clf-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 1-8944

CLEVELAND-CLIFFS INC.

(Exact Name of Registrant as Specified in Its Charter)

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)

Registrant’s Telephone Number, Including Area Code: (216) 694-5700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares, par value $0.125 per share

CLF

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant’s common shares, par value $0.125 per share, was 515,302,483 as of October 25, 2022.

Table of Contents

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, 2022 and December 31, 2021

Statements of Unaudited Condensed Consolidated Operations for the Three and Nine Months Ended September 30, 2022 and 2021

Statements of Unaudited Condensed Consolidated Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021

Statements of Unaudited Condensed Consolidated Cash Flows for the Nine Months Ended September 30, 2022 and 2021

Statements of Unaudited Condensed Consolidated Changes in Equity for the Nine Months Ended September 30, 2022 and 2021

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

Table of Contents

DEFINITIONS

The following abbreviations or acronyms are used in the text. References in this report to the “Company,” “we,” “us,” “our” and “Cliffs” are to Cleveland-Cliffs Inc. and subsidiaries, collectively, unless stated otherwise or the context indicates otherwise.


Abbreviation or acronym						Term

4.625% 2029 Senior Notes						4.625% Senior Guaranteed Notes due 2029 issued by Cleveland-Cliffs Inc. on February 17, 2021 in an aggregate principal amount of $500 million
4.875% 2031 Senior Notes						4.875% Senior Guaranteed Notes due 2031 issued by Cleveland-Cliffs Inc. on February 17, 2021 in an aggregate principal amount of $500 million

ABL Facility						Asset-Based Revolving Credit Agreement, dated as of March 13, 2020, among Cleveland-Cliffs Inc., the lenders party thereto from time to time and Bank of America, N.A., as administrative agent, as amended as of March 27, 2020, and December 9, 2020, and as may be further amended from time to time
Adjusted EBITDA						EBITDA, excluding certain items such as EBITDA of noncontrolling interests, asset impairment, extinguishment of debt, severance, acquisition-related costs, acquisition-related loss on equity method investment, amortization of inventory step-up and impacts of discontinued operations
AK Steel						AK Steel Holding Corporation (n/k/a Cleveland-Cliffs Steel Holding Corporation) and its consolidated subsidiaries, including AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), its direct, wholly owned subsidiary, collectively, unless stated otherwise or the context indicates otherwise

AOCI						Accumulated Other Comprehensive Income (Loss)
ArcelorMittal						ArcelorMittal S.A., a company organized under the laws of Luxembourg and the former ultimate parent company of ArcelorMittal USA
ArcelorMittal USA						Substantially all of the operations of the former ArcelorMittal USA LLC, its subsidiaries and certain affiliates, collectively
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
Board						The Board of Directors of Cleveland-Cliffs Inc.
BOF						Basic oxygen furnace
CERCLA						Comprehensive Environmental Response, Compensation and Liability Act of 1980
CHIPS Act						The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022
COVID-19						A novel strain of coronavirus that the World Health Organization declared a global pandemic in March 2020
Dodd-Frank Act						Dodd-Frank Wall Street Reform and Consumer Protection Act
EAF						Electric arc furnace
EBITDA						Earnings before interest, taxes, depreciation and amortization

EPA						U.S. Environmental Protection Agency
EPS						Earnings per share
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
Fe						Iron
FMSH Act						Federal Mine Safety and Health Act of 1977, as amended
FPT						Ferrous Processing and Trading Company, including certain related entities
FPT Acquisition						The purchase of FPT, subject to the terms and conditions set forth in the FPT Acquisition Agreement
FPT Acquisition Agreement						Securities Purchase Agreement, dated as of October 8, 2021, by and between Cleveland-Cliffs Inc. and Anthony Soave Revocable Trust u/a/d January 14, 1987, as amended and restated
GAAP						Accounting principles generally accepted in the United States
GHG						Greenhouse gas
GOES						Grain oriented electrical steel
HBI						Hot briquetted iron

HRC						Hot-rolled coil steel
IRB						Industrial Revenue Bond
Long ton						2,240 pounds
Metric ton						2,205 pounds
MSHA						U.S. Mine Safety and Health Administration
Net ton						2,000 pounds
NOES						Non-oriented electrical steel

NPDES						National Pollutant Discharge Elimination System, authorized by the Clean Water Act
OPEB						Other postretirement benefits
Platts 62% price						Platts IODEX 62% Fe Fines CFR North China
RCRA						Resource Conservation and Recovery Act
RI/FS						Remedial Investigation/Feasibility Study

SEC						U.S. Securities and Exchange Commission
Section 232						Section 232 of the Trade Expansion Act of 1962, as amended
Securities Act						Securities Act of 1933, as amended
SunCoke Middletown						Middletown Coke Company, LLC, a subsidiary of SunCoke Energy, Inc.

Table of Contents


Abbreviation or acronym						Term
Topic 805						ASC Topic 805, Business Combinations
Topic 815						ASC Topic 815, Derivatives and Hedging

U.S.						United States of America
U.S. Steel						United States Steel Corporation and its subsidiaries, collectively, unless stated otherwise or the context indicates otherwise

USW						United Steelworkers
VEBA						Voluntary employee benefit association trusts
VIE						Variable interest entity

Table of Contents

PART I


Item 1.			Financial Statements

Statements of Unaudited Condensed Consolidated Financial Position

Cleveland-Cliffs Inc. and Subsidiaries


	(In Millions)
	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	56	$	48
Accounts receivable, net	2,301		2,154
Inventories	5,542		5,188
Other current assets	426		263
Total current assets	8,325		7,653
Non-current assets:
Property, plant and equipment, net	9,030		9,186
Goodwill	1,141		1,116

Pension and OPEB, asset	390		224
Other non-current assets	802		796
TOTAL ASSETS	$	19,688	$	18,975
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,361	$	2,073
Accrued employment costs	479		585

Other current liabilities	740		903
Total current liabilities	3,580		3,561
Non-current liabilities:
Long-term debt	4,475		5,238
Pension liability, non-current	464		578
OPEB liability, non-current	2,287		2,383
Other non-current liabilities	1,614		1,441
TOTAL LIABILITIES	12,420		13,201
Commitments and contingencies (See Note 18)
Equity:
Common shares - par value $0.125 per share
Authorized - 1,200,000,000 shares (2021 - 1,200,000,000 shares);
Issued - 531,051,530 shares (2021 - 506,832,537 shares);
Outstanding - 515,297,720 shares (2021 - 500,158,955 shares)	66		63
Capital in excess of par value of shares	4,864		4,892
Retained earnings (deficit)	1,548		(1)
Cost of 15,753,810 common shares in treasury (2021 - 6,673,582 shares)	(280)		(82)
Accumulated other comprehensive income	810		618
Total Cliffs shareholders' equity	7,008		5,490
Noncontrolling interest	260		284
TOTAL EQUITY	7,268		5,774
TOTAL LIABILITIES AND EQUITY	$	19,688	$	18,975

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

Table of Contents

Statements of Unaudited Condensed Consolidated Operations

Cleveland-Cliffs Inc. and Subsidiaries


	(In Millions, Except Per Share Amounts)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	5,653	$	6,004	$	17,945	$	15,098
Operating costs:
Cost of goods sold	(5,305)		(4,229)		(15,367)		(11,838)
Selling, general and administrative expenses	(124)		(116)		(353)		(329)

Miscellaneous – net	(37)		(10)		(104)		(38)
Total operating costs	(5,466)		(4,355)		(15,824)		(12,205)
Operating income	187		1,649		2,121		2,893
Other income (expense):
Interest expense, net	(64)		(81)		(205)		(258)
Gain (loss) on extinguishment of debt	4		—		(76)		(88)
Net periodic benefit credits other than service cost component	49		46		148		139
Other non-operating income (expense)	(1)		1		(6)		5
Total other expense	(12)		(34)		(139)		(202)
Income from continuing operations before income taxes	175		1,615		1,982		2,691
Income tax expense	(10)		(334)		(404)		(559)
Income from continuing operations	165		1,281		1,578		2,132
Income from discontinued operations, net of tax	—		1		2		2
Net income	165		1,282		1,580		2,134
Income attributable to noncontrolling interest	(13)		(8)		(31)		(39)
Net income attributable to Cliffs shareholders	$	152	$	1,274	$	1,549	$	2,095

Earnings per common share attributable to Cliffs shareholders - basic
Continuing operations	$	0.30	$	2.46	$	2.98	$	3.87
Discontinued operations	—		—		—		—
	$	0.30	$	2.46	$	2.98	$	3.87
Earnings per common share attributable to Cliffs shareholders - diluted
Continuing operations	$	0.29	$	2.33	$	2.95	$	3.69
Discontinued operations	—		—		—		—
	$	0.29	$	2.33	$	2.95	$	3.69

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

Table of Contents

Statements of Unaudited Condensed Consolidated Comprehensive Income

Cleveland-Cliffs Inc. and Subsidiaries


	(In Millions)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	165	$	1,282	$	1,580	$	2,134
Other comprehensive income (loss):
Changes in pension and OPEB, net of tax	93		6		94		20
Changes in foreign currency translation	(2)		—		(4)		(1)
Changes in derivative financial instruments, net of tax	61		83		102		137
Total other comprehensive income	152		89		192		156
Comprehensive income	317		1,371		1,772		2,290
Comprehensive income attributable to noncontrolling interests	(13)		(8)		(31)		(39)
Comprehensive income attributable to Cliffs shareholders	$	304	$	1,363	$	1,741	$	2,251

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

Table of Contents

Statements of Unaudited Condensed Consolidated Cash Flows

Cleveland-Cliffs Inc. and Subsidiaries


	(In Millions)
	Nine Months Ended September 30,
	2022		2021
OPERATING ACTIVITIES
Net income	$	1,580	$	2,134
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	788		664
Impairment of long-lived assets	29		1

Deferred income taxes	210		557
Pension and OPEB credits	(81)		(59)
Loss on extinguishment of debt	76		88
Amortization of inventory step-up	—		129
Other	75		79
Changes in operating assets and liabilities, net of business combination:
Receivables and other assets	(108)		(1,166)
Inventories	(348)		(793)
Income taxes	(109)		(1)
Pension and OPEB payments and contributions	(174)		(279)
Payables, accrued expenses and other liabilities	(4)		294
Net cash provided by operating activities	1,934		1,648
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(716)		(473)
Acquisition of FPT, net of cash acquired	(31)		—
Acquisition of ArcelorMittal USA, net of cash acquired	—		54
Other investing activities	20		5
Net cash used by investing activities	(727)		(414)
FINANCING ACTIVITIES
Series B Redeemable Preferred Stock redemption	—		(1,343)
Proceeds from issuance of common shares	—		322
Repurchase of common shares	(210)		—
Proceeds from issuance of debt	—		1,000

Repayments of debt	(1,355)		(1,346)
Borrowings under credit facilities	4,650		4,353
Repayments under credit facilities	(4,169)		(4,160)

Other financing activities	(115)		(130)
Net cash used by financing activities	(1,199)		(1,304)
Net increase (decrease) in cash and cash equivalents	8		(70)
Cash and cash equivalents at beginning of period	48		112
Cash and cash equivalents at end of period	$	56	$	42

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

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 (Deficit)		Common Shares in Treasury		AOCI		Non-controlling Interests		Total
December 31, 2021	500	$	63	$	4,892	$	(1)	$	(82)	$	618	$	284	$	5,774
Comprehensive income	—	—		—		801		—		97		13		911

Redemption of convertible debt	24	3		(28)		—		—		—		—		(25)
Stock and other incentive plans	2	—		(16)		—		11		—		—		(5)
Common stock repurchases	(1)	—		—		—		(19)		—		—		(19)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(28)		(28)
March 31, 2022	525	$	66	$	4,848	$	800	$	(90)	$	715	$	269	$	6,608
Comprehensive income (loss)	—	—		—		596		—		(57)		5		544
Stock and other incentive plans	—	—		7		—		1		—		—		8
Common stock repurchases	(8)	—		—		—		(157)		—		—		(157)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(9)		(9)
June 30, 2022	517	$	66	$	4,855	$	1,396	$	(246)	$	658	$	265	$	6,994
Comprehensive income	—	—		—		152		—		152		13		317
Stock and other incentive plans	—	—		9		—		—		—		—		9
Common stock repurchases	(2)	—		—		—		(34)		—		—		(34)

Net distributions to noncontrolling interests	—	—		—		—		—		—		(18)		(18)
September 30, 2022	515	$	66	$	4,864	$	1,548	$	(280)	$	810	$	260	$	7,268


	(In Millions)
	Number of Common Shares Outstanding	Par Value of Common Shares Issued		Capital in Excess of Par Value of Shares		Retained Earnings (Deficit)		Common Shares in Treasury		AOCI (Loss)		Non-controlling Interests		Total
December 31, 2020	478	$	63	$	5,431	$	(2,989)	$	(354)	$	(133)	$	323	$	2,341
Comprehensive income	—	—		—		41		—		13		16		70
Issuance of common stock	20	—		78		—		244		—		—		322
Stock and other incentive plans	1	—		(22)		—		17		—		—		(5)
Acquisition of ArcelorMittal USA - Measurement period adjustments	—	—		—		—		—		—		(1)		(1)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(8)		(8)
March 31, 2021	499	$	63	$	5,487	$	(2,948)	$	(93)	$	(120)	$	330	$	2,719
Comprehensive income	—	—		—		780		—		54		15		849
Stock and other incentive plans	1	—		4		—		6		—		—		10
Acquisition of ArcelorMittal USA - Measurement period adjustments	—	—		—		—		—		—		(13)		(13)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(24)		(24)
June 30, 2021	500	$	63	$	5,491	$	(2,168)	$	(87)	$	(66)	$	308	$	3,541
Comprehensive income	—	—		—		1,274		—		89		8		1,371
Stock and other incentive plans	—	—		5		—		4		—		—		9
Series B Redeemable Preferred Stock redemption	—	—		(605)		—		—		—		—		(605)
Repurchase of convertible debt	—	—		(4)		—		—		—		—		(4)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(22)		(22)
September 30, 2021	500	$	63	$	4,887	$	(894)	$	(83)	$	23	$	294	$	4,290

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

Table of Contents

Notes to Unaudited Condensed 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, 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 nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or any other future period. 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, 2021 and in our Quarterly Report on Form 10-Q for the quarterly periods ended June 30, 2022 and March 31, 2022.

Business Operations

We are vertically integrated from mined raw materials, direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are 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. As of September 30, 2022 and December 31, 2021, our investment in affiliates of $134 million and $128 million, 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, 2021 filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein.

Recent Accounting Pronouncements

Issued and Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update requires certain convertible instruments to be accounted for as a single liability measured at its amortized cost. Additionally, the update requires the use of the "if-converted" method, removing the treasury stock method, when calculating diluted shares. We utilized the modified retrospective method of adoption; using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year in which the amendment was adopted. On January 18, 2022, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes; therefore, there was a de minimis impact as a result of our adoption of this update.

Table of Contents

Issued and Not Yet Effective

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 rollforward of the related obligations. The new standard does not affect the recognition, measurement or financial statement presentation of the supplier finance program obligations. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Upon adoption, we may be required to include additional disclosures to the extent we have material supplier finance program obligations.

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)
	2022		2021
Allowance for credit losses as of January 1	$	(4)	$	(5)
Increase in allowance	(1)		—
Allowance for credit losses as of September 30	$	(5)	$	(5)

Inventories

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


	(In Millions)
	September 30, 2022		December 31, 2021
Product inventories
Finished and semi-finished goods	$	3,084	$	2,814
Raw materials	2,111		2,070
Total product inventories	5,195		4,884
Manufacturing supplies and critical spares	347		304
Inventories	$	5,542	$	5,188

Cash Flow Information

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


	(In Millions)
	Nine Months Ended September 30,
	2022		2021
Capital additions	$	736	$	572
Less:
Non-cash accruals	(10)		64
Right-of-use assets - finance leases	30		35

Cash paid for capital expenditures including deposits	$	716	$	473

Table of Contents

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


	(In Millions)
	Nine Months Ended September 30,
	2022		2021
Taxes paid on income	$	306	$	38
Income tax refunds	(3)		(15)
Interest paid on debt obligations net of capitalized interest1	201		231

1 Capitalized interest was $7 million and $4 million for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 3 - ACQUISITIONS

FPT Acquisition

Overview

On November 18, 2021, pursuant to the FPT Acquisition Agreement, we completed the FPT Acquisition, in which we were the acquirer. The FPT Acquisition gives us a competitive advantage in sourcing prime scrap, a key raw material for our steelmaking facilities. We incurred acquisition-related costs, excluding severance costs, of $1 million for the nine months ended September 30, 2022, which was recorded in Selling, general and administrative expenses on the Statements of Unaudited Condensed Consolidated Operations.

The fair value of the total purchase consideration was determined as follows:


	(In Millions)
Cash consideration:
Cash consideration pursuant to the FPT Acquisition Agreement	$	778
Cash consideration paid related to Internal Revenue Code Section 338(h)(10)	23
Total cash consideration	801
Fair value of settlement of a pre-existing relationship	(20)
Total purchase consideration	$	781

We made certain elections under Section 338(h)(10) of the Internal Revenue Code with respect to entities acquired in connection with the FPT Acquisition that were finalized during the third quarter of 2022, which changed the final cash consideration.

Valuation Assumption and Purchase Price Allocation

We estimated fair values at November 18, 2021 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the FPT Acquisition. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the FPT Acquisition, most notably, deferred taxes and environmental obligations, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future.

Table of Contents

The preliminary purchase price allocation to assets acquired and liabilities assumed in the FPT Acquisition was:


	(In Millions)
	Initial Allocation of Consideration		Measurement Period Adjustments		Updated Allocation
Cash and cash equivalents	$	9	$	—	$	9
Accounts receivable, net	233		2		235
Inventories	137		(1)		136
Other current assets	4		—		4
Property, plant and equipment	179		12		191
Other non-current assets	74		(11)		63
Accounts payable	(122)		—		(122)
Accrued employment costs	(8)		—		(8)
Other current liabilities	(9)		—		(9)
Other non-current liabilities	(21)		(1)		(22)
Net identifiable assets acquired	476		1		477
Goodwill	279		25		304
Total net assets acquired	$	755	$	26	$	781

The goodwill resulting from the FPT Acquisition primarily represents the incremental benefit of providing substantial access to prime scrap for our vertically integrated steelmaking business, as well as any synergistic benefits to be realized from the FPT Acquisition within our Steelmaking segment.

The preliminary purchase price allocated to identifiable intangible assets acquired was:


	(In Millions)		Weighted Average Life (In Years)
Customer relationships	$	13	15
Supplier relationships	21		18
Trade names and trademarks	7		15
Total identifiable intangible assets	$	41	17

Intangible assets are classified as Other non-current assets on the Statements of Unaudited Condensed Consolidated Financial Position.

NOTE 4 - 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.

Table of Contents

The following table represents our Revenues by market:


	(In Millions)				(In Millions)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Steelmaking:
Automotive	$	1,734	$	1,149	$	4,985	$	3,577
Infrastructure and manufacturing	1,462		1,603		4,619		3,889
Distributors and converters	1,468		2,447		5,137		5,672
Steel producers	847		670		2,740		1,572
Total Steelmaking	5,511		5,869		17,481		14,710
Other Businesses:
Automotive	113		105		359		306
Infrastructure and manufacturing	14		12		43		33
Distributors and converters	15		18		62		49
Total Other Businesses	142		135		464		388
Total revenues	$	5,653	$	6,004	$	17,945	$	15,098

The following tables represent our Revenues by product line:


	(Dollars in Millions, Sales Volumes in Thousands of Net Tons)
	Three Months Ended September 30,
	2022			2021
	Revenue		Volume	Revenue		Volume
Steelmaking:
Hot-rolled steel	$	1,050	1,055	$	1,800	1,332
Cold-rolled steel	740		530	935		728
Coated steel	1,757		1,203