Cliffs Natural Resources Inc. Reports Third-Quarter 2012 Results
CLEVELAND, Oct. 24, 2012 /PRNewswire/ -- Cliffs Natural
Resources Inc. (NYSE: CLF) (Paris: CLF) today reported
third-quarter results for the period ended Sept. 30, 2012.
Consolidated revenues decreased 26% for the third quarter to
$1.5 billion, from $2.1 billion in the same quarter last year. This
was primarily driven by a 36% decrease in year-over-year pricing
for seaborne iron ore. Reduced revenues, along with increased
labor, mining, and maintenance expenses resulted in a 76% decrease
in consolidated sales margin to $198
million, compared with the third quarter of 2011.
(Logo: http://photos.prnewswire.com/prnh/20101104/CLIFFSLOGO
)
Joseph A. Carrabba, Cliffs'
chairman, president and chief executive officer, said, "During this
volatile pricing environment, management remains focused on
executing the Phase II expansion at Bloom Lake and maintaining our
cash dividend and investment-grade rating. Our U.S. Iron Ore
business continues to deliver consistent performance, generating
strong results quarter over quarter. With our diverse customer base
in the U.S. and Asia, we believe
the Company is well positioned to manage through this business
cycle."
Net income attributable to Cliffs' common shareholders was
$85 million, or $0.59 per diluted share, down from $601 million, or $4.15 per diluted share, in the third quarter of
2011. The decrease was primarily due to lower consolidated sales
margin, as indicated above. Primarily driven by lower pricing, the
Company has reduced its anticipated full-year income from
continuing operations. As a result, Cliffs decreased its expected
full-year effective tax rate. Also during the quarter, Sonoma Coal
was reported as a discontinued operation and generated a
$2.7 million loss, which was included
within net income attributable to Cliffs' common shareholders.
U.S. Iron Ore
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Volumes
- In Thousands of Long Tons
|
|
|
|
|
|
|
|
Total sales volume
|
6,576
|
|
7,891
|
|
15,399
|
|
16,481
|
Cliffs' share of total production volume
|
5,075
|
|
6,273
|
|
15,739
|
|
17,595
|
Sales
Margin - In Millions
|
|
|
|
|
|
|
|
Revenues from product sales and services
|
$
|
796.0
|
|
$
|
1,106.7
|
|
$
|
1,942.7
|
|
$
|
2,502.0
|
Cost of goods sold and operating expenses
|
540.1
|
|
625.4
|
|
1,233.8
|
|
1,218.3
|
Sales margin
|
$
|
255.9
|
|
$
|
481.3
|
|
$
|
708.9
|
|
$
|
1,283.7
|
Sales
Margin - Per Long Ton
|
|
|
|
|
|
|
|
Revenues from product sales and services*
|
$
|
110.51
|
|
$
|
137.90
|
|
$
|
115.19
|
|
$
|
142.66
|
Cash cost**
|
67.81
|
|
74.00
|
|
64.48
|
|
60.98
|
Depreciation, depletion and amortization
|
3.79
|
|
2.91
|
|
4.67
|
|
3.79
|
Cost of goods sold and operating expenses*
|
71.60
|
|
76.91
|
|
69.15
|
|
64.77
|
Sales margin
|
$
|
38.91
|
|
$
|
60.99
|
|
$
|
46.04
|
|
$
|
77.89
|
*
|
Excludes
revenues and expenses related to freight, which are offsetting and
have no impact on sales margin. Revenues also exclude venture
partner cost reimbursements.
|
**
|
Cash cost
per ton is defined as cost of goods sold and operating expenses per
ton less depreciation, depletion and amortization per
ton.
|
Third-quarter 2012 U.S. Iron Ore pellet sales volume was 6.6
million tons, compared with 7.9 million tons in the third quarter
of 2011. The decrease was attributed to a lower demand for iron ore
pellets and timing of vessel shipments. Cliffs indicated that sales
volume recorded in third-quarter 2011 included 203,000 tons related
to first-half shipments due to recording the full consolidation of
Empire Mine.
U.S. Iron Ore third-quarter 2012 revenues per ton were
$110.51, down 20% from $137.90 in the year-ago quarter. The prior year's
third-quarter revenue included a previously disclosed favorable
adjustment of $9.39 per ton related
to first-half 2011 revenue that was recorded in third-quarter 2011
due to the full consolidation of Empire Mine. Excluding this
adjustment, 2012 third-quarter revenue per ton decreased 14% over
the prior year and was primarily attributable to lower
year-over-year pricing for seaborne iron ore and changes in
customer mix.
Cash cost per ton in U.S. Iron Ore was $67.81, down 8% from $74.00 in the prior year's third quarter.
Third-quarter 2011 cash costs included a previously disclosed
unfavorable adjustment of $11.07 per
ton related to first-half 2011 cash costs that were recorded in
third-quarter 2011 due to the full consolidation of Empire Mine.
Excluding this, cash costs per ton increased 8%, primarily driven
by higher stripping and maintenance costs, as well as idle costs
attributed to the previously disclosed planned temporary production
curtailment at Empire Mine, and lower fixed-cost leverage.
Eastern Canadian Iron Ore
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
|
2012
|
|
|
2011
|
|
2012
|
|
|
2011
|
Volumes
- In Thousands of Metric Tons
|
|
|
|
|
|
|
|
Total sales volume
|
2,375
|
|
3,111
|
|
6,638
|
|
5,499
|
Total production volume
|
2,255
|
|
2,477
|
|
6,189
|
|
5,199
|
Sales
Margin - In Millions
|
|
|
|
|
|
|
|
Revenues from product sales and services
|
$
|
253.1
|
|
$
|
517.3
|
|
$
|
777.8
|
|
$
|
942.2
|
Cost of goods sold and operating expenses
|
293.6
|
|
326.3
|
|
820.8
|
|
648.7
|
Sales margin
|
$
|
(40.5)
|
|
$
|
191.0
|
|
$
|
(43.0)
|
|
$
|
293.5
|
Sales
Margin - Per Metric Ton
|
|
|
|
|
|
|
|
Revenues from product sales and services*
|
$
|
106.57
|
|
$
|
166.25
|
|
$
|
117.17
|
|
$
|
171.32
|
Cash costs**
|
106.06
|
|
87.37
|
|
105.85
|
|
91.71
|
Inventory step-up
|
—
|
|
3.60
|
|
—
|
|
10.87
|
Depreciation, depletion and amortization
|
17.56
|
|
13.89
|
|
17.81
|
|
15.37
|
Cost of goods sold and operating expenses*
|
123.62
|
|
104.85
|
|
123.66
|
|
117.95
|
Sales margin
|
$
|
(17.05)
|
|
$
|
61.40
|
|
$
|
(6.48)
|
|
$
|
53.37
|
|
*
|
Excludes
revenues and expenses related to freight, which are offsetting and
have no impact on sales margin.
|
**
|
Cash cost
per ton is defined as cost of goods sold and operating expenses per
ton less depreciation, depletion and amortization per
ton.
|
Third-quarter 2012 Eastern Canadian Iron Ore sales volume was
2.4 million tons, a 24% decrease from the 3.1 million tons sold in
the third quarter of 2011. The decrease was primarily driven by the
timing of vessel shipments related to iron ore concentrate and a
lack of iron ore pellet availability. The third-quarter 2012 sales
volume mix included 1.4 million tons of iron ore concentrate and
1.0 million tons of iron ore pellets.
Eastern Canadian Iron Ore third-quarter 2012 revenues per ton
were $106.57, down 36% from
$166.25 in the prior year's third
quarter. The lower per-ton revenues were attributable to decreased
year-over-year seaborne pricing for iron ore. Cliffs indicated the
Platts Fe Index for a 62% fines product, CFR China, decreased 36%
from the year-ago quarter.
Cash cost per ton in Eastern Canadian Iron Ore was $106.06, up 21% from $87.37 in the year-ago quarter. The increase
reflected higher cash costs at Wabush Mine of $132 per ton, up 25% from the prior year's
comparable quarter, due to higher labor costs and increased
spending related to maintenance and repairs. Additionally,
third-quarter 2012 cash costs at Bloom Lake Mine were $88 per ton, up 18% from the year-ago quarter,
primarily driven by higher fuel, contract labor, and maintenance
and supply costs. Cliffs indicated Bloom Lake Mine's cash costs per
ton have improved over second-quarter 2012 results primarily due to
increased production throughput rates at the mine.
Asia Pacific Iron Ore
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Volumes
- In Thousands of Metric Tons
|
|
|
|
|
|
|
|
Total sales volume
|
2,998
|
|
2,350
|
|
8,840
|
|
6,772
|
Total production volume
|
2,908
|
|
2,422
|
|
8,024
|
|
6,778
|
Sales
Margin - In Millions
|
|
|
|
|
|
|
|
Revenues from product sales and services
|
$
|
254.2
|
|
$
|
400.1
|
|
$
|
975.3
|
|
$
|
1,127.1
|
Cost of goods sold and operating expenses
|
270.0
|
|
185.5
|
|
719.2
|
|
511.7
|
Sales margin
|
$
|
(15.8)
|
|
$
|
214.6
|
|
$
|
256.1
|
|
$
|
615.4
|
Sales
Margin - Per Metric Ton
|
|
|
|
|
|
|
|
Revenues from product sales and services
|
$
|
84.79
|
|
$
|
170.26
|
|
$
|
110.33
|
|
$
|
166.44
|
Cash cost*
|
76.65
|
|
68.13
|
|
68.91
|
|
64.59
|
Depreciation, depletion and amortization
|
13.41
|
|
10.81
|
|
12.44
|
|
10.97
|
Cost of goods sold and operating expenses
|
90.06
|
|
78.94
|
|
81.35
|
|
75.56
|
Sales margin
|
$
|
(5.27)
|
|
$
|
91.32
|
|
$
|
28.97
|
|
$
|
90.87
|
|
|
*
|
Cash cost
per metric ton is defined as cost of goods sold and operating
expenses per metric ton less depreciation, depletion and
amortization per metric ton.
|
Third-quarter 2012 Asia Pacific Iron Ore sales volume increased
28% to 3.0 million tons from 2.4 million tons in 2011's third
quarter. The increase is attributed to the completion of Cliffs'
Koolyanobbing Complex expansion project to achieve an
11-million-ton annual run rate. The project included several
logistical infrastructure investments including longer trains, new
locomotives, and upgrades to the port.
Revenues per ton for third-quarter 2012 decreased 50% to
$84.79, from $170.26 in last year's third quarter. The
decrease was primarily driven by lower year-over-year seaborne
pricing for iron ore and customer mix. The current quarter's sales
mix included nearly 900,000 tons of a low-grade iron ore product,
which also contributed to the lower year-over-year revenues-per-ton
results. The lower-quality product sells at a reduced rate.
Cash cost per ton in Asia Pacific Iron Ore increased 13% to
$76.65 from $68.13 in 2011's comparable quarter. The
year-over-year increase was primarily attributable to higher mining
costs, partially offset by lower royalty expenses versus the
year-ago quarter. Due to geology and the development stage of the
newer open-pit mines, Cliffs moved nearly 50% more material
compared with the prior year's third quarter.
North American Coal
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Volumes
- In Thousands of Short Tons
|
|
|
|
|
|
|
|
Total sales volume
|
1,662
|
|
646
|
|
4,600
|
|
3,168
|
Total production volume
|
1,434
|
|
950
|
|
4,539
|
|
3,411
|
Sales
Margin - In Millions
|
|
|
|
|
|
|
|
Revenues from product sales and services
|
$
|
241.8
|
|
$
|
64.0
|
|
$
|
640.9
|
|
$
|
388.7
|
Cost of goods sold and operating expenses
|
243.1
|
|
106.7
|
|
637.1
|
|
449.1
|
Sales margin
|
$
|
(1.3)
|
|
$
|
(42.7)
|
|
$
|
3.8
|
|
$
|
(60.4)
|
Sales
Margin - Per Short Ton
|
|
|
|
|
|
|
|
Revenues from product sales and services*
|
$
|
128.88
|
|
$
|
99.38
|
|
$
|
123.80
|
|
$
|
116.82
|
Cash cost**
|
114.56
|
|
134.98
|
|
107.87
|
|
116.29
|
Depreciation, depletion and amortization
|
15.10
|
|
30.50
|
|
15.11
|
|
19.60
|
Cost of goods sold and operating expenses*
|
129.66
|
|
165.48
|
|
122.98
|
|
135.89
|
Sales margin
|
$
|
(0.78)
|
|
$
|
(66.10)
|
|
$
|
0.83
|
|
$
|
(19.07)
|
|
|
*
|
Excludes
revenues and expenses related to freight, which are offsetting and
have no impact on sales margin.
|
**
|
Cash cost
per ton is defined as cost of goods sold and operating expenses per
ton less depreciation, depletion and amortization per
ton.
|
For the third quarter of 2012, North American Coal sales volume
was 1.7 million tons, a 157% increase from the 646,000 tons sold in
the prior year's comparable quarter. The increase was due to
significantly higher sales volume from Cliffs' low-volatile
metallurgical coal mines, which achieved meaningfully higher
year-over-year production rates. The Company indicated that
third-quarter 2011 production and sales volumes were unfavorably
impacted by severe weather damage at Oak Grove Mine and the
detection of high carbon monoxide at Pinnacle Mine. The
year-over-year sales volume increase was partially offset by lower
sales from Cliffs' Toney Fork thermal coal mine. As previously
disclosed, Cliffs has curtailed production and reduced its labor
force at Toney Fork Mine due to weak thermal coal market
conditions.
North American Coal's third-quarter 2012 revenues per ton were
up 30% to $128.88, versus
$99.38 in the third quarter of 2011.
The increase was primarily driven by sales mix, as third-quarter
2012 included a higher proportion of premium low-volatile
metallurgical coal sales. The increase was partially offset by
lower year-over-year market pricing for all coal products.
Cash cost per ton decreased 15% to $114.56, from $134.98 in the comparable quarter last year.
Third-quarter 2012 cash costs per ton benefited from improved
fixed-cost leverage, partially offset by a longwall machine move at
Oak Grove Mine.
Sonoma Coal and Amapa
As previously disclosed, Cliffs
entered into a definitive share and asset sale agreement to sell
its 45% economic interest in Sonoma Coal. The Company expects the
transaction to close during the fourth quarter of 2012. Upon
completion of the transaction, Cliffs anticipates collecting
approximately AUD$141 million in cash proceeds. During the third
quarter of 2012, Cliffs reported its 45% economic interest in
Sonoma Coal as a loss of $2.7
million, net of tax, in income (loss) from discontinued
operations.
Cliffs has a 30% ownership interest in Amapa, an iron ore
operation in Brazil. During the
third quarter of 2012, Amapa produced approximately 1.6 million
tons. Primarily driven by a settlement charge for the termination
of a transportation contract and lower year-over-year pricing for
seaborne iron ore, Cliffs recorded an equity loss of $14 million for its share of the operation.
Capital Structure, Cash Flow and Liquidity
At quarter
end, Cliffs had $36 million of cash
and cash equivalents and $3.9 billion
in total debt, including $250 million
drawn on its $1.75 billion revolving
credit facility. For the quarter, Cliffs generated $308 million in cash from operations versus
$821 million in the 2011 comparable
quarter. The Company indicated weaker year-over-year pricing and
higher costs negatively impacted cash from operations results.
Cliffs reported depreciation, depletion and amortization of
$133 million during the third quarter
of 2012.
Outlook
Looking forward, Cliffs expects the U.S.
economy to remain stable for the remainder of the year. The Company
anticipates moderate volatility in the pricing for seaborne iron
ore and metallurgical coal products, driven by Asian and European
end markets. Based on recent destocking activity within China's
steel industry and the recent decline in its annualized crude steel
production, Cliffs is lowering its full-year expectation for
Chinese crude steel production to approximately 715 million tons,
from its previous expectation of 730 million tons. Also, due
to the year-to-date average spot price for 62% Fe seaborne iron ore
of $133 per ton, Cliffs is decreasing
its average full-year 2012 seaborne iron ore spot price expectation
to approximately $128 per ton
(C.F.R. China) from its previous
expectation of $145 per ton. The
revised pricing assumption serves as the basis for the iron ore
business outlook below.
U.S. Iron Ore Outlook (Long tons)
For 2012, the Company is reducing its U.S. Iron Ore sales volume
expectation to 22 million tons from its previous expectation of 23
million tons. The decrease reflects a lower expected average for
seaborne iron ore pricing during the second half of 2012, which
reduces Cliffs' ability to profitably place product in the seaborne
market from the lower Great Lakes. Cliffs is maintaining its
full-year production volume expectation of approximately 22 million
tons.
The Company is also maintaining its full-year 2012 U.S. Iron Ore
revenues-per-ton expectation of approximately $115 - $120, based on the following
assumptions:
- Average 2012 U.S. steelmaking utilization rate of approximately
75%; and
- Average 2012 hot-rolled steel pricing of approximately
$650 - $675 per ton.
In addition, the revenues-per-ton expectation considers various
contract provisions, lag-year adjustments and pricing caps and
floors contained in certain supply agreements. Actual realized
revenues per ton for the full year will depend on iron ore price
changes, customer mix, production input costs and/or steel prices
(all factors contained in certain Cliffs' supply agreements).
Cliffs is also maintaining its full-year 2012 U.S. Iron Ore
cash-cost-per-ton expectation of approximately $60 - $65, and depreciation, depletion and
amortization expectation of approximately $4 per ton.
In 2013, Cliffs expects to sell approximately 19 million -
20 million tons from its U.S. Iron Ore business. This expectation
assumes a slightly lower year-over-year North American blast
furnace utilization rate for 2013.
Eastern Canadian Iron Ore Outlook (Metric tons,
F.O.B. Eastern Canada)
Cliffs is decreasing its expected full-year production volume to
approximately 8.9 million tons, from its previous expectation of
9.2 million tons. As a result, the Company is decreasing its
full-year Eastern Canadian Iron Ore sales volume expectation to
approximately 9.4 million tons from its previous expectation of 9.6
million tons.
Cliffs is decreasing its full-year 2012 Eastern Canadian Iron
Ore revenues-per-ton expectation to approximately $110 - $115 from its previous expectation of
$130 - $135 per ton. The decrease is
primarily driven by the previously indicated lower full-year
assumption for seaborne iron ore pricing. The full-year product mix
expectation is anticipated to be approximately 65% iron ore
concentrate and 35% iron ore pellets.
Despite the reduced sales and production volumes, the Company is
maintaining its Eastern Canadian Iron Ore full-year 2012
cash-cost-per-ton expectation of approximately $100 - $105. Depreciation, depletion and
amortization is anticipated to be approximately $18 per ton for full-year 2012.
In 2013, Cliffs expects to sell approximately 13 million - 14
million tons from its Eastern Canadian Iron Ore business, comprised
of approximately one-third iron ore pellets and two-thirds iron ore
concentrate.
Asia Pacific Iron Ore Outlook (Metric tons, F.O.B. the
port)
Cliffs is maintaining its full-year 2012 Asia Pacific Iron Ore
expected sales and production volumes of approximately 11.6 million
tons and 11.1 million tons, respectively.
Due to the lower assumption for full-year iron ore pricing,
Cliffs is reducing its full-year 2012 Asia Pacific Iron Ore
revenues-per-ton expectation to approximately $100 - $105, from its previous expectation of
$120 - $125. The anticipated product
mix is approximately half lump and half fines iron ore.
Cliffs is maintaining its Asia Pacific Iron Ore
cash-cost-per-ton expectation of approximately $65 - $70. Cliffs anticipates depreciation,
depletion and amortization to be approximately $13 per ton for full-year 2012.
In 2013, Cliffs expects to sell approximately 10 million - 11
million tons from its Asia Pacific Iron Ore business, comprised of
approximately 50% lump iron ore and 50% fines iron ore.
North American Coal Outlook (Short tons, F.O.B. the
mine)
As the result of softer metallurgical coal market conditions,
Cliffs is reducing its full-year sales volume expectation to
approximately 6.4 million tons, from its previous expectation of
approximately 6.9 million tons. The Company is maintaining its
anticipated full-year production volume of 6.2 million tons. Sales
volume mix is anticipated to be approximately 4.3 million tons
of low-volatile metallurgical coal and 1.4 million tons of
high-volatile metallurgical coal, with thermal coal making up the
remainder of the expected sales volume.
Cliffs is decreasing its North American Coal 2012
revenues-per-ton expectation to approximately $120 - $125, from its previous expectation of
$130 - $135. The decrease is driven
by lower pricing for metallurgical coal products.
Due to continuing performance improvements at Cliffs' longwall
operations, the Company is decreasing its cash-cost-per-ton
expectation to $105 - $110 versus its
previous expectation of $110 - $115.
Full-year 2012 depreciation, depletion and amortization is expected
to be approximately $15 per ton.
In 2013, Cliffs expects to sell approximately 6 million - 7
million tons from its North American Coal business, comprised of
approximately 65% low-volatile metallurgical coal, 25%
high-volatile metallurgical coal and 10% thermal coal.
The following table provides a summary of Cliffs' 2012 guidance
for its four business segments:
|
2012
Outlook Summary
|
|
U.S.
Iron
Ore (1)
|
|
Eastern
Canadian
Iron
Ore (2)
|
|
Asia
Pacific
Iron
Ore (3)
|
|
North
American
Coal
(4)
|
|
Current
Outlook
|
|
Previous
Outlook
|
|
Current
Outlook
|
|
Previous
Outlook
|
|
Current
Outlook
|
|
Previous
Outlook
|
|
Current
Outlook
|
|
Previous
Outlook
|
Sales
volume
(million tons)
|
22
|
|
23
|
|
9.4
|
|
9.6
|
|
11.6
|
|
11.6
|
|
6.4
|
|
6.9
|
Revenues per ton
|
$115 -
$120
|
|
$115 -
$120
|
|
$110 -
$115
|
|
$130 -
$135
|
|
$100 -
$105
|
|
$120 -
$125
|
|
$120 -
$125
|
|
$130 -
$135
|
Cash
cost per ton
|
$60 -
$65
|
|
$60 -
$65
|
|
$100 -
$105
|
|
$100 -
$105
|
|
$65 -
$70
|
|
$65 -
$70
|
|
$105 -
$110
|
|
$110 -
$115
|
DD&A per ton
|
$4
|
|
$4
|
|
$18
|
|
$18
|
|
$13
|
|
$13
|
|
$15
|
|
$
|
13
|
|
|
(1) U.S.
Iron Ore tons are reported in long tons.
|
(2)
Eastern Canadian lron Ore tons are reported in metric tons, F.O.B.
Eastern Canada.
|
(3) Asia
Pacific Iron Ore tons are reported in metric tons, F.O.B. the
port.
|
(4) North
American Coal tons are reported in short tons, F.O.B. the
mine.
|
Outlook for Amapa and Sonoma
For the full year, Cliffs anticipates a $25
million equity loss for its interest in Amapa, primarily
driven by the previously disclosed charge and lower expected
pricing for seaborne iron ore. As previously disclosed, Cliffs'
sale of its economic interest in Sonoma Coal is expected to be
completed in the fourth quarter of 2012.
SG&A Expenses and Other
Expectations
Cliffs is reducing its full-year 2012 SG&A
expense expectation to approximately $275
million, from its previous expectation of $300 million. The decrease is primarily driven by
a continued focus to reduce overhead costs.
To support future growth projects, Cliffs' full-year cash
outflows expectation is approximately $165
million. This is comprised of approximately $90 million related to exploration and drilling
programs and approximately $75
million related to its chromite project in Ontario, Canada.
For 2012, Cliffs anticipates a full-year effective tax rate
benefit of approximately 35%. Excluding the previously disclosed
enacted Minerals Resource Rent Tax and other discrete tax items,
the Company anticipates its effective tax rate to be approximately
8%. In addition, Cliffs expects its full-year 2012 depreciation,
depletion and amortization to be approximately $515 million.
2012 Capital Budget Update and Other Uses of
Cash
Due to the Company's revised outlook, Cliffs is
decreasing its full-year 2012 cash flow from operations expectation
to approximately $600 million, from
its previous expectation of $1.3
billion.
Cliffs is maintaining its previously disclosed 2012 capital
expenditures budget of approximately $1
billion, comprised of approximately $300 million in sustaining capital and
$700 million in growth and
productivity-improvement capital.
Cliffs will host a conference call to discuss its third-quarter
2012 results tomorrow, Oct. 25, 2012, at 10 a.m. ET. The call will be broadcast live and
archived on Cliffs' website: www.cliffsnaturalresources.com.
About Cliffs Natural Resources Inc.
Cliffs Natural
Resources Inc. is an international mining and natural resources
company. A member of the S&P 500 Index, the Company is a major
global iron ore producer and a significant producer of high- and
low-volatile metallurgical coal. Cliffs' strategy is to continually
achieve greater scale and diversification in the mining industry
through a focus on serving the world's largest and fastest growing
steel markets. Driven by the core values of social, environmental
and capital stewardship, Cliffs associates across the globe
endeavor to provide all stakeholders operating and financial
transparency.
The Company is organized through a global commercial group
responsible for sales and delivery of Cliffs products and a global
operations group responsible for the production of the minerals the
Company markets. Cliffs operates iron ore and coal mines in
North America and two iron ore
mining complexes in Western
Australia. In addition, Cliffs has a major chromite project,
in the feasibility stage of development, located in Ontario, Canada.
News releases and other information on the Company are available
on the Internet at: http://www.cliffsnaturalresources.com
Forward-Looking Statements
This release contains
forward-looking statements within the meaning of the federal
securities laws. Although the Company believes that its
forward-looking statements are based on reasonable assumptions,
such statements are subject to risks and uncertainties relating to
Cliffs' operations and business environment that are difficult to
predict and may be beyond Cliffs' control. Such uncertainties and
factors may cause actual results to differ materially from those
expressed or implied by forward-looking statements for a variety of
reasons including without limitation: the uncertainty or weakness
in global economic and/or market conditions, including downward
pressure on prices and reduced market demand; trends affecting our
financial condition, results of operations or future prospects,
particularly any slowing of the economic growth rate in
China for an extended period; our
ability to successfully integrate acquired companies into our
operations and achieve post-acquisition synergies, including
without limitation, Cliffs Quebec Iron Mining Limited (formerly
Consolidated Thompson); our ability to successfully complete
planned divestitures; our ability to reach agreement with our iron
ore customers regarding modifications to sales contract pricing
escalation provisions to reflect a shorter-term or spot-based
pricing mechanism; the outcome of any contractual disputes with our
customers, joint venture partners or significant energy, materials
or services providers, or any other litigation or arbitration;
changes in sales volume or mix; the impact of price-adjustment
factors on our sales contracts; the ability of our customers to
meet their obligations to us on a timely basis or at all; our
actual economic iron ore and coal reserves or reductions in current
resource estimates; our ability to successfully identify and
consummate any strategic investments; events or circumstances that
could impair or adversely impact the viability of a mine and the
carrying value of associated assets; the results of pre-feasibility
and feasibility studies in relation to projects; impacts of
increasing governmental regulation and related costs, including
failure to receive or maintain required environmental permits,
approvals, modifications or other authorization of, or from, any
governmental or regulatory entity and costs related to implementing
improvements to ensure compliance with regulatory changes; the
ability to achieve planned production rates or levels;
uncertainties associated with unanticipated geological conditions,
natural disasters, weather conditions, supply or price of energy,
equipment failures and other unexpected events; adverse changes in
currency values, currency exchange rates, interest rates and tax
laws; our ability to maintain adequate liquidity and successfully
implement our financing plans; our ability to maintain appropriate
relations with unions and employees and renew expiring collective
bargaining agreements on satisfactory terms; availability of
capital equipment and component parts; the amount and timing of any
insurance recovery proceeds with respect to Oak Grove mine; risks
related to international operations; potential existence of
significant deficiencies or material weakness in our internal
control over financial reporting; problems or uncertainties with
productivity, tons mined, transportation, mine-closure obligations,
employee benefit costs and other risks of the mining industry; and
other factors and risks that are set forth in the Company's most
recently filed reports with the Securities and Exchange Commission.
The information contained herein speaks as of the date of this
release and may be superseded by subsequent events. Except as may
be required by applicable securities laws, we do not undertake any
obligation to revise or update any forward-looking statements
contained in this release.
FINANCIAL TABLES FOLLOW
CLIFFS
NATURAL RESOURCES INC. AND SUBSIDIARIES
STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED
OPERATIONS
|
|
|
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
REVENUES FROM PRODUCT SALES AND
SERVICES
|
|
|
|
|
|
|
|
Product
|
$
|
1,447.9
|
|
$
|
2,070.7
|
|
$
|
4,096.6
|
|
$
|
4,790.8
|
Freight and venture partners' cost
reimbursements
|
97.0
|
|
18.4
|
|
240.2
|
|
169.4
|
|
1,544.9
|
|
2,089.1
|
|
4,336.8
|
|
4,960.2
|
COST OF
GOODS SOLD AND OPERATING EXPENSES
|
(1,346.6)
|
|
(1,246.0)
|
|
(3,403.2)
|
|
(2,829.4)
|
SALES MARGIN
|
198.3
|
|
843.1
|
|
933.6
|
|
2,130.8
|
OTHER
OPERATING INCOME (EXPENSE)
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
(63.9)
|
|
(61.3)
|
|
(202.6)
|
|
(164.4)
|
Consolidated Thompson acquisition
costs
|
—
|
|
(2.1)
|
|
—
|
|
(25.0)
|
Exploration costs
|
(45.6)
|
|
(26.6)
|
|
(95.2)
|
|
(55.4)
|
Miscellaneous - net
|
(12.5)
|
|
64.0
|
|
25.5
|
|
59.4
|
|
(122.0)
|
|
(26.0)
|
|
(272.3)
|
|
(185.4)
|
OPERATING INCOME
|
76.3
|
|
817.1
|
|
661.3
|
|
1,945.4
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
Changes in fair value of foreign currency
contracts, net
|
—
|
|
(6.2)
|
|
0.3
|
|
100.5
|
Interest expense
|
(47.2)
|
|
(49.4)
|
|
(141.2)
|
|
(168.2)
|
Other non-operating income
|
3.3
|
|
0.9
|
|
6.2
|
|
6.7
|
|
(43.9)
|
|
(54.7)
|
|
(134.7)
|
|
(61.0)
|
INCOME
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY INCOME
(LOSS) FROM VENTURES
|
32.4
|
|
762.4
|
|
526.6
|
|
1,884.4
|
INCOME
TAX (EXPENSE) BENEFIT
|
64.0
|
|
(3.7)
|
|
235.2
|
|
(287.2)
|
EQUITY
INCOME (LOSS) FROM VENTURES
|
(15.3)
|
|
11.1
|
|
(22.7)
|
|
2.8
|
INCOME
FROM CONTINUING OPERATIONS
|
81.1
|
|
769.8
|
|
739.1
|
|
1,600.0
|
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS, net of tax
|
|
(2.7)
|
|
(16.8)
|
|
5.1
|
|
3.7
|
NET
INCOME
|
78.4
|
|
753.0
|
|
744.2
|
|
1,603.7
|
LESS: INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING
INTEREST
|
(6.7)
|
|
151.8
|
|
25.2
|
|
170.1
|
NET
INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS
|
$
|
85.1
|
|
$
|
601.2
|
|
$
|
719.0
|
|
$
|
1,433.6
|
EARNINGS
PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS -
BASIC
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.62
|
|
$
|
4.29
|
|
$
|
5.02
|
|
$
|
10.24
|
Discontinued operations
|
(0.02)
|
|
(0.12)
|
|
0.04
|
|
0.03
|
|
$
|
0.60
|
|
$
|
4.17
|
|
$
|
5.06
|
|
$
|
10.27
|
EARNINGS
PER COMMON SHARE ATTRIBUTABLE TO CLIFFS SHAREHOLDERS -
DILUTED
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.61
|
|
$
|
4.27
|
|
$
|
5.00
|
|
$
|
10.19
|
Discontinued operations
|
(0.02)
|
|
(0.12)
|
|
0.04
|
|
0.03
|
|
$
|
0.59
|
|
$
|
4.15
|
|
$
|
5.04
|
|
$
|
10.22
|
AVERAGE
NUMBER OF SHARES (IN THOUSANDS)
|
|
|
|
|
|
|
|
Basic
|
142,396
|
|
144,203
|
|
142,332
|
|
139,563
|
Diluted
|
142,895
|
|
144,989
|
|
142,780
|
|
140,321
|
CASH
DIVIDENDS DECLARED PER SHARE
|
$
|
0.63
|
|
$
|
0.28
|
|
$
|
1.54
|
|
$
|
0.56
|
CLIFFS
NATURAL RESOURCES INC. AND SUBSIDIARIES
STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL POSITION
|
|
|
|
(In
Millions)
|
|
|
September 30,
2012
|
|
|
December
31,
2011
|
ASSETS
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash equivalents
|
$
|
36.3
|
|
$
|
519.3
|
Accounts receivable
|
285.9
|
|
287.9
|
Inventories
|
526.7
|
|
456.9
|
Supplies and other inventories
|
259.5
|
|
216.9
|
Derivative assets
|
78.3
|
|
82.1
|
Assets held for sale
|
156.6
|
|
159.9
|
Other current assets
|
322.1
|
|
188.2
|
TOTAL CURRENT ASSETS
|
1,665.4
|
|
1,911.2
|
PROPERTY,
PLANT AND EQUIPMENT, NET
|
11,030.7
|
|
10,404.1
|
OTHER
ASSETS
|
|
|
|
Investments in ventures
|
517.0
|
|
526.6
|
Goodwill
|
1,167.2
|
|
1,152.1
|
Intangible assets, net
|
133.8
|
|
147.0
|
Deferred income taxes
|
612.3
|
|
209.5
|
Other non-current assets
|
170.4
|
|
191.2
|
TOTAL OTHER ASSETS
|
2,600.7
|
|
2,226.4
|
TOTAL ASSETS
|
$
|
15,296.8
|
|
$
|
14,541.7
|
LIABILITIES
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Accounts payable
|
$
|
422.1
|
|
$
|
364.7
|
Accrued expenses
|
485.2
|
|
384.8
|
Taxes payable
|
84.7
|
|
324.5
|
Current portion of debt
|
369.7
|
|
74.8
|
Deferred revenue
|
125.1
|
|
126.6
|
Liabilities held for sale
|
29.7
|
|
25.9
|
Other current liabilities
|
197.8
|
|
200.8
|
TOTAL CURRENT LIABILITIES
|
1,714.3
|
|
1,502.1
|
POSTEMPLOYMENT BENEFIT LIABILITIES
|
603.3
|
|
665.8
|
ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS
|
226.3
|
|
213.2
|
DEFERRED
INCOME TAXES
|
1,147.0
|
|
1,062.4
|
LONG-TERM
DEBT
|
3,514.3
|
|
3,608.7
|
BELOW-MARKET SALES CONTRACTS, NET
|
83.8
|
|
111.8
|
OTHER
LIABILITIES
|
318.6
|
|
338.0
|
TOTAL LIABILITIES
|
7,607.6
|
|
7,502.0
|
EQUITY
|
|
|
|
CLIFFS
SHAREHOLDERS' EQUITY
|
6,336.8
|
|
5,785.0
|
NONCONTROLLING INTEREST
|
1,352.4
|
|
1,254.7
|
TOTAL EQUITY
|
7,689.2
|
|
7,039.7
|
TOTAL LIABILITIES AND EQUITY
|
$
|
15,296.8
|
|
$
|
14,541.7
|
CLIFFS
NATURAL RESOURCES INC. AND SUBSIDIARIES
STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED
CASH FLOWS
|
|
|
|
(In
Millions)
|
|
Nine
Months Ended September 30,
|
|
|
2012
|
|
|
2011
|
OPERATING ACTIVITIES
|
|
|
|
Net income
|
$
|
744.2
|
|
$
|
1,603.7
|
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
|
|
|
|
Depreciation, depletion and amortization
|
382.3
|
|
306.3
|
Derivatives and currency hedges
|
12.0
|
|
(84.4)
|
Equity income (loss) in ventures (net of
tax)
|
22.7
|
|
(2.8)
|
Pensions and other postretirement benefits
|
(45.4)
|
|
(43.3)
|
Deferred income taxes
|
(352.5)
|
|
(29.7)
|
Changes in deferred revenue and
below-market
sales contracts
|
(36.2)
|
|
(156.3)
|
Other
|
(10.3)
|
|
3.7
|
Changes in operating assets and
liabilities:
|
|
|
|
Receivables and other assets
|
(118.6)
|
|
(62.5)
|
Product inventories
|
(70.4)
|
|
(128.5)
|
Payables and accrued expenses
|
(252.3)
|
|
139.5
|
Net cash provided by operating activities
|
275.5
|
|
1,545.7
|
INVESTING ACTIVITIES
|
|
|
|
Acquisition of Consolidated Thompson, net of cash
acquired
|
—
|
|
(4,423.5)
|
Purchase of property, plant and equipment
|
(793.6)
|
|
(478.9)
|
Settlements in Canadian dollar foreign exchange
contracts
|
—
|
|
93.1
|
Investment in Consolidated Thompson senior secured
notes
|
—
|
|
(125.0)
|
Other investing activities
|
8.9
|
|
15.7
|
Net cash used by investing activities
|
(784.7)
|
|
(4,918.6)
|
FINANCING ACTIVITIES
|
|
|
|
Net proceeds from issuance of common
shares
|
—
|
|
853.7
|
Net proceeds from issuance of senior notes
|
—
|
|
998.1
|
Borrowings on term loan
|
—
|
|
1,250.0
|
Borrowings on bridge credit facility
|
—
|
|
750.0
|
Repayment of bridge credit facility
|
—
|
|
(750.0)
|
Repayment of term loan
|
(49.9)
|
|
(265.4)
|
Debt issuance costs
|
—
|
|
(54.8)
|
Borrowings under revolving credit facility
|
670.0
|
|
250.0
|
Repayment under revolving credit facility
|
(420.0)
|
|
—
|
Repayment of Consolidated Thompson convertible
debentures
|
—
|
|
(337.2)
|
Payments under share buyback program
|
—
|
|
(221.9)
|
Contributions by joint ventures, net
|
68.8
|
|
—
|
Common stock dividends
|
(217.8)
|
|
(78.8)
|
Other financing activities
|
(23.9)
|
|
(27.1)
|
Net cash provided by financing activities
|
27.2
|
|
2,366.6
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
(0.1)
|
|
(15.3)
|
DECREASE
IN CASH AND CASH EQUIVALENTS
|
(482.1)
|
|
(1,021.6)
|
CASH AND
CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
521.6
|
|
1,566.7
|
CASH AND
CASH EQUIVALENTS AT END OF PERIOD
|
$
|
39.5
|
|
$
|
545.1
|
SOURCE Cliffs Natural Resources Inc.