Exhibit 99(b) NEWS RELEASE Cleveland-Cliffs Inc 1100 Superior Avenue Cleveland, Ohio 44114-2589 . CLEVELAND-CLIFFS REPORTS 1998 THIRD QUARTER EARNINGS --------------------------- Cleveland, OH -- October 21, 1998 -- Cleveland-Cliffs Inc (NYSE:CLF) today reported 1998 third quarter earnings of $20.1 million, or $1.78 per diluted share. Comparable earnings, before special items, in the third quarter of 1997 were $15.5 million, or $1.36 per diluted share. Net income for the third quarter of 1997 included a $5.6 million tax credit resulting from the settlement of prior years' tax issues. Earnings for the first nine months of 1998 were $37.5 million, or $3.30 per diluted share. Comparable earnings, before special items, in the first nine months of 1997 were $28.6 million, or $2.50 per diluted share. Net income for the first nine months of 1997 included the $5.6 million special tax credit recorded in the third quarter and an after-tax credit of $2.8 million resulting from the second quarter reversal of an excess accrual for closedown obligations of the Savage River Mine in Australia. Following is a summary of results:
(In Millions, Except Per Share) ------------------------------- Third Quarter First Nine Months ------------- ----------------- 1998 1997 1998 1997 ---- ---- ---- ---- Income Before Special Items: Amount $20.1 $15.5 $37.5 $28.6 Per Share (Basic) 1.80 1.37 3.33 2.52 Per Share (Diluted) 1.78 1.36 3.30 2.50 Special Items: Amount -- 5.6 -- 8.4 Per Share (Basic) -- .49 -- .74 Per Share (Diluted) -- .49 -- .74 Net Income: Amount 20.1 21.1 37.5 37.0 Per Share (Basic) 1.80 1.86 3.33 3.26 Per Share (Diluted) 1.78 1.85 3.30 3.24
The $4.6 million, or 30 percent, increase in third quarter earnings, before special items, was mainly due to higher North American sales volume and price realization, higher royalties and management fees, lower administrative expenses and a lower effective tax rate. Partly offsetting were higher ferrous metallics and international development expenses and an increase in the reserve for accounts receivable. The $8.9 million, or 31 percent, increase in nine-month earnings, before special items, was principally due to higher North American sales volume and price realization, higher royalties and management fees, lower interest expense and a lower effective tax rate. Partly offsetting were higher ferrous metallics and international development expenses and non-recurring 1997 Savage River earnings. Savage River, which produced its last iron ore pellets in December, 1996, earned $2.9 million in the first nine months of 1997 on sales of its remaining inventory. Cliffs' North American iron ore pellet sales in the third quarter of 1998 were a record 4.4 million tons, a 26 percent increase from the 3.5 million tons sold in the third quarter of 1997. Sales of 9.0 million tons in the first nine months of 1998 were also a record and 36 percent higher than the 6.6 million tons sold in the first nine months of 1997. As a result of deteriorating conditions in the North American steel industry, full year 1998 sales are expected to be lower than previously estimated, but should be between 12.0 and 12.5 million tons. This would establish a new record, exceeding the 10.4 million tons sold in 1997 and the previous record of 11.0 million tons sold in 1996. Fourth quarter 1998 sales will be lower than the 3.8 million tons sold in the fourth quarter of 1997. On September 28, 1998, Acme Metals Incorporated, a partner in the Cliffs-managed Wabush Mine in Canada and an iron ore customer, petitioned for protection under Chapter 11 of the U.S. Bankruptcy Code. At the time of the filing, Cliffs had a $1.2 million trade receivable from Acme. In recognition of growing concerns about steel industry conditions, a $1.2 million charge ($.9 million after-tax) was recorded in September, to raise the total reserve for trade receivables to $2.2 million. Since its filing, Acme has maintained operations with debtor-in-possession financing and has continued its relationship with Cliffs. Iron ore sales to Acme have historically accounted for less than 5 percent of Cliffs' annual sales volume. Administrative expenses decreased by $2.0 million in the third quarter of 1998 versus 1997 principally due to the lower cost of Performance Share grants, a key component of senior management compensation. Lower interest expense in the third quarter and first nine months resulted from increased capitalization of interest on Cliffs' share of construction costs of the Cliffs and Associates Limited reduced iron project. Other expenses were higher in both periods due to increased costs of ferrous metallics and international development activities and the $1.2 million increase in the reserve for accounts receivable. Cliffs-managed mines produced 10.8 million tons of iron ore pellets in the third quarter of 1998 compared with 10.0 million tons in 1997. Nine-month production was 30.2 million tons in 1998, up from 29.2 million tons in 1997. For the full year 1998, the six mines are expected to produce a record 40.3 million tons, with Cliffs' share being a record 11.5 million tons. In 1997, the mines produced 39.6 million tons, with Cliffs' share being 10.9 million tons. The increases in 1998 are mainly due to higher production at the Tilden Mine. Following is a summary of 1998 production tonnage by mine:
(In Millions) -------------------------------------------------------------- Nine Month Full Year Actual Estimate ------------------------- ------------------------ Total Cliffs' Share Total Cliffs' Share ----- ------------- ----- ------------- Empire 6.1 1.4 8.3 1.9 Hibbing 5.9 .9 7.8 1.2 LTV Steel Mining 5.5 -- 7.2 -- Northshore 3.2 3.2 4.3 4.3 Tilden 5.0 2.0 6.8 2.8 Wabush 4.5 1.0 5.9 1.3 ---- --- ---- ---- 30.2 8.5 40.3 11.5 ==== === ==== ====
-2- All mines are currently operating at capacity levels, with the exception of LTV Steel Mining, which is reducing production by .3 million tons to lower full year output to 7.2 million tons. During the third quarter of 1998, the Company repurchased 177,100 shares of its common stock at a total cost of $8.3 million. Since the inception of the stock repurchase program in 1995, 1,130,500 shares have been repurchased at a total cost of $46.7 million. At September 30, there were 11,148,453 shares outstanding. FERROUS METALLICS ACTIVITIES CLIFFS AND ASSOCIATES LIMITED ("CAL") -- Construction of the hot-briquetted iron (HBI) project in Trinidad and Tobago with LTV Corporation and Lurgi AG has been progressing well and completion is expected by the end of the year. Operations planning and employee training activities are proceeding with the operating group preparing for commissioning and start-up in the first quarter of 1999. A training simulator is being utilized to prepare technicians to operate the plant under various conditions. The plant is projected to achieve its design capacity rate of 500,000 metric tons per year in mid-1999. Demand for and market prices of ferrous metallics products in North America continue to deteriorate in large part due to the availability of substantial quantities of low-priced imported pig iron. NORTHSHORE "REDSMELT" PIG IRON PROJECT -- The Company continues to evaluate an investment in a plant at Cliffs' wholly-owned Northshore Mine in Minnesota that would produce 700,000 metric tons annually of a premium grade pig iron. While good progress has been made in a number of areas, uncertainty over state environmental permitting and market conditions has postponed a decision on whether or not to proceed with the project. OUTLOOK Commenting on the business outlook, Cliffs' President and Chief Executive Officer John S. Brinzo said, "Steel production in the United States and Canada, which was fairly strong through the first half of 1998, took a sudden turn for the worse in the third quarter. Record levels of low-priced steel imports are wreaking havoc on the industry, adversely impacting order rates, capacity utilization rates, shipment volumes and profits of virtually every steelmaker in North America. Competition is fierce and steel prices have collapsed as producers fight to hold volume. Steel inventories have soared causing cutbacks in steel production." In late September, steel producers in the United States and Canada filed complaints against foreign competitors for unfair trade practices. While successful resolution of the filings should benefit the steelmakers in the long run, the outlook for the remainder of 1998 and some part of 1999 is for import penetration to continue at a relatively high level, causing steel demand to remain low and steel prices weak. Cliffs-managed mines are currently planning to start the year 1999 operating at capacity levels; however, production levels can be reduced during the year. It is anticipated that Cliffs' 1999 sales volume will be less than 1998 sales. Reflecting the difficult business environment, Cliffs and the mines are reviewing cost reduction initiatives. Mr. Brinzo added, "Given the state of the iron and steel business, Cliffs' strong financial position and emphasis on multi-year sales contracts with a diversified customer base is -3- proving beneficial to all stakeholders. It should also be noted that Cliffs' earnings from royalties and management fees, which typically represent more than half of pre-tax earnings, are relatively stable over the business cycle. Our financial strength and unique profile of contractual earnings enable us to deal with adverse business conditions while we employ the Company's financial resources to build shareholder value. We remain focused on building a company that through business cycles delivers both superior performance and higher sustainable growth." * * * 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 six iron ore mines in North America and hold equity interests in five of the mines. Cliffs has a major iron ore reserve position in the United States, is a substantial iron ore merchant, and is constructing a joint venture plant in Trinidad to produce high-quality iron briquettes. This news release contains forward-looking statements regarding iron ore production and sales volume which reflect forecasts of activity in the steel and iron ore industries. Actual production and sales volume could differ significantly from current expectations due to inherent risks such as lower steel and iron ore demand, higher steel imports, or other factors. This news release also contains a projection of the construction completion date and profitability of the Cliffs and Associates Limited project which could change due to inherent risks such as construction delays, process difficulties, product pricing, or other factors. Although the Company believes that the forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties which could cause actual results to differ materially. Contacts: Media: David L. Gardner, (216) 694-5407 Financial Community: Fred B. Rice, (800) 214-0739 or (216) 694-5459 To obtain faxed copies of Cleveland-Cliffs Inc news releases dial 1-800-778-3888. News releases and other information on the Company are available on the Internet at http://www.businesswire.com/cnn/clf.htm. --------------------------------------- -4-
CLEVELAND-CLIFFS INC STATEMENT OF CONSOLIDATED INCOME Three Months Nine Months Ended Sept. 30 Ended Sept. 30 ---------------------------- ---------------------------- (In Millions Except Per Share Amounts) 1998 1997 1998 1997 - -------------------------------------- ------------ ------------- ------------ ------------ REVENUES Product sales and services $ 158.1 $ 133.1 $ 328.5 $ 256.3 Royalties and management fees 15.5 13.7 36.8 34.4 ------------ ------------- ------------ ------------ Total Operating Revenues 173.6 146.8 365.3 290.7 Investment income (securities) 1.5 1.0 3.7 4.4 Recovery of excess closedown provision - - - 4.3 Other income .6 1.1 2.4 2.9 ------------ ------------- ------------ ------------ TOTAL REVENUES 175.7 148.9 371.4 302.3 COSTS AND EXPENSES Cost of goods sold and operating expenses 140.6 118.3 297.9 235.4 Administrative, selling and general expenses 3.4 5.4 13.0 12.6 Interest expense .1 .5 .4 2.2 Other expenses 4.4 1.6 9.4 5.1 ------------ ------------- ------------ ------------ TOTAL COSTS AND EXPENSES 148.5 125.8 320.7 255.3 ------------ ------------- ------------ ------------ INCOME BEFORE INCOME TAXES 27.2 23.1 50.7 47.0 INCOME TAXES Currently payable 4.1 8.0 7.6 11.3 Deferred 3.0 (6.0) 5.6 (1.3) ------------ ------------- ------------ ------------ TOTAL INCOME TAXES 7.1 2.0 13.2 10.0 ------------ ------------- ------------ ------------ NET INCOME $ 20.1 $ 21.1 $ 37.5 $ 37.0 ============ ============= ============ ============ NET INCOME PER COMMON SHARE Basic $ 1.80 $ 1.86 $ 3.33 $ 3.26 Diluted $ 1.78 $ 1.85 $ 3.30 $ 3.24 AVERAGE NUMBER OF SHARES Basic 11.2 11.4 11.3 11.4 Diluted 11.3 11.5 11.4 11.5
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CLEVELAND-CLIFFS INC STATEMENT OF CONSOLIDATED CASH FLOWS Three Months Nine Months Ended Sept. 30 Ended Sept. 30 ---------------------- ---------------------- (In Millions, Brackets Indicate Decrease in Cash) 1998 1997 1998 1997 ----------------------------------------------- ---------- --------- --------- --------- OPERATING ACTIVITIES Net income $ 20.1 $ 21.1 $ 37.5 $ 37.0 Depreciation and amortization: Consolidated 2.1 1.7 6.4 5.2 Share of associated companies 3.1 3.1 9.4 9.1 Decrease in Savage River closedown reserve - - - (16.1) Provision for deferred income taxes 3.0 4.4 5.6 9.2 Tax credit - (5.6) - (5.6) Other (.6) 2.4 (2.9) 3.0 ---------- --------- --------- --------- Total Before Changes in Operating Assets and Liabilities 27.7 27.1 56.0 41.8 Changes in operating assets and liabilities 46.3 24.2 3.6 (51.1) ---------- --------- --------- --------- NET CASH FROM (USED BY) OPERATING ACTIVITIES 74.0 51.3 59.6 (9.3) INVESTING ACTIVITIES Purchase of property, plant and equipment: Consolidated (12.7) (3.5) (18.8) (11.0) Share of associated companies (5.1) (19.0) (18.9) (35.7) Purchase of Wabush interest - - - (15.0) Other - - 1.3 4.8 ---------- --------- --------- --------- NET CASH (USED BY) INVESTING ACTIVITIES (17.8) (22.5) (36.4) (56.9) FINANCING ACTIVITIES Dividends (4.1) (3.7) (12.1) (11.1) Repurchases of Common Shares (8.3) - (11.5) (1.7) ---------- --------- --------- --------- NET CASH (USED BY) FINANCING ACTIVITIES (12.4) (3.7) (23.6) (12.8) EFFECT OF EXCHANGE RATE CHANGES ON CASH - (.2) - - ---------- --------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 43.8 $ 24.9 $ (.4) $ (79.0) ========== ========= ========= =========
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CLEVELAND-CLIFFS INC STATEMENT OF CONSOLIDATED FINANCIAL POSITION (In Millions) -------------------------------------------------------- Sept. 30 June 30 Dec. 31 Sept. 30 ASSETS 1998 1998 1997 1997 --------------- ------------ ----------- ----------- ------------ CURRENT ASSETS Cash and cash equivalents $ 115.5 $ 71.7 $ 115.9 $ 86.4 Accounts receivable - net 68.9 73.2 73.4 71.8 Inventories 54.7 87.5 61.4 78.4 Other 15.0 16.6 15.1 14.5 ------------ ----------- ----------- ------------ TOTAL CURRENT ASSETS 254.1 249.0 265.8 251.1 PROPERTIES - NET 146.0 134.6 134.0 133.8 INVESTMENTS IN ASSOCIATED COMPANIES 225.8 225.9 218.3 209.4 OTHER ASSETS 76.7 81.1 76.2 86.3 ------------ ----------- ----------- ------------ TOTAL ASSETS $ 702.6 $ 690.6 $ 694.3 $ 680.6 ============ =========== =========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES $ 87.0 $ 78.0 $ 91.8 $ 90.2 LONG-TERM OBLIGATIONS 70.0 70.0 70.0 70.0 POSTEMPLOYMENT BENEFIT LIABILITIES 69.8 69.8 70.1 70.4 OTHER LIABILITIES 55.1 56.8 55.0 53.3 SHAREHOLDERS' EQUITY 420.7 416.0 407.4 396.7 ------------ ----------- ----------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 702.6 $ 690.6 $ 694.3 $ 680.6 ============ =========== =========== ============ - ---------------------------------------------------------------------------------------------------------------------------
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. 7