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FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended
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Mar. 31, 2017
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | NOTE 6 - FAIR VALUE MEASUREMENTS The following represents the assets and liabilities of the Company measured at fair value at March 31, 2017 and December 31, 2016:
| (In Millions)
| March 31, 2017
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 | $ | 90.0 |  |  | $ | 45.0 |  |  | $ | — |  |  | $ | 135.0 |
Derivative assets | — |  |  | — |  |  | 59.4 |  |  | 59.4 |
Loans to and accounts receivable from the Canadian Entities | — |  |  | — |  |  | 49.0 |  |  | 49.0 |
Total | $ | 90.0 |  |  | $ | 45.0 |  |  | $ | 108.4 |  |  | $ | 243.4 |
Liabilities: |  |  |  |  |  |  |
Derivative liabilities | $ | — |  |  | $ | — |  |  | $ | 9.1 |  |  | $ | 9.1 |
Contingent liabilities | — |  |  | — |  |  | 37.5 |  |  | 37.5 |
Total | $ | — |  |  | $ | — |  |  | $ | 46.6 |  |  | $ | 46.6 |
| (In Millions)
| December 31, 2016
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 | $ | 177.0 |  |  | $ | — |  |  | $ | — |  |  | $ | 177.0 |
Derivative assets | — |  |  | 1.5 |  |  | 31.6 |  |  | 33.1 |
Loans to and accounts receivable from the Canadian Entities | — |  |  | — |  |  | 48.6 |  |  | 48.6 |
Total | $ | 177.0 |  |  | $ | 1.5 |  |  | $ | 80.2 |  |  | $ | 258.7 |
Liabilities: |  |  |  |  |  |  |
Derivative liabilities | $ | — |  |  | $ | — |  |  | $ | 0.5 |  |  | $ | 0.5 |
Contingent liabilities | — |  |  | — |  |  | 37.2 |  |  | 37.2 |
Total | $ | — |  |  | $ | — |  |  | $ | 37.7 |  |  | $ | 37.7 |
Financial assets classified in Level 1 as of March 31, 2017 and December 31, 2016 include money market funds of $90.0 million and $177.0 million, respectively. The valuation of these instruments is based upon unadjusted quoted prices for identical assets in active markets. The valuation of financial assets and liabilities classified in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable. Level 2 assets included $45.0 million of commercial paper and $1.5 million of commodity hedge contracts at March 31, 2017 and December 31, 2016, respectively. The Level 3 assets include amounts receivable from the Canadian Entities and derivative assets which consist of a freestanding derivative instrument related to certain supply agreements with one of our U.S Iron Ore customers and certain provisional pricing arrangements with our U.S. Iron Ore and Asia Pacific Iron Ore customers. Prior to the deconsolidations, various Cliffs wholly-owned entities made loans to the Canadian Entities for the purpose of funding their operations and had accounts receivable generated in the ordinary course of business. The loans, corresponding interest and the accounts receivable were considered intercompany transactions and were eliminated from our consolidated financial statements. Since the deconsolidations, the loans, associated interest and accounts receivable are considered related party transactions and have been recognized in our consolidated financial statements at their estimated fair value of $49.0 million and $48.6 million in the Statements of Unaudited Condensed Consolidated Financial Position at March 31, 2017 and December 31, 2016, respectively, and are classified as Level 3 assets. The supply agreements included in our Level 3 assets include provisions for supplemental revenue or refunds based on the customer’s annual steel pricing at the time the product is consumed in the customer’s blast furnaces. We account for this provision as a derivative instrument at the time of sale and adjust this provision to fair value as an adjustment to Product revenues each reporting period until the product is consumed and the amounts are settled. The fair value of the instrument is determined using a market approach based on an estimate of the annual realized price of hot-rolled coil steel at the steelmaker’s facilities and takes into consideration current market conditions and nonperformance risk. We had assets of $35.9 million and $21.3 million at March 31, 2017 and December 31, 2016, respectively, related to supply agreements. The provisional pricing arrangements included in our Level 3 assets specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate to be based on market inputs at a specified point in time in the future, per the terms of the supply agreements. The difference between the estimated final revenue at the date of sale and the estimated final revenue rate is characterized as a derivative and is required to be accounted for separately once the revenue has been recognized. The derivative instrument is adjusted to fair value through Product revenues each reporting period based upon current market data and forward-looking estimates provided by management until the final revenue rate is determined. We had assets of $23.5 million and $10.3 million at March 31, 2017 and December 31, 2016, respectively, related to provisional pricing arrangements. Level 3 liabilities include guarantees backstopped by standby letters of credit for certain environmental obligations of the Canadian Entities. We have liabilities of $37.5 million and $37.2 million in our consolidated results, classified as Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position as of March 31, 2017 and December 31, 2016, respectively. In addition, we have liabilities of $9.1 million and $0.5 million related to provisional pricing arrangements at March 31, 2017 and December 31, 2016, respectively. The following table illustrates information about quantitative inputs and assumptions for the assets and liabilities categorized in Level 3 of the fair value hierarchy:
Qualitative/Quantitative Information About Level 3 Fair Value Measurements
|  | (In Millions) Fair Value at March 31, 2017 |  | Balance Sheet Location |  | Valuation Technique |  | Unobservable Input |  | Range or Point Estimate per dry metric ton (Weighted Average)
Provisional pricing arrangements |  | $ | 23.5 |  |  | Other current assets |  | Market Approach |  | Management's Estimate of Platts 62% Price |  | $79
|  |  |  | Hot-Rolled Coil Steel Estimate |  | $651
Provisional pricing arrangements |  | $ | 9.1 |  |  | Other current liabilities |  | Market Approach |  | Management's Estimate of Platts 62% Price |  | $79
Customer supply agreement |  | $ | 35.9 |  |  | Other current assets |  | Market Approach |  | Hot-Rolled Coil Steel Estimate |  | $520 - $630 ($575)
Loans to and accounts receivable from the Canadian Entities |  | $ | 49.0 |  |  | Loans to and accounts receivable from the Canadian Entities |  | * |  | * |  | N/A
Contingent liabilities |  | $ | 37.5 |  |  | Other liabilities |  | * |  | * |  | N/A
* To assess the fair value and recoverability of the amounts receivable from the Canadian Entities, we estimated the fair value of the underlying net assets of the Canadian Entities available for distribution to their creditors in relation to the estimated creditor claims and the priority of those claims. The recorded expenses include an accrual for the estimated probable loss related to claims that may be asserted against us. We are not able to estimate reasonably a range of possible losses in excess of the accrual because there are significant factual and legal issues to be resolved. Our estimates involve significant judgment. Our estimates are based on currently available information, an assessment of the validity of certain claims and estimated payments by the Canadian Entities.
The significant unobservable inputs used in the fair value measurement of our provisional pricing arrangements are management’s estimates of Platts 62% Price based upon current market data, index pricing, and the annual average steel pricing benchmark for hot-rolled coil, each of which include forward-looking estimates determined by management. Significant increases or decreases in these inputs would result in a significantly higher or lower fair value measurement, respectively. The significant unobservable input used in the fair value measurement of our customer supply agreement is the customer's future hot-rolled coil steel price that is estimated based on current market data, analysts' projections, projections provided by the customer and forward-looking estimates determined by management. Significant increases or decreases in this input would result in a significantly higher or lower fair value measurement, respectively. We recognize any transfers between levels as of the beginning of the reporting period, including both transfers into and out of levels. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2017 and 2016. 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 three months ended March 31, 2017 and 2016.
| (In Millions)
| Level 3 Assets
| Three Months Ended March 31,
| 2017 |  | 2016
Beginning balance | $ | 80.2 |  |  | $ | 80.7 |
Total gains (losses) |  |  |
Included in earnings | 42.5 |  |  | 8.2 |
Settlements | (14.3 | ) |  | (10.0 | )
Transfers into Level 3 | — |  |  | — |
Transfers out of Level 3 | — |  |  | — |
Ending balance - March 31 | $ | 108.4 |  |  | $ | 78.9 |
Total gains for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date | $ | 33.2 |  |  | $ | 3.6 |
| (In Millions)
| Level 3 Liabilities
| Three Months Ended March 31,
| 2017 |  | 2016
Beginning balance | $ | (37.7 | ) |  | $ | (135.8 | )
Total gains (losses) |  |  |
Included in earnings | (8.9 | ) |  | (7.9 | )
Settlements | — |  |  | 75.7 |
Transfers into Level 3 | — |  |  | — |
Transfers out of Level 3 | — |  |  | — |
Ending balance - March 31 | $ | (46.6 | ) |  | $ | (68.0 | )
Total losses for the period included in earnings attributable to the change in unrealized losses on liabilities still held at the reporting date | $ | (9.1 | ) |  | $ | (0.8 | )
Gains and losses from derivative assets and liabilities, contingent liabilities and accounts receivables from the Canadian Entities are included in earnings and are reported in Product revenues, Miscellaneous - net, and Income from Discontinued Operations, net of tax, respectively, for the three months ended March 31, 2017 and 2016. The carrying amount for certain financial instruments (e.g., Accounts receivable, net, Accounts payable and Accrued expenses) approximates fair value and, therefore, has been excluded from the table below. A summary of the carrying amount and fair value of other financial instruments at March 31, 2017 and December 31, 2016 were as follows:
|  |  | (In Millions)
|  |  | March 31, 2017 |  | December 31, 2016
| Classification |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Long-term debt: |  |  |  |  |  |  |  |  |
Secured Notes |  |  |  |  |  |  |  |  |
First Senior Lien Notes —$540 million | Level 1 |  | $ | 508.6 |  |  | $ | 583.9 |  |  | $ | 506.3 |  |  | $ | 595.0 |
1.5 Senior Lien Notes —$218.5 million | Level 2 |  | — |  |  | — |  |  | 284.2 |  |  | 229.5 |
Second Senior Lien Notes —$544.2 million | Level 1 |  | — |  |  | — |  |  | 339.1 |  |  | 439.7 |
Unsecured Notes |  |  |  |  |  |  |  |  |
Senior Notes—$500 million | Level 1 |  | 491.7 |  |  | 486.3 |  |  | — |  |  | — |
Senior Notes—$400 million | Level 1 |  | 88.5 |  |  | 88.4 |  |  | 224.5 |  |  | 219.6 |
Senior Notes—$1.3 billion | Level 1 |  | 414.5 |  |  | 358.9 |  |  | 528.4 |  |  | 455.8 |
Senior Notes—$700 million | Level 1 |  | 137.9 |  |  | 134.3 |  |  | 308.2 |  |  | 283.1 |
ABL Facility | Level 2 |  | — |  |  | — |  |  | — |  |  | — |
Fair value adjustment to interest rate hedge | Level 2 |  | 1.7 |  |  | 1.7 |  |  | 1.9 |  |  | 1.9 |
Total long-term debt |  |  | $ | 1,642.9 |  |  | $ | 1,653.5 |  |  | $ | 2,192.6 |  |  | $ | 2,224.6 |
The fair value of long-term debt was determined using quoted market prices based upon current borrowing rates.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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