Ohio
|
|
34-1464672
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
200 Public Square, Cleveland, Ohio
|
|
44114-2315
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Abbreviation or acronym
|
|
Term
|
ABL Facility
|
|
Syndicated Facility Agreement by and among Bank of America, N.A., as Administrative Agent and Australian Security Trustee, the Lenders that are parties hereto, Cliffs Natural Resources Inc., as Parent and a Borrower, and the Subsidiaries of Parent party hereto, as Borrowers dated as of March 30, 2015, as amended
|
ArcelorMittal
|
|
ArcelorMittal (as the parent company of ArcelorMittal Mines Canada, ArcelorMittal USA and ArcelorMittal Dofasco, as well as, many other subsidiaries)
|
ALJ
|
|
Administrative Law Judge
|
ASC
|
|
Accounting Standards Codification
|
ASU
|
|
Accounting Standards Updates
|
Bloom Lake
|
|
The Bloom Lake Iron Ore Mine Limited Partnership
|
Bloom Lake Group
|
|
Bloom Lake General Partner Limited and certain of its affiliates, including Cliffs Quebec Iron Mining ULC
|
Canadian Entities
|
|
Bloom Lake Group, Wabush Group and certain other wholly-owned Canadian subsidiaries
|
CCAA
|
|
Companies' Creditors Arrangement Act (Canada)
|
Dodd-Frank Act
|
|
Dodd-Frank Wall Street Reform and Consumer Protection Act
|
DR-grade pellets
|
|
Direct Reduction pellets
|
EAF
|
|
Electric Arc Furnace
|
EBITDA
|
|
Earnings before interest, taxes, depreciation and amortization
|
Empire
|
|
Empire Iron Mining Partnership
|
Exchange Act
|
|
Securities Exchange Act of 1934, as amended
|
FASB
|
|
Financial Accounting Standards Board
|
Fe
|
|
Iron
|
FERC
|
|
Federal Energy Regulatory Commission
|
FMSH Act
|
|
U.S. Federal Mine Safety and Health Act 1977, as amended
|
GAAP
|
|
Accounting principles generally accepted in the United States
|
Hibbing
|
|
Hibbing Taconite Company, an unincorporated joint venture
|
Koolyanobbing
|
|
Collective term for the operating deposits at Koolyanobbing, Mount Jackson and Windarling
|
LTVSMC
|
|
LTV Steel Mining Company
|
MISO
|
|
Midcontinent Independent System Operator, Inc.
|
MMBtu
|
|
Million British Thermal Units
|
MSHA
|
|
U.S. Mine Safety and Health Administration
|
Monitor
|
|
FTI Consulting Canada Inc.
|
Northshore
|
|
Northshore Mining Company
|
Oak Grove
|
|
Oak Grove Resources, LLC
|
OPEB
|
|
Other postretirement employment benefits
|
Pinnacle
|
|
Pinnacle Mining Company, LLC
|
Platts IODEX
|
|
Refers to the Platts daily iron ore assessment rate for “IODEX 62% Fe cost and freight North China” or seaborne traded iron ore fines as published in the McGraw-Hill Companies ‘Platts Steel Markets Daily’ report
|
Preferred Share
|
|
7.00 percent Series A Mandatory Convertible Preferred Stock, Class A, without par value
|
SEC
|
|
U.S. Securities and Exchange Commission
|
SG&A
|
|
Selling, general and administrative
|
Securities Act
|
|
Securities Act of 1933, as amended
|
SSR
|
|
System Support Resource
|
Tilden
|
|
Tilden Mining Company L.C.
|
TDR
|
|
Troubled debt restructuring
|
United Taconite
|
|
United Taconite LLC
|
U.S.
|
|
United States of America
|
Wabush
|
|
Wabush Mines Joint Venture
|
Wabush Group
|
|
Wabush Iron Co. Limited and Wabush Resources Inc., and certain of its affiliates, including Wabush Mines (an unincorporated joint venture of Wabush Iron Co. Limited and Wabush Resources Inc.), Arnaud Railway Company and Wabush Lake Railway Company
|
2015 Equity Plan
|
|
Cliffs Natural Resources Inc. 2015 Equity and Incentive Compensation Plan
|
Item 1.
|
Financial Statements
|
|
(In Millions)
|
||||||
|
September 30,
2016 |
|
December 31,
2015 |
||||
ASSETS
|
|
|
|
||||
CURRENT ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
132.2
|
|
|
$
|
285.2
|
|
Accounts receivable, net
|
49.2
|
|
|
40.2
|
|
||
Inventories
|
317.3
|
|
|
329.6
|
|
||
Supplies and other inventories
|
84.0
|
|
|
110.4
|
|
||
Short-term assets of discontinued operations
|
—
|
|
|
14.9
|
|
||
Loans to and accounts receivable from the Canadian Entities
|
69.3
|
|
|
72.9
|
|
||
Insurance coverage receivable
|
—
|
|
|
93.5
|
|
||
Other current assets
|
47.6
|
|
|
36.0
|
|
||
TOTAL CURRENT ASSETS
|
699.6
|
|
|
982.7
|
|
||
PROPERTY, PLANT AND EQUIPMENT, NET
|
990.1
|
|
|
1,059.0
|
|
||
OTHER ASSETS
|
|
|
|
||||
Other non-current assets
|
83.2
|
|
|
93.8
|
|
||
TOTAL OTHER ASSETS
|
83.2
|
|
|
93.8
|
|
||
TOTAL ASSETS
|
$
|
1,772.9
|
|
|
$
|
2,135.5
|
|
|
(In Millions, Except Per Share Amounts)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
REVENUES FROM PRODUCT SALES AND SERVICES
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
508.6
|
|
|
$
|
542.5
|
|
|
$
|
1,237.0
|
|
|
$
|
1,399.9
|
|
Freight and venture partners' cost reimbursements
|
44.7
|
|
|
50.7
|
|
|
118.0
|
|
|
137.4
|
|
||||
|
553.3
|
|
|
593.2
|
|
|
1,355.0
|
|
|
1,537.3
|
|
||||
COST OF GOODS SOLD AND OPERATING EXPENSES
|
(467.9
|
)
|
|
(538.1
|
)
|
|
(1,147.2
|
)
|
|
(1,344.1
|
)
|
||||
SALES MARGIN
|
85.4
|
|
|
55.1
|
|
|
207.8
|
|
|
193.2
|
|
||||
OTHER OPERATING INCOME (EXPENSE)
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses
|
(31.1
|
)
|
|
(22.4
|
)
|
|
(81.8
|
)
|
|
(82.2
|
)
|
||||
Miscellaneous - net
|
(19.6
|
)
|
|
(3.5
|
)
|
|
(16.9
|
)
|
|
15.8
|
|
||||
|
(50.7
|
)
|
|
(25.9
|
)
|
|
(98.7
|
)
|
|
(66.4
|
)
|
||||
OPERATING INCOME
|
34.7
|
|
|
29.2
|
|
|
109.1
|
|
|
126.8
|
|
||||
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
(48.7
|
)
|
|
(61.7
|
)
|
|
(156.2
|
)
|
|
(168.2
|
)
|
||||
Gain (loss) on extinguishment/restructuring of debt
|
(18.3
|
)
|
|
79.2
|
|
|
164.1
|
|
|
392.9
|
|
||||
Other non-operating income (expense)
|
0.1
|
|
|
(0.1
|
)
|
|
0.4
|
|
|
(3.0
|
)
|
||||
|
(66.9
|
)
|
|
17.4
|
|
|
8.3
|
|
|
221.7
|
|
||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
(32.2
|
)
|
|
46.6
|
|
|
117.4
|
|
|
348.5
|
|
||||
INCOME TAX BENEFIT (EXPENSE)
|
7.1
|
|
|
3.4
|
|
|
1.7
|
|
|
(169.9
|
)
|
||||
EQUITY LOSS FROM VENTURES, NET OF TAX
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
||||
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
(25.1
|
)
|
|
49.9
|
|
|
119.1
|
|
|
178.5
|
|
||||
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
|
(2.7
|
)
|
|
(43.9
|
)
|
|
(0.6
|
)
|
|
(869.0
|
)
|
||||
NET INCOME (LOSS)
|
(27.8
|
)
|
|
6.0
|
|
|
118.5
|
|
|
(690.5
|
)
|
||||
LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
2.0
|
|
|
4.6
|
|
|
(23.5
|
)
|
|
1.5
|
|
||||
(Three and Nine Months Ended September 30, 2016 - No loss related to Discontinued Operations, Three Months Ended September 30, 2015 - No loss related to Discontinued Operations, Nine Months Ended September 30, 2015 - Loss of $7.7 million related to Discontinued Operations)
|
|
|
|
||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CLIFFS SHAREHOLDERS
|
$
|
(25.8
|
)
|
|
$
|
10.6
|
|
|
$
|
95.0
|
|
|
$
|
(689.0
|
)
|
PREFERRED STOCK DIVIDENDS
|
—
|
|
|
(25.6
|
)
|
|
—
|
|
|
(38.4
|
)
|
||||
NET INCOME (LOSS) ATTRIBUTABLE TO CLIFFS COMMON SHAREHOLDERS
|
$
|
(25.8
|
)
|
|
$
|
(15.0
|
)
|
|
$
|
95.0
|
|
|
$
|
(727.4
|
)
|
EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS - BASIC
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.11
|
)
|
|
$
|
0.19
|
|
|
$
|
0.51
|
|
|
$
|
0.87
|
|
Discontinued operations
|
(0.01
|
)
|
|
(0.29
|
)
|
|
—
|
|
|
(5.62
|
)
|
||||
|
$
|
(0.12
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
0.51
|
|
|
$
|
(4.75
|
)
|
EARNINGS (LOSS) PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS - DILUTED
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.11
|
)
|
|
$
|
0.19
|
|
|
$
|
0.51
|
|
|
$
|
0.87
|
|
Discontinued operations
|
(0.01
|
)
|
|
(0.29
|
)
|
|
—
|
|
|
(5.62
|
)
|
||||
|
$
|
(0.12
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
0.51
|
|
|
$
|
(4.75
|
)
|
AVERAGE NUMBER OF SHARES (IN THOUSANDS)
|
|
|
|
|
|
|
|
||||||||
Basic
|
206,279
|
|
|
153,237
|
|
|
186,454
|
|
|
153,213
|
|
||||
Diluted
|
206,279
|
|
|
153,237
|
|
|
188,471
|
|
|
153,213
|
|
||||
CASH DIVIDENDS DECLARED PER DEPOSITARY SHARE
|
$
|
—
|
|
|
$
|
0.88
|
|
|
$
|
—
|
|
|
$
|
1.32
|
|
|
(In Millions)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO CLIFFS SHAREHOLDERS
|
$
|
(25.8
|
)
|
|
$
|
10.6
|
|
|
$
|
95.0
|
|
|
$
|
(689.0
|
)
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
||||||||
Changes in pension and other post-retirement benefits, net of tax
|
7.1
|
|
|
6.6
|
|
|
19.0
|
|
|
36.0
|
|
||||
Unrealized net gain on marketable securities, net of tax
|
—
|
|
|
0.1
|
|
|
—
|
|
|
1.6
|
|
||||
Unrealized net gain (loss) on foreign currency translation
|
0.9
|
|
|
(11.4
|
)
|
|
2.6
|
|
|
157.1
|
|
||||
Unrealized net gain (loss) on derivative financial instruments, net of tax
|
0.7
|
|
|
9.2
|
|
|
(2.6
|
)
|
|
16.7
|
|
||||
OTHER COMPREHENSIVE INCOME
|
8.7
|
|
|
4.5
|
|
|
19.0
|
|
|
211.4
|
|
||||
OTHER COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST
|
(0.9
|
)
|
|
(0.7
|
)
|
|
(2.2
|
)
|
|
9.3
|
|
||||
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLIFFS SHAREHOLDERS
|
$
|
(18.0
|
)
|
|
$
|
14.4
|
|
|
$
|
111.8
|
|
|
$
|
(468.3
|
)
|
|
(In Millions)
|
||||||
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
OPERATING ACTIVITIES
|
|
|
|
||||
Net income (loss)
|
$
|
118.5
|
|
|
$
|
(690.5
|
)
|
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
|
|
|
|
||||
Depreciation, depletion and amortization
|
88.9
|
|
|
99.1
|
|
||
Impairment of other long-lived assets
|
—
|
|
|
76.6
|
|
||
Deferred income taxes
|
—
|
|
|
160.0
|
|
||
Gain on extinguishment/restructuring of debt
|
(164.1
|
)
|
|
(392.9
|
)
|
||
(Gain) loss on deconsolidation, net of cash deconsolidated
|
(3.2
|
)
|
|
654.8
|
|
||
Other
|
9.0
|
|
|
52.7
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Receivables and other assets
|
137.5
|
|
|
293.1
|
|
||
Inventories
|
21.6
|
|
|
(76.2
|
)
|
||
Payables, accrued expenses and other liabilities
|
(136.1
|
)
|
|
(236.2
|
)
|
||
Net cash provided (used) by operating activities
|
72.1
|
|
|
(59.5
|
)
|
||
INVESTING ACTIVITIES
|
|
|
|
||||
Purchase of property, plant and equipment
|
(45.8
|
)
|
|
(57.9
|
)
|
||
Other investing activities
|
6.3
|
|
|
0.7
|
|
||
Net cash used by investing activities
|
(39.5
|
)
|
|
(57.2
|
)
|
||
FINANCING ACTIVITIES
|
|
|
|
||||
Repayment of equipment loans
|
(95.6
|
)
|
|
(36.9
|
)
|
||
Distributions of partnership equity
|
(52.5
|
)
|
|
(31.7
|
)
|
||
Debt issuance costs
|
(5.2
|
)
|
|
(33.6
|
)
|
||
Net proceeds from issuance of common shares
|
287.6
|
|
|
—
|
|
||
Proceeds from first lien notes offering
|
—
|
|
|
503.5
|
|
||
Repurchase of debt
|
(301.0
|
)
|
|
(225.9
|
)
|
||
Borrowings under credit facilities
|
105.0
|
|
|
309.8
|
|
||
Repayment under credit facilities
|
(105.0
|
)
|
|
(309.8
|
)
|
||
Preferred stock dividends
|
—
|
|
|
(38.4
|
)
|
||
Other financing activities
|
(19.3
|
)
|
|
(38.8
|
)
|
||
Net cash provided (used) by financing activities
|
(186.0
|
)
|
|
98.2
|
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
0.4
|
|
|
(2.2
|
)
|
||
DECREASE IN CASH AND CASH EQUIVALENTS
|
(153.0
|
)
|
|
(20.7
|
)
|
||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
285.2
|
|
|
290.9
|
|
||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
132.2
|
|
|
$
|
270.2
|
|
Name
|
|
Location
|
|
Ownership Interest
|
|
Operation
|
|
Status of Operations
|
Northshore
|
|
Minnesota
|
|
100.0%
|
|
Iron Ore
|
|
Active
|
United Taconite
|
|
Minnesota
|
|
100.0%
|
|
Iron Ore
|
|
Active
|
Tilden
|
|
Michigan
|
|
85.0%
|
|
Iron Ore
|
|
Active
|
Empire
|
|
Michigan
|
|
79.0%
|
|
Iron Ore
|
|
Idle
|
Koolyanobbing
|
|
Western Australia
|
|
100.0%
|
|
Iron Ore
|
|
Active
|
|
(In Millions)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net Income (Loss)
|
$
|
(27.8
|
)
|
|
$
|
6.0
|
|
|
$
|
118.5
|
|
|
$
|
(690.5
|
)
|
Less:
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
(48.7
|
)
|
|
(62.3
|
)
|
|
(156.2
|
)
|
|
(170.7
|
)
|
||||
Income tax benefit (expense)
|
7.1
|
|
|
4.8
|
|
|
1.7
|
|
|
(167.3
|
)
|
||||
Depreciation, depletion and amortization
|
(26.8
|
)
|
|
(35.6
|
)
|
|
(88.9
|
)
|
|
(99.1
|
)
|
||||
EBITDA
|
$
|
40.6
|
|
|
$
|
99.1
|
|
|
$
|
361.9
|
|
|
$
|
(253.4
|
)
|
Less:
|
|
|
|
|
|
|
|
||||||||
Impairment of other long-lived assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3.3
|
)
|
Impact of discontinued operations
|
(2.7
|
)
|
|
(44.8
|
)
|
|
(0.6
|
)
|
|
(865.9
|
)
|
||||
Gain (loss) on extinguishment/restructuring of debt
|
(18.3
|
)
|
|
79.2
|
|
|
164.1
|
|
|
392.9
|
|
||||
Severance and contractor termination costs
|
—
|
|
|
2.2
|
|
|
(0.1
|
)
|
|
(9.3
|
)
|
||||
Foreign exchange remeasurement
|
(0.3
|
)
|
|
2.4
|
|
|
(1.2
|
)
|
|
15.2
|
|
||||
Adjusted EBITDA
|
$
|
61.9
|
|
|
$
|
60.1
|
|
|
$
|
199.7
|
|
|
$
|
217.0
|
|
|
|
|
|
|
|
|
|
||||||||
EBITDA:
|
|
|
|
|
|
|
|
||||||||
U.S. Iron Ore
|
$
|
61.1
|
|
|
$
|
69.2
|
|
|
$
|
196.6
|
|
|
$
|
239.6
|
|
Asia Pacific Iron Ore
|
21.2
|
|
|
11.1
|
|
|
69.6
|
|
|
38.7
|
|
||||
Other
|
(41.7
|
)
|
|
18.8
|
|
|
95.7
|
|
|
(531.7
|
)
|
||||
Total EBITDA
|
$
|
40.6
|
|
|
$
|
99.1
|
|
|
$
|
361.9
|
|
|
$
|
(253.4
|
)
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||||||
U.S. Iron Ore
|
$
|
65.3
|
|
|
$
|
72.3
|
|
|
$
|
208.6
|
|
|
$
|
254.6
|
|
Asia Pacific Iron Ore
|
23.7
|
|
|
9.7
|
|
|
73.2
|
|
|
32.8
|
|
||||
Other
|
(27.1
|
)
|
|
(21.9
|
)
|
|
(82.1
|
)
|
|
(70.4
|
)
|
||||
Total Adjusted EBITDA
|
$
|
61.9
|
|
|
$
|
60.1
|
|
|
$
|
199.7
|
|
|
$
|
217.0
|
|
|
(In Millions)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Depreciation, depletion and amortization:
|
|
|
|
|
|
|
|
||||||||
U.S. Iron Ore
|
$
|
18.8
|
|
|
$
|
27.9
|
|
|
$
|
65.1
|
|
|
$
|
71.6
|
|
Asia Pacific Iron Ore
|
6.3
|
|
|
6.1
|
|
|
19.2
|
|
|
19.1
|
|
||||
Other
|
1.7
|
|
|
1.6
|
|
|
4.6
|
|
|
5.2
|
|
||||
Total depreciation, depletion and amortization
|
$
|
26.8
|
|
|
$
|
35.6
|
|
|
$
|
88.9
|
|
|
$
|
95.9
|
|
|
|
|
|
|
|
|
|
||||||||
Capital additions
1
:
|
|
|
|
|
|
|
|
||||||||
U.S. Iron Ore
|
$
|
25.8
|
|
|
$
|
15.0
|
|
|
$
|
39.5
|
|
|
$
|
35.8
|
|
Asia Pacific Iron Ore
|
0.2
|
|
|
0.3
|
|
|
0.2
|
|
|
4.8
|
|
||||
Other
|
0.4
|
|
|
2.4
|
|
|
4.8
|
|
|
6.0
|
|
||||
Total capital additions
|
$
|
26.4
|
|
|
$
|
17.7
|
|
|
$
|
44.5
|
|
|
$
|
46.6
|
|
|
(In Millions)
|
||||||
|
September 30,
2016 |
|
December 31,
2015 |
||||
Assets:
|
|
|
|
||||
U.S. Iron Ore
|
$
|
1,429.0
|
|
|
$
|
1,476.4
|
|
Asia Pacific Iron Ore
|
137.7
|
|
|
202.5
|
|
||
Total segment assets
|
1,566.7
|
|
|
1,678.9
|
|
||
Corporate
|
206.2
|
|
|
441.7
|
|
||
Assets of Discontinued Operations
|
—
|
|
|
14.9
|
|
||
Total assets
|
$
|
1,772.9
|
|
|
$
|
2,135.5
|
|
|
(In Millions)
|
||||||||||||||||||||||
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
Segment
|
Finished Goods
|
|
Work-in Process
|
|
Total Inventory
|
|
Finished Goods
|
|
Work-in
Process
|
|
Total
Inventory
|
||||||||||||
U.S. Iron Ore
|
$
|
248.8
|
|
|
$
|
20.4
|
|
|
$
|
269.2
|
|
|
$
|
252.3
|
|
|
$
|
11.7
|
|
|
$
|
264.0
|
|
Asia Pacific Iron Ore
|
17.3
|
|
|
30.8
|
|
|
48.1
|
|
|
20.8
|
|
|
44.8
|
|
|
65.6
|
|
||||||
Total
|
$
|
266.1
|
|
|
$
|
51.2
|
|
|
$
|
317.3
|
|
|
$
|
273.1
|
|
|
$
|
56.5
|
|
|
$
|
329.6
|
|
|
(In Millions)
|
||||||
|
September 30,
2016 |
|
December 31,
2015 |
||||
Land rights and mineral rights
|
$
|
500.5
|
|
|
$
|
500.5
|
|
Office and information technology
|
63.6
|
|
|
71.0
|
|
||
Buildings
|
61.1
|
|
|
60.4
|
|
||
Mining equipment
|
598.7
|
|
|
594.0
|
|
||
Processing equipment
|
541.2
|
|
|
516.8
|
|
||
Electric power facilities
|
49.6
|
|
|
46.4
|
|
||
Land improvements
|
24.8
|
|
|
24.8
|
|
||
Asset retirement obligation
|
18.3
|
|
|
87.9
|
|
||
Other
|
28.4
|
|
|
28.2
|
|
||
Construction in-progress
|
37.9
|
|
|
40.3
|
|
||
|
1,924.1
|
|
|
1,970.3
|
|
||
Allowance for depreciation and depletion
|
(934.0
|
)
|
|
(911.3
|
)
|
||
|
$
|
990.1
|
|
|
$
|
1,059.0
|
|
($ in Millions)
|
|
||||||||||||||||||
September 30, 2016
|
|
||||||||||||||||||
Debt Instrument
|
|
Annual Effective Interest Rate
|
|
Total Principal Amount
|
|
Debt Issuance Costs
|
|
Undiscounted Interest/(Unamortized Discounts)
|
|
Total Debt
|
|
||||||||
$700 Million 4.875% 2021 Senior Notes
|
|
4.89%
|
|
$
|
325.7
|
|
|
$
|
(1.2
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
324.3
|
|
(1)
|
$1.3 Billion Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
$500 Million 4.80% 2020 Senior Notes
|
|
4.83%
|
|
244.8
|
|
|
(0.7
|
)
|
|
(0.2
|
)
|
|
243.9
|
|
(2)
|
||||
$800 Million 6.25% 2040 Senior Notes
|
|
6.34%
|
|
298.4
|
|
|
(2.5
|
)
|
|
(3.4
|
)
|
|
292.5
|
|
(3)
|
||||
$400 Million 5.90% 2020 Senior Notes
|
|
5.98%
|
|
225.6
|
|
|
(0.7
|
)
|
|
(0.5
|
)
|
|
224.4
|
|
(4)
|
||||
$500 Million 3.95% 2018 Senior Notes
|
|
6.15%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(5)
|
||||
$540 Million 8.25% 2020 First Lien Notes
|
|
9.97%
|
|
540.0
|
|
|
(8.6
|
)
|
|
(27.4
|
)
|
|
504.0
|
|
|
||||
$218.5 Million 8.00% 2020 1.5 Lien Notes
|
|
N/A
|
|
218.5
|
|
|
—
|
|
|
70.0
|
|
|
288.5
|
|
(6)
|
||||
$544.2 Million 7.75% 2020 Second Lien Notes
|
|
15.55%
|
|
430.1
|
|
|
(6.2
|
)
|
|
(90.1
|
)
|
|
333.8
|
|
(7)
|
||||
$550 Million ABL Facility:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
ABL Facility
|
|
N/A
|
|
550.0
|
|
|
N/A
|
|
|
N/A
|
|
|
—
|
|
(8)
|
||||
Fair Value Adjustment to Interest Rate Hedge
|
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|||||||
Total debt
|
|
|
|
$
|
2,833.1
|
|
|
|
|
|
|
$
|
2,213.4
|
|
|
||||
Less: Current portion
|
|
|
|
|
|
|
|
|
|
17.5
|
|
|
|||||||
Long-term debt
|
|
|
|
|
|
|
|
|
|
$
|
2,195.9
|
|
|
($ in Millions)
|
|
||||||||||||||||||
December 31, 2015
|
|
||||||||||||||||||
Debt Instrument
|
|
Annual Effective Interest Rate
|
|
Total Principal Amount
|
|
Debt Issuance Costs
|
|
Unamortized Discounts
|
|
Total Debt
|
|
||||||||
$700 Million 4.875% 2021 Senior Notes
|
|
4.89%
|
|
$
|
412.5
|
|
|
$
|
(1.7
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
410.6
|
|
|
$1.3 Billion Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
$500 Million 4.80% 2020 Senior Notes
|
|
4.83%
|
|
306.7
|
|
|
(1.1
|
)
|
|
(0.4
|
)
|
|
305.2
|
|
|
||||
$800 Million 6.25% 2040 Senior Notes
|
|
6.34%
|
|
492.8
|
|
|
(4.3
|
)
|
|
(5.8
|
)
|
|
482.7
|
|
|
||||
$400 Million 5.90% 2020 Senior Notes
|
|
5.98%
|
|
290.8
|
|
|
(1.1
|
)
|
|
(0.8
|
)
|
|
288.9
|
|
|
||||
$500 Million 3.95% 2018 Senior Notes
|
|
6.30%
|
|
311.2
|
|
|
(0.9
|
)
|
|
(1.2
|
)
|
|
309.1
|
|
|
||||
$540 Million 8.25% 2020 First Lien Notes
|
|
9.97%
|
|
540.0
|
|
|
(10.5
|
)
|
|
(32.1
|
)
|
|
497.4
|
|
|
||||
$544.2 Million 7.75% 2020 Second Lien Notes
|
|
15.55%
|
|
544.2
|
|
|
(9.5
|
)
|
|
(131.5
|
)
|
|
403.2
|
|
|
||||
$550 Million ABL Facility:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
ABL Facility
|
|
N/A
|
|
550.0
|
|
|
N/A
|
|
|
N/A
|
|
|
—
|
|
(9)
|
||||
Fair Value Adjustment to Interest Rate Hedge
|
|
|
|
|
|
|
|
|
|
2.3
|
|
|
|||||||
Total debt
|
|
|
|
$
|
3,448.2
|
|
|
|
|
|
|
$
|
2,699.4
|
|
|
(1)
|
On March 2, 2016, we exchanged as part of an exchange offer
$76.3 million
of the
4.875 percent
senior notes for
$30.5 million
of the
8.00 percent
1.5 lien notes that were recorded at a carrying value of
$41.5 million
, including undiscounted interest payments as of the transaction date. Additionally, during the third quarter of 2016 we entered into a debt for equity exchange; see
NOTE 15 - CAPITAL STOCK
for further discussion of this transaction.
|
(2)
|
On March 2, 2016, we exchanged as part of an exchange offer
$44.7 million
of the
4.80 percent
senior notes for
$17.9 million
of the
8.00 percent
1.5 lien notes that were recorded at a carrying value of
$24.4 million
, including undiscounted interest payments as of the transaction date. Additionally, during the second and third quarters of 2016 we entered into a debt for equity exchange; see
NOTE 15 - CAPITAL STOCK
for further discussion of this transaction.
|
(3)
|
On March 2, 2016, we exchanged as part of an exchange offer
$194.4 million
of the
6.25 percent
senior notes for
$75.8 million
of the
8.00 percent
1.5 lien notes that were recorded at a carrying value of
$103.0 million
, including undiscounted interest payments as of the transaction date.
|
(4)
|
On March 2, 2016, we exchanged as part of an exchange offer
$65.1 million
of the
5.90 percent
senior notes for
$26.0 million
of the
8.00 percent
1.5 lien notes that were recorded at a carrying value of
$35.4 million
, including undiscounted interest payments as of the transaction date.
|
(5)
|
See the section entitled "
$500 million 3.95 percent 2018 Senior Notes - Full Redemption
" below for further discussion related to this instrument. On March 2, 2016, we exchanged as part of an exchange offer
$17.6 million
of the
3.95 percent
senior notes for
$11.4 million
of the
8.00 percent
1.5 lien notes that were recorded at a carrying value of
$15.5 million
, including undiscounted interest payments as of the transaction date. Additionally, during the first quarter of 2016, we entered into a debt for equity exchange; see
NOTE 15 - CAPITAL STOCK
for further discussion of this transaction.
|
(6)
|
See the section entitled "
$218.5 million
8.00 percent
2020 Senior Secured 1.5 Lien Notes - 2016 Exchange Offers"
below for further discussion related to this instrument. As of
September 30, 2016
,
$17.5 million
of the undiscounted interest is recorded as current and classified as
Other current liabilities
in the Statements of Unaudited Condensed Consolidated Financial Position.
|
(7)
|
On March 2, 2016, we exchanged as part of an exchange offer
$114.1 million
of the
7.75 percent
senior notes for
$57.0 million
of the
8.00 percent
1.5 lien notes that were recorded at a carrying value of
$77.5 million
, including undiscounted interest payments as of the transaction date.
|
(8)
|
As of
September 30, 2016
,
no
loans were drawn under the ABL Facility and we had total availability of
$355.7 million
as a result of borrowing base limitations. As of
September 30, 2016
, the principal amount of letter of credit obligations totaled
$108.8 million
, thereby further reducing available borrowing capacity on our ABL Facility to
$246.9 million
.
|
(9)
|
As of
December 31, 2015
,
no
loans were drawn under the ABL Facility and we had total availability of
$366.0 million
as a result of borrowing base limitations. As of
December 31, 2015
, the principal amount of letter of credit obligations totaled
$186.3 million
and commodity hedge obligations totaled
$0.5 million
, thereby further reducing available borrowing capacity on our ABL Facility to
$179.2 million
.
|
|
(In Millions)
|
||
|
Maturities of Debt
|
||
2016 (October 1 - December 31)
|
$
|
—
|
|
2017
|
—
|
|
|
2018
|
—
|
|
|
2019
|
—
|
|
|
2020
|
1,659.0
|
|
|
2021
|
325.7
|
|
|
2022 and thereafter
|
298.4
|
|
|
Total maturities of debt
|
$
|
2,283.1
|
|
|
(In Millions)
|
||||||||||||||
|
Derivative Liabilities (Level 3)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Beginning balance
|
$
|
(2.6
|
)
|
|
$
|
(8.0
|
)
|
|
$
|
(3.4
|
)
|
|
$
|
(9.5
|
)
|
Total gains (losses)
|
|
|
|
|
|
|
|
||||||||
Included in earnings
|
(2.9
|
)
|
|
(13.7
|
)
|
|
(12.8
|
)
|
|
(45.4
|
)
|
||||
Settlements
|
2.8
|
|
|
20.9
|
|
|
13.5
|
|
|
54.1
|
|
||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending balance - September 30
|
$
|
(2.7
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
(0.8
|
)
|
Total losses for the period included in earnings attributable to the change in unrealized losses on liabilities still held at the reporting date
|
$
|
(2.7
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
(0.8
|
)
|
|
(In Millions)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Service cost
|
$
|
4.2
|
|
|
$
|
3.1
|
|
|
$
|
13.2
|
|
|
$
|
15.7
|
|
Interest cost
|
7.8
|
|
|
9.0
|
|
|
22.7
|
|
|
27.9
|
|
||||
Expected return on plan assets
|
(13.6
|
)
|
|
(14.5
|
)
|
|
(41.0
|
)
|
|
(44.4
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Prior service costs
|
0.5
|
|
|
0.5
|
|
|
1.6
|
|
|
1.7
|
|
||||
Net actuarial loss
|
5.4
|
|
|
4.5
|
|
|
15.9
|
|
|
15.3
|
|
||||
Curtailments/settlements
|
—
|
|
|
$
|
(0.1
|
)
|
|
—
|
|
|
0.2
|
|
|||
Net periodic benefit cost to continuing operations
|
$
|
4.3
|
|
|
$
|
2.5
|
|
|
$
|
12.4
|
|
|
$
|
16.4
|
|
|
(In Millions)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Service cost
|
$
|
0.4
|
|
|
$
|
(1.6
|
)
|
|
$
|
1.3
|
|
|
$
|
1.4
|
|
Interest cost
|
2.3
|
|
|
2.1
|
|
|
6.8
|
|
|
8.6
|
|
||||
Expected return on plan assets
|
(4.3
|
)
|
|
(4.5
|
)
|
|
(12.8
|
)
|
|
(13.7
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Prior service credits
|
(0.9
|
)
|
|
0.6
|
|
|
(2.8
|
)
|
|
(1.2
|
)
|
||||
Net actuarial loss
|
1.7
|
|
|
1.1
|
|
|
4.5
|
|
|
4.2
|
|
||||
Net periodic benefit credit to continuing operations
|
$
|
(0.8
|
)
|
|
$
|
(2.3
|
)
|
|
$
|
(3.0
|
)
|
|
$
|
(0.7
|
)
|
|
(In Millions)
|
||||||
|
Capital Leases
|
|
Operating Leases
|
||||
2016 (October 1 - December 31)
|
$
|
6.4
|
|
|
$
|
2.3
|
|
2017
|
23.4
|
|
|
8.9
|
|
||
2018
|
18.9
|
|
|
7.6
|
|
||
2019
|
10.5
|
|
|
4.9
|
|
||
2020
|
9.4
|
|
|
4.9
|
|
||
2021 and thereafter
|
9.4
|
|
|
5.0
|
|
||
Total minimum lease payments
|
$
|
78.0
|
|
|
$
|
33.6
|
|
Amounts representing interest
|
14.2
|
|
|
|
|||
Present value of net minimum lease payments
|
$
|
63.8
|
|
(1)
|
|
(1)
|
The total is comprised of
$18.3 million
and
$45.5 million
classified as
Other current liabilities
and
Other liabilities
, respectively, in the Statements of Unaudited Condensed Consolidated Financial Position at
September 30, 2016
.
|
|
(In Millions)
|
||||||
|
September 30,
2016 |
|
December 31,
2015 |
||||
Environmental
|
$
|
3.0
|
|
|
$
|
3.6
|
|
Mine closure
|
|
|
|
||||
LTVSMC
|
25.0
|
|
|
24.1
|
|
||
Operating mines:
|
|
|
|
||||
U.S. Iron Ore
|
176.8
|
|
|
189.9
|
|
||
Asia Pacific Iron Ore
|
18.0
|
|
|
16.4
|
|
||
Total mine closure
|
219.8
|
|
|
230.4
|
|
||
Total environmental and mine closure obligations
|
222.8
|
|
|
234.0
|
|
||
Less current portion
|
2.6
|
|
|
2.8
|
|
||
Long term environmental and mine closure obligations
|
$
|
220.2
|
|
|
$
|
231.2
|
|
|
|
|
(In Millions)
|
||||||||||||||||||||||
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Classification
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Permits
|
Other non-current assets
|
|
$
|
78.7
|
|
|
$
|
(23.8
|
)
|
|
$
|
54.9
|
|
|
$
|
78.4
|
|
|
$
|
(20.2
|
)
|
|
$
|
58.2
|
|
Total intangible assets
|
|
|
$
|
78.7
|
|
|
$
|
(23.8
|
)
|
|
$
|
54.9
|
|
|
$
|
78.4
|
|
|
$
|
(20.2
|
)
|
|
$
|
58.2
|
|
Below-market sales contracts
|
Other current liabilities
|
|
$
|
(23.1
|
)
|
|
$
|
15.4
|
|
|
$
|
(7.7
|
)
|
|
$
|
(23.1
|
)
|
|
$
|
—
|
|
|
$
|
(23.1
|
)
|
Below-market sales contracts
|
Other liabilities
|
|
(205.8
|
)
|
|
205.8
|
|
|
—
|
|
|
(205.8
|
)
|
|
205.8
|
|
|
—
|
|
||||||
Total below-market sales contracts
|
|
|
$
|
(228.9
|
)
|
|
$
|
221.2
|
|
|
$
|
(7.7
|
)
|
|
$
|
(228.9
|
)
|
|
$
|
205.8
|
|
|
$
|
(23.1
|
)
|
|
(In Millions)
|
||||||||||||||||||||||
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||||||||||
|
September 30, 2016
|
|
December 31, 2015
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||
Derivative Instrument
|
Balance Sheet Location
|
|
Fair
Value
|
|
Balance
Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
||||||||
Customer supply agreement
|
Other current assets
|
|
28.0
|
|
|
Other current assets
|
|
5.8
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||
Provisional pricing arrangements
|
Other current assets
|
|
0.4
|
|
|
Other current assets
|
|
2.0
|
|
|
Other current liabilities
|
|
2.7
|
|
|
Other current liabilities
|
|
3.4
|
|
||||
Commodity contracts
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Other current liabilities
|
|
0.6
|
|
||||
Total derivatives not designated as hedging instruments under ASC 815
|
|
|
$
|
28.4
|
|
|
|
|
$
|
7.8
|
|
|
|
|
$
|
2.7
|
|
|
|
|
$
|
4.0
|
|
|
|
(In Millions)
|
||||||||||||||
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30, |
||||||||||||
Loss from Discontinued Operations
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues from product sales and services
|
|
$
|
—
|
|
|
$
|
78.8
|
|
|
$
|
—
|
|
|
$
|
338.1
|
|
Cost of goods sold and operating expenses
|
|
—
|
|
|
(102.9
|
)
|
|
—
|
|
|
(377.2
|
)
|
||||
Sales margin
|
|
—
|
|
|
(24.1
|
)
|
|
—
|
|
|
(39.1
|
)
|
||||
Other operating expense
|
|
(1.8
|
)
|
|
(7.4
|
)
|
|
(3.8
|
)
|
|
(25.7
|
)
|
||||
Other expense
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
(1.4
|
)
|
||||
Loss from discontinued operations before income taxes
|
|
(1.8
|
)
|
|
(31.9
|
)
|
|
(3.8
|
)
|
|
(66.2
|
)
|
||||
Impairment of long-lived assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73.4
|
)
|
||||
Income tax benefit
|
|
—
|
|
|
2.1
|
|
|
—
|
|
|
2.6
|
|
||||
Loss from discontinued operations, net of tax
|
|
$
|
(1.8
|
)
|
|
$
|
(29.8
|
)
|
|
$
|
(3.8
|
)
|
|
$
|
(137.0
|
)
|
|
|
(In Millions)
|
||||||
Assets and Liabilities of Discontinued Operations
(1)
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Other current assets
|
|
$
|
—
|
|
|
$
|
14.9
|
|
Total assets of discontinued operations
|
|
$
|
—
|
|
|
$
|
14.9
|
|
|
|
|
|
|
||||
Accrued liabilities
|
|
$
|
1.2
|
|
|
$
|
—
|
|
Other current liabilities
(1)
|
|
4.3
|
|
|
6.9
|
|
||
Total liabilities of discontinued operations
|
|
$
|
5.5
|
|
|
$
|
6.9
|
|
(1)
At September 30, 2016 and December 31, 2015, we had $4.0 million and $7.8 million, respectively, of contingent liabilities associated with our exit from the coal business recorded on our parent company.
|
|
(In Millions)
|
||||||||||
|
Cliffs
Shareholders’
Equity (Deficit)
|
|
Noncontrolling
Interest (Deficit)
|
|
Total Equity (Deficit)
|
||||||
December 31, 2015
|
$
|
(1,981.4
|
)
|
|
$
|
169.8
|
|
|
$
|
(1,811.6
|
)
|
Comprehensive income
|
|
|
|
|
|
||||||
Net income
|
95.0
|
|
|
23.5
|
|
|
118.5
|
|
|||
Other comprehensive income
|
16.8
|
|
|
2.2
|
|
|
19.0
|
|
|||
Total comprehensive income
|
111.8
|
|
|
25.7
|
|
|
137.5
|
|
|||
Issuance of common shares
|
315.2
|
|
|
—
|
|
|
315.2
|
|
|||
Stock and other incentive plans
|
10.1
|
|
|
—
|
|
|
10.1
|
|
|||
Distributions of partnership equity
|
—
|
|
|
(48.8
|
)
|
|
(48.8
|
)
|
|||
Undistributed losses to noncontrolling interest
|
—
|
|
|
(2.9
|
)
|
|
(2.9
|
)
|
|||
September 30, 2016
|
$
|
(1,544.3
|
)
|
|
$
|
143.8
|
|
|
$
|
(1,400.5
|
)
|
|
(In Millions)
|
||||||||||
|
Cliffs
Shareholders’ Equity (Deficit) |
|
Noncontrolling
Interest (Deficit) |
|
Total Equity (Deficit)
|
||||||
December 31, 2014
|
$
|
(1,431.3
|
)
|
|
$
|
(303.0
|
)
|
|
$
|
(1,734.3
|
)
|
Comprehensive income (loss)
|
|
|
|
|
|
||||||
Net loss
|
(689.0
|
)
|
|
(1.5
|
)
|
|
(690.5
|
)
|
|||
Other comprehensive income (loss)
|
220.7
|
|
|
(9.3
|
)
|
|
211.4
|
|
|||
Total comprehensive loss
|
(468.3
|
)
|
|
(10.8
|
)
|
|
(479.1
|
)
|
|||
Effect of deconsolidation
|
—
|
|
|
528.2
|
|
|
528.2
|
|
|||
Stock and other incentive plans
|
6.0
|
|
|
—
|
|
|
6.0
|
|
|||
Preferred share dividends
|
(38.4
|
)
|
|
—
|
|
|
(38.4
|
)
|
|||
Distributions to noncontrolling interest
|
—
|
|
|
(40.7
|
)
|
|
(40.7
|
)
|
|||
Undistributed losses to noncontrolling interest
|
—
|
|
|
(1.2
|
)
|
|
(1.2
|
)
|
|||
September 30, 2015
|
$
|
(1,932.0
|
)
|
|
$
|
172.5
|
|
|
$
|
(1,759.5
|
)
|
|
(In Millions)
|
||||||||||||||||||
|
Changes in Pension and Other Post-Retirement Benefits, net of tax
|
|
Unrealized Net Gain (Loss) on Securities, net of tax
|
|
Unrealized Net Gain (Loss) on Foreign Currency Translation
|
|
Net Unrealized Gain (Loss) on Derivative Financial Instruments, net of tax
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance December 31, 2014
|
$
|
(291.1
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
64.4
|
|
|
$
|
(18.1
|
)
|
|
$
|
(245.8
|
)
|
Other comprehensive income (loss) before reclassifications
|
9.3
|
|
|
2.8
|
|
|
(14.7
|
)
|
|
(7.1
|
)
|
|
(9.7
|
)
|
|||||
Net loss (gain) reclassified from accumulated other comprehensive income (loss)
|
30.3
|
|
|
(2.0
|
)
|
|
182.7
|
|
|
6.3
|
|
|
217.3
|
|
|||||
Balance March 31, 2015
|
$
|
(251.5
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
232.4
|
|
|
$
|
(18.9
|
)
|
|
$
|
(38.2
|
)
|
Other comprehensive income (loss) before reclassifications
|
1.3
|
|
|
1.0
|
|
|
1.2
|
|
|
0.5
|
|
|
4.0
|
|
|||||
Net loss (gain) reclassified from accumulated other comprehensive income (loss)
|
(1.6
|
)
|
|
(0.9
|
)
|
|
—
|
|
|
7.8
|
|
|
5.3
|
|
|||||
Balance June 30, 2015
|
$
|
(251.8
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
233.6
|
|
|
$
|
(10.6
|
)
|
|
$
|
(28.9
|
)
|
Other comprehensive income (loss) before reclassifications
|
(0.7
|
)
|
|
0.1
|
|
|
(11.4
|
)
|
|
4.8
|
|
|
(7.2
|
)
|
|||||
Net loss reclassified from accumulated other comprehensive income (loss)
|
6.6
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
11.0
|
|
|||||
Balance September 30, 2015
|
$
|
(245.9
|
)
|
|
$
|
—
|
|
|
$
|
222.2
|
|
|
$
|
(1.4
|
)
|
|
$
|
(25.1
|
)
|
(1)
|
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost. See
NOTE 7 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS
for further information.
|
(2)
|
Represents Canadian accumulated currency translation adjustments that were deconsolidated. See
NOTE 14 - DISCONTINUED OPERATIONS
for further information.
|
|
(In Millions)
|
||||||
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Capital additions
(1)
|
$
|
44.5
|
|
|
$
|
69.0
|
|
Cash paid for capital expenditures
|
45.8
|
|
|
57.9
|
|
||
Difference
|
$
|
(1.3
|
)
|
|
$
|
11.1
|
|
Non-cash accruals
|
$
|
(1.3
|
)
|
|
$
|
10.4
|
|
Capital leases
|
—
|
|
|
0.7
|
|
||
Total
|
$
|
(1.3
|
)
|
|
$
|
11.1
|
|
(1)
|
Includes capital additions of
$44.5 million
related to continuing operations for the nine months ended
September 30, 2016
. Includes capital additions of
$46.6 million
and
$22.4 million
related to continuing operations and discontinued operations, respectively, for the nine months ended
September 30, 2015
.
|
Mine
|
|
Cliffs Natural Resources
|
|
ArcelorMittal
|
|
U.S. Steel Corporation
|
|||
Empire
|
|
79.0
|
%
|
|
21.0
|
%
|
|
—
|
|
Tilden
|
|
85.0
|
%
|
|
—
|
|
|
15.0
|
%
|
Hibbing
|
|
23.0
|
%
|
|
62.3
|
%
|
|
14.7
|
%
|
|
(In Millions, Except Per Share Amounts)
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Income (Loss) from Continuing Operations
|
$
|
(25.1
|
)
|
|
$
|
49.9
|
|
|
$
|
119.1
|
|
|
$
|
178.5
|
|
Loss (Income) from Continuing Operations Attributable to Noncontrolling Interest
|
2.0
|
|
|
4.6
|
|
|
(23.5
|
)
|
|
(6.2
|
)
|
||||
Net Income (Loss) from Continuing Operations Attributable to Cliffs Shareholders
|
$
|
(23.1
|
)
|
|
$
|
54.5
|
|
|
$
|
95.6
|
|
|
$
|
172.3
|
|
Loss from Discontinued Operations, net of tax
|
(2.7
|
)
|
|
(43.9
|
)
|
|
(0.6
|
)
|
|
(861.3
|
)
|
||||
Net Income (Loss) Attributable to Cliffs Shareholders
|
$
|
(25.8
|
)
|
|
$
|
10.6
|
|
|
$
|
95.0
|
|
|
$
|
(689.0
|
)
|
Preferred Stock Dividends
|
—
|
|
|
(25.6
|
)
|
|
—
|
|
|
(38.4
|
)
|
||||
Net Income (Loss) Attributable to Cliffs Common Shareholders
|
$
|
(25.8
|
)
|
|
$
|
(15.0
|
)
|
|
$
|
95.0
|
|
|
$
|
(727.4
|
)
|
Weighted Average Number of Shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
206.3
|
|
|
153.2
|
|
|
186.5
|
|
|
153.2
|
|
||||
Employee Stock Plans
|
—
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
||||
Diluted
|
206.3
|
|
|
153.2
|
|
|
188.5
|
|
|
153.2
|
|
||||
Earnings (Loss) per Common Share Attributable to
Cliffs Common Shareholders - Basic: |
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.11
|
)
|
|
$
|
0.19
|
|
|
$
|
0.51
|
|
|
$
|
0.87
|
|
Discontinued operations
|
(0.01
|
)
|
|
(0.29
|
)
|
|
—
|
|
|
(5.62
|
)
|
||||
|
$
|
(0.12
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
0.51
|
|
|
$
|
(4.75
|
)
|
Earnings (Loss) per Common Share Attributable to
Cliffs Common Shareholders - Diluted: |
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.11
|
)
|
|
$
|
0.19
|
|
|
$
|
0.51
|
|
|
$
|
0.87
|
|
Discontinued operations
|
(0.01
|
)
|
|
(0.29
|
)
|
|
—
|
|
|
(5.62
|
)
|
||||
|
$
|
(0.12
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
0.51
|
|
|
$
|
(4.75
|
)
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net Income (Loss)
|
$
|
(27.8
|
)
|
|
$
|
6.0
|
|
|
$
|
118.5
|
|
|
$
|
(690.5
|
)
|
Less:
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
(48.7
|
)
|
|
(62.3
|
)
|
|
(156.2
|
)
|
|
(170.7
|
)
|
||||
Income tax benefit (expense)
|
7.1
|
|
|
4.8
|
|
|
1.7
|
|
|
(167.3
|
)
|
||||
Depreciation, depletion and amortization
|
(26.8
|
)
|
|
(35.6
|
)
|
|
(88.9
|
)
|
|
(99.1
|
)
|
||||
EBITDA
|
$
|
40.6
|
|
|
$
|
99.1
|
|
|
$
|
361.9
|
|
|
$
|
(253.4
|
)
|
Less:
|
|
|
|
|
|
|
|
||||||||
Impairment of other long-lived assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3.3
|
)
|
Impact of discontinued operations
|
(2.7
|
)
|
|
(44.8
|
)
|
|
(0.6
|
)
|
|
(865.9
|
)
|
||||
Gain (loss) on extinguishment/restructuring of debt
|
(18.3
|
)
|
|
79.2
|
|
|
164.1
|
|
|
392.9
|
|
||||
Severance and contractor termination costs
|
—
|
|
|
2.2
|
|
|
(0.1
|
)
|
|
(9.3
|
)
|
||||
Foreign exchange remeasurement
|
(0.3
|
)
|
|
2.4
|
|
|
(1.2
|
)
|
|
15.2
|
|
||||
Adjusted EBITDA
|
$
|
61.9
|
|
|
$
|
60.1
|
|
|
$
|
199.7
|
|
|
$
|
217.0
|
|
|
|
|
|
|
|
|
|
||||||||
EBITDA:
|
|
|
|
|
|
|
|
||||||||
U.S. Iron Ore
|
$
|
61.1
|
|
|
$
|
69.2
|
|
|
$
|
196.6
|
|
|
$
|
239.6
|
|
Asia Pacific Iron Ore
|
21.2
|
|
|
11.1
|
|
|
69.6
|
|
|
38.7
|
|
||||
Other
|
(41.7
|
)
|
|
18.8
|
|
|
95.7
|
|
|
(531.7
|
)
|
||||
Total EBITDA
|
$
|
40.6
|
|
|
$
|
99.1
|
|
|
$
|
361.9
|
|
|
$
|
(253.4
|
)
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||||||
U.S. Iron Ore
|
$
|
65.3
|
|
|
$
|
72.3
|
|
|
$
|
208.6
|
|
|
$
|
254.6
|
|
Asia Pacific Iron Ore
|
23.7
|
|
|
9.7
|
|
|
73.2
|
|
|
32.8
|
|
||||
Other
|
(27.1
|
)
|
|
(21.9
|
)
|
|
(82.1
|
)
|
|
(70.4
|
)
|
||||
Total Adjusted EBITDA
|
$
|
61.9
|
|
|
$
|
60.1
|
|
|
$
|
199.7
|
|
|
$
|
217.0
|
|
•
|
Lower sales volumes of 313 thousand long tons which resulted in lower revenues of
$24.0 million
due to:
|
◦
|
A termination of a customer contract in the fourth quarter of the prior year that was reinstated in June of 2016, to begin in 2017, offset partially by fewer nominated tons on short term contracts with the customer in the interim; and
|
◦
|
Space limitations at a third party and customer locations for different ore grades which limited that customer's ability to take iron ore pellets in the quarter.
|
◦
|
These decreases were offset partially by additional sales in the third quarter of 2016 that resulted from a short-term contract with a customer that we made no sales to in 2015.
|
•
|
The realized product revenue rate declined by
$3.02
per long ton or
3.9
percent to
$73.50
per long ton in third quarter of 2016, which resulted in a decrease of
$15.8 million
. This decline is a result of:
|
◦
|
Changes in customer pricing negatively affected the realized revenue rate by $2 per long ton driven primarily by the negative inflation projections of certain price indices and lower full-year world pricing than the 2015 period;
|
◦
|
An unfavorable variance of $1 per long ton due to overall net lower contracted pricing terms for two customers which were based on stated negotiated rates compared to the prior-year period; and
|
◦
|
A decrease in revenue rate of $1 per long ton due to lower projected hot-rolled coil pricing for one customer compared to the prior-year period.
|
◦
|
Partially offset by an increase in service revenue from increased rail activity for approximately $1 per long ton.
|
•
|
Lower idle costs of
$21.1 million
as a result of the Empire mine idle during the third quarter of 2015 and due to the United Taconite mine which started production again in August of 2016 versus the idle that began in August 2015. Additionally, our Northshore mine was in full production during the third quarter of 2016 versus the one idled production line at Northshore during the third quarter of 2015;
|
•
|
Decreased sales volumes as discussed above that decreased costs by
$17.2 million
compared to the prior-year period; and
|
•
|
Lower costs in the third quarter of 2016 in comparison to the prior-year period primarily driven by the reduction in maintenance and repair spend due to cost reduction initiatives and condition based monitoring, year-over-year reduction in energy rates and lower employment costs.
|
•
|
Lower sales volumes of
1.4 million
long tons, which resulted in lower revenues of
$117.5 million
due to:
|
◦
|
A termination of a customer contract in the fourth quarter of the prior year that was reinstated in June 2016, to begin 2017, offset partially by fewer nominated tons on short term contracts with the customer in the interim; and
|
◦
|
Lower demand from two customer locations primarily due to their inventory levels which resulted from idled blast furnaces at the customer's facilities.
|
◦
|
These decreases were offset partially by additional sales in 2016 that resulted from a short-term contract with a customer that we made no sales to in 2015.
|
•
|
The average year-to-date realized product revenue rate declined by
$4.03
per long ton or
5.0 percent
to
$76.82
per long ton in nine months ended September 30, 2016, which resulted in a decrease of
$45.1 million
, compared to the prior-year period. The decline is a result of:
|
◦
|
Changes in customer pricing negatively affected the realized revenue rate by $4 per long ton driven primarily by the negative inflation of certain price indices, the reduction in Platts IODEX price and the impact of higher carryover pricing in the prior-year period than the 2016 period; and
|
◦
|
An unfavorable variance of $1 per long ton due to overall net lower contracted pricing terms for two customers that were based on stated negotiated rates compared to the prior-year period.
|
◦
|
These decreases were offset partially by an increase in realized revenue rates of a $1 per long ton as a result of one major customer contract with a pricing mechanism tied to the full-year estimate of their hot-rolled coil pricing. The estimate in 2016 has increased since the beginning of the year, compared to 2015 when the estimate was revised lower.
|
•
|
Decreased sales volumes as discussed above that decreased costs by
$84.6 million
compared to the prior-year period; and
|
•
|
Lower costs in comparison to the prior-year period primarily driven by the reduction in maintenance and repair costs resulting from cost reduction initiatives and condition based monitoring, year-over-year reduction in energy rates, and lower employment costs.
|
•
|
Partially offset by increased costs of
$22.2 million
from the United Taconite mine idle that began in August 2015 and continued until the last week of August 2016 and the Northshore mine full idle that began in November 2015 through May 2016 versus the one idled production line during the first nine months of 2015.
|
|
|
(In Millions)
|
||||||||||||||||||||||||||
|
|
|
|
Change due to:
|
|
|
||||||||||||||||||||||
|
|
Three Months Ended
September 30, |
|
Revenue
and cost rate
|
|
Sales volume
|
|
Exchange rate
|
|
Freight and reimburse-ment
|
|
Total change
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
|
|
|
|
|||||||||||||||||||
Revenues from product sales and services
|
|
$
|
125.0
|
|
|
$
|
122.2
|
|
|
$
|
12.2
|
|
|
$
|
(5.3
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
(3.1
|
)
|
|
$
|
2.8
|
|
Cost of goods sold and operating expenses
|
|
(106.1
|
)
|
|
(115.8
|
)
|
|
6.1
|
|
|
5.0
|
|
|
(4.5
|
)
|
|
3.1
|
|
|
9.7
|
|
|||||||
Sales margin
|
|
$
|
18.9
|
|
|
$
|
6.4
|
|
|
$
|
18.3
|
|
|
$
|
(0.3
|
)
|
|
$
|
(5.5
|
)
|
|
$
|
—
|
|
|
$
|
12.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Three Months Ended
September 30, |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Per Ton Information
|
|
2016
|
|
2015
|
|
Difference
|
|
Percent change
|
|
|
|
|
|
|
||||||||||||||
Realized product revenue rate
1
|
|
$
|
42.87
|
|
|
$
|
39.00
|
|
|
$
|
3.87
|
|
|
9.9
|
%
|
|
|
|
|
|
|
|||||||
Cash production cost
2
|
|
26.10
|
|
|
26.87
|
|
|
(0.77
|
)
|
|
(2.9
|
)%
|
|
|
|
|
|
|
||||||||||
Non-production cash cost
2
|
|
7.77
|
|
|
7.85
|
|
|
(0.08
|
)
|
|
(1.0
|
)%
|
|
|
|
|
|
|
||||||||||
Cost of goods sold and operating expenses rate (excluding DDA)
1
|
|
33.87
|
|
|
34.72
|
|
|
(0.85
|
)
|
|
(2.4
|
)%
|
|
|
|
|
|
|
||||||||||
Depreciation, depletion & amortization
|
|
2.25
|
|
|
2.08
|
|
|
0.17
|
|
|
8.2
|
%
|
|
|
|
|
|
|
||||||||||
Total cost of goods sold and operating expenses rate
|
|
36.12
|
|
|
36.80
|
|
|
(0.68
|
)
|
|
(1.8
|
)%
|
|
|
|
|
|
|
||||||||||
Sales margin
|
|
$
|
6.75
|
|
|
$
|
2.20
|
|
|
$
|
4.55
|
|
|
206.8
|
%
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Sales tons
3
(In thousands)
|
|
2,799
|
|
|
2,926
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Production tons
3
(In thousands)
|
|
2,968
|
|
|
2,928
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
1
The information above excludes revenues and expenses related to freight, which are offsetting and have no impact on sales margin.
|
||||||||||||||||||||||||||||
2
Cash production cost per long/metric ton is defined as cost of goods sold and operating expenses per ton less depreciation, depletion and amortization; as well as idle costs, period costs, costs of services and inventory effects per long/metric ton. Non-production cash cost per long/metric ton is defined as the sum of idle costs, period costs (including royalties), costs of services, and inventory effects per long/metric ton.
|
||||||||||||||||||||||||||||
3
Metric tons (2,205 pounds).
|
•
|
The average year-to-date realized product revenue rate increased by
$3.87
per metric ton or
9.9 percent
to
$42.87
per metric ton in third quarter of 2016 compared to the prior-year period, which resulted in an increase of
$11.2 million
, including the impact of foreign exchange. This increase is a result of:
|
◦
|
Changes in benchmark pricing positively affected the realized revenue rate by $4 per metric ton driven by the increase in Platts IODEX price;
|
◦
|
A favorable variance of $3 per metric ton improvement due to a $8.5 million hedging impact in 2015 that was not repeated in 2016, due to the suspension of the hedging program that protected against volatility in exchange rates; and
|
◦
|
Lower average Australia to Asia freight rates in the third quarter compared to the prior-year period, which is a component in the formula pricing, favorably affected the revenue rate by $1 per metric ton.
|
◦
|
Partially offset by a decrease in revenue rate of $4 per metric ton due to price adjustments to meet market competition to compensate for varying quality ores and a reduction in iron content.
|
•
|
The sales volume decreased by 127 thousand metric tons, or 4.3 percent, to 2.8 million metric tons in the third quarter of 2016 compared to the prior-year period. The decrease in tons sold resulted in decreased revenue of
$5.3 million
for the three months ended September 30, 2016 and was due to one less shipment or 16 total shipments during the period compared to 17 total shipments during the three months ended September 30, 2015. Adverse weather conditions delayed the loading of the last scheduled shipment for the third quarter of 2016.
|
•
|
Cost of goods sold and operating expenses in the three months ended
September 30, 2016
decreased $
6.6 million
, excluding the decrease of
$3.1 million
of freight and reimbursements, compared to the same period in
2015
primarily as a result of:
|
◦
|
A reduction in production costs in the current period that were lower compared to the weighted average cost of inventory for a favorable change of $10.4 million;
|
◦
|
Decreased costs of
$5.0 million
as a result of lower sales volumes as discussed above compared to the same period in the prior year; and
|
◦
|
A reduction in transportation costs and administrative costs of $4.0 million from reduced rail freight rates, employment costs and contractor fees also reduced costs.
|
◦
|
Partially offset by increased mining and maintenance costs of $4.8 million which were driven by increased mining activities during the three months ended September 30, 2016, and an environmental reserve adjustment of $3.1 million that benefited the prior-year period and was not repeated in 2016; and
|
◦
|
Partially offset by unfavorable foreign exchange rate variances of
$4.5 million
.
|
•
|
The year-to-date realized revenue from product and services increased by
$4.0 million
, excluding the impact of foreign exchange rates, during the nine months ended September 30, 2016, compared to the prior-year period. This increase is a result of:
|
◦
|
A $3 per metric ton improvement due to a $28.8 million hedging impact in 2015 that was not repeated in 2016, due to the suspension of the hedging program that protected against volatility in exchange rates; and
|
◦
|
Lower average Australia to Asia freight rates compared to the prior-year to date period, which is a component in the formula pricing, favorably affected the revenue rate by $2 per metric ton.
|
◦
|
Partially offset by changes in benchmark pricing which negatively affected the realized revenue rate by $3 per metric ton driven by the reduction in Platts IODEX price; and
|
◦
|
Lower lump premiums of a $1 per metric ton due to lower average spot pricing and required discounts on those premiums.
|
•
|
The increase in average year-to-date realized product revenue rate was offset partially by unfavorable foreign exchange rate variances of
$4.0 million
.
|
•
|
A reduction in mining costs of $12.2 million from mining efficiencies and transportation costs of $13.6 million due to decreased hauling volumes and reduced freight costs as a result of a revised mine plan;
|
•
|
Reduced administration and employment costs of $17.2 million due to lower headcount and contractor fees; and
|
•
|
Favorable foreign exchange rate variances of
$8.6 million
.
|
•
|
Partially offset by the impact of depleting our finished goods stock piles which has a weighted average cost of inventory that is higher than current production costs, for increased expense of $7.6 million.
|
•
|
trends affecting our financial condition, results of operations or future prospects, particularly the continued volatility of iron ore prices;
|
•
|
availability of capital and our ability to maintain adequate liquidity;
|
•
|
our level of indebtedness could limit cash flow available to fund working capital, capital expenditures, acquisitions and other general corporate purposes or ongoing needs of our business, which could prevent us from fulfilling our debt obligations;
|
•
|
continued weaknesses in global economic conditions, including downward pressure on prices caused by oversupply or imported products, including the impact of any reduced barriers to trade, recently filed and forthcoming trade cases, reduced market demand and any change to the economic growth rate in China;
|
•
|
our ability to reach agreement with our iron ore customers regarding any modifications to sales contract provisions, renewals or new arrangements;
|
•
|
uncertainty relating to restructurings in the steel industry and/or affecting the steel industry;
|
•
|
our ability to maintain appropriate relations with unions and employees;
|
•
|
the impact of our customers reducing their steel production or using other methods to produce steel;
|
•
|
our ability to successfully execute an exit option for our Canadian Entities that minimizes the cash outflows and associated liabilities of such entities, including the CCAA process;
|
•
|
our ability to successfully identify and consummate any strategic investments and complete planned divestitures;
|
•
|
our ability to successfully diversify our product mix and add new customers beyond our traditional blast furnace clientele;
|
•
|
the outcome of any contractual disputes with our customers, joint venture partners or significant energy, material or service providers or any other litigation or arbitration;
|
•
|
the ability of our customers and joint venture partners to meet their obligations to us on a timely basis or at all;
|
•
|
the impact of price-adjustment factors on our sales contracts;
|
•
|
changes in sales volume or mix;
|
•
|
our actual levels of capital spending;
|
•
|
our actual economic iron ore reserves or reductions in current mineral estimates, including whether any mineralized material qualifies as a reserve;
|
•
|
events or circumstances that could impair or adversely impact the viability of a mine and the carrying value of associated assets, as well as any resulting impairment charges;
|
•
|
the results of prefeasibility and feasibility studies in relation to projects;
|
•
|
impacts of existing and increasing governmental regulation and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorization of, or from, any governmental or regulatory entity and costs related to implementing improvements to ensure compliance with regulatory changes;
|
•
|
our ability to cost-effectively achieve planned production rates or levels;
|
•
|
uncertainties associated with natural disasters, weather conditions, unanticipated geological conditions, supply or price of energy, equipment failures and other unexpected events;
|
•
|
adverse changes in currency values, currency exchange rates, interest rates and tax laws;
|
•
|
risks related to international operations;
|
•
|
availability of capital equipment and component parts;
|
•
|
the potential existence of significant deficiencies or material weakness in our internal control over financial reporting; and
|
•
|
problems or uncertainties with productivity, tons mined, transportation, mine-closure obligations, environmental liabilities, employee-benefit costs and other risks of the mining industry.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of Shares
(or Units) Purchased
(1)
|
|
Average Price Paid per Share
(or Unit)
|
|
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
|
|||||
July 1 - 31, 2016
|
|
94
|
|
|
$
|
1.58
|
|
|
—
|
|
$
|
—
|
|
August 1 - 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
September 1 - 30, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
|
94
|
|
|
$
|
1.58
|
|
|
—
|
|
$
|
—
|
|
Item 4.
|
Mine Safety Disclosures
|
Item 6.
|
Exhibits
|
(a)
|
List of Exhibits — Refer to Exhibit Index on pg.
64
.
|
|
|
|
CLIFFS NATURAL RESOURCES INC.
|
||||
|
|
|
|
|
|||
|
|
|
By:
|
|
/s/ Timothy K. Flanagan
|
||
|
|
|
|
|
Name:
|
|
Timothy K. Flanagan
|
|
|
|
|
|
Title:
|
|
Vice President, Corporate Controller,
|
|
|
|
|
|
|
|
Treasurer and Chief Accounting Officer
|
Date:
|
October 27, 2016
|
|
|
|
|
|
|
Exhibit
Number
|
|
Exhibit
|
10.1
|
|
* Form of 2016 Change in Control Severance Agreement (filed herewith)
|
31.1
|
|
Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed and dated by Lourenco Goncalves as of October 27, 2016 (filed herewith)
|
31.2
|
|
Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed and dated by P. Kelly Tompkins as of October 27, 2016 (filed herewith)
|
32.1
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Lourenco Goncalves, Chairman, President and Chief Executive Officer of Cliffs Natural Resources Inc., as of October 27, 2016 (furnished herewith)
|
32.2
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by P. Kelly Tompkins, Executive Vice President and Chief Financial Officer of Cliffs Natural Resources Inc., as of October 27, 2016 (furnished herewith)
|
95
|
|
Mine Safety Disclosures (filed herewith)
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
*
|
Indicates management contract or other compensatory arrangement.
|
1
.
|
Certain Defined Terms
.
In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters:
|
(a)
|
“
Accounting Firm
” means such nationally recognized certified public accounting firm mutually agreeable to both the Executive and the Company.
|
(b)
|
“
Agreement Payment
” means a Payment paid or payable pursuant to this Agreement (disregarding any reduction applied pursuant to Section 10).
|
(c)
|
"
Base Pay
” means the Executive’s annual base salary rate as in effect from time to time.
|
(d)
|
“
Board
” means the Board of Directors of the Company.
|
(e)
|
“
Cause
” means that, prior to any termination of employment, the Executive shall have committed:
|
(i)
|
and been convicted of (or given a plea of nolo contendere in connection with) a criminal violation involving fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary;
|
(ii)
|
intentional wrongful damage to property of the Company or any Subsidiary;
|
(iii)
|
intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or
|
(iv)
|
intentional wrongful engagement in any Competitive Activity;
|
(f)
|
“
Change in Control
” means as defined in the Cliffs 2015 Equity and Incentive Compensation Plan:
|
(i)
|
any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “
Person
”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then-outstanding Common Shares (the “
Outstanding Company Common Stock
”) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “
Outstanding Company Voting Securities
”);
provided
,
however
, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate or (D) any acquisition pursuant to a transaction that complies with
Sections 12(c)(i)
,
(c)(ii)
and
(c)(iii)
below
|
(ii)
|
individuals who, as of the date hereof, constitute the Board (the “
Incumbent Board
”) cease for any reason to constitute at least a majority of the Board;
provided
,
however
, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for director, without objection to such nomination) shall be considered as though such
|
(iii)
|
consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or securities of another entity by the Company or any of its subsidiaries (each, a “
Business Combination
”), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
|
(iv)
|
approval by the Shareholders of a complete liquidation or dissolution of the Company.
|
(g)
|
“
Code
” shall mean the Internal Revenue Code of 1986 and regulations thereunder, both as amended from time to time.
|
(h)
|
“
Competitive Activity
” means the Executive’s participation, without the written consent of an officer of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise’s sales of any product or service competitive with any product or service of the Company amounted to at least 10% of the Company’s net sales for its most recently completed fiscal year. “Competitive Activity” will not include (i) the ownership of less than 5% of the securities in any such enterprise and/or the exercise of rights appurtenant thereto or (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise.
|
(i)
|
“
Continuation Period
” means the
[ ]
period commencing on the date of the Executive’s Separation from Service.
|
(j)
|
“
Disability
” means the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long‑term disability plan in effect for, or applicable to, the Executive immediately prior to the Change in Control.
|
(k)
|
“
Employee Benefits
” means the benefits as provided under any and all employee retirement income, incentive compensation and/or welfare benefit policies, plans, programs or arrangements in which the Executive is entitled to participate, including without limitation any savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self‑insured by the Company or a Subsidiary), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company or a Subsidiary, providing perquisites, benefits and service credit for benefits at least as great in value in the aggregate as are payable thereunder prior to a Change in Control.
|
(l)
|
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
|
(m)
|
“
Good Reason
” means the initial occurrence, without the Executive’s consent, of one or more of the following events:
|
(i)
|
a material diminution in his Base Pay;
|
(ii)
|
a material diminution in his authority, duties or responsibilities;
|
(iii)
|
a material change in the principal executive offices in excess of 50 miles at which he must perform services;
|
(iv)
|
a material reduction in his Incentive Pay opportunity; and
|
(v)
|
any other action or inaction that constitutes a material breach by his employer of the employment agreement, if any, under which he provides services;
|
(A)
|
the Executive has provided notice to his employer of the existence of one or more of the conditions listed in (i) through (v) above within 90 days after the initial occurrence of such condition or conditions;
|
(B)
|
such condition or conditions have not been cured by his employer within 30 days after receipt of such notice; and
|
(C)
|
the Executive actually terminates his employment with his employer within 60 days after his employer’s receipt of such notice.
|
(n)
|
"
Incentive Pay"
means an annual bonus, incentive or other payment of compensation, in addition to Base Pay, made or to be made in regard to services rendered in any year pursuant to the Executive Management Performance Incentive Plan (“EMPI”), or the Management Performance Incentive (“MPI”) Plan or replacement plan. "Incentive Pay"
|
(o)
|
“
Net After-Tax Receipt
” means the present value of a Payment net of all taxes imposed on the Executive with respect thereto under Code Sections 1 and 4999 and under applicable state and local laws, determined by applying the highest marginal rate under Code Section 1 and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Executive shall certify, in the Executive’s sole discretion, as likely to apply to the Executive in the relevant tax year(s).
|
(p)
|
“
Parent
” shall mean the entity that owns at least 50% of the total fair market value and total voting power that employs the Executive.
|
(q)
|
“
Payment
” means any payment or distribution in the nature of compensation (within the meaning of Code Section 280G(b)(2)) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
|
(r)
|
“
Protection Period
” means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earlier of (i) the second anniversary of the occurrence of the Change in Control, or (ii) the Executive’s death.
|
(s)
|
“
Qualifying Termination
” has the meaning given to it in Section 3.
|
(t)
|
“
Reduced Amount
” means the amount of Agreement Payments that (i) has a present value that is less than the present value of all Agreement Payments and (ii) results in aggregate Net After-Tax Receipts for all Payments that are greater than the Net After-Tax Receipts for all Payments that would result if the aggregate present value of Agreement Payments were any other amount that is less than the present value of all Agreement Payments.
|
(u)
|
“
Retirement Plans
” means the Company defined benefit pension plan, supplemental executive retirement, excess benefits and retiree medical, life and similar benefit plans providing retirement perquisites, benefits and service credit for benefits at least as great in value in the aggregate as are payable thereunder prior to a Change in Control.
|
(v)
|
“
Separation from Service
” means the Executive’s “separation from service” within the meaning of Code Section 409A with the Company and all members of the Controlled Group, for any reason, including, without limitation, quit, discharge, or retirement, or a leave of absence (including military leave, sick leave, or other bona fide leave of absence such as temporary employment by the government if the period of such leave exceeds the greater of six months or the period for which the Executive’s right to reemployment is provided either by statute or by contract). “Separation from Service” also means the permanent decrease in the Executive’s service for the Company and all Controlled Group members to a level that is no more than 20% of its prior level. For this purpose, whether a Separation from Service has occurred is determined based on whether it is reasonably anticipated that no further services as an employee will be performed by the Executive after a certain date or that the level of bona fide services the Executive will perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 20% of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding
|
(w)
|
“
Severance Compensation
” means the severance pay and other benefits provided by Section 4(a).
|
(x)
|
“
Subsidiary
” means an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding capital or profits interests or Voting Stock.
|
(y)
|
“
Supplemental Retirement Plan
” or “
SERP
” means the Cliffs Natural Resources Inc. Supplemental Retirement Benefit Plan (as Amended and Restated as of December 1, 2006), as it may be amended prior to a Change in Control.
|
(z)
|
“
Term
” means the period commencing as of
August 7, 2016
and expiring as of the later of (i) the close of business on December 31, 2017 or (ii) the expiration of the Protection Period; provided, however, that (A) on January 1, 2018, and each January 1 thereafter, the Term will automatically be extended for one additional year unless, not later than 90 days prior to the date of any such extension and so long as a Change in Control has not occurred, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) if, prior to a Change in Control, the Executive ceases for any reason to be an Officer of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate upon such cessation and be of no further effect.
|
(aa)
|
“
Voting Stock
” means securities of the Company entitled to vote generally in the election of directors.
|
2.
|
Right to Severance Compensation
. Subject to Sections 6, 7 and 11, the Executive shall be entitled to receive the Severance Compensation provided under Section 4 from the Company in accordance with Section 4, if there has been a Change in Control of the Company and (ii) following the occurrence of the Change in Control, the Executive incurs a Qualifying Termination during the Protection Period.
|
3.
|
Qualifying Termination
.
|
(a)
|
A Qualifying Termination shall be the occurrence of either one of the following event:
|
(i)
|
The Executive’s employment is terminated by the Company or any Subsidiary without Cause during the Protection Period; or
|
(ii)
|
The Executive terminates employment with the Company or any Subsidiary for Good Reason during the Protection Period.
|
(b)
|
For purposes of this Agreement, a Qualifying Termination shall not include the Executive’s termination of employment by reason of death or Disability, the Executive’s voluntary termination of employment other than pursuant to Section 3(a)(ii), or a termination of the Executive’s employment by the Company or any Subsidiary for Cause.
|
(c)
|
The Executive’s Qualifying Termination will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company or Subsidiary providing Employee Benefits, which rights shall be governed by the terms thereof, except for any rights to severance compensation to which the Executive may be entitled upon Separation from Service under any severance pay policy, plan, program
|
4.
|
Severance Compensation
. For purposes of this Agreement, “Severance Compensation” shall include each of the following:
|
(a)
|
If, following the occurrence of a Change in Control, the Executive incurs a Qualifying Termination during the Protection Period, the Company will pay or provide to the Executive the payments and other benefits described below at the times and in the manner described therein.
|
(b)
|
A lump sum payment in an amount equal to the number of years in the Continuation Period multiplied by the sum of (i) Base Pay (at the highest rate in effect during the 5-year period prior to the Executive’s Separation from Service), plus (ii) Incentive Pay (in an amount equal to not less than the greatest of (A) the target bonus and/or target award opportunity for the fiscal year immediately preceding the year in which the Change in Control occurs, (B) the target bonus and/or target award opportunity for the fiscal year in which the Change in Control occurs or (C) the target bonus and/or target award opportunity for the fiscal year in which the Executive’s Separation from Service occurs). Such payment shall be made by the later of 10 business days after the Executive’s Separation from Service or the end of the 7-day revocation period that applies, but in no event shall payment occur after the 35
th
day following the Executive’s Separation from Service.
|
(c)
|
A lump sum payment (the “
Non-accrued SERP Payment
”) payable within the first 5 days of the seventh month after the Executive’s Separation from Service in an amount equal to the actuarial equivalent of the future pension benefits which the Executive would have been entitled to accrue under the SERP during the Continuation Period, (including Base Salary and Incentive Pay), if the Executive had remained in the full-time employment of the Company for the entire Continuation Period. The calculation of the SERP Payments shall be made as of the date 6 months after Executive’s Separation from Service using the assumptions and factors used in the salaried pension plan for similar calculations.
|
(d)
|
Reasonable outplacement services by a firm selected by the Executive, at the expense of the Company in an amount up to $10,000. Such outplacement services shall be provided within a period ending no later than the end of the second taxable year of the Executive following the year in which the Executive’s Separation from Service occurred and the fees for such services shall be paid by the Company within 5 days of receipt of an invoice from the outplacement provider for its services or within 5 days of the time
|
(e)
|
Company provided tax and financial planning services up to $10,000 per year through the AYCO Company equal to the number of years in the Continuation period.
|
(f)
|
During the Continuation Period, the Company will arrange to provide the Executive with medical, dental, and vision benefits that are the same as those that the Executive was receiving or entitled to receive immediately prior to the Executive’s Separation from Service (or, if greater, immediately prior to the Change in Control);
provided
,
however
, that if such medical, dental, and vision benefits are subject to income tax, the reimbursement of an eligible expense shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the medical, dental, or vision expense was incurred. Without otherwise limiting the purposes or effect of Section 4(d) of the Agreement, the medical, dental, and vision benefits otherwise receivable by the Executive pursuant to this Section 4(d) will be reduced to the extent comparable medical, dental, and vision benefits are actually received by the Executive from another employer during the Continuation Period following the Executive’s Separation from Service, and any such benefits actually received by the Executive shall be reported by the Executive to the Company.
|
(g)
|
If and to the extent that any benefit described in Section 4(f) is not or cannot be paid or provided under a policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits.
|
6.
|
Competitive Activity; Confidentiality; Non-solicitation
.
|
(a)
|
During the Term and for the duration of the Continuation Period, if the Executive shall have received or shall be receiving benefits under Section 4, the Executive shall not, without the prior written consent of the Company, engage in any Competitive Activity anywhere in the United States.
|
(b)
|
During the Term, the Company agrees that it will disclose to the Executive its confidential or proprietary information (as defined in this Section 6(b)) to the extent necessary for the Executive to carry out his obligations to the Company. The Executive hereby covenants and agrees that he will not, without the prior written consent of the Company, during the Term or thereafter disclose to any person not employed by the Company, or use in connection with engaging in competition with the Company, any confidential or proprietary information of the Company. For purposes of this Agreement, the term “confidential or proprietary information” will include all information of any nature and in any form that is owned by the Company and that is not publicly available (other than by the Executive’s breach of this Section 6(b)) or generally known to persons engaged in businesses similar or related to those of the Company. Confidential or proprietary information will include, without limitation, the Company’s financial matters, customers, employees, industry contracts, strategic business plans, product development (or other proprietary product data), marketing plans, and all other secrets and all other information of a confidential or proprietary nature. For purposes of the preceding two sentences, the term “
Company
” will also include any Subsidiary (collectively, the “
Restricted Group
”). The foregoing obligations imposed by this Section 6(b) will not apply (i) during the Term, in the course of the business of and for the benefit of the Company, (ii) if such confidential or proprietary information will have become, through no fault of the Executive, generally known to the public or (iii) if the Executive is required by law to make disclosure (after giving the Company notice and an opportunity to contest such requirement).
|
(c)
|
The Executive hereby covenants and agrees that during the Term and for the duration of the Continuation Period, the Executive will not, without the prior written consent of the Company, on behalf of the Executive or on behalf of any person, firm or company, directly or indirectly, attempt to influence, persuade or induce, or assist any other person in so persuading or inducing, any employee of the Restricted Group to give up, or to not commence, employment or a business relationship with the Restricted Group.
|
(d)
|
The Executive further agrees that he shall return, within 10 days of the effective date of his termination as an employee of the Company and any Subsidiary, in good condition, all property of the Company and any Subsidiary then in his possession, including, without limitation, whether in hard copy or in media (i) property, documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to confidential or proprietary information of the Company or any Subsidiary, (ii) keys to property of the Company or any Subsidiary, (iii) files and (iv) blueprints or other drawings.
|
(e)
|
The Executive further acknowledges and agrees that his obligation of confidentiality shall survive until and unless such confidential or proprietary information of the Company or any Subsidiary shall have become, through no fault of the Executive, generally known to the public or the Executive is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. The Executive’s obligations under this Section are in addition to, and not in limitation or preemption of,
|
(f)
|
During the term and for the duration of the Continuation Period, the Executive further agrees that he will not, directly or indirectly:
|
(i)
|
induce or attempt to induce customers, business relations or accounts of the Company or any of the Subsidiaries to relinquish their contracts or relationships with the Company or any of the Subsidiaries; or
|
(ii)
|
solicit, entice, assist or induce other employees, agents or independent contractors to leave the employ of the Company or any of the Subsidiaries or to terminate their engagements with the Company and/or any of the Subsidiaries or assist any competitors of the Company or any of the Subsidiaries in securing the services of such employees, agents or independent contractors.
|
7.
|
Release
. Receipt of Severance Compensation and other benefits or amounts by the Executive under this Agreement, is conditioned upon the Executive executing and delivering to the Company a release.. Such release must be executed and delivered by no later than the fifth day following the expiration of the applicable 21-day review period that commences on the day after Executive’s Separation from Service, and no payment of any Severance Compensation will be made until the expiration of the 7-day revocation period that follows the date on which the Executive executes the release.
|
8.
|
Employment Rights
. Nothing expressed or implied in this Agreement shall create any right or duty on the part of the Company, a Subsidiary or the Executive to have the Executive remain in the employment of the Company or a Subsidiary at any time prior to or following a Change in Control.
|
9.
|
Withholding of Taxes
. The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling.
|
10.
|
Code Section 280G
.
|
(a)
|
Notwithstanding any other provisions in this Agreement, in the event that any payment or benefit received or to be received by the Executive (including, without limitation, any payment or benefit received in connection with a Change in Control or the termination of Employee’s employment, whether pursuant to the terms of this Agreement or any other plan, program, arrangement or agreement) (all such payments and benefits, together, the “Total Payments”) would be subject (in whole or in part) to any excise tax imposed under Code Section 4999, or any successor provision thereto (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Code Section 280G in such other plan, agreement, arrangement or program, the Total Payments shall be reduced (but in no event to less than zero) in the following order to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax: (i) cash payments that do not constitute deferred compensation within the meaning of Code Section 409A, (ii) acceleration of vesting of equity and equity-based awards and non-cash benefits that do not constitute deferred compensation within the meaning of Section 409A of the Code and (iii) all other cash payments, acceleration of vesting of equity and equity-based awards and non-cash benefits that do constitute deferred compensation within the meaning of Code Section 409A (the payments and benefits in clauses (i), (ii) and (iii), together, the “Potential Payments”); provided, however, that the Potential Payments shall only be reduced if (A) the net amount of the Total Payments,
|
(b)
|
All determination under this Section 10 shall be made by a nationally recognized accounting firm or law firm selected by the Company (the “Tax Advisor”). The Company and the Executive will each provide the Tax Advisor access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Tax Advisor, and otherwise cooperate with the Tax Advisor in connection with the preparation and issuance of the determinations and calculations contemplated by this Section 10.
|
(a)
|
The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.
|
(b)
|
This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.
|
(c)
|
This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 12(a) and 12(b). Without limiting the generality or effect of the foregoing, the Executive’s right to receive Severance Compensation and other benefits hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 12(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.
|
(d)
|
The obligation of the Company to provide Severance Compensation and other benefits hereunder shall represent an unsecured obligation of the Company.
|
(e)
|
The Company recognizes that each Executive will have no adequate remedy at law for breach by the Company of any of the agreements contained herein and, in the event of any such breach, the Company hereby agrees and consents that each Executive shall
|
(f)
|
This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof and replaces the Prior Agreement, which Prior Agreement shall, without further action, be superseded and replaced without further effect as of the Effective Date.
|
12.
|
Governing Law
. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State.
|
13.
|
Effect on Prior Agreements
. This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof and shall expressly replace, supersede, and render null, void and invalid any prior severance pay agreement or agreements of a similar nature previously entered into by the Company and Employee with respect to the subject matter of this Agreement, including, without limitation, the Prior Agreement; provided however, for the avoidance of doubt, the restriction covenant provisions in this Agreement shall not supersede any similar restrictive covenant provisions in any other agreement entered into by and between the Company and Employee that would be in effect upon a termination of employment for any reason other than a Qualifying Termination following a Change in Control.
|
14.
|
Validity
. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal.
|
15.
|
Administration of This Agreement.
|
(b)
|
Delegation of Duties
. The Company may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Severance Compensation under this Agreement, and any severance pay generally, to named administrator or administrators.
|
(c)
|
Regulations
. The Company shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of this Agreement or to interpret the terms and conditions of this Agreement;
provided
,
however
, that no rule, regulation or interpretation shall be contrary to the provisions of this Agreement.
|
16.
|
Amendment and Termination
. The Company reserves the right, except as hereinafter provided, at any time and from time to time, to amend, modify, change or terminate this Agreement and/or any action by the Compensation and Organization Committee of the Company’s Board of Directors relating thereto, including any Annex or Exhibit thereto;
provided
,
however
, that any such amendment, modification, change or termination that adversely affects the rights of the Executive under this Agreement may not be made without the written consent of the Executive except as provided in the next sentence; and provided further that any such amendment or termination shall be made only if permitted in accordance with the requirements of Code Section 409A. Notwithstanding anything in this Agreement to the contrary, Executive acknowledges and agrees that this Agreement and the payments and benefits provided for hereunder are subject to the terms and conditions of the Company's clawback policy (if any) as may be effect from time to time specifically to implement Section 10D of the Exchange Act and
|
17.
|
Construction
. The masculine gender, when used in this Agreement, shall be deemed to include the feminine gender and the singular number shall include the plural, unless the context clearly indicates to the contrary.
|
18.
|
Counterparts
. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.
|
19.
|
Code Section 409A
.
|
(a)
|
General
. The amounts payable under this Agreement are intended to be exempt or excluded from the application of Code Section 409A, or are otherwise intended to avoid the incurrence of tax penalties under Code Section 409A and, with respect to amounts payable under this Agreement that are subject to Code Section 409A, this Agreement shall in all respects be administered in accordance with Code Section 409A. Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Prior to the Change in Control but within the time period permitted by the applicable Treasury Regulations (or such later time as may be permitted under Code Section 409A or any IRS or Department of Treasury rules or other guidance issued thereunder), the Company may, in consultation with the Executive, modify the Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Executive, in order to avoid the incurrence of tax penalties under Code Section 409A. Notwithstanding anything herein to the contrary, the tax treatment of the benefits provided under this Agreement is not warranted or guaranteed. Neither the Company, its affiliates nor their respective boards of directors shall be held liable for any taxes, interest, penalties, or other similar monetary amounts owed by Executive or other taxpayers as a result of the Agreement.
|
(b)
|
Separation from Service; Specified Employee
. For clarity, the amounts payable under this Agreement shall only be paid following the Executive’s Separation from Service. If a termination of the Executive’s employment does not constitute a Separation from Service, any amounts payable under this Agreement shall be delayed until after the date Executive incurs a Separation from Service. For clarity, the foregoing provision shall not cause any forfeiture of the payments due to the Executive under this Agreement, but shall only act as a delay until such time as Executive incurs a Separation from Service. Notwithstanding anything herein to the contrary, in the event that the Executive is a “specified employee” within the meaning of Code Section 409A (as determined in accordance with the methodology established by the Company as in effect on the Separation from Service) (a “
Specified Employee
”), amounts and benefits that constitute “nonqualified deferred compensation” within the meaning of Code Section 409A that would otherwise be payable and or provided under this Agreement during the six-month period immediately following the Separation from Service shall instead be paid, with interest determined as of the Separation from Service, or provided, on the first normal payroll date after the date that is six months following the Executive’s Separation from Service (the “
Delayed Payment Date
”). If the Executive dies following the Separation from Service and prior to the payment of any amounts delayed to the Delayed Payment
|
(c)
|
Reimbursements and In-Kind Benefits
. All reimbursements and in-kind benefits provided under this Agreement that constitute “nonqualified deferred compensation” within the meaning of Code Section 409A shall be made or provided in accordance with Code Section 409A, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred,
provided
, that the Executive shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated to pay or provide in any given calendar year (other than medical reimbursements described in Treas. Reg. § 1.409A-3(i)(1)(iv)(B)) shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) the Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the Executive’s remaining lifetime (or if longer, through the 20th anniversary of the Effective Date). Prior to the Change in Control but within the time period permitted by the applicable Treasury Regulations (or such later time as may be permitted under Code Section 409A or any IRS or Department of Treasury rules or other guidance issued thereunder), the Company may, in consultation with the Executive, modify the Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Executive, in order to avoid the incurrence of tax penalties under Code Section 409A.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Cliffs Natural Resources Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
October 27, 2016
|
|
By:
|
|
/s/ Lourenco Goncalves
|
|
|
|
|
|
Lourenco Goncalves
|
|
|
|
|
|
Chairman, President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Cliffs Natural Resources Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
October 27, 2016
|
|
By:
|
|
/s/ P. Kelly Tompkins
|
|
|
|
|
|
P. Kelly Tompkins
|
|
|
|
|
|
Executive Vice President & Chief Financial Officer
|
|
|
|
|
|
|
(1)
|
The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Form 10-Q.
|
Date:
|
|
October 27, 2016
|
|
|
|
|
|
|
|
By:
|
/s/ Lourenco Goncalves
|
|
|
|
Lourenco Goncalves
|
|
|
|
Chairman, President and Chief Executive Officer
|
(1)
|
The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Form 10-Q.
|
Date:
|
|
October 27, 2016
|
|
|
|
|
|
|
|
By:
|
/s/ P. Kelly Tompkins
|
|
|
|
P. Kelly Tompkins
|
|
|
|
Executive Vice President & Chief Financial Officer
|
|
|
|
|
(A)
|
The total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under section 104 of the FMSH Act (30 U.S.C. 814) for which the operator received a citation from MSHA;
|
(B)
|
The total number of orders issued under section 104(b) of the FMSH Act (30 U.S.C. 814(b));
|
(C)
|
The total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of the FMSH Act (30 U.S.C. 814(d));
|
(D)
|
The total number of imminent danger orders issued under section 107(a) of the FMSH Act (30 U.S.C. 817(a));
|
(E)
|
The total dollar value of proposed assessments from MSHA under the FMSH Act (30 U.S.C. 801 et seq.);
|
(F)
|
Legal actions pending before the Federal Mine Safety and Health Review Commission involving such coal or other mine as of the last day of the period;
|
(G)
|
Legal actions initiated before the Federal Mine Safety and Health Review Commission involving such coal or other mine during the period; and
|
(H)
|
Legal actions resolved before the Federal Mine Safety and Health Review Commission involving such coal or other mine during the period.
|
|
|
|
Three Months Ended September 30, 2016
|
|||||||||||||||||||||||
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|
(F)
|
|
(G)
|
|
(H)
|
|||||||||
Mine Name/ MSHA ID No.
|
Operation
|
|
Section 104 S&S Citations
|
|
Section 104(b) Orders
|
|
Section 104(d) Citations & Orders
|
|
Section 107(a) Orders
|
|
Total Dollar Value of MSHA Proposed Assessments (1)
|
|
Legal Actions Pending as of Last Day of Period
|
|
Legal Actions Initiated During Period
|
|
Legal Actions Resolved During Period
|
|||||||||
Tilden / 2000422
|
Iron Ore
|
|
31
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
$
|
60,998
|
|
|
20
|
|
(2)
|
10
|
|
|
2
|
|
Empire / 2001012
|
Iron Ore
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
(3)
|
—
|
|
|
—
|
|
|
Northshore Plant / 2100831
|
Iron Ore
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
(4)
|
1
|
|
|
—
|
|
|
Northshore Mine / 2100209
|
Iron Ore
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Hibbing / 2101600
|
Iron Ore
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
(5)
|
4
|
|
|
—
|
|
|
United Taconite Plant / 2103404
|
Iron Ore
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
United Taconite Mine / 2103403
|
Iron Ore
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
(1)
|
Amounts included under the heading “Total Dollar Value of MSHA Proposed Assessments” are the total dollar amounts for proposed assessments received from MSHA for the three months ended
September 30, 2016
.
|
(2)
|
This number consists of 9 pending legal actions related to contests of citations and orders referenced in Subpart B of FMSH Act's procedural rules, 9 pending legal actions related to contests of proposed penalties referenced in Subpart C of FMSH Act's procedural rules, 1 appeal of judges' decisions or orders to the Federal Mine Safety and Health Review Commission referenced in Subpart H of FMSH Act's procedural rules, and 1 pending legal action related to complaints of discharge, discrimination, or interference referenced in Subpart E of FMSH Act's procedural rules.
|
(3)
|
This number consists of 10 pending legal actions related to contests of proposed penalties referenced in Subpart C of FMSH Act's procedural rules and 1 pending legal action related to complaints of discharge, discrimination, or interference referenced in Subpart E of FMSH Act's procedural rules.
|
(4)
|
This number consists of 4 pending legal actions related to contests of proposed penalties referenced in Subpart C of FMSH Act's procedural rules.
|
(5)
|
This number consists of 8 pending legal actions related to contests of proposed penalties referenced in Subpart C of FMSH Act's procedural rules and 2 pending legal actions related to contests of citations and orders referenced in Subpart B of FMSH Act's procedural rules.
|