Cleveland-Cliffs Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

The following represents the assets and liabilities of the Company measured at fair value at December 31, 2015 and 2014:



	(In Millions)
	December 31, 2015
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	$	30.0	$	—	$	—	$	30.0
Derivative assets	—		—		7.8		7.8
Total	$	30.0	$	—	$	7.8	$	37.8
Liabilities:
Derivative liabilities	$	—	$	0.6	$	3.4	$	4.0
Total	$	—	$	0.6	$	3.4	$	4.0



	(In Millions)
	December 31, 2014
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:
Derivative assets	$	—	$	—	$	63.2	$	63.2
Available-for-sale marketable securities	4.3		—		—		4.3
Total	$	4.3	$	—	$	63.2	$	67.5
Liabilities:
Derivative liabilities	$	—	$	—	$	9.5	$	9.5
Foreign exchange contracts	—		31.5		—		31.5
Total	$	—	$	31.5	$	9.5	$	41.0

Fair Value, Recurring and Nonrecurring, Valuation Techniques

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:

Qualitative/Quantitative Information About Level 3 Fair Value Measurements

($ in millions)

Fair Value at

Balance Sheet Location

Valuation Technique

Unobservable Input

Range or Point Estimate

(Weighted Average)

12/31/2015

Provisional Pricing Arrangements

2.0

Other current assets

Market Approach

Management's

Estimate of 62% Fe

$43

3.4

Other current liabilities

Customer Supply Agreement

5.8

Other current assets

Market Approach

Hot-Rolled Steel Estimate

$415 - $450 ($430)

Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation

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) for the years ended December 31, 2015 and 2014.



	(In Millions)
	Derivative Assets (Level 3)						Derivative Liabilities (Level 3)
	Year Ended December 31,						Year Ended December 31,
	2015			2014			2015			2014
Beginning balance - January 1	$	63.2		$	57.7		$	(9.5	)	$	(1.0	)
Total gains (losses)
Included in earnings	35.1			187.8			(61.0		)	(9.5		)
Settlements	(90.5		)	(182.3		)	67.1			1.0
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Ending balance - December 31	$	7.8		$	63.2		$	(3.4	)	$	(9.5	)
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) on assets still held at the reporting date	$	29.1		$	187.8		$	(3.4	)	$	(9.5	)

Schedule Of Carrying Value And Fair Value Of Financial Instruments

A summary of the carrying amount and fair value of other financial instruments at December 31, 2015 and 2014 were as follows:



		(In Millions)
		December 31, 2015				December 31, 2014
	Classification	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt:
Senior Notes—$700 million	Level 1	$	410.6	$	69.4	$	686.0	$	367.3
Senior Notes—$1.3 billion	Level 1	787.9		137.4		1,270.5		704.0
Senior Notes—$400 million	Level 1	288.9		52.8		391.9		228.1
Senior Notes—$500 million	Level 1	309.1		87.1		475.3		312.0
Senior First Lien Notes—$540 million	Level 1	497.4		414.5		—		—
Senior Second Lien Notes—$544.2 million	Level 1	403.2		134.7		—		—
ABL Facility	Level 2	—		—		—		—
Fair Value Adjustment to Interest Rate Hedge	Level 2	2.3		2.3		2.8		2.8
Total long-term debt		$	2,699.4	$	898.2	$	2,826.5	$	1,614.2

Fair Value Measurements, Nonrecurring

The following tables present information about the impairment charges on both financial and nonfinancial assets and liabilities that were measured on a fair value basis at March 31, 2015 and December 31, 2014. There were no financial and non-financial assets and liabilities that were measured on a non-recurring fair value basis at December 31, 2015. The tables also indicate the fair value hierarchy of the valuation techniques used to determine such fair value.



	(In Millions)
	March 31, 2015
Description	Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Total Gains
Liabilities:
$544.2 Million 7.75% 2020 Second Lien Notes	$	—	$	397.2	$	—	$	397.2	$	269.5
	$	—	$	397.2	$	—	$	397.2	$	269.5

The $544.2 million 7.75 percent Second Lien Notes issued in the exchange offers were recorded as an extinguishment of debt as the change in debt terms was considered substantial. As such, the newly issued Second Lien Senior Notes were recorded at fair value at the issuance date. In order to determine the fair value of the Second Lien Senior Notes on the date of the exchange, we utilized the median bid-ask spread obtained from various investment banks for the exchange date. The bid-ask spread is indicative of the fair value of the notes on the exchange date. The 27.0 percent discount equated to a discount of $147.0 million on the issue value of $544.2 million, or an estimated fair value of $397.2 million.



	(In Millions)
	Year Ended December 31, 2014
Description	Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Total Losses
Assets:
Goodwill impairment - Asia Pacific Iron Ore reporting unit	$	—	$	—	$	—	$	—	$	73.5
Other long-lived assets - Property, plant and equipment and Mineral rights:
Asia Pacific Iron Ore reporting unit	—		—		72.4		72.4		526.5
Other reporting units	—		—		—		—		11.3
Other long-lived assets - Intangibles and other long-term assets:
Asia Pacific Iron Ore reporting unit	—		—		7.0		7.0		24.2
Investment in ventures impairment - Global Exploration	—		—		—		—		9.2
	$	—	$	—	$	79.4	$	79.4	$	644.7