- Record quarterly revenue of $6.0 billion
- Record quarterly net income of $1.3 billion
- Record quarterly adjusted EBITDA1 of $1.9 billion
Cleveland-Cliffs Inc. (NYSE: CLF) today reported
third-quarter results for the period ended September 30, 2021.
Third-quarter 2021 consolidated revenues were $6.0 billion,
compared to the prior-year third-quarter revenues of $1.6
billion.
For the third quarter of 2021, the Company recorded net income
of $1.3 billion, or $2.33 per diluted share. In the prior-year
third quarter, the Company recorded net income of $2 million.
For the first nine months of 2021, the Company recorded revenues
of $15.1 billion and net income of $2.1 billion, or $3.69 per
diluted share. In the first nine months of 2020, the Company
recorded revenues of $3.1 billion and a net loss of $155 million,
or a loss of $0.51 per diluted share.
Third-quarter 2021 adjusted EBITDA1 was $1.9 billion, compared
to adjusted EBITDA1 of $126 million in the third quarter of
2020.
(In Millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Adjusted EBITDA1
Steelmaking
$
1,969
$
127
$
3,901
$
117
Other Businesses
6
18
25
22
Corporate and Eliminations
(42
)
(19
)
(120
)
(72
)
Total Adjusted EBITDA1
$
1,933
$
126
$
3,806
$
67
Lourenco Goncalves, Cliffs' Chairman, President, and CEO said:
“In a short period of less than two years, we went from $2 billion
annual revenues in 2019 to expected revenues of $21 billion in
2021. Also, the $1.9 billion of Q3 adjusted EBITDA we have just
reported is equivalent to half of our year-to-date adjusted EBITDA
of $3.8 billion, showing that our profitability continues to
increase, as we continue to implement our way of doing business,
and take advantage of - and extract synergies from - our modern,
efficient and unique footprint.”
Mr. Goncalves continued: "Our record free cash flow generated
this quarter was used to retire the entirety of our outstanding
preferred shares, equating to a 10% share buyback, a meaningful
reduction in share count to the benefit of our shareholders. This
month, we agreed to acquire Ferrous Processing and Trading Company,
the leading prime scrap processor in the United States. The
integration of FPT into our Cleveland-Cliffs footprint as a premier
flat-rolled steel producer should allow us to utilize more prime
scrap in our BOFs, further reducing both our utilization of coke
and our carbon emissions. We are looking forward to closing this
acquisition in the fourth quarter and capturing more value from our
scrap right away. This is real growth; profitable growth;
environmentally friendly growth.”
Mr. Goncalves concluded: “The Cleveland-Cliffs business model is
based on a significant amount of contract sales. We have already
concluded the renewal of several annual fixed price sales contracts
with a significant number of our most important customers, and we
are pleased with the successful results of these negotiations.
Differently from other steel companies more exposed to spot prices,
we believe that our average sales price next year should be higher
than in 2021, allowing us to continue to grow our already strong
profitability and to further strengthen our balance sheet."
Steelmaking
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
External Sales Volumes
Steel Products (net tons)
4,153
1,115
12,502
1,926
Operating Results
- In Millions
Revenues
$
5,869
$
1,506
$
14,710
$
2,866
Cost of goods sold
(4,098
)
(1,405
)
(11,472
)
(2,882
)
Selling Price -
Per Net Ton
Average net selling price per net ton of
steel products
$
1,334
$
1,000
$
1,122
$
1,011
Third-quarter 2021 steel product volume of 4.2 million net tons
consisted of 32% hot-rolled, 31% coated, 18% cold-rolled, 6% plate,
4% stainless and electrical, and 9% other, including slabs and
rail.
Steelmaking revenues of $5.9 billion included $2.5 billion, or
42%, of sales to the distributors and converters market; $1.6
billion, or 27%, of sales to the infrastructure and manufacturing
market; $1.1 billion, or 20%, of sales to the automotive market;
and $670 million, or 11%, of sales to steel producers.
Third-quarter 2021 Steelmaking cost of goods sold included
depreciation, depletion, and amortization of $229 million and
amortization of inventory step-up of $11 million. Steelmaking
Segment adjusted EBITDA of $2.0 billion included $66 million of
SG&A expense.
Liquidity
As of October 19, 2021, the Company had total liquidity of
approximately $2.2 billion.
Conference Call Information
Cleveland-Cliffs Inc. will host a conference call this morning,
October 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 supplier of steel 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:
our ability to successfully complete the acquisition (the "FPT
Acquisition") of Ferrous Processing and Trading Company ("FPT");
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 and supply chain disruptions, such as the
microchip shortage, 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 the FPT Acquisition and to successfully integrate the
business of FPT into our existing businesses, including
uncertainties associated with maintaining relationships with
customers, vendors and employees; additional debt we will incur in
connection with the FPT Acquisition, as well as additional debt we
incurred in connection with enhancing our liquidity during the
COVID-19 pandemic, the merger with AK Steel Holding Corporation and
the acquisition of ArcelorMittal USA LLC, may negatively impact our
credit profile and limit our financial flexibility; known and
unknown liabilities we will assume in connection with the FPT
Acquisition; 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 other postretirement benefit 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. The Company undertakes no obligation to
publicly update forward-looking statements, whether as a result of
new information, future events or otherwise.
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 September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Revenues
$
6,004
$
1,646
$
15,098
$
3,098
Operating costs:
Cost of goods sold
(4,229
)
(1,525
)
(11,838
)
(3,089
)
Selling, general and administrative
expenses
(112
)
(59
)
(311
)
(149
)
Acquisition-related costs
(4
)
(7
)
(18
)
(68
)
Miscellaneous – net
(10
)
(17
)
(38
)
(41
)
Total operating costs
(4,355
)
(1,608
)
(12,205
)
(3,347
)
Operating income (loss)
1,649
38
2,893
(249
)
Other income (expense):
Interest expense, net
(81
)
(68
)
(258
)
(168
)
Gain (loss) on extinguishment of debt
—
—
(88
)
133
Net periodic benefit credits other than
service cost component
46
9
139
30
Other non-operating income
1
1
5
1
Total other expense
(34
)
(58
)
(202
)
(4
)
Income (loss) from continuing
operations before income taxes
1,615
(20
)
2,691
(253
)
Income tax benefit (expense)
(334
)
22
(559
)
98
Income (loss) from continuing
operations
1,281
2
2,132
(155
)
Income from discontinued operations, net
of tax
1
—
2
—
Net income (loss)
1,282
2
2,134
(155
)
Income attributable to noncontrolling
interest
(8
)
(12
)
(39
)
(31
)
Net income (loss) attributable to
Cliffs shareholders
$
1,274
$
(10
)
$
2,095
$
(186
)
Earnings (loss) per common share
attributable to Cliffs shareholders - basic
Continuing operations
$
2.46
$
(0.02
)
$
3.87
$
(0.51
)
Discontinued operations
—
—
—
—
$
2.46
$
(0.02
)
$
3.87
$
(0.51
)
Earnings (loss) per common share
attributable to Cliffs shareholders - diluted
Continuing operations
$
2.33
$
(0.02
)
$
3.69
$
(0.51
)
Discontinued operations
—
—
—
—
$
2.33
$
(0.02
)
$
3.69
$
(0.51
)
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL POSITION
(In Millions)
September 30,
2021
December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
42
$
112
Accounts receivable, net
2,348
1,169
Inventories
4,505
3,828
Other current assets
251
189
Total current assets
7,146
5,298
Non-current assets:
Property, plant and equipment, net
8,974
8,743
Goodwill
1,072
1,406
Deferred income taxes
70
537
Other non-current assets
804
787
TOTAL ASSETS
$
18,066
$
16,771
LIABILITIES
Current liabilities:
Accounts payable
$
1,828
$
1,575
Accrued employment costs
592
460
Pension and OPEB liabilities, current
151
151
Other current liabilities
708
743
Total current liabilities
3,279
2,929
Non-current liabilities:
Long-term debt
5,350
5,390
Pension and OPEB liabilities,
non-current
3,773
4,113
Other non-current liabilities
1,374
1,260
TOTAL LIABILITIES
13,776
13,692
SERIES B PARTICIPATING REDEEMABLE
PREFERRED STOCK
—
738
TOTAL EQUITY
4,290
2,341
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND EQUITY
$
18,066
$
16,771
CLEVELAND-CLIFFS INC. AND
SUBSIDIARIES
STATEMENTS OF UNAUDITED
CONDENSED CONSOLIDATED CASH FLOWS
(In Millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
OPERATING ACTIVITIES
Net income (loss)
$
1,282
$
2
$
2,134
$
(155
)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation, depletion and
amortization
239
73
664
184
Amortization of inventory step-up
11
15
129
74
Changes in deferred revenue
6
(3
)
1
(46
)
Deferred income taxes
332
(17
)
557
(90
)
Pension and OPEB credits
(18
)
(3
)
(59
)
(11
)
Loss (gain) on extinguishment of debt
—
—
88
(133
)
Gain on derivatives
—
(27
)
—
(19
)
Other
20
23
79
47
Changes in operating assets and
liabilities, net of business combination:
Receivables and other assets
(283
)
(106
)
(1,175
)
260
Inventories
(236
)
122
(793
)
(4
)
Pension and OPEB payments and
contributions
(56
)
(14
)
(279
)
(31
)
Payables, accrued expenses and other
liabilities
219
182
302
(127
)
Net cash provided (used) by operating
activities
1,516
247
1,648
(51
)
INVESTING ACTIVITIES
Purchase of property, plant and
equipment
(175
)
(96
)
(473
)
(379
)
Acquisition of AK Steel, net of cash
acquired
—
—
—
(869
)
Acquisition of ArcelorMittal USA, net of
cash acquired
—
—
54
—
Other investing activities
3
8
5
8
Net cash used by investing activities
(172
)
(88
)
(414
)
(1,240
)
FINANCING ACTIVITIES
Series B Redeemable Preferred Stock
redemption
(1,343
)
—
(1,343
)
—
Proceeds from issuance of common
shares
—
—
322
—
Proceeds from issuance of debt
—
—
1,000
1,763
Debt issuance costs
—
—
(17
)
(58
)
Repayments of debt
(7
)
—
(1,346
)
(1,000
)
Borrowings under credit facilities
1,673
—
4,353
800
Repayments under credit facilities
(1,670
)
(150
)
(4,160
)
(400
)
Repayments of leased liabilities
(24
)
(4
)
(70
)
(9
)
SunCoke Middletown distributions to
noncontrolling interest owners
(25
)
(24
)
(57
)
(48
)
Other financing activities
21
1
14
(54
)
Net cash provided (used) by financing
activities
(1,375
)
(177
)
(1,304
)
994
Net decrease in cash and cash
equivalents
(31
)
(18
)
(70
)
(297
)
Cash and cash equivalents at beginning of
period
73
74
112
353
Cash and cash equivalents at end of
period
$
42
$
56
$
42
$
56
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,
2021
2020
2021
2020
Net income (loss)
$
1,282
$
2
$
2,134
$
(155)
Less:
Interest expense, net
(81)
(68)
(258)
(168)
Income tax benefit (expense)
(334)
22
(559)
98
Depreciation, depletion and
amortization
(239)
(72)
(664)
(184)
Total EBITDA
$
1,936
$
120
$
3,615
$
99
Less:
EBITDA of noncontrolling interests1
$
17
$
16
$
60
$
41
Gain (loss) on extinguishment of debt
—
—
(88)
133
Severance costs
(3)
(2)
(15)
(38)
Acquisition-related costs excluding
severance costs
(1)
(5)
(3)
(30)
Acquisition-related loss on equity method
investment
—
—
(18)
—
Amortization of inventory step-up
(11)
(15)
(129)
(74)
Impact of discontinued operations
1
—
2
—
Total Adjusted EBITDA
$
1,933
$
126
$
3,806
$
67
1 EBITDA of noncontrolling interests
includes $8 million and $12 million for income for the three months
ended September 30, 2021 and 2020, respectively. For the nine
months ended September 30, 2021 and 2020, respectively, EBITDA of
noncontrolling interests includes $39 million and $31 million for
income. Depreciation, depletion, and amortization for the three
months ended September 30, 2021 and 2020, respectively, includes $9
million and $4 million. For the nine months ended September 30,
2021 and 2020, respectively, depreciation, depletion, and
amortization includes $21 million and $10 million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211022005095/en/
MEDIA CONTACT: Patricia Persico Director, Corporate
Communications (216) 694-5316
INVESTOR CONTACT: James Kerr Manager, Investor Relations
(216) 694-7719
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