Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
OR
☐
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
clf-20210331_g1.jpg
CLEVELAND-CLIFFS INC.
(Exact Name of Registrant as Specified in Its Charter)
Ohio34-1464672
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
200 Public Square,Cleveland,Ohio44114-2315
(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 classTrading Symbol(s)Name of each exchange on which registered
Common shares, par value $0.125 per shareCLFNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ☒                                         No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes  ☒                                         No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ☐                                        No  ☒
The number of shares outstanding of the registrant’s common shares, par value $0.125 per share, was 399,198,070499,402,288 as of July 27, 2020.

April 26, 2021.

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TABLE OF CONTENTS
TABLE OF CONTENTS
Page Number
Page Number
DEFINITIONS
1
DEFINITIONS
1
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Statements of Unaudited Condensed Consolidated Financial Position as of June 30, 2020March 31, 2021 and December 31, 20192020
3
Statements of Unaudited Condensed Consolidated Operations for the Three and Six Months Ended June 30,March 31, 2021 and 2020 and 2019
4
Statements of Unaudited Condensed Consolidated Comprehensive Income (Loss) for the Three and Six Months Ended June 30,March 31, 2021 and 2020 and 2019
5
Statements of Unaudited Condensed Consolidated Cash Flows for the SixThree Months Ended June 30,March 31, 2021 and 2020 and 2019
6
Statements of Unaudited Condensed Consolidated Changes in Equity for the Three and Six Months Ended June 30,March 31, 2021 and 2020 and 2019
7
Notes to Unaudited Condensed Consolidated Financial Statements
8
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
4134
Item 3.Quantitative and Qualitative Disclosures About Market Risk
6150
Item 4.Controls and Procedures
6251
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
6352
Item 1A.Risk Factors
6352
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
6352
Item 4.Mine Safety Disclosures
6352
Item 5.Other Information
6353
Item 6.Exhibits
6453
Signatures
6654

Table of Contents


DEFINITIONS
The following abbreviations or acronyms are used in the text. References in this report to the “Company,” “we,” “us,” “our” and “Cliffs” are to Cleveland-Cliffs Inc. and subsidiaries, collectively, unless stated otherwise or the context indicates otherwise.
Abbreviation or acronymTerm
Abbreviation or acronym4.625% 2029 Senior NotesTerm4.625% Senior Guaranteed Notes due 2029 issued by Cleveland-Cliffs Inc. on February 17, 2021 in an aggregate principal amount of $500 million
4.875% 2031 Senior Notes4.875% Senior Guaranteed Notes due 2031 issued by Cleveland-Cliffs Inc. on February 17, 2021 in an aggregate principal amount of $500 million
ABL FacilityAsset-Based Revolving Credit Agreement, bydated as of March 13, 2020, among Cleveland-Cliffs Inc., the lenders party thereto from time to time and among Bank of America, N.A., as Agent, the Lenders that are parties thereto,administrative agent, as the Lenders, and Cleveland-Cliffs Inc., as Parent and a Borrower, datedamended as of March 13,27, 2020, and December 9, 2020, and as may be further amended from time to time
AcquisitionsThe AK Steel Merger and AM USA Transaction, together
Adjusted EBITDAEBITDA, excluding certain items such as EBITDA of noncontrolling interests, extinguishment of debt, severance, acquisition-related costs, amortization of inventory step-up and impacts of discontinued operations and intersegment corporate allocations of selling, general and administrative costs
AK CoalAK Coal Resources, Inc., an indirect, wholly owned subsidiary of AK Steel and related coal mining operations
AK SteelAK Steel Holding Corporation (n/k/a Cleveland-Cliffs Steel Holding Corporation) and its consolidated subsidiaries, including AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), its direct, wholly owned subsidiary, collectively, unless stated otherwise or the context indicates otherwise
AK TubeAK Tube LLC, an indirect, wholly owned subsidiary of AK Steel
AMT MergerAlternative Minimum Tax
AOCIAccumulated Other Comprehensive Income (Loss)
ArcelorMittal USAArcelorMittal USA LLC (including many of its United States affiliates, subsidiaries and representatives. References to ArcelorMittal USA comprise all such relationships unless a specific ArcelorMittal USA entity is referenced)
ASCAccounting Standards Codification
Atlantic Basin pellet premiumPlatts Atlantic Basin Blast Furnace 65% Fe pellet premium
BoardThe Board of Directors of Cleveland-Cliffs Inc.
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CECLCurrent Expected Credit Losses
CERCLAComprehensive Environmental Response, Compensation and Liability Act
Compensation CommitteeCompensation and Organization Committee of the Board
COVID-19A novel strain of coronavirus that the World Health Organization declared a global pandemic in March 2020
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act
DR-gradeDirect Reduction-grade
EAFElectric Arc Furnace
EBITDAEarnings before interest, taxes, depreciation and amortization
EmpireEmpire Iron Mining Partnership
EPAU.S. Environmental Protection Agency
ERISAEmployee Retirement Income Security Act of 1974, as amended
Exchange ActSecurities Exchange Act of 1934, as amended
FeIron
FILOFirst-in, last-out
Former ABL FacilityAmended and Restated Syndicated Facility Agreement by and among Bank of America, N.A., as Administrative Agent, the Lenders that are parties thereto, as the Lenders, Cleveland-Cliffs Inc., as Parent and a Borrower, and the Subsidiaries of Parent party thereto, as Borrowers, dated as of March 30, 2015, as amended and restated as of February 28, 2018, and as further amended
GAAPAccounting principles generally accepted in the United States
HBIHot Briquetted Iron
HibbingHibbing Taconite Company, an unincorporated joint venture
Hot-rolled coil steel priceEstimated average annual daily market price for hot-rolled coil steel
IRBsIndustrial Revenue Bonds
LIBORLondon Interbank Offered Rate
LIFOLast-in, first-out
Long ton2,240 pounds
MergerThe merger of Merger Sub with and into AK Steel, with AK Steel surviving the merger as a wholly owned subsidiary of Cliffs,Cleveland-Cliffs Inc., subject to the terms and conditions set forth in the AK Steel Merger Agreement, effective as ofconsummated on March 13, 2020
AK Steel Merger AgreementAgreement and Plan of Merger, dated as of December 2, 2019, among Cliffs,Cleveland-Cliffs Inc., AK Steel and Merger Sub
AM USA TransactionThe acquisition of ArcelorMittal USA, consummated on December 9, 2020
AM USA Transaction AgreementTransaction Agreement, dated as of September 28, 2020, by and between Cleveland-Cliffs Inc. and ArcelorMittal
AOCIAccumulated Other Comprehensive Income (Loss)
ArcelorMittalArcelorMittal S.A., a company organized under the laws of Luxembourg and the former ultimate parent company of ArcelorMittal USA
ArcelorMittal USASubstantially all of the operations of the former ArcelorMittal USA LLC, its subsidiaries and certain affiliates, and Kote and Tek, collectively
ASCAccounting Standards Codification
ASUAccounting Standards Update
BoardThe Board of Directors of Cleveland-Cliffs Inc.
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CERCLAComprehensive Environmental Response, Compensation and Liability Act of 1980
COVID-19A novel strain of coronavirus that the World Health Organization declared a global pandemic in March 2020
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act
EAFElectric arc furnace
EBITDAEarnings before interest, taxes, depreciation and amortization
EDCExport Development Canada
EPAU.S. Environmental Protection Agency
EPSEarnings per share
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FeIron
GAAPAccounting principles generally accepted in the United States
GHGGreenhouse gas
HBIHot briquetted iron
HibbingIron ore mining property owned by Hibbing Taconite Company, an unincorporated joint venture between subsidiaries of Cliffs and U.S. Steel
HRCHot-rolled coil steel
IRBIndustrial Revenue Bond
Kote and TekI/N Kote L.P. (n/k/a Cleveland-Cliffs Kote L.P.) and I/N Tek L.P. (n/k/a Cleveland-Cliffs Tek L.P.), former joint ventures between subsidiaries of the former ArcelorMittal USA LLC and Nippon Steel Corporation
Long ton2,240 pounds
Merger SubPepper Merger Sub Inc., a direct, wholly owned subsidiary of Cliffs prior to the AK Steel Merger
Metric ton2,205 pounds
MMBtuMSHAMillion British Thermal Units
MSHAU.S. Mine Safety and Health Administration
Net ton2,000 pounds
NorthshoreNorthshore Mining Company
OPEBNPDESNational Pollutant Discharge Elimination System, authorized by the Clean Water Act
OPEBOther postretirement benefits
Platts 62% PricepricePlatts IODEX 62% Fe Fines cost and freightCFR North China
Precision PartnersRCRAPPHC Holdings,Resource Conservation and Recovery Act
1
Table of Contents

Abbreviation or acronymTerm
RI/FSRemedial Investigation/Feasibility Study
SAARSeasonally Adjusted Annualized Rate
SECU.S. Securities and Exchange Commission
Section 232Section 232 of the Trade Expansion Act of 1962, as amended
Securities ActSecurities Act of 1933, as amended
SunCoke MiddletownMiddletown Coke Company, LLC, (ana subsidiary of SunCoke Energy, Inc.
Topic 805ASC Topic 805, Business Combinations
Topic 815ASC Topic 815, Derivatives and Hedging
Tubular ComponentsCleveland-Cliffs Tubular Components LLC (f/k/a AK Tube LLC), an indirect, wholly owned subsidiary of AK Steel)Steel
U.S.United States of America
U.S. SteelU.S. Steel Corporation and its subsidiaries, collectively, unless stated otherwise or the context indicates otherwise
RCRAUSMCAResource Conservation and Recovery ActUnited States-Mexico-Canada Agreement
SECUSWU.S. Securities and Exchange Commission
Section 232Section 232 of the Trade Expansion Act of 1962, as amended
Securities ActSecurities Act of 1933, as amended

1
Table of ContentsUnited Steelworkers


Abbreviation or acronymVIETerm
SunCoke MiddletownMiddletown Coke Company, LLC, a subsidiary of SunCoke Energy, Inc.
TildenTilden Mining Company L.C.
Topic 805ASC Topic 805, Business Combinations
Topic 815ASC Topic 815, Derivatives and Hedging
United TaconiteUnited Taconite LLC
U.S.United States of America
U.S. SteelOntario Hibbing Company, a subsidiary of United States Steel Corporation and a participant in Hibbing
USMCAUnited States-Mexico-Canada Agreement
VIEVariable Interest Entityinterest entity

2
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PART I
Item 1.Financial Statements
Statements of Unaudited Condensed Consolidated Financial Position
Cleveland-Cliffs Inc. and Subsidiaries
 (In Millions)
 June 30,
2020		 December 31,
2019
ASSETS   
Current assets:   
Cash and cash equivalents$73.7
 $352.6
Accounts receivable, net482.2
 94.0
Inventories1,933.6
 317.4
Income tax receivable, current62.6
 58.6
Other current assets90.2
 75.3
Total current assets2,642.3
 897.9
Non-current assets:   
Property, plant and equipment, net4,547.9
 1,929.0
Goodwill139.3
 2.1
Intangible assets, net192.6
 48.1
Income tax receivable, non-current4.1
 62.7
Deferred income taxes506.5
 459.5
Right-of-use asset, operating lease213.0
 11.7
Other non-current assets245.0
 92.8
TOTAL ASSETS$8,490.7
 $3,503.8
LIABILITIES AND EQUITY   
Current liabilities:   
Accounts payable$504.8
 $193.2
Accrued liabilities288.3
 126.3
Other current liabilities244.9
 89.9
Total current liabilities1,038.0
 409.4
Non-current liabilities:   
Long-term debt4,451.6
 2,113.8
Operating lease liability, non-current191.5
 10.5
Intangible liabilities, net72.3
 —
Pension and OPEB liabilities1,159.6
 311.5
Asset retirement obligations181.1
 163.2
Other non-current liabilities278.4
 137.5
TOTAL LIABILITIES7,372.5
 3,145.9
Commitments and contingencies (See Note 18)

 

Equity:   
Common shares - par value $0.125 per share   
Authorized - 600,000,000 shares (2019 - 600,000,000 shares);   
Issued - 428,645,866 shares (2019 - 301,886,794 shares);   
Outstanding - 399,159,988 shares (2019 - 270,084,005 shares)53.6
 37.7
Capital in excess of par value of shares4,443.6
 3,872.1
Retained deficit(3,042.5) (2,842.4)
Cost of 29,485,878 common shares in treasury (2019 - 31,802,789 shares)(355.9) (390.7)
Accumulated other comprehensive loss(305.9) (318.8)
Total Cliffs shareholders' equity792.9
 357.9
Noncontrolling interest325.3
 —
TOTAL EQUITY1,118.2
 357.9
TOTAL LIABILITIES AND EQUITY$8,490.7
 $3,503.8
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3
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Statements of Unaudited Condensed Consolidated Operations
Cleveland-Cliffs Inc. and Subsidiaries
 (In Millions, Except Per Share Amounts)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Revenues$1,092.7
 $743.2
 $1,417.2
 $900.2
Realization of deferred revenue—
 —
 34.6
 —
Operating costs:       
Cost of goods sold(1,207.5) (480.2) (1,563.5) (606.3)
Selling, general and administrative expenses(62.1) (29.4) (89.6) (56.7)
Acquisition-related costs(18.4) —
 (60.9) —
Miscellaneous – net(13.1) (6.8) (25.0) (11.2)
Total operating costs(1,301.1) (516.4) (1,739.0) (674.2)
Operating income (loss)(208.4) 226.8
 (287.2) 226.0
Other income (expense):       
Interest expense, net(68.7) (26.1) (99.7) (51.2)
Gain (loss) on extinguishment of debt129.4
 (17.9) 132.6
 (18.2)
Other non-operating income15.2
 0.6
 21.2
 1.0
Total other income (expense)75.9
 (43.4) 54.1
 (68.4)
Income (loss) from continuing operations before income taxes(132.5) 183.4
 (233.1) 157.6
Income tax benefit (expense)24.7
 (22.0) 76.1
 (18.3)
Income (loss) from continuing operations(107.8) 161.4
 (157.0) 139.3
Income (loss) from discontinued operations, net of tax(0.3) (0.6) 0.3
 (0.6)
Net income (loss)(108.1) 160.8
 (156.7) 138.7
Income attributable to noncontrolling interest(15.8) —
 (19.3) —
Net income (loss) attributable to Cliffs shareholders$(123.9) $160.8
 $(176.0) $138.7
        
Earnings (loss) per common share attributable to Cliffs shareholders - basic       
Continuing operations$(0.31) $0.59
 $(0.51) $0.49
Discontinued operations—
 —
 —
 —
 $(0.31) $0.59
 $(0.51) $0.49
Earnings (loss) per common share attributable to Cliffs shareholders - diluted       
Continuing operations$(0.31) $0.57
 $(0.51) $0.47
Discontinued operations—
 —
 —
 —
 $(0.31) $0.57
 $(0.51) $0.47
Average number of shares (in thousands)       
Basic399,088
 275,769
 348,302
 282,647
Diluted399,088
 285,479
 348,302
 293,580
(In Millions)
March 31,
2021		December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$110 $112 
Accounts receivable, net1,659 1,169 
Inventories3,932 3,828 
Other current assets160 189 
Total current assets5,861 5,298 
Non-current assets:
Property, plant and equipment, net9,014 8,743 
Goodwill994 1,406 
Deferred income taxes562 537 
Other non-current assets784 787 
TOTAL ASSETS$17,215 $16,771 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$1,743 $1,575 
Accrued employment costs465 460 
Pension and OPEB liabilities, current151 151 
Other current liabilities574 743 
Total current liabilities2,933 2,929 
Non-current liabilities:
Long-term debt5,734 5,390 
Pension and OPEB liabilities, non-current3,916 4,113 
Other non-current liabilities1,175 1,260 
TOTAL LIABILITIES13,758 13,692 
Commitments and contingencies (See Note 18)00
Series B Participating Redeemable Preferred Stock - 0 par value
Authorized, Issued and Outstanding - 583,273 shares738 738 
Equity:
Common shares - par value $0.125 per share
Authorized - 600,000,000 shares (2020 - 600,000,000 shares);
Issued - 506,832,537 shares (2020 - 506,832,537 shares);
Outstanding - 499,214,434 shares (2020 - 477,517,372 shares)63 63 
Capital in excess of par value of shares5,487 5,431 
Retained deficit(2,948)(2,989)
Cost of 7,618,103 common shares in treasury (2020 - 29,315,165 shares)(93)(354)
Accumulated other comprehensive loss(120)(133)
Total Cliffs shareholders' equity2,389 2,018 
Noncontrolling interest330 323 
TOTAL EQUITY2,719 2,341 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY$17,215 $16,771 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3
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Statements of Unaudited Condensed Consolidated Comprehensive Income (Loss)Operations
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions, Except Per Share Amounts)
Three Months Ended
March 31,
20212020
Revenues$4,049 $359 
Operating costs:
Cost of goods sold(3,761)(356)
Selling, general and administrative expenses(95)(28)
Acquisition-related costs(13)(42)
Miscellaneous – net(3)(12)
Total operating costs(3,872)(438)
Operating income (loss)177 (79)
Other income (expense):
Interest expense, net(92)(31)
Gain (loss) on extinguishment of debt(66)3 
Net periodic benefit credits other than service cost component47 6 
Total other expense(111)(22)
Income (loss) from continuing operations before income taxes66 (101)
Income tax benefit (expense)(9)51 
Income (loss) from continuing operations57 (50)
Income from discontinued operations, net of tax0 1 
Net income (loss)57 (49)
Income attributable to noncontrolling interest(16)(3)
Net income (loss) attributable to Cliffs shareholders$41 $(52)
Earnings (loss) per common share attributable to Cliffs shareholders - basic
Continuing operations$0.08 $(0.18)
Discontinued operations0 0 
$0.08 $(0.18)
Earnings (loss) per common share attributable to Cliffs shareholders - diluted
Continuing operations$0.07 $(0.18)
Discontinued operations0 0 
$0.07 $(0.18)
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Net income (loss)$(108.1) $160.8
 $(156.7) $138.7
Other comprehensive income (loss):       
Changes in pension and OPEB, net of tax6.0
 5.8
 11.6
 11.5
Changes in foreign currency translation0.7
 —
 (0.2) —
Changes in derivative financial instruments, net of tax4.5
 (2.1) 1.5
 0.6
Total other comprehensive income11.2
 3.7
 12.9
 12.1
Comprehensive income (loss)(96.9) 164.5
 (143.8) 150.8
Comprehensive income attributable to noncontrolling interests(15.8) —
 (19.3) —
Comprehensive income (loss) attributable to Cliffs shareholders$(112.7) $164.5
 $(163.1) $150.8
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

statements.
5
4

Statements of Unaudited Condensed Consolidated Cash FlowsComprehensive Income (Loss)
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions)
Three Months Ended
March 31,
20212020
Net income (loss)$57 $(49)
Other comprehensive income (loss):
Changes in pension and OPEB, net of tax7 6 
Changes in foreign currency translation(1)(1)
Changes in derivative financial instruments, net of tax7 (3)
Total other comprehensive income13 2 
Comprehensive income (loss)70 (47)
Comprehensive income attributable to noncontrolling interests(16)(3)
Comprehensive income (loss) attributable to Cliffs shareholders$54 $(50)
 (In Millions)
 Six Months Ended
June 30,
 2020 2019
OPERATING ACTIVITIES   
Net income (loss)$(156.7) $138.7
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:   
Depreciation, depletion and amortization111.5
 40.9
Amortization of inventory step-up59.4
 —
Deferred income taxes(72.5) 18.2
Loss (gain) on extinguishment of debt(132.6) 18.2
Loss (gain) on derivatives8.0
 (27.2)
Other(28.0) 28.4
Changes in operating assets and liabilities, net of business combination:   
Receivables and other assets365.7
 145.4
Inventories(126.1) (148.7)
Payables, accrued expenses and other liabilities(327.9) (62.8)
Net cash provided (used) by operating activities(299.2) 151.1
INVESTING ACTIVITIES   
Purchase of property, plant and equipment(282.9) (300.9)
Acquisition of AK Steel, net of cash acquired(869.3) —
Other investing activities(0.2) 8.5
Net cash used by investing activities(1,152.4) (292.4)
FINANCING ACTIVITIES   
Repurchase of common shares—
 (252.9)
Proceeds from issuance of debt1,762.9
 720.9
Debt issuance costs(57.9) (6.8)
Repurchase of debt(999.5) (729.3)
Borrowings under credit facilities800.0
 —
Repayments under credit facilities(250.0) —
Dividends paid(40.8) (28.9)
Other financing activities(43.6) (10.9)
Net cash provided (used) by financing activities1,171.1
 (307.9)
Decrease in cash and cash equivalents, including cash classified within other current assets related to discontinued operations(280.5) (449.2)
Less: decrease in cash and cash equivalents from discontinued operations, classified within other current assets(1.6) (3.2)
Net decrease in cash and cash equivalents(278.9) (446.0)
Cash and cash equivalents at beginning of period352.6
 823.2
Cash and cash equivalents at end of period$73.7
 $377.2
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
5

Statements of Unaudited Condensed Consolidated Cash Flows
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions)
Three Months Ended
March 31,
20212020
OPERATING ACTIVITIES
Net income (loss)$57 $(49)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation, depletion and amortization217 35 
Amortization of inventory step-up81 23 
Changes in deferred revenue(3)(48)
Deferred income taxes10 (48)
Loss (gain) on extinguishment of debt66 (3)
Other(2)51 
Changes in operating assets and liabilities, net of business combination:
Receivables and other assets(480)254 
Inventories(172)(267)
Pension and OPEB payments and contributions(175)(13)
Payables, accrued expenses and other liabilities22 (99)
Net cash used by operating activities(379)(164)
INVESTING ACTIVITIES
Purchase of property, plant and equipment(136)(138)
Acquisition of AK Steel, net of cash acquired0 (869)
Other investing activities1 0 
Net cash used by investing activities(135)(1,007)
FINANCING ACTIVITIES
Proceeds from issuance of common shares322 0 
Proceeds from issuance of debt1,000 716 
Debt issuance costs(16)(44)
Repayments of debt(902)(430)
Borrowings under credit facilities1,158 800 
Repayments under credit facilities(1,010)0 
Other financing activities(40)(37)
Net cash provided by financing activities512 1,005 
Net decrease in cash and cash equivalents(2)(166)
Cash and cash equivalents at beginning of period112 353 
Cash and cash equivalents at end of period$110 $187 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

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		AOCINon-controlling InterestsTotal
December 31, 2020478 $63 $5,431 $(2,989)$(354)$(133)$323 $2,341 
Comprehensive income— — — 41 — 13 16 70 
Issuance of common stock20 0 78 — 244 — — 322 
Stock and other incentive plans1 — (22)— 17 — — (5)
Acquisition of ArcelorMittal USA - Measurement period adjustments— — — — — — (1)(1)
Net distributions to noncontrolling interests— — — — — — (8)(8)
March 31, 2021499 $63 $5,487 $(2,948)$(93)$(120)$330 $2,719 
(In Millions)(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		 AOCI Non-controlling Interests TotalNumber
of
Common
Shares Outstanding		Par Value of Common
Shares Issued		Capital in
Excess of
Par Value
of Shares		Retained
Deficit		Common
Shares
in
Treasury		AOCINon-controlling InterestsTotal
December 31, 2019270.1
 $37.7
 $3,872.1
 $(2,842.4) $(390.7) $(318.8) $—
 $357.9
December 31, 2019271 $37 $3,873 $(2,842)$(391)$(319)$0 $358 
Comprehensive income (loss)—
 —
 —
 (52.1) —
 1.7
 3.5
 (46.9)Comprehensive income (loss)— — — (52)— 2 3 (47)
Stock and other incentive plans1.7
 —
 (23.6) —
 25.7
 —
 —
 2.1
Stock and other incentive plans1 — (24)— 26 — — 2 
Acquisition of AK Steel126.8
 15.9
 601.7
 —
 —
 —
 329.8
 947.4
Acquisition of AK Steel127 16 602 — — — 330 948 
Common share dividends ($0.06 per share)—
 —
 —
 (24.0) —
 —
 —
 (24.0)
Common stock dividends ($0.06 per share)Common stock dividends ($0.06 per share)— — — (24)— — — (24)
Net distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 (5.5) (5.5)Net distributions to noncontrolling interests— — — — — — (6)(6)
March 31, 2020398.6
 $53.6
 $4,450.2
 $(2,918.5) $(365.0) $(317.1) $327.8
 $1,231.0
March 31, 2020399 $53 $4,451 $(2,918)$(365)$(317)$327 $1,231 
Comprehensive income (loss)—
 —
 —
 (123.9) —
 11.2
 15.8
 (96.9)
Stock and other incentive plans0.6
 —
 (6.6) —
 9.1
 —
 —
 2.5
Common share dividends—
 —
 —
 (0.1) —
 —
 —
 (0.1)
Net distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 (18.3) (18.3)
June 30, 2020399.2
 $53.6
 $4,443.6
 $(3,042.5) $(355.9) $(305.9) $325.3
 $1,118.2
 (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		 AOCI Total
December 31, 2018292.6
 $37.7
 $3,916.7
 $(3,060.2) $(186.1) $(283.9) $424.2
Comprehensive income (loss)—
 —
 —
 (22.1) —
 8.4
 (13.7)
Stock and other incentive plans1.7
 —
 (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, 2019282.8
 $37.7
 $3,860.2
 $(3,096.8) $(263.9) $(275.5) $261.7
Comprehensive income—
 —
 —
 160.8
 —
 3.7
 164.5
Stock and other incentive plans0.1
 —
 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, 2019270.0
 $37.7
 $3,863.6
 $(2,952.6) $(391.3) $(271.8) $285.6

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

7

Notes to Unaudited Condensed Consolidated Financial Statements
Cleveland-Cliffs Inc. and Subsidiaries

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business, Consolidation and Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with SEC rules and regulations and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations, comprehensive income (loss), cash flows and changes in equity for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. The results of operations for the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 20202021 or any other future period. Due to the acquisition of AK Steel, certain balances have become material and are no longer being condensed in our Statements of Unaudited Condensed Consolidated Financial Position, such as balances for Right-of-use asset, operating lease and Operating lease liability, non-current. As a result, certain prior period amounts have been reclassified to conform with the current year presentation. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020.
Acquisition of AK SteelBusiness Operations
On March 13, 2020, we consummated the Merger, pursuant to which, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub was merged with and into AK Steel, with AK Steel surviving the Merger as a wholly owned subsidiary of Cliffs. Refer to NOTE 3 - ACQUISITION OF AK STEEL for further information.
AK Steel is a leading North American producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing markets. The acquisition of AK Steel has transformed us into aWe are vertically integrated producerfrom the mining of value-added iron ore and coal; to production of metallics and coke; through iron making, steelmaking, rolling and finishing; and to downstream tubular components, stamping and tooling. We have the unique advantage as a steel products.
COVID-19
In response to the COVID-19 pandemic, we made various operational changes to adjust to the demandproducer of being fully or partially self-sufficient with our production of raw materials for our products. Although steel andmanufacturing, which includes iron ore production have been considered “essential” bypellets, HBI and coking coal.
We are organized into four operating segments based on differentiated products, Steelmaking, Tubular, Tooling and Stamping, and European Operations. We primarily operate through one reportable segment – the states in which we operate, certain of our facilities and construction activities were temporarily idled during the second quarter of 2020.  Nearly all of these temporarily idled facilities were restarted as of June 30, 2020, with the exception of the Dearborn hot-end operations and Mansfield operations, which were restarted in July 2020, and the Northshore mine, which we plan to restart in early August 2020.Steelmaking segment.
Basis of Consolidation
The unaudited condensed consolidated financial statements consolidate our accounts and the accounts of our wholly owned subsidiaries, all subsidiaries in which we have a controlling interest and two variable interest entitiesVIEs for which we are the primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation.
Reportable Segments
The acquisition of AK Steel has transformed us into a vertically integrated producer of value-added iron ore and steel products and we are organized according to our differentiated products in two reportable segments - the new Steel and Manufacturing segment and the Mining and Pelletizing segment. Our new Steel and Manufacturing segment includes the assets acquired through the acquisition of AK Steel and our previously reported Metallics segment, and our Mining and Pelletizing segment includes our three active operating mines and our indefinitely idled mine.

8

Investments in Affiliates
We have investments in several businesses accounted for using the equity method of accounting. We review an investment for impairment when circumstances indicate that a loss in value below its carrying amount is other than temporary. Investees
As of March 31, 2021 and equity ownership percentages are presented below:
InvesteeSegment Reported WithinEquity Ownership Percentage
Combined Metals of Chicago, LLCSteel and Manufacturing40.0%
Hibbing Taconite CompanyMining and Pelletizing23.0%
Spartan Steel Coating, LLCSteel and Manufacturing48.0%

We recorded a basis difference for Spartan SteelDecember 31, 2020, our investment in affiliates of $32.5$116 million as part of our acquisition of AK Steel.  The basis difference relates to the excess of the fair value over the investee's carrying amount of property, plant and equipment and will be amortized over the remaining useful lives of the underlying$105 million, respectively, was classified in Other non-current assets.
Significant Accounting Policies
A detailed description of our significant accounting policies can be found in the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC, which were updated and can be found in the unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein.
8

Recent Accounting Pronouncements
Issued and AdoptedNot Effective
On March 2,In August 2020, the SECFASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update requires certain convertible instruments to be accounted for as a final rule that amendedsingle liability measured at its amortized cost. Additionally, the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rule 3-10, which required separate financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The final rule replacesupdate requires the previous requirement under Rule 3-10 to provide condensed consolidating financial information in the registrant’s financial statements with a requirement to provide alternative financial disclosures (which include summarized financial informationuse of the parent"if-converted" method, removing the treasury stock method, when calculating diluted shares. The two methods of adoption are the full and any issuers and guarantors,modified retrospective approaches. We expect to utilize the modified retrospective approach. Using this approach, the guidance shall be applied to transactions outstanding as well as other qualitative disclosures)of the beginning of the fiscal year in eitherwhich the registrant’s Management's Discussion and Analysis of Financial Condition and Results of Operations or its financial statements, in addition to other simplifications.amendment is adopted. The final rule is effective for filings on orfiscal years beginning after January 4, 2021, and earlyDecember 15, 2021. Early adoption is permitted.permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We electedexpect the adoption of this update to early adopt this disclosure update fordecrease our diluted EPS unless the period ended March 31, 2020. As a result, we have excluded the footnote disclosures requiredadditional shares under the previous Rule 3-10, and appliedif-converted method are anti-dilutive. We expect to adopt the final rule by includingupdate at the summarized financial information and qualitative disclosures in Part I - Item 2. Management's Discussion and Analysisrequired adoption date of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Exhibit 22.1, filed herewith.January 1, 2022.

9

NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Revenues
The following table represents our consolidated Revenues (excluding intercompany revenues) by market:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Steel and Manufacturing:       
Automotive$363.8
 $—
 $484.0
 $—
Infrastructure and manufacturing203.4
 —
 247.4
 —
Distributors and converters147.9
 —
 201.2
 —
Total Steel and Manufacturing715.1
 —
 932.6
 —
Mining and Pelletizing:       
Steel producers1
377.6
 743.2
 519.2
 900.2
Total revenues$1,092.7
 $743.2
 $1,451.8
 $900.2
1 Includes Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020.
The following table represents our consolidated Revenues (excluding intercompany revenues) by product line:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Steel and Manufacturing:       
Carbon steel$431.8
 $—
 $570.4
 $—
Stainless and electrical steel222.5
 —
 281.9
 —
Tubular products, components and other60.8
 —
 80.3
 —
Total Steel and Manufacturing715.1
 —
 932.6
 —
Mining and Pelletizing:       
Iron ore1
349.7
 697.4
 481.0
 842.8
Freight27.9
 45.8
 38.2
 57.4
Total Mining and Pelletizing377.6
 743.2
 519.2
 900.2
Total revenues$1,092.7
 $743.2
 $1,451.8
 $900.2
1 Includes Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020.
We sell domestically to customers located primarily in the Midwestern, Southern and Eastern United States and to foreign customers, primarily in Canada, Mexico and Western Europe. Net revenues to customers located outside the United States were $176.0 million and $222.7 million for the three and six months ended June 30, 2020, respectively, and $136.4 million and $179.4 million for the three and six months ended June 30, 2019, respectively.
Allowance for Credit Losses
The following is a roll forward of our allowance for credit losses associated with Accounts receivable, net:
 (In Millions)
 2020 2019
Allowance for credit losses as of January 1$—
 $—
Increase in allowance4.3
 —
Allowance for credit losses as of June 30$4.3
 $—


10

(In Millions)
20212020
Allowance for credit losses as of January 1$(5)$0 
Increase in allowance(1)(1)
Allowance for credit losses as of March 31$(6)$(1)
Inventories
The following table presents the detail of our Inventories in the Statements of Unaudited Condensed Consolidated Financial Position:
 (In Millions)
 June 30,
2020		 December 31,
2019
Product inventories   
Finished and semi-finished goods$1,026.4
 $114.1
Work-in-process89.5
 68.7
Raw materials438.0
 9.4
Total product inventories1,553.9
 192.2
Manufacturing supplies and critical spares379.7
 125.2
Inventories$1,933.6
 $317.4

Deferred Revenue
The table below summarizes our deferred revenue balances:
 (In Millions)
 Deferred Revenue (Current) Deferred Revenue (Long-Term)
 2020 2019 2020 2019
Opening balance as of January 1$22.1
 $21.0
 $25.7
 $38.5
Net decrease(17.2) (5.5) (25.7) (4.2)
Closing balance as of June 30$4.9
 $15.5
 $—
 $34.3

Prior to the Merger, our iron ore pellet sales agreement with Severstal, subsequently assumed by AK Steel, required supplemental payments to be paid by the customer during the period 2009 through 2013. Installment amounts received under this arrangement in excess of sales were classified as deferred revenue in the Statements of Consolidated Financial Position upon receipt of payment and the revenue was recognized over the term of the supply agreement, which had extended until 2022, in equal annual installments. As a result of the termination of that iron ore pellet sales agreement, we realized $34.6 million of deferred revenue, which was recognized within Realization of deferred revenue in the Statements of Unaudited Condensed Consolidated Operations, during the six months ended June 30, 2020.
We have certain other sales agreements that require customers to pay in advance. Payments received pursuant to these agreements prior to revenue being recognized are recorded as deferred revenue in Other current liabilities.
Accrued Liabilities
The following table presents the detail of our Accrued liabilities in the Statements of Unaudited Condensed Consolidated Financial Position:
 (In Millions)
 June 30,
2020		 December 31, 2019
Accrued employment costs$153.8
 $61.7
Accrued interest71.5
 29.0
Accrued dividends1.1
 17.8
Other61.9
 17.8
Accrued liabilities$288.3
 $126.3


11

(In Millions)
March 31,
2021		December 31,
2020
Product inventories
Finished and semi-finished goods$2,296 $2,125 
Raw materials1,372 1,431 
Total product inventories3,668 3,556 
Manufacturing supplies and critical spares264 272 
Inventories$3,932 $3,828 
Cash Flow Information
A reconciliation of capital additions to cash paid for capital expenditures is as follows:
(In Millions)
Three Months Ended
March 31,
20212020
Capital additions$162 $158 
Less:
Non-cash accruals23 (10)
Right-of-use assets - finance leases3 30 
Cash paid for capital expenditures including deposits$136 $138 
9
 (In Millions)
 Six Months Ended
June 30,
 2020 2019
Capital additions$230.7
 $320.9
Less:   
Non-cash accruals(91.6) 3.6
Right-of-use assets - finance leases39.4
 24.8
Grants—
 (8.4)
Cash paid for capital expenditures including deposits$282.9
 $300.9

Cash payments (receipts) for income taxes and interest are as follows:
(In Millions)
Three Months Ended
March 31,
20212020
Taxes paid on income$3 $0 
Income tax refunds(14)(60)
Interest paid on debt obligations net of capitalized interest1
75 30 
1 Capitalized interest was $1 million and $10 million for the three months ended March 31, 2021 and 2020, respectively.
 (In Millions)
 Six Months Ended
June 30,
 2020 2019
Taxes paid on income$0.2
 $0.1
Income tax refunds(60.4) (117.9)
Interest paid on debt obligations net of capitalized interest1
63.0
 53.2
1 Capitalized interest was $23.3 million and $9.9 million for the six months ended June 30, 2020 and 2019, respectively.
Non-Cash Investing and Financing Activities
 (In Millions)
 Six Months Ended
June 30,
 2020 2019
Fair value of common shares issued for consideration for business combination$617.6
 $—
Fair value of equity awards assumed from AK Steel acquisition3.9
 —

NOTE 3 - ACQUISITION OF AK STEELACQUISITIONS
Transaction Overview
On March 13,In 2020, pursuant to the Merger Agreement, we completed the acquisition ofacquired two major steelmakers, AK Steel in which we were the acquirer. As a result of the Merger, each share ofand ArcelorMittal USA, vertically integrating our legacy iron ore business with steel production. Our fully-integrated portfolio includes custom-made pellets and HBI; flat-rolled carbon steel, stainless, electrical, plate, tinplate and long steel products; and carbon and stainless steel tubing, hot and cold stamping and tooling. The AK Steel common stock issued and outstanding immediately prior to the effective time of the Merger (other than excluded shares) was converted into the right to receive 0.400 Cliffs common shares and, if applicable, cash in lieu of any fractional Cliffs common shares.
The acquisition combined Cliffs, North America’s largesta producer of iron ore pellets, with AK Steel, a leading producer of innovative flat-rolled carbon, stainless and electrical steel products, to create a vertically integrated producer of value-added iron ore and steel products. The AM USA Transaction transformed us into a fully-integrated steel enterprise with the size and scale to expand product offerings and improve through-the cycle margins.
We now have a presence across the entire steel manufacturing process, from mining to pelletizing to the development and production of finished high value steel products. The combination is expected to create significant opportunities to generate additional value from market trends across the entire steel value chain and enable more consistent, predictable performance through normal market cycles. Together, Cliffs and AK Steel have a presence across the entire manufacturing process, from mining to pelletizing
Acquisition of ArcelorMittal USA
Overview
On December 9, 2020, pursuant to the developmentterms of the AM USA Transaction Agreement, we purchased ArcelorMittal USA from ArcelorMittal. In connection with the closing of the AM USA Transaction, as contemplated by the terms of the AM USA Transaction Agreement, ArcelorMittal’s former joint venture partner in Kote and productionTek exercised its put right pursuant to the terms of finished high value steel products, including Next Generation Advanced High Strength Steels for automotivethe Kote and other markets. We expect the combination will generate additional cost synergies, whichTek joint venture agreements. As a result, we have identifiedpurchased all of such joint venture partner’s interests in Kote and already set into motion savings of approximately $150 million, primarily from consolidating corporate functions, reducing duplicative overhead costs, and procurement and energy cost savings, as well as operational and supply chain efficiencies. The combined company is well positioned to provide high-value iron ore and steel solutions to customers primarily across North America.

12

Total net revenues for AK Steel for the most recent pre-acquisition year ended December 31, 2019 were $6,359.4 million.Tek. Following the acquisition, the operating results of AK Steel are included in our unaudited condensed consolidated financial statements and are reported as part of our Steel and Manufacturing segment. For the three months ended June 30, 2020, AK Steel generated Revenues of $715.1 million and a loss of $206.5 million included within Net income (loss) attributable to Cliffs shareholders, which included $36.2 million and $15.1 million related to amortizationclosing of the fair value inventory step-up and severance costs, respectively. For the period subsequent to the acquisition (March 13, 2020 through June 30, 2020), AK Steel generated Revenues of $932.6 million and a loss of $261.6 million included within Net income (loss) attributable to Cliffs shareholders, which included $59.4 million and $32.7 million related to amortizationAM USA Transaction, we own 100% of the fair value inventory step-upinterests in Kote and severance costs, respectively.Tek.
Additionally, weWe incurred acquisition-related costs excluding severance costs of $1.8 million and $25.0$2 million for the three and six months endedJune 30, 2020, respectively, March 31, 2021, which were recorded in Acquisition-related costs on the Statements of Unaudited Condensed Consolidated Operations.
Refer to NOTE 7 - DEBT AND CREDIT FACILITIES for information regarding debt transactions executed in connection with the Merger.
The MergerAM USA Transaction was accounted for under the acquisition method of accounting for business combinations. The acquisition date fair value of the consideration transferred totaled $1.5 billion. The following tables summarize the consideration paid for AK Steel and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
The fair value of the total purchase consideration was determined as follows:
(In Millions)
Fair value of Cliffs common shares issued$990 
Fair value of Series B Participating Redeemable Preferred Stock issued738 
Fair value of settlement of a pre-existing relationship237 
Cash consideration (subject to customary working capital adjustments)635 
Total purchase consideration$2,600
 (In Millions)
Fair value of Cliffs common shares issued for AK Steel outstanding common stock$617.6
Fair value of replacement equity awards3.9
Fair value of AK Steel debt913.6
Total purchase consideration$1,535.1
10

The fair value of Cliffs common shares issued for outstanding shares of AK Steel common stock and with respect to Cliffs common shares underlying converted AK Steel equity awards that vested upon completion of the Merger is calculated as follows:
 (In Millions, Except Per Share Amounts)
Number of shares of AK Steel common stock issued and outstanding316.9
Exchange ratio0.400
Shares of Cliffs common shares issued to AK Steel stockholders126.8
Price per share of Cliffs common shares$4.87
Fair value of Cliffs common shares issued for AK Steel outstanding common stock$617.6

Number of Cliffs common shares issued78,186,671
Closing price of Cliffs common share as of December 9, 2020$12.66 
Fair value of Cliffs common shares issued (in millions)$990
The fair value of AK Steel's debt included in the considerationCliffs Series B Participating Redeemable Preferred Stock issued is calculated as follows:
 (In Millions)
Credit Facility$590.0
7.50% Senior Secured Notes due July 2023323.6
Fair value of debt included in consideration$913.6

Number of Cliffs Series B Participating Redeemable Preferred Stock issued583,273 
Redemption price per share as of December 9, 2020$1,266 
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued (in millions)$738

The fair value of the estimated cash consideration is comprised of the following:

(In Millions)
Cash consideration pursuant to the AM USA Transaction Agreement$505 
Cash consideration for purchase of the remaining JV partner's interest of Kote and Tek182 
Estimated total cash consideration receivable(52)
Total estimated cash consideration$635
13
TableThe cash portion of Contentsthe purchase price is subject to customary working capital adjustments.

The fair value of the settlement of a pre-existing relationship is comprised of the following:

(In Millions)
Accounts receivable$97 
Freestanding derivative asset from customer supply agreement140 
Total fair value of settlement of a pre-existing relationship$237
Valuation Assumption and Preliminary Purchase Price Allocation
We estimated fair values at March 13,December 9, 2020 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed.assumed in connection with the AM USA Transaction. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the acquisition,AM USA Transaction, most notably, inventories, including manufacturing supplies and critical spares, personal and real property, mineral reserves, leases, investments, deferred taxes, asset retirement obligations pension and OPEB liabilities and intangible assets and liabilities, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future.
11

The preliminary purchase price allocation to assets acquired and liabilities assumed in the MergerAM USA Transaction was:
 (In Millions)
 Initial Allocation of Consideration Measurement Period Adjustments June 30,
2020
Cash and cash equivalents$37.7
 $2.0
 $39.7
Accounts receivable666.0
 (3.2) 662.8
Inventories1,562.8
 (37.8) 1,525.0
Other current assets67.5
 (14.5) 53.0
Property, plant and equipment2,184.4
 2.9
 2,187.3
Intangible assets163.0
 (15.0) 148.0
Right of use asset, operating leases225.9
 (16.3) 209.6
Other non-current assets85.9
 25.9
 111.8
Accounts payable(636.3) (2.9) (639.2)
Accrued liabilities(222.5) (2.1) (224.6)
Other current liabilities(181.8) 7.0
 (174.8)
Long-term debt(1,179.4) —
 (1,179.4)
Deferred income taxes(19.7) (1.7) (21.4)
Operating lease liability, non-current(188.1) —
 (188.1)
Intangible liabilities(140.0) 65.0
 (75.0)
Pension and OPEB liabilities(873.0) —
 (873.0)
Asset retirement obligations(13.9) —
 (13.9)
Other non-current liabilities(144.2) (5.7) (149.9)
Net identifiable assets acquired1,394.3
 3.6
 1,397.9
Goodwill141.2
 (4.0) 137.2
Total net assets acquired$1,535.5
 $(0.4) $1,535.1

(In Millions)
Initial Allocation of ConsiderationMeasurement Period AdjustmentsUpdated Allocation
Cash and cash equivalents$35 $0 $35 
Accounts receivable, net349 0 349 
Inventories2,115 14 2,129 
Other current assets34 (5)29 
Property, plant and equipment4,017 366 4,383 
Other non-current assets158 8 166 
Accounts payable(758)2 (756)
Accrued employment costs(271)(3)(274)
Pension and OPEB liabilities, current(109)0 (109)
Other current liabilities(398)(2)(400)
Pension and OPEB liabilities, non-current(3,195)0 (3,195)
Other non-current liabilities(598)35 (563)
Noncontrolling interest(13)1 (12)
Net identifiable assets acquired1,366 416 1,782 
Goodwill1,230 (412)818 
Total net assets acquired$2,596 $4 $2,600 
During the second quarter of 2020,period subsequent to the AM USA Transaction, we made certain measurement period adjustments to the acquired assets and liabilities assumed due to clarification of information utilized to determine fair value during the measurement period.
The goodwill resulting from the acquisition of ArcelorMittal USA primarily represents the growth opportunities in the automotive, construction, appliances, infrastructure and machinery and equipment markets, as well as any synergistic benefits to be realized from the AM USA Transaction, and was assigned to our flat steel operations within our Steelmaking segment. Goodwill from the AM USA Transaction is expected to be deductible for U.S. federal income tax purposes.
Acquisition of AK Steel
Overview
On March 13, 2020, pursuant to the AK Steel Merger Agreement, we completed the acquisition of AK Steel, in which we were the acquirer. As a result of the AK Steel Merger, each share of AK Steel common stock issued and outstanding immediately prior to the effective time of the AK Steel Merger (other than excluded shares) was converted into the right to receive 0.400 Cliffs common shares and, if applicable, cash in lieu of any fractional Cliffs common shares.
The AK Steel Merger was accounted for under the acquisition method of accounting for business combinations. The acquisition date fair value of the consideration transferred totaled $1,535 million. The following tables summarize the consideration paid for AK Steel and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
12
Inventories
The fair value of the total purchase consideration was determined as follows:
(In Millions)
Fair value of AK Steel debt$914 
Fair value of Cliffs common shares issued for AK Steel outstanding common stock1
618 
Other1
3 
Total purchase consideration$1,535
1 Included as non-cash investing activities in Statements of Unaudited Condensed Consolidated Cash Flows for the three months ended March 31, 2020.
The fair value of Cliffs common shares issued for outstanding shares of AK Steel common stock and with respect to Cliffs common shares underlying converted AK Steel equity awards that vested upon completion of the AK Steel Merger is calculated as follows:
(In Millions, Except Per Share Amounts)
Number of shares of AK Steel common stock issued and outstanding317 
Exchange ratio0.400 
Number of Cliffs common shares issued to AK Steel stockholders127 
Price per share of Cliffs common shares$4.87 
Fair value of Cliffs common shares issued for AK Steel outstanding common stock$618
The fair value of AK Steel's debt included in the consideration is calculated as follows:
(In Millions)
Credit Facility$590 
7.50% Senior Secured Notes due July 2023324 
Fair value of debt included in consideration$914
13

Valuation Assumption and Purchase Price Allocation
The allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the AK Steel Merger is based on estimated fair values at March 13, 2020, and was finalized during the quarter ended March 31, 2021. The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AK Steel Merger:
(In Millions)
Initial Allocation of ConsiderationMeasurement Period AdjustmentsFinal Allocation of Consideration as of March 31, 2021
Cash and cash equivalents$38 $1 $39 
Accounts receivable, net666 (2)664 
Inventories1,563 (243)1,320 
Other current assets68 (16)52 
Property, plant and equipment2,184 90 2,274 
Deferred income taxes0 69 69 
Other non-current assets475 (4)471 
Accounts payable(636)(8)(644)
Accrued employment costs(94)1 (93)
Pension and OPEB liabilities, current(75)(3)(78)
Other current liabilities(236)9 (227)
Long-term debt(1,179)0 (1,179)
Pension and OPEB liabilities, non-current(873)2 (871)
Other non-current liabilities(507)72 (435)
Noncontrolling interest0 (1)(1)
Net identifiable assets acquired1,394 (33)1,361 
Goodwill141 33 174 
Total net assets acquired$1,535 $0 $1,535 
During the period subsequent to the AK Steel Merger, we made certain measurement period adjustments to the acquired assets and liabilities assumed due to clarification of $37.8 million, resulted in a favorable impact of $7.8 millioninformation utilized to Cost of goods sold fordetermine fair value during the three months ended June 30, 2020.measurement period.
The goodwill resulting from the acquisition of AK Steel was assigned to Precision Partners, our downstream toolingTubular and stamping operations,Tooling and AK Tube, our tubing operations, that are reporting units included in the Steel and Manufacturing segment.Stamping operating segments. Goodwill is calculated as the excess of the purchase price over the net identifiable assets recognized and primarily represents the growth opportunities in lightweightinglight weighting solutions to automotive customers, as well as any synergistic benefits to be realizedrealized. Goodwill from the acquisition of AK Steel. None of the goodwillSteel Merger is not expected be deductible for income tax purposes.

14

The preliminary purchase price allocated to identifiable intangible assets and liabilities acquired was:
(In Millions)Weighted Average Life (In Years)
Intangible assets:
Customer relationships$77 18
Developed technology60 17
Trade names and trademarks11 10
Total identifiable intangible assets$148 17
Intangible liabilities:
Above-market supply contracts$(71)12
14
 (In Millions) Weighted Average Life (In Years)
Intangible assets:   
Customer relationships$77.0
 18
Developed technology60.0
 17
Trade names and trademarks11.0
 10
Total identifiable intangible assets$148.0
 17
Intangible liabilities:   
Above-market supply contracts$(75.0) 12

The above-market supply contracts relate to the long-term coke and energy supply agreements with SunCoke Energy, which includes SunCoke Middletown, a consolidated VIE. Refer to NOTE 16 - VARIABLE INTEREST ENTITIES for further information.
Pro Forma Results
The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, for the three and six months ended June 30,March 31, 2020, and 2019, as if AK Steel had been acquired as of January 1, 2019:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Revenues$979.1
 $2,233.8
 $2,427.7
 $4,021.1
Net income (loss) attributable to Cliffs shareholders(125.3) 184.9
 (163.7) 128.3

(In Millions)
Three Months Ended
March 31,
2020
Revenues$1,526 
Net loss attributable to Cliffs shareholders(17)
The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments, net of tax, that assume the acquisitionAK Steel Merger occurred on January 1, 2019. Significant pro forma adjustments include the following:
1.The elimination of intercompany revenues between Cliffs and AK Steel of $113.6 million and $259.2 million for the three and six months ended June 30, 2020, respectively, and $189.9 million and $257.3 million for the three and six months ended June 30, 2019, respectively.
2.The 2020 pro forma net loss was adjusted to exclude $36.2 million and $59.4 million of non-recurring inventory acquisition accounting adjustments incurred during the three and six months ended June 30, 2020, respectively. The 2019 pro forma net income was adjusted to include $18.5 million and $74.2 million of non-recurring inventory acquisition accounting adjustments for the three and six months ended June 30, 2019, respectively.
3.The elimination of nonrecurring transaction costs incurred by Cliffs and AK Steel in connection with the Merger of $1.8 million and $28.4 million for the three and six months ended June 30, 2020, respectively.
4.Total other pro forma adjustments included expense of $12.3 million and $1.0 million for the three and six months ended June 30, 2020, respectively, and expense of $4.0 million and $6.9 million for the three and six months ended June 30, 2019, respectively, primarily due to reduced interest and amortization expense, offset partially by additional depreciation expense and pension and OPEB expense.
5.
The income tax impact of pro forma transaction adjustments that affect Net income (loss) attributable to Cliffs shareholders at a statutory rate of 24.3% resulted in an income tax benefit of $1.6 million and an income tax expense of $3.3 million for the three and six months ended June 30, 2020, respectively, and an income tax expense of $8.0 million and an income tax benefit of $2.8 million, for the three and six months ended June 30, 2019, respectively.
1.The elimination of intercompany revenues between Cliffs and AK Steel of $68 million for the three months ended March 31, 2020.
2.The 2020 pro forma net income was adjusted to exclude $23 million of non-recurring inventory acquisition accounting adjustments incurred during the three months ended March 31, 2020.
3.The elimination of nonrecurring transaction costs incurred by Cliffs and AK Steel in connection with the AK Steel Merger of $27 million for the three months ended March 31, 2020.
4.Total other pro forma adjustments included income of $13 million for the three months ended March 31, 2020, primarily due to reduced interest and amortization expense, offset partially by additional depreciation expense.
5.The income tax impact of pro forma transaction adjustments that affect Net loss attributable to Cliffs shareholders at a statutory rate of 24.3% resulted in an income tax expense of $12 million for the three months ended March 31, 2020.
The unaudited pro forma financial information does not reflect the potential realization of synergies or cost savings, nor does it reflect other costs relating to the integration of the two companies.AK Steel. This unaudited pro forma financial

15

information should not be considered indicative of the results that would have actually occurred if the acquisitionAK Steel Merger had been consummated on January 1, 2019, nor are they indicative of future results.
NOTE 4 - REVENUES
We generate our revenue through product sales, in which shipping terms generally indicate when we have fulfilled our performance obligations and transferred control of products to our customer. Our revenue transactions consist of a single performance obligation to transfer promised goods. Our contracts with customers usually define the mechanism for determining the sales price, which is generally fixed upon transfer of control, but the contracts generally do not impose a specific quantity on either party. Quantities to be delivered to the customer are generally determined at a point near the date of delivery through purchase orders or other written instructions we receive from the customer. Spot market sales are made through purchase orders or other written instructions. We consider our performance obligation to be complete and recognize revenue when control transfers in accordance with shipping terms.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring product. We reduce the amount of revenue recognized for estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets we serve. Sales taxes collected from customers are excluded from revenues.
Prior to the AM USA Transaction, we had a supply agreement with ArcelorMittal USA, which included supplemental revenue or refunds based on the HRC price in the year the iron ore was consumed in ArcelorMittal USA's blast furnaces. As control transferred prior to consumption, the supplemental revenue was recorded in
15

accordance with Topic 815. All sales occurring subsequent to the AM USA Transaction are intercompany and eliminated in consolidation. For the three months ended March 31, 2020, we had a derivative loss of $26 million included within Revenues related to Topic 815 for the supplemental revenue portion of the supply agreement.
The following table represents our Revenues by market:
(In Millions)
Three Months Ended
March 31,
20212020
Steelmaking:
Automotive$1,287 $102 
Infrastructure and manufacturing954 39 
Distributors and converters1,248 52 
Steel producers430144 
Total Steelmaking3,919 337 
Other Businesses:
Automotive105 16 
Infrastructure and manufacturing10 4 
Distributors and converters15 2 
Total Other Businesses130 22 
Total revenues$4,049 $359 
The following table represents our Revenues by product line:
(Dollars In Millions, Sales Volumes in Thousands)
Three Months Ended
March 31,
20212020
Revenue
Volume1
Revenue
Volume1
Steelmaking:
Hot-rolled steel$895 1,182 $19 31 
Cold-rolled steel632 748 28 40 
Coated steel1,308 1,369 90 99 
Stainless and electrical steel363 167 56 27 
Plate steel244 275 0 0 
Other steel products289 403 0 0 
Iron products70 600 142 1,351 
Other118 N/A2 N/A
Total steelmaking3,919 337 
Other Businesses:
Other130 N/A22 N/A
Total revenues$4,049 $359 
1 All steel product volumes are stated in net tons. Iron product volumes are stated in long tons.

16

NOTE 45 - SEGMENT REPORTING
Our Company is aWe are vertically integrated producerfrom the mining of value-added iron ore and coal; to production of metallics and coke; through iron making, steelmaking, rolling, finishing; and to downstream tubing, stamping and tooling. We are organized into 4 operating segments based on our differentiated products - Steelmaking, Tubular, Tooling and Stamping, and European Operations. Our previous Mining and Pelletizing segment is included within the Steelmaking operating segment as iron ore pellets are a primary raw material for our steel products. We have 1 reportable segment - Steelmaking. The operating segment results of our Tubular, Tooling and Stamping, and European Operations that do not constitute reportable segments are combined and disclosed in the Other Businesses category. Our operations are organized and managed in 2 operating segments according to our upstream and downstream operations. Our Steel and ManufacturingSteelmaking segment is a leadingthe largest flat-rolled steel producer of flat-rolled carbon, stainless and electrical steel products,supported by being the largest iron ore pellet producer in North America, primarily forserving the automotive, infrastructure and manufacturing, and distributors and converters markets. Our Steel and Manufacturing segment includes subsidiariesOther Businesses primarily include the operating segments that provide customer solutions with carbon and stainless steel tubing products, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components, and complex assemblies. Construction of our HBI production plant in Toledo, Ohio, now included as part of our Steel and Manufacturing segment, is expected to be completed in the fourth quarter of 2020. Our Mining and Pelletizing segment 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. All intersegment transactions were eliminated in consolidation.
We evaluate performance on aan operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel and iron ore industries.industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
Our results by segment are as follows:
 (In Millions, Except Sales Tons)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Sales volume (in thousands):       
Steel and Manufacturing (net tons)619
 —
 818
 —

       
Mining and Pelletizing sales (long tons)4,759
 6,227
 6,893
 7,777
Less: Intercompany sales (long tons)(1,041) (38) (1,824) (38)
Mining and Pelletizing consolidated sales (long tons)3,718
 6,189
 5,069
 7,739

       
Revenues:       
Steel and Manufacturing net sales to external customers$715.1
 $—
 $932.6
 $—

       
Mining and Pelletizing net sales1
489.0
 747.2
 718.4
 904.2
Less: Intercompany sales(111.4) (4.0) (199.2) (4.0)
Mining and Pelletizing net sales to external customers377.6
 743.2
 519.2
 900.2

       
Total revenues$1,092.7
 $743.2
 $1,451.8
 $900.2
        
Adjusted EBITDA:       
Steel and Manufacturing$(104.0) $(1.1) $(115.1) $(1.9)
Mining and Pelletizing82.4
 280.5
 164.2
 328.0
Corporate and eliminations(60.4) (31.0) (108.4) (56.5)
Total Adjusted EBITDA$(82.0) $248.4
 $(59.3) $269.6
1 Includes Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020.


(In Millions)
Three Months Ended
March 31,
20212020
Revenues:
Steelmaking$3,919 $337 
Other Businesses130 22 
Total revenues$4,049 $359 
Adjusted EBITDA:
Steelmaking$537 $44 
Other Businesses11 2 
Corporate and eliminations(35)(23)
Total Adjusted EBITDA$513 $23 
16
17


The following table provides a reconciliation of our consolidated Net income (loss) to total Adjusted EBITDA:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Net income (loss)$(108.1) $160.8
 $(156.7) $138.7
Less:

 

 
 
Interest expense, net(68.6) (26.3) (99.7) (51.4)
Income tax benefit (expense)24.7
 (22.0) 76.1
 (18.3)
Depreciation, depletion and amortization(77.1) (21.0) (111.5) (40.9)
Total EBITDA$12.9
 $230.1
 $(21.6) $249.3
Less:       
EBITDA of noncontrolling interests1
$20.5
 $—
 $25.1
 $—
Gain (loss) on extinguishment of debt129.4
 (17.9) 132.6
 (18.2)
Severance costs(16.6) —
 (35.9) (1.7)
Acquisition-related costs excluding severance costs(1.8) —
 (25.0) —
Amortization of inventory step-up(36.2) —
 (59.4) —
Impact of discontinued operations(0.4) (0.4) 0.3
 (0.4)
Total Adjusted EBITDA$(82.0) $248.4
 $(59.3) $269.6
1 EBITDA of noncontrolling interests includes $15.8 million and $19.3 million for income and $4.7 million and $5.8 million of depreciation, depletion and amortization for the three and six months ended June 30, 2020, respectively.
(In Millions)
Three Months Ended
March 31,
20212020
Net income (loss)$57 $(49)
Less:
Interest expense, net(92)(31)
Income tax benefit (expense)(9)51 
Depreciation, depletion and amortization(217)(35)
375 (34)
Less:
EBITDA of noncontrolling interests1
22 4 
Gain (loss) on extinguishment of debt(66)3 
Severance costs(11)(19)
Acquisition-related costs excluding severance costs(2)(23)
Amortization of inventory step-up(81)(23)
Impact of discontinued operations0 1 
Total Adjusted EBITDA$513 $23 
1 EBITDA of noncontrolling interests includes $16 million and $3 million for income and $6 million and $1 million for depreciation, depletion and amortization for the three months ended March 31, 2021 and 2020, respectively.
The following summarizes our assets by segment:
 (In Millions)
 June 30,
2020		 December 31,
2019
Assets:   
Steel and Manufacturing$6,201.6
 $913.6
Mining and Pelletizing1,685.1
 1,643.1
Total segment assets7,886.7
 2,556.7
Corporate and Other (including discontinued operations)604.0
 947.1
Total assets$8,490.7
 $3,503.8

(In Millions)
March 31,
2021		December 31,
2020
Assets:
Steelmaking$16,271 $15,849 
Other Businesses295 239 
Total segment assets16,566 16,088 
Corporate649 683 
Total assets$17,215 $16,771 
The following table summarizes our capital additions by segment:
(In Millions)
Three Months Ended
March 31,
20212020
Capital additions1:
Steelmaking$133 $154 
Other Businesses11 3 
Corporate18 1 
Total capital additions$162 $158 
1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.
18
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Capital additions1:
       
Steel and Manufacturing$55.6
 $155.1
 $178.8
 $237.5
Mining and Pelletizing17.4
 35.6
 51.6
 82.4
Corporate and Other—
 0.9
 0.3
 1.0
Total capital additions$73.0
 $191.6
 $230.7
 $320.9
1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.

17

NOTE 56 - PROPERTY, PLANT AND EQUIPMENT
The following table indicates the carrying value of each of the major classes of our depreciable assets:
 (In Millions)
 June 30,
2020		 December 31,
2019
Land, land improvements and mineral rights$653.2
 $582.2
Buildings454.4
 157.8
Steel and Manufacturing equipment2,147.9
 42.0
Mining and Pelletizing equipment1,448.6
 1,413.6
Other123.4
 101.5
Construction-in-progress1,058.3
 730.3
Total property, plant and equipment1
5,885.8
 3,027.4
Allowance for depreciation and depletion(1,337.9) (1,098.4)
Property, plant and equipment, net$4,547.9
 $1,929.0

1 Includes right-of-use assets related to finance leases of $93.7 million and $49.0 million as of June 30, 2020 and December 31, 2019, respectively.
We recorded capitalized interest into property, plant and equipment of $13.6 million and $23.3 million during the three and six months ended June 30, 2020, respectively, and $5.9 million and $9.9 million for the three and six months ended June 30, 2019, respectively.
(In Millions)
March 31,
2021		December 31,
2020
Land, land improvements and mineral rights$1,241 $1,213 
Buildings1,004 703 
Equipment7,877 6,786 
Other173 151 
Construction in progress407 1,364 
Total property, plant and equipment1
10,702 10,217 
Allowance for depreciation and depletion(1,688)(1,474)
Property, plant and equipment, net$9,014 $8,743 
1 Includes right-of-use assets related to finance leases of $365 million and $361 million as of March 31, 2021 and December 31, 2020, respectively.
We recorded depreciation and depletion expense of $75.3$215 million and $110.7$36 million for the three and six months ended June 30,March 31, 2021 and 2020, respectively, and $20.9 million and $40.5 million for the three and six months ended June 30, 2019, respectively.
NOTE 67 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES
Goodwill
The increasefollowing is a summary of Goodwill by segment:
(In Millions)
March 31,
2021		December 31,
2020
Steelmaking$820 $1,232 
Other Businesses174 174 
Total goodwill$994 $1,406 
The decrease of $412 million in the balance of Goodwill in our Steelmaking segment as of June 30, 2020,March 31, 2021, compared to December 31, 2019,2020, is due to the preliminary assignmentchange in estimated identified goodwill as a result of $137.2 millionmeasurement period adjustments toGoodwill in 2020 based on the preliminary purchase price allocation for the acquisition of AK Steel. The carrying amount of goodwill relatedArcelorMittal USA. Refer to our Mining and Pelletizing segment was $2.1 million as of both June 30, 2020 and December 31, 2019.NOTE 3 - ACQUISITIONS for further details.

1819


Intangible Assets and Liabilities
The following is a summary of our intangible assets and liabilities:
   (In Millions)
 
Classification1
 Gross Amount Accumulated Amortization Net Amount
As of June 30, 2020       
Intangible assets:       
Customer relationshipsIntangible assets, net $77.0
 $(1.5) $75.5
Developed technologyIntangible assets, net 60.0
 (1.2) 58.8
Trade names and trademarksIntangible assets, net 11.0
 (0.4) 10.6
Mining permitsIntangible assets, net 72.2
 (24.5) 47.7
Total intangible assets  $220.2
 $(27.6) $192.6
Intangible liabilities:       
Above-market supply contractsIntangible liabilities, net $(75.0) $2.7
 $(72.3)
        
As of December 31, 2019       
Intangible assets:       
Mining permitsIntangible assets, net $72.2
 $(24.1) $48.1
1 Amortization of intangible liabilities related to above-market supply contracts and intangible assets related to mining permits is recognized in Cost of goods sold. Amortization of all other intangible assets is recognized in Selling, general and administrative expenses.
(In Millions)
March 31, 2021December 31, 2020
Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Intangible assets1:
Customer relationships$77 $(5)$72 $77 $(3)$74 
Developed technology60 (4)56 60 (3)57 
Trade names and trademarks11 (1)10 11 (1)10 
Mining permits72 (25)47 72 (25)47 
Total intangible assets$220 $(35)$185 $220 $(32)$188 
Intangible liabilities2:
Above-market supply contracts$(71)$8 $(63)$(71)$7 $(64)
1 Intangible assets are classified as Other non-current assets. Amortization related to mining permits is recognized in Cost of goods sold. Amortization of all other intangible assets is recognized in Selling, general and administrative expenses.
2 Intangible liabilities are classified as Other non-current liabilities. Amortization of all intangible liabilities is recognized in Cost of goods sold.
Amortization expense related to intangible assets was $2.4$3 million and $3.5$1 million for the three and six months ended June 30,March 31, 2021 and 2020, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively.
Estimated future amortization expense related to intangible assets at June 30, 2020 is as follows:
  (In Millions)
Years ending December 31,  
2020 (remaining period of the year) $5.0
2021 10.0
2022 10.0
2023 10.0
2024 10.0
2025 10.0

$7 million for the remainder of 2021 and $10 million annually for the years 2022 through 2026.
Income from amortization related to the intangible liabilities was $0.6$1 million and $2.7$2 million for the three and six months ended June 30,March 31, 2021 and 2020, respectively.
Estimated future income from amortization income related tois $6 million for the intangible liabilities at June 30, 2020 is as follows:remainder of 2021 and $5 million annually for the years 2022 through 2026.
  (In Millions)
Years ending December 31,  
2020 (remaining period of the year) $4.1
2021 8.2
2022 8.2
2023 8.2
2024 8.2
2025 8.2
20


19

NOTE 78 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt:
(In Millions)
June 30, 2020
Debt Instrument 
Issuer1
 
Annual Effective
Interest Rate
 Total Principal Amount Debt Issuance Costs Unamortized Premiums (Discounts) Total Debt
Senior Secured Notes:            
4.875% 2024 Senior Secured Notes Cliffs 5.00% $394.5
 $(4.0) $(1.6) $388.9
9.875% 2025 Senior Secured Notes Cliffs 10.57% 955.2
 (8.7) (26.7) 919.8
6.75% 2026 Senior Secured Notes Cliffs 6.99% 845.0
 (22.6) (9.4) 813.0
Senior Unsecured Notes:            
7.625% 2021 AK Senior Notes AK Steel 7.33% 33.5
 —
 0.1
 33.6
7.50% 2023 AK Senior Notes AK Steel 6.17% 12.8
 —
 0.5
 13.3
6.375% 2025 Senior Notes Cliffs 8.11% 64.3
 (0.2) (4.8) 59.3
6.375% 2025 AK Senior Notes AK Steel 8.11% 38.4
 —
 (2.9) 35.5
1.50% 2025 Convertible Senior Notes Cliffs 6.26% 296.3
 (3.9) (55.6) 236.8
5.75% 2025 Senior Notes Cliffs 6.01% 396.2
 (2.8) (4.3) 389.1
7.00% 2027 Senior Notes Cliffs 9.24% 88.0
 (0.3) (9.8) 77.9
7.00% 2027 AK Senior Notes AK Steel 9.24% 56.3
 —
 (6.2) 50.1
5.875% 2027 Senior Notes Cliffs 6.49% 555.5
 (4.5) (19.0) 532.0
6.25% 2040 Senior Notes Cliffs 6.34% 262.7
 (1.9) (2.8) 258.0
IRBs due 2024 to 2028 AK Steel Various 92.0
 —
 2.3
 94.3
ABL Facility 
Cliffs2
 2.79% 2,000.0
 —
 —
 550.0
Total long-term debt           $4,451.6
1 Unless otherwise noted, references in this column to "Cliffs" are to Cleveland-Cliffs Inc., and references to "AK Steel" are to AK Steel Corporation.
2 Refers to Cleveland-Cliffs Inc. as borrower under our ABL Facility.
(In Millions)
March 31, 2021
Debt Instrument
Issuer1
Annual Effective
Interest Rate
Total Principal AmountUnamortized
Debt Issuance Costs		Unamortized Premiums (Discounts)Total Debt
Senior Secured Notes:
9.875% 2025 Senior Secured NotesCliffs10.57%$633 $(5)$(16)$612 
6.75% 2026 Senior Secured NotesCliffs6.99%845 (19)(8)818 
Senior Unsecured Notes:
1.50% 2025 Convertible Senior NotesCliffs6.26%296 (3)(47)246 
5.75% 2025 Senior NotesCliffs6.01%396 (2)(4)390 
7.00% 2027 Senior NotesCliffs9.24%73 0 (7)66 
7.00% 2027 AK Senior NotesAK Steel9.24%56 0 (6)50 
5.875% 2027 Senior NotesCliffs6.49%556 (4)(17)535 
4.625% 2029 Senior NotesCliffs4.63%500 (9)0 491 
4.875% 2031 Senior NotesCliffs4.88%500 (9)0 491 
6.25% 2040 Senior NotesCliffs6.34%263 (2)(3)258 
IRBs due 2024 to 2028AK SteelVarious92 0 2 94 
EDC Revolving Facilities3
*Various80 — — 53 
ABL Facility3
Cliffs2
2.14%3,500 — — 1,630 
Total long-term debt$5,734 
* Our subsidiaries, Fleetwood Metal Industries Inc. and The Electromac Group Inc., are the borrowers under the EDC Revolving Facilities.
1 Unless otherwise noted, references in this column and throughout this NOTE 8 - DEBT AND CREDIT FACILITIES to "Cliffs" are to Cleveland-Cliffs Inc., and references to "AK Steel" are to AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation).
2 Refers to Cleveland-Cliffs Inc. as borrower under our ABL Facility.
3 The total principal amounts for the indicated credit facilities are stated at their respective maximum borrowing capacities.
(In Millions)
December 31, 2019
Debt Instrument 
Issuer1
 
Annual Effective
Interest Rate
 Total Principal Amount Debt Issuance Costs Unamortized Discounts Total Debt
Senior Secured Notes:            
4.875% 2024 Senior Notes Cliffs 5.00% $400.0
 $(4.6) $(1.8) $393.6
Senior Unsecured Notes:            
1.50% 2025 Convertible Senior Notes Cliffs 6.26% 316.3
 (4.6) (65.0) 246.7
5.75% 2025 Senior Notes Cliffs 6.01% 473.3
 (3.6) (5.5) 464.2
5.875% 2027 Senior Notes Cliffs 6.49% 750.0
 (6.3) (27.3) 716.4
6.25% 2040 Senior Notes Cliffs 6.34% 298.4
 (2.2) (3.3) 292.9
Former ABL Facility 
Cliffs2
 N/A 450.0
 N/A
 N/A
 —
Total long-term debt           $2,113.8
21

1 Unless otherwise noted, references in this column to "Cliffs" are to Cleveland-Cliffs Inc.
2 Refers to Cleveland-Cliffs Inc. and certain of its subsidiaries as borrowers under our Former ABL Facility.


20


(In Millions)
December 31, 2020
Debt Instrument
Issuer1
Annual Effective
Interest Rate
Total Principal AmountUnamortized
Debt Issuance Costs		Unamortized
Premiums
(Discounts)		Total Debt
Senior Secured Notes:
4.875% 2024 Senior NotesCliffs5.00%$395 $(3)$(1)$391 
9.875% 2025 Senior Secured NotesCliffs10.57%955 (8)(25)922 
6.75% 2026 Senior Secured NotesCliffs6.99%845 (20)(9)816 
Senior Unsecured Notes:
7.625% 2021 AK Senior NotesAK Steel7.33%34 0 0 34 
7.50% 2023 AK Senior NotesAK Steel6.17%13 0 0 13 
6.375% 2025 Senior NotesCliffs8.11%64 0 (4)60 
6.375% 2025 AK Senior NotesAK Steel8.11%29 0 (2)27 
1.50% 2025 Convertible Senior NotesCliffs6.26%296 (4)(49)243 
5.75% 2025 Senior NotesCliffs6.01%396 (3)(4)389 
7.00% 2027 Senior NotesCliffs9.24%73 0 (8)65 
7.00% 2027 AK Senior NotesAK Steel9.24%56 0 (6)50 
5.875% 2027 Senior NotesCliffs6.49%556 (4)(18)534 
6.25% 2040 Senior NotesCliffs6.34%263 (2)(3)258 
IRBs due 2024 to 2028AK SteelVarious92 0 2 94 
EDC Revolving Facility3
*3.25%40 — — 18 
ABL Facility3
Cliffs2
2.15%3,500 — — 1,510 
Total debt5,424 
Less: current debt34 
Total long-term debt$5,390 
* Our subsidiaries, Fleetwood Metal Industries Inc. and The Electromac Group Inc., are the borrowers under the EDC Revolving Facility.
1 Unless otherwise noted, references in this column and throughout this NOTE 8 - DEBT AND CREDIT FACILITIES to "Cliffs" are to Cleveland-Cliffs Inc., and references to "AK Steel" are to AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation).
2 Refers to Cleveland-Cliffs Inc. as borrower under our ABL Facility.
3 The total principal amounts for the indicated credit facilities are stated at their respective maximum borrowing capacities.
9.875% 20254.625% 2029 Senior Secured Notes Offerings
On AprilFebruary 17, 2020,2021, we entered into an indenture among Cliffs, the guarantors party thereto and U.S. Bank National Association, as trustee and notes collateral agent, relating to the issuance by Cliffs of $400.0 million aggregate principal amount of 9.875% 2025 Senior Secured Notes issued at 94.5% of face value.
On April 24, 2020, we issued an additional $555.2 million aggregate principal amount of 9.875% 2025 Senior Secured Notes issued at 99.0% of face value. These additional notes are of the same class and series as, and otherwise identical to, the 9.875% 2025 Senior Secured Notes issued on April 17, 2020, other than with respect to the date of issuance and issue price.
The 9.875% 2025 Senior Secured Notes were issued in private placement transactions exempt from the registration requirements of the Securities Act. The 9.875% 2025 Senior Secured Notes bear interest at a rate of 9.875% per annum, payable semi-annually in arrears on April 17 and October 17 of each year, commencing on October 17, 2020. The 9.875% 2025 Senior Secured Notes will mature on October 17, 2025.
The 9.875% 2025 Senior Secured Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of our material domestic subsidiaries and are secured (subject in each case to certain exceptions and permitted liens) by (i) a first-priority lien, on a pari passu basis with the 6.75% 2026 Senior Secured Notes and 4.875% 2024 Senior Secured Notes, on substantially all of our assets and the assets of the guarantors, other than the ABL Collateral (as defined below), and (ii) a second-priority lien on the ABL Collateral, which is junior to a first-priority lien for the benefit of the lenders under our ABL Facility.
The 9.875% 2025 Senior Secured Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 9.875% 2025 Senior Secured Notes. The following is a summary of redemption prices for our 9.875% 2025 Senior Secured Notes:
Redemption Period
Redemption Price1
Restricted Amount
Prior to August 15, 2020 - using proceeds of a regulatory debt facility103.000%Up to 35% of original aggregate principal
Prior to October 17, 2022 - using proceeds of equity issuance109.875Up to 35% of original aggregate principal
Prior to October 17, 20222
100.000
Beginning on October 17, 2022107.406
Beginning on April 17, 2023104.938
Beginning on April 17, 2024102.469
Beginning on April 17, 2025 and thereafter100.000
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 9.875% 2025 Senior Secured Notes, we will be required to offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.
The terms of the 9.875% 2025 Senior Secured Notes contain certain customary covenants; however, there are no financial covenants.
Debt issuance costs of $9.1 million were incurred related to the offerings of the 9.875% 2025 Senior Secured Notes and are included in Long-term debt in the Statements of Unaudited Condensed Consolidated Financial Position.

21

6.75% 2026 Senior Secured Notes Offerings
On March 13, 2020, we entered into an indenture among Cliffs, the guarantors party thereto and U.S. Bank National Association, as trustee and notes collateral agent, relating to the issuance of $725.0 million aggregate principal amount of 6.75% 2026 Senior Secured Notes issued at 98.783% of face value.
On June 19, 2020, we issued an additional $120.0 million aggregate principal amount of 6.75% 2026 Senior Secured Notes issued at 99.25% of face value. These additional notes are of the same class and series as, and otherwise identical to, the 6.75% 2026 Senior Secured Notes issued on March 13, 2020, other than with respect to the date of issuance and issue price.
The 6.75% 2026 Senior Secured Notes were issued in private placement transactions exempt from the registration requirements of the Securities Act. The 6.75% 2026 Senior Secured Notes bear interest at a rate of 6.75% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2020. The 6.75% 2026 Senior Secured Notes mature on March 15, 2026.
The 6.75% 2026 Senior Secured Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of our material domestic subsidiaries and are secured (subject in each case to certain exceptions and permitted liens) by (i) a first-priority lien, on a pari passu basis with the 4.875% 2024 Senior Secured Notes and 9.875% 2025 Senior Secured Notes, on substantially all of our assets and the assets of the guarantors, other than the ABL Collateral, and (ii) a second-priority lien on the ABL Collateral, which is junior to a first-priority lien for the benefit of the lenders under our ABL Facility.
The 6.75% 2026 Senior Secured Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 6.75% 2026 Senior Secured Notes. The following is a summary of redemption prices for our 6.75% 2026 Senior Secured Notes:
Redemption Period
Redemption Price1
Restricted Amount
Prior to March 15, 2022 - using proceeds of equity issuance106.750%Up to 35% of original aggregate principal
Prior to March 15, 20222
100.000
Beginning on March 15, 2022105.063
Beginning on March 15, 2023103.375
Beginning on March 15, 2024101.688
Beginning on March 15, 2025 and thereafter100.000
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 6.75% 2026 Senior Secured Notes, we will be required to offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.
The terms of the 6.75% 2026 Senior Secured Notes contain certain customary covenants; however, there are no financial covenants.
Debt issuance costs of $23.7 million were incurred related to the offerings of the 6.75% 2026 Senior Secured Notes and are included in Long-term debt in the Statements of Unaudited Condensed Consolidated Financial Position.

22

Cliffs Senior Notes exchanged for AK Steel Corporation Senior Notes
On March 16, 2020, we entered into indentures, in each case among Cliffs, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the issuance by Cliffs of $231.8$500 million aggregate principal amount of 6.375% 20254.625% 2029 Senior Notes and $335.4 million aggregate principal amount of 7.00% 2027 Senior Notes. issued at par value.
The new notes were issued in exchange for equal aggregate principal amounts of 6.375% 2025 AK Senior Notes and 7.00% 2027 AK Senior Notes, respectively. The 6.375% 2025 Senior Notes and 7.00% 20274.625% 2029 Senior Notes were issued pursuant to exchange offers made by Cliffs in private placement transactions exempt from the registration requirements of the Securities Act. Pursuant to the registration rights agreements executed in connection with the issuance of the new notes, we agreed to file registration statements with the SEC with respect to registered offers to exchange the 6.375% 2025The 4.625% 2029 Senior Notes bear interest at a rate of 4.625% per annum, payable semi-annually in arrears on March 1 and 7.00% 2027September 1 of each year, commencing on September 1, 2021. The 4.625% 2029 Senior Notes for publicly registered notes within 365 days of the closing date, with all significant terms and conditions remaining the same.will mature on March 1, 2029.
The 6.375% 2025 Senior Notes and 7.00% 20274.625% 2029 Senior Notes are unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The notes4.625% 2029 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly ownedwholly-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 4.625% 2029 Senior Notes.
22

The 4.625% 2029 Senior Notes may be redeemed, in whole or in part, on not less than 10 nor more than 60 days’ prior notice sent to the holders of the notes. The following is a summary of redemption prices for our 4.625% 2029 Senior Notes:
Redemption Period
Redemption Price1
Restricted Amount
Prior to March 1, 2024 - using the proceeds of equity issuance104.625 %Up to 35% of original aggregate principal
Prior to March 1, 20242
100.000 
Beginning March 1, 2024102.313 
Beginning March 1, 2025101.156 
Beginning on March 1, 2026 and thereafter100.000 
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 indentures,indenture, occurs with respect to the 6.375% 2025 Senior Notes or 7.00% 20274.625% 2029 Senior Notes, we will be required to offer to purchaserepurchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.repurchase.
The terms of the 6.375% 2025 Senior Notes and 7.00% 20274.625% 2029 Senior Notes contain certain customary covenants; however, there are no financial covenants.
6.375% 20254.875% 2031 Senior Notes
On February 17, 2021, we entered into an indenture among Cliffs, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the issuance by Cliffs of $500 million aggregate principal amount of 4.875% 2031 Senior Notes issued at par value.
The 6.375% 20254.875% 2031 Senior Notes were issued in private placement transactions exempt from the registration requirements of the Securities Act. The 4.875% 2031 Senior Notes bear interest at a rate of 6.375%4.875% per annum, payable semi-annually in arrears on April 15March 1 and October 15September 1 of each year, commencing on April 15, 2020.September 1, 2021. The 6.375% 20254.875% 2031 Senior Notes will mature on October 15, 2025.March 1, 2031.
The 6.375% 20254.875% 2031 Senior Notes are unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The 4.875% 2031 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 4.875% 2031 Senior Notes.
23

The 4.875% 2031 Senior Notes may be redeemed, in whole or in part, at any time at our option uponon not less than 30, and not10 nor more than 60 days'days’ prior notice sent to the holders of the 6.375% 2025 Senior Notes.notes. The following is a summary of redemption prices for our 6.375% 20254.875% 2031 Senior Notes:
Redemption Period
Redemption Price1
Restricted Amount
Prior to March 1, 2026 - using the proceeds of equity issuance104.875 %Up to 35% of original aggregate principal
Prior to March 1, 2026 2
100.000 
Beginning March 1, 2026102.438 
Beginning March 1, 2027101.625 
Beginning March 1, 2028100.813 
Beginning on March 1, 2029 and thereafter100.000 
Redemption Period
Redemption Price1
Restricted Amount
Prior to October 15, 2020 - using proceeds of equity issuance106.375%Up to 35% of original aggregate principal
Prior to October 15, 20202
100.000
Beginning on October 15, 2020103.188
Beginning on October 15, 2021101.594
Beginning on October 15, 2022 and thereafter100.000
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 4.875% 2031 Senior Notes, we will be required to offer to repurchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
Debt issuance costs of $0.9 million were incurred in connection with the issuanceThe terms of the 6.375% 20254.875% 2031 Senior Notes and are included in Long-term debt in the Statements of Unaudited Condensed Consolidated Financial Position.
7.00% 2027 Senior Notes
The 7.00% 2027 Senior Notes bear interest at a rate of 7.00% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2020. The 7.00% 2027 Senior Notes mature on March 15, 2027.

23

The 7.00% 2027 Senior Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 7.00% 2027 Senior Notes. The following is a summary of redemption prices for our 7.00% 2027 Senior Notes:
Redemption Period
Redemption Price1
Prior to March 15, 20222
100.000%
Beginning on March 15, 2022103.500
Beginning on March 15, 2023102.333
Beginning on March 15, 2024101.167
Beginning on March 15, 2025 and thereafter100.000
1  Plus accrued and unpaid interest, if any, up to but excluding the redemption date.
2  Plus a "make-whole" premium.

Debt issuance costs of $1.3 million were incurred in connection with the issuance of the 7.00% 2027 Senior Notes and are included in Long-term debt in the Statements of Unaudited Condensed Consolidated Financial Position.
AK Steel Corporation Senior Unsecured Notes
As of June 30, 2020, AK Steel Corporation had outstanding a total of $141.0 million aggregate principal amount of 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes, 6.375% 2025 AK Senior Notes and 7.00% 2027 AK Senior Notes. These senior notes are unsecured obligations and rank equally in right of payment with AK Steel Corporation's guarantees of Cliffs' unsecured and unsubordinated indebtedness. These notes contain certain customary covenants; however, there are no financial covenants.
We may redeemDebt Extinguishments - 2021
On March 11, 2021, we purchased an aggregate principal amount of $322 million of the 9.875% 2025 Senior Secured Notes using the net proceeds from the February 11, 2021 issuance of 20 million common shares and cash on hand. On March 12, 2021, we fully redeemed the 4.875% 2024 Senior Secured Notes, 7.625% 2021 AK Senior Notes at 100.000% of theirNotes, 7.50% 2023 AK Senior Notes, 6.375% 2025 Senior Notes and 6.375% 2025 AK Senior Notes, which totaled an aggregate principal amount together with all accrued and unpaid interest to the date of redemption.$535 million.
The following is a summary of redemption prices for the 7.50% 2023 AK Senior Notes:debt extinguished and the respective impact on extinguishment:
Redemption Period
Redemption Price1
Prior to July 15, 2020103.750%
Beginning on July 15, 2020101.875
Beginning on July 15, 2021 and thereafter100.000
1  Plus accrued and unpaid interest, if any, up to but excluding the redemption date.

The following is a summary of redemption prices for the 6.375% 2025 AK Senior Notes:
Redemption Period
Redemption Price1
Prior to October 15, 20202
100.000%
Beginning on October 15, 2020103.188
Beginning on October 15, 2021101.594
Beginning on October 15, 2022 and thereafter100.000
1  Plus accrued and unpaid interest, if any, up to but excluding the redemption date.
2  Plus a "make-whole" premium.


24

The following is a summary of redemption prices for the 7.00% 2027 AK Senior Notes:
Redemption Period
Redemption Price1
Prior to March 15, 20222
100.000%
Beginning on March 15, 2022103.500
Beginning on March 15, 2023102.333
Beginning on March 15, 2024101.167
Beginning on March 15, 2025 and thereafter100.000
1  Plus accrued and unpaid interest, if any, up to but excluding the redemption date.
2  Plus a "make-whole" premium.

Industrial Revenue Bonds
AK Steel Corporation had outstanding $66.0 million aggregate principal amount of fixed-rate, tax-exempt IRBs as of June 30, 2020. The weighted-average fixed rate of the unsecured IRBs is 6.86%. The IRBs are unsecured senior debt obligations that are equal in ranking with AK Steel Corporation's senior unsecured notes and AK Steel Corporation's guarantees of Cliffs' unsecured and unsubordinated indebtedness. In addition, AK Steel Corporation had outstanding $26.0 million aggregate principal amount of variable-rate IRBs as of June 30, 2020 that are backed by a letter of credit. These IRBs contain certain customary covenants; however, there are no financial covenants.
(In Millions)
Three Months Ended
March 31, 2021
Debt InstrumentDebt Extinguished(Loss) on Extinguishment
9.875% 2025 Senior Secured Notes$322 $(42)
4.875% 2024 Senior Secured Notes395 (14)
7.625% 2021 AK Senior Notes34 0 
7.50% 2023 AK Senior Notes13 0 
6.375% 2025 Senior Notes64 (7)
6.375% 2025 AK Senior Notes29 (3)
$857 $(66)
Debt Extinguishments - 2020
On April 24, 2020, we used the net proceeds from the offering of the additional 9.875% 2025 Senior Secured Notes to repurchase $736.4 million aggregate principal amount of our outstanding senior notes of various series, which resulted in debt reduction of $181.2 million. During the second quarter of 2020, we also repurchased an additional $11.2 million aggregate principal amount of our outstanding senior notes of various series with cash on hand. On June 1, 2020, we redeemed $7.3 million aggregate principal amount of our outstanding 2020 IRBs.
On March 13, 2020, in connection with the AK Steel Merger, we purchased $364.2$364 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $310.7$311 million aggregate principal amount of 7.50% 2023 AK Senior Notes upon early settlement of tender offers made by Cliffs. The net proceeds from the offering of 6.75% 2026 Senior Secured Notes, along with a portion of the ABL Facility borrowings, were used to fund such purchases. As the 7.625% 2021 AK Senior Notes and 7.50% 2023 AK Senior Notes were recorded at fair value just prior to being purchased, there was no gain or loss on extinguishment. Additionally, in connection with the final settlement of the tender offers, on March 27, 2020, we purchased $8.5$9 million aggregate principal amount of the 7.625% 2021 AK Senior Notes and $56.5$56 million aggregate principal amount of the 7.50% 2023 AK Senior Notes with cash on hand.
24

The following is a summary of the debt extinguished and the respective gainimpact on extinguishment:
  (In Millions)
  Three Months Ended
June 30, 2020		 Six Months Ended
June 30, 2020
Debt Instrument Debt Extinguished Gain on Extinguishment Debt Extinguished Gain on Extinguishment
7.625% 2021 AK Senior Notes $—
 $—
 $372.7
 $0.4
7.50% 2023 AK Senior Notes —
 —
 367.2
 2.8
4.875% 2024 Senior Secured Notes 5.5
 0.5
 5.5
 0.5
6.375% 2025 Senior Notes 167.5
 21.3
 167.5
 21.3
1.50% 2025 Convertible Senior Notes 20.0
 1.3
 20.0
 1.3
5.75% 2025 Senior Notes 77.1
 16.3
 77.1
 16.3
7.00% 2027 Senior Notes 247.3
 28.4
 247.3
 28.4
5.875% 2027 Senior Notes 194.5
 48.7
 194.5
 48.7
6.25% 2040 Senior Notes 35.7
 12.9
 35.7
 12.9
  $747.6
 $129.4
 $1,487.5
 $132.6


25

Debt Extinguishments - 2019
The following is a summary of the debt extinguished with cash 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
4.875% 2021 Senior Notes $114.0
 $(5.0) $124.0
 $(5.3)
5.75% 2025 Senior Notes 600.0
 (12.9) 600.0
 (12.9)
  $714.0
 $(17.9) $724.0
 $(18.2)

(In Millions)
Three Months Ended
March 31, 2020
Debt InstrumentDebt ExtinguishedGain on Extinguishment
7.625% 2021 AK Senior Notes$373 $0 
7.50% 2023 AK Senior Notes367 3 
$740 $3 
ABL Facility
On March 13, 2020, in connection with the Merger, we entered into a new ABL Facility with various financial institutions to replace and refinance Cliffs’ Former ABL Facility and AK Steel Corporation’s former revolving credit facility. The ABL Facility will mature upon the earlierAs of March 13, 2025 or 91 days prior to the maturity of certain other material debt and provides for up to $2.0 billion in borrowings, including a $555.0 million sublimit for the issuance of letters of credit and a $125.0 million sublimit for swingline loans. Availability under the ABL Facility is limited to an eligible 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 of our existing wholly owned U.S. subsidiaries and are required to be guaranteed by certain of our future U.S. subsidiaries. Amounts outstanding 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 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.
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. We may amend this agreement to replace the LIBOR rate with one or more secured overnight financing based rates or an alternative benchmark rate, giving consideration to any evolving or then existing convention for similar dollar denominated syndicated credit facilities for such alternative benchmarks.
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 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 default exists (beyond any applicable grace or cure period), 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.

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On March 27, 2020, the ABL Facility was amended, by and among Cliffs, the lenders and the administrative agent. The amendment modified the ABL Facility to, among other things, provide for a new FILO tranche of commitments in the aggregate amount of $150.0 million by exchanging existing commitments under the ABL Facility. The total commitments under the ABL Facility after giving effect to the amendment remain at $2.0 billion. The terms and conditions (other than the pricing) that apply to the FILO tranche are substantially the same as the terms and conditions that apply to the tranche A facility of the ABL Facility immediately prior to the amendment.
As of June 30, 2020,31, 2021, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.
The following represents a summary of our borrowing capacity under the ABL Facility:
  (In Millions)
  June 30,
2020
Available borrowing base on ABL Facility1
 $1,652.1
Borrowings (550.0)
Letter of credit obligations2
 (198.5)
Borrowing capacity available $903.6
(In Millions)
March 31,
2021
Available borrowing base on ABL Facility1
$3,500
Borrowings(1,630)
Letter of credit obligations2
(272)
Borrowing capacity available$1,598
1 As of March 31, 2021, the ABL Facility has a maximum borrowing base of $3.5 billion. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
1 As of June 30, 2020, the ABL Facility has a maximum borrowing base of $2.0 billion. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
2 We issued standby letters of credit with certain financial institutions in order to support business obligations including, but not limited to, workers' compensation, employee severance, insurance, operating agreements, IRBs and environmental obligations.
Debt Maturities
The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at June 30, 2020:March 31, 2021:
(In Millions)
Maturities of Debt
2021 (remaining period of year)$0 
20220 
202353 
202462 
20252,955 
Thereafter2,823 
Total maturities of debt$5,893 
  (In Millions)
  Maturities of Debt
2020 (remaining period of year) $—
2021 33.5
2022 —
2023 12.8
2024 456.5
Thereafter 4,137.9
Total maturities of debt $4,640.7
25


27

NOTE 89 - FAIR VALUE MEASUREMENTS
The following represents the assets and liabilities measured at fair value:
 (In Millions)
 June 30, 2020
 
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 - Money market funds$21.8
 $—
 $—
 $21.8
Other current assets:       
Commodity contracts—
 5.4
 —
 5.4
Customer supply agreement—
 —
 27.3
 27.3
Provisional pricing arrangement—
 —
 8.0
 8.0
Other non-current assets:       
Commodity contracts—
 0.7
 —
 0.7
     Total$21.8
 $6.1
 $35.3
 $63.2
Liabilities:       
Other current liabilities:       
Commodity contracts$—
 $(17.2) $—
 $(17.2)
Foreign exchange contracts—
 (1.0) —
 (1.0)
Other non-current liabilities:       
Commodity contracts—
 (1.1) —
 (1.1)
Foreign exchange contracts—
 (0.4) —
 (0.4)
     Total$—
 $(19.7) $—
 $(19.7)
 (In Millions)
 December 31, 2019
 
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 - Commercial paper$—
 $187.6
 $—
 $187.6
Other current assets:       
Customer supply agreement—
 —
 44.5
 44.5
Provisional pricing arrangement—
 —
 1.3
 1.3
Total$—
 $187.6
 $45.8
 $233.4
Liabilities:       
Other current liabilities:       
Commodity contracts$—
 $(3.2) $—
 $(3.2)
Provisional pricing arrangement—
 —
 (1.1) (1.1)
Total$—
 $(3.2) $(1.1) $(4.3)


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Financial assets classified in Level 1 include money market 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. Our foreign exchange contracts include Canadian dollars, and our commodity hedge contracts primarily include those related to natural gas, electricity and zinc.
The Level 3 assets consist of a freestanding derivative instrument related to a certain supply agreement and derivative assets related to certain provisional pricing arrangements with our customers. The Level 3 liabilities consist of derivative liabilities related to certain provisional pricing arrangements with our customers.
The supply agreement included in our Level 3 assets contains provisions for supplemental revenue or refunds based on the hot-rolled coil steel price in the year the iron ore product is consumed in the customer’s blast furnaces. We account for these provisions as a derivative instrument at the time of sale and adjust the derivative instrument to fair value through Revenues each reporting period until the product is consumed and the amounts are settled.
The provisional pricing arrangements included in our Level 3 assets/liabilities 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. 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 and is required to be accounted for separately once the revenue has been recognized. The derivative instruments are adjusted to fair value through Revenues each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rates are determined.
The following table illustrates information about quantitative inputs and assumptions for the derivative assets and derivative liabilities categorized in Level 3 of the fair value hierarchy:
 Qualitative/Quantitative Information About Level 3 Fair Value Measurements
   
Fair Value at June 30, 2020
(In Millions)
 
Balance Sheet
Location
 Valuation Technique Unobservable Input Range or Point Estimate (Weighted Average)
 
 Customer supply agreement $27.3
 Other current assets Market Approach Management's estimate of hot-rolled coil steel price per net ton $562 - $639
$(564)
 Provisional pricing arrangements $8.0
 Other current assets Market Approach 
Management's
estimate of Platts 62% price per dry metric ton
 $94
     Atlantic Basin Pellet Premium $32

The significant unobservable input used in the fair value measurement of our customer supply agreement was a forward-looking estimate of the hot-rolled coil steel price determined by management.
The significant unobservable inputs used in the fair value measurement of our provisional pricing arrangements at June 30, 2020 were the forward-looking estimate of Platts 62% price and the Atlantic Basin Pellet Premium based upon current market data determined by management.

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The following tables represent a reconciliation of 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,
 2020 2019 2020 2019
Beginning balance$19.6
 $106.7
 $45.8
 $91.4
Total gains included in earnings40.0
 74.3
 13.8
 89.6
Settlements(24.3) (62.9) (24.3) (62.9)
Ending balance$35.3
 $118.1
 $35.3
 $118.1
Total gains for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date$33.6
 $73.0
 $13.6
 $88.3

 (In Millions)
 Level 3 Liabilities
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Beginning balance$—
 $(9.8) $(1.1) $—
Total gains (losses) included in earnings—
 4.5
 (0.6) (5.3)
Settlements—
 5.3
 1.7
 5.3
Ending balance$—
 $—
 $—
 $—

The carrying values of certain financial instruments (e.g., Accounts receivable, net, Accounts payable and Other current liabilities) approximate fair value and, therefore, have been excluded from the table below. A summary of the carrying value and fair value of other financial instruments were as follows:
   (In Millions)
   June 30, 2020 December 31, 2019
 Classification 
Carrying
Value
 Fair Value 
Carrying
Value
 Fair Value
Long-term debt:         
Senior NotesLevel 1 $3,807.3
 $3,681.8
 $2,113.8
 $2,237.0
IRBs due 2024 to 2028Level 1 94.3
 86.0
 —
 —
ABL Facility - outstanding balanceLevel 2 550.0
 550.0
 —
 —
Total long-term debt  $4,451.6
 $4,317.8
 $2,113.8
 $2,237.0

(In Millions)
March 31, 2021December 31, 2020
Classification
Carrying
Value
Fair Value
Carrying
Value
Fair Value
Senior NotesLevel 1$3,957 $4,674 $3,802 $4,446 
IRBs due 2024 to 2028Level 194 94 94 91 
EDC Revolving Facilities - outstanding balanceLevel 253 53 18 18 
ABL Facility - outstanding balanceLevel 21,630 1,630 1,510 1,510 
Total long-term debt$5,734 $6,451 $5,424 $6,065 
The fair value of long-term debt was determined using quoted market prices.
NOTE 910 - 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 as part of a total compensation and benefits program. The defined benefit pension plans 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.
As a result of the acquisition of AK Steel, we assumed the obligations under AK Steel's defined benefit pension plans and OPEB plans. Noncontributory pension and various healthcare and life insurance benefits are provided to a significant portion of our employees and retirees. AK SteelBenefits are also contributes toprovided through multiemployer pension plans according

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to collective bargaining agreements that coverfor certain union-represented employees and defined contribution pension plans. The AK Steel pension and OPEB plans were remeasured as of March 13, 2020.union members.
The following are the components of defined benefit pension and OPEB costs (credits):
Defined Benefit Pension Costs (Credits)
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Service cost$5.3
 $4.2
 $10.6
 $8.3
Interest cost14.9
 8.6
 23.1
 17.3
Expected return on plan assets(36.7) (13.7) (55.2) (27.3)
Amortization:       
Prior service costs0.3
 0.3
 0.5
 0.6
Net actuarial loss6.6
 5.9
 13.3
 11.8
Net periodic benefit cost (credit)$(9.6) $5.3
 $(7.7) $10.7

(In Millions)
Three Months Ended
March 31,
20212020
Service cost$14 $5 
Interest cost26 8 
Expected return on plan assets(90)(18)
Amortization:
Net actuarial loss8 7 
Net periodic benefit cost (credit)$(42)$2 
OPEB Costs (Credits)
(In Millions)
Three Months Ended
March 31,
20212020
Service cost$13 $1 
Interest cost18 2 
Expected return on plan assets(10)(5)
Amortization:
Prior service credits0 (1)
Net actuarial loss1 1 
Net periodic benefit cost (credit)$22 $(2)
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Service cost$1.4
 $0.4
 $1.9
 $0.8
Interest cost4.3
 2.4
 6.5
 4.7
Expected return on plan assets(4.6) (4.2) (9.1) (8.4)
Amortization:       
Prior service credits(0.5) (0.5) (1.0) (1.0)
Net actuarial loss0.7
 1.2
 1.4
 2.5
Net periodic benefit cost (credit)$1.3
 $(0.7) $(0.3) $(1.4)
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Based on funding requirements, we made defined benefit pension contributions of $146 million and $4 million for the three months ended March 31, 2021 and 2020, respectively. As a result of the CARES Act enacted on March 27, 2020, we have deferred $118 million of 2020 pension contributions, starting in the second quarter of 2020.which were paid on January 4, 2021. Based on prior funding requirements, we made defined benefit pension contributions of $0.2 million and $4.0 million for the three and six months ended June 30, 2020, respectively, compared to defined benefit pension contributions of $3.5 million and $6.7 million for the three and six months ended June 30, 2019, respectively. OPEB contributions for our voluntary employee benefit association trust plans are typically made on an annual basis in the first quarter of each year, but due to plan funding requirements being met, 0 OPEB contributions for our voluntary employee benefit association trust plans were required or made for the three and six months ended June 30, 2020March 31, 2021 and 2019.2020.
NOTE 1011 - INCOME TAXES
Our 20202021 estimated annual effective tax rate before discrete items as of June 30, 2020March 31, 2021 is 31.1%19%. The estimated annual effective tax rate differs from the U.S. statutory rate of 21.0%21% primarily due to the deduction for percentage depletion in excess of cost depletion related to our Mining and Pelletizing segment operations, as well as non-deductible transaction costs, executive officers' compensation, global intangible low-taxed income and income of noncontrolling interests for which no tax is recognized.depletion. The 20192020 estimated annual effective tax rate before discrete items as of June 30, 2019March 31, 2020 was 12.1%47%. The increasedecrease in the estimated annual effective tax rate before discrete items is driven by the change in the mix of income, as well as transaction costs and other acquisition-related charges that were incurred only in 2020.income.

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For the three and six months ended June 30, 2020, we recorded discrete items that resulted in an income tax expense of $0.3 million and benefit of $3.7 million, respectively. The discrete adjustments are primarily related to interest on uncertain tax positions in the quarter and the refund of amounts sequestered by the Internal Revenue Service on previously filed AMT credit refunds. For the three and six months ended June 30, 2019, we recorded discrete items that resulted in an income tax benefit of $0.4 million and $0.8 million, respectively.
NOTE 1112 - ASSET RETIREMENT OBLIGATIONS
The following is a summary of our asset retirement obligations:
 (In Millions)
 June 30,
2020		 December 31,
2019
Asset retirement obligations1
$183.3
 $165.3
Less current portion2.2
 2.1
Long-term asset retirement obligations$181.1
 $163.2

1 Includes $33.0 million and $22.0 million related to our active operations as of June 30, 2020 and December 31, 2019, respectively.
(In Millions)
March 31,
2021		December 31,
2020
Asset retirement obligations1
$310 $342 
Less: current portion12 7 
Long-term asset retirement obligations$298 $335 
1 Includes $158 million and $190 million related to our active operations as of March 31, 2021 and December 31, 2020, respectively.
The accrued closure obligation is predominantlyprovides for contractual and legal obligations related to our indefinitely idled and closed iron ore mining operations and provides for contractual and legal obligations associated with the eventual closure of thoseour active operations. Additionally, we have included in our asset retirement obligation $13.9 million for our integrated steel facilities acquired in the Merger. The closure date for each of our active mine sites was determined based on the exhaustion date of the remaining iron oremineral reserves and the amortization of the related asset and accretion of the liability is recognized over the estimated mine lives. The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines is determined based on the unique circumstances of each property. For indefinitely idled or closed mines, the accretion of the liability is recognized over the anticipated timing of remediation. As the majority of our asset retirement obligations at our steelmaking operations have indeterminate settlement dates, asset retirement obligations have been recorded at present values using estimated ranges of the economic lives of the underlying assets.
The following is a roll forward of our asset retirement obligation liability:
 (In Millions)
 2020 2019
Asset retirement obligation as of January 1$165.3
 $172.4
Increase from AK Steel acquisition13.9
 —
Accretion expense4.9
 5.1
Remediation payments(0.8) (0.4)
Asset retirement obligation as of June 30$183.3
 $177.1

(In Millions)
20212020
Asset retirement obligation as of January 1$342 $165 
Increase (decrease) from Acquisitions(34)14 
Accretion expense3 2 
Remediation payments(1)0 
Asset retirement obligation as of March 31$310 $181 

The decrease from Acquisitions for the three months ended March 31, 2021, relates to measurement period adjustments as a result of the preliminary purchase price allocation of the AM USA Transaction.
32
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NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
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:
  Derivatives designated as hedging instruments under Topic 815: Derivatives not designated as hedging instruments under Topic 815:
Derivative Asset (Liability) June 30,
2020		 December 31,
2019		 June 30,
2020		 December 31,
2019
Other current assets:        
Customer supply agreement $—
 $—
 $27.3
 $44.5
Provisional pricing arrangements —
 —
 8.0
 1.3
Commodity contracts 1.6
 —
 3.8
 —
Other non-current assets:        
Commodity contracts 0.6
 —
 0.1
 —
Other current liabilities:        
Provisional pricing arrangements —
 —
 —
 (1.1)
Commodity contracts (14.2) (3.2) (3.0) —
Foreign exchange contracts (1.0) —
 —
 —
Other non-current liabilities:        
Commodity contracts (0.9) —
 (0.2) —
Foreign exchange contracts (0.4) —
 —
 —

Derivatives Designated as Hedging Instruments - Cash Flow Hedges
Exchange rate fluctuations affect a portion of revenues and operating costs that are denominated in foreign currencies, and we use forward currency and currency option contracts to reduce our exposure to certain of these currency price fluctuations. Contracts to purchase Canadian dollars are designated as cash flow hedges for accounting purposes, and we record the gains and losses for the derivatives and premiums paid for option contracts in Accumulated other comprehensive loss until we reclassify them into Cost of goods sold when we recognize the associated underlying operating costs.
We are exposed to fluctuations in market prices of raw materials and energy sources. We may use cash-settled commodity swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. Our hedging strategy is to reduce the effect on earnings from the price volatility of these various commodity exposures, including timing differences between when we incur raw material commodity costs and when we receive sales surcharges from our customers based on those raw materials. Independent of any hedging activities, price changes in any of these commodity markets could negatively affect operating costs.

33

The following table presents our outstanding hedge contracts:
    (In Millions)
    June 30, 2020 December 31, 2019
  Unit of Measure Maturity DatesNotional Amount Notional Amount
Commodity contracts:       
Natural gas MMBtu July 2020 - December 202139.2
 20.1
Diesel Gallons ——
 0.8
Zinc Pounds July 2020 - December 202118.2
 —
Electricity Megawatt hours July 2020 - December 20211.5
 —
Foreign exchange contracts:       
Canadian dollars CAD July 2020 - December 2021C$48.7
 C$—

Estimated gains (losses) before tax expected to be reclassified into Cost of goods sold within the next 12 months for our existing derivatives that qualify as cash flow hedges are presented below:
  (In Millions)
Hedge: Estimated Gains (Losses)
Natural gas $(4.6)
Zinc 0.6
Electricity (1.0)

Derivatives Not Designated as Hedging Instruments
Customer Supply Agreement
A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the hot-rolled coil steel price at the time the iron ore product is consumed in the customer’s blast 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 through 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 settled.
Provisional Pricing Arrangements
Certain of our 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, Atlantic Basin pellet premiums and Platts international indexed freight rates. 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 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 Topic 815 and is characterized as a derivative instrument and accounted for separately.  Subsequently,

34

the derivative instruments are adjusted to fair value through Revenues each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rate is determined.
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,
 
 2020 20192020 2019
 Customer supply agreements Revenues $31.2
 $57.5
 $5.6
 $74.6
 Provisional pricing arrangements Revenues 8.8
 17.3
 7.6
 5.7
 Foreign exchange contracts Other non-operating income 0.1
 —
 —
 —
 Commodity contracts Cost of goods sold 1.2
 —
 (4.7) —
 Total   $41.3
 $74.8
 $8.5
 $80.3

Refer to NOTE 8 - FAIR VALUE MEASUREMENTS for additional information.
NOTE 13 - SHAREHOLDERS' EQUITYCAPITAL STOCK
Underwritten Public Offering
On February 11, 2021, we sold 20 million of our common shares and 40 million common shares were sold by an affiliate of ArcelorMittal, in an underwritten public offering. In each case, shares were sold at a price per share of $16.12. Prior to this sale, ArcelorMittal held approximately 78 million common shares, which were issued as a part of the consideration in connection with the AM USA Transaction. We did not receive any proceeds from the sale of the 40 million common shares sold on behalf of ArcelorMittal. We used the net proceeds from the offering, plus cash on hand, to redeem $322 million aggregate principal amount of our outstanding 9.875% 2025 Senior Secured Notes.
Acquisition of AK Steel
As more fully described in NOTE 3 - ACQUISITION OF AK STEEL,ACQUISITIONS, we acquired AK Steel on March 13, 2020. At the effective time of the AK Steel Merger, each share of AK Steel common stock issued and outstanding prior to the effective time of the AK Steel Merger was converted into, and became exchangeable for, 0.400 Cliffs common shares, par value $0.125 per share. We issued a total of 126.8127 million Cliffs common shares in connection with the AK Steel Merger at a fair value of $617.6$618 million. Following the closing of the AK Steel Merger, AK Steel's common stock was de-listed from the New York Stock Exchange.
Acquisition of ArcelorMittal USA
As more fully described in NOTE 3 - ACQUISITIONS, we acquired ArcelorMittal USA on December 9, 2020. Pursuant to the terms of the AM USA Transaction Agreement, we issued 78,186,671 common shares and 583,273 shares of a new series of our Serial Preferred Stock, Class B, without par value, designated as the “Series B Participating Redeemable Preferred Stock,” in each case to an indirect, wholly owned subsidiary of ArcelorMittal as part of the consideration paid by us in connection with the closing of the AM USA Transaction.
Preferred Stock
We have 3,000,000 shares of Serial Preferred Stock, Class A, without par value, of which, none are issued or outstanding. We also have 4,000,000 shares of Serial Preferred Stock, Class B, without par value, authorized, of which, 583,273 shares are issued and outstanding as described above.
Dividends
The below table summarizes our recent dividend activity:    activity during 2020:
Declaration Date Record Date Payment Date 
Dividend Declared per Common Share1
2/18/2020 4/3/2020 4/15/2020 $0.06
12/2/2019 1/3/2020 1/15/2020 0.06
9/3/2019 10/4/2019 10/15/2019 0.10
5/31/2019 7/5/2019 7/15/2019 0.06
2/19/2019 4/5/2019 4/15/2019 0.05
10/18/2018 1/4/2019 1/15/2019 0.05

1 The dividend declared on September 3, 2019 included a special cash dividend of $0.04 per common share.
Declaration DateRecord DatePayment DateDividend Declared per Common Share
2/18/20204/3/20204/15/2020$0.06 
12/2/20191/3/20201/15/20200.06 
Subsequent to the dividend paid on April 15, 2020, our Board temporarily suspended future dividends as a result of the COVID-19 pandemic in order to preserve cash during this time of economic uncertainty.dividends.
Preferred Stock
We have 3,000,000 Class A preferred shares authorized and 4,000,000 Class B preferred shares authorized; no preferred shares are issued or outstanding.

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Share Repurchase Program
In November 2018, our Board authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, up to a maximum of $200 million, excluding commissions and fees. In April 2019, our Board increased the common share repurchase authorization by an additional $100 million, excluding commissions and fees. During the six months ended June 30, 2019 we repurchased 24.4 million common shares at a cost of $252.9 million in the aggregate, including commissions and fees. The share repurchase program was effective until December 31, 2019.
NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables reflect the changes in Accumulated other comprehensive loss related to Cliffs shareholders’ equity:
 (In Millions)
 Postretirement Benefit Liability,
net of tax		 Foreign Currency Translation Derivative Financial Instruments, net of tax Accumulated Other Comprehensive Loss
December 31, 2019$(315.7) $—
 $(3.1) $(318.8)
Other comprehensive loss before reclassifications—
 (0.9) (5.2) (6.1)
Net loss reclassified from accumulated other comprehensive loss5.6
 —
 2.2
 7.8
March 31, 2020$(310.1) $(0.9) $(6.1) $(317.1)
Other comprehensive income before reclassifications0.4
 0.7
 1.4
 2.5
Net loss reclassified from accumulated other comprehensive loss5.6
 —
 3.1
 8.7
June 30, 2020$(304.1) $(0.2) $(1.6) $(305.9)
(In Millions)
Postretirement Benefit Liability,
net of tax		Foreign Currency TranslationDerivative Financial Instruments, net of taxAccumulated Other Comprehensive Loss
December 31, 2020$(135)$3 $(1)$(133)
Other comprehensive income (loss) before reclassifications0 (1)8 7 
Net (gain) loss reclassified from accumulated other comprehensive loss7 0 (1)6 
March 31, 2021$(128)$2 $6 $(120)
 (In Millions)
 Postretirement Benefit Liability, net of tax 
Derivative Financial Instruments,
net of tax
 Accumulated Other Comprehensive Loss
December 31, 2018$(281.1) $(2.8) $(283.9)
Other comprehensive income before reclassifications0.2
 2.5
 2.7
Net loss reclassified from accumulated other comprehensive loss5.5
 0.2
 5.7
March 31, 2019$(275.4) $(0.1) $(275.5)
Other comprehensive income (loss) before reclassifications0.3
 (2.3) (2.0)
Net loss reclassified from accumulated other comprehensive loss5.5
 0.2
 5.7
June 30, 2019$(269.6) $(2.2) $(271.8)
28


36


(In Millions)
Postretirement Benefit Liability, net of taxForeign
Currency Translation
Derivative Financial Instruments,
net of tax
Accumulated Other Comprehensive Loss
December 31, 2019$(316)$0 $(3)$(319)
Other comprehensive loss before reclassifications0 (1)(5)(6)
Net loss reclassified from accumulated other comprehensive loss6 0 2 8 
March 31, 2020$(310)$(1)$(6)$(317)
The following table reflects the details about Accumulated other comprehensive loss components related toreclassified from Cliffs shareholders’ equity:
  (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,		 
 2020 2019 2020 2019 
Amortization of pension and OPEB liability:          
Prior service credits $(0.2) $(0.2) $(0.5) $(0.4) Other non-operating income
Net actuarial loss 7.3
 7.1
 14.7
 14.3
 Other non-operating income
  $7.1
 $6.9
 14.2
 13.9
 Total before taxes
  (1.5) (1.4) (3.0) (2.9) Income tax benefit (expense)
  $5.6
 $5.5
 $11.2
 $11.0
 Net of taxes
           
Unrealized loss on derivative financial instruments:          
Commodity contracts $3.9
 $0.2
 $6.7
 $0.5
 Cost of goods sold
  (0.8) —
 (1.4) (0.1) Income tax benefit (expense)
  $3.1
 $0.2
 $5.3
 $0.4
 Net of taxes
           
Total reclassifications for the period, net of tax $8.7
 $5.7
 $16.5
 $11.4
  

(In Millions)
Details about Accumulated Other Comprehensive Loss ComponentsAmount of (Gain)/Loss Reclassified into Income, Net of TaxAffected Line Item in the Statement of Unaudited Condensed Consolidated Operations
Three Months Ended
March 31,
20212020
Amortization of pension and OPEB liability:
Net actuarial loss$9 $7 Other non-operating income
Income tax benefit(2)(1)Income tax benefit (expense)
Net of taxes$7 $6 
Changes in derivative financial instruments:
Commodity contracts$(1)$3 Cost of goods sold
Income tax benefit0 (1)Income tax benefit (expense)
Net of taxes$(1)$2 
Total reclassifications for the period, net of tax$6 $8 
NOTE 15 - RELATED PARTIES
We have certain co-owned joint ventures with companies from the steel and mining industries, including integrated steel companies, their subsidiaries and other downstream users of steel and iron ore products. In addition,
Hibbing is a co-owned joint venture in which we haveown 85.3% and U.S. Steel owns 14.7% as of March 31, 2021. As a result of the AM USA Transaction, we acquired an additional 62.3% ownership stake in the Hibbing mine and became the majority owner and mine manager. Prior to the AM USA Transaction, ArcelorMittal was a related party due to its ownership interest in Hibbing. As such, for the three months ended March 31, 2020, certain long-term contracts and from time to time, enter into other sales agreements with these parties, and as a result, generateArcelorMittal resulted in Revenues from related parties. As of March 31, 2020, we owned 23% of Hibbing.
Hibbing is a co-owned joint venture with companies that are integrated steel producers or their subsidiaries. The following is a summary of the mine ownership of the co-owned iron ore mine at June 30, 2020:
Mine Cleveland-Cliffs Inc. ArcelorMittal USA U.S. Steel
Hibbing 23.0% 62.3% 14.7%

The tables below summarize our material related party transactions:
Revenues from related parties were as follows:
(In Millions)
Three Months Ended
March 31,
20212020
Revenue from related parties$77 $11 
Revenues$4,049 $359 
Related party revenues as a percent of Revenues2 %3 %
Purchases from related parties$27 $3 
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Revenue from related parties$281.8
 $452.4
 $292.6
 $499.3
Revenues1
$1,092.7
 $743.2
 $1,451.8
 $900.2
Related party revenues as a percent of Revenues1
25.8% 60.9% 20.2% 55.5%
Purchases from related parties$9.7
 $—
 $12.2
 $—
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1 Includes Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020.
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,
2020		 December 31,
2019
Accounts receivable, net $91.6
 $31.1
Other current assets 35.3
 44.5
Accounts payable (2.4) —
Other current liabilities (2.0) (2.0)

(In Millions)
Balance Sheet Location of Assets (Liabilities)March 31,
2021		December 31,
2020
Accounts receivable, net$30 $2 
Accounts payable(9)(6)
Other current assets
A supply agreement with one customer provides for supplemental revenue or refunds to the customer based on the hot-rolled coil steel price 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 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information.
NOTE 16 - VARIABLE INTEREST ENTITIES
SunCoke Middletown
We purchase all the coke and electrical power generated from SunCoke Middletown’s plant under long-term supply agreements. SunCoke Middletown is a VIE because weagreements and have committed to purchase all the expected production from the facility through 2032 and2032. We consolidate SunCoke Middletown as a VIE because we are the primary beneficiary. Therefore, we consolidate SunCoke Middletown’s financial results with our financial results, even though we havebeneficiary despite having no ownership interest in SunCoke Middletown. SunCoke Middletown had income before income taxes of $16.0$17 million and $19.5$4 million for the three and six months ended June 30,March 31, 2021 and 2020, respectively, that was included in our consolidated income before income taxes.
The assets of the consolidated VIE can only be used to settle the obligations of the consolidated VIE and not obligations of the Company. The creditors of SunCoke Middletown do not have recourse to the assets or general credit of the Company to satisfy liabilities of the VIE. The consolidated balance sheet asStatements of June 30, 2020Unaudited Condensed Consolidated Financial Position includes the following amounts for SunCoke Middletown:
 (In Millions)
 June 30,
2020
Cash and cash equivalents$1.0
Inventories21.2
Property, plant and equipment, net309.2
Accounts payable(5.6)
Other assets (liabilities), net(1.2)
Noncontrolling interests(324.6)


(In Millions)
March 31,
2021		December 31,
2020
Cash and cash equivalents$4 $5 
Inventories22 21 
Property, plant and equipment, net304 308 
Accounts payable(12)(15)
Other assets (liabilities), net1 (10)
Noncontrolling interests(319)(309)
37
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NOTE 17 - EARNINGS PER SHARE
The following table summarizes the computation of basic and diluted earnings per share:
 (In Millions, Except Per Share Amounts)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Income (loss) from continuing operations$(107.8) $161.4
 $(157.0) $139.3
Income from continuing operations attributable to noncontrolling interest(15.8) —
 (19.3) —
Net income (loss) from continuing operations attributable to Cliffs shareholders(123.6) 161.4
 (176.3) 139.3
Income (loss) from discontinued operations, net of tax(0.3) (0.6) 0.3
 (0.6)
Net income (loss) attributable to Cliffs shareholders$(123.9) $160.8
 $(176.0) $138.7
        
Weighted average number of shares:       
Basic399.1
 275.8
 348.3
 282.6
Convertible senior notes—
 6.7
 —
 6.9
Employee stock plans—
 3.0
 —
 4.1
Diluted399.1
 285.5
 348.3
 293.6
        
Earnings (loss) per common share attributable to Cliffs shareholders - basic:       
Continuing operations$(0.31) $0.59
 $(0.51) $0.49
Discontinued operations—
 —
 —
 —
 $(0.31) $0.59
 $(0.51) $0.49
        
Earnings (loss) per common share attributable to Cliffs shareholders - diluted:       
Continuing operations$(0.31) $0.57
 $(0.51) $0.47
Discontinued operations—
 —
 —
 —
 $(0.31) $0.57
 $(0.51) $0.47

(In Millions, Except Per Share Amounts)
Three Months Ended
March 31,
20212020
Income (loss) from continuing operations$57 $(50)
Income from continuing operations attributable to noncontrolling interest(16)(3)
Net income (loss) from continuing operations attributable to Cliffs shareholders41 (53)
Income from discontinued operations, net of tax0 1 
Net income (loss) attributable to Cliffs shareholders$41 $(52)
Weighted average number of shares:
Basic490298
Redeemable preferred shares580
Convertible senior notes190
Employee stock plans40
Diluted571298
Earnings (loss) per common share attributable to Cliffs shareholders - basic1:
Continuing operations$0.08 $(0.18)
Discontinued operations0 0 
$0.08 $(0.18)
Earnings (loss) per common share attributable to Cliffs shareholders - diluted:
Continuing operations$0.07 $(0.18)
Discontinued operations0 0 
$0.07 $(0.18)
1 For the three months ended March 31, 2021, basic earnings per share is calculated by dividing Net income (loss) attributable to Cliffs shareholders, less $4 million of earnings attributed to Series B Participating Redeemable Preferred Stock, by the weighted average number of basic common shares outstanding during the period presented.
The following table summarizesFor the three months ended March 31, 2020, we had 2 million shares related to employee stock plans that have beenwere excluded from the diluted earnings per shareEPS calculation as they were anti-dilutive:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Shares related to employee stock plans1.8
 —
 1.8
 —

anti-dilutive. There was 0 dilution during the three and six months ended June 30,March 31, 2020 related to the common share equivalents for the convertible senior notes as our common shares average price did not rise above the conversion price.

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NOTE 18 - COMMITMENTS AND CONTINGENCIES
Purchase Commitments
HBI production plant
In 2017, we began to incur capital commitments related toWe purchase portions of the constructionprincipal raw materials required for our steel manufacturing operations under annual and multi-year agreements, some of which have minimum quantity requirements. We also use large volumes of natural gas, electricity and industrial gases in our steel manufacturing operations. We negotiate most of our HBI production plant in Toledo, Ohio; however, due to the COVID-19 pandemic, we temporarily halted construction in March 2020. In June 2020, we resumed constructionpurchases of chrome, industrial gases and expect to complete the project in the fourth quartera portion of 2020. In total, to complete the project, we expect to spend approximately $1 billion on the HBI production plant, excluding capitalized interest,our electricity under multi-year agreements. Our purchases of which $894.3 million was paid ascoke are made under annual or multi-year agreements with periodic price adjustments. We typically purchase coal under annual fixed-price agreements. We also purchase certain transportation services under multi-year contracts with minimum quantity requirements.
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Contingencies
We are currently the subject of, or party to, various claims and legal proceedings incidental to our current and historical operations. These claims and legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, additional funding requirements or an injunction. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on 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 adverse effect in relation to our consolidated financial statements.
Environmental Contingencies
Although we believe our operating practices have been consistent with prevailing industry standards, hazardous materials may have been released at operating sites or third-party sites in the past, including operating sites that we no longer own. If we reasonably can, we estimate potential remediation expenditures for those sites where future remediation efforts are probable based on identified conditions, regulatory requirements or contractual obligations arising from the sale of a business or facility. For sites involving government required investigations, we typically make an estimate of potential remediation expenditures only after the investigation is complete and when we better understand the nature and scope of the remediation. In general, the material factors in these estimates include the costs associated with investigations, delineations, risk assessments, remedial work, governmental response and oversight, site monitoring, and preparation of reports to the appropriate environmental agencies.
The following is a summary of our environmental obligations:
 (In Millions)
 June 30,
2020		 December 31,
2019
Environmental obligations$41.4
 $2.0
Less current portion6.5
 0.3
Long-term environmental obligations$34.9
 $1.7

(In Millions)
March 31,
2021		December 31,
2020
Environmental obligations$134 $135 
Less: current portion20 18 
Long-term environmental obligations$114 $117 
We cannot predict the ultimate costs for each site with certainty because of the evolving nature of the investigation and remediation process. Rather, to estimate the probable costs, we must make certain assumptions. The most significant of these assumptions is for the nature and scope of the work that will be necessary to investigate and remediate a particular site and the cost of that work. Other significant assumptions include the cleanup technology that will be used, whether and to what extent any other parties will participate in paying the investigation and remediation costs, reimbursement of past response costs and future oversight costs by governmental agencies, and the reaction of the governing environmental agencies to the proposed work plans. Costs for future investigation and remediation are not discounted to their present value, unless the amount and timing of the cash disbursements are readily known. To the extent that we have been able to reasonably estimate future liabilities, we do not believe that there is a reasonable possibility that we will incur a loss or losses that exceed the amounts we accrued for the environmental matters discussed below that would, either individually or in the aggregate, have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, since we recognize amounts in the consolidated financial statements in accordance with GAAP that exclude potential losses that are not probable or that may not be currently estimable, the ultimate costs of these environmental matters may be higher than the liabilities we currently have recorded in our consolidated financial statements.

39

Except as we expressly note below, we do not currently anticipate any material effect on our consolidated financial position, results of operations or cash flows as a result of compliance with current environmental regulations. Moreover, because all domestic steel and iron ore producers operate under the same federal environmental regulations, we do not believe that we are more disadvantaged than our domestic competitors by our need to comply with these regulations. Some foreign competitors may benefit from less stringent environmental requirements in the countries where they produce, resulting in lower compliance costs for them and providing those foreign competitors with a cost advantage on their products.
AccordingPursuant to RCRA, which governs the treatment, handling and disposal of hazardous waste, the EPA and authorized state environmental agencies may conduct inspections of RCRA-regulated facilities to identify areas where there have been releases of hazardous waste or hazardous constituents into the environment and may order the facilities to take corrective action to remediate such releases. Likewise, the EPA or the states may require closure or post-closure care of residual, industrial and hazardous waste management units, including, but not limited to, landfills and deep injection wells. Environmental regulators mayhave the authority to inspect all of our major iron ore and steelmaking facilities. While we cannot predict the future actions of these regulators, it is possible that they may identify conditions in future inspections of these facilities whichthat they believe require corrective action.
Under authority fromPursuant to CERCLA, the EPA and state environmental authorities have conducted site investigations at certainsome of our facilities and other third-party facilities, portions of which previously may have been used for disposal of materials that are currently regulated. The results of these investigations are still pending, and we could be directed to spend funds for remedial activities at the former disposal areas. Because of the uncertain status of these
32

investigations, however, we cannot reliablyreasonably predict whether or when such spending might be required or its magnitude.
On April 29, 2002, AK Steel entered a mutually agreed-upon administrative order onwith the consent withof the EPA pursuant to Section 122 of CERCLA to perform a Remedial Investigation/Feasibility Study (“RI/FS”)FS of the Hamilton Plantplant site located in New Miami, Ohio. The plant ceased operations in 1990 and all of its former structures have been demolished. AK Steel submitted the investigation portion of the RI/FS and completed supplemental studies. We currently have accrued $0.7 million for the remaining cost of the RI/FS. Until the RI/FS is complete, we cannot reliablyreasonably estimate the additional costs, if any, we may incur for potentially required remediation of the site or when we may incur them.
EPA Administrative Order In Re: Ashland Coke
On September 26, 2012, the EPA issued an order under Section 3013 of RCRA requiring a plan to be developed for investigation of four areas at the Ashland Works coke plant. The Ashland Works coke plant ceased operations in 2011 and all of its former structures have been demolished and removed. In 1981, AK Steel acquired the plant from Honeywell International Corporation (as successor to Allied Corporation), who had managed the coking operations there for approximately 60 years. In connection with the sale of the coke plant, Honeywell agreed to indemnify AK Steel against certain claims and obligations that could arise from the investigation, and we intend to pursue such indemnification from Honeywell, if necessary. We cannot reliablyreasonably estimate how long it will take to complete the site investigation. On March 10, 2016, the EPA invited AK Steel to participate in settlement discussions regarding an enforcement action. Settlement discussions between the parties are ongoing, though whether the parties will reach agreement and any such agreement’s terms are uncertain. We currently have accrued $1.4 million for the projected cost of the investigation and known remediation. Until the site investigation is complete, we cannot reliablyreasonably estimate the costs, if any, we may incur for potential additional required remediation of the site or when we may incur them.
On May 12, 2014, the Michigan DepartmentBurns Harbor Water Issues
In August 2019, ArcelorMittal Burns Harbor LLC (n/k/a Cleveland-Cliffs Burns Harbor LLC) suffered a loss of Environment, Great Lakes, and Energy (“EGLE”) (previously the Michigan Department of Environmental Quality) issued to Dearborn Works an Air Permit to Install No. 182-05C (the “PTI”) to increase the emission limits for the blast furnace cooling water recycle system, which led to the discharge of cyanide and other emission sources. The PTI was issued as a correction to a prior permit to install that did not include certain information during the prior permitting process. On July 10, 2014, the South Dearborn Environmental Improvement Association (“SDEIA”), Detroiters Working for Environmental Justice, Original United Citizens of Southwest Detroit and the Sierra Club filed a Claim of Appealammonia in excess of the PTIBurns Harbor plant's NPDES permit limits. Since that time, the facility has taken numerous steps to prevent recurrence and maintain compliance with its NPDES permit. Since the August 2019 event, we have been engaged in settlement discussions with the U.S. Department of Justice, the EPA and the State of Michigan, Wayne County CircuitIndiana to resolve any alleged violations of environmental laws or regulations. Also, ArcelorMittal Burns Harbor LLC was served with a subpoena on December 5, 2019, from the United States District Court for the Northern District of Indiana relating to the August 2019 event and has responded to the subpoena requests. In addition, the plaintiffs in Environmental Law & Policy Center et al. v. ArcelorMittal Burns Harbor LLC et al. (U.S. District Court, N.D. Indiana Case No. 14-008887-AA. The appellants19-cv-473), which was filed on December 20, 2019,have alleged violations resulting from the August 2019 event and EGLE required the intervention of Severstal Dearborn, LLC (later merged into AK Steel Corporation) in this action as an additional appellee. The appellants allege multiple deficiencies with the PTI and the permitting process. On July 2, 2019, the Circuit Court dismissed the PTI appeal and ruled that EGLE appropriately issued the permit modification. The appellants have appealed that decision. Until the appeal is resolved,other Clean Water Act claims. Although we cannot determine what the ultimate permit limits will be. Until the permit limits are determined and final, we cannot reliablyaccurately estimate the costs we may incur, ifamount of civil penalty, the cost of any or when we may incur them.
On August 21, 2014, the SDEIA filed a Complaint under the Michigan Environmental Protection Act (“MEPA”) in the State of Michigan, Wayne County Circuit Court, Case No. 14-010875-CE. The plaintiffs allege that the air emissions from Dearborn Works are impacting the air, water and other natural resources, as well as the public trust in such resources. The plaintiffs are requesting, among other requestedinjunctive relief that the court assess and determine the sufficiency of the PTI’s limitations. On October 15, 2014, the court ordered a stay of the proceedings until a final order is issued in Wayne County Circuit Court Case No. 14-008887-AA (discussed above). When the proceedings resume, we intend to vigorously

40

contest these claims. Until the claims in this complaint are resolved, we cannot reliably estimaterequirements, or the costs we may incur, if any, or when we may incur them.
On November 18, 2019, November 26, 2019, and March 16, 2020, EGLE issued Notices of Violations (“NOVs”) with respect to the basic oxygen furnace electrostatic precipitator at Dearborn Works alleging violations of manganese, lead and opacity limits. We are investigating these claims and will work with EGLE to attempt to resolve them. We intendthird-party claims, including potential natural resource damages claims, they are likely to vigorously contest any claims which cannot be resolved through a settlement. Until a settlement is reached with EGLE orexceed the claims of the NOVs are otherwise resolved, we cannot reliably estimate the costs, if any, associated with any potentially required work.reporting threshold in total.
In addition to the foregoing matters, we are or may be involved in proceedings with various regulatory authorities that may require us to pay fines, comply with more rigorous standards or other requirements or incur capital and operating expenses for environmental compliance. We believe that the ultimate disposition of theany such proceedings will not have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.
Tax Matters
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our liabilities, our effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash and result in an increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year of resolution. Refer to NOTE 11 - INCOME TAXES for further information.
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Other Contingencies
In addition to the matters discussed above, there are various pending and potential claims against us and our subsidiaries involving product liability, commercial, employee benefits and other matters arising in the ordinary course of business. Because of the considerable uncertainties whichthat exist for any claim, it is difficult to reliably or accurately estimate what the amount of a loss would be if a claimant prevails. If material assumptions or factual understandings we rely on to evaluate exposure for these contingencies prove to be inaccurate or otherwise change, we may be required to record a liability for an adverse outcome. If, however, we have reasonably evaluated potential future liabilities for all of these contingencies, including those described more specifically above, it is our opinion, unless we otherwise noted, that the ultimate liability from these contingencies, individually andor in the aggregate, should not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
NOTE 19 - SUBSEQUENT EVENTS
We have evaluated subsequent events through the date of financial statement issuance.
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 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 Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020, as well as other publicly available information.
Overview
Cleveland-Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 Cleveland-Cliffs is amongas a mine operator, we are also the largest vertically integrated producersproducer of differentiated iron ore and steelpellets in North America. With anIn 2020, we acquired two major steelmakers, AK Steel and ArcelorMittal USA, vertically integrating our legacy iron ore business with quality-focused steel production and emphasis on non-commoditized products, we are uniquely positioned to supply both customized iron orethe automotive end market. Our fully integrated portfolio includes custom-made pellets and steel solutions to a quality-focused customer base. AK Steel, a wholly-owned subsidiary of Cleveland-Cliffs, is a leading producer ofHBI; flat-rolled carbon steel, stainless, electrical, plate, tinplate and electricallong steel products. The AK Tubeproducts; and Precision Partners businesses provide customer solutions with carbon and stainless steel tubing, products, die designhot and tooling,cold stamping and hot- and cold-stamped components. In 2020, we expect to be the sole producer of HBI in the Great Lakes region.tooling. Headquartered in Cleveland, Ohio, we employ approximately 11,00025,000 people across our mining, steel and steeldownstream manufacturing operations in the United States and Canada.
During the second quarter of 2020,Economic Overview
The fundamentals for our business have rebounded strongly since the COVID-19 pandemic negatively disrupted, to varying degrees, effectively alldisruption that occurred during 2020. The price for domestic HRC, the most significant index in driving our revenues and profitability, currently is at an all-time high, as a direct result of favorable supply-demand dynamics following the end markets that we serve. Aspandemic. The HRC index averaged $1,201 per net ton for the first quarter of 2021, 105% higher than the same period last year.
The dramatic increase in the HRC price is a result we saw decreasedof both supply and demand factors. Healthy consumer balance sheets have driven strong demand for ourlight vehicles and consumer goods, such as HVAC products and appliances. In addition, demand from machinery and equipment producers has remained robust. On the supply side, spot steel and raw material productsavailability remains very limited as steel production in the U.S. has not recovered from the industrial marketsfacility shutdowns that were impacted,occurred during the early pandemic period. Import penetration has grown slightly but remains lower than its prior five-year average due to healthy demand globally as well as trade restrictions such as the Section 232 tariffs.
Along with these supply-demand factors, pricing for HRC has also risen due to the rise in price of steelmaking input costs both domestically and globally, most notably the automotive industry. Conditions have since improved and automotive customers have resumedfor iron units. The price of busheling scrap, a necessary input for flat-rolled steel production in previously idled facilities, but we have not yet seen conditions fully normalizeEAFs in the U.S., averaged $535 per long ton during the first quarter of 2021, a 70% increase from the prior-year period. We expect the price of busheling scrap to remain elevated due to supply chain issuesdecreasing prime scrap generation from original equipment manufacturers and other concerns relatedthe growth of EAF capacity in the U.S., along with a push for expanded EAF production in China. As we are fully-integrated and have primarily a blast furnace footprint, the rising prices for busheling scrap in the U.S. bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan. The rising price of busheling scrap should also benefit the profitability of our HBI sold externally, and provide greater cost savings potential for HBI used internally.
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The price of iron ore has also risen dramatically over the past year, which along with strong demand, has been an important factor in rising steel prices globally. The Platts 62% Price averaged $167 per metric ton in the first quarter of 2021, an 88% increase compared to the COVID-19 pandemic, and it remains unclear how long the economic impactsame period in 2020. While playing a role in increased prices of the COVID-19 pandemic will be felt. In response to the COVID-19 pandemic and the corresponding reduction in demand,steel, we made several operational adjustments to keep both our employees and Company healthyalso directly benefit from higher iron ore prices for the long term. See "–COVID-19" below.

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iron ore pellets we sell to third parties.
The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand. In the first six monthsquarter of 2020,2021, North American light vehicle production was approximately 5.13.6 million units, a 40%5% reduction from the prior year’s comparable period. The reduction is a result of automotive plants shutting down throughout the United States in responseprimarily due to the COVID-19 pandemic, with second quarter of 2020 production falling by 69% from the prior year period.
global semiconductor shortage. In our Steel and Manufacturing segment, we also sell our steel productsaddition to the infrastructure, manufacturing, electrical power, distributorssemiconductor shortage, production in North America has also experienced weather‐related and converters markets, whichother supply chain disruptions, including a petrochemical shortage. In light of these production outages, we have all been challenged by the COVID-19 pandemic, thoughable to a lesser extent than the automotive market. Similarredirect certain volumes intended for this end market to the automotive sector, our sales to these markets generally declined during the second quarter of 2020spot market, where demand is strong and we expect them to increase during the second half of the year.pricing is at an all-time high.
For our Mining and Pelletizing segment, the key driver of our business is demand for raw materials from U.S. steelmakers. During the first six monthsquarter of 2020,2021, light vehicle sales in the U.S. producedsaw a SAAR of approximately 3616.7 million metric tonsunits with 3.7 million passenger cars and 13.0 million light trucks sold. The first quarter average represents an 11% increase over the first quarter of crude2020. However, the most recent sales data from March reflected an increase in sales to a SAAR of 17.9 million units, the highest sales rate in 41 months, leaving dealer inventories at multi-year lows.
Competitive Strengths
As the largest flat-rolled steel producer in North America, we benefit from having the size and scale necessary in a competitive, capital intensive business. Our sizeable operating footprint provides us with the operational leverage, flexibility and cost performance to achieve competitive margins throughout the business cycle. We also have a unique vertically integrated profile, which begins at the mining stage and goes all the way through the manufacturing of steel products, including stamping, tooling and tubing. This positioning gives us both lower and more predictable costs throughout the supply chain and more control over both our manufacturing inputs and our end product destination.
Our legacy business of producing iron ore pellets, our primary steelmaking raw material input, is 18% lower than the same period in 2019, representinganother competitive advantage. Mini-mills (producers using EAFs) now comprise about 4%70% of total global crude steel production. U.S. total steel capacity utilization was approximately 67%production in the first six months of 2020,U.S. Their primary iron input is scrap metal, which is an approximate 17% decrease from the same period in 2019. Due to the timing of the COVID-19 pandemichas unpredictable and the U.S. response, we expect production and utilization rates to remain below prior-year levels until economic conditions improve.
The price for domestic hot-rolled coil steel, an important attribute in the pricing foroften volatile pricing. By controlling our iron ore pelletspellet supply, our primary steelmaking raw material feedstock can be secured at a stable and certainpredictable cost, and not subject to factors outside of our control.
We are also the largest supplier of automotive-grade steel products, averaged $539 per net tonin the U.S. Compared to other steel end markets, automotive steel is generally higher quality and more operationally and technologically intensive to produce. As such, it often generates higher through-the-cycle margins, making it a desirable end market for the steel industry. With our continued technological innovation, as well as leading delivery performance, we expect to remain the leader in supplying this industry.
We offer the most comprehensive flat-rolled steel product selection in the industry, along with several complementary products and services. A sampling of this offering includes advanced high-strength steel, hot-dipped galvanized, aluminized, galvalume, electrogalvanized, galvanneal, HRC, cold-rolled coil, plate, tinplate, grain oriented electrical steel, non-oriented electrical steel, stainless steels, tool & die, stamped components, rail and slabs. Across the quality spectrum and the supply chain, our customers can frequently find the solutions they need from our product selection.
We are the first six monthsand the only producer of 2020, 18% lower thanHBI in the same period last year.Great Lakes region. Construction of our Toledo, Ohio, direct reduction plant was completed in the fourth quarter of 2020. From this modern plant, we produce a high-quality scrap and pig iron alternative. Ore-based metallics that compete with our HBI generally have to be imported from locations like Russia, Ukraine and Brazil. With increasing tightness in the scrap market and our own internal needs for scrap and metallics, we expect our Toledo direct reduction plant to support healthy Steelmaking margins for us going forward.
Strategy
Optimizing Our Fully-Integrated Steelmaking Footprint
We have transformed into a fully-integrated steel enterprise with the size and scale to achieve improved through-the-cycle margins and are the largest flat-rolled steel producer in North America.
Now that the AM USA Transaction is completed, our focus is on the integration of these facilities within our footprint. These assets build upon our existing high-end steelmaking and raw material capabilities, and also open up new markets to us. The pricecombination provides us the additional scale and technical capabilities necessary in a
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competitive and increasingly quality-focused marketplace. We have ample opportunities to implement improvements in logistics, procurement, utilization and quality.
We expect the AM USA Transaction to improve our production capabilities, flexibility, and cost performance. We have targeted approximately $150 million of potential cost synergies through asset optimization, economies of scale, and duplicative overhead savings. The transaction also provided us additional access to non-automotive industries with pricing correlated to the COVID-19 pandemic; however, we are encouraged that there were numerous domestic steel capacity curtailments in response,U.S. HRC index, which should help improve steel supply-demand dynamics in the United States.
The two other important indices that impact pricing in our Mining and Pelletizing segment are the Platts 62% Price and the Atlantic Basin pellet premium. The Platts 62% Price averaged $91 per metric ton in the first six months of 2020 and 2019. The Platts 62% Price increased significantly during the second quarter of 2020, as Chinese demand for iron ore remained strong and other iron ore producing countries struggled to meet production targets due to the COVID-19 pandemic. The Atlantic Basin pellet premium averaged $30 per metric ton for the first six months of 2020, a 56% decrease compared to the same period in 2019, as weakness in the European steel market has driven reduced demand for higher quality raw materials.
For the three and six months ended June 30, 2020, our consolidated Revenues, including Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020, were $1,092.7 million and $1,451.8 million, respectively. For the three and six months ended June 30, 2019, our consolidated Revenues were $743.2 million and $900.2 million, respectively. For the three and six months ended June 30, 2020 we had net loss from continuing operations attributable to Cliffs shareholders of $0.31 and $0.51 per diluted share, respectively, and negative consolidated Adjusted EBITDA of $82.0 million and $59.3 million, respectively. For the three and six months ended June 30, 2019, we had net income from continuing operations attributable to Cliffs shareholders of $0.57 and $0.47 per diluted share, respectively, and consolidated Adjusted EBITDA of $248.4 million and $269.6 million, respectively. See "– Results of Operations – Segment Information" below for a reconciliation of our consolidated Net Income (loss) to Adjusted EBTIDA.
Strategy
Our key strategic initiatives include:currently is at an all-time high.
Maximizing ourOur Commercial Strengths
With the acquisition of AK Steel,Acquisitions completed, we now offerhave enhanced our offering to a full suite of flat steel products encompassing all steps of the iron ore and steel manufacturing process. From mining to pelletizing to the development and production of finished high-value steel products, we are uniquely positioned to supply both customized iron ore pellets and flat-rolled carbon, stainless and electrical steel products in the United States. We have anincreased our industry-leading market share in the automotive industry,sector, where our portfolio of high-end products deliverswill deliver a broad range of differentiated solutions for this highly sought after customer base.
OurWe believe we have the broadest flat steel product offering is generally geared toward the high-qualityin North America, and can meet customer needs from a variety of end markets and quality specifications. We have several finishing and downstream facilities with advanced technological capabilities.
We are also proponents of the spectrum, compared to other suppliers“value over volume” approach in terms of steel and iron oresupply. We take our leadership role in the domesticindustry very seriously and global marketplace. Since 2015,intend to manage our subsidiary AK Steel has de-emphasized the marketing of commodity-grade steel such as hot-rolled coil and focused on high-end applications and solutions, emphasizing niche products primarily for the automotive industry, which is well known for its extremely selective buying behavior. The AK Steel expertise, equipment capabilities and delivery reliability differentiate us from what most U.S.-based steelmakers are capable of offering. It also allows for the abilityoutput in a responsible manner.
Expanding to minimize the pricing influence of volatile market indices with more focus on fixed-price agreements.

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We also produce iron ore pellets, the most advanced and sophisticated iron ore product in the marketplace. The major global iron ore producers primarily sell iron ore fines, a commodity-grade product that makes up the vast majority of the seaborne iron ore trade. Our pellets are iron ore fines that have been further processed into homogenous feedstock that allow for enhanced efficiency within a blast furnace, offering steelmakers improved productivity and environmental performance. The sophisticated and tailor-made nature of our pellets allows us to charge a premium when compared to other iron ore products available in the marketplace.New Markets
Our Toledo HBI productiondirect reduction plant when operational, will allowallows us to offer another unique, high-quality product to discerning raw material buyers. EAF steelmakers primarily use scrap for their iron feedstock, and our HBI will offeroffers a sophisticated alternative with less impurities, allowing theother steelmakers to increase the quality of their respective end steelend-steel products and reduce reliance on imported metallics.
ExpandingThe completed Acquisitions provide other potential outlets for HBI, as it can also be used in our Customer Baseintegrated steel operations to increase productivity and Product Offering
The acquisition of AK Steel allows ushelp to benefit from a largerreduce carbon footprint, allowing for more cost efficient and more diverse base of customers, with less overall emphasis on commodity-linked contracts as part of our new Steel and Manufacturing business. This expansion of our customer base into the automotive industry, as well as other steel consuming manufacturers, is expected to generate more predictable earnings and cash flows due to the focus on value-added and non-commoditized products, and less exposure to volatile commodity indices. We will now generally supply more advanced steel products than EAF steelmakers, who have gained market share from other blast furnaces on less advanced commodity-grade steels. As currently configured, EAFs are largely unable to supply the highly-specified products that we primarily sell.environmentally friendly steelmaking.
We are also seeking to expand our customer base with the rapidly growing and attractivedesirable electric vehicle market. We believe, atAt this time, we believe the North American automotive industry is approaching a monumental inflection point, with the adoption of electrical enginesmotors in passenger vehicles. As this market grows, it will require more advanced steel applications to meet the needs of electric vehicle producers and consumers. With AK Steel’sour unique technical capabilities, we believe we are positioned better than any other North American steelmaker to supply the steel and parts necessary to fill these needs.
Additionally, althoughImproving Financial Flexibility
Given the cyclicality of our business, it is important to us to be in the financial position to easily withstand any negative demand or pricing pressure we may encounter. As such, our top priority for the allocation of our free cash flow is to improve our balance sheet via the reduction of long-term debt. During the COVID-19 pandemic, we were able to issue secured debt to provide insurance capital through the uncertain industry conditions that the pandemic caused. Now that business conditions have improved and we expect to generate healthy free cash flow during 2021, we have the ability to lower our long-term debt balance.
We anticipate that the current strong market environment will provide us ample opportunities to reduce our debt with our own free cash flow generation. We will also continue to review the composition of our debt, as we are interested in both extending our average maturity profile and increasing our ratio of unsecured debt to secured debt, which we demonstrated by executing a different customer base comparedseries of favorable debt and equity capital markets transactions during February 2021. These actions will better prepare us to other blast furnace steelmakers, we cannot ignore the ongoing shift of steelmaking sharenavigate more easily through potentially volatile industry conditions in the U.S. away fromfuture.
Enhance our Environmental Sustainability
As we transform, our commitment to operating our business in a more environmentally responsible manner remains constant. One of the blast furnace producers to the EAF steelmakers. Over the past 25 years, the market share of EAFs has nearly doubled. However, as EAFs have moved to higher-value steel products, they require more high-quality iron ore-based metallics instead of lower-grade scrap as raw material feedstock.most important issues impacting our industry, our stakeholders and our planet is climate change. As a result, of this trend, onewe are continuing Cliffs’ proactive approach by committing to reduce GHG emissions 25% from 2017 levels by 2030. This goal represents combined Scope 1 (direct) and Scope 2 (indirect) GHG emission reductions across all of our top strategic priorities will beoperations.
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Prior to become a critical supplier of the EAF market by providing these specialized metallics.
Once operational,setting this goal with our newly acquired steel assets, we expectexceeded our HBI production plant to partially replace the over three million metric tons of ore-based metallics that are imported into the Great Lakes region every year from Russia, Ukraine, Brazil and Venezuela, as well as the nearly 20 million metric tons of scrap used in the Great Lakes area every year. The Toledo site is in close proximity to over 20 EAFs, giving us a natural competitive freight advantage over import competitors. Not only will this production plant create another outlet forprevious 26% GHG reduction target at our high-margin pellets, but it also presents an attractive economic opportunity for us. As the only producer of DR-grade pellets in the Great Lakes region and with access to abundant, low-cost natural gas, we will be in a unique position to serve clients in the area and grow our customer base.
The acquisition of AK Steel provides another potential outlet for HBI as it can also be used in integrated steel operations to increase productivity and reduce carbon footprint, allowing for more cost efficient and environmentally friendly steelmaking.
Protecting our Mining and Pelletizing Business
We are the market-leading iron ore producer in the U.S., supplying differentiated iron ore pellets under long-term contracts to major North American blast furnace steel producers. We have the unique advantage of being a low-cost, high-quality, iron ore pellet producer with significant transportation and logistics advantages to serve the Great Lakes steel market. The pricing structure and long-term naturelegacy facilities six years ahead of our existing contracts, along with our cost-effective operating profile, position our Mining and Pelletizing segment as a strong cash flow generator in most commodity pricing environments.
We recognize the importance of our current strong position in the North American blast furnace steel industry, and one of our top priorities is to protect and enhance the market position of our Mining and Pelletizing business. This involves continuing to deliver high-quality, custom-made pellets that allow our customers to remain competitive in the quality, production efficiency, and environmental friendliness of their steel products. Protecting this business also involves continually evaluating opportunities to preserve our customer base, expand our production capacity and increase ore

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reserve life. In 2017, we achieved key accomplishments toward these goals by acquiring the remaining minority stake in our Tilden and Empire mines as well as additional real estate interests in Minnesota. In 2018, we began supplying pellets under two new customer supply agreements in the Great Lakes region.2025 goal. In 2019, we completed the upgrades atreduced our Northshore minecombined Scope 1 and Scope 2 GHG emissions by 42% on a mass basis from 2005 baseline levels. Our goal is to begin commercially producing DR-grade pellets.further reduce those emissions in coming years.
The acquisition of AK Steel is central to protecting our Mining and Pelletizing business, as sales to AK Steel accounted for 29%Additionally, many of our steel assets have improved plant and energy efficiency through participation in programs like the U.S. Department of Energy’s Better Plants program and the EPA’s Energy Star program. With our longstanding focus on plant and energy efficiency, we aim to build on our previous successes across our newly integrated enterprise.
Our GHG reduction commitment is based on executing the following five strategic priorities:
•Developing domestically sourced, high quality iron ore product revenuefeedstock and utilizing natural gas in the production of HBI;
•Implementing energy efficiency and clean energy projects;
•Investing in the development of carbon capture technology;
•Enhancing our GHG emissions transparency and sustainability focus; and
•Supporting public policies that facilitate GHG reduction in the domestic steel industry.
Recent Developments
Labor Agreements
On April 12, 2021, we reached a tentative agreement with the USW for the year ended December 31, 2019.a new 53-month labor contract for our Mansfield Works employees that is effective as of April 1, 2021. The acquisition of AK Steel is expected to ensure pellet volume commitments fornew contract will cover approximately six million long tons of pellets annually in a normalized environment, to complement our existing long-term minimum volume pellet offtake agreements with other key integrated steel producers and pellets to be eventually consumed at our Toledo HBI production plant.
Second Quarter 2020 Recent Developments300 USW-represented workers.
Financing Transactions
On April 17, 2020,February 11, 2021, we sold 20 million of our common shares and 40 million common shares were sold by an affiliate of ArcelorMittal, in an underwritten public offering. In each case, shares were sold at a price per share of $16.12. Prior to this sale, ArcelorMittal held approximately 78 million common shares, which were issued $400.0as a part of the consideration in connection with the AM USA Transaction. We did not receive any proceeds from the sale of the 40 million common shares sold on behalf of ArcelorMittal. We used the net proceeds from the offering, plus cash on hand, to redeem $322 million aggregate principal amount of our outstanding 9.875% 2025 Senior Secured Notes.
On February 17, 2021, we issued $500 million aggregate principal amount of 4.625% 2029 Senior Notes and $500 million aggregate principal amount of 4.875% 2031 Senior Notes in an offering that was exempt from the registration requirements of the Securities Act. We used the net proceeds from thisthe notes offering to redeem all of the outstanding 4.875% 2024 Senior Secured Notes and 6.375% 2025 Senior Notes issued by Cleveland-Cliffs Inc. and all of the outstanding 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes issued by AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.
Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for further detail.
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Results of Operations
Overview
For the three months ended March 31, 2021, we had Net income of $57 million, compared to a Net loss of $49 million for the prior-year period. Our Revenues, diluted EPS and Adjusted EBITDA for the three months ended March 31, 2021 and 2020 were as follows:
clf-20210331_g2.jpgclf-20210331_g3.jpg
clf-20210331_g4.jpg
See "— Results of Operations — Adjusted EBITDA" below for a reconciliation of our Net income (loss) to Adjusted EBITDA.
Revenues
During the three months ended March 31, 2021, our consolidated Revenues were $4.0 billion, an increase of $3.7 billion, compared to the prior-year period. The increase was primarily due to the addition of 3.9 million net tons of steel shipments from our Steelmaking segment as a result of the Acquisitions.
Revenues by Product Line
The following represents our Revenues by product line:
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Revenues by Market
The following table represents our consolidated Revenues and percentage of revenues to each of the markets we supply:
(In Millions)
Three Months Ended March 31,
20212020
Revenue%Revenue%
Automotive$1,392 34 %$118 33 %
Infrastructure and Manufacturing964 24 %43 12 %
Distributors and Converters1,263 31 %54 15 %
Steel Producers430 11 %144 40 %
Total revenues$4,049 $359 
Operating Costs
Cost of goods sold
Cost of goods sold increased by $3.4 billion for the three months ended March 31, 2021, as compared to the prior-year period, primarily due to the addition of 3.9 million net tons of steel shipments resulting from the Acquisitions.
Selling, general corporate purposes, includingand administrative expenses
As a result of the Acquisitions, our Selling, general and administrative expenses increased by $67 million during the three months ended March 31, 2021, as compared to strengthenthe prior-year period.
Acquisition-related costs
The Acquisition-related costs of $13 millionfor the three months ended March 31, 2021, includes severance of $11 million and other various third-party expenses related to the Acquisitions of $2 million. The Acquisition-related costs of $42 million for the three months ended March 31, 2020, includes severance of $19 million and $23 million of other various third-party expenses related to the AK Steel Merger. Refer to NOTE 3 - ACQUISITIONS for further information on the Acquisitions.
Miscellaneous – net
Miscellaneous – net decreased by $9 million for the three months ended March 31, 2021, as compared to the prior-year period, which was primarily due to expenses incurred at our balance sheetToledo direct reduction plant recorded in Miscellaneous – net prior to start of production in December 2020.
Other Income (Expense)
Interest expense, net
Interest expense, net increased by $61 million for the three months ended March 31, 2021, as compared to the prior-year period, primarily due to the incremental debt that we incurred in connection with the AK Steel Merger, along with borrowings on the ABL Facility, and increase our liquidity.a decrease in capitalized interest during the current year due to the completion of the Toledo direct reduction plant.
On April 24, 2020, we issued an additional $555.2Gain (loss) on extinguishment of debt
The loss on extinguishment of debt of $66 million for the three months ended March 31, 2021, primarily relates to the repurchase of $322 million in aggregate principal amount of 9.875% 2025 Senior Secured Notes in an offering that was exempt from the registration requirements of the Securities Act. These additional notes are of the same class and series as, and otherwise identical to, the 9.875% 2025 Senior Secured Notes issued on April 17, 2020, other than with respect to the date of issuance and issue price. We usedusing the net proceeds from the offeringissuance of these additional notes to repurchase $736.420 million aggregate principal amount of our outstanding senior notes of various series, which resulted in a net principal debt reduction of $181.2 million.
On June 19, 2020,common shares. Additionally, we issued an additional $120.0 million aggregate principal amount of 6.75% 2026 Senior Secured Notes in an offering that was exempt from the registration requirements of the Securities Act. These additional notes are of the same class and series as, and otherwise identical to, the 6.75% 2026 Senior Secured Notes issued on March 13, 2020, other than with respect to the date of issuance and issue price. We intend to use the net proceeds from this offering to finance the construction of our HBI production plant. Pending such use, the net proceeds were used to temporarily reduce the outstanding borrowings under our ABL Facility.
COVID-19
In December 2019, COVID-19 surfaced in Wuhan, China, and has since spread to other countries, including the United States. In March 2020, the World Health Organization characterized COVID-19 as a pandemic. Efforts to contain the spread of COVID-19 intensified throughout the first quarter and second quarter of 2020 and many countries, including the United States, took steps to restrict travel, temporarily close businesses and issue quarantine orders, and it remains unclear how long the economic impact of the COVID-19 pandemic will be felt.
On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, AMT credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We have evaluated the impact the CARES Act will have on our business and are receiving liquidity relief due to our ability to accelerate the receipt of approximately $60 million of AMT credit refunds, originally receivable in 2021 and 2022 but instead were collected in July 2020, and defer pension contributions and employer social security payments of approximately $90 million.
The COVID-19 pandemic continued to disrupt our operations during the second quarter of 2020. Although we implemented stringent social distancing procedures in our operating facilities, including checking employees’ temperatures and symptoms before entering the workplace each day and deep cleaning our operational facilities throughout each day, the outbreak of COVID-19 has heightened the risk that a significant portion of our workforce will suffer illness or otherwise be unable to perform their ordinary work functions.
Although steel and iron ore production have been considered “essential” by the states in which we operate, certain of our facilities and construction activities were temporarily idled during the second quarter.  Nearly all of these temporarily idled facilities were restarted as of June 30, 2020, with the exception of the Dearborn hot-end operations and Mansfield operations, which restarted in July 2020, and the Northshore mine, which we plan to restart in early August 2020. We cannot predict whether our operations will experience additional disruptions in the future. We may also continue to experience supply chain disruptions or operational issues with our vendors, as our suppliers and contractors face similar challenges related to the COVID-19 pandemic. Because the impact of the COVID-19 pandemic continues to evolve, we cannot currently predict the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted.
To mitigate the impact of the COVID-19 pandemic, we have taken a number of steps during the first six months of 2020 to solidify our liquidity position, including issuing $520 million aggregate principal amount of secured debt, adding a $150 million FILO tranche to our ABL facility, idling several facilities both temporarily and permanently, temporarily reducing our Chief Executive Officer’s compensation by 40%, temporarily reducing salaries by up to 20%, temporarily reducing other salaried employee benefits, and temporarily suspending capital expenditures. We have increased the synergy target associated with our acquisition of AK Steel by $30 million to $150 million. Lastly, our Board of Directors has suspended future dividends, which is a typical cash obligation of approximately $100 million on an annualized basis.
In light of the sudden onset and unknown impact and duration of the COVID-19 pandemic, our previously released guidance for the fiscal year ending December 31, 2020, should not be relied upon.

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Results of Operations - Consolidated
The following is a summary of our consolidated results of operations for the three and six months ended June 30, 2020 and 2019:
Revenues
The following table presents our sales volumes and Revenues by reportable segment:
 (In Millions, Except Sales Tons)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Sales volume (in thousands):       
Steel and Manufacturing (net tons)619
 —
 818
 —

       
Mining and Pelletizing sales (long tons)4,759
 6,227
 6,893
 7,777
Less: Intercompany sales (long tons)(1,041) (38) (1,824) (38)
Mining and Pelletizing consolidated sales (long tons)3,718
 6,189
 5,069
 7,739

       
Revenues:       
Steel and Manufacturing net sales to external customers$715.1
 $—
 $932.6
 $—

       
Mining and Pelletizing net sales1
489.0
 747.2
 718.4
 904.2
Less: Intercompany sales(111.4) (4.0) (199.2) (4.0)
Mining and Pelletizing net sales to external customers377.6
 743.2
 519.2
 900.2

      —
Total revenues$1,092.7
 $743.2
 $1,451.8
 $900.2
1 Includes Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020.
Revenues increased by $349.5 million, or 47.0%, for the three months ended June 30, 2020, compared to the prior-year period. Revenues, including Realization of deferred revenue, increased by $551.6 million, or 61.3%, for the six months ended June 30, 2020, compared to the prior-year period. The increases were due to the addition of revenues from our new Steel and Manufacturing segment as a result of the AK Steel acquisition, which was completed on March 13, 2020, and were partially offset by a decrease in the sales volumes and realized revenue rates within the Mining and Pelletizing segment.
Refer to “– Results of Operations – Segment Information" for additional information regarding the specific factors that impacted revenue during the period.

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Operating Costs
The following is a summary of Total operating costs:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 Variance
Favorable/
(Unfavorable)		 2020 2019 
Variance
Favorable/
(Unfavorable)
Cost of goods sold$(1,207.5) $(480.2) $(727.3) $(1,563.5) $(606.3) $(957.2)
Selling, general and administrative expenses(62.1) (29.4) (32.7) (89.6) (56.7) (32.9)
Acquisition-related costs(18.4) —
 (18.4) (60.9) —
 (60.9)
Miscellaneous – net:           
Empire idle costs(3.7) (5.3) 1.6
 (7.0) (9.3) 2.3
HBI production plant startup costs(7.1) (1.1) (6.0) (15.0) (1.9) (13.1)
Other(2.3) (0.4) (1.9) (3.0) —
 (3.0)
Total Miscellaneous – net(13.1) (6.8) (6.3) (25.0) (11.2) (13.8)
Total operating costs$(1,301.1) $(516.4) $(784.7) $(1,739.0) $(674.2) $(1,064.8)
Cost of goods sold
The increases for the three and six months ended June 30, 2020, were primarily due to the addition of activity from the Steel and Manufacturing segment, including Cost of goods sold of $859.9 million and $1,106.5 million, respectively, which were unfavorably impacted by idle related costs of approximately $119 million, resulting from the COVID-19 pandemic. Cost of goods sold was partially offset by lower sales volume at the Mining and Pelletizing segment for a decrease of $55.4 million and $14.2 million for the three and six months ended June 30, 2020, respectively, which were unfavorably impacted by idle related costs of approximately $50repurchased $535 million in each case, resulting from the COVID-19 pandemic.
Refer to “– Results of Operations – Segment Information” for additional information regarding the specific factors that impacted our operating results during the period.
Selling, general and administrative expenses
We had additional Selling, general and administrative expenses for the three and six months ended June 30, 2020 for costs incurred related to AK Steel, which were partially offset by lower incentive compensation costs.
Acquisition-related costs
The Acquisition-related costs for the three and six months ended June 30, 2020, include severance of $16.6 million and $35.9 million, respectively. Refer to NOTE 3 - ACQUISITION OF AK STEEL for further information on the acquisition.

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Other Income (Expense)
The following is a summary of Total other income (expense):
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 Variance
Favorable/
(Unfavorable)		 2020 2019 
Variance
Favorable/
(Unfavorable)
Interest expense, net$(68.7) $(26.1) $(42.6) $(99.7) $(51.2) $(48.5)
Other non-operating income (expense):           
Gain (loss) on extinguishment of debt129.4
 (17.9) 147.3
 132.6
 (18.2) 150.8
Net periodic benefit credits (costs) other than service costs component15.1
 (0.1) 15.2
 20.6
 (0.2) 20.8
Other0.1
 0.7
 (0.6) 0.6
 1.2
 (0.6)
Total other income (expense)$75.9
 $(43.4) $119.3
 $54.1
 $(68.4) $122.5
The increases in Interest expense, net were primarily due to the incremental debt associated with the acquisition of AK Steel. These increases were offset partially by an increase in capitalized interest primarily related to construction of the HBI production plant.
The gain on extinguishment of debt for the three months ended June 30, 2020, resulted from the repurchase of $747.6 million aggregate principal amount of our outstanding senior notes of various series using the net proceeds from the additional $555.2 million 9.875% 2025 Senior Secured Notes issuance and other sources of cash. The six months ended June 30, 2020 were also impacted by the purchase of $56.5 million aggregate principal amount of 7.50% 2023 AK4.625% 2029 Senior Notes and $8.5 million aggregate principal amount of 7.625% 2021 AK4.875% 2031 Senior Notes, pursuant to tender offers.along with cash on hand. Refer to NOTE 78 - DEBT AND CREDIT FACILITIES for further details.
The increases in net
39

Net periodic benefit credits other than service cost component were
The increase of $41 million in Net periodic benefit credits other than service cost component primarily duerelates to an increase in the expected return on pension and voluntary employee benefit association trust assets due toacquired as a result of the acquisition of AK Steel pension assets and increased asset values for the plans held in 2019.Acquisitions. Refer to NOTE 910 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further detail on the components of net periodic benefit credits other than service cost component.details.
Income Taxes
Our effective tax rate is impacted by permanent items, 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, Except Percentages)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 Variance 2020 2019 Variance
Income tax benefit (expense)$24.7
 $(22.0) $46.7
 $76.1
 $(18.3) $94.4
Effective tax rate18.6% 12.0% 6.6% 32.6% 11.6% 21.0%
(In Millions)
Three Months Ended
March 31,
20212020
Income tax benefit (expense)$(9)$51 
Effective tax rate14 %51 %
The difference in the effective rate and income tax expense from the comparable prior-year periodsperiod primarily relates to the mix of income and certain non-deductible transaction related items, as well as discrete items recorded in each period.
Our 20202021 estimated annual effective tax rate before discrete items is 31.1%19%. This estimated annual effective tax rate differs from the U.S. statutory rate of 21%, primarily due to the deduction for percentage depletion in excess of cost depletion related to our Mining and Pelletizing segment operations, as well as non-deductible transaction costs, executive officers' compensation, global intangible low-taxed income and income of noncontrolling interests for which no tax is recognized.depletion. The 20192020 estimated annual effective tax rate before discrete items at June 30, 2019March 31, 2020 was 12.1%47%.

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The increasedecrease in the estimated annual effective tax rate before discrete items is driven by the change in the mix of income, as well as transaction costs and other acquisition-related charges that were incurred in 2020 but not in 2019.income.
For the three and six months ended June 30, 2020, we recorded discrete items that resulted in an income tax expense of $0.3 million and benefit of $3.7 million, respectively. The discrete adjustments are primarily related to interest on uncertain tax positions and the refund of amounts sequestered by the Internal Revenue Service on previously filed AMT credit refunds. For the three and six months ended June 30, 2019, we recorded discrete items that resulted in an income tax benefit of $0.4 million and $0.8 million, respectively.
Results of Operations - Segment Information
Adjusted EBITDA
We evaluate performance on a segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel and iron ore industries,industry, although it is not necessarily comparable to similarly titled measures used by other companies. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
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The following table provides a reconciliation of our consolidated Net income (loss) to Adjusted EBITDA:
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Net income (loss)$(108.1) $160.8
 $(156.7) $138.7
Less:       
Interest expense, net(68.6) (26.3) (99.7) (51.4)
Income tax benefit (expense)24.7
 (22.0) 76.1
 (18.3)
Depreciation, depletion and amortization(77.1) (21.0) (111.5) (40.9)
EBITDA$12.9
 $230.1
 $(21.6) $249.3
Less:       
EBITDA of noncontrolling interests1
$20.5
 $—
 $25.1
 $—
Gain (loss) on extinguishment of debt129.4
 (17.9) 132.6
 (18.2)
Severance costs(16.6) —
 (35.9) (1.7)
Acquisition-related costs excluding severance costs(1.8) —
 (25.0) —
Amortization of inventory step-up(36.2) —
 (59.4) —
Impact of discontinued operations(0.4) (0.4) 0.3
 (0.4)
Adjusted EBITDA$(82.0) $248.4
 $(59.3) $269.6
1 EBITDA of noncontrolling interests includes $15.8 million and $19.3 million for income and $4.7 million and $5.8 million for depreciation, depletion and amortization for the three and six months ended June 30, 2020, respectively.

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(In Millions)
Three Months Ended
March 31,
20212020
Net income (loss)$57 $(49)
Less:
Interest expense, net(92)(31)
Income tax benefit (expense)(9)51 
Depreciation, depletion and amortization(217)(35)
Total EBITDA$375 $(34)
Less:
EBITDA of noncontrolling interests1
$22 $4 
Gain (loss) on extinguishment of debt(66)3 
Severance costs(11)(19)
Acquisition-related costs excluding severance costs(2)(23)
Amortization of inventory step-up(81)(23)
Impact of discontinued operations— 1 
Total Adjusted EBITDA$513 $23 
1 EBITDA of noncontrolling interests includes $16 million and $3 million for income and $6 million and $1 million for depreciation, depletion and amortization for the three months ended March 31, 2021 and 2020, respectively.
The following table provides a summary of our Adjusted EBITDA by segment:
(In Millions)
Three Months Ended
March 31,
20212020
Adjusted EBITDA:
Steelmaking$537 $44 
Other Businesses11 2 
Corporate and eliminations(35)(23)
Total Adjusted EBITDA$513 $23 
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 Change 2020 2019 Change
Adjusted EBITDA:           
Steel and Manufacturing$(104.0) $(1.1) $(102.9) $(115.1) $(1.9) $(113.2)
Mining and Pelletizing82.4
 280.5
 (198.1) 164.2
 328.0
 (163.8)
Corporate and eliminations(60.4) (31.0) (29.4) (108.4) (56.5) (51.9)
Total Adjusted EBITDA$(82.0) $248.4
 $(330.4) $(59.3) $269.6
 $(328.9)
Adjusted EBITDA from the Steel and Manufacturingour Steelmaking segment for the three and six months ended June 30, 2020, was unfavorably impactedincreased by decreased customer demand resulting from the COVID-19 pandemic. As a result, we incurred idle related costs resulting from production curtailments of approximately $119 million. Additionally, Cost of goods sold as a percentage of Revenues was unfavorably impacted by product sales mix primarily due to the COVID-19 pandemic, which resulted in lower sales volumes to automotive customers.
Adjusted EBITDA from the Mining and Pelletizing segment$493 million for the three months ended June 30, 2020 decreased $198.1 million, asMarch 31, 2021, compared to the three months ended June 30, 2019, primarily due to lower Revenues of $258.2 million, which was partially offset by lower Cost of goods sold of $55.4 million.prior-year period. The lower Revenuesresults were driven primarily by a decrease in sales volume of 1.5 million long tons due to reduced customer demand associated with the COVID-19 pandemic and a decrease in the average year-to-date realized product revenue rate, predominantly due to lower pellet premiums. The lower Cost of goods sold was primarily drivenfavorably impacted by the decrease in sales volume, which was partially offset by idle costs of $40 million, excluding idle depreciation, depletion and amortization expense, as a result of the temporary idling of operations in response to reduced customer demand driven by the COVID-19 pandemic, that were incurred during the three months ended June 30, 2020.
Adjusted EBITDA from the Mining and Pelletizing segment for the six months ended June 30, 2020 decreased $163.8 million, as comparedoperating results related to the six months ended June 30, 2019, primarily due to lower Revenues of $185.8 million, which was partially offset by lower Cost of goods sold of $14.2 million. The lower Revenues were driven primarily by a decrease in sales volume of 0.9 million long tons and a decrease in the average year-to-date realized product revenue rate, predominantly due to lower pellet premiums. The lower Cost of goods sold was primarily driven by the decrease in sales volume, which was partially offset by idle costs of $40 million, excluding idle depreciation, depletion and amortization expense, as a result of the temporary idling of operations in response to reduced customer demand driven by the COVID-19 pandemic, that were incurred during the six months ended June 30, 2020.acquired steelmaking operations.
Adjusted EBITDA from Corporate and eliminations for the three months ended June 30, 2020 and 2019 includes intercompany profit eliminations for iron ore sales from the Mining and Pelletizing segmentprimarily relates to the Steel and Manufacturing segment of $31.8 million and $1.6 million, respectively. Additionally, Adjusted EBITDA from Corporate and eliminations for the three months ended June 30, 2020 and 2019 includes corporate Selling, general and administrative expenses, net of adjustments, of $17.8 million and $22.4 million, respectively, and corporate allocated Selling, general and administrative expenses of $9.8 million and $5.8 million, respectively. at our Corporate headquarters.
Adjusted EBITDA from Corporate and eliminations for the six months ended June 30, 2020 and 2019 includes intercompany profit eliminations for iron ore sales from the Mining and Pelletizing Segment to the Steel and Manufacturing segment of $61.7 million and $1.6 million, respectively. Additionally, Adjusted EBITDA from Corporate and eliminations for the six months ended June 30, 2020 and 2019 includes corporate Selling, general and administrative expenses, net of adjustments, of $26.7 million and $42.2 million, respectively, and corporate allocated Selling, general and administrative expenses of $18.0 million and $10.6 million, respectively.

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Steel and ManufacturingSteelmaking
The following is a summary of Steel and Manufacturingour Steelmaking segment results included in our consolidated financial statements for the three months ended March 31, 2021 and 2020. The results for the three and six months ended June 30, 2020. TheseMarch 31, 2021, include full period results for all Steelmaking operations. The results for the three months ended March 31, 2020, include the AK Steel operations within our Steel and Manufacturing segment subsequent to March 13, 2020.2020, and our results from operations previously reported as part of our Mining and Pelletizing segment.
Flat-Rolled Steel Shipments by Product Category
41
chart-ac8615604b2b58fbbd9.jpgchart-dc6c33637f6a6d8d34d.jpg
The following is a summary of the Steel and Manufacturingour Steelmaking segment operating results:
 Three Months Ended Six Months Ended
 June 30, 2020 June 30, 2020
Volumes - In Thousands of Net Tons   
Flat-rolled steel shipments619
 818
Operating Results - In Millions   
Revenues$715.1
 $932.6
Cost of goods sold$(859.9) $(1,106.5)
Adjusted EBITDA1
$(104.0) $(115.1)
Selling Price - Per Net Ton   
Average net selling price per net ton of flat-rolled steel$1,056
 $1,042
Revenues Attributable to International Customers   
Revenues to customers outside the United States (In Millions)$52.0
 $70.9
Revenues to customers outside the United States as a percent of total revenues7.3% 7.6%
1 We had negative Adjusted EBITDA for the three and six months ended June 30, 2019, of $1.1 million and $1.9 million, respectively, for costs incurred at our HBI production plant.
Three Months Ended
March 31,
20212020
Operating Results - In Millions
Revenues$3,919 $337 
Cost of goods sold$(3,644)$(335)
Selling Price - Per Ton
Average net selling price per net ton of steel products$900 $980 
The following table presents the percentage of revenues to each of our Steel and Manufacturing markets:
  Three Months Ended Six Months Ended
Market June 30, 2020 June 30, 2020
Automotive 51% 52%
Infrastructure and Manufacturing 28% 26%
Distributors and Converters 21% 22%

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Operating Results
Adjusted EBITDA for the three and six months ended June 30, 2020 was unfavorably impacted by decreased customer demand resulting from the COVID-19 pandemic. Cost of goods sold for the three and six months ended June 30, 2020 was unfavorably impacted by idle related costs of approximately $119 million, driven by the temporary idling of facilities in response to lower customer demand due to the COVID-19 pandemic. Additionally, Cost of goods sold as a percentage of Revenues was unfavorably impacted by product sales mix primarily due to the COVID-19 pandemic, which resulted in lower sales volumes to our automotive customers.
Production
Although steel production has been considered “essential” by the states in which we operate, certain of our facilities, including Dearborn Works, Mansfield Works, all Precision Partners stamping facilities and approximately 65% of AK Tube production were temporarily idled during the three months ended June 30, 2020 in response to the COVID-19 pandemic. Dearborn Works hot strip mill, anneal and temper operations and AK Coal were permanently idled as part of the permanent cost reduction efforts.
Mining and Pelletizing
The following is a summary of Mining and Pelletizing segment resultsaverage net selling price per ton for the three months ended June 30, 2020March 31, 2021, reflects changes in mix associated with the first full quarter of ownership of ArcelorMittal USA, reducing the overall contribution of higher-priced coated, stainless and 2019:
  (In Millions)  
  Three Months Ended
June 30,		    
  2020 2019 Change Percent change
Volumes - In Thousands of Long Tons1,2
        
Sales tons 4,759
 6,227
 (1,468) (23.6)%
Production tons 2,038
 5,177
 (3,139) (60.6)%
Operating Results - In Millions2
        
Revenues $489.0
 $747.2
 $(258.2) (34.6)%
Cost of goods sold $(427.2) $(482.6) $55.4
 (11.5)%
Adjusted EBITDA $82.4
 $280.5
 $(198.1) (70.6)%
electrical steel products.
1The following table represents our Steelmaking segment Revenues Includes Cliffs' 23% share of the Hibbing mine production.by product line:
2 Includes intercompany sales to our Steel and Manufacturing segment of 1,041 thousand long tons,
(Dollars In Millions,
Sales Volumes In Thousands)
Three Months Ended
March 31,
20212020
Revenue
Volume1
Revenue
Volume1
Hot-rolled steel$895 1,182 $19 31 
Cold-rolled steel632 748 28 40 
Coated steel1,308 1,369 90 99 
Stainless and electrical steel363 167 56 27 
Plate Steel244 275 — — 
Other steel products289 403 — — 
Iron products70 600 142 1,351 
Other118 N/A2 N/A
Total$3,919 $337 
1 All steel product volumes are stated in net tons. Iron product volumes are stated in long tons.
Operating Results
Steelmaking revenues for the three months ended June 30,March 31, 2021, increased by $3,582 million compared to the prior-year period due to the addition of sales following the Acquisitions. The three months ended March 31, 2021 included results of the operations acquired in the Acquisitions for a full quarter, compared to the three months ended March 31, 2020, and 38 thousand long tonswhich included the operating results from AK Steel during the period of March 13, 2020 through March 31, 2020. Results for the three months ended June 30, 2019.
The following table presents certain operating results on a per ton basis:
  Three Months Ended
June 30,		    
Per Ton Information 2020 2019 Change Percent change
Realized product revenue rate1
 $94.73
 $112.64
 $(17.91) (15.9)%
         
Cash cost of goods sold rate1,2
 $77.71
 $67.00
 $10.71
 16.0 %
Depreciation, depletion & amortization 4.03
 3.15
 0.88
 27.9 %
Total cost of goods sold $81.74
 $70.15
 $11.59
 16.5 %
1 ExcludesMarch 31, 2021 were impacted positively by the increase in the price for domestic HRC, which is the most significant index in driving our revenues and expenses related to freight, which are offsetting.profitability. The HRC index averaged $1,201 per net ton for the first quarter of 2021, 105% higher than the same period last year and currently at an all-time high as a direct result of favorable supply-demand dynamics following the pandemic.
2 Cash costCost of goods sold rate is a non-GAAP financial measure. Refer to "–Non-GAAP Reconciliation" for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP.
Adjusted EBITDA decreased by $198.1 million during the three months ended June 30, 2020,March 31, 2021, increased by $3,309 million compared to the prior-year period primarily due to the decrease in revenues of $258.2 million, offset partially by the decrease in cost of goods sold of $55.4 million, as discussed below.
Revenues decreased by $250.6 million during the three months ended June 30, 2020, compared to the prior-

51

year period, excluding a decrease in domestic freight of $7.6 million, driven by:
Lower sales volume of 1.5 million long tons, primarily due to reduced demand as customers idled their blast furnaces in response to the COVID-19 pandemic, which resulted in decreased revenue of $165 million.
A decrease in the average year-to-date realized product revenue rate of $17.91 per long ton, or 15.9%, during the three months ended June 30, 2020, compared to the prior-year period, which resulted in a decrease of $86 million, predominantly due to lower pellet premiums, which negatively affectedadditional sales resulting from the realized revenue rate by $16 per long ton or $76 million.Acquisitions.
Cost of goods sold decreased $47.8 million during the three months ended June 30, 2020, excluding the domestic freight decrease of $7.6 million, compared to the same period in 2019. This is predominantly due to a decrease in sales volume, as discussed above, of 1.5 million long tons, which resulted in decreased costs of $103 million period-over-period. This was offset partially by idle costs of $50 million asAs a result, of the temporary idling of operations in response to reduced customer demand driven by the COVID-19 pandemic, that were incurred during the three months ended June 30, 2020.
Production
ProductionAdjusted EBITDA was $537 million for the three months ended June 30, 2020, decreased 60.6%March 31, 2021, compared to the same period in 2019, predominantly due to the idling of the Tilden, Northshore and Hibbing mines in response to the COVID-19 pandemic and resulting decreased customer demand.
Mining and Pelletizing
The following is a summary of Mining and Pelletizing segment results for the six months ended June 30, 2020 and 2019:
  (In Millions)  
  Six Months Ended
June 30,		    
  2020 2019 Change Percent change
Volumes - In Thousands of Long Tons1,2
        
Sales tons 6,893
 7,777
 (884) (11.4)%
Production tons 6,870
 9,578
 (2,708) (28.3)%
Operating Results - In Millions2
        
Revenues $718.4
 $904.2
 $(185.8) (20.5)%
Cost of goods sold $(594.5) $(608.7) $14.2
 (2.3)%
Adjusted EBITDA $164.2
 $328.0
 $(163.8) (49.9)%
1 Includes Cliffs' 23% share of the Hibbing mine production.
2 Includes intercompany sales to our Steel and Manufacturing segment of 1,824 thousand long tons, for the six months ended June 30, 2020 and 38 thousand long tons for the six months ended June 30, 2019.

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The following table presents certain operating results on a per ton basis:
  Six Months Ended
June 30,		    
Per Ton Information 2020 2019 Change Percent change
Realized product revenue rate1,3
 $96.21
 $108.89
 $(12.68) (11.6)%
         
Cash cost of goods sold rate1,2
 $72.74
 $65.99
 $6.75
 10.2 %
Depreciation, depletion & amortization 5.50
 4.90
 0.60
 12.2 %
Total cost of goods sold $78.24
 $70.89
 $7.35
 10.4 %
1 Excludes revenues and expenses related to freight, which are offsetting.
2 Cash cost of goods sold rate is a non-GAAP financial measure. Refer to "–Non-GAAP Reconciliation" for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP.
3 Includes Realization of deferred revenue of $34.6$44 million for the sixprior-year period. Refer to "— Results of Operations" above for additional information.
Production
During the first three months ended June 30, 2020.
Adjusted EBITDA decreased by $163.8of 2021, we produced 4.8 million during the six months ended June 30, 2020, compared to the prior-year period, primarily due to the decrease in revenuesnet tons of $185.8 million, offset partially by the decrease in cost of goods sold of $14.2 million, as discussed below.
Revenues decreased by $183.6 million during the six months ended June 30, 2020, compared to the prior-year period, excluding a decrease in domestic freight of $2.2 million, driven by:
Lower sales volume of 0.9raw steel, 6.9 million long tons primarilyof iron ore products and 0.7 million net tons of coke. Our Columbus and Monessen facilities acquired through the AM USA Transaction are temporarily idled due to reduced demand as customers idled their blast furnaces in response toimpacts of the COVID-19 pandemic, which resulted in decreased revenue of $96 million.
A decrease in the average year-to-date realized product revenue rate of $12.68 per long ton, or 11.6%,pandemic. We anticipate restarting our Columbus facility during the sixsecond quarter of 2021. During the first three months ended June 30,of 2020, compared to the prior-year period, which resulted in a decreasewe produced 0.3 million net tons of $88 million, predominantly due to:
◦Lower pellet premiums which negatively affected the realized revenue rate by $12 per long ton or $83 million; and
◦A decrease in the hot-rolled coil steel price, which negatively affected the realized revenue rate by $5 per long ton, or $35 million, during the six months ended June 30, 2020.
◦These decreases were offset partially by the realization of deferred revenue of $35 million, or $5 per long ton, as a result of the termination of the AK Steel iron ore pellet sales agreement.
Cost of goods sold decreased $12.0 million during the six months ended June 30, 2020, excluding the domestic freight decrease of $2.2 million, compared to the same period in 2019. This is predominantly due to a decrease in sales volume, as discussed above, of 0.9raw steel and 4.8 million long tons which resulted in decreased costs of $62 million period-over-period. This was offset partially by idle costsiron ore pellets.
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Production
Production for the six months ended June 30, 2020, decreased 28.3% compared to the same period in 2019, predominantly due to the idling of the Tilden, Northshore and Hibbing mines in response to the COVID-19 pandemic and resulting decrease in customer demand.
Liquidity, Cash Flows and Capital Resources
Our primary sources of liquidity are Cash and cash equivalents and cash generated from our operations, availability under the ABL Facility and other financing activities. Our capital allocation decision-making process is focused on preserving healthy liquidity levels 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 maximizing the cash generation of our operations, reducing debt, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.

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SinceFollowing the onset of the COVID-19 pandemic in the United States,U.S. in 2020, our primary focus has been on maintainingwas to maintain adequate levels of liquidity to manage through a potentially prolonged economic downturn. In alignment with this,Now that business conditions have improved and we expect to generate healthy free cash flow during remaining nine months of 2021, we believe we will have made several operational adjustments, including facility closures, idles, and extended maintenance outages. Along with the cost savings achieved through these operational adjustments, we have reduced planned capital expenditures for the year, reduced overhead costs and suspendedability to lower our quarterly dividend payment. Additionally, on April 17, 2020 and April 24, 2020, we issued $400.0 million aggregate principal amount and an additional $555.2 million aggregate principal amount, respectively, of 9.875% 2025 Senior Secured Notes to further bolster our liquidity position and reduce debt.long-term debt balance. We also issued an additional $120.0look at the composition of our debt, as we are interested in both extending our maturity profile and increasing our ratio of unsecured debt to secured debt. These actions will better prepare us to navigate more easily through potentially volatile industry conditions in the future. In furtherance of these goals, we consummated certain financing transactions in February 2021.
On February 11, 2021, we sold 20 million common shares at a price per share of $16.12. We used the net proceeds from the offering, plus cash on hand, to redeem $322 million aggregate principal amount of 6.75% 2026our outstanding 9.875% 2025 Senior Secured Notes on June 19, 2020, the net proceeds of which we intendNotes. Prior to use to finance construction of our HBI production plant. Pending such use, the net proceeds were used to temporarily reduce the outstanding borrowings under our ABL Facility.
On February 17, 2021, we issued $500 million aggregate principal amount of 4.625% 2029 Senior Notes and $500 million aggregate principal amount of 4.875% 2031 Senior Notes in an offering that was exempt from the registration requirements of the Securities Act. We believe these measures will allowused the net proceeds from the notes offerings to redeem all of the outstanding 4.875% 2024 Senior Secured Notes and 6.375% 2025 Senior Notes issued by Cleveland-Cliffs Inc. and all of the outstanding 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes issued by AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.
The application of the net proceeds to us from the February 2021 financing transactions shifted our debt horizon by providing a four-year window in which none of our long-term senior notes are due clearing the way for us to remain comfortable with our liquidity levels for an extended market downturn related to the COVID-19 pandemic.fully focus on operational integration.
Based on our outlook for the next 12 months, which is subject to continued changing demand from customers and volatility in iron ore and domestic steel prices, we expect to have ample liquidity through cash generated from operations and availability under our ABL Facility sufficient to meet the needs of our operations and service our debt obligations.
The following discussion summarizes the significant items impacting our cash flows during the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 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 used by operating activities was $299.2$379 million and $164 million for the sixthree months ended June 30,March 31, 2021 and 2020, compared to net cash provided by operating activities of $151.1 million for the comparable period in 2019.respectively. The incremental increase in cash used by operating activities during the first sixthree months of 2020,2021, compared to 2019,2020, was driven by the increasing receivables due primarily to rising prices, unwind of the slowing economy in connection with the COVID-19 pandemic resulting in reduced customer demandArcelorMittal USA factoring agreement and the need2020 pension contributions that were deferred under the CARES Act to temporary idle many of our operations, which had an adverse effect on our operating results.January 2021.
Our U.S. cashCash and cash equivalents balance at June 30, 2020March 31, 2021 was $55.8$91 million, or 77%86% of our consolidated total cashCash and cash equivalents balance, excluding cash related to our consolidated VIE of $72.7$4 million. Additionally, we had a cash balance at June 30, 2020 of $5.3 million classified as part of Other current assets in the Statements of Unaudited Condensed Consolidated Financial Position related to discontinued operations.
Investing Activities
Net cash used by investing activities was $1,152.4$135 million and $292.4$1,007 million for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. During the first six months of 2020, we had net cash outflows of $869.3 million for the acquisition of AK Steel, net of cash acquired. This includes $590.0 million to pay off AK Steel Corporation's former revolving credit facility and $323.6 million to purchase outstanding 7.50% 2023 AK Senior Notes. Additionally, weWe had capital expenditures, including capitalized interest, of $282.9$136 million and $300.9$138 million for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
During the six months ended June 30, 2020, we We had cash outflows, including deposits and capitalized interest, of approximately $210 million onfor the development of the HBI production plant. This compares to net cash outflows, including depositsToledo direct reduction plant of $28 million and capitalized interest, during$112 million for the first sixthree months of 2019 of approximately $230 million on development of the HBI production plantended March 31, 2021 and approximately $40 million on the upgrades at Northshore.2020, respectively. Additionally, we spent approximately $70$108 million and $30$26 million on sustaining capital expenditures during the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. Sustaining capital spend includes infrastructure, mobile equipment, fixed equipment, product quality, environment, health and safety.
In response
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During the first three months of 2020, we had net cash outflows of $869 million for the acquisition of AK Steel, net of cash acquired, which included $590 million used to repay the COVID-19 pandemic, we temporarily limited our cashformer AK Steel Corporation revolving credit facility and $324 million used for capital expenditures to critical sustaining capital, but have now resumed growth capital spending, including the restart of Toledo HBI production plant construction in June. The HBI production plant is expected to be completed during the fourth quarter of 2020. purchase outstanding 7.50% 2023 AK Senior Notes.
We anticipate total cash used for capital expenditures during the next 12 months to be approximately $450 million, including capitalized interest. Included within this estimate is approximately $220 million for sustaining capital, $190 million related to completion of the HBI production plantbetween $650 and $40 million for other growth capital.$700 million.

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Financing Activities
Net cash provided by financing activities was $1,171.1$512 million and $1,005 million for the sixthree months ended June 30,March 31, 2021 and 2020, compared to net cash used byrespectively. Cash inflows from financing activities of $307.9 million for the comparable periodthree months ended March 31, 2021, included the issuance of $500 million aggregate principal amount of 4.625% 2029 Senior Notes, issuance of $500 million aggregate principal amount of 4.875% 2031 Senior Notes, issuance of 20 million common shares for net proceeds of $322 million and net borrowings of $148 million under credit facilities. We used the net proceeds from the issuance of the 20 million common shares, and cash on hand, to repurchase $322 million in 2019. Cashaggregate principal amount of 9.875% 2025 Senior Secured Notes. We used the net proceeds from the issuances of the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes to redeem all of the outstanding 4.875% 2024 Senior Secured Notes and 6.375% 2025 Senior Notes issued by Cleveland-Cliffs Inc. and all of the outstanding 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes issued by AK Steel Corporation (n/k/a Cleveland-Cliffs Steel Corporation), and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.
Net cash provided by financing activities for the sixthree months ended June 30,March 31, 2020, primarily related to the issuancesissuance of $845.0$725 million aggregate principal amount of 6.75% 2026 Senior Secured Notes $955.2 million aggregate principal amount of 9.875% 2025 Senior Secured Notes and borrowings of $800.0$800 million under the ABL Facility. The net proceeds from the initial issuance of $725.0 million aggregate principal amount of the 6.75% 2026 Senior Secured Notes, along with cash on hand, were used to purchase $372.7$373 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $367.2$367 million aggregate principal amount of 7.50% 2023 AK Senior Notes and to pay for the $44.4$44 million of debt issuance costs in the first quarter of 2020. The net proceeds from the additional issuance of $555.2 million aggregate principal amount of the 9.875% 2025 Senior Secured Notes were used to repurchase $736.4 million aggregate principal amount of our outstanding senior notes. Additionally, during the second quarter of 2020, we repaid $250.0 million under the ABL Facility.costs.
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 $300.0 million share repurchase program. Additionally, we issued $750.0 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 $600.0 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.
Additional uses of cash from financing activities during the first six months of 2020 and 2019, included payments of cash dividends on our common shares of $40.8 million and $28.9 million, respectively.
We have temporarily suspended future dividend distributions as a result of the COVID-19 pandemic in order to preserve cash during this time of economic uncertainty. We anticipate future uses of cash forand cash provided by financing activities during the next 12 months to include opportunistic debt transactions as part of our liability management strategy, such as the transactions that occurred during the second quarter of 2020.
in addition to, providing supplemental financing to meet cash requirements for business improvement opportunities.
Capital Resources
The following represents a summary of key liquidity measures:
 (In Millions)
 June 30,
2020
Cash and cash equivalents$73.7
Cash and cash equivalents from discontinued operations, included within Other current assets
5.3
Less: Cash and cash equivalents from variable interest entities(1.0)
Total cash and cash equivalents$78.0
  
Available borrowing base on ABL Facility1
$1,652.1
Borrowings(550.0)
Letter of credit obligations(198.5)
Borrowing capacity available$903.6
1 As of June 30, 2020, the ABL Facility had a maximum borrowing base of $2.0
(In Millions)
March 31,
2021
Cash and cash equivalents$110
Less: Cash and cash equivalents from VIE's(4)
Total cash and cash equivalents$106
Available borrowing base on ABL Facility1
$3,500
Borrowings(1,630)
Letter of credit obligations(272)
Borrowing capacity available$1,598
1 As of March 31, 2021, the ABL Facility had a maximum borrowing base of $3.5 billion. 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,and cash equivalents, which totaled $78.0$106 million as of June 30, 2020,March 31, 2021, cash generated by our business, availability under the ABL Facility and other financing activities. The combination of cash and availability under the ABL Facility gives us $981.6 million$1.7 billion in liquidity entering the thirdsecond quarter of 2020,2021, 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 June 30, 2020,March 31, 2021, 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.

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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. We also havecommitments and minimum port facility usage commitments, and financial instruments with off-balance sheet risk, such as bank letters of credit and bank guarantees.
Information about our Guarantors and the Issuer of our Guaranteed Securities
The accompanying summarized 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,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") have fully and unconditionally, and jointly and severally, guaranteed the obligations under (a) the 5.75% 2025 Senior Notes, the 6.375% 2025 Senior Notes, the 5.875% 2027 Senior Notes, and the 7.00% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes issued by Cleveland-Cliffs Inc. on a senior unsecured basis and (b) the 4.875% 2024 Senior Secured Notes, the 6.75% 2026 Senior Secured Notes and the 9.875% 2025 Senior Secured Notes on a senior secured basis. See NOTE 78 - DEBT AND CREDIT FACILITIES for further information.
The following presents the summarized financial information on a combined basis for Cleveland-Cliffs Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group. Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.
Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc. as of June 30, 2020.March 31, 2021. Refer to Exhibit 22.1, filed herewith,22, incorporated herein by reference, for the detailed list of entities included within the obligated group as of June 30, 2020 and DecemberMarch 31, 2019.2021.
The guarantee of a Guarantor subsidiary with respect to Cliffs' 5.75% 2025 Senior Notes, 6.375% 2025 Senior Notes, 5.875% 2027 Senior Notes, 7.00% 2027 Senior Notes, 4.875% 2024 Senior Secured Notes,the 6.75% 2026 Senior Secured Notes, andthe 5.875% 2027 Senior Notes, the 7.00% 2027 Senior Notes, the 9.875% 2025 Senior Secured Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:
(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), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company; provided that (i) such sale, exchange, transfer or disposition is made in compliance with the applicable Indenture, including the covenants regarding consolidation, merger and sale of assets and, as applicable, dispositions of assets that constitute notes collateral, and (ii) all the obligations of such Guarantor subsidiary under all debt of the Company or its subsidiaries terminate upon consummation of such transaction;
(b) designation of any Guarantor subsidiary as an “excluded subsidiary” (as defined in the Indentures); or
(c) defeasance or satisfaction and discharge of the Indentures.
Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group's amounts due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.

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Summarized Combined Financial Information of the Issuer and Guarantor Subsidiaries:
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:
(In Millions)(In Millions)
June 30, 2020 December 31, 2019March 31, 2021December 31, 2020
Current assets$2,464.5
 $891.0
Current assets$5,491 $4,903 
Non-current assets5,104.5
 2,381.8
Non-current assets10,160 10,535 
Current liabilities715.3
 392.9
Current liabilities(2,810)(2,767)
Non-current liabilities6,344.6
 2,791.7
Non-current liabilities(10,508)(10,563)
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:
 (In Millions)
 Six Months Ended
 June 30, 2020
Revenues1
$1,414.2
Cost of goods sold(1,546.0)
Loss from continuing operations(168.0)
Net loss(167.3)
Net loss attributable to Cliffs shareholders(167.3)
1 Includes Realization of deferred revenue of $34.6 million for the six months ended June 30, 2020.
(In Millions)
Three Months Ended
March 31, 2021
Revenues$3,979
Cost of goods sold(3,724)
Income from continuing operations32
Net income33
Net income attributable to Cliffs shareholders34
As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the obligated group had the following balances with non-Guarantor subsidiaries and other related parties:
(In Millions)(In Millions)
June 30, 2020 December 31, 2019March 31, 2021December 31, 2020
Balances with non-Guarantor subsidiaries:   Balances with non-Guarantor subsidiaries:
Accounts receivable, net$6.6
 $—
Accounts receivable, net$29 $69 
Accounts payable(14.0) —
Accounts payable(25)(17)
   
Balances with other related parties:   Balances with other related parties:
Accounts receivable, net$91.6
 $31.1
Accounts receivable, net$30 $2 
Other current assets35.3
 44.5
Accounts payable(2.4) —
Accounts payable(9)(6)
Other current liabilities(2.0) (2.0)
Additionally, for the sixthree months ended June 30, 2020,March 31, 2021, the obligated group had Revenues of $292.6$77 million and Cost of goods sold of $243.0$59 million, in each case with other related parties.
Market Risks
We are subject to a variety of risks, including those caused by changes in commodity prices and interest rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control.

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Pricing Risks
Commodity Price RiskIn the ordinary course of business, we are exposed to market risk and price fluctuations related to the sale of our products, which are impacted primarily by market prices for HRC, and the purchase of energy and raw materials used in our operations, which are impacted by market prices for electricity, natural gas, ferrous and stainless steel scrap, chrome, coal, coke, nickel and zinc. Our strategy to address market risk has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand; however, we make forward physical purchases and enter into hedge contracts to manage exposure to price risk related to the purchases of certain raw materials and energy used in the production process.
Our financial results can vary for our operations as a result of fluctuations in market prices. We attempt to mitigate commodity price riskthese risks by aligning fixed and variable components in our customer pricing contracts, supplier purchasing agreements and derivative financial instruments.
Some customer contracts have fixed-pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter into annual, fixed-price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.
Certain of our customer contracts include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, while other of our customer contracts exclude such mechanisms. We may enter multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer pricing contracts and supplier purchasingpurchase agreements. Therefore, in some cases, price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.
Our strategy to address volatile natural gas rates diesel rates and electricity rates includes improving efficiency in energy usage, identifying alternative providers and utilizing the lowest cost alternative fuels. If we are unable to align fixed and variable components between customer pricing contracts and supplier purchasingpurchase agreements, we use cash-settled commodity price swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. Additionally, we routinely use these derivative instruments to hedge a portion of our natural gas, electricity and zinc requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs. The following table summarizes the impact of a 10% and 25% change in market price from the June 30, 2020March 31, 2021 estimated price on our derivative instruments, thereby impacting our pre-tax income by the same amount.
  
Positive or Negative Effect on
Pre-tax Income
(In Millions)
Commodity Derivative 10% Increase or Decrease 25% Increase or Decrease
Natural gas $9.0
 $22.3
Electricity 3.4
 8.6
Zinc 1.3
 3.4
Other 1.3
 1.3
Additionally, our iron ore pellet revenue is impacted by pricing 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.

(In Millions)
Positive or Negative Effect on
Pre-tax Income
Commodity Derivative10% Increase or Decrease25% Increase or Decrease
Natural gas$22 $54 
Electricity1 3 
Zinc1 1 
58
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Valuation of Goodwill and Other Long-Lived Assets
A supply agreement with one Mining and Pelletizing customer providesWe assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Goodwill is tested on a qualitative basis for supplemental revenue or refunds based on the hot-rolled coil steel priceimpairment at the time the iron ore product is consumed in the customer’s blast furnaces. At June 30, 2020, we had derivative assets of $27.3 million, representingreporting unit level on an annual basis (October 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce 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 thatreporting unit below its carrying value. These events or circumstances could include a $75 positive or negativesignificant change in the hot-rolled coil steel price realized from the June 30, 2020 estimates would causebusiness climate, legal factors, operating performance indicators, competition or sale or disposition of a significant portion of a reporting unit. As necessary, should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carry amount, we perform a quantitative test to determine the derivative instrumentamount of impairment, if any, to increase or decrease by $24.5 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.
Refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for further information.
Foreign Currency Exchange Rate Risk
Exchange rate fluctuations affect a portion of Precision Partner's operating costs, reported within the Steel and Manufacturing segment, that are denominated in Canadian dollars, and we use forward currency contracts to reduce our exposure to certain of these currency price fluctuations. At June 30, 2020, we had outstanding option and forward currency contracts with a total contractcarrying value of $35.9 million for the purchasereporting unit and its associated goodwill.
Application of Canadian dollars. Based on the contracts outstanding at June 30, 2020,goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and if a 10% changequantitative assessment is deemed necessary in the U.S. dollar-to-Canadian dollar exchange rate would result in a pre-tax impactdetermination of $1.8 million on the fair value of these contracts,each reporting unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology, which would offsetconsiders forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the effectrecoverability of our goodwill requires significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, expected Adjusted EBITDA, expected capital expenditures and working capital requirements, which are based upon our long-range plan estimates. The assumptions used to calculate the fair value of a reporting unit may change from year to year based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the exchange rate on the underlying operating costs. Refer to NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESdetermination of fair value for further information.
Valuation of Other Long-Lived Assetseach reporting unit.
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or environmental factors or in the business climate; changes in estimates of our recoverable reserves; and unanticipated competition. Any adverse change in these factors could have a significant impact on the 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 estimate of economic and market conditions over the projected period, including growth rates in revenues and costs, and 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. WhileFor the three months ended March 31, 2021, we concluded that an event triggering the need for an impairment assessment did not occur during the six months ended June 30, 2020, a prolonged COVID-19 pandemic could impact the results of operations due to changes to assumptions that would indicate that the carrying value of our asset groups may not be recoverable.occur.
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 applicable base rate plus the applicable base rate margin depending on the excess availability. Additionally, we have outstanding IRBs with fixed and variable rates. As of June 30, 2020,March 31, 2021, we had $550.0$1,630 million outstanding under the ABL Facility. An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings from the ABL Facility. For example, a 100 basis point change to interest rates under the ABL Facility at the current borrowing level would result in a change of $5.6$17 million to interest expense on an annual basis.
Supply Concentration Risks
Many of our operations and mines rely 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.

48
59

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 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 our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:
•disruptions to our operations relating to the COVID-19 pandemic, including the heightened risk that a significant portion of our workforce or on-site contractors may suffer illness or otherwise be unable to perform their ordinary work functions;
•continued volatility of steel and iron ore market prices, which directly and indirectly impact the prices of the products that we sell to our customers;
•uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry, which has been experiencing a trend toward light weighting that could result in lower steel volumes being consumed;
•potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity, oversupply of iron ore, prevalence of steel imports and reduced market demand, including as a result of the COVID-19 pandemic;
•severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges, due to the ongoing COVID-19 pandemic or otherwise, of one or more of our major customers, including customers in the automotive market, key suppliers or contractors, which, among other adverse effects, could lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;
uncertainty and weaknesses in global economic conditions, including downward pressure on prices caused by the COVID-19 pandemic, oversupply of imported products, reduced market demand and •risks related to U.S. government actions with respect to Section 232, the USMCA and/or other trade agreements, tariffs, treaties or policies;policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;
uncertainties associated with the highly competitive and highly cyclical steel industry and reliance on the demand for steel from the automotive industry;
continued volatility of steel and iron ore prices and other trends, which may impact the price-adjustment calculations under certain of our sales contracts;
our ability to successfully diversify our product mix and add new customers for our Mining and Pelletizing segment beyond our traditional blast furnace clientele;
our ability to cost-effectively achieve planned production rates or levels, including at our HBI production plant currently under construction, and to resume full operations at certain facilities that are or were temporarily idled due to the COVID-19 pandemic;
our ability to successfully identify and consummate any strategic investments or development projects, including our HBI production plant;
the impact of our steelmaking customers reducing their steel production due to the COVID-19 pandemic, or increased market share of steel produced using methods other than those used by our customers, or increased market share of lighter-weight steel alternatives, including aluminum;
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 actual economic iron ore reserves or reductions in current mineral estimates, including whether any mineralized material qualifies as a reserve;
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;
problems or uncertainties with sales volume or mix, productivity, transportation, environmental liabilities, employee-benefit costs and other risks of the steel and mining industries;
•impacts of existing and increasing governmental regulation, including climate change and other environmental regulation that may be proposed under the Biden Administration, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizationauthorizations of, or from, any governmental or regulatory entityauthority and costs related to implementing improvements to ensure compliance with regulatory changes;changes, including potential financial assurance requirements;
•potential impacts to the environment or exposure to hazardous substances resulting from our operations;
•our ability to maintain appropriate relations with unionsadequate liquidity, our level of indebtedness and employees;
the abilityavailability of capital could limit cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our customers, joint venture partners and third-party service providers to meet their obligations to us on a timely basis or at all;business;

60

events or circumstances that could impair or adversely impact the viability of a production plant or mine 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, infectious disease outbreaks and other unexpected events;
adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;
the potential existence•limitations on our ability to realize some or all of significant deficiencies or material weakness in our internal control over financial reporting;deferred tax assets, including our NOLs;
•our ability to realize the anticipated synergies and benefits of the MergerAcquisitions and to successfully integrate the businesses of AK Steel and ArcelorMittal USA into our existing businesses, including uncertainties associated with maintaining relationships with customers, vendors and employees, as well as realizing additional future synergies;employees;
•additional debt we assumed, incurred or issued in connection with the Merger,Acquisitions, as well as additional debt we incurred in connection with enhancing our liquidity during the COVID-19 pandemic, may negatively impact our credit profile and limit our financial flexibility;
•known and unknown liabilities we assumed in connection with the Acquisitions, including significant environmental, pension and OPEB obligations;
49

•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;
•supply chain disruptions or changes in the cost or quality of energy sources or critical raw materials and supplies;supplies, including iron ore, industrial gases, graphite electrodes, scrap, chrome, zinc, coke and coal;
supply chain•liabilities and costs arising in connection with any business decisions to temporarily idle or permanently close a mine or production facility, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled mine or production facility;
•problems or disruptions associated with transporting products to our customers, moving products internally among our facilities or poor quality ofsuppliers transporting raw materials to us;
•uncertainties associated with natural or supplies, including scrap, coal, cokehuman-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and alloys;other unexpected events;
•our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks;
•disruptions in, or failures of, our information technology systems, including those related to cybersecurity;
•our ability to successfully identify and consummate any strategic investments or development projects, cost-effectively achieve planned production rates or levels, and diversify our product mix and add new customers;
•our actual economic iron ore and coal reserves or reductions in current mineral estimates, including whether we are able to replace depleted reserves with additional mineral bodies to support the long-term viability of our operations;
•the outcome of any contractual disputes with our customers, joint venture partners, lessors, or significant energy, raw material or service providers, or any other litigation or arbitration;
•our ability to maintain our social license to operate with our stakeholders, including by fostering a strong reputation and consistent operational and safety track record;
•our ability to maintain satisfactory labor relations with unions and employees;
•availability of workers to fill critical operational positions and potential labor shortages caused by the COVID-19 pandemic, as well as our ability to attract, hire, develop and retain key personnel, including within the acquired AK Steel and ArcelorMittal USA businesses;
•unanticipated or higher costs associated with healthcare, pension and OPEB obligations.obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations; and
•potential significant deficiencies or material weaknesses in our internal control over financial reporting.
For additional factors affecting our business, refer to Part II – Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. You are urged to carefully consider these risk factors.
Non-GAAP Reconciliations
We present cash cost of goods sold 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 is useful to investors because it excludes depreciation, depletion and amortization, which are non-cash, and freight, which 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 Mining and Pelletizing segment cost of goods sold.
 (In Millions)
 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2020 2019 2020 2019
Cost of goods sold$427.2
 $482.6
 $594.5
 $608.7
Less:       
Freight38.2
 45.8
 55.2
 57.4
Depreciation, depletion & amortization19.2
 19.6
 37.9
 38.1
Cash cost of goods sold$369.8
 $417.2
 $501.4
 $513.2
Refer to " – Results of Operations – Segment Information" above for a reconciliation of the non–GAAP measure, Adjusted EBITDA.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Information regarding our market risk is presented under the caption "Market Risks," which is included in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, and Part I – Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.

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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 theour President and 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 theour President and Chief Executive Officer and theour Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, theour President and Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.
The Company acquired AK Steel during March 2020. We are currently integrating the processes and internal controls of AK Steel. Except for the AK Steel acquisition, there was no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the COVID-19 pandemic. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.
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PART II - OTHER INFORMATION
Item 1.Legal Proceedings
SEC regulations require us to disclose certain information about administrative or judicial proceedings involving the environment and to which a governmental authority is a party if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, we use a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required. We believe that this threshold is reasonably designed to result in disclosure of any such proceedings that are material to our business or financial condition.
We have described the material pending legal proceedings, including administrative or judicial proceedings involving the environment, to which we are a party in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. Additional information for this item relating to certain environmental and other contingencies may be found in NOTE 18 - COMMITMENTS AND CONTINGENCIES to the consolidated financial statements in Part I – Item 1. Financial Statements of this Quarterly Report on Form 10-Q, andwhich is incorporated herein by reference.
Item 1A.Risk Factors
We caution readers that our business activities involve risks and uncertainties that could cause actual results to differ materially from those currently expected by management. We described the most significant risks that could impact our results in Part II, Item 1A, "Risk Factors" in our QuarterlyOur Annual Report on Form 10-Q10-K for the quarteryear ended MarchDecember 31, 2020.2020, 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.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 ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 - 31, 2021731,095 $18.51 — $— 
February 1 - 28, 20215,521 16.83 — — 
March 1 - 31, 20211,891 8.68 — — 
Total738,507 $18.47 — $— 
1 All 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 Programs
April 1 - 30, 2020 2,369
 $3.80
 —
 $—
May 1 - 31, 2020 263,594
 $4.45
 —
 $—
June 1 - 30, 2020 20,662
 $5.78
 —
 $—
Total 286,625
 $4.54
 —
 
         
1 All shares were delivered to us to satisfy tax withholding obligations due upon the vesting or payment of stock awards.
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 Part II – Item 6. Exhibits of this Quarterly Report on Form 10-Q.
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Item 5.Other Information
None.

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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.

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Exhibit
Number
Exhibit
Indenture, dated as of AprilFebruary 17, 2020,2021, by and among Cleveland-Cliffs Inc., the guarantorsGuarantors party thereto and U.S. Bank National Association, as trustee, and first lien notes collateral agent (relating to Cleveland-Cliffs Inc.’s 9.875% Senior Secured Notes due 2025) (including Formincluding Forms of Note) (filed herewith).
4.2
First Supplemental Indenture, dated as of April 24, 2020, by and among Cleveland-Cliffs Inc., the guarantors party thereto and U.S. Bank National Association, as trustee and first lien notes collateral agent (relating to Cleveland-Cliffs Inc.’s 9.875% Senior Secured Notes due 2025) (including Form of Note) (filed herewith).
4.3
Second Supplemental Indenture, dated as of May 22, 2020, by and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee and first lien notes collateral agent (relating to Cleveland-Cliffs Inc.’s 9.875% Senior Secured Notes due 2025) (filed herewith).
4.4
Sixth Supplemental Indenture, dated as of May 22, 2020, by and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee (relating to Cleveland-Cliffs Inc.’s 5.75% Senior Notes due 2025) (filed herewith).
4.5
Third Supplemental Indenture, dated as of May 22, 2020, by and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee and first lien notes collateral agent (relating to Cleveland-Cliffs Inc.’s 4.875% Senior Secured Notes due 2024) (filed herewith).
4.6
Second Supplemental Indenture, dated as of May 22, 2020, by and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee (relating to Cleveland-Cliffs Inc.’s 5.875%4.625% Senior Guaranteed Notes due 2027) (filed herewith).
4.7
First Supplemental Indenture, dated as of May 22, 2020, by2029 and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee (relating to Cleveland-Cliffs Inc.’s 7.00%4.875% Senior Guaranteed Notes due 2027)2031 (filed herewith).
First Supplemental Indenture, dated as of May 22, 2020, by and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee (relating to Cleveland-Cliffs Inc.’s 6.375% Senior Guaranteed Notes due 2025) (filed herewith).
4.9
First Supplemental Indenture, dated as of May 22, 2020, by and among Cleveland-Cliffs Inc., the additional guarantors party thereto and U.S. Bank National Association, as trustee and first lien notes collateral agent (relating to Cleveland-Cliffs Inc.’s 6.75% Senior Secured Notes due 2026) (filed herewith).
4.10
Second Supplemental Indenture, dated as of June 19, 2020, by and among Cleveland-Cliffs Inc., the guarantors party thereto and U.S. Bank National Association, as trustee and first lien notes collateral agent (relating to Cleveland-Cliffs Inc.’s 6.75% Senior Secured Notes due 2026) (including Form of Note) (filed herewith).
22.1
Schedule of the obligated group, including the parent and issuer and the subsidiary guarantors that have guaranteed the obligations under the 4.875% 2024 Senior Secured Notes, the 5.75% 2025 Senior Notes, the 6.375% 2025 Senior Notes, the 6.75% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.00% 2027 Senior Notes, and the 9.875% 2025 Senior Secured Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes issued by Cleveland-Cliffs Inc. (filed herewith).
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 July 30, 2020April 28, 2021 (filed herewith).
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 Keith A. Koci as of July 30, 2020April 28, 2021 (filed herewith).
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 July 30, 2020April 28, 2021 (filed herewith).
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 Keith A. Koci, Executive Vice President, Chief Financial Officer of Cleveland-Cliffs Inc., as of July 30, 2020April 28, 2021 (filed herewith).
Mine Safety Disclosures (filed herewith).
101The following financial information from Cleveland-Cliffs Inc.'s Quarterly Report on Form 10-Q for the quarterquarterly period ended June 30, 2020March 31, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Statements of Unaudited Condensed Consolidated Financial Position, (ii) the Statements of Unaudited Condensed Consolidated Operations, (iii) the Statements of Unaudited Condensed Consolidated Comprehensive Income (Loss), (iv) the Statements of Unaudited Condensed Consolidated Cash Flows, (v) the Statements of Unaudited Condensed Consolidated Changes in Equity, and (vi) Notes to the Unaudited Condensed Consolidated Financial Statements.
104The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101.


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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/ Kimberly A. Floriani
Name:Kimberly A. Floriani
Title:Vice President, Corporate Controller & Chief Accounting Officer
Date:April 28, 2021CLEVELAND-CLIFFS INC.
By:/s/ Kimberly A. Floriani
Name:Kimberly A. Floriani
Title:Vice President, Corporate Controller & Chief Accounting Officer
Date:July 30, 2020

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