- Net income of $91 million, or $0.33 per diluted share
- Adjusted EBITDA1 of $144 million
Cleveland-Cliffs Inc. (NYSE: CLF) today reported
third-quarter results for the period ended September 30, 2019.
The Company reported consolidated revenues of $556 million,
compared to the prior year's third-quarter consolidated revenues of
$742 million. Cost of goods sold was $401 million compared to $480
million reported in the third quarter of 2018.
The Company recorded net income of $91 million, or $0.33 per
diluted share. This compares to net income of $438 million, or
$1.41 per diluted share recorded in the prior-year quarter, which
included a one-time gain of $228 million related to historical
changes in foreign currency translation. For the nine months ended
September 30, 2019, net income was $230 million, compared to $519
million during the same period in 2018.
For the third quarter of 2019, the Company reported adjusted
EBITDA1 of $144 million.
(In Millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Adjusted EBITDA1
Mining and Pelletizing
$
182.7
$
279.5
$
510.7
$
657.9
Metallics
(2.1
)
(1.0
)
(4.0
)
(2.5
)
Corporate
(36.5
)
(28.2
)
(93.0
)
(77.1
)
Total Adjusted EBITDA1
$
144.1
$
250.3
$
413.7
$
578.3
“This past quarter was a story of continued execution at both
the operational level and at our HBI site under construction in
Toledo. While irrational behavior by one major supplier in the
pellet marketplace has dampened the Atlantic Basin pellet premium,
our business remains on solid footing with a very strong balance
sheet supporting our world-class operations in Minnesota and in
Michigan." Mr. Goncalves concluded, "We believe the currently weak
steel prices in the United States are temporary, and the
cyclicality associated with our business should be largely
mitigated as we start-up HBI next year. With that, Cliffs is
well-positioned to become an even stronger free-cash-flow
generating enterprise, with limited cash needs and the ability to
return even more capital to our shareholders."
Mining and Pelletizing
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Volumes - In Thousands of Long
Tons
Sales volume
5,750
6,481
13,527
14,060
Production volume
5,159
4,719
14,737
14,731
Sales Margin - In Millions
Revenues from product sales and
services
$
590.6
$
741.8
$
1,494.8
$
1,636.1
Cost of goods sold
(424.8
)
(480.2
)
(1,033.5
)
(1,028.5
)
Sales margin
$
165.8
$
261.6
$
461.3
$
607.6
Sales Margin - Per Long Ton
Revenues from product sales and
services*
$
95.65
$
105.65
$
103.26
$
108.53
Cash cost of goods sold rate2
63.20
62.54
64.80
61.81
Depreciation, depletion and
amortization
3.62
2.75
4.35
3.50
Cost of goods sold*
66.82
65.29
69.15
65.31
Sales margin
$
28.83
$
40.36
$
34.11
$
43.22
*Excludes revenues and expenses related to
domestic freight, which are offsetting and have no impact on sales
margin.
Mining and Pelletizing pellet sales volume in the third quarter
of 2019 was 5.8 million long tons, an 11 percent decrease from the
prior-year quarter on reduced customer nominations, partially
offset by intercompany sales to the Toledo HBI plant.
Realized revenues were $96 per long ton in the third quarter of
2019. The quarter's results were negatively impacted by an
unfavorable true-up of previously sold volumes due to lower pellet
premiums and HRC prices.
Outlook
2019 Outlook Summary
Per Long Ton Information
Mining and Pelletizing
Cost of goods sold rate
$73 - $78
Less:
Freight expense rate (A)
$7
Depreciation, depletion & amortization
rate
$4
Cash cost of goods sold rate2
$62 - $67
Sales volume (million long tons)
19.5
Production volume (million long tons)
20.0
(A) Freight has an offsetting amount in
revenue and has no impact on sales margin.
Mining and Pelletizing Outlook (Long Tons)
Based on the assumption that relevant pricing indices will
average for the remainder of 2019 their respective year-to-date
averages, Cliffs would expect to realize Mining and Pelletizing
revenue rates in the range of $101 to $106 per long ton. Assuming
spot prices as of October 22, 2019, including an iron ore price of
$86 per metric ton, a hot-rolled coil steel price of $479 per short
ton, and a pellet premium of $36 per metric ton, will average these
levels for the remainder of 2019, Cliffs would expect to realize
Mining and Pelletizing revenue rates in the range of $97 to $102
per long ton for the full-year 2019.
The 2019 sales volume expectation was revised to 19.5 million
long tons, driven by seaborne export economics and timing. Cliffs'
full-year 2019 Mining and Pelletizing cash cost of goods sold rate2
expectation is maintained at $62 to $67 per long ton.
Other Outlook
Cliffs' full-year 2019 SG&A expense expectation of $120
million is being maintained. Cliffs also notes that of the $120
million expectation, approximately $20 million is considered
non-cash. The Company's full-year 2019 net interest expense
expectation is maintained at $100 million. Full-year 2019
depreciation, depletion and amortization is expected to be
approximately $85 million.
The Company has lowered its effective tax rate expectation for
2019 to approximately 10 percent, from its previous expectation of
12-14 percent. Due to the Company's NOL position, its cash tax
payments are expected to be zero.
Cliffs' 2019 total capital expenditures expectation was reduced
to approximately $625-$675 million, from its previous expectation
of $650-$700 million.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
October 23, 2019, at 9 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. The
company is 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, Cliffs' 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 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. 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: 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 United States-Mexico-Canada Agreement and/or other
trade agreements, treaties or policies; continued volatility of
iron ore and steel prices and other trends, which may impact the
price-adjustment calculations under our sales contracts; our
ability to successfully diversify our product mix and add new
customers beyond our traditional blast furnace clientele; our
ability to cost-effectively achieve planned production rates or
levels, including at our HBI plant; our ability to successfully
identify and consummate any strategic investments or development
projects, including our HBI 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 actual economic iron ore reserves or reductions
in current mineral estimates, including whether any mineralized
material qualifies as a reserve; 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; problems or uncertainties with sales volume or mix,
productivity, tons mined, transportation, mine closure obligations,
environmental liabilities, employee-benefit costs and other risks
of the mining industry; 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; our ability to maintain adequate
liquidity, our level of indebtedness and the availability of
capital could limit cash flow available to fund working capital,
planned 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; our ability to maintain appropriate relations with
unions and employees; 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; events or
circumstances that could impair or adversely impact the viability
of a mine or production plant and the carrying value of associated
assets, as well as any resulting impairment charges; uncertainties
associated with natural disasters, weather conditions,
unanticipated geological conditions, supply or price of energy,
equipment failures and other unexpected events; adverse changes in
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 II – Item 1A. Risk Factors of our Annual Report on Form
10-K for the year ended December 31, 2018. 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 September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
REVENUES FROM PRODUCT SALES AND
SERVICES
Product
$
515.0
$
684.7
$
1,357.8
$
1,525.9
Freight
40.6
57.1
98.0
110.2
555.6
741.8
1,455.8
1,636.1
COST OF GOODS SOLD
(400.7
)
(480.2
)
(1,007.0
)
(1,028.5
)
SALES MARGIN
154.9
261.6
448.8
607.6
OTHER OPERATING EXPENSE
Selling, general and administrative
expenses
(25.5
)
(29.1
)
(82.2
)
(78.9
)
Miscellaneous – net
(7.8
)
(7.0
)
(19.0
)
(18.7
)
(33.3
)
(36.1
)
(101.2
)
(97.6
)
OPERATING INCOME
121.6
225.5
347.6
510.0
OTHER INCOME (EXPENSE)
Interest expense, net
(25.3
)
(29.5
)
(76.5
)
(93.1
)
Gain (loss) on extinguishment of debt
—
—
(18.2
)
0.2
Other non-operating income
0.3
4.3
1.3
13.1
(25.0
)
(25.2
)
(93.4
)
(79.8
)
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES
96.6
200.3
254.2
430.2
INCOME TAX EXPENSE
(4.8
)
(0.5
)
(23.1
)
(14.4
)
INCOME FROM CONTINUING OPERATIONS
91.8
199.8
231.1
415.8
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAX
(0.9
)
238.0
(1.5
)
102.8
NET INCOME
$
90.9
$
437.8
$
229.6
$
518.6
EARNINGS (LOSS) PER COMMON SHARE –
BASIC
Continuing operations
$
0.34
$
0.67
$
0.83
$
1.40
Discontinued operations
—
0.80
(0.01
)
0.35
$
0.34
$
1.47
$
0.82
$
1.75
EARNINGS (LOSS) PER COMMON SHARE –
DILUTED
Continuing operations
$
0.33
$
0.64
$
0.80
$
1.37
Discontinued operations
—
0.77
—
0.34
$
0.33
$
1.41
$
0.80
$
1.71
AVERAGE NUMBER OF SHARES (IN
THOUSANDS)
Basic
269,960
297,878
278,418
297,587
Diluted
276,578
310,203
287,755
303,518
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
September 30, 2019
December 31, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
399.3
$
823.2
Accounts receivable, net
164.9
226.7
Finished goods inventories
162.2
77.8
Work-in-process inventories
55.2
10.1
Supplies and other inventories
110.8
93.2
Derivative assets
72.8
91.5
Income tax receivable, current
58.7
117.3
Other current assets
40.7
39.8
TOTAL CURRENT ASSETS
1,064.6
1,479.6
PROPERTY, PLANT AND EQUIPMENT, NET
1,769.9
1,286.0
OTHER ASSETS
Deposits for property, plant and
equipment
41.6
83.0
Income tax receivable, non-current
62.7
121.3
Deferred income taxes
437.5
464.8
Other non-current assets
114.9
94.9
TOTAL OTHER ASSETS
656.7
764.0
TOTAL ASSETS
$
3,491.2
$
3,529.6
LIABILITIES
CURRENT LIABILITIES
Accounts payable
$
212.8
$
186.8
Accrued employment costs
57.3
74.0
Accrued interest
34.1
38.4
Derivative liabilities
32.6
3.7
Partnership distribution payable
—
43.5
Other current liabilities
121.7
121.8
TOTAL CURRENT LIABILITIES
458.5
468.2
PENSION AND POSTEMPLOYMENT BENEFIT
LIABILITIES
233.2
248.7
ENVIRONMENTAL AND MINE CLOSURE
OBLIGATIONS
179.1
172.0
LONG-TERM DEBT
2,109.1
2,092.9
OTHER LIABILITIES
151.4
123.6
TOTAL LIABILITIES
3,131.3
3,105.4
EQUITY
TOTAL EQUITY
359.9
424.2
TOTAL LIABILITIES AND EQUITY
$
3,491.2
$
3,529.6
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Nine Months Ended September
30,
2019
2018
OPERATING ACTIVITIES
Net income
$
229.6
$
518.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization
63.1
68.6
Deferred income taxes
22.7
—
Loss (gain) on extinguishment of debt
18.2
(0.2
)
Change in derivatives
48.4
(136.4
)
Gain on foreign currency translation
—
(228.1
)
Other
49.4
5.7
Changes in operating assets and
liabilities:
Receivables and other assets
156.5
96.2
Inventories
(129.4
)
(57.1
)
Payables, accrued expenses and other
liabilities
(70.4
)
(78.6
)
Net cash provided by operating
activities
388.1
188.7
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(447.9
)
(111.4
)
Deposits for property, plant and
equipment
(12.8
)
(83.3
)
Other investing activities
11.2
21.0
Net cash used by investing activities
(449.5
)
(173.7
)
FINANCING ACTIVITIES
Repurchase of common shares
(252.9
)
—
Dividends paid
(45.1
)
—
Proceeds from issuance of debt
720.9
—
Debt issuance costs
(6.8
)
(1.5
)
Repurchase of debt
(729.3
)
(16.3
)
Distributions of partnership equity
(44.2
)
(44.2
)
Other financing activities
(9.5
)
(45.7
)
Net cash used by financing activities
(366.9
)
(107.7
)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH
—
(2.3
)
DECREASE IN CASH AND CASH EQUIVALENTS,
INCLUDING CASH CLASSIFIED WITHIN OTHER CURRENT ASSETS RELATED TO
DISCONTINUED OPERATIONS
(428.3
)
(95.0
)
LESS: DECREASE IN CASH AND CASH
EQUIVALENTS FROM DISCONTINUED OPERATIONS, CLASSIFIED WITHIN OTHER
CURRENT ASSETS
(4.4
)
(13.8
)
NET DECREASE IN CASH AND CASH
EQUIVALENTS
(423.9
)
(81.2
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
823.2
978.3
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
399.3
$
897.1
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 September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Net income
$
90.9
$
437.8
$
229.6
$
518.6
Less:
Interest expense, net
(25.4
)
(29.7
)
(76.8
)
(95.5
)
Income tax expense
(4.8
)
(0.5
)
(23.1
)
(14.4
)
Depreciation, depletion and
amortization
(22.2
)
(19.2
)
(63.1
)
(68.6
)
EBITDA
$
143.3
$
487.2
$
392.6
$
697.1
Less:
Impact of discontinued operations
$
(0.8
)
$
238.2
$
(1.2
)
$
120.4
Gain (loss) on extinguishment of debt
—
—
(18.2
)
0.2
Severance costs
—
—
(1.7
)
—
Foreign exchange remeasurement
—
(0.2
)
—
(0.7
)
Impairment of long-lived assets
—
(1.1
)
—
(1.1
)
Adjusted EBITDA
$
144.1
$
250.3
$
413.7
$
578.3
2 CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION EXPLANATIONS
The Company presents cash cost of goods sold rate per long 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 is useful to investors because
it excludes depreciation, depletion and amortization, which are
non-cash, and freight, which has 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.
Below is a reconciliation in dollars of this non-GAAP financial
measure to the Mining and Pelletizing segment cost of goods
sold.
(In Millions)
Mining and Pelletizing
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Cost of goods sold
$
424.8
$
480.2
$
1,033.5
$
1,028.5
Less:
Freight
40.6
57.1
98.0
110.2
Depreciation, depletion &
amortization
20.8
17.8
58.9
49.2
Cash cost of goods sold
$
363.4
$
405.3
$
876.6
$
869.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191023005155/en/
MEDIA CONTACT: Patricia Persico Director, Corporate
Communications (216) 694-5316
INVESTOR CONTACT: Paul Finan Director, Investor Relations
(216) 694-6544
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