Cleveland-Cliffs Inc. (NYSE: CLF) today reported
first-quarter results for the period ended March 31, 2021.
First-quarter 2021 consolidated revenues were $4.0 billion,
compared to the prior-year first-quarter revenues of $359
million.
For the first quarter of 2021, the Company recorded net income
of $41 million, or $0.07 per diluted share. This included the
following charges totaling $160 million, or $0.28 per diluted
share:
- charges of $81 million, or $0.14 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 $66 million, or $0.12 per diluted share, for debt
extinguishment costs; and
- charges of $13 million, or $0.02 per diluted share, for
severance and acquisition-related costs.
In the prior-year first quarter, the Company recorded a net loss
of $52 million, or $0.18 per diluted share.
First-quarter 2021 Adjusted EBITDA1 was $513 million, compared
to $23 million in the first-quarter of 2020.
(In Millions)
Three Months Ended March
31,
2021
2020
Adjusted EBITDA1
Steelmaking
$
537
$
44
Other Businesses
11
2
Corporate and Eliminations
(35
)
(23
)
Total Adjusted EBITDA1
$
513
$
23
Outlook
The Company has increased its full-year 2021 adjusted EBITDA2
guidance to approximately $4.0 billion, up $500 million from its
previous guidance of approximately $3.5 billion. The full-year
revision is based on better-than-expected contractual renewals and
the assumption that the US HRC index price averages $1,100 per net
ton for the last nine months of the year. The Company's
second-quarter adjusted EBITDA2 expectation is $1.2 billion.
Cliffs' Chairman, President, and CEO Lourenco Goncalves said:
“Q1 was just the first full quarter for Cleveland-Cliffs as a fully
transformed business, and we have already accomplished a lot. This
being said, and with all the operational and commercial actions we
have been implementing, the best will come through during the
balance of 2021."
Mr. Goncalves added: “As the year progresses, it will become
abundantly clear that the pricing environment we are in - and will
continue to benefit from going forward - is not a consequence of
luck. Our expectation of $4 billion in adjusted EBITDA for the
full-year is predicated on conservative pricing expectations
relative to today’s pricing and the current forward curve. This
will allow us to generate record levels of free cash flow and pay
down a substantial amount of debt, allowing us to reach leverage of
less than 1x by the end of the year."
Mr. Goncalves concluded, “With our leadership position in the
industry, we are as focused on profitability as we are on
environmental stewardship and on supporting good paying middle
class union jobs. Our commitment to reduce our environmental
footprint will only further strengthen America's position as the
cleanest steelmaking country among all the major steel producing
nations. As a country responsible for just 2% of the global steel
industry's GHG emissions, the United States has the right to
produce steel and manufacture in America, instead of importing
steel and allowing foreign polluting countries to export their full
employment at the expense of the American worker."
Steelmaking
Three Months Ended March 31,
2021
Three Months Ended March 31,
2020
External Sales
Volumes
Steel Products (net tons)
4,144
197
Operating Results
- In Millions
Revenues
$
3,919
$
337
Cost of goods sold
(3,644
)
(335
)
Selling Price -
Per Net Ton
Average net selling price per net ton of
steel products*
$
900
$
980
*The average net selling price per ton for
the three months ended March 31, 2021, reflects changes in mix
associated with the first full quarter of ownership of
ArcelorMittal USA, reducing the overall contribution of
higher-priced coated, stainless and electrical steel products.
First-quarter 2021 steel product volume of 4.1 million net tons
consisted of 33% coated, 28% hot-rolled, 18% cold-rolled, 7% plate,
4% stainless and electrical, and 10% other, including slabs and
rail.
Steelmaking revenues of $3.9 billion included $1.3 billion, or
33%, of sales to the automotive market; $1.2 billion, or 32%, of
sales to the distributors and converters market; $954 million, or
24%, of sales to the infrastructure and manufacturing market; and
$430 million, or 11%, of sales to steel producers.
First-quarter 2021 Steelmaking cost of goods sold included
depreciation, depletion, and amortization of $206 million and
amortization of inventory step-up of $81 million. Segment adjusted
EBITDA of $537 million also included $53 million of SG&A
expense.
Cash Flow and Liquidity
Net cash used by operating activities of $373 million in the
first quarter of 2021 was impacted by approximately $650 million of
net working capital build primarily related to the completion of
the unwind of the ArcelorMittal USA factoring agreement, as
previously disclosed, and increasing receivables due to rising
prices. In addition, the Company made $118 million in deferred
pension contributions under the CARES Act during the first quarter,
which will not recur.
As of April 19, 2021, the Company had total liquidity of
approximately $1.8 billion.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
April 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, 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; our ability to
return capital to shareholders within the expected timeframe 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 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, 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
March 31,
2021
2020
Revenues
$
4,049
$
359
Operating costs:
Cost of goods sold
(3,761
)
(356
)
Selling, general and administrative
expenses
(95
)
(28
)
Acquisition-related costs
(13
)
(42
)
Miscellaneous – net
(3
)
(12
)
Total operating costs
(3,872
)
(438
)
Operating income (loss)
177
(79
)
Other income (expense):
Interest expense, net
(92
)
(31
)
Gain (loss) on extinguishment of debt
(66
)
3
Net periodic benefit credits other than
service cost component
47
6
Total other expense
(111
)
(22
)
Income (loss) from continuing
operations before income taxes
66
(101
)
Income tax benefit (expense)
(9
)
51
Income (loss) from continuing
operations
57
(50
)
Income from discontinued operations, net
of tax
—
1
Net income (loss)
57
(49
)
Income attributable to noncontrolling
interest
(16
)
(3
)
Net income (loss) attributable to
Cliffs shareholders
$
41
$
(52
)
Earnings (loss) per common share
attributable to Cliffs shareholders - basic
Continuing operations
$
0.08
$
(0.18
)
Discontinued operations
—
—
$
0.08
$
(0.18
)
Earnings (loss) per common share
attributable to Cliffs shareholders - diluted
Continuing operations
$
0.07
$
(0.18
)
Discontinued operations
—
—
$
0.07
$
(0.18
)
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
March 31, 2021
December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
110
$
112
Accounts receivable, net
1,659
1,169
Inventories
3,932
3,828
Other current assets
160
189
Total current assets
5,861
5,298
Non-current assets:
Property, plant and equipment, net
9,014
8,743
Goodwill
994
1,406
Deferred income taxes
562
537
Other non-current assets
784
787
TOTAL ASSETS
$
17,215
$
16,771
LIABILITIES
Current liabilities:
Accounts payable
$
1,743
$
1,575
Accrued employment costs
465
460
Pension and OPEB liabilities, current
151
151
Other current liabilities
574
743
Total current liabilities
2,933
2,929
Non-current liabilities:
Long-term debt
5,734
5,390
Pension and OPEB liabilities,
non-current
3,916
4,113
Other non-current liabilities
1,175
1,260
TOTAL LIABILITIES
13,758
13,692
SERIES B PARTICIPATING REDEEMABLE
PREFERRED STOCK
738
738
TOTAL EQUITY
2,719
2,341
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND EQUITY
$
17,215
$
16,771
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Three Months Ended
March 31,
2021
2020
OPERATING ACTIVITIES
Net income (loss)
$
57
$
(49
)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation, depletion and
amortization
217
35
Amortization of inventory step-up
81
23
Changes in deferred revenue
(3
)
(48
)
Deferred income taxes
10
(48
)
Loss (gain) on extinguishment of debt
66
(3
)
Other
(2
)
51
Changes in operating assets and
liabilities, net of business combination:
Receivables and other assets
(480
)
254
Inventories
(172
)
(267
)
Pension and OPEB payments and
contributions
(175
)
(13
)
Payables, accrued expenses and other
liabilities
22
(99
)
Net cash used by operating activities
(379
)
(164
)
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(136
)
(138
)
Acquisition of AK Steel, net of cash
acquired
—
(869
)
Other investing activities
1
—
Net cash used by investing activities
(135
)
(1,007
)
FINANCING ACTIVITIES
Proceeds from issuance of common
shares
322
—
Proceeds from issuance of debt
1,000
716
Debt issuance costs
(16
)
(44
)
Repayments of debt
(902
)
(430
)
Borrowings under credit facilities
1,158
800
Repayments under credit facilities
(1,010
)
—
Other financing activities
(40
)
(37
)
Net cash provided by financing
activities
512
1,005
Net decrease in cash and cash
equivalents
(2
)
(166
)
Cash and cash equivalents at beginning of
period
112
353
Cash and cash equivalents at end of
period
$
110
$
187
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
March 31,
2021
2020
Net income (loss)
$
57
$
(49
)
Less:
Interest expense, net
(92
)
(31
)
Income tax benefit (expense)
(9
)
51
Depreciation, depletion and
amortization
(217
)
(35
)
Total EBITDA
$
375
$
(34
)
Less:
EBITDA of noncontrolling interests1
$
22
$
4
Gain (loss) on extinguishment of debt
(66
)
3
Severance costs
(11
)
(19
)
Acquisition-related costs excluding
severance costs
(2
)
(23
)
Amortization of inventory step-up
(81
)
(23
)
Impact of discontinued operations
—
1
Total Adjusted EBITDA
$
513
$
23
1 EBITDA of noncontrolling interests
includes $16 million and $3 million for income and $6 million and
$1 million for depreciation, depletion and amortization for the
three months ended March 31, 2021 and 2020, respectively.
2 CLEVELAND-CLIFFS INC. AND SUBSIDIARIES
ADJUSTED EBITDA OUTLOOK
We are unable to reconcile, without unreasonable effort, our
expected adjusted EBITDA to its most directly comparable GAAP
financial measure, net income, 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/20210422005360/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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