- Net income increases 728 percent to
$438 million
- Adjusted EBITDA increases 66 percent to
$250 million
- Company begins cash dividend of $0.20
per share on an annualized basis, to be paid quarterly
Cleveland-Cliffs Inc. (NYSE: CLF) today reported
third-quarter results for the period ended September 30, 2018.
The Company reported consolidated revenues of $742 million,
compared to the prior year's third-quarter consolidated revenues of
$597 million. Cost of goods sold was $480 million compared to $439
million reported in the third quarter of 2017.
Net income was $438 million, or $1.41 per diluted share,
compared to $53 million, or $0.18 per diluted share, recorded in
the prior-year third quarter. For the nine months ended September
30, 2018, net income was $519 million, compared to $53 million
during the same period in 2017.
For the third quarter of 2018, the Company reported adjusted
EBITDA1 of $250 million, a 66 percent increase from the
prior-year's third quarter adjusted EBITDA of $151 million.
(In Millions) Three Months Ended
Nine Months Ended September 30, September
30, 2018 2017
2018 2017 Adjusted
EBITDA1 U.S. Iron Ore
$ 279.5 $ 174.2
$
657.9 $ 399.8 Corporate/Other
(29.2 ) (23.4 )
(79.6 ) (73.9 )
Total Adjusted EBITDA1
$ 250.3 $ 150.8
$ 578.3
$ 325.9
Lourenco Goncalves, Cleveland-Cliffs' Chairman, President and
Chief Executive Officer, said, “This quarter's results are another
clear demonstration of the strength of Cleveland-Cliffs’ unique
business model as a supplier of highly customized high-grade iron
units to select steelmakers. The success of our four-year
transformational journey is on full display." Mr. Goncalves added,
"As we begin to wrap up the year, we expect current strong market
conditions to support our strong profitability through the next
quarter and into 2019. Our long-term forecast of predictable and
consistent cash flow generation, as well as the great progress we
continue to make on the HBI project, gave us the comfort to
implement a healthy quarterly dividend." Mr. Goncalves concluded,
"It has now become abundantly clear to the market in general that
global supply-demand dynamics have shifted favorably towards
producers of high-grade iron units. We at Cleveland-Cliffs were
ahead of the curve on identifying the trend, and will continue to
center and expand our proven strategy around this premise. "
Cleveland-Cliffs announced that on October 18,
2018, its Board of Directors declared a quarterly cash
dividend on the Company's common shares of $0.05 per share.
This equates to $0.20 per year on an annualized basis. The cash
dividend will be payable on January 15, 2019, to shareholders
of record as of the close of business on January 4, 2019.
Cliffs expects to pay the dividend on a quarterly basis, subject to
the approval of its Board of Directors.
U.S. Iron Ore
Three Months Ended Nine Months Ended
September 30, September 30, 2018 2017
2018 2017
Volumes - In
Thousands of Long Tons
Sales volume
6,481 5,863
14,060 13,291 Production
volume
4,719 4,265
14,731 13,233
Sales Margin - In
Millions
Revenues from product sales and services
$ 741.8 $
596.7
$ 1,636.1 $ 1,354.2 Cost of goods sold and
operating expenses
480.2 438.9
1,028.5
1,002.7 Sales margin
$ 261.6 $ 157.8
$ 607.6 $ 351.5
Sales Margin -
Per Long Ton
Revenues from product sales and services*
$ 105.65 $
90.52
$ 108.53 $ 89.91 Cash cost of goods sold
and operating expense rate2
62.54 60.79
61.81 59.73
Depreciation, depletion and amortization
2.75 2.81
3.50 3.73 Cost of goods sold and operating
expenses*
65.29 63.60
65.31
63.46 Sales margin
$ 40.36 $ 26.92
$ 43.22 $ 26.45
*Excludes revenues and expenses related to domestic freight,
which are offsetting and have no impact on sales margin. Revenues
and expenses also exclude venture partner cost reimbursements,
where applicable.
U.S. Iron Ore pellet sales volume in the third quarter of 2018
was 6.5 million long tons. The 10 percent increase from the
third-quarter 2017 volume of 5.9 million long tons was driven
primarily by increased customer demand.
Realized revenues per ton of $105.65 increased 17 percent from
the prior-year period, primarily as a result of increased steel
pricing and pellet premiums, which are magnified by favorable
contract structures. This increase was partially offset by higher
freight rates.
Cash cost of goods sold and operating expense rate2 in U.S. Iron
Ore was $62.54 per long ton, compared to $60.79 per long ton in the
prior year's third quarter. The increase was driven by higher
employee-related expenses and higher royalties.
Other Income Statement Items
During August 2018, the Company completed the sale of its Asia
Pacific Iron Ore assets to Mineral Resources Limited. As a result,
the historical changes in foreign currency translation of $228
million were reclassified and recognized as a gain in Income from
Discontinued Operations.
Miscellaneous-net expense of $6 million included, among other
items, $5 million in charges related to the indefinite idle at
Empire mine.
Outlook
2018 Outlook Summary Per Long Ton Information
U.S. Iron Ore Revenues from product sales and services (A)
$105 - $110 Cost of goods sold and operating expense rate
$69 - $74 Less: Freight expense rate (B) $8 Depreciation, depletion
& amortization rate $3 Cash cost of goods sold and operating
expense rate2 $58 - $63 Sales volume (million long tons)
21.0 Production volume (million long tons) 20.0 (A) This
expectation is based on the assumption that iron ore prices, steel
prices, and pellet premiums will average for the remainder of 2018
their respective year-to-date averages. (B) Freight has an
offsetting amount in revenue and has no impact on sales margin.
U.S. Iron Ore Outlook (Long Tons)
Based on the assumption that iron ore prices, steel prices, and
pellet premiums will average for the remainder of 2018 their
respective year-to-date averages, Cliffs would realize USIO
revenue rates in the range of $105 to $110 per long ton. This range
remains consistent with the prior calculation as the year-to-date
average increase in hot-rolled coil steel prices has been offset by
higher freight rates.
Cliffs full-year sales volume expectation of 21 million long
tons and production volume expectation of 20 million long tons were
each maintained.
Cliffs' full-year 2018 U.S. Iron Ore cash cost of goods sold and
operating expense expectation is unchanged at $58 - $63 per long
ton.
SG&A Expense and Other Expectations
Cliffs' full-year 2018 SG&A expense expectation of $115
million is being maintained. Cliffs also notes that of the $115
million expectation, approximately $20 million is considered
non-cash.
The Company's full-year 2018 net interest expense expectation
was maintained at $120 million.
Full-year 2018 depreciation, depletion and amortization
associated with U.S. Iron Ore and Corporate/Other is expected to be
approximately $80 million.
Capital Expenditures
Cliffs provided the following updates to its 2018 capital
expenditures budget:
- the Toledo HBI Project spend
expectation was reduced by $25 million to $175 million due to
further development and refined timing of the project spending
plan;
- the sustaining capital expectation of
$75 million was maintained; and
- the Northshore Mine upgrade spend
expectation of $50 million was maintained.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
October 19, 2018, at 10 a.m. ET. The call will be broadcast live
and archived on Cliffs' website: www.clevelandcliffs.com
About Cleveland-Cliffs Inc.
Founded in 1847, Cleveland-Cliffs Inc. is the largest and oldest
independent iron ore mining company in the United States. We are a
major supplier of iron ore pellets to the North American steel
industry from our mines and pellet plants located in Michigan and
Minnesota. By 2020, Cliffs expects to be the sole producer of hot
briquetted iron (HBI) in the Great Lakes region with the
development of its first production plant in Toledo, Ohio. Driven
by the core values of safety, social, environmental and capital
stewardship, our employees endeavor to provide all stakeholders
with operating and financial transparency. For more information,
visit http://www.clevelandcliffs.com.
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 Cliffs’ 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. Uncertainties and risk
factors that could affect Cliffs’ future performance and cause
results to differ from the forward-looking statements in this
report include, but are not limited to: uncertainty and weaknesses
in global economic conditions, including downward pressure on
prices caused by oversupply or imported products, reduced market
demand and 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 North American Free Trade Agreement and/or other
trade agreements, treaties or policies; continued volatility of
iron ore and steel prices and other trends, including the supply
approach of the major iron ore producers, affecting our financial
condition, results of operations or future prospects, specifically
the impact of price-adjustment factors on our sales contracts; our
ability to cost-effectively achieve planned production rates or
levels, including at our HBI production plant; our ability to
successfully identify and consummate any strategic investments or
development projects, including our HBI production plant; the
impact of our customers reducing their steel production due to
increased market share of steel produced using other methods or
lighter-weight steel alternatives; our ability to successfully
diversify our product mix and add new customers beyond our
traditional blast furnace clientele; our actual economic iron ore
reserves or reductions in current mineral estimates, including
whether any mineralized material qualifies as a reserve; our
ability to maintain appropriate relations with unions and
employees; the outcome of any contractual disputes with our
customers, joint venture partners or significant energy, material
or service providers or any other litigation or arbitration; the
ability of our customers and joint venture partners to meet their
obligations to us on a timely basis or at all; problems or
uncertainties with productivity, tons mined, transportation,
mine-closure obligations, environmental liabilities,
employee-benefit costs and other risks of the mining industry; our
ability to reach agreement with our customers regarding any
modifications to sales contract provisions, renewals or new
arrangements; our actual levels of capital spending; our level of
indebtedness could limit cash flow available to fund working
capital, capital expenditures, acquisitions and other general
corporate purposes or ongoing needs of our business; our ability to
continue to pay cash dividends, and the amount and timing of any
cash dividends; availability of capital and our ability to maintain
adequate liquidity; changes in sales volume or mix; events or
circumstances that could impair or adversely impact the viability
of a mine and the carrying value of associated assets, as well as
any resulting impairment charges; impacts of existing and
increasing governmental regulation and related costs and
liabilities, including failure to receive or maintain required
operating and 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; uncertainties associated with
natural disasters, weather conditions, unanticipated geological
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; and the potential
existence of significant deficiencies or material weakness 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, 2017. You are urged to
carefully consider these risk factors.
FINANCIAL TABLES FOLLOW
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES STATEMENTS
OF UNAUDITED CONDENSED CONSOLIDATED OPERATIONS (In
Millions, Except Per Share Amounts) Three Months Ended
Nine Months Ended September 30,
September 30, 2018 2017
2018
2017 REVENUES FROM PRODUCT SALES AND SERVICES Product
$
684.7 $ 530.7
$ 1,525.9 $ 1,195.0 Freight and
venture partners' cost reimbursements
57.1 66.0
110.2 159.2
741.8 596.7
1,636.1 1,354.2 COST OF GOODS SOLD AND OPERATING EXPENSES
(480.2 ) (438.9 )
(1,028.5 ) (1,002.7 )
SALES MARGIN
261.6 157.8
607.6 351.5 OTHER OPERATING
INCOME (EXPENSE) Selling, general and administrative expenses
(30.1 ) (23.8 )
(81.4 ) (75.5 )
Miscellaneous – net
(6.0 ) (5.3 )
(16.2
) 1.3
(36.1 ) (29.1 )
(97.6
) (74.2 ) OPERATING INCOME
225.5 128.7
510.0
277.3 OTHER INCOME (EXPENSE) Interest expense, net
(29.5
) (27.6 )
(93.1 ) (99.1 ) Gain (loss) on
extinguishment of debt
— (88.6 )
0.2 (165.4 ) Other
non-operating income
4.3 2.6
13.1
7.6
(25.2 ) (113.6 )
(79.8
) (256.9 ) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES
200.3 15.1
430.2 20.4 INCOME TAX BENEFIT
(EXPENSE)
(0.5 ) 7.2
(14.4 ) 7.2
INCOME FROM CONTINUING OPERATIONS
199.8 22.3
415.8 27.6 INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
238.0 30.6
102.8 25.6 NET
INCOME
437.8 52.9
518.6 53.2 LOSS ATTRIBUTABLE TO
NONCONTROLLING INTEREST
— 0.5
—
3.9 NET INCOME ATTRIBUTABLE TO CLIFFS SHAREHOLDERS
$
437.8 $ 53.4
$ 518.6 $
57.1 INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS
SHAREHOLDERS – BASIC Continuing operations
$ 0.67 $
0.08
$ 1.40 $ 0.11 Discontinued operations
0.80 0.10
0.35 0.09
$ 1.47 $ 0.18
$ 1.75
$ 0.20 INCOME PER COMMON SHARE ATTRIBUTABLE TO CLIFFS
SHAREHOLDERS – DILUTED Continuing operations
$ 0.64 $
0.08
$ 1.37 $ 0.11 Discontinued operations
0.77 0.10
0.34 0.08
$ 1.41 $ 0.18
$ 1.71
$ 0.19 AVERAGE NUMBER OF SHARES (IN THOUSANDS) Basic
297,878 296,079
297,587 285,771 Diluted
310,203 301,075
303,518 290,512
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES STATEMENTS OF
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions) September 30, December 31,
2018 2017
ASSETS
CURRENT ASSETS Cash and cash equivalents
$ 897.1 $
978.3 Accounts receivable, net
141.4 106.7 Inventories
187.9 138.4 Supplies and other inventories
88.2 88.8
Derivative assets
190.8 37.9 Income tax receivable
110.3 13.3 Current assets of discontinued operations
16.1 118.5 Loans to and accounts receivable from the
Canadian Entities
— 51.6 Other current assets
18.8
11.1
TOTAL CURRENT ASSETS
1,650.6 1,544.6 PROPERTY, PLANT AND EQUIPMENT, NET
1,144.8 1,033.8 OTHER ASSETS Deposits for property, plant
and equipment
94.6 17.8 Income tax receivable
113.6
235.3 Non-current assets of discontinued operations
— 20.3
Other non-current assets
121.4 101.6 TOTAL
OTHER ASSETS
329.6 375.0 TOTAL ASSETS
$
3,125.0 $ 2,953.4
LIABILITIES
CURRENT LIABILITIES Accounts payable
$ 140.8 $ 99.5
Accrued expenses
95.1 79.1 Accrued interest
26.2 31.4
Contingent claims
— 55.6 Partnership distribution payable
43.1 44.2 Current liabilities of discontinued operations
14.2 75.0 Other current liabilities
61.3 67.4
TOTAL CURRENT LIABILITIES
380.7 452.2
PENSION AND POSTEMPLOYMENT BENEFIT LIABILITIES
$
225.0 $ 257.7 ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS
174.4 167.7 LONG-TERM DEBT
2,300.0 2,304.2
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS
9.3 52.2
OTHER LIABILITIES
121.8 163.5 TOTAL
LIABILITIES
3,211.2 3,397.5
EQUITY
CLIFFS SHAREHOLDERS' DEFICIT
(86.2 )
(444.3 ) NONCONTROLLING INTEREST
— 0.2 TOTAL
DEFICIT
(86.2 ) (444.1 ) TOTAL LIABILITIES AND
DEFICIT
$ 3,125.0 $ 2,953.4
CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
STATEMENTS OF UNAUDITED CONDENSED CONSOLIDATED CASH FLOWS
(In Millions) Nine Months Ended September
30, 2018 2017 OPERATING ACTIVITIES Net income
$ 518.6 $ 53.2
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization
68.6 66.3 Loss
(gain) on extinguishment of debt
(0.2 ) 165.4 Loss on
deconsolidation
— 16.3 Gain on derivatives
(136.4
) (47.5 ) Gain on foreign currency translation
(228.1
) — Other
5.7 19.0 Changes in operating assets and
liabilities: Receivables and other assets
96.2 68.9
Inventories
(57.1 ) (26.1 ) Payables, accrued
expenses and other liabilities
(78.6 ) (108.8 ) Net
cash provided by operating activities
188.7 206.7 INVESTING
ACTIVITIES
Purchase of property, plant and
equipment
(111.4 ) (62.7 ) Deposits for property, plant and
equipment
(83.3 ) (16.2 ) Proceeds on sales of assets
18.5 2.2 Other investing activities
2.5 (7.7 )
Net cash used by investing activities
(173.7 ) (84.4
) FINANCING ACTIVITIES Net proceeds from issuance of common shares
— 661.3 Proceeds from issuance of debt
— 1,057.8 Debt
issuance costs
(1.5 ) (12.0 ) Repurchase of debt
(16.3 ) (1,720.7 ) Acquisition of noncontrolling
interest
— (105.0 ) Distributions of partnership equity
(44.2 ) (53.0 ) Other financing activities
(45.7 ) (17.0 ) Net cash used by financing activities
(107.7 ) (188.6 ) EFFECT OF EXCHANGE RATE CHANGES ON
CASH
(2.3 ) 3.7 DECREASE IN CASH AND CASH
EQUIVALENTS, INCLUDING CASH CLASSIFIED WITHIN CURRENT ASSETS OF
DISCONTINUED OPERATIONS
(95.0 ) (62.6 ) LESS:
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CLASSIFIED WITHIN
CURRENT ASSETS OF DISCONTINUED OPERATIONS
(13.8 )
23.1 NET DECREASE IN CASH AND CASH EQUIVALENTS
(81.2
) (85.7 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
978.3 312.8 CASH AND CASH EQUIVALENTS AT END
OF PERIOD
$ 897.1 $ 227.1
1 CLEVELAND-CLIFFS INC. AND
SUBSIDIARIESNON-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
Nine Months Ended September 30, September 30,
2018 2017
2018 2017 Net Income
$
437.8 $ 52.9
$ 518.6 $ 53.2 Less: Interest
expense, net
(29.7 ) (28.9 )
(95.5 )
(103.1 ) Income tax benefit (expense)
(0.5 ) 7.6
(14.4 ) 6.8 Depreciation, depletion and amortization
(19.2 ) (21.5 )
(68.6 ) (66.3 ) EBITDA
$ 487.2 $ 95.7
$ 697.1
$ 215.8 Less: Impact of discontinued operations
$ 238.2 $ 34.8
$ 120.4 $ 41.3 Foreign
exchange remeasurement
(0.2 ) (1.3 )
(0.7
) 14.0 Gain (loss) on extinguishment of debt
— (88.6
)
0.2 (165.4 ) Impairment of long-lived assets
(1.1
) —
(1.1 ) — Adjusted EBITDA
$ 250.3 $ 150.8
$ 578.3
$ 325.9
2 CLEVELAND-CLIFFS INC. AND
SUBSIDIARIESNON-GAAP RECONCILIATION EXPLANATIONS
The Company presents cash cost of goods sold and operating
expense rate per long/metric ton, which is a non-GAAP financial
measure that management uses in evaluating operating performance.
Cliffs believes the presentation of non-GAAP cash cost of goods
sold and operating expenses is useful to investors because it
excludes depreciation, depletion and amortization, which are
non-cash, and freight and venture partners' cost reimbursements,
which have no impact on sales margin, thus providing a more
accurate view of the cash outflows related to the sale of iron ore.
The presentation of this measure 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 this measure may be different from
non-GAAP financial measures used by other companies.
(In Millions) U.S. Iron Ore Three Months
Ended Nine Months Ended September 30,
September 30, 2018 2017
2018
2017 Cost of goods sold and operating expenses
$
480.2 $ 438.9
$ 1,028.5 $ 1,002.7 Less:
Freight and reimbursements
57.1 66.0
110.2 159.2
Depreciation, depletion & amortization
17.8 16.5
49.2 49.6 Cash cost of goods sold and
operating expenses
$ 405.3 $ 356.4
$ 869.1 $ 793.9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181019005065/en/
Cleveland-Cliffs Inc.Media:Patricia Persico,
216-694-5316Director, Corporate
CommunicationsorInvestors:Paul Finan, 216-694-6544Director,
Investor Relations
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cleveland Cliffs (NYSE:CLF)
Historical Stock Chart
From Apr 2023 to Apr 2024