Cleveland-Cliffs Inc. (NYSE: CLF) today reported
fourth-quarter and full-year results for the period ended December
31, 2020.
On December 9, 2020, Cleveland-Cliffs completed the acquisition
of substantially all the operations of ArcelorMittal USA LLC
("ArcelorMittal USA"), which has since been renamed to
Cleveland-Cliffs Steel LLC. The results set forth in this release
only consider the operating results of Cleveland-Cliffs Steel LLC
for the period from December 9, 2020 through December 31, 2020.
Due to the transformative nature of the ArcelorMittal USA
acquisition, the Company has updated its segment structure to
coincide with its new business model. The Company now has one
reportable segment, Steelmaking. The previous Mining and
Pelletizing segment is included within Steelmaking as iron ore
pellets are a primary raw material for Cliffs' steel products. The
other remaining operating segments, including Tooling and Stamping,
are classified as Other Businesses.
Fourth-Quarter Consolidated Results
Fourth-quarter 2020 consolidated revenues were $2.3 billion,
compared to prior-year fourth-quarter revenues of $534 million.
For the fourth quarter of 2020, the Company recorded net income
of $74 million, or $0.14 per diluted share. This included $44
million of charges, or $0.10 per diluted share, from
acquisition-related costs and amortization of inventory step-up.
This compares to net income of $63 million, or $0.23 per diluted
share, recorded in the fourth quarter of 2019, which included $7
million, or $0.03 per share, of acquisition-related costs.
Fourth-quarter 2020 Adjusted EBITDA1 was $286 million, compared
to $111 million in the fourth quarter of 2019.
Full-Year Consolidated Results
Full-year 2020 consolidated revenues were $5.4 billion, compared
to the prior year's revenues of $2.0 billion.
For the full-year 2020, the Company recorded a net loss of $81
million, which included $186 million of acquisition-related,
amortization of inventory step-up and severance costs. This
compares to 2019 net income of $293 million, which included $9
million of acquisition-related and severance costs.
For the full-year 2020, Adjusted EBITDA1 was $353 million,
compared to $525 million in 2019.
(In Millions)
Three Months Ended
December 31,
Year Ended December
31,
2020
2019
2020
2019
Adjusted EBITDA:
Steelmaking
$
316
$
142
$
433
$
636
Other Businesses
25
—
47
—
Corporate and eliminations
(55
)
(31
)
(127
)
(111
)
Total Adjusted EBITDA1
$
286
$
111
$
353
$
525
Lourenco Goncalves, Chairman, President and Chief Executive
Officer, said: “Without question, 2020 was the most
transformational year in our Company's 173 year history. We
completed two seminal acquisitions, AK Steel and ArcelorMittal USA,
that transformed us from an iron ore miner into the largest
flat-rolled steelmaker in North America. We also completed our
Toledo direct reduction plant, which began operations in the fourth
quarter. We were able to accomplish all of this while navigating
through the COVID-19 pandemic and taking action to preserve the
health and safety of our workforce and our company for the
long-term.”
Mr. Goncalves added: “Our strong fourth quarter results offer
just a sample of what we expect to accomplish in 2021, when we will
show the full magnitude of the ArcelorMittal USA acquisition as
well as the added contribution from our state-of-the art direct
reduction plant. The integration of the ArcelorMittal USA assets
into our portfolio is going extremely well, and we are benefiting
substantially from our increased exposure to markets where we are
currently seeing all-time highs in pricing. Our differentiated
business model is set up perfectly to thrive in this
environment.”
Mr. Goncalves concluded: “We continue to manage supply in a
disciplined manner, and will let our order book dictate our
production levels, not adding volume for volume's sake. We also
have made a serious and important commitment to the environment,
laying out an aggressive plan to reduce greenhouse gas emissions by
25% by 2030. The opportunities that await us in 2021 and beyond are
immense, and we look forward to putting on full display what this
transformed business can accomplish.”
Steelmaking
Steelmaking segment results only include the results of
Cleveland-Cliffs Steel LLC from December 9, 2020 through December
31, 2020. Prior-year comparable data only includes results from the
previous Mining and Pelletizing segment.
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
External Sales
Volumes
Steel Products (net tons)
1,858
N/A
3,783
N/A
Operating Results
- In Millions
Revenues*
$
2,099
$
534
$
4,965
$
1,990
Cost of goods sold
$
1,867
$
(407
)
$
(4,749
)
$
(1,414
)
Selling Price -
Per Net Ton
Average net selling price per net ton of
steel products
$
880
N/A
$
947
N/A
* Includes Realization of deferred revenue
of $35 million for the year ended December 31, 2020.
Fourth-quarter 2020 Steelmaking revenues of $2.1 billion
included approximately $859 million, or 41%, of sales to the
automotive market; $503 million, or 24%, of sales to steel
producers including external pellet sales, slabs and freight; $374
million, or 18%, of sales to the distributors and converters
market; and $363 million, or 17%, of sales to the infrastructure
and manufacturing market.
Fourth-quarter 2020 Steelmaking cost of goods sold of $1.9
billion included depreciation, depletion, and amortization of $105
million; and amortization of inventory step-up charges of $22
million.
Liquidity
As of February 24, 2021, the Company had total liquidity of
approximately $2.6 billion, consisting of approximately $200
million in cash and approximately $2.4 billion of availability
under its ABL credit facility. Of this liquidity balance,
approximately $850 million will be used to redeem senior notes, as
previously announced.
Outlook
Regarding business outlook, Mr. Goncalves stated: “We expect the
continuation of the favorable market environment we are in now, and
an increasingly positive impact of the well-known lagged pricing
mechanisms common in our steel sales. With the contribution of
steel sales from Cleveland-Cliffs Steel LLC for a full quarter, we
expect first-quarter 2021 steel product shipments of approximately
4 million net tons, and a significant improvement in first-quarter
2021 Adjusted EBITDA from the fourth quarter of 2020. Additionally
positive, our second-quarter 2021 profitability should be enhanced
even further by the impact of our initial sales of HBI to outside
clients.”
On capital expenditures, Mr. Goncalves noted: “Our full-year
2021 capital expenditures are expected to stay in the range of $600
million to $650 million. This includes sustaining capital of
approximately $500 million and $60 million in the run-out of Toledo
spend, with the remainder related to minor growth projects at
Precision Partners, Cleveland Works, and Burns Harbor Works.”
The Company provided expectations on the following items for
modeling purposes for the full-year 2021:
- Selling, General, and Administrative Expenses: approximately
$450 million;
- Depreciation, Depletion, and Amortization: approximately $700
million, subject to finalization of purchase price accounting;
- Interest Expense: approximately $315 million in cash interest;
$350 million total including non-cash interest expense; and
- Income Tax: zero U.S Federal cash taxes, approximately 20%
effective income tax rate (non-cash).
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
February 25, 2021, at 10 a.m. ET. The call will be broadcast live
and archived on Cliffs' website: www.clevelandcliffs.com.
About Cleveland-Cliffs Inc.
Cliffs is the largest flat-rolled steel producer in North
America. Founded in 1847 as a mine operator, we are also the
largest producer of iron ore pellets in North America. In 2020, we
acquired two major steelmakers, AK Steel and ArcelorMittal USA,
vertically integrating our legacy iron ore business with
quality-focused steel production and emphasis on the automotive end
market. Our fully integrated portfolio includes custom-made pellets
and hot briquetted iron (HBI); flat-rolled carbon steel, stainless,
electrical, plate, tinplate and long steel products; as well as
carbon and stainless steel tubing, hot and cold stamping and
tooling. Headquartered in Cleveland, Ohio, we employ approximately
25,000 people across our 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; 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 or 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, including within the acquired AK Steel
and ArcelorMittal USA businesses; 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, 2019, our Quarterly Reports on Form
10-Q for the quarterly periods ended March 31, 2020 and September
30, 2020, and other filings with the SEC.
SOURCE: Cleveland-Cliffs Inc.
FINANCIAL TABLES FOLLOW
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED OPERATIONS
(In Millions, Except Per Share
Amounts)
Three Months Ended
December 31,
Year Ended December
31,
2020
2019
2020
2019
Revenues
$
2,256
$
534
$
5,319
$
1,990
Realization of deferred revenue
—
—
35
—
2,256
534
5,354
1,990
Operating costs:
Cost of goods sold
(2,013
)
(407
)
(5,102
)
(1,414
)
Selling, general and administrative
expenses
(95
)
(31
)
(244
)
(113
)
Acquisition-related costs
(22
)
(7
)
(90
)
(7
)
Miscellaneous – net
(19
)
(8
)
(60
)
(27
)
Total operating costs
(2,149
)
(453
)
(5,496
)
(1,561
)
Operating income (loss)
107
81
(142
)
429
Other income (expense):
Interest expense, net
(70
)
(24
)
(238
)
(101
)
Gain (loss) on extinguishment of debt
(3
)
—
130
(18
)
Other non-operating income
26
1
57
3
Total other expense
(47
)
(23
)
(51
)
(116
)
Income (loss) from continuing
operations before income taxes
60
58
(193
)
313
Income tax benefit (expense)
13
5
111
(18
)
Income (loss) from continuing
operations
73
63
(82
)
295
Income (loss) from discontinued
operations, net of tax
1
—
1
(2
)
Net income (loss)
74
63
(81
)
293
Income attributable to noncontrolling
interest
(10
)
—
(41
)
—
Net income (loss) attributable to
Cliffs shareholders
$
64
$
63
$
(122
)
$
293
Earnings (loss) per common share
attributable to Cliffs shareholders - basic
Continuing operations
$
0.15
$
0.23
$
(0.32
)
$
1.07
Discontinued operations
—
—
—
(0.01
)
$
0.15
$
0.23
$
(0.32
)
$
1.06
Earnings (loss) per common share
attributable to Cliffs shareholders - diluted
Continuing operations
$
0.14
$
0.23
$
(0.32
)
$
1.04
Discontinued operations
—
—
—
(0.01
)
$
0.14
$
0.23
$
(0.32
)
$
1.03
Average number of shares (in
thousands)
Basic
418,917
271,021
378,663
276,761
Diluted
444,869
273,521
378,663
284,480
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
112
$
353
Accounts receivable, net
1,169
94
Inventories
3,828
317
Income tax receivable, current
24
59
Other current assets
165
75
Total current assets
5,298
898
Non-current assets:
Property, plant and equipment, net
8,743
1,929
Goodwill
1,406
2
Deferred income taxes
537
460
Other non-current assets
787
215
TOTAL ASSETS
$
16,771
$
3,504
LIABILITIES
Current liabilities:
Accounts payable
$
1,575
$
193
Accrued employment costs
460
67
State and local taxes
147
38
Pension and OPEB liabilities, current
151
4
Other current liabilities
596
107
Total current liabilities
2,929
409
Non-current liabilities:
Long-term debt
5,390
2,114
Pension and OPEB liabilities,
non-current
4,113
312
Other non-current liabilities
1,260
311
TOTAL LIABILITIES
$
13,692
$
3,146
SERIES B PARTICIPATING REDEEMABLE
PREFERRED STOCK
738
—
TOTAL EQUITY
2,341
358
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND EQUITY
$
16,771
$
3,504
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Year Ended December
31,
2020
2019
OPERATING ACTIVITIES
Net income (loss)
$
(81
)
$
293
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation, depletion and
amortization
308
85
Amortization of inventory step-up
96
—
Deferred income taxes
(101
)
17
Loss (gain) on extinguishment of debt
(130
)
18
Loss (gain) on derivatives
(104
)
47
Other
11
66
Changes in operating assets and
liabilities, net of business combination:
Receivables and other assets
(42
)
255
Inventories
(146
)
(136
)
Pension and OPEB payments and
contributions
(75
)
(20
)
Payables, accrued expenses and other
liabilities
3
(62
)
Net cash provided (used) by operating
activities
(261
)
563
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(525
)
(656
)
Acquisition of ArcelorMittal USA, net of
cash acquired
(658
)
—
Acquisition of AK Steel, net of cash
acquired
(869
)
—
Other investing activities
10
12
Net cash used by investing activities
(2,042
)
(644
)
FINANCING ACTIVITIES
Repurchase of common shares
—
(253
)
Dividends paid
(41
)
(72
)
Proceeds from issuance of debt
1,763
721
Debt issuance costs
(76
)
(7
)
Repurchase of debt
(1,023
)
(729
)
Borrowings under credit facilities
2,060
—
Repayments under credit facilities
(550
)
—
SunCoke Middletown distributions to
noncontrolling interest owners
(61
)
—
Other financing activities
(13
)
(54
)
Net cash provided (used) by financing
activities
2,059
(394
)
Decrease in cash and cash equivalents,
including cash classified within other current assets related to
discontinued operations
(244
)
(475
)
Less: decrease in cash and cash
equivalents from discontinued operations, classified within other
current assets
(3
)
(5
)
Net decrease in cash and cash
equivalents
(241
)
(470
)
Cash and cash equivalents at beginning of
year
353
823
Cash and cash equivalents at end of
year
$
112
$
353
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
December 31,
Year Ended December
31,
2020
2019
2020
2019
Net income (loss)
$
74
$
63
$
(81
)
$
293
Less:
Interest expense, net
(70
)
(24
)
(238
)
(101
)
Income tax benefit (expense)
13
5
111
(18
)
Depreciation, depletion and
amortization
(124
)
(22
)
(308
)
(85
)
Total EBITDA
$
255
$
104
$
354
$
497
Less:
EBITDA from noncontrolling interests
$
15
$
—
$
56
$
—
Gain (loss) on extinguishment of debt
(3
)
—
130
(18
)
Severance costs
—
—
(38
)
(2
)
Acquisition-related costs excluding
severance costs
(22
)
(7
)
(52
)
(7
)
Amortization of inventory step-up
(22
)
—
(96
)
—
Impact of discontinued operations
1
—
1
(1
)
Adjusted EBITDA1
$
286
$
111
$
353
$
525
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210225005334/en/
MEDIA CONTACT: Patricia Persico Director, Global
Communications (216) 694-5316
INVESTOR CONTACT: Paul Finan Vice President, Investor
Relations (216) 694-6544
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