Cleveland-Cliffs Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES

GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES

Goodwill

The following table summarizes changes in the carrying amount of goodwill allocated by operating segment for the nine months ended September 30, 2014 and the year ended December 31, 2013:



	(In Millions)
	September 30, 2014																	December 31, 2013
	U.S. Iron Ore		Eastern Canadian Iron Ore			Asia Pacific Iron Ore			North American Coal			Other			Total			U.S. Iron Ore		Eastern Canadian Iron Ore			Asia Pacific Iron Ore			North American Coal			Other			Total
Beginning Balance	$	2.0	$	—		$	72.5		$	—		$	—		$	74.5		$	2.0	$	—		$	84.5		$	—		$	80.9		$	167.4
Arising in business combinations	—		—			—			—			—			—			—		—			—			—			—			—
Impairment	—		—			(73.5		)	—			—			(73.5		)	—		—			—			—			(80.9		)	(80.9		)
Impact of foreign currency translation	—		—			1.0			—			—			1.0			—		—			(12.0		)	—			—			(12.0		)
Ending Balance	$	2.0	$	—		$	—		$	—		$	—		$	2.0		$	2.0	$	—		$	72.5		$	—		$	—		$	74.5
Accumulated goodwill impairment loss	$	—	$	(1,000.0	)	(73.5		)	$	(27.8	)	$	(80.9	)	$	(1,182.2	)	$	—	$	(1,000.0	)	$	—		$	(27.8	)	$	(80.9	)	$	(1,108.7	)

During the third quarter of 2014, a goodwill impairment charge of $73.5 million was recorded for our Asia Pacific Iron Ore reporting units within our Asia Pacific Iron Ore operating segment. Refer to NOTE 7 - FAIR VALUE MEASUREMENTS for further discussion of the goodwill impairment.

Other Intangible Assets and Liabilities

The following table is a summary of intangible assets and liabilities as of September 30, 2014 and December 31, 2013:



		(In Millions)
		September 30, 2014									December 31, 2013
	Classification	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Definite-lived intangible assets:
Permits	Other non-current assets	$	91.6		$	(16.8	)	$	74.8		$	127.4		$	(35.9	)	$	91.5
Utility contracts	Other non-current assets	54.3			(53.9		)	0.4			54.7			(53.1		)	1.6
Leases	Other non-current assets	2.4			(0.2		)	2.2			2.4			(0.1		)	2.3
Total intangible assets		$	148.3		$	(70.9	)	$	77.4		$	184.5		$	(89.1	)	$	95.4
Below-market sales contracts	Other current liabilities	$	(23.0	)	$	—		$	(23.0	)	$	(23.0	)	$	—		$	(23.0	)
Below-market sales contracts	Other liabilities	(205.9		)	175.0			(30.9		)	(205.9		)	159.7			(46.2		)
Total below-market sales contracts		$	(228.9	)	$	175.0		$	(53.9	)	$	(228.9	)	$	159.7		$	(69.2	)

Amortization expense relating to intangible assets was $2.8 million and $8.3 million, respectively, for the three and nine months ended September 30, 2014 and is recognized in Cost of goods sold and operating expenses in the Statements of Unaudited Condensed Consolidated Operations. Amortization expense relating to intangible assets was $4.8 million and $14.1 million for the comparable respective periods in 2013. The estimated amortization expense relating to intangible assets for the remainder of this year and each of the five succeeding years is as follows:



	(In Millions)
	Amount
Year Ending December 31,
2014 (remaining three months)	$	1.4
2015	5.6
2016	5.3
2017	5.1
2018	5.3
2019	5.3
Total	$	28.0

The below-market sales contracts are classified as a liability and recognized over the term of the underlying contracts. The outstanding below-market sales contract has a remaining life of approximately three years and expires December 31, 2016. For the three and nine months ended September 30, 2014, we recognized $7.7 million and $15.4 million, respectively, in Product revenues related to below-market sales contracts. For the three and nine months ended September 30, 2013, we recognized $14.7 million and $31.3 million, respectively, in Product revenues related to below-market sales contracts. The following amounts are estimated to be recognized in Product revenues for the remainder of this year and each of the two succeeding fiscal years:



	(In Millions)
	Amount
Year Ending December 31,
2014 (remaining three months)	$	7.8
2015	23.0
2016	23.1
Total	$	53.9

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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