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Annual report pursuant to Section 13 and 15(d)

ACQUISITIONS (Tables)

v3.22.4
ACQUISITIONS (Tables)
 12 Months Ended
Dec. 31, 2022
Business Combinations [Abstract] Ìý
Schedule of Fair Value of Purchase Consideration
The fair value of the total purchase consideration was determined as follows:
(In millions)
Cash consideration:
Cash consideration pursuant to the FPT Acquisition Agreement $ 778Ìý
Cash consideration paid related to IRC Section 338(h)(10) 23Ìý
Total cash consideration 801Ìý
Fair value of settlement of a pre-existing relationship (20)
Total purchase consideration $ 781Ìý
(In millions) Initial Allocation of Consideration Measurement
Period Adjustments		 Final Allocation of Consideration as of December 31, 2022
Cash and cash equivalents $ 9Ìý $ —Ìý $ 9Ìý
Accounts receivable, net 233Ìý 2Ìý 235Ìý
Inventories 137Ìý (2) 135Ìý
Other current assets 4Ìý (1) 3Ìý
Property, plant and equipment 179Ìý 12Ìý 191Ìý
Other non-current assets 74Ìý (2) 72Ìý
Accounts payable (122) —Ìý (122)
Accrued employment costs (8) —Ìý (8)
Other current liabilities (9) 3Ìý (6)
Other non-current liabilities (21) —Ìý (21)
Net identifiable assets acquired 476Ìý 12Ìý 488Ìý
Goodwill 279Ìý 14Ìý 293Ìý
Total net assets acquired $ 755Ìý $ 26Ìý $ 781Ìý
The fair value of the total purchase consideration was determined as follows:
(In millions)
Fair value of Cliffs common shares issued $ 990Ìý
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued 738Ìý
Fair value of settlement of a pre-existing relationship 237Ìý
Cash consideration 639Ìý
Total purchase consideration $ 2,604Ìý
The fair value of Cliffs common shares issued was calculated as follows:
Number of Cliffs common shares issued 78,186,671
Closing price of Cliffs common share as of December 9, 2020 $ 12.66Ìý
Fair value of Cliffs common shares issued (in millions) $ 990Ìý
The fair value of Cliffs Series B Participating Redeemable Preferred Stock issued was calculated as follows:
Number of Cliffs Series B Participating Redeemable Preferred Stock issued 583,273Ìý
Redemption price per share as of December 9, 2020 $ 1,266Ìý
Fair value of Cliffs Series B Participating Redeemable Preferred Stock issued (in millions) $ 738Ìý
The fair value of the cash consideration was comprised of the following:
(In millions)
Cash consideration pursuant to the AM USA Transaction Agreement $ 505Ìý
Cash consideration for purchase of the remaining JV partner's interest of Kote and Tek 182Ìý
Cash consideration pursuant to working capital adjustments (48)
Total cash consideration $ 639Ìý
The cash portion of the purchase price was subject to customary working capital adjustments, and the working capital adjustments were finalized during the second quarter of 2021. We made certain elections under Section 338(h)(10) of the IRC with respect to entities acquired in connection with the AM USA Transaction, which did not change the final cash consideration.
The fair value of the settlement of a pre-existing relationship was comprised of the following:
(In millions)
Accounts receivable $ 97Ìý
Freestanding derivative asset from customer supply agreement 140Ìý
Total fair value of settlement of a pre-existing relationship $ 237Ìý
VALUATION ASSUMPTION AND PURCHASE PRICE ALLOCATION
The fair value of the total purchase consideration was determined as follows:
(In millions)
Fair value of AK Steel debt $ 914Ìý
Fair value of Cliffs common shares issued for AK Steel outstanding common stock 618Ìý
Other 3Ìý
Total purchase consideration $ 1,535Ìý
The fair value of AK Steel's debt included in the consideration was calculated as follows:
(In millions)
Credit Facility $ 590Ìý
7.500% Senior Secured Notes due July 2023 324Ìý
Fair value of debt included in consideration $ 914Ìý
Summary of Purchase Price Allocated to Identifiable Intangible Assets and Liabilities Acquired
The purchase price allocated to identifiable intangible assets acquired was:
(In millions) Weighted Average Life (In years)
Customer relationships $ 13Ìý 15
Supplier relationships 29Ìý 18
Trade names and trademarks 7Ìý 15
Total identifiable intangible assets $ 49Ìý 17
The purchase price allocated to identifiable intangible assets and liabilities acquired was:
(In millions) Weighted Average Life (In Years)
Intangible assets:
Customer relationships $ 77Ìý 18
Developed technology 60Ìý 17
Trade names and trademarks 11Ìý 10
Total identifiable intangible assets $ 148Ìý 17
Intangible liabilities:
Above-market supply contracts $ (71) 12
Summary of the Purchase Price Allocation to Assets Acquired and Liabilities Assumed The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AM USA Transaction:
(In millions) Initial Allocation of Consideration Measurement
Period Adjustments		 Final Allocation Consideration as of December 31, 2021
Cash and cash equivalents $ 35Ìý $ —Ìý $ 35Ìý
Accounts receivable, net 349Ìý (3) 346Ìý
Inventories 2,115Ìý 14Ìý 2,129Ìý
Other current assets 34Ìý 2Ìý 36Ìý
Property, plant and equipment 4,017Ìý 387Ìý 4,404Ìý
Deferred income taxes —Ìý 285Ìý 285Ìý
Other non-current assets 158Ìý 7Ìý 165Ìý
Accounts payable (736) 8Ìý (728)
Accrued employment costs (271) 5Ìý (266)
State and local taxes (76) —Ìý (76)
Other current liabilities (453) 23Ìý (430)
Pension liability, non-current (730) —Ìý (730)
OPEB liability, non-current (2,465) —Ìý (2,465)
Other non-current liabilities (598) (171) (769)
Noncontrolling interest (13) 21Ìý 8Ìý
Net identifiable assets acquired 1,366Ìý 578Ìý 1,944Ìý
Goodwill 1,230Ìý (570) 660Ìý
Total net assets acquired $ 2,596Ìý $ 8Ìý $ 2,604Ìý
The following is a summary of the purchase price allocation to assets acquired and liabilities assumed in the AK Steel Merger:
(In millions) Initial Allocation of Consideration Measurement Period Adjustments Final Allocation of Consideration as of March 31, 2021
Cash and cash equivalents $ 38Ìý $ 1Ìý $ 39Ìý
Accounts receivable, net 666Ìý (2) 664Ìý
Inventories 1,563Ìý (243) 1,320Ìý
Other current assets 68Ìý (16) 52Ìý
Property, plant and equipment 2,184Ìý 90Ìý 2,274Ìý
Deferred income taxes —Ìý 69Ìý 69Ìý
Other non-current assets 475Ìý (4) 471Ìý
Accounts payable (636) (8) (644)
Accrued employment costs (94) 1Ìý (93)
State and local taxes (35) 4Ìý (31)
Other current liabilities (276) 2Ìý (274)
Long-term debt (1,179) —Ìý (1,179)
Pension liability, non-current (473) 10Ìý (463)
OPEB liability, non-current (400) (8) (408)
Other non-current liabilities (507) 72Ìý (435)
Noncontrolling interest —Ìý (1) (1)
Net identifiable assets acquired 1,394Ìý (33) 1,361Ìý
Goodwill 141Ìý 33Ìý 174Ìý
Total net assets acquired $ 1,535Ìý $ —Ìý $ 1,535Ìý
Schedule of Common Shares Issues upon Completion of Merger
The fair value of Cliffs common shares issued for outstanding shares of AK Steel common stock and with respect to Cliffs common shares underlying converted AK Steel equity awards that vested upon completion of the AK Steel Merger was calculated as follows:
(In millions, except per share amounts)
Number of shares of AK Steel common stock issued and outstanding 317Ìý
Exchange ratio 0.400Ìý
Shares of Cliffs common shares issued to AK Steel stockholders 127Ìý
Price per share of Cliffs common shares $ 4.87Ìý
Fair value of Cliffs common shares issued for outstanding AK Steel common stock $ 618Ìý
Summary of Unaudited Pro Forma Financial Information
The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, as if ArcelorMittal USA and AK Steel had been acquired as of January 1, 2019:
Year Ended
(In millions) December 31, 2020
Revenues $ 12,837Ìý
Net loss attributable to Cliffs shareholders (520)
The following table provides unaudited pro forma financial information, prepared in accordance with Topic 805, as if FPT had been acquired as of January 1, 2020:
Year Ended December 31,
(In millions) 2021 2020
Revenues $ 21,701Ìý $ 13,549Ìý
Net income (loss) attributable to Cliffs shareholders 3,074Ìý (526)