CLEVELAND-CLIFFS INC., 10-Q filed on 4/24/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
Apr. 20, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name CLEVELAND-CLIFFS INC.  
Entity Central Index Key 0000764065  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   297,733,061
Trading Symbol clf  
Entity Well-known Seasoned Issuer Yes  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
v3.8.0.1
Statements Of Condensed Consolidated Financial Position - USD ($)
$ in Millions
Mar. 31, 2018
Dec. 31, 2017
CURRENT ASSETS    
Cash and cash equivalents $ 786.6 $ 1,007.7
Accounts receivable, net 47.2 140.6
Inventories 324.4 183.4
Supplies and other inventories 81.7 93.9
Derivative assets 93.6 39.4
Loans to and accounts receivable from the Canadian Entities 50.4 51.6
Other current assets 28.5 28.0
TOTAL CURRENT ASSETS 1,412.4 1,544.6
PROPERTY, PLANT AND EQUIPMENT, NET 1,047.3 1,051.0
OTHER ASSETS    
Deposits for property, plant and equipment 74.1 17.8
Income tax receivable 219.9 235.3
Other non-current assets 109.2 104.7
TOTAL OTHER ASSETS 403.2 357.8
TOTAL ASSETS 2,862.9 2,953.4
CURRENT LIABILITIES    
Accounts payable 99.5 127.7
Accrued expenses 94.4 107.1
Accrued interest 28.2 31.4
Contingent claims 54.3 55.6
Partnership distribution payable 44.2 44.2
Other current liabilities 104.3 86.2
TOTAL CURRENT LIABILITIES 424.9 452.2
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES 251.4 257.7
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS 181.2 196.5
LONG-TERM DEBT 2,308.2 2,304.2
OTHER LIABILITIES 182.0 186.9
TOTAL LIABILITIES 3,347.7 3,397.5
COMMITMENTS AND CONTINGENCIES (REFER TO NOTE 19)
CLIFFS SHAREHOLDERS' DEFICIT    
Common Shares - par value $0.125 per share, Authorized - 600,000,000 shares (2017 - 600,000,000 shares); Issued - 301,886,794 shares (2017 - 301,886,794 shares); Outstanding - 297,733,061 shares (2017 - 297,400,968 shares) 37.7 37.7
Capital in excess of par value of shares 3,918.0 3,933.9
Retained deficit (4,257.6) (4,207.3)
Cost of 4,153,733 common shares in treasury (2017 - 4,485,826 shares) (151.8) (169.6)
Accumulated other comprehensive loss (31.3) (39.0)
TOTAL CLIFFS SHAREHOLDERS' DEFICIT (485.0) (444.3)
NONCONTROLLING INTEREST 0.2 0.2
TOTAL DEFICIT (484.8) (444.1)
TOTAL LIABILITIES AND DEFICIT $ 2,862.9 $ 2,953.4
v3.8.0.1
Statements Of Condensed Consolidated Financial Position (Parenthetical) - $ / shares
Mar. 31, 2018
Dec. 31, 2017
Class of Stock [Line Items]    
Preferred stock, par value $ 0 $ 0
Common Stock, Par or Stated Value Per Share $ 0.125 $ 0.125
Common shares, authorized (in shares) 600,000,000 600,000,000
Common shares, issued (in shares) 301,886,794 301,886,794
Common shares, outstanding 297,733,061 297,400,968
Common shares in treasury 4,153,733 4,485,826
Preferred Class A [Member]    
Class of Stock [Line Items]    
Preferred stock, shares authorized (in shares) 3,000,000 3,000,000
Preferred Class B [Member]    
Class of Stock [Line Items]    
Preferred stock, shares authorized (in shares) 4,000,000 4,000,000
v3.8.0.1
Statements Of Condensed Consolidated Operations - USD ($)
shares in Thousands, $ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
REVENUES FROM PRODUCT SALES AND SERVICES    
Product $ 220.7 $ 412.8
Freight and venture partners' cost reimbursements 18.3 48.8
TOTAL REVENUES 239.0 461.6
COST OF GOODS SOLD AND OPERATING EXPENSES (242.6) (365.3)
SALES MARGIN (3.6) 96.3
OTHER OPERATING INCOME (EXPENSE)    
Selling, general and administrative expenses (27.7) (27.7)
Miscellaneous - net (8.7) 11.5
Other operating expense (36.4) (16.2)
OPERATING INCOME (LOSS) (40.0) 80.1
OTHER INCOME (EXPENSE)    
Interest expense, net (33.5) (42.8)
Loss on extinguishment of debt 0.0 (71.9)
Other non-operating income 4.4 2.5
TOTAL OTHER INCOME (EXPENSE) (29.1) (112.2)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (69.1) (32.1)
INCOME TAX BENEFIT (EXPENSE) (15.7) 1.8
LOSS FROM CONTINUING OPERATIONS (84.8) (30.3)
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX 0.5 0.5
NET LOSS (84.3) (29.8)
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST 0.0 1.7
NET LOSS ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ (84.3) $ (28.1)
LOSS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – BASIC    
Continuing operations (in dollars per share) $ (0.29) $ (0.11)
Discontinued operations (in dollars per share) 0.00 0.00
Earnings (Loss) per Common Share Attributable to Cliffs Common Shareholders - Basic (in dollars per share) (0.29) (0.11)
LOSS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – DILUTED    
Continuing operations (in dollars per share) (0.29) (0.11)
Discontinued operations (in dollars per share) 0.00 0.00
Earnings (Loss) per Common Share Attributable to Cliffs Common Shareholders - Diluted (in dollars per share) $ (0.29) $ (0.11)
AVERAGE NUMBER OF SHARES (IN THOUSANDS)    
Basic 297,266 265,164
Diluted 297,266 265,164
v3.8.0.1
Statements Of Condensed Consolidated Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]    
NET LOSS ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ (84.3) $ (28.1)
OTHER COMPREHENSIVE INCOME (LOSS)    
Changes in pension and other post-retirement benefits, net of tax 6.7 4.7
Unrealized net gain (loss) on foreign currency translation 0.7 (12.7)
Unrealized net gain on derivative financial instruments, net of tax 0.3 0.0
OTHER COMPREHENSIVE INCOME (LOSS) 7.7 (8.0)
OTHER COMPREHENSIVE LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST 0.0 (5.0)
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO CLIFFS SHAREHOLDERS $ (76.6) $ (31.1)
v3.8.0.1
Statements Of Condensed Consolidated Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
OPERATING ACTIVITIES    
NET INCOME (LOSS) $ (84.3) $ (29.8)
Adjustments to reconcile net loss to net cash used by operating activities:    
Depreciation, depletion and amortization 23.9 23.2
Loss on extinguishment/restructuring of debt 0.0 71.9
Gain on derivatives (40.8) (17.7)
Other 25.9 0.8
Changes in operating assets and liabilities:    
Receivables and other assets 196.3 86.5
Inventories (193.0) (70.0)
Payables, accrued expenses and other liabilities (70.9) (90.0)
Net cash used by operating activities (142.9) (25.1)
INVESTING ACTIVITIES    
Property, Plant and Equipment, Cash Additions (12.4) (25.9)
Purchase of property, plant and equipment (59.0) (2.0)
Other investing activities 0.0 0.5
Net cash used by investing activities (71.4) (27.4)
FINANCING ACTIVITIES    
Proceeds from issuance of debt 0.0 500.0
Debt issuance costs (1.5) (8.5)
Net proceeds from issuance of common shares 0.0 661.3
Repurchase of debt 0.0 (1,115.5)
Distributions of partnership equity 0.0 (8.7)
Other financing activities (5.5) (5.6)
Net cash provided (used) by financing activities (7.0) 23.0
EFFECT OF EXCHANGE RATE CHANGES ON CASH 0.2 1.4
DECREASE IN CASH AND CASH EQUIVALENTS (221.1) (28.1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,007.7 323.4
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 786.6 $ 295.3
v3.8.0.1
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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 (loss) and cash flows 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, 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2018 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, 2017.
On January 25, 2018, we announced that we would accelerate the projected time frame for the planned closure of our Asia Pacific Iron Ore mining operations in Australia. On April 6, 2018, we committed to a course of action expected to lead to the permanent closure of the Asia Pacific Iron Ore mining operations and expect our final Asia Pacific Iron Ore shipment to occur by June 30, 2018. Factors considered in this decision include increasingly discounted prices for lower-iron-content ore, the quality of the remaining iron ore reserves and the lack of a legitimate offer from a qualified buyer. As a result, we recorded various adjustments to Inventories, Property, Plant and Equipment, Environmental and mine closure obligations and Supplies and other inventories consistent with our current mine plan. Refer to NOTE 5 - INVENTORIES, NOTE 6 - PROPERTY, PLANT AND EQUIPMENT and NOTE 13 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS for further information.
We report our results from continuing operations in two reportable segments: U.S. Iron Ore and Asia Pacific Iron Ore.
Basis of Consolidation
The unaudited condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, including the following operations as of March 31, 2018:
Name
 
Location
 
Status of Operations
Northshore
 
Minnesota
 
Active
United Taconite
 
Minnesota
 
Active
Tilden
 
Michigan
 
Active
Empire
 
Michigan
 
Indefinitely Idled
Koolyanobbing1
 
Western Australia
 
Active
 
 
 
 
 
1 On April 6, 2018, we committed to a course of action expected to lead to the permanent closure of the Asia Pacific Iron Ore mining operations and expect our final Asia Pacific Iron Ore shipment to occur by June 30, 2018.

Intercompany transactions and balances are eliminated upon consolidation.
Equity Method Investments
Our 23% ownership interest in Hibbing is recorded as an equity method investment. As of March 31, 2018 and December 31, 2017, our investment in Hibbing was $7.3 million and $11.0 million, respectively, classified as Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position.
Foreign Currency
Our financial statements are prepared with the U.S. dollar as the reporting currency. The functional currency of our Australian subsidiaries is the Australian dollar. The functional currency of all other international subsidiaries is the U.S. dollar. The financial statements of our Australian subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments are recorded as Accumulated other comprehensive loss. Income taxes generally are not provided for foreign currency translation adjustments. To the extent that monetary assets and liabilities, including short-term intercompany loans, are recorded in a currency other than the functional currency, these amounts are remeasured each reporting period, with the resulting gain or loss being recorded in the Statements of Unaudited Condensed Consolidated Operations. Transaction gains and losses resulting from remeasurement of short-term intercompany loans are included in Miscellaneous – net in the Statements of Unaudited Condensed Consolidated Operations.
The following represents the transaction gains and losses resulting from remeasurement:
 
(In Millions)
 
Three Months Ended
March 31,
 
2018
 
2017
Short-term intercompany loans
$
(0.2
)
 
$
15.1

Cash and cash equivalents
0.1

 
(1.2
)
Other
(0.2
)
 
(0.3
)
Net impact of transaction gains (losses) resulting from remeasurement
$
(0.3
)
 
$
13.6


Significant Accounting Policies
A detailed description of our significant accounting policies can be found in the audited financial statements for the fiscal year ended December 31, 2017 included in our Annual Report on Form 10-K filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein other than those related to the adoption of Topic 606. Refer to NOTE 2 - NEW ACCOUNTING STANDARDS for further information.
v3.8.0.1
NEW ACCOUNTING STANDARDS
3 Months Ended
Mar. 31, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
NEW ACCOUNTING STANDARDS
NOTE 2 - NEW ACCOUNTING STANDARDS
Adoption of New Accounting Standards
ASC Topic 606, Revenue from Contracts with Customers (Topic 606). On January 1, 2018, we adopted Topic 606 and applied it to all contracts that were not completed using the modified retrospective method. We recognized the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of Retained deficit of $34.0 million. The comparative period information has not been restated and continues to be reported under the accounting standards in effect for those periods. We do not expect that the adoption of Topic 606 will have a material impact to our annual net income on an ongoing basis.
Under Topic 606, revenue will generally be recognized upon delivery for our U.S. Iron Ore customers, which is earlier than under the previous guidance. As an example, for certain iron ore shipments where revenue was previously recognized upon title transfer when payment was received, we will now recognize revenue when control transfers, which is generally upon delivery. While we continue to retain title until we receive payment, we determined upon review of our customer contracts that the preponderance of control indicators pass to our customers' favor when we deliver our products; thus, we generally concluded control transfers at that point. As a result of the adoption of Topic 606 and vessel deliveries not occurring during the winter months because of the closure of the Soo Locks and the Welland Canal, our revenues and net income will be relatively lower than historical levels during the first quarter of each year and relatively higher than historical levels during the remaining three quarters in future years. However, the total amount of revenue recognized during the year should remain substantially the same as under previous accounting standards, assuming revenue rates and volumes are consistent between years.
The adoption of Topic 606 will not change the pattern or timing of revenue recognition for Asia Pacific Iron Ore, as control transfers when vessels are loaded, which is the same time title and the risk of loss transfers to our customers.
The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606 were as follows:
 
 
($ in Millions)
 
 
Balance at December 31, 2017
 
Adjustments due to Topic 606
 
Balance at January 1, 2018
ASSETS
 
 
 
 
 
 
CURRENT ASSETS
 
 
 


 


Cash and cash equivalents
 
$
1,007.7

 
$

 
$
1,007.7

Accounts receivable, net
 
140.6

 
76.6

 
217.2

Inventories
 
183.4

 
(51.4
)
 
132.0

Supplies and other inventories
 
93.9

 

 
93.9

Derivative assets
 
39.4

 
11.6

 
51.0

Loans to and accounts receivable from the Canadian Entities
 
51.6

 

 
51.6

Other current assets
 
28.0

 

 
28.0

TOTAL CURRENT ASSETS
 
1,544.6

 
36.8

 
1,581.4

PROPERTY, PLANT AND EQUIPMENT, NET
 
1,051.0

 

 
1,051.0

OTHER ASSETS
 
 
 
 
 
 
Deposits for property, plant and equipment
 
17.8

 

 
17.8

Income tax receivable
 
235.3

 

 
235.3

Other non-current assets
 
104.7

 

 
104.7

TOTAL OTHER ASSETS
 
357.8

 

 
357.8

TOTAL ASSETS
 
$
2,953.4

 
$
36.8

 
$
2,990.2

 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
Accounts payable
 
$
127.7

 
$
1.4

 
$
129.1

Accrued expenses
 
107.1

 

 
107.1

Accrued interest
 
31.4

 

 
31.4

Contingent claims
 
55.6

 

 
55.6

Partnership distribution payable
 
44.2

 

 
44.2

Other current liabilities
 
86.2

 
1.4

 
87.6

TOTAL CURRENT LIABILITIES
 
452.2

 
2.8

 
455.0

PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES
 
257.7

 

 
257.7

ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS
 
196.5

 

 
196.5

LONG-TERM DEBT
 
2,304.2

 

 
2,304.2

OTHER LIABILITIES
 
186.9

 

 
186.9

TOTAL LIABILITIES
 
3,397.5

 
2.8

 
3,400.3

EQUITY
 
 
 
 
 
 
CLIFFS SHAREHOLDERS' DEFICIT
 
(444.3
)
 
34.0

 
(410.3
)
NONCONTROLLING INTEREST
 
0.2

 

 
0.2

TOTAL DEFICIT
 
(444.1
)
 
34.0

 
(410.1
)
TOTAL LIABILITIES AND DEFICIT
 
$
2,953.4

 
$
36.8

 
$
2,990.2

The impact of adoption on our Statements of Unaudited Condensed Consolidated Operations and Statements of Unaudited Condensed Consolidated Financial Position is as follows:
 
 
($ in Millions)
 
 
Three Months Ended March 31, 2018
 
 
As Reported
 
Balances without Adoption of Topic 606
 
Effect of Change
REVENUES FROM PRODUCT SALES AND SERVICES
 
 
 
 
 
 
Product
 
$
220.7

 
$
279.1

 
$
(58.4
)
Freight and venture partners' cost reimbursements
 
18.3

 
22.4

 
(4.1
)
 
 
239.0

 
301.5

 
(62.5
)
COST OF GOODS SOLD AND OPERATING EXPENSES
 
(242.6
)
 
(286.2
)
 
43.6

SALES MARGIN
 
(3.6
)
 
15.3

 
(18.9
)
OTHER OPERATING EXPENSE
 
 
 
 
 
 
Selling, general and administrative expenses
 
(27.7
)
 
(27.7
)
 

Miscellaneous – net
 
(8.7
)
 
(8.7
)
 

 
 
(36.4
)
 
(36.4
)
 

OPERATING LOSS
 
(40.0
)
 
(21.1
)
 
(18.9
)
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
Interest expense, net
 
(33.5
)
 
(33.5
)
 

Other non-operating income
 
4.4

 
4.4

 

 
 
(29.1
)
 
(29.1
)
 

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
(69.1
)
 
(50.2
)
 
(18.9
)
INCOME TAX EXPENSE
 
(15.7
)
 
(15.7
)
 

LOSS FROM CONTINUING OPERATIONS
 
(84.8
)
 
(65.9
)
 
(18.9
)
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
 
0.5

 
0.5

 

NET LOSS
 
(84.3
)
 
(65.4
)
 
(18.9
)
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
 

 

 

NET LOSS ATTRIBUTABLE TO CLIFFS SHAREHOLDERS
 
$
(84.3
)
 
$
(65.4
)
 
$
(18.9
)
LOSS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – BASIC
 
 
 
 
 
 
Continuing operations
 
$
(0.29
)
 
$
(0.23
)
 
$
(0.06
)
Discontinued operations
 

 

 

 
 
$
(0.29
)
 
$
(0.23
)
 
$
(0.06
)
LOSS PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS – DILUTED
 
 
 
 
 
 
Continuing operations
 
$
(0.29
)
 
$
(0.23
)
 
$
(0.06
)
Discontinued operations
 

 

 

 
 
$
(0.29
)
 
$
(0.23
)
 
$
(0.06
)
AVERAGE NUMBER OF SHARES (IN THOUSANDS)
 
 
 
 
 
 
Basic
 
297,266

 
297,266

 
 
Diluted
 
297,266

 
297,266

 
 
 
 
($ in Millions)
 
 
March 31, 2018
 
 
As Reported
 
Balances without Adoption of Topic 606
 
Effect of Change
ASSETS
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 


Cash and cash equivalents
 
$
786.6

 
$
786.6

 
$

Accounts receivable, net
 
47.2

 
24.9

 
22.3

Inventories
 
324.4

 
332.0

 
(7.6
)
Supplies and other inventories
 
81.7

 
81.7

 

Derivative assets
 
93.6

 
91.3

 
2.3

Loans to and accounts receivable from the Canadian Entities
 
50.4

 
50.4

 

Other current assets
 
28.5

 
28.5

 

TOTAL CURRENT ASSETS
 
1,412.4

 
1,395.4

 
17.0

PROPERTY, PLANT AND EQUIPMENT, NET
 
1,047.3

 
1,047.3

 

OTHER ASSETS
 
 
 
 
 
 
Deposits for property, plant and equipment
 
74.1

 
74.1

 

Income tax receivable
 
219.9

 
219.9

 

Other non-current assets
 
109.2

 
109.2

 

TOTAL OTHER ASSETS
 
403.2

 
403.2

 

TOTAL ASSETS
 
2,862.9

 
2,845.9

 
17.0

 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
Accounts payable
 
$
99.5

 
$
99.2

 
$
0.3

Accrued expenses
 
94.4

 
94.4

 

Accrued interest
 
28.2

 
28.2

 

Contingent claims
 
54.3

 
54.3

 

Partnership distribution payable
 
44.2

 
44.2

 

Other current liabilities
 
104.3

 
104.0

 
0.3

TOTAL CURRENT LIABILITIES
 
424.9

 
424.3

 
0.6

PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES
 
251.4

 
251.4

 

ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS
 
181.2

 
181.2

 

LONG-TERM DEBT
 
2,308.2

 
2,308.2

 

OTHER LIABILITIES
 
182.0

 
182.0

 

TOTAL LIABILITIES
 
3,347.7

 
3,347.1

 
0.6

EQUITY
 
 
 
 
 
 
CLIFFS SHAREHOLDERS' DEFICIT
 
(485.0
)
 
(501.4
)
 
16.4

NONCONTROLLING INTEREST
 
0.2

 
0.2

 

TOTAL DEFICIT
 
(484.8
)
 
(501.2
)
 
16.4

TOTAL LIABILITIES AND DEFICIT
 
$
2,862.9

 
$
2,845.9

 
$
17.0


The adoption of Topic 606 did not have an impact on net cash flows in our Statements of Unaudited Condensed Consolidated Cash Flows.
ASU 2017-07, Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On January 1, 2018, we adopted the amendments to ASC 715 regarding the presentation of net periodic pension and postretirement benefit costs. We retrospectively adopted the presentation of service cost separate from the other components of net periodic costs. The interest cost, expected return on assets, amortization of prior service costs, net remeasurement, and other costs have been reclassified from Cost of goods sold and operating expenses, Selling, general and administrative expenses and Miscellaneous – net to Other non-operating income.  We elected to apply the practical expedient, which allows us to reclassify amounts disclosed previously in our Pension and other postretirement benefits footnote as the basis for applying retrospective presentation for comparative periods. On a prospective basis, only service costs will be included in amounts capitalized in inventory or property, plant, and equipment.
The effect of the retrospective presentation change related to the net periodic cost of our defined benefit pension and other postretirement employee benefits plans on our Statements of Unaudited Condensed Consolidated Operations was as follows:
 
 
($ in Millions)
 
 
Three Months Ended March 31, 2017
 
 
As Revised
 
Previously Reported
 
Effect of Change
Cost of goods sold and operating expenses
 
$
(365.3
)
 
$
(365.9
)
 
$
0.6

Selling, general and administrative expenses
 
$
(27.7
)
 
$
(25.7
)
 
$
(2.0
)
Miscellaneous – net
 
$
11.5

 
$
11.9

 
$
(0.4
)
Operating income
 
$
80.1

 
$
81.9

 
$
(1.8
)
Other non-operating income
 
$
2.5

 
$
0.7

 
$
1.8

Net Loss
 
$
(29.8
)
 
$
(29.8
)
 
$


Recent Accounting Pronouncements
Issued and Not Effective
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases except for short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the Statements of Unaudited Condensed Consolidated Operations. We plan to adopt the standard on its effective date of January 1, 2019. The new standard may be adopted using either the modified retrospective approach, which requires application of the new guidance at the beginning of the earliest comparative period presented or the optional alternative approach, which requires application of the new guidance at the beginning of the standards effective date. We are currently finalizing our implementation plan, compiling an inventory of existing leases and evaluating the effect the updated standard will have on our consolidated financial statements and related disclosures.
v3.8.0.1
SEGMENT REPORTING
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
SEGMENT REPORTING
NOTE 3 - SEGMENT REPORTING
Our continuing operations are organized and managed according to geographic location: U.S. Iron Ore and Asia Pacific Iron Ore. Our U.S. Iron Ore segment is a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. The Asia Pacific Iron Ore segment is located in Western Australia and provides iron ore to the seaborne market for Asian steel producers. There were no intersegment revenues in the first quarter of 2018 or 2017.
We evaluate segment performance based on sales margin, defined as revenues less cost of goods sold and operating expenses identifiable to each segment. Additionally, we evaluate performance on a segment basis, as well as a consolidated basis, based on EBITDA and Adjusted EBITDA. These measures allow management and investors to focus on our ability to service our debt as well as illustrate how the business and each operating segment are performing.  Additionally, EBITDA and Adjusted EBITDA assist management and investors in their analysis and forecasting as these measures approximate the cash flows associated with operational earnings.
The following tables present a summary of our reportable segments including a reconciliation of segment sales margin to Loss from Continuing Operations Before Income Taxes and a reconciliation of Net Loss to EBITDA and Adjusted EBITDA:
 
(In Millions)
 
Three Months Ended
March 31,
 
2018
 
2017
Revenues from product sales and services:
 
 
 
 
 
 
 
U.S. Iron Ore
$
180.0

 
75
%
 
$
286.2

 
62
%
Asia Pacific Iron Ore
59.0

 
25
%
 
175.4

 
38
%
Total revenues from product sales and services
$
239.0

 
100
%
 
$
461.6

 
100
%
 
 
 
 
 
 
 
 
Sales margin:
 
 
 
 
 
 
 
U.S. Iron Ore
$
61.5

 
 
 
$
49.0

 
 
Asia Pacific Iron Ore
(65.1
)
 
 
 
47.3

 
 
Sales margin
(3.6
)
 
 
 
96.3

 
 
Other operating expense
(36.4
)
 
 
 
(16.2
)
 
 
Other expense
(29.1
)
 
 
 
(112.2
)
 
 
Loss from continuing operations before income taxes
$
(69.1
)
 
 
 
$
(32.1
)
 
 
 
(In Millions)
 
Three Months Ended
March 31,
 
2018
 
2017
Net Loss
$
(84.3
)
 
$
(29.8
)
Less:
 
 
 
Interest expense, net
(33.5
)
 
(42.8
)
Income tax benefit (expense)
(15.7
)
 
1.8

Depreciation, depletion and amortization
(23.9
)
 
(23.2
)
EBITDA
$
(11.2
)
 
$
34.4

Less:
 
 
 
Inventory impairments
$
(18.9
)
 
$

Impairment of long-lived assets
(2.6
)
 

Severance and retention costs
(1.5
)
 

Impact of discontinued operations
0.5

 
0.5

Foreign exchange remeasurement
(0.3
)
 
13.6

Loss on extinguishment of debt

 
(71.9
)
Adjusted EBITDA
$
11.6

 
$
92.2

 
 
 
 
EBITDA
 
 
 
U.S. Iron Ore
$
72.5

 
$
57.9

Asia Pacific Iron Ore
(63.7
)
 
51.4

Other
(20.0
)
 
(74.9
)
Total EBITDA
$
(11.2
)
 
$
34.4

 
 
 
 
Adjusted EBITDA:
 
 
 
U.S. Iron Ore
$
77.1

 
$
64.1

Asia Pacific Iron Ore
(39.6
)
 
53.8

Other
(25.9
)
 
(25.7
)
Total Adjusted EBITDA
$
11.6

 
$
92.2

 
(In Millions)
 
Three Months Ended
March 31,
 
2018
 
2017
Depreciation, depletion and amortization:
 
 
 
U.S. Iron Ore
$
15.8

 
$
16.4

Asia Pacific Iron Ore
6.7

 
4.7

Other
1.4

 
2.1

Total depreciation, depletion and amortization
$
23.9

 
$
23.2

 
 
 
 
Capital additions1:
 
 
 
U.S. Iron Ore
$
18.7

 
$
27.1

Asia Pacific Iron Ore

 
0.2

Other2
60.2

 

Total capital additions
$
78.9

 
$
27.3

 
 
 
 
1 Includes cash paid for capital additions of $71.4 million, including deposits of $59.0 million, and an increase in non-cash accruals of $7.5 million for the three months ended March 31, 2018 compared to cash paid for capital additions of $27.9 million, including deposits of $2.0 million, and a decrease in non-cash accruals of $0.6 million for the three months ended March 31, 2017.
2 Includes capital additions related to our HBI project.

A summary of assets by segment is as follows:
 
(In Millions)
 
March 31,
2018
 
December 31,
2017
Assets:
 
 
 
U.S. Iron Ore
$
1,646.8

 
$
1,500.6

Asia Pacific Iron Ore
78.4

 
138.8

Total segment assets
1,725.2

 
1,639.4

Corporate and Other
1,137.7

 
1,314.0

Total assets
$
2,862.9

 
$
2,953.4

v3.8.0.1
REVENUE
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]
NOTE 4 - REVENUE
Revenue is recognized generally when iron ore is delivered to our customers. Revenue is measured at the point control transfers and represents the amount of consideration we expect to receive in exchange for transferring goods. We offer standard payment terms to our customers, generally requiring settlement within 30 days.
We enter into supply contracts of varying lengths to provide customers iron ore to use in their blast furnaces. Blast furnaces run continuously with a constant feed of iron ore and once shut down, cannot easily be restarted. As a result, we ship iron ore in large quantities for storage and use by customers at a later date. Customers do not simultaneously receive and consume the benefits of the iron ore. Based on our assessment of the factors that indicate the pattern of satisfaction, we transfer control of the iron ore at a point in time upon shipment or delivery of the product. The customer is able to direct the use of, and obtain substantially all of the benefits from, the product at the time the product is delivered.
We disaggregate Revenues from product sales and services based on geographical location. We sell a single product, iron ore, in the North American and Asian markets. Refer to NOTE 3 - SEGMENT REPORTING for further information on disaggregated revenue.
Certain of our U.S. Iron Ore and Asia Pacific Iron Ore customer supply agreements specify a provisional price, which is used for initial billing and cash collection. Revenue recorded in accordance with Topic 606 is calculated using the expected revenue rate at the point when control transfers. The final settlement includes market inputs for a specified period of time, which may vary by customer, but typically include one or more of the following: Platts 62% Price, pellet premiums, Platts international indexed freight rates and changes in specified Producer Price Indices, including industrial commodities, energy and steel. Changes in the expected revenue rate from the date control transfers through final settlement of contract terms is recorded in accordance with ASC Topic 815. Refer to NOTE 15 - DERIVATIVE INSTRUMENTS for further information on how our estimated expected and final revenue rates are determined.
A supply agreement with one U.S. Iron Ore customer provides for supplemental revenue or refunds based on the average annual daily market price for hot-rolled coil steel at the time the iron ore is consumed in the customer’s blast furnaces. As control transfers prior to consumption, the supplemental revenue is recorded in accordance with ASC Topic 815. Refer to NOTE 15 - DERIVATIVE INSTRUMENTS for further information on supplemental revenue or refunds.
Included within Revenues from product sales and services is derivative revenue related to ASC Topic 815 of $43.8 million and $1.3 million, for three months ended March 31, 2018 at our U.S. Iron Ore and Asia Pacific Iron Ore segments, respectively.
Practical expedients and exemptions
We have elected to treat all shipping and handling costs as fulfillment costs as a significant portion of these costs are incurred prior to control transfer.
We have various long-term sales contracts with minimum purchase and supply requirement provisions that extend beyond the current reporting period. The portion of our transaction price for these contracts that is allocated entirely to wholly unsatisfied performance obligations is based on market prices that have not yet been determined and therefore is variable in nature. As such, we have not disclosed the value of unsatisfied performance obligations pursuant to the practical expedient.
Deferred Revenue
The table below summarizes our deferred revenue balances:
 
Deferred Revenue (Current)1
 
Deferred Revenue (Long-Term)
Opening balance as of January 1, 2018
$
23.8

 
$
51.4

Closing balance as of March 31, 2018
31.0

 
51.4

Increase
$
7.2

 
$

 
 
 
 
1 The opening balance includes a $1.4 million adjustment from the December 31, 2017 balance due to the adoption of Topic 606.

The terms of one of our U.S. Iron Ore pellet supply agreements required supplemental payments to be paid by the customer during the period 2009 through 2012, with the option to defer a portion of the 2009 monthly amount in exchange for interest payments until the deferred amount was repaid in 2013. Installment amounts received under this arrangement in excess of sales were classified as Other current liabilities and Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position upon receipt of payment. Revenue is recognized over the life of the supply agreement, which extends until 2022, in equal annual installments. As of March 31, 2018 and December 31, 2017, installment amounts received in excess of sales totaled $64.2 million related to this agreement. As of March 31, 2018 and December 31, 2017, deferred revenue of $12.8 million was recorded in Other current liabilities and $51.4 million was recorded as long-term in Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position, related to this agreement.
Due to the payment terms and the timing of cash receipts near a period end, cash receipts can exceed shipments for certain customers. Revenue recognized on these transactions totaling $18.2 million and $9.6 million was deferred and included in Other current liabilities in the Statements of Unaudited Condensed Consolidated Financial Position as of March 31, 2018 and December 31, 2017, respectively.
v3.8.0.1
INVENTORIES
3 Months Ended
Mar. 31, 2018
Inventory Disclosure [Abstract]  
Inventories
NOTE 5 - INVENTORIES
The following table presents the detail of our Inventories in the Statements of Unaudited Condensed Consolidated Financial Position:
 
 
(In Millions)
 
 
March 31, 2018
 
December 31, 2017
Segment
 
Finished Goods
 
Work-in Process
 
Total Inventory
 
Finished Goods
 
Work-in Process
 
Total
Inventory
U.S. Iron Ore
 
$
267.2

 
$
36.0

 
$
303.2

 
$
127.1

 
$
11.3

 
$
138.4

Asia Pacific Iron Ore
 
20.2

 
1.0

 
21.2

 
33.3

 
11.7

 
45.0

Total
 
$
287.4

 
$
37.0

 
$
324.4

 
$
160.4

 
$
23.0

 
$
183.4


We recorded lower of cost or net realizable value inventory charges of $13.0 million and $9.1 million related to finished goods inventory and work-in process inventory, respectively, at Asia Pacific Iron Ore in Cost of goods sold and operating expenses in the Statements of Unaudited Condensed Consolidated Operations for the three months ended March 31, 2018. The charges were a result of the decline in our expected realized revenue rates for future sales of these tons. There were no lower of cost or net realizable value inventory adjustments recorded for the three months ended March 31, 2017.
We recorded an impairment charge of $1.4 million and $13.2 million related to finished goods inventory and work-in process inventory, respectively, at Asia Pacific Iron Ore in Cost of goods sold and operating expenses in the Statements of Consolidated Operations for the three months ended March 31, 2018. Inventory not expected to be sold prior to the closure of operations was impaired. There were no inventory impairment adjustments recorded for the three months ended March 31, 2017.
v3.8.0.1
PROPERTY, PLANT AND EQUIPMENT
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT AND EQUIPMENT
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
The following table indicates the value of each of the major classes of our consolidated depreciable assets:
 
(In Millions)
 
March 31,
2018
 
December 31,
2017
Land rights and mineral rights
$
549.6

 
$
549.6

Office and information technology
66.3

 
66.3

Buildings
85.5

 
86.8

Mining equipment
594.0

 
594.4

Processing equipment
619.8

 
617.0

Electric power facilities
57.0

 
57.0

Land improvements
23.6

 
23.7

Asset retirement obligation
16.9

 
19.2

Other
30.3

 
30.3

Construction in-progress
48.1

 
35.1

 
2,091.1

 
2,079.4

Allowance for depreciation and depletion
(1,043.8
)
 
(1,028.4
)
 
$
1,047.3

 
$
1,051.0


We recorded depreciation and depletion expense of $21.3 million and $22.6 million in the Statements of Unaudited Condensed Consolidated Operations for the three months ended March 31, 2018 and March 31, 2017, respectively.
As of March 31, 2018, based on the anticipated closure of the Asia Pacific Iron Ore operations we determined that we would not recover the value of certain long-lived assets at our Asia Pacific Iron Ore operations. As a result, we recorded an impairment of $2.6 million in Miscellaneous – net in the Statements of Unaudited Condensed Consolidated Operations.
v3.8.0.1
DEBT AND CREDIT FACILITIES
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
DEBT AND CREDIT FACILITIES
NOTE 7 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt:
(In Millions)
March 31, 2018
Debt Instrument
 
Annual Effective
Interest Rate
 
Total Principal Amount
 
Debt Issuance Costs
 
Unamortized Discounts
 
Total Debt
Secured Notes
 
 
 
 
 
 
 
 
 
 
$400 Million 4.875% 2024 Senior Notes
 
5.00%
 
$
400.0

 
$
(6.7
)
 
$
(2.5
)
 
$
390.8

Unsecured Notes
 
 
 
 
 
 
 
 
 
 
$400 Million 5.90% 2020 Senior Notes
 
5.98%
 
88.9

 
(0.2
)
 
(0.1
)
 
88.6

$500 Million 4.80% 2020 Senior Notes
 
4.83%
 
122.4

 
(0.2
)
 
(0.1
)
 
122.1

$700 Million 4.875% 2021 Senior Notes
 
4.89%
 
138.4

 
(0.3
)
 
(0.1
)
 
138.0

$316.25 Million 1.50% 2025 Convertible Senior Notes
 
6.26%
 
316.3

 
(6.3
)
 
(83.2
)
 
226.8

$1.075 Billion 5.75% 2025 Senior Notes
 
6.01%
 
1,075.0

 
(11.1
)
 
(16.0
)
 
1,047.9

$800 Million 6.25% 2040 Senior Notes
 
6.34%
 
298.4

 
(2.3
)
 
(3.4
)
 
292.7

ABL Facility
 
N/A
 
450.0

 
N/A

 
N/A

 

Fair Value Adjustment to Interest Rate Hedge
 
 
 
 
 
 
 
 
 
1.3

Long-term debt
 
 
 
 
 
 
 
 
 
$
2,308.2

(In Millions)
December 31, 2017
Debt Instrument
 
Annual Effective
Interest Rate
 
Total Principal Amount
 
Debt Issuance Costs
 
Unamortized Discounts
 
Total Debt
Secured Notes
 
 
 
 
 
 
 
 
 
 
$400 Million 4.875% 2024 Senior Notes
 
5.00%
 
$
400.0

 
$
(7.1
)
 
$
(2.6
)
 
$
390.3

Unsecured Notes
 
 
 
 
 
 
 
 
 
 
$400 Million 5.90% 2020 Senior Notes
 
5.98%
 
88.9

 
(0.2
)
 
(0.1
)
 
88.6

$500 Million 4.80% 2020 Senior Notes
 
4.83%
 
122.4

 
(0.3
)
 
(0.1
)
 
122.0

$700 Million 4.875% 2021 Senior Notes
 
4.89%
 
138.4

 
(0.3
)
 
(0.1
)
 
138.0

$316.25 Million 1.50% 2025 Convertible Senior Notes
 
6.26%
 
316.3

 
(6.6
)
 
(85.6
)
 
224.1

$1.075 Billion 5.75% 2025 Senior Notes
 
6.01%
 
1,075.0

 
(11.3
)
 
(16.5
)
 
1,047.2

$800 Million 6.25% 2040 Senior Notes
 
6.34%
 
298.4

 
(2.4
)
 
(3.4
)
 
292.6

ABL Facility
 
N/A
 
550.0

 
N/A

 
N/A

 

Fair Value Adjustment to Interest Rate Hedge
 
 
 
 
 
 
 
 
 
1.4

Long-term debt
 
 
 
 
 
 
 
 
 
$
2,304.2


$1.075 Billion 5.75% 2025 Senior Notes
On February 27, 2017, we entered into an indenture among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the issuance of $500 million aggregate principal amount of 5.75% 2025 Senior Notes. On August 7, 2017, we issued an additional $575 million aggregate principal amount of our 5.75% 2025 Senior Notes. The second tranche was issued at 97.0% of face value. The 5.75% 2025 Senior Notes were issued in private transactions exempt from the registration requirements of the Securities Act. Pursuant to the registration rights agreement executed as part of these issuances, we filed on February 14, 2018 a registration statement with the SEC with respect to a registered offer to exchange the 5.75% 2025 Senior Notes for publicly registered notes, with all significant terms and conditions remaining the same.
Debt Maturities
The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at March 31, 2018:
 
 
(In Millions)
 
 
Maturities of Debt
2018
 
$

2019
 

2020
 
211.3

2021
 
138.4

2022
 

2023
 

2024 and thereafter
 
2,089.7

Total maturities of debt
 
$
2,439.4


ABL Facility
On February 28, 2018, we entered into an amended and restated senior secured asset-based revolving credit facility with various financial institutions. The ABL Facility amends and restates our prior $550.0 million Syndicated Facility Agreement, dated as of March 30, 2015. The ABL Facility will mature upon the earlier of February 28, 2023 or 60 days prior to the maturity of certain other material debt, and provides for up to $450.0 million in borrowings, comprised of (i) a $400.0 million U.S. tranche, including a $248.8 million sublimit for the issuance of letters of credit and a $100.0 million sublimit for U.S. swingline loans, and (ii) a $50.0 million Australian tranche, including a $24.4 million sublimit for the issuance of letters of credit and a $20.0 million sublimit for Australian swingline loans. Availability under both the U.S. tranche and Australian tranche of the ABL Facility is limited to an eligible U.S. borrowing base and Australian borrowing base, as applicable, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
The ABL Facility and certain bank products and hedge obligations are guaranteed by us and certain of our existing wholly-owned U.S. and Australian subsidiaries and are required to be guaranteed by certain of our future U.S. and Australian subsidiaries; provided, however, that the obligations of any U.S. entity will not be guaranteed by any Australian entity. Amounts outstanding under the ABL Facility are secured by (i) a first-priority security interest in the accounts receivable and other rights to payment, inventory, as-extracted collateral, certain investment property, deposit accounts, securities accounts, certain general intangibles and commercial tort claims, certain mobile equipment, commodities accounts, deposit accounts, securities accounts and other related assets of ours, the other borrowers and the guarantors, and proceeds and products of each of the foregoing (collectively, the “ABL Collateral”); provided, however, that the ABL Collateral owned by a borrower or guarantor that is organized under the laws of Australia (the “Australian Loan Parties”) shall only secure the Australian tranche and obligations of the borrowers and guarantors organized under the laws of Australia, (ii) a second-priority security interest in substantially all of our assets and the assets of the other borrowers and the guarantors (other than the Australian Loan Parties) other than the ABL Collateral (collectively, the “Notes Collateral” and, together with the ABL Collateral, the “Collateral”) and (iii) solely in the case of the obligations of the Australian Loan Parties under the ABL Facility, a featherweight floating security interest over substantially all assets of the Australian Loan Parties other than ABL Collateral, in each case, subject to certain customary exceptions.
Borrowings under the ABL Facility bear interest, at our option, at a base rate, an Australian base rate or, if certain conditions are met, a LIBOR rate, in each case plus an applicable margin. The base rate is equal to the greatest of the federal funds rate plus ½ of 1%, the LIBOR rate based on a one-month interest period plus 1% and the floating rate announced by Bank of America Merrill Lynch as its “prime rate" and 1%. The Australian base rate is equal to the LIBOR rate as of 11:00 a.m. on the first business day of each month for a one-month period. The LIBOR rate is a per annum fixed rate equal to LIBOR with respect to the applicable interest period and amount of LIBOR rate loan requested.
The ABL Facility contains customary representations and warranties and affirmative and negative covenants including, among others, covenants regarding the maintenance of certain financial ratios if certain conditions are triggered, covenants relating to financial reporting, covenants relating to the payment of dividends on, or purchase or redemption of, our capital stock, covenants relating to the incurrence or prepayment of certain debt, covenants relating to the incurrence of liens or encumbrances, covenants relating to compliance with laws, covenants relating to transactions with affiliates, covenants relating to mergers and sales of all or substantially all of our assets and limitations on changes in the nature of our business.
The ABL Facility provides for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees, or other amounts, a representation or warranty proving to have been materially incorrect when made, failure to perform or observe certain covenants within a specified period of time, a cross-default to certain material indebtedness, the bankruptcy or insolvency of the Company and certain of its subsidiaries, monetary judgment defaults of a specified amount, invalidity of any loan documentation, a change of control of the Company, and ERISA defaults resulting in liability of a specified amount. If an event of a default exists (beyond any applicable grace or cure period, if any), the administrative agent may and, at the direction of the requisite number of lenders, shall declare all amounts owing under the ABL Facility immediately due and payable, terminate such lenders’ commitments to make loans under the ABL Facility and/or exercise any and all remedies and other rights under the ABL Facility. For certain events of default related to insolvency and receivership, the commitments of the lenders will be automatically terminated and all outstanding loans and other amounts will become immediately due and payable.
As of March 31, 2018 and December 31, 2017, 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.
As of March 31, 2018 and December 31, 2017, no loans were drawn under the ABL Facility and we had total availability of $314.1 million and $273.2 million, respectively, as a result of borrowing base limitations. As of March 31, 2018 and December 31, 2017, the principal amount of letter of credit obligations totaled $46.6 million and $46.5 million, respectively, to support business obligations primarily related to workers compensation and environmental obligations, thereby further reducing available borrowing capacity on our ABL Facility to $267.5 million and $226.7 million, respectively.
v3.8.0.1
FAIR VALUE OF FINANCIAL INSTRUMENTS
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
NOTE 8 - FAIR VALUE MEASUREMENTS
The following represents the assets and liabilities of the Company measured at fair value:
 
(In Millions)
 
March 31, 2018
Description
Quoted Prices in Active
Markets for Identical Assets/Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
36.0

 
$
490.6

 
$

 
$
526.6

Derivative assets

 

 
93.6

 
93.6

Total
$
36.0

 
$
490.6

 
$
93.6

 
$
620.2

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$

 
$
0.2

 
$
4.2

 
$
4.4

Total
$

 
$
0.2