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 March 31, 20212022
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-20220331_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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 499,402,288524,737,194 as of April 26, 2021.25, 2022.


Table of Contents


TABLE OF CONTENTS
Page Number
DEFINITIONS
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Statements of Unaudited Condensed Consolidated Financial Position as of March 31, 20212022 and December 31, 20202021
Statements of Unaudited Condensed Consolidated Operations for the Three Months Ended March 31, 20212022 and 20202021
Statements of Unaudited Condensed Consolidated Comprehensive Income (Loss) for the Three Months Ended March 31, 20212022 and 20202021
Statements of Unaudited Condensed Consolidated Cash Flows for the Three Months Ended March 31, 20212022 and 20202021
Statements of Unaudited Condensed Consolidated Changes in Equity for the Three Months Ended March 31, 20212022 and 20202021
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures


Table of Contents

DEFINITIONS
    The following abbreviations or acronyms are used in the text. References in this report to the “Company,” “we,” “us,” “our” and “Cliffs” are to Cleveland-Cliffs Inc. and subsidiaries, collectively, unless stated otherwise or the context indicates otherwise.
Abbreviation or acronymTerm
4.625% 2029 Senior Notes4.625% 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, dated as of March 13, 2020, among Cleveland-Cliffs Inc., the lenders party thereto from time to time and Bank of America, N.A., as administrative agent, as amended as of March 27, 2020, and December 9, 2020, and as may be further amended from time to time
AcquisitionsThe AK Steel Merger and AM USA Transaction, together
Adjusted EBITDAEBITDA, excluding certain items such as EBITDA of noncontrolling interests, asset impairment, extinguishment of debt, severance, acquisition-related costs, amortization of inventory step-up and impacts of discontinued 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 Steel MergerThe merger of Merger Sub with and into AK Steel, with AK Steel surviving the merger as a wholly owned subsidiary of Cleveland-Cliffs Inc., subject to the terms and conditions set forth in the AK Steel Merger Agreement, consummated on March 13, 2020
AK Steel Merger AgreementAgreement and Plan of Merger, dated as of December 2, 2019, among 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.
BOFBasic oxygen furnace
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
FMSH ActFederal Mine Safety and Health Act of 1977, as amended
FPTFerrous Processing and Trading Company, including certain related entities
FPT AcquisitionThe purchase of FPT, subject to the terms and conditions set forth in the FPT Acquisition Agreement
FPT Acquisition AgreementSecurities Purchase Agreement, dated as of October 8, 2021, by and between Cleveland-Cliffs Inc. and Anthony Soave Revocable Trust u/a/d January 14, 1987, as amended and restated
GAAPAccounting principles generally accepted in the United States
GHGGreenhouse gas
GOESGrain oriented electrical steel
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
JSW SteelJSW Steel (USA) Inc. and JSW Steel USA Ohio, Inc., collectively
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
MSHAU.S. Mine Safety and Health Administration
Net ton2,000 pounds
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Abbreviation or acronymTerm
NOESNon-oriented electrical steel
NPDESNational Pollutant Discharge Elimination System, authorized by the Clean Water Act
OPEBOther postretirement benefits
Platts 62% pricePlatts IODEX 62% Fe Fines CFR North China
RCRAResource Conservation and Recovery Act
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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, a 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
U.S.United States of America
U.S. SteelU.S.United States Steel Corporation and its subsidiaries, collectively, unless stated otherwise or the context indicates otherwise
USMCAUnited States-Mexico-Canada Agreement
USWUnited Steelworkers
VIEVariable interest entity
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PART I
Item 1.Financial Statements
Statements of Unaudited Condensed Consolidated Financial Position
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$110 $112 Cash and cash equivalents$35 $48 
Accounts receivable, netAccounts receivable, net1,659 1,169 Accounts receivable, net2,667 2,154 
InventoriesInventories3,932 3,828 Inventories5,562 5,188 
Other current assetsOther current assets160 189 Other current assets295 263 
Total current assetsTotal current assets5,861 5,298 Total current assets8,559 7,653 
Non-current assets:Non-current assets:Non-current assets:
Property, plant and equipment, netProperty, plant and equipment, net9,014 8,743 Property, plant and equipment, net9,012 9,186 
GoodwillGoodwill994 1,406 Goodwill1,127 1,116 
Deferred income taxes562 537 
Other non-current assetsOther non-current assets784 787 Other non-current assets1,070 1,020 
TOTAL ASSETSTOTAL ASSETS$17,215 $16,771 TOTAL ASSETS$19,768 $18,975 
LIABILITIES AND EQUITYLIABILITIES AND EQUITYLIABILITIES AND EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$1,743 $1,575 Accounts payable$2,271 $2,073 
Accrued employment costsAccrued employment costs465 460 Accrued employment costs541 585 
Pension and OPEB liabilities, current151 151 
Other current liabilitiesOther current liabilities574 743 Other current liabilities939 903 
Total current liabilitiesTotal current liabilities2,933 2,929 Total current liabilities3,751 3,561 
Non-current liabilities:Non-current liabilities:Non-current liabilities:
Long-term debtLong-term debt5,734 5,390 Long-term debt5,028 5,238 
Pension and OPEB liabilities, non-current3,916 4,113 
Pension liability, non-currentPension liability, non-current552 578 
OPEB liability, non-currentOPEB liability, non-current2,346 2,383 
Other non-current liabilitiesOther non-current liabilities1,175 1,260 Other non-current liabilities1,483 1,441 
TOTAL LIABILITIESTOTAL LIABILITIES13,758 13,692 TOTAL LIABILITIES13,160 13,201 
Commitments and contingencies (See Note 18)Commitments and contingencies (See Note 18)00Commitments and contingencies (See Note 18)00
Series B Participating Redeemable Preferred Stock - 0 par value
Authorized, Issued and Outstanding - 583,273 shares738 738 
Equity:Equity:Equity:
Common shares - par value $0.125 per shareCommon shares - par value $0.125 per shareCommon 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 
Authorized - 1,200,000,000 shares (2021 - 1,200,000,000 shares);Authorized - 1,200,000,000 shares (2021 - 1,200,000,000 shares);
Issued - 531,051,530 shares (2021 - 506,832,537 shares);Issued - 531,051,530 shares (2021 - 506,832,537 shares);
Outstanding - 524,714,208 shares (2021 - 500,158,955 shares)Outstanding - 524,714,208 shares (2021 - 500,158,955 shares)66 63 
Capital in excess of par value of sharesCapital in excess of par value of shares5,487 5,431 Capital in excess of par value of shares4,848 4,892 
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)
Retained earnings (deficit)Retained earnings (deficit)800 (1)
Cost of 6,337,322 common shares in treasury (2021 - 6,673,582 shares)Cost of 6,337,322 common shares in treasury (2021 - 6,673,582 shares)(90)(82)
Accumulated other comprehensive incomeAccumulated other comprehensive income715 618 
Total Cliffs shareholders' equityTotal Cliffs shareholders' equity2,389 2,018 Total Cliffs shareholders' equity6,339 5,490 
Noncontrolling interestNoncontrolling interest330 323 Noncontrolling interest269 284 
TOTAL EQUITYTOTAL EQUITY2,719 2,341 TOTAL EQUITY6,608 5,774 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY$17,215 $16,771 
TOTAL LIABILITIES AND EQUITYTOTAL LIABILITIES AND EQUITY$19,768 $18,975 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Statements of Unaudited Condensed Consolidated Operations
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions, Except Per Share Amounts)(In Millions, Except Per Share Amounts)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
RevenuesRevenues$4,049 $359 Revenues$5,955 $4,049 
Operating costs:Operating costs:Operating costs:
Cost of goods soldCost of goods sold(3,761)(356)Cost of goods sold(4,706)(3,761)
Selling, general and administrative expensesSelling, general and administrative expenses(95)(28)Selling, general and administrative expenses(122)(108)
Acquisition-related costs(13)(42)
Miscellaneous – netMiscellaneous – net(3)(12)Miscellaneous – net(33)(3)
Total operating costsTotal operating costs(3,872)(438)Total operating costs(4,861)(3,872)
Operating income (loss)177 (79)
Operating incomeOperating income1,094 177 
Other income (expense):Other income (expense):Other income (expense):
Interest expense, netInterest expense, net(92)(31)Interest expense, net(77)(92)
Gain (loss) on extinguishment of debt(66)
Loss on extinguishment of debtLoss on extinguishment of debt(14)(66)
Net periodic benefit credits other than service cost componentNet periodic benefit credits other than service cost component47 Net periodic benefit credits other than service cost component49 47 
Other non-operating expenseOther non-operating expense(2)— 
Total other expenseTotal other expense(44)(111)
Income from continuing operations before income taxesIncome from continuing operations before income taxes1,050 66 
Income tax expenseIncome tax expense(237)(9)
Income from continuing operationsIncome from continuing operations813 57 
Income from discontinued operations, net of taxIncome from discontinued operations, net of tax1 — 
Net incomeNet income814 57 
Income attributable to noncontrolling interestIncome attributable to noncontrolling interest(13)(16)
Net income attributable to Cliffs shareholdersNet income attributable to Cliffs shareholders$801 $41 
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 
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
Earnings per common share attributable to Cliffs shareholders - basicEarnings per common share attributable to Cliffs shareholders - basic
Continuing operationsContinuing operations$0.08 $(0.18)Continuing operations$1.54 $0.08 
Discontinued operationsDiscontinued operations0 Discontinued operations — 
$0.08 $(0.18)$1.54 $0.08 
Earnings (loss) per common share attributable to Cliffs shareholders - diluted
Earnings per common share attributable to Cliffs shareholders - dilutedEarnings per common share attributable to Cliffs shareholders - diluted
Continuing operationsContinuing operations$0.07 $(0.18)Continuing operations$1.50 $0.07 
Discontinued operationsDiscontinued operations0 Discontinued operations — 
$0.07 $(0.18)$1.50 $0.07 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Statements of Unaudited Condensed Consolidated Comprehensive Income (Loss)
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Net income (loss)$57 $(49)
Net incomeNet income$814 $57 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Changes in pension and OPEB, net of taxChanges in pension and OPEB, net of tax7 Changes in pension and OPEB, net of tax1 
Changes in foreign currency translationChanges in foreign currency translation(1)(1)Changes in foreign currency translation (1)
Changes in derivative financial instruments, net of taxChanges in derivative financial instruments, net of tax7 (3)Changes in derivative financial instruments, net of tax96 
Total other comprehensive incomeTotal other comprehensive income13 Total other comprehensive income97 13 
Comprehensive income (loss)70 (47)
Comprehensive incomeComprehensive income911 70 
Comprehensive income attributable to noncontrolling interestsComprehensive income attributable to noncontrolling interests(16)(3)Comprehensive income attributable to noncontrolling interests(13)(16)
Comprehensive income (loss) attributable to Cliffs shareholders$54 $(50)
Comprehensive income attributable to Cliffs shareholdersComprehensive income attributable to Cliffs shareholders$898 $54 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Statements of Unaudited Condensed Consolidated Cash Flows
Cleveland-Cliffs Inc. and Subsidiaries
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
OPERATING ACTIVITIESOPERATING ACTIVITIESOPERATING ACTIVITIES
Net income (loss)$57 $(49)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Net incomeNet income$814 $57 
Adjustments to reconcile net income to net cash provided (used) by operating activities:Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation, depletion and amortizationDepreciation, depletion and amortization217 35 Depreciation, depletion and amortization301 217 
Impairment of long-lived assetsImpairment of long-lived assets29 — 
Pension and OPEB creditsPension and OPEB credits(27)(21)
Loss on extinguishment of debtLoss on extinguishment of debt14 66 
Amortization of inventory step-upAmortization of inventory step-up81 23 Amortization of inventory step-up 81 
Changes in deferred revenue(3)(48)
Deferred income taxes10 (48)
Loss (gain) on extinguishment of debt66 (3)
OtherOther(2)51 Other82 26 
Changes in operating assets and liabilities, net of business combination:Changes in operating assets and liabilities, net of business combination:Changes in operating assets and liabilities, net of business combination:
Receivables and other assetsReceivables and other assets(480)254 Receivables and other assets(441)(480)
InventoriesInventories(172)(267)Inventories(372)(172)
Pension and OPEB payments and contributionsPension and OPEB payments and contributions(175)(13)Pension and OPEB payments and contributions(60)(175)
Payables, accrued expenses and other liabilitiesPayables, accrued expenses and other liabilities22 (99)Payables, accrued expenses and other liabilities193 22 
Net cash used by operating activities(379)(164)
Net cash provided (used) by operating activitiesNet cash provided (used) by operating activities533 (379)
INVESTING ACTIVITIESINVESTING ACTIVITIESINVESTING ACTIVITIES
Purchase of property, plant and equipmentPurchase of property, plant and equipment(136)(138)Purchase of property, plant and equipment(236)(136)
Acquisition of AK Steel, net of cash acquired0 (869)
Other investing activitiesOther investing activities1 Other investing activities1 
Net cash used by investing activitiesNet cash used by investing activities(135)(1,007)Net cash used by investing activities(235)(135)
FINANCING ACTIVITIESFINANCING ACTIVITIESFINANCING ACTIVITIES
Proceeds from issuance of common sharesProceeds from issuance of common shares322 Proceeds from issuance of common shares 322 
Repurchase of common sharesRepurchase of common shares(19)— 
Proceeds from issuance of debtProceeds from issuance of debt1,000 716 Proceeds from issuance of debt 1,000 
Debt issuance costs(16)(44)
Repayments of debtRepayments of debt(902)(430)Repayments of debt(360)(902)
Borrowings under credit facilitiesBorrowings under credit facilities1,158 800 Borrowings under credit facilities1,715 1,158 
Repayments under credit facilitiesRepayments under credit facilities(1,010)Repayments under credit facilities(1,609)(1,010)
Other financing activitiesOther financing activities(40)(37)Other financing activities(38)(56)
Net cash provided by financing activities512 1,005 
Net cash provided (used) by financing activitiesNet cash provided (used) by financing activities(311)512 
Net decrease in cash and cash equivalentsNet decrease in cash and cash equivalents(2)(166)Net decrease in cash and cash equivalents(13)(2)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period112 353 Cash and cash equivalents at beginning of period48 112 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$110 $187 Cash and cash equivalents at end of period$35 $110 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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)
Number
of
Common
Shares Outstanding
Par Value of
Common
Shares Issued
Capital in
Excess of
Par Value
of Shares
Retained
Earnings (Deficit)
Common
Shares
in
Treasury
AOCINon-controlling InterestsTotal
December 31, 2021500 $63 $4,892 $(1)$(82)$618 $284 $5,774 
Comprehensive income   801  97 13 911 
Redemption of convertible debt24 3 (28)    (25)
Stock and other incentive plans2  (16) 11   (5)
Common stock repurchases(1)   (19)  (19)
Net distributions to noncontrolling interests      (28)(28)
March 31, 2022525 $66 $4,848 $800 $(90)$715 $269 $6,608 
(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, 2019271 $37 $3,873 $(2,842)$(391)$(319)$$358 
Comprehensive income (loss)— — — (52)— (47)
Stock and other incentive plans— (24)— 26 — — 
Acquisition of AK Steel127 16 602 — — — 330 948 
Common stock dividends ($0.06 per share)— — — (24)— — — (24)
Net distributions to noncontrolling interests— — — — — — (6)(6)
March 31, 2020399 $53 $4,451 $(2,918)$(365)$(317)$327 $1,231 
(In Millions)
Number
of
Common
Shares Outstanding
Par Value of Common
Shares Issued
Capital in
Excess of
Par Value
of Shares
Retained
Earnings (Deficit)
Common
Shares
in
Treasury
AOCI (Loss)Non-controlling InterestsTotal
December 31, 2020478 $63 $5,431 $(2,989)$(354)$(133)$323 $2,341 
Comprehensive income— — — 41 — 13 16 70 
Issuance of common stock20 — 78 — 244 — — 322 
Stock and other incentive plans— (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 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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 months ended March 31, 20212022 are not necessarily indicative of results to be expected for the year ending December 31, 20212022 or any other future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Business Operations
We are vertically integrated from the mining of 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 producer of being fully or partially self-sufficient with our production ofmined raw materials, for steel manufacturing, which includesdirect reduced iron ore pellets, HBI and coking coal.
ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are organized into four4 operating segments based on differentiated products, Steelmaking, Tubular, Tooling and Stamping, and European Operations. We primarily operate through one1 reportable segment – the Steelmaking segment.
Basis of Consolidation
The unaudited condensed consolidated financial statements consolidate our accounts and the accounts of our wholly owned subsidiaries, all subsidiaries in which we have a controlling interest and VIEs for which we are the primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation.
Investments in Affiliates
We have investments in several businesses accounted for using the equity method of accounting. We review an investment for impairment when circumstances indicate that a loss in value below its carrying amount is other than temporary.
As of March 31, 20212022 and December 31, 2020,2021, our investment in affiliates of $116$129 million and $105$128 million, respectively, was classified in Other non-current assets.
Significant Accounting Policies
A detailed description of our significant accounting policies can be found in the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein.
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Recent Accounting Pronouncements
Issued and Not EffectiveAdopted
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update requires certain convertible instruments to be accounted for as a single liability measured at its amortized cost. Additionally, the update requires the use of the "if-converted" method, removing the treasury stock method, when calculating diluted shares. The two methods of adoption are the full and modified retrospective approaches. We expect to utilizeutilized the modified retrospective approach. Usingmethod of adoption; using this approach, the guidance shall bewas applied to transactions outstanding as of the beginning of the fiscal year in which the amendment iswas adopted. The final rule is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We expect theOn January 18, 2022, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes; therefore, there was a de minimis impact as a result of our adoption of this update to decrease our diluted EPS unless the additional shares under the if-converted method are anti-dilutive. We expect to adopt the update at the required adoption dateupdate.
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NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Allowance for Credit Losses
The following is a roll forwardroll-forward of our allowance for credit losses associated with Accounts receivable, net:
(In Millions)(In Millions)
2021202020222021
Allowance for credit losses as of January 1Allowance for credit losses as of January 1$(5)$Allowance for credit losses as of January 1$(4)$(5)
Increase in allowanceIncrease in allowance(1)(1)Increase in allowance (1)
Allowance for credit losses as of March 31Allowance for credit losses as of March 31$(6)$(1)Allowance for credit losses as of March 31$(4)$(6)
Inventories
The following table presents the detail of our Inventories in the Statements of Unaudited Condensed Consolidated Financial Position:
(In Millions)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
Product inventoriesProduct inventoriesProduct inventories
Finished and semi-finished goodsFinished and semi-finished goods$2,296 $2,125 Finished and semi-finished goods$2,943 $2,814 
Raw materialsRaw materials1,372 1,431 Raw materials2,312 2,070 
Total product inventoriesTotal product inventories3,668 3,556 Total product inventories5,255 4,884 
Manufacturing supplies and critical sparesManufacturing supplies and critical spares264 272 Manufacturing supplies and critical spares307 304 
InventoriesInventories$3,932 $3,828 Inventories$5,562 $5,188 
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 
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(In Millions)
Three Months Ended
March 31,
20222021
Capital additions$181 $162 
Less:
Non-cash accruals(55)23 
Right-of-use assets - finance leases 
Cash paid for capital expenditures including deposits$236 $136 
Cash payments (receipts) for income taxes and interest are as follows:
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Taxes paid on incomeTaxes paid on income$3 $Taxes paid on income$1 $
Income tax refundsIncome tax refunds(14)(60)Income tax refunds(1)(14)
Interest paid on debt obligations net of capitalized interest1
Interest paid on debt obligations net of capitalized interest1
75 30 
Interest paid on debt obligations net of capitalized interest1
65 75 
1 Capitalized interest was $1 million and $10 million for the three months ended March 31, 2021 and 2020, respectively.
1 Capitalized interest was $2 million and $1 million for the three months ended March 31, 2022 and 2021, respectively.
1 Capitalized interest was $2 million and $1 million for the three months ended March 31, 2022 and 2021, respectively.
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NOTE 3 - ACQUISITIONS
In 2020, we acquired two major steelmakers, AK Steel and 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 Merger combined Cliffs, a producer of iron ore pellets, with AK Steel, a producer of 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.
FPT Acquisition of ArcelorMittal USA
Overview
On December 9, 2020,November 18, 2021, pursuant to the terms of the AM USA TransactionFPT Acquisition Agreement, we purchased ArcelorMittal USA from ArcelorMittal. In connection withcompleted the closing ofFPT Acquisition, in which we were the AM USA Transaction, as contemplated by the terms of the AM USA Transaction Agreement, ArcelorMittal’s former joint venture partneracquirer. The FPT Acquisition gives us a competitive advantage in Kote and Tek exercised its put right pursuant to the terms of the Kote and Tek joint venture agreements. Assourcing prime scrap, a result, we purchased all of such joint venture partner’s interests in Kote and Tek. Following the closing of the AM USA Transaction, we own 100% of the interests in Kote and Tek.
key raw material for our steelmaking facilities. We incurred acquisition-related costs, excluding severance costs, of $2$1 million for the three months ended March 31, 2021,2022, which werewas recorded in Acquisition-related costsSelling, general and administrative expenses on the Statements of Unaudited Condensed Consolidated Operations.
The AM USA Transaction was accounted for under the acquisition method of accounting for business combinations.
The fair value of the total purchase consideration was determined as follows:
(In Millions)
Fair value of Cliffs common shares issuedCash consideration:
Cash consideration pursuant to the FPT Acquisition Agreement$990778 
Fair value of Series B Participating Redeemable Preferred Stock issuedEstimated cash consideration payable related to Internal Revenue Code Section 338(h)(10)73835 
Total cash consideration813 
Fair value of settlement of a pre-existing relationship237 
Cash consideration (subject to customary working capital adjustments)635 (20)
Total purchase consideration$2,600
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The fair value of Cliffs common shares issued is calculated as follows:
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)$990793 
The fair valueCompany's estimation of Cliffs Series B Participating Redeemable Preferred Stock issued is calculated as follows:
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 comprisedpayable related to Internal Revenue Code Section 338(h)(10) with respect to entities acquired in connection with the FPT Acquisition could potentially change as elections are expected to be finalized in the third quarter 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
The cash portion of the 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
2022.
Valuation Assumption and Preliminary Purchase Price Allocation
We estimated fair values at December 9, 2020November 18, 2021 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the AM USA Transaction.FPT Acquisition. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the AM USA Transaction,FPT Acquisition, most notably, inventories, personal and real property, mineral reserves, leases, investments, deferred taxes, asset retirementenvironmental obligations and intangible assets, 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.
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The preliminary purchase price allocation to assets acquired and liabilities assumed in the AM USA TransactionFPT Acquisition was:
(In Millions)
Initial Allocation of ConsiderationMeasurement Period AdjustmentsUpdated Allocation
Cash and cash equivalents$35 $$35 
Accounts receivable, net349 349 
Inventories2,115 14 2,129 
Other current assets34 (5)29 
Property, plant and equipment4,017 366 4,383 
Other non-current assets158 166 
Accounts payable(758)(756)
Accrued employment costs(271)(3)(274)
Pension and OPEB liabilities, current(109)(109)
Other current liabilities(398)(2)(400)
Pension and OPEB liabilities, non-current(3,195)(3,195)
Other non-current liabilities(598)35 (563)
Noncontrolling interest(13)(12)
Net identifiable assets acquired1,366 416 1,782 
Goodwill1,230 (412)818 
Total net assets acquired$2,596 $$2,600 
During the 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.
(In Millions)
Initial Allocation of ConsiderationMeasurement Period AdjustmentsUpdated Allocation
Cash and cash equivalents$$— 
Accounts receivable, net233 235 
Inventories137 139 
Other current assets(1)
Property, plant and equipment179 26 205 
Other non-current assets74 (1)73 
Accounts payable(122)— (122)
Accrued employment costs(8)— (8)
Other current liabilities(9)— (9)
Other non-current liabilities(21)(1)(22)
Net identifiable assets acquired476 27 503 
Goodwill279 11 290 
Total net assets acquired$755 $38 $793 
The goodwill resulting from the acquisition of ArcelorMittal USAFPT Acquisition primarily represents the growth opportunities in the automotive, construction, appliances, infrastructure and machinery and equipment markets,incremental benefit of providing substantial access to prime scrap for our vertically integrated steelmaking business, as well as any synergistic benefits to be realized from the AM USA Transaction, and was assigned to our flat steel operationsFPT Acquisition 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.
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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
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
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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 $$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 taxes69 69 
Other non-current assets475 (4)471 
Accounts payable(636)(8)(644)
Accrued employment costs(94)(93)
Pension and OPEB liabilities, current(75)(3)(78)
Other current liabilities(236)(227)
Long-term debt(1,179)(1,179)
Pension and OPEB liabilities, non-current(873)(871)
Other non-current liabilities(507)72 (435)
Noncontrolling interest(1)(1)
Net identifiable assets acquired1,394 (33)1,361 
Goodwill141 33 174 
Total net assets acquired$1,535 $$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 information utilized to determine fair value during the measurement period.
The goodwill resulting from the acquisition of AK Steel was assigned to our downstream Tubular and Tooling and 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 light weighting solutions to automotive customers, as well as any synergistic benefits to be realized. Goodwill from the AK Steel Merger is not expected be deductible for income tax purposes.
Thepreliminary 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
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(In Millions)Weighted Average Life (In Years)
Customer relationships$13 15
Supplier relationships21 18
Trade names and trademarks7 15
Total identifiable intangible assets$41 17

Intangible assets are classified as
The above-market supply contracts relate toOther non-current assets on 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 months ended March 31, 2020, as if AK Steel had been acquired asStatements of January 1, 2019:
(In Millions)Unaudited Condensed Consolidated Financial Position.
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 AK 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 $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 AK Steel. This unaudited pro forma financial information should not be considered indicative of the results that would have actually occurred if the AK 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
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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)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Steelmaking:Steelmaking:Steelmaking:
AutomotiveAutomotive$1,287 $102 Automotive$1,607 $1,287 
Infrastructure and manufacturingInfrastructure and manufacturing954 39 Infrastructure and manufacturing1,542 954 
Distributors and convertersDistributors and converters1,248 52 Distributors and converters1,829 1,248 
Steel producersSteel producers430144 Steel producers816 430 
Total SteelmakingTotal Steelmaking3,919 337 Total Steelmaking5,794 3,919 
Other Businesses:Other Businesses:Other Businesses:
AutomotiveAutomotive105 16 Automotive122 105 
Infrastructure and manufacturingInfrastructure and manufacturing10 Infrastructure and manufacturing15 10 
Distributors and convertersDistributors and converters15 Distributors and converters24 15 
Total Other BusinessesTotal Other Businesses130 22 Total Other Businesses161 130 
Total revenuesTotal revenues$4,049 $359 Total revenues$5,955 $4,049 
The following table representstables represent 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 
Other steel products289 403 
Iron products70 600 142 1,351 
Other118 N/AN/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
(Dollars in Millions,
Sales Volumes in Thousands of Net Tons)
Three Months Ended March 31,
20222021
RevenueVolumeRevenueVolume
Steelmaking:
Hot-rolled steel$1,194 903 $895 1,182 
Cold-rolled steel984 651 632 748 
Coated steel1,775 1,242 1,308 1,369 
Stainless and electrical steel551 189 363 167 
Plate421 221 244 275 
Other steel products334 431 289 403 
Other535 N/A188 N/A
Total Steelmaking5,794 3,919 
Other Businesses:
Other161 N/A130 N/A
Total revenues$5,955 $4,049 

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NOTE 5 - SEGMENT REPORTING
We are vertically integrated from the mining ofmined raw materials and direct reduced iron ore and coal;ferrous scrap to production of metallicsprimary steelmaking and coke; through iron making, steelmaking, rolling, finishing;downstream finishing, stamping, tooling and to downstream tubing, stamping and tooling.tubing. 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 Steelmaking segment isoperates as the largest flat-rolled steel producer supported by being the largest iron ore pellet producer as well as a leading prime scrap processor in North America, primarily serving the automotive, distributors and converters and infrastructure and manufacturing and distributors and converters markets. Our Other 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. All intersegment transactions were eliminated in consolidation.
We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other
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external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
Our results by segment are as follows:
(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 
Corporate and eliminations(35)(23)
Total Adjusted EBITDA$513 $23 
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(In Millions)
Three Months Ended
March 31,
20222021
Revenues:
Steelmaking$5,794 $3,919 
Other Businesses161 130 
Total revenues$5,955 $4,049 
Adjusted EBITDA:
Steelmaking$1,423 $502 
Other Businesses29 11 
Eliminations1
(1)— 
Total Adjusted EBITDA$1,451 $513 
1 In 2022, we began allocating Corporate SG&A to our operating segments. Prior periods have been adjusted to reflect this change. The Eliminations line now only includes sales between segments.
The following table provides a reconciliation of our consolidated Net income (loss) to total Adjusted EBITDA:
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Net income (loss)$57 $(49)
Net incomeNet income$814 $57 
Less:Less:Less:
Interest expense, netInterest expense, net(92)(31)Interest expense, net(77)(92)
Income tax benefit (expense)(9)51 
Income tax expenseIncome tax expense(237)(9)
Depreciation, depletion and amortizationDepreciation, depletion and amortization(217)(35)Depreciation, depletion and amortization(301)(217)
375 (34)1,429 375 
Less:Less:Less:
EBITDA of noncontrolling interests1
EBITDA of noncontrolling interests1
22 
EBITDA of noncontrolling interests1
22 22 
Gain (loss) on extinguishment of debt(66)
Asset impairmentAsset impairment(29)— 
Loss on extinguishment of debtLoss on extinguishment of debt(14)(66)
Severance costsSeverance costs(11)(19)Severance costs(1)(11)
Acquisition-related costs excluding severance costsAcquisition-related costs excluding severance costs(2)(23)Acquisition-related costs excluding severance costs(1)(2)
Amortization of inventory step-upAmortization of inventory step-up(81)(23)Amortization of inventory step-up (81)
Impact of discontinued operationsImpact of discontinued operations0 Impact of discontinued operations1 — 
Total Adjusted EBITDATotal Adjusted EBITDA$513 $23 Total Adjusted EBITDA$1,451 $513 
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.
1 EBITDA of noncontrolling interests includes the following:
1 EBITDA of noncontrolling interests includes the following:
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests$13 $16 
Depreciation, depletion and amortizationDepreciation, depletion and amortization9 
EBITDA of noncontrolling interestsEBITDA of noncontrolling interests$22 $22 
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The following summarizes our assets by segment:
(In Millions)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
Assets:Assets:Assets:
SteelmakingSteelmaking$16,271 $15,849 Steelmaking$19,042 $18,326 
Other BusinessesOther Businesses295 239 Other Businesses335 306 
Total segment assetsTotal segment assets16,566 16,088 Total segment assets19,377 18,632 
Corporate649 683 
Corporate/EliminationsCorporate/Eliminations391 343 
Total assetsTotal assets$17,215 $16,771 Total assets$19,768 $18,975 
The following table summarizes our capital additions by segment:
(In Millions)
Three Months Ended
March 31,
20212020
Capital additions1:
Steelmaking$133 $154 
Other Businesses11 
Corporate18 
Total capital additions$162 $158 
1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.
18
(In Millions)
Three Months Ended
March 31,
20222021
Capital additions1:
Steelmaking$175 $133 
Other Businesses6 11 
Corporate 18 
Total capital additions$181 $162 
1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.

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NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
The following table indicates the carrying value of each of the major classes of our depreciable assets:
(In Millions)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
Land, land improvements and mineral rightsLand, land improvements and mineral rights$1,241 $1,213 Land, land improvements and mineral rights$1,397 $1,291 
BuildingsBuildings1,004 703 Buildings907 889 
EquipmentEquipment7,877 6,786 Equipment8,691 8,709 
OtherOther173 151 Other233 229 
Construction in progressConstruction in progress407 1,364 Construction in progress414 408 
Total property, plant and equipment1
Total property, plant and equipment1
10,702 10,217 
Total property, plant and equipment1
11,642 11,526 
Allowance for depreciation and depletionAllowance for depreciation and depletion(1,688)(1,474)Allowance for depreciation and depletion(2,630)(2,340)
Property, plant and equipment, netProperty, plant and equipment, net$9,014 $8,743 Property, plant and equipment, net$9,012 $9,186 
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.
1 Includes right-of-use assets related to finance leases of $371 million and $411 million as of March 31, 2022 and December 31, 2021, respectively.
1 Includes right-of-use assets related to finance leases of $371 million and $411 million as of March 31, 2022 and December 31, 2021, respectively.
We recorded depreciation and depletion expense of $215$298 million and $36$215 million for the three months ended March 31, 2022 and 2021, respectively. Depreciation and 2020, respectively.depletion expense for the three months ended March 31, 2022 includes $68 million of accelerated depreciation related to the indefinite idle of the Indiana Harbor #4 blast furnace.
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NOTE 7 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES
Goodwill
The following is a summary of Goodwill by segment:
(In Millions)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
SteelmakingSteelmaking$820 $1,232 Steelmaking$953 $942 
Other BusinessesOther Businesses174 174 Other Businesses174 174 
Total goodwillTotal goodwill$994 $1,406 Total goodwill$1,127 $1,116 
The decreaseincrease of $412$11 million in the balance of Goodwill in our Steelmaking segment as of March 31, 2021,2022, compared to December 31, 2020,2021, is due to the change in estimated identified goodwill as a result of measurement period adjustments to the preliminary purchase price allocation for the acquisition of ArcelorMittal USA.FPT. Refer to NOTE 3 - ACQUISITIONS for further details.
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Intangible Assets and Liabilities
The following is a summary of our intangible assets and liabilities:
(In Millions)(In Millions)
March 31, 2021December 31, 2020March 31, 2022December 31, 2021
Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Intangible assets1:
Intangible assets1:
Intangible assets1:
Customer relationshipsCustomer relationships$77 $(5)$72 $77 $(3)$74 Customer relationships$90 $(9)$81 $95 $(8)$87 
Developed technologyDeveloped technology60 (4)56 60 (3)57 Developed technology60 (8)52 60 (6)54 
Trade names and trademarksTrade names and trademarks11 (1)10 11 (1)10 Trade names and trademarks18 (3)15 18 (2)16 
Mining permitsMining permits72 (25)47 72 (25)47 Mining permits72 (26)46 72 (26)46 
Supplier relationshipsSupplier relationships21  21 18 — 18 
Total intangible assetsTotal intangible assets$220 $(35)$185 $220 $(32)$188 Total intangible assets$261 $(46)$215 $263 $(42)$221 
Intangible liabilities2:
Intangible liabilities2:
Intangible liabilities2:
Above-market supply contractsAbove-market supply contracts$(71)$8 $(63)$(71)$$(64)Above-market supply contracts$(71)$15 $(56)$(71)$14 $(57)
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.
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.
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.
2 Intangible liabilities are classified as Other non-current liabilities. Amortization of all intangible liabilities is recognized in Cost of goods sold.
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 $3$4 million and $1$3 million for the three months ended March 31, 20212022 and 2020,2021, respectively. Estimated future amortization expense is $7$9 million for the remainder of 20212022 and $10$13 million annually for the years 20222023 through 2026.2027.
Income from amortization related to the intangible liabilities was $1 million and $2 million for both the three months ended March 31, 2022 and 2021 and 2020, respectively.was $1 million. Estimated future income from amortization is $6$4 million for the remainder of 20212022 and $5 million annually for the years 20222023 through 2026.2027.
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NOTE 8 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt:
(In Millions)(In Millions)(In Millions)
March 31, 2021
Debt InstrumentDebt Instrument
Issuer1
Annual Effective
Interest Rate
Total Principal AmountUnamortized
Debt Issuance Costs
Unamortized Premiums (Discounts)Total DebtDebt Instrument
Issuer1
Annual Effective
Interest Rate
March 31,
2022
December 31,
2021
Senior Secured Notes:Senior Secured Notes:Senior Secured Notes:
9.875% 2025 Senior Secured Notes9.875% 2025 Senior Secured NotesCliffs10.57%$633 $(5)$(16)$612 9.875% 2025 Senior Secured NotesCliffs10.57%$607 $607 
6.75% 2026 Senior Secured NotesCliffs6.99%845 (19)(8)818 
6.750% 2026 Senior Secured Notes6.750% 2026 Senior Secured NotesCliffs6.99%845 845 
Senior Unsecured Notes:Senior Unsecured Notes: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 
1.500% 2025 Convertible Senior Notes1.500% 2025 Convertible Senior NotesCliffs6.26% 294 
7.000% 2027 Senior Notes7.000% 2027 Senior NotesCliffs9.24%73 73 
7.000% 2027 AK Senior Notes7.000% 2027 AK Senior NotesAK Steel9.24%56 56 
5.875% 2027 Senior Notes5.875% 2027 Senior NotesCliffs6.49%556 (4)(17)535 5.875% 2027 Senior NotesCliffs6.49%556 556 
4.625% 2029 Senior Notes4.625% 2029 Senior NotesCliffs4.63%500 (9)0 491 4.625% 2029 Senior NotesCliffs4.63%500 500 
4.875% 2031 Senior Notes4.875% 2031 Senior NotesCliffs4.88%500 (9)0 491 4.875% 2031 Senior NotesCliffs4.88%500 500 
6.25% 2040 Senior NotesCliffs6.34%263 (2)(3)258 
6.250% 2040 Senior Notes6.250% 2040 Senior NotesCliffs6.34%263 263 
IRBs due 2024 to 2028IRBs due 2024 to 2028AK SteelVarious92 0 2 94 IRBs due 2024 to 2028AK SteelVarious 66 
EDC Revolving Facilities3
*Various80   53 
ABL Facility3
Cliffs2
2.14%3,500   1,630 
ABL FacilityABL Facility
Cliffs2
Variable3
1,715 1,609 
Total principal amountTotal principal amount5,115 5,369 
Unamortized discounts and issuance costsUnamortized discounts and issuance costs(87)(131)
Total long-term debtTotal long-term debt$5,734 Total long-term debt$5,028 $5,238 
* 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).
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).
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.
2 Refers to Cleveland-Cliffs Inc. as borrower under our ABL Facility.
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.
3 Our ABL Facility annual effective interest rate was 2.00% and 1.87%, respectively, as of March 31, 2022 and December 31, 2021.
3 Our ABL Facility annual effective interest rate was 2.00% and 1.87%, respectively, as of March 31, 2022 and December 31, 2021.
Debt Extinguishments - 2022
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TableOn January 18, 2022, we redeemed all of Contents

(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 34 
7.50% 2023 AK Senior NotesAK Steel6.17%13 13 
6.375% 2025 Senior NotesCliffs8.11%64 (4)60 
6.375% 2025 AK Senior NotesAK Steel8.11%29 (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 (8)65 
7.00% 2027 AK Senior NotesAK Steel9.24%56 (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 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.
4.625% 2029our outstanding 1.500% 2025 Convertible Senior Notes
On February 17, 2021, we entered into an indenture among Cliffs, through a combination settlement, with 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 4.625% 2029 Senior Notes issued at par value.
The 4.625% 2029 Senior Notes were issued$294 million paid in private placement transactions exempt from the registration requirementscash, and 24 million common shares, with a fair value of $499 million, delivered to noteholders in settlement of the Securities Act. The 4.625% 2029 Senior Notes bear interest at a rate of 4.625%premium due per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021. The 4.625% 2029 Senior Notes will mature on March 1, 2029.
The 4.625% 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 4.625% 2029 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 4.625% 2029 Senior Notes.
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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 holdersterms of the notes. The following is a summaryindenture, plus cash in respect 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 indenture, occurs with respect to the 4.625% 2029 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,on the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date of repurchase.
Theper the terms of the 4.625% 2029 Senior Notes contain certain customary covenants; however, there are no financial covenants.indenture.
4.875% 2031 Senior Notes
On February 17, 2021,Additionally, on March 25, 2022, 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 $500redeemed all $66 million aggregate principal amount of 4.875% 2031 Senior Notes issued at par value.
The 4.875% 2031 Senior Notes were issued in private placement transactions exempt from the registration requirementsoutstanding of the Securities Act. The 4.875% 2031 Senior Notes bear interest at a rate of 4.875% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021. The 4.875% 2031 Senior Notes will mature on March 1, 2031.
The 4.875% 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 seniorIRBs due 2024 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.
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The 4.875% 2031 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 4.875% 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 
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.
The terms of the 4.875% 2031 Senior Notes contain certain customary covenants; however, there are no financial covenants.
Debt 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, 7.50% 2023 AK Senior Notes, 6.375% 2025 Senior Notes and 6.375% 2025 AK Senior Notes, which totaled an aggregate principal amount of $535 million.2028.
The following is a summary of the debt extinguished and the respective impact on extinguishment:
(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)
(In Millions)
Three Months Ended
March 31, 2022
Debt InstrumentDebt ExtinguishedGain (Loss) on Extinguishment
1.500% 2025 Convertible Senior Notes$294 $(16)
IRBs due 2024 to 202866 2 
Total$360 $(14)
Debt Extinguishments - 2020
OnSubsequent to the quarter ended March 13, 2020, in connection with the AK Steel Merger,31, 2022, we purchased $364 million aggregate principal amountredeemed all of 7.625% 2021 AK Senior Notes and $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% 2026our outstanding 9.875% 2025 Senior Secured Notes along with a portion of the ABL Facility borrowings, were usedavailable liquidity on April 20, 2022. Refer 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, we purchased $9 million aggregate principal amount of the 7.625% 2021 AK Senior Notes and $56 million aggregate principal amount of the 7.50% 2023 AK Senior Notes with cash on hand.NOTE 19 - SUBSEQUENT EVENTS for further information.
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The following is a summary of the debt extinguished and the respective impact on extinguishment:
(In Millions)
Three Months Ended
March 31, 2020
Debt InstrumentDebt ExtinguishedGain on Extinguishment
7.625% 2021 AK Senior Notes$373 $
7.50% 2023 AK Senior Notes367 
$740 $
ABL Facility
As of March 31, 2021,2022, 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)
March 31,
20212022
Available borrowing base on ABL Facility1
$3,5004,500 
Borrowings(1,630)(1,715)
Letter of credit obligations2
(272)(171)
Borrowing capacity available$1,5982,614 
1 As of March 31, 2021,2022, the ABL Facility has a maximum available borrowing base of $3.5$4.5 billion. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
2 We issued standby letters of credit with certain financial institutions in order to support business obligations including, but not limited to, workers' compensation, employee severance, insurance, operating agreements IRBs and environmental obligations.
Debt Maturities
The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at March 31, 2021:2022:
(In Millions)
Maturities of Debt
2021 (remaining period of year)$
2022
202353 
202462 
20252,955 
Thereafter2,823 
Total maturities of debt$5,893 
25
(In Millions)
Maturities of Debt
2022 (remaining period of year)$— 
2023— 
2024— 
20252,322 
2026845 
Thereafter1,948 
Total maturities of debt$5,115 

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NOTE 9 - FAIR VALUE MEASUREMENTS
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. See NOTE 13 - DERIVATIVE INSTRUMENTS for information on our derivative instruments, which are accounted for at fair value on a recurring basis.
A summary of the carrying value and fair value of other financial instruments were as follows:
(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 
(In Millions)
March 31, 2022December 31, 2021
Classification
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Senior notesLevel 1$3,313 $3,525 $3,561 $3,911 
IRBs due 2024 to 2028Level 1  68 66 
ABL Facility - outstanding balanceLevel 21,715 1,715 1,609 1,609 
Total$5,028 $5,240 $5,238 $5,586 
The fair value of long-term debt was determined using quoted market prices.
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NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We offer defined benefit pension plans, defined contribution pension plans and OPEB plans to a significant portion of our employees and retirees. Benefits are also provided through multiemployer plans for certain union members.
The following are the components of defined benefit pension and OPEB costs (credits):
Defined Benefit Pension Costs (Credits)
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Service costService cost$14 $Service cost$12 $14 
Interest costInterest cost26 Interest cost32 26 
Expected return on plan assetsExpected return on plan assets(90)(18)Expected return on plan assets(92)(90)
Amortization:Amortization:Amortization:
Net actuarial lossNet actuarial loss8 Net actuarial loss4 
Net periodic benefit cost (credit)$(42)$
Net periodic benefit creditsNet periodic benefit credits$(44)$(42)
OPEB Costs (Credits)
(In Millions)
Three Months Ended
March 31,
20212020
Service cost$13 $
Interest cost18 
Expected return on plan assets(10)(5)
Amortization:
Prior service credits0 (1)
Net actuarial loss1 
Net periodic benefit cost (credit)$22 $(2)
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(In Millions)
Three Months Ended
March 31,
20222021
Service cost$11 $13 
Interest cost20 18 
Expected return on plan assets(10)(10)
Amortization:
Net actuarial loss (income)(3)
Net periodic benefit costs$18 $22 
Based on funding requirements, we made no defined benefit pension contributions of $146 million and $4 million for the three months ended March 31, 2021 and 2020, respectively.2022. Based on funding requirements, we made $146 million of defined benefit pension contributions for the three months ended March 31, 2021. As a result of the CARES Act enacted on March 27, 2020, we deferred $118 million of 2020 pension contributions, which were paid on January 4, 2021. We made contributions of $28 million to our voluntary employee benefit association trust plans for the three months ended March 31, 2022. Based on funding requirements, 0no contributions forto our voluntary employee benefit association trust plans were required or made for the three months ended March 31, 2021 and 2020.2021.
NOTE 11 - INCOME TAXES
Our 2022 estimated annual effective tax rate before discrete items as of March 31, 2022 is 22%. The estimated annual effective tax rate exceeds the U.S. statutory rate of 21%, as state income tax expense exceeds the percentage depletion in excess of cost depletion. The 2021 estimated annual effective tax rate before discrete items as of March 31, 2021 iswas 19%. The 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. The 2020 estimated annual effective tax rate before discrete items as of March 31, 2020 was 47%. The decreaseincrease in the estimated annual effective tax rate before discrete items is driven by the change in income and a decrease to the mixpercentage depletion in excess of income.cost depletion.
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NOTE 12 - ASSET RETIREMENT OBLIGATIONS
The following is a summary of our asset retirement obligations:
(In Millions)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
Asset retirement obligations1
Asset retirement obligations1
$310 $342 
Asset retirement obligations1
$460 $449 
Less: current portionLess: current portion12 Less: current portion33 35 
Long-term asset retirement obligationsLong-term asset retirement obligations$298 $335 Long-term asset retirement obligations$427 $414 
1 Includes $158 million and $190 million related to our active operations as of March 31, 2021 and December 31, 2020, respectively.
1 Includes $297 million and $293 million related to our active operations as of March 31, 2022 and December 31, 2021, respectively.
1 Includes $297 million and $293 million related to our active operations as of March 31, 2022 and December 31, 2021, respectively.
The accrued closure obligation provides for contractual and legal obligations related to our indefinitely idled and closed operations and for the eventual closure of our active operations. The closure date for each of our active mine sites was determined based on the exhaustion date of the remaining mineral 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)(In Millions)
2021202020222021
Asset retirement obligation as of January 1Asset retirement obligation as of January 1$342 $165 Asset retirement obligation as of January 1$449 $342 
Increase (decrease) from Acquisitions(34)14 
Decrease from acquisitionsDecrease from acquisitions (34)
Accretion expenseAccretion expense3 Accretion expense7 
Revision in estimated cash flowsRevision in estimated cash flows7 — 
Remediation paymentsRemediation payments(1)Remediation payments(3)(1)
Asset retirement obligation as of March 31Asset retirement obligation as of March 31$310 $181 Asset retirement obligation as of March 31$460 $310 
NOTE 13 - DERIVATIVE INSTRUMENTS
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.
Our commodity contracts are designated as cash flow hedges for accounting purposes, and we record the gains and losses for the derivatives in Accumulated other comprehensive income until we reclassify them into Cost of goods sold when we recognize the associated underlying operating costs. Refer to NOTE 15 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) for further information.
The decrease from Acquisitions forfollowing table presents the three months ended March 31, 2021, relates to measurement period adjustments as a resultnotional amount of the preliminary purchase price allocation of the AM USA Transaction.our outstanding hedge contracts:
(In Millions)
March 31, 2022December 31, 2021
Commodity ContractsUnit of MeasureMaturity DatesNotional AmountNotional Amount
Natural gasMMBtuApril 2022 - November 2024105 93 
ZincPoundsApril 2022 - December 202227 35 
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The following table presents the fair value of our cash flow hedges and the classification in the Statements of Unaudited Condensed Consolidated Financial Position:
(In Millions)
Balance Sheet LocationMarch 31,
2022
December 31,
2021
Other current assets$140 $40 
Other non-current assets26 — 
Other current liabilities (10)
Other non-current liabilities (4)
NOTE 1314 - CAPITAL STOCK
Share Repurchase Program
On February 10, 2022, our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchases, up to a maximum of $1 billion. We are not obligated to make any purchases and the program may be suspended or discontinued at any time. The share repurchase program does not have a specific expiration date. During the three months ended March 31, 2022, we repurchased 1 million common shares at a cost of $19 million in the aggregate.
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 of our 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 - 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 127 million common shares in connection with the AK Steel Merger at a fair value of $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 haveauthorized and 4,000,000 shares of Serial Preferred Stock, Class B, without par value, authorized, of which, 583,273authorized; no preferred shares are issued and outstanding as described above.or outstanding.
Dividends
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The below table summarizes our dividend activity during 2020:

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Declaration Date
Record DatePayment DateDividend Declared per Common Share
2/18/20204/3/20204/15/2020$0.06 
12/2/20191/3/20201/15/20200.06 
Subsequent to the dividend paid on April 15, 2020, our Board suspended future dividends.
NOTE 1415 - ACCUMULATED OTHER COMPREHENSIVE LOSSINCOME (LOSS)
The following tables reflect the changes in Accumulated other comprehensive lossincome related to Cliffs shareholders’ equity:
(In Millions)
Postretirement Benefit Liability,
net of tax
Foreign Currency TranslationDerivative Financial Instruments, net of taxAccumulated Other Comprehensive Loss
December 31, 2020$(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 $(120)
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(In Millions)
Postretirement Benefit Liability, net of taxForeign
Currency Translation
Derivative Financial Instruments,
net of tax
Accumulated Other Comprehensive Loss
December 31, 2019$(316)$$(3)$(319)
Other comprehensive loss before reclassifications(1)(5)(6)
Net loss reclassified from accumulated other comprehensive loss
March 31, 2020$(310)$(1)$(6)$(317)
The following table reflects the details about Accumulated other comprehensive loss components reclassified from Cliffs shareholders’ equity:
(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 $Other non-operating income
Income tax benefit(2)(1)Income tax benefit (expense)
Net of taxes$7 $
Changes in derivative financial instruments:
Commodity contracts$(1)$Cost of goods sold
Income tax benefit0 (1)Income tax benefit (expense)
Net of taxes$(1)$
Total reclassifications for the period, net of tax$6 $
(In Millions)
Three Months Ended
March 31,
20222021
Foreign Currency Translation
Beginning balance$1 $
Other comprehensive loss before reclassifications (1)
Ending balance$1 $
Derivative Instruments
Beginning balance$68 $(1)
Other comprehensive income before reclassifications168 10 
Income tax(39)(2)
Other comprehensive income before reclassifications, net of tax129 
Gains reclassified from AOCI to net income1
(42)(1)
Income tax expense2
9 — 
Net gains reclassified from AOCI to net income(33)(1)
Ending balance$164 $
Pension and OPEB
Beginning balance$549 $(135)
Net actuarial loss reclassified from AOCI to net income3
1 
Income tax benefit2
 (2)
Net losses reclassified from AOCI to net income1 
Ending balance$550 $(128)
Total AOCI Ending Balance$715 $(120)
1 Amounts recognized in Cost of goods sold in the Statements of Unaudited Condensed Consolidated Operations.
2 Amounts recognized in Income tax expense in the Statements of Unaudited Condensed Consolidated Operations.
3 Amounts recognized in Net periodic benefit credits other than service cost component in the Statements of Unaudited Condensed Consolidated Operations.
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.
Hibbing is a co-owned joint venture in which we own 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 with ArcelorMittal resulted in Revenues from related parties. As of March 31, 2020, we owned 23% of Hibbing.
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 %%
Purchases from related parties$27 $
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The following table presents the classification of related party assets and liabilities in the Statements of Unaudited Condensed Consolidated Financial Position:
(In Millions)
Balance Sheet Location of Assets (Liabilities)March 31,
2021
December 31,
2020
Accounts receivable, net$30 $
Accounts payable(9)(6)
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 and have committed to purchase all the expected production from the facility through 2032. We consolidate SunCoke Middletown as a VIE because we are the primary beneficiary despite having no ownership interest in SunCoke Middletown. SunCoke Middletown had income before income taxes of $17$15 million and $4$17 million for the three months ended March 31, 20212022 and 2020,2021, respectively, that was included in our consolidated income before income taxes.
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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 Statements of Unaudited Condensed Consolidated Financial Position includes the following amounts for SunCoke Middletown:
(In Millions)
March 31,
2021
December 31,
2020
Cash and cash equivalents$4 $
Inventories22 21 
Property, plant and equipment, net304 308 
Accounts payable(12)(15)
Other assets (liabilities), net1 (10)
Noncontrolling interests(319)(309)
30
(In Millions)
March 31,
2022
December 31,
2021
Cash and cash equivalents$ $— 
Inventories30 20 
Property, plant and equipment, net294 300 
Accounts payable(20)(12)
Other assets (liabilities), net(16)(12)
Noncontrolling interests(288)(296)

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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)(In Millions, Except Per Share Amounts)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Income (loss) from continuing operations$57 $(50)
Income from continuing operationsIncome from continuing operations$813 $57 
Income from continuing operations attributable to noncontrolling interestIncome from continuing operations attributable to noncontrolling interest(16)(3)Income from continuing operations attributable to noncontrolling interest(13)(16)
Net income (loss) from continuing operations attributable to Cliffs shareholders41 (53)
Net income from continuing operations attributable to Cliffs shareholdersNet income from continuing operations attributable to Cliffs shareholders800 41 
Income from discontinued operations, net of taxIncome from discontinued operations, net of tax0 Income from discontinued operations, net of tax1 — 
Net income (loss) attributable to Cliffs shareholders$41 $(52)
Net income attributable to Cliffs shareholdersNet income attributable to Cliffs shareholders$801 $41 
Weighted average number of shares:Weighted average number of shares:Weighted average number of shares:
BasicBasic490298Basic521490
Redeemable preferred sharesRedeemable preferred shares580Redeemable preferred shares58
Convertible senior notes190
Convertible senior notes1
Convertible senior notes1
719
Employee stock plansEmployee stock plans40Employee stock plans44
DilutedDiluted571298Diluted532571
Earnings (loss) per common share attributable to Cliffs shareholders - basic1:
Earnings per common share attributable to Cliffs shareholders - basic2:
Earnings per common share attributable to Cliffs shareholders - basic2:
Continuing operationsContinuing operations$0.08 $(0.18)Continuing operations$1.54 $0.08 
Discontinued operationsDiscontinued operations0 Discontinued operations — 
$0.08 $(0.18)$1.54 $0.08 
Earnings (loss) per common share attributable to Cliffs shareholders - diluted:
Earnings per common share attributable to Cliffs shareholders - diluted:Earnings per common share attributable to Cliffs shareholders - diluted:
Continuing operationsContinuing operations$0.07 $(0.18)Continuing operations$1.50 $0.07 
Discontinued operationsDiscontinued operations0 Discontinued operations — 
$0.07 $(0.18)$1.50 $0.07 
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.
1 On January 1, 2022, we adopted 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). We utilized the modified retrospective method of adoption; using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year.
1 On January 1, 2022, we adopted 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). We utilized the modified retrospective method of adoption; using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year.
2 For the three months ended March 31, 2021, basic earnings per share is calculated by dividing Net income 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.
2 For the three months ended March 31, 2021, basic earnings per share is calculated by dividing Net income 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.
For the three months ended March 31, 2020, we had 2 million shares related to employee stock plans that were excluded from the diluted EPS calculation as they were anti-dilutive. There was 0 dilution during the three months ended 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
We purchase portions of the principal 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 purchases of chrome, industrial gases and a portion of our electricity under multi-year agreements. Our purchases of coke 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 requiredgovernment-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 remediation is determined or approved by the remediation.relevant environmental agencies. 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)(In Millions)
March 31,
2021
December 31,
2020
March 31,
2022
December 31,
2021
Environmental obligationsEnvironmental obligations$134 $135 Environmental obligations$206 $207 
Less: current portionLess: current portion20 18 Less: current portion19 20 
Long-term environmental obligationsLong-term environmental obligations$114 $117 Long-term environmental obligations$187 $187 
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.
Pursuant 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
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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.units. Environmental regulators have the authority to inspect all of our 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 that they believe require corrective action.
Pursuant to CERCLA, the EPA and state environmental authorities have conducted site investigations at some 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
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investigations, however, we cannot reasonably 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 with the consent of the EPA pursuant to Section 122 of CERCLA to perform a RI/FS of the Hamilton plant 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. Until the RI/FS is complete, we cannot reasonably 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 reasonably 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. Until the site investigation is complete, we cannot reasonably estimate the costs, if any, we may incur for potential additional required remediation of the site or when we may incur them.
Burns Harbor Water Issues
In August 2019, ArcelorMittal Burns Harbor LLC (n/k/a Cleveland-Cliffs Burns Harbor LLC) suffered a loss of the blast furnace cooling water recycle system, which led to the discharge of cyanide and ammonia in excess of the Burns 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 beenWe engaged in settlement discussions with the U.S. Department of Justice, the EPA and the State of Indiana to resolve any alleged violations of environmental laws or regulations. Also,regulations arising out of the August 2019 event. Later stages of the settlement discussions included the Environmental Law and Policy Center (ELPC) and Hoosier Environmental Council (HEC), which had filed a lawsuit on December 20, 2019 in the U.S. District Court for the Northern District of Indiana alleging violations resulting from the August 2019 event and other Clean Water Act claims. On February 14, 2022, the United States and the State of Indiana filed a complaint and a proposed consent decree, and on April 21, 2022, the United States, with the consent of all of the parties, filed a motion seeking final approval of the consent decree from the court. The consent decree requires specified enhancements to the mill's wastewater treatment systems and a $3 million civil penalty, along with other terms and conditions. Other parties to the consent decree include the United States, the State of Indiana, ELPC and HEC. In addition, 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, including follow-up requests. In addition,With 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. 19-cv-473), which was filed on December 20, 2019,have alleged violations resulting from the August 2019 eventresolution of monetary sanctions and other Clean Water Act claims. Although we cannot accurately estimate the amount of civil penalty, the cost of any injunctive relief requirements orunder the pending consent decree, we do not believe that the costs to resolve any other third-party claims, including potential natural resource damages claims, theythat may arise out of the August 2019 event are likely to exceedhave, individually or in the reporting threshold in total.aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.
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 any 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, personal injury, commercial, employee benefits and other matters arising in the ordinary course of business. Because of the considerable uncertainties that 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 or 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 throughOn March 21, 2022, we issued a notice of redemption for all $607 million aggregate principal amount outstanding of the 9.875% 2025 Senior Secured Notes. The total payment made on April 20, 2022, the redemption date, to holders of financial statement issuance.the notes, including the redemption premium, was $677 million. The notes were redeemed with available liquidity and resulted in a loss on extinguishment of debt of $85 million, which will be recorded during the second quarter of 2022. The cash interest associated with these notes was approximately $60 million per year.
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, 2020,2021, as well as other publicly available information.
Overview
Cleveland-CliffsCliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, we are also the largest producermanufacturer of iron ore pellets in North America. In 2020, we acquired two major steelmakers, AK SteelWe are vertically integrated from mined raw materials, direct reduced iron and ArcelorMittal USA, vertically integrating our legacy iron ore business with quality-focusedferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are the largest supplier of steel production and emphasis onto the automotive end market. Our fully integrated portfolio includes custom-made pelletsindustry in North America and HBI;serve a diverse range of other markets due to our comprehensive offering of flat-rolled carbon steel stainless, electrical, plate, tinplate and long steel products; and carbon and stainless steel tubing, hot and cold stamping and tooling.products. Headquartered in Cleveland, Ohio, we employ approximately 25,00026,000 people across our mining, steel and downstream manufacturing operations in the United States and Canada.
Economic Overview
The fundamentals for our U.S.-centric, vertically integrated business have rebounded strongly sinceremain healthy as demand continues to be strong, the COVID-19 pandemic disruption that occurred during 2020.economic rationale for importing steel has diminished and our primary competition’s cost structure has increased more than our own. We believe the ongoing increase in input costs, driven largely by current geopolitical events, provides us a unique advantage relative to our domestic peers, which can be capitalized on through higher margins. 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 pandemic. The HRC index averaged $1,201$1,215 per net ton for the first quarter of 2021, 105%2022, 4% higher than the same period last year.year and well above the prior ten-year average of approximately $712 per net ton. Our expectation, as supported by the futures curve, is that HRC will remain substantially above historical averages.
The dramatic increaseHRC prices bottomed in early March 2022 at $935 per net ton, before sharply rebounding 47% to $1,379 per net ton at the HRC price is a resultend of both supply and demand factors.the first quarter of 2022. Healthy consumer balance sheets have driven strong demand for light vehicles and consumer goods, such as HVAC products and appliances. In addition, demandDemand from machinery and equipment producers has remainedalso been robust. The demand for light vehicles has been strong; however, automotive supply chain difficulties have limited the demand for steel from automotive manufacturers. Additionally, the recently passed Infrastructure and Jobs Act of 2021 in the U.S. will likely generate increased steel demand. On the supply side, spot steel availability remains veryhas been limited as steel production in the U.S. has not recovered from the facility shutdowns that occurred during the early pandemic period. Import penetration has grown slightly but remains lower than its prior five-year average due to healthy demand globallyuncertainty in raw material supply and costs as well as trade restrictions suchhigher global steel prices, which reduces import viability.
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The conflict between Russia and Ukraine has disrupted raw material sourcing for our minimill competitors and increased their steelmaking input costs. Approximately two-thirds of all U.S. imported pig iron, a primary feedstock of minimills, is sourced from Russia and Ukraine. During the first quarter of 2022, imported pig iron prices surged from $565 to $1,045 per metric ton, the highest level since Fastmarkets AMM began assessing the pig iron market in September 2017. Higher imported pig iron costs will continue to support a higher HRC price. Unlike other flat-rolled steel producers, we are not reliant on imported pig iron as we produce it in house at our blast furnaces, using our own iron ore and HBI as the Section 232 tariffs.primary raw materials.
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 for iron units. The price offor busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., averaged $535has significantly increased since the beginning of 2022. The Fastmarkets AMM Cleveland busheling price increased from $580 per long ton duringat the beginning of the first quarter of 2021, a 70% increase from2022 to $795 per long ton for the prior-year period. Wemost recently reported data. As the nearest replacement to imported pig iron, we expect the busheling scrap price will remain elevated as the availability of imported pig iron from Russia and Ukraine remains uncertain. We had already expected the supply of busheling scrap to remain elevatedtight due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., along with a push for expanded EAF production in China.scrap use globally. As we are fully-integrated and primarily 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 enhance the benefit of sourcing more scrap internally following the profitability of our HBI sold externally,FPT Acquisition and provide greater cost savings potential for HBI used internally.
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The price of iron ore has also risen dramatically oversince the past year,beginning of 2022, from $120 to $158 per metric ton at the end of the first quarter, which along with strong demand, has been ananother important factor in rising steel prices globally. The Platts 62% Priceprice averaged $167$142 per metric ton in the first quarter of 2021, an 88% increase compared to2022, which is 44% higher than the same period in 2020.historical ten-year average. While playinghigher iron ore prices play a role in increased steel prices, of steel, we also directly benefit from higher iron ore prices for the portion of 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 quarterthree months of 2021,2022, North American light vehicle production was approximately 3.6 million units, a 5% reduction from the prior year’s comparable period. The reduction is primarily duehighest quarterly production volume since the first quarter of 2021. However, automotive production continues to be adversely affected by the global semiconductor shortage. In addition to the semiconductor shortage, production in North America has also experienced weather‐relatedas well as other material shortages and other supply chain disruptions, including a petrochemical shortage. Indisruptions. This has continued to cause several outages amongst light of these production outages, we have been able to redirect certain volumes intended for this end market tovehicle manufacturers and the spot market, where demandultimate resolution timing is strong and pricing is at an all-time high.currently unknown.
During the first quarter of 2021,2022, light vehicle sales in the U.S. saw a SAARseasonally adjusted annualized rate of approximately 16.714.2 million units, with 3.72.9 million passenger cars and 13.011.3 million light trucks sold. The first quarter average represents an 11% increasesold, representing a 15% decrease over the first quarter of 2020. However,2021 due primarily to decreased availability. While the most recent sales data from March reflected an increase in salessemiconductor shortage is still present, it has eased modestly since 2021. Production is expected to a SAAR of 17.9improve and finish the year at 14.7 million units compared to 13.0 million units in each of 2020 and 2021. Improved sales and continued production issues have kept inventory near all-time lows, with only 1.1 million units of gross stock at the highest sales rate in 41 months, leaving dealer inventories at multi-year lows.end of the first quarter of 2022.
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 stagefrom mined raw materials, direct reduced iron, and goes all the way through the manufacturing of steel products, includingferrous scrap to primary steelmaking and downstream finishing, 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 businessOne of producing iron ore pellets,our main competitive strengths is our ability to source our primary steelmakingfeedstock domestically and internally. This model reduces our exposure to volatile pricing and unreliable global sourcing. The current Russia-Ukraine conflict has displayed the importance of our U.S.-centric footprint, as our minimill competitors rely on imported pig iron to produce flat-rolled steel. We believe this advantage allows us to achieve margins above industry averages for flat-rolled steel, as we are not as reliant on unpredictable and volatile raw material input, is another competitive advantage. Mini-mills (producers using EAFs) now comprise about 70% of steel production in the U.S. Their primary iron input is scrap metal, which has unpredictablesupplies and often volatile pricing. By controllingBecause we control our iron ore pellet supply, our primary steelmaking raw material feedstock can be secured at a stable and predictable cost and not be subject to as many factors outside of our control.
The FPT Acquisition has given us a competitive advantage in sourcing prime scrap, as we have started leveraging our long-standing flat-rolled automotive and other customer relationships into recycling partnerships to further grow our prime scrap presence. In the short period of time since the FPT Acquisition was completed, we have already seen success in our strategy by increasing our prime scrap presence. Additionally, FPT has 22 facilities
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located primarily in the Midwest near our steel facilities, which gives us an increased advantage in logistics. We believe the strategic importance of these assets is now even further elevated as a result of the Russia-Ukraine conflict.
We are also the largest supplier of automotive-grade steel in 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. Given the strong demand and market environment for steel in 2021, we were able to significantly improve our fixed-price contracts, which should benefit us throughout 2022. Demand for our automotive-grade steel is expected to increase in 2022 with pent-up automotive demand as a result of the semiconductor shortage. With our continued technological innovation, as well as leading delivery performance, we expect to remain the leader in supplying this industry.
We are the only producers of both GOES and NOES in the U.S. The recently passed Infrastructure and Jobs Act of 2021 in the U.S. provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased electric vehicle adoption, both of which require electrical steels. As a result, with increased demand for both transformers and motors for electric vehicles, we expect to benefit from this position in what is currently a rapidly growing market.
We believe we offer the most comprehensive flat-rolled steel product selection in the industry, along with several complementary products and services. A sampling of thisour 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,GOES, NOES, stainless steels, tool &and die, stamped components, rail, slab and slabs.cast ingot. 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 and the only producer of HBI in the Great Lakes region. Construction of our Toledo Ohio, direct reduction plant was completed in the fourth quarter of 2020.2020 and reached full run-rate nameplate annual capacity of 1.9 million metric tons during the middle of 2021. From this modern plant, we produce a high-quality, low-cost and low-carbon intensive HBI product that can be used in our blast furnaces as a productivity enhancer or in our BOFs and EAFs as a premium scrap alternative. We use HBI to stretch our hot metal production, lowering carbon intensity and pig iron alternative. Ore-based metallics that competereliance on coke. As a result of our internal usage of HBI, coupled with our HBI generally have to be imported from locations like Russia, Ukraineongoing evaluation of coke use strategies, we idled our coke facility at Middletown Works during the third quarter of 2021 and Brazil.permanently closed our Mountain State Carbon coke plant in the first quarter of 2022. With increasing tightness in the scrap market and metallics markets combined with 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 combination 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 U.S. HRC index, which currently is at an all-time high.
MaximizingMaximize Our Commercial Strengths
With the Acquisitions completed, we now have enhanced our offering toWe offer a full suite of flat steel products encompassing all steps of the steel manufacturing process. We have increased ouran industry-leading market share in the automotive sector, where our portfolio of high-end products will deliverdelivers a broad range of differentiated solutions for this highly sought after customer base.
We believeAs a result of our exposure to these high-end markets, we have the broadest flat steel product offeringhighest fixed-price contractual volumes in North America,our industry. Approximately 45% of our volumes are sold under these contracts. These contracts reduce volatility and can meet customer needs from a variety of end marketsallow for more predictable through-the-cycle margins. The pricing in our fixed-price contracts has dramatically improved in 2022 compared to 2021. We expect to be able to maintain and quality specifications. We have several finishingincrease contract values as fundamentals remain strong and downstream facilities with advanced technological capabilities.the HRC price remains above historical averages.
We are also proponents of the “value over volume” approach in terms of steel supply. We take our leadership role in the industry very seriously and intend to manage our steel output in a responsible manner. In the first quarter of 2022, we announced the indefinite idle of Indiana Harbor #4 blast furnace. Going forward, we will continue to use our operational flexibility to align with our “value over volume” approach in terms of steel supply.
ExpandingTake Advantage of our U.S.-Centric, Internally Sourced Supply Chain
We believe the conflict between Russia and Ukraine has displayed the unique advantage of our vertically integrated business model. Two-thirds of U.S. imports of pig iron, a critical raw material for flat-rolled minimills, are sourced from Russia and Ukraine. This supply has been largely disrupted, driving a spike in costs and reduced availability for our competitors’ ferrous inputs. We produce our pig iron in house in the United States, supported by internally sourced iron ore and HBI and supplemented with internally sourced scrap. As a result, our costs remain relatively stable and our iron feedstock needs are secure compared to New Marketsour competitors.
Our
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While these competitors are forced to scramble for materials and increase their selling prices as a result of rising input costs, we expect to be able to realize higher margins as we take advantage of our vertically integrated footprint. We are also more secure in offering additional finished steel to customers with less exposure to uncertain materials costs or limited availability.
We began construction of our Toledo direct reduction plant in 2017, in part because of the uncertainty of the industry sourcing metallics from Russia and Ukraine. Russia had previously invaded the Crimea peninsula in 2014, and we felt it necessary to on-shore more metallics capacity to the United States. HBI, which is a lower-carbon alternative to imported pig iron, has also become a critical component of our decarbonization strategy.
Optimize Our Fully Integrated Steelmaking Footprint
We are a fully-integrated steel enterprise with the size and scale to achieve margins above industry averages for flat-rolled steel. Our focus remains on both maintaining and enhancing our cost advantage while also lowering carbon emissions. The combination of our ferrous raw materials, including iron ore, scrap and HBI, allows us to offer another unique, high-quality productdo so relative to discerningpeers who must rely on more unpredictable and unreliable raw material buyers. EAF steelmakers primarily use scrap for their iron feedstock, and our HBI offers a sophisticated alternative with less impurities, allowing other steelmakerssourcing strategies.
We have started to increase the qualityamount of their respective end-steel productsscrap and reduce reliance on imported metallics.
The completed Acquisitions provide other potential outlets for HBI as it can also be used in our integratedmelting processes to stretch our production of liquid pig iron from traditional inputs. With our acquisition of FPT, we have ample access to scrap along with internally-sourced HBI. The use of higher amounts of HBI in our blast furnaces ultimately boosts liquid steel operationsoutput, reduces coke needs and lowers carbon emissions from our operations. As a result of the successful operational improvements, we announced the indefinite idle of the Indiana Harbor #4 blast furnace in the first quarter of 2022. The indefinite idle reduced our operational blast furnaces from 8 to 7 without any expected change to our full-year 2022 steel shipment volumes.
Expand our Ferrous Scrap Recycling Presence
Throughout our entire footprint, we consume a very significant amount of scrap in our EAFs and BOFs, more than half of which can now be obtained through internal sources. Prime scrap is a byproduct of industrial manufacturing. As manufacturing in the U.S. has moved offshore and yields have improved, prime scrap supply has been shrinking for the last 50 years. As the steel industry continues to increase its focus on decarbonization and brings new flat-rolled EAF capacity online over the next five years, and the global metallics market remains disrupted as a result of the Russia-Ukraine conflict, securing additional access to prime scrap will continue to be an important strategic initiative.
Our expansion in this area began with the FPT Acquisition and has continued to grow by pairing FPT's processing capabilities with our long-standing customer relationships. As the largest supplier of flat-rolled steel in North America, we are the largest source of the steel that generates prime scrap in manufacturing facilities. Based on this, we are growing our prime scrap presence by leveraging our long-standing flat-rolled automotive and other customer relationships and expanding them into recycling partnerships. The FPT Acquisition allows us to optimize productivity at our existing EAFs and helpBOFs, as we have no current plans to reduce carbon footprint, allowing for more cost efficient and environmentally friendly steelmaking.add additional steelmaking capacity.
Advance our Participation in the Green Economy
We are also seeking to expand our customer base with the rapidly growing and desirable electric vehicle market. At this time, we believe the North American automotive industry is approaching a monumentalstructural inflection point with the adoption of electrical motors 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 our unique technical capabilities and leadership in the automotive industry, we believe we are positioned better than any other North American steelmaker to supply the steel and parts necessary to fill these needs.
Improving Financial FlexibilityWe also have the right products to meet the growing demand for renewable energy as well as for the modernization of the U.S. electrical grid. We offer plate products that can be used in windmills, which we estimate contain 130 tons of steel per megawatt of electricity. In addition, panels for solar power are heavy consumers of galvanized steel, where we are a leading producer. We estimate solar panels consume 40 tons of steel per megawatt of electricity.
GivenWe are currently the cyclicalitysole producer of our business, it is important to us to beelectrical steels in the financial position to easily withstand any negative demand or pricing pressure we may encounter. As such, our top priority forU.S., which can facilitate the allocationmodernization 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 debtU.S. electrical grid. Along with our own free cash flow generation. We willcharging networks, electrical steels are 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 series of favorable debt and equity capital markets transactions during February 2021. These actions will better prepare us to navigate more easily through potentially volatile industry conditionsneeded in the future.motors of electric vehicles.
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Enhance our Environmental Sustainability
As we transform, ourOur commitment to operating our business in a more environmentally responsible manner remains constant. One of the most important issues impacting our industry, our stakeholders and our planet is climate change. As a result,In early 2021, we are continuing Cliffs’ proactive approach by committingannounced our commitment to reduce GHG emissions 25% from 2017 levels by 2030. This goal represents combined Scope 1 (direct)(direct emissions) and Scope 2 (indirect)(indirect emissions from purchased electricity or other forms of energy) GHG emission reductions across all of our operations.
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Prior to setting this goal with our newly acquired steel assets, we exceeded our previous 26% GHG reduction target at our legacy facilities six years ahead of our 2025 goal. In 2019, we reduced our combined Scope 1 and Scope 2 GHG emissions by 42% on a mass basis from 2005 baseline levels. Our goal is to further reduce those emissions in coming years.
Additionally, manyOur future GHG emissions reductions are expected to be driven by the use of our steel assets have improved plantdirect reduced iron in blast furnaces, the stretching of hot metal with additional scrap, driving more productivity out of fewer blast furnaces, natural gas technologies, including natural gas injection, carbon capture, clean energy and energy efficiency projects.
Improve 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. With strong business conditions and the expectation to generate healthy free cash flow throughout 2022 and beyond, we have the ability to reduce substantial amounts of debt, return capital to shareholders through participation in programs like the U.S. Department of Energy’s Better Plantsour share repurchase program and the EPA’s Energy Star program. Withmake investments to both improve and grow our longstanding focus on plantbusiness.
We anticipate that a strong market environment and energy efficiency, we aimsignificantly improved fixed-price contracts will provide us ample opportunities to build onreduce our previous successes acrossdebt with our newly integrated enterprise.
Our GHG reduction commitment is based on executing the following five strategic priorities:
Developing domestically sourced, high quality iron ore feedstock and utilizing natural gasown free cash flow generation in the productioncoming years. We have demonstrated this by redeeming all $607 million aggregate principal amount outstanding of HBI;
Implementing energy efficiency and clean energy projects;
Investingour 9.875% 2025 Senior Secured Notes in the developmentApril 2022. In addition, we redeemed all $294 million aggregate principal amount outstanding of carbon capture technology;
Enhancing our GHG emissions transparency and sustainability focus; and
Supporting public policies that facilitate GHG reduction1.500% 2025 Convertible Senior Notes in the domestic steel industry.January 2022.
Recent Developments
Labor AgreementsClosure of Mountain State Carbon
As a result of our internal usage of HBI, coupled with our ongoing evaluation of coke use strategies, we permanently closed our Mountain State Carbon coke plant during the first quarter of 2022.
Indefinite Idle of Indiana Harbor #4 Blast Furnace
On April 12, 2021,February 21, 2022, we reachedannounced the indefinite idle of the Indiana Harbor #4 blast furnace. The Indiana Harbor #4 blast furnace, which has a tentative agreement withproduction capacity of 2.1 million net tons of hot metal per year, is now indefinitely idled. We do not expect any change to full-year 2022 steel shipment volumes as a result of the USW for a new 53-month labor contract for our Mansfield Works employees that is effective asindefinite idle of April 1, 2021. The new contract will cover approximately 300 USW-represented workers.the Indiana Harbor #4 blast furnace.
Financing Transactions
On February 11, 2021,March 21, 2022, we sold 20 millionissued a notice 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 $322redemption for all $607 million aggregate principal amount outstanding of our outstandingthe 9.875% 2025 Senior Secured Notes. The total payment made on April 20, 2022, the redemption date, to holders of the notes, including the redemption premium, was $677 million. The notes were redeemed with available liquidity. The cash interest associated with these notes was approximately $60 million per year.
On February 17, 2021,January 18, 2022, we issued $500redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes through a combination settlement, with the aggregate principal amount of $294 million paid in cash, and 24 million common shares, with a fair value of $499 million, delivered to noteholders in settlement of the premium due per the terms of the indenture, plus cash in respect of the accrued and unpaid interest on the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date per the terms of the indenture.
Additionally, on March 25, 2022, we redeemed all $66 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 requirementsoutstanding of the Securities Act. We used the net proceeds from the notes offeringIRBs due 2024 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.2028.
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Results of Operations
Overview
For the three months ended March 31, 2021, we had NetOur total revenues, 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, 20212022 and 20202021 were as follows:
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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, 2021,2022, our consolidated Revenues were $4.0 billion,$5,955 million, an increase of $3.7 billion,$1,906 million, compared to the prior-year period. The increase was primarily due to an increase in the additionaverage steel product selling price of 3.9 million$546 per net ton, partially offset by a decrease of 507 thousand net tons of steel shipments from our Steelmaking segment as a result of the Acquisitions.segment.
Revenues by Product Line
The following represents our consolidated Revenuesby product line:line for the three months ended:
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Revenues by Market
The following table represents our consolidated Revenues and percentage of revenues attributable to each of the markets we supply:
(In Millions)(In Millions)
Three Months Ended March 31,Three Months Ended
March 31,
2021202020222021
Revenue%Revenue%Revenue%Revenue%
AutomotiveAutomotive$1,392 34 %$118 33 %Automotive$1,729 29 %$1,392 34 %
Infrastructure and ManufacturingInfrastructure and Manufacturing964 24 %43 12 %Infrastructure and Manufacturing1,557 26 %964 24 %
Distributors and ConvertersDistributors and Converters1,263 31 %54 15 %Distributors and Converters1,853 31 %1,263 31 %
Steel ProducersSteel Producers430 11 %144 40 %Steel Producers816 14 %430 11 %
Total revenuesTotal revenues$4,049 $359 Total revenues$5,955 $4,049 
Operating Costs
Cost of goods sold
Cost of goods sold increased by $3.4 billion forDuring the three months ended March 31, 2021,2022, Cost of goods sold increased by $945 million, as compared to the prior-year period, primarily due to the additionperiod. See "— Results of 3.9 million net tons of steel shipments resulting from the Acquisitions.Operations — Steelmaking" below for further detail.
Selling, general and administrative expenses
As a result ofDuring the Acquisitions, ourthree months ended March 31, 2022, Selling, general and administrative expenses increased by $67$14 million, during the three months ended March 31, 2021, as compared to the prior-year period.
Acquisition-related The increase was primarily due to an increase in employment-related costs
and higher charitable contributions to 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.Cleveland-Cliffs Foundation.
Miscellaneous – net
Miscellaneous – net decreasedincreased by $9$30 million for the three months ended March 31, 2021,2022, as compared to the prior-year period, whichperiod. The increase in miscellaneous expense was primarily due to expenses incurred at our Toledo direct reduction plant recorded in Miscellaneous – net prior to startthe $29 million asset impairment charge associated with the permanent closure of production in December 2020.Mountain State Carbon.
Other Income (Expense)
Interest expense, net
Interest expense, net increaseddecreased by $61$15 million for the three months ended March 31, 2021,2022, as compared to the prior-year period,period. The decrease was primarily due to the incremental debt that we incurred in connection with the AK Steel Merger, along with borrowingsrestructuring activities during 2021, which reduced interest expense on the ABL Facility, and a decrease in capitalized interest during the current year due to the completion of the Toledo direct reduction plant.our senior notes.
Gain (loss) on extinguishment of debt
The loss on extinguishment of debt of $14 million for the three months ended March 31, 2022 primarily resulted from the redemption of all $294 million aggregate principal amount of our outstanding 1.500% 2025 Convertible Senior Notes in January 2022.
The loss on extinguishment of debt of $66 million for the three months ended March 31, 2021 primarily relates toresulted from the repurchase of $322 million in aggregate principal amount of 9.875% 2025 Senior Secured Notes using the net proceeds from the issuance of 20 million common shares. Additionally, we repurchasedand $535 million in aggregate principal amount of our outstanding senior notes of various series using the net proceeds from the issuance of the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes, along with cash on hand. series.
Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for further details.
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Net periodic benefit credits other than service cost component
The increase of $41 million in Net periodic benefit credits other than service cost component primarily relates to an increase in the expected return on pension and voluntary employee benefit association trust assets acquired as a result of the Acquisitions. Refer to NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS for further details.
Income Taxes
Our effective tax rate is impacted by permanent items, primarily state income tax expense and depletion. It also is affected by discrete items that may occur in any given period but are not consistent from period to period. The following represents a summary of our tax provision and corresponding effective rates:
(In Millions)
Three Months Ended
March 31,
20212020
Income tax benefit (expense)$(9)$51 
Effective tax rate14 %51 %
The difference in the effective rate and income tax expense from the comparable prior-year period primarily relates to the mix of income as well as discrete items recorded in each period.
(In Millions)
Three Months Ended
March 31,
20222021
Income tax expense$(237)$(9)
Effective tax rate23 %14 %
Our 2021 estimated annual effective tax rate before discrete items is 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. The 20202022 estimated annual effective tax rate before discrete items at March 31, 20202022 is 22%. This estimated annual effective tax rate exceeds the U.S. statutory rate of 21%, as state income tax expense exceeds the percentage depletion in excess of cost depletion. The 2021 estimated annual effective tax rate before discrete items at March 31, 2021 was 47%19%. The decreaseincrease in the estimated annual effective tax rate before discrete items is driven by the change in income and a decrease to the mixpercentage depletion in excess of income.cost depletion.
Adjusted EBITDA
We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry, although it is not necessarily comparable to similarly titled measures used by other companies.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.
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The following table provides a reconciliation of our Net income (loss) to Adjusted EBITDA:
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Net income (loss)$57 $(49)
Net incomeNet income$814 $57 
Less:Less:Less:
Interest expense, netInterest expense, net(92)(31)Interest expense, net(77)(92)
Income tax benefit (expense)(9)51 
Income tax expenseIncome tax expense(237)(9)
Depreciation, depletion and amortizationDepreciation, depletion and amortization(217)(35)Depreciation, depletion and amortization(301)(217)
Total EBITDATotal EBITDA$375 $(34)Total EBITDA$1,429 $375 
Less:Less:Less:
EBITDA of noncontrolling interests1
EBITDA of noncontrolling interests1
$22 $
EBITDA of noncontrolling interests1
$22 $22 
Gain (loss) on extinguishment of debt(66)
Asset impairmentAsset impairment(29)— 
Loss on extinguishment of debtLoss on extinguishment of debt(14)(66)
Severance costsSeverance costs(11)(19)Severance costs(1)(11)
Acquisition-related costs excluding severance costsAcquisition-related costs excluding severance costs(2)(23)Acquisition-related costs excluding severance costs(1)(2)
Amortization of inventory step-upAmortization of inventory step-up(81)(23)Amortization of inventory step-up (81)
Impact of discontinued operationsImpact of discontinued operations Impact of discontinued operations1 — 
Total Adjusted EBITDATotal Adjusted EBITDA$513 $23 Total Adjusted EBITDA$1,451 $513 
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.
1 EBITDA of noncontrolling interests includes the following:
1 EBITDA of noncontrolling interests includes the following:
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests$13 $16 
Depreciation, depletion and amortizationDepreciation, depletion and amortization9 
EBITDA of noncontrolling interestsEBITDA of noncontrolling interests$22 $22 
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The following table provides a summary of our Adjusted EBITDA by segment:
(In Millions)(In Millions)
Three Months Ended
March 31,
Three Months Ended
March 31,
2021202020222021
Adjusted EBITDA:Adjusted EBITDA:Adjusted EBITDA:
SteelmakingSteelmaking$537 $44 Steelmaking$1,423 $502 
Other BusinessesOther Businesses11 Other Businesses29 11 
Corporate and eliminations(35)(23)
Eliminations1
Eliminations1
(1)— 
Total Adjusted EBITDATotal Adjusted EBITDA$513 $23 Total Adjusted EBITDA$1,451 $513 
1 In 2022, we began allocating Corporate SG&A to our operating segments. Prior periods have been adjusted to reflect this change. The Eliminations line now only includes sales between segments.
1 In 2022, we began allocating Corporate SG&A to our operating segments. Prior periods have been adjusted to reflect this change. The Eliminations line now only includes sales between segments.
Adjusted EBITDA from our Steelmaking segment for the three months ended March 31, 2022 increased by $493$921 million, as compared to the prior-year period. The increase was primarily attributable to higher gross margin of $947 million for the three months ended March 31, 2021,2022, as compared to the prior-year period. The results were favorably impacted byFor the operating results related to the acquired steelmaking operations.
three months ended March 31, 2022 and 2021, our Steelmaking Adjusted EBITDA from Corporate and eliminations primarily relates toincluded Selling, general and administrative expenses at our Corporate headquarters.of $114 million and $99 million, respectively.
Steelmaking
The following is a summary of our Steelmaking segment results included in our consolidated financial statements for the three months ended March 31, 20212022 and 2020. The results for the three months ended March 31, 2021, include full period results for all Steelmaking operations. The results for the three months ended March 31, 2020, include AK Steel operations subsequent to March 13, 2020, and our results from operations previously reported as part of our Mining and Pelletizing segment.
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2021.
The following is a summary of our Steelmaking segment operating results:
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 
Three Months Ended
March 31,
Percent Change
20222021
Steel shipments (in thousands of net tons)3,637 4,144 (12)%
Average selling price per net ton of steel products$1,446 $900 61 %
Revenues (in millions)$5,794 $3,919 48 %
Cost of goods sold (in millions)$(4,572)$(3,644)25 %
Gross margin (in millions)$1,222 $275 344 %
Gross margin percentage21 %%
Adjusted EBITDA (in millions)$1,423 $502 183 %
The average net selling price per ton forOperating Results
Gross margin increased by $947 million, or 344%, during the three months ended March 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 electrical steel products.
The following table represents our Steelmaking segment Revenues by product line:
(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/AN/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 March 31, 2021, increased by $3,582 million2022, as compared to the prior-year period, primarily due to:
An increase in selling prices (approximately $2 billion impact) driven by favorable renewals of annual sales contracts, higher index steel prices and spot prices;
This increase was partially offset by lower sales volumes (approximately $150 million impact), predominantly driven by lower shipments to the distributor and converters end market 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, comparedhigh inventory levels, as well as reduced shipments to the three months ended March 31, 2020, which included the operating results from AK Steel during the period of March 13, 2020 through March 31, 2020. Results for the three months ended March 31, 2021 were impacted positively by the increase in the price for domestic HRC, which is the most significant index in driving our revenuesautomotive and 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 highend user markets, as a direct result of favorable supply-demand dynamics following the pandemic.supply chain shortages; and
CostIncreased costs of goods sold for the three months ended March 31, 2021,production (approximately $900 million impact) driven by higher raw materials and utility costs, including coal, alloys, scrap and natural gas, coupled with increased by $3,309 million compared to the prior-year period predominantly due to additional sales resulting from the Acquisitions.
As a result, Adjusted EBITDA was $537 million for the three months ended March 31, 2021, compared to $44 million for the prior-year period. Refer to "— Results of Operations" above for additional information.
Production
During the first three months of 2021, we produced 4.8 million net tons of raw steel, 6.9 million long tons of iron ore productsinvestment in maintenance and 0.7 million net tons of coke. Our Columbus and Monessen facilities acquired through the AM USA Transaction are temporarily idled due to impacts of the COVID-19 pandemic. We anticipate restarting our Columbus facility during the second quarter of 2021. During the first three months of 2020, we produced 0.3 million net tons of raw steel and 4.8 million long tons of iron ore pellets.labor costs.
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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.
Following the onset of the COVID-19 pandemic in the U.S. in 2020,The current strong market environment has provided us opportunities to reduce our primary focus was to maintain adequate levels of liquidity to manage through a potentially prolonged economic downturn. Now that business conditions have improved and we expect to generate healthydebt with our own free cash flow during remaining nine months of 2021, we believe we will have the ability to lower our long-term debt balance.generation. We also continue to look at the composition of our debt, as we are interested in both extending our average maturity profilelength and increasing our ratio of unsecured debt to secured debt. These actions will better prepare us to navigate more easily through potentially volatile industry conditionsdebt, which can be accomplished with cash provided by operating activities. During 2022, we took action in the future. In furtherancealignment with these priorities. First, in January 2022, we redeemed all $294 million in aggregate principal amount outstanding of these goals,our 1.500% 2025 Convertible Senior Notes. Second, in March 2022, 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 $322redeemed all $66 million aggregate principal amount outstanding of the IRBs due 2024 to 2028. Most recently, in April 2022, we redeemed all $607 million remaining aggregate principal amount outstanding of our outstanding 9.875% 2025 Senior Secured Notes. Prior to 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 used 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 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 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, service and servicerepay our debt obligations.obligations and return capital to shareholders.
The following discussion summarizes the significant items impacting our cash flows during the three months ended March 31, 20212022 and 20202021 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 usedprovided by operating activities was $379 million and $164$533 million for the three months ended March 31, 2021 and 2020, respectively. The increase in2022, compared to net cash used by operating activities duringof $379 million for the first three months of 2021, compared to 2020,ended March 31, 2021. The period-over-period improvement was driven by improved operating results. Additionally, there were positive changes in working capital period-over-period. Changes in working capital included increases in payables partially offset by increases in inventory primarily related to the increasing receivables due to rising prices, unwind of the ArcelorMittal USA factoring agreementautomotive semiconductor shortage and the 2020increased raw material and production costs. Additionally, we had lower pension contributions that were deferred under the CARES Act to January 2021.
Our U.S. Cash and cash equivalents balance at March 31, 2021 was $91 million, or 86%as a result of our consolidated Cash and cash equivalents balance, excluding cash relatedimprovements to our consolidated VIE of $4 million.pension plans' funded status.
Investing Activities
Net cash used by investing activities was $135$235 million and $1,007$135 million for the three months ended March 31, 20212022 and 2020,2021, respectively. We had capital expenditures including capitalized interest, of $136$236 million and $138$136 million for the three months ended March 31, 2022 and 2021, and 2020, respectively. We had cash outflows, including deposits and capitalized interest, for the development of the Toledo direct reduction plant of $28 million and $112 million for the three months ended March 31, 2021 and 2020, respectively. Additionally, we spent approximately $108 million and $26 million onrespectively, primarily relating to sustaining capital expenditures during the three months ended March 31, 2021 and 2020, respectively.spend. Sustaining capital spend includes infrastructure, mobile equipment, fixed equipment, product quality, reliability, environment, health and safety.
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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 former AK Steel Corporation revolving credit facility and $324 million used to purchase outstanding 7.50% 2023 AK Senior Notes.
We anticipate total cash used for capital expenditures during the next 12 months to be between $650$850 and $700$900 million.
Financing Activities
Net cash providedused by financing activities was $512 million and $1,005$311 million for the three months ended March 31, 20212022, compared to net cash provided by financing activities of $512 million for the three months ended March 31, 2021. Cash outflows from financing activities for the three months ended March 31, 2022 included $360 million for repayments of debt. We used available liquidity to redeem all $294 million aggregate principal amount outstanding of our 1.500% 2025 Convertible Senior Notes and 2020, respectively. Cash inflows fromall $66 million aggregate principal amount outstanding of our IRBs due 2024 to 2028.
Net cash provided by financing activities for the three months ended March 31, 2021 included the issuanceissuances 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 ofand 20 million common shares for net proceeds of $322 million, andalong with 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 repurchaseredeem $322 million in aggregate principal amount of our 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
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Senior Notes, 7.50%7.500% 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 three months ended March 31, 2020, primarily related to the issuance of $725 million aggregate principal amount of 6.75% 2026 Senior Secured Notes and borrowings of $800 million under the ABL Facility. The net proceeds from the issuance of the 6.75% 2026 Senior Secured Notes, along with cash on hand, were used to purchase $373 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $367 million aggregate principal amount of 7.50% 2023 AK Senior Notes and to pay for the $44 million of debt issuance costs.
We anticipate future uses of cash and cash provided by financing activities during the next 12 months to include opportunistic debt transactions as partrepayment of our liability management strategy, in addition to, providing supplemental financing to meet cash requirements for business improvement opportunities.ABL Facility balance, as well as opportunistic transactions, including other debt repayments.
Capital Resources
The following represents a summary of key liquidity measures:
(In Millions)
March 31,
20212022
Cash and cash equivalents$11035 
Less: Cash and cash equivalents from VIE's(4)
Total cash and cash equivalents$106
Available borrowing base on ABL Facility1
$3,5004,500 
Borrowings(1,630)(1,715)
Letter of credit obligations(272)(171)
Borrowing capacity available$1,5982,614 
1 As of March 31, 2021,2022, the ABL Facility had a maximum borrowing base of $3.5$4.5 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 and cash equivalents, which totaled $106$35 million as of March 31, 2021,2022, 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 $1.7$2.6 billion in liquidity entering the second quarter of 2021,2022, 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 March 31, 2021,2022, 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, coke, diesel and natural gas purchase commitments, minimum railroad transportation commitments and minimum port facility usage commitments,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 5.875% 2027 Senior Notes, the 7.00%7.000% 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 6.75%6.750% 2026 Senior Secured Notes and, prior to the full redemption in April 2022, the 9.875% 2025 Senior Secured Notes issued by Cleveland-Cliffs Inc. on a senior secured basis. See NOTE 8 - 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 March 31, 2021.2022. Refer to Exhibit 22, incorporated herein by reference, for the detailed list of entities included within the obligated group as of March 31, 2021.2022.
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The guarantee of a Guarantor subsidiary with respect to Cliffs' 5.75% 2025 Senior Notes, the 6.75%6.750% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.00%7.000% 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, and with respect to the 9.875% 2025 Senior Secured Notes, would have been, automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be, and with respect to the 9.875% 2025 Senior Secured Notes, would have been, 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)
March 31, 2021December 31, 2020March 31, 2022December 31, 2021
Current assetsCurrent assets$5,491 $4,903 Current assets$7,937 $6,539 
Non-current assetsNon-current assets10,160 10,535 Non-current assets9,858 12,753 
Current liabilitiesCurrent liabilities(2,810)(2,767)Current liabilities(3,701)(3,222)
Non-current liabilitiesNon-current liabilities(10,508)(10,563)Non-current liabilities(8,914)(9,081)
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:
(In Millions)
Three Months Ended
March 31, 20212022
Revenues$3,9795,535 
Cost of goods sold(3,724)(4,338)
Income from continuing operations32724 
Net income33725 
Net income attributable to Cliffs shareholders34725 
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As of March 31, 20212022 and December 31, 2020,2021, the obligated group had the following balances with non-Guarantor subsidiaries and other related parties:
(In Millions)(In Millions)
March 31, 2021December 31, 2020March 31, 2022December 31, 2021
Balances with non-Guarantor subsidiaries:Balances with non-Guarantor subsidiaries:Balances with non-Guarantor subsidiaries:
Accounts receivable, netAccounts receivable, net$29 $69 Accounts receivable, net$350 $199 
Accounts payableAccounts payable(25)(17)Accounts payable(442)(186)
Balances with other related parties:Balances with other related parties:Balances with other related parties:
Accounts receivable, netAccounts receivable, net$30 $Accounts receivable, net$13 $
Accounts payableAccounts payable(9)(6)Accounts payable(11)(7)
Additionally, for the three months ended March 31, 2021,2022, the obligated group had Revenues of $77$37 million and Cost of goods sold of $59$27 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
In 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, metallurgical 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 these 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 contracts and supplier purchase 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.
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Our strategy to address volatile natural gas 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 contracts and supplier purchase 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 impactnegative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of March 31, 2022, due to a 10% and 25% change in the market price fromof each of the March 31, 2021 estimated price on our derivative instruments, thereby impacting our pre-taxindicated commodities:
(In Millions)
Commodity Derivative10% Change25% Change
Natural gas$52 $130 
Zinc5 12 
Any resulting changes in fair value would be recorded as adjustments to AOCI, net of income taxes or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the same amount.
(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 
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lower prices paid for the related commodities.
Valuation of Goodwill and Other Long-Lived Assets
We 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 impairment at the reporting 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 a reporting unit below its carrying value. These events or circumstances could include a significant change in the business 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 amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.
Application of the 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 quantitative assessment is deemed necessary in determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology, which considers forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the recoverability 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 determination of fair value for each 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. ForWe concluded that there were no additional triggering events resulting in the need for an impairment assessment except
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for the announcement of the permanent closure of Mountain State Carbon, which resulted in a $29 million asset impairment charge for the three months ended March 31, 2021, we concluded that an event triggering the need for an impairment assessment did not occur.2022.
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. As of March 31, 2021,2022, we had $1,630$1,715 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 currentMarch 31, 2022 borrowing level would result in a change of $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.
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Forward-Looking Statements
This report contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to 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. Investors are cautioned not to place undue reliance on forward-looking 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 and scrap metal 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 and supply chain disruptions, such as the semiconductor shortage, 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 prolonged COVID-19 pandemic;pandemic, conflicts or otherwise;
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;
disruptions to our operations relating to the ongoing 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;
risks related to U.S. government actions with respect to Section 232, the USMCA and/or other trade agreements, tariffs, treaties or 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;
impacts of existing and increasing governmental regulation, including potential environmental regulations relating to climate change and other environmental regulation that may be proposed under the Biden Administration,carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements;
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potential impacts to the environment or exposure to hazardous substances resulting from our operations;
our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit our financial flexibility and cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our business;
our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all;
adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;
limitations on our ability to realize some or allthe outcome of, our deferred tax assets, including our NOLs;
our ability to realize the anticipated synergies and benefits of the Acquisitions 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;
additional debt we assumed, incurred or issued in connection with the Acquisitions, as well as additional debt wecosts incurred in connection with, enhancing our liquidity during the COVID-19 pandemic, may negatively impact our credit profilelawsuits, claims, arbitrations or governmental proceedings relating to commercial and limit our financial flexibility;business disputes, environmental matters, government investigations, occupational or personal injury claims, property damage, labor and employment matters, or suits involving legacy operations and other matters;
knownuncertain cost or availability of critical manufacturing equipment and unknown liabilities we assumed in connection with the Acquisitions, including significant environmental, pension and OPEB obligations;
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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;spare parts;
supply chain disruptions or changes in the cost, quality or qualityavailability of energy sources, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, coke and metallurgical coal;
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 manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us;
uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;
disruptions in, or failures of, our information technology systems, including those related to cybersecurity;
liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, 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 operating facility or mine;
our ability to realize the anticipated synergies and benefits of our recent acquisition transactions and to successfully integrate the acquired businesses into our existing businesses, including uncertainties associated with maintaining relationships with customers, vendors and employees and known and unknown liabilities we assumed in connection with the acquisitions;
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 failureschallenges to maintaining our social license to operate with our stakeholders, including the impacts of our information technology systems, including those relatedoperations on local communities, reputational impacts of operating in a carbon-intensive industry that produces GHG emissions, and our ability to cybersecurity;foster a consistent operational and safety track record;
our ability to successfully identify and consummate any strategic capital 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 coalmineral reserves or reductions in current mineral reserve estimates, including whether we are able to replace depleted reserves with additional mineral bodies to support the long-term viabilityand any title defect or loss of our operations;any lease, license, easement or other possessory interest for any mining property;
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 ongoing COVID-19 pandemic, as well as our ability to attract, hire, develop and retain key personnel, including within the acquired AK Steelpersonnel;
our ability to maintain satisfactory labor relations with unions and ArcelorMittal USA businesses;employees;
unanticipated or higher costs associated with pension and OPEB obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations;
the amount and timing of any repurchases of our common shares; and
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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.
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, 2020,2021, 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 our President and Chief Executive Officer and 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 our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our President and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
There was no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1.Legal Proceedings
JSW Steel Litigation. As previously disclosed, on June 8, 2021, JSW Steel filed a complaint against Cleveland-Cliffs Inc., AK Steel Holding Corporation (now known as Cleveland-Cliffs Steel Holding Corporation), Nucor Corporation and U.S. Steel in the United States District Court for the Southern District of Texas. JSW Steel alleges that the defendants engaged in a group boycott against JSW Steel in violation of federal and Texas antitrust laws by refusing to sell semi-finished steel slabs to JSW Steel, beginning in 2018 and continuing through the present; civil conspiracy among the defendants; and tortious interference with JSW Steel’s contractual rights and business relations involving its vendors and customers. JSW Steel’s allegations involve the tariffs and quotas imposed on steel imports by the U.S. government under Section 232 beginning in March 2018, which JSW Steel alleges raised the price of imported slabs, and statements made to the U.S. government related to exemption requests submitted by JSW Steel in 2018 and 2021. JSW Steel further claims that this alleged anticompetitive conduct negatively impacted JSW Steel’s costs, production and revenues and prevented it from pursuing expansion plans at its Ohio and Texas facilities that would compete with the defendants. JSW Steel is seeking to hold the defendants jointly and severally liable for treble damages in an amount in excess of $500 million and other relief. On February 17, 2022, the district court granted the defendants' Motions to Dismiss in their entirety and dismissed all of JSW Steel's claims with prejudice. On March 16, 2022, JSW Steel filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit. We continue to believe the claims asserted against us are without merit, and we intend to vigorously contest the appeal.

Environmental Matters. 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 other 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, 2020,2021, and 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, which is incorporated herein by reference.
Item 1A.Risk Factors
OurWe 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 I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020, includes a detailed discussion2021.




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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to repurchases by the Company of our common shares during the periods indicated:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of Shares
(or Units) Purchased1
Average Price Paid per Share
(or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or 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 Programs2
January 1 - 31, 2022628,715 $22.52 — $— 
February 1 - 28, 20221,000,008 $19.00 1,000,000 $981,024,500 
March 1 - 31, 202230,854 $19.57 — $981,024,500 
Total1,659,577 $20.34 1,000,000 
1 Includes 628,715 shares that were delivered to us in January 2022, 8 shares that were delivered to us in February 2022, and 30,854 shares that were delivered to us in March 2022 to satisfy tax withholding obligations due upon the vesting or payment of stock awards.
2 On February 11, 2022, we announced the Board of Directors authorized a program to repurchase our outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchase, up to a maximum of $1 billion. We are not obligated to make any purchases, and the program may be suspended or discontinued at any time. The share repurchase program does not have a specific expiration date.
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.
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* Form of February 17,Cleveland-Cliffs Inc. 2021 byEquity and amongIncentive Compensation Plan Restricted Stock Unit Award Memorandum and Restricted Stock Unit Award Agreement (filed herewith).
* Form of Cleveland-Cliffs Inc., the Guarantors party thereto 2021 Equity and U.S. Bank National Association, as trustee, including FormsIncentive Compensation Plan Performance Share Award Memorandum (TSR) and Performance Share Award Agreement (filed herewith).
* Form of 4.625% Senior Guaranteed Notes due 2029Cleveland-Cliffs Inc. 2021 Equity and 4.875% Senior Guaranteed Notes due 2031Incentive Compensation Plan Cash Incentive Award Memorandum (TSR) and Cash Incentive Award Agreement (TSR) (filed herewith).
Schedule of the obligated group, including the parent and issuer and the subsidiary guarantors that have guaranteed the obligations under the 5.75% 2025 Senior Notes, the 6.75% 2026 Senior Secured Notes, the 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 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 April 28, 202126, 2022 (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. KociCelso L. Goncalves Jr. as of April 28, 202126, 2022 (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 April 28, 202126, 2022 (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,Celso L. Goncalves Jr., Executive Vice President, Chief Financial Officer of Cleveland-Cliffs Inc., as of April 28, 202126, 2022 (filed herewith).
Mine Safety Disclosures (filed herewith).
101The following financial information from Cleveland-Cliffs Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 20212022 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.

_______________
*        Indicates management contract or other compensatory arrangement.
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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:Senior Vice President, Corporate Controller & Chief Accounting Officer
Date:April 28, 202126, 2022
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