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FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 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 September 30, 2017 and December 31, 2016:
| (In Millions)
| September 30, 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 | $ | 40.0 |  |  | $ | 37.0 |  |  | $ | — |  |  | $ | 77.0 |
Derivative assets | — |  |  | — |  |  | 89.5 |  |  | 89.5 |
Total | $ | 40.0 |  |  | $ | 37.0 |  |  | $ | 89.5 |  |  | $ | 166.5 |
Liabilities: |  |  |  |  |  |  |
Derivative liabilities | $ | — |  |  | $ | — |  |  | $ | 9.3 |  |  | $ | 9.3 |
Total | $ | — |  |  | $ | — |  |  | $ | 9.3 |  |  | $ | 9.3 |
| (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 |
Total | $ | 177.0 |  |  | $ | 1.5 |  |  | $ | 31.6 |  |  | $ | 210.1 |
Liabilities: |  |  |  |  |  |  |
Derivative liabilities | $ | — |  |  | $ | — |  |  | $ | 0.5 |  |  | $ | 0.5 |
Total | $ | — |  |  | $ | — |  |  | $ | 0.5 |  |  | $ | 0.5 |
Financial assets classified in Level 1 as of September 30, 2017 and December 31, 2016 include money market funds of $40.0 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 $37.0 million of commercial paper at September 30, 2017 and $1.5 million of commodity hedge contracts at December 31, 2016. The Level 3 assets include derivative assets that consist of freestanding derivative instruments 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. The supply agreements included in our Level 3 assets/liabilities include provisions for supplemental revenue or refunds based on the customer’s annual steel pricing or the average annual daily market price for hot-rolled coil steel at the time the product is consumed in the customer’s blast furnaces. We account for these provisions as derivative instruments at the time of sale and adjust these provisions 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 instruments are determined using a market approach with one supply agreement based on an estimate of the annual realized price of hot-rolled coil steel at the steelmaker’s facilities and the other supply agreement based on the estimate of the average annual daily market price for hot-rolled coil steel. Both estimates take into consideration current market conditions and nonperformance risk. We had assets of $84.8 million and $21.3 million at September 30, 2017 and December 31, 2016, respectively, related to supply agreements. The provisional pricing arrangements included in our Level 3 assets/liabilities 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 at the measurement date 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 $4.7 million and $10.3 million at September 30, 2017 and December 31, 2016, respectively, related to provisional pricing arrangements. In addition, we had liabilities of $9.3 million and $0.5 million related to provisional pricing arrangements at September 30, 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 September 30, 2017 |  | Balance Sheet Location |  | Valuation Technique |  | Unobservable Input |  | Range or Point Estimate (Weighted Average)
Provisional pricing arrangements |  | $ | 4.7 |  |  | Derivative assets |  | Market Approach |  | Management's Estimate of Platts 62% Price per dry metric ton |  | $61 - $74 ($73)
|  |  |  | Market Hot-Rolled Coil Steel Estimate per net ton |  | $580 - $660 ($625)
Provisional pricing arrangements |  | $ | 9.3 |  |  | Derivative liabilities |  | Market Approach |  | Management's Estimate of Platts 62% Price per dry metric ton |  | $61 - $74 ($73)
Customer supply agreements |  | $ | 84.8 |  |  | Derivative assets |  | Market Approach |  | Customer Hot-Rolled Steel Estimate per net ton |  | $558 - $622 ($565)
|  |  |  | Market Hot-Rolled Coil Steel Estimate per net ton |  | $580 - $660 ($625)
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 average annual daily steel market price for hot-rolled coil steel, each of which includes 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 inputs used in the fair value measurement of our customer supply agreements are the customer's future hot-rolled coil steel price that is estimated based on projections provided by the customer, analysts' projections and estimates determined by management, and the average annual daily market price for hot-rolled coil steel, 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. 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 and no transfers into or out of Level 3 of the fair value hierarchy during the three and nine months ended September 30, 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 and nine months ended September 30, 2017 and 2016.
| (In Millions)
| Level 3 Assets
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Beginning balance | $ | 72.5 |  |  | $ | 25.8 |  |  | $ | 31.6 |  |  | $ | 7.8 |
Total gains (losses) |  |  |  |  |  |  |
Included in earnings | 60.6 |  |  | 14.6 |  |  | 156.0 |  |  | 62.6 |
Settlements | (43.6 | ) |  | (12.0 | ) |  | (98.1 | ) |  | (42.0 | )
Ending balance - September 30 | $ | 89.5 |  |  | $ | 28.4 |  |  | $ | 89.5 |  |  | $ | 28.4 |
Total gains for the period included in earnings attributable to the change in unrealized gains on assets still held at the reporting date | $ | 0.1 |  |  | $ | 8.2 |  |  | $ | 53.4 |  |  | $ | 24.7 |
| (In Millions)
| Level 3 Liabilities
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Beginning balance | $ | (20.9 | ) |  | $ | (2.6 | ) |  | $ | (0.5 | ) |  | $ | (3.4 | )
Total gains (losses) |  |  |  |  |  |  |
Included in earnings | (19.3 | ) |  | (2.9 | ) |  | (64.9 | ) |  | (12.8 | )
Settlements | 30.9 |  |  | 2.8 |  |  | 56.1 |  |  | 13.5 |
Ending balance - September 30 | $ | (9.3 | ) |  | $ | (2.7 | ) |  | $ | (9.3 | ) |  | $ | (2.7 | )
Total gains (losses) for the period included in earnings attributable to the change in unrealized losses on liabilities still held at the reporting date | $ | 6.0 |  |  | $ | (2.7 | ) |  | $ | (14.8 | ) |  | $ | (2.7 | )
Gains and losses from derivative assets and liabilities are included in earnings and are reported in Product revenues for the three and nine months ended September 30, 2017 and 2016. The carrying amount of 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 September 30, 2017 and December 31, 2016 were as follows:
|  |  | (In Millions)
|  |  | September 30, 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 |  | $ | — |  |  | $ | — |  |  | $ | 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—$1.075 billion | Level 1 |  | 1,046.8 |  |  | 1,032.0 |  |  | — |  |  | — |
Senior Notes—$400 million | Level 1 |  | 88.5 |  |  | 88.4 |  |  | 224.5 |  |  | 219.6 |
Senior Notes—$500 million | Level 1 |  | 122.0 |  |  | 116.9 |  |  | 235.9 |  |  | 221.1 |
Senior Notes—$700 million | Level 1 |  | 138.0 |  |  | 132.4 |  |  | 308.2 |  |  | 283.1 |
Senior Notes—$800 million | Level 1 |  | 292.6 |  |  | 249.0 |  |  | 292.5 |  |  | 234.7 |
ABL Facility | Level 2 |  | — |  |  | — |  |  | — |  |  | — |
Fair value adjustment to interest rate hedge | Level 2 |  | 1.5 |  |  | 1.5 |  |  | 1.9 |  |  | 1.9 |
Total long-term debt |  |  | $ | 1,689.4 |  |  | $ | 1,620.2 |  |  | $ | 2,192.6 |  |  | $ | 2,224.6 |
The fair value of long-term debt was determined using quoted market prices based upon current borrowing rates. Items Measured at Fair Value on a Non-Recurring Basis The following tables present information about the financial assets and liabilities that were measured on a fair value basis at September 30, 2017 and December 31, 2016 for the Canadian Entities. The tables also indicate the fair value hierarchy of the valuation techniques used to determine such fair value.
|  | (In Millions)
|  | September 30, 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 |  | Total Year-to-Date Gains
Assets: |  |  |  |  |  |  |  |  |  |
Loans to and accounts receivables from the Canadian Entities |  | $ | — |  |  | $ | — |  |  | $ | 51.9 |  |  | $ | 51.9 |  |  | $ | 3.3 |
Liabilities: |  |  |  |  |  |  |  |  |  |
Guarantees |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 31.4 |
|  | (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 |  | Total Year-to-Date Gains (Losses)
Assets: |  |  |  |  |  |  |  |  |  |
Loans to and accounts receivables from the Canadian Entities |  | $ | — |  |  | $ | — |  |  | $ | 48.6 |  |  | $ | 48.6 |  |  | $ | (17.5 | )
Liabilities: |  |  |  |  |  |  |  |  |  |
Guarantees |  | $ | — |  |  | $ | — |  |  | $ | 37.2 |  |  | $ | 37.2 |  |  | $ | 0.4 |
We determined the fair value and recoverability of our Canadian investments by comparing the estimated fair value of the remaining underlying assets of the Canadian Entities to remaining estimated liabilities. We recorded the Canadian denominated guarantees at book value, which best approximated fair value, and adjusted the carrying balance on a quarterly basis based on the change in foreign exchange rates. We previously recorded liabilities of $37.2 million related to guarantees for certain environmental obligations of the Canadian Entities, classified as Other liabilities in the Statements of Unaudited Condensed Consolidated Financial Position as of December 31, 2016. During the three months ended September 30, 2017, the Wabush Scully Mine was sold as part of the ongoing CCAA proceedings. As part of the transaction, we were required to fund the buyer's financial assurance shortfall of $7.7 million in order to complete the conveyance of the environmental remediation obligations to the buyer, which released us from our guarantees, and along with other current period activity, resulted in a net gain of $31.4 million included in Income (Loss) from Discontinued Operations, net of tax in the Statements of Unaudited Condensed Consolidated Operations. To assess the fair value and recoverability of the accounts 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. These underlying amounts are denominated primarily in Canadian dollars and are remeasured on a quarterly basis. Our estimates involve significant judgment and are based on currently available information, an assessment of the validity of certain claims and estimated payments made by the Canadian Entities. Our ultimate recovery is subject to the final liquidation value of the Canadian Entities. Further, the final liquidation value and ultimate recovery of the creditors of the Canadian Entities, including, if any, to Cliffs and various subsidiaries, may impact our estimates of liability exposure described previously.

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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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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