Cliffs(CLF) - 2025 Q1 - Quarterly Report

Definitions The report defines key financial, operational, and technical terms and abbreviations used throughout the document - The report provides a list of abbreviations and acronyms used throughout the text, defining key financial and operational terms such as ABL Facility, Adjusted EBITDA, AOCI, BOF, EBITDA, EPS, HBI, HRC, OPEB, SEC, Stelco, and USW[7][8] Part I - Financial Information This part presents the company's unaudited financial statements and management's analysis of financial condition and results of operations Item 1. Financial Statements and Supplementary Data This section presents unaudited condensed consolidated financial statements and detailed notes for the reporting period Statements of Unaudited Condensed Consolidated Financial Position The company's total assets and liabilities show slight changes between March 31, 2025, and December 31, 2024 | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | $6,964 | $6,907 | | Total non-current assets | $13,872 | $14,070 | | TOTAL ASSETS | $20,836 | $20,947 | | LIABILITIES AND EQUITY | | | | Total current liabilities | $3,266 | $3,322 | | Total non-current liabilities | $11,185 | $10,677 | | TOTAL LIABILITIES | $14,352 | $14,050 | | Total Cliffs shareholders' equity | $6,254 | $6,664 | | Noncontrolling interests | $230 | $233 | | TOTAL EQUITY | $6,484 | $6,897 | | TOTAL LIABILITIES AND EQUITY | $20,836 | $20,947 | Statements of Unaudited Condensed Consolidated Operations The company reported a significant increase in net loss for the first quarter of 2025 compared to the prior year | (In millions, except per share amounts) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $4,629 | $5,199 | | Total operating costs | $(5,167) | $(5,237) | | Operating loss | $(538) | $(38) | | Total other expense | $(92) | $(23) | | Loss before income taxes | $(630) | $(61) | | Income tax benefit | $147 | $8 | | Net loss | $(483) | $(53) | | Net income attributable to noncontrolling interests | $(12) | $(14) | | Net loss attributable to Cliffs shareholders | $(495) | $(67) | | Loss per common share attributable to Cliffs shareholders: | | | | Basic | $(1.00) | $(0.14) | | Diluted | $(1.00) | $(0.14) | Statements of Unaudited Condensed Consolidated Comprehensive Loss Comprehensive loss attributable to shareholders widened significantly in Q1 2025 versus the prior-year period | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | $(483) | $(53) | | Total other comprehensive income (loss) | $75 | $(9) | | Comprehensive loss | $(408) | $(62) | | Comprehensive income attributable to noncontrolling interests | $(12) | $(14) | | Comprehensive loss attributable to Cliffs shareholders | $(420) | $(76) | Statements of Unaudited Condensed Consolidated Cash Flows Operating activities used cash in Q1 2025, a reversal from the cash provided in the same period of 2024 | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $(351) | $142 | | Net cash used by investing activities | $(145) | $(179) | | Net cash provided (used) by financing activities | $499 | $(131) | | Net increase (decrease) in cash and cash equivalents | $3 | $(168) | | Cash and cash equivalents at end of period | $57 | $30 | Statements of Unaudited Condensed Consolidated Changes in Equity Total equity decreased in the first quarter of 2025, primarily driven by a comprehensive loss Changes in Equity for Q1 2025 | (In millions) | December 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | Total Cliffs shareholders' equity | $6,897 | $6,484 | | Comprehensive income (loss) | $(408) | $(408) | | Stock and other incentive plans | $10 | $10 | | Net distributions to noncontrolling interests | $(15) | $(15) | | Total Equity | $6,897 | $6,484 | Changes in Equity for Q1 2024 | (In millions) | December 31, 2023 | March 31, 2024 | | :--- | :--- | :--- | | Total Cliffs shareholders' equity | $8,122 | $7,442 | | Comprehensive income (loss) | $(62) | $(62) | | Common stock repurchases, net of excise tax | $(615) | $(615) | | Stock and other incentive plans | $5 | $5 | | Net distributions to noncontrolling interests | $(8) | $(8) | | Total Equity | $8,122 | $7,442 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations of accounting policies and specific financial statement items Note 1 - Basis of Presentation and Significant Accounting Policies The company is a vertically integrated steel producer focused on the automotive industry and operates in four segments - Cleveland-Cliffs Inc is a leading North America-based steel producer, vertically integrated from iron ore mining to downstream finishing, with a focus on value-added sheet products for the automotive industry[19] - The company completed the Stelco Acquisition on November 1, 2024, expanding its presence in Canada and diversifying its customer base[20] - The company is organized into four operating segments: Steelmaking (primary reportable segment), Tubular, Tooling and Stamping, and European Operations[21] Note 2 - Supplementary Financial Statement Information This note provides supplementary details on inventories, capital expenditures, and other cash flow items Inventories | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finished and semi-finished goods | $2,396 | $2,393 | | Raw materials | $1,974 | $2,208 | | Total product inventories | $4,370 | $4,601 | | Manufacturing supplies and critical spares | $516 | $493 | | Inventories | $4,886 | $5,094 | Cash Paid for Capital Expenditures | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Capital additions | $129 | $157 | | Less: Non-cash accruals | $(68) | $(45) | | Equipment financed with seller | $16 | — | | Right-of-use assets - finance leases | $29 | $20 | | Cash paid for capital expenditures including deposits | $152 | $182 | Other Cash Flow Information | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Income taxes paid | $1 | $1 | | Income tax refunds | $(5) | $(2) | | Interest paid on debt obligations net of capitalized interest | $77 | $53 | Note 3 - Acquisitions This note details the financial impact and allocation of the Stelco Acquisition completed in late 2024 - The Stelco Acquisition was completed on November 1, 2024, expanding the company's presence in Canada and diversifying its customer base[30] Total Purchase Consideration | (In millions) | | | :--- | :--- | | Total cash consideration | $2,450 | | Total share exchange consideration | $343 | | Total debt consideration | $415 | | Total purchase consideration | $3,208 | Allocation of Purchase Consideration | (In millions) | Initial Allocation of Consideration | Measurement Period Adjustments | Updated Allocation | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $341 | — | $341 | | Accounts receivable | $104 | — | $104 | | Inventories | $726 | $(7) | $719 | | Other current assets | $107 | $(1) | $106 | | Property, plant and equipment | $1,286 | $(5) | $1,281 | | Intangible assets | $1,025 | — | $1,025 | | Other non-current assets | $250 | — | $250 | | Accounts payable | $(212) | — | $(212) | | Accrued employment costs | $(29) | — | $(29) | | Accrued expenses | $(6) | $(1) | $(7) | | Other current liabilities | $(71) | — | $(71) | | Pension and OPEB liability, non-current | $(14) | — | $(14) | | Deferred income taxes | $(449) | $10 | $(439) | | Asset retirement and environmental obligations | $(20) | — | $(20) | | Other non-current liabilities | $(616) | $5 | $(611) | | Net identifiable assets acquired | $2,422 | $1 | $2,423 | | Goodwill | $786 | $(1) | $785 | | Total net assets acquired | $3,208 | — | $3,208 | Identifiable Intangible Assets | (In millions) | Weighted Average Life (In years) | | :--- | :--- | | Customer relationships | $953 | 15 | | Trade names and trademarks | $72 | 15 | | Total identifiable intangible assets | $1,025 | 15 | Pro Forma Financial Information | (In millions) | Three Months Ended March 31, 2024 | | :--- | :--- | | Revenues | $5,752 | | Net loss attributable to Cliffs shareholders | $(93) | Note 4 - Revenues This note disaggregates total revenues by market and product type for the first quarters of 2025 and 2024 Revenues by Market | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Steelmaking: | | | | Direct automotive | $1,297 | $1,617 | | Infrastructure and manufacturing | $1,354 | $1,392 | | Distributors and converters | $1,228 | $1,412 | | Steel producers | $588 | $606 | | Total Steelmaking | $4,467 | $5,027 | | Other Businesses: | | | | Direct automotive | $130 | $140 | | Infrastructure and manufacturing | $10 | $10 | | Distributors and converters | $22 | $22 | | Total Other Businesses | $162 | $172 | | Total revenues | $4,629 | $5,199 | Revenues by Product | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Steelmaking: | | | | Hot-rolled steel | $1,166 | $1,128 | | Cold-rolled steel | $591 | $749 | | Coated steel | $1,361 | $1,623 | | Stainless and electrical steel | $444 | $461 | | Plate | $247 | $333 | | Slab and other steel products | $247 | $335 | | Other | $411 | $398 | | Total Steelmaking | $4,467 | $5,027 | | Other Businesses: | | | | Other | $162 | $172 | | Total revenues | $4,629 | $5,199 | Note 5 - Segment Reporting This note provides a breakdown of financial performance by the company's operating segments - The company's primary reportable segment is Steelmaking, which focuses on value-added sheet products for automotive, infrastructure, and manufacturing markets[40] - Performance is evaluated based on Adjusted EBITDA, a non-GAAP measure, used by management and investors to assess operating performance and compare to industry peers[41] Segment Performance for Q1 2025 | (In millions) | Steelmaking | Other Businesses | Eliminations | Total | | :--- | :--- | :--- | :--- | :--- | | Revenues | $4,495 | $162 | $(28) | $4,629 | | Cost of goods sold | $(4,895) | $(153) | $28 | $(5,020) | | Selling, general and administrative expenses | $(126) | $(7) | — | $(133) | | Net periodic benefit credits other than service cost component | $57 | — | — | $57 | | Excluding depreciation, depletion and amortization | $274 | $8 | — | $282 | | Other segment items | $11 | — | — | $11 | | Total Adjusted EBITDA | $(184) | $10 | — | $(174) | | Interest expense, net | | | | $(140) | | Income tax benefit | | | | $147 | | Depreciation, depletion and amortization | | | | $(282) | | EBITDA from noncontrolling interests | | | | $18 | | Weirton indefinite idle | | | | $(3) | | Idled facilities employment charges | | | | $(41) | | Changes in fair value of derivatives, net | | | | $(9) | | Amortization of inventory step-up | | | | $7 | | Other, net | | | | $(6) | | Net loss | | | | $(483) | | Capital Additions | $123 | $6 | — | $129 | Segment Performance for Q1 2024 | (In millions) | Steelmaking | Other Businesses | Eliminations | Total | | :--- | :--- | :--- | :--- | :--- | | Revenues | $5,053 | $172 | $(26) | $5,199 | | Cost of goods sold | $(4,785) | $(157) | $28 | $(4,914) | | Selling, general and administrative expenses | $(125) | $(7) | — | $(132) | | Net periodic benefit credits other than service cost component | $60 | — | — | $60 | | Excluding depreciation, depletion and amortization | $222 | $8 | — | $230 | | Other segment items | $(30) | $1 | — | $(29) | | Total Adjusted EBITDA | $395 | $17 | $2 | $414 | | Interest expense, net | | | | $(64) | | Income tax benefit | | | | $8 | | Depreciation, depletion and amortization | | | | $(230) | | EBITDA from noncontrolling interests | | | | $21 | | Weirton indefinite idle | | | | $(177) | | Loss on extinguishment of debt | | | | $(21) | | Other, net | | | | $(4) | | Net loss | | | | $(53) | | Capital Additions | $156 | $1 | — | $157 | Total Segment Assets | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Steelmaking | $20,200 | $20,327 | | Other Businesses | $636 | $620 | | Total segment assets | $20,836 | $20,947 | Note 6 - Property, Plant and Equipment This note details the composition of the company's fixed assets and related depreciation expense | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Land, land improvements and mineral rights | $1,452 | $1,451 | | Buildings | $1,104 | $1,104 | | Equipment | $11,185 | $11,119 | | Other | $354 | $349 | | Construction in progress | $759 | $728 | | Total property, plant and equipment | $14,854 | $14,751 | | Allowance for depreciation and depletion | $(5,057) | $(4,809) | | Property, plant and equipment, net | $9,797 | $9,942 | - Depreciation and depletion expense increased to $264 million for the three months ended March 31, 2025, from $227 million in the prior-year period[44] Note 7 - Goodwill and Intangible Assets and Liabilities This note outlines the carrying amounts of goodwill and other intangible assets and liabilities Goodwill | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Steelmaking | $1,718 | $1,719 | | Other Businesses | $49 | $49 | | Total goodwill | $1,767 | $1,768 | - Goodwill in the Steelmaking segment decreased by $1 million due to measurement period adjustments related to the Stelco Acquisition[45] Intangible Assets and Liabilities | (In millions) | March 31, 2025 Gross Amount | March 31, 2025 Accumulated Amortization | March 31, 2025 Net Amount | December 31, 2024 Gross Amount | December 31, 2024 Accumulated Amortization | December 31, 2024 Net Amount | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Intangible assets: | | | | | | | | Customer relationships | $1,014 | $(51) | $963 | $1,015 | $(34) | $981 | | Developed technology | $60 | $(18) | $42 | $60 | $(17) | $43 | | Trade names and trademarks | $87 | $(9) | $78 | $87 | $(8) | $79 | | Mining permits | $72 | $(29) | $43 | $72 | $(29) | $43 | | Supplier relationships | $29 | $(5) | $24 | $29 | $(5) | $24 | | Total intangible assets | $1,262 | $(112) | $1,150 | $1,263 | $(93) | $1,170 | | Intangible liabilities: | | | | | | | | Above-market supply contracts | $(71) | $31 | $(40) | $(71) | $30 | $(41) | - Amortization expense related to intangible assets was $19 million for the three months ended March 31, 2025, compared to $4 million for the same period in 2024[46] Note 8 - Debt and Credit Facilities This note provides a comprehensive overview of the company's outstanding debt and available credit Long-Term Debt | Debt Instrument | Issuer | Annual Effective Interest Rate | March 31, 2025 (In millions) | December 31, 2024 (In millions) | | :--- | :--- | :--- | :--- | :--- | | Senior Unsecured Notes: | | | | | | 7.000% 2027 Senior Notes | Cliffs | 9.240% | $73 | $73 | | 7.000% 2027 AK Senior Notes | AK Steel | 9.240% | $56 | $56 | | 5.875% 2027 Senior Notes | Cliffs | 6.490% | $556 | $556 | | 4.625% 2029 Senior Notes | Cliffs | 4.625% | $368 | $368 | | 6.875% 2029 Senior Notes | Cliffs | 6.875% | $900 | $900 | | 6.750% 2030 Senior Notes | Cliffs | 6.750% | $750 | $750 | | 4.875% 2031 Senior Notes | Cliffs | 4.875% | $325 | $325 | | 7.500% 2031 Senior Notes | Cliffs | 7.500% | $850 | — | | 7.000% 2032 Senior Notes | Cliffs | 7.054% | $1,425 | $1,425 | | 7.375% 2033 Senior Notes | Cliffs | 7.375% | $900 | $900 | | 6.250% 2040 Senior Notes | Cliffs | 6.340% | $235 | $235 | | ABL Facility | Cliffs | Variable | $1,255 | $1,560 | | Total principal amount | | | $7,693 | $7,148 | | Unamortized discounts and issuance costs | | | $(92) | $(83) | | Total long-term debt | | | $7,601 | $7,065 | - On February 6, 2025, the company issued $850 million aggregate principal amount of 7.500% 2031 Senior Notes in a private placement[49] ABL Facility Availability | (In millions) | March 31, 2025 | | :--- | :--- | | Available borrowing base on ABL Facility | $4,236 | | Borrowings | $(1,255) | | Letter of credit obligations | $(55) | | Borrowing capacity available | $2,926 | Debt Maturities | (In millions) | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Debt Maturities | — | — | $685 | $1,255 | $1,268 | $4,485 | $7,693 | Note 9 - Pensions and Other Postretirement Benefits This note details the components of net periodic benefit credits for pension and other postretirement benefit plans Net Periodic Pension Benefit Credits | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Service cost | $7 | $7 | | Interest cost | $53 | $55 | | Expected return on plan assets | $(79) | $(80) | | Amortization: Prior service costs | $4 | $4 | | Amortization: Net actuarial gain | $(2) | — | | Net periodic benefit credits | $(17) | $(14) | Net Periodic OPEB Credits | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Service cost | $2 | $2 | | Interest cost | $14 | $12 | | Expected return on plan assets | $(11) | $(11) | | Termination benefits | — | $2 | | Amortization: Prior service credits | $(3) | $(4) | | Amortization: Net actuarial gain | $(33) | $(38) | | Net periodic benefit credits | $(31) | $(37) | - The company made $15 million in defined benefit pension contributions for the three months ended March 31, 2025, compared to a nominal amount in the prior-year period[58] Note 10 - Income Taxes This note explains the significant increase in the company's income tax benefit for the first quarter of 2025 - Income tax benefit increased to $147 million for the three months ended March 31, 2025, from $8 million in the prior-year period, primarily due to an increase in Loss before income taxes[59] Note 11 - Asset Retirement and Environmental Obligations This note provides details on the company's obligations related to asset retirement and environmental remediation Asset Retirement Obligations | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Asset retirement obligations | $525 | $526 | | Less: current portion | $19 | $25 | | Long-term asset retirement obligations | $506 | $501 | Change in Asset Retirement Obligations | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Asset retirement obligations as of January 1 | $526 | $459 | | Accretion expense | $7 | $5 | | Revision in estimated cash flows | — | $48 | | Remediation payments | $(8) | $(2) | | Asset retirement obligations as of March 31 | $525 | $510 | - Asset retirement obligations increased in Q1 2024 due to the indefinite idling of the Weirton tinplate production plant, accelerating timing and refining remediation costs[61] Environmental Obligations | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Environmental obligations | $113 | $114 | | Less: current portion | $11 | $14 | | Long-term environmental obligations | $102 | $100 | Note 12 - Fair Value Measurements This note discloses the fair value of financial instruments and other assets and liabilities Fair Value of Debt | (In millions) | Valuation Hierarchy Classification | March 31, 2025 Carrying Value | March 31, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior notes | Level 1 | $6,346 | $6,240 | $5,505 | $5,496 | | ABL Facility - outstanding balance | Level 2 | $1,255 | $1,255 | $1,560 | $1,560 | | Total | | $7,601 | $7,495 | $7,065 | $7,056 | - The company acquired funding commitments to employee life and health trusts as part of the Stelco Acquisition, recorded as a Level 3 liability at fair value using a discounted cash flow model[65] Change in Fair Value of Funding Commitments | (In millions) | 2025 | | :--- | :--- | | Beginning balance as of January 1 | $(188) | | Change in fair value | $(2) | | Payments | $5 | | Ending balance as of March 31 | $(185) | - Stelco holds an option to purchase a 25% ownership interest in the MinnTac iron ore mine, recorded as a Level 3 derivative asset at fair value using the Black-Scholes option pricing model[67] Change in Fair Value of MinnTac Option | (In millions) | 2025 | | :--- | :--- | | Beginning balance as of January 1 | $95 | | Change in fair value | $(9) | | Ending balance as of March 31 | $86 | Note 13 - Derivative Instruments and Hedging This note describes the company's use of derivative instruments to manage commodity price risk - The company uses cash-settled commodity purchase swaps and sales swaps to hedge market risk associated with purchased raw materials, energy sources, and the sales price of certain steel products[69] Notional Amounts of Hedge Contracts | Hedge Contract Type | Classification | Unit of Measure | Maturity Dates | March 31, 2025 Notional Amount | December 31, 2024 Notional Amount | | :--- | :--- | :--- | :--- | :--- | :--- | | Natural Gas | Commodity purchase swaps | MMBtu | April 2025 - August 2027 | 120,600,000 | 143,250,000 | | Electricity | Commodity purchase swaps | Megawatt hours | April 2025 - October 2027 | 2,729,940 | 3,224,227 | | HRC | Sales swaps | Metric tons | April 2025 - August 2025 | 395,000 | — | - As of March 31, 2025, the company estimates $37 million of net gains and $8 million of net losses from hedge contracts will be reclassified from AOCI into Cost of goods sold and Revenues, respectively, within the next 12 months[71] Fair Value of Derivative Instruments | Balance Sheet Location (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Other current assets | $69 | $5 | | Other non-current assets | $25 | $9 | | Other current liabilities | $(8) | $(41) | | Other non-current liabilities | — | $(6) | Note 14 - Capital Stock This note provides information on the company's share repurchase activity and share issuances - No common shares were repurchased during the three months ended March 31, 2025. In contrast, 30.4 million common shares were repurchased for $608 million in the prior-year period[74] - As of March 31, 2025, there was $1.4 billion remaining authorization under the active share repurchase program[74] - As a result of the Stelco Acquisition, the company issued 25.9 million Cliffs treasury shares at a fair value of $343 million[76] Note 15 - Accumulated Other Comprehensive Income This note details the changes in the components of accumulated other comprehensive income (AOCI) | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Foreign Currency Translation | | | | Beginning balance | $(70) | — | | Other comprehensive income (loss) before reclassifications | $1 | $(1) | | Ending balance | $(69) | $(1) | | Derivative Instruments | | | | Beginning balance | $(53) | $(170) | | Other comprehensive income (loss) before reclassifications | $101 | $(33) | | Income tax (benefit) | $(24) | $8 | | Other comprehensive income (loss) before reclassifications, net of tax | $77 | $(25) | | Losses reclassified from AOCI to net loss | $32 | $59 | | Income tax benefit | $(8) | $(14) | | Net losses reclassified from AOCI to net loss | $24 | $45 | | Ending balance | $48 | $(150) | | Pension and OPEB | | | | Beginning balance | $1,660 | $1,827 | | Gains reclassified from AOCI to net loss | $(35) | $(38) | | Income tax expense | $8 | $10 | | Net gains reclassified from AOCI to net loss | $(27) | $(28) | | Ending balance | $1,633 | $1,799 | | Total AOCI Ending Balance | $1,612 | $1,648 | Note 16 - Variable Interest Entities This note explains the consolidation of SunCoke Middletown as a Variable Interest Entity (VIE) - The company consolidates SunCoke Middletown as a Variable Interest Entity (VIE) because it is the primary beneficiary, purchasing all coke and electrical power from its plant under long-term supply agreements through 2032[78] Assets and Liabilities of Consolidated VIE | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Inventories | $28 | $27 | | Property, plant and equipment, net | $283 | $288 | | Accounts payable | $(12) | $(19) | | Other assets (liabilities), net | $(53) | $(47) | | Noncontrolling interests | $(246) | $(249) | Note 17 - Earnings Per Share This note provides the calculation for basic and diluted loss per share attributable to shareholders | (In millions, except per share amounts) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | $(483) | $(53) | | Net income attributable to noncontrolling interests | $(12) | $(14) | | Net loss attributable to Cliffs shareholders | $(495) | $(67) | | Weighted average number of shares: Basic | 495 | 492 | | Employee stock plans | — | — | | Diluted | 495 | 492 | | Loss per common share attributable to Cliffs shareholders: Basic | $(1.00) | $(0.14) | | Diluted | $(1.00) | $(0.14) | Note 18 - Commitments and Contingencies This note discusses the company's purchase commitments, letters of credit, and legal and environmental matters - The company has purchase commitments for principal raw materials, energy, and transportation services, some with minimum quantity requirements[81] - As of March 31, 2025, the company had $261 million in surety-backed letters of credit and surety bonds outstanding, plus $55 million in outstanding letters of credit under its ABL Facility[82] - The company is involved in various claims and legal proceedings but does not believe any pending matters will result in a material adverse effect on its financial position or results of operations[83] - Environmental remediation obligations are recognized based on estimates, and the company does not believe there is a reasonable possibility of incurring losses that would materially exceed accrued amounts[86] Note 19 - Subsequent Events This note discloses significant events that occurred after the balance sheet date - In the second quarter of 2025, the company decided to idle its Conshohocken, Riverdale, and Steelton plants due to financial underperformance, and is assessing the material financial impacts for the remainder of 2025[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity, and future outlook Overview The company is a leading, vertically integrated steel producer in North America with a focus on the automotive sector - Cleveland-Cliffs is a leading North America-based steel producer, vertically integrated from iron ore mining to downstream finishing, focusing on value-added sheet products for the automotive industry[94] Financial Summary The company experienced a significant decline in profitability in the first quarter of 2025 compared to the prior year | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total Revenue | $4,629 million | $5,199 million | | Net Loss | $(483) million | $(53) million | | Adjusted EBITDA | $(174) million | $414 million | | Diluted EPS | $(1.00) | $(0.14) | Economic Overview The steel market faced headwinds in Q1 2025, but recent tariffs are expected to provide support - The steel market in Q1 2025 faced unfavorable conditions due to weaker light vehicle production, inconsistent customer buying behavior, and elevated import levels, resulting in a 16% year-over-year decrease in the average HRC price to $792 per net ton[98] - The HRC price increased to over $960 per ton in April 2025, supported by recently announced steel tariffs[98] - In 2025, the company decided to fully or partially idle six operations to optimize its footprint and consume excess pellet inventory, with minimal impact on flat-rolled steel output[99] - The company expects to benefit from recently implemented steel and automotive tariffs, which are seen as critical for addressing global overproduction and unfair trade practices[101] - North American light vehicle production decreased to approximately 3.8 million units in Q1 2025 from 4.0 million in Q1 2024, but U.S. light vehicle sales saw a 7% increase in the seasonally adjusted annualized rate[102] - The average busheling scrap price was $471 per long ton in Q1 2025, and its expected tightening supply bolsters the company's competitive advantage due to its internal iron feedstock sourcing[103] Competitive Strengths The company's key strengths include vertical integration, a strong union partnership, and a leading automotive market position - The company benefits from a unique vertically integrated profile, from mined raw materials to downstream finishing, providing predictable costs and control over its supply chain[104] - A strong partnership with its unionized workforce, particularly the USW, is a critical strength, enabling collaboration against unfairly traded imports and supporting middle-class jobs[105] - As a leading supplier of high-quality, automotive-grade steel in the U.S., the company serves a demanding market that typically generates higher through-the-cycle margins[106][107] - Approximately 30-35% of the company's volumes are sold under fixed price contracts, which helps mitigate pricing volatility in the steel industry[110] - The ability to domestically and primarily internally source its primary feedstock (iron ore pellets) provides stable and predictable costs, reducing exposure to global market volatility[111] - The company is a leading producer of electrical steels (GOES and NOES) in the U.S., which are critical for grid modernization and EV adoption, and expects strong profitability from this business[113] - The company is the first and only producer of Hot Briquetted Iron (HBI) in the Great Lakes region, which is used to enhance productivity in blast furnaces or as a premium scrap alternative, supporting operational efficiency[114] Strategy The company's strategy focuses on maximizing commercial strengths, optimizing its footprint, and maintaining financial flexibility - The company aims to maximize commercial strengths by being a leading supplier to the automotive sector with high-end products and technical expertise, including MOTOR-MAX® NOES and C-STAR™ EV battery protection design[115][116][118] - The conclusion of a five-year contract to supply semi-finished steel slabs in December 2025 presents a significant opportunity to shift sales and product mix to higher-margin business[117] - A 'Buy American' incentive program was announced for employees to support domestically-built vehicles with Cliffs steel content, aligning with President Trump's vision for U.S. manufacturing[119] - The company is optimizing its fully-integrated steelmaking footprint by idling six operations to streamline and enhance efficiency with minimal impact on flat-rolled steel output[124] - The company decided to no longer deploy capital toward a new electrical distribution transformer production plant due to suggested changes in scope from a project partner[125] - The Stelco Acquisition strengthens the company's cost position, expands its Canadian presence, and diversifies its customer base, with significant identified synergy opportunities[126][127] - New environmental sustainability targets include reducing Scope 1 and 2 GHG emissions intensity by 30% by 2035, material upstream Scope 3 GHG emissions intensity by 20% by 2035, and achieving near net zero by 2050[128][131] - The company aims to maintain financial flexibility by maximizing cash generation, reducing debt, and aligning capital investments, with a priority on deleveraging the balance sheet[129][130] Steelmaking Results The Steelmaking segment saw lower revenue and margins in Q1 2025 despite an increase in shipment volumes | | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $4,056 million | $4,629 million | | Gross Margin % | (9)% | 5% | | Adjusted EBITDA % | (4)% | 8% | | Average Selling Price Per Ton of Steel Products | $980 | $1,175 | | Steel Shipments (nt) | 4,140 thousand | 3,940 thousand | Steel Shipments by Product | (In thousands of net tons) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Hot-rolled steel | 1,693 | 1,266 | 34 % | | Cold-rolled steel | 608 | 663 | (8)% | | Coated steel | 1,123 | 1,216 | (8)% | | Stainless and electrical steel | 142 | 145 | (2)% | | Plate | 203 | 201 | 1 % | | Slab and other steel products | 371 | 449 | (17)% | | Total steel shipments by product | 4,140 | 3,940 | 5 % | Steelmaking Revenues by Market | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Direct automotive | $1,297 | $1,617 | (20)% | | Infrastructure and manufacturing | $1,354 | $1,392 | (3)% | | Distributors and converters | $1,228 | $1,412 | (13)% | | Steel producers | $588 | $606 | (3)% | | Total Steelmaking revenues by market | $4,467 | $5,027 | (11)% | - Steelmaking revenues decreased by 11% year-over-year, primarily due to a 20% decrease in direct automotive market revenues and a 13% decrease in distributors and converters market revenues, partially offset by incremental tons from the Stelco acquisition[134] - Gross margin decreased by $670 million (248%) year-over-year, mainly due to a $500 million impact from lower average selling prices and a $44 million increase in idled facilities employment charges[135][145] - Adjusted EBITDA from the Steelmaking segment decreased by $579 million year-over-year, driven by the decreased gross margin[135] Results of Operations Consolidated revenues and gross margin declined significantly in Q1 2025 compared to the prior-year period - Consolidated Revenues decreased by $570 million and consolidated gross margin decreased by $676 million during the three months ended March 31, 2025, compared to the prior-year period[136] - Restructuring and other charges decreased significantly to $3 million in Q1 2025 from $104 million in Q1 2024, primarily related to the indefinite idle of the Weirton tinplate production plant[137] - No asset impairment was recorded in Q1 2025, compared to $64 million in Q1 2024 resulting from the Weirton plant idle[138] - Consolidated Interest expense, net increased by $76 million year-over-year due to an increase in outstanding borrowings[141] - Consolidated Income tax benefit increased by $139 million year-over-year, primarily due to an increase in Loss before income taxes[143] Liquidity, Cash Flows and Capital Resources The company's operating cash flow turned negative in Q1 2025, though total liquidity remains strong - The company's capital allocation strategy focuses on preserving healthy liquidity, strengthening the balance sheet, and creating financial flexibility to manage cyclical demand and commodity price volatility[144] | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Cash flows provided by (used in): Operating activities | $(351) | $142 | | Cash flows provided by (used in): Investing activities | $(145) | $(179) | | Cash flows provided by (used in): Financing activities | $499 | $(131) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $3 | $(168) | | Free cash flow | $(503) | $(40) | - Net cash used by operating activities was $(351) million in Q1 2025, a $493 million decrease year-over-year, primarily due to lower gross margins and increased accounts receivable, partially offset by inventory reduction and lower incentive compensation[148] - Cash used for capital expenditures decreased by $30 million year-over-year to $152 million in Q1 2025[149] - The company anticipates total cash used for capital expenditures to be approximately $650 million for the next 12 months[150] - Net cash provided by financing activities was $499 million in Q1 2025, compared to $(131) million used in Q1 2024, primarily due to no common share repurchases in Q1 2025 versus $608 million in Q1 2024[151] - Total liquidity, comprising cash and cash equivalents and availability under the ABL Facility, was $3.0 billion as of March 31, 2025[152] - The company has approximately $3.3 billion of secured debt capacity[155] Non-GAAP Financial Measures This section provides reconciliations of non-GAAP measures like Adjusted EBITDA and free cash flow to their GAAP equivalents - Adjusted EBITDA is a non-GAAP measure used by management, investors, and lenders to assess operating performance, compare to industry peers, and evaluate the business's earnings power and ability to service debt and fund capital expenditures[159] Reconciliation of Net Loss to Adjusted EBITDA | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | $(483) | $(53) | | Less: Interest expense, net | $(140) | $(64) | | Less: Income tax benefit | $147 | $8 | | Less: Depreciation, depletion and amortization | $(282) | $(230) | | Total EBITDA | $(208) | $233 | | Less: EBITDA of noncontrolling interests | $18 | $21 | | Less: Weirton indefinite idle | $(3) | $(177) | | Less: Idled facilities employment charges | $(41) | — | | Less: Changes in fair value of derivatives, net | $(9) | — | | Less: Amortization of inventory step-up | $7 | — | | Less: Loss on extinguishment of debt | — | $(21) | | Less: Other, net | $(6) | $(4) | | Total Adjusted EBITDA | $(174) | $414 | Adjusted EBITDA by Segment | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Steelmaking | $(184) | $395 | | Other Businesses | $10 | $17 | | Intersegment Eliminations | — | $2 | | Total Adjusted EBITDA | $(174) | $414 | - Free cash flow, a non-GAAP measure defined as operating cash flow less purchase of property, plant and equipment, is used to assess cash generation available for debt service, strategic initiatives, or other financing activities[161] Reconciliation of Net Cash from Operating Activities to Free Cash Flow | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $(351) | $142 | | Purchase of property, plant and equipment | $(152) | $(182) | | Free cash flow | $(503) | $(40) | Information About Our Guarantors and the Issuer of Our Guaranteed Securities This section provides summarized financial information for the issuer and guarantors of the company's senior notes - Certain subsidiaries (Guarantor subsidiaries) fully and unconditionally guarantee obligations under various senior notes issued by Cleveland-Cliffs Inc. on a senior unsecured basis[163] Summarized Balance Sheet Information | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current assets | $6,642 | $6,463 | | Non-current assets | $11,769 | $11,856 | | Current liabilities | $(3,887) | $(4,121) | | Non-current liabilities | $(9,641) | $(9,241) | Summarized Statement of Operations Information | (In millions) | Three Months Ended March 31, 2025 | | :--- | :--- | | Revenues | $4,176 | | Cost of goods sold | $(4,548) | | Net loss | $(409) | | Net loss attributable to Cliffs shareholders | $(409) | Intercompany Balances | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Balances with non-Guarantor subsidiaries: Accounts receivable, net | $755 | $755 | | Balances with non-Guarantor subsidiaries: Accounts payable | $(1,037) | $(1,279) | | Balances with other related parties: Accounts receivable, net | $9 | $9 | | Balances with other related parties: Accounts payable | $(13) | $(20) | Market Risks The company is exposed to market risks from commodity prices, goodwill impairment, foreign currency, and interest rates - The company is exposed to price fluctuations in raw materials (e.g., natural gas, electricity, scrap, coal, zinc, chrome, nickel) and sales prices of steel products (primarily HRC)[172] - Strategies to manage price risk include improving energy efficiency, identifying alternative providers, utilizing lowest cost alternative fuels, and making forward physical purchases[173] - The company uses cash-settled commodity price swaps to hedge natural gas and electricity requirements and sales swaps to manage HRC price fluctuations[176][177] Sensitivity Analysis of Hedge Contracts | Contract Type (In millions) | 10% Change | 25% Change | | :--- | :--- | :--- | | Natural gas | $54 | $135 | | Electricity | $14 | $35 | | HRC | $33 | $83 | - Goodwill impairment testing requires significant judgment and assumptions, which are sensitive to changes in the business climate, commodity prices, and general economic conditions[181] - The company is subject to foreign currency exchange rate risk, primarily from its Canadian operations and an intercompany note denominated in Canadian dollars; a 1% change in the CAD exchange rate would result in a $9 million change in currency exchange income (expense)[185] - Interest payable on senior notes is fixed, but the ABL Facility has a variable rate; a 100 basis point increase in ABL interest rates would increase annual interest expense by $13 million based on Q1 2025 borrowing levels[186] Forward-Looking Statements This section cautions that statements about future expectations are subject to various risks and uncertainties - Forward-looking statements are subject to uncertainties and factors that are difficult to predict and may cause actual results to differ materially from expectations[188] - Key risks include continued volatility of steel, scrap, and iron ore market prices; uncertainties in the highly competitive and cyclical steel industry; potential weaknesses in global economic conditions; impacts of governmental regulation and trade policies; and the ability to maintain adequate liquidity and manage indebtedness[188][191] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the "Market Risks" discussion within Item 2 for detailed information on market risk exposures - Information regarding market risk is presented under the caption "Market Risks" within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, and in the Annual Report on Form 10-K for the year ended December 31, 2024[192] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting - Management, including the President and CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[194] - There was no change in the company's internal control over financial reporting during the quarter ended March 31, 2025, that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[195] Part II - Other Information This part covers legal proceedings, risk factors, share repurchases, and other required disclosures Item 1. Legal Proceedings This section details ongoing legal proceedings and asserts that no material adverse effect is anticipated - The Fifth Circuit Court of Appeals affirmed the dismissal of JSW Steel's antitrust complaint against Cleveland-Cliffs and other defendants on March 17, 2025[197] - U.S. Steel and Nippon Steel filed a lawsuit alleging unlawful agreement to oppose U.S. Steel's sale to any buyer other than Cliffs, monopolization, and racketeering; Cleveland-Cliffs is vigorously defending against these claims[198] - The company discloses environmental proceedings with a $1 million threshold for materiality and believes that current accruals are adequate, not expecting a material adverse effect[199] Item 1A. Risk Factors This section refers readers to the comprehensive risk factors detailed in the company's 2024 Annual Report - Readers are urged to carefully consider the significant risks impacting the business, as detailed in Part I, Item 1A. "Risk Factors" of the Annual Report on Form 10-K for the year ended December 31, 2024[201] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on common share repurchases, noting no activity under the public program in Q1 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | January 1 - 31, 2025 | 254,691 | $9.50 | — | $1,375,931,379 | | February 1 - 28, 2025 | 312 | $10.55 | — | $1,375,931,379 | | March 1 - 31, 2025 | 77 | $11.48 | — | $1,375,931,379 | | Total | 255,080 | $9.50 | — | | - No common shares were repurchased under the publicly announced share repurchase program during the three months ended March 31, 2025[204] - As of March 31, 2025, approximately $1.376 billion remained authorized under the active share repurchase program[202][204] Item 4. Mine Safety Disclosures This section affirms the company's commitment to employee safety and references detailed disclosures in Exhibit 95 - The company is committed to protecting the occupational health and well-being of its employees, striving for zero injuries and incidents through proactive prevention, standards, and intensive training[205] - Mine safety results for each mine location are included in Exhibit 95 of this Quarterly Report on Form 10-Q, as required by the Dodd-Frank Act[206] Item 5. Other Information This section states that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025[207] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q - The report includes various exhibits, such as the Indenture for the 7.500% Senior Guaranteed Notes due 2031, equity and incentive compensation plan documents, the schedule of the obligated group, certifications, and Mine Safety Disclosures[209] Signatures The report is duly signed by the company's authorized officer - The report was signed on May 8, 2025, by Kimberly A. Floriani, Senior Vice President, Controller & Chief Accounting Officer of Cleveland-Cliffs Inc[211]