- Record quarterly revenue of $5.0 billion
- Record quarterly net income of $795 million
- Record quarterly adjusted EBITDA1 of $1.4 billion
Cleveland-Cliffs Inc. (NYSE: CLF) today reported
second-quarter results for the period ended June 30, 2021.
Second-quarter 2021 consolidated revenues were $5.0 billion,
compared to the prior-year second-quarter revenues of $1.1
billion.
For the second quarter of 2021, the Company recorded net income
of $795 million, or $1.33 per diluted share. This included the
following charges totaling $77 million, or $0.13 per diluted
share:
- charges of $37 million, or $0.06 per diluted share, of
inventory step-up amortization, related to the revaluation of
inventory following the acquisition of substantially all of the
operations of ArcelorMittal USA;
- charges of $22 million, or $0.04 per diluted share, for debt
extinguishment costs; and
- charges of $18 million, or $0.03 per diluted share, for
acquisition-related loss on equity method investment.
In the prior-year second quarter, the Company recorded a net
loss of $108 million, or a loss of $0.31 per diluted share.
For the first six months of 2021, the Company recorded revenues
of $9.1 billion and net income of $852 million, or $1.48 per
diluted share. In the first six months of 2020, the Company
recorded revenues of $1.5 billion and a net loss of $157 million,
or a loss of $0.51 per diluted share.
Second-quarter 2021 adjusted EBITDA 1 was $1.4 billion, compared
to an adjusted EBITDA 1 loss of $82 million in the second quarter
of 2020.
(In Millions)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Adjusted EBITDA1
Steelmaking
$
1,395
$
(54
)
$
1,932
$
(10
)
Other Businesses
8
2
19
4
Corporate and Eliminations
(43
)
(30
)
(78
)
(53
)
Total Adjusted EBITDA1
$
1,360
$
(82
)
$
1,873
$
(59
)
Outlook
The Company expects third-quarter 2021 adjusted EBITDA2 of
approximately $1.8 billion and free cash flow2 generation of $1.4
billion.
Cliffs' Chairman, President, and CEO Lourenco Goncalves said:
“In the second quarter of 2021 we achieved all-time quarterly
records in revenue, net income, and adjusted EBITDA. The numbers
unequivocally confirm our efficiency in operating the new
footprint, resulting from the integration of the two major steel
companies acquired in 2020 as a single and indivisible mining and
steel company. They also demonstrate our flawless execution in
ramping up our state-of-the-art Direct Reduction plant in Toledo to
the current level of production above nominal capacity.”
Mr. Goncalves added: “This quarter was also a clear illustration
of our raw material cost and quality advantage over others in the
industry, particularly the ones fully dependent on scarce prime
scrap and dirty pig iron imported from polluting countries. The
decision we made four years ago to invest $1 billion in our Direct
Reduction plant has been proven to be not only right, but also
perfectly timed. Our internal use of HBI has minimized our reliance
on prime scrap in our BOFs and EAFs, as well as enhanced
productivity and reduced emissions in our blast furnaces as
demonstrated by our actual CO2 emissions figures.”
Mr. Goncalves concluded: “Our team has done a remarkable job in
meeting the demand for steel we have been experiencing over the
past six months, overcoming the impact of the automotive chip
shortage as well as limited rail and truck availability. Steel
demand remains excellent and, as we continue to negotiate our
contract businesses with several clients in different sectors, it
is progressively translating into substantially higher contract
prices later this year and into 2022. Ultimately, we are set for a
monumental debt reduction during the back half of this year, and
the achievement of zero net debt in 2022."
Steelmaking
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
External Sales Volumes
Steel Products (net tons)
4,205
614
8,349
811
Operating Results
- In Millions
Revenues
$
4,922
$
1,023
$
8,841
$
1,360
Cost of goods sold
(3,730
)
(1,142
)
(7,374
)
(1,477
)
Selling Price -
Per Net Ton
Average net selling price per net ton of
steel products
$
1,118
$
1,041
$
1,017
$
1,026
Second-quarter 2021 steel product volume of 4.2 million net tons
consisted of 33% hot-rolled, 30% coated, 17% cold-rolled, 6% plate,
4% stainless and electrical, and 10% other, including slabs and
rail.
Steelmaking revenues of $4.9 billion included $2.0 billion, or
40%, of sales to the distributors and converters market; $1.3
billion, or 27%, of sales to the infrastructure and manufacturing
market; $1.1 billion, or 23%, of sales to the automotive market;
and $532 million, or 10%, of sales to steel producers.
Second-quarter 2021 Steelmaking cost of goods sold included
depreciation, depletion, and amortization of $197 million,
amortization of inventory step-up of $37 million and $18 million of
an acquisition-related loss on equity method investment.
Steelmaking Segment adjusted EBITDA of $1.4 billion included $61
million of SG&A expense.
Liquidity
As of July 19, 2021, the Company had total liquidity of
approximately $2.1 billion.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
July 22, 2021, at 10 a.m. ET. The call will be broadcast live and
archived on Cliffs' website: www.clevelandcliffs.com.
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in
North America. Founded in 1847 as a mine operator, Cliffs also is
the largest manufacturer of iron ore pellets in North America. The
Company is vertically integrated from mined raw materials and
direct reduced iron to primary steelmaking and downstream
finishing, stamping, tooling, and tubing. The Company serves a
diverse range of markets due to its comprehensive offering of
flat-rolled steel products and is the largest steel supplier to the
automotive industry in North America. Headquartered in Cleveland,
Ohio, Cleveland-Cliffs employs approximately 25,000 people across
its mining, steel and downstream manufacturing operations in the
United States and Canada.
Forward-Looking Statements
This release contains statements that constitute
"forward-looking statements" within the meaning of the federal
securities laws. All statements other than historical facts,
including, without limitation, statements regarding our current
expectations, estimates and projections about our industry or our
businesses, are forward-looking statements. We caution investors
that any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends to
differ materially from those matters expressed in or implied by
such forward-looking statements. Investors are cautioned not to
place undue reliance on forward-looking statements. Among the risks
and uncertainties that could cause actual results to differ from
those described in forward-looking statements are the following:
disruptions to our operations relating to the COVID-19 pandemic,
including the heightened risk that a significant portion of our
workforce or on-site contractors may suffer illness or otherwise be
unable to perform their ordinary work functions; continued
volatility of steel and iron ore 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 a trend
toward light weighting that could result in lower steel volumes
being consumed; 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 the COVID-19 pandemic; severe financial
hardship, bankruptcy, temporary or permanent shutdowns or
operational challenges, due to the COVID-19 pandemic or otherwise,
of one or more of our major customers, including customers in the
automotive market, key suppliers or contractors, which, among other
adverse effects, could 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; our ability to
reduce our indebtedness or return capital to shareholders within
the expected timeframes or at all, depending on market and other
conditions; risks related to U.S. government actions with respect
to Section 232 of the Trade Expansion Act (as amended by the Trade
Act of 1974), the United States-Mexico-Canada Agreement 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 climate change and other
environmental regulation that may be proposed under the Biden
Administration, 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;
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 cash flow necessary to fund working capital,
planned capital expenditures, acquisitions, and other general
corporate purposes or ongoing needs of our business; adverse
changes in credit ratings, interest rates, foreign currency rates
and tax laws; limitations on our ability to realize some or all of
our deferred tax assets, including our net operating loss
carryforwards; our ability to realize the anticipated synergies and
benefits of our acquisitions of AK Steel and ArcelorMittal USA and
to successfully integrate the businesses of AK Steel and
ArcelorMittal USA into our existing businesses, including
uncertainties associated with maintaining relationships with
customers, vendors and employees; additional debt we assumed,
incurred or issued in connection with the acquisitions of AK Steel
and ArcelorMittal USA, as well as additional debt we incurred in
connection with enhancing our liquidity during the COVID-19
pandemic, may negatively impact our credit profile and limit our
financial flexibility; known and unknown liabilities we assumed in
connection with the acquisitions of AK Steel and ArcelorMittal USA,
including significant environmental, pension and other
postretirement benefits (“OPEB”) obligations; the ability of our
customers, joint venture partners and third-party service providers
to meet their obligations to us on a timely basis or at all; supply
chain disruptions or changes in the cost or quality of energy
sources or critical raw materials and supplies, including iron ore,
industrial gases, graphite electrodes, scrap, chrome, zinc, coke
and coal; liabilities and costs arising in connection with any
business decisions to temporarily idle or permanently close a mine
or production facility, 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 mine or production
facility; problems or disruptions associated with transporting
products to our customers, moving products internally among our
facilities or suppliers transporting raw materials to us;
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; our level of
self-insurance and our ability to obtain sufficient third-party
insurance to adequately cover potential adverse events and business
risks; disruptions in, or failures of, our information technology
systems, including those related to cybersecurity; our ability to
successfully identify and consummate any strategic investments or
development projects, cost-effectively achieve planned production
rates or levels, and diversify our product mix and add new
customers; our actual economic iron ore and coal reserves or
reductions in current mineral estimates, including whether we are
able to replace depleted reserves with additional mineral bodies to
support the long-term viability of our operations; the outcome of
any contractual disputes with our customers, joint venture
partners, lessors, or significant energy, raw material or service
providers, or any other litigation or arbitration; our ability to
maintain our social license to operate with our stakeholders,
including by fostering a strong reputation and consistent
operational and safety track record; our ability to maintain
satisfactory labor relations with unions and employees;
availability of workers to fill critical operational positions and
potential labor shortages caused by the COVID-19 pandemic, as well
as our ability to attract, hire, develop and retain key personnel;
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; and
potential significant deficiencies or material weaknesses in our
internal control over financial reporting.
For additional factors affecting the business of Cliffs, refer
to Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K
for the year ended December 31, 2020, and other filings with the
SEC.
FINANCIAL TABLES FOLLOW
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED OPERATIONS
(In Millions, Except Per Share
Amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Revenues
$
5,045
$
1,093
$
9,094
$
1,452
Operating costs:
Cost of goods sold
(3,848
)
(1,208
)
(7,609
)
(1,564
)
Selling, general and administrative
expenses
(104
)
(62
)
(199
)
(90
)
Acquisition-related costs
(1
)
(19
)
(14
)
(61
)
Miscellaneous – net
(25
)
(12
)
(28
)
(24
)
Total operating costs
(3,978
)
(1,301
)
(7,850
)
(1,739
)
Operating income (loss)
1,067
(208
)
1,244
(287
)
Other income (expense):
Interest expense, net
(85
)
(69
)
(177
)
(100
)
Gain (loss) on extinguishment of debt
(22
)
130
(88
)
133
Net periodic benefit credits other than
service cost component
46
15
93
21
Other non-operating income
4
—
4
—
Total other income (expense)
(57
)
76
(168
)
54
Income (loss) from continuing
operations before income taxes
1,010
(132
)
1,076
(233
)
Income tax benefit (expense)
(216
)
25
(225
)
76
Income (loss) from continuing
operations
794
(107
)
851
(157
)
Income (loss) from discontinued
operations, net of tax
1
(1
)
1
—
Net income (loss)
795
(108
)
852
(157
)
Income attributable to noncontrolling
interest
(15
)
(16
)
(31
)
(19
)
Net income (loss) attributable to
Cliffs shareholders
$
780
$
(124
)
$
821
$
(176
)
Earnings (loss) per common share
attributable to Cliffs shareholders - basic
Continuing operations
$
1.40
$
(0.31
)
$
1.48
$
(0.51
)
Discontinued operations
—
—
—
—
$
1.40
$
(0.31
)
$
1.48
$
(0.51
)
Earnings (loss) per common share
attributable to Cliffs shareholders - diluted
Continuing operations
$
1.33
$
(0.31
)
$
1.42
$
(0.51
)
Discontinued operations
—
—
—
—
$
1.33
$
(0.31
)
$
1.42
$
(0.51
)
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
June 30, 2021
December 31, 2020
ASSETS
Current assets:
.
Cash and cash equivalents
$
73
$
112
Accounts receivable, net
2,062
1,169
Inventories
4,280
3,828
Other current assets
159
189
Total current assets
6,574
5,298
Non-current assets:
Property, plant and equipment, net
8,982
8,743
Goodwill
1,070
1,406
Deferred income taxes
333
537
Other non-current assets
787
787
TOTAL ASSETS
$
17,746
$
16,771
LIABILITIES
Current liabilities:
Accounts payable
$
1,665
$
1,575
Accrued employment costs
550
460
Pension and OPEB liabilities, current
151
151
Other current liabilities
620
743
Total current liabilities
2,986
2,929
Non-current liabilities:
Long-term debt
5,368
5,390
Pension and OPEB liabilities,
non-current
3,841
4,113
Other non-current liabilities
1,272
1,260
TOTAL LIABILITIES
13,467
13,692
SERIES B PARTICIPATING REDEEMABLE
PREFERRED STOCK
738
738
TOTAL EQUITY
3,541
2,341
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND EQUITY
$
17,746
$
16,771
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Six Months Ended June
30,
2021
2020
OPERATING ACTIVITIES
Net income (loss)
$
852
$
(157
)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation, depletion and
amortization
425
112
Amortization of inventory step-up
118
59
Deferred income taxes
225
(73
)
Loss (gain) on extinguishment of debt
88
(133
)
Other
24
(20
)
Changes in operating assets and
liabilities, net of business combination:
Receivables and other assets
(903
)
366
Inventories
(557
)
(126
)
Pension and OPEB payments and
contributions
(223
)
(17
)
Payables, accrued expenses and other
liabilities
83
(309
)
Net cash provided (used) by operating
activities
132
(298
)
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(298
)
(283
)
Acquisition of AK Steel, net of cash
acquired
—
(869
)
Acquisition of ArcelorMittal USA, net of
cash acquired
54
—
Other investing activities
2
—
Net cash used by investing activities
(242
)
(1,152
)
FINANCING ACTIVITIES
Proceeds from issuance of common
shares
322
—
Proceeds from issuance of debt
1,000
1,763
Debt issuance costs
(17
)
(58
)
Repayments of debt
(1,339
)
(1,000
)
Borrowings under credit facilities
2,680
800
Repayments under credit facilities
(2,490
)
(250
)
Repayments of leased liabilities
(46
)
(5
)
Other financing activities
(39
)
(79
)
Net cash provided by financing
activities
71
1,171
Net decrease in cash and cash
equivalents
(39
)
(279
)
Cash and cash equivalents at beginning of
period
112
353
Cash and cash equivalents at end of
period
$
73
$
74
1 CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION - EBITDA AND ADJUSTED EBITDA
In addition to the consolidated financial statements presented
in accordance with U.S. GAAP, the Company has presented EBITDA and
adjusted EBITDA on a consolidated basis. EBITDA and adjusted EBITDA
are non-GAAP financial measures that management uses in evaluating
operating performance. The presentation of these measures is not
intended to be considered in isolation from, as a substitute for,
or as superior to, the financial information prepared and presented
in accordance with U.S. GAAP. The presentation of these measures
may be different from non-GAAP financial measures used by other
companies. A reconciliation of these consolidated measures to their
most directly comparable GAAP measures is provided in the table
below.
(In Millions)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net income (loss)
$
795
$
(108
)
$
852
$
(157
)
Less:
Interest expense, net
(85
)
(69
)
(177
)
(100
)
Income tax benefit (expense)
(216
)
25
(225
)
76
Depreciation, depletion and
amortization
(208
)
(77
)
(425
)
(112
)
Total EBITDA
$
1,304
$
13
$
1,679
$
(21
)
Less:
EBITDA of noncontrolling interests1
$
21
$
21
$
43
$
25
Gain (loss) on extinguishment of debt
(22
)
130
(88
)
133
Severance costs
(1
)
(17
)
(12
)
(36
)
Acquisition-related costs excluding
severance costs
—
(2
)
(2
)
(25
)
Acquisition-related loss on equity method
investment
(18
)
—
(18
)
—
Amortization of inventory step-up
(37
)
(36
)
(118
)
(59
)
Impact of discontinued operations
1
(1
)
1
—
Total Adjusted EBITDA
$
1,360
$
(82
)
$
1,873
$
(59
)
1 EBITDA of noncontrolling interests
includes $15 million and $16 million for income for the three
months ended June 30, 2021 and 2020, respectively. For the six
months ended June 30, 2021 and 2020, respectively, EBITDA of
noncontrolling interests includes $31 million and $19 million for
income. Depreciation, depletion, and amortization for the three
months ended June 30, 2021 and 2020, respectively, includes $6
million and $5 million. For the six months ended June 30, 2021 and
2020, respectively, depreciation, depletion, and amortization
includes $12 million and $6 million.
2 CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
ADJUSTED EBITDA AND FREE CASH FLOW OUTLOOK
Adjusted EBITDA and free cash flow are non-GAAP financial
measures that management uses in evaluating operating performance.
Free cash flow is defined as net cash provided by operating
activities less purchase of property, plant and equipment (capital
expenditures). We are unable to reconcile, without unreasonable
effort, our expected adjusted EBITDA or free cash flow generation
to the most directly comparable GAAP financial measure due to the
uncertainty and inherent difficulty of predicting the occurrence
and the financial impact of items impacting comparability. This
includes the finalization of the preliminary allocation of
consideration related to the ArcelorMittal USA acquisition to the
net tangible and intangible assets acquired and liabilities assumed
and associated tax impacts. For the same reasons, we are unable to
address the significance of the unavailable information.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210722005302/en/
MEDIA CONTACT: Patricia Persico Director, Corporate
Communications (216) 694-5316
INVESTOR CONTACT: Paul Finan Vice President, Investor
Relations (216) 694-6544
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