Exhibit 99(a)
NEWS RELEASE
Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, Ohio 44114-2589
CLEVELAND-CLIFFS REPORTS
------------------------
SECOND QUARTER 2001 RESULTS
---------------------------
Cleveland, OH -- July 25, 2001-- Cleveland-Cliffs Inc (NYSE:CLF) today
reported a net loss of $15.1 million, or $1.50 per diluted share, for the second
quarter of 2001, and a net loss of $24.7 million, or $2.45 per diluted share,
for the first half of 2001. In the second quarter of 2000, Cliffs recorded net
income of $11.0 million, or $1.04 per diluted share, and first half 2000 net
income was $7.5 million, or $.71 per diluted share.
Following is a summary of results:
NET INCOME (LOSS)
(IN MILLIONS, EXCEPT PER SHARE)
SECOND QUARTER FIRST HALF
--------------------- ---------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net Income (Loss)
Excluding Special Items $ (15.1) $ 7.6 $ (24.7) $ 4.1
Special Items -- 3.4 -- 3.4
-------- -------- -------- --------
Net Income (Loss)
Amount (15.1) 11.0 (24.7) 7.5
Per Share (1.50) 1.04 (2.45) .71
Excluding special items, second quarter 2001 results were $22.7 million
below 2000, and first half 2001 results were $28.8 million below 2000. The lower
results in 2001 were primarily due to production curtailments, lower pellet
sales volume, higher mine costs, a decrease in royalties and management fees, a
greater loss from Cliffs and Associates Limited (CAL) and higher interest
expense, partly offset by a modest increase in the average price realization on
pellet sales. Higher energy costs contributed to the increase in mine costs.
Second quarter and first half 2001 results benefited from the sale of
non-strategic lands, and first half 2001 results included a $2.1 million pre-tax
charge for restructuring activities.
1
John S. Brinzo, Cliffs' Chairman and Chief Executive Officer, said, "Soft
markets and excessive inventories caused most domestic steel mills to operate at
low levels in the first six months of 2001. As a result, Cliffs' iron ore pellet
sales in the first half of 2001 were 2.8 million tons versus 4.1 million tons in
2000." Second quarter sales were 2.3 million tons compared to 3.4 million tons
in 2000.
OPERATIONS
- ----------
Iron ore pellet production at Cliffs-managed mines was 6.5 million tons
in the second quarter of 2001 versus 10.8 million tons in 2000. First-half
production was 13.4 million tons compared to 20.6 million tons in 2000. Cliffs'
share of production in the second quarter and first half of 2001 was 1.2 million
tons below 2000. Following is a summary of production tonnages by mine for the
first half of 2001 and 2000:
(TONS IN MILLIONS)
------------------------------------
TOTAL CLIFFS' SHARE
---------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
Empire 3.3 3.8 1.0 .8
Hibbing 2.8 4.0 .1 .6
LTV Steel Mining -- 3.8 -- --
Northshore 1.7 2.2 1.7 2.2
Tilden 2.7 3.8 1.1 1.5
Wabush 2.9 3.0 .7 .7
------ ------ ------ ------
Total 13.4 20.6 4.6 5.8
====== ====== ====== ======
The 7.2 million ton decrease in total production was principally due to the
permanent closure of LTV Steel Mining Company at the beginning of 2001 and
production curtailments at the Empire, Hibbing, Northshore and Tilden Mines. The
following table summarizes the production curtailments that have been
implemented:
PERIOD OF
CURTAILMENT
-----------------------------------------
EMPIRE June 3 - July 15
HIBBING January 28 - March 11
June 17 - August 5
TILDEN May 13 - June 23
NORTHSHORE Only operating 2 of 3 pelletizing lines
Further production curtailments are planned at Northshore in the fourth quarter,
and production schedules at all mines for the remainder of 2001 are subject to
change.
The CAL hot-briquetted iron (HBI) plant in Trinidad has made progress
during the ramp-up of operations that started in mid-March. As of June 30, the
plant had produced 59,000 tons of commercial grade Circal(TM) briquettes, and
shipments through June 30 totaled 42,000 tons. The first half loss from CAL was
higher than last year primarily due
2
to Cliffs' increased ownership of CAL. Cliffs increased its CAL ownership from
46.5 percent to approximately 82 percent as a result of the Company and Lurgi
acquiring LTV Corporation's 46.5 percent share of CAL in November 2000.
SPECIAL ITEMS IN 2000
- ---------------------
Earnings for the second quarter and first half of 2000 included $3.4
million of income attributable to two special items. Cliffs recorded a $15.0
million ($9.8 million after-tax) recovery on a business interruption insurance
claim related to the loss of pellet sales to Rouge Industries in 1999, that was
partly offset by a $9.1 million charge ($6.4 million after-tax) to recognize the
reduction in the market value of LTV Corporation shares then owned by the
Company.
LIQUIDITY
- ---------
At June 30, 2001, Cliffs had cash and cash equivalents of $56 million.
In May 2001, the Company borrowed the remaining $35 million available under its
$100 million unsecured revolving credit facility to fund pellet inventories and
other working capital requirements. At the end of June, there were 5.3 million
tons of pellets in inventory at a cost of $151 million, a decrease of .4 million
tons since March 31, 2001. Pellet inventory at June 30, 2000 was 3.2 million
tons, or $91 million. Cash flow from inventory liquidation is expected to permit
repayment of all of borrowings under the revolving credit facility by year-end.
OUTLOOK
- -------
A sharp decline in steel demand caused North American steelmakers to
operate at less than 80 percent of capacity in the first half of 2001.
Conditions are expected to improve late this year, and into 2002, due to a
decrease in imports and reduction of inventories, but the recovery will likely
be restrained by the worst downturn in manufacturing since the Gulf War
recession.
Brinzo said, "We continue to have considerable uncertainty regarding
the pellet requirements of certain customers, and our sales forecast for the
full year 2001 has been reduced to approximately 10 million tons. This estimate
assumes LTV Corporation will continue to operate two blast furnaces in Cleveland
and two furnaces in Chicago." Separately, LTV continues to meet its obligations
as a 25 percent partner in the Empire Mine, but has neither affirmed nor
rejected its ownership in Empire.
Given the weak sales forecast for the second half of 2001, the high
level of inventory at June 30 and the plan to significantly reduce inventory by
the end of the year, full year production will be significantly below Cliffs'
production capacity of 12.8 million tons. Production curtailments have been
implemented in Minnesota and Michigan in the first half and additional
curtailments are expected. With fixed costs representing approximately one-third
of total production costs, Cliffs' financial results for the second half will
continue to be adversely impacted by costs associated with the curtailments. A
modest loss is expected in the second half.
3
Brinzo said, "We are managing our iron ore business with the
expectation that integrated steel and iron ore production capacity will shrink
and foreign competition will remain intense. With most steel companies
interested in exiting their iron ore ownership positions, there is a unique
opportunity for Cliffs to be a bigger, more powerful force in a consolidating
industry. Cliffs should be and will be the leader in remaking the iron ore
business in the United States. We have been in the business for 154 years and
we're good at what we do.
Having said that, we also recognize that we must make major changes in
how we operate and staff our mines if they are going to be world class
competitive. We must be relentless in pursuing increased productivity and cost
reduction. Cliffs' mines must deliver pellets to North American steel producers
at a cost that encourages steelmakers to use their blast furnaces rather than
import foreign made semi-finished steel slabs.
We know we can only achieve success if we reject the status quo and
think in new terms. We have put new programs in place in recent months, and
others are under development that will allow us to achieve our objectives. Every
employee throughout the organization is expected to become part of the solution
for a better tomorrow. We will prevail in our mission to better serve a "new"
steel industry and restore Cliffs' shareholder value."
* * * * * * * * * * * * * * * * * * *
Cleveland-Cliffs is the largest supplier of iron ore products to the
North American steel industry and is developing a significant ferrous metallics
business. Subsidiaries of the Company manage and hold equity interests in five
iron ore mines in Michigan, Minnesota and Eastern Canada. Cliffs has a major
iron ore reserve position in the United States and is a substantial iron ore
merchant. References in this news release to "Cliffs" and "Company" include
subsidiaries and affiliates as appropriate in the context.
This news release contains predictive statements that are intended to
be made as "forward-looking" within the safe harbor protections of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
forward-looking statements are based on reasonable assumptions, such statements
are subject to risks and uncertainties.
Actual results may differ materially from such statements for a variety
of factors; such as displacement of iron production by North American integrated
steel producers due to electric furnace production or imports of semi-finished
steel or pig iron; changes in the financial condition of the Company's partners
and/or customers; rejection of major contracts and/or venture agreements by
customers and/or participants under provisions of the U.S. Bankruptcy Code or
similar statutes in other countries; changes in imports of steel, iron ore, or
ferrous metallic products; changes due to the ability of Cliffs and Associates
Limited to forecast revenue rates, costs and production levels; domestic or
international economic and political conditions; major equipment failure,
availability and magnitude and duration or repairs; process difficulties; and
availability and cost of key components of production (e.g., labor, electric
power, fuel, water).
4
Reference is made to the detailed explanation of the many factors and
risks that may cause such predictive statements to turn out differently, as set
forth in the Company's Annual Report for 2000 and Reports on Form 10-K and 10-Q
and previous news releases filed with the Securities and Exchange Commission,
which are available publicly on Cliffs' web site. The information contained in
this document speaks as of the date of this news release and may be superceded
by subsequent events.
Cliffs will host its second quarter 2001 earnings conference call
tomorrow, July 26, at 10:00 a.m. EDT. The call will be broadcast live on Cliffs'
website at http://www.cleveland-cliffs.com. A replay of the call will be
available on the website for 30 days.
Contacts:
- ---------
Media: Ralph S. Berge, (216) 694-4870
Financial Community: Fred B. Rice, (800) 214-0739 or (216) 694-5459
News releases and other information on the Company are available on the Internet
at http://www.cleveland-cliffs.com
5
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED OPERATIONS
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
(In Millions Except Per Share Amounts) 2001 2000 2001 2000
- -------------------------------------- ---- ---- ---- ----
REVENUES
Product sales and services
Iron ore products $ 83.1 $ 120.5 $ 104.0 $ 145.6
HBI products 3.7 3.7
------- ------- ------- -------
Total 86.8 120.5 107.7 145.6
Royalties and management fees 10.1 15.4 18.9 24.6
------- ------- ------- -------
Total Operating Revenues 96.9 135.9 126.6 170.2
Insurance recovery 15.0 15.0
Interest income .9 .4 2.0 1.4
Other income 2.2 1.1 4.6 2.1
------- ------- ------- -------
TOTAL REVENUES 100.0 152.4 133.2 188.7
COSTS AND EXPENSES
Cost of goods sold and operating expenses
Iron ore products 104.2 116.3 140.2 147.4
HBI products 10.3 10.3
------- ------- ------- -------
Total 114.5 116.3 150.5 147.4
Administrative, selling and general expenses 5.2 4.9 8.0 8.3
Loss on long-term investment 9.1 9.1
Pre-operating loss in
Cliffs and Associates Limited 3.4 5.8 6.3
Interest expense 2.5 1.3 4.6 2.5
Other expenses 1.4 1.4 3.9 3.8
------- ------- ------- -------
TOTAL COSTS AND EXPENSES 123.6 136.4 172.8 177.4
------- ------- ------- -------
INCOME (LOSS) BEFORE
INCOME TAXES AND MINORITY INTEREST (23.6) 16.0 (39.6) 11.3
INCOME TAXES (CREDIT) (7.1) 5.0 (12.3) 3.8
------- ------- ------- -------
INCOME (LOSS) BEFORE MINORITY INTEREST (16.5) 11.0 (27.3) 7.5
MINORITY INTEREST 1.4 2.6
------- ------- ------- -------
NET INCOME (LOSS) $ (15.1) $ 11.0 $ (24.7) $ 7.5
======= ======= ======= =======
NET INCOME (LOSS) PER COMMON SHARE
Basic $ (1.50) $ 1.04 $ (2.45) $ .71
Diluted $ (1.50) $ 1.04 $ (2.45) $ .71
AVERAGE NUMBER OF SHARES
Basic 10.1 10.5 10.1 10.6
Diluted 10.1 10.6 10.1 10.6
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED CASH FLOWS
Three Months Six Months
Ended June 30, Ended June 30,
---------------- -----------------
(In Millions, Brackets Indicate Decrease in Cash) 2001 2000 2001 2000
- ------------------------------------------------- ------ ------ ------ ------
OPERATING ACTIVITIES
Net income (loss) $(15.1) $ 11.0 $(24.7) $ 7.5
Depreciation and amortization:
Consolidated 4.0 3.2 7.8 6.3
Share of associated companies 2.4 3.0 5.5 6.2
Equity loss in Cliffs and Associates Limited 3.4 6.3
Loss on long-term investment 9.1 9.1
Minority interest in Cliffs and Associates Limited (1.4) (2.6)
Deferred income taxes (4.5) (3.2) (6.0) (3.2)
Gain on sale of assets (1.1) (2.5)
Other .2 3.2 1.3 2.6
------ ------ ------ ------
Total before changes in operating
assets and liabilities (15.5) 29.7 (21.2) 34.8
Changes in operating assets and liabilities (19.4) (24.9) (50.6) (52.8)
------ ------ ------ ------
Net cash from (used by) operating activities (34.9) 4.8 (71.8) (18.0)
INVESTING ACTIVITIES
Purchase of property, plant and equipment:
Consolidated:
Cliffs and Associates Limited (.1) (5.5)
All other (.8) (1.9) (2.9) (2.7)
------ ------ ------ ------
Total (.9) (1.9) (8.4) (2.7)
Share of associated companies (.6) (1.8) (.9) (2.4)
Equity investment and advances in
Cliffs and Associates Limited (3.4) (7.5)
Proceeds from sale of assets 1.2 2.7
Other (.4)
------ ------ ------ ------
Net cash used by investing activities (.3) (7.1) (7.0) (12.6)
FINANCING ACTIVITIES
Dividends (1.1) (4.0) (2.1) (8.0)
Short-term borrowings 35.0 100.0
Contributions by minority shareholder in
Cliffs and Associates Limited 1.3 6.5
Repurchases of Common Shares (5.5) (5.5)
------ ------ ------ ------
Net cash from (used by) financing activities 35.2 (9.5) 104.4 (13.5)
------ ------ ------ ------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ $(11.8) $ 25.6 $(44.1)
====== ====== ====== ======
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(In Millions)
-------------------------------------------
June 30, Dec. 31, June 30,
2001 2000 2000
------------ ------------ -------------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 55.5 $ 29.9 $ 23.5
Trade accounts receivable - net 32.4 46.3 46.6
Receivables from associated companies 13.6 18.5 20.5
Inventories
Product 152.0 90.8 91.3
Supplies and other 23.7 22.4 15.1
------------ ------------ -------------
175.7 113.2 106.4
Other 37.1 40.1 31.7
------------ ------------ -------------
TOTAL CURRENT ASSETS 314.3 248.0 228.7
PROPERTIES - NET 273.2 272.7 150.0
INVESTMENTS IN ASSOCIATED COMPANIES 132.4 138.4 226.6
OTHER ASSETS 61.3 68.7 78.4
------------ ------------ -------------
TOTAL ASSETS $ 781.2 $ 727.8 $ 683.7
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings $ 100.0 $ $
Accounts payable and accrued expenses 84.4 102.2 79.9
------------ ------------ -------------
TOTAL CURRENT LIABILITIES 184.4 102.2 79.9
LONG-TERM DEBT 70.0 70.0 70.0
POSTEMPLOYMENT BENEFIT LIABILITIES 65.2 71.7 67.2
OTHER LIABILITIES 58.2 58.0 59.5
MINORITY INTEREST 27.8 23.9
SHAREHOLDERS' EQUITY 375.6 402.0 407.1
------------ ------------ -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 781.2 $ 727.8 $ 683.7
============ ============ =============
- --------------------------------------------------------------------------------
UNAUDITED FINANCIAL STATEMENTS
In management's opinion, the unaudited financial statements present fairly
the company's financial position and results. All supplementary information
required by generally accepted accounting principles for complete financial
statements has not been included. For further information, please refer to the
Company's latest Annual Report.