BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Notes) |
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | 听 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Significant Accounting Policies [Text Block] |
Business, Consolidation and Presentation
听听听听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), 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 and nine months ended September听30, 2020 are not necessarily indicative of results to be expected for the year ending December听31, 2020 or any other future period. Due to the acquisition of AK AG真人平台AG真人试玩, certain balances have become material and are no longer being condensed in our Statements of Unaudited Condensed Consolidated Financial Position, such as balances for Right-of-use asset, operating lease and Operating lease liability, non-current. As a result, certain prior period amounts have been reclassified to conform with the current year presentation. 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听31, 2019 and in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020.
听听听听Proposed acquisition of substantially all of the operations of ArcelorMittal USA
On September 28, 2020, we entered into a Transaction Agreement with ArcelorMittal S.A., pursuant to which Cliffs will acquire substantially all of the operations of ArcelorMittal USA for an aggregate purchase price of approximately $1.4听billion, consisting of (i) $505听million in cash, (ii) 78,186,671 of our common shares, par value $0.125 per share, and (iii) 583,273 shares of a new series of our Serial Preferred Stock, Class B, without par value, to be designated as the 鈥淪eries B Participating Redeemable Preferred Stock鈥� at closing. The cash portion of the purchase price is subject to customary working capital and purchase price adjustments.
We expect to complete the Transaction in the fourth quarter of 2020. Completion of the Transaction is subject to various customary closing conditions, including the receipt of required regulatory approvals in identified jurisdictions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, and it is possible that factors outside of our control could result in the Transaction being completed at a later time or not at all. The Transaction Agreement also contains certain termination rights that may be exercised by either us or ArcelorMittal S.A. We plan to complete the Transaction as soon as reasonably practicable following the satisfaction or waiver of all applicable conditions.
Acquisition of AK AG真人平台AG真人试玩
听听听听On March 13, 2020, we consummated the Merger, pursuant to which, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub was merged with and into AK AG真人平台AG真人试玩, with AK AG真人平台AG真人试玩 surviving the Merger as a wholly owned subsidiary of Cliffs. Refer to NOTE 3 - ACQUISITION OF AK STEEL for further information.
听听听听AK AG真人平台AG真人试玩 is a leading North American producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing markets. The acquisition of AK AG真人平台AG真人试玩 has transformed us into a vertically integrated producer of value-added iron ore and steel products.
听听听听COVID-19
听听听听In response to the COVID-19 pandemic, we made various operational changes to adjust to the demand for our products. Although steel and iron ore production have been considered 鈥渆ssential鈥� by the states in which we operate, certain of our facilities and construction activities were temporarily idled during the second quarter of 2020.听 Most of these temporarily idled facilities were restarted during the second quarter, and the remaining operations were restarted during the third quarter.
听听听听Basis of Consolidation
听听听听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 two variable interest entities for which we are the primary beneficiary. All intercompany transactions and balances are eliminated upon consolidation.
听听听听Reportable Segments
听听听听The acquisition of AK AG真人平台AG真人试玩 has transformed us into a vertically integrated producer of value-added iron ore and steel products and we are organized according to our differentiated products in two reportable segments - the AG真人平台AG真人试玩 and Manufacturing segment and the Mining and Pelletizing segment. Our new AG真人平台AG真人试玩 and Manufacturing segment includes the assets acquired through the acquisition of AK AG真人平台AG真人试玩 and our previously reported Metallics segment, and our Mining and Pelletizing segment includes our three active operating mines and our indefinitely idled mine.
听听听听Investments in Affiliates
听听听听We have investments in several businesses accounted for using the equity method of accounting. We review an investment for impairment when circumstances indicate that a loss in value below its carrying amount is other than temporary. Investees and equity ownership percentages are presented below:
听听听听We recorded a basis difference for Spartan AG真人平台AG真人试玩 of $32.5 million as part of our acquisition of AK AG真人平台AG真人试玩.听 The basis difference relates to the excess of the fair value over the investee's carrying amount of property, plant and equipment and will be amortized over the remaining useful lives of the underlying assets.
Significant Accounting Policies
听听听听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听31, 2019 filed with the SEC, which were updated and can be found in the unaudited condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020 filed with the SEC. There have been no material changes in our significant accounting policies and estimates from those disclosed therein.
Recent Accounting Pronouncements
听听听听Issued and Adopted
听听听听On March 2, 2020, the SEC issued a final rule that amended the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rule 3-10, which required separate financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The final rule replaces the previous requirement under Rule 3-10 to provide condensed consolidating financial information in the registrant鈥檚 financial statements with a requirement to provide alternative financial disclosures (which include summarized financial information of the parent and any issuers and guarantors, as well as other qualitative disclosures) in either the registrant鈥檚 Management's Discussion and Analysis of Financial Condition and Results of Operations or its financial statements, in addition to other simplifications. The final rule is effective for filings on or after January 4, 2021, and early adoption is permitted. We elected to early adopt this disclosure update for the period ended March 31, 2020. As a result, we have excluded the footnote disclosures required under the previous Rule 3-10, and applied the final rule by including the summarized financial information and qualitative disclosures in Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and , hereto.
Issued and Not EffectiveIn August 2020, the Financial Accounting Standards Board issued Accounting Standards Update No. 2020-06, Debt鈥擠ebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging鈥擟ontracts in Entity鈥檚 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. The two methods of adoption are the full and modified retrospective approaches. We expect to utilize the modified retrospective approach. Using this approach, the guidance shall be applied to transactions outstanding as of the beginning of the fiscal year in which the amendment is adopted. The final rule is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are continuing to evaluate the impact of this update to our financials and would expect to adopt at the required adoption date of January 1, 2022.
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