The following table provides a summary of our cash flows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2023 | | 2022 |
Cash flows provided by (used in): | | | |
Operating activities | $ | (39) | | | $ | 533 | |
Investing activities | (185) | | | (235) | |
Financing activities | 257 | | | (311) | |
Net increase (decrease) in cash and cash equivalents | $ | 33 | | | $ | (13) | |
| | | |
Free cash flow1 | $ | (227) | | | $ | 297 | |
| | | |
1See "— Non-GAAP Financial Measures" for a reconciliation of our free cash flows. |
Given the recently improving market conditions at the end of the first quarter of 2023, we expect to have opportunities to reduce our debt and return capital to shareholders with our own free cash flow generation during the remainder of 2023. As of March 31, 2023, we had principal long-term debt of $4,613 million with maturities starting in 2025. As of March 31, 2023, there was $760 million remaining under the authorization of our share repurchase program.
On April 14, 2023, we issued $750 million aggregate principal amount of 6.750% 2030 Senior Notes in an offering exempt from the registration requirements of the Securities Act. The proceeds from the 6.750% 2030 Senior Notes were used to repay a portion of the borrowings under our existing ABL facility. The transaction increased our financial flexibility and liquidity, extended our debt maturity profile, and was effectively leverage and interest expense neutral. Following the transaction, we maintained in excess of $1 billion in pre-payable debt on our ABL Facility and another $1.5 billion in callable debt that we expect to continue to reduce with our free cash flow generation.
These actions give us additional financial flexibility and will better prepare us to navigate more easily through potentially volatile industry conditions in the future.
CASH FLOWS
OPERATING ACTIVITIES
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2023 | | 2022 | | Variance |
Net income (loss) | $ | (42) | | | $ | 814 | | | $ | (856) | |
Non-cash adjustments to net income (loss) | 237 | | | 399 | | | (162) | |
Working capital: | | | | | |
Accounts receivable, net | (257) | | | (512) | | | 255 | |
Inventories | 207 | | | (372) | | | 579 | |
Income taxes | 15 | | | 180 | | | (165) | |
Pension and OPEB payments and contributions | (30) | | | (60) | | | 30 | |
Payables, accrued employment and accrued expenses | (90) | | | 109 | | | (199) | |
Other, net | (79) | | | (25) | | | (54) | |
Total working capital | (234) | | | (680) | | | 446 | |
Net cash provided (used) by operating activities | $ | (39) | | | $ | 533 | | | $ | (572) | |
The variance was driven by:
•A $1,018 million decrease in net income (loss) after adjustments for non-cash items primarily due to lower gross margins from lower steel sales prices. See "— Steelmaking Results" above for further detail on our operating results.
•A $446 million decrease in cash used for working capital. This was primarily due to a decrease in inventories, as a result of higher sales volumes and lower costs during the three months ended March 31, 2023, as compared to the prior-year period, where we had an increase in inventory costs due to increased raw material and production costs. During the three months ended March 31, 2023, we also experienced lower increases in accounts receivable due to lower pricing, as compared to the prior-year period.
INVESTING ACTIVITIES
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2023 | | 2022 | | Variance |
Purchase of property, plant and equipment | $ | (188) | | | $ | (236) | | | $ | 48 | |
| | | | | |
Other | 3 | | | 1 | | | 2 | |
Net cash used by investing activities | $ | (185) | | | $ | (235) | | | $ | 50 | |
Our cash used for capital expenditures decreased $48 million due to the completion of our major maintenance cycle in 2022. Our capital expenditures primarily relate to sustaining capital spend, which includes infrastructure, mobile equipment, fixed equipment, product quality, environmental, and health and safety.
We anticipate total cash used for capital expenditures during the next 12 months to be between $675 and $725 million, which primarily consists of sustaining capital spend. With our facilities and equipment in the best shape since our 2020 transformational acquisitions, we do not expect any major investments until at least 2025.
FINANCING ACTIVITIES
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2023 | | 2022 | | Variance |
| | | | | |
Repayments of debt | $ | — | | | $ | (360) | | | $ | 360 | |
Borrowings under credit facilities, net | 307 | | | 106 | | | 201 | |
Repurchase of common shares | — | | | (19) | | | 19 | |
Other | (50) | | | (38) | | | (12) | |
Net cash provided (used) by financing activities | $ | 257 | | | $ | (311) | | | $ | 568 | |
The variance was driven by:
•A $561 million decrease in cash used resulting from higher net repayments of debt during the three months ended March 31, 2022, along with increased borrowings on our ABL Facility during the three months ended March 31, 2023, as compared to the prior-year period.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are Cash and cash equivalents, cash generated from our operations, availability under our ABL Facility and access to capital markets. We generally maintain minimal cash balances and utilize our access to our ABL Facility to cover fluctuations in our cash requirements. Cash and cash equivalents, which totaled $59 million as of March 31, 2023, include cash on hand and on deposit. The combination of cash and availability under our ABL Facility gives us $2.2 billion in liquidity as of March 31, 2023. Subsequent to the three months ended March 31, 2023, we issued $750 million in aggregate principal amount of 6.750% 2030 Senior Notes. We used the net proceeds from the offering to repay a portion of the borrowings under our ABL Facility, increasing our liquidity. We believe our liquidity and access to capital markets will be adequate to fund our cash requirements for the next 12 months and for the foreseeable future.
Our ABL Facility, which matures in March 2025, has a maximum borrowing base of $4.5 billion, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment. Our ABL Facility includes a $555 million sublimit for the issuance of letters of credit and a $200 million sublimit for swingline loans. As of March 31, 2023, outstanding letters of credit totaled $147 million, which reduced availability. We issue standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, workers' compensation, employee severance, insurance, operating agreements and environmental obligations. Our ABL Facility agreement contains various financial and other covenants. As of March 31, 2023, we were in compliance with all of our ABL Facility covenants.
We have the capability to issue additional unsecured notes and, subject to the limitations set forth in our existing senior notes indentures and ABL Facility, additional secured debt, if we elect to access the debt capital markets. However, our ability to issue additional notes could be limited by market conditions. We intend from time to time to seek to redeem or repurchase our outstanding senior notes with cash on hand, borrowings from existing credit sources or new debt financings and/or exchanges for debt or equity securities, in open market purchases, privately negotiated transactions or otherwise. Such redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material.
Refer to NOTE 7 - DEBT AND CREDIT FACILITIES for more information on our ABL Facility and debt.
NON-GAAP FINANCIAL MEASURES
ADJUSTED EBITDA
We evaluate performance on an operating segment basis, as well as a consolidated basis, based on Adjusted EBITDA, which is a non-GAAP measure. This measure is used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the steel industry. In addition, management believes Adjusted EBITDA is a useful measure to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
The following table provides a reconciliation of our Net income (loss) to Adjusted EBITDA:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(In millions) | | | | | 2023 | | 2022 |
Net income (loss) | | | | | $ | (42) | | | $ | 814 | |
Less: | | | | | | | |
Interest expense, net | | | | | (77) | | | (77) | |
Income tax benefit (expense) | | | | | 13 | | | (237) | |
Depreciation, depletion and amortization | | | | | (242) | | | (301) | |
Total EBITDA | | | | | $ | 264 | | | $ | 1,429 | |
Less: | | | | | | | |
EBITDA of noncontrolling interests1 | | | | | $ | 23 | | | $ | 22 | |
Loss on extinguishment of debt | | | | | — | | | (14) | |
| | | | | | | |
Asset impairment | | | | | — | | | (29) | |
Other, net | | | | | (2) | | | (2) | |
Total Adjusted EBITDA | | | | | $ | 243 | | | $ | 1,452 | |
| | | | | | | |
1 EBITDA of noncontrolling interests includes the following: |
Net income attributable to noncontrolling interests | | | | | $ | 15 | | | $ | 13 | |
Depreciation, depletion and amortization | | | | | 8 | | | 9 | |
EBITDA of noncontrolling interests | | | | | $ | 23 | | | $ | 22 | |
The following table provides a summary of our Adjusted EBITDA by segment:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(In millions) | | | | | 2023 | | 2022 |
Adjusted EBITDA: | | | | | | | |
Steelmaking | | | | | $ | 240 | | | $ | 1,424 | |
Other Businesses | | | | | 8 | | | 29 | |
Corporate and eliminations | | | | | (5) | | | (1) | |
Total Adjusted EBITDA | | | | | $ | 243 | | | $ | 1,452 | |
FREE CASH FLOW
Free cash flow is a non-GAAP measure defined as operating cash flows less purchase of property, plant and equipment. Management believes it is an important measure to assess the cash generation available to service debt, strategic initiatives or other financing activities.
The following table provides a reconciliation of our operating cash flows to free cash flows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2023 | | 2022 |
Net cash provided (used) by operating activities | $ | (39) | | | $ | 533 | |
Purchase of property, plant and equipment | (188) | | | (236) | |
Free cash flows | $ | (227) | | | $ | 297 | |
INFORMATION ABOUT OUR GUARANTORS AND THE ISSUER OF OUR GUARANTEED SECURITIES
The accompanying summarized financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” and Rule 13-01 "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralized a Registrant's Securities." Certain of our subsidiaries (the "Guarantor subsidiaries") as of March 31, 2023 have fully and unconditionally, and jointly and severally, guaranteed the obligations under (a) the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes issued by Cleveland-Cliffs Inc. on a senior unsecured basis and (b) the 6.750% 2026 Senior Secured Notes issued by Cleveland-Cliffs Inc. on a senior secured basis. See NOTE 7 - DEBT AND CREDIT FACILITIES for further information.
The following presents the summarized financial information on a combined basis for Cleveland-Cliffs Inc. (parent company and issuer of the guaranteed obligations) and the Guarantor subsidiaries, collectively referred to as the obligated group. Transactions between the obligated group have been eliminated. Information for the non-Guarantor subsidiaries was excluded from the combined summarized financial information of the obligated group.
Each Guarantor subsidiary is consolidated by Cleveland-Cliffs Inc. as of March 31, 2023. Refer to Exhibit 22, incorporated herein by reference, for the detailed list of entities included within the obligated group as of March 31, 2023. As of March 31, 2023, the guarantee of a Guarantor subsidiary with respect to Cliffs' 6.750% 2026 Senior Secured Notes, the 5.875% 2027 Senior Notes, the 7.000% 2027 Senior Notes, the 4.625% 2029 Senior Notes and the 4.875% 2031 Senior Notes will be automatically and unconditionally released and discharged, and such Guarantor subsidiary’s obligations under the guarantee and the related indentures (the “Indentures”) will be automatically and unconditionally released and discharged, upon the occurrence of any of the following, along with the delivery to the trustee of an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable Indenture relating to the release and discharge of such Guarantor subsidiary’s guarantee have been complied with:
(a) any sale, exchange, transfer or disposition of such Guarantor subsidiary (by merger, consolidation, or the sale of) or the capital stock of such Guarantor subsidiary after which the applicable Guarantor subsidiary is no longer a subsidiary of the Company or the sale of all or substantially all of such Guarantor subsidiary’s assets (other than by lease), whether or not such Guarantor subsidiary is the surviving entity in such transaction, to a person which is not the Company or a subsidiary of the Company; provided that (i) such sale, exchange, transfer or disposition is made in compliance with the applicable Indenture, including the covenants regarding consolidation, merger and sale of assets and, as applicable, dispositions of assets that constitute notes collateral, and (ii) all the obligations of such Guarantor subsidiary under all debt of the Company or its subsidiaries terminate upon consummation of such transaction;
(b) designation of any Guarantor subsidiary as an “excluded subsidiary” (as defined in the Indentures); or
(c) defeasance or satisfaction and discharge of the Indentures.
Each entity in the summarized combined financial information follows the same accounting policies as described in the consolidated financial statements. The accompanying summarized combined financial information does not reflect investments of the obligated group in non-Guarantor subsidiaries. The financial information of the obligated group is presented on a combined basis; intercompany balances and transactions within the obligated group have been eliminated. The obligated group's amounts
due from, amounts due to, and transactions with, non-Guarantor subsidiaries and related parties have been presented in separate line items.
SUMMARIZED COMBINED FINANCIAL INFORMATION OF THE ISSUER AND GUARANTOR SUBSIDIARIES:
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Financial Position of the obligated group:
| | | | | | | | | | | |
(In millions) | March 31, 2023 | | December 31, 2022 |
Current assets | $ | 7,653 | | | $ | 7,063 | |
Non-current assets | 9,821 | | | 9,935 | |
Current liabilities | (4,176) | | | (3,866) | |
Non-current liabilities | (6,863) | | | (6,630) | |
| | | |
The following table is summarized combined financial information from the Statements of Unaudited Condensed Consolidated Operations of the obligated group:
| | | | | |
| Three Months Ended |
(In millions) | March 31, 2023 |
Revenues | $ | 4,883 | |
Cost of goods sold | (4,820) | |
Loss from continuing operations | (73) | |
Net loss | (73) | |
Net loss attributable to Cliffs shareholders | (73) | |
The obligated group had the following balances with non-Guarantor subsidiaries and other related parties:
| | | | | | | | | | | |
(In millions) | March 31, 2023 | | December 31, 2022 |
Balances with non-Guarantor subsidiaries: | | | |
Accounts receivable, net | $ | 171 | | | $ | 163 | |
Accounts payable | (643) | | | (527) | |
| | | |
Balances with other related parties: | | | |
Accounts receivable, net | $ | 4 | | | $ | 8 | |
| | | |
Accounts payable | (12) | | | (13) | |
| | | |
Additionally, for the three months ended March 31, 2023, the obligated group had Revenues of $32 million and Cost of goods sold of $24 million, in each case, with other related parties.
MARKET RISKS
We are subject to a variety of risks, including those caused by changes in commodity prices and interest rates. We have established policies and procedures to manage such risks; however, certain risks are beyond our control.
PRICING RISKS
In the ordinary course of business, we are exposed to market risk and price fluctuations related to the sale of our products, which are impacted primarily by market prices for HRC and other related spot pricing indices, and the purchase of energy and raw materials used in our operations, which are impacted by market prices for natural gas, electricity, ferrous and stainless steel scrap, chrome, metallurgical coal, coke, zinc and nickel. Our strategy to address market risk has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand; however, we make forward physical purchases and enter into hedge contracts to manage exposure to price risk related to the purchases of certain raw materials and energy used in the production process.
Our financial results can vary for our operations as a result of fluctuations in market prices. We attempt to mitigate these risks by aligning fixed and variable components in our customer pricing contracts, supplier purchasing agreements and derivative financial instruments.
Some customer contracts have fixed-pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter into annual, fixed-price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing
purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.
Certain of our customer contracts include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, while other of our customer contracts exclude such mechanisms. We may enter into multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer contracts and supplier purchase agreements. Therefore, in some cases, price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.
Our strategy to address volatile natural gas rates and electricity rates includes improving efficiency in energy usage, identifying alternative providers and utilizing the lowest cost alternative fuels. If we are unable to align fixed and variable components between customer contracts and supplier purchase agreements, we use cash-settled commodity price swaps to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. Additionally, we routinely use these derivative instruments to hedge a portion of our natural gas, electricity, tin and zinc requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs.
The following table summarizes the negative effect of a hypothetical change in the fair value of our derivative instruments outstanding as of March 31, 2023, due to a 10% and 25% change in the market price of each of the indicated commodities:
| | | | | | | | | | | | | | |
Commodity Derivative (In millions) | | 10% Change | | 25% Change |
Natural gas | | $ | 50 | | | $ | 126 | |
Electricity | | 9 | | | 22 | |
| | | | |
Tin | | — | | | 1 | |
Any resulting changes in fair value would be recorded as adjustments to AOCI, net of income taxes, or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid for the related commodities.
VALUATION OF GOODWILL AND OTHER LONG-LIVED ASSETS
GOODWILL
We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Goodwill is tested on a qualitative or quantitative basis for impairment at the reporting unit level on an annual basis (October 1) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. We have an unconditional option to bypass the qualitative test for any reporting unit in any period and proceed directly to performing the quantitative test. Should our qualitative test indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative test to determine the amount of impairment, if any, to the carrying value of the reporting unit and its associated goodwill.
Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and if a quantitative assessment is deemed necessary in determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using the guideline public company method, the discounted cash flow methodology, or a combination of both, which considers forecasted cash flows discounted at an estimated weighted average cost of capital. Assessing the recoverability of our goodwill requires significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of a reporting unit, including, among other things, estimates related to forecasts of future revenues, expected Adjusted EBITDA, expected capital expenditures and working capital requirements, which are based upon our long-range plan estimates. The assumptions used to calculate the fair value of a reporting unit may change from year to year based on operating results, market conditions and other factors. Changes in these assumptions could materially affect the determination of fair value for each reporting unit.
Our Tooling and Stamping reporting unit fair value was not substantially in excess of its carrying values as of March 31, 2023. A slower than anticipated resolution of the supply chain issues related to the global semiconductor shortages that have hampered the automotive industry, higher than expected capital requirements, and/or an increase in the discount rate could result in future impairment indicators.
OTHER LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverable. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in market pricing; a significant adverse change in legal or environmental factors or in the business climate; changes in estimates of our recoverable reserves; and unanticipated competition. Any adverse change in these factors could have a significant impact on the recoverability of our long-lived assets and could have a material impact on our consolidated statements of operations and statements of financial position.
A comparison of each asset group's carrying value to the estimated undiscounted net future cash flows expected to result from the use of the assets, including cost of disposition, is used to determine if an asset is recoverable. Projected future cash flows reflect management's best estimate of economic and market conditions over the projected period, including growth rates in revenues and costs, and estimates of future expected changes in operating margins and capital expenditures. If the carrying value of the asset group is higher than its undiscounted net future cash flows, the asset group is measured at fair value and the difference is recorded as a reduction to the long-lived assets. We estimate fair value using a market approach, an income approach or a cost approach. For the three months ended March 31, 2023, we concluded that there were no additional triggering events resulting in the need for an impairment assessment.
INTEREST RATE RISK
Interest payable on our senior notes is at fixed rates. Interest payable under our ABL Facility is at a variable rate based upon the applicable base rate plus the applicable base rate margin depending on the excess availability. As of March 31, 2023, we had $2,171 million outstanding under our ABL Facility. An increase in prevailing interest rates would increase interest expense and interest paid for any outstanding borrowings under our ABL Facility. For example, a 100 basis point change to interest rates under our ABL Facility at the March 31, 2023 borrowing level would result in a change of $22 million to interest expense on an annual basis.
SUPPLY CONCENTRATION RISKS
Many of our operations and mines rely on one source each of electric power and natural gas. A significant interruption or change in service or rates from our energy suppliers could materially impact our production costs, margins and profitability.
FORWARD-LOOKING STATEMENTS
This report contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to our operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These statements speak only as of the date of this report, and we undertake no ongoing obligation, other than that imposed by law, to update these statements. Investors are cautioned not to place undue reliance on forward-looking statements. Uncertainties and risk factors that could affect our future performance and cause results to differ from the forward-looking statements in this report include, but are not limited to:
•continued volatility of steel, iron ore and scrap metal market prices, which directly and indirectly impact the prices of the products that we sell to our customers;
•uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry, which has been experiencing supply chain disruptions, such as the semiconductor shortage, and higher consumer interest rates, which could result in lower steel volumes being demanded;
•potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity, oversupply of iron ore, prevalence of steel imports and reduced market demand, including as a result of inflationary pressures, the COVID-19 pandemic, conflicts or otherwise;
•severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges of one or more of our major customers, including customers in the automotive market, key suppliers or contractors, which, among other adverse effects, could disrupt our operations or lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us;
•disruptions to our operations relating to an infectious disease outbreak or the COVID-19 pandemic, including workforce challenges and the risk that novel variants will prove resistant to existing vaccines or that new or continuing pandemic lockdowns in China will impact our ability to source certain critical supplies in a timely and predictable manner;
•risks related to U.S. government actions with respect to Section 232, the USMCA and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports;
•impacts of existing and increasing governmental regulation, including potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements, and reclamation and remediation obligations;
•potential impacts to the environment or exposure to hazardous substances resulting from our operations;
•our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit our financial flexibility and cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our business;
•our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all;
•adverse changes in credit ratings, interest rates, foreign currency rates and tax laws, including adverse impacts as a result of the Inflation Reduction Act;
•the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property damage, labor and employment matters, or suits involving legacy operations and other matters;
•uncertain availability or cost, due to inflation or otherwise, of critical manufacturing equipment and spare parts;
•supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, or critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, coke and metallurgical coal;
•problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us;
•the risk that the cost or time to implement a strategic or sustaining capital project may prove to be greater than originally anticipated;
•uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events;
•cybersecurity incidents relating to, disruptions in, or failures of, information technology systems that are managed by us or third parties that host or have access to our data and systems, including the loss, theft or corruption of sensitive or essential business or personal information and the inability to access or control systems;
•liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine;
•our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks;
•uncertainties associated with our ability to meet customers’ and suppliers’ decarbonization goals and reduce our GHG emissions in alignment with our own announced targets;
•challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces GHG emissions, and our ability to foster a consistent operational and safety track record;
•our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, easement or other possessory interest for any mining property;
•our ability to maintain satisfactory labor relations with unions and employees;
•unanticipated or higher costs associated with pension and OPEB obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations;
•uncertain availability or cost of skilled workers to fill critical operational positions and potential labor shortages caused by experienced employee attrition or otherwise, as well as our ability to attract, hire, develop and retain key personnel;
•the amount and timing of any repurchases of our common shares; and
•potential significant deficiencies or material weaknesses in our internal control over financial reporting.
For additional factors affecting our business, refer to Part II – Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. You are urged to carefully consider these risk factors.
Forward-looking and other statements in this Quarterly Report on Form 10-Q regarding our GHG reduction plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current and forward-looking GHG-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.