星空传媒

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2022


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

For the transition period from to .

Commission File Number: 1-8944

CLEVELAND-CLIFFS INC.

(Exact Name of Registrant as Specified in Its Charter)

Ohio

34-1464672

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

200 Public Square,

Cleveland,

Ohio

44114-2315

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (216) 694-5700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares, par value $0.125 per share

CLF

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant’s common shares, par value $0.125 per share, was 524,737,194 as of April 25, 2022.

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TABLE OF CONTENTS

Page Number

DEFINITIONS

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

Statements of Unaudited Condensed Consolidated Financial Position as of March 31, 2022 and December 31, 2021

Statements of Unaudited Condensed Consolidated Operations for the Three Months Ended March 31, 2022 and 2021

Statements of Unaudited Condensed Consolidated Comprehensive Income for the Three Months Ended March 31, 2022 and 2021

Statements of Unaudited Condensed Consolidated Cash Flows for the Three Months Ended March 31, 2022 and 2021

Statements of Unaudited Condensed Consolidated Changes in Equity for the Three Months Ended March 31, 2022 and 2021

Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

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DEFINITIONS

The following abbreviations or acronyms are used in the text. References in this report to the “Company,” “we,” “us,” “our” and “Cliffs” are to 星空传媒 Inc. and subsidiaries, collectively, unless stated otherwise or the context indicates otherwise.


Abbreviation or acronym						Term

4.625% 2029 Senior Notes						4.625% Senior Guaranteed Notes due 2029 issued by 星空传媒 Inc. on February 17, 2021 in an aggregate principal amount of $500 million
4.875% 2031 Senior Notes						4.875% Senior Guaranteed Notes due 2031 issued by 星空传媒 Inc. on February 17, 2021 in an aggregate principal amount of $500 million

ABL Facility						Asset-Based Revolving Credit Agreement, dated as of March 13, 2020, among 星空传媒 Inc., the lenders party thereto from time to time and Bank of America, N.A., as administrative agent, as amended as of March 27, 2020, and December 9, 2020, and as may be further amended from time to time
Adjusted EBITDA						EBITDA, excluding certain items such as EBITDA of noncontrolling interests, asset impairment, extinguishment of debt, severance, acquisition-related costs, amortization of inventory step-up and impacts of discontinued operations
AK Steel						AK Steel Holding Corporation (n/k/a 星空传媒 Steel Holding Corporation) and its consolidated subsidiaries, including AK Steel Corporation (n/k/a 星空传媒 Steel Corporation), its direct, wholly owned subsidiary, collectively, unless stated otherwise or the context indicates otherwise
AK Steel Merger						The merger of Merger Sub with and into AK Steel, with AK Steel surviving the merger as a wholly owned subsidiary of 星空传媒 Inc., subject to the terms and conditions set forth in the AK Steel Merger Agreement, consummated on March 13, 2020
AK Steel Merger Agreement						Agreement and Plan of Merger, dated as of December 2, 2019, among 星空传媒 Inc., AK Steel and Merger Sub
AM USA Transaction						The acquisition of ArcelorMittal USA, consummated on December 9, 2020
AM USA Transaction Agreement						Transaction Agreement, dated as of September 28, 2020, by and between 星空传媒 Inc. and ArcelorMittal
AOCI						Accumulated Other Comprehensive Income (Loss)
ArcelorMittal						ArcelorMittal S.A., a company organized under the laws of Luxembourg and the former ultimate parent company of ArcelorMittal USA
ArcelorMittal USA						Substantially all of the operations of the former ArcelorMittal USA LLC, its subsidiaries and certain affiliates, and Kote and Tek, collectively
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
Board						The Board of Directors of 星空传媒 Inc.
BOF						Basic oxygen furnace
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CERCLA						Comprehensive Environmental Response, Compensation and Liability Act of 1980
COVID-19						A novel strain of coronavirus that the World Health Organization declared a global pandemic in March 2020
Dodd-Frank Act						Dodd-Frank Wall Street Reform and Consumer Protection Act
EAF						Electric arc furnace
EBITDA						Earnings before interest, taxes, depreciation and amortization

EPA						U.S. Environmental Protection Agency
EPS						Earnings per share
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
Fe						Iron
FMSH Act						Federal Mine Safety and Health Act of 1977, as amended
FPT						Ferrous Processing and Trading Company, including certain related entities
FPT Acquisition						The purchase of FPT, subject to the terms and conditions set forth in the FPT Acquisition Agreement
FPT Acquisition Agreement						Securities Purchase Agreement, dated as of October 8, 2021, by and between 星空传媒 Inc. and Anthony Soave Revocable Trust u/a/d January 14, 1987, as amended and restated
GAAP						Accounting principles generally accepted in the United States
GHG						Greenhouse gas
GOES						Grain oriented electrical steel
HBI						Hot briquetted iron

HRC						Hot-rolled coil steel
IRB						Industrial Revenue Bond
JSW Steel						JSW Steel (USA) Inc. and JSW Steel USA Ohio, Inc., collectively
Kote and Tek						I/N Kote L.P. (n/k/a 星空传媒 Kote L.P.) and I/N Tek L.P. (n/k/a 星空传媒 Tek L.P.), former joint ventures between subsidiaries of the former ArcelorMittal USA LLC and Nippon Steel Corporation
Long ton						2,240 pounds
Merger Sub						Pepper Merger Sub Inc., a direct, wholly owned subsidiary of Cliffs prior to the AK Steel Merger
Metric ton						2,205 pounds
MSHA						U.S. Mine Safety and Health Administration
Net ton						2,000 pounds

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Abbreviation or acronym						Term
NOES						Non-oriented electrical steel

NPDES						National Pollutant Discharge Elimination System, authorized by the Clean Water Act
OPEB						Other postretirement benefits
Platts 62% price						Platts IODEX 62% Fe Fines CFR North China
RCRA						Resource Conservation and Recovery Act
RI/FS						Remedial Investigation/Feasibility Study

SEC						U.S. Securities and Exchange Commission
Section 232						Section 232 of the Trade Expansion Act of 1962, as amended
Securities Act						Securities Act of 1933, as amended
SunCoke Middletown						Middletown Coke Company, LLC, a subsidiary of SunCoke Energy, Inc.
Topic 805						ASC Topic 805, Business Combinations
Topic 815						ASC Topic 815, Derivatives and Hedging

U.S.						United States of America
U.S. Steel						United States Steel Corporation and its subsidiaries, collectively, unless stated otherwise or the context indicates otherwise

USMCA						United States-Mexico-Canada Agreement


VIE						Variable interest entity

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PART I


Item 1.			Financial Statements

Statements of Unaudited Condensed Consolidated Financial Position

星空传媒 Inc. and Subsidiaries


	(In Millions)
	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	35	$	48
Accounts receivable, net	2,667		2,154
Inventories	5,562		5,188
Other current assets	295		263
Total current assets	8,559		7,653
Non-current assets:
Property, plant and equipment, net	9,012		9,186
Goodwill	1,127		1,116

Other non-current assets	1,070		1,020
TOTAL ASSETS	$	19,768	$	18,975
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,271	$	2,073
Accrued employment costs	541		585

Other current liabilities	939		903
Total current liabilities	3,751		3,561
Non-current liabilities:
Long-term debt	5,028		5,238
Pension liability, non-current	552		578
OPEB liability, non-current	2,346		2,383
Other non-current liabilities	1,483		1,441
TOTAL LIABILITIES	13,160		13,201
Commitments and contingencies (See Note 18)
Equity:
Common shares - par value $0.125 per share
Authorized - 1,200,000,000 shares (2021 - 1,200,000,000 shares);
Issued - 531,051,530 shares (2021 - 506,832,537 shares);
Outstanding - 524,714,208 shares (2021 - 500,158,955 shares)	66		63
Capital in excess of par value of shares	4,848		4,892
Retained earnings (deficit)	800		(1)
Cost of 6,337,322 common shares in treasury (2021 - 6,673,582 shares)	(90)		(82)
Accumulated other comprehensive income	715		618
Total Cliffs shareholders' equity	6,339		5,490
Noncontrolling interest	269		284
TOTAL EQUITY	6,608		5,774
TOTAL LIABILITIES AND EQUITY	$	19,768	$	18,975

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

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Statements of Unaudited Condensed Consolidated Operations

星空传媒 Inc. and Subsidiaries


		(In Millions, Except Per Share Amounts)
	Three Months Ended March 31,
		2022		2021
Revenues		$	5,955	$	4,049
Operating costs:
Cost of goods sold		(4,706)		(3,761)
Selling, general and administrative expenses		(122)		(108)

Miscellaneous – net		(33)		(3)
Total operating costs		(4,861)		(3,872)
Operating income		1,094		177
Other income (expense):
Interest expense, net		(77)		(92)
Loss on extinguishment of debt		(14)		(66)
Net periodic benefit credits other than service cost component		49		47
Other non-operating expense		(2)		—
Total other expense		(44)		(111)
Income from continuing operations before income taxes		1,050		66
Income tax expense		(237)		(9)
Income from continuing operations		813		57
Income from discontinued operations, net of tax		1		—
Net income		814		57
Income attributable to noncontrolling interest		(13)		(16)
Net income attributable to Cliffs shareholders		$	801	$	41

Earnings per common share attributable to Cliffs shareholders - basic
Continuing operations		$	1.54	$	0.08
Discontinued operations		—		—
		$	1.54	$	0.08
Earnings per common share attributable to Cliffs shareholders - diluted
Continuing operations		$	1.50	$	0.07
Discontinued operations		—		—
		$	1.50	$	0.07

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

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Statements of Unaudited Condensed Consolidated Comprehensive Income

星空传媒 Inc. and Subsidiaries


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Net income		$	814	$	57
Other comprehensive income (loss):
Changes in pension and OPEB, net of tax		1		7
Changes in foreign currency translation		—		(1)
Changes in derivative financial instruments, net of tax		96		7
Total other comprehensive income		97		13
Comprehensive income		911		70
Comprehensive income attributable to noncontrolling interests		(13)		(16)
Comprehensive income attributable to Cliffs shareholders		$	898	$	54

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

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Statements of Unaudited Condensed Consolidated Cash Flows

星空传媒 Inc. and Subsidiaries


	(In Millions)
	Three Months Ended March 31,
	2022		2021
OPERATING ACTIVITIES
Net income	$	814	$	57
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation, depletion and amortization	301		217
Impairment of long-lived assets	29		—


Pension and OPEB credits	(27)		(21)
Loss on extinguishment of debt	14		66
Amortization of inventory step-up	—		81
Other	82		26
Changes in operating assets and liabilities, net of business combination:
Receivables and other assets	(441)		(480)
Inventories	(372)		(172)
Pension and OPEB payments and contributions	(60)		(175)
Payables, accrued expenses and other liabilities	193		22
Net cash provided (used) by operating activities	533		(379)
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(236)		(136)

Other investing activities	1		1
Net cash used by investing activities	(235)		(135)
FINANCING ACTIVITIES

Proceeds from issuance of common shares	—		322
Repurchase of common shares	(19)		—
Proceeds from issuance of debt	—		1,000

Repayments of debt	(360)		(902)
Borrowings under credit facilities	1,715		1,158
Repayments under credit facilities	(1,609)		(1,010)


Other financing activities	(38)		(56)
Net cash provided (used) by financing activities	(311)		512
Net decrease in cash and cash equivalents	(13)		(2)
Cash and cash equivalents at beginning of period	48		112
Cash and cash equivalents at end of period	$	35	$	110

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

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Statements of Unaudited Condensed Consolidated Changes in Equity

星空传媒 Inc. and Subsidiaries


	(In Millions)
	Number of Common Shares Outstanding	Par Value of Common Shares Issued		Capital in Excess of Par Value of Shares		Retained Earnings (Deficit)		Common Shares in Treasury		AOCI		Non-controlling Interests		Total
December 31, 2021	500	$	63	$	4,892	$	(1)	$	(82)	$	618	$	284	$	5,774
Comprehensive income	—	—		—		801		—		97		13		911

Redemption of convertible debt	24	3		(28)		—		—		—		—		(25)
Stock and other incentive plans	2	—		(16)		—		11		—		—		(5)
Common stock repurchases	(1)	—		—		—		(19)		—		—		(19)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(28)		(28)
March 31, 2022	525	$	66	$	4,848	$	800	$	(90)	$	715	$	269	$	6,608


	(In Millions)
	Number of Common Shares Outstanding	Par Value of Common Shares Issued		Capital in Excess of Par Value of Shares		Retained Earnings (Deficit)		Common Shares in Treasury		AOCI (Loss)		Non-controlling Interests		Total
December 31, 2020	478	$	63	$	5,431	$	(2,989)	$	(354)	$	(133)	$	323	$	2,341
Comprehensive income	—	—		—		41		—		13		16		70
Issuance of common stock	20	—		78		—		244		—		—		322
Stock and other incentive plans	1	—		(22)		—		17		—		—		(5)
Acquisition of ArcelorMittal USA - Measurement period adjustments	—	—		—		—		—		—		(1)		(1)
Net distributions to noncontrolling interests	—	—		—		—		—		—		(8)		(8)
March 31, 2021	499	$	63	$	5,487	$	(2,948)	$	(93)	$	(120)	$	330	$	2,719

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

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Notes to Unaudited Condensed Consolidated Financial Statements

星空传媒 Inc. and Subsidiaries

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Business, Consolidation and Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with SEC rules and regulations and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations, comprehensive income, cash flows and changes in equity for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or any other future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Business Operations

We are vertically integrated from mined raw materials, direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are organized into four operating segments based on differentiated products, Steelmaking, Tubular, Tooling and Stamping, and European Operations. We primarily operate through one reportable segment – the Steelmaking segment.

Basis of Consolidation

The unaudited condensed consolidated financial statements consolidate our accounts and the accounts of our wholly owned subsidiaries, all subsidiaries in which we have a controlling interest and VIEs for which we are the primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation.

Investments in Affiliates

We have investments in several businesses accounted for using the equity method of accounting. As of March 31, 2022 and December 31, 2021, our investment in affiliates of $129 million and $128 million, respectively, was classified in Other non-current assets.

Significant Accounting Policies

A detailed description of our significant accounting policies can be found in the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein.

Recent Accounting Pronouncements

Issued and Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update requires certain convertible instruments to be accounted for as a single liability measured at its amortized cost. Additionally, the update requires the use of the "if-converted" method, removing the treasury stock method, when calculating diluted shares. We utilized the modified retrospective method of adoption; using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year in which the amendment was adopted. On January 18, 2022, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes; therefore, there was a de minimis impact as a result of our adoption of this update.

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NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

Allowance for Credit Losses

The following is a roll-forward of our allowance for credit losses associated with Accounts receivable, net:


	(In Millions)
	2022		2021
Allowance for credit losses as of January 1	$	(4)	$	(5)
Increase in allowance	—		(1)
Allowance for credit losses as of March 31	$	(4)	$	(6)

Inventories

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


	(In Millions)
	March 31, 2022		December 31, 2021
Product inventories
Finished and semi-finished goods	$	2,943	$	2,814
Raw materials	2,312		2,070
Total product inventories	5,255		4,884
Manufacturing supplies and critical spares	307		304
Inventories	$	5,562	$	5,188

Cash Flow Information

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


	(In Millions)
	Three Months Ended March 31,
	2022		2021
Capital additions	$	181	$	162
Less:
Non-cash accruals	(55)		23
Right-of-use assets - finance leases	—		3

Cash paid for capital expenditures including deposits	$	236	$	136

Cash payments (receipts) for income taxes and interest are as follows:


	(In Millions)
	Three Months Ended March 31,
	2022		2021
Taxes paid on income	$	1	$	3
Income tax refunds	(1)		(14)
Interest paid on debt obligations net of capitalized interest1	65		75

1 Capitalized interest was $2 million and $1 million for the three months ended March 31, 2022 and 2021, respectively.

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NOTE 3 - ACQUISITIONS

FPT Acquisition

Overview

On November 18, 2021, pursuant to the FPT Acquisition Agreement, we completed the FPT Acquisition, in which we were the acquirer. The FPT Acquisition gives us a competitive advantage in sourcing prime scrap, a key raw material for our steelmaking facilities. We incurred acquisition-related costs, excluding severance costs, of $1 million for the three months ended March 31, 2022, which was recorded in Selling, general and administrative expenses on the Statements of Unaudited Condensed Consolidated Operations.

The fair value of the total purchase consideration was determined as follows:


	(In Millions)
Cash consideration:
Cash consideration pursuant to the FPT Acquisition Agreement	$	778
Estimated cash consideration payable related to Internal Revenue Code Section 338(h)(10)	35
Total cash consideration	813
Fair value of settlement of a pre-existing relationship	(20)
Total purchase consideration	$	793

The Company's estimation of cash consideration payable related to Internal Revenue Code Section 338(h)(10) with respect to entities acquired in connection with the FPT Acquisition could potentially change as elections are expected to be finalized in the third quarter of 2022.

Valuation Assumption and Purchase Price Allocation

We estimated fair values at November 18, 2021 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the FPT Acquisition. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If we determine any measurement period adjustments are material, we will apply those adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. We are in the process of conducting a valuation of the assets acquired and liabilities assumed related to the FPT Acquisition, most notably, personal and real property, deferred taxes, environmental obligations and intangible assets, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future.

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The preliminary purchase price allocation to assets acquired and liabilities assumed in the FPT Acquisition was:


	(In Millions)
	Initial Allocation of Consideration		Measurement Period Adjustments		Updated Allocation
Cash and cash equivalents	$	9	$	—	9
Accounts receivable, net	233		2		235
Inventories	137		2		139
Other current assets	4		(1)		3
Property, plant and equipment	179		26		205
Other non-current assets	74		(1)		73
Accounts payable	(122)		—		(122)
Accrued employment costs	(8)		—		(8)
Other current liabilities	(9)		—		(9)
Other non-current liabilities	(21)		(1)		(22)
Net identifiable assets acquired	476		27		503
Goodwill	279		11		290
Total net assets acquired	$	755	$	38	$	793

The goodwill resulting from the FPT Acquisition primarily represents the incremental benefit of providing substantial access to prime scrap for our vertically integrated steelmaking business, as well as any synergistic benefits to be realized from the FPT Acquisition within our Steelmaking segment.

The preliminary purchase price allocated to identifiable intangible assets acquired was:


	(In Millions)		Weighted Average Life (In Years)
Customer relationships	$	13	15
Supplier relationships	21		18
Trade names and trademarks	7		15
Total identifiable intangible assets	$	41	17

Intangible assets are classified as Other non-current assets on the Statements of Unaudited Condensed Consolidated Financial Position.

NOTE 4 - REVENUES

We generate our revenue through product sales, in which shipping terms indicate when we have fulfilled our performance obligations and transferred control of products to our customer. Our revenue transactions consist of a single performance obligation to transfer promised goods. Our contracts with customers define the mechanism for determining the sales price, which is generally fixed upon transfer of control, but the contracts generally do not impose a specific quantity on either party. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders or other written instructions we receive from the customer. Spot market sales are made through purchase orders or other written instructions. We consider our performance obligation to be complete and recognize revenue when control transfers in accordance with shipping terms.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring product. We reduce the amount of revenue recognized for estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets we serve. Sales taxes collected from customers are excluded from revenues.

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The following table represents our Revenues by market:


	(In Millions)
	Three Months Ended March 31,
	2022		2021
Steelmaking:
Automotive	$	1,607	$	1,287
Infrastructure and manufacturing	1,542		954
Distributors and converters	1,829		1,248
Steel producers	816		430
Total Steelmaking	5,794		3,919
Other Businesses:
Automotive	122		105
Infrastructure and manufacturing	15		10
Distributors and converters	24		15
Total Other Businesses	161		130
Total revenues	$	5,955	$	4,049

The following tables represent our Revenues by product line:


	(Dollars in Millions, Sales Volumes in Thousands of Net Tons)
	Three Months Ended March 31,
	2022			2021
	Revenue		Volume	Revenue		Volume
Steelmaking:
Hot-rolled steel	$	1,194	903	$	895	1,182
Cold-rolled steel	984		651	632		748
Coated steel	1,775		1,242	1,308		1,369
Stainless and electrical steel	551		189	363		167
Plate	421		221	244		275
Other steel products	334		431	289		403
Other	535		N/A	188		N/A
Total Steelmaking	5,794			3,919
Other Businesses:
Other	161		N/A	130		N/A
Total revenues	$	5,955		$	4,049

NOTE 5 - SEGMENT REPORTING

We are vertically integrated from mined raw materials and direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are organized into four operating segments based on our differentiated products – Steelmaking, Tubular, Tooling and Stamping, and European Operations. We have one reportable segment – Steelmaking. The operating segment results of our Tubular, Tooling and Stamping, and European Operations that do not constitute reportable segments are combined and disclosed in the Other Businesses category. Our Steelmaking segment operates as the largest flat-rolled steel producer supported by being the largest iron ore pellet producer as well as a leading prime scrap processor in North America, primarily serving the automotive, distributors and converters and infrastructure and manufacturing markets. Our Other Businesses primarily include the operating segments that provide customer solutions with carbon and stainless steel tubing products, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components, and complex assemblies. All intersegment transactions were eliminated in consolidation.

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external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.

Our results by segment are as follows:


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Revenues:
Steelmaking		$	5,794	$	3,919
Other Businesses		161		130
Total revenues		$	5,955	$	4,049

Adjusted EBITDA:
Steelmaking		$	1,423	$	502
Other Businesses		29		11
Eliminations1		(1)		—
Total Adjusted EBITDA		$	1,451	$	513

1 In 2022, we began allocating Corporate SG&A to our operating segments. Prior periods have been adjusted to reflect this change. The Eliminations line now only includes sales between segments.

The following table provides a reconciliation of our consolidated Net income to total Adjusted EBITDA:


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Net income		$	814	$	57
Less:
Interest expense, net		(77)		(92)
Income tax expense		(237)		(9)
Depreciation, depletion and amortization		(301)		(217)
		1,429		375
Less:
EBITDA of noncontrolling interests1		22		22
Asset impairment		(29)		—
Loss on extinguishment of debt		(14)		(66)
Severance costs		(1)		(11)
Acquisition-related costs excluding severance costs		(1)		(2)

Amortization of inventory step-up		—		(81)
Impact of discontinued operations		1		—
Total Adjusted EBITDA		$	1,451	$	513

1 EBITDA of noncontrolling interests includes the following:
Net income attributable to noncontrolling interests		$	13	$	16
Depreciation, depletion and amortization		9		6
EBITDA of noncontrolling interests		$	22	$	22

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The following summarizes our assets by segment:


	(In Millions)
	March 31, 2022		December 31, 2021
Assets:
Steelmaking	$	19,042	$	18,326
Other Businesses	335		306
Total segment assets	19,377		18,632
Corporate/Eliminations	391		343
Total assets	$	19,768	$	18,975

The following table summarizes our capital additions by segment:


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Capital additions1:
Steelmaking		$	175	$	133
Other Businesses		6		11
Corporate		—		18
Total capital additions		$	181	$	162

1 Refer to NOTE 2 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION for additional information.

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

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


	(In Millions)
	March 31, 2022		December 31, 2021
Land, land improvements and mineral rights	$	1,397	$	1,291
Buildings	907		889
Equipment	8,691		8,709
Other	233		229
Construction in progress	414		408
Total property, plant and equipment1	11,642		11,526
Allowance for depreciation and depletion	(2,630)		(2,340)
Property, plant and equipment, net	$	9,012	$	9,186

1 Includes right-of-use assets related to finance leases of $371 million and $411 million as of March 31, 2022 and December 31, 2021, respectively.

We recorded depreciation and depletion expense of $298 million and $215 million for the three months ended March 31, 2022 and 2021, respectively. Depreciation and depletion expense for the three months ended March 31, 2022 includes $68 million of accelerated depreciation related to the indefinite idle of the Indiana Harbor #4 blast furnace.

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NOTE 7 - GOODWILL AND INTANGIBLE ASSETS AND LIABILITIES

Goodwill

The following is a summary of Goodwill by segment:


	(In Millions)
	March 31, 2022		December 31, 2021
Steelmaking	$	953	$	942
Other Businesses	174		174
Total goodwill	$	1,127	$	1,116

The increase of $11 million in the balance of Goodwill in our Steelmaking segment as of March 31, 2022, compared to December 31, 2021, is due to the change in estimated identified goodwill as a result of measurement period adjustments to the preliminary purchase price allocation for the acquisition of FPT. Refer to NOTE 3 - ACQUISITIONS for further details.

Intangible Assets and Liabilities

The following is a summary of our intangible assets and liabilities:


	(In Millions)
	March 31, 2022						December 31, 2021
	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Intangible assets1:
Customer relationships	$	90	$	(9)	$	81	$	95	$	(8)	$	87
Developed technology	60		(8)		52		60		(6)		54
Trade names and trademarks	18		(3)		15		18		(2)		16
Mining permits	72		(26)		46		72		(26)		46
Supplier relationships	21		—		21		18		—		18
Total intangible assets	$	261	$	(46)	$	215	$	263	$	(42)	$	221
Intangible liabilities2:
Above-market supply contracts	$	(71)	$	15	$	(56)	$	(71)	$	14	$	(57)

1 Intangible assets are classified as Other non-current assets. Amortization related to mining permits is recognized in Cost of goods sold. Amortization of all other intangible assets is recognized in Selling, general and administrative expenses.
2 Intangible liabilities are classified as Other non-current liabilities. Amortization of all intangible liabilities is recognized in Cost of goods sold.

Amortization expense related to intangible assets was $4 million and $3 million for the three months ended March 31, 2022 and 2021, respectively. Estimated future amortization expense is $9 million for the remainder of 2022 and $13 million annually for the years 2023 through 2027.

Income from amortization related to the intangible liabilities for both the three months ended March 31, 2022 and 2021 was $1 million. Estimated future income from amortization is $4 million for the remainder of 2022 and $5 million annually for the years 2023 through 2027.

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NOTE 8 - DEBT AND CREDIT FACILITIES

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


(In Millions)
Debt Instrument	Issuer1	Annual Effective Interest Rate	March 31, 2022		December 31, 2021
Senior Secured Notes:
9.875% 2025 Senior Secured Notes	Cliffs	10.57%	$	607	$	607
6.750% 2026 Senior Secured Notes	Cliffs	6.99%	845		845
Senior Unsecured Notes:
1.500% 2025 Convertible Senior Notes	Cliffs	6.26%	—		294
7.000% 2027 Senior Notes	Cliffs	9.24%	73		73
7.000% 2027 AK Senior Notes	AK Steel	9.24%	56		56
5.875% 2027 Senior Notes	Cliffs	6.49%	556		556
4.625% 2029 Senior Notes	Cliffs	4.63%	500		500
4.875% 2031 Senior Notes	Cliffs	4.88%	500		500
6.250% 2040 Senior Notes	Cliffs	6.34%	263		263
IRBs due 2024 to 2028	AK Steel	Various	—		66
ABL Facility	Cliffs2	Variable3	1,715		1,609
Total principal amount			5,115		5,369
Unamortized discounts and issuance costs			(87)		(131)
Total long-term debt			$	5,028	$	5,238



1 Unless otherwise noted, references in this column and throughout this NOTE 8 - DEBT AND CREDIT FACILITIES to "Cliffs" are to 星空传媒 Inc., and references to "AK Steel" are to AK Steel Corporation (n/k/a 星空传媒 Steel Corporation).
2 Refers to 星空传媒 Inc. as borrower under our ABL Facility.
3 Our ABL Facility annual effective interest rate was 2.00% and 1.87%, respectively, as of March 31, 2022 and December 31, 2021.

Debt Extinguishments - 2022

On January 18, 2022, we redeemed all of our outstanding 1.500% 2025 Convertible Senior Notes through a combination settlement, with the aggregate principal amount of $294 million paid in cash, and 24 million common shares, with a fair value of $499 million, delivered to noteholders in settlement of the premium due per the terms of the indenture, plus cash in respect of the accrued and unpaid interest on the 1.500% 2025 Convertible Senior Notes to, but not including, the redemption date per the terms of the indenture.

Additionally, on March 25, 2022, we redeemed all $66 million aggregate principal amount outstanding of the IRBs due 2024 to 2028.

The following is a summary of the debt extinguished and the respective impact on extinguishment:


		(In Millions)
	Three Months Ended March 31, 2022
Debt Instrument			Debt Extinguished		Gain (Loss) on Extinguishment
1.500% 2025 Convertible Senior Notes			$	294	$	(16)
IRBs due 2024 to 2028			66		2
Total			$	360	$	(14)

Subsequent to the quarter ended March 31, 2022, we redeemed all of our outstanding 9.875% 2025 Senior Secured Notes with available liquidity on April 20, 2022. Refer to NOTE 19 - SUBSEQUENT EVENTS for further information.

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ABL Facility

As of March 31, 2022, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.

The following represents a summary of our borrowing capacity under the ABL Facility:


	(In Millions)
	March 31, 2022
Available borrowing base on ABL Facility1	$	4,500
Borrowings	(1,715)
Letter of credit obligations2	(171)
Borrowing capacity available	$	2,614

1 As of March 31, 2022, the ABL Facility has a maximum available borrowing base of $4.5 billion. The borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
2 We issued standby letters of credit with certain financial institutions in order to support business obligations including, but not limited to, workers' compensation, employee severance, insurance, operating agreements and environmental obligations.

Debt Maturities

The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at March 31, 2022:


	(In Millions)
	Maturities of Debt
2022 (remaining period of year)	$	—
2023	—
2024	—
2025	2,322
2026	845
Thereafter	1,948
Total maturities of debt	$	5,115

NOTE 9 - FAIR VALUE MEASUREMENTS

The carrying values of certain financial instruments (e.g., Accounts receivable, net, Accounts payable and Other current liabilities) approximate fair value and, therefore, have been excluded from the table below. See NOTE 13 - DERIVATIVE INSTRUMENTS for information on our derivative instruments, which are accounted for at fair value on a recurring basis.

A summary of the carrying value and fair value of other financial instruments were as follows:


		(In Millions)
		March 31, 2022				December 31, 2021
	Classification	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes	Level 1	$	3,313	$	3,525	$	3,561	$	3,911
IRBs due 2024 to 2028	Level 1	—		—		68		66
ABL Facility - outstanding balance	Level 2	1,715		1,715		1,609		1,609
Total		$	5,028	$	5,240	$	5,238	$	5,586

The fair value of long-term debt was determined using quoted market prices.

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NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS

We offer defined benefit pension plans, defined contribution pension plans and OPEB plans to a significant portion of our employees and retirees. Benefits are also provided through multiemployer plans for certain union members.

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

Defined Benefit Pension Costs (Credits)


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Service cost		$	12	$	14
Interest cost		32		26
Expected return on plan assets		(92)		(90)
Amortization:

Net actuarial loss		4		8
Net periodic benefit credits		$	(44)	$	(42)

OPEB Costs (Credits)


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Service cost		$	11	$	13
Interest cost		20		18
Expected return on plan assets		(10)		(10)
Amortization:

Net actuarial loss (income)		(3)		1
Net periodic benefit costs		$	18	$	22

Based on funding requirements, we made no defined benefit pension contributions for the three months ended March 31, 2022. Based on funding requirements, we made $146 million of defined benefit pension contributions for the three months ended March 31, 2021. As a result of the CARES Act enacted on March 27, 2020, we deferred $118 million of 2020 pension contributions, which were paid on January 4, 2021. We made contributions of $28 million to our voluntary employee benefit association trust plans for the three months ended March 31, 2022. Based on funding requirements, no contributions to our voluntary employee benefit association trust plans were required or made for the three months ended March 31, 2021.

NOTE 11 - INCOME TAXES

Our 2022 estimated annual effective tax rate before discrete items as of March 31, 2022 is 22%. The estimated annual effective tax rate exceeds the U.S. statutory rate of 21%, as state income tax expense exceeds the percentage depletion in excess of cost depletion. The 2021 estimated annual effective tax rate before discrete items as of March 31, 2021 was 19%. The increase in the estimated annual effective tax rate before discrete items is driven by the change in income and a decrease to the percentage depletion in excess of cost depletion.

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NOTE 12 - ASSET RETIREMENT OBLIGATIONS

The following is a summary of our asset retirement obligations:


	(In Millions)
	March 31, 2022		December 31, 2021
Asset retirement obligations1	$	460	$	449
Less: current portion	33		35
Long-term asset retirement obligations	$	427	$	414

1 Includes $297 million and $293 million related to our active operations as of March 31, 2022 and December 31, 2021, respectively.

The accrued closure obligation provides for contractual and legal obligations related to our indefinitely idled and closed operations and for the eventual closure of our active operations. The closure date for each of our active mine sites was determined based on the exhaustion date of the remaining mineral reserves, and the amortization of the related asset and accretion of the liability is recognized over the estimated mine lives. The closure date and expected timing of the capital requirements to meet our obligations for our indefinitely idled or closed mines is determined based on the unique circumstances of each property. For indefinitely idled or closed mines, the accretion of the liability is recognized over the anticipated timing of remediation. As the majority of our asset retirement obligations at our steelmaking operations have indeterminate settlement dates, asset retirement obligations have been recorded at present values using estimated ranges of the economic lives of the underlying assets.

The following is a roll forward of our asset retirement obligation liability:


	(In Millions)
	2022		2021
Asset retirement obligation as of January 1	$	449	$	342
Decrease from acquisitions	—		(34)
Accretion expense	7		3
Revision in estimated cash flows	7		—
Remediation payments	(3)		(1)
Asset retirement obligation as of March 31	$	460	$	310

NOTE 13 - DERIVATIVE INSTRUMENTS

We are exposed to fluctuations in market prices of raw materials and energy sources. We may use cash-settled commodity swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. Our hedging strategy is to reduce the effect on earnings from the price volatility of these various commodity exposures, including timing differences between when we incur raw material commodity costs and when we receive sales surcharges from our customers based on those raw materials. Independent of any hedging activities, price changes in any of these commodity markets could negatively affect operating costs.

Our commodity contracts are designated as cash flow hedges for accounting purposes, and we record the gains and losses for the derivatives in Accumulated other comprehensive income until we reclassify them into Cost of goods sold when we recognize the associated underlying operating costs. Refer to NOTE 15 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) for further information.

The following table presents the notional amount of our outstanding hedge contracts:

(In Millions)

March 31, 2022

December 31, 2021

Commodity Contracts

Unit of Measure

Maturity Dates

Notional Amount

Natural gas

MMBtu

April 2022 - November 2024

105

Zinc

Pounds

April 2022 - December 2022

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The following table presents the fair value of our cash flow hedges and the classification in the Statements of Unaudited Condensed Consolidated Financial Position:


	(In Millions)
Balance Sheet Location	March 31, 2022		December 31, 2021
Other current assets	$	140	$	40
Other non-current assets	26		—
Other current liabilities	—		(10)
Other non-current liabilities	—		(4)

NOTE 14 - CAPITAL STOCK

Share Repurchase Program

On February 10, 2022, our Board of Directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchases, up to a maximum of $1 billion. We are not obligated to make any purchases and the program may be suspended or discontinued at any time. The share repurchase program does not have a specific expiration date. During the three months ended March 31, 2022, we repurchased 1 million common shares at a cost of $19 million in the aggregate.

Underwritten Public Offering

On February 11, 2021, we sold 20 million of our common shares and 40 million common shares were sold by an affiliate of ArcelorMittal in an underwritten public offering. In each case, shares were sold at a price per share of $16.12. Prior to this sale, ArcelorMittal held approximately 78 million of our common shares, which were issued as a part of the consideration in connection with the AM USA Transaction. We did not receive any proceeds from the sale of the 40 million common shares sold on behalf of ArcelorMittal. We used the net proceeds from the offering, plus cash on hand, to redeem $322 million aggregate principal amount of our outstanding 9.875% 2025 Senior Secured Notes.

Preferred Stock

We have 3,000,000 shares of Serial Preferred Stock, Class A, without par value, authorized and 4,000,000 shares of Serial Preferred Stock, Class B, without par value, authorized; no preferred shares are issued or outstanding.

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NOTE 15 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables reflect the changes in Accumulated other comprehensive income related to Cliffs shareholders’ equity:


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Foreign Currency Translation
Beginning balance		$	1	$	3
Other comprehensive loss before reclassifications		—		(1)
Ending balance		$	1	$	2

Derivative Instruments
Beginning balance		$	68	$	(1)
Other comprehensive income before reclassifications		168		10
Income tax		(39)		(2)
Other comprehensive income before reclassifications, net of tax		129		8
Gains reclassified from AOCI to net income1		(42)		(1)
Income tax expense2		9		—
Net gains reclassified from AOCI to net income		(33)		(1)
Ending balance		$	164	$	6

Pension and OPEB
Beginning balance		$	549	$	(135)

Net actuarial loss reclassified from AOCI to net income3		1		9


Income tax benefit2		—		(2)
Net losses reclassified from AOCI to net income		1		7
Ending balance		$	550	$	(128)

Total AOCI Ending Balance		$	715	$	(120)

1 Amounts recognized in Cost of goods sold in the Statements of Unaudited Condensed Consolidated Operations.
2 Amounts recognized in Income tax expense in the Statements of Unaudited Condensed Consolidated Operations.
3 Amounts recognized in Net periodic benefit credits other than service cost component in the Statements of Unaudited Condensed Consolidated Operations.

NOTE 16 - VARIABLE INTEREST ENTITIES

SunCoke Middletown

We purchase all the coke and electrical power generated from SunCoke Middletown’s plant under long-term supply agreements and have committed to purchase all the expected production from the facility through 2032. We consolidate SunCoke Middletown as a VIE because we are the primary beneficiary despite having no ownership interest in SunCoke Middletown. SunCoke Middletown had income before income taxes of $15 million and $17 million for the three months ended March 31, 2022 and 2021, respectively, that was included in our consolidated income before income taxes.

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The assets of the consolidated VIE can only be used to settle the obligations of the consolidated VIE and not obligations of the Company. The creditors of SunCoke Middletown do not have recourse to the assets or general credit of the Company to satisfy liabilities of the VIE. The Statements of Unaudited Condensed Consolidated Financial Position includes the following amounts for SunCoke Middletown:


	(In Millions)
	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	—	$	—
Inventories	30		20
Property, plant and equipment, net	294		300
Accounts payable	(20)		(12)
Other assets (liabilities), net	(16)		(12)
Noncontrolling interests	(288)		(296)

NOTE 17 - EARNINGS PER SHARE

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


		(In Millions, Except Per Share Amounts)
	Three Months Ended March 31,
		2022		2021
Income from continuing operations		$	813	$	57
Income from continuing operations attributable to noncontrolling interest		(13)		(16)
Net income from continuing operations attributable to Cliffs shareholders		800		41
Income from discontinued operations, net of tax		1		—
Net income attributable to Cliffs shareholders		$	801	$	41

Weighted average number of shares:
Basic		521		490
Redeemable preferred shares		—		58
Convertible senior notes1		7		19
Employee stock plans		4		4
Diluted		532		571

Earnings per common share attributable to Cliffs shareholders - basic2:
Continuing operations		$	1.54	$	0.08
Discontinued operations		—		—
		$	1.54	$	0.08

Earnings per common share attributable to Cliffs shareholders - diluted:
Continuing operations		$	1.50	$	0.07
Discontinued operations		—		—
		$	1.50	$	0.07

1 On January 1, 2022, we adopted ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). We utilized the modified retrospective method of adoption; using this approach, the guidance was applied to transactions outstanding as of the beginning of the fiscal year.
2 For the three months ended March 31, 2021, basic earnings per share is calculated by dividing Net income attributable to Cliffs shareholders, less $4 million of earnings attributed to Series B Participating Redeemable Preferred Stock, by the weighted average number of basic common shares outstanding during the period presented.

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NOTE 18 - COMMITMENTS AND CONTINGENCIES

Purchase Commitments

We purchase portions of the principal raw materials required for our steel manufacturing operations under annual and multi-year agreements, some of which have minimum quantity requirements. We also use large volumes of natural gas, electricity and industrial gases in our steel manufacturing operations. We negotiate most of our purchases of chrome, industrial gases and a portion of our electricity under multi-year agreements. Our purchases of coke are made under annual or multi-year agreements with periodic price adjustments. We typically purchase coal under annual fixed-price agreements. We also purchase certain transportation services under multi-year contracts with minimum quantity requirements.

Contingencies

We are currently the subject of, or party to, various claims and legal proceedings incidental to our current and historical operations. These claims and legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages, additional funding requirements or an injunction. If an unfavorable ruling were to occur, there exists the possibility of a material adverse effect on the financial position and results of operations for the period in which the ruling occurs or future periods. However, based on currently available information we do not believe that any pending claims or legal proceedings will result in a material adverse effect in relation to our consolidated financial statements.

Environmental Contingencies

Although we believe our operating practices have been consistent with prevailing industry standards, hazardous materials may have been released at operating sites or third-party sites in the past, including operating sites that we no longer own. If we reasonably can, we estimate potential remediation expenditures for those sites where future remediation efforts are probable based on identified conditions, regulatory requirements or contractual obligations arising from the sale of a business or facility. For sites involving government-required investigations, we typically make an estimate of potential remediation expenditures only after the scope of remediation is determined or approved by the relevant environmental agencies. In general, the material factors in these estimates include the costs associated with investigations, delineations, risk assessments, remedial work, governmental response and oversight, site monitoring, and preparation of reports to the appropriate environmental agencies.

The following is a summary of our environmental obligations:


	(In Millions)
	March 31, 2022		December 31, 2021
Environmental obligations	$	206	$	207
Less: current portion	19		20
Long-term environmental obligations	$	187	$	187

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

Pursuant to RCRA, which governs the treatment, handling and disposal of hazardous waste, the EPA and authorized state environmental agencies may conduct inspections of RCRA-regulated facilities to identify areas where

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there have been releases of hazardous waste or hazardous constituents into the environment and may order the facilities to take corrective action to remediate such releases. Likewise, the EPA or the states may require closure or post-closure care of residual, industrial and hazardous waste management units. Environmental regulators have the authority to inspect all of our facilities. While we cannot predict the future actions of these regulators, it is possible that they may identify conditions in future inspections of these facilities that they believe require corrective action.

Pursuant to CERCLA, the EPA and state environmental authorities have conducted site investigations at some of our facilities and other third-party facilities, portions of which previously may have been used for disposal of materials that are currently regulated. The results of these investigations are still pending, and we could be directed to spend funds for remedial activities at the former disposal areas. Because of the uncertain status of these investigations, however, we cannot reasonably predict whether or when such spending might be required or its magnitude.

On April 29, 2002, AK Steel entered a mutually agreed-upon administrative order with the consent of the EPA pursuant to Section 122 of CERCLA to perform a RI/FS of the Hamilton plant site located in New Miami, Ohio. The plant ceased operations in 1990 and all of its former structures have been demolished. AK Steel submitted the investigation portion of the RI/FS and completed supplemental studies. Until the RI/FS is complete, we cannot reasonably estimate the additional costs, if any, we may incur for potentially required remediation of the site or when we may incur them.

Burns Harbor Water Issues

In August 2019, ArcelorMittal Burns Harbor LLC (n/k/a 星空传媒 Burns Harbor LLC) suffered a loss of the blast furnace cooling water recycle system, which led to the discharge of cyanide and ammonia in excess of the Burns Harbor plant's NPDES permit limits. Since that time, the facility has taken numerous steps to prevent recurrence and maintain compliance with its NPDES permit. We engaged in settlement discussions with the U.S. Department of Justice, the EPA and the State of Indiana to resolve any alleged violations of environmental laws or regulations arising out of the August 2019 event. Later stages of the settlement discussions included the Environmental Law and Policy Center (ELPC) and Hoosier Environmental Council (HEC), which had filed a lawsuit on December 20, 2019 in the U.S. District Court for the Northern District of Indiana alleging violations resulting from the August 2019 event and other Clean Water Act claims. On February 14, 2022, the United States and the State of Indiana filed a complaint and a proposed consent decree, and on April 21, 2022, the United States, with the consent of all of the parties, filed a motion seeking final approval of the consent decree from the court. The consent decree requires specified enhancements to the mill's wastewater treatment systems and a $3 million civil penalty, along with other terms and conditions. Other parties to the consent decree include the United States, the State of Indiana, ELPC and HEC. In addition, ArcelorMittal Burns Harbor LLC was served with a subpoena on December 5, 2019, from the United States District Court for the Northern District of Indiana, relating to the August 2019 event and has responded to the subpoena requests, including follow-up requests. With the resolution of monetary sanctions and injunctive relief requirements under the pending consent decree, we do not believe that the costs to resolve any other third-party claims, including potential natural resource damages claims, that may arise out of the August 2019 event are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.

In addition to the foregoing matters, we are or may be involved in proceedings with various regulatory authorities that may require us to pay fines, comply with more rigorous standards or other requirements or incur capital and operating expenses for environmental compliance. We believe that the ultimate disposition of any such proceedings will not have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Tax Matters

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our liabilities, our effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash and result in an increase in our effective tax rate in the year of resolution. A favorable tax settlement would be recognized as a reduction in our effective tax rate in the year of resolution. Refer to NOTE 11 - INCOME TAXES for further information.

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Other Contingencies

In addition to the matters discussed above, there are various pending and potential claims against us and our subsidiaries involving product liability, personal injury, commercial, employee benefits and other matters arising in the ordinary course of business. Because of the considerable uncertainties that exist for any claim, it is difficult to reliably or accurately estimate what the amount of a loss would be if a claimant prevails. If material assumptions or factual understandings we rely on to evaluate exposure for these contingencies prove to be inaccurate or otherwise change, we may be required to record a liability for an adverse outcome. If, however, we have reasonably evaluated potential future liabilities for all of these contingencies, including those described more specifically above, it is our opinion, unless we otherwise noted, that the ultimate liability from these contingencies, individually or in the aggregate, should not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

NOTE 19 - SUBSEQUENT EVENTS

On March 21, 2022, we issued a notice of redemption for all $607 million aggregate principal amount outstanding of the 9.875% 2025 Senior Secured Notes. The total payment made on April 20, 2022, the redemption date, to holders of the notes, including the redemption premium, was $677 million. The notes were redeemed with available liquidity and resulted in a loss on extinguishment of debt of $85 million, which will be recorded during the second quarter of 2022. The cash interest associated with these notes was approximately $60 million per year.


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

Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and other factors that may affect our future results. We believe it is important to read our Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, as well as other publicly available information.

Overview

Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, we are also the largest manufacturer of iron ore pellets in North America. We are vertically integrated from mined raw materials, direct reduced iron and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. We are the largest supplier of steel to the automotive industry in North America and serve a diverse range of other markets due to our comprehensive offering of flat-rolled steel products. Headquartered in Cleveland, Ohio, we employ approximately 26,000 people across our operations in the United States and Canada.

Economic Overview

The fundamentals for our U.S.-centric, vertically integrated business remain healthy as demand continues to be strong, the economic rationale for importing steel has diminished and our primary competition’s cost structure has increased more than our own. We believe the ongoing increase in input costs, driven largely by current geopolitical events, provides us a unique advantage relative to our domestic peers, which can be capitalized on through higher margins. The price for domestic HRC, the most significant index in driving our revenues and profitability, averaged $1,215 per net ton for the first quarter of 2022, 4% higher than the same period last year and well above the prior ten-year average of approximately $712 per net ton. Our expectation, as supported by the futures curve, is that HRC will remain substantially above historical averages.

HRC prices bottomed in early March 2022 at $935 per net ton, before sharply rebounding 47% to $1,379 per net ton at the end of the first quarter of 2022. Healthy consumer balance sheets have driven strong demand for consumer goods, such as HVAC products and appliances. Demand from machinery and equipment producers has also been robust. The demand for light vehicles has been strong; however, automotive supply chain difficulties have limited the demand for steel from automotive manufacturers. Additionally, the recently passed Infrastructure and Jobs Act of 2021 in the U.S. will likely generate increased steel demand. On the supply side, spot steel availability has been limited due to uncertainty in raw material supply and costs as well as higher global steel prices, which reduces import viability.

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The conflict between Russia and Ukraine has disrupted raw material sourcing for our minimill competitors and increased their steelmaking input costs. Approximately two-thirds of all U.S. imported pig iron, a primary feedstock of minimills, is sourced from Russia and Ukraine. During the first quarter of 2022, imported pig iron prices surged from $565 to $1,045 per metric ton, the highest level since Fastmarkets AMM began assessing the pig iron market in September 2017. Higher imported pig iron costs will continue to support a higher HRC price. Unlike other flat-rolled steel producers, we are not reliant on imported pig iron as we produce it in house at our blast furnaces, using our own iron ore and HBI as the primary raw materials.

The price for busheling scrap, a necessary input for flat-rolled steel production in EAFs in the U.S., has significantly increased since the beginning of 2022. The Fastmarkets AMM Cleveland busheling price increased from $580 per long ton at the beginning of the first quarter of 2022 to $795 per long ton for the most recently reported data. As the nearest replacement to imported pig iron, we expect the busheling scrap price will remain elevated as the availability of imported pig iron from Russia and Ukraine remains uncertain. We had already expected the supply of busheling scrap to remain tight due to decreasing prime scrap generation from original equipment manufacturers and the growth of EAF capacity in the U.S., along with a push for expanded scrap use globally. As we are fully-integrated and primarily have a blast furnace footprint, the rising prices for busheling scrap in the U.S. bolster our competitive advantage, as we source the majority of our iron feedstock from our stable-cost mining and pelletizing operations in Minnesota and Michigan. The rising price of scrap should also enhance the benefit of sourcing more scrap internally following the FPT Acquisition and provide greater cost savings potential for HBI used internally.

The price of iron ore has risen dramatically since the beginning of 2022, from $120 to $158 per metric ton at the end of the first quarter, which has been another important factor in rising steel prices globally. The Platts 62% price averaged $142 per metric ton in the first quarter of 2022, which is 44% higher than the historical ten-year average. While higher iron ore prices play a role in increased steel prices, we also directly benefit from higher iron ore prices for the portion of iron ore pellets we sell to third parties.

The largest market for our steel products is the automotive industry in North America, which makes light vehicle production a key driver of demand. In the first three months of 2022, North American light vehicle production was approximately 3.6 million units, the highest quarterly production volume since the first quarter of 2021. However, automotive production continues to be adversely affected by the global semiconductor shortage, as well as other material shortages and supply chain disruptions. This has continued to cause several outages amongst light vehicle manufacturers and the ultimate resolution timing is currently unknown.

During the first quarter of 2022, light vehicle sales in the U.S. saw a seasonally adjusted annualized rate of 14.2 million units, with 2.9 million passenger cars and 11.3 million light trucks sold, representing a 15% decrease over the first quarter of 2021 due primarily to decreased availability. While the semiconductor shortage is still present, it has eased modestly since 2021. Production is expected to improve and finish the year at 14.7 million units compared to 13.0 million units in each of 2020 and 2021. Improved sales and continued production issues have kept inventory near all-time lows, with only 1.1 million units of gross stock at the end of the first quarter of 2022.

Competitive Strengths

As the largest flat-rolled steel producer in North America, we benefit from having the size and scale necessary in a competitive, capital intensive business. Our sizeable operating footprint provides us with the operational leverage, flexibility and cost performance to achieve competitive margins throughout the business cycle. We also have a unique vertically integrated profile from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling and tubing. This positioning gives us both lower and more predictable costs throughout the supply chain and more control over both our manufacturing inputs and our end product destination.

One of our main competitive strengths is our ability to source our primary feedstock domestically and internally. This model reduces our exposure to volatile pricing and unreliable global sourcing. The current Russia-Ukraine conflict has displayed the importance of our U.S.-centric footprint, as our minimill competitors rely on imported pig iron to produce flat-rolled steel. We believe this advantage allows us to achieve margins above industry averages for flat-rolled steel, as we are not as reliant on unpredictable and volatile raw material supplies and pricing. Because we control our iron ore pellet supply, our primary steelmaking raw material feedstock can be secured at a stable and predictable cost and not be subject to as many factors outside of our control.

The FPT Acquisition has given us a competitive advantage in sourcing prime scrap, as we have started leveraging our long-standing flat-rolled automotive and other customer relationships into recycling partnerships to further grow our prime scrap presence. In the short period of time since the FPT Acquisition was completed, we have already seen success in our strategy by increasing our prime scrap presence. Additionally, FPT has 22 facilities

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located primarily in the Midwest near our steel facilities, which gives us an increased advantage in logistics. We believe the strategic importance of these assets is now even further elevated as a result of the Russia-Ukraine conflict.

We are also the largest supplier of automotive-grade steel in the U.S. Compared to other steel end markets, automotive steel is generally higher quality and more operationally and technologically intensive to produce. As such, it often generates higher through-the-cycle margins, making it a desirable end market for the steel industry. Given the strong demand and market environment for steel in 2021, we were able to significantly improve our fixed-price contracts, which should benefit us throughout 2022. Demand for our automotive-grade steel is expected to increase in 2022 with pent-up automotive demand as a result of the semiconductor shortage. With our continued technological innovation, as well as leading delivery performance, we expect to remain the leader in supplying this industry.

We are the only producers of both GOES and NOES in the U.S. The recently passed Infrastructure and Jobs Act of 2021 in the U.S. provides funding to be used for the modernization of the electrical grid and the infrastructure needed to allow for increased electric vehicle adoption, both of which require electrical steels. As a result, with increased demand for both transformers and motors for electric vehicles, we expect to benefit from this position in what is currently a rapidly growing market.

We believe we offer the most comprehensive flat-rolled steel product selection in the industry, along with several complementary products and services. A sampling of our offering includes advanced high-strength steel, hot-dipped galvanized, aluminized, galvalume, electrogalvanized, galvanneal, HRC, cold-rolled coil, plate, tinplate, GOES, NOES, stainless steels, tool and die, stamped components, rail, slab and cast ingot. Across the quality spectrum and the supply chain, our customers can frequently find the solutions they need from our product selection.

We are the first and the only producer of HBI in the Great Lakes region. Construction of our Toledo direct reduction plant was completed in the fourth quarter of 2020 and reached full run-rate nameplate annual capacity of 1.9 million metric tons during the middle of 2021. From this modern plant, we produce a high-quality, low-cost and low-carbon intensive HBI product that can be used in our blast furnaces as a productivity enhancer or in our BOFs and EAFs as a premium scrap alternative. We use HBI to stretch our hot metal production, lowering carbon intensity and reliance on coke. As a result of our internal usage of HBI, coupled with our ongoing evaluation of coke use strategies, we idled our coke facility at Middletown Works during the third quarter of 2021 and permanently closed our Mountain State Carbon coke plant in the first quarter of 2022. With increasing tightness in the scrap and metallics markets combined with our own internal needs, we expect our Toledo direct reduction plant to support healthy margins for us going forward.

Strategy

Maximize Our Commercial Strengths

We offer a full suite of flat steel products encompassing all steps of the steel manufacturing process. We have an industry-leading market share in the automotive sector, where our portfolio of high-end products delivers a broad range of differentiated solutions for this highly sought after customer base.

As a result of our exposure to these high-end markets, we have the highest fixed-price contractual volumes in our industry. Approximately 45% of our volumes are sold under these contracts. These contracts reduce volatility and allow for more predictable through-the-cycle margins. The pricing in our fixed-price contracts has dramatically improved in 2022 compared to 2021. We expect to be able to maintain and increase contract values as fundamentals remain strong and the HRC price remains above historical averages.

We are also proponents of the “value over volume” approach in terms of steel supply. We take our leadership role in the industry very seriously and intend to manage our steel output in a responsible manner. In the first quarter of 2022, we announced the indefinite idle of Indiana Harbor #4 blast furnace. Going forward, we will continue to use our operational flexibility to align with our “value over volume” approach in terms of steel supply.

Take Advantage of our U.S.-Centric, Internally Sourced Supply Chain

We believe the conflict between Russia and Ukraine has displayed the unique advantage of our vertically integrated business model. Two-thirds of U.S. imports of pig iron, a critical raw material for flat-rolled minimills, are sourced from Russia and Ukraine. This supply has been largely disrupted, driving a spike in costs and reduced availability for our competitors’ ferrous inputs. We produce our pig iron in house in the United States, supported by internally sourced iron ore and HBI and supplemented with internally sourced scrap. As a result, our costs remain relatively stable and our iron feedstock needs are secure compared to our competitors.

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While these competitors are forced to scramble for materials and increase their selling prices as a result of rising input costs, we expect to be able to realize higher margins as we take advantage of our vertically integrated footprint. We are also more secure in offering additional finished steel to customers with less exposure to uncertain materials costs or limited availability.

We began construction of our Toledo direct reduction plant in 2017, in part because of the uncertainty of the industry sourcing metallics from Russia and Ukraine. Russia had previously invaded the Crimea peninsula in 2014, and we felt it necessary to on-shore more metallics capacity to the United States. HBI, which is a lower-carbon alternative to imported pig iron, has also become a critical component of our decarbonization strategy.

Optimize Our Fully Integrated Steelmaking Footprint

We are a fully-integrated steel enterprise with the size and scale to achieve margins above industry averages for flat-rolled steel. Our focus remains on both maintaining and enhancing our cost advantage while also lowering carbon emissions. The combination of our ferrous raw materials, including iron ore, scrap and HBI, allows us to do so relative to peers who must rely on more unpredictable and unreliable raw material sourcing strategies.

We have started to increase the amount of scrap and HBI in our melting processes to stretch our production of liquid pig iron from traditional inputs. With our acquisition of FPT, we have ample access to scrap along with internally-sourced HBI. The use of higher amounts of HBI in our blast furnaces ultimately boosts liquid steel output, reduces coke needs and lowers carbon emissions from our operations. As a result of the successful operational improvements, we announced the indefinite idle of the Indiana Harbor #4 blast furnace in the first quarter of 2022. The indefinite idle reduced our operational blast furnaces from 8 to 7 without any expected change to our full-year 2022 steel shipment volumes.

Expand our Ferrous Scrap Recycling Presence

Throughout our entire footprint, we consume a very significant amount of scrap in our EAFs and BOFs, more than half of which can now be obtained through internal sources. Prime scrap is a byproduct of industrial manufacturing. As manufacturing in the U.S. has moved offshore and yields have improved, prime scrap supply has been shrinking for the last 50 years. As the steel industry continues to increase its focus on decarbonization and brings new flat-rolled EAF capacity online over the next five years, and the global metallics market remains disrupted as a result of the Russia-Ukraine conflict, securing additional access to prime scrap will continue to be an important strategic initiative.

Our expansion in this area began with the FPT Acquisition and has continued to grow by pairing FPT's processing capabilities with our long-standing customer relationships. As the largest supplier of flat-rolled steel in North America, we are the largest source of the steel that generates prime scrap in manufacturing facilities. Based on this, we are growing our prime scrap presence by leveraging our long-standing flat-rolled automotive and other customer relationships and expanding them into recycling partnerships. The FPT Acquisition allows us to optimize productivity at our existing EAFs and BOFs, as we have no current plans to add additional steelmaking capacity.

Advance our Participation in the Green Economy

We are seeking to expand our customer base with the rapidly growing and desirable electric vehicle market. At this time, we believe the North American automotive industry is approaching a structural inflection point with the adoption of electrical motors in passenger vehicles. As this market grows, it will require more advanced steel applications to meet the needs of electric vehicle producers and consumers. With our unique technical capabilities and leadership in the automotive industry, we believe we are positioned better than any other North American steelmaker to supply the steel and parts necessary to fill these needs.

We also have the right products to meet the growing demand for renewable energy as well as for the modernization of the U.S. electrical grid. We offer plate products that can be used in windmills, which we estimate contain 130 tons of steel per megawatt of electricity. In addition, panels for solar power are heavy consumers of galvanized steel, where we are a leading producer. We estimate solar panels consume 40 tons of steel per megawatt of electricity.

We are currently the sole producer of electrical steels in the U.S., which can facilitate the modernization of the U.S. electrical grid. Along with charging networks, electrical steels are also needed in the motors of electric vehicles.

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Enhance our Environmental Sustainability

Our commitment to operating our business in a more environmentally responsible manner remains constant. One of the most important issues impacting our industry, our stakeholders and our planet is climate change. In early 2021, we announced our commitment to reduce GHG emissions 25% from 2017 levels by 2030. This goal represents combined Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity or other forms of energy) GHG emission reductions across all of our operations.

Prior to setting this goal with our newly acquired steel assets, we exceeded our previous GHG reduction target at our legacy facilities six years ahead of our 2025 goal. In 2019, we reduced our combined Scope 1 and Scope 2 GHG emissions by 42% on a mass basis from 2005 baseline levels. Our goal is to further reduce those emissions in coming years.

Our future GHG emissions reductions are expected to be driven by the use of direct reduced iron in blast furnaces, the stretching of hot metal with additional scrap, driving more productivity out of fewer blast furnaces, natural gas technologies, including natural gas injection, carbon capture, clean energy and energy efficiency projects.

Improve Financial Flexibility

Given the cyclicality of our business, it is important to us to be in the financial position to easily withstand any negative demand or pricing pressure we may encounter. With strong business conditions and the expectation to generate healthy free cash flow throughout 2022 and beyond, we have the ability to reduce substantial amounts of debt, return capital to shareholders through our share repurchase program and make investments to both improve and grow our business.

We anticipate that a strong market environment and significantly improved fixed-price contracts will provide us ample opportunities to reduce our debt with our own free cash flow generation in the coming years. We have demonstrated this by redeeming all $607 million aggregate principal amount outstanding of our 9.875% 2025 Senior Secured Notes in April 2022. In addition, we redeemed all $294 million aggregate principal amount outstanding of our 1.500% 2025 Convertible Senior Notes in January 2022.

Recent Developments

Closure of Mountain State Carbon

As a result of our internal usage of HBI, coupled with our ongoing evaluation of coke use strategies, we permanently closed our Mountain State Carbon coke plant during the first quarter of 2022.

Indefinite Idle of Indiana Harbor #4 Blast Furnace

On February 21, 2022, we announced the indefinite idle of the Indiana Harbor #4 blast furnace. The Indiana Harbor #4 blast furnace, which has a production capacity of 2.1 million net tons of hot metal per year, is now indefinitely idled. We do not expect any change to full-year 2022 steel shipment volumes as a result of the indefinite idle of the Indiana Harbor #4 blast furnace.

Financing Transactions

On March 21, 2022, we issued a notice of redemption for all $607 million aggregate principal amount outstanding of the 9.875% 2025 Senior Secured Notes. The total payment made on April 20, 2022, the redemption date, to holders of the notes, including the redemption premium, was $677 million. The notes were redeemed with available liquidity. The cash interest associated with these notes was approximately $60 million per year.

Additionally, on March 25, 2022, we redeemed all $66 million aggregate principal amount outstanding of the IRBs due 2024 to 2028.

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Results of Operations

Overview

Our total revenues, net income, diluted EPS and Adjusted EBITDA for the three months ended March 31, 2022 and 2021 were as follows:

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See "— Results of Operations — Adjusted EBITDA" below for a reconciliation of our Net income to Adjusted EBITDA.

Revenues

During the three months ended March 31, 2022, our consolidated Revenues were $5,955 million, an increase of $1,906 million, compared to the prior-year period. The increase was primarily due to an increase in the average steel product selling price of $546 per net ton, partially offset by a decrease of 507 thousand net tons of steel shipments from our Steelmaking segment.

Revenues by Product Line

The following represents our consolidated Revenues by product line for the three months ended:

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Revenues by Market

The following table represents our consolidated Revenues and percentage of revenues attributable to each of the markets we supply:


	(In Millions)
	Three Months Ended March 31,
	2022				2021
	Revenue		%		Revenue		%
Automotive	$	1,729	29	%	$	1,392	34	%
Infrastructure and Manufacturing	1,557		26	%	964		24	%
Distributors and Converters	1,853		31	%	1,263		31	%
Steel Producers	816		14	%	430		11	%
Total revenues	$	5,955			$	4,049

Operating Costs

Cost of goods sold

During the three months ended March 31, 2022, Cost of goods sold increased by $945 million, as compared to the prior-year period. See "— Results of Operations — Steelmaking" below for further detail.

Selling, general and administrative expenses

During the three months ended March 31, 2022, Selling, general and administrative expenses increased by $14 million, as compared to the prior-year period. The increase was primarily due to an increase in employment-related costs and higher charitable contributions to The 星空传媒 Foundation.

Miscellaneous – net

Miscellaneous – net increased by $30 million for the three months ended March 31, 2022, as compared to the prior-year period. The increase in miscellaneous expense was primarily due to the $29 million asset impairment charge associated with the permanent closure of Mountain State Carbon.

Other Income (Expense)

Interest expense, net

Interest expense, net decreased by $15 million for the three months ended March 31, 2022, as compared to the prior-year period. The decrease was primarily due to debt restructuring activities during 2021, which reduced interest expense on our senior notes.

Gain (loss) on extinguishment of debt

The loss on extinguishment of debt of $14 million for the three months ended March 31, 2022 primarily resulted from the redemption of all $294 million aggregate principal amount of our outstanding 1.500% 2025 Convertible Senior Notes in January 2022.

The loss on extinguishment of debt of $66 million for the three months ended March 31, 2021 primarily resulted from the repurchase of $322 million aggregate principal amount of 9.875% 2025 Senior Secured Notes and $535 million in aggregate principal amount of our outstanding senior notes of various series.

Refer to NOTE 8 - DEBT AND CREDIT FACILITIES for further details.

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Income Taxes

Our effective tax rate is impacted by permanent items, primarily state income tax expense and depletion. It also is affected by discrete items that may occur in any given period but are not consistent from period to period. The following represents a summary of our tax provision and corresponding effective rates:


		(In Millions)
	Three Months Ended March 31,
		2022			2021
Income tax expense		$	(237)		$	(9)
Effective tax rate		23		%	14		%

Our 2022 estimated annual effective tax rate before discrete items at March 31, 2022 is 22%. This estimated annual effective tax rate exceeds the U.S. statutory rate of 21%, as state income tax expense exceeds the percentage depletion in excess of cost depletion. The 2021 estimated annual effective tax rate before discrete items at March 31, 2021 was 19%. The increase in the estimated annual effective tax rate before discrete items is driven by the change in income and a decrease to the percentage depletion in excess of cost depletion.

Adjusted EBITDA

We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.

The following table provides a reconciliation of our Net income to Adjusted EBITDA:


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Net income		$	814	$	57
Less:
Interest expense, net		(77)		(92)
Income tax expense		(237)		(9)
Depreciation, depletion and amortization		(301)		(217)
Total EBITDA		$	1,429	$	375
Less:
EBITDA of noncontrolling interests1		$	22	$	22
Asset impairment		(29)		—
Loss on extinguishment of debt		(14)		(66)
Severance costs		(1)		(11)
Acquisition-related costs excluding severance costs		(1)		(2)

Amortization of inventory step-up		—		(81)
Impact of discontinued operations		1		—
Total Adjusted EBITDA		$	1,451	$	513

1 EBITDA of noncontrolling interests includes the following:
Net income attributable to noncontrolling interests		$	13	$	16
Depreciation, depletion and amortization		9		6
EBITDA of noncontrolling interests		$	22	$	22

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The following table provides a summary of our Adjusted EBITDA by segment:


		(In Millions)
	Three Months Ended March 31,
		2022		2021
Adjusted EBITDA:
Steelmaking		$	1,423	$	502
Other Businesses		29		11
Eliminations1		(1)		—
Total Adjusted EBITDA		$	1,451	$	513

1 In 2022, we began allocating Corporate SG&A to our operating segments. Prior periods have been adjusted to reflect this change. The Eliminations line now only includes sales between segments.

Adjusted EBITDA from our Steelmaking segment for the three months ended March 31, 2022 increased by $921 million, as compared to the prior-year period. The increase was primarily attributable to higher gross margin of $947 million for the three months ended March 31, 2022, as compared to the prior-year period. For the three months ended March 31, 2022 and 2021, our Steelmaking Adjusted EBITDA included Selling, general and administrative expenses of $114 million and $99 million, respectively.

Steelmaking

The following is a summary of our Steelmaking segment results included in our consolidated financial statements for the three months ended March 31, 2022 and 2021.

The following is a summary of our Steelmaking segment operating results:


	Three Months Ended March 31,				Percent Change
		2022						2021
Steel shipments (in thousands of net tons)		3,637			4,144				(12)	%
Average selling price per net ton of steel products		$	1,446		$	900			61	%

Revenues (in millions)		$	5,794		$	3,919			48	%
Cost of goods sold (in millions)		$	(4,572)		$	(3,644)			25	%
Gross margin (in millions)		$	1,222		$	275			344	%
Gross margin percentage		21		%	7		%
Adjusted EBITDA (in millions)		$	1,423		$	502			183	%

Operating Results

Gross margin increased by $947 million, or 344%, during the three months ended March 31, 2022, as compared to the prior-year period, primarily due to:

•An increase in selling prices (approximately $2 billion impact) driven by favorable renewals of annual sales contracts, higher index steel prices and spot prices;

•This increase was partially offset by lower sales volumes (approximately $150 million impact), predominantly driven by lower shipments to the distributor and converters end market due to high inventory levels, as well as reduced shipments to the automotive and end user markets, as a result of supply chain shortages; and

•Increased costs of production (approximately $900 million impact) driven by higher raw materials and utility costs, including coal, alloys, scrap and natural gas, coupled with increased investment in maintenance and labor costs.

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Liquidity, Cash Flows and Capital Resources

Our primary sources of liquidity are Cash and cash equivalents and cash generated from our operations, availability under the ABL Facility and other financing activities. Our capital allocation decision-making process is focused on preserving healthy liquidity levels while maintaining the strength of our balance sheet and creating financial flexibility to manage through the inherent cyclical demand for our products and volatility in commodity prices. We are focused on maximizing the cash generation of our operations, reducing debt, and aligning capital investments with our strategic priorities and the requirements of our business plan, including regulatory and permission-to-operate related projects.

The current strong market environment has provided us opportunities to reduce our debt with our own free cash flow generation. We also continue to look at the composition of our debt, as we are interested in both extending our average maturity length and increasing our ratio of unsecured debt to secured debt, which can be accomplished with cash provided by operating activities. During 2022, we took action in alignment with these priorities. First, in January 2022, we redeemed all $294 million in aggregate principal amount outstanding of our 1.500% 2025 Convertible Senior Notes. Second, in March 2022, we redeemed all $66 million aggregate principal amount outstanding of the IRBs due 2024 to 2028. Most recently, in April 2022, we redeemed all $607 million remaining aggregate principal amount outstanding of our 9.875% 2025 Senior Secured Notes.

Based on our outlook for the next 12 months, which is subject to continued changing demand from customers and volatility in domestic steel prices, we expect to have ample liquidity through cash generated from operations and availability under our ABL Facility sufficient to meet the needs of our operations, service and repay our debt obligations and return capital to shareholders.

The following discussion summarizes the significant items impacting our cash flows during the three months ended March 31, 2022 and 2021 as well as expected impacts to our future cash flows over the next 12 months. Refer to the Statements of Unaudited Condensed Consolidated Cash Flows for additional information.

Operating Activities

Net cash provided by operating activities was $533 million for the three months ended March 31, 2022, compared to net cash used by operating activities of $379 million for the three months ended March 31, 2021. The period-over-period improvement was driven by improved operating results. Additionally, there were positive changes in working capital period-over-period. Changes in working capital included increases in payables partially offset by increases in inventory primarily related to the automotive semiconductor shortage and increased raw material and production costs. Additionally, we had lower pension contributions as a result of improvements to our pension plans' funded status.

Investing Activities

Net cash used by investing activities was $235 million and $135 million for the three months ended March 31, 2022 and 2021, respectively. We had capital expenditures of $236 million and $136 million for the three months ended March 31, 2022 and 2021, respectively, primarily relating to sustaining capital spend. Sustaining capital spend includes infrastructure, mobile equipment, fixed equipment, product quality, reliability, environment, health and safety.

We anticipate total cash used for capital expenditures during the next 12 months to be between $850 and $900 million.

Financing Activities

Net cash used by financing activities was $311 million for the three months ended March 31, 2022, compared to net cash provided by financing activities of $512 million for the three months ended March 31, 2021. Cash outflows from financing activities for the three months ended March 31, 2022 included $360 million for repayments of debt. We used available liquidity to redeem all $294 million aggregate principal amount outstanding of our 1.500% 2025 Convertible Senior Notes and all $66 million aggregate principal amount outstanding of our IRBs due 2024 to 2028.

Net cash provided by financing activities for the three months ended March 31, 2021 included the issuances of $500 million aggregate principal amount of 4.625% 2029 Senior Notes, $500 million aggregate principal amount of 4.875% 2031 Senior Notes and 20 million common shares for proceeds of $322 million, along with net borrowings of $148 million under credit facilities. We used the net proceeds from the issuance of the 20 million common shares, and cash on hand, to redeem $322 million in aggregate principal amount of our 9.875% 2025 Senior Secured Notes. We used the net proceeds from the issuances of the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes to redeem all of the outstanding 4.875% 2024 Senior Secured Notes, 6.375% 2025 Senior Notes, 7.625% 2021 AK

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Senior Notes, 7.500% 2023 AK Senior Notes and 6.375% 2025 AK Senior Notes, and pay fees and expenses in connection with such redemptions, and reduce borrowings under our ABL Facility.

We anticipate future uses of cash during the next 12 months to include repayment of our ABL Facility balance, as well as opportunistic transactions, including other debt repayments.

Capital Resources

The following represents a summary of key liquidity measures:


	(In Millions)
	March 31, 2022
Cash and cash equivalents	$	35



Available borrowing base on ABL Facility1	$	4,500
Borrowings	(1,715)
Letter of credit obligations	(171)
Borrowing capacity available	$	2,614

1 As of March 31, 2022, the ABL Facility had a maximum borrowing base of $4.5 billion. The available borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.

Our primary sources of funding are cash and cash equivalents, which totaled $35 million as of March 31, 2022, cash generated by our business, availability under the ABL Facility and other financing activities. The combination of cash and availability under the ABL Facility gives us $2.6 billion in liquidity entering the second quarter of 2022, which is expected to be adequate to fund operations, letter of credit obligations, capital expenditures and other cash commitments for at least the next 12 months.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain arrangements that are not reflected on our Statements of Unaudited Condensed Consolidated Financial Position. These arrangements include minimum "take or pay" purchase commitments, such as minimum electric power demand charges, minimum coal, coke, diesel and natural gas purchase commitments, minimum railroad transportation commitments and minimum port facility usage commitments; and financial instruments with off-balance sheet risk, such as bank letters of credit and bank guarantees.

Information about our Guarantors and the Issuer of our Guaranteed Securities

The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") have fully and unconditionally, and jointly and severally, guaranteed the obligations under (a) the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes issued by 星空传媒 Inc. on a senior unsecured basis and (b) the 6.750% 2026 Senior Secured Notes and, prior to the full redemption in April 2022, the 9.875% 2025 Senior Secured Notes issued by 星空传媒 Inc. on a senior secured basis. See NOTE 8 - DEBT AND CREDIT FACILITIES for further information.

The following presents the summarized financial information on a combined basis for 星空传媒 Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group. Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.

Each Guarantor subsidiary is consolidated by 星空传媒 Inc. as of March 31, 2022. Refer to Exhibit 22, incorporated herein by reference, for the detailed list of entities included within the obligated group as of March 31, 2022.

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The guarantee of a Guarantor subsidiary with respect to Cliffs' 6.750% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes will be, and with respect to the 9.875% 2025 Senior Secured Notes, would have been, automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be, and with respect to the 9.875% 2025 Senior Secured Notes, would have been, automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:

(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company; provided that (i) such sale, exchange, transfer or disposition is made in compliance with the applicable Indenture, including the covenants regarding consolidation, merger and sale of assets and, as applicable, dispositions of assets that constitute notes collateral, and (ii) all the obligations of such Guarantor subsidiary under all debt of the Company or its subsidiaries terminate upon consummation of such transaction;

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

Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group's amounts due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.

Summarized Combined Financial Information of the Issuer and Guarantor Subsidiaries:

The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:


	(In Millions)
	March 31, 2022		December 31, 2021
Current assets	$	7,937	$	6,539
Non-current assets	9,858		12,753
Current liabilities	(3,701)		(3,222)
Non-current liabilities	(8,914)		(9,081)

The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:


	(In Millions)
	Three Months Ended
	March 31, 2022
Revenues	$	5,535
Cost of goods sold	(4,338)
Income from continuing operations	724
Net income	725
Net income attributable to Cliffs shareholders	725

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As of March 31, 2022 and December 31, 2021, the obligated group had the following balances with non-Guarantor subsidiaries and other related parties:


	(In Millions)
	March 31, 2022		December 31, 2021
Balances with non-Guarantor subsidiaries:
Accounts receivable, net	$	350	$	199
Accounts payable	(442)		(186)

Balances with other related parties:
Accounts receivable, net	$	13	$	3

Accounts payable	(11)		(7)

Additionally, for the three months ended March 31, 2022, the obligated group had Revenues of $37 million and Cost of goods sold of $27 million, in each case, with other related parties.

Market Risks

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

Pricing Risks

In the ordinary course of business, we are exposed to market risk and price fluctuations related to the sale of our products, which are impacted primarily by market prices for HRC, and the purchase of energy and raw materials used in our operations, which are impacted by market prices for electricity, natural gas, ferrous and stainless steel scrap, chrome, metallurgical coal, coke, nickel and zinc. Our strategy to address market risk has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand; however, we make forward physical purchases and enter into hedge contracts to manage exposure to price risk related to the purchases of certain raw materials and energy used in the production process.

Our financial results can vary for our operations as a result of fluctuations in market prices. We attempt to mitigate these risks by aligning fixed and variable components in our customer pricing contracts, supplier purchasing agreements and derivative financial instruments.

Some customer contracts have fixed-pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter into annual, fixed-price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.

Certain of our customer contracts include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, while other of our customer contracts exclude such mechanisms. We may enter multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer contracts and supplier purchase agreements. Therefore, in some cases, price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.

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Our strategy to address volatile natural gas rates and electricity rates includes improving efficiency in energy usage, identifying alternative providers and utilizing the lowest cost alternative fuels. If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we use cash-settled commodity price swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. Additionally, we routinely use these derivative instruments to hedge a portion of our natural gas and zinc requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs.

The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of March 31, 2022, due to a 10% and 25% change in the market price of each of the indicated commodities:


	(In Millions)
Commodity Derivative	10% Change		25% Change
Natural gas	$	52	$	130

Zinc	5		12

Any resulting changes in fair value would be recorded as adjustments to AOCI, net of income taxes or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid for the related commodities.

Valuation of Goodwill and Other Long-Lived Assets

We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Goodwill is tested on a qualitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition or sale or disposition of a significant portion of a reporting unit. As necessary, should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carry amount, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and if a quantitative assessment is deemed necessary in determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology, which considers forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the recoverability of our goodwill requires significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, expected Adjusted EBITDA, expected capital expenditures and working capital requirements, which are based upon our long-range plan estimates. The assumptions used to calculate the fair value of a reporting unit may change from year to year based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the determination of fair value for each reporting unit.

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or environmental factors or in the business climate; changes in estimates of our recoverable reserves; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of our long-lived assets and could have a material impact on our consolidated statements of operations and statement of financial position.

A comparison of each asset group's carrying value to the estimated undiscounted net future cash flows expected to result from the use of the assets, including cost of disposition, is used to determine if an asset is recoverable. Projected future cash flows reflect management's best estimate of economic and market conditions over the projected period, including growth rates in revenues and costs, and estimates of future expected changes in operating margins and capital expenditures. If the carrying value of the asset group is higher than its undiscounted net future cash flows, the asset group is measured at fair value and the difference is recorded as a reduction to the long-lived assets. We estimate fair value using a market approach, an income approach or a cost approach. We concluded that there were no additional triggering events resulting in the need for an impairment assessment except

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for the announcement of the permanent closure of Mountain State Carbon, which resulted in a $29 million asset impairment charge for the three months ended March 31, 2022.

Interest Rate Risk

Interest payable on our senior notes is at fixed rates. Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability. As of March 31, 2022, we had $1,715 million outstanding under the ABL Facility. An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings from the ABL Facility. For example, a 100 basis point change to interest rates under the ABL Facility at the March 31, 2022 borrowing level would result in a change of $17 million to interest expense on an annual basis.

Supply Concentration Risks

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

Forward-Looking Statements

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

•continued volatility of steel, iron ore and scrap metal market prices, which directly and indirectly impact the prices of the products that we sell to our customers;

•uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry, which has been experiencing a trend toward light weighting and supply chain disruptions, such as the semiconductor shortage, that could result in lower steel volumes being consumed;

•potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity, oversupply of iron ore, prevalence of steel imports and reduced market demand, including as a result of the prolonged COVID-19 pandemic, conflicts or otherwise;

•severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges, due to the ongoing COVID-19 pandemic or otherwise, of one or more of our major customers, including customers in the automotive market, key suppliers or contractors, which, among other adverse effects, could lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;

•disruptions to our operations relating to the ongoing COVID-19 pandemic, including the heightened risk that a significant portion of our workforce or on-site contractors may suffer illness or otherwise be unable to perform their ordinary work functions;

•risks related to U.S. government actions with respect to Section 232, the USMCA and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;

•impacts of existing and increasing governmental regulation, including potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements;

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•potential impacts to the environment or exposure to hazardous substances resulting from our operations;

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

•our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all;

•adverse changes in credit ratings, interest rates, foreign currency rates and tax laws;

•the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, environmental matters, government investigations, occupational or personal injury claims, property damage, labor and employment matters, or suits involving legacy operations and other matters;

•uncertain cost or availability of critical manufacturing equipment and spare parts;

•supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, coke and metallurgical coal;

•problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us;

•uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;

•disruptions in, or failures of, our information technology systems, including those related to cybersecurity;

•liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine;

•our ability to realize the anticipated synergies and benefits of our recent acquisition transactions and to successfully integrate the acquired businesses into our existing businesses, including uncertainties associated with maintaining relationships with customers, vendors and employees and known and unknown liabilities we assumed in connection with the acquisitions;

•our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks;

•challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces GHG emissions, and our ability to foster a consistent operational and safety track record;

•our ability to successfully identify and consummate any strategic capital investments or development projects, cost-effectively achieve planned production rates or levels, and diversify our product mix and add new customers;

•our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, easement or other possessory interest for any mining property;

•availability of workers to fill critical operational positions and potential labor shortages caused by the ongoing COVID-19 pandemic, as well as our ability to attract, hire, develop and retain key personnel;

•our ability to maintain satisfactory labor relations with unions and employees;

•unanticipated or higher costs associated with pension and OPEB obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations;

•the amount and timing of any repurchases of our common shares; and

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•potential significant deficiencies or material weaknesses in our internal control over financial reporting.

For additional factors affecting our business, refer to Part II – Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. You are urged to carefully consider these risk factors.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Information regarding our market risk is presented under the caption "Market Risks," which is included in our Annual Report on Form 10-K for the year ended December 31, 2021, and Part I – Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q.


Item 4.			Controls and Procedures

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

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

There was no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

JSW Steel Litigation. As previously disclosed, on June 8, 2021, JSW Steel filed a complaint against 星空传媒 Inc., AK Steel Holding Corporation (now known as 星空传媒 Steel Holding Corporation), Nucor Corporation and U.S. Steel in the United States District Court for the Southern District of Texas. JSW Steel alleges that the defendants engaged in a group boycott against JSW Steel in violation of federal and Texas antitrust laws by refusing to sell semi-finished steel slabs to JSW Steel, beginning in 2018 and continuing through the present; civil conspiracy among the defendants; and tortious interference with JSW Steel’s contractual rights and business relations involving its vendors and customers. JSW Steel’s allegations involve the tariffs and quotas imposed on steel imports by the U.S. government under Section 232 beginning in March 2018, which JSW Steel alleges raised the price of imported slabs, and statements made to the U.S. government related to exemption requests submitted by JSW Steel in 2018 and 2021. JSW Steel further claims that this alleged anticompetitive conduct negatively impacted JSW Steel’s costs, production and revenues and prevented it from pursuing expansion plans at its Ohio and Texas facilities that would compete with the defendants. JSW Steel is seeking to hold the defendants jointly and severally liable for treble damages in an amount in excess of $500 million and other relief. On February 17, 2022, the district court granted the defendants' Motions to Dismiss in their entirety and dismissed all of JSW Steel's claims with prejudice. On March 16, 2022, JSW Steel filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit. We continue to believe the claims asserted against us are without merit, and we intend to vigorously contest the appeal.

Environmental Matters. SEC regulations require us to disclose certain information about administrative or judicial proceedings involving the environment and to which a governmental authority is a party if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, we use a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required. We believe that this threshold is reasonably designed to result in disclosure of any such proceedings that are material to our business or financial condition.

We have described the other material pending legal proceedings, including administrative or judicial proceedings involving the environment, to which we are a party in our Annual Report on Form 10-K for the year ended December 31, 2021, and in NOTE 18 - COMMITMENTS AND CONTINGENCIES to the consolidated financial statements in Part I – Item 1. Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.


Item 1A.			Risk Factors

We caution readers that our business activities involve risks and uncertainties that could cause actual results to differ materially from those currently expected by management. We described the most significant risks that could impact our results in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.

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

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

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares (or Units) Purchased1	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs2
January 1 - 31, 2022	628,715	$	22.52	—	$	—
February 1 - 28, 2022	1,000,008	$	19.00	1,000,000	$	981,024,500
March 1 - 31, 2022	30,854	$	19.57	—	$	981,024,500
Total	1,659,577	$	20.34	1,000,000

1 Includes 628,715 shares that were delivered to us in January 2022, 8 shares that were delivered to us in February 2022, and 30,854 shares that were delivered to us in March 2022 to satisfy tax withholding obligations due upon the vesting or payment of stock awards.
2 On February 11, 2022, we announced the Board of Directors authorized a program to repurchase our outstanding common shares in the open market or in privately negotiated transactions, which may include purchases pursuant to Rule 10b5-1 plans or accelerated share repurchase, up to a maximum of $1 billion. We are not obligated to make any purchases, and the program may be suspended or discontinued at any time. The share repurchase program does not have a specific expiration date.


Item 4.			Mine Safety Disclosures

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

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


Item 5.			Other Information

None.


Item 6.			Exhibits

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

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Exhibit Number						Exhibit
10.1						* Form of 星空传媒 Inc. 2021 Equity and Incentive Compensation Plan Restricted Stock Unit Award Memorandum and Restricted Stock Unit Award Agreement (filed herewith).
10.2						* Form of 星空传媒 Inc. 2021 Equity and Incentive Compensation Plan Performance Share Award Memorandum (TSR) and Performance Share Award Agreement (filed herewith).
10.3						* Form of 星空传媒 Inc. 2021 Equity and Incentive Compensation Plan Cash Incentive Award Memorandum (TSR) and Cash Incentive Award Agreement (TSR) (filed herewith).
22						Schedule of the obligated group, including the parent and issuer and the subsidiary guarantors that have guaranteed the obligations under the 6.75% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.00% 2027 Senior Notes, the 9.875% 2025 Senior Secured Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes issued by 星空传媒 Inc. (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 April 26, 2022 (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 Celso L. Goncalves Jr. as of April 26, 2022 (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 星空传媒 Inc., as of April 26, 2022 (filed herewith).
32.2						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed and dated by Celso L. Goncalves Jr., Executive Vice President, Chief Financial Officer of 星空传媒 Inc., as of April 26, 2022 (filed herewith).
95						Mine Safety Disclosures (filed herewith).
101						The following financial information from 星空传媒 Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Statements of Unaudited Condensed Consolidated Financial Position, (ii) the Statements of Unaudited Condensed Consolidated Operations, (iii) the Statements of Unaudited Condensed Consolidated Comprehensive Income, (iv) the Statements of Unaudited Condensed Consolidated Cash Flows, (v) the Statements of Unaudited Condensed Consolidated Changes in Equity, and (vi) Notes to the Unaudited Condensed Consolidated Financial Statements.
104						The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101.

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* Indicates management contract or other compensatory arrangement.

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SIGNATURES

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

CLEVELAND-CLIFFS INC.

By:

/s/ Kimberly A. Floriani

Name:

Kimberly A. Floriani

Title:

Senior Vice President, Controller & Chief Accounting Officer

Date:

April 26, 2022