Ohio | 34-1464672 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
200 Public Square, Cleveland, Ohio | 44114-2315 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
TABLE OF CONTENTS | |||||
Page Number | |||||
DEFINITIONS | |||||
PART I - FINANCIAL INFORMATION | |||||
Item 1. | Financial Statements | ||||
Statements of Unaudited Condensed Consolidated Financial Position as of September 30, 2018 and December 31, 2017 | |||||
Statements of Unaudited Condensed Consolidated Operations for the Three and Nine Months Ended September 30, 2018 and 2017 | |||||
Statements of Unaudited Condensed Consolidated Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 | |||||
Statements of Unaudited Condensed Consolidated Cash Flows for the Nine Months Ended September 30, 2018 and 2017 | |||||
Notes to Unaudited Condensed Consolidated Financial Statements | |||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||||
Item 4. | Controls and Procedures | ||||
PART II - OTHER INFORMATION | |||||
Item 1. | Legal Proceedings | ||||
Item 1A. | Risk Factors | ||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||||
Item 4. | Mine Safety Disclosures | ||||
Item 5. | Other Information | ||||
Item 6. | Exhibits | ||||
Signatures | |||||
Abbreviation or acronym | Term | |
A&R 2015 Equity Plan | Amended and Restated Cliffs Natural Resources Inc. 2015 Equity and Incentive Compensation Plan | |
ABL Facility | Amended and Restated Syndicated Facility Agreement by and among Bank of America, N.A., as Administrative Agent and Australian Security Trustee, the Lenders that are parties hereto, as the Lenders, Cleveland-Cliffs Inc., as Parent and a Borrower, and the Subsidiaries of Parent party hereto, as Borrowers dated as of March 30, 2015, and Amended and Restated as of February 28, 2018 | |
Adjusted EBITDA | EBITDA excluding certain items such as impacts of discontinued operations, foreign currency exchange remeasurement, extinguishment of debt, impairment of long-lived assets and intersegment corporate allocations of SG&A costs | |
ArcelorMittal | ArcelorMittal (as the parent company of ArcelorMittal Mines Canada, ArcelorMittal USA and ArcelorMittal Dofasco, as well as many other subsidiaries) | |
ALJ | Administrative Law Judge | |
AMT | Alternative Minimum Tax | |
ASC | Accounting Standards Codification | |
ASU | Accounting Standards Update | |
Bloom Lake Group | Bloom Lake General Partner Limited and certain of its affiliates, including Cliffs Quebec Iron Mining ULC | |
Canadian Entities | Bloom Lake Group, Wabush Group and certain other wholly-owned Canadian subsidiaries | |
CCAA | Companies' Creditors Arrangement Act (Canada) | |
Compensation Committee | Compensation and Organization Committee of the Board of Directors | |
Dodd-Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act | |
DR-grade | Direct Reduction-grade | |
EBITDA | Earnings before interest, taxes, depreciation and amortization | |
Empire | Empire Iron Mining Partnership | |
Exchange Act | Securities Exchange Act of 1934, as amended | |
FASB | Financial Accounting Standards Board | |
Fe | Iron | |
FERC | Federal Energy Regulatory Commission | |
FMSH Act | U.S. Federal Mine Safety and Health Act 1977, as amended | |
GAAP | Accounting principles generally accepted in the United States | |
HBI | Hot briquetted iron | |
Hibbing | Hibbing Taconite Company, an unincorporated joint venture | |
Koolyanobbing | Collective term for the operating deposits at Koolyanobbing, Mount Jackson and Windarling | |
Long ton | 2,240 pounds | |
LTVSMC | LTV Steel Mining Company | |
Metric ton | 2,205 pounds | |
MISO | Midcontinent Independent System Operator, Inc. | |
MMBtu | Million British Thermal Units | |
MSHA | U.S. Mine Safety and Health Administration | |
Monitor | FTI Consulting Canada Inc. | |
Net ton | 2,000 pounds | |
Northshore | Northshore Mining Company | |
OPEB | Other postretirement employment benefits | |
Platts 62% Price | Platts IODEX 62% Fe Fines Spot Price | |
SEC | U.S. Securities and Exchange Commission | |
SG&A | Selling, general and administrative | |
Securities Act | Securities Act of 1933, as amended | |
Senior Notes Due 2020 | 5.90% senior notes due March 2020 and 4.80% senior notes due October 2020 | |
SSR | System support resource | |
Tilden | Tilden Mining Company L.C. | |
Topic 606 | ASC Topic 606, Revenue from Contracts with Customers | |
Topic 815 | ASC Topic 815, Derivatives and Hedging | |
TSR | Total shareholder return | |
United Taconite | United Taconite LLC | |
U.S. | United States of America | |
U.S. Steel | U.S Steel Corporation and all subsidiaries | |
USW | United Steelworkers | |
Wabush Group | Wabush Iron Co. Limited and Wabush Resources Inc., and certain of its affiliates, including Wabush Mines (an unincorporated joint venture of Wabush Iron Co. Limited and Wabush Resources Inc.), Arnaud Railway Company and Wabush Lake Railway Company |
Item 1. | Financial Statements |
(In Millions) | |||||||
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 897.1 | $ | 978.3 | |||
Accounts receivable, net | 141.4 | 106.7 | |||||
Inventories | 187.9 | 138.4 | |||||
Supplies and other inventories | 88.2 | 88.8 | |||||
Derivative assets | 190.8 | 37.9 | |||||
Income tax receivable | 110.3 | 13.3 | |||||
Current assets of discontinued operations | 16.1 | 118.5 | |||||
Loans to and accounts receivable from the Canadian Entities | — | 51.6 | |||||
Other current assets | 18.8 | 11.1 | |||||
TOTAL CURRENT ASSETS | 1,650.6 | 1,544.6 | |||||
PROPERTY, PLANT AND EQUIPMENT, NET | 1,144.8 | 1,033.8 | |||||
OTHER ASSETS | |||||||
Deposits for property, plant and equipment | 94.6 | 17.8 | |||||
Income tax receivable | 113.6 | 235.3 | |||||
Non-current assets of discontinued operations | — | 20.3 | |||||
Other non-current assets | 121.4 | 101.6 | |||||
TOTAL OTHER ASSETS | 329.6 | 375.0 | |||||
TOTAL ASSETS | $ | 3,125.0 | $ | 2,953.4 |
(In Millions) | |||||||
September 30, 2018 | December 31, 2017 | ||||||
LIABILITIES | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable | $ | 140.8 | $ | 99.5 | |||
Accrued expenses | 95.1 | 79.1 | |||||
Accrued interest | 26.2 | 31.4 | |||||
Contingent claims | — | 55.6 | |||||
Partnership distribution payable | 43.1 | 44.2 | |||||
Current liabilities of discontinued operations | 14.2 | 75.0 | |||||
Other current liabilities | 61.3 | 67.4 | |||||
TOTAL CURRENT LIABILITIES | 380.7 | 452.2 | |||||
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES | 225.0 | 257.7 | |||||
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS | 174.4 | 167.7 | |||||
LONG-TERM DEBT | 2,300.0 | 2,304.2 | |||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS | 9.3 | 52.2 | |||||
OTHER LIABILITIES | 121.8 | 163.5 | |||||
TOTAL LIABILITIES | 3,211.2 | 3,397.5 | |||||
COMMITMENTS AND CONTINGENCIES (REFER TO NOTE 20) | |||||||
EQUITY | |||||||
CLIFFS SHAREHOLDERS' DEFICIT | |||||||
Preferred Stock - no par value | |||||||
Class A - 3,000,000 shares authorized | |||||||
Class B - 4,000,000 shares authorized | |||||||
Common Shares - par value $0.125 per share | |||||||
Authorized - 600,000,000 shares (2017 - 600,000,000 shares); | |||||||
Issued - 301,886,794 shares (2017 - 301,886,794 shares); | |||||||
Outstanding - 298,007,453 shares (2017 - 297,400,968 shares) | 37.7 | 37.7 | |||||
Capital in excess of par value of shares | 3,913.3 | 3,933.9 | |||||
Retained deficit | (3,654.7 | ) | (4,207.3 | ) | |||
Cost of 3,879,341 common shares in treasury (2017 - 4,485,826 shares) | (139.1 | ) | (169.6 | ) | |||
Accumulated other comprehensive loss | (243.4 | ) | (39.0 | ) | |||
TOTAL CLIFFS SHAREHOLDERS' DEFICIT | (86.2 | ) | (444.3 | ) | |||
NONCONTROLLING INTEREST | — | 0.2 | |||||
TOTAL DEFICIT | (86.2 | ) | (444.1 | ) | |||
TOTAL LIABILITIES AND DEFICIT | $ | 3,125.0 | $ | 2,953.4 |
(In Millions, Except Per Share Amounts) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
REVENUES FROM PRODUCT SALES AND SERVICES | |||||||||||||||
Product | $ | 684.7 | $ | 530.7 | $ | 1,525.9 | $ | 1,195.0 | |||||||
Freight and venture partners' cost reimbursements | 57.1 | 66.0 | 110.2 | 159.2 | |||||||||||
741.8 | 596.7 | 1,636.1 | 1,354.2 | ||||||||||||
COST OF GOODS SOLD AND OPERATING EXPENSES | (480.2 | ) | (438.9 | ) | (1,028.5 | ) | (1,002.7 | ) | |||||||
SALES MARGIN | 261.6 | 157.8 | 607.6 | 351.5 | |||||||||||
OTHER OPERATING INCOME (EXPENSE) | |||||||||||||||
Selling, general and administrative expenses | (30.1 | ) | (23.8 | ) | (81.4 | ) | (75.5 | ) | |||||||
Miscellaneous – net | (6.0 | ) | (5.3 | ) | (16.2 | ) | 1.3 | ||||||||
(36.1 | ) | (29.1 | ) | (97.6 | ) | (74.2 | ) | ||||||||
OPERATING INCOME | 225.5 | 128.7 | 510.0 | 277.3 | |||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||
Interest expense, net | (29.5 | ) | (27.6 | ) | (93.1 | ) | (99.1 | ) | |||||||
Gain (loss) on extinguishment of debt | — | (88.6 | ) | 0.2 | (165.4 | ) | |||||||||
Other non-operating income | 4.3 | 2.6 | 13.1 | 7.6 | |||||||||||
(25.2 | ) | (113.6 | ) | (79.8 | ) | (256.9 | ) | ||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 200.3 | 15.1 | 430.2 | 20.4 | |||||||||||
INCOME TAX BENEFIT (EXPENSE) | (0.5 | ) | 7.2 | (14.4 | ) | 7.2 | |||||||||
INCOME FROM CONTINUING OPERATIONS | 199.8 | 22.3 | 415.8 | 27.6 | |||||||||||
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | 238.0 | 30.6 | 102.8 | 25.6 | |||||||||||
NET INCOME | 437.8 | 52.9 | 518.6 | 53.2 | |||||||||||
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST | — | 0.5 | — | 3.9 | |||||||||||
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS | $ | 437.8 | $ | 53.4 | $ | 518.6 | $ | 57.1 | |||||||
INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – BASIC | |||||||||||||||
Continuing operations | $ | 0.67 | $ | 0.08 | $ | 1.40 | $ | 0.11 | |||||||
Discontinued operations | 0.80 | 0.10 | 0.35 | 0.09 | |||||||||||
$ | 1.47 | $ | 0.18 | $ | 1.75 | $ | 0.20 | ||||||||
INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – DILUTED | |||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.08 | $ | 1.37 | $ | 0.11 | |||||||
Discontinued operations | 0.77 | 0.10 | 0.34 | 0.08 | |||||||||||
$ | 1.41 | $ | 0.18 | $ | 1.71 | $ | 0.19 | ||||||||
AVERAGE NUMBER OF SHARES (IN THOUSANDS) | |||||||||||||||
Basic | 297,878 | 296,079 | 297,587 | 285,771 | |||||||||||
Diluted | 310,203 | 301,075 | 303,518 | 290,512 |
(In Millions) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS | $ | 437.8 | $ | 53.4 | $ | 518.6 | $ | 57.1 | |||||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||
Changes in pension and other post-retirement benefits, net of tax | 6.8 | 7.5 | 20.2 | 18.9 | |||||||||||
Changes in foreign currency translation | (228.3 | ) | 0.5 | (225.4 | ) | (13.6 | ) | ||||||||
Changes in derivative financial instruments, net of tax | 0.3 | — | 0.8 | — | |||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | (221.2 | ) | 8.0 | (204.4 | ) | 5.3 | |||||||||
OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST | — | (5.7 | ) | — | (1.1 | ) | |||||||||
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS | $ | 216.6 | $ | 55.7 | $ | 314.2 | $ | 61.3 |
(In Millions) | |||||||
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 518.6 | $ | 53.2 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, depletion and amortization | 68.6 | 66.3 | |||||
Loss (gain) on extinguishment of debt | (0.2 | ) | 165.4 | ||||
Loss on deconsolidation | — | 16.3 | |||||
Gain on derivatives | (136.4 | ) | (47.5 | ) | |||
Gain on foreign currency translation | (228.1 | ) | — | ||||
Other | 5.7 | 19.0 | |||||
Changes in operating assets and liabilities: | |||||||
Receivables and other assets | 96.2 | 68.9 | |||||
Inventories | (57.1 | ) | (26.1 | ) | |||
Payables, accrued expenses and other liabilities | (78.6 | ) | (108.8 | ) | |||
Net cash provided by operating activities | 188.7 | 206.7 | |||||
INVESTING ACTIVITIES | |||||||
Purchase of property, plant and equipment | (111.4 | ) | (62.7 | ) | |||
Deposits for property, plant and equipment | (83.3 | ) | (16.2 | ) | |||
Proceeds on sales of assets | 18.5 | 2.2 | |||||
Other investing activities | 2.5 | (7.7 | ) | ||||
Net cash used by investing activities | (173.7 | ) | (84.4 | ) | |||
FINANCING ACTIVITIES | |||||||
Net proceeds from issuance of common shares | — | 661.3 | |||||
Proceeds from issuance of debt | — | 1,057.8 | |||||
Debt issuance costs | (1.5 | ) | (12.0 | ) | |||
Repurchase of debt | (16.3 | ) | (1,720.7 | ) | |||
Acquisition of noncontrolling interest | — | (105.0 | ) | ||||
Distributions of partnership equity | (44.2 | ) | (53.0 | ) | |||
Other financing activities | (45.7 | ) | (17.0 | ) | |||
Net cash used by financing activities | (107.7 | ) | (188.6 | ) | |||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (2.3 | ) | 3.7 | ||||
DECREASE IN CASH AND CASH EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN CURRENT ASSETS OF DISCONTINUED OPERATIONS | (95.0 | ) | (62.6 | ) | |||
LESS: INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CLASSIFIED WITHIN CURRENT ASSETS OF DISCONTINUED OPERATIONS | (13.8 | ) | 23.1 | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (81.2 | ) | (85.7 | ) | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 978.3 | 312.8 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 897.1 | $ | 227.1 |
Name | Location | Status of Operations | ||
Northshore | Minnesota | Active | ||
United Taconite | Minnesota | Active | ||
Tilden | Michigan | Active | ||
Empire | Michigan | Indefinitely Idled | ||
Koolyanobbing1 | Western Australia | Substantially All Assets Sold | ||
1 During June 2018, we completed the final planned shipment from Asia Pacific Iron Ore and commenced selling its assets. As of September 30, 2018, substantially all of the Asia Pacific Iron Ore assets were sold. Refer to NOTE 16 - DISCONTINUED OPERATIONS. |
(In Millions) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Short-term intercompany loans | $ | (0.2 | ) | $ | 0.1 | $ | (0.5 | ) | $ | 16.7 | ||||||
Other | — | (1.4 | ) | (0.2 | ) | (2.7 | ) | |||||||||
Net impact of transaction gains (losses) resulting from remeasurement | $ | (0.2 | ) | $ | (1.3 | ) | $ | (0.7 | ) | $ | 14.0 |
($ in Millions) | ||||||||||||
Balance at December 31, 2017 | Adjustments due to Topic 606 | Balance at January 1, 2018 | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 978.3 | $ | — | $ | 978.3 | ||||||
Accounts receivable, net | 106.7 | 76.6 | 183.3 | |||||||||
Inventories | 138.4 | (51.4 | ) | 87.0 | ||||||||
Supplies and other inventories | 88.8 | — | 88.8 | |||||||||
Derivative assets | 37.9 | 11.6 | 49.5 | |||||||||
Income tax receivable | 13.3 | — | 13.3 | |||||||||
Current assets of discontinued operations | 118.5 | — | 118.5 | |||||||||
Loans to and accounts receivable from the Canadian Entities | 51.6 | — | 51.6 | |||||||||
Other current assets | 11.1 | — | 11.1 | |||||||||
TOTAL CURRENT ASSETS | 1,544.6 | 36.8 | 1,581.4 | |||||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 1,033.8 | — | 1,033.8 | |||||||||
OTHER ASSETS | ||||||||||||
Deposits for property, plant and equipment | 17.8 | — | 17.8 | |||||||||
Income tax receivable | 235.3 | — | 235.3 | |||||||||
Non-current assets of discontinued operations | 20.3 | — | 20.3 | |||||||||
Other non-current assets | 101.6 | — | 101.6 | |||||||||
TOTAL OTHER ASSETS | 375.0 | — | 375.0 | |||||||||
TOTAL ASSETS | $ | 2,953.4 | $ | 36.8 | $ | 2,990.2 | ||||||
LIABILITIES | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Accounts payable | $ | 99.5 | $ | 1.4 | $ | 100.9 | ||||||
Accrued expenses | 79.1 | — | 79.1 | |||||||||
Accrued interest | 31.4 | — | 31.4 | |||||||||
Contingent claims | 55.6 | — | 55.6 | |||||||||
Partnership distribution payable | 44.2 | — | 44.2 | |||||||||
Current liabilities of discontinued operations | 75.0 | — | 75.0 | |||||||||
Other current liabilities | 67.4 | 1.4 | 68.8 | |||||||||
TOTAL CURRENT LIABILITIES | 452.2 | 2.8 | 455.0 | |||||||||
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES | 257.7 | — | 257.7 | |||||||||
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS | 167.7 | — | 167.7 | |||||||||
LONG-TERM DEBT | 2,304.2 | — | 2,304.2 | |||||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS | 52.2 | — | 52.2 | |||||||||
OTHER LIABILITIES | 163.5 | — | 163.5 | |||||||||
TOTAL LIABILITIES | 3,397.5 | 2.8 | 3,400.3 | |||||||||
EQUITY | ||||||||||||
CLIFFS SHAREHOLDERS' DEFICIT | (444.3 | ) | 34.0 | (410.3 | ) | |||||||
NONCONTROLLING INTEREST | 0.2 | — | 0.2 | |||||||||
TOTAL DEFICIT | (444.1 | ) | 34.0 | (410.1 | ) | |||||||
TOTAL LIABILITIES AND DEFICIT | $ | 2,953.4 | $ | 36.8 | $ | 2,990.2 |
($ in Millions) | |||||||||||||||||||||||
Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||||||||||||
As Reported | Balances without Adoption of Topic 606 | Effect of Change | As Reported | Balances without Adoption of Topic 606 | Effect of Change | ||||||||||||||||||
REVENUES FROM PRODUCT SALES AND SERVICES | |||||||||||||||||||||||
Product | $ | 684.7 | $ | 675.6 | $ | 9.1 | $ | 1,525.9 | $ | 1,471.2 | $ | 54.7 | |||||||||||
Freight and venture partners' cost reimbursements | 57.1 | 56.5 | 0.6 | 110.2 | 107.7 | 2.5 | |||||||||||||||||
741.8 | 732.1 | 9.7 | 1,636.1 | 1,578.9 | 57.2 | ||||||||||||||||||
COST OF GOODS SOLD AND OPERATING EXPENSES | (480.2 | ) | (475.9 | ) | (4.3 | ) | (1,028.5 | ) | (1,006.6 | ) | (21.9 | ) | |||||||||||
SALES MARGIN | 261.6 | 256.2 | 5.4 | 607.6 | 572.3 | 35.3 | |||||||||||||||||
OTHER OPERATING EXPENSE | |||||||||||||||||||||||
Selling, general and administrative expenses | (30.1 | ) | (30.1 | ) | — | (81.4 | ) | (81.4 | ) | — | |||||||||||||
Miscellaneous – net | (6.0 | ) | (6.0 | ) | — | (16.2 | ) | (16.2 | ) | — | |||||||||||||
(36.1 | ) | (36.1 | ) | — | (97.6 | ) | (97.6 | ) | — | ||||||||||||||
OPERATING INCOME | 225.5 | 220.1 | 5.4 | 510.0 | 474.7 | 35.3 | |||||||||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||||||||||
Interest expense, net | (29.5 | ) | (29.5 | ) | — | (93.1 | ) | (93.1 | ) | — | |||||||||||||
Gain on extinguishment of debt | — | — | — | 0.2 | 0.2 | — | |||||||||||||||||
Other non-operating income | 4.3 | 4.3 | — | 13.1 | 13.1 | — | |||||||||||||||||
(25.2 | ) | (25.2 | ) | — | (79.8 | ) | (79.8 | ) | — | ||||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 200.3 | 194.9 | 5.4 | 430.2 | 394.9 | 35.3 | |||||||||||||||||
INCOME TAX EXPENSE | (0.5 | ) | (0.5 | ) | — | (14.4 | ) | (14.4 | ) | — | |||||||||||||
INCOME FROM CONTINUING OPERATIONS | 199.8 | 194.4 | 5.4 | 415.8 | 380.5 | 35.3 | |||||||||||||||||
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | 238.0 | 238.0 | — | 102.8 | 102.8 | — | |||||||||||||||||
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS | $ | 437.8 | $ | 432.4 | $ | 5.4 | $ | 518.6 | $ | 483.3 | $ | 35.3 | |||||||||||
INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – BASIC | |||||||||||||||||||||||
Continuing operations | $ | 0.67 | $ | 0.65 | $ | 0.02 | $ | 1.40 | $ | 1.28 | $ | 0.12 | |||||||||||
Discontinued operations | 0.80 | 0.80 | — | 0.35 | 0.35 | — | |||||||||||||||||
$ | 1.47 | $ | 1.45 | $ | 0.02 | $ | 1.75 | $ | 1.63 | $ | 0.12 | ||||||||||||
INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – DILUTED | |||||||||||||||||||||||
Continuing operations | $ | 0.64 | $ | 0.62 | $ | 0.02 | $ | 1.37 | $ | 1.25 | $ | 0.12 | |||||||||||
Discontinued operations | 0.77 | 0.77 | — | 0.34 | 0.34 | — | |||||||||||||||||
$ | 1.41 | $ | 1.39 | $ | 0.02 | $ | 1.71 | $ | 1.59 | $ | 0.12 | ||||||||||||
AVERAGE NUMBER OF SHARES (IN THOUSANDS) | |||||||||||||||||||||||
Basic | 297,878 | 297,878 | 297,587 | 297,587 | |||||||||||||||||||
Diluted | 310,203 | 310,203 | 303,518 | 303,518 |
($ in Millions) | ||||||||||||
September 30, 2018 | ||||||||||||
As Reported | Balances without Adoption of Topic 606 | Effect of Change | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 897.1 | $ | 897.1 | $ | — | ||||||
Accounts receivable, net | 141.4 | 34.8 | 106.6 | |||||||||
Inventories | 187.9 | 257.5 | (69.6 | ) | ||||||||
Supplies and other inventories | 88.2 | 88.2 | — | |||||||||
Derivative assets | 190.8 | 156.6 | 34.2 | |||||||||
Income tax receivable | 110.3 | 110.3 | — | |||||||||
Current assets of discontinued operations | 16.1 | 16.1 | — | |||||||||
Other current assets | 18.8 | 18.8 | — | |||||||||
TOTAL CURRENT ASSETS | 1,650.6 | 1,579.4 | 71.2 | |||||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 1,144.8 | 1,144.8 | — | |||||||||
OTHER ASSETS | ||||||||||||
Deposits for property, plant and equipment | 94.6 | 94.6 | — | |||||||||
Income tax receivable | 113.6 | 113.6 | — | |||||||||
Other non-current assets | 121.4 | 121.4 | — | |||||||||
TOTAL OTHER ASSETS | 329.6 | 329.6 | — | |||||||||
TOTAL ASSETS | $ | 3,125.0 | $ | 3,053.8 | $ | 71.2 | ||||||
LIABILITIES | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Accounts payable | $ | 140.8 | $ | 140.1 | $ | 0.7 | ||||||
Accrued expenses | 95.1 | 95.1 | — | |||||||||
Accrued interest | 26.2 | 26.2 | — | |||||||||
Partnership distribution payable | 43.1 | 43.1 | — | |||||||||
Current liabilities of discontinued operations | 14.2 | 14.2 | — | |||||||||
Other current liabilities | 61.3 | 61.5 | (0.2 | ) | ||||||||
TOTAL CURRENT LIABILITIES | 380.7 | 380.2 | 0.5 | |||||||||
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES | 225.0 | 225.0 | — | |||||||||
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS | 174.4 | 174.4 | — | |||||||||
LONG-TERM DEBT | 2,300.0 | 2,300.0 | — | |||||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS | 9.3 | 9.3 | — | |||||||||
OTHER LIABILITIES | 121.8 | 121.8 | — | |||||||||
TOTAL LIABILITIES | 3,211.2 | 3,210.7 | 0.5 | |||||||||
EQUITY | ||||||||||||
CLIFFS SHAREHOLDERS' DEFICIT | (86.2 | ) | (156.9 | ) | 70.7 | |||||||
TOTAL LIABILITIES AND DEFICIT | $ | 3,125.0 | $ | 3,053.8 | $ | 71.2 |
($ in Millions) | |||||||||||||||||||||||
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||||||||||
As Revised | Without Adoption of ASU 2017-07 | Effect of Change | As Revised | Without Adoption of ASU 2017-07 | Effect of Change | ||||||||||||||||||
Cost of goods sold and operating expenses | $ | (438.9 | ) | $ | (439.5 | ) | $ | 0.6 | $ | (1,002.7 | ) | $ | (1,004.4 | ) | $ | 1.7 | |||||||
Selling, general and administrative expenses | $ | (23.8 | ) | $ | (21.8 | ) | $ | (2.0 | ) | $ | (75.5 | ) | $ | (69.6 | ) | $ | (5.9 | ) | |||||
Miscellaneous – net | $ | (5.3 | ) | $ | (4.9 | ) | $ | (0.4 | ) | $ | 1.3 | $ | 2.4 | $ | (1.1 | ) | |||||||
Operating income | $ | 128.7 | $ | 130.5 | $ | (1.8 | ) | $ | 277.3 | $ | 282.6 | $ | (5.3 | ) | |||||||||
Other non-operating income | $ | 2.6 | $ | 0.8 | $ | 1.8 | $ | 7.6 | $ | 2.3 | $ | 5.3 | |||||||||||
Net Income | $ | 52.9 | $ | 52.9 | $ | — | $ | 53.2 | $ | 53.2 | $ | — |
(In Millions) | |||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Revenues from product sales and services: | |||||||||||||||||||||||||||
U.S. Iron Ore | $ | 741.8 | 100 | % | $ | 596.7 | 100 | % | $ | 1,636.1 | 100 | % | $ | 1,354.2 | 100 | % | |||||||||||
Sales margin | $ | 261.6 | $ | 157.8 | $ | 607.6 | $ | 351.5 | |||||||||||||||||||
Other operating expense | (36.1 | ) | (29.1 | ) | (97.6 | ) | (74.2 | ) | |||||||||||||||||||
Other expense | (25.2 | ) | (113.6 | ) | (79.8 | ) | (256.9 | ) | |||||||||||||||||||
Income from continuing operations before income taxes | $ | 200.3 | $ | 15.1 | $ | 430.2 | $ | 20.4 |
(In Millions) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net Income | $ | 437.8 | $ | 52.9 | $ | 518.6 | $ | 53.2 | |||||||
Less: | |||||||||||||||
Interest expense, net | (29.7 | ) | (28.9 | ) | (95.5 | ) | (103.1 | ) | |||||||
Income tax benefit (expense) | (0.5 | ) | 7.6 | (14.4 | ) | 6.8 | |||||||||
Depreciation, depletion and amortization | (19.2 | ) | (21.5 | ) | (68.6 | ) | (66.3 | ) | |||||||
EBITDA | $ | 487.2 | $ | 95.7 | $ | 697.1 | $ | 215.8 | |||||||
Less: | |||||||||||||||
Impact of discontinued operations | $ | 238.2 | $ | 34.8 | $ | 120.4 | $ | 41.3 | |||||||
Foreign exchange remeasurement | (0.2 | ) | (1.3 | ) | (0.7 | ) | 14.0 | ||||||||
Gain (loss) on extinguishment of debt | — | (88.6 | ) | 0.2 | (165.4 | ) | |||||||||
Impairment of long-lived assets | (1.1 | ) | — | (1.1 | ) | — | |||||||||
Adjusted EBITDA | $ | 250.3 | $ | 150.8 | $ | 578.3 | $ | 325.9 | |||||||
EBITDA | |||||||||||||||
U.S. Iron Ore | $ | 273.1 | $ | 168.9 | $ | 641.6 | $ | 381.8 | |||||||
Corporate and Other1 | 214.1 | (73.2 | ) | 55.5 | (166.0 | ) | |||||||||
Total EBITDA | $ | 487.2 | $ | 95.7 | $ | 697.1 | $ | 215.8 | |||||||
Adjusted EBITDA: | |||||||||||||||
U.S. Iron Ore | $ | 279.5 | $ | 174.2 | $ | 657.9 | $ | 399.8 | |||||||
Corporate and Other1 | (29.2 | ) | (23.4 | ) | (79.6 | ) | (73.9 | ) | |||||||
Total Adjusted EBITDA | $ | 250.3 | $ | 150.8 | $ | 578.3 | $ | 325.9 | |||||||
1Corporate and Other includes activity from discontinued operations and immaterial costs related to the HBI project. |
(In Millions) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Depreciation, depletion and amortization: | |||||||||||||||
U.S. Iron Ore | $ | 17.8 | $ | 16.5 | $ | 49.2 | $ | 49.6 | |||||||
Corporate and Other | 1.4 | 1.7 | 4.2 | 5.4 | |||||||||||
Total depreciation, depletion and amortization | $ | 19.2 | $ | 18.2 | $ | 53.4 | $ | 55.0 | |||||||
Capital additions1: | |||||||||||||||
U.S. Iron Ore | $ | 51.8 | $ | 19.2 | $ | 97.2 | $ | 70.9 | |||||||
Corporate and Other2 | 40.8 | 7.1 | 144.7 | 7.1 | |||||||||||
Total capital additions | $ | 92.6 | $ | 26.3 | $ | 241.9 | $ | 78.0 | |||||||
1 Includes cash paid for capital additions of $194.6 million, including deposits of $83.3 million, lease additions of $7.6 million, and an increase in non-cash accruals of $42.2 million, partially offset by governmental grants received of $2.5 million for the nine months ended September 30, 2018, compared to cash paid for capital additions of $77.4 million, including deposits of $16.2 million, and an increase in non-cash accruals of $0.6 million for the nine months ended September 30, 2017. | |||||||||||||||
2 Includes capital additions related to our HBI project. |
(In Millions) | |||||||
September 30, 2018 | December 31, 2017 | ||||||
Assets: | |||||||
U.S. Iron Ore | $ | 1,798.8 | $ | 1,500.6 | |||
Corporate and Other1 | 1,310.1 | 1,314.0 | |||||
Assets of Discontinued Operations | 16.1 | 138.8 | |||||
Total assets | $ | 3,125.0 | $ | 2,953.4 | |||
1Corporate and Other includes assets related to the HBI project. |
Deferred Revenue (Current)1 | Deferred Revenue (Long-Term) | ||||||
Opening balance as of January 1, 2018 | $ | 23.8 | $ | 51.4 | |||
Closing balance as of September 30, 2018 | 16.1 | 42.8 | |||||
Decrease | $ | (7.7 | ) | $ | (8.6 | ) | |
1 The opening balance includes a $1.4 million adjustment from the December 31, 2017 balance due to the adoption of Topic 606. |
(In Millions) | ||||||||
September 30, 2018 | December 31, 2017 | |||||||
Finished Goods | $ | 171.8 | $ | 127.1 | ||||
Work-in-Process | 16.1 | 11.3 | ||||||
Total Inventories | $ | 187.9 | $ | 138.4 |
(In Millions) | |||||||
September 30, 2018 | December 31, 2017 | ||||||
Land rights and mineral rights | $ | 549.6 | $ | 549.6 | |||
Office and information technology | 67.8 | 65.8 | |||||
Buildings | 84.1 | 85.2 | |||||
Mining equipment | 538.7 | 533.9 | |||||
Processing equipment | 619.0 | 610.9 | |||||
Electric power facilities | 58.7 | 56.9 | |||||
Land improvements | 24.2 | 23.7 | |||||
Asset retirement obligation | 16.9 | 16.9 | |||||
Other | 25.2 | 25.2 | |||||
Construction in-progress | 168.7 | 32.6 | |||||
2,152.9 | 2,000.7 | ||||||
Allowance for depreciation and depletion | (1,008.1 | ) | (966.9 | ) | |||
$ | 1,144.8 | $ | 1,033.8 |
(In Millions) | ||||||||||||||||||
September 30, 2018 | ||||||||||||||||||
Debt Instrument | Annual Effective Interest Rate | Total Principal Amount | Debt Issuance Costs | Unamortized Discounts | Total Debt | |||||||||||||
Secured Notes | ||||||||||||||||||
$400 Million 4.875% 2024 Senior Notes | 5.00% | $ | 400.0 | $ | (6.0 | ) | $ | (2.3 | ) | $ | 391.7 | |||||||
Unsecured Notes | ||||||||||||||||||
$400 Million 5.90% 2020 Senior Notes | 5.98% | 88.4 | (0.1 | ) | (0.1 | ) | 88.2 | |||||||||||
$500 Million 4.80% 2020 Senior Notes | 4.83% | 122.3 | (0.2 | ) | (0.1 | ) | 122.0 | |||||||||||
$700 Million 4.875% 2021 Senior Notes | 4.89% | 124.2 | (0.3 | ) | — | 123.9 | ||||||||||||
$316.25 Million 1.50% 2025 Convertible Senior Notes | 6.26% | 316.3 | (5.8 | ) | (78.1 | ) | 232.4 | |||||||||||
$1.075 Billion 5.75% 2025 Senior Notes | 6.01% | 1,073.3 | (10.3 | ) | (15.1 | ) | 1,047.9 | |||||||||||
$800 Million 6.25% 2040 Senior Notes | 6.34% | 298.4 | (2.3 | ) | (3.3 | ) | 292.8 | |||||||||||
ABL Facility | N/A | 450.0 | N/A | N/A | — | |||||||||||||
Fair Value Adjustment to Interest Rate Hedge | 1.1 | |||||||||||||||||
Long-term debt | $ | 2,300.0 |
(In Millions) | ||||||||||||||||||
December 31, 2017 | ||||||||||||||||||
Debt Instrument | Annual Effective Interest Rate | Total Principal Amount | Debt Issuance Costs | Unamortized Discounts | Total Debt | |||||||||||||
Secured Notes | ||||||||||||||||||
$400 Million 4.875% 2024 Senior Notes | 5.00% | $ | 400.0 | $ | (7.1 | ) | $ | (2.6 | ) | $ | 390.3 | |||||||
Unsecured Notes | ||||||||||||||||||
$400 Million 5.90% 2020 Senior Notes | 5.98% | 88.9 | (0.2 | ) | (0.1 | ) | 88.6 | |||||||||||
$500 Million 4.80% 2020 Senior Notes | 4.83% | 122.4 | (0.3 | ) | (0.1 | ) | 122.0 | |||||||||||
$700 Million 4.875% 2021 Senior Notes |