UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE~~



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

For the quarterly period ended ~~September~~June 30, ~~2018~~2019

☐ ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE~~



	☐	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~~ Yes ☒ NO 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~~ Yes ☒ NO No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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~~ Yes ☐ NO No ☒

The number of shares outstanding of the registrant’s common shares, par value $0.125 per share, was ~~298,018,441~~270,048,477 as of ~~October~~July 17, ~~2018.~~2019.

Table of Contents

TABLE OF CONTENTS


			Page Number

DEFINITIONS				1

PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Statements of Unaudited Condensed Consolidated Financial Position as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018		2
		Statements of Unaudited Condensed Consolidated Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018		4
		Statements of Unaudited Condensed Consolidated Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018		5
		Statements of Unaudited Condensed Consolidated Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018		6
		Statements of Unaudited Condensed Consolidated Changes in Equity for the Three and Six Months Ended June 30, 2019 and 2018		7
		Notes to Unaudited Condensed Consolidated Financial Statements		79
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		5238
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		6751
	Item 4.	Controls and Procedures		6751

PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings		6852
	Item 1A.	Risk Factors		6952
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		6952
	Item 4.	Mine Safety Disclosures		7053
	Item 5.	Other Information		7053
	Item 6.	Exhibits		7053

Signatures				7154

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. ~~References to “C$” refer to Canadian currency and “$” to United States currency.~~



Abbreviation or acronym		Term
A&R 2015 Equity Plan		~~Amended and Restated~~ Cliffs Natural Resources Inc. Amended and Restated 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 extinguishment/restructuring of debt, impacts of discontinued operations, foreign currency exchange remeasurement, ~~extinguishment of debt,~~ impairment of other long-lived assets, severance 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~~CECL		~~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)~~Current Expected Credit Losses model
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~~Hot-rolled coil steel price		~~Collective term~~Estimated average annual daily market price for ~~the operating deposits at Koolyanobbing, Mount Jackson and Windarling~~hot-rolled coil steel
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~~CFR North China
PPI		Producer Price Indices
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

Table of Contents

PART I



Item 1.	Financial Statements

Statements of Unaudited Condensed Consolidated Financial Position

Cleveland-Cliffs Inc. and Subsidiaries



	(In Millions)
	June 30, 2019		December 31, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	377.2	$	823.2
Accounts receivable, net	193.1		226.7
Inventories	219.0		87.9
Supplies and other inventories	110.8		93.2
Derivative assets	118.3		91.5
Income tax receivable, current	58.7		117.3
Other current assets	42.3		39.8
TOTAL CURRENT ASSETS	1,119.4		1,479.6
PROPERTY, PLANT AND EQUIPMENT, NET	1,597.3		1,286.0
OTHER ASSETS
Deposits for property, plant and equipment	52.2		83.0
Income tax receivable, non-current	62.7		121.3
Deferred income taxes	443.3		464.8
Other non-current assets	118.3		94.9
TOTAL OTHER ASSETS	676.5		764.0
TOTAL ASSETS	$	3,393.2	$	3,529.6

(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

(continued)

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

Table of Contents

Statements of Unaudited Condensed Consolidated Financial Position

Cleveland-Cliffs Inc. and Subsidiaries - (Continued)


	(In Millions)						(In Millions)
	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	140.8		$	99.5		$	188.1		$	186.8
Accrued expenses	95.1			79.1
Accrued employment costs							58.4			74.0
Accrued interest	26.2			31.4			31.3			38.4
Contingent claims	—			55.6
Partnership distribution payable	43.1			44.2			44.1			43.5
Current liabilities of discontinued operations	14.2			75.0
Other current liabilities	61.3			67.4			115.5			125.5
TOTAL CURRENT LIABILITIES	380.7			452.2			437.4			468.2
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES	225.0			257.7			239.3			248.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS	174.4			167.7			176.7			172.0
LONG-TERM DEBT	2,300.0			2,304.2			2,104.5			2,092.9
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS	9.3			52.2
OTHER LIABILITIES	121.8			163.5			149.7			123.6
TOTAL LIABILITIES	3,211.2			3,397.5			3,107.6			3,105.4
COMMITMENTS AND CONTINGENCIES (REFER TO NOTE 20)
EQUITY
CLIFFS SHAREHOLDERS' DEFICIT
SHAREHOLDERS' EQUITY
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
Authorized - 600,000,000 shares (2018 - 600,000,000 shares);
Issued - 301,886,794 shares (2018 - 301,886,794 shares);
Outstanding - 270,042,018 shares (2018 - 292,611,569 shares)							37.7			37.7
Capital in excess of par value of shares	3,913.3			3,933.9			3,863.6			3,916.7
Retained deficit	(3,654.7		)	(4,207.3		)	(2,952.6		)	(3,060.2		)
Cost of 3,879,341 common shares in treasury (2017 - 4,485,826 shares)	(139.1		)	(169.6		)
Cost of 31,844,776 common shares in treasury (2018 - 9,275,225 shares)							(391.3		)	(186.1		)
Accumulated other comprehensive loss	(243.4		)	(39.0		)	(271.8		)	(283.9		)
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
TOTAL EQUITY							285.6			424.2
TOTAL LIABILITIES AND EQUITY							$	3,393.2		$	3,529.6

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)												(In Millions, Except Per Share Amounts)
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	684.7		$	530.7		$	1,525.9		$	1,195.0		$	697.4		$	672.0		$	842.8		$	841.2
Freight and venture partners' cost reimbursements	57.1			66.0			110.2			159.2
Freight													45.8			42.3			57.4			53.1
	741.8			596.7			1,636.1			1,354.2			743.2			714.3			900.2			894.3
COST OF GOODS SOLD AND OPERATING EXPENSES	(480.2		)	(438.9		)	(1,028.5		)	(1,002.7		)
COST OF GOODS SOLD													(480.2		)	(429.8		)	(606.3		)	(548.3		)
SALES MARGIN	261.6			157.8			607.6			351.5			263.0			284.5			293.9			346.0
OTHER OPERATING INCOME (EXPENSE)
OTHER OPERATING EXPENSE
Selling, general and administrative expenses	(30.1		)	(23.8		)	(81.4		)	(75.5		)	(30.6		)	(26.2		)	(58.7		)	(51.3		)
Miscellaneous – net	(6.0		)	(5.3		)	(16.2		)	1.3			(5.6		)	(4.1		)	(9.2		)	(10.2		)
	(36.1		)	(29.1		)	(97.6		)	(74.2		)	(36.2		)	(30.3		)	(67.9		)	(61.5		)
OPERATING INCOME	225.5			128.7			510.0			277.3			226.8			254.2			226.0			284.5
OTHER INCOME (EXPENSE)
Interest expense, net	(29.5		)	(27.6		)	(93.1		)	(99.1		)	(26.1		)	(31.2		)	(51.2		)	(63.6		)
Gain (loss) on extinguishment of debt	—			(88.6		)	0.2			(165.4		)	(17.9		)	0.2			(18.2		)	0.2
Other non-operating income	4.3			2.6			13.1			7.6			0.6			4.4			1.0			8.8
	(25.2		)	(113.6		)	(79.8		)	(256.9		)	(43.4		)	(26.6		)	(68.4		)	(54.6		)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	200.3			15.1			430.2			20.4			183.4			227.6			157.6			229.9
INCOME TAX BENEFIT (EXPENSE)	(0.5		)	7.2			(14.4		)	7.2			(22.0		)	1.8			(18.3		)	(13.9		)
INCOME FROM CONTINUING OPERATIONS	199.8			22.3			415.8			27.6			161.4			229.4			139.3			216.0
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX	238.0			30.6			102.8			25.6
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX													(0.6		)	(64.3		)	(0.6		)	(135.2		)
NET INCOME	437.8			52.9			518.6			53.2			$	160.8		$	165.1		$	138.7		$	80.8
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

EARNINGS (LOSS) PER COMMON SHARE – BASIC
Continuing operations	$	0.67		$	0.08		$	1.40		$	0.11		$	0.59		$	0.77		$	0.49		$	0.73
Discontinued operations	0.80			0.10			0.35			0.09			—			(0.22		)	—			(0.46		)
	$	1.47		$	0.18		$	1.75		$	0.20		$	0.59		$	0.55		$	0.49		$	0.27
INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – DILUTED
EARNINGS (LOSS) PER COMMON SHARE – DILUTED
Continuing operations	$	0.64		$	0.08		$	1.37		$	0.11		$	0.57		$	0.76		$	0.47		$	0.72
Discontinued operations	0.77			0.10			0.34			0.08			—			(0.21		)	—			(0.45		)
	$	1.41		$	0.18		$	1.71		$	0.19		$	0.57		$	0.55		$	0.47		$	0.27
AVERAGE NUMBER OF SHARES (IN THOUSANDS)
Basic	297,878			296,079			297,587			285,771			275,769			297,618			282,647			297,442
Diluted	310,203			301,075			303,518			290,512			285,479			301,275			293,580			301,143

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,
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)
	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
NET INCOME	$	160.8		$	165.1	$	138.7	$	80.8
OTHER COMPREHENSIVE INCOME
Changes in pension and other post-retirement benefits, net of tax	5.8			6.7		11.5		13.4
Changes in foreign currency translation	—			2.2		—		2.9
Changes in derivative financial instruments, net of tax	(2.1		)	0.2		0.6		0.5
OTHER COMPREHENSIVE INCOME	3.7			9.1		12.1		16.8
TOTAL COMPREHENSIVE INCOME	$	164.5		$	174.2	$	150.8	$	97.6

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)						(In Millions)
	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
OPERATING ACTIVITIES
Net income	$	518.6		$	53.2		$	138.7		$	80.8
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation, depletion and amortization	68.6			66.3			40.9			49.4
Loss (gain) on extinguishment of debt	(0.2		)	165.4			18.2			(0.2		)
Loss on deconsolidation	—			16.3
Gain on derivatives	(136.4		)	(47.5		)	(27.2		)	(123.5		)
Gain on foreign currency translation	(228.1		)	—
Other	5.7			19.0			46.6			12.6
Changes in operating assets and liabilities:
Receivables and other assets	96.2			68.9			127.8			61.8
Inventories	(57.1		)	(26.1		)	(131.1		)	(125.6		)
Payables, accrued expenses and other liabilities	(78.6		)	(108.8		)	(62.8		)	(4.6		)
Net cash provided by operating activities	188.7			206.7
Net cash provided (used) by operating activities							151.1			(49.3		)
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(111.4		)	(62.7		)	(294.4		)	(42.1		)
Deposits for property, plant and equipment	(83.3		)	(16.2		)	(6.5		)	(72.3		)
Proceeds on sales of assets	18.5			2.2			—			14.6
Other investing activities	2.5			(7.7		)	8.5			—
Net cash used by investing activities	(173.7		)	(84.4		)	(292.4		)	(99.8		)
FINANCING ACTIVITIES
Net proceeds from issuance of common shares	—			661.3
Repurchase of common shares							(252.9		)	—
Dividends paid							(28.9		)	—
Proceeds from issuance of debt	—			1,057.8			720.9			—
Debt issuance costs	(1.5		)	(12.0		)	(6.8		)	(1.5		)
Repurchase of debt	(16.3		)	(1,720.7		)	(729.3		)	(15.3		)
Acquisition of noncontrolling interest	—			(105.0		)
Distributions of partnership equity	(44.2		)	(53.0		)
Other financing activities	(45.7		)	(17.0		)	(10.9		)	(8.9		)
Net cash used by financing activities	(107.7		)	(188.6		)	(307.9		)	(25.7		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(2.3		)	3.7			—			(1.0		)
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
DECREASE IN CASH AND CASH EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN OTHER CURRENT ASSETS RELATED TO DISCONTINUED OPERATIONS							(449.2		)	(175.8		)
LESS: DECREASE IN CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS, CLASSIFIED WITHIN OTHER CURRENT ASSETS							(3.2		)	—
NET DECREASE IN CASH AND CASH EQUIVALENTS	(81.2		)	(85.7		)	(446.0		)	(175.8		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	978.3			312.8			823.2			978.3
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	897.1		$	227.1		$	377.2		$	802.5

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 Deficit			Common Shares in Treasury			Accumulated Other Comprehensive Loss			Total
December 31, 2018	292.6		$	37.7	$	3,916.7		$	(3,060.2	)	$	(186.1	)	$	(283.9	)	$	424.2
Comprehensive income (loss)
Net loss	—		—		—			(22.1		)	—			—			(22.1		)
Other comprehensive income	—		—		—			—			—			8.4			8.4
Total comprehensive loss																	(13.7		)
Stock and other incentive plans	1.7		—		(56.5		)	—			46.5			—			(10.0		)
Common share repurchases	(11.5	)	—		—			—			(124.3		)	—			(124.3		)
Common share dividends ($0.05 per share)	—		—		—			(14.5		)	—			—			(14.5		)
March 31, 2019	282.8		$	37.7	$	3,860.2		$	(3,096.8	)	$	(263.9	)	$	(275.5	)	$	261.7
Comprehensive income
Net income	—		—		—			160.8			—			—			160.8
Other comprehensive income	—		—		—			—			—			3.7			3.7
Total comprehensive income																	164.5
Stock and other incentive plans	0.1		—		3.4			—			1.2			—			4.6
Common share repurchases	(12.9	)	—		—			—			(128.6		)	—			(128.6		)
Common share dividends ($0.06 per share)	—		—		—			(16.6		)	—			—			(16.6		)
June 30, 2019	270.0		$	37.7	$	3,863.6		$	(2,952.6	)	$	(391.3	)	$	(271.8	)	$	285.6

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	(In Millions)
	Number of Common Shares Outstanding	Par Value of Common Shares Issued		Capital in Excess of Par Value of Shares			Retained Deficit			Common Shares in Treasury			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total
December 31, 2017	297.4	$	37.7	$	3,933.9		$	(4,207.3	)	$	(169.6	)	$	(39.0	)	$	0.2		$	(444.1	)
Adoption of accounting standard	—	—		—			34.0			—			—			—			34.0
Comprehensive income (loss)
Net loss	—	—		—			(84.3		)	—			—			—			(84.3		)
Other comprehensive income	—	—		—			—			—			7.7			—			7.7
Total comprehensive loss																			(76.6		)
Stock and other incentive plans	0.3	—		(15.8		)	—			17.7			—			—			1.9
March 31, 2018	297.7	$	37.7	$	3,918.1		$	(4,257.6	)	$	(151.9	)	$	(31.3	)	$	0.2		$	(484.8	)
Comprehensive income
Net income	—	—		—			165.1			—			—			—			165.1
Other comprehensive income	—	—		—			—			—			9.1			—			9.1
Total comprehensive income																			174.2
Distributions to noncontrolling interest	—	—		—						—			—			(0.2		)	(0.2		)
Stock and other incentive plans	0.1	—		0.2			—			4.3			—			—			4.5
June 30, 2018	297.8	$	37.7	$	3,918.3		$	(4,092.5	)	$	(147.6	)	$	(22.2	)	$	—		$	(306.3	)

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

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Cleveland-Cliffs Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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, ~~and~~ 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~~six months ended ~~September~~June 30, ~~2018~~2019 are not necessarily indicative of results to be expected for the year ending December 31, ~~2018~~2019 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, ~~2017.~~2018.

We have two reportable segments - the Mining and Pelletizing segment and the Metallics segment. Unless otherwise noted, discussion of our business and results of operations in this Quarterly Report on Form 10-Q refers to our continuing operations.

As more fully described in ~~NOTE 16 - DISCONTINUED OPERATIONS, on January 25, 2018, we announced that we would accelerate~~ the ~~time frame~~Form 10-K for the ~~planned closure of our Asia Pacific Iron Ore mining operations~~year ended December 31, 2018, in ~~Australia. On April 6,~~ 2018 we committed to a course of action leading to the permanent closure of the Asia Pacific Iron Ore mining operations and, as planned, completed our final shipment in June 2018. Factors considered in this decision included increasingly discounted prices for lower-iron-content ore and the quality of the remaining iron ore reserves.

During ~~June~~ 2018, we ~~completed a sale of the mobile equipment to a third party and entered into a definitive agreement to sell substantially~~sold all of the ~~remaining~~ assets of our Asia Pacific Iron Ore business through a series of sales to ~~Mineral Resources Limited. The sale to Mineral Resources Limited was completed during August 2018.~~ third parties. As a result of ~~the period ended June 30, 2018,~~our planned exit, management determined that our Asia Pacific Iron Ore operating segment met the criteria to be classified as held for sale and a discontinued operation under ASC Topic 205, Presentation of Financial Statements. As such, all ~~current and historical~~ Asia Pacific Iron Ore operating segment results are ~~included in our financial statements and~~ classified within discontinued operations.

~~We now operate in one reportable segment – U.S. Iron Ore. Unless otherwise noted, discussion of our business and results of operations in this Quarterly Report on Form 10-Q refers~~ Refer to ~~our continuing operations.~~NOTE 14 - DISCONTINUED OPERATIONS for further information.

Basis of Consolidation

The unaudited condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, including the following operations as of ~~September~~June 30, ~~2018:~~2019:



Name	Location	Business Segment	Status of Operations
Northshore	Minnesota	Mining and Pelletizing	Active
United Taconite	Minnesota	Mining and Pelletizing	Active
Tilden	Michigan	Mining and Pelletizing	Active
Empire	Michigan	Mining and Pelletizing	Indefinitely Idled
~~Koolyanobbing~~¹ Toledo HBI	~~Western Australia~~Ohio	~~Substantially All Assets Sold~~
Metallics
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. Construction Stage

Intercompany transactions and balances are eliminated upon consolidation.

Equity Method Investments

Our 23% ownership interest in Hibbing is recorded as an equity method investment. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, our investment in Hibbing was ~~$7.2~~$12.9 million and ~~$11.0~~$15.4 million, respectively, classified as Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position.

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~~Foreign Currency~~

Our financial statements are prepared with the U.S. dollar as the reporting currency. Historically, the functional currency of our Australian subsidiaries has been the Australian dollar. Concurrent with the sale of assets to Mineral Resources Limited in August 2018, management determined that there have been significant changes in economic factors related to our Australian subsidiaries. The change in economic factors is a result of the sale and conveyance of substantially all assets and liabilities of our Australian subsidiaries to third parties, representing a significant change in operations. As such, the functional currency for the Australian subsidiaries has changed from the Australian dollar to the U.S. dollar and all Australian denominated monetary balances will be remeasured through the Statements of Unaudited Condensed Consolidated Operations on a prospective basis.

~~In addition, as a result of the liquidation of substantially all of the Australian subsidiaries' assets, the historical impact of foreign currency translation recorded in~~ ~~Accumulated other comprehensive loss~~ ~~in the Statements of Unaudited Condensed Consolidated Financial Position of $228.1 million was reclassified and recognized in~~ ~~Income from Discontinued Operations, net of tax~~ ~~in the Statements of Unaudited Condensed Consolidated Operations. Refer to NOTE 16 - DISCONTINUED OPERATIONS for further information regarding our Australian subsidiaries.~~

The functional currency of all other subsidiaries is the U.S. dollar. To the extent that monetary assets and liabilities, including short-term intercompany loans, are recorded in a currency other than the functional currency, these amounts are remeasured each reporting period, with the resulting gain or loss being recorded in the Statements of Unaudited Condensed Consolidated Operations. Transaction gains and losses resulting from remeasurement of short-term intercompany loans are included in ~~Miscellaneous – net~~ ~~in the Statements of Unaudited Condensed Consolidated Operations.~~

~~The following represents the transaction gains and losses resulting from remeasurement:~~

(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

Significant Accounting Policies

A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended December 31, ~~2017~~2018 included in our Annual Report on Form 10-K filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein other than those related to the adoption of Topic 606 and the change in functional currency related to our Australian subsidiaries. Refer to NOTE 2 - NEW ACCOUNTING STANDARDS for further information related to the adoption of Topic 606.therein.

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NOTE 2 - NEW ACCOUNTING STANDARDS

~~Adoption of New Accounting Standards~~

~~ASC Topic 606, Revenue from Contracts with Customers (Topic 606).~~ On January 1, 2018, we adopted Topic 606 and applied it to all contracts that were not completed using the modified retrospective method. We recognized the cumulative effect of initially applying Topic 606 as an adjustment of $34.0 million to the opening balance of ~~Retained deficit~~. The comparative period information has not been restated and continues to be reported under the accounting standards in effect for those periods. We do not expect that the adoption of Topic 606 will have a material impact to our annual net income on an ongoing basis.

Under Topic 606, revenue is generally recognized upon delivery to our customers, which is earlier than under the previous guidance. As an example, for certain iron ore shipments where revenue was previously recognized upon title transfer when payment was received, we now recognize revenue when control transfers, which is generally upon delivery. While we continue to retain title until we receive payment, we determined upon review of our customer contracts that the preponderance of control indicators pass to our customers' favor when we deliver our products; thus, we generally concluded that control transfers at that point. As a result of the adoption of Topic 606 and vessel deliveries not occurring

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during the winter months because of the closure of the Soo Locks and the Welland Canal, our revenues and net income will be relatively lower than historical levels during the first quarter of each year and relatively higher than historical levels during the remaining three quarters in future years. However, the total amount of revenue recognized during the year should remain substantially the same as under previous accounting standards, assuming revenue rates and volumes are consistent between years.

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~~The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606 were as follows:~~

($ 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

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~~The impact of adoption on our Statements of Unaudited Condensed Consolidated Operations and Statements of Unaudited Condensed Consolidated Financial Position is as follows:~~

($ 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

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($ 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

~~The adoption of Topic 606 did not have an impact on net cash flows in our Statements of Unaudited Condensed Consolidated Cash Flows.~~

~~ASU 2017-07, Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~. On January 1, 2018, we adopted the amendments to ASC 715 regarding the presentation of net periodic pension and postretirement benefit costs. We retrospectively adopted the presentation of service cost

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separate from the other components of net periodic costs. The interest cost, expected return on assets, amortization of prior service costs, net remeasurement, and other costs have been reclassified from ~~Cost of goods sold and operating expenses,Selling, general and administrative expenses~~ ~~and~~ ~~Miscellaneous – net~~ to ~~Other non-operating income.~~ We elected to apply the practical expedient, which allows us to reclassify amounts disclosed previously in our pension and other postretirement benefits footnote as the basis for applying retrospective presentation for comparative periods. On a prospective basis from adoption, only service costs will be included in amounts capitalized in inventory or property, plant, and equipment.

The effect of the retrospective presentation change related to the net periodic cost of our defined benefit pension and other postretirement employee benefits plans on our Statements of Unaudited Condensed Consolidated Operations was as follows:

($ 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
$ —

~~Recent Accounting Pronouncements~~

Issued and ~~Not Effective~~Adopted

~~In August 2018, the FASB issued ASU No. 2018-14,~~ ~~Defined Benefit Plans (Topic 715-20) - Changes to the Disclosure Requirements for Defined Benefit Plans~~. Certain of the existing required disclosures were modified for clarification or removed and additional disclosures were added. The new standard is effective for the year ending December 31, 2020, will be applied on a retrospective basis and early adoption is permitted. Based on our analysis to date, the updated standard is not expected to have a material impact on our consolidated financial statements, but will affect our footnote disclosures. We expect to early adopt this new standard during the fourth quarter of 2018.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases except for short-term leases. For lessees, leases ~~will continue to be~~are classified as either operating or finance ~~leases in the Statements of Unaudited Condensed Consolidated Operations.~~leases. We ~~plan to adopt the~~adopted this standard on its effective date of January 1, ~~2019. We will apply~~2019 using the ~~standard on~~optional alternative approach, which requires application of the ~~adoption date and recognize a cumulative-effect adjustment to~~new guidance at the ~~opening balance~~beginning of ~~retained earnings in~~ the ~~period~~standard's effective date. Adoption of ~~adoption as permitted by ASU 2018-11. Based on our analysis to date,~~ the updated standard did not have a material effect on our consolidated financial statements.

Issued and Not Effective

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326), which introduces a new accounting model, CECL. CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk. CECL utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. We plan to adopt this standard on its effective date of January 1, 2020, and do not ~~expected~~expect the standard to have a material effect on our consolidated financial statements. For example, based on the future minimum payments under non-cancellable operating leases as of September 30, 2018, we would expect to record right–of–use assets and lease liabilities of approximately $19 million, discounted to fair value, in the Statements of Unaudited Condensed Consolidated Financial Position.

~~Issued and Adopted~~

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement~~. The new standard removes or modifies certain existing disclosure requirements and adds additional disclosure requirements. We have evaluated the impact of the adoption of this new accounting standard update and determined that it will not have a material effect on our consolidated financial statements. However, we do expect an overall reduction in both our quarterly and annual disclosures related to fair value measurement. We are adopting the standard effective for the period ended September 30, 2018.

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NOTE 3 - SEGMENT REPORTING

~~We operate~~In alignment with our strategic goals, our Company’s continuing operations are organized and managed in ~~one reportable~~two operating segments according to our differentiated products. Our Mining and Pelletizing segment ~~– U.S. Iron Ore. U.S. Iron Ore~~ is a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. In our Metallics segment, we are currently constructing an HBI production plant in Toledo, Ohio. We expect to complete construction and begin production in 2020. In the second quarter of 2019, Northshore mine began supplying DR-grade pellets to our Metallics segment, which will be used as feedstock for the HBI production plant.

We evaluate ~~segment~~ performance based on sales margin, defined as revenues less cost of goods sold ~~and operating expenses~~ identifiable to each segment. Additionally, we evaluate performance on a segment basis, as well as a consolidated basis, based on EBITDA and Adjusted EBITDA. These measures ~~allow~~are used by management, investors, lenders and ~~investors~~other external users of our financial statements to ~~focus on~~assess our operating performance and to compare operating performance to other companies in the iron ore industry. In addition, management believes EBITDA and Adjusted EBITDA are useful measures to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service ~~our~~ debt ~~as well as illustrate how~~and fund future capital expenditures in the business and each operating segment are performing. Additionally, EBITDA and Adjusted EBITDA assist management and investors in their analysis and forecasting as these measures approximate the cash flows associated with operational earnings.business.

The following tables present a summary of our reportable ~~segment~~segments including a reconciliation of segment revenues to total revenues, segment sales margin to ~~Income from Continuing Operations Before Income Taxes~~total sales margin and a reconciliation of Net ~~Income~~income to EBITDA and Adjusted EBITDA:

(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 June 30, 2019								Six Months Ended June 30, 2019
	Mining and Pelletizing			Metallics		Total			Mining and Pelletizing			Metallics		Total
Operating segment revenues from product sales and services	$	747.2		$	—	$	747.2		$	904.2		$	—	$	904.2
Elimination of intersegment revenues	(4.0		)	—		(4.0		)	(4.0		)	—		(4.0		)
Total revenue	$	743.2		$	—	$	743.2		$	900.2		$	—	$	900.2

Operating segment sales margin	$	264.6		$	—	$	264.6		$	295.5		$	—	$	295.5
Elimination of intersegment sales margin	(1.6		)	—		(1.6		)	(1.6		)	—		(1.6		)
Total sales margin	$	263.0		$	—	$	263.0		$	293.9		$	—	$	293.9

Revenues from product sales and services of $714.3 million and $894.3 million, respectively, and sales margin of $284.5 million and $346.0 million, respectively, related to our Mining and Pelletizing segment accounted for all of our consolidated revenues and sales margin for the three and six months ended June 30, 2018.

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	(In Millions)												(In Millions)
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net Income	$	437.8		$	52.9		$	518.6		$	53.2
Net income													$	160.8		$	165.1		$	138.7		$	80.8
Less:
Interest expense, net	(29.7		)	(28.9		)	(95.5		)	(103.1		)	(26.3		)	(32.3		)	(51.4		)	(65.8		)
Income tax benefit (expense)	(0.5		)	7.6			(14.4		)	6.8			(22.0		)	1.8			(18.3		)	(13.9		)
Depreciation, depletion and amortization	(19.2		)	(21.5		)	(68.6		)	(66.3		)	(21.0		)	(25.5		)	(40.9		)	(49.4		)
EBITDA	$	487.2		$	95.7		$	697.1		$	215.8		$	230.1		$	221.1		$	249.3		$	209.9
Less:
Foreign exchange remeasurement													$	(0.1	)	$	(0.1	)	$	—		$	(0.5	)
Impact of discontinued operations	$	238.2		$	34.8		$	120.4		$	41.3		(0.4		)	(54.7		)	(0.4		)	(117.8		)
Foreign exchange remeasurement	(0.2		)	(1.3		)	(0.7		)	14.0
Gain (loss) on extinguishment of debt	—			(88.6		)	0.2			(165.4		)	(17.9		)	0.2			(18.2		)	0.2
Impairment of long-lived assets	(1.1		)	—			(1.1		)	—
Severance costs													—			—			(1.7		)	—
Adjusted EBITDA	$	250.3		$	150.8		$	578.3		$	325.9		$	248.5		$	275.7		$	269.6		$	328.0

EBITDA
U.S. Iron Ore	$	273.1		$	168.9		$	641.6		$	381.8
Corporate and Other¹	214.1			(73.2		)	55.5			(166.0		)
EBITDA:
Mining and Pelletizing													$	274.6		$	296.0		$	317.4		$	368.5
Metallics													(1.1		)	(1.2		)	(1.9		)	(1.5		)
Corporate and Other (including discontinued operations)													(43.4		)	(73.7		)	(66.2		)	(157.1		)
Total EBITDA	$	487.2		$	95.7		$	697.1		$	215.8		$	230.1		$	221.1		$	249.3		$	209.9

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		)
Mining and Pelletizing													$	280.5		$	301.3		$	328.0		$	378.4
Metallics													(1.1		)	(1.2		)	(1.9		)	(1.5		)
Corporate													(30.9		)	(24.4		)	(56.5		)	(48.9		)
Total Adjusted EBITDA	$	250.3		$	150.8		$	578.3		$	325.9		$	248.5		$	275.7		$	269.6		$	328.0

¹Corporate and Other includes activity from discontinued operations and immaterial costs related to the HBI project.

The following table summarizes our depreciation, depletion and amortization expense and capital additions:



	(In Millions)
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Depreciation, depletion and amortization:
Mining and Pelletizing	$	19.6	$	15.6	$	38.1	$	31.4
Corporate	1.4		1.4		2.8		2.8
Total depreciation, depletion and amortization	$	21.0	$	17.0	$	40.9	$	34.2

Capital additions¹:
Mining and Pelletizing	$	35.6	$	26.7	$	82.4	$	45.4
Metallics	155.1		43.0		237.5		103.0
Corporate	0.9		0.7		1.0		0.9
Total capital additions	$	191.6	$	70.4	$	320.9	$	149.3

¹Refer to NOTE 17 - CASH FLOW INFORMATION for additional information.

(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.

1511

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A summary of assets by segment is as follows:



	(In Millions)
	June 30, 2019		December 31, 2018
Assets:
Mining and Pelletizing	$	1,893.9	$	1,694.1
Metallics	514.7		265.9
Total segment assets	2,408.6		1,960.0
Corporate and Other (including discontinued operations)	984.6		1,569.6
Total assets	$	3,393.2	$	3,529.6

(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.

NOTE 4 - REVENUE

We sell primarily a single product, iron ore pellets, in the North American market. ~~Generally, revenue~~Revenue is recognized generally when iron ore is delivered to our customers. Revenue is measured at the point that control transfers and represents the amount of consideration we expect to receive in exchange for transferring goods. We offer standard payment terms to our customers, generally requiring settlement within 30 days.

We enter into supply contracts of varying lengths to provide customers iron ore pellets to use in their blast furnaces. Blast furnaces run continuously with a constant feed of iron ore and, once shut down, cannot easily be restarted. As a result, we ship iron ore in large quantities for storage and use by customers at a later date. Customers do not simultaneously receive and consume the ~~benefits of the~~ iron ore. Based on our assessment of the factors that indicate the pattern of satisfaction, we transfer control of the iron ore at a point in time upon shipment or delivery of the product. The customer is able to direct the use of, and obtain substantially all of the benefits from, the product at the time the product is delivered.

~~Certain~~Most of our customer supply agreements specify a provisional price, which is used for initial billing and cash collection. Revenue recorded in accordance with Topic 606 is calculated using the expected revenue rate at the point when control transfers. The final settlement includes market inputs for a specified period of time, which may vary by customer, but typically include one or more of the ~~following:~~following published rates: Platts 62% Price, Atlantic Basin pellet premiums, Platts international indexed freight rates and changes in specified ~~Producer Price Indices,~~PPI, including industrial commodities, ~~energy~~fuel and steel. Changes in the expected revenue rate from the date control transfers through final settlement of contract terms is recorded in accordance with Topic 815. Refer to NOTE 1513 - DERIVATIVE INSTRUMENTS for further information on how our estimated and final revenue rates are determined.

A supply agreement with one customer provides for supplemental revenue or refunds based on the average annual daily market price for hot-rolled coil steel atin the ~~time~~year the iron ore is consumed in the customer’s blast furnaces. ~~Since, in this case,~~As control transfers prior to consumption, the supplemental revenue is recorded in accordance with ASC Topic 815. Refer to NOTE 1513 - DERIVATIVE INSTRUMENTS for further information on supplemental revenue or refunds.

Included within Revenues from product sales and services is derivative revenue related to Topic 815 of ~~$135.9~~$74.8 million and ~~$334.4~~$80.3 million for the three and ~~nine~~six months ended ~~September~~June 30, 2019, respectively, and $154.7 million and $198.5 million for the three and six months ended June 30, 2018, respectively.

~~Practical expedients and exemptions~~

~~We have elected to treat all shipping and handling costs as fulfillment costs because a significant portion of these costs are incurred prior to control transfer.~~

We have various long-term sales contracts with minimum purchase and supply requirement provisions that extend beyond the current reporting period. The portion of our transaction price for these contracts that is allocated entirely to wholly unsatisfied performance obligations is based on market prices that have not yet been determined and therefore is variable in nature. As such, we have not disclosed the value of unsatisfied performance obligations pursuant to the practical expedient.

~~Table of Contents~~

Deferred Revenue

The table below summarizes our deferred revenue balances:



	(In Millions)
	Deferred Revenue (Current)						Deferred Revenue (Long-Term)
	2019			2018			2019			2018
Opening balance as of January 1	$	21.0		$	23.8		$	38.5		$	51.4
Closing balance as of June 30	15.5			20.0			34.3			47.1
Decrease	$	(5.5	)	$	(3.8	)	$	(4.2	)	$	(4.3	)

Table of Contents

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.

The terms of one of our pellet supply agreements required supplemental payments to be paid by the customer during the period 2009 through ~~2012, with the option to defer a portion of the 2009 monthly amount in exchange for interest payments until the deferred amount was repaid in 2013.~~2012. Installment amounts received under this arrangement in excess of sales were classified as Other current liabilities and Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position upon receipt of payment. Revenue is recognized over the life of the supply agreement, which extends until 2022, in equal annual installments. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, installment amounts received in excess of sales totaled ~~$55.6~~$47.1 million and ~~$64.2~~$51.3 million, respectively, related to this agreement. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, deferred revenue of $12.8 million was recorded in Other current liabilities and ~~$42.8~~$34.3 million and ~~$51.4~~$38.5 million, respectively, was recorded as long-term in Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position, related to this agreement.

Due to the payment terms and the timing of cash receipts near a period end, cash receipts can exceed shipments for certain customers. Revenue recognized on these transactions totaling ~~$3.3~~$2.7 million and ~~$9.6~~$8.2 million was deferred and included in Other current liabilities in the Statements of Unaudited Condensed Consolidated Financial Position as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

NOTE 5 - INVENTORIES

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



	(In Millions)
	June 30, 2019								December 31, 2018
Segment	Finished Goods		Work-in-Process			Total Inventory			Finished Goods		Work-in-Process		Total Inventory
Mining and Pelletizing	$	186.2	$	30.4		$	216.6		$	77.8	$	10.1	$	87.9
Metallics	—		4.0			4.0			—		—		—
Intersegment elimination	—		(1.6		)	(1.6		)	—		—		—
Total	$	186.2	$	32.8		$	219.0		$	77.8	$	10.1	$	87.9

(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

~~Table of Contents~~

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

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



	(In Millions)
	June 30, 2019			December 31, 2018
Land rights and mineral rights	$	549.6		$	549.6
Office and information technology	70.6			70.0
Buildings	95.4			87.2
Mining equipment	575.8			548.5
Processing equipment	740.3			645.8
Electric power facilities	58.7			58.7
Land improvements	23.8			23.8
Asset retirement obligation	14.9			14.8
Other	27.6			25.2
Construction-in-progress	501.3			284.8
	2,658.0			2,308.4
Allowance for depreciation and depletion	(1,060.7		)	(1,022.4		)
	$	1,597.3		$	1,286.0

We recorded capitalized interest into property, plant and equipment of $5.9 million and $9.9 million for the three and six months ended June 30, 2019, respectively, and $1.1 million and $2.1 million during the three and six months ended June 30, 2018, respectively.

(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

Table of Contents

NOTE 7 - DEBT AND CREDIT FACILITIES

The following represents a summary of our long-term debt:

																								(In Millions)
September 30, 2018
June 30, 2019												June 30, 2019
Debt Instrument	Annual Effective Interest Rate	Total Principal Amount		Debt Issuance Costs			Unamortized Discounts			Total Debt			Annual Effective Interest Rate	Total Principal Amount		Debt Issuance Costs			Unamortized Discounts			Total Debt
Secured Notes
Secured Notes:
$400 Million 4.875% 2024 Senior Notes	5.00%	$	400.0	$	(6.0	)	$	(2.3	)	$	391.7		5.00%	$	400.0	$	(5.2	)	$	(2.0	)	$	392.8
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
Unsecured Notes:
$316.25 Million 1.50% 2025 Convertible Senior Notes	6.26%	316.3		(5.8		)	(78.1		)	232.4			6.26%	316.3		(5.1		)	(70.3		)	240.9
$1.075 Billion 5.75% 2025 Senior Notes	6.01%	1,073.3		(10.3		)	(15.1		)	1,047.9			6.01%	473.3		(4.0		)	(6.0		)	463.3
$750 Million 5.875% 2027 Senior Notes													6.49%	750.0		(6.7		)	(28.7		)	714.6
$800 Million 6.25% 2040 Senior Notes	6.34%	298.4		(2.3		)	(3.3		)	292.8			6.34%	298.4		(2.2		)	(3.3		)	292.9
ABL Facility	N/A	450.0		N/A			N/A			—			N/A	450.0		N/A			N/A			—
Fair Value Adjustment to Interest Rate Hedge										1.1
Long-term debt										$	2,300.0											$	2,104.5



(In Millions)
December 31, 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	$	(5.7	)	$	(2.2	)	$	392.1
Unsecured Notes:
$700 Million 4.875% 2021 Senior Notes	4.89%	124.0		(0.2		)	—			123.8
$316.25 Million 1.50% 2025 Convertible Senior Notes	6.26%	316.3		(5.5		)	(75.6		)	235.2
$1.075 Billion 5.75% 2025 Senior Notes	6.01%	1,073.3		(9.9		)	(14.6		)	1,048.8
$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										0.2
Long-term debt										$	2,092.9

~~Table of Contents~~

(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 4.89% 138.4
(0.3 ) (0.1 ) 138.0
$316.25 Million 1.50% 2025 Convertible Senior Notes 6.26% 316.3
(6.6 ) (85.6 ) 224.1
$1.075 Billion 5.75% 2025 Senior Notes 6.01% 1,075.0
(11.3 ) (16.5 ) 1,047.2
$800 Million 6.25% 2040 Senior Notes 6.34% 298.4
(2.4 ) (3.4 ) 292.6
ABL Facility N/A 550.0
N/A
N/A
—
Fair Value Adjustment to Interest Rate Hedge 1.4
Long-term debt $ 2,304.2

$~~1.075 Billion 5.75% 2025~~750 Million 5.875% Senior Notes due 2027 Offering

On ~~February 27, 2017,~~May 13, 2019, we entered into an indenture among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the issuance of ~~$500~~$750 million aggregate principal amount of ~~5.75% 2025 Senior Notes. On August 7, 2017, we issued an additional $575 million aggregate principal amount of our 5.75% 2025~~5.875% 2027 Senior Notes. The ~~second tranche was~~5.875% 2027 Senior Notes were issued at ~~97.0%~~96.125% of face value. The ~~5.75% 2025~~5.875% 2027 Senior Notes were ~~originally~~ issued in a private ~~transactions~~transaction exempt from the registration requirements of the Securities ~~Act.~~Act of 1933. Pursuant to the registration rights agreement executed as part of ~~these issuances,~~this offering, we ~~filed on February 14, 2018~~agreed to file a registration statement with the SEC with respect to a registered offer to exchange the ~~5.75% 2025~~5.875% 2027 Senior Notes for publicly registered notes within 365 days of the closing date, with all significant terms and conditions remaining the same.

The ~~exchange offer expired~~5.875% 2027 Senior Notes bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on ~~April 26, 2018,~~June 1 and ~~substantially~~December 1 of each year, commencing on December 1, 2019. The 5.875% 2027 Senior Notes mature on June 1, 2027.

Table of Contents

The 5.875% 2027 Senior Notes are unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The 5.875% 2027 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly-owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 5.875% 2027 Senior Notes.

The 5.875% 2027 Senior Notes may be redeemed, in whole or in part, at any time at our option not less than 30 days nor more than 60 days after prior notice is sent to the holders of the 5.875% 2027 Senior Notes. The following is a summary of redemption prices for our 5.875% 2027 Senior Notes:



Redemption Period	Redemption Price¹		Restricted Amount
Prior to June 1, 2022 - using proceeds of equity issuance	105.875	%	Up to 35% of original aggregate principal
Prior to June 1, 2022²	100.000
Beginning on June 1, 2022	102.938
Beginning on June 1, 2023	101.958
Beginning on June 1, 2024	100.979
Beginning on June 1, 2025 and thereafter	100.000

¹ Plus accrued and unpaid interest, if any, up to but excluding the redemption date.
² Plus a "make-whole" premium.

In addition, if a change in control triggering event, as defined in the indenture, occurs with respect to the 5.875% 2027 Senior Notes, we will be required to offer to purchase the notes at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.

The terms of the 5.875% 2027 Senior Notes contain certain customary covenants; however, there are no financial covenants.

Debt issuance costs of $6.8 million were incurred related to the offering of the 5.875% 2027 Senior Notes and included in Long-term debt in the Statements of Unaudited Condensed Consolidated Financial Position.

Debt Extinguishments - 2019

The net proceeds from the issuance of $750 million aggregate principal amount of 5.875% 2027 Senior Notes, along with cash on hand, were used to redeem in full all of our outstanding 4.875% 2021 Senior Notes and to fund the repurchase of $600 million aggregate principal amount of our outstanding 5.75% 2025 Senior Notes ~~were tendered for exchange.~~in a tender offer. The following is a summary of the debt extinguished and the respective loss on extinguishment:



	(In Millions)
	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
Debt Instrument	Debt Extinguished		Loss on Extinguishment		Debt Extinguished		Loss on Extinguishment
$700 Million 4.875% 2021 Senior Notes	$	114.0	$	5.0	$	124.0	$	5.3
$1.075 Billion 5.75% 2025 Senior Notes	600.0		12.9		600.0		12.9
	$	714.0	$	17.9	$	724.0	$	18.2

Table of Contents

Debt ~~Extinguishment~~Extinguishments - 2018

The following is a summary of the debt extinguished with cash ~~during~~and the ~~three and nine months ended September 30, 2018 that resulted in no gain or loss on extinguishment for the three months ended September 30, 2018, and a~~respective gain on ~~extinguishment of $0.2 million for the nine months ended September 30, 2018:~~extinguishment:



	(In Millions)
	Three and Six Months Ended June 30, 2018
Debt Instrument	Debt Extinguished		Gain on Extinguishment
$400 Million 5.90% 2020 Senior Notes	$	0.5	$	—
$500 Million 4.80% 2020 Senior Notes	0.1		—
$700 Million 4.875% 2021 Senior Notes	13.2		0.1
$1.075 Billion 5.75% 2025 Senior Notes	1.7		0.1
	$	15.5	$	0.2

(In Millions)
Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Debt Instrument Debt Extinguished
$400 Million 5.90% 2020 Senior Notes $ —
$ 0.5
$500 Million 4.80% 2020 Senior Notes —
0.1
$700 Million 4.875% 2021 Senior Notes 1.0
14.2
$1.075 Billion 5.75% 2025 Senior Notes —
1.7
$ 1.0
$ 16.5

~~Table of Contents~~

Debt Maturities

The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at ~~September~~June 30, ~~2018:~~2019:



	(In Millions)
	Maturities of Debt
2019	$	—
2020	—
2021	—
2022	—
2023	—
2024	400.0
2025 and thereafter	1,838.0
Total maturities of debt	$	2,238.0

(In Millions)
Maturities of Debt
2018 $ —
2019 —
2020¹
210.7
2021 124.2
2022 —
2023 —
2024 and thereafter 2,088.0
Total maturities of debt $ 2,422.9

¹On October 5, 2018, we redeemed the entirety of our outstanding Senior Notes Due 2020. The aggregate principal amount outstanding of the Senior Notes Due 2020 was approximately $211 million. Pursuant to the terms of the indenture governing the Senior Notes Due 2020, approximately $218 million in the aggregate, including make-whole premiums and accrued and unpaid interest to, but excluding, the redemption date, was paid to holders of the Senior Notes Due 2020.

ABL Facility

~~On February 28, 2018, we entered into an amended and restated senior secured asset-based revolving credit facility with various financial institutions.~~ The ABL Facility amends and restates our prior $550.0 million Syndicated Facility Agreement, dated as of March 30, 2015. The ABL Facility will mature upon the earlier of February 28, 2023 or 60 days prior to the maturity of certain other material debt and provides for up to $450.0 million in borrowings, comprised of (i)following represents a $400.0 million U.S. tranche, including a $248.8 million sublimit for the issuance of letters of credit and a $100.0 million sublimit for U.S. swingline loans, and (ii) at the time of closing, a $50.0 million Australian tranche, including a $24.4 million sublimit for the issuance of letters of credit and a $20.0 million sublimit for Australian swingline loans. On June 19, 2018, the Australian tranche was terminated and reallocated to the U.S. tranche, resulting in a $450.0 million allocation to the U.S. tranche, including a $273.2 million sublimit for the issuance of letters of credit and $120.0 million sublimit for swingline loans. Availability under the U.S. tranche of the ABL Facility is limited to an eligible U.S. borrowing base, as applicable, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

~~The ABL Facility and certain bank products and hedge obligations are guaranteed by us and certain~~summary of our ~~existing wholly-owned U.S. subsidiaries and are required to be guaranteed by certain of our future U.S. subsidiaries. Amounts outstanding~~borrowing capacity under the ABL Facility are secured by (i) a first-priority security interest in the accounts receivable and other rights to payment, inventory, as-extracted collateral, certain investment property, deposit accounts, securities accounts, certain general intangibles and commercial tort claims, certain mobile equipment, commodities accounts, deposit accounts, securities accounts and other related assets of ours, the other borrowers and the guarantors, and proceeds and products of each of the foregoing (collectively, the “ABL Collateral”) and (ii) a second-priority security interest in substantially all of our assets and the assets of the other borrowers and the guarantors other than the ABL Collateral (collectively, the “Notes Collateral” and, together with the ABL Collateral, the “Collateral”).

Borrowings under the ABL Facility bear interest, at our option, at a base rate or, if certain conditions are met, a LIBOR rate, in each case plus an applicable margin. The base rate is equal to the greater of the federal funds rate plus ½ of 1%, the LIBOR rate based on a one-month interest period plus 1% and the floating rate announced by Bank of America Merrill Lynch as its “prime rate" and 1%. The LIBOR rate is a per annum fixed rate equal to LIBOR with respect to the applicable interest period and amount of LIBOR rate loan requested.

The ABL Facility contains customary representations and warranties and affirmative and negative covenants including, among others, covenants regarding the maintenance of certain financial ratios if certain conditions are triggered, covenants relating to financial reporting, covenants relating to the payment of dividends on, or purchase or redemption of, our capital stock, covenants relating to the incurrence or prepayment of certain debt, covenants relating to the incurrence of liens or encumbrances, covenants relating to compliance with laws, covenants relating to transactions

Facility:



	(In Millions)
	June 30, 2019			December 31, 2018
Available borrowing base on ABL Facility¹	$	450.0		$	323.7
Letter of credit obligations²	(61.1		)	(55.0		)
Borrowing capacity available³	$	388.9		$	268.7

¹The ABL Facility has a maximum borrowing base of $450 million. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
²We issued standby letters of credit with certain financial institutions in order to support business obligations including, but not limited to, workers compensation, environmental obligations and certain Metallics' contracts.
³ As of June 30, 2019 and December 31, 2018, we had no loans drawn under the ABL Facility.

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~~with affiliates, covenants relating to mergers and sales of all or substantially all of our assets and limitations on changes in the nature of our business.~~

The ABL Facility provides for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees, or other amounts, a representation or warranty proving to have been materially incorrect when made, failure to perform or observe certain covenants within a specified period of time, a cross-default to certain material indebtedness, the bankruptcy or insolvency of the Company and certain of its subsidiaries, monetary judgment defaults of a specified amount, invalidity of any loan documentation, a change of control of the Company, and ERISA defaults resulting in liability of a specified amount. If an event of a default exists (beyond any applicable grace or cure period, if any), the administrative agent may and, at the direction of the requisite number of lenders, shall declare all amounts owing under the ABL Facility immediately due and payable, terminate such lenders’ commitments to make loans under the ABL Facility and/or exercise any and all remedies and other rights under the ABL Facility. For certain events of default related to insolvency and receivership, the commitments of the lenders will be automatically terminated and all outstanding loans and other amounts will become immediately due and payable.

As of September 30, 2018 and December 31, 2017, 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.

As of September 30, 2018 and December 31, 2017, no loans were drawn under the ABL Facility and we had total availability of $368.4 million and $273.2 million, respectively, as a result of borrowing base limitations. As of September 30, 2018 and December 31, 2017, the principal amount of letter of credit obligations totaled $37.7 million and $46.5 million, respectively, to support business obligations primarily related to workers compensation and environmental obligations, thereby further reducing available borrowing capacity on our ABL Facility to $330.7 million and $226.7 million, respectively.

NOTE 8 - FAIR VALUE MEASUREMENTS

The following represents the assets and liabilities measured at fair value:


	(In Millions)								(In Millions)
	September 30, 2018								June 30, 2019
Description	Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
									Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents	$	0.7	$	596.2	$	—	$	596.9	$	—	$	302.3	$	—	$	302.3
Derivative assets	—		0.2		190.6		190.8		—		0.2		118.1		118.3
Total	$	0.7	$	596.4	$	190.6	$	787.7	$	—	$	302.5	$	118.1	$	420.6
Liabilities:
Derivative liabilities	$	—	$	0.1	$	5.7	$	5.8	$	—	$	2.6	$	—	$	2.6
Total	$	—	$	0.1	$	5.7	$	5.8	$	—	$	2.6	$	—	$	2.6



	(In Millions)
	December 31, 2018
	Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents	$	0.8	$	542.6	$	—	$	543.4
Derivative assets	—		0.1		91.4		91.5
Total	$	0.8	$	542.7	$	91.4	$	634.9
Liabilities:
Derivative liabilities	$	—	$	3.7	$	—	$	3.7
Total	$	—	$	3.7	$	—	$	3.7

~~Table of Contents~~

(In Millions)
December 31, 2017
Description
Quoted Prices in Active
Markets for Identical Assets/Liabilities
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Total
Assets:
Cash equivalents $ 66.3
$ 550.6
$ —
$ 616.9
Derivative assets —
—
37.9
37.9
Total $ 66.3
$ 550.6
$ 37.9
$ 654.8
Liabilities:
Derivative liabilities $ —
$ 0.3
$ 1.7
$ 2.0
Total $ —
$ 0.3
$ 1.7
$ 2.0

Financial assets classified in Level 1 ~~include~~included money market ~~funds and treasury bonds.~~funds. The valuation of these instruments is based upon unadjusted quoted prices for identical assets in active markets.

The valuation of financial assets and liabilities classified in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable. Level 2 assets include commercial paper, certificates of deposit and commodity hedge contracts. Level 2 liabilities include commodity hedge contracts.

The Level 3 assets ~~and liabilities include derivative assets that~~ consist of a freestanding derivative ~~instruments~~instrument related to a ~~customer~~certain supply agreement and derivative assets related to certain provisional pricing arrangements with our customers.

The supply agreement included in our Level 3 assets ~~includes~~contains provisions for supplemental revenue or refunds based on the average annual daily market price for hot-rolled coil steel atin the ~~time~~year the iron ore product is consumed in the customer’s blast furnaces. We account for these provisions as a derivative ~~instruments~~instrument at the time of sale and adjust the ~~corresponding asset or liability~~derivative instrument to fair value ~~as an adjustment to~~ through Product revenues each reporting period until the product is consumed and the amounts are settled. We had assets of ~~$186.0~~$102.4 million and ~~$37.9~~$89.3 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, related to this supply agreement.

The provisional pricing arrangements included in our Level 3 ~~assets/liabilities~~assets specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate ~~to be~~ based on market inputs at

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a specified point in time in the future, per the terms of the supply agreements. The difference between the estimated final revenue rate at the date of sale and the estimated final revenue rate at the measurement date is characterized as a derivative instrument and is required to be accounted for separately once the revenue has been recognized. The derivative instruments are adjusted to fair value through Product revenues each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rates are determined. We had assets of ~~$4.6~~$15.7 million and ~~liabilities of $5.7~~$2.1 million, respectively, related to provisional pricing arrangements at ~~September~~June 30, ~~2018 compared to liabilities of $1.7 million related to provisional pricing arrangements at~~2019 and December 31, ~~2017.~~

~~Table of Contents~~

2018.

The following table illustrates information about qualitative and quantitative inputs and assumptions for the assets and liabilities categorized in Level 3 of the fair value hierarchy:

Qualitative/Quantitative Information About Level 3 Fair Value Measurements

(In Millions)

Fair Value at June 30, 2019

Balance Sheet

Location

Valuation Technique

Unobservable Input

Range or Point Estimate

(Weighted Average)

Customer supply agreement

102.4

Derivative assets

Market Approach

Management's Estimate of Market Hot-Rolled Coil Steel per net ton

$667

Provisional pricing arrangements

15.7

Derivative assets

Market Approach

PPI Estimates

179 - 221
(203)

Management's Estimate of Platts 62% Price per dry metric ton for respective contract period

$87 - $100
$(96)

Qualitative/Quantitative Information About Level 3 Fair Value Measurements

(In Millions)
Fair Value at September 30, 2018

Balance Sheet
Location
Valuation Technique Unobservable Input
Range or Point Estimate
(Weighted Average)

Customer supply agreement $ 186.0
Derivative assets Market Approach Management's Estimate of Market Hot-Rolled Coil Steel per net ton $842
Provisional pricing arrangements $ 4.6
Derivative assets Market Approach
Management's
Estimate of Platts 62% Price
per dry metric ton
$68 - $70
($70)
Provisional pricing arrangements $ 5.7
Other current liabilities Market Approach
Management's
Estimate of Platts 62% Price
per dry metric ton
$68 - $70
($70)

The significant unobservable input used in the fair value measurement of our customer supply agreement is a forward-looking estimate of the average annual daily market price for hot-rolled coil steel determined by management.

The significant unobservable ~~input~~inputs used in the fair value measurement of our provisional pricing arrangements isinclude estimates for PPI data and management’s estimate of Platts 62% Price based upon current market data and index pricing, which include forward-looking ~~estimates.~~estimates determined by management.

The following tables ~~represent a reconciliation of~~reconcile the changes in fair value of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



	(In Millions)
	Level 3 Assets
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Beginning balance	$	106.7		$	93.5		$	91.4		$	49.5
Total gains included in earnings	74.3			158.6			89.6			202.8
Settlements	(62.9		)	(77.5		)	(62.9		)	(77.7		)
Ending balance - June 30	$	118.1		$	174.6		$	118.1		$	174.6
Total gains for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date	$	73.0		$	80.6		$	88.3		$	125.1

(In Millions)
Level 3 Assets
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Beginning balance¹
$ 174.6
$ 70.2
$ 49.5
$ 30.1
Total gains
Included in earnings 139.0
54.0
341.8
138.5
Settlements (123.0 ) (35.2 ) (200.7 ) (79.6 )
Ending balance - September 30 $ 190.6
$ 89.0
$ 190.6
$ 89.0
Total gains for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date $ 15.9
$ 52.9
$ 141.0
$ 63.1

¹ Beginning balance as of January 1, 2018 includes an $11.6 million adjustment for adoption of Topic 606.

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	(In Millions)
	Level 3 Liabilities
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Beginning balance	$	(9.8	)	$	—		$	—		$	(1.7	)
Total gains (losses) included in earnings	4.5			(3.7		)	(5.3		)	(4.3		)
Settlements	5.3			0.7			5.3			3.0
Ending balance - June 30	$	—		$	(3.0	)	$	—		$	(3.0	)
Total losses for the period included in earnings attributable to the change in unrealized losses on liabilities still held at the reporting date	$	—		$	(3.0	)	$	—		$	(3.0	)

(In Millions)
Level 3 Liabilities
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Beginning balance $ (3.0 ) $ (20.3 ) $ (1.7 ) $ —
Total losses
Included in earnings (3.1 ) (15.3 ) (7.4 ) (35.6 )
Settlements 0.4
30.2
3.4
30.2
Ending balance - September 30 $ (5.7 ) $ (5.4 ) $ (5.7 ) $ (5.4 )
Total losses for the period included in earnings attributable to the change in unrealized losses on liabilities still held at the reporting date $ (2.7 ) $ (10.9 ) $ (5.7 ) $ (6.4 )

The carrying ~~amount~~values of certain financial instruments (e.g., Accounts receivable, net, Accounts payable and ~~Accrued expenses~~Other current liabilities) approximates fair value and, therefore, ~~has~~have been excluded from the table below. A summary of the carrying ~~amount~~value and fair value of other financial instruments were as follows:



		(In Millions)
		June 30, 2019				December 31, 2018
	Classification	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt:
Secured Notes
$400 Million 4.875% 2024 Senior Notes	Level 1	$	392.8	$	406.0	$	392.1	$	370.2
Unsecured Notes
$700 Million 4.875% 2021 Senior Notes	Level 1	—		—		123.8		122.3
$316.25 Million 1.50% 2025 Convertible Senior Notes	Level 1	240.9		454.2		235.2		352.4
$1.075 Billion 5.75% 2025 Senior Notes	Level 1	463.3		472.1		1,048.8		962.0
$750 Million 5.875% 2027 Senior Notes	Level 1	714.6		730.8		—		—
$800 Million 6.25% 2040 Senior Notes	Level 1	292.9		263.2		292.8		232.8
ABL Facility	Level 2	—		—		—		—
Fair value adjustment to interest rate hedge	Level 2	—		—		0.2		0.2
Total long-term debt		$	2,104.5	$	2,326.3	$	2,092.9	$	2,039.9

(In Millions)
September 30, 2018 December 31, 2017
Classification
Carrying
Value
Fair Value
Carrying
Value
Fair Value
Long-term debt:
Secured Notes
$400 Million 4.875% 2024 Senior Notes Level 1 $ 391.7
$ 395.0
$ 390.3
$ 398.0
Unsecured Notes
$400 Million 5.90% 2020 Senior Notes Level 1 88.2
91.5
88.6
88.0
$500 Million 4.80% 2020 Senior Notes Level 1 122.0
125.9
122.0
118.8
$700 Million 4.875% 2021 Senior Notes Level 1 123.9
124.8
138.0
130.8
$316.25 Million 1.50% 2025 Convertible Senior Notes Level 1 232.4
531.4
224.1
352.9
$1.075 Billion 5.75% 2025 Senior Notes Level 1 1,047.9
1,047.8
1,047.2
1,029.3
$800 Million 6.25% 2040 Senior Notes Level 1 292.8
255.3
292.6
227.1
ABL Facility Level 2 —
—
—
—
Fair value adjustment to interest rate hedge Level 2 1.1
1.1
1.4
1.4
Total long-term debt $ 2,300.0
$ 2,572.8
$ 2,304.2
$ 2,346.3

The fair value of long-term debt was determined using quoted market ~~prices based upon current borrowing rates.~~prices.

NOTE 9 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We offer defined benefit pension plans, defined contribution pension plans and OPEB plans, primarily consisting of retiree healthcare benefits, to most employees ~~in the U.S.~~ as part of a total compensation and benefits program. The defined benefit pension plans ~~largely~~ are noncontributory and benefits generally are based on a minimum formula or employees’ years of service and average earnings for a defined period prior to retirement.

On January 1, 2018, we adopted the amendments to ASC 715 regarding the presentation of net periodic pension and postretirement benefit costs. We retrospectively adopted the presentation of service cost separate from the other components of net periodic costs. Service costs are classified within ~~Cost of goods sold and operating expenses, Selling, general and administrative expenses~~ ~~and~~ ~~Miscellaneous – net~~ ~~while the interest cost, expected return on assets, amortization of prior service costs/credits, net actuarial gain/loss, and other costs are classified within~~ ~~Other non-operating income~~ ~~in our Statements of Unaudited Condensed Consolidated Operations~~.

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The following are the components of defined benefit pension and OPEB ~~costs and credits:~~costs:

Defined Benefit Pension Costs



	(In Millions)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Service cost	$	4.2		$	4.6		$	8.3		$	9.3
Interest cost	8.6			7.5			17.3			15.1
Expected return on plan assets	(13.7		)	(15.0		)	(27.3		)	(30.0		)
Amortization:
Prior service costs	0.3			0.6			0.6			1.1
Net actuarial loss	5.9			5.3			11.8			10.6
Net periodic benefit cost	$	5.3		$	3.0		$	10.7		$	6.1

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Service cost $ 4.7
$ 3.4
$ 14.0
$ 12.9
Interest cost 7.6
7.9
22.7
22.9
Expected return on plan assets (15.0 ) (13.8 ) (45.0 ) (40.9 )
Amortization:
Prior service costs 0.6
0.6
1.7
1.9
Net actuarial loss 5.3
6.1
15.9
16.7
Net periodic benefit cost $ 3.2
$ 4.2
$ 9.3
$ 13.5

Other Postretirement Employment Benefits Credits



	(In Millions)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Service cost	$	0.4		$	0.5		$	0.8		$	1.0
Interest cost	2.4			2.0			4.7			4.1
Expected return on plan assets	(4.2		)	(4.6		)	(8.4		)	(9.2		)
Amortization:
Prior service credits	(0.5		)	(0.7		)	(1.0		)	(1.5		)
Net actuarial loss	1.2			1.3			2.5			2.5
Net periodic benefit credit	$	(0.7	)	$	(1.5	)	$	(1.4	)	$	(3.1	)

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Service cost $ 0.6
$ 0.3
$ 1.6
$ 1.3
Interest cost 2.1
1.9
6.2
6.2
Expected return on plan assets (4.6 ) (4.4 ) (13.8 ) (13.3 )
Amortization:
Prior service credits (0.7 ) (0.8 ) (2.2 ) (2.3 )
Net actuarial loss 1.3
0.9
3.8
3.4
Net periodic benefit credit $ (1.3 ) $ (2.1 ) $ (4.4 ) $ (4.7 )

Based on funding requirements, we made defined benefit pension contributions of ~~$18.3~~$3.5 million and ~~$23.9~~$6.7 million for the three and ~~nine~~six months ended~~September~~June 30, ~~2018~~2019, respectively, compared to defined benefit pension contributions of ~~$19.7~~$3.3 million and ~~$22.0~~$5.6 million for the three and ~~nine~~six months ended ~~September~~ June 30, ~~2017,~~2018, respectively. OPEB contributions are typically made on an annual basis in the first quarter of each year, but due to plan funding requirements being met, no OPEB contributions were required or made for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

NOTE 10 - STOCK COMPENSATION PLANS

Employees’ Plans

On February ~~21, 2018,~~19, 2019, the Compensation Committee approved grants under the A&R 2015 Equity Plan to certain officers and employees for the ~~2018~~2019 to ~~2020~~2021 performance period. Shares granted under the awards consisted of ~~0.7~~0.6 million restricted stock units and ~~0.7~~0.6 million performance shares.

Restricted stock units granted during ~~2018~~2019 are subject to continued employment, are retention based and are payable in common shares. The outstanding restricted stock units that were granted in ~~2018~~2019 cliff vest on December 31, ~~2020.~~2021.

Performance shares are subject to continued employment, and each performance share, if earned, entitles the holder to be paid out in common shares. Performance is measured on the basis of relative TSR for the period of January 1, ~~2018~~2019 to December 31, ~~2020~~2021 and measured against the constituents of the SPDR S&P Metals and Mining ETF Index at the beginning of the relevant performance period. The final payouts for the outstanding performance period grants will vary from zero to 200% of the original grant depending on whether and to what extent the Company achieves certain objectives and performance goals as established by the Compensation Committee.

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Determination of Fair Value

The fair value of each performance share grant is estimated on the date of grant using a Monte Carlo simulation to forecast relative TSR performance. A correlation matrix of ~~historic~~historical and projected ~~stock~~share prices was developed for both the Company and our predetermined peer group of mining and metals companies. The fair value assumes that the objective will be achieved.

The expected term of the grant represents the time from the grant date to the end of the service period. We estimate the volatility of our common shares and that of the peer group ~~of mining and metals companies~~ using daily price intervals for all companies. The risk-free interest rate is the rate at the grant date on zero-coupon government bonds with a term commensurate with the remaining life of the performance period.

The following assumptions were utilized to estimate the fair value for the ~~2018~~2019 performance share grant:



Grant Date	Grant Date Market Price		Average Expected Term (Years)	Expected Volatility	Risk-Free Interest Rate	Dividend Yield	Fair Value		Fair Value (Percent of Grant Date Market Price)
February 19, 2019	$	11.24	2.87	67.5%	2.55%	—%	$	18.31	162.90%

Grant Date Grant Date Market Price Average Expected Term (Years) Expected Volatility Risk-Free Interest Rate Dividend Yield Fair Value Fair Value (Percent of Grant Date Market Price)
February 21, 2018 $ 7.53
2.86 86.8% 2.42% —% $ 11.93
158.43%

NOTE 11 - INCOME TAXES

Our ~~2018~~2019 estimated annual effective tax rate before discrete items is ~~approximately 0.1%~~12.1%. The estimated annual effective tax rate differs from the U.S. statutory rate of 21.0% primarily due to the ~~deductions~~deduction for percentage depletion in excess of cost depletion related to U.S. ~~operations and the reversal of valuation allowance from operations in the current year.~~operations. The ~~2017~~2018 estimated annual effective tax rate before discrete items at ~~September~~June 30, ~~2017~~2018 was ~~negative 6.8%.~~0.1%, which was significantly lower due to the reversal of valuation allowance in the same period.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we recorded discrete items that resulted in an income tax ~~expense~~benefit of ~~$0.2~~$0.4 million and ~~$13.9~~$0.8 million, respectively. For the ~~nine~~three and six months ended ~~September~~June 30, 2018, we recorded discrete items that resulted in a benefit of $2.0 million and an expense of $13.7 million, respectively. The $2.0 million benefit primarily relates to the ~~$13.9~~reversal of a reserve for uncertain tax positions due to a lapse in the statute of limitations. The $13.7 million expense relates primarily to a $14.5 million reduction of the refundable AMT credit recorded in Income tax receivable, non-current in our Statements of Unaudited Condensed Consolidated Financial Position based on ~~the~~ sequestration guidance issued by the Internal Revenue Service during the first quarter of 2018. This position was subsequently reversed by the Internal Revenue Service during the fourth quarter of 2018. The ~~$14.5 million current year~~prior-year period expense iswas a reduction of an asset and ~~will~~did not result in a cash tax outlay. ~~For the~~ ~~three and nine months ended~~ ~~September 30, 2017, we recorded discrete items that resulted in a benefit of $5.9 million and $5.8 million, respectively.~~

~~Table of Contents~~

~~NOTE 12 - LEASE OBLIGATIONS~~

We lease certain building space, mining, production and other equipment under operating and capital leases. The capital leases are for varying lengths, generally at market interest rates and contain purchase and/or renewal options at the end of the terms. Our operating lease expense was $1.1 million and $2.9 million for the ~~three and nine months endedSeptember 30, 2018, respectively, compared with $1.2 million and $3.5 million for the comparable period in 2017.~~

~~Future minimum payments under capital leases and non-cancellable operating leases as of~~ ~~September 30, 2018~~ ~~are as follows:~~

(In Millions)
Capital Leases Operating Leases
2018 (October 1 - December 31) $ 1.1
$ 1.1
2019 3.9
3.5
2020 3.7
3.1
2021 3.0
2.4
2022 6.2
1.8
2023 and thereafter —
7.5
Total minimum lease payments $ 17.9
$ 19.4
Amounts representing interest 2.1

Present value of net minimum lease payments¹
$ 15.8

¹ The total is comprised of $3.4 million and $12.4 million classified as Other current liabilities and Other liabilities, respectively, in the Statements of Unaudited Condensed Consolidated Financial Position as of September 30, 2018.

NOTE 1312 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS

~~We had environmental and mine closure liabilities of $177.3 million and $171.3 million at September 30, 2018 and December 31, 2017, respectively.~~ The following is a summary of ~~the~~our environmental and mine closure obligations:



	(In Millions)
	June 30, 2019		December 31, 2018
Environmental	$	2.4	$	2.5
Mine closure¹	177.1		172.4
Total environmental and mine closure obligations	179.5		174.9
Less current portion	2.8		2.9
Long-term environmental and mine closure obligations	$	176.7	$	172.0

¹ Includes our active operating mines, our indefinitely idled Empire mine and a closed mine formerly operating as LTV Steel Mining Company.

(In Millions)
September 30,
2018 December 31,
2017
Environmental $ 2.7
$ 2.9
Mine closure¹
174.6
168.4
Total environmental and mine closure obligations 177.3
171.3
Less current portion 2.9
3.6
Long-term environmental and mine closure obligations $ 174.4
$ 167.7

¹ Includes our active operating mines, our indefinitely idled Empire mine and a closed mine formerly operating as LTVSMC.

Mine Closure

The accrued ~~mine~~ closure obligation for our active mining operations provides for contractual and legal obligations associated with the eventual closure of the mining operations. The ~~accretion~~closure date for each of our active mine sites was determined based on the exhaustion date of the ~~liability and~~remaining iron ore reserves. The amortization of the related asset and

Table of Contents

accretion of the liability is recognized over the estimated mine lives for our active operations. The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines is determined based on the unique circumstances of each ~~location.~~

~~Table~~property. For indefinitely idled or closed mines, the accretion of ~~Contents~~

the liability is recognized over the anticipated timing of remediation.

The following ~~represents~~is a roll forward of our mine closure obligation ~~liability for the nine months ended September 30, 2018 and for the year ended December 31, 2017:~~liability:



	(In Millions)
	Six Months Ended June 30, 2019			Year Ended December 31 ,2018
Asset retirement obligation at beginning of period	$	172.4		$	168.4
Accretion expense	5.1			9.5
Remediation payments	(0.4		)	(1.0		)
Revision in estimated cash flows	—			(4.5		)
Asset retirement obligation at end of period	$	177.1		$	172.4

(In Millions)
September 30,
2018 December 31,
2017
Mine closure obligation at beginning of period $ 168.4
$ 187.8
Accretion expense 7.1
13.9
Remediation payments (0.9 ) (5.6 )
Revision in estimated cash flows —
(27.7 )
Mine closure obligation at end of period $ 174.6
$ 168.4

For the year ended December 31, 2017, the revision in estimated cash flows relates primarily to updates to our estimates resulting from our three-year in-depth review of our mine closure obligations for each of our U.S. mines. The primary driver of the decrease in estimated cash flows was the Empire mine, as the mine closure obligation was reduced by $26.2 million as a result of the refinement of the cash flows required for reclamation, remediation and structural removal. Prior estimates were based on RS Means (a common costing methodology used in the construction and demolition industry) average costing data while the current estimate was compiled using a more detailed cost build-up approach.

~~NOTE 14 - GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~Goodwill~~

~~The carrying amount of goodwill as of September 30, 2018 and December 31, 2017 was $2.0 million and related to our U.S. Iron Ore operating segment.~~

~~Other Intangible Assets~~

~~The following table is a summary of definite-lived intangible assets:~~

(In Millions)
September 30, 2018 December 31, 2017
Classification
Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount
Permits Other non-current assets $ 72.2
$ (23.1 ) $ 49.1
$ 72.2
$ (22.5 ) $ 49.7

~~Amortization expense relating to other intangible assets was $0.2 million and $0.6 million for the~~ ~~three and nine months endedSeptember 30, 2018~~ ~~and 2017, respectively, and is recognized in~~ ~~Cost of goods sold and operating expenses~~ ~~in the~~ ~~Statements of Unaudited Condensed Consolidated Operations. Amortization expense of other intangible assets is expected to continue to be immaterial going forward.~~

~~Table of Contents~~

NOTE 1513 - DERIVATIVE INSTRUMENTS

The following table presents the fair value of our derivative instruments and the classification of each in the Statements of Unaudited Condensed Consolidated Financial Position:



	(In Millions)
	Derivative Assets						Derivative Liabilities
	June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018
Derivative Instrument	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under ASC 815:
Commodity contracts	Derivative assets	$	0.2	Derivative assets	$	0.1	Other current liabilities	$	2.6	Other current liabilities	$	3.7
Derivatives not designated as hedging instruments under ASC 815:
Customer supply agreement	Derivative assets	$	102.4	Derivative assets	$	89.3		$	—		$	—
Provisional pricing arrangements	Derivative assets	15.7		Derivative assets	2.1			—			—
Total derivatives not designated as hedging instruments under ASC 815		$	118.1		$	91.4		$	—		$	—
Total derivatives		$	118.3		$	91.5		$	2.6		$	3.7

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(In Millions)
Derivative Assets Derivative Liabilities
September 30, 2018 December 31, 2017 September 30, 2018 December 31, 2017
Derivative Instrument
Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
Value
Derivatives designated as hedging instruments under ASC 815:
Commodity Contracts Derivative assets $ 0.2
$ —
Other current liabilities $ 0.1
Other current liabilities $ 0.3
Derivatives not designated as hedging instruments under ASC 815:
Customer supply agreement Derivative assets $ 186.0
Derivative assets $ 37.9
$ —
$ —
Provisional pricing arrangements Derivative assets 4.6
—
Other current liabilities 5.7
Other current liabilities 1.7
Total derivatives not designated as hedging instruments under ASC 815 $ 190.6
$ 37.9
$ 5.7
$ 1.7
Total derivatives $ 190.8
$ 37.9
$ 5.8
$ 2.0

Derivatives Designated as Hedging Instruments - Cash Flow Hedges

Commodity Contracts

~~As of~~ ~~September 30, 2018, we had~~The following table presents our outstanding ~~natural gas~~ hedge ~~contracts for a notional amount of 3.6 million MMBtu in the form of forward contracts with varying maturity dates ranging from October 2018 to August 2019. As of~~ ~~December 31, 2017, we had outstanding natural gas hedge contracts for a notional amount of 3.5 million MMBtu in the form of forward contracts with varying maturity dates ranging from January 2018 to November 2018.~~contracts:

~~As of~~ ~~September 30, 2018~~, we had outstanding diesel hedge contracts for a notional amount of 1.4 million gallons in the form of forward contracts with varying maturity dates ranging from January 2019 to September 2019. We had no outstanding diesel hedge contracts as of ~~December 31, 2017~~.



	(In Millions)
	June 30, 2019			December 31, 2018
	Notional Amount	Unit of Measure	Varying Maturity Dates	Notional Amount	Unit of Measure	Varying Maturity Dates
Natural gas	9.0	MMBtu	July 2019 - November 2020	1.8	MMBtu	January 2019 - August 2019
Diesel	5.0	Gallons	July 2019 - December 2019	11.0	Gallons	January 2019 - December 2019

~~Refer to~~ ~~NOTE 17 - SHAREHOLDERS' DEFICIT for additional information.~~

Derivatives Not Designated as Hedging Instruments

Most of our long-term supply agreements are comprised of a base price with annual price adjustment factors. The base price is the primary component of the purchase price for each contract. The indexed price adjustment factors are integral to the iron ore supply contracts and vary based on the agreement, but typically include adjustments based upon changes in the Platts 62% Price, along with pellet premiums, published international indexed freight rates and changes in specified Producer Price Indices, including those for industrial commodities, fuel and steel. The pricing adjustments are generally applied in the same manner for each long-term agreement. Each adjustment factor typically comprises a portion of the price adjustment, although the weight of each factor varies based upon the specific terms of each agreement. In most cases, these adjustment factors are not finalized at the time our product is sold. In these cases, we estimate the adjustment factors at each reporting period based upon the best third-party information available. The estimates are then adjusted to actual when the information has been finalized. The price adjustment factors have been evaluated to determine if they qualify as embedded derivatives. The price adjustment factors share the same economic characteristics and risks as the host contract and are integral to the host contract as inflation adjustments; accordingly, they have not been separately valued as derivative instruments.

~~Table of Contents~~

Customer Supply Agreement

A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the average annual daily steel market price for hot-rolled coil steel at the time the iron ore product is consumed in the customer’s blast ~~furnace.~~furnaces. The supplemental pricing is characterized as a freestanding derivative instrument and is required to be accounted for separately once control transfers to the customer. The derivative instrument, which is finalized based on a future price, is adjusted to fair value ~~as a revenue adjustment~~through Product revenues each reporting period based upon current market data and forward-looking estimates provided by management until the pellets are consumed and the ~~amounts are~~price is settled.

~~We recognized net derivative revenue of $139.7 million and $337.1 million in~~ ~~Product revenues~~ in the Statements of Unaudited Condensed Consolidated Operations for the three and nine months ended September 30, 2018, respectively, related to the supplemental payments. This compares with net derivative revenue of ~~$54.3 million~~ ~~and $123.9 million in~~ ~~Product revenues~~ ~~in the Statements of Unaudited Condensed Consolidated Operations for the comparable periods in~~ ~~2017, related to supplemental payments.~~ ~~Derivative assets~~, representing the fair value of the supplemental revenue, were $186.0 million and $37.9 million as of September 30, 2018 and December 31, 2017 in the Statements of Unaudited Condensed Consolidated Financial Position, respectively.

Provisional Pricing Arrangements

Certain of our ~~customer~~ supply agreements specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate based on certain market inputs at a specified period in time in the future, per the terms of the supply agreements. Market inputs are tied to indexed price adjustment factors that are integral to the iron ore supply contracts and vary based on the agreement. The pricing mechanisms typically include adjustments based upon changes in the Platts 62% Price, ~~along with~~Atlantic Basin pellet premiums, ~~published~~Platts international indexed freight rates and changes in specified ~~Producer Price Indices,~~PPI, including those for industrial commodities, fuel and steel. The pricing adjustments generally operate in the same manner, with each factor typically comprising a portion of the price adjustment, although the weighting of each factor varies based upon the specific terms of each agreement. The price adjustment factors have been evaluated to determine if they qualify as embedded derivatives. The price adjustment factors share the same economic characteristics and risks as the host sales contract and are integral to the host sales contract as inflation adjustments; accordingly, they have not been separately valued as derivative instruments.

Revenue is recognized generally ~~when iron ore is delivered~~upon delivery to our customers. Revenue is measured at the point that control transfers and represents the amount of consideration we expect to receive in exchange for transferring goods. Changes in the expected revenue rate from the date that control transfers through final settlement of contract terms is recorded in accordance with ~~ASC~~ Topic 815 and is characterized as a derivative instrument and accounted for separately. Subsequently, the derivative instruments are adjusted to fair value through Product revenues each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rate is determined.

~~At September 30, 2018, we recorded $4.6 million as~~ ~~Derivative assets~~ ~~and $5.7 million as derivative liabilities classified as~~ ~~Other current liabilities~~ related to our estimate of the final revenue rate with our customers in the Statements of Unaudited Condensed Consolidated Financial Position. At December 31, 2017, we recorded $1.7 million as derivative liabilities classified as ~~Other current liabilities~~ related to our estimate of the final revenue rate with our customers in the Statements of Unaudited Condensed Consolidated Financial Position. The 2018 amounts represent the difference between the amount we expected to receive when revenue was initially measured at the point control transfers and our subsequent estimate of the final revenue rate based on the price calculations established in the supply agreements. The 2017 amounts represent the difference between the provisional price agreed upon with our customers based on the supply agreement terms and our estimate of the final revenue rate based on the price calculations established in the supply agreements. We recognized a net decrease of $3.8 million and $2.7 million in ~~Product revenues~~ in the Statements of Unaudited Condensed Consolidated Operations for the three and nine months ended September 30, 2018, respectively, related to these arrangements as compared to a net decrease of $15.7 million and $21.0 million in ~~Product revenues~~ ~~for the comparable periods in 2017.~~

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The following summarizes the effect of our derivatives that are not designated as hedging instruments in the Statements of Unaudited Condensed Consolidated Operations:



(In Millions)
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended June 30,					Six Months Ended June 30,
		Three Months Ended June 30,					Six Months Ended June 30,
		2019		2018			2019		2018
Customer supply agreements	Product revenues	$	57.5	$	155.5		$	74.6	$	197.4
Provisional pricing arrangements	Product revenues	17.3		(0.8		)	5.7		1.1
Total		$	74.8	$	154.7		$	80.3	$	198.5

(In Millions)
Derivatives Not Designated as Hedging Instruments Location of Income (Loss) Recognized on Derivatives Amount of Income (Loss) Recognized on Derivatives
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Customer Supply Agreements Product revenues $ 139.7
$ 54.3
$ 337.1
$ 123.9
Provisional Pricing Arrangements Product revenues (3.8 ) (15.7 ) (2.7 ) (21.0 )
Commodity Contracts Cost of goods sold and operating expenses —
—
—
(1.3 )
Total $ 135.9
$ 38.6
$ 334.4
$ 101.6

Refer to NOTE 8 - FAIR VALUE MEASUREMENTS for additional information.

NOTE 1614 - DISCONTINUED OPERATIONS

The information below sets forth selected financial information related to operating results of our businesses classified as discontinued operations, which include our former Asia Pacific Iron Ore, North American Coal and Canadian operations. While the reclassification of revenues and expenses related to discontinued operations from prior periods have no impact upon previously reported ~~net~~Net income, the Statements of Unaudited Condensed Consolidated Operations present the revenues and expenses that were reclassified from the specified line items to Loss from discontinued operations, net of tax and the Statements of Unaudited Condensed Consolidated Financial Position present the assets and liabilities that were reclassified from the specified line items to Other current assets, Other current liabilities and Other liabilities ~~of discontinued operations.~~. The charts below provide an asset group breakout for each financial statement line impacted by discontinued operations.


	(In Millions)												(In Millions)
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Income (Loss) from Discontinued Operations, net of tax
Income (loss) from discontinued operations, net of tax
Asia Pacific Iron Ore	$	242.3		$	(1.8	)	$	117.6		$	39.2		$	(0.5	)	$	(53.3	)	$	(1.0	)	$	(124.7	)
North American Coal	(4.3		)	(0.7		)	(4.2		)	1.9			(0.1		)	(0.3		)	0.4			0.1
Canadian Operations	—			33.1			(10.6		)	(15.5		)	—			(10.7		)	—			(10.6		)
	$	238.0		$	30.6		$	102.8		$	25.6		$	(0.6	)	$	(64.3	)	$	(0.6	)	$	(135.2	)



	(In Millions)
	Six Months Ended June 30,
	2019			2018
Net cash used by operating activities
Asia Pacific Iron Ore	$	(1.5	)	$	(31.7	)
Canadian Operations	—			(14.6		)
	$	(1.5	)	$	(46.3	)

Net cash provided by investing activities
Asia Pacific Iron Ore	$	0.1		$	14.1
	$	0.1		$	14.1

(In Millions)
September 30, 2018 December 31, 2017
Asia Pacific Iron Ore North American Coal Total Asia Pacific Iron Ore North American Coal Total
Current assets of discontinued operations $ 16.1
$ —
$ 16.1
$ 118.5
$ —
$ 118.5
Non-current assets of discontinued operations $ —
$ —
$ —
$ 20.3
$ —
$ 20.3
Current liabilities of discontinued operations $ 7.2
$ 7.0
$ 14.2
$ 71.8
$ 3.2
$ 75.0
Non-current liabilities of discontinued operations $ 9.3
$ —
$ 9.3
$ 52.2
$ —
$ 52.2

~~Table of Contents~~

(In Millions)
Nine Months Ended
September 30,
2018 2017
Net cash provided (used) by operating activities
Asia Pacific Iron Ore $ (77.0 ) $ 78.5
Canadian Operations (14.6 ) —
$ (91.6 ) $ 78.5

Net cash provided (used) by investing activities
Asia Pacific Iron Ore $ 17.8
$ (1.5 )
$ 17.8
$ (1.5 )

~~Additionally, for~~For the ~~nine~~six months ended ~~September~~June 30, 2018, we had ~~$27.1~~$28.6 million of non-cash ~~investing~~financing activities related to the ~~release~~settlement of ~~asset retirement~~capital lease obligations at Asia Pacific Iron ~~Ore as part~~Ore.

Table of ~~the sale of substantially all remaining assets discussed below.~~Contents

Asia Pacific Iron Ore Operations

Background

In January 2018, we announced that we would accelerate the time frame for the planned closure of our Asia Pacific Iron Ore mining operations in Australia. In April 2018, we committed to a course of action leading to the permanent closure of the Asia Pacific Iron Ore mining operations and, as planned, completed our final shipment in June 2018. Factors considered in this decision included increasingly discounted prices for lower-iron-content ore and the quality of the remaining iron ore reserves.

During ~~June~~ 2018, we ~~completed a sale of the mobile equipment to a third party and entered into a definitive agreement to sell substantially~~sold all of the ~~remaining~~ assets of our Asia Pacific Iron Ore business through a series of sales to ~~Mineral Resources Limited.~~ third parties. As a result of ~~the period ended June 30, 2018,~~our planned exit, management determined that our Asia Pacific Iron Ore operating segment met the criteria to be classified as held for sale and a discontinued operation under ASC Topic 205, Presentation of Financial Statements. As such, all ~~current and historical~~ Asia Pacific Iron Ore operating segment results are ~~included in our financial statements and~~ classified within discontinued operations.

~~During August~~Loss from Discontinued Operations



	(In Millions)
	Three Months Ended June 30,						Six Months Ended June 30,
Loss from Discontinued Operations	2019			2018			2019			2018
Revenues from product sales and services	$	—		$	70.1		$	—		$	129.1
Cost of goods sold	—			(106.1		)	—			(230.2		)
Sales margin	—			(36.0		)	—			(101.1		)
Other operating expense	(0.4		)	(16.2		)	(0.8		)	(18.8		)
Other expense	(0.1		)	(1.1		)	(0.2		)	(2.2		)
Impairment of long-lived assets	—			—			—			(2.6		)
Loss from discontinued operations, net of tax	$	(0.5	)	$	(53.3	)	$	(1.0	)	$	(124.7	)

NOTE 15 - SHAREHOLDERS' EQUITY

Share Repurchase Program

On November 26, 2018, we ~~completed~~announced a new share repurchase program to repurchase outstanding common shares in the ~~sale~~open market or in privately negotiated transactions, up to a maximum of ~~substantially all remaining assets to Mineral Resources Limited. As part~~$200 million, excluding commissions and fees. On April 24, 2019, we announced that our Board of ~~this sale~~Directors increased the common share repurchase authorization by an additional $100 million, excluding commissions and fees. During the three and six months ended June 30, 2019, we ~~transferred the asset retirement obligation liability of $27.1~~repurchased 12.9 million and ~~recognized~~24.4 million common shares at a ~~net gain~~cost of ~~$16.8~~$128.6 million and $252.9 million in ~~Income from Discontinued Operations, net~~the aggregate, including commissions and fees, respectively. As of ~~tax~~ June 30, 2019, there was $0.2 million available under the authorization. The share repurchase program is effective until December 31, 2019.

Dividends

On May 31, 2019, the Board of Directors declared a quarterly cash dividend on our common shares of $0.06 per share. We have accrued dividends recorded of $17.1 million in ~~the Statements of Unaudited Condensed Consolidated Operations.~~

~~Income (Loss) from Discontinued Operations~~

~~For the reasons discussed above, our previously reported Asia Pacific Iron Ore operating segment results for all periods presented, as well as exit costs, are classified as discontinued operations.~~

~~Table of Contents~~

(In Millions)
Three Months Ended September 30, Nine Months Ended
September 30,
Income (Loss) from Discontinued Operations 2018 2017 2018 2017
Revenues from product sales and services $ —
$ 101.7
$ 129.1
$ 375.1
Cost of goods sold and operating expenses (0.5 ) (98.7 ) (230.7 ) (323.9 )
Sales margin (0.5 ) 3.0
(101.6 ) 51.2
Other operating income (expense) 14.8
(3.9 ) (4.0 ) (7.6 )
Other expense (0.1 ) (1.3 ) (2.3 ) (4.0 )
Income (loss) from discontinued operations before income taxes 14.2
(2.2 ) (107.9 ) 39.6
Gain on foreign currency translation 228.1
—
228.1
—
Impairment of long-lived assets —
—
(2.6 ) —
Income tax benefit (expense) —
0.4
—
(0.4 )
Income (loss) from discontinued operations, net of tax $ 242.3
$ (1.8 ) $ 117.6
$ 39.2

~~Recorded Assets and Liabilities~~

(In Millions)
Assets and Liabilities of Discontinued Operations September 30,
2018 December 31,
2017
Cash and cash equivalents $ 15.6
$ 29.4
Accounts receivable, net —
33.9
Inventories —
45.0
Supplies and other inventories —
5.1
Other current assets 0.5
5.1
Total current assets of discontinued operations 16.1
118.5
Property, plant and equipment, net —
17.2
Other non-current assets —
3.1
Total assets of discontinued operations $ 16.1
$ 138.8

Accounts payable $ 4.2
$ 28.2
Accrued liabilities 3.0
28.0
Other current liabilities —
15.6
Total current liabilities of discontinued operations 7.2
71.8
Environmental and mine closure obligations —
28.8
Other liabilities 9.3
23.4
Total liabilities of discontinued operations $ 16.5
$ 124.0

~~Foreign Currency~~

Historically, the functional currency of our Australian subsidiaries has been the Australian dollar. The financial statements of our Australian subsidiaries were previously translated into U.S. dollars using the exchange rate at each balance sheet date for assets andOther current liabilities ~~and a weighted average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments were recorded as~~ ~~Accumulated other comprehensive loss~~. Income taxes generally were not provided for foreign currency translation adjustments. Concurrent with the sale of assets to Mineral Resources Limited in August 2018, management determined that there have been significant changes in economic factors related to our Australian subsidiaries. The change in economic factors is a result of the sale and conveyance of substantially all assets and liabilities of our Australian subsidiaries to third parties, representing a significant change in operations. As such, the functional currency for the Australian subsidiaries has changed from the Australian dollar to the U.S. dollar and all Australian denominated monetary balances will be remeasured through the Statements of Unaudited Condensed Consolidated Operations on a prospective basis.

~~Table of Contents~~

~~In addition, as a result of the liquidation of substantially all of the Australian subsidiaries' net assets, the historical changes in foreign currency translation recorded in~~ ~~Accumulated other comprehensive loss~~ in the Statements of Unaudited Condensed Consolidated Financial Position ~~totaling $228.1 million~~as of June 30, 2019. Subsequent to quarter end, on July 15, 2019, the cash dividend was ~~reclassified and recognized in~~ ~~Income from Discontinued Operations, net~~paid to shareholders of ~~tax~~ ~~in the Statements of Unaudited Condensed Consolidated Operations.~~

~~Eastern Canada Iron Ore Operations~~

Effective January 27, 2015, following the commencement of CCAA proceedings for the Bloom Lake Group, we deconsolidated the Bloom Lake Group and certain other wholly-owned subsidiaries comprising substantially all of our Canadian operations. Additionally, on May 20, 2015, the Wabush Group commenced CCAA proceedings which resulted in the deconsolidationrecord as of the ~~remaining Wabush Group entities that were not previously deconsolidated. As a result~~close of ~~this action, the CCAA protection granted to the Bloom Lake Group was extended to include the Wabush Group to facilitate the reorganization of~~business on July 5, 2019.

On each of ~~their businesses~~October 18, 2018 and ~~operations.~~

~~Prior~~February 19, 2019, our Board of Directors declared a quarterly cash dividend on our common shares of $0.05 per share. The cash dividends were paid on January 15, 2019 and April 15, 2019, to ~~the deconsolidations, certain~~our shareholders of our wholly-owned subsidiaries made loans to the Canadian Entities for the purpose of funding their operations and had accounts receivable generated in the ordinary course of business. The loans, corresponding interest and the accounts receivable were considered intercompany transactions and eliminated in our consolidated financial statements. Since the deconsolidations, the loans, associated interest and accounts receivable are considered related party transactions and have been recognized in our consolidated financial statements at their estimated fair value. As of September 30, 2018, we had no amounts outstanding classifiedrecord as~~Loans to and accounts receivable from the Canadian Entities~~ in the Statements of Unaudited Condensed Consolidated Financial Position in accordance with the Amended Plan, as defined and described below. As of December 31, 2017, we had $51.6 million classified as ~~Loans to and accounts receivable from the Canadian Entities~~ ~~in the Statements of Unaudited Condensed Consolidated Financial Position.~~

During 2017, we became aware that it was probable the Monitor would assert a preference claim against us and/or certain of our affiliates. We estimated a liability, which included the value of our related-party claims against the Bloom Lake Group and the Wabush Group, classified as Contingent claims in the Statements of Unaudited Condensed Consolidated Financial Position. As described below, the estimated liability has been settled pursuant to the Amended Plan.

During March 2018, we entered into a restructuring term sheet with the Bloom Lake Group and the Wabush Group that documents the proposed terms of a plan of compromise or arrangement in the CCAA proceedings to be sponsored by us as negotiated between us and the Monitor. By order of the ~~Québec Superior Court~~close of ~~Justice (Commercial Division) (the “Court”) dated~~business on January 4, 2019 and April 20, 2018, the Bloom Lake Group and the Wabush Group were authorized to file a joint plan of compromise and arrangement dated April 16, 2018 (the “Original Plan”). Following discussions with various stakeholder groups, the Original Plan was amended by order of the Court dated May 18, 2018. The Bloom Lake Group and the Wabush Group were authorized to file the amended and restated joint plan of compromise and arrangement dated May 16, 2018 (as same may be further amended from time to time, the “Amended Plan”). The Amended Plan was approved by the required majorities of each unsecured creditor class and was sanctioned by the Court by order dated June 29, 2018 (the “Sanction Order”). In addition, the Bloom Lake Group and the Wabush Group brought a motion before the Court on July 30, 2018 seeking to make further amendments to the Amended Plan to address the manner in which certain distributions under the Amended Plan will be effected.5, 2019, respectively.

~~On July 31, 2018, the conditions precedent to the implementation of the Amended Plan were satisfied and the Amended Plan was implemented.~~

Under the terms of the Amended Plan, we and certain of our wholly-owned subsidiaries made a C$19.0 million cash contribution to the Wabush Group pension plans and will contribute into the CCAA estate any remaining distributions or payments we may be entitled to receive as creditors of the Bloom Lake Group and the Wabush Group for distribution to other creditors. The Original Plan did not resolve certain employee claims asserted against us and certain of our affiliates outside of the CCAA proceedings. The Amended Plan resolved those employee claims, all claims by the Bloom Lake Group, the Wabush Group and their respective creditors against us as well as all of our claims against the Bloom Lake Group and the Wabush Group.

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NOTE 1716 - ~~SHAREHOLDERS' DEFICIT~~ACCUMULATED OTHER COMPREHENSIVE LOSS

The following ~~table reflects~~tables reflect the changes in ~~shareholders' deficit attributable to both us and the noncontrolling interests, primarily related to Tilden and Empire. We own 100% of both mines as of September 30, 2018 and September 30, 2017:~~

(In Millions)
Cliffs
Shareholders’
Equity (Deficit) Noncontrolling
Interest Total Equity
(Deficit)
December 31, 2017 $ (444.3 ) $ 0.2
$ (444.1 )
Adoption of accounting standard (REFER TO NOTE 2) 34.0
—
34.0
Comprehensive income (loss)
Net loss (84.3 ) —
(84.3 )
Other comprehensive income 7.7
—
7.7
Total comprehensive loss (76.6 ) —
(76.6 )
Stock and other incentive plans 1.9
—
1.9
March 31, 2018 $ (485.0 ) $ 0.2
$ (484.8 )
Comprehensive income
Net income 165.1
—
165.1
Other comprehensive income 9.1
—
9.1
Total comprehensive income 174.2
—
174.2
Stock and other incentive plans 4.5
—
4.5
Distributions to noncontrolling interest —
(0.2 ) (0.2 )
June 30, 2018 $ (306.3 ) $ —
$ (306.3 )
Comprehensive income (loss)
Net income 437.8
—
437.8
Other comprehensive loss (221.2 ) —
(221.2 )
Total comprehensive income 216.6
—
216.6
Stock and other incentive plans 3.5
—
3.5
September 30, 2018 $ (86.2 ) $ —
$ (86.2 )

~~Table of Contents~~

(In Millions)
Cliffs
Shareholders’
Equity (Deficit) Noncontrolling
Interest (Deficit) Total Equity
(Deficit)
December 31, 2016 $ (1,464.3 ) $ 133.8
$ (1,330.5 )
Comprehensive loss
Net loss (28.1 ) (1.7 ) (29.8 )
Other comprehensive loss (3.0 ) (5.0 ) (8.0 )
Total comprehensive loss (31.1 ) (6.7 ) (37.8 )
Issuance of common shares 661.3
—
661.3
Stock and other incentive plans 4.0
—
4.0
March 31, 2017 $ (830.1 ) $ 127.1
$ (703.0 )
Comprehensive income (loss)
Net income (loss) 31.8
(1.7 ) 30.1
Other comprehensive income 4.9
0.4
5.3
Total comprehensive income (loss) 36.7
(1.3 ) 35.4
Stock and other incentive plans 4.3
—
4.3
Distributions to noncontrolling interest —
(3.4 ) (3.4 )
June 30, 2017 $ (789.1 ) $ 122.4
$ (666.7 )
Comprehensive income
Net income (loss) 53.4
(0.5 ) 52.9
Other comprehensive income 2.3
5.7
8.0
Total comprehensive income 55.7
5.2
60.9
Stock and other incentive plans 5.2
—
5.2
Acquisition of noncontrolling interest (89.1 ) (15.9 ) (105.0 )
Distributions of partnership equity (16.0 ) (116.7 ) (132.7 )
Contributions by noncontrolling interest —
5.2
5.2
September 30, 2017 $ (833.3 ) $ 0.2
$ (833.1 )

~~Table of Contents~~

~~The following table reflects the changes in~~ Accumulated other comprehensive loss related to ~~Cliffs~~ shareholders’ ~~deficit:~~equity (deficit):

(In Millions)
Changes in Pension and OPEB,
net of tax Changes in Foreign Currency Translation Changes in Derivative Financial Instruments, net of tax Accumulated Other Comprehensive Loss
December 31, 2017 $ (263.9 ) $ 225.4
$ (0.5 ) $ (39.0 )
Other comprehensive income before reclassifications 0.5
0.7
0.4
1.6
Net loss (gain) reclassified from accumulated other comprehensive loss 6.2
—
(0.1 ) 6.1
March 31, 2018 $ (257.2 ) $ 226.1
$ (0.2 ) $ (31.3 )
Other comprehensive income before reclassifications 0.2
2.2
0.2
2.6
Net loss reclassified from accumulated other comprehensive loss 6.5
—
—
6.5
June 30, 2018 $ (250.5 ) $ 228.3
$ —
$ (22.2 )
Other comprehensive income (loss) before reclassifications 0.3
(0.2 ) 0.2
0.3
Net loss (gain) reclassified from accumulated other comprehensive loss 6.5
(228.1 ) 0.1
(221.5 )
September 30, 2018 $ (243.7 ) $ —
$ 0.3
$ (243.4 )



	(In Millions)
	Postretirement Benefit Liability, net of tax			Derivative Financial Instruments, net of tax			Accumulated Other Comprehensive Loss
December 31, 2018	$	(281.1	)	$	(2.8	)	$	(283.9	)
Other comprehensive income before reclassifications	0.2			2.5			2.7
Net loss reclassified from accumulated other comprehensive loss	5.5			0.2			5.7
March 31, 2019	$	(275.4	)	$	(0.1	)	$	(275.5	)
Other comprehensive income (loss) before reclassifications	0.3			(2.3		)	(2.0		)
Net loss reclassified from accumulated other comprehensive loss	5.5			0.2			5.7
June 30, 2019	$	(269.6	)	$	(2.2	)	$	(271.8	)



	(In Millions)
	Postretirement Benefit Liability, net of tax			Foreign Currency Translation		Derivative Financial Instruments, net of tax			Accumulated Other Comprehensive Loss
December 31, 2017	$	(263.9	)	$	225.4	$	(0.5	)	$	(39.0	)
Other comprehensive income before reclassifications	0.5			0.7		0.4			1.6
Net loss (gain) reclassified from accumulated other comprehensive loss	6.2			—		(0.1		)	6.1
March 31, 2018	$	(257.2	)	$	226.1	$	(0.2	)	$	(31.3	)
Other comprehensive income before reclassifications	0.2			2.2		0.2			2.6
Net loss reclassified from accumulated other comprehensive loss	6.5			—		—			6.5
June 30, 2018	$	(250.5	)	$	228.3	$	—		$	(22.2	)

(In Millions)
Changes in Pension and OPEB, net of tax Changes in Foreign Currency Translation Accumulated Other Comprehensive Loss
December 31, 2016 $ (260.6 ) $ 239.3
$ (21.3 )
Other comprehensive income (loss) before reclassifications 3.3
(12.7 ) (9.4 )
Net loss reclassified from accumulated other comprehensive loss 6.4
—
6.4
March 31, 2017 $ (250.9 ) $ 226.6
$ (24.3 )
Other comprehensive loss before reclassifications (0.1 ) (1.5 ) (1.6 )
Net loss reclassified from accumulated other comprehensive loss 6.5
—
6.5
June 30, 2017 $ (244.5 ) $ 225.1
$ (19.4 )
Other comprehensive income (loss) before reclassifications (18.7 ) 0.5
(18.2 )
Net loss reclassified from accumulated other comprehensive loss 6.8
—
6.8
September 30, 2017 $ (256.4 ) $ 225.6
$ (30.8 )

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The following table reflects the details about Accumulated other comprehensive loss components related to ~~Cliffs~~ shareholders’ ~~deficit:~~equity (deficit):



	(In Millions)
Details about Accumulated Other Comprehensive Loss Components	Amount of (Gain)/Loss Reclassified into Income, Net of Tax												Affected Line Item in the Statement of Unaudited Condensed Consolidated Operations
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Amortization of pension and OPEB liability:
Prior service credits	$	(0.2	)	$	(0.1	)	$	(0.4	)	$	(0.4	)	Other non-operating income
Net actuarial loss	7.1			6.6			14.3			13.1			Other non-operating income
	$	6.9		$	6.5		$	13.9		$	12.7
	(1.4		)	—			(2.9		)	—			Income tax benefit (expense)
	$	5.5		$	6.5		$	11.0		$	12.7		Net of taxes

Unrealized loss (gain) on derivative financial instruments:
Commodity contracts	$	0.2		$	—		$	0.5		$	(0.1	)	Cost of goods sold
	—			—			(0.1		)	—			Income tax benefit (expense)
	$	0.2		$	—		$	0.4		$	(0.1	)	Net of taxes

Total reclassifications for the period, net of tax	$	5.7		$	6.5		$	11.4		$	12.6

(In Millions)
Details about Accumulated Other Comprehensive Loss Components Amount of (Gain)/Loss Reclassified into Income, Net of Tax Affected Line Item in the Statement of Unaudited Condensed Consolidated Operations
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Amortization of pension and OPEB liability:
Prior service credits $ (0.1 ) $ (0.2 ) $ (0.5 ) $ (0.4 ) Other non-operating income
Net actuarial loss 6.6
7.0
19.7
20.1
Other non-operating income
$ 6.5
$ 6.8
$ 19.2
$ 19.7

Changes in foreign currency translation:
Gain on foreign currency translation $ (228.1 ) $ —
$ (228.1 ) $ —
Income from Discontinued Operations, net of tax
$ (228.1 ) $ —
$ (228.1 ) $ —

Unrealized loss on derivative financial instruments:
Commodity contracts $ 0.1
$ —
$ —
$ —
Cost of goods sold and operating expenses
$ 0.1
$ —
$ —
$ —

Total reclassifications for the period, net of tax $ (221.5 ) $ 6.8
$ (208.9 ) $ 19.7

NOTE 17 - CASH FLOW INFORMATION

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



	(In Millions)
	Six Months Ended June 30,
	2019			2018
Capital additions	$	320.9		$	149.3
Less:
Non-cash accruals	3.6			34.9
Right-of-use assets – finance leases	24.8			—
Grants	(8.4		)	—
Cash paid for capital expenditures including deposits	$	300.9		$	114.4

Non-Cash Financing Activities - Declared Dividends

On May 31, 2019, the Board of Directors declared a quarterly cash dividend on our common shares of $0.06 per share. The cash dividend of $16.2 million was paid on July 15, 2019 to shareholders of record as of the close of business on July 5, 2019.

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NOTE 18 - RELATED PARTIES

One of our four operating mines, Hibbing, is a co-owned joint venture with companies that are integrated steel producers or their subsidiaries. We are the manager of ~~such co-owned mine~~Hibbing and rely on our joint venture partners to make their required capital contributions and to pay for their share of the iron ore pellets that we produce. ~~Our joint venture partners are often~~In 2018, we tendered our ~~customers.~~resignation as the mine manager of the Hibbing mine and plan to transition this role to the majority owner in August 2019. The following is a summary of the mine ownership of the co-owned iron ore mine at ~~September~~June 30, ~~2018~~2019:



Mine	Cleveland-Cliffs Inc.		ArcelorMittal		U.S. Steel
Hibbing	23.0	%	62.3	%	14.7	%

Mine Cleveland-Cliffs Inc. ArcelorMittal U.S. Steel
Hibbing 23.0 % 62.3 % 14.7 %

Product revenues from related parties were as follows:



	(In Millions)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Product revenues from related parties	$	415.8		$	409.4		$	456.9		$	471.1
Total product revenues	$	697.4		$	672.0		$	842.8		$	841.2
Related party product revenue as a percent of total product revenue	59.6		%	60.9		%	54.2		%	56.0		%

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Product revenues from related parties $ 392.4
$ 265.5
$ 863.8
$ 602.4
Total product revenues $ 684.7
$ 530.7
$ 1,525.9
$ 1,195.0
Related party product revenue as a percent of total product revenue 57.3 % 50.0 % 56.6 % 50.4 %

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The following table presents the classification of related party assets and liabilities in the Statements of Unaudited Condensed Consolidated Financial Position:



	(In Millions)
Balance Sheet Location	June 30, 2019			December 31, 2018
Accounts receivable, net	$	139.3		$	176.0
Derivative assets	116.2			89.3
Partnership distribution payable	(44.1		)	(43.5		)
Other current liabilities	(2.7		)	(1.8		)
	$	208.7		$	220.0

(In Millions)

Balance Sheet
Location
September 30, 2018 December 31, 2017
Amounts due from related parties Accounts receivable, net $ 73.5
$ 68.1
Customer supply agreement and provisional pricing agreements Derivative assets 186.0
37.9
Amounts due to related parties Partnership distribution payable (43.1 ) (44.2 )
Amounts due to related parties Other current liabilities (5.5 ) (12.3 )
Amounts due to related parties Other liabilities —
(41.4 )
Net amounts due from related parties $ 210.9
$ 8.1
A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the average annual daily market price for hot-rolled coil steel at the time the product is consumed in the customer’s blast furnaces. The supplemental pricing is characterized as a freestanding derivative. Refer to NOTE 13 - DERIVATIVE INSTRUMENTS for further information.

During 2017, our ownership interest in Empire increased to 100% as we reached an agreement to distribute the noncontrolling interest net assets of $132.7 million to ArcelorMittal, in exchange for its interest in Empire. The net assets were agreed to be distributed in three installments of $44.2 million each, the first of which was paid upon the execution of the agreement, the second of which was paid in August 2018 and the final of which is due in August 2019. The remaining installment is reflected in Partnership distribution payable in the Statements of Unaudited Condensed Consolidated Financial Position as of ~~September~~June 30, ~~2018~~.2019 and December 31, 2018.

A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the average annual daily market price for hot-rolled coil steel at the time the product is consumed in the customer’s blast furnace. The supplemental pricing is characterized as a freestanding derivative. Refer to NOTE 15 - DERIVATIVE INSTRUMENTS for further information.

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NOTE 19 - EARNINGS PER SHARE

The following table summarizes the computation of basic and diluted earnings per share:



	(In Millions, Except Per Share Amounts)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Income from continuing operations	$	161.4		$	229.4		$	139.3		$	216.0
Loss from discontinued operations, net of tax	(0.6		)	(64.3		)	(0.6		)	(135.2		)
Net income	$	160.8		$	165.1		$	138.7		$	80.8

Weighted average number of shares:
Basic	275.8			297.6			282.6			297.4
$316.25 million 1.50% 2025 Convertible Senior Notes	6.7			—			6.9			—
Employee stock plans	3.0			3.7			4.1			3.7
Diluted	285.5			301.3			293.6			301.1

Earnings (loss) per common share - basic:
Continuing operations	$	0.59		$	0.77		$	0.49		$	0.73
Discontinued operations	—			(0.22		)	—			(0.46		)
	$	0.59		$	0.55		$	0.49		$	0.27

Earnings (loss) per common share - diluted:
Continuing operations	$	0.57		$	0.76		$	0.47		$	0.72
Discontinued operations	—			(0.21		)	—			(0.45		)
	$	0.57		$	0.55		$	0.47		$	0.27

(In Millions, Except Per Share Amounts)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Income from Continuing Operations $ 199.8
$ 22.3
$ 415.8
$ 27.6
Loss from Continuing Operations Attributable to Noncontrolling Interest —
0.5
—
3.9
Net Income from Continuing Operations Attributable to Cliffs Shareholders $ 199.8
$ 22.8
$ 415.8
$ 31.5
Income from Discontinued Operations, net of tax 238.0
30.6
102.8
25.6
Net Income Attributable to Cliffs Shareholders $ 437.8
$ 53.4
$ 518.6
$ 57.1
Weighted Average Number of Shares:
Basic 297.9
296.1
297.6
285.8
Convertible Senior Notes 8.0
—
1.9
—
Employee Stock Plans 4.3
5.0
4.0
4.7
Diluted 310.2
301.1
303.5
290.5
Income per Common Share Attributable to
Cliffs Common 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 Common 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

NOTE 20 - COMMITMENTS AND CONTINGENCIES

Purchase Commitments

HBI production plant

In 2017, we began to incur capital commitments related to the construction of our HBI production plant in Toledo, Ohio. We now expect to reach commercial production ahead of schedule, in the first half of 2020. Due to the advanced construction timeline and more certain visibility of the start–up date, a portion of the budgeted contingency has been allocated. In total, we expect to spend approximately ~~$700~~$830 million plus a contingency of up to 20% on the HBI production plant, ~~exclusive of construction-related contingencies and~~excluding capitalized interest, through 2020. ~~Through September~~As of June 30, ~~2018,~~2019, we have ~~entered into~~ contracts and purchase orders in place for approximately ~~$520 million of the total capital investment for the HBI production plant, of which a total of approximately $130 million has been expended project-to-date, including deposits.~~$420 million. We expect ~~expenditures of approximately $60 million during the remaining three months of 2018. Of the remaining committed~~cash capital expenditures of approximately ~~$360~~$370 million ~~and $150 million are expected to be made~~ during the second half of 2019 and ~~2020, respectively.~~

As of September 30, 2018, we did not have any other material contractual cash obligations, such as purchase obligations, financing lease obligations or other long-term liabilities other than those reflected in the paragraph above and previously disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included on Form 10-K for the year ended December 31, 2017.

~~Table of Contents~~

approximately $170 million during 2020.

Contingencies

We are currently the subject of, or party to, various claims and legal proceedings incidental to our operations. If management believes that a loss arising from these matters is probable and can reasonably be estimated, we record the amount of the loss or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more probable than another. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Based on currently available information, management believes that the ultimate outcome of these matters, individually and in the aggregate, will not have a material effect on our financial position, results of operations or cash flows. However, theseThese claims and legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, additional funding requirements or an injunction. If an unfavorable ruling were to occur, there exists the possibility of a material ~~impact~~effect on the financial position and results of operations for the period in which the ruling occurs or future periods. However, based on currently available information we do not believe that any pending claims or legal proceedings will result in a material ~~liability~~effect in relation to our consolidated financial statements.

~~Currently, we have recorded a liability in the Statements of Unaudited Condensed Consolidated Financial Position related to the following legal matters:~~

~~Bluestone Litigation~~. On April 7, 2017, the Company was served with an Amended Complaint adding Cliffs, among others, as a defendant to a lawsuit brought by Bluestone Coal Corporation and Double-Bonus Mining Company against Pinnacle Mining Company, LLC and Target Drilling, Inc. in the U.S. District Court for the Southern District of West Virginia. The Amended Complaint alleges that the defendants deviated from plans authorized by plaintiffs and U.S. Mine Safety and Health Administration in the drilling of a borehole in 2013 and 2014 at the Pinnacle mine and through an inactive portion of plaintiffs’ mine. Plaintiffs further allege negligence and trespass in the drilling of the borehole and claim compensatory and punitive damages due to flooding. On October 3, 2018, the parties reached a settlement in full, and the Court entered an order dismissing the case with prejudice subject to reopening on good cause shown within 90 days. On October 14, 2018, Mission Coal Company, LLC and ten of its affiliates, including Pinnacle Mining Company, LLC, filed a petition in the U.S. Bankruptcy Court for the Northern District of Alabama for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. We are reviewing this bankruptcy petition, but do not believe it will have a material adverse effect on our settlement.

~~Michigan Electricity Matters.~~ On February 19, 2015, in connection with various proceedings before FERC with respect to certain cost allocations for continued operation of the Presque Isle Power Plant in Marquette, Michigan, FERC issued an order directing MISO to submit a revised methodology for allocating SSR costs that identified the load serving entities that require the operation of SSR units at the power plant for reliability purposes. On September 17, 2015, FERC issued an order conditionally approving MISO’s revised allocation methodology. On September 22, 2016, FERC denied requests for rehearing of the February 19 order, rejecting arguments that FERC did not have the authority to order refunds in a cost allocation case and to impose retroactive surcharges to effectuate such refunds. FERC, however, suspended any refunds and surcharges pending its review of a July 25, 2016 ALJ initial decision on the appropriate amount of SSR compensation. This suspension was ultimately lifted after FERC’s Order on Initial Decision of October 19, 2017, affirming in part and reversing in part certain aspects of the ALJ’s decision, and FERC’s order on February 28, 2018, directing that refunds and surcharges be effectuated over a ten-month period beginning on the date of the order. Our current estimate of the potential liability to the Empire and Tilden mines is $13.0 million in the aggregate, based on a schedule of anticipated surcharges (including interest) for the Escanaba, White Pine and Presque Isle SSRs from Empire and Tilden's electricity supplier. During the nine months ended September 30, 2018, Tilden and Empire made payments on invoiced surcharges totaling $4.2 million. Separate from these SSR compensation issues, Tilden and Empire, along with various Michigan-aligned parties, filed petitions for review regarding allocation and non-cost SSR issues with the U.S. Court of Appeals for the D.C. Circuit. On July 31, 2018, the Court of Appeals denied the petitions, ruling that FERC had authority to order refunds and corresponding surcharges under the Federal Power Act. The Michigan-aligned parties filed a Petition for Rehearing En Banc on September 12, 2018. Tilden and Empire decided not to further participate in the matter by way of a Petition for Rehearing En Banc or appeal to the U.S. Supreme Court.~~As of September 30, 2018, $8.8 million is included in our Statements of Unaudited Condensed Consolidated Financial Position as part of~~ ~~Accrued expenses~~ ~~for the remaining portion of this estimated liability.~~

Additionally, we previously recorded a liability in the Statements of Unaudited Condensed Consolidated Financial Position related to the following matter, in which a settlement was reached during the period ended June 30, 2018:

~~Table of Contents~~

~~CCAA Proceedings.~~ Effective January 27, 2015, following the commencement of CCAA proceedings for the Bloom Lake Group, we deconsolidated the Bloom Lake Group and certain other wholly-owned subsidiaries comprising substantially all of our Canadian operations. Additionally, on May 20, 2015, the Wabush Group commenced CCAA proceedings which resulted in the deconsolidation of the remaining Wabush Group entities that were not previously deconsolidated. As a result of this action, the CCAA protection granted to the Bloom Lake Group was extended to include the Wabush Group to facilitate the reorganization of each of their businesses and operations.

Prior to the deconsolidations, certain of our wholly-owned subsidiaries made loans to the Canadian Entities for the purpose of funding their operations and had accounts receivable generated in the ordinary course of business. The loans, corresponding interest and the accounts receivable were considered intercompany transactions and eliminated in our consolidated financial statements. Since the deconsolidations, the loans, associated interest and accounts receivable are considered related party transactions and have been recognized in our consolidated financial statements at their estimated fair value. As of September 30, 2018, we had no amounts outstanding classified as ~~Loans to and accounts receivable from the Canadian Entities~~ in the Statements of Unaudited Condensed Consolidated Financial Position in accordance with the Amended Plan, as defined and described below. As of December 31, 2017, we had $51.6 million classified as ~~Loans to and accounts receivable from the Canadian Entities~~ ~~in the Statements of Unaudited Condensed Consolidated Financial Position.~~

During March 2018, we entered into a restructuring term sheet with the Bloom Lake Group and the Wabush Group that documents the proposed terms of a plan of compromise or arrangement in the CCAA proceedings to be sponsored by us as negotiated between us and the Monitor. By order of the Québec Superior Court of Justice (Commercial Division) (the “Court”) dated April 20, 2018, the Bloom Lake Group and the Wabush Group were authorized to file a joint plan of compromise and arrangement dated April 16, 2018 (the “Original Plan”). Following discussions with various stakeholder groups, the Original Plan was amended by order of the Court dated May 18, 2018. The Bloom Lake Group and the Wabush Group were authorized to file the amended and restated joint plan of compromise and arrangement dated May 16, 2018 (as same may be further amended from time to time, the “Amended Plan”). The Amended Plan was approved by the required majorities of each unsecured creditor class and was sanctioned by the Court by order dated June 29, 2018 (the “Sanction Order”). In addition, the Bloom Lake Group and the Wabush Group brought a motion before the Court on July 30, 2018 seeking to make further amendments to the Amended Plan to address the manner in which certain distributions under the Amended Plan will be effected.

~~On July 31, 2018, the conditions precedent to the implementation of the Amended Plan were satisfied and the Amended Plan was implemented.~~

~~The net financial impact of the Amended Plan has been recorded in our financial statements.~~

NOTE 21 - SUBSEQUENT EVENTS

~~On October 5, 2018, we redeemed~~We have evaluated subsequent events through the ~~entirety~~date of our outstanding Senior Notes Due 2020. The aggregate principal amount outstanding of the Senior Notes Due 2020 was approximately $211 million. Pursuant to the terms of the indenture governing the Senior Notes Due 2020, approximately $218 million in the aggregate, including make-whole premiums and accrued and unpaid interest to, but not including, the redemption date, was paid to holders of the Senior Notes Due 2020.financial statement issuance.

We reached an agreement with the USW for a new four-year labor contract that is effective as of October 1, 2018. The new contract will cover approximately 1,800 of our USW-represented workers at the Tilden and Empire mines in Michigan, and the United Taconite and Hibbing Taconite mines in Minnesota. The new labor contract was ratified on October 11, 2018.

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On October 18, 2018, the Board of Directors declared a quarterly cash dividend on our common shares of $0.05 per share. The cash dividend will be payable on January 15, 2019, to shareholders of record as of the close of business on January 4, 2019. The Board of Directors determined that the cash dividend may be paid out of capital surplus.

~~Table of Contents~~

NOTE 22 - SUPPLEMENTARY GUARANTOR INFORMATION

The accompanying unaudited condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” Certain of our subsidiaries (the "Guarantors") have guaranteed the obligations under the ~~$1.075 billion~~ 5.75% 2025 Senior Notes and the 5.875% 2027 Senior Notes issued by Cleveland-Cliffs Inc. See NOTE 7 - DEBT AND CREDIT FACILITIES for further information.

The following presents the unaudited condensed consolidating financial information for: (i) the Parent Company and the Issuer of the guaranteed obligations (Cleveland-Cliffs Inc.); (ii) the Guarantor subsidiaries, on a combined basis; (iii) the non-guarantor subsidiaries, on a combined basis; (iv) consolidating eliminations; and (v) Cleveland-Cliffs Inc. and subsidiaries on a consolidated basis. Each Guarantor subsidiary is 100% owned by the Parent Company as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. The unaudited condensed consolidating financial information is presented as if the Guarantor structure at ~~September~~June 30, ~~2018~~2019 existed for all periods presented. ~~As a result, the Guarantor subsidiaries within the unaudited condensed consolidating financial information as of September 30, 2018 and December 31, 2017 and for the~~ ~~three and nine months ended~~ ~~September 30, 2018 and 2017 include results of subsidiaries that were previously less than wholly-owned and were historically non-guarantors until 100% ownership was obtained.~~

Each of the Guarantor subsidiaries fully and unconditionally ~~guarantee,~~guarantees, on a joint and several basis, the obligations of Cleveland-Cliffs Inc. under the ~~$1.075 billion~~ 5.75% 2025 Senior Notes and the 5.875% 2027 Senior Notes. The guarantee of a Guarantor subsidiary will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related ~~indenture~~indentures governing the ~~$1.075 billion~~ 5.75% 2025 Senior Notes and the 5.875% 2027 Senior Notes (the ~~“Indenture”~~“Indentures”) will be automatically and unconditionally released and discharged, upon:

(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease);

(b) upon designation of any Guarantor subsidiary as an “excluded subsidiary” (as defined in the ~~Indenture)~~Indentures); or

Each entity in the unaudited consolidating financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying unaudited condensed consolidating financial information has been presented on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for investments in subsidiaries, and intra-entity activity and balances.

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																											Unaudited Condensed Consolidating Statement of Financial Position
As of September 30, 2018
As of June 30, 2019															As of June 30, 2019
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated			Cleveland-Cliffs Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	892.5		$	1.9	$	2.7		$	—		$	897.1		$	374.2	$	0.4	$	2.6		$	—		$	377.2
Accounts receivable, net	7.8			137.4		0.1			(3.9		)	141.4			8.1		188.8		0.3			(4.1		)	193.1
Inventories	—			187.9		—			—			187.9			—		219.0		—			—			219.0
Supplies and other inventories	—			88.2		—			—			88.2			—		110.8		—			—			110.8
Income tax receivable	110.1			—		0.2			—			110.3
Derivative assets	0.2			190.6		—			—			190.8			0.2		118.1		—			—			118.3
Current assets of discontinued operations	—			—		16.1			—			16.1
Income tax receivable, current															58.7		—		—			—			58.7
Other current assets	7.9			10.3		0.6			—			18.8			8.5		24.1		9.7			—			42.3
TOTAL CURRENT ASSETS	1,018.5			616.3		19.7			(3.9		)	1,650.6			449.7		661.2		12.6			(4.1		)	1,119.4
PROPERTY, PLANT AND EQUIPMENT, NET	14.3			1,079.7		50.8			—			1,144.8			11.6		1,534.9		50.8			—			1,597.3
OTHER ASSETS
Deposits for property, plant and equipment	—			80.0		14.6			—			94.6			—		37.4		14.8			—			52.2
Income tax receivable	109.9			3.7		—			—			113.6
Income tax receivable, non-current															58.6		4.1		—			—			62.7
Deferred income taxes															442.1		—		1.2			—			443.3
Investment in subsidiaries	1,325.5			38.3		—			(1,363.8		)	—			1,701.2		35.2		—			(1,736.4		)	—
Long-term intercompany notes	—			—		121.3			(121.3		)	—			—		—		121.3			(121.3		)	—
Other non-current assets	8.5			111.2		1.7			—			121.4			16.1		100.8		1.4			—			118.3
TOTAL OTHER ASSETS	1,443.9			233.2		137.6			(1,485.1		)	329.6			2,218.0		177.5		138.7			(1,857.7		)	676.5
TOTAL ASSETS	$	2,476.7		$	1,929.2	$	208.1		$	(1,489.0	)	$	3,125.0		$	2,679.3	$	2,373.6	$	202.1		$	(1,861.8	)	$	3,393.2
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	4.1		$	136.5	$	4.1		$	(3.9	)	$	140.8		$	7.8	$	180.2	$	4.2		$	(4.1	)	$	188.1
Accrued expenses	16.7			78.2		0.2			—			95.1
Accrued employment costs															16.1		42.2		0.1			—			58.4
Accrued interest	26.2			—		—			—			26.2			31.3		—		—			—			31.3
Partnership distribution payable	—			43.1		—			—			43.1			—		44.1		—			—			44.1
Current liabilities of discontinued operations	4.0			—		10.2			—			14.2
Other current liabilities	1.8			57.7		1.8			—			61.3			26.2		82.1		7.2			—			115.5
TOTAL CURRENT LIABILITIES	52.8			315.5		16.3			(3.9		)	380.7			81.4		348.6		11.5			(4.1		)	437.4
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES	64.3			415.1		(254.4		)	—			225.0			64.0		414.8		(239.5		)	—			239.3
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS	—			147.6		26.8			—			174.4			—		157.1		19.6			—			176.7
LONG-TERM DEBT	2,300.0			—		—			—			2,300.0			2,104.5		—		—			—			2,104.5
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS	—			—		9.3			—			9.3
LONG-TERM INTERCOMPANY NOTES	121.3			—		—			(121.3		)	—			121.3		—		—			(121.3		)	—
OTHER LIABILITIES	24.4			96.9		0.5			—			121.8			22.5		120.1		7.1			—			149.7
TOTAL LIABILITIES	2,562.8			975.1		(201.5		)	(125.2		)	3,211.2			2,393.7		1,040.6		(201.3		)	(125.4		)	3,107.6
EQUITY
TOTAL CLIFFS SHAREHOLDERS' EQUITY (DEFICIT)	(86.1		)	954.1		409.6			(1,363.8		)	(86.2		)
TOTAL EQUITY (DEFICIT)	(86.1		)	954.1		409.6			(1,363.8		)	(86.2		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,476.7		$	1,929.2	$	208.1		$	(1,489.0	)	$	3,125.0
TOTAL EQUITY															285.6		1,333.0		403.4			(1,736.4		)	285.6
TOTAL LIABILITIES AND EQUITY															$	2,679.3	$	2,373.6	$	202.1		$	(1,861.8	)	$	3,393.2

4531

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Unaudited Condensed Consolidating Statement of Financial Position
As of December 31, 2018
(In Millions)
	Cleveland-Cliffs Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	819.8	$	0.7	$	2.7		$	—		$	823.2
Accounts receivable, net	9.2		221.3		0.3			(4.1		)	226.7
Inventories	—		87.9		—			—			87.9
Supplies and other inventories	—		93.2		—			—			93.2
Derivative assets	0.1		91.4		—			—			91.5
Income tax receivable, current	117.3		—		—			—			117.3
Other current assets	10.0		16.9		12.9			—			39.8
TOTAL CURRENT ASSETS	956.4		511.4		15.9			(4.1		)	1,479.6
PROPERTY, PLANT AND EQUIPMENT, NET	13.3		1,221.9		50.8			—			1,286.0
OTHER ASSETS
Deposits for property, plant and equipment	—		68.4		14.6			—			83.0
Income tax receivable, non-current	117.2		4.1		—			—			121.3
Deferred income taxes	463.6		—		1.2			—			464.8
Investment in subsidiaries	1,262.3		50.8		—			(1,313.1		)	—
Long-term intercompany notes	—		—		121.3			(121.3		)	—
Other non-current assets	8.0		85.4		1.5			—			94.9
TOTAL OTHER ASSETS	1,851.1		208.7		138.6			(1,434.4		)	764.0
TOTAL ASSETS	$	2,820.8	$	1,942.0	$	205.3		$	(1,438.5	)	$	3,529.6
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	5.3	$	181.4	$	4.2		$	(4.1	)	$	186.8
Accrued employment costs	28.5		45.4		0.1			—			74.0
Accrued interest	38.4		—		—			—			38.4
Partnership distribution payable	—		43.5		—			—			43.5
Other current liabilities	30.6		86.7		8.2			—			125.5
TOTAL CURRENT LIABILITIES	102.8		357.0		12.5			(4.1		)	468.2
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES	64.3		414.4		(230.0		)	—			248.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS	—		152.1		19.9			—			172.0
LONG-TERM DEBT	2,092.9		—		—			—			2,092.9
LONG-TERM INTERCOMPANY NOTES	121.3		—		—			(121.3		)	—
OTHER LIABILITIES	15.3		99.5		8.8			—			123.6
TOTAL LIABILITIES	2,396.6		1,023.0		(188.8		)	(125.4		)	3,105.4
EQUITY
TOTAL EQUITY	424.2		919.0		394.1			(1,313.1		)	424.2
TOTAL LIABILITIES AND EQUITY	$	2,820.8	$	1,942.0	$	205.3		$	(1,438.5	)	$	3,529.6

Table of Contents

Unaudited Condensed Consolidating Statement of Financial Position
As of December 31, 2017
(In Millions)
Cleveland-Cliffs Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 948.9
$ 2.1
$ 27.3
$ —
$ 978.3
Accounts receivable, net 4.5
102.9
—
(0.7 ) 106.7
Inventories —
138.4
—
—
138.4
Supplies and other inventories —
88.8
—
—
88.8
Income tax receivable 11.4
1.9
—
—
13.3
Derivative assets —
37.9
—
—
37.9
Current assets of discontinued operations —
—
118.5
—
118.5
Loans to and accounts receivable from the Canadian Entities 44.7
6.9
—
—
51.6
Other current assets 5.0
5.6
0.5
—
11.1
TOTAL CURRENT ASSETS 1,014.5
384.5
146.3
(0.7 ) 1,544.6
PROPERTY, PLANT AND EQUIPMENT, NET 17.5
965.5
50.8
—
1,033.8
OTHER ASSETS
Deposits for property, plant and equipment —
8.2
9.6
—
17.8
Income tax receivable 235.3
—
—
—
235.3
Non-current assets of discontinued operations —
—
20.3
—
20.3
Investment in subsidiaries 1,024.3
29.9
—
(1,054.2 ) —
Long-term intercompany notes —
—
242.0
(242.0 ) —
Other non-current assets 7.8
91.8
2.0
—
101.6
TOTAL OTHER ASSETS 1,267.4
129.9
273.9
(1,296.2 ) 375.0
TOTAL ASSETS $ 2,299.4
$ 1,479.9
$ 471.0
$ (1,296.9 ) $ 2,953.4
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 7.1
$ 92.3
$ 0.8
$ (0.7 ) $ 99.5
Accrued expenses 19.0
59.9
0.2
—
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 2.1
63.5
1.8
—
67.4
TOTAL CURRENT LIABILITIES 115.2
259.9
77.8
(0.7 ) 452.2
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES 66.4
430.6
(239.3 ) —
257.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS —
140.6
27.1
—
167.7
LONG-TERM DEBT 2,304.2
—
—
—
2,304.2
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS —
—
52.2
—
52.2
LONG-TERM INTERCOMPANY NOTES 242.0
—
—
(242.0 ) —
OTHER LIABILITIES 15.7
147.2
0.6
—
163.5
TOTAL LIABILITIES 2,743.5
978.3
(81.6 ) (242.7 ) 3,397.5
EQUITY
TOTAL CLIFFS SHAREHOLDERS' EQUITY (DEFICIT) (444.1 ) 501.6
552.4
(1,054.2 ) (444.3 )
NONCONTROLLING INTEREST —
—
0.2
—
0.2
TOTAL EQUITY (DEFICIT) (444.1 ) 501.6
552.6
(1,054.2 ) (444.1 )
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 2,299.4
$ 1,479.9
$ 471.0
$ (1,296.9 ) $ 2,953.4



Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Three Months Ended June 30, 2019
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	—		$	697.4		$	—		$	—		$	697.4
Freight	—			45.8			—			—			45.8
	—			743.2			—			—			743.2
COST OF GOODS SOLD	—			(480.2		)	—			—			(480.2		)
SALES MARGIN	—			263.0			—			—			263.0
OTHER OPERATING EXPENSE
Selling, general and administrative expenses	(23.6		)	(6.8		)	(0.2		)	—			(30.6		)
Miscellaneous – net	—			(4.8		)	(0.8		)	—			(5.6		)
	(23.6		)	(11.6		)	(1.0		)	—			(36.2		)
OPERATING INCOME (LOSS)	(23.6		)	251.4			(1.0		)	—			226.8
OTHER INCOME (EXPENSE)
Interest income (expense), net	(25.4		)	(0.8		)	0.1			—			(26.1		)
Loss on extinguishment of debt	(17.9		)	—			—			—			(17.9		)
Other non-operating income (expense)	(1.0		)	(3.2		)	4.8			—			0.6
	(44.3		)	(4.0		)	4.9			—			(43.4		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(67.9		)	247.4			3.9			—			183.4
INCOME TAX EXPENSE	(21.8		)	(0.2		)	—			—			(22.0		)
EQUITY IN INCOME OF SUBSIDIARIES	250.4			4.3			—			(254.7		)	—
INCOME FROM CONTINUING OPERATIONS	160.7			251.5			3.9			(254.7		)	161.4
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX	0.1			0.1			(0.8		)	—			(0.6		)
NET INCOME	$	160.8		$	251.6		$	3.1		$	(254.7	)	$	160.8
OTHER COMPREHENSIVE INCOME	3.7			6.6			—			(6.6		)	3.7
TOTAL COMPREHENSIVE INCOME	$	164.5		$	258.2		$	3.1		$	(261.3	)	$	164.5

4633

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Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Three Months Ended June 30, 2018
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	—		$	672.0		$	—		$	—		$	672.0
Freight	—			42.3			—			—			42.3
	—			714.3			—			—			714.3
COST OF GOODS SOLD	—			(429.8		)	—			—			(429.8		)
SALES MARGIN	—			284.5			—			—			284.5
OTHER OPERATING EXPENSE
Selling, general and administrative expenses	(19.7		)	(6.4		)	(0.1		)	—			(26.2		)
Miscellaneous – net	(0.2		)	(3.6		)	(0.3		)	—			(4.1		)
	(19.9		)	(10.0		)	(0.4		)	—			(30.3		)
OPERATING INCOME (LOSS)	(19.9		)	274.5			(0.4		)	—			254.2
OTHER INCOME (EXPENSE)
Interest income (expense), net	(30.8		)	(0.6		)	0.2			—			(31.2		)
Gain on extinguishment of debt	0.2			—			—			—			0.2
Other non-operating income (expense)	(0.8		)	0.2			5.0			—			4.4
	(31.4		)	(0.4		)	5.2			—			(26.6		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(51.3		)	274.1			4.8			—			227.6
INCOME TAX BENEFIT (EXPENSE)	2.1			(0.1		)	(0.2		)	—			1.8
EQUITY IN INCOME OF SUBSIDIARIES	210.4			4.6			—			(215.0		)	—
INCOME FROM CONTINUING OPERATIONS	161.2			278.6			4.6			(215.0		)	229.4
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax	3.9			(0.3		)	(67.9		)	—			(64.3		)
NET INCOME (LOSS)	$	165.1		$	278.3		$	(63.3	)	$	(215.0	)	$	165.1
OTHER COMPREHENSIVE INCOME	9.1			6.0			2.2			(8.2		)	9.1
TOTAL COMPREHENSIVE INCOME (LOSS)	$	174.2		$	284.3		$	(61.1	)	$	(223.2	)	$	174.2

Table of Contents


Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income
For the Three Months Ended September 30, 2018
Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)																Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Six Months Ended June 30, 2019																For the Six Months Ended June 30, 2019
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	—		$	684.7		$	—		$	—		$	684.7		$	—		$	842.8		$	—		$	—		$	842.8
Freight and venture partners' cost reimbursements	—			57.1			—			—			57.1
Freight																—			57.4			—			—			57.4
	—			741.8			—			—			741.8			—			900.2			—			—			900.2
COST OF GOODS SOLD AND OPERATING EXPENSES	—			(480.2		)	—			—			(480.2		)
COST OF GOODS SOLD																—			(606.3		)	—			—			(606.3		)
SALES MARGIN	—			261.6			—			—			261.6			—			293.9			—			—			293.9
OTHER OPERATING EXPENSE
Selling, general and administrative expenses	(23.1		)	(6.7		)	(0.3		)	—			(30.1		)	(46.4		)	(12.0		)	(0.3		)	—			(58.7		)
Miscellaneous – net	—			(5.5		)	(0.5		)	—			(6.0		)	—			(8.2		)	(1.0		)	—			(9.2		)
	(23.1		)	(12.2		)	(0.8		)	—			(36.1		)	(46.4		)	(20.2		)	(1.3		)	—			(67.9		)
OPERATING INCOME (LOSS)	(23.1		)	249.4			(0.8		)	—			225.5			(46.4		)	273.7			(1.3		)	—			226.0
OTHER INCOME (EXPENSE)
Interest expense, net	(29.2		)	(0.4		)	0.1			—			(29.5		)
Interest income (expense), net																(50.1		)	(1.3		)	0.2			—			(51.2		)
Loss on extinguishment of debt																(18.2		)	—			—			—			(18.2		)
Other non-operating income (expense)	(0.9		)	0.1			5.1			—			4.3			(2.1		)	(6.4		)	9.5			—			1.0
	(30.1		)	(0.3		)	5.2			—			(25.2		)	(70.4		)	(7.7		)	9.7			—			(68.4		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(53.2		)	249.1			4.4			—			200.3			(116.8		)	266.0			8.4			—			157.6
INCOME TAX EXPENSE	(0.3		)	—			(0.2		)	—			(0.5		)	(17.9		)	(0.3		)	(0.1		)	—			(18.3		)
EQUITY IN INCOME OF SUBSIDIARIES	471.0			4.7			—			(475.7		)	—			273.3			8.7			—			(282.0		)	—
INCOME FROM CONTINUING OPERATIONS	417.5			253.8			4.2			(475.7		)	199.8			138.6			274.4			8.3			(282.0		)	139.3
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX	20.3			12.9			204.8			—			238.0
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	437.8		$	266.7		$	209.0		$	(475.7	)	$	437.8
OTHER COMPREHENSIVE INCOME (LOSS)	(221.2		)	6.1			(230.5		)	224.4			(221.2		)
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	216.6		$	272.8		$	(21.5	)	$	(251.3	)	$	216.6
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX																0.1			—			(0.7		)	—			(0.6		)
NET INCOME																$	138.7		$	274.4		$	7.6		$	(282.0	)	$	138.7
OTHER COMPREHENSIVE INCOME																12.1			13.3			—			(13.3		)	12.1
TOTAL COMPREHENSIVE INCOME																$	150.8		$	287.7		$	7.6		$	(295.3	)	$	150.8

4735

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																															Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Three Months Ended September 30, 2017
For the Six Months Ended June 30, 2018																For the Six Months Ended June 30, 2018
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	—		$	530.7		$	—		$	—		$	530.7		$	—		$	841.2		$	—		$	—		$	841.2
Freight and venture partners' cost reimbursements	—			66.0			—			—			66.0
Freight																—			53.1			—			—			53.1
	—			596.7			—			—			596.7			—			894.3			—			—			894.3
COST OF GOODS SOLD AND OPERATING EXPENSES	—			(438.9		)	—			—			(438.9		)
COST OF GOODS SOLD																—			(548.3		)	—			—			(548.3		)
SALES MARGIN	—			157.8			—			—			157.8			—			346.0			—			—			346.0
OTHER OPERATING EXPENSE
Selling, general and administrative expenses	(18.7		)	(4.3		)	(0.8		)	—			(23.8		)	(39.8		)	(11.1		)	(0.4		)	—			(51.3		)
Miscellaneous – net	(1.4		)	(4.1		)	0.2			—			(5.3		)	(0.4		)	(8.9		)	(0.9		)	—			(10.2		)
	(20.1		)	(8.4		)	(0.6		)	—			(29.1		)	(40.2		)	(20.0		)	(1.3		)	—			(61.5		)
OPERATING INCOME (LOSS)	(20.1		)	149.4			(0.6		)	—			128.7			(40.2		)	326.0			(1.3		)	—			284.5
OTHER INCOME (EXPENSE)
Interest expense, net	(27.8		)	—			0.2			—			(27.6		)
Loss on extinguishment of debt	(88.6		)	—			—			—			(88.6		)
Interest income (expense), net																(62.7		)	(1.4		)	0.5			—			(63.6		)
Gain on extinguishment of debt																0.2			—			—			—			0.2
Other non-operating income (expense)	(1.0		)	(0.6		)	4.2			—			2.6			(1.7		)	0.7			9.8			—			8.8
	(117.4		)	(0.6		)	4.4			—			(113.6		)	(64.2		)	(0.7		)	10.3			—			(54.6		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(137.5		)	148.8			3.8			—			15.1			(104.4		)	325.3			9.0			—			229.9
INCOME TAX BENEFIT (EXPENSE)	7.3			—			(0.1		)	—			7.2
INCOME TAX EXPENSE																(13.5		)	(0.2		)	(0.2		)	—			(13.9		)
EQUITY IN INCOME OF SUBSIDIARIES	150.5			3.5			—			(154.0		)	—			194.7			9.1			—			(203.8		)	—
INCOME FROM CONTINUING OPERATIONS	20.3			152.3			3.7			(154.0		)	22.3			76.8			334.2			8.8			(203.8		)	216.0
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX	33.1			0.2			(2.7		)	—			30.6
NET INCOME	53.4			152.5			1.0			(154.0		)	52.9
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST	—			0.5			—			—			0.5
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	53.4		$	153.0		$	1.0		$	(154.0	)	$	53.4
OTHER COMPREHENSIVE INCOME (LOSS)	2.3			(84.3		)	1.8			82.5			2.3
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	55.7		$	68.7		$	2.8		$	(71.5	)	$	55.7
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax																4.0			(0.1		)	(139.1		)	—			(135.2		)
NET INCOME (LOSS)																$	80.8		$	334.1		$	(130.3	)	$	(203.8	)	$	80.8
OTHER COMPREHENSIVE INCOME																16.8			11.9			3.0			(14.9		)	16.8
TOTAL COMPREHENSIVE INCOME (LOSS)																$	97.6		$	346.0		$	(127.3	)	$	(218.7	)	$	97.6

4836

Table of Contents

Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income
For the Nine Months Ended September 30, 2018
(In Millions)
Cleveland-Cliffs Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product $ —
$ 1,525.9
$ —
$ —
$ 1,525.9
Freight and venture partners' cost reimbursements —
110.2
—
—
110.2
—
1,636.1
—
—
1,636.1
COST OF GOODS SOLD AND OPERATING EXPENSES —
(1,028.5 ) —
—
(1,028.5 )
SALES MARGIN —
607.6
—
—
607.6
OTHER OPERATING EXPENSE
Selling, general and administrative expenses (62.9 ) (17.8 ) (0.7 ) —
(81.4 )
Miscellaneous – net (0.4 ) (14.4 ) (1.4 ) —
(16.2 )
(63.3 ) (32.2 ) (2.1 ) —
(97.6 )
OPERATING INCOME (LOSS) (63.3 ) 575.4
(2.1 ) —
510.0
OTHER INCOME (EXPENSE)
Interest expense, net (91.9 ) (1.8 ) 0.6
—
(93.1 )
Gain on extinguishment of debt 0.2
—
—
—
0.2
Other non-operating income (expense) (2.6 ) 0.8
14.9
—
13.1
(94.3 ) (1.0 ) 15.5
—
(79.8 )
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (157.6 ) 574.4
13.4
—
430.2
INCOME TAX EXPENSE (13.8 ) (0.2 ) (0.4 ) —
(14.4 )
EQUITY IN INCOME OF SUBSIDIARIES 665.7
13.8
—
(679.5 ) —
INCOME FROM CONTINUING OPERATIONS 494.3
588.0
13.0
(679.5 ) 415.8
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX 24.3
12.8
65.7
—
102.8
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ 518.6
$ 600.8
$ 78.7
$ (679.5 ) $ 518.6
OTHER COMPREHENSIVE INCOME (LOSS) (204.4 ) 18.0
(227.5 ) 209.5
(204.4 )
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ 314.2
$ 618.8
$ (148.8 ) $ (470.0 ) $ 314.2



Unaudited Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2019
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided (used) by operating activities	$	20.1		$	134.0		$	(3.0	)	$	—		$	151.1
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(1.2		)	(293.2		)	—			—			(294.4		)
Deposits for property, plant and equipment	—			(6.3		)	(0.2		)	—			(6.5		)
Intercompany investing	(153.3		)	(1.2		)	—			154.5			—
Other investing activities	—			8.4			0.1			—			8.5
Net cash used by investing activities	(154.5		)	(292.3		)	(0.1		)	154.5			(292.4		)
FINANCING ACTIVITIES
Repurchase of common shares	(252.9		)	—			—			—			(252.9		)
Dividends paid	(28.9		)	—			—			—			(28.9		)
Proceeds from issuance of debt	720.9			—			—			—			720.9
Debt issuance costs	(6.8		)	—			—			—			(6.8		)
Repurchase of debt	(729.3		)	—			—			—			(729.3		)
Intercompany financing	—			152.9			1.6			(154.5		)	—
Other financing activities	(14.2		)	5.1			(1.8		)	—			(10.9		)
Net cash provided (used) by financing activities	(311.2		)	158.0			(0.2		)	(154.5		)	(307.9		)
DECREASE IN CASH AND CASH EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN OTHER CURRENT ASSETS RELATED TO DISCONTINUED OPERATIONS	(445.6		)	(0.3		)	(3.3		)	—			(449.2		)
LESS: DECREASE IN CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS, CLASSIFIED WITHIN OTHER CURRENT ASSETS	—			—			(3.2		)	—			(3.2		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(445.6		)	(0.3		)	(0.1		)	—			(446.0		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	819.8			0.7			2.7			—			823.2
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	374.2		$	0.4		$	2.6		$	—		$	377.2

4937

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Unaudited Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2018
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided (used) by operating activities	$	(82.1	)	$	83.5		$	(50.7	)	$	—		$	(49.3	)
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(0.3		)	(41.8		)	—			—			(42.1		)
Deposits for property, plant and equipment	—			(67.6		)	(4.7		)	—			(72.3		)
Intercompany investing	(35.2		)	(5.5		)	14.6			26.1			—
Proceeds on sales of assets	—			0.4			14.2			—			14.6
Net cash provided (used) by investing activities	(35.5		)	(114.5		)	24.1			26.1			(99.8		)
FINANCING ACTIVITIES
Debt issuance costs	(1.5		)	—			—			—			(1.5		)
Repurchase of debt	(15.3		)	—			—			—			(15.3		)
Intercompany financing	(14.6		)	31.5			9.2			(26.1		)	—
Other financing activities	(1.5		)	(1.0		)	(6.4		)	—			(8.9		)
Net cash provided (used) by financing activities	(32.9		)	30.5			2.8			(26.1		)	(25.7		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	—			—			(1.0		)	—			(1.0		)
DECREASE IN CASH AND CASH EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN OTHER CURRENT ASSETS RELATED TO DISCONTINUED OPERATIONS	(150.5		)	(0.5		)	(24.8		)	—			(175.8		)
LESS: DECREASE IN CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS, CLASSIFIED WITHIN OTHER CURRENT ASSETS	—			—			—			—			—
NET DECREASE IN CASH AND CASH EQUIVALENTS	(150.5		)	(0.5		)	(24.8		)	—			(175.8		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	948.9			2.1			27.3			—			978.3
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	798.4		$	1.6		$	2.5		$	—		$	802.5

Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2017
(In Millions)
Cleveland-Cliffs Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product $ —
$ 1,195.0
$ —
$ —
$ 1,195.0
Freight and venture partners' cost reimbursements —
159.2
—
—
159.2
—
1,354.2
—
—
1,354.2
COST OF GOODS SOLD AND OPERATING EXPENSES —
(1,002.7 ) —
—
(1,002.7 )
SALES MARGIN —
351.5
—
—
351.5
OTHER OPERATING INCOME (EXPENSE)
Selling, general and administrative expenses (57.9 ) (14.4 ) (3.2 ) —
(75.5 )
Miscellaneous – net (2.3 ) (13.3 ) 16.9
—
1.3
(60.2 ) (27.7 ) 13.7
—
(74.2 )
OPERATING INCOME (LOSS) (60.2 ) 323.8
13.7
—
277.3
OTHER INCOME (EXPENSE)
Interest expense, net (99.8 ) —
0.7
—
(99.1 )
Loss on extinguishment of debt (165.4 ) —
—
—
(165.4 )
Other non-operating income (expense) (3.0 ) (2.2 ) 12.8
—
7.6
(268.2 ) (2.2 ) 13.5
—
(256.9 )
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (328.4 ) 321.6
27.2
—
20.4
INCOME TAX BENEFIT (EXPENSE) 7.5
—
(0.3 ) —
7.2
EQUITY IN INCOME OF SUBSIDIARIES 393.5
10.1
—
(403.6 ) —
INCOME FROM CONTINUING OPERATIONS 72.6
331.7
26.9
(403.6 ) 27.6
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax (15.5 ) 1.1
40.0
—
25.6
NET INCOME 57.1
332.8
66.9
(403.6 ) 53.2
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST —
3.9
—
—
3.9
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ 57.1
$ 336.7
$ 66.9
$ (403.6 ) $ 57.1
OTHER COMPREHENSIVE INCOME (LOSS) 4.2
(67.8 ) (17.5 ) 85.3
4.2
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ 61.3
$ 268.9
$ 49.4
$ (318.3 ) $ 61.3

~~Table of Contents~~

Unaudited Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2018
(In Millions)
Cleveland-Cliffs Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net cash provided (used) by operating activities $ (100.6 ) $ 425.6
$ (136.3 ) $ —
$ 188.7
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1.1 ) (110.2 ) (0.1 ) —
(111.4 )
Deposits for property, plant and equipment —
(78.1 ) (5.2 ) —
(83.3 )
Intercompany investing 185.7
(6.3 ) 120.7
(300.1 ) —
Proceeds on sale of assets —
0.6
17.9
—
18.5
Other investing activities —
2.5
—
—
2.5
Net cash provided (used) by investing activities 184.6
(191.5 ) 133.3
(300.1 ) (173.7 )
FINANCING ACTIVITIES
Debt issuance costs (1.5 ) —
—
—
(1.5 )
Repurchase of debt (16.3 ) —
—
—
(16.3 )
Distributions of partnership equity —
(44.2 ) —
—
(44.2 )
Intercompany financing (120.7 ) (188.6 ) 9.2
300.1
—
Other financing activities (1.9 ) (1.5 ) (42.3 ) —
(45.7 )
Net cash used by financing activities (140.4 ) (234.3 ) (33.1 ) 300.1
(107.7 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH —
—
(2.3 ) —
(2.3 )
DECREASE IN CASH AND CASH EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN CURRENT ASSETS OF DISCONTINUED OPERATIONS (56.4 ) (0.2 ) (38.4 ) —
(95.0 )
LESS: DECREASE IN CASH AND CASH EQUIVALENTS CLASSIFIED WITHIN CURRENT ASSETS OF DISCONTINUED OPERATIONS —
—
(13.8 ) —
(13.8 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (56.4 ) (0.2 ) (24.6 ) —
(81.2 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 948.9
2.1
27.3
—
978.3
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 892.5
$ 1.9
$ 2.7
$ —
$ 897.1

~~Table of Contents~~

Unaudited Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2017
(In Millions)
Cleveland-Cliffs Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net cash provided (used) by operating activities $ (162.9 ) $ 293.9
$ 75.7
$ —
$ 206.7
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1.8 ) (59.4 ) (1.5 ) —
(62.7 )
Deposits for property, plant and equipment —
(11.3 ) (4.9 ) —
(16.2 )
Intercompany investing 160.6
(6.5 ) (45.0 ) (109.1 ) —
Proceeds on sales of assets —
2.2
—
—
2.2
Other investing activities (7.7 ) —
—
—
(7.7 )
Net cash provided (used) by investing activities 151.1
(75.0 ) (51.4 ) (109.1 ) (84.4 )
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 661.3
—
—
—
661.3
Proceeds from issuance of debt 1,057.8
—
—
—
1,057.8
Debt issuance costs (12.0 ) —
—
—
(12.0 )
Repurchase of debt (1,720.7 ) —
—
—
(1,720.7 )
Acquisition of noncontrolling interest (105.0 ) —
—
—
(105.0 )
Distributions of partnership equity —
(53.0 ) —
—
(53.0 )
Intercompany financing 45.0
(162.2 ) 8.1
109.1
—
Other financing activities (0.6 ) (3.8 ) (12.6 ) —
(17.0 )
Net cash used by financing activities (74.2 ) (219.0 ) (4.5 ) 109.1
(188.6 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH —
—
3.7
—
3.7
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN CURRENT ASSETS OF DISCONTINUED OPERATIONS (86.0 ) (0.1 ) 23.5
—
(62.6 )
LESS: INCREASE IN CASH AND CASH EQUIVALENTS CLASSIFIED WITHIN CURRENT ASSETS OF DISCONTINUED OPERATIONS —
—
23.1
—
23.1
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (86.0 ) (0.1 ) 0.4
—
(85.7 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 283.4
2.5
26.9
—
312.8
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 197.4
$ 2.4
$ 27.3
$ —
$ 227.1



Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and other factors that may affect our future results. We believe it is important to read our MD&A in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 as well as other publicly available information.

Overview

Founded in 1847, Cleveland-Cliffs Inc. is the largest and oldest independent iron ore mining company in the United States. We are a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. By 2020, we expect to be the sole producer of HBI in the Great Lakes region with the development of our first production plant in Toledo, Ohio. Driven by the core values of safety, social, environmental and capital stewardship, our employees endeavor to provide all stakeholders with operating and financial transparency.

~~Table of Contents~~

The key driver of our business is demand for steelmaking raw materials from U.S. steelmakers. During the first ~~eight~~five months of ~~2018,~~2019, the U.S. produced approximately 5737 million metric tons of crude steel, ~~a 4% increase~~which is up 6% when compared to the same period in ~~2017,~~2018, or about 5% of total global crude steel production. U.S. total steel capacity utilization was approximately ~~77%~~81% in the first ~~eight~~six months of ~~2018, compared to 75% during~~2019, which is an approximate 6% increase from the same period in ~~2017.~~2018. Through the first ~~eight~~five months of ~~2018,~~2019, global crude steel production increased about 5% compared to the same period in ~~2017,~~2018, driven by an approximate 6%10% increase in Chinese crude steel ~~production~~.production.

Table of Contents

For the first six months of 2019, conditions in the global iron ore market were at their most favorable levels since 2014. In January 2019, a tailings dam operated by Vale S.A., the largest iron ore miner in the world, suffered a catastrophic failure resulting in hundreds of fatalities in Brumadinho, Brazil. The fallout of this disaster has led to multiple disruptions in iron ore supply. Due in large part to these disruptions and China's healthy steel production levels, the Platts 62% Price, ~~decreased 6% to an average price of $69~~a key component in our supply contracts, averaged $91 per metric ton ~~for~~in the ~~nine~~first six months ~~ended September 30, 2018,~~of 2019, a 30% increase compared to $70 per metric ton in the ~~same period~~first six months of 2018.

The Vale S.A. incident in ~~2017. Changes~~Brazil also intensified the already prevailing shortage in the iron ore ~~price impact our revenue rates, but~~pellet market. This shortage, along with the price of the commodity and our realized rate are not fully correlated. Pricing mechanisms in our contracts reference this metric, but our prices are somewhat protected from potential volatility given that it is just one of many of the inputs used in contract pricing formulas. While iron ore pricing over the past six months has remained stable, we recognize that changes in behavior of the major iron ore producers and/or Chinese steelmakers could either lift or put pressurecontinued global focus on iron ore ~~prices in~~product quality, pushed pellet premiums higher during the ~~near term.~~

first six months of the year. The Atlantic Basin pellet premium, another important pricing factor in our contracts, averaged ~~$58~~$67 per metric ton for the first ~~nine~~six months of ~~2018,~~2019, a ~~30%~~17% increase compared to the same period in ~~2017.~~2018. We believe the supply-demand dynamics of this market will continue to be favorable for ~~us. Heightened demand for iron ore pellets is a result of rapidly increasing Chinese demand~~us for the ~~most productive and environmentally friendly feedstock.~~near term. Iron ore pellets remain scarce in the international market and new capacity is unlikely to come online in the near term due to the time and expense required to do so. We believe this scarcity will support and potentially increase these multi-year high premiums for pellet products in the foreseeable future.

The price for domestic hot-rolled coil steel, which is an important attribute in the calculation of supplemental revenue in ~~a customer's~~one customer supply agreement, averaged ~~$840~~$653 per net ton for the first ~~nine~~six months of ~~2018, 35% higher~~2019, 20% lower than the same period last year. ~~The price of~~While purchasers scrambled to place steel ~~was impacted positively~~orders in the ~~first nine months~~wake of ~~2018 by healthy U.S. manufacturing activity and inflation on major steel input costs, and~~the Section 232 tariffs implemented last year, the U.S. ~~government's implementation of~~market has since cooled and prices have moved substantially lower due to inventory destocking and increased supply, in a ~~25% tariff on~~market with effectively flat apparent demand. Despite these negative pressures, we believe steel ~~imports from many of its major trade counterparts. Because the United States is the largest importer of steel~~prices will recover in the ~~world, we believe these tariffs should not only alleviate some national security concerns, but also keep~~back half of the ~~prices for domestic hot-rolled coil~~year as supply rationalizations correct market imbalances, inventory is restocked and higher raw material costs are pushed through to steel ~~elevated above historical averages for as long as they remain in place. As such, we remain positive on our outlook for the domestic steel market.~~consumers.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, our consolidated revenues were ~~$741.8~~$743.2 million and ~~$1,636.1~~$900.2 million, respectively, with net income from continuing operations per diluted share of ~~$0.64~~$0.57 and ~~$1.37,~~$0.47, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, our consolidated revenues were ~~$596.7~~$714.3 million and ~~$1,354.2~~$894.3 million, respectively, with net income from continuing operations per diluted share of ~~$0.08~~$0.76 and ~~$0.11,~~$0.72, respectively.

~~Third~~Second Quarter ~~2018~~2019 Recent Developments

Share Repurchase Program

On ~~October 18,~~November 24, 2018, ~~the~~our Board of Directors ~~declared a quarterly cash dividend on our~~authorized us to repurchase common shares of ~~$0.05 per share. The cash dividend will be payable on January 15,~~up to a maximum amount of $200 million. On April 24, 2019, ~~to shareholders of record as of the close of business on January 4, 2019. The~~we announced that our Board of Directors ~~determined that~~increased the ~~cash dividend may be paid out~~common share repurchase authorization by an additional $100 million. During the three and six months ended June 30, 2019, we repurchased 12.9 million and 24.4 million common shares at a cost of ~~capital surplus. We expect to continue to pay a dividend on a quarterly basis, subject to the approval of the Board of Directors. The timing~~$128.6 million and amount of future dividends will depend on the Board of Directors' assessment of our operations, financial condition, projected liabilities, compliance with any restrictions contained in agreements governing our debt, restrictions imposed by applicable law and other factors.

On October 5, 2018, we redeemed the entirety of our outstanding Senior Notes Due 2020. The aggregate principal amount outstanding of the Senior Notes Due 2020 was approximately $211 million. Pursuant to the terms of the indenture governing the Senior Notes Due 2020, approximately $218$252.9 million in the aggregate, including ~~make-whole premiums~~commissions and ~~accrued~~fees, respectively. As of June 30, 2019, there was $0.2 million available under the authorization. The share repurchase program is effective until December 31, 2019.

Debt Issuance and ~~unpaid interest to, but not including,~~Repurchases

On May 13, 2019, we completed an issuance of $750 million aggregate principal amount of 5.875% Senior Notes due 2027 at 96.125% of face value for net proceeds of $714 million. The notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly-owned domestic subsidiaries. The notes issuance was a private transaction exempt from the ~~redemption date, was paid to holders~~registration requirements of the Securities Act of 1933. Pursuant to the registration rights agreement executed as part of this offering, we agreed to file a registration statement with the SEC with respect to a registered offer to exchange the 5.875% Senior Notes ~~Due 2020.~~due 2027 for publicly registered notes within 365 days of the closing date, with all significant terms and conditions remaining the same.

~~During August 2018, we completed a sale of substantially~~The net proceeds from the notes offering, along with cash on hand, were used to redeem all of our then-outstanding 4.875% Senior Notes due 2021 and to fund the ~~remaining assets~~repurchase of $600 million aggregate principal amount of our ~~Asia Pacific Iron Ore business~~outstanding 5.75% Senior Notes due 2025 pursuant to ~~Mineral Resources Limited. As~~ a ~~result~~tender offer. The aggregate principal amount of ~~this transaction, our previously disclosed costs of closing the Australian operations were reduced by approximately $85~~4.875% Senior Notes due 2021 redeemed was $114 million. ~~Included in this amount are asset retirement obligations~~

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assumed by Mineral Resources Limited. In addition, as a result of the liquidation of substantially all of the Australian subsidiaries' net assets, the historical changes in foreign currency translation recorded in ~~Accumulated other comprehensive loss~~ ~~in the Statements of Unaudited Condensed Consolidated Financial Position of $228.1 million was reclassified and recognized as a gain in~~ ~~Income from Discontinued Operations, net of tax~~ ~~in the Statements of Unaudited Condensed Consolidated Operations.~~

Results of Operations

The following is a summary of ~~U.S. Iron Ore~~Mining and Pelletizing results for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~:2018:


	(In Millions)																								(In Millions)
							Changes due to:																								Changes due to:
	Three Months Ended September 30,						Revenue and cost rate				Sales volume				Idle cost/production volume variance			Freight and reimburse-ment			Total change				Three Months Ended June 30,						Revenue and cost rate			Sales volume				Freight and reimburse-ment			Total change
	2018			2017							Sales volume				Idle cost/production volume variance		2019				Total change			2018							Revenue and cost rate			Sales volume				Freight and reimburse-ment			Total change
Revenues from product sales and services	$	741.8		$	596.7		Revenue and cost rate			$	99.7			$	54.3		$	Freight and reimburse-ment		—		$	(8.9	)		$	145.1		$	747.2		$	714.3		$	(0.2	)		$	29.6		$	3.5	$	32.9
Cost of goods sold and operating expenses	(480.2		)	(438.9		)	(13.5		)		(38.2		)		1.5			8.9			(41.3		)
Cost of goods sold																									(482.6		)	(429.8		)	(32.0		)	(17.3		)		(3.5		)	(52.8		)
Sales margin	$	261.6		$	157.8		$	86.2			$	16.1			$	1.5		$	—		$	103.8			$	264.6		$	284.5		$	(32.2	)	$	12.3			$	—		$	(19.9	)


		Three Months Ended September 30,										Three Months Ended June 30,
Per Ton Information		2018		2017		Difference			Percent change			2019		2018		Difference			Percent change
Realized product revenue rate¹		$	105.65	$	90.52	$	15.13		16.7	%		$	112.64	$	112.60	$	0.04		—	%
Cash cost of goods sold and operating expense rate^1,2		62.54		60.79		1.75			2.9	%
Cash cost of goods sold rate^1,2												67.00		62.32		4.68			7.5	%
Depreciation, depletion & amortization		2.75		2.81		(0.06		)	(2.1	)%		3.15		2.61		0.54			20.7	%
Total cost of goods sold and operating expenses rate		65.29		63.60		1.69			2.7	%
Total cost of goods sold												70.15		64.93		5.22			8.0	%
Sales margin		$	40.36	$	26.92	$	13.44		49.9	%		$	42.49	$	47.67	$	(5.18	)	(10.9	)%

Sales tons³ (In thousands)		6,481		5,863								6,227		5,968
Production tons³(In thousands)
Production tons³(In thousands):
Total		6,200		6,048								6,666		6,970
Cliffs’ share of total		4,719		4,265								5,177		5,512

¹ Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin. Revenues and expenses also exclude venture partner cost reimbursements.
² Cash cost of goods sold and operating expense rate is a non-GAAP financial measure. Refer to "Non-GAAP Reconciliation" for reconciliation in dollars back to our consolidated financial statements.
¹ Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin.											¹ Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin.
² Cash cost of goods sold rate is a non-GAAP financial measure. Refer to "Non-GAAP Reconciliation" for reconciliation in dollars back to our consolidated financial statements.											² Cash cost of goods sold rate is a non-GAAP financial measure. Refer to "Non-GAAP Reconciliation" for reconciliation in dollars back to our consolidated financial statements.
³ Tons are long tons.	³ Tons are long tons.										³ Tons are long tons.

Sales margin was ~~$261.6~~$264.6 million for the three months ended ~~September~~June 30, ~~2018,~~2019, compared with ~~$157.8~~$284.5 million for the three months ended ~~September~~June 30, ~~2017.~~2018. Sales margin per long ton ~~increased 49.9%~~decreased 10.9% to ~~$40.36~~$42.49 during the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the three months ended ~~September~~June 30, ~~2017.~~2018.

Revenue increased by ~~$154.0~~$29.4 million during the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the prior-year period, excluding the domestic freight ~~and reimbursements decrease of $8.9 million, driven by:~~

An increase in the average year-to-date realized product revenue rate of $15 per long ton or 16.7% during the three months ended September 30, 2018, compared to the same period in the previous year, which resulted in an increase of ~~$100~~$3.5 million. This iswas predominantly due ~~to:~~


◦	An increase in the estimated average annual daily market price for hot-rolled coil steel, which positively affected the realized revenue rate for current-year sales by $12 per long ton or $79 million during the third quarter of 2018; and


◦	~~Higher pellet premiums, which positively affected the realized revenue rate by $7 per long ton or $45 million.~~

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◦	~~These increases were offset partially by:~~


▪	~~Higher index freight rates, a component in most of our contract pricing formulas, which negatively affected the realized revenue rate by $4 per long ton or $24 million; and~~


▪	Lower full-year estimated Platts 62% Price as of September 30, 2018, compared to the prior year full-year estimated Platts 62% Price, which negatively affected the realized revenue rate by $2 per long ton or $14 million.

~~Higher~~to higher sales volume of ~~0.6~~0.3 million long tons, which resulted in increased revenue of ~~$54~~$30 million, ~~predominantly~~ due to ~~increased demand from two customers resulting in two additional contracts that started during~~ the ~~current year.~~timing of customer demand.

~~Cost~~Despite the market volatility of ~~goods sold and operating expenses increased $50.2 million~~several inputs to our contract pricing, the average quarter-to-date realized product revenue rate remained relatively flat during the three months ended ~~September~~June 30, 2018, excluding the freight and reimbursements decrease of $8.9 million, compared to the same period in 2017. This was predominantly as a result of an increase in sales volumes as discussed above, which resulted in increased costs of $38 million period-over-period.

~~Production~~

Our share of production increased by 10.6% for the three months ended September 30, 2018 when compared to the same period in 2017. The increase in production volume primarily is attributable to incremental tonnage of 0.3 million long tons as a result of the increase in ownership of Tilden to 100% in the third quarter of 2017, 0.1 million long tons due to increased productivity at United Taconite resulting from the Mustang project work that was occurring during the prior-year comparable period, and 0.1 million long tons at Tilden as a result of repairs and maintenance, which reduced production during the prior-year comparable period.

~~Table of Contents~~

~~The following is a summary of U.S. Iron Ore results for the nine months ended September 30, 2018 and 2017:~~

(In Millions)
Changes due to:
Nine Months Ended
September 30,
Revenue
and cost rate
Sales volume Idle cost/production volume variance Freight and reimburse-ment Total change
2018 2017
Revenues from product sales and services $ 1,636.1
$ 1,354.2
$ 263.1
$ 67.8
$ —
$ (49.0 ) $ 281.9
Cost of goods sold and operating expenses (1,028.5 ) (1,002.7 ) (28.8 ) (48.3 ) 2.3
49.0
(25.8 )
Sales margin $ 607.6
$ 351.5
$ 234.3
$ 19.5
$ 2.3
$ —
$ 256.1

Nine Months Ended
September 30,
Per Ton Information 2018 2017 Difference Percent change
Realized product revenue rate¹
$ 108.53
$ 89.91
$ 18.62
20.7 %
Cash cost of goods sold and operating expense rate^1,2
61.81
59.73
2.08
3.5 %
Depreciation, depletion & amortization 3.50
3.73
(0.23 ) (6.2 )%
Total cost of goods sold and operating expenses rate 65.31
63.46
1.85
2.9 %
Sales margin $ 43.22
$ 26.45
$ 16.77
63.4 %

Sales tons³(In thousands)
14,060
13,291

Production tons³(In thousands)

Total 19,060
18,353

Cliffs’ share of total 14,731
13,233

¹ Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin. Revenues and expenses also exclude venture partner cost reimbursements, where applicable.
² Cash cost of goods sold and operating expense rate is a non-GAAP financial measure. Refer to "Non-GAAP Reconciliation" for reconciliation in dollars back to our consolidated financial statements.
³ Tons are long tons.

Sales margin was $607.6 million for the nine months ended September 30, 2018, compared with $351.5 million for the nine months ended September 30, 2017. Sales margin per long ton increased 63.4% to $43.22 in the first nine months of 2018 compared to the first nine months of 2017.

~~Revenue increased by $330.9 million during the nine months ended September 30, 2018, compared to the prior-year period, excluding the freight and reimbursements decrease of $49.0 million, driven by:~~

~~An increase in the average year-to-date realized product revenue rate of $19 per long ton or 20.7% during the nine months ended September 30, 2018,~~2019, compared to the same period in the previous year. The components of our average quarter-to-date realized product revenue rate were driven by the following:

Higher full year estimated Platts 62% Price as of June 30, 2019, compared to the prior year period's full-year estimated Platts 62% Price, which ~~resulted~~positively affected the realized revenue rate by $17 per long ton or $105 million; and

Higher full-year estimated pellet premiums which positively affected the realized revenue rate by $5 per long ton or $31 million.

These increases were offset partially by a decrease in ~~an increase~~the full year hot-rolled coil steel price, which negatively affected the realized revenue rate by $21 per long ton or $133 million during the second quarter of ~~$263 million. This is predominantly due to:~~2019.

◦

An increase in the estimated average annual daily market price for hot-rolled coil steel, which positively affected both the realized revenue rate for current-year sales and the supplemental revenue associated with prior-period sales tons that will be consumed during 2018 and ultimately priced at the final full-year 2018 rate. These increases affected the realized revenue rate by $14 per long ton or $195 million during the first nine months of 2018; and


◦	~~Higher pellet premiums, which positively affected the realized revenue rate by $6 per long ton or $89 million; and~~


◦	~~Changes in customer and contract mix, which positively affected the realized revenue rate by $3 per long ton or $43 million.~~

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◦	~~These increases were offset partially by:~~


▪	~~An increase in index freight rates, a component in most of our contract pricing formulas, which negatively affected the realized revenue rate by $3 per long ton or $41 million; and~~


▪	Lower full-year estimated Platts 62% Price as of September 30, 2018, compared to the prior year full-year estimated Platts 62% Price, which negatively affected the realized revenue rate by $3 per long ton or $37 million.

Cost of goods sold ~~and operating expenses~~ increased ~~$74.8~~$49.3 million during the ~~nine~~three months ended ~~September~~June 30, ~~2018,~~2019, excluding the domestic freight ~~and reimbursements decrease~~increase of ~~$49.0~~$3.5 million, compared to the same period in ~~2017,~~2018. This is predominantly ~~as a result of:~~

~~An increase in sales volume of 0.8 million long tons, which resulted in increased costs of $48 million period-over-period; and~~due to:

Unfavorable change in the full-year standard cost driven by ~~higher employment-related~~increased royalties and ~~profit sharing~~labor costs of ~~$23~~$9 million, or $2$1 per long ton, increased ~~royalties~~commodity supply and transportation rates of ~~$13~~$8 million, or $1 per long ton, and increased ~~transportation rates~~maintenance and stripping costs of $9$5 million, or $1 per long ~~ton.~~ton;

~~These increases were offset partially by a favorable~~An unfavorable impact of $7 million, or $1 per long ton, to the full-year standard cost as a result of an expected LIFO layer liquidation in the prior year which was not recurring; and

An increase in sales volume of ~~$19~~0.3 million ~~or $1 per~~ long ~~ton.~~tons, which resulted in increased costs of $17 million period-over-period.

Production

Our share of production ~~increased~~decreased by ~~11.3%~~6% for the ~~nine~~three months ended ~~September~~June 30, ~~2018~~2019, when compared to the same period in ~~2017.~~2018. The ~~increase~~decrease in production volume primarily is attributable to ~~incremental tonnage of 0.9 million long tons as a result of the increase in ownership of Tilden to 100% in the third quarter of 2017, and incremental tonnage of 0.4 million long tons~~lower operating times due to ~~lower production~~unplanned maintenance at Tilden.

Additionally, during the ~~prior-year comparable period at~~three months ended June 30, 2019, Northshore ~~as a result~~began production of ~~the timing of scheduled annual maintenance shut-downs.~~DR-grade pellets to supply our HBI production plant.

~~Other Operating Income (Expense)~~

The following is a summary of ~~Other operating income (expense)~~:Mining and Pelletizing results for the six months ended June 30, 2019 and 2018:

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 Variance
Favorable/
(Unfavorable) 2018 2017
Variance
Favorable/
(Unfavorable)
Selling, general and administrative expenses $ (30.1 ) $ (23.8 ) $ (6.3 ) $ (81.4 ) $ (75.5 ) $ (5.9 )
Miscellaneous – net (6.0 ) (5.3 ) (0.7 ) (16.2 ) 1.3
(17.5 )
$ (36.1 ) $ (29.1 ) $ (7.0 ) $ (97.6 ) $ (74.2 ) $ (23.4 )



	(In Millions)
							Changes due to:
	Six Months Ended June 30,						Revenue and cost rate			Sales volume			Freight			Total change
	2019			2018			Revenue and cost rate			Sales volume			Freight			Total change
Revenues from product sales and services	$	904.2		$	894.3		$	(16.9	)	$	22.5		$	4.3		$	9.9
Cost of goods sold	(608.7		)	(548.3		)	(43.0		)	(13.1		)	(4.3		)	(60.4		)
Sales margin	$	295.5		$	346.0		$	(59.9	)	$	9.4		$	—		$	(50.5	)



	Six Months Ended June 30,
Per Ton Information	2019		2018		Difference			Percent change
Realized product revenue rate¹	$	108.89	$	110.99	$	(2.10	)	(1.9	)%
Cash cost of goods sold rate^1,2	65.99		61.20		4.79			7.8	%
Depreciation, depletion & amortization	4.90		4.14		0.76			18.4	%
Total cost of goods sold	70.89		65.34		5.55			8.5	%
Sales margin	$	38.00	$	45.65	$	(7.65	)	(16.8	)%

Sales tons³(In thousands)	7,777		7,579
Production tons³(In thousands):
Total	12,345		12,860
Cliffs’ share of total	9,578		10,012

¹ Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin.
² Cash cost of goods sold rate is a non-GAAP financial measure. Refer to "Non-GAAP Reconciliation" for reconciliation in dollars back to our consolidated financial statements.
³ Tons are long tons.

Sales margin was $295.5 million for the six months ended June 30, 2019, compared with $346.0 million for the six months ended June 30, 2018. Sales margin per long ton decreased 16.8% to $38.00 in the first six months of 2019 compared to the first six months of 2018.

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Revenue increased by $5.6 million during the six months ended June 30, 2019, compared to the prior-year period, excluding the domestic freight increase of $4.3 million. This was predominantly due to higher sales volume of 0.2 million long tons, which resulted in increased revenue of $22.5 million, due to the timing of customer demand.

This increase was offset partially by a decrease in the average year-to-date realized product revenue rate of $2 per long ton, or 1.9%, during the six months ended June 30, 2019, compared to the first six months of 2018, which resulted in a decrease of $17 million. This is predominantly due to:

Lower full-year hot-rolled coil steel price, which negatively affected the realized revenue rate for current-year sales by $20 per long ton or $158 million.

This decrease was offset partially by higher full-year estimated Platts 62% Price as of June 30, 2019, compared to the prior-year period, which positively affected the realized revenue rate by $15 per long ton or $114 million; and

Higher full-year estimated pellet premiums, which positively affected the realized revenue rate by $4 per long ton or $30 million.

Cost of goods sold increased $56.1 million during the six months ended June 30, 2019, excluding the domestic freight increase of $4.3 million, compared to the same period in 2018. This is predominantly due to:

Unfavorable change in the full-year standard cost driven by increased royalties and labor costs, due to increased revenue, of $11 million, or $1 per long ton, increased commodity supply and transportation rates of $9 million, or $1 per long ton, and increased maintenance and stripping costs of $7 million, or $1 per long ton;

An unfavorable impact of $9 million, or $1 per long ton, to the full-year standard cost as a result of an expected LIFO layer liquidation in the prior year which was not recurring; and

An increase in sales volume of 0.2 million long tons, which resulted in increased costs of $13 million period-over-period.

Production

Our share of production was relatively consistent for the six months ended June 30, 2019, when compared to the same period in 2018, decreasing approximately 4%.

Other Operating Expense

The following is a summary of Other operating expense:



	(In Millions)
	Three Months Ended June 30,									Six Months Ended June 30,
	2019			2018			Variance Favorable/ (Unfavorable)			2019			2018			Variance Favorable/ (Unfavorable)
Selling, general and administrative expenses	$	(30.6	)	$	(26.2	)	$	(4.4	)	$	(58.7	)	$	(51.3	)	$	(7.4	)
Miscellaneous – net	(5.6		)	(4.1		)	(1.5		)	(9.2		)	(10.2		)	1.0
	$	(36.2	)	$	(30.3	)	$	(5.9	)	$	(67.9	)	$	(61.5	)	$	(6.4	)

Selling, general and administrative expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, had an unfavorable variance of ~~$6.3~~$4.4 million and ~~$5.9~~$7.4 million, respectively, from the comparable periods in ~~2017,~~2018. The unfavorable variances were primarily due to increased employment costs, including severance and incentive-based compensation.

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Other Income (Expense)

The following is a summary of ~~Miscellaneous – net~~Other income (expense):

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 Variance
Favorable/
(Unfavorable) 2018 2017 Variance
Favorable/
(Unfavorable)
Foreign exchange remeasurement $ (0.2 ) $ (1.3 ) $ 1.1
$ (0.7 ) $ 14.0
$ (14.7 )
Empire idle costs (4.5 ) (5.2 ) 0.7
(14.1 ) (17.7 ) 3.6
Impairment of long-lived assets (1.1 ) —
(1.1 ) (1.1 ) —
(1.1 )
Other (0.2 ) 1.2
(1.4 ) (0.3 ) 5.0
(5.3 )
$ (6.0 ) $ (5.3 ) $ (0.7 ) $ (16.2 ) $ 1.3
$ (17.5 )



	(In Millions)
	Three Months Ended June 30,									Six Months Ended June 30,
	2019			2018			Variance Favorable/ (Unfavorable)			2019			2018			Variance Favorable/ (Unfavorable)
Interest expense, net	$	(26.1	)	$	(31.2	)	$	5.1		$	(51.2	)	$	(63.6	)	$	12.4
Gain (loss) on extinguishment of debt	(17.9		)	0.2			(18.1		)	(18.2		)	0.2			(18.4		)
Other non-operating income (expense):
Net periodic benefit costs other than service cost component	(0.1		)	3.7			(3.8		)	(0.2		)	7.3			(7.5		)
Other	0.7			0.7			—			1.2			1.5			(0.3		)
	$	(43.4	)	$	(26.6	)	$	(16.8	)	$	(68.4	)	$	(54.6	)	$	(13.8	)

~~Miscellaneous –~~Interest expense, net for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, had an unfavorable variance of $0.7~~2019 was $5.1 million and ~~$17.5~~$12.4 million lower than the prior-year periods, respectively, ~~from the comparable periods in 2017. For the nine months ended September 30, 2017, there was a favorable impact of $14.7 million~~primarily due to ~~a change in foreign exchange remeasurement of intercompany loans that was not recurring in the current year.~~

~~Other Income (Expense)~~

~~The following is a summary of~~ ~~Other income (expense)~~:

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 Variance
Favorable/
(Unfavorable) 2018 2017
Variance
Favorable/
(Unfavorable)
Interest expense, net $ (29.5 ) $ (27.6 ) $ (1.9 ) $ (93.1 ) $ (99.1 ) $ 6.0
Gain (loss) on extinguishment of debt —
(88.6 ) 88.6
0.2
(165.4 ) 165.6
Other non-operating income 4.3
2.6
1.7
13.1
7.6
5.5
$ (25.2 ) $ (113.6 ) $ 88.4
$ (79.8 ) $ (256.9 ) $ 177.1

~~Interest expense, net~~ ~~for the three months ended September 30, 2018 had~~ an unfavorable variance of $1.9 million versus the comparable prior-year period, predominantly as a result of the issuance of 5.75% 2025 Senior Notes, 4.875% 2024 Senior Notes and 1.50% 2025 Convertible Senior Notes in the second half of 2017. The increase in ~~Interest expense, net~~ ~~was partially offset by~~capitalized interest related to the ~~redemption in full of all of our outstanding First Lien Notes in~~HBI production plant and upgrades at the ~~second half of 2017 and an incrementally favorable variance of $3.7 million attributable to interest income from our commercial paper and certificates of deposit.~~

~~Interest expense, net~~ ~~for the nine months ended September 30, 2018 had a favorable variance of $6.0 million versus the comparable prior-year periods, predominantly as a result of the~~Northshore plant. Additionally, debt restructuring activities ~~that occurred throughout 2017, including the redemption in full of all of our outstanding First Lien Notes~~during 2018 and ~~Second Lien Notes. In addition, there was a $9.0 million incrementally favorable variance attributable to~~2019 reduced 2019 interest income from our commercial paper and certificates of deposit. These favorable variances were offset partially by an increase in expense from the issuance of our 5.75% 2025 Senior Notes, 4.875% 2024 Senior Notes and 1.50% 2025 Convertible Senior Notes in the second half of 2017.expense.

The loss on extinguishment of debt of ~~$88.6~~$17.9 million and ~~$165.4~~$18.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, primarily related to the ~~repurchase of certain of our senior notes and the~~ redemption ~~in full~~ of all of our ~~outstanding First Lien~~then-outstanding 4.875% Senior Notes ~~1.5 Lien~~due 2021 and the $600 million repurchase of our 5.75% Senior Notes ~~and Second Lien Notes.~~

~~Table~~due 2025 completed during the second quarter of ~~Contents~~

2019.

Income Taxes

Our effective tax rate is impacted by permanent items, ~~such as depletion and the relative mix of income we earn in various foreign jurisdictions with tax rates that differ from the U.S. statutory rate.~~primarily depletion. It also is affected by discrete items that may occur in any given period but are not consistent from period to period. The following represents a summary of our tax provision and corresponding effective rates:



	(In Millions)
	Three Months Ended June 30,									Six Months Ended June 30,
	2019			2018			Variance			2019			2018			Variance
Income tax benefit (expense)	$	(22.0	)	$	1.8		$	(23.8	)	$	(18.3	)	$	(13.9	)	$	(4.4	)
Effective tax rate	12.0		%	(0.8		)%	12.8		%	11.6		%	6.0		%	5.6		%

(In Millions)
Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 Variance 2018 2017 Variance
Income tax benefit (expense) $ (0.5 ) $ 7.2
$ (7.7 ) $ (14.4 ) $ 7.2
$ (21.6 )
Effective tax rate 0.2 % (47.7 )% 47.9 % 3.3 % (35.2 )% 38.5 %

Our tax provision for the three months ended ~~September~~June 30, ~~2018~~2019 was an expense of ~~$0.5~~$22.0 million and a ~~0.2%~~12.0% effective tax rate compared with a benefit of ~~$7.2~~$1.8 million and a negative ~~47.7%~~0.8% effective tax rate for the comparable prior-year period. Our tax provision for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was an expense of ~~$14.4~~$18.3 million and a ~~3.3%~~11.6% effective tax rate compared with ~~a $7.2~~an expense of $13.9 million ~~benefit~~ and a ~~negative 35.2%~~6.0% effective tax rate for the comparable prior-year period. The difference in the effective rate and income tax expense from the comparable prior-year periods is primarily ~~related~~relates to the reversal of valuation allowance in the prior year as well as discrete items recorded in each period.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we recorded discrete items that resulted in an income tax ~~expense~~benefit of ~~$0.2~~$0.4 million and ~~$13.9~~$0.8 million, respectively. For the ~~nine~~three and six months ended ~~September~~June 30, 2018, we recorded discrete items that resulted in a benefit of $2.0 million and an expense of $13.7 million, respectively. The $2.0 million benefit primarily relates to the ~~$13.9~~reversal of a reserve for uncertain tax positions due to a lapse in the statute of limitations. The $13.7 million expense relates primarily to a $14.5 million reduction of the refundable AMT credit recorded in Income tax receivable, non-current in our Statements of Unaudited Condensed Consolidated Financial Position based on the sequestration guidance issued by the Internal Revenue Service during the first quarter of 2018. This position was subsequently reversed by the Internal Revenue Service during the fourth quarter of 2018. The ~~$14.5 million current year~~prior-year period expense iswas a reduction of an asset and ~~will~~did not result in a cash tax outlay. ~~For the three and nine months ended September 30, 2017, we recorded discrete items that resulted in a benefit~~

Table of ~~$5.9 million and $5.8 million, respectively.~~Contents

Our ~~2018~~2019 estimated annual effective tax rate before discrete items is ~~0.1%~~12.1%. This estimated annual effective tax rate differs from the U.S. statutory rate of 21% primarily due to the ~~deductions~~deduction for percentage depletion in excess of cost depletion related to U.S. ~~operations and~~operations. The 2018 estimated annual effective tax rate before discrete items at June 30, 2018 was 0.1%, which was significantly lower due to the reversal of valuation allowance ~~from operations~~ in the ~~current year.~~same period.

~~Income~~Loss from Discontinued Operations, net of tax

During the three and ~~nine~~six months ended ~~September~~June 30, 2019, we had a loss of $0.6 million from discontinued operations. During the three and six months ended June 30, 2018, we ~~recorded income~~had a loss of ~~$238.0~~$64.3 million and ~~$102.8~~$135.2 million, respectively, ~~within~~ ~~Income from Discontinued Operations, net of tax,~~ primarily due to the exit from our Asia Pacific Iron Ore operations. ~~Net income attributable~~Refer to ~~Asia Pacific Iron Ore was $242.3 million and $117.6 million~~NOTE 14 - DISCONTINUED OPERATIONS for the three and nine months ended September 30, 2018, respectively. As a result of the liquidation of substantially all of the Australian subsidiaries' net assets, the historical changes in foreign currency translation recorded in ~~Accumulated other comprehensive loss~~ ~~in the Statements of Unaudited Condensed Consolidated Financial Position of $228.1 million was reclassified and recognized as a gain in~~ ~~Income from Discontinued Operations, net of tax~~.

~~During the three and nine months ended September 30, 2017, we recorded income of $30.6 million and $25.6 million, respectively, within~~ ~~Income from Discontinued Operations, net of tax~~. During the three months ended September 30, 2017, the Wabush Scully Mine was sold as part of the ongoing CCAA proceedings. As part of this transaction, we were required to fund the buyer's financial assurance shortfall of $7.7 million in order to complete the conveyance of the environmental remediation obligations to the buyer, which released us from our guarantees and resulted in a net gain of $31.4 million in ~~Income from Discontinued Operations, net of tax~~. During the nine months ended September 30, 2017, income from our Asia Pacific Iron Ore operations was $39.2 million, which was partially offset by the losses incurred by the Canadian entities. During the nine months ended September 30, 2017, the Canadian entities generated a net loss of $10.6 million as a result of the recording of an estimated liability related to the probable assertion of a preference claim against us and/or our affiliates, partially offset by the aforementioned gain from the sale of Wabush Scully Mine and the release from prior guarantees.further information.

EBITDA and Adjusted EBITDA

We evaluate performance based on EBITDA and Adjusted ~~EBITDA.~~EBITDA, which are non-GAAP measures. These measures ~~allow~~are used by management, investors, lenders and ~~investors~~other external users of our financial statements to ~~focus on~~assess our operating performance and to compare operating performance to other companies in the iron ore industry. In addition, management believes EBITDA and Adjusted EBITDA are useful measures to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service ~~our~~ debt ~~as well as illustrate how~~and fund future capital expenditures in the ~~business is performing. Additionally, EBITDA and Adjusted EBITDA assist management and investors in their analysis and forecasting as these measures~~business.

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~~approximate the cash flows associated with operational earnings.~~


	(In Millions)												(In Millions)
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net Income	$	437.8		$	52.9		$	518.6		$	53.2
Net income													$	160.8		$	165.1		$	138.7		$	80.8
Less:
Interest expense, net	(29.7		)	(28.9		)	(95.5		)	(103.1		)	(26.3		)	(32.3		)	(51.4		)	(65.8		)
Income tax benefit (expense)	(0.5		)	7.6			(14.4		)	6.8			(22.0		)	1.8			(18.3		)	(13.9		)
Depreciation, depletion and amortization	(19.2		)	(21.5		)	(68.6		)	(66.3		)	(21.0		)	(25.5		)	(40.9		)	(49.4		)
EBITDA	$	487.2		$	95.7		$	697.1		$	215.8		$	230.1		$	221.1		$	249.3		$	209.9
Less:
Foreign exchange remeasurement													$	(0.1	)	$	(0.1	)	$	—		$	(0.5	)
Impact of discontinued operations	$	238.2		$	34.8		$	120.4		$	41.3		(0.4		)	(54.7		)	(0.4		)	(117.8		)
Foreign exchange remeasurement	(0.2		)	(1.3		)	(0.7		)	14.0
Gain (loss) on extinguishment of debt	—			(88.6		)	0.2			(165.4		)	(17.9		)	0.2			(18.2		)	0.2
Impairment of long-lived assets	(1.1		)	—			(1.1		)	—
Severance costs													—			—			(1.7		)	—
Adjusted EBITDA	$	250.3		$	150.8		$	578.3		$	325.9		$	248.5		$	275.7		$	269.6		$	328.0

EBITDA
U.S. Iron Ore	$	273.1		$	168.9		$	641.6		$	381.8
Corporate and Other	214.1			(73.2		)	55.5			(166.0		)
EBITDA:
Mining and Pelletizing													$	274.6		$	296.0		$	317.4		$	368.5
Metallics													(1.1		)	(1.2		)	(1.9		)	(1.5		)
Corporate and Other (including discontinued operations)													(43.4		)	(73.7		)	(66.2		)	(157.1		)
Total EBITDA	$	487.2		$	95.7		$	697.1		$	215.8		$	230.1		$	221.1		$	249.3		$	209.9

Adjusted EBITDA:
U.S. Iron Ore	$	279.5		$	174.2		$	657.9		$	399.8
Corporate and Other	(29.2		)	(23.4		)	(79.6		)	(73.9		)
Mining and Pelletizing													$	280.5		$	301.3		$	328.0		$	378.4
Metallics													(1.1		)	(1.2		)	(1.9		)	(1.5		)
Corporate													(30.9		)	(24.4		)	(56.5		)	(48.9		)
Total Adjusted EBITDA	$	250.3		$	150.8		$	578.3		$	325.9		$	248.5		$	275.7		$	269.6		$	328.0

EBITDA increased ~~$391.5~~$9.0 million and ~~$481.3~~$39.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, on a consolidated basis from the comparable periods in ~~2017.~~2018. The favorable variance in EBITDA for the three months ended ~~September~~June 30, ~~2018~~2019 was driven primarily by ~~a favorable~~the impact of the $54.7 million from Loss from discontinued operations, net of ~~$238.2 million and an increase~~tax during the prior-year period that did not recur in 2019, partially offset by a decrease in sales margin of ~~$103.8~~$21.5 million ~~compared to the prior-year period.~~and a loss on extinguishment of debt for $17.9 million. The favorable variance ~~in EBITDA~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was driven primarily by ~~an increase~~the impact of the $117.8 million from Loss from discontinued operations, net of tax during the prior-year period that did not recur in 2019, partially offset by a decrease in sales margin of ~~$256.1~~$52.1 million ~~compared to the prior-year period~~ and a ~~favorable impact from discontinued operations~~loss on extinguishment of ~~$120.4~~debt for $18.2 million.

Adjusted EBITDA ~~increased $99.5~~decreased $27.2 million and ~~$252.4~~$58.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, from the comparable ~~period~~periods in ~~2017.~~2018. The ~~favorable~~unfavorable variance ~~in Adjusted EBITDA~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was driven by ~~an increase~~a decrease in sales margin of ~~$103.8~~$21.5 million and ~~$256.1~~$52.1 million, respectively, compared to the prior-year periods.

Liquidity, Cash Flows and Capital Resources

Our primary sources of liquidity are Cash and cash equivalents and cash generated from our operating and financing activities. Our capital allocation decision-making process is focused on returning capital to shareholders while maintaining the strength of our balance sheet and creating financial flexibility to manage through the inherent cyclical demand for our products and volatility in commodity prices. We are focused on ~~the preservation of liquidity in our business through~~ maximizing the cash generation of our operations as well as ~~actively managing~~reducing operating costs, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related ~~projects, and managing SG&A expenses.~~projects.

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During the first ~~nine~~six months of ~~2018,~~2019, we took action consistent with our capital allocation priorities ~~and our stated objective~~ of ~~improving~~returning capital to shareholders, maintaining the strength of our balance sheet, improving our financial flexibility and executing on opportunities that will allow us to increase our long-term profitability. During the first six months we repurchased 24.4 million common shares for $252.9 million in the aggregate under the $300 million share repurchase program. We have remained focused on protecting our ~~core U.S. Iron Ore~~ business based on our ~~plan~~actions to allocate capital to both sustaining our existing operations and our two major capital projects: the HBI plant in Toledo, Ohio and the completion of the upgrade to the Northshore plant to replace up to 3.5 million long tons of blast furnace pellet production with DR-grade pellet production. ~~Additionally,~~Using the net proceeds from the issuance of our 5.875% Senior Notes due 2027, along with cash generated through operations, we ~~have employed~~redeemed in full all of our outstanding 4.875% Senior Notes due 2021 and repurchased $600 million aggregate principal amount of our outstanding 5.75% Senior Notes due 2025 pursuant to a ~~strategy to mitigate~~tender offer, thereby extending our costs as we exited the Asia Pacific Iron Ore operations, including the completion of two sales of substantially all remaining assets of the operations and have taken additional steps to reduce our long-term debt.debt maturities.

Based on our outlook for the next 12 months, which is subject to continued changing demand from steelmakers that utilize our products and volatility in iron ore and domestic steel prices, we expect to generate cash from operations sufficient to meet the needs of our ~~existing~~ operations, service our debt obligations and fund ~~dividend distributions.~~our dividends.

Refer to “Outlook” for additional guidance regarding expected future results, including projections on sales volume and production.

The following discussion summarizes the significant activities impacting our cash flows during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 as well as expected impacts to our future cash flows over the next 12 months. Refer to the Statements of Unaudited Condensed Consolidated Cash Flows for additional information.

Operating Activities

Net cash provided by operating activities was ~~$188.7 million and $206.7~~$151.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018 and 2017, respectively.~~2019, compared with net cash used by operating activities of $49.3 million for the six months ended June 30, 2018. The incremental ~~decrease~~increase in cash provided by operating activities during the first ~~nine~~six months of 2019 compared to 2018 primarily was ~~primarily~~ due to ~~the increase~~changes in ~~accounts receivable~~sales derivatives and ~~derivative assets on sales that have not yet been collected, which was offset partially by other~~ working capital ~~changes and improved operating results previously discussed related~~resulting from continuing operations, in addition to ~~U.S. Iron Ore.~~prior-year uses of cash by our discontinued operations. The current year change in working capital was driven primarily by the collection of the $117.3 million income tax receivable.

Our U.S. cash and cash equivalents balance at ~~September~~June 30, ~~2018~~2019 was ~~$895.6~~$375.7 million, or ~~approximately 99.8%~~99.6% of our consolidated total cash and cash equivalents balance of ~~$897.1~~$377.2 million. Additionally, we had a cash balance at ~~September~~June 30, ~~2018~~2019 of ~~$15.6~~$9.2 million classified as part of ~~Current~~Other current assets ~~of discontinued operations~~ in the Statements of Unaudited Condensed Consolidated Financial Position, which will be utilized to support the completion of our exit from Australia.

Investing Activities

Net cash used by investing activities was ~~$173.7~~$292.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared with ~~$84.4~~$99.8 million for the comparable period in ~~2017. We~~2018. During the first six months of 2019, we had net cash outflows, including deposits, of approximately $220 million on development of the HBI production plant and approximately $40 million on the upgrades at Northshore. Additionally, we spent approximately ~~$45~~$31 million and ~~$74~~$24 million on ~~expenditures related to~~ sustaining capital expenditures during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Sustaining capital spend includes infrastructure, mobile equipment, ~~environment, safety,~~ fixed equipment, product quality, environment, health and health. Additionally, during the first nine months of 2018, we had cash outflows, including deposits, of approximately $120 million on development of the HBI production plant in Toledo, Ohio and approximately $30 million on the upgrades at Northshore Mine.safety.

We anticipate total cash used for capital expenditures during the next 12 months to be approximately $680 million, excluding amounts attributable to ~~construction-related contingencies and~~ capitalized ~~interest, during the next twelve months to be approximately $510 million.~~interest. Included within this estimate is approximately ~~$110~~$130 million for sustaining capital, ~~$340~~$540 million related to development of the HBI production plant ~~in Toledo, Ohio~~ and ~~approximately $60~~$10 million for the completion of the upgrades at the Northshore ~~plant to enable it to produce significantly increased levels of DR-grade pellets that could be sold commercially or used as feedstock for the HBI production~~ plant. In total, we expect to spend approximately $700 million on the HBI production plant and $90 million on the Northshore upgrades, exclusive of construction-related contingencies and capitalized interest, through 2020.

Financing Activities

Net cash used by financing activities in the first ~~nine~~six months of ~~2018~~2019 was ~~$107.7~~$307.9 million, compared to ~~$188.6~~$25.7 million for the comparable period in ~~2017.~~2018. Net cash used by financing activities during the first six months of 2019 primarily related to the repurchase of 24.4 million common shares for $252.9 million in the aggregate under the $300 million share repurchase program. Additionally, we issued $750 million aggregate principal amount of 5.875% 2027 Senior Notes, which provided net proceeds of approximately $714 million. The net proceeds from the notes offering, along with cash on hand, were used to redeem in full all of our then-outstanding 4.875% 2021 Senior Notes and to purchase $600 million aggregate principal amount of our outstanding 5.75% 2025 Senior Notes pursuant to a tender offer. In total, during the first six months of 2019, we purchased $724.0 million aggregate principal amount of senior notes for $729.3 million in cash.

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Additional uses of cash from financing activities included cash dividends on our common shares of $28.9 million. Uses of cash for financing activities during the first ~~nine~~six months of 2018 ~~included cash payments of $44.2 million for the second of three annual installments~~primarily related to ~~an agreement to distribute~~ the ~~net assets~~repurchase of debt for $15.3 million and the ~~noncontrolling interest in Empire in exchange for the remaining interest in Empire, $43.2 million for repayments~~repayment of lease liabilities ~~and $16.3 million to purchase $16.5 million aggregate principal amount of our outstanding senior notes.~~for $7.6 million.

~~Uses~~We anticipate future uses of cash for financing activities during the ~~first nine~~next 12 months of 2017 included the redemption of various tranches of secured and unsecured debt. We redeemed in full all of our outstanding 8.00% 1.5 Lien Notes due 2020 and 7.75% Second Lien Notes due 2020 and purchased certain other outstanding senior notes through tender offers

~~Table of Contents~~

and redemptions. The total aggregate principal amount of debt redeemed and purchased, including premiums, during the first nine months of 2017 was $1.721 billion. To fund the redemptions mentioned above, we utilized cash provided by financing activities during the first nine months of 2017, which included a common share offering, generating net proceeds of $661.3 million, and the issuance of $1.075 billion aggregate principal amount of 5.75% Senior Notes due 2025, which provided further net proceeds of approximately $1.046 billion.

~~On October 5, 2018, we redeemed the entirety of our outstanding Senior Notes Due 2020. The aggregate principal amount outstanding of the Senior Notes Due 2020 was approximately $211 million. Pursuant~~ to the terms of the indenture governing the Senior Notes Due 2020, approximately $218 million in the aggregate, including make-whole premiums and accrued and unpaid interest to, but not including, the redemption date, was paid to holders of the Senior Notes Due 2020.

~~On October 18, 2018, the Board of Directors declared a~~include quarterly cash dividend onpayments of approximately $16 million per quarter and our ~~common shares~~final $44 million distribution of $0.05 per share. The cash dividend will be payable on January 15, 2019, to shareholders of record as of the close of business on January 4, 2019. The Board of Directors determined that the cash dividend may be paid out of capital surplus. We expect to continue to pay a dividend on a quarterly basis, subject to the approval of the Board of Directors. The timing and amount of future dividends will depend on the Board of Directors' assessment of our operations, financial condition, projected liabilities, compliance with any restrictions contained in agreements governing our debt, restrictions imposed by applicable law and other factors.Empire partnership equity.

Capital Resources

The following represents a summary of key liquidity measures:


	(In Millions)						(In Millions)
	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Cash and cash equivalents	$	897.1		$	978.3		$	377.2		$	823.2
Cash and cash equivalents included within current assets of discontinued operations	15.6			29.4
Cash and cash equivalents from discontinued operations, included within other current assets							9.2			12.4
Total cash and cash equivalents	$	912.7		$	1,007.7		$	386.4		$	835.6

Available borrowing base on ABL Facility¹	$	368.4		$	273.2		$	450.0		$	323.7
ABL Facility loans drawn	—			—			—			—
Letter of credit obligations and other commitments	(37.7		)	(46.5		)
Letter of credit obligations							(61.1		)	(55.0		)
Borrowing capacity available	$	330.7		$	226.7		$	388.9		$	268.7

¹ The ABL Facility had a maximum borrowing base of $450 million and $550 million at September 30, 2018 and December 31, 2017, respectively, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
¹ The ABL Facility has a maximum borrowing base of $450 million. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.							¹ The ABL Facility has a maximum borrowing base of $450 million. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

Our primary sources of funding are cash on hand, which totaled ~~$912.7~~$386.4 million as of ~~September~~June 30, ~~2018,~~2019, cash generated by our business, ~~and~~ availability under the ABL ~~Facility.~~Facility and other financing activities. The combination of cash and availability under the ABL Facility gives us ~~$1,243.4~~$775.3 million in liquidity entering the ~~fourth~~third quarter of ~~2018,~~2019, which is expected to be adequate to fund operations, letter of credit obligations, sustaining and expansion capital expenditures and other cash commitments for at least the next 12 months.

As of ~~September~~June 30, ~~2018,~~2019, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum ~~Fixed Charge Coverage Ratio~~fixed charge coverage ratio of 1.0 to 1.0 was not applicable.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain arrangements that are not reflected on our Statements of Unaudited Condensed Consolidated Financial Position. These arrangements include minimum "take or pay" purchase commitments, such as minimum electric power demand charges, minimum coal, diesel and natural gas purchase commitments and minimum railroad transportation ~~commitments;~~commitments. We also have financial instruments with off-balance sheet risk, such as bank letters of credit and bank ~~guarantees; and operating leases, which relate primarily to equipment and office space.~~guarantees.

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Market Risks

We are subject to a variety of risks, including those caused by changes in commodity prices ~~foreign currency exchange rates~~ and interest rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control.

Pricing Risks

Commodity Price Risk

Our consolidated revenues include the sale of primarily a single product, iron ore pellets, in the North American market. Our financial results can vary significantly as a result of fluctuations in the market prices of iron ore, hot-rolled coil steel and iron ore pellet premiums. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control.The world market price that is most commonly utilized in our iron ore sales contracts is the Platts 62% Price, which can fluctuate widely due to numerous factors, such as global economic growth or contraction, change in demand for steel or changes in availability of supply.

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Customer Supply Agreement

A supply agreement with one customer provides for supplemental revenue or refunds based on the average annual daily market price for hot-rolled coil steel at the time the iron ore product is consumed in the customer’s blast furnaces. At ~~September~~June 30, ~~2018~~2019, we had derivative assets of ~~$186.0~~$102.4 million, representing the fair value of the pricing factors, based upon the amount of unconsumed long tons and an estimated average hot-rolled coil steel price for the period in which the iron ore is expected to be consumed in the customer's blast furnaces, subject to final pricing at a future date. We estimate that a $75 positive or negative change in the average daily market price for hot-rolled coil steel realized from the ~~September~~June 30, ~~2018~~2019 estimated price recorded would cause the fair value of the derivative instrument to increase or decrease by approximately ~~$19.5~~$36.8 million, respectively, thereby impacting our consolidated revenues by the same amount. We have not entered into any hedging programs to mitigate the risk of adverse price fluctuations.

Provisional Pricing Arrangements

Certain of our customer supply agreements specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate ~~to be~~ based on market inputs at a specified point in time in the future, per the terms of the supply agreements. At ~~September~~June 30, ~~2018,~~2019, we had derivative assets ~~and liabilities~~ of ~~$4.6~~$15.7 million, ~~and $5.7 million, respectively,~~ reflected as part of our revenue, representing the fair value of the provisional price calculations. We estimate that a positive or negative $10 change in management's annual estimates of the Platts 62% Price ~~from the~~ ~~September 30, 2018~~ ~~estimated price recorded~~ would cause the fair value of the net derivative instrument position for provisional pricing arrangements to increase or decrease by approximately $16 million. We have not entered into any hedging programs to mitigate the risk of adverse price fluctuations.

Volatile Energy and Fuel Costs

The ~~volatile~~ cost of energy is an important factor affecting the production costs at our iron ore operations. Our operations consumed ~~12.9~~8.3 million MMBtu’s of natural gas at an average delivered price of ~~$3.36~~$3.51 per MMBtu during the first ~~nine months~~half of ~~2018.~~2019. Additionally, our operations consumed ~~17.0~~9.5 million gallons of diesel fuel at an average delivered price of ~~$2.34~~$2.18 per gallon during the first ~~nine~~half of 2019.

Our strategy to address volatile natural gas and diesel rates includes improving efficiency in energy usage, identifying alternative providers and utilizing the lowest cost alternative fuels. We utilize a full-year hedging program to manage the price risk of natural gas and diesel at our operations. We will continue to monitor relevant energy markets for risk mitigation opportunities and may make additional forward purchases or employ other hedging instruments in the future as warranted and deemed appropriate by management. Based on the expected consumption for the remaining six months of ~~2018.~~2019, a 10% change in our current average year-to-date prices for both natural gas and diesel fuel would result in a change of approximately $5.1 million in our annual fuel and energy cost.

In the ordinary course of business, there may also be increases in prices relative to electricity costs at our ~~U.S.~~ mine sites. Specifically, Tilden has entered into large curtailable special contracts with Wisconsin Electric Power Company. Charges under those special contracts are subject to a power supply cost recovery mechanism that is based on variations in the utility's actual fuel and purchase power expenses.

~~Our strategy to address volatile natural gas and diesel rates includes improving efficiency~~Valuation of Other Long-Lived Assets

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in ~~energy usage, identifying alternative providers and utilizing~~circumstances that would indicate that the ~~lowest cost alternative fuels. A full-year hedging program was implemented during~~carrying value of the ~~fourth quarter of 2017~~assets may not be recoverable. Such indicators may include: a significant decline in order to manage the price risk of natural gas at our U.S. Iron Ore mines. Additionally, during the third quarter of 2018, we began entering into forward hedge contracts to manage the price of diesel fuel at our U.S. Iron Ore mines. We will continue to monitor relevant energy markets for risk mitigation opportunities and may make additional forward purchasesexpected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or ~~employ other hedging instruments~~environmental factors or in the ~~future as warranted~~business climate; changes in estimates of our recoverable reserves; and ~~deemed appropriate by management. In the near term, a 10%~~unanticipated competition. Any adverse change in these factors could have a significant impact on the ~~remaining three months~~recoverability of our long-lived assets and could have a material impact on our consolidated statements of operations and statement of financial position.

A comparison of each asset group's carrying value to the estimated undiscounted net future cash flows expected to result from the use of the assets, including cost of disposition, is used to determine if an asset is recoverable. Projected future cash flows reflect management's best estimates of economic and market conditions over the projected period, including growth rates in revenues and costs, estimates of future expected changes in operating margins and capital expenditures. If the carrying value of the asset group is higher than its undiscounted net future cash flows, the asset group is measured at fair value and the difference is recorded as a reduction to the long-lived assets. We estimate fair value using a market approach, an income approach or a cost approach. As of June 30, 2019, no impairment factors were present that would indicate that the carrying value of our ~~current average year-to-date natural gas and diesel fuel prices would~~asset groups may not be recoverable; as a result, ~~in a change of approximately $3.1 million in our annual fuel and energy cost based on expected consumption for 2018.~~no impairment assessment was required.

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Interest Rate Risk

Interest payable on our senior notes is at fixed rates. Interest payable under our ABL Facility is at a variable rate based upon the base rate plus the base rate margin depending on the excess availability. As of ~~September~~June 30, ~~2018~~2019, we had no amounts drawn on the ABL Facility.

Supply Concentration Risks

Many of our mines are dependent on one source each of electric power and natural gas. A significant interruption or change in service or rates from our energy suppliers could materially impact our production costs, margins and profitability.

Outlook



		~~2018~~2019 Outlook Summary
Per Long Ton Information		~~U.S. Iron Ore~~
~~Revenues from product sales~~Mining and ~~services~~¹		~~$105 - $110~~
		Pelletizing
Cost of goods sold ~~and operating expense~~ rate		$6974 - ~~$74~~$79
Less:
Freight expense rate²¹		$8
Depreciation, depletion & amortization rate		$34
Cash cost of goods sold ~~and operating expense~~ rate		$5862 - ~~$63~~$67

Sales volume (million long tons)		~~21.0~~20.0
Production volume (million long tons)		20.0
¹~~This expectation is based on the assumption that iron ore prices, steel prices, and pellet premiums will average for the remainder of 2018 their respective year-to-date averages.~~
²¹Freight has an offsetting amount in revenue and has no impact on sales margin.

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~~U.S. Iron Ore~~Mining and Pelletizing Outlook ~~(Long~~(Long Tons)

Based on the assumption that ~~iron ore prices, steel prices, and pellet premiums~~relevant pricing indices will average for the remainder of ~~2018~~2019 their respective year-to-date averages, we would expect to realize ~~USIO~~Mining and Pelletizing revenue rates in the range of ~~$105~~$109 to ~~$110~~$114 per long ~~ton. This~~ton, a $1 per long ton increase versus the comparable range ~~remains consistent with the prior calculation as the year-to-date average increase in hot-rolled coil steel prices has been offset by higher freight rates.~~provided last quarter.

~~Our~~For 2019, we maintained our full-year sales ~~volume expectation of 21 million long tons~~ and production volume expectation of 20 million long ~~tons were each maintained.~~

tons. Our full-year ~~2018 U.S. Iron Ore~~2019 Mining and Pelletizing cash cost of goods sold ~~and operating expense~~rate expectation is ~~unchanged~~maintained at ~~$58 - $63~~$62 to $67 per long ton.

~~SG&A Expense and~~ Other ~~Expectations~~Outlook

Our full-year ~~2018~~2019 SG&A expense expectation of ~~$115~~$120 million is being maintained. We also note that of the ~~$115~~$120 million expectation, approximately $20 million is considered non-cash.

Our full-year ~~2018~~2019 net interest expense expectation ~~was~~is maintained at ~~$120~~$100 million.

Full-year ~~2018~~2019 depreciation, depletion and amortization ~~associated with U.S. Iron Ore and Corporate/Other~~ is expected to be approximately ~~$80~~$85 million.

~~Capital Expenditures~~Our 2019 effective tax rate is expected to be approximately 12-14 percent. Due to our net operating loss position, our cash tax payments are expected to be zero.

We ~~provided~~now expect to reach commercial production at our Toledo HBI plant ahead of schedule, in the ~~following updates~~first half of 2020. Due to the advanced construction timeline and more certain visibility of the start-up date, a portion of the budgeted contingency has been allocated. As a result, our ~~2018~~2019 total capital expenditures ~~budget:~~

~~the Toledo HBI Project spend~~ expectation was ~~reduced by $25 million~~revised to ~~$175 million due~~$650 - $700 million. There is no change to ~~further development and refined timing~~the base budget of the ~~project spending plan;~~HBI project.

~~the sustaining capital expectation of $75 million was maintained; and~~

~~the Northshore Mine upgrade spend expectation of $50 million was maintained.~~

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Forward-Looking Statements

This report contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to ~~Cliffs’~~our operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These statements speak only as of the date of this report, and we undertake no ongoing obligation, other than that imposed by law, to update these statements. Uncertainties and risk factors that could affect ~~Cliffs’~~our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:

uncertainty and weaknesses in global economic conditions, including downward pressure on prices caused by oversupply or imported products, reduced market demand and risks related to U.S. government actions with respect to Section 232 of the Trade Expansion Act (as amended by the Trade Act of 1974), the ~~North American Free Trade~~United States-Mexico-Canada Agreement and/or other trade agreements, treaties or policies;

continued volatility of iron ore and steel prices and other trends, ~~including~~which may impact the ~~supply approach of the major iron ore producers, affecting our financial condition, results of operations or future prospects, specifically the impact of~~ price-adjustment ~~factors on~~calculations under our sales contracts;

our ability to successfully diversify our product mix and add new customers beyond our traditional blast furnace clientele;

our ability to cost-effectively achieve planned production rates or levels, including at our HBI ~~production~~ plant;

our ability to successfully identify and consummate any strategic investments or development projects, including our HBI ~~production~~ plant;

the impact of our customers reducing their steel production due to increased market share of steel produced using other methods or lighter-weight steel alternatives;

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~~our ability to successfully diversify our product mix and add new customers beyond our traditional blast furnace clientele;~~

our actual economic iron ore reserves or reductions in current mineral estimates, including whether any mineralized material qualifies as a reserve;

~~our ability to maintain appropriate relations with unions and employees;~~

the outcome of any contractual disputes with our customers, joint venture partners or significant energy, material or service providers or any other litigation or arbitration;

~~the ability of our customers and joint venture partners to meet their obligations to us on a timely basis or at all;~~

problems or uncertainties with sales volume or mix, productivity, tons mined, transportation, ~~mine-closure~~mine closure obligations, environmental liabilities, employee-benefit costs and other risks of the mining industry;

~~our ability to reach agreement with our customers regarding any modifications to sales contract provisions, renewals or new arrangements;~~

~~our actual levels of capital spending;~~

~~our level of indebtedness could limit cash flow available to fund working capital, capital expenditures, acquisitions and other general corporate purposes or ongoing needs of our business;~~

~~our ability to continue to pay cash dividends, and the amount and timing of any cash dividends;~~

~~availability of capital and our ability to maintain adequate liquidity;~~

~~changes in sales volume or mix;~~

~~events or circumstances that could impair or adversely impact the viability of a mine and the carrying value of associated assets, as well as any resulting impairment charges;~~

impacts of existing and increasing governmental regulation and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorization of, or from, any governmental or regulatory entity and costs related to implementing improvements to ensure compliance with regulatory changes;

our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit cash flow available to fund working capital, planned capital expenditures, acquisitions and other general corporate purposes or ongoing needs of our business;

our ability to continue to pay cash dividends, and the amount and timing of any cash dividends;

our ability to maintain appropriate relations with unions and employees;

the ability of our customers, joint venture partners and third party service providers to meet their obligations to us on a timely basis or at all;

events or circumstances that could impair or adversely impact the viability of a mine or production plant and the carrying value of associated assets, as well as any resulting impairment charges;

uncertainties associated with natural disasters, weather conditions, unanticipated geological conditions, supply or price of energy, equipment failures and other unexpected events;

adverse changes in ~~currency values, currency exchange rates,~~ interest rates and tax laws; and

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the potential existence of significant deficiencies or material weakness in our internal control over financial reporting.

For additional factors affecting ~~the~~our business, ~~of Cliffs,~~ refer to Part II – Item 1A. Risk Factors. You are urged to carefully consider these risk factors.

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Non-GAAP Reconciliation

We present cash cost of goods sold ~~and operating expense~~ rate per long ton, which is a non-GAAP financial measure that management uses in evaluating operating performance. We believe our presentation of non-GAAP cash cost of goods sold ~~and operating expenses~~ is useful to investors because it excludes depreciation, depletion and amortization, which are non-cash, and freight, ~~and joint venture partners' cost reimbursements,~~ which ~~have~~has no impact on sales margin, thus providing a more accurate view of the cash outflows related to the sale of iron ore. The presentation of this measure is not intended to be considered in isolation from, as a substitute for, or as superior to, the financial information prepared and presented in accordance with GAAP. The presentation of this measure may be different from non-GAAP financial measures used by other companies. Below is a reconciliation in dollars of this non-GAAP financial measure to our ~~consolidated financial statements.~~Mining and Pelletizing operating segment cost of goods sold.

(In Millions)
U.S. Iron Ore
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Cost of goods sold and operating expenses $ 480.2
$ 438.9
$ 1,028.5
$ 1,002.7
Less:
Freight and reimbursements 57.1
66.0
110.2
159.2
Depreciation, depletion & amortization 17.8
16.5
49.2
49.6
Cash cost of goods sold and operating expenses $ 405.3
$ 356.4
$ 869.1
$ 793.9



	(In Millions)
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Cost of goods sold	$	482.6	$	429.8	$	608.7	$	548.3
Less:
Freight	45.8		42.3		57.4		53.1
Depreciation, depletion & amortization	19.6		15.6		38.1		31.4
Cash cost of goods sold	$	417.2	$	371.9	$	513.2	$	463.8



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Information regarding our Market Risk is presented under the caption Market Risks, which is included inour Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and in the Management's Discussion and Analysis section of this report.



Item 4.	Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based solely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting or in other factors that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION



Item 1.	Legal Proceedings

~~CCAA Proceedings.~~ ~~Refer~~Bluestone Litigation. On April 7, 2017, the Company was served with an Amended Complaint adding Cliffs, among others, as a defendant to ~~NOTE 20 - COMMITMENTS AND CONTINGENCIES of the notes to our condensed consolidated financial statements included in Item 1 of Part 1 of this report for~~ a ~~description of the CCAA Proceedings concerning the Bloom Lake Group~~lawsuit brought by Bluestone Coal Corporation and ~~the Wabush Group. Such description is incorporated by reference into this Item 1.~~

~~Bluestone Litigation~~. Refer to NOTE 20 - COMMITMENTS AND CONTINGENCIES of the notes to our condensed consolidated financial statements included in Item 1 of Part 1 of this report for a description of the Bluestone litigation concerning theDouble-Bonus Mining Company against Pinnacle Mining Company, ~~LLC. Such description is incorporated by reference into this Item 1.~~

~~Mesabi Metallics Adversary Proceeding.~~ ~~On September 7, 2017, Mesabi Metallics Company~~ LLC ~~(f/k/a Essar Steel Minnesota LLC) ("Mesabi Metallics") filed a complaint against Cleveland-Cliffs~~and Target Drilling, Inc. in the ~~Essar Steel Minnesota LLC~~U.S. District Court for the Southern District of West Virginia. The Amended Complaint alleged that the defendants deviated from plans authorized by plaintiffs and ~~ESML Holdings Inc.~~ ~~bankruptcy proceeding that is pending~~MSHA in the ~~United States Bankruptcy Court, District~~drilling of ~~Delaware. Mesabi Metallics alleges tortious interference with its contractual rights~~a borehole in 2013 and ~~business relations involving certain vendors, suppliers~~2014 at the Pinnacle mine and ~~contractors, violations~~through an inactive portion of ~~federal~~plaintiffs’ mine. Plaintiffs further alleged negligence and ~~Minnesota antitrust laws through monopolization, attempted monopolization and restraint of trade, violation~~trespass in the drilling of the ~~automatic stay,~~borehole and ~~civil conspiracy~~claimed compensatory and punitive damages due to flooding. On October 3, 2018, the parties reached a settlement in full. The Court entered an order dismissing the case with ~~unnamed Doe defendants. Mesabi Metallics amended its complaint~~prejudice subject to add additional defendants, including, among others, our subsidiary, Cleveland-Cliffs Minnesota Land Development Company LLC ("Cliffs Minnesota Land"), and to add additional claims, including avoidance and recovery of unauthorized post-petition transfers of real estate interests, claims disallowance, civil contempt and declaratory relief. Mesabi Metallics seeks, among other things, unspecified damages and injunctive relief. Cliffs and Cliffs Minnesota Land filed counterclaims against Mesabi Metallics, Chippewa Capital Partners ("Chippewa"), and Thomas M. Clarke ("Clarke"), for tortious interference and civil conspiracy, as well as additional claims against Chippewa and Clarke for aiding and abetting tortious interference and against Clarke for libel, for which we seek, among other things, damages and injunctive relief. The parties filed various dispositive motionsreopening on ~~certain~~good cause shown. Finalization of the claims, including a motion for partial summary judgment to settle a dispute over real estate transactions between Cliffs Minnesota Land and Glacier Park Iron Ore Properties LLC ("GPIOP"). A ruling in favor of Cliffs, Cliffs Minnesota Land and GPIOPsettlement was ~~issued~~delayed when, on July 23, 2018, finding that Mesabi's leases had terminated and upholding Cliffs' and Cliffs Minnesota Land's purchase and lease of the contested real estate interests. Mesabi Metallics filed a Motion for Leave to File an Interlocutory Appeal, which is fully briefed. The parties have filed additional motions for partial summary judgment and motions to dismiss with respect to other pending claims and counterclaims. We believe the claims asserted against us are unmeritorious and intend to continue to vigorously defend any remaining claims in the lawsuit.

~~Seneca Coal Resources Litigation.~~ We are a plaintiff in a lawsuit we filed against Seneca Coal Resources, LLC and others on December 20, 2016, alleging, among other things, breach of the Unit Purchase Agreement (“UPA”) dated December 22, 2015 wherein Seneca purchased certain of our coal properties. That dispute, which we amended to include claims of fraudulent transfers and violations of the Racketeer Influenced and Corrupt Organizations provisions of the Organized Crime Control Act of 1970 against individual defendants, including Clarke, is currently being litigated in Delaware Superior Court. On July 2, 2018, Seneca filed suit against us, a subsidiary of ours, and certain of our employees, in the Delaware Chancery Court, alleging that we failed to disclose certain liabilities in connection with the UPA and seeking monetary damages and, alternatively, reformation of the UPA. The lawsuit filed in Chancery Court asserts identical claims to those that Seneca filed as counterclaims in Delaware Superior Court on the same day, and the two cases will proceed as one consolidated matter in the Superior Court. We have filed motions to dismiss certain claims against us and to dismiss all claims against our employees individually. We believe the claims Seneca has asserted are unmeritorious and intend to vigorously defend this lawsuit and the related counterclaims. On October 14, 2018, Mission Coal Company, LLC and ten of its affiliates, including ~~Seneca and certain of our former coal properties,~~Pinnacle Mining Company, LLC, filed a petition in the U.S. Bankruptcy Court for the Northern District of Alabama for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. ~~We are reviewing the impact of this bankruptcy petition~~The settlement was eventually finalized on ~~our lawsuit.~~

~~Taconite MACT Compliance Review.~~ EPA Region 5 issued Notices of Violation during the first quarter of 2014 to Empire, Tilden and United Taconite related to alleged historical violations of the Taconite MACT rule and certain elements of their respective state-issued Title V operating permits dating back to 2010. EPA proposed, and we agreed to, a tolling agreement which targeted a completion of the enforcement action by December 6, 2018. Based on current information, we anticipate the final settlement for alleged exceedances at United Taconite to be resolved by consent decree with a civil cash penalty of less than $0.1 million and a supplemental environmental project. We anticipate the final settlement for alleged exceedances at Tilden and Empire to be resolved by consent decree with a total penalty of no more than $0.3 million and $0.15 million, respectively, to be comprised of a combination of cash penalty and a potential

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~~supplemental environmental project. This enforcement matter is not anticipated currently to have a material adverse impact on our business.~~

~~Wabush Pensioners Matter.~~ On May ~~31, 2017, an action captioned~~ ~~Johnson, et al. v. Cliffs Mining Company, et al.~~ ~~was filed in the Supreme Court of Newfoundland and Labrador, Trial Division (General) (the "Newfoundland Court") under the~~ ~~Class Actions Act~~ (Newfoundland) by certain former employees of Wabush Mines on behalf of all non-union employees and retirees of Wabush Mines, against the defendants Cliffs Natural Resources Inc., Cliffs Mining Company, and certain former and current officers, directors and employees (the "Salaried Employees Action"). The Salaried Employees Action sought, among other things, various declarations and damages relating to the “Contributory Salaried Plan for Salaried Employees of Wabush Mines, Cliffs Mining Company, Managing Agent, Arnaud Railway Company and Wabush Lake Railway Company, Limited”. On or about June 23, 2017, a separate action captioned ~~Skinner, et al. v. Cliffs Mining Company, et al.~~ ~~was filed in the Newfoundland Court under the~~ ~~Class Actions Act~~ (Newfoundland) by certain former employees of Wabush Mines on behalf of all unionized employees and retirees of Wabush Mines against the same defendants (the "Union Employees Action"). The Union Employees Action sought, among other things, declarations and damages relating to the "Pension Plan for Bargaining Unit Employees of Wabush Mines, Cliffs Mining Company, Managing Agent, Arnaud Railway Company and Wabush Lake Railway Company, Limited." On May 10, 2018, the parties reached a settlement of both the Salaried Employees Action2, 2019, and the Union Employees Action (together the "Employee Actions") which were implemented as part of the Amended Plan within the CCAA proceedings involving the Bloom Lake Group and the Wabush Group. Under the terms of the Amended Plan, we and certain of our wholly-owned subsidiaries have madeCompany obtained a C$19.0 million cash contribution to the Wabush Group pension plan and will contribute into the CCAA estate any distributions or payments we may be entitled to receive as creditors of the Bloom Lake Group and the Wabush Group for distribution to other creditors within the CCAA proceedings. Upon implementation of the Amended Plan on July 31, 2018, each of the Employee Actions was discontinued and the defendants in the Employee Actions were released from those claims contained in or which could have been raised in the Employee Actions.full release at that time.



Item 1A.	Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, includes a detailed discussion of our risk factors.



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to repurchases by the Company of our common shares during the periods indicated.

ISSUER PURCHASES OF EQUITY SECURITIES

Period
Total Number of Shares
(or Units) Purchased¹

Average Price Paid per Share
(or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
July 1 - 31, 2018 3,948
$ 10.15
— $ —
August 1 - 31, 2018 163
$ 9.92
— $ —
September 1 - 30, 2018 —
$ —
— $ —
4,111
$ 10.14
— $ —

¹ These shares were delivered to us to satisfy tax withholding obligations due upon the vesting or payment of stock awards.



Period	Total Number of Shares (or Units) Purchased¹	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs²
April 1 - 30, 2019	1,464	$	10.38	—	$	128,595,269
May 1 - 31, 2019	12,884,533	$	9.96	12,884,533	$	229,356
June 1 - 30, 2019	—	$	—	—	$	229,356
	12,885,997	$	9.96	12,884,533

¹ Includes 1,464 shares that were delivered to us to satisfy tax withholding obligations due upon the vesting or payment of stock awards.
² On November 26, 2018, we announced a new share repurchase program which was authorized by the Board of Directors, pursuant to which we may buy back our outstanding common shares in the open market or in private negotiated transactions up to a maximum of $200 million, excluding commissions and fees. On April 25, 2019, we announced that the Board of Directors increased the common share repurchase authorization by an additional $100 million, excluding commissions and fees. The program may be executed through open-market purchases, including through Rule 10b5-1 agreements, or privately negotiated transactions. The authorization is effective until December 31, 2019.

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Item 4.	Mine Safety Disclosures

We are committed to protecting the occupational health and well-being of each of our employees. Safety is one of our core values and we strive to ensure that safe production is the first priority for all employees. Our internal objective is to achieve zero injuries and incidents across the Company by focusing on proactively identifying needed prevention activities, establishing standards and evaluating performance to mitigate any potential loss to people, equipment, production and the environment. We have implemented intensive employee training that is geared toward maintaining a high level of awareness and knowledge of safety and health issues in the work environment through the development and coordination of requisite information, skills and attitudes. We believe that through these policies we have developed an effective safety management system.

Under the Dodd-Frank Act, each operator of a coal or other mine is required to include certain mine safety results within its periodic reports filed with the SEC. As required by the reporting requirements included in §1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, the required mine safety results regarding certain mining safety and health matters for each of our mine locations that are covered under the scope of the Dodd-Frank Act are included in Exhibit 95 of Item 6. Exhibits of this Quarterly Report on Form 10-Q.



Item 5.	Other Information

None.



Item 6.	Exhibits

All documents referenced below have been filed pursuant to the Securities Exchange Act of 1934 by Cleveland-Cliffs Inc., file number 1-09844, unless otherwise indicated.



Exhibit Number		Exhibit
~~10.1~~4.1		*Eighth Amendment to Trust Agreement No. 5, betweenIndenture, dated as of May 13, 2019, among Cleveland-Cliffs Inc. ~~(f/k/a Cliffs Natural Resources Inc.)~~, the guarantors party thereto and ~~KeyBank~~U.S. Bank National Association, ~~entered into~~as trustee (filed as Exhibit 4.1 to Cliffs' Form 8-K on May 14, 2019 and ~~effective as of August 24, 2018 (filed herewith)~~incorporated herein by reference)
10.1		Registration Rights Agreement, dated as of May 13, 2019, among Cleveland-Cliffs Inc., the guarantors party thereto and Goldman Sachs & Co. LLC, as the initial purchaser (filed as Exhibit 10.1 to Cliffs' Form 8-K on May 14, 2019 and incorporated herein by reference)
31.1		Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed and dated by Lourenco Goncalves as of ~~October~~July 19, ~~2018~~2019 (filed herewith)
31.2		Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed and dated by ~~Timothy K. Flanagan~~Keith A. Koci as of ~~October~~July 19, ~~2018~~2019 (filed herewith)
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Lourenco Goncalves, Chairman, President and Chief Executive Officer of Cleveland-Cliffs Inc., as of ~~October~~July 19, ~~2018~~2019 (filed herewith)
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by ~~Timothy K. Flanagan,~~Keith A. Koci, Executive Vice President, Chief Financial Officer of Cleveland-Cliffs Inc., as of ~~October~~July 19, ~~2018~~2019 (filed herewith)
95		Mine Safety Disclosures (filed herewith)
101.INS		The instance document does not appear in the interactive data file because its XBRL ~~Instance Document~~tags are embedded within the inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* Indicates management contract or other compensatory arrangement.

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		CLEVELAND-CLIFFS INC.

		By:	/s/ R. Christopher Cebula
			Name:	R. Christopher Cebula
			Title:	Vice President, Corporate Controller & Chief Accounting Officer

Date:	~~10/19/2018~~July 19, 2019

7154



	($ 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)
	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		$	—



	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)
	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Debt Instrument	Debt Extinguished
$400 Million 5.90% 2020 Senior Notes	$	—	$	0.5
$500 Million 4.80% 2020 Senior Notes	—		0.1
$700 Million 4.875% 2021 Senior Notes	1.0		14.2
$1.075 Billion 5.75% 2025 Senior Notes	—		1.7
	$	1.0	$	16.5



	(In Millions)
	Capital Leases		Operating Leases
2018 (October 1 - December 31)	$	1.1	$	1.1
2019	3.9		3.5
2020	3.7		3.1
2021	3.0		2.4
2022	6.2		1.8
2023 and thereafter	—		7.5
Total minimum lease payments	$	17.9	$	19.4
Amounts representing interest	2.1
Present value of net minimum lease payments¹	$	15.8

¹ The total is comprised of $3.4 million and $12.4 million classified as Other current liabilities and Other liabilities, respectively, in the Statements of Unaudited Condensed Consolidated Financial Position as of September 30, 2018.



(In Millions)
Derivatives Not Designated as Hedging Instruments	Location of Income (Loss) Recognized on Derivatives	Amount of Income (Loss) Recognized on Derivatives
		Three Months Ended September 30,						Nine Months Ended September 30,
		2018			2017			2018			2017
Customer Supply Agreements	Product revenues	$	139.7		$	54.3		$	337.1		$	123.9
Provisional Pricing Arrangements	Product revenues	(3.8		)	(15.7		)	(2.7		)	(21.0		)
Commodity Contracts	Cost of goods sold and operating expenses	—			—			—			(1.3		)
Total		$	135.9		$	38.6		$	334.4		$	101.6



	(In Millions)
Assets and Liabilities of Discontinued Operations	September 30, 2018		December 31, 2017
Cash and cash equivalents	$	15.6	$	29.4
Accounts receivable, net	—		33.9
Inventories	—		45.0
Supplies and other inventories	—		5.1
Other current assets	0.5		5.1
Total current assets of discontinued operations	16.1		118.5
Property, plant and equipment, net	—		17.2
Other non-current assets	—		3.1
Total assets of discontinued operations	$	16.1	$	138.8

Accounts payable	$	4.2	$	28.2
Accrued liabilities	3.0		28.0
Other current liabilities	—		15.6
Total current liabilities of discontinued operations	7.2		71.8
Environmental and mine closure obligations	—		28.8
Other liabilities	9.3		23.4
Total liabilities of discontinued operations	$	16.5	$	124.0



	(In Millions)
	Cliffs Shareholders’ Equity (Deficit)			Noncontrolling Interest			Total Equity (Deficit)
December 31, 2017	$	(444.3	)	$	0.2		$	(444.1	)
Adoption of accounting standard (REFER TO NOTE 2)	34.0			—			34.0
Comprehensive income (loss)
Net loss	(84.3		)	—			(84.3		)
Other comprehensive income	7.7			—			7.7
Total comprehensive loss	(76.6		)	—			(76.6		)
Stock and other incentive plans	1.9			—			1.9
March 31, 2018	$	(485.0	)	$	0.2		$	(484.8	)
Comprehensive income
Net income	165.1			—			165.1
Other comprehensive income	9.1			—			9.1
Total comprehensive income	174.2			—			174.2
Stock and other incentive plans	4.5			—			4.5
Distributions to noncontrolling interest	—			(0.2		)	(0.2		)
June 30, 2018	$	(306.3	)	$	—		$	(306.3	)
Comprehensive income (loss)
Net income	437.8			—			437.8
Other comprehensive loss	(221.2		)	—			(221.2		)
Total comprehensive income	216.6			—			216.6
Stock and other incentive plans	3.5			—			3.5
September 30, 2018	$	(86.2	)	$	—		$	(86.2	)



	(In Millions)
	Cliffs Shareholders’ Equity (Deficit)			Noncontrolling Interest (Deficit)			Total Equity (Deficit)
December 31, 2016	$	(1,464.3	)	$	133.8		$	(1,330.5	)
Comprehensive loss
Net loss	(28.1		)	(1.7		)	(29.8		)
Other comprehensive loss	(3.0		)	(5.0		)	(8.0		)
Total comprehensive loss	(31.1		)	(6.7		)	(37.8		)
Issuance of common shares	661.3			—			661.3
Stock and other incentive plans	4.0			—			4.0
March 31, 2017	$	(830.1	)	$	127.1		$	(703.0	)
Comprehensive income (loss)
Net income (loss)	31.8			(1.7		)	30.1
Other comprehensive income	4.9			0.4			5.3
Total comprehensive income (loss)	36.7			(1.3		)	35.4
Stock and other incentive plans	4.3			—			4.3
Distributions to noncontrolling interest	—			(3.4		)	(3.4		)
June 30, 2017	$	(789.1	)	$	122.4		$	(666.7	)
Comprehensive income
Net income (loss)	53.4			(0.5		)	52.9
Other comprehensive income	2.3			5.7			8.0
Total comprehensive income	55.7			5.2			60.9
Stock and other incentive plans	5.2			—			5.2
Acquisition of noncontrolling interest	(89.1		)	(15.9		)	(105.0		)
Distributions of partnership equity	(16.0		)	(116.7		)	(132.7		)
Contributions by noncontrolling interest	—			5.2			5.2
September 30, 2017	$	(833.3	)	$	0.2		$	(833.1	)



	(In Millions)
	Changes in Pension and OPEB, net of tax			Changes in Foreign Currency Translation			Changes in Derivative Financial Instruments, net of tax			Accumulated Other Comprehensive Loss
December 31, 2017	$	(263.9	)	$	225.4		$	(0.5	)	$	(39.0	)
Other comprehensive income before reclassifications	0.5			0.7			0.4			1.6
Net loss (gain) reclassified from accumulated other comprehensive loss	6.2			—			(0.1		)	6.1
March 31, 2018	$	(257.2	)	$	226.1		$	(0.2	)	$	(31.3	)
Other comprehensive income before reclassifications	0.2			2.2			0.2			2.6
Net loss reclassified from accumulated other comprehensive loss	6.5			—			—			6.5
June 30, 2018	$	(250.5	)	$	228.3		$	—		$	(22.2	)
Other comprehensive income (loss) before reclassifications	0.3			(0.2		)	0.2			0.3
Net loss (gain) reclassified from accumulated other comprehensive loss	6.5			(228.1		)	0.1			(221.5		)
September 30, 2018	$	(243.7	)	$	—		$	0.3		$	(243.4	)



	(In Millions)
	Changes in Pension and OPEB, net of tax			Changes in Foreign Currency Translation			Accumulated Other Comprehensive Loss
December 31, 2016	$	(260.6	)	$	239.3		$	(21.3	)
Other comprehensive income (loss) before reclassifications	3.3			(12.7		)	(9.4		)
Net loss reclassified from accumulated other comprehensive loss	6.4			—			6.4
March 31, 2017	$	(250.9	)	$	226.6		$	(24.3	)
Other comprehensive loss before reclassifications	(0.1		)	(1.5		)	(1.6		)
Net loss reclassified from accumulated other comprehensive loss	6.5			—			6.5
June 30, 2017	$	(244.5	)	$	225.1		$	(19.4	)
Other comprehensive income (loss) before reclassifications	(18.7		)	0.5			(18.2		)
Net loss reclassified from accumulated other comprehensive loss	6.8			—			6.8
September 30, 2017	$	(256.4	)	$	225.6		$	(30.8	)



Unaudited Condensed Consolidating Statement of Financial Position
As of December 31, 2017
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	948.9		$	2.1	$	27.3		$	—		$	978.3
Accounts receivable, net	4.5			102.9		—			(0.7		)	106.7
Inventories	—			138.4		—			—			138.4
Supplies and other inventories	—			88.8		—			—			88.8
Income tax receivable	11.4			1.9		—			—			13.3
Derivative assets	—			37.9		—			—			37.9
Current assets of discontinued operations	—			—		118.5			—			118.5
Loans to and accounts receivable from the Canadian Entities	44.7			6.9		—			—			51.6
Other current assets	5.0			5.6		0.5			—			11.1
TOTAL CURRENT ASSETS	1,014.5			384.5		146.3			(0.7		)	1,544.6
PROPERTY, PLANT AND EQUIPMENT, NET	17.5			965.5		50.8			—			1,033.8
OTHER ASSETS
Deposits for property, plant and equipment	—			8.2		9.6			—			17.8
Income tax receivable	235.3			—		—			—			235.3
Non-current assets of discontinued operations	—			—		20.3			—			20.3
Investment in subsidiaries	1,024.3			29.9		—			(1,054.2		)	—
Long-term intercompany notes	—			—		242.0			(242.0		)	—
Other non-current assets	7.8			91.8		2.0			—			101.6
TOTAL OTHER ASSETS	1,267.4			129.9		273.9			(1,296.2		)	375.0
TOTAL ASSETS	$	2,299.4		$	1,479.9	$	471.0		$	(1,296.9	)	$	2,953.4
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	7.1		$	92.3	$	0.8		$	(0.7	)	$	99.5
Accrued expenses	19.0			59.9		0.2			—			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	2.1			63.5		1.8			—			67.4
TOTAL CURRENT LIABILITIES	115.2			259.9		77.8			(0.7		)	452.2
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES	66.4			430.6		(239.3		)	—			257.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS	—			140.6		27.1			—			167.7
LONG-TERM DEBT	2,304.2			—		—			—			2,304.2
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS	—			—		52.2			—			52.2
LONG-TERM INTERCOMPANY NOTES	242.0			—		—			(242.0		)	—
OTHER LIABILITIES	15.7			147.2		0.6			—			163.5
TOTAL LIABILITIES	2,743.5			978.3		(81.6		)	(242.7		)	3,397.5
EQUITY
TOTAL CLIFFS SHAREHOLDERS' EQUITY (DEFICIT)	(444.1		)	501.6		552.4			(1,054.2		)	(444.3		)
NONCONTROLLING INTEREST	—			—		0.2			—			0.2
TOTAL EQUITY (DEFICIT)	(444.1		)	501.6		552.6			(1,054.2		)	(444.1		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,299.4		$	1,479.9	$	471.0		$	(1,296.9	)	$	2,953.4



Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income
For the Nine Months Ended September 30, 2018
(In Millions)
	Cleveland-Cliffs Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
REVENUES FROM PRODUCT SALES AND SERVICES
Product	$	—		$	1,525.9		$	—		$	—		$	1,525.9
Freight and venture partners' cost reimbursements	—			110.2			—			—			110.2
	—			1,636.1			—			—			1,636.1
COST OF GOODS SOLD AND OPERATING EXPENSES	—			(1,028.5		)	—			—			(1,028.5		)
SALES MARGIN	—			607.6			—			—			607.6
OTHER OPERATING EXPENSE
Selling, general and administrative expenses	(62.9		)	(17.8		)	(0.7		)	—			(81.4		)
Miscellaneous – net	(0.4		)	(14.4		)	(1.4		)	—			(16.2		)
	(63.3		)	(32.2		)	(2.1		)	—			(97.6		)
OPERATING INCOME (LOSS)	(63.3		)	575.4			(2.1		)	—			510.0
OTHER INCOME (EXPENSE)
Interest expense, net	(91.9		)	(1.8		)	0.6			—			(93.1		)
Gain on extinguishment of debt	0.2			—			—			—			0.2
Other non-operating income (expense)	(2.6		)	0.8			14.9			—			13.1
	(94.3		)	(1.0		)	15.5			—			(79.8		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(157.6		)	574.4			13.4			—			430.2
INCOME TAX EXPENSE	(13.8		)	(0.2		)	(0.4		)	—			(14.4		)
EQUITY IN INCOME OF SUBSIDIARIES	665.7			13.8			—			(679.5		)	—
INCOME FROM CONTINUING OPERATIONS	494.3			588.0			13.0			(679.5		)	415.8
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX	24.3			12.8			65.7			—			102.8
NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	518.6		$	600.8		$	78.7		$	(679.5	)	$	518.6
OTHER COMPREHENSIVE INCOME (LOSS)	(204.4		)	18.0			(227.5		)	209.5			(204.4		)
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLIFFS SHAREHOLDERS	$	314.2		$	618.8		$	(148.8	)	$	(470.0	)	$	314.2