which we completed on November 1, 2024.

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.

11 unchanged sentences

however, there are no financial covenants.

DEBT EXTINGUISHMENTS

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

On April 3, 2024,

we redeemed the remaining $ 189 million in aggregate principal amount of our then-outstanding 6.750% 2026 Senior Secured Notes with the remaining portion of the net proceeds from the 7.000% 2032 Senior Notes issuance and available liquidity.

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.

On July 31, 2024 and September 13, 2024, in connection with the Stelco Acquisition, we entered into the fifth and sixth amendments to our ABL Facility, respectively.

The amendments, among other things, (i) amend the normal conditions for borrowing loans to allow for the Stelco Acquisition and permit additional borrowings for the purpose of financing a portion of the Stelco Acquisition purchase price, and (ii) subsequent to the Stelco Acquisition and the satisfaction of customary conditions, divide the existing $ 4.75 billion of aggregate lending commitments under our ABL Facility into two tranches, (x) a $ 4.25 billion tranche of lending commitments available to be borrowed by the Company and certain U.S.

subsidiaries of the Company that are designated as borrowers from time to time in accordance with the ABL Facility and (y) a $ 500 million tranche of lending commitments available to be borrowed by certain Canadian subsidiaries of the Company that are designated as borrowers from time to time in accordance with the ABL Facility.

As of September 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,

(In millions) September 30,

Available borrowing base on ABL Facility 1

2 unchanged sentences

Borrowing capacity available $ 3,740

1 As of June 30, 2024, the ABL Facility has a maximum available borrowing base of $ 4.75 billion.

1 As of September 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.

COMMITMENT LETTER

In the third quarter of 2024, we entered into a Commitment Letter under which a syndicate of banks committed to provide us with up to $ 3.3 billion of financing under a Bridge Facility to finance the Stelco Acquisition.

Per terms outlined in the Commitment Letter, the Bridge Facility was subsequently reduced to $ 2.4 billion at September 13, 2024, the effective date of the sixth amendment to the ABL Facility.

As of September 30, 2024, the Bridge Facility was available in a single draw on the closing date of the Stelco Acquisition and had a maturity date 364 days after the closing date.

The Bridge Facility is also subject to further reductions as outlined in the Commitment Letter, including reductions equal to 100% of the net cash proceeds from any issuance of senior notes.

The Bridge Facility commitment terminates on the earliest of (i) five business days after April 14, 2025 (or as such date may be extended under the terms of the Arrangement Agreement), (ii) the consummation of the Stelco Acquisition and (iii) the date that the Arrangement Agreement is terminated or expires in accordance with its terms without the closing of the Stelco Acquisition.

See NOTE 18 - SUBSEQUENT EVENTS for further information.

DEBT EXTINGUISHMENTS

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

On April 3, 2024, we redeemed the remaining $ 189 million in aggregate principal amount of our then-outstanding 6.750% 2026 Senior Secured Notes with the remaining portion of the net proceeds from the initial 7.000% 2032 Senior Notes issuance and available liquidity.

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):

The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at September 30, 2024 (in millions):

2024 2025 2026 2027 2028 Thereafter Total

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

8 unchanged sentences

1 The termination benefits relate to the announcement of the indefinite idle of our Weirton tinplate production plant.

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.

Based on funding requirements, we made $ 75 million and $ 91 million of defined benefit pension contributions for the three and nine months ended September 30, 2024, respectively.

Based on funding requirements, we made nominal defined benefit pension contributions for the three and nine months ended September 30, 2023.

Based on funding requirements, we made no contributions to our voluntary employee benefit association trust plans for both the three and nine months ended September 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.

Our income tax benefit for the three and nine months ended September 30, 2024 is $ 76 million and $ 99 million, respectively, compared to income tax expense of $ 29 million and $ 118 million for the three and nine months ended September 30, 2023, respectively, changed 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

6 unchanged sentences

The following is a summary of our asset retirement obligations:

(In millions) June 30,

(In millions) September 30,

2024 December 31,

2 unchanged sentences

Long-term asset retirement obligations $ 459 $ 444

1 Includes $ 266 million and $ 259 million related to our active operations as of June 30, 2024 and December 31, 2023, respectively.

1 Includes $ 269 million and $ 259 million related to our active operations as of September 30, 2024 and December 31, 2023, respectively.

The following is a roll-forward of our asset retirement obligations:

4 unchanged sentences

Remediation payments ( 24 ) ( 17 )

Asset retirement obligations as of June 30 $ 506 $ 525

Asset retirement obligations as of September 30 $ 501 $ 522

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.

3 unchanged sentences

A summary of the carrying value and fair value of other financial instruments were as follows:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions) Valuation Hierarchy Classification Carrying

5 unchanged sentences

NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING

COMMODITY CONTRACTS

We are exposed to fluctuations in market prices of raw materials and energy sources.

2 unchanged sentences

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.

Impacts of our designated commodity contracts are reflected within Other, net in the Statements of Unaudited Condensed Consolidated Cash Flows.

Refer to NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE INCOME for further information.

2 unchanged sentences

Notional Amount

Commodity Contracts Unit of Measure Maturity Dates June 30,

Commodity Contracts Unit of Measure Maturity Dates September 30,

2024 December 31,

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.

Natural Gas MMBtu October 2024 - August 2027 157,430,000 168,590,000

Electricity Megawatt hours October 2024 - October 2027 3,499,413 3,501,898

At September 30, 2024, we estimate $ 97 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 September 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,

Balance Sheet Location (In millions) September 30,

2024 December 31,

3 unchanged sentences

Other non-current liabilities ( 26 ) ( 52 )

FOREIGN CURRENCY CONTRACTS

On July 15, 2024, we announced that we had entered into the Arrangement Agreement with Stelco to acquire all of its common shares in a cash and stock transaction valued, at the time, at approximately $ 2.5 billion.

We hedged a portion of the purchase price by entering into foreign currency option contracts with a notional amount of $ 1.5 billion as of September 30, 2024 with a maturity date of October 15, 2024.

Our foreign currency 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.

These hedge contracts are considered economic hedges and do not qualify for hedge accounting.

As a result, the hedge contracts are recorded at fair value as a derivative asset or liability on the Statements of Unaudited Condensed Consolidated Financial Position with their corresponding change in fair value recognized in Other (income) expense .

These options had a fair value of $ 3 million at September 30, 2024 and are included in Other Current Assets on the Statements of Unaudited Condensed Consolidated Financial Position.

During the three and nine months ended September 30, 2024, these contracts resulted in a loss of $ 7 million presented in Changes in fair value of foreign currency contracts, net.

NOTE 13 - CAPITAL STOCK

4 unchanged sentences

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.

During the three months ended September 30, 2024, we did not repurchase any common shares.

During the nine months ended September 30, 2024, we repurchased 37.9 million common shares at an aggregate cost of $ 733 million, excluding any excise tax due under the Inflation Reduction Act.

During the three and nine months ended September 30, 2023, we repurchased 3.9 million and 10.4 million common shares, respectively, at a cost of $ 58 million and $ 152 million in the aggregate, respectively.

As of September 30, 2024, there was approximately $ 1.4 billion remaining authorization under our active share repurchase program.

PREFERRED STOCK

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023 2024 2023

1 unchanged sentence

Beginning balance $ ( 1 ) $ ( 1 ) $ — $ ( 1 )

Other comprehensive loss before reclassifications — — ( 1 ) —

Other comprehensive gain before reclassifications 1 — — —

Ending balance $ — $ ( 1 ) $ — $ ( 1 )

1 unchanged sentence

Beginning balance $ ( 103 ) $ ( 150 ) $ ( 170 ) $ ( 16 )

Other comprehensive gain (loss) before reclassifications 2 ( 31 ) ( 31 ) ( 208 )

Other comprehensive loss before reclassifications ( 36 ) ( 21 ) ( 67 ) ( 229 )

Income tax benefit 9 5 17 56

Other comprehensive gain (loss) before reclassifications, net of tax 2 ( 24 ) ( 23 ) ( 157 )

Other comprehensive loss before reclassifications, net of tax ( 27 ) ( 16 ) ( 50 ) ( 173 )

Losses reclassified from AOCI to net income (loss) 1

18 unchanged sentences

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.

SunCoke Middletown had income before income taxes of $ 14 million and $ 38 million for the three and nine months ended September 30, 2024, respectively, compared to $ 13 million and $ 40 million for the three and nine months ended September 30, 2023, respectively, that was included in our consolidated income before income taxes.

Additionally, SunCoke Middletown had cash used for capital expenditures of $ 20 million for the nine months ended September 30, 2024, compared to $ 21 million for the nine months ended September 30, 2023, that was included in our consolidated Purchase of property, plant and equipment on the Statements of Unaudited Condensed Consolidated Cash Flows.

The assets of the consolidated VIE can only be used to settle the obligations of the consolidated VIE and not obligations of the Company.

1 unchanged sentence

The Statements of Unaudited Condensed Consolidated Financial Position includes the following amounts for SunCoke Middletown:

(In millions) June 30,

(In millions) September 30,

2024 December 31,

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In millions, except per share amounts) 2024 2023 2024 2023

17 unchanged sentences

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.

For both the three and nine months ended September 30, 2024 2 million shares were excluded.

For both the three and nine months ended September 30, 2023 2 million shares were excluded.

NOTE 17 - COMMITMENTS AND CONTINGENCIES

8 unchanged sentences

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.

As of September 30, 2024, we had $ 270 million of surety-backed letters of credit and surety bonds outstanding.

Additionally, as of September 30, 2024, we had $ 46 million of outstanding letters of credit issued under our ABL Facility.

CONTINGENCIES

7 unchanged sentences

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.

For sites involving government required investigations, we typically estimate 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,

(In millions) September 30,

2024 December 31,

31 unchanged sentences

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.

On October 22, 2024, we issued $ 900 million aggregate principal amount of 6.875 % 2029 Senior Guaranteed Notes and $ 900 million aggregate principal amount of 7.375 % 2033 Senior Guaranteed Notes in a private placement transaction that was exempt from the registration requirements of the Securities Act.

The completion of the notes offering further reduced the Bridge Facility by $ 1.8 billion.

The net proceeds from the notes offering were used to finance a portion of the cash consideration paid in connection with the Stelco Acquisition.

On November 1, 2024, pursuant to the terms of the Arrangement Agreement announced on July 15, 2024, we completed the Stelco Acquisition.

In connection with closing, Stelco shareholders received CAD $ 60.00 in cash and 0.454 shares of Cliffs common stock per share of Stelco common stock.

Additionally, Stelco equity award holders received CAD $ 60.00 in cash and 0.454 shares of Cliffs common stock per outstanding restricted share unit and deferred share unit.

The total purchase consideration of the Stelco Acquisition was approximately $ 3.2 billion.

Additionally, pursuant to the terms outlined in the Commitment Letter, the Bridge Facility was terminated concurrently with the completion of the acquisition.

The Stelco Acquisition will be accounted for using the acquisition method of accounting for business combinations pursuant to ASC 805 - Business Combinations , which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date.

Any excess of consideration to be transferred over the estimated fair value of assets acquired and liabilities assumed will be recorded as goodwill.

Determining the fair value of acquired assets and liabilities assumed requires management’s judgment and the use of independent valuation specialists.

At the time of this filing, it is impracticable to disclose all the information required by ASC 805 - Business Combinations , as we are in the process of evaluating the purchase accounting and pro forma implications of this transaction.

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 1. Financial Statements