- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ .
Commission File Number:1-8944
CLEVELAND-CLIFFS INC
(Exact name of registrant as specified in its charter)
Ohio 34-1464672
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
1100 Superior Avenue, Cleveland, Ohio 44114-2589
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 694-5700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
As of August 4, 1997, there were 11,379,448 Common Shares (par value $1.00 per
share) outstanding.
==============================================================================
PART I - FINANCIAL INFORMATION
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED INCOME
(In Millions, Except Per Share Amounts)
--------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
REVENUES:
Product sales and services $ 102.7 $ 122.9 $ 123.2 $ 170.8
Royalties and management fees 12.4 13.4 20.7 22.6
------- ------- ------- -------
Total operating revenues 115.1 136.3 143.9 193.4
Investment income (securities) 1.2 1.6 3.4 3.8
Recovery of excess closedown provision 4.3 4.3
Property damage claim recovery 2.0 2.0
Other income 1.5 0.9 1.8 1.4
------- ------- ------- -------
TOTAL REVENUES 122.1 140.8 153.4 200.6
COSTS AND EXPENSES:
Cost of goods sold and operating expenses 96.1 106.2 117.1 152.9
Administrative, selling and general expenses 3.5 3.7 7.2 7.5
Interest expense 0.8 1.2 1.7 2.4
Other expenses 2.2 1.9 3.5 4.7
------- ------- ------- -------
TOTAL COSTS AND EXPENSES 102.6 113.0 129.5 167.5
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 19.5 27.8 23.9 33.1
INCOME TAXES
Currently payable 2.7 8.2 3.3 9.6
Deferred 3.9 1.8 4.7 2.1
------- ------- ------- -------
TOTAL INCOME TAXES 6.6 10.0 8.0 11.7
------- ------- ------- -------
NET INCOME $ 12.9 $ 17.8 $ 15.9 $ 21.4
======= ======= ======= =======
NET INCOME PER COMMON SHARE $ 1.14 $ 1.52 $ 1.40 $ 1.82
======= ======= ======= =======
See notes to financial statements
2
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(In Millions)
-----------------------
June 30, December 31,
ASSETS 1997 1996
------ ------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 61.5 $165.4
Marketable securities 4.0
------ ------
61.5 169.4
Accounts receivable - net 61.8 70.2
Inventories:
Finished products 91.7 28.7
Work in process 0.7 0.9
Supplies 14.9 15.4
------ ------
107.3 45.0
Federal income taxes 6.9 4.4
Other 11.2 11.8
------ ------
TOTAL CURRENT ASSETS 248.7 300.8
PROPERTIES 272.0 269.3
Less allowances for depreciation and depletion (142.6) (141.6)
------ ------
TOTAL PROPERTIES 129.4 127.7
INVESTMENTS IN ASSOCIATED COMPANIES 196.4 161.9
OTHER ASSETS
Long-term investments 11.9 10.8
Deferred income taxes 6.2 11.9
Prepaid pensions 38.3 34.8
Other 23.8 25.8
------ ------
TOTAL OTHER ASSETS 80.2 83.3
------ ------
TOTAL ASSETS $654.7 $673.7
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES $ 81.2 $105.5
LONG-TERM OBLIGATIONS 70.0 70.0
POSTEMPLOYMENT BENEFIT LIABILITIES 70.5 67.5
RESERVE FOR CAPACITY RATIONALIZATION 6.2 15.5
OTHER LIABILITIES 48.2 44.6
SHAREHOLDERS' EQUITY
Preferred Stock
Class A - No Par Value
Authorized - 500,000 shares; Issued - None -- --
Class B - No Par Value
Authorized - 4,000,000 shares; Issued - None -- --
Common Shares - Par Value $1 a share
Authorized - 28,000,000 shares 16.8 16.8
Issued - 16,827,941 shares
Capital in excess of par value of shares 67.3 68.8
Retained income 440.5 432.0
Foreign currency translation adjustments 0.3 0.1
Net unrealized gain (loss) on marketable securities 0.3 (1.0)
Cost of 5,453,493 Common Shares in treasury
(1996 - 5,458,224) (143.2) (142.5)
Unearned Compensation (3.4) (3.6)
------ ------
TOTAL SHAREHOLDERS' EQUITY 378.6 370.6
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $654.7 $673.7
====== ======
See notes to financial statements
3
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED CASH FLOWS
Increase (Decrease)
in Cash and Cash
Equivalents for
Six Months Ended
June 30,
(In Millions)
----------------------
1997 1996
-------- -------
OPERATING ACTIVITIES
Net income $ 15.9 $ 21.4
Depreciation and amortization:
Consolidated 3.5 3.2
Share of associated companies 6.0 5.4
Provision for deferred income taxes 4.8 2.1
Increase (decrease) in capacity rationalization reserve (14.8) 1.5
Other (0.7) (0.1)
------ ------
Total Before Changes in Operating Assets and Liabilities 14.7 33.5
Changes in operating assets and liabilities (75.3) (44.8)
------ ------
NET CASH USED BY OPERATING ACTIVITIES (60.6) (11.3)
INVESTMENT ACTIVITIES
Capital expenditures:
Consolidated (5.0) (4.0)
Share of associated companies (19.2) (7.4)
Purchase of Wabush interest (15.0) --
Other 4.8 --
------ ------
NET CASH USED BY INVESTMENT ACTIVITIES (34.4) (11.4)
FINANCING ACTIVITIES
Dividends (7.4) (7.6)
Repurchases of common shares (1.7) (8.8)
------ ------
NET CASH USED BY FINANCING ACTIVITIES (9.1) (16.4)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 0.2 0.2
------ ------
DECREASE IN CASH AND CASH EQUIVALENTS (103.9) (38.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 165.4 148.8
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 61.5 $109.9
====== ======
Income taxes paid $ 10.7 $ 9.9
Interest paid on debt obligations $ 2.5 $ 2.4
See notes to financial statements
4
CLEVELAND-CLIFFS INC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and should be read in conjunction
with the financial statement footnotes and other information in the Company's
1996 Annual Report on Form 10-K. In management's opinion, the quarterly
unaudited financial statements present fairly the Company's financial position
and results in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
References to the "Company" mean Cleveland-Cliffs Inc and consolidated
subsidiaries, unless otherwise indicated. Quarterly results are not necessarily
representative of annual results due to seasonal and other factors.
Certain prior year amounts have been reclassified to conform to current
year classifications.
NOTE B - ACCOUNTING AND DISCLOSURE CHANGES
In February, 1997, the Financial Accounting Standards Board ("FASB")
issued Statement 128, "Earnings per Share", which simplifies the standards for
computing earnings per share and makes them comparable to international
standards. Under the new requirements, basic earnings per share is expected to
approximate currently reported earnings per share and the impact of the diluted
earnings per share calculation is not expected to be material under the
Company's present capital structure. This Statement is effective for years
ending after December 15, 1997. Early application is not permitted.
In February, 1997, the FASB issued Statement 129, "Disclosure of
Information about Capital Structure," which is effective for years ending after
December 15, 1997. It contains no change in disclosure requirements for the
Company.
In June, 1997, the FASB issued Statement 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The standard is effective for years beginning after
December 15, 1997. Management is evaluating the disclosure alternatives.
In June, 1997, the FASB issued Statement 131, "Disclosures About
Segments of an Enterprise and Related Information." This Statement changes the
way the Company reports segment information in annual and interim financial
statements. It is effective for years beginning after December 15, 1997.
Management is evaluating the disclosure requirements.
5
In October, 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
96-1, "Environmental Remediation Liabilities," the purpose of which is to
improve the manner in which existing authoritative accounting literature is
applied in recognizing, measuring and disclosing environmental remediation
liabilities. The Company's adoption of this statement in the first quarter of
1997 did not have a significant effect on recorded earnings.
NOTE C - ACCOUNTING POLICY CHANGE
In June, 1997, the Company redefined its accounting policy for cash
equivalents to include highly liquid debt instruments with a put option.
Included in cash equivalents at June 30, 1997 are $12.4 million ($12.3 million
at December 31, 1996 - reclassified) variable rate demand notes. These
investments are revalued every seven days and can be put with seven days notice.
The notes are guaranteed by letters of credit from highly rated financial
institutions. The carrying value of these instruments approximates fair value on
the reporting dates.
The new accounting policy is, "The Company considers investments in
highly liquid debt instruments with a put option exercisable in three months or
less or an initial maturity of three months or less to be cash equivalents."
NOTE D - ENVIRONMENTAL RESERVES
The Company has a formal code of environmental conduct which promotes
environmental protection and restoration. The Company's obligations for known
environmental problems at active mining operations, idle and closed mining
operations, and other sites have been recognized based on estimates of the cost
of investigation and remediation at each site. If the cost can only be estimated
as a range of possible amounts with no specific amount being most likely, the
minimum of the range is accrued in accordance with generally accepted accounting
principles. Estimates may change as additional information becomes available.
Actual costs incurred may vary from the estimates due to the inherent
uncertainties involved. Any potential insurance recoveries have not been
reflected in the determination of the financial reserves.
At June 30, 1997, the Company has an environmental reserve, including
its share of the environmental obligations of associated companies, of $24.0
million, of which $3.6 million is current. The reserve includes the Company's
obligations related to:
- Federal and State Superfund and Clean Water Act sites where the
Company is named as a potential responsible party, including
Cliffs-Dow and Kipling sites in Michigan and the Rio Tinto mine
site in Nevada, all of which sites are independent of the
Company's iron mining operations. The reserves are based on
engineering studies prepared by outside consultants engaged by
the potential responsible parties. The Company continues to
evaluate the recommendations of the studies and other means for
site clean-up. Significant site clean-up activities have taken
place at Rio Tinto and Cliffs-Dow.
- Wholly-owned active and idle operations, including Northshore
mine and Silver Bay power plant in Minnesota. The
Northshore/Silver Bay reserve is based on an environmental
investigation conducted by the Company and an outside consultant.
6
- Other sites, including former operations, for which reserves are
based on the Company's estimated cost of investigation and
remediation of sites where expenditures may be incurred.
NOTE E - SAVAGE RIVER MINE CLOSEDOWN OBLIGATIONS
The remaining assets of Savage River Mines and all related
environmental and rehabilitation obligations were transferred to the Tasmanian
government on March 25, 1997. As a result of completion of the transaction, the
Company has recorded a $2.8 million after-tax ($4.3 million pre-tax) credit in
the second quarter 1997 from recognition of actual Savage River Mines closedown
obligations being less than the accrual.
NOTE F - WABUSH INVESTMENT
On June 30, 1997, the Company completed its previously announced
acquisition of Inland Steel Company's 15.1 percent interest in the Wabush Mines
iron ore joint venture in Canada for $15 million, effective January 1, 1997. The
acquisition raises the Company's interest in the Company-managed venture to 22.8
percent. Depending on the magnitude of future tonnage, additional payments to
Inland may be required, but would not be expected to be material in any year.
Separately, the Company revised existing sales arrangements with Inland
to supply Inland's pellet requirements beyond its 40 percent ownership in the
Company-managed Empire Mine in Michigan and Inland's wholly-owned Minorca Mine
in Minnesota. Sales to Inland under this new 10-year contract are expected to
range between 800,000 and 900,000 tons in 1997.
NOTE G - STOCK PLANS
The 1992 Incentive Equity Plan was amended in May, 1997 to authorize
the Company to issue up to 1,150,000 Common Shares (previously 595,000 common
shares) upon the exercise of Option Rights, as Restricted Shares, in payment of
Performance Shares or Performance Units that have been earned, as Deferred
Shares, or in payment of dividend equivalents paid with respect to awards made
under the Plan.
Under the terms of the 1987 Incentive Equity Plan, effective April,
1997 no further grants or awards may be made from this Plan.
NOTE H - SHAREHOLDERS' EQUITY
In May, 1997, the Company's program to repurchase common shares in the
open market or in negotiated transactions was increased to 1,500,000 common
shares from the previous authorization of 1,000,000 common shares.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
RESULTS OF OPERATIONS
---------------------
COMPARISON OF SECOND QUARTER AND FIRST SIX MONTHS - 1997 AND 1996
- -----------------------------------------------------------------
Earnings for the second quarter were $12.9 million, or $1.14 per share,
and first-half earnings were $15.9 million, or $1.40 a share. Earnings for both
periods included an after-tax credit of $2.8 million resulting from the second
quarter reversal of an excess accrual for Savage River Mine closedown
obligations recorded in prior years.
Second quarter 1996 earnings were $17.8 million, or $1.52 a share, and
first-half 1996 earnings were $21.4 million, or $1.82 a share. Earnings for both
1996 periods included a $1.3 million after-tax property damage insurance
recovery on a 1996 ore train derailment.
Excluding the special items in both years, second quarter 1997 earnings
were $10.1 million, or $.89 a share, versus $16.5 million, or $1.41 a share in
1996, and first-half 1997 earnings were $13.1 million, or $1.15 a share,
compared to $20.1 million, or $1.71 a share in 1996.
Following is a summary of results:
(In Millions, Except Per Share)
-------------------------------
Second Quarter First-Half
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Income Before Special Items:
Amount $10.1 $16.5 $13.1 $20.1
Per Share .89 1.41 1.15 1.71
Special Items:
Amount 2.8 1.3 2.8 1.3
Per Share .25 .11 .25 .11
Net Income:
Amount 12.9 17.8 15.9 21.4
Per Share 1.14 1.52 1.40 1.82
The $6.4 million decrease in second quarter earnings before special
items was mainly due to the planned termination of Savage River Mine operations
in Australia, in March 1997, and higher North American mine operating costs.
The $7.0 million decrease in first-half earnings before special items
was principally due to the Savage River termination, lower North American sales
volume in the first quarter, and higher mine operating costs.
Pre-tax earnings from Savage River in the second quarter of 1996 were
$5.7 million compared to a loss of $.1 million in 1997. First-half pre-tax
earnings from Savage River in 1996 were $9.2 million compared to $3.6 million in
1997.
* * *
The Company's managed mines in North America produced 9.6 million tons
of pellets in the second quarter of 1997 compared with 9.8 million tons in 1996.
First-half production was 19.2 million tons, up from 18.8 million tons in 1996.
8
The Company's North American iron ore pellet sales in the second
quarter of 1997 were 2.8 million tons compared with 2.9 million tons in 1996.
First-half sales were 3.1 million tons versus 3.9 million tons in 1996. Lower
first quarter sales resulted from certain customers delaying shipments to
correct inventories, and the early 1996 shutdown of McLouth Steel, which had
traditionally purchased consigned ore during the winter months.
LIQUIDITY
- ---------
At June 30, 1997, the Company had cash and marketable securities of
$61.5 million. Since December 31, 1996, cash and marketable securities have
decreased $107.9 million, primarily due to increased working capital, $75.3
million, project investments and capital expenditures, $39.2 million (including
investment in a reduced iron joint venture in Trinidad and Tobago, $17.2
million, and the Wabush Mines investment, $15.0 million), payments associated
with closing Savage River Mines and transferring related assets and liabilities,
$11.6 million, dividends, $7.4 million, and repurchases of common shares, $1.7
million, partially offset by cash flow from operations, $26.3 million.
Capital additions and replacements at the Company and the six Company-
managed mines in North America are projected to total approximately $81 million
in 1997. The Company's share of such 1997 expenditures is expected to
approximate $30 million.
In 1996, the Company announced an international joint venture (with LTV
Corporation and Lurgi AG of Germany), located in Trinidad and Tobago, to produce
and market premium quality reduced iron briquettes to the steel industry. All
definitive project documents were subsequently signed on May 8, 1996. The
Company's share of capital expenditures is estimated to be $75 million, of which
$27 million has been spent through June 30, 1997, and $24 million is expected to
be spent in the remainder of 1997. No project financing will be used. Start-up
is expected to occur in the fourth quarter 1998.
Cliffs and Associates Limited, the venture company, has entered into
forward currency exchange contracts to hedge the Deutsche Mark as part of the
construction project. The purpose of the contracts is to manage the risk of
exchange rate fluctuation with respect to a portion of project construction
costs denominated in the Deutsche Mark. The Company's share of outstanding
contracts, which have varying maturity dates to June 1, 1998, have an aggregate
contract value of $8.5 million and an aggregate estimated fair value of $7.4
million at June 30, 1997.
The Company anticipates further investment in reduced iron projects.
Under the Company's program to repurchase up to 1,500,000 of its common
shares (increased from 1,000,000 common shares in May, 1997) in the open market
or in negotiated transactions, the Company has repurchased 821,900 shares
through August 5, 1997, at a total cost of $32.0 million.
The UMWA Combined Benefit Fund and the UMWA 1992 Benefit Plan have
assigned responsibility to the Company for premium payments with respect to
retirees, dependents, and "orphans" (unassigned beneficiaries) under the Coal
Industry Retiree Health Benefit Act of 1992. The Company is making premium
payments under protest and is contesting the assignments that it believes are
incorrect. At June 30, 1997, the Company's coal retiree reserve was $10.4
million, of which $.9 million is expected to be paid in 1997 ($1.3 million to be
spent, less $.4 million received in April, 1997 as a refund of contested
premiums).
9
CAPITALIZATION
- --------------
The Company has $70.0 million of senior unsecured notes outstanding
with a group of private investors. The notes, which have a fixed interest rate
of 7.0 percent, are due in December, 2005. In addition, the Company has a $100
million revolving credit agreement. No borrowings are outstanding under this
agreement which expires on March 1, 2002. The Company was in compliance with all
financial covenants and restrictions of the agreements.
The fair value of the Company's long-term debt (which had a carrying
value of $70.0 million) at June 30, 1997, was estimated to be $67.4 million
based on a discounted cash flow analysis and estimates of current borrowing
rates.
Following is a summary of common shares outstanding:
1997 1996 1995
---------- ---------- -------
March 31 11,377,322 11,832,767 12,031,392
June 30 11,374,448 11,614,517 12,892,092
September 30 11,367,717 11,898,467
December 31 11,369,717 11,829,267
AUSTRALIAN OPERATIONS
- ---------------------
On March 25, 1997, the remaining assets (including $8.6 million in
cash) of Savage River Mines and all related environmental and rehabilitation
obligations were transferred to the Tasmanian government. The release from these
obligations includes not only release from previously identified environmental
and rehabilitation obligations but also release from any such obligations that
may be asserted in the future, whether presently known or unknown.
Estimated costs associated with the planned closure of Savage River
Mines, including estimates of previously agreed environmental and rehabilitation
obligations, had been fully provided for in the Capacity Rationalization
Reserve. In light of the completion of the transaction with the Tasmanian
government, the Company has recorded a $2.8 million after-tax ($4.3 million
pre-tax) credit in the second quarter 1997 resulting from reversal of an excess
accrual for Savage River Mines closedown obligations.
OTHER DEVELOPMENTS
- ------------------
On June 30, 1997, the Company completed its previously announced
acquisition of Inland Steel Company's 15.1 percent interest in the Wabush Mine
in Canada, retroactive to January 1, 1997. The acquisition, which adds 900,000
tons to the Company's share of production capacity, raises the Company's total
sales capacity in North America to 11.5 million tons and provides increased
access to international markets.
Separately, the Company revised existing sales arrangements with Inland
to supply Inland's pellet requirements beyond its 40 percent ownership in the
Company-managed Empire Mine in Michigan and Inland's wholly-owned Minorca Mine
in Minnesota. Sales to Inland under this new 10-year contract are expected to
range between 800,000 and 900,000 tons in 1997.
10
OUTLOOK FOR 1997
- ----------------
U.S. and Canadian steelmakers continue to operate at high levels due to
strong demand from key markets, including automotive, appliance and
construction. Most industry analysts are expecting a strong second half with raw
steel production for the full year 1997 exceeding 1996. The increase in steel
production is projected to come from electric furnaces, with production from
integrated steelmakers about equal to 1996. Steel imports, which were relatively
high in the first half of 1997, have slowed recently and the consensus belief is
that imports for the year will fall below 1996.
The six North American mines managed by the Company are expected to
produce 39.5 million tons for the year 1997, a slight decrease from the 39.9
million tons produced in 1996. The Company's share of expected production is
10.8 million tons in 1997 versus 10.4 million tons in 1996, which reflects the
Company's increased equity interest in the Wabush Mine, partly offset by a
production cutback at the Tilden Mine in Michigan to control inventories. The
Company and its partners in the Tilden Mine, Algoma Steel Inc. and Stelco Inc.,
have reduced their 1997 production nominations at Tilden from 7.0 to 6.0 million
tons, which is being accomplished by a six-week shutdown that started June 25.
The Company's North American iron ore pellet sales for the full year
1997 are expected to approximate 10.4 million tons, or about 90 percent of sales
capacity, which is unchanged from the Company's previously announced expectation
but trails last year's record pace. While first-half sales were slower than
normal, sales for the balance of the year are expected to modestly exceed last
year's second-half.
BUSINESS RISK
- -------------
The North American integrated steel industry has experienced high
operating rates in recent years. Most steel company partners and customers of
the Company have improved their financial condition due to improved operating
results and increased equity capital. However, the integrated steel industry
continues to have relatively high fixed costs and obligations.
The improvement in most integrated steel companies' financial positions
has reduced the major business risk faced by the Company, i.e., the potential
financial failure and shutdown of one or more of its significant customers or
partners, with the resulting loss of ore sales or royalty and management fee
income. However, if any such shutdown were to occur without full mitigation
through replacement sales or cost reduction, it would represent a significant
adverse financial development to the Company.
FORWARD-LOOKING STATEMENTS
- --------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. In addition to historical information,
this report contains forward-looking statements that are subject to risks and
uncertainties which could cause future results to differ materially from
expected results. Such statements are based on management's beliefs and
assumptions made on information currently available to it.
11
The Company's dominant business is the production and sale of iron ore
pellets, which is subject to the cyclical nature of the integrated steel
industry. Factors that could cause the Company's actual results to be materially
different from projected results include the following:
- Changes in the financial condition of integrated steel company
partners and customers;
- Domestic or international economic and political conditions;
- Unanticipated geological conditions or ore processing changes;
- Changes in imports of steel or iron ore;
- Development of alternative steel-making technologies;
- Displacement of integrated steel production by electric furnace
production;
- Displacement of steel by competitive materials;
- Energy costs and availability;
- Labor contract negotiations;
- Changes in individual customers' iron ore requirements;
- Changes in tax laws affecting corporate income and deductions;
- Changes in laws, regulations or enforcement practices governing
environmental site remediation requirements and safety standards; and
- Accounting principles or policies imposed by the Financial Accounting
Standards Board or the Securities and Exchange Commission.
The Company is under no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
- ---------------------------------------------------------
The Company's Annual Meeting of Shareholders was held on May 13, 1997.
At the meeting the Company's shareholders acted upon the election of Directors,
a proposal to approve the Cleveland-Cliffs Inc 1992 Incentive Equity Plan (as
Amended and Restated as of May 13, 1997), and a proposal to ratify the
appointment of the Company's independent public accountants. In the election of
Directors, all 11 nominees named in the Company's Proxy Statement, dated March
24, 1997, were elected to hold office until the next Annual Meeting of
Shareholders and until their respective successors are elected. Each nominee
received the number of votes set opposite his or her name:
NOMINEES FOR WITHHELD
-------- --- --------
Ronald C. Cambre 9,748,492 30,500
Robert S. Colman 9,749,099 29,893
James D. Ireland III 9,748,692 30,300
G. Frank Joklik 9,747,715 31,277
Leslie L. Kanuk 9,747,255 31,737
Francis R. McAllister 9,749,149 29,843
M. Thomas Moore 9,748,477 30,515
John C. Morley 9,748,033 30,959
Stephen B. Oresman 9,748,419 30,573
Alan Schwartz 9,748,482 30,510
Alton W. Whitehouse 9,697,009 81,983
Votes cast in person and by proxy at such meeting for and against the
adoption of the proposal to approve the Cleveland-Cliffs Inc 1992 Incentive
Equity Plan (as Amended and Restated as of May 13, 1997) were as follows:
9,426,096 Common Shares were cast for the adoption of the proposal; 306,785
Common Shares were cast against the adoption of the proposal; and 46,111 Common
Shares abstained from voting on the proposal.
Votes cast in person and by proxy at such meeting for and against the
adoption of the proposal to ratify the appointment of the firm of Ernst & Young
LLP, independent public accountants, to examine the books of account and other
records of the Company and its consolidated subsidiaries for the year 1997 were
as follows: 9,748,952 Common Shares were cast for the adoption of the proposal;
8,208 Common Shares were cast against the adoption of the proposal; and 21,832
Common Shares abstained from voting on the proposal.
There were no broker non-votes with respect to the election of
directors, the approval of the Cleveland-Cliffs Inc 1992 Incentive Equity Plan
(as Amended and Restated as of May 13, 1997), or the ratification of the
independent public accountants.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) List of Exhibits - Refer to Exhibit Index on page 15.
(b) There were no reports on Form 8-K filed during the three months
ended June 30, 1997.
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEVELAND-CLIFFS INC
Date August 13, 1997 By /s/ J.S. Brinzo
------------------------ ----------------------------------------------
J. S. Brinzo
Executive Vice President-Finance and Planning
and Principal Financial Officer
14
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------------------------------------------------- --------
4(a) Amendment dated as of June 1, 1997, to the Credit Filed
Agreement dated as of March 1, 1995, as amended, Herewith
among Cleveland-Cliffs Inc, the Banks named therein
and The Chase Manhattan Bank, as Agent
10(a) Trust Agreement No. 1 (Amended and Restated Effective Filed
June 1, 1997), dated June 12, 1997 by and between Herewith
Cleveland-Cliffs Inc and Key Trust Company of Ohio,
N.A., with respect to the Cleveland-Cliffs Inc
Supplemental Retirement Benefit Plan and certain
employment agreements
10(b) Trust Agreement No. 2 (Amended and Restated Effective Filed
June 1, 1997), dated June 12, 1997, by and between Herewith
Cleveland-Cliffs Inc and Key Trust Company of Ohio,
N.A., with respect to the Severance Pay Plan for Key
Employees of Cleveland-Cliffs Inc, the
Cleveland-Cliffs Inc Retention Plan for Salaried
Employees, and certain employment agreements
10(c) First Amendment to Trust Agreement No. 2 (Amended and Filed
Restated Effective June 1, 1997), dated July 15, Herewith
1997, by and between Cleveland-Cliffs Inc and Key Trust
Company of Ohio, N.A., Trustee
10(d) Third Amendment to Trust Agreement No. 4, dated Filed
June 12, 1997, by and between Cleveland-Cliffs Inc and Herewith
Key Trust Company of Ohio, N.A., Trustee
10(e) Fifth Amendment to Trust Agreement No. 5, dated Filed
May 23, 1997, by and between Cleveland-Cliffs Inc Herewith
and Key Trust Company of Ohio, N.A., Trustee
10(f) First Amendment to Amended and Restated Trust Agreement Filed
No. 6, dated June 12, 1997, by and between Cleveland- Herewith
Cliffs Inc and Key Trust Company of Ohio, N.A., Trustee
10(g) Third Amendment to Trust Agreement No. 7, dated Filed
May 23, 1997, by and between Cleveland-Cliffs Inc and Herewith
Key Trust Company of Ohio, N.A., Trustee
10(h) Fourth Amendment to Trust Agreement No. 7, dated Filed
July 15, 1997, by and between Cleveland-Cliffs Inc and Herewith
Key Trust Company of Ohio, N.A., Trustee
15
Exhibit
Number Exhibit
- ------- ---------------------------------------------------- ----
10(i) Second Amendment to Trust Agreement No. 8, dated Filed
June 12, 1997, by and between Cleveland-Cliffs Inc Herewith
and Key Trust Company of Ohio, N.A., Trustee
10(j) Cleveland-Cliffs Inc Amended and Restated Employment Filed
Agreements with certain executive officers Herewith
10(k) Severance Pay Plan for Key Employees of Cleveland- Filed
Cliffs Inc (As Amended and Restated as of Herewith
February 1, 1997) dated June 26, 1997
10(l) Cleveland-Cliffs Inc Supplemental Retirement Filed
Benefit Plan (as Amended and Restated Effective Herewith
January 1, 1997), dated April 24, 1997
10(m) Second Amendment to Cleveland-Cliffs Inc Filed
Nonemployee Directors' Compensation Plan, Herewith
effective May 13, 1997, dated May 13, 1997
10(n) Cleveland-Cliffs Inc Long-Term Performance Share Filed
Program, effective as of March 31, 1994, as amended Herewith
as of January 13, 1997
11 Statement re computation of earnings per share Filed
Herewith
27 Consolidated Financial Data Schedule submitted for
Securities and Exchange Commission information only
16