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, 2013

Dec. 31, 2012

The following represents the assets and liabilities of the Company measured at fair value at December 31, 2013 and 2012:



	(In Millions)
	December 31, 2013
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	$	85.0	$	—	$	—	$	85.0
Derivative assets	—		—		58.9		58.9
Available-for sale marketable securities	21.4		—		—		21.4
Foreign exchange contracts	—		0.3		—		0.3
Total	$	106.4	$	0.3	$	58.9	$	165.6
Liabilities:
Derivative liabilities	$	—	$	2.1	$	10.3	$	12.4
Foreign exchange contracts	—		26.9		—		26.9
Total	$	—	$	29.0	$	10.3	$	39.3



	(In Millions)
	December 31, 2012
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	$	100.0	$	—	$	—	$	100.0
Derivative assets	—		—		62.4		62.4
Available-for sale marketable securities	27.0		—		—		27.0
Foreign exchange contracts	—		16.2		—		16.2
Total	$	127.0	$	16.2	$	62.4	$	205.6
Liabilities:
Derivative liabilities	$	—	$	—	$	11.3	$	11.3
Foreign exchange contracts	—		1.9		—		1.9
Total	$	—	$	1.9	$	11.3	$	13.2

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)

12/31/2013

Provisional Pricing Arrangements

3.1

Other current assets

Market Approach

Management's

Estimate of 62% Fe

$135

10.3

Other current liabilities

Customer Supply Agreement

55.8

Other current assets

Market Approach

Hot-Rolled Steel Estimate

$605 - $655 ($640)

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, 2013 and 2012.



	(In Millions)
	Derivative Assets (Level 3)						Derivative Liabilities (Level 3)
	Year Ended December 31,						Year Ended December 31,
	2013			2012			2013			2012
Beginning balance - January 1	$	62.4		$	157.9		$	(11.3	)	$	(19.5	)
Total gains (losses)
Included in earnings	152.3			174.9			(10.3		)	(11.3		)
Settlements	(155.8		)	(270.4		)	11.3			19.5
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Ending balance - December 31	$	58.9		$	62.4		$	(10.3	)	$	(11.3	)
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	$	152.3		$	174.9		$	(10.3	)	$	(11.3	)

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, 2013 and 2012 were as follows:



		(In Millions)
		December 31, 2013						December 31, 2012
	Classification	Carrying Value			Fair Value			Carrying Value		Fair Value
Other receivables:
Customer supplemental payments	Level 2	$	—		$	—		$	22.3	$	21.3
ArcelorMittal USA—Receivable	Level 2	11.3			11.9			19.3		21.3
Other	Level 2	9.4			9.4			10.9		10.9
Total receivables		$	20.7		$	21.3		$	52.5	$	53.5
Long-term debt:
Term loan—$1.25 billion	Level 2	$	—		$	—		$	753.0	$	753.0
Senior notes—$700 million	Level 2	699.4			718.2			699.4		759.4
Senior notes—$1.3 billion	Level 2	1,289.6			1,404.9			1,289.4		1,524.7
Senior notes—$400 million	Level 2	398.4			432.1			398.2		464.3
Senior notes—$500 million	Level 2	496.5			523.8			495.7		528.4
Revolving loan	Level 2	—			—			325.0		325.0
Equipment Loan Facilities	Level 2	140.8			140.8			—		—
Fair Value Adjustment to Interest Rate Hedge	Level 2	(2.1		)	(2.1		)	—		—
Total long-term debt		$	3,022.6		$	3,217.7		$	3,960.7	$	4,354.8

Fair Value Measurements, Nonrecurring



	(In Millions)
	December 31, 2013
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 - Ferroalloys reporting unit	$	—	$	—	$	—	$	—	$	80.9
Other long-lived assets - Property, plant and equipment	—		—		46.3		46.3		155.4
Other long-lived assets - Intangibles and long-term deposits	—		—		1.6		1.6		14.5
Investment in ventures impairment - Amapá	—		—		—		—		67.6
Total	$	—	$	—	$	47.9	$	47.9	$	318.4

The following tables present information about the impairment charges on both financial and nonfinancial assets that were measured on a fair value basis at December 31, 2013 and December 31, 2012. The table also indicates the fair value hierarchy of the valuation techniques used to determine such fair value.



	(In Millions)
	December 31, 2013
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 - Ferroalloys reporting unit	$	—	$	—	$	—	$	—	$	80.9
Other long-lived assets - Property, plant and equipment	—		—		46.3		46.3		155.4
Other long-lived assets - Intangibles and long-term deposits	—		—		1.6		1.6		14.5
Investment in ventures impairment - Amapá	—		—		—		—		67.6
Total	$	—	$	—	$	47.9	$	47.9	$	318.4

Financial Assets

In light of the March 28, 2013 collapse of the Santana port shiploader and subsequent evaluation of the effect that this event had on the carrying value of our investment in Amapá as of June 30, 2013, we recorded an impairment charge of $67.6 million in the second quarter of 2013. The sale of Amapá was completed in the fourth quarter of 2013.

Non-Financial Assets

During the fourth quarter of 2013, a goodwill impairment charge of $80.9 million was recorded for our Cliffs Chromite Ontario and Cliffs Chromite Far North reporting units within our Ferroalloys operating segment. The impairment charge was primarily a result of the decision to indefinitely suspend the Chromite Project and to not allocate additional capital for the project given the uncertain timeline and risks associated with the development of necessary infrastructure to bring the project online. Based on our review of the fair value hierarchy, the inputs used in these fair value measurements were considered Level 3 inputs.

We also recorded an impairment charges to property, plant and equipment during 2013 related to our Wabush operation within our Eastern Canadian Iron Ore operating segment, our Cliffs Chromite Ontario and Cliffs Chromite Far North reporting units within our Other reportable segments and certain mineral lands at our Asia Pacific Iron Ore operating segment to reduce the related assets to their estimated fair value as we determined that the cash flows associated with these operations were not sufficient to support the recoverability of the carrying value of these assets. Fair value was determined based on management's estimate of liquidation value, which is considered a Level 3 input, and resulted in a charge of $155.4 million.



	(In Millions)
	December 31, 2012
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 - CQIM reporting unit	$	—	$	—	$	—	$	—	$	997.3
Goodwill impairment - Wabush reporting unit	—		—		—		—		2.7
Other long-lived assets - Property, plant and equipment	—		—		—		—		49.9
Investment in ventures impairment - Amapá	—		—		72.5		72.5		365.4
Total	$	—	$	—	$	72.5	$	72.5	$	1,415.3

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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