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Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.20.1
FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract] Ìý
FAIR VALUE MEASUREMENTS
The following represents the assets and liabilities measured at fair value:
Ìý
(In Millions)
Ìý
MarchÌý31, 2020
Ìý
Quoted Prices in Active
Markets for Identical Assets/Liabilities
(Level 1)
Ìý
Significant Other Observable Inputs
(Level 2)
Ìý
Significant Unobservable Inputs
(Level 3)
Ìý
Total
Assets:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Other current assets:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Commodity contracts
$
—

Ìý
$
1.6

Ìý
$
—

Ìý
$
1.6

Customer supply agreement
—

Ìý
—

Ìý
19.0

Ìý
19.0

Provisional pricing arrangement
—

Ìý
—

Ìý
0.6

Ìý
0.6

ÌýÌýÌýÌýÌýTotal
$
—

Ìý
$
1.6

Ìý
$
19.6

Ìý
$
21.2

Liabilities:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Other current liabilities:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Commodity contracts
$
—

Ìý
$
26.5

Ìý
$
—

Ìý
$
26.5

Foreign exchange contracts
—

Ìý
1.6

Ìý
—

Ìý
1.6

Other non-current liabilities:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Commodity contracts
—

Ìý
3.4

Ìý
—

Ìý
3.4

Foreign exchange contracts
—

Ìý
0.9

Ìý
—

Ìý
0.9

ÌýÌýÌýÌýÌýTotal
$
—

Ìý
$
32.4

Ìý
$
—

Ìý
$
32.4

Ìý
(In Millions)
Ìý
DecemberÌý31, 2019
Ìý
Quoted Prices in Active
Markets for Identical Assets/Liabilities
(Level 1)
Ìý
Significant Other Observable Inputs
(Level 2)
Ìý
Significant Unobservable Inputs
(Level 3)
Ìý
Total
Assets:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Cash equivalents - Commercial paper
$
—

Ìý
$
187.6

Ìý
$
—

Ìý
$
187.6

Other current assets:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Customer supply agreement
—

Ìý
—

Ìý
44.5

Ìý
44.5

Provisional pricing arrangement
—

Ìý
—

Ìý
1.3

Ìý
1.3

Total
$
—

Ìý
$
187.6

Ìý
$
45.8

Ìý
$
233.4

Liabilities:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Other current liabilities:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Commodity contracts
$
—

Ìý
$
3.2

Ìý
$
—

Ìý
$
3.2

Provisional pricing arrangement
—

Ìý
—

Ìý
1.1

Ìý
1.1

Total
$
—

Ìý
$
3.2

Ìý
$
1.1

Ìý
$
4.3


The valuation of financial assets and liabilities classified in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable. Our foreign exchange contracts include Canadian dollars and euro, and our commodity hedge contracts primarily include those related to natural gas, electricity and zinc.
The Level 3 assets and liabilities consist of a freestanding derivative instrument related to a certain supply agreement and derivative assets and liabilities related to certain provisional pricing arrangements with our customers.
The supply agreement included in our Level 3 assets contains provisions for supplemental revenue or refunds based on the hot-rolled coil steel price in the year the iron ore product is consumed in the customer’s blast furnaces. We account for these provisions as a derivative instrument at the time of sale and adjust the derivative instrument to fair value through Revenues each reporting period until the product is consumed and the amounts are settled. We had assets of $19.0 million and $44.5 million at MarchÌý31, 2020 and DecemberÌý31, 2019, respectively, related to this supply agreement.
The provisional pricing arrangements included in our Level 3 assets/liabilities specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate to be based on market inputs at a specified point in time in the future, per the terms of the supply agreements. The difference between the estimated final revenue rate at the date of sale and the estimated final revenue rate at the measurement date is characterized as a derivative and is required to be accounted for separately once the revenue has been recognized. The derivative instruments are adjusted to fair value through Revenues each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rates are determined. We had assets of $0.6 million and no liabilities related to provisional pricing arrangements at MarchÌý31, 2020. At DecemberÌý31, 2019, we had assets of $1.3 million and liabilities of $1.1 million related to provisional pricing arrangements.
The following table illustrates information about quantitative inputs and assumptions for the derivative assets and derivative liabilities categorized in Level 3 of the fair value hierarchy:
Ìý
Qualitative/Quantitative Information About Level 3 Fair Value Measurements
Ìý
Ìý
Ìý
Fair Value at March 31, 2020
(In Millions)
Ìý
Balance Sheet
Location
Ìý
Valuation Technique
Ìý
Unobservable Input
Ìý
Point Estimate
Ìý
Ìý
Customer supply agreement
Ìý
$
19.0

Ìý
Other current assets
Ìý
Market Approach
Ìý
Management's estimate of hot-rolled coil steel price per net ton
Ìý
$559
Ìý
Provisional pricing arrangements
Ìý
$
0.6

Ìý
Other current assets
Ìý
Market Approach
Ìý
PPI Estimates
Ìý
136.5

The significant unobservable input used in the fair value measurement of our customer supply agreement was a forward-looking estimate of the hot-rolled coil steel price determined by management.
The significant unobservable input used in the fair value measurement of our provisional pricing arrangements at MarchÌý31, 2020 was estimates for PPI data.
The following tables represent a reconciliation of the changes in fair value of financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Ìý
(In Millions)
Ìý
Level 3 Assets
Ìý
Three Months Ended
March 31,
Ìý
2020
Ìý
2019
Beginning balance - January 1
$
45.8

Ìý
$
91.4

Total gains (losses) included in earnings
(26.2
)
Ìý
15.3

Ending balance - March 31
$
19.6

Ìý
$
106.7

Total gains (losses) for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date
$
(25.3
)
Ìý
$
15.3


Ìý
(In Millions)
Ìý
Level 3 Liabilities
Ìý
Three Months Ended
March 31,
Ìý
2020
Ìý
2019
Beginning balance - January 1
$
(1.1
)
Ìý
$
—

Total losses included in earnings
(0.6
)
Ìý
(9.8
)
Settlements
1.7

Ìý
—

Ending balance - March 31
$
—

Ìý
$
(9.8
)
Total losses for the period included in earnings attributable to the change in unrealized losses on liabilities still held at the reporting date
$
—

Ìý
$
(9.8
)

The carrying values of certain financial instruments (e.g., Accounts receivable, net, Accounts payable and Other current liabilities) approximates fair value and, therefore, have been excluded from the table below. A summary of the carrying value and fair value of other financial instruments were as follows:
Ìý
Ìý
Ìý
(In Millions)
Ìý
Ìý
Ìý
MarchÌý31, 2020
Ìý
DecemberÌý31, 2019
Ìý
Classification
Ìý
Carrying
Value
Ìý
Fair Value
Ìý
Carrying
Value
Ìý
Fair Value
Long-term debt:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Senior Notes
Level 1
Ìý
$
3,455.3

Ìý
$
2,712.8

Ìý
$
2,113.8

Ìý
$
2,237.0

IRBs due 2020 to 2028
Level 1
Ìý
101.8

Ìý
101.4

Ìý
—

Ìý
—

ABL Facility - outstanding balance
Level 2
Ìý
800.0

Ìý
800.0

Ìý
—

Ìý
—

Total long-term debt
Ìý
Ìý
$
4,357.1

Ìý
$
3,614.2

Ìý
$
2,113.8

Ìý
$
2,237.0


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