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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended December 31, 1993
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 (I.R.S. Employer Identification No.)
of incorporation)
1100 Superior Avenue, Cleveland, Ohio 44114-2589
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 694-5700
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class On Which Registered
------------------- -------------------
Common Shares - par value $1.00 per share New York Stock Exchange
and Chicago Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of the Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of March 14, 1994, the aggregate market value of the voting stock held
by non-affiliates of the registrant, based on the closing price of $42.375 per
share as reported on the New York Stock Exchange - Composite Index was
$494,340,055 (excluded from this figure is the voting stock beneficially owned
by the registrant's officers and directors).
The number of shares outstanding of the registrant's $1.00 par value common
stock was 12,079,085 as of March 14, 1994.
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DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of registrant's 1993 Annual Report to Shareholders are filed as
Exhibits 13(a) through 13(j) and are incorporated by reference into Parts I,
II and IV.
2. Portions of registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held May 10, 1994 are incorporated by reference
into Part III.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
INTRODUCTION
Cleveland-Cliffs Inc (including its consolidated subsidiaries, the
"Company") is the successor to business enterprises whose beginnings can be
traced to earlier than 1850. The Company's headquarters are at 1100 Superior
Avenue, Cleveland, Ohio 44114-2589, and its telephone number is (216) 694-5700.
BUSINESS
The Company owns three major operating subsidiaries, The
Cleveland-Cliffs Iron Company ("Iron"), Cliffs Mining Company ("CMC") (formerly
known as Pickands Mather & Co.), and Pickands Mather & Co. International
("PMI"), which hold interests in various independent iron ore mining ventures
and act as managing agent. Iron, CMC and PMI's dominant business during 1993
was the production and sale of iron ore pellets. Iron, CMC and PMI control,
develop, and lease reserves to mine owners; manage and own interests in mines;
sell iron ore; and own interests in ancillary companies providing services to
the mines. Iron ore production activities are conducted in the United States,
Canada and Australia. Iron ore is marketed by the subsidiaries in the United
States, Canada, Europe, Asia and Australia.
For information on the iron ore business, including royalties and
management fees for the years 1991-1993, see Note B in the Notes to the
Company's Consolidated Financial Statements in the Company's Annual Report to
Security Holders for the year ended December 31, 1993, which Note B is
contained in Exhibit 13(g) and incorporated herein by reference and made a part
hereof.
For information concerning operations of the Company, see material
under the heading "11-Year Summary of Financial and Other Statistical Data" in
the Company's Annual Report to Security Holders for the year ended December 31,
1993, which 11-Year Summary of Financial and Other Statistical Data is
contained in Exhibit 13(j) and incorporated herein by reference and made a part
hereof.
NORTH AMERICA. Iron and CMC (collectively "Cliffs") own or hold
long-term leasehold interests in active North American properties containing
approximately 1.7 billion tons of crude iron ore reserves and manage five
active mines in North America with a total rated annual capacity of 34.8
million tons. Cliffs owns equity interests in four of these mines (see Table on
page 6).
Cliffs' United States properties are located on the Marquette Range of
the Upper Peninsula of Michigan and the Mesabi Range in Minnesota, each of
which has two active open-pit mines and pellet plants. CMC acts only in the
capacity of manager at one of the Mesabi Range facilities. Two railroads, one
of which is 99.2% owned by a subsidiary of the Company, link the Marquette
Range with Lake Michigan at the loading port of Escanaba and with Lake Superior
at the loading port of Marquette. From the Mesabi Range, pellets are
transported by rail to shiploading ports at Superior, Wisconsin and Taconite
Harbor, Minnesota. In addition, in Canada, there is an open-pit mine and
concentrator at Wabush, Labrador, Newfoundland and a pellet plant and dock
facility at Pointe Noire, Quebec. From Wabush Mines, concentrates are shipped
by rail from the Scully Mine in Labrador to Pointe Noire, Quebec, where they
are pelletized for shipment via vessel to Canada, United States and Europe or
shipped as concentrates for sinter feed to Europe.
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Cliffs leases or subleases its reserves to certain mining ventures
which pay royalties to Cliffs on such reserves based on the tonnage and the
iron content of iron ore produced. The royalty rates on leased or subleased
reserves per ton are subject to periodic adjustments based on changes in the
Bureau of Labor Statistics producer price index for all commodities or on
certain iron ore and steel price indices. The mining ventures, except LTV Steel
Mining Company which is wholly-owned by LTV Steel Company, include Iron or CMC
and steel producers (who are "participants" either directly or through
subsidiaries).
Cliffs, pursuant to management agreements with the participants having
operating interests in the mining ventures, manages the development,
construction and operation of iron ore mines and concentrating and pelletizing
plants to produce iron ore pellets for steel producers. Cliffs is reimbursed by
the participants of the mining ventures for substantially all expenses directly
and indirectly incurred by Cliffs in operating the mines and ventures. In
addition, Cliffs is paid a management fee based on the tonnage of iron ore
produced. A substantial portion of such fees is subject to escalation
adjustments in a manner similar to the royalty adjustments.
With respect to the active mines in which Cliffs has an equity
interest, such interests range from 7.01% to 100% (see Table on page 6).
Pursuant to certain operating agreements at each mine, each participant is
generally obligated to take its share of production for its own use. Cliffs'
share of production is resold pursuant to multi-year contracts with price
escalation adjustment provisions or one year sales contracts with steel
manufacturers. Pursuant to operating agreements at each mine, each participant
is entitled to nominate the amount of iron ore which will be produced for its
account for that year. During the year, such nomination generally may be
increased (subject to capacity availability) or decreased (subject to certain
minimum production levels) by a specified amount. During 1993, three of the
North American mines operated below capacity levels due to a six-week labor
strike at those mines.
In 1993, the Tilden Magnetite Partnership ("TMP") project, in which
affiliates of Cliffs, Algoma Steel, Inc. ("Algoma"), and Stelco Inc. ("Stelco")
owned equity interests of 33.3%, 50.0%, and 16.7% respectively, had four
million tons per year of magnetite pellet production capacity. Pursuant to
facilities leasing and other operational arrangements between TMP and the
original Tilden Mining Company joint venture, substantial hematite iron ore
pellet production capacity continued to be available at the Tilden Mine. The
participants in the Tilden Mining Company joint venture are affiliates of
Cliffs, Algoma and Stelco. The joint venture's activities relate to the
development and operation of hematite iron ore reserves at the Tilden Mine.
In February, 1994, the Company reached agreement in principle with
Algoma and Stelco to restructure and simplify the Tilden Mine operating
agreement effective January 1, 1994. The principal terms of the new agreement
are: (1) the participants' tonnage entitlements and cost-sharing will be based
on a 6 million ton target normal production level instead of the previous 4
million ton base production level; (2) the Company's interest increases from
33.3% to 40.0% with an associated increase in the Company's obligation for mine
costs; (3) the Company will receive an increased royalty; (4) the Company has
the right to supply any additional iron ore pellet requirements of Algoma from
Tilden or the Company; and (5) a partner may take additional production with
certain fees paid to TMP. The agreement is not expected to have a material
financial effect on the Company's consolidated financial statements. In a
related transaction, Algoma repaid $4.2 million to the Company on December 30,
1993, in connection with cancellation of the hematite pellet production rights
arrangements. The new Tilden arrangements reflect an underlying plan of
operating improvements and will allow a lengthening of the magnetite ore
reserve life. Additional capital and development expenditures are expected in
connection with the improvement plan.
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As of December 31, 1992, McLouth Steel Products Company ("McLouth")
was indebted to the Company in the amount $9.3 million for payments for iron
ore pellets sold to McLouth under a term sales agreement. In December 1992,
McLouth announced that it was implementing a business recovery plan that
included temporary concessions by all major stakeholders commencing in
December, 1992 in order to alleviate its continuing financial liquidity
problems. The Company agreed to participate in McLouth's plan through April 15,
1993, on an equality of sacrifice principle with other major suppliers and all
McLouth employees, and in 1993, McLouth was paying for current iron ore
shipments under this plan. The past due amount of $9.3 million was reduced by
$3.0 million in 1993 and the remaining amount was reserved in 1993. Any failure
of McLouth to pay the past due amounts would not have a material impact on the
Company; however, non-performance by McLouth on its sales arrangement with the
Company would have a materially adverse effect on the Company unless comparable
replacement sales to other companies are obtained.
On November 30, 1992, Sharon Steel Corporation ("Sharon") filed for
protection under Chapter 11 of the U.S. Bankruptcy laws. At the time of the
filing, Sharon was indebted to the Company for substantial amounts relating to
contract defaults for payments for iron ore pellets sold to Sharon during the
years 1991 and 1992 under a term sales agreement. In 1992 the Company recorded
a $12.5 million reserve, representing amounts due on the ore sales accounts
receivable of Sharon at the time of Sharon's Chapter 11 filing. Pellet sales to
Sharon, which were suspended in 1992, represented approximately 14% of the
Company's sales capacity. Sharon is attempting to formulate a Plan of
Reorganization. The Company has filed a substantial claim against Sharon in
the Bankruptcy Court for amounts owed and contractual damages and it cannot be
determined at this time whether Sharon will have a court approved Plan of
Reorganization. The Company was able to replace the lost Sharon sales for the
year 1993.
In 1992, the Company purchased $1.0 million worth of steel from LCG
Funding Corporation, an entity owned by the principal owner of Sharon and
affiliated with Castle Harlan, Inc. In connection with the transaction, LCG
Funding Corporation agreed to indemnify the Company for any loss incurred upon
resale of the steel. Following ultimate resale of the steel, LCG Funding
Corporation and Castle Harlan, Inc. refused to honor that commitment, and the
Company has accordingly filed suit against Castle Harlan, Inc. and LCG Funding
Corporation for the purchase price of the steel plus interest. The proceedings
in that case are in the initial discovery stage.
Partner Bankruptcy Proceedings
------------------------------
The Company reached agreement with LTV Steel Company, Inc. ("LTV") in
1989 regarding the settlement of substantially all bankruptcy claims asserted
by the Company against LTV in LTV's bankruptcy proceedings under the
jurisdiction of the bankruptcy court. The terms of the settlement reached with
LTV provided for commercial ore sales and supply arrangements between the
Company and LTV, granted an allowed claim in the amount of $205 million
(reduced by a subsequent assignment of $4 million of the allowed claim) to the
Company, obligated the Company to indemnify LTV against further liability
relating to the claims covered by such settlement agreement or to rejected
operations, and provided for the dismissal or release of certain claims such
entities asserted or could have asserted against the Company. On January 19,
1993, LTV filed its modified Plan of Reorganization ("Plan") and Disclosure
Statement, which indicated a plan to emerge from bankruptcy on or about June
30, 1993. The Disclosure Statement, which outlined the proposed recoveries for
LTV creditors, was approved by the bankruptcy court on February 17, 1993. The
Plan was submitted to a vote of the LTV creditors and shareholders in March,
1993 and approved.
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On June 28, 1993, LTV and its parent corporation, The LTV Corporation
("LTV Corp") emerged from bankruptcy. In final settlement of its allowed claim,
the Company received 2.3 million shares of LTV Corp Common Stock and 4.4
million Contingent Value Rights ("CVRs"), which were issued by the Pension
Benefit Guaranty Corporation. On July 13, 1993, the Company distributed to its
shareholders a special dividend consisting of 1.5 million shares of LTV Corp
Common Stock and $12.0 million ($1.00 per share) cash.
The Company does not expect any significant changes in the composition
or structure of the Empire Mine to arise from any future developments by reason
of LTV's former bankruptcy proceedings. The LTV subsidiary holding the Empire
Mine interest was not in bankruptcy. LTV is performing and is current with
respect to its Empire Mine related obligations, including all debt service,
operating expense and ore purchase payments.
In addition to the Company's allowed claims against LTV, the owners of
Wabush Mines ("Wabush") (the Canadian iron ore mine managed by Cliffs and in
which it holds a 7.01% ownership interest) have negotiated a settlement
agreement with respect to the asserted claims against LTV relating to LTV's
15.6% interest in Wabush which agreement has been approved by the bankruptcy
court and provided for an allowed claim of $60 million. Following LTV's
emergence from bankruptcy in 1993, the Wabush Mines participants assigned their
allowed claim to the Wabush Mines' bondholders, who received proceeds of
700,000 shares of LTV Corp Common Stock and 1.3 million CVRs.
In January, 1991, Cannelton Iron Ore Company ("Cannelton"), a
wholly-owned subsidiary of Algoma, defaulted on its obligation to fund its
share of the Tilden Mine production costs, and cured its default in February,
1991. During the period of default, Cliffs accelerated its share of funding and
production in order to maintain the scheduled production rate. In February,
1991, Algoma sought and obtained protection from creditors under the Canadian
Companies' Creditor's Arrangement Act. In January, 1992, Algoma filed its Plan
of Arrangement Under the Companies' Creditor's Arrangement Act (Canada) and the
Business Corporation Act (Ontario) in the Ontario Court of Justice, covering
its restructuring plan. The Plan was approved by the Court on April 16, 1992
and on June 5, 1992, Algoma emerged from Canadian reorganization proceedings.
As part of Algoma's reorganization plan, Cliffs entered into an agreement
pursuant to which Cliffs purchased Algoma's Tilden hematite pellet production
rights in return for certain commercial and financial benefits. Algoma also
renewed its guarantee of Cannelton's Tilden obligations. This agreement was
cancelled on December 30, 1993. In February, 1994, the Company reached
agreement in principle with Algoma and Stelco to restructure and simplify the
Tilden Mine operating agreement effective January 1, 1994. (See discussion in
paragraph five on page 3).
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<TABLE>
Following is a table of production, current defined capacity, and estimated
exhaustion dates for the iron ore mines managed by Cliffs. The exhaustion dates are
based on estimated mineral reserves and assume full production rates, which could be
affected by future industry conditions and ongoing mine planning. Maintenance of
effective production capacity or estimated exhaustion dates could require increases in
capital and development expenditures. Alternatively, changes in economic conditions or
the quality of ore reserves could decrease capacity or accelerate exhaustion dates.
Continuing technological progress could alleviate such factors or improve capacity or
mine life.
<CAPTION>
Cliffs' Current
Current Pellet Production Current Operating Estimated
Mining Venture Operating ----------------------- Annual Continuously Exhaustion
Name and Location Type of Ore Interest 1991 1992 1993 Capacity Since Date (1)
- ----------------- -------------- -------- ------ ------ ------ ---------------------- --------
(Tons in Thousands)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michigan
- --------
Marquette Range
Empire Iron Mining
Partnership (3) Magnetite 22.56%(4) 7,641 8,099 7,209 8,000 1963 2023
Tilden Mine (3) Hematite and
Magnetite (5)(6) 4,697 5,470 5,369 6,000(5)(6) 1974 2047
Minnesota
- ---------
Mesabi Range
LTV Steel Mining
Company (7) Magnetite 0.00% 7,093 6,776 7,668 8,000 1957 2059
Hibbing Taconite
Joint Venture (7) Magnetite 15.00% 8,195 8,048 7,544 8,270 1976 2023
Canada
- ------
Wabush Mines
(Newfoundland and Specular
Quebec) (7)(8) Hematite 7.01% 4,612 4,495 4,492 4,500 1965 2057
Australia
- ---------
Savage River Mines
(Tasmania) Magnetite 100.00% 1,383 1,432 1,488 1,500 1967 1997
------ ----- ------ ------
TOTAL 33,621 34,320 33,770 36,270
====== ====== ====== ======
<FN>
- --------------------------------------------------------------------------------
(1) Based on full production at current annual capacity without regard to
economic feasibility.
(2) Tons are long tons of 2,240 pounds.
(3) Cliffs receives royalties and management fees.
(4) On January 1, 1992, a wholly-owned subsidiary of Iron transferred 2.5%
of its Empire Mine interest to Wheeling-Pittsburgh.
(5) In 1993, Iron's ownership interest in the Tilden Mining Company and
Tilden Magnetite Partnership was 60.0% and 33.3%, respectively. Design
capacity for exclusive production of hematite ore was 8 million tons
annually. The Tilden Mining Company and the Tilden Magnetite Partnership
established certain leasing and shared usage arrangements relating to
production and other facilities at the Tilden Mine.
(6) As a result of the restructuring of the Tilden Magnetite Partnership,
effective as of January 1, 1994 and as discussed on page 3, Iron's
ownership in the Tilden Magnetite Partnership increases from 33.3% to
40.0%. As a result of these arrangements annual production capacity is
targeted at 6 million tons annually, and could be increased to 8 million
tons of capacity, depending on type of ore production.
(7) Cliffs received no royalty payments with respect to such mine, but did
receive management fees.
(8) In 1991, the mine's annual production capacity was reduced to 4.5
million tons per year.
</TABLE>
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With respect to the Empire Mine, Cliffs owns directly approximately
one-half of the remaining mineral reserves and Cliffs leases the balance of the
reserves from their owners; with respect to the Tilden Mine, Cliffs owns all of
the mineral reserves; with respect to the Hibbing Mine, Wabush, and Savage
River Mines, all of the mineral reserves are owned by others and leased or
subleased directly to those mining ventures.
Each of the mining ventures contains crushing, concentrating, and
pelletizing facilities. The Empire Iron Mining Partnership facilities were
constructed beginning in 1962 and expanded in 1966, 1974 and 1980 at a total
cost of approximately $367 million; the Tilden Mine facilities were constructed
beginning in 1972 and expanded in 1979 at a total cost of approximately $492
million; the LTV Steel Mining Company facilities were constructed beginning in
1954 and expanded in 1967 at a total cost of approximately $250 million; the
Hibbing Taconite Joint Venture facilities were constructed beginning in 1973
and expanded in 1979 at a total cost of approximately $302 million; the Wabush
Mines facilities were constructed beginning in 1962 at a total cost of
approximately $103 million; and the Savage River Mines facilities were
constructed beginning in 1965 at a total cost of approximately $57 million.
Cliffs believes the facilities at each site are in satisfactory condition.
Production and Sales Information
--------------------------------
In 1993, Cliffs produced 26.9 million gross tons of iron ore in the
United States and Canada for participants other than Cliffs. The share of
participants having the 5 largest amounts, Bethlehem Steel Corporation
("Bethlehem"), Algoma, Inland Steel Company, LTV and Stelco aggregated 25
million gross tons, or 92.9%. None of such participants accounted for more than
35.1% of such production.
During 1993, Cliffs sold 100% of the iron ore and pellets that were
produced in the United States and Canada for its own account or purchased from
others to 14 U.S., Canadian and European iron and steel manufacturing
companies.
In 1993, McLouth Steel Products, WCI (formerly Warren Consolidated
Industries, Inc.), and Weirton Steel Company, directly and indirectly accounted
for 14.0%, 11.7%, and 10.7%, respectively, of total revenues.
AUSTRALIA. PMI owns 100% of Savage River Mines, an open pit iron ore
mining operation and concentrator at Savage River, Tasmania, and a pellet plant
with offshore loading facilities at Port Latta, Tasmania. Concentrate slurry is
pumped from the minesite through a 53 mile pipeline to Port Latta where it is
pelletized and shipped by vessel to customers in the Pacific Rim region. The
operation was downsized in 1990 to produce approximately 1.5 million tons per
year and long term sales agreements were signed with customers in Australia,
Japan and Korea to support the operation until the exhaustion of economic ore
reserves in 1997. A potential mine life extension is under study but any
extension is highly uncertain.
RAIL TRANSPORTATION. The Company, through a wholly-owned subsidiary,
owns a 99.2% stock interest in Lake Superior & Ishpeming Railroad Company. The
railroad operates approximately 49 miles of track in the Upper Peninsula of
Michigan, principally to haul iron ore from the Empire and Tilden Mines to Lake
Superior at Marquette, Michigan, where the railroad has an ore loading dock, or
to interchange points with another railroad for delivery to Lake Michigan at
Escanaba, Michigan. In 1993, 90.7% of the railroad's revenues were derived from
hauling iron ore and pellets and other services in connection with mining
operations managed by Iron. The railroad's rates are subject to regulation by
the Interstate Commerce Commission.
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Other Activities and Resources
------------------------------
OIL SHALE. Cliffs Synfuel Corp., a wholly-owned subsidiary of Iron,
principally through a 75-year lease and ownership of the surface, controls
extensive oil shale reserves in Utah with an estimated 850 million barrels of
recoverable shale oil on approximately 17,500 acres, together with conditional
water rights. Mining and processing the oil shale is currently uneconomical due
to world oil market conditions. However, holding costs are minimal. The
Company's oil and gas rights on this property are leased to a major energy
company which is conducting exploration in the area.
Cliffs Oil Shale Corp., another wholly-owned subsidiary of Iron, owns
a 15% interest in a smaller Colorado oil shale property. The remaining 85% is
owned by a Mobil Corporation subsidiary.
COAL. In 1992 CMC owned and operated its 100% owned Turner Elkhorn
Mining Co. from reserves located in Floyd County, Kentucky and managed
Pikeville Coal Co. which operates the Chisholm Mine at Phelps, Kentucky, owned
100% by Stelco. CMC sold the coal produced from Turner Elkhorn to utility and
other customers. CMC's employment as manager of the Pikeville Coal Co. was
governed by an agreement between it and the owner of the mine, which agreement
provided that CMC be reimbursed for substantially all of its expenses incurred
as manager and receive a management fee based on the number of clean tons
produced. Stelco terminated the management contract on December 31, 1992. CMC
continued to provide administrative services to Pikeville Coal Company under
the terms of an interim administrative services agreement with Stelco which
agreement terminated March 31, 1993. CMC sold its broker operations, lake
forwarding services, and royalty reserves in 1992. On February 26, 1993 CMC
sold Turner Elkhorn Mining Co., CMC's last remaining coal property.
DIRECT REDUCED IRON. The Company's corporate strategy includes
extending its business scope to produce and supply "reduced iron feed" for
steel and iron production. Reduced iron products contain approximately 90% iron
versus 65% for traditional iron ore pellets and have less undesirable chemical
elements than most scrap steel feed. The market for reduced iron is relatively
small but is projected to increase at a greater rate than other iron ore
products. In 1993, the Company formed a management group to evaluate technical
and commercial issues associated with potential operating ventures to supply
direct reduced iron units to steel company customers.
An investigation is under way to reactivate the Company-owned Republic
Mine in Michigan to produce 450,000 tons per year of direct reduced iron
briquettes using a coal-based process. Pilot plant testwork completed in 1993
confirmed that relatively minor modifications to the existing Republic
flowsheet would produce a high-quality concentrate that would be an appropriate
feed for the process. The $65 million to $75 million project contemplates the
addition of a rotary hearth furnace and related equipment to produce a 93%
metallized, direct reduced iron briquette. The Company plans to form a joint
venture with one or more steel company partners who would consume their share
of the plant's production. A decision to proceed with construction could be
made by mid-1994 leading to production by late 1995 or early 1996.
Through a partnership with North Star Steel, a leading U.S. electric
furnace steel producer, the Company has been actively engaged in refining
technology to produce iron carbide, a premium form of reduced iron that does
not have to be pelletized or briquetted before being charged into a steelmaking
furnace. Evaluation of modifications to the iron carbide process is continuing.
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The Company, with Mitsubishi Corporation, has an option for a license
to produce iron carbide in four areas in the Pacific Rim, Australia, Malaysia,
Indonesia, and mainland China. A joint feasibility study is under way to
identify the preferred location for a commercial plant and to assess the
Pacific Rim market for iron carbide; however, no decision has been made to
begin commercial development.
Technical assistance on iron ore mining and processing is being
provided by the Company under contract to the Venezuelan state-owned iron ore
company, CVG Ferrominera Orinoco.
Credit Agreement and Senior Notes
---------------------------------
On April 30, 1992 the Company entered into a Credit Agreement ("Credit
Agreement") with Chemical Bank, as Agent for a six-bank lending group, pursuant
to which the Company may borrow up to $75 million as revolving loans until
April 30, 1995. Any borrowings outstanding at that time may be converted to a
term loan payable in six consecutive semi-annual installments commencing
October 30, 1995 and ending April 30, 1998. Interest on borrowings will be
based on the Adjusted CD Rate, the Adjusted Libor Rate, or the Alternate Base
Rate, as defined in the Credit Agreement and as selected by the Company
pursuant to the terms of the Credit Agreement. The Company pays a commitment
fee of .25% per annum on the average daily unused amount of the commitments of
the banks. At December 31, 1993 there were no borrowings outstanding under the
Credit Agreement.
On May 1, 1992, the Company placed privately with a group of
institutional lenders $25 million 8.51% Senior Notes, Series A due May 1, 1999
("Series A Notes") and $50 million 8.84% Senior Notes, Series B due May 1, 2002
("Series B Notes"). The Series A Notes are subject to mandatory annual
redemption of $5 million commencing May 1, 1995 and ending May 1, 1999. The
Series B Notes are subject to mandatory annual redemption of $7.14 million
commencing May 1, 1996 and ending May 1, 2002.
Discontinued or Divested Operations and Investments
---------------------------------------------------
FOREST PRODUCTS. In January, 1991, Cliffs Forest Products Company
("Forest Products"), a wholly-owned subsidiary of Iron, sold substantially all
of its timberlands and related assets and Iron sold part of its timberland
located in the Upper Peninsula of Michigan for approximately $24 million.
COMPETITION
The iron ore mines, which the company operates in North America,
Canada and Australia, produce various grades of iron ore which was marketed in
the United States, Canada, Great Britain, Italy, Australia, Japan and Korea. In
North America, the Company is in competition with several iron ore producers,
including Oglebay Norton Company, Iron Ore Company of Canada, Quebec Cartier
Mining Company, Cyprus Northshore Mining Company, and USX Corporation, as well
as other major steel companies which own interests in iron ore mines and/or
have excess iron ore purchase commitments. In addition, significant amounts of
iron ore have, since the early 1980s, been shipped to the United States from
Venezuela and Brazil in competition with iron ore produced by the Company.
Other competitive forces have in the last decade become a large factor
in the iron ore business. With respect to a significant portion of steelmaking
in North America, electric furnaces built by "minimills" have replaced the use
of iron ore pellets with scrap metal in the steelmaking process. In addition,
operators of sinter plants produce iron agglomerates which substitute for iron
ore pellets. Imported steel slabs also replace the use of iron ore pellets in
producing finished steel products. Imported steel produced from iron ore
supplied by international competitors also effectively competes with the
Company's iron ore pellets.
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Competition among the sellers of iron units is predicated upon the
usual competitive factors of price, availability of supply, product
performance, service and cost to the consumer.
EMPLOYEES AND ENERGY
ENVIRONMENT. In the construction of the Company's facilities and in
its operating arrangements, substantial costs have been incurred and will be
incurred to avoid undue effect on the environment. The Company's commitment to
environmental preservation resulted in North American capital expenditures of
$481,000 in 1992 and $835,000 in 1993. It is estimated that approximately
$810,000 will be spent in 1994 for environmental control facilities.
The Company received notice from the U.S. Environmental Protection
Agency ("U.S. EPA") that the Company is a potentially responsible party with
respect to the Cliffs-Dow Superfund Site, located in the Upper Peninsula of the
State of Michigan, which is not related to the Company's iron ore mining
business. The Cliffs-Dow site was used prior to 1973 for the disposal of wastes
from charcoal production by a joint venture of the Company, the Dow Chemical
Company and afterward by a successor in interest, Georgia-Pacific Corporation.
The Company and other potentially responsible parties voluntarily participated
in the preparation of a Remedial Investigation and Feasibility Study ("RI/FS")
with respect to the Cliffs-Dow site, which concluded with the publication by
the U.S. EPA of a Record of Decision dated September 27, 1989 ("ROD"), setting
forth the selected remedial action plan adopted by the U.S. EPA for the
Cliffs-Dow site. The Company and other potentially responsible parties have
notified the U.S. EPA that they are implementing, at an estimated cost of $2.8
million, some of the remedial action selected in the ROD. The Company and
certain other potentially responsible parties have agreed upon allocation of
the costs for conducting the RI/FS, and implementation of the selected remedial
action plan. Upon the advice of counsel, the Company believes it has a right to
contribution from the other potentially responsible parties for the costs of
any remedial action plan ultimately implemented at the Cliffs-Dow site. A
second disposal area at the Cliffs-Dow charcoal production plant is on the list
of priority sites issued by the Michigan Department of Natural Resources. The
Company is participating in an RI/FS of this site, but that study has not yet
been completed. The Company has joined with the other potentially responsible
parties in an interim removal action at the site. The Company has a financial
reserve of $4.2 million to provide for its expected share of the cost of the
remedial actions at the above mentioned sites. (See "Legal Proceedings" for
additional information concerning environmental matters).
Generally, various legislative bodies and federal and state agencies
are continually promulgating numerous new laws and regulations affecting the
Company, its customers, and its suppliers in many areas, including waste
discharge and disposal; hazardous classification of materials, products, and
ingredients; coke oven emissions; and many other matters. Although the Company
believes that its environmental policies and practices are sound and does not
expect a material adverse effect of any current laws or regulations, it cannot
predict the collective adverse impact of the rapidly expanding body of laws and
regulations.
EMPLOYEES. As of December 31, 1993, the Company and its North American
independent mining ventures, for which Cliffs acts as managing agent, had 5,743
employees. Of the foregoing, 4,410 were hourly employees employed at the
independent mining ventures, all of which employees were represented by unions
which have collective bargaining agreements. The United Steelworkers of America
("United Steelworkers") represents the union employees. The United Steelworkers
labor agreement at Hibbing Taconite Company, Tilden and Empire Mines, and
General Shops facilities expired on August 1, 1993, and the United
Steelworkers struck those mines and facilities for six weeks. A new six-year
"no strike" labor agreement was entered between those Mines and facilities and
the United Steelworkers covering the period
10
<PAGE> 11
to July 31, 1999. The United Steelworkers labor agreement covering employees of
LTV Steel Mining Company will expire on June 1, 1994. The United Steelworkers
labor agreement covering Wabush expired on March 1, 1993; however, work
continues under the contract.
As of December 31, 1993, the Savage River Mines operations had 230
employees, 167 of whom are represented by several unions, whose contracts are
renegotiated from time to time.
ENERGY. Wisconsin Electric Power Company (WEPCO) electric power supply
contracts with the Empire and Tilden Mines, entered into in December 1987,
provide that WEPCO shall furnish electric power to these Mines, within specific
demand limits, pursuant to price formulas. The primary term of these contracts
covers ten years through 1997. In return for a substantial reduction in rates,
the Tilden Mine converted a portion of its firm power contract to curtailable
power beginning in 1993. Electric power for Hibbing Taconite is supplied by
Minnesota Power and Light under an agreement which can be terminated with four
years' notice. Hibbing Taconite received a substantial reduction in rates for
converting a portion of its contractual requirements to curtailable power
starting in November, 1993. Electric power requirements will continue to be
specified annually by the Hibbing Taconite venturers corresponding to Hibbing's
operating requirements. LTV Steel Mining Company completed reactivation of its
power plant in 1992, and is currently generating the majority of its
requirements, and an interchange agreement with Minnesota Power and Light
provides backup power and allows sale of excess capacity to the Midwestern Area
Power Pool. Wabush Mines owns a portion of the Twin Falls Hydro Generation
facility which provides power for Wabush's mining operations in Newfoundland. A
twenty year agreement with Newfoundland Power allows an interchange of water
rights in return for the power needs for Wabush's mining operations. The Wabush
pelletizing operations in Quebec are served by Quebec Hydro on an annual
contract. Savage River Mines obtains its power from the local Government Power
Authority on a special contract for the expected life of the mine.
Cliffs has contracts providing for the transport of natural gas for
its North American iron ore operations. No material interruptions of supply of
natural gas occurred in 1993.
Cliffs' pelletizing facilities have the capability of burning coal,
natural gas, or oil, except Savage River Mines and Wabush which have the
capability of burning coal and oil and Hibbing Taconite and LTV Steel Mining
Company which have the capability of burning natural gas and oil. During 1993
the U.S. mines burned natural gas as their primary fuel due to favorable
pricing. Wabush and Savage River Mines used oil, supplemented with coal or coke
breeze.
Any substantial interruption of operations or substantial price
increase resulting from future government regulations or energy taxes,
injunctive order, or fuel shortages could be materially adverse to the Company.
11
<PAGE> 12
In the paper format version of this document, this page contains a
map. See Appendix A to this report.
12
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS.
Arrowhead.
- ----------
CMC, which has a 15 percent ownership interest in and acts as Managing
Agent for Hibbing Taconite Company, a joint venture, has been included as a
named defendant in a suit captioned United States of America v. Arrowhead
Refining Company, et al., which was filed on or about September 29, 1989 in the
United States District Court for the District of Minnesota, Fifth Division. In
that suit, the United States seeks declaratory relief and recovery of costs
incurred in connection with the study and remedial plan conducted or to be
conducted by the United States Environmental Protection Agency ("U.S. EPA") at
the Arrowhead Refinery Superfund Site near Duluth, St. Louis County, Minnesota.
In that suit, the United States has alleged that CMC and the other 14 named
defendants, including former and present owners of the Arrowhead site, are
jointly and severally liable for $1.9 million, plus interest, representing the
amount incurred for actions already taken by or on behalf of the U.S. EPA at
the Arrowhead site, and are jointly and severally liable for the cost
attributable to implementation of a remedial plan adopted by the U.S. EPA with
respect to the Arrowhead site, which remedial action is estimated by the U.S.
EPA to cost $30 million. CMC has filed an answer to the suit denying liability.
It is not possible presently to estimate the amount of CMC's potential
liability, if any. Since January 31, 1991, CMC and 13 of the other named
defendants have filed a counter claim against the United States and further
complaints naming additional parties as third party defendants. The counter
claim and third party complaints allege that the parties named therein are
jointly and severally liable for such costs. During the year certain defendants
have been dismissed, and as of December 31, 1993 there are 140 third party
defendants named in this suit. It is not expected that this matter will result
in a material adverse effect on the Company's consolidated financial
statements.
Rio Tinto.
- ----------
On July 21, 1993, Iron and Cliffs Copper Corp, a subsidiary of the Company,
each received Findings of Alleged Violation and Order from the Department of
Conservation and Natural Resources, Division of Environmental Protection, State
of Nevada. The Findings allege that tailings materials left at the Rio Tinto
Mine, located near Mountain City, Nevada, are entering State waters which the
State considers to be in violation of State water quality laws. The Rio Tinto
Mine was operated by Cliffs Copper Corp from 1971 to 1975 and by other
companies prior to 1971. The Order requires remedial action to eliminate water
quality impacts. The Company does not believe the potential liability, if any,
to be material. The Company believes that it has substantial defenses to claims
of liability and intends to vigorously defend alleged violations.
Summitville.
- ------------
On January 12, 1993, Iron received from the United States Environmental
Protection Agency a Notice of Potential Liability at the Summitville mine site,
located at Summitville, Colorado, where Iron, as one of three joint venturers,
conducted an unsuccessful copper ore exploration activity from 1966 through
1969. On June 25, 1993, Iron received from the United States Environmental
Protection Agency a Notice of Potential Involvement in certain portions of the
Summitville mine site. The mine site has been proposed for listing on the
National Priorities List under the Comprehensive Environmental Response
Compensation and Liability Act. The Company does not believe the potential
liability, if any, to be material. The Company has substantial defenses to
these claims of liability.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
13
<PAGE> 14
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<CAPTION>
Position with the Company
as of March 1, 1994
-------------------------
Name Age
---- ---
<S> <C> <C>
M. T. Moore Chairman, President and Chief 59
Executive Officer
J. S. Brinzo Senior Executive-Finance 52
W. R. Calfee Senior Executive-Commercial 47
F. S. Forsythe Senior Executive-Operations 61
T. J. O'Neil Senior Vice President-Technical 53
A. S. West Senior Vice President-Sales 57
</TABLE>
There is no family relationship between any of the executive officers of the
Company, or between any of such executive officers and any of the Directors of
the Company. Officers are elected to serve until successors have been elected.
All of the above-named executive officers of the Company were elected effective
on the effective dates listed below for each such officer.
<TABLE>
The business experience of the persons named above for the last five years
is as follows:
<CAPTION>
<S> <C>
M. T. Moore President and Chief Executive Officer, Company,
January 1, 1987 to May 9, 1988.
Chairman, President and Chief Executive Officer,
Company, May 10, 1988 to date.
J. S. Brinzo Senior Vice President-Finance, Company,
May 1, 1987 to August 31, 1989.
Executive Vice President-Finance, Company,
September 1, 1989 to September 30, 1993.
Senior Executive-Finance, Company,
October 1, 1993 to date.
W. R. Calfee Group Executive Vice President, Company,
March 1, 1987 to August 31, 1989.
Senior Executive Vice President, Company,
September 1, 1989 to September 30, 1993.
Senior Executive-Commercial, Company,
October 1, 1993 to date.
F. S. Forsythe Executive Vice President-Commercial, Company,
February 25, 1985 to August 31, 1989.
Executive Vice President-Operations, Company,
September 1, 1989 to September 30, 1993.
Senior Executive-Operations, Company,
October 1, 1993 to date.
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
T. J. O'Neil Vice President-South Pacific Operations,
Cyprus Gold Company,
October, 1987 to August, 1989.
Vice President/General Manager,
Cyprus Sierrita Corp.,
August, 1989 to April, 1991.
Vice President-Engineering and Development,
Cyprus Copper Company,
April, 1991 to November, 1991.
Senior Vice President-Technical, Company,
November 18, 1991 to date.
A. S. West Senior Vice President-Sales, Iron,
April 15, 1987 to date.
Vice President, Company,
May 14, 1985 to May 11, 1987.
Senior Vice President-Sales, Company,
July 1, 1988 to date.
</TABLE>
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1993 contained in
the material under the headings, "Common Share Price Performance and
Dividends", "Investor and Corporate Information" and "11-Year Summary of
Financial and Other Statistical Data", such information filed as a part hereof
as Exhibits 13(h), 13(i) and 13(j), respectively.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1993 contained in
the material under the headings, "11-Year Summary of Financial and Other
Statistical Data" and "Notes to Consolidated Financial Statements", such
information filed as a part hereof as Exhibits 13(j) and 13(g), respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1993 contained in
the material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations", such information filed as a
part hereof as Exhibit 13(a).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated herein by
reference and made a part hereof from that portion of the Company's Annual
Report to Security Holders for the year ended December 31, 1993 contained in
the material under the headings "Statement of Consolidated Financial Position",
"Statement of Consolidated Income", "Statement of Consolidated Cash Flows",
"Statement of Consolidated Shareholders' Equity", "Notes to Consolidated
Financial Statements" and "Quarterly Results of Operations", such information
filed as a part hereof as Exhibits 13(c), 13(d), 13(e), 13(f), 13(g) and 13(h),
respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
16
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding Directors required by this Item is
incorporated herein by reference and made a part hereof from the Company's
Proxy Statement to Security Holders, dated March 25, 1994, from the material
under the heading "Election of Directors". The information regarding executive
officers required by this item is set forth in Part I hereof under the heading
"Executive Officers of the Registrant", which information is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by
reference and made a part hereof from the Company's Proxy Statement to Security
Holders, dated March 25, 1994 from the material under the headings "Executive
Compensation (excluding the Compensation Committee Report on Executive
Compensation)", "Pension Benefits", and the first five paragraphs under
"Agreements and Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by
reference and made a part hereof from the Company's Proxy Statement to Security
Holders, dated March 25, 1994, from the material under the heading "Securities
Ownership of Management and Certain Other Persons".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by
reference and made a part hereof from the Company's Proxy Statement to Security
Holders, dated March 25, 1994, from the material under the last paragraph of
the heading "Directors' Compensation" and from the material under the heading
"Board of Directors and Board Committees".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)
(1) and (2)-List of Financial Statements and Financial Statement
Schedules.
The following consolidated financial statements of the Company and
its subsidiaries, included in the Annual Report to Security Holders for the
year ended December 31, 1993, are incorporated herein by reference from Item 8
and made a part hereof:
Statement of Consolidated Financial Position -
December 31, 1993 and 1992
Statement of Consolidated Income - Years ended
December 31, 1993, 1992 and 1991
Statement of Consolidated Cash Flows - Years ended
December 31, 1993, 1992 and 1991
Statement of Consolidated Shareholders' Equity - Years ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
17
<PAGE> 18
<TABLE>
<CAPTION>
The following consolidated financial statement schedules of the Company and
its subsidiaries are included herein in Item 14(d) and attached as Exhibits 99(a),
99(b) and 99(c).
<S> <C> <C>
Schedule I - Marketable securities
Schedule VIII - Valuation and qualifying accounts
Schedule X - Supplementary income statement information
</TABLE>
The following financial statements and financial statement schedules
for significant investee companies are included herein in Item 14(d) and
attached as Exhibit 99(e).
Tilden Mining Company (A 60.0% ownership interest carried at equity)
Statement of Financial Position -
December 31, 1993 and 1992
Statement of Costs and Expenses Charged to Associates - Years ended
December 31, 1993, 1992 and 1991
Statement of Associates' Account - Years ended
December 31, 1993, 1992 and 1991
Statement of Cash Flows - Years ended
December 31, 1993, 1992 and 1991
Notes to Financial Statements
Schedule V - Property, plant and equipment
Schedule VI - Accumulated depreciation, depletion and
amortization of property, plant and equipment
Schedule X - Supplementary income statement information
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(3) List of Exhibits - Refer to Exhibit Index on pages 20-28 which
is incorporated herein by reference.
(b) There were no reports on Form 8-K filed during the three
months ended December 31, 1993.
(c) Exhibits listed in Item 14(a)(3) above are included herein.
(d) Financial Statements and Schedules listed above in Item
14(a)(1) and (2) are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 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
By: /s/John E. Lenhard
---------------------
John E. Lenhard,
Secretary
Date: March 28, 1994
18
<PAGE> 19
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
M. T. Moore Chairman, March 28, 1994
President and Chief
Executive Officer and
Principal Executive Officer
and Director
J. S. Brinzo Senior Executive-Finance March 28, 1994
and Principal
Financial Officer
J. A. Trethewey Vice President and March 28, 1994
Controller and Principal
Accounting Officer
R. S. Colman Director March 28, 1994
E. M. de Windt Director March 28, 1994
J. D. Ireland, III Director March 28, 1994
G. F. Joklik Director March 28, 1994
L. L. Kanuk Director March 28, 1994
G. H. Lamphere Director March 28, 1994
S. B. Oresman Director March 28, 1994
A. Schwartz Director March 28, 1994
S. K. Scovil Director March 28, 1994
J. H. Wade Director March 28, 1994
A. W. Whitehouse Director March 28, 1994
By: /s/John E. Lenhard
--------------------
(John E. Lenhard, as
Attorney-in-Fact)
</TABLE>
Original powers of attorney authorizing Messrs. M. Thomas Moore, John S.
Brinzo, Frank L. Hartman, and John E. Lenhard and each of them, to sign this
Annual Report on Form 10-K and amendments thereto on behalf of the above-named
officers and Directors of the Registrant have been filed with the Securities
and Exchange Commission.
19
<PAGE> 20
<TABLE>
EXHIBIT INDEX
<CAPTION>
Pagination by
Sequential
Exhibit Numbering
Number System
------ -------------
<S> <C> <C>
Articles of Incorporation and By-Laws
of Cleveland-Cliffs Inc
-----------------------
3(a) Amended Articles of Incorporation of Cleveland-Cliffs Inc (filed as Exhibit 3(a) to
Form 10-K of Cleveland-Cliffs Inc filed on March 29, 1991 and incorporated by
reference) Not Applicable
3(b) Regulations of Cleveland-Cliffs Inc (filed as Exhibit 3(b) to Form 10-K of
Cleveland-Cliffs Inc filed on March 29, 1991 and incorporated by reference) Not Applicable
Instruments defining rights of security
holders, including indentures
-----------------------------
4(a) Restated Indenture, between Empire Iron Mining Partnership, Inland Steel Company,
McLouth Steel Corporation, The Cleveland-Cliffs Iron Company, International
Harvester Company, WSC Empire, Inc. and Chemical Bank, as Trustee, dated as of
December 1, 1978 (filed as Exhibit 4(a) to Form 10-K of Cleveland-Cliffs Inc filed
on March 29, 1991 and incorporated by reference) Not Applicable
4(b) First Supplemental Indenture, between Empire Iron Mining Partnership, Inland Steel
Company, McLouth Steel Corporation, The Cleveland-Cliffs Iron Company,
International Harvester Company, WSC Empire Inc. and Chemical Bank, as Trustee,
dated as of February 14, 1981 (filed as Exhibit 4(b) to Form 10-K of Cleveland-
Cliffs Inc filed on March 29, 1991 and incorporated by reference) Not Applicable
4(c) Second Supplemental Indenture, between Empire Iron Mining Partnership, Inland Steel
Company, McLouth Steel Corporation, The Cleveland-Cliffs Iron Company,
International Harvester Company, and Chemical Bank, as Trustee, dated as of May 1,
1982 (filed as Exhibit 4(c) to Form 10-K of Cleveland-Cliffs Inc filed on March 29,
1991 and incorporated by reference) Not Applicable
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C> <C>
4(d) Third Supplemental Indenture, between Empire Iron
Mining Partnership, Inland Steel Company, McLouth
Steel Corporation, The Cleveland-Cliffs Iron
Company, and Chemical Bank, as Trustee, dated as of
June 21, 1982 (filed as Exhibit 4(d) to Form 10-K
of Cleveland-Cliffs Inc filed on March 29, 1991 and
incorporated by reference) Not Applicable
4(e) Fourth Supplemental Indenture, between Empire Iron
Mining Partnership, Inland Steel Company, The
Cleveland-Cliffs Iron Company, Cliffs IH
Empire, Inc., Cliffs MC Empire, Inc., Jones &
Laughlin Ore Mining Company, J&L Empire, Inc.
and Chemical Bank, as Trustee, dated as of February
1, 1983 (filed as Exhibit 4(e) to Form 10-K of
Cleveland-Cliffs Inc filed on March 29, 1991 and
incorporated by reference) Not Applicable
4(f) Fifth Supplemental Indenture, between Empire Iron
Mining Partnership, Inland Steel Company, The
Cleveland-Cliffs Iron Company, Cliffs IH Empire,
Inc., J&L Empire, Inc., Wheeling-Pittsburgh/Cliffs
Partnership, and Chemical Bank, as Trustee, dated
as of October 1, 1983 (filed as Exhibit 4(f) to
Form 10-K of Cleveland-Cliffs Inc filed on March
29, 1991 and incorporated by reference) Not Applicable
4(g) Sixth Supplemental Indenture, between Empire Iron
Mining Partnership, Inland Steel Company, The
Cleveland-Cliffs Iron Company, J&L Empire,
Inc., Wheeling- Pittsburgh/Cliffs Partnership,
McLouth-Cliffs Partnership, Cliffs Empire, Inc.
and Chemical Bank, as Trustee, dated as of July 1,
1984 (filed as Exhibit 4(g) to Form 10-K of
Cleveland-Cliffs Inc filed on March 29, 1991 and
incorporated by reference) Not Applicable
4(h) Form of Guaranty of Payment of 9.55% Secured
Guaranteed Notes of Empire Iron Mining Partnership
due September 1, 1998 (filed as Exhibit 4(h)
to Form 10-K of Cleveland-Cliffs Inc filed on
March 29, 1991 and incorporated by reference) Not Applicable
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C>
4(i) Restated First Mortgage Indenture, among Tilden
Iron Ore Partnership, Tilden Iron Ore Company and
Chemical Bank and Clinton G. Martens, as
Trustees, dated as of October 31, 1977, as
supplemented and amended (See Footnote (A)) Not Applicable
4(j) Restated Financing Agreement, by and among Tilden
Iron Ore Partnership, Tilden Iron Ore Company,
Cannelton Iron Ore Company, The Cleveland-Cliffs
Iron Company, Stelco Coal Company,
Wheeling-Pittsburgh Steel Corporation, Sharon
Steel Corporation and Chemical Bank and Clinton
G. Martens, as Trustees, dated as of October
31, 1977 (filed as Exhibit 4(j) to Form 10-K of
Cleveland-Cliffs Inc filed on March 29, 1991 and
incorporated by reference) Not Applicable
4(k) Form of Guarantee of Payment, dated January 20,
1984 relating to Notes of Empire Iron Mining
Partnership (See Footnote (A)) Not Applicable
4(l) Form of Guarantee of Payment, dated August 12,
1986 relating to Notes of Empire Iron Mining
Partnership (See Footnote (A)) Not Applicable
4(m) Form of Common Stock Certificate (filed as
Exhibit 4(m) to Form 10-K of Cleveland-Cliffs
Inc filed on March 30, 1992 and incorporated by
reference) Not Applicable
4(n) Rights Agreement dated September 8, 1987 and
amended and restated as of November 19, 1991, by
and between Cleveland-Cliffs Inc and Society
National Bank (successor to Ameritrust Company
National Association) (filed as Exhibit 4.2 to
Form 8-K of Cleveland-Cliffs Inc filed on November
20, 1991 and incorporated by reference) Not Applicable
<FN>
- ---------------------------------------------
(A) This document has not been filed as an exhibit hereto because the
long-term debt of the Company represented thereby, either directly or
through its interest in an affiliated or associated entity, does not exceed
10% of the total assets of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of this document to the Securities
and Exchange Commission upon request.
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C>
4(o) Credit Agreement dated as of April 30, 1992 among
Cleveland-Cliffs Inc, the Banks named therein and
Chemical Bank, as Agent (filed as Exhibit 4(s) to
Form 10-Q of Cleveland-Cliffs Inc filed on May 14,
1992 and incorporated by reference) Not Applicable
4(p) Conformed Note Agreements dated as of May 1,
1992 among Cleveland-Cliffs Inc and each of the
Purchasers named in Schedule I thereto (filed as
Exhibit 4(t) to Form 10-Q of Cleveland-Cliffs Inc
filed on July 22, 1992 and incorporated by
reference) Not Applicable
Material Contracts
------------------
10(a) * Amendment and Restatement of Supplemental
Retirement Benefit Plan of Cleveland-Cliffs
Inc, dated as of September 1, 1985 (filed as
Exhibit 10(a) to Form 10-K of Cleveland-Cliffs
Inc filed on March 30, 1992 and incorporated
by reference) Not Applicable
10(b) * The Cleveland-Cliffs Iron Company Plan for
Deferred Payment of Directors' Fees dated as of
July 1, 1981, assumed by Cleveland-Cliffs Inc
effective July 1, 1985 (filed as Exhibit 10(b) to
Form 10-K of Cleveland-Cliffs Inc filed on March
29, 1991 and incorporated by reference) Not Applicable
10(c) * Amendment No. 1 to Cleveland-Cliffs Inc Plan for
Deferred Payment of Directors' Fees (filed as
Exhibit 10(c) to Form 10-K of Cleveland-Cliffs
Inc filed on March 30, 1992 and incorporated by
reference) Not Applicable
10(d) * Consulting Agreement dated as of June 23, 1987, by
and between Cleveland-Cliffs Inc and S. K. Scovil
(filed as Exhibit 10(c) to Form 10-K of
Cleveland-Cliffs Inc filed on March 29, 1991 and
incorporated by reference) Not Applicable
10(e) * Amendment to Consulting Agreement wth S.K. Scovil
(filed as Exhibit 10(e) to Form 10-K of Cleveland-
Cliffs Inc filed on March 30, 1992 and incorporated
by referene) Not Applicable
10(f) * Form of contingent employment agreements with
certain executive officers (filed as Exhibit 10(f)
to Form 10-K of Cleveland-Cliffs Inc filed on
March 30, 1992 and incorporated by reference) Not Applicable
<FN>
- ---------------------------------------
*Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C>
10(g) * Cleveland-Cliffs Inc and Subsidiaries Management
Performance Incentive Plan, dated as of January
1, 1993 (Summary Description) (filed as Exhibit
10 to Form 10-Q of Cleveland-Cliffs Inc on
November 10, 1993 and incorporated by reference) Not Applicable
10(h) Instrument of Assignment and Assumption dated as
of July 1, 1985, by and between The
Cleveland-Cliffs Iron Company and Cleveland-Cliffs
Inc (filed as Exhibit 10(f) to Form 10-K of
Cleveland-Cliffs Inc filed on March 29, 1991 and
incorporated by reference) Not Applicable
10(i) Instrument of Assignment and Assumption dated
as of September 1, 1985, by and between The
Cleveland-Cliffs Iron Company and Cleveland-
Cliffs Inc (filed as Exhibit 10(g) to Form 10-K
of Cleveland-Cliffs Inc filed on March 29, 1991
and incorporated by reference) Not Applicable
10(j) Form of indemnification agreements with certain
directors and officers (filed as Exhibit 10(h)
to Form 10-K of Cleveland-Cliffs Inc filed on
March 29, 1991 and incorporated by reference) Not Applicable
10(k) * 1987 Incentive Equity Plan (filed as Exhibit 10(k)
to Form 10-K of Cleveland-Cliffs Inc filed on March
30, 1992 and incorporated by reference) Not Applicable
10(l) * 1992 Incentive Equity Plan (filed as
Appendix A to Proxy Statement of
Cleveland-Cliffs Inc filed on March 13, 1992 and
incorporated by reference) Not Applicable
10(m) Purchase and Sale Agreement dated as of
December 8, 1987, by and among The Cleveland-
Cliffs Iron Company, Cliffs Electric Service
Company, Upper Peninsula Generating Company,
Upper Peninsula Power Company and Wisconsin
Electric Power Company (filed as Exhibit 10(m) to
Form 10-K of Cleveland-Cliffs Inc filed on March
29, 1993 and incorporated by reference) Not Applicable
10(n) * Amended and Restated Cleveland-Cliffs Inc
Retirement Plan for Non-Employee Directors
dated as of January 1, 1988 (filed as Exhibit
10(n) to Form 10-K of Cleveland-Cliffs Inc on
March 29, 1993 and incorporated by reference) Not Applicable
<FN>
- ---------------------------------------------
*Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C>
10(o) * Amended and Restated Trust Agreement No. 1
dated as of March 9, 1992, by and between
Cleveland-Cliffs Inc and Society National Bank
(successor to Ameritrust Company National
Association) with respect to the Supplemental
Retirement Benefit Plan and certain contingent
employment agreements (filed as Exhibit 10(o) to
Form 10-K of Cleveland-Cliffs Inc filed on March
30, 1992 and incorporated by reference) Not Applicable
10(p) * Amended and Restated Trust Agreement No. 2
dated as of March 9, 1992, by and between
Cleveland-Cliffs Inc and Society National Bank
(successor to Ameritrust Company National
Association) 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 contingent
employment agreements (filed as Exhibit 10(p) to
Form 10-K of Cleveland-Cliffs Inc filed on March
30, 1992 and incorporated by reference) Not Applicable
10(q) * Trust Agreement No. 4 dated as of October 28,
1987, by and between Cleveland-Cliffs Inc and
Society National Bank (successor to
Ameritrust Company National Association) with
respect to the Plan for Deferred Payment of
Directors' Fees (filed as Exhibit 10(q) to Form
10-K of Cleveland-Cliffs Inc on March 29, 1993 and
incorporated by reference) Not Applicable
10(r) * First Amendment to Trust Agreement No. 4 dated as
of April 9, 1991, by and between Cleveland-Cliffs
Inc and Society National Bank (successor to
Ameritrust Company National Association) and
Second Amendment to Trust Agreement No. 4 dated
as of March 9, 1992 by and between
Cleveland-Cliffs Inc and Society National Bank
(successor to Ameritrust Company National
Association) (filed as Exhibit 10(r) to Form 10-K
of Cleveland-Cliffs Inc filed on March 29, 1993
and incorporated by reference) Not Applicable
<FN>
- ----------------------------------------------------------------
*Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C> <C>
10(s) * Trust Agreement No. 5 dated as of October 28,
1987, by and between Cleveland-Cliffs Inc and
Society National Bank (successor to
Ameritrust Company National Association) with
respect to the Cleveland-Cliffs Inc Voluntary
Non-Qualified Deferred Compensation Plan (filed as
Exhibit 10(s) to Form 10-K of Cleveland-Cliffs Inc
filed on March 29, 1993 and incorporated by
reference) Not Applicable
10(t) * First Amendment to Trust Agreement No. 5 dated as
of May 12, 1989, by and between Cleveland-Cliffs
Inc and Society National Bank (successor to
Ameritrust Company National Association), Second
Amendment to Trust Agreement No. 5 dated as of
April 9, 1991 by and between Cleveland-Cliffs Inc
and Society National Bank (successor to Ameritrust
Company National Association) and Third Amendment
to Trust Agreement No. 5 dated as of March 9,
1992, by and between Cleveland-Cliffs Inc and
Society National Bank (successor to Ameritrust
Company National Association) (filed as Exhibit
10(t) to Form 10-K of Cleveland-Cliffs Inc filed
on March 30, 1992 and incorporated by reference) Not Applicable
10(u) Amended and Restated Trust Agreement No. 6
dated as of March 9, 1992, by and between
Cleveland-Cliffs Inc and Society National Bank
(successor to Ameritrust Company National
Association) with respect to certain
indemnification agreements with directors and
certain officers (filed as Exhibit 10(u) to
Form 10-K of Cleveland-Cliffs Inc filed on March
30, 1992 and incorporated by reference) Not Applicable
10(v) * Trust Agreement No. 7 dated as of April 9, 1991,
by and between Cleveland-Cliffs Inc and Society
National Bank (successor to Ameritrust
Company National Association) with respect to
the Cleveland-Cliffs Inc Supplemental Retirement
Benefit Plan, as amended by First Amendment to
Trust Agreement No. 7 (filed as Exhibit 10(v) to
Form 10-K of Cleveland-Cliffs Inc filed on March
30, 1992 and incorporated by reference) Not Applicable
<FN>
- -------------------------------------------------
*Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
26
<PAGE> 27
<TABLE>
<S> <C> <C>
10(w) * Trust Agreement No. 8 dated as of April 9, 1991,
by and between Cleveland-Cliffs Inc and Society
National Bank (successor to Ameritrust
Company National Association) with respect to
the Cleveland-Cliffs Inc Retirement Plan for
Non-Employee Directors, as amended by First
Amendment to Trust Agreement No. 8 (filed as
Exhibit 10(w) to Form 10-K of Cleveland-Cliffs
Inc filed on March 30, 1992 and incorporated by
reference) Not Applicable
10(x) Cleveland-Cliffs Inc Retention Plan for Salaried
Employees (filed as Exhibit 10(x) to Form 10-K of
Cleveland-Cliffs Inc filed on March 30, 1992 and
incorporated by reference) Not Applicable
10(y) * Severance Pay Plan for Key Employees of
Cleveland-Cliffs Inc (filed as Exhibit 10(y) to
Form 10-K of Cleveland-Cliffs Inc filed on March
30, 1992 and incorporated by reference) Not Applicable
10(z) * Voluntary Non-Qualified Deferred Compensation
Plan of Cleveland-Cliffs Inc as amended by
Amendment No. 1 to Voluntary Non-Qualified
Deferred Compensation Plan and Amendment No. 2 to
Voluntary Non-Qualified Deferred Compensation Plan
(filed as Exhibit 10(z) to Form 10-K of
Cleveland-Cliffs Inc filed on March 30, 1992
and incorporated by reference) Not Applicable
10(aa) * First Amendment to Amendment and Restatement of
Cleveland-Cliffs Inc Supplemental Retirement
Benefit Plan, dated as of January 15, 1993 (filed
as Exhibit 10(aa) to Form 10-Q of
Cleveland-Cliffs Inc filed on May 12, 1993 and
incorporated by reference) Not Applicable
11 Statement re computation of per share earnings 29-30
13 Selected portions of 1993 Annual Report to Security
Holders
13(a) Management's Discussion and Analysis of
Financial Condition and Results of
Operations 31-40
13(b) Report of Independent Auditors 41
13(c) Statement of Consolidated Financial
Position 42-43
13(d) Statement of Consolidated Income 44
13(e) Statement of Consolidated Cash Flows 45
<FN>
- ------------------------------------------------
*Reflects management contract or other compensatory arrangement required to be
filed as an Exhibit pursuant to Item 14(c) of this Report.
</TABLE>
27
<PAGE> 28
<TABLE>
<S> <C> <C>
13(f) Statement of Consoldiated Shareholders'
Equity 46
13(g) Notes to Consolidated Financial Statements 47-61
13(h) Quarterly Results of Operations/
Common Share Price Performance and
Dividends 62
13(i) Investor and Corporate Information 63
13(j) 11-Year Summary of Financial and Other
Statistical Data 64-65
21 Subsidiaries of the registrant 66-68
23 Consent of independent auditors 69
24 Power of Attorney 70
99 Additional Exhibits
99(a) Schedule I - Marketable securities 71
99(b) Schedule VIII - Qualification and
valuation accounts 72
99(c) Schedule X - Supplementary income
statement information 73
99(d) Report of Independent Auditors for
Significant Investee Company 74
99(e) Financial Statements and Financial
Statement Schedules for Significant
Investee Company 75-85
Appendix Image and Graphic Material 86
</TABLE>
28
<PAGE> 1
<TABLE>
Exhibit 11
Computation of Earnings Per Share
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
(In Millions, Except Per
Share Amounts)
Year Ended December 31
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Earnings per share, as reported:
Average shares outstanding 12.0 12.0 11.8
======== ======== ========
Income before cumulative effect of
changes in accounting principles $ 54.6 $ 30.8 $ 53.8
Cumulative effect on prior years of
changes in accounting principles -- (38.7) --
-------- -------- --------
Net income (loss) $ 54.6 $ ( 7.9) $ 53.8
======== ======== ========
Income (loss) per share:
Income before cumulative effect of
changes in accounting principles $ 4.55 $ 2.57 $ 4.55
Cumulative effect on prior years of
changes in accounting principles -- (3.23) --
-------- -------- --------
Net income (loss) $ 4.55 $ ( .66) $ 4.55
======== ======== ========
Primary earnings per share:
Average shares outstanding 12.0 12.0 11.8
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 0.1 0.1 0.1
-------- -------- --------
Average shares and equivalents 12.1 12.1 11.9
======== ======== ========
Income before cumulative effect of
changes in accounting principles $ 54.6 $ 30.8 $ 53.8
Cumulative effect on prior years of
changes in accounting principles -- (38.7) --
-------- -------- --------
Net income (loss) $ 54.6 $ (7.9) $ 53.8
======== ======== ========
Income (loss) per share:
Income before cumulative effect of
changes in accounting principles $ 4.51 $ 2.55 $ 4.52
Cumulative effect on prior years of
changes in accounting principles -- (3.20) --
-------- -------- --------
Net income (loss) $ 4.51 $ (.65) $ 4.52
======== ======== ========
</TABLE>
29
<PAGE> 2
<TABLE>
<CAPTION>
(In Millions, Except Per
Share Amounts)
Year Ended December 31
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Fully diluted earnings per share:
Average shares outstanding 12.0 12.0 11.8
Net effect of dilutive stock options -
based on the treasury stock method
using higher of year-end or average
market price 0.1 0.1 0.1
-------- -------- --------
Average fully diluted shares 12.1 12.1 11.9
======== ======== ========
Income before cumulative effect of
changes in accounting principles $ 54.6 $ 30.8 $ 53.8
Cumulative effect on prior years of
changes in accounting principles -- (38.7) --
-------- -------- --------
Net income (loss) $ 54.6 $ (7.9) $ 53.8
======== ======== ========
Income (loss) per share:
Income before cumulative effect of
changes in accounting principles $ 4.51 $ 2.55 $ 4.52
Cumulative effect on prior years of
changes in accounting principles -- (3.20) --
-------- -------- --------
Net income (loss) $ 4.51 $ (.65) $ 4.52
======== ======== ========
<FN>
Common stock options do not have a material dilutive effect and therefore
were not included in the computation of earnings per share as reported.
</TABLE>
30
<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS Exhibit 13(a)
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
In 1993, Cleveland-Cliffs earned $31.4 million, or $2.62 a share, excluding
the recovery on the settlement of the Company's bankruptcy claim against The
LTV Corporation (including its wholly-owned, integrated steel company
subsidiary, LTV Steel Company, Inc.; collectively "LTV"). Including the
$23.2 million net recovery, earnings were $54.6 million, or $4.55 per share.
<TABLE>
Following is a summary of results for the years 1993, 1992, and 1991:
<CAPTION>
(In Millions, Except Per Share)
--------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income Before Cumulative
Effect of Accounting Changes
- Amount $ 54.6 $ 30.8 $ 53.8
- Per Share 4.55 2.57 4.55
Cumulative Effect of Accounting Changes,
Net of Income Taxes
Other Post Employment Benefits (42.5)
Income Taxes 3.8
------- ------- -------
Total Cumulative Effect (38.7)
------- ------- -------
Net Income (Loss)
- Amount $ 54.6 $( 7.9) $ 53.8
======= ======= =======
- Per Share $ 4.55 $( .66) $ 4.55
======= ======= =======
<FN>
Year 1991 results included a $14.4 million net gain on the sale of timberlands.
</TABLE>
1993 VERSUS 1992
- ----------------
Revenues were $355.9 million in 1993, an increase of $28.9 million from 1992.
Revenues included a $35.7 million pre-tax recovery on the LTV bankruptcy claim
in 1993 and a $2.4 million residual recovery of a bankruptcy claim against
Wheeling-Pittsburgh Steel Corporation ("Wheeling") in 1992. Without these
items, revenues in 1993 were $320.2 million, down $4.4 million from 1992.
Revenues from product sales and services in 1993 totaled $268.1 million, up
$1.2 million from 1992, mainly due to higher sales volume, partially offset by
lower coal revenues related to the Company's exit from the coal business in
1993 and lower average iron ore sales price. North American pellet sales were
6.4 million tons in 1993 compared with 6.0 million tons in 1992. Royalty and
management fee revenues in 1993 totaled $39.7 million, a decrease of $4.1
million from 1992 due primarily to decreased production as a result of a
six-week labor strike in the third quarter of 1993 at the Empire, Hibbing
and Tilden mines, and higher payments to mineral owners.
31
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Net income for the year 1993, excluding a $23.2 million gain on the LTV
bankruptcy settlement, was $31.4 million, an increase of $2.2 million from the
comparable 1992 period, before a $38.7 million after-tax charge in 1992 for
the cumulative effect of adopting two new accounting standards and a $1.6
million after-tax residual Wheeling bankruptcy recovery in 1992.
The earnings improvement of $2.2 million reflected a $13.0 million after-tax
provision for doubtful accounts receivable in 1992, higher sales volume,
inventory reduction, and higher Australian earnings, partially offset by an
estimated $5.4 million after-tax cost of the six-week strike, lower sales
margin, a non-recurring state tax credit in 1992, and lower royalties.
In 1993, the Company recorded a $23.2 million, or $1.93 per share, after-tax
gain on the receipt of securities in settlement of its bankruptcy claim
against LTV. In January, 1992, the Company recorded a $38.7 million, or $3.23
per share, charge for the cumulative effect of adopting new accounting
standards covering retiree medical costs and income taxes. In 1992, the
Company received a $2.4 million supplemental recovery on a prior year
settlement of its bankruptcy claim against Wheeling, which resulted in an
after-tax gain of $1.6 million, or 13 cents per share.
Including the special items, year 1993 net income was $54.6 million, versus a
net loss of $7.9 million in 1992.
1992 VERSUS 1991
- ----------------
Revenues were $327.0 million in 1992, a decrease of $36.3 million from 1991.
Revenues in 1992 included a $2.4 million pre-tax recovery on bankruptcy
claims. Revenues in 1991 included a $21.5 million pre-tax gain on the sale of
forest lands and $5.8 million of pre-tax recoveries on bankruptcy claims.
Without these items, revenues in 1992 were $324.6 million, down $11.4 million
from 1991. Revenues from product sales and services in 1992 totaled $266.9
million, a decrease of $4.7 million from 1991 mainly due to the sale of
coal interests in 1992 and reduced Savage River sales realization, partially
offset by increased service revenues. North American pellet sales were 6.0
million tons in both years. Royalties and management fee revenue in 1992
totaled $43.8 million, a decrease of $2.0 million from 1991 due primarily to
the Company's reduced coal business and higher payments to mineral owners.
Net income before the cumulative effect of accounting changes of $30.8
million in 1992 decreased $23.0 million from results in 1991. The decrease
primarily reflected a $21.5 million pre-tax gain on the sale of timberlands
in 1991 and a $17.5 million provision for doubtful accounts receivable in
1992, a less favorable sales mix, higher effective income tax rate, and lower
net interest income, partially offset by lower mine development costs, a $3.9
million credit for resolution of a state tax dispute, and higher dividend
income.
In 1992, the Company adopted Financial Accounting Standards ("FAS") 106
and 109 effective January 1, 1992. (See Note A to Consolidated Financial
Statements).
32
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
The prior years' cumulative effect of FAS 106, "Accounting for Post-Retirement
Benefits Other than Pensions" ("OPEB"), resulted in a one-time, after-tax
charge against first quarter 1992 results of $42.5 million, or $3.54 per common
share.
The prior years' cumulative effect of FAS 109, "Accounting for Income Taxes,"
which changes the accounting for income taxes from the deferred method to the
liability method, resulted in a non-cash credit to income of $3.8 million, or
31 cents per share, in the first quarter of 1992.
OPERATING RESULTS IN 1994
- -------------------------
The following items are expected to affect 1994 results of operations versus
1993:
bullet Higher labor contract costs
bullet Lower Australian pellet price
bullet Increased pension and OPEB costs due to lower interest rates
bullet Development costs for reduced iron projects
bullet Higher average North American pellet price
bullet Extremely severe winter weather in U.S. mining regions in
early 1994
bullet Non-recurring strike impact in 1993, including inventory
liquidation
CASH FLOW AND LIQUIDITY
- -----------------------
At December 31, 1993, the Company had cash and equivalents totaling $67.9
million, including $3.1 million dedicated to fund Australian mine
obligations. During the year 1993, the Company converted $90.0 million of
cash equivalents to highly-liquid marketable securities to improve its return
on those funds. At year-end, these marketable securities were $93.1
million. In addition, the full amount of a $75.0 million unsecured revolving
credit agreement was available.
Since December 31, 1992, cash and marketable securities have increased by
$32.4 million to $161.0 million due mainly to cash flow from operating
activities (excluding changes in operating assets and liabilities), $33.8
million, and decreases in operating assets and liabilities other than
marketable securities, $36.5 million, partially offset by cash dividends,
$26.4 million, capital expenditures, $5.0 million, and debt repayments, $4.4
million.
Excluding the $93.1 million investment in marketable securities, working
capital decreased by $36.5 million primarily due to a decrease in product
inventories, $21.9 million, decreased receivables from associated companies,
$5.6 million, and lower deferred tax assets, $3.6 million.
North American pellet inventories at December 31, 1993 were .8 million tons or
$19.4 million, a decrease of .7 million tons, or $20.1 million, from December
31, 1992. The decrease reflected lower production due to the six-week strike
and increased sales, partially offset by strike-related pellet purchases.
33
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
<TABLE>
FOLLOWING IS A SUMMARY OF 1993 CASH FLOW:
<CAPTION>
(Millions)
-----------
<S> <C>
Cash Flow from Operating Activities
excluding changes in operating assets and liabilities........... $ 33.8
Changes in Operating Assets and Liabilities:
Marketable Securities........................................... ( 93.1)
Other .......................................................... 36.5
--------
Net Cash (Used by) Operations.................................. ( 22.8)
Dividends......................................................... ( 26.4)
Capital Expenditures.............................................. ( 5.0)
Debt Payments..................................................... ( 4.4)
Purchase of Long-Term Investments................................. ( 3.6)
Other (net) ...................................................... 1.5
--------
Net (Decrease) in Cash and Cash Equivalents.................... $( 60.7)
Increase in short-term Marketable Securities...................... 93.1
---------
Net Increase in Cash and Marketable Securities................. $ 32.4
=========
</TABLE>
<TABLE>
FOLLOWING IS A SUMMARY OF KEY LIQUIDITY MEASURES:
<CAPTION>
At December 31
(Millions)
------------------------------------
1993 1992 1991
------ -------- --------
<S> <C> <C> <C>
Cash and Temporary Investments
Cash and Cash Equivalents ................. $ 67.9 $128.6 $ 95.9
Marketable Securities...................... 93.1 -- --
------ ------- -------
Total $161.0 $128.6 $ 95.9
====== ======= =======
Working Capital.............................. $186.0 $188.9 $139.7
====== ======= =======
Ratio of Current Assets to Current
Liabilities................................ 3.9:1 4.1:1 3.1:1
</TABLE>
LONG-TERM INVESTMENTS
- ---------------------
Total cash and long-term securities at December 31, 1993 dedicated to fund
the eventual Savage River closedown liability were $15.5 million, including
Australian government securities, $12.4 million, and cash of $3.1 million.
Additionally at December 31, 1993, the Company had other long-term investments
as follows:
bullet Weirton Steel Corporation 12-1/2 percent redeemable issue of
preferred stock, with a par value of $25.0 million, due in 2003.
bullet LTV Common Stock, .8 million shares with a market value of $13.2
million.
bullet Long-term government and corporate bonds, $6.9 million.
34
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
NORTH AMERICAN IRON ORE
- -----------------------
Since the integrated steel industry in North America has experienced
difficult business conditions and substantial financial losses over a period
of years, the major business risk faced by the Company is the potential
financial failure and shutdown of one or more of its significant customers and
partners, with the resulting loss of ore sales and royalty and management fee
income. If any such shutdown were to occur without mitigation through
replacement sales volume or cost reduction, it would represent a significant
adverse financial development to the Company. The iron mining business has
relatively high operating leverage because "fixed" costs are a large portion
of the cost structure. Therefore, loss of sales volume due to failure of a
customer or other loss of business would have an adverse income effect
proportionately greater than the revenue effect.
Sharon Steel Corporation ("Sharon"), which was a significant customer,
suspended its blast furnace operations in September, 1992, and filed for
protection from its creditors under Chapter 11 of the U. S. Bankruptcy Code
on November 30, 1992. The Company's sales of iron ore to Sharon, which for
the year 1992 totaled .7 million tons through August, were suspended when
Sharon's blast furnace operations were idled prior to the bankruptcy filing.
No shipments of iron ore were made to Sharon in the fourth quarter of 1992 or
for the entire year 1993. Sharon is attempting to reorganize, but it is
highly unlikely that such reorganization efforts will be successful in
restarting blast furnace operations. The Company was able to replace the lost
Sharon sales for the year 1993.
Another significant customer of the Company, McLouth Steel Corporation
("McLouth") continues to encounter financial difficulties. Temporary
concessions were extended by the Company, other suppliers and McLouth employees
during 1993. Sales to McLouth totaled 1.5 million tons in 1993 which
represented 23 percent of sales volume and contributed $8.9 million to net
income before fixed cost absorption. Included in the Company's December 31,
1993 inventory was .2 million tons consigned to McLouth in accordance with
long-standing practice.
The Company has fully reserved its accounts receivable from McLouth and Sharon.
Algoma Steel Inc. ("Algoma"), one of the Company's significant partners,
emerged from Canadian financial restructuring proceedings on June 5, 1992. The
Company purchased Algoma's Tilden Mine hematite production rights as part of
the restructuring in return for certain commercial and financial benefits.
Algoma also renewed its guarantee of the Tilden obligations of Algoma's
wholly-owned subsidiary.
35
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
In February, 1994, the Company reached agreement in principle with Algoma and
Stelco Inc. to restructure and simplify the Tilden Mine operating agreement
effective January 1, 1994. The principal terms of the new agreement are (1)
the participants' tonnage entitlements and cost-sharing will be based on a
6.0 million ton target normal production level instead of the previous 4.0
million ton base production level, (2) the Company's interest in the Tilden
Magnetite Partnership increases from 33.33% to 40.0% with an associated
increase in the Company's obligation for mine costs, (3) the Company will
receive an increased royalty, (4) the Company has the right to supply any
additional iron ore pellet requirements of Algoma from Tilden or the Company,
and (5) a partner may take additional production with certain fees paid to the
Partnership. The agreement is not expected to have a material financial effect
on the Company's consolidated financial statements. In a related transaction,
Algoma repaid $4.2 million to the Company on December 30, 1993, in
connection with cancellation of the Hematite Entitlement Agreement. The
Company's investments in associated companies, $152.2 million, reflect an $8.8
million reduction, related to such cancellation. The new Tilden arrangements
reflect an underlying plan of operating improvements and will allow a
lengthening of the magnetite ore reserve life. Additional capital and
development expenditures are expected in connection with the improvement plan.
On June 28, 1993, LTV, another significant partner of the Company, emerged
from Chapter 11 bankruptcy. In final settlement of its allowed claim, the
Company received 2.3 million shares of LTV Common Stock and 4.4 million
Contingent Value Rights. The settlement, reflected in the Company's operating
results, totaled $35.7 million before tax and $23.2 million after-tax.
Labor contracts expired at four of the mines managed by the Company during
1993. The Wabush Mines' contract expired on February 28, 1993; however, the
employees have continued to work under the terms of the previous agreement.
Six-year, no strike agreements between the United Steelworkers of America and
three U.S. iron ore mining operations managed by the Company were ratified by
the union members after the six-week strike that began August 1. The
agreements cover the Empire and Tilden Mines in Michigan and the Hibbing Mine
in Minnesota.
The agreements follow the wage and signing bonus pattern of the earlier
settlements by major steel companies, grant higher pension benefits during
the six-year term, increase vacation time and incentive pay, and allow certain
work force productivity gains. On-going employment costs per hour are
expected to rise approximately 10 percent by July 31, 1996. At that time, the
agreements can be reopened for limited economic and other matters, subject to
binding arbitration or conformity to certain steel company contract changes.
Important objectives achieved were the six-year term, limited economic
reopener, and improved work rule flexibility. Also, the agreements do not
have the employment guarantee, joint decision-making, and asset lien
provisions of the recent steel company labor contracts. The union obtained
certain economic gains beyond the steel company pattern.
The Company's inventory and contingent purchase agreements in 1993 were
sufficient to satisfy customer requirements during the strike period.
36
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Domestic steel shipments, which were 88 million tons in 1993, are expected to
exceed 90 million tons in 1994, the highest level since 1979. Continuing
strong demand from the automotive industry combined with improving markets for
other steel products are resulting from strengthening U.S. and Canadian
economies.
The five North American mines operated by the Company have initially scheduled
34.5 million tons of pellet production for 1994 which is nearly 100 percent
of active capacity. The Company's share of scheduled production is 6.0
million tons. In 1993, total production at the Company-managed mines was
32.3 million tons and the Company's share totaled 5.3 million tons. Production
schedules are subject to change throughout the year.
The Company's North American pellet sales under the Company's current
multi-year contracts are expected to total about 5.0 million tons in 1994,
which represents 83% of its 1994 production nomination. In 1993, total pellet
sales were 6.4 million tons including spot market sales. Each year, the
Company makes substantial sales in the spot market. Multi-year contracts
generally have pre-determined price escalation provisions.
AUSTRALIA
- ---------
Savage River Mines in Tasmania, Australia operated at its capacity of 1.5
million tons in 1993 with continued satisfactory financial results. A decrease
in the international pellet price in 1993 was largely offset by a favorable
currency exchange effect. International iron ore prices are expected to
decrease in 1994 due to weak markets in Japan and Europe. The current
operation is projected to continue until early 1997. Potential mine life
extension is under study. Savage River closedown costs are included in
the Capacity Rationalization Reserve with investments in Australian
government securities and cash to fund the obligations.
COAL
- ----
The Company's sale of the Turner Elkhorn Mining Company and the termination
of management and administrative support of the Chisholm Mine in early 1993
completed the Company's exit from the coal business. No material effect on the
Company's consolidated financial statements resulted.
Pursuant to the Coal Industry Retiree Health Benefit Act of 1992, the
Trustees of the UMWA Combined Benefit Fund have assigned responsibility to the
Company for premium payments with respect to 366 retirees and dependents and
111 "orphans" (unassigned beneficiaries), representing less than one-half of
one percent of all "assigned beneficiaries." The Company is evaluating each
assignment and expects to contest those it believes were incorrectly
assigned. Premium payments by the Company in 1993 were $.3 million. In
December, 1993, a complaint was filed by the Trustees of the United Mine
Workers of America 1992 Benefit Plan against the Company demanding the
payment of premiums on 75 beneficiaries related to two formerly operated
joint venture coal mines. The Company is actively contesting the complaint.
Monthly premium payments are being paid into an escrow account (80% by a
former joint venture participant and 20% by the Company) by joint agreement
with the Trustee, pending outcome of the litigation. In 1993, the Company
increased its coal retiree reserve to $11.0 million, of which $1.3 million is
current, net of the 1993 payments. The reserve is reflected at present
37
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
value, utilizing an assumed discount rate of 7.25%. The Company's liability
has been adequately covered in its capacity rationalization costs.
Constitutional and other legal challenges to various provisions of the Act by
other former coal producers are pending in the Federal Courts.
ACTUARIAL ASSUMPTIONS
- ---------------------
As a result of declining long-term interest rates, the Company has
re-evaluated the interest rates used to calculate its pension and OPEB
obligations. Financial accounting standards require that the discount rates
used to calculate the actuarial present value of such benefits reflect the
rate of interest on high quality fixed income securities. The discount rates
used to calculate the Company's pension and OPEB obligations were reduced
to 7.25% at December 31, 1993. At December 31, 1992, the discount rates
used for determining pension and OPEB obligations were 8.0% and 8.5%,
respectively. The Company also reduced its assumed long-term rate of return
on pension assets from 9% at December 31, 1992 to 8% at December 31, 1993.
The decrease in interest rates did not affect year 1993 financial results;
however, in 1994 and subsequent years, the Company will realize a non-cash
decrease in pension credits and a non-cash increase in OPEB expense. The
decrease in annual net income resulting from the lower discount rate and
decreased long-term rate of return assumptions is estimated to approximate $1.7
million.
ENVIRONMENTAL COSTS
- -------------------
The Company's policy is to conduct business in a manner that promotes
environmental quality. Environmental costs at active operations are included
in current operating and capital costs. The Company's environmental
obligations for idle and closed mining and other sites have been recognized
based on specific estimates for known conditions and required
investigations. Any potential insurance recoveries have not been reflected
in the determination of the reserve.
At December 31, 1993, the Company has provided an environmental reserve of
$10.3 million, of which $3.1 million is current. The components are as
follows:
bullet $4.2 million for the Cliffs-Dow sites under the Federal Superfund
and Michigan Environmental Response and Liability Act, based on a
clean-up plan prepared by outside consultants engaged by the
several responsible parties. Remediation activities are in progress
at these non-mining sites and costs to date are consistent with the
estimate.
bullet $6.1 million for other actual and potential exposures for
long-terminated activities, including the Arrowhead Refining site
in Minnesota, the Rio Tinto mine site in Nevada, and the
Summitville mine and Colorado School of Mining Research Institute
sites in Colorado, which are independent of the Company's iron
mining operations. The reserve is based on the estimated cost of
investigation and remediation, to the extent determinable, of
sites where expenditures may be required. Final obligations,
plans and cost allocations among the involved parties are
undetermined. Therefore, additional costs could be incurred but the
range is unknown.
38
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Environmental expenditures are not expected to materially impact the Company's
consolidated financial statements. However, operations owned and managed by
the Company are subject to numerous federal, state and local environmental
laws and regulations. These laws and regulations have been constantly
evolving and becoming more complex and more stringent. Their impact may not be
immediately known or determinable.
CAPITAL EXPENDITURES
- --------------------
The Company's corporate strategy includes extending its business scope to
produce and supply direct reduced iron for steelmakers. Current activities
involve investigation of various potential projects, including reactivation
of the Company's idle Republic Mine to produce hot briquetted iron in
conjunction with several steel companies. A commercial decision could occur on
this $65 to $75 million project during the first half of 1994 with production
beginning by late 1995 or early 1996. The Company expects to have approximately
a 33 percent interest in the project or, depending on contractual
arrangements, a higher interest. The Company's share of the project
expenditures in 1994 would range between $5.1 and $15.0 million. The project
may be organized as a partnership with financing of a substantial portion of
the investment. Other capital expenditures in 1994 are expected to total
$8.3 million, including the Company's $4.7 million share of associated
companies' expenditures. The year 1993 capital expenditures totaled $5.0
million.
<TABLE>
CAPITALIZATION
- --------------
On May 21, 1992, the Company completed a private placement of $75.0 million of
medium term, unsecured senior notes pursuant to agreements with an insurance
company group. The proceeds were partially used to retire the Company's existing
$41.0 million term loan. One-third of the notes have an interest rate of 8.5
percent, and two-thirds have an interest rate of 8.8 percent. The notes require
annual repayments of principal beginning in 1995 and 1996, respectively, with
final maturities of 1999 and 2002, respectively. The aggregate maturities for the
five years succeeding December 31, 1993 are $5.0 million for 1995 and $12.1
million for 1996 through 1998. Following is a summary of long-term obligations:
LONG-TERM OBLIGATIONS AT DECEMBER 31
(In Millions)
------------------------------------------------------------------------------------
Effectively Serviced Obligations
----------------------------------------------
Share of
Associated Guaranteed Total
Consolidated Companies Total Obligations Obligations
------------ ---------- ----- ----------- -----------
<S> <C> <C> <C> <C> <C>
1993 $ 75.0 $ 13.6 $ 88.6 $ 20.8 $109.4
1992 75.1 17.0 92.1 27.9 120.0
1991 41.2 23.8 65.0 35.4 100.4
</TABLE>
On April 30, 1992, the Company entered into a $75.0 million three-year
revolving credit agreement. No borrowings are outstanding under the revolving
credit facility which expires on April 30, 1995.
39
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
At December 31, 1993, guaranteed obligations principally
represented the Empire Mine debt obligations of LTV and
Wheeling. In June, 1993, LTV emerged from bankruptcy pursuant
to its reorganization plan approved by the Bankruptcy Court.
As part of the settlement of the Company's claim asserted
against LTV and in the bankruptcy proceedings, LTV has
affirmed its ongoing interest in the Empire Mine,
substantially reducing the Company's financial exposure on the
guaranteed obligations. On January 1, 1992, the Company
transferred 2.4875% of its Empire Mine interest to Wheeling
which reduced the Company's share of effectively serviced
Empire Mine debt obligations by $2.3 million with a
corresponding increase in guaranteed obligations. The Empire
Mine long-term debt is scheduled to be fully extinguished
in December, 1996 (the Company's share of Empire long-term
debt principal payments is $4.3 million in 1994 and 1995 and
$3.9 million in 1996).
The ratio of effectively serviced long-term obligations to
shareholders' equity was .3:1 at December 31, 1993 versus
.3:1 at December 31, 1992, and .2:1 at December 31, 1991.
(The "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains two graphs,
one entitled "Cumulative Earnings & Dividends" and the
other entitled "Components of Invested Capital". For a
description of the graph of "Cumulative Earnings & Dividends"
see graph A in Appendix A to this report, and for a
description of the graph of "Components of Invested Capital"
see graph B in Appendix A to this report.)
40
<PAGE> 1
Exhibit 13(b)
REPORT OF INDEPENDENT AUDITORS
------------------------------
Shareholders and Board of Directors
Cleveland-Cliffs Inc
We have audited the accompanying statement of consolidated
financial position of Cleveland-Cliffs Inc and consolidated
subsidiaries as of December 31, 1993 and 1992, and the
related statements of consolidated income, shareholders'
equity and cash flows for each of the three years in the
period ended December 31, 1993. Our audits also included
the financial statement schedules listed in the index at
Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Cleveland-Cliffs Inc and consolidated
subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Note A to the consolidated financial
statements, in 1992 the Company changed its methods of
accounting for post-retirement benefits other than pensions
and income taxes.
Ernst & Young
Cleveland, Ohio
February 14, 1994
41
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 13(c)
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
Cleveland-Cliffs Inc and Consolidated Subsidiaries
(In Millions)
December 31
--------------------
1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 67.9 $ 128.6
Marketable securities 93.1 --
------- -------
161.0 128.6
Trade accounts receivable (net of allowance,
1993 - $19.5 and 1992 - $20.8) 27.6 27.4
Receivables from associated companies 9.3 14.9
Product inventories 27.5 49.4
Deferred income taxes 14.1 17.7
Other 10.5 11.2
------- -------
TOTAL CURRENT ASSETS 250.0 249.2
PROPERTIES
Plant and Equipment 157.6 161.7
Minerals 15.0 15.2
------- -------
172.6 176.9
Allowances for depreciation and depletion (137.3) (141.2)
------- -------
TOTAL PROPERTIES 35.3 35.7
INVESTMENTS IN ASSOCIATED COMPANIES 152.3 167.1
OTHER ASSETS
Long-term investments 57.4 38.2
Deferred charges 9.2 10.7
Deferred income taxes 6.5 5.8
Miscellaneous 34.7 30.5
------- -------
TOTAL OTHER ASSETS 107.8 85.2
------- -------
TOTAL ASSETS $ 545.4 $ 537.2
======= =======
</TABLE>
42
<PAGE> 2
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
Cleveland-Cliffs Inc and Consolidated Subsidiaries
(In Millions)
December 31
----------------------
1993 1992
--------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 11.5 $ 11.8
Payables to associated companies 4.9 4.4
Accrued employment costs 17.7 16.1
Accrued expenses 10.0 7.4
Income taxes payable 14.6 12.7
Current portion of long-term obligations -- .1
Reserve for capacity rationalization 1.7 2.7
Other 3.6 5.1
--------- --------
TOTAL CURRENT LIABILITIES 64.0 60.3
LONG-TERM OBLIGATIONS 75.0 75.0
POST-EMPLOYMENT BENEFIT LIABILITIES 71.2 70.5
RESERVE FOR CAPACITY RATIONALIZATION 21.7 26.3
OTHER LIABILITIES 32.8 35.5
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;
Issued - 16,827,941 shares 16.8 16.8
Capital in excess of par value of shares 61.4 61.2
Retained income 315.8 308.0
Foreign currency translation adjustments ( .3) ( .3)
Unrealized gain on available for sale securities,
net of tax 1.3 --
Cost of 4,763,824 Common Shares in
treasury (1992 - 4,839,387 shares) (114.3) (116.1)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 280.7 269.6
-------- --------
COMMITMENTS - Note B
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 545.4 $ 537.2
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
43
<PAGE> 1
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED INCOME Exhibit 13(d)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
(In Millions, Except Per Share Amounts)
Year Ended December 31
---------------------------------------------
1993 1992 1991
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Product sales and service $ 268.1 $ 266.9 $ 271.6
Royalties and management fees 39.7 43.8 45.8
------- -------- ----------
Total Operating Revenues 307.8 310.7 317.4
Recoveries on bankruptcy claims 35.7 2.4 5.8
Gains on sales of assets -- .8 21.5
Interest income 6.0 6.5 8.6
Other income 6.4 6.6 10.0
-------- -------- ----------
Total Revenues 355.9 327.0 363.3
COSTS AND EXPENSES
Cost of goods sold and operating expenses 252.8 241.1 255.3
Administrative, selling and general expenses 15.2 16.6 19.7
Bad debt expense -- 17.5 --
Interest expense 6.6 5.0 3.8
Other expenses 5.6 5.4 14.4
-------- -------- ----------
Total Costs and Expenses 280.2 285.6 293.2
-------- -------- ----------
INCOME BEFORE INCOME TAXES AND
THE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 75.7 41.4 70.1
Income taxes 21.1 10.6 16.3
-------- -------- ----------
INCOME BEFORE THE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES 54.6 30.8 53.8
Cumulative effect on prior years
of changes in accounting principles -- ( 38.7) --
-------- -------- ----------
NET INCOME (LOSS) $ 54.6 $( 7.9) $ 53.8
======== ======== ==========
INCOME (LOSS) PER COMMON SHARE
Before the cumulative effect
of changes in accounting principles $ 4.55 $ 2.57 $ 4.55
Cumulative effect on prior years
of changes in accounting principles -- ( 3.23) --
--------- --------- -----------
NET INCOME (LOSS) $ 4.55 $( .66) $ 4.55
========= ========= ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
44
<PAGE> 1
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED CASH FLOWS Exhibit 13(e)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
(In Millions,
Brackets Indicate Cash Decrease)
Year Ended December 31
-------------------------------------------
1993 1992 1991
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 54.6 $ (7.9) $ 53.8
Adjustments to reconcile net income (loss)
to net cash from operations:
Depreciation and amortization:
Consolidated 2.6 2.8 2.8
Share of associated companies 10.9 11.3 13.2
Cumulative effect of change in accounting
principle-other post-retirement benefits -0- 64.3 -0-
Provision for deferred income taxes 2.2 (27.4) (21.5)
Gains on sales of assets ( .2) ( .8) (21.5)
Recovery on bankruptcy claims ( 31.6) -0- 71.3
Provision for doubtful accounts -0- 17.5 -0-
Increases (charges) to capacity rationalization reserve 2.5 .5 ( 1.5)
Other ( 7.2) (10.6) 9.4
--------- -------- --------
Total before changes in operating assets and liabilities 33.8 49.7 106.0
Changes in operating assets and liabilities:
Marketable securities (increase) decrease ( 93.1) -0- -0-
Inventories and prepaid expenses (increase) decrease 22.3 (13.9) .3
Receivables (increase) decrease 6.7 ( 7.0) ( 3.0)
Payables and accrued expenses increase (decrease) 7.5 ( 2.5) (11.2)
--------- ------- --------
Total changes in operating assets and liabilities ( 56.6) (23.4) (13.9)
--------- ------- --------
Net cash from (used by) operating activities ( 22.8) 26.3 92.1
INVESTING ACTIVITIES
Purchase of plant, property and equipment:
Consolidated ( 2.8) ( 2.9) ( 2.9)
Share of associated companies ( 2.2) ( 2.3) ( 4.4)
Proceeds from sales of assets .3 1.0 23.0
Purchase of long-term investments ( 3.6) ( 5.5) (33.1)
--------- -------- --------
Net cash (used by) investing activities ( 8.3) ( 9.7) (17.4)
FINANCING ACTIVITIES
Proceeds from long-term debt -0- 75.0 -0-
Principal payments on long-term debt:
Consolidated ( .1) (41.1) (11.8)
Share of associated companies ( 4.3) ( 4.4) ( 5.6)
Dividends * ( 26.4) (14.1) (59.1)
Other 1.2 1.2 1.7
--------- ------- --------
Net cash from (used by) financing activities ( 29.6) 16.6 (74.8)
EFFECT OF EXCHANGE RATE CHANGES ON CASH -0- ( .5) -0-
--------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 60.7) 32.7 ( .1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 128.6 95.9 96.0
--------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 67.9 $128.6 $ 95.9
========= ======= =======
Taxes paid on income $ 16.6 $ 18.6 $ 32.4
Interest paid on debt obligations $ 6.5 $ 4.0 $ 3.9
<FN>
*Excludes non-cash distribution of 1.5 million shares ($20.4 million) of the 2.3 million shares of LTV Corporation
common stock received in the bankruptcy settlement.
See notes to consolidated financial statements.
</TABLE>
45
<PAGE> 1
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY Exhibit 13(f)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
(In Millions)
--------------------------------------------------------------------------------------
Capital In Foreign
Excess of Currency Available Common
Common Par Value Retained Translation For Sale Shares
Shares Of Shares Income Adjustments Securities In Treasury Total
------ --------- -------- ----------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE December 31, 1990 $ 16.8 $ 61.6 $ 335.3 $ .4 $ -- $(123.3) $290.8
Net income 53.8 53.8
Cash dividends-$5.03 a share ( 59.1) (59.1)
Issuance of 203,163 Common Shares
under stock plans ( .5) 4.9 4.4
Other .3 .6 .9
------ --------- -------- ----------- ---------- ---------- -------
BALANCE December 31, 1991 16.8 61.1 330.0 .7 ( 117.8) 290.8
Net loss ( 7.9) ( 7.9)
Cash dividends-$1.18 a share ( 14.1) (14.1)
Issuance of 65,968 Common Shares
under stock plans .1 1.6 1.7
Other ( 1.0) .1 ( .9)
------ --------- -------- ----------- ---------- -------- -------
BALANCE December 31, 1992 16.8 61.2 308.0 ( .3) ( 116.1) 269.6
Net income 54.6 54.6
Cash dividends:
Regular - $1.20 a share ( 14.4) (14.4)
Special - $1.00 a share ( 12.0) (12.0)
Non-cash dividend - $1.70 a share ( 20.4) (20.4)
Change in unrealized gains,
net of tax 1.3 1.3
Issuance of 60,286 Common Shares
under stock plans .3 1.4 1.7
Other ( .1) .4 .3
------ --------- -------- ----------- --------- -------- -------
BALANCE December 31, 1993 $16.8 $ 61.4 $315.8 $( .3) $ 1.3 $(114.3) $280.7
===== ======== ======= ======== ========= ======== =======
<FN>
See notes to consolidated financial statements.
</TABLE>
46
<PAGE> 1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Exhibit 13(g)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
ACCOUNTING POLICIES
BASIS OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and its majority-owned
subsidiaries, and references to the "Company" include the Company
and consolidated subsidiaries. "Investments in Associated Companies"
are comprised of partnerships and unconsolidated companies which the
Company does not control. Such investments are accounted by the
equity method (see Note B). The Company's equity in earnings of
mining partnerships from which the Company purchases iron ore
production is credited to cost of goods sold upon sale of the product.
BUSINESS: The Company's dominant business is the production and sale
of iron ore pellets. The Company controls, develops, and leases
reserves to mine owners; manages and owns interests in mines; sells
iron ore; and owns interests in ancillary companies providing
services to the mines. Iron ore production activities are conducted
in the United States, Canada and Australia. The Australian
operations had total revenues and operating profit of $41.9
million and $3.2 million, $40.3 million and $2.2 million, and
$44.0 million and $.2 million, in 1993, 1992 and 1991,
respectively. Total Australian assets, including securities to fund
eventual shutdown cost ($12.4 million, 1993 and $9.4 million,
1992), were $29.8 million at December 31, 1993 (1992-$28.6 million).
Iron ore is marketed in North America, Europe, Asia, and Australia.
The three largest steel company customers' contribution to the
Company's revenues were 14%, 12% and 11% in 1993; 13%, 13% and 12% in
1992; and 14%, 13% and 10% in 1991.
CASH EQUIVALENTS: The Company considers investments in highly
liquid debt instruments with an initial maturity of three months or
less to be cash equivalents.
INVESTMENTS: The Company determines the appropriate classification of
debt and equity securities at the time of purchase and reevaluates
such designation as of each balance sheet date.
Securities are classified as held-to-maturity when the Company has
the intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at cost and investment income
is included in earnings.
The Company classifies certain highly liquid securities as trading
securities. Trading securities are stated at fair value and unrealized
holding gains and losses are included in income.
Securities that are not classified as held-to-maturity or trading
are classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the unrealized holding gains and
losses, net of tax, reported as a separate component of
shareholders' equity.
47
<PAGE> 2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Cleveland-Cliffs Inc and Consolidated Subsidiaries
FORWARD FOREIGN EXCHANGE CONTRACTS: The Company had $20.0 million
and $24.0 million of forward foreign exchange contracts at December
31, 1993 and 1992, respectively, to hedge against fluctuations of
the Australian dollar. The fair value of foreign currency exchange
contracts which have varying maturity dates to November 30, 1994 is
estimated to be $20.5 million, based on the December 31, 1993 forward
rates.
INVENTORIES: Product inventories, primarily finished goods, are
stated at the lower of cost or market. The cost of product
inventories is determined using the last-in, first-out ("LIFO")
method. The excess of current cost over LIFO cost of product
inventories was $1.8 million and $2.0 million at December 31, 1993
and 1992, respectively. The cost of other inventories is determined
by the average cost method.
PROPERTIES: Depreciation of plant and equipment is computed
principally by the straight-line method based on estimated useful
lives. Depreciation is not reduced when operating units are
temporarily idled. Depletion of mineral lands is computed using the
units of production method based upon proven mineral reserves.
EXPLORATION, RESEARCH AND DEVELOPMENT COSTS: Exploration, research
and continuing development costs of mining properties are charged to
operations as incurred. Initial development and startup costs of
major new facilities are deferred and amortized over five years from
commencement of commercial production.
INCOME TAXES: Effective January 1, 1992, the Company adopted the
Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes." Prior years financial statements have not been
restated, as further explained in Note A.
INCOME (LOSS) PER COMMON SHARE: Income or loss per common share is
based on the average number of common shares outstanding during each
year.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified
to conform to current year classifications.
NOTE A - ACCOUNTING CHANGES
In December, 1990, the Financial Accounting Standards Board issued
Statement 106, "Accounting for Post-retirement Benefits Other than
Pensions," which requires that the projected future expense of
providing post-retirement benefits, such as health care and life
insurance, be recognized as employees render service instead of
when the benefits are paid. The Statement requires the assumption
that present benefit plans continue at escalating costs. The Company
adopted the provisions of the new standard in its financial
statements for the year ended December 31, 1992. The cumulative
effect as of January 1, 1992 of adopting Statement 106 decreased
1992 net income by $42.5 million, or $3.54 per share (after
deferred income tax benefit of $21.8 million).
48
<PAGE> 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
In February, 1992, the Financial Accounting Standards Board issued
Statement 109, "Accounting for Income Taxes." The Company adopted
the provisions of the new standard in its financial statements for
the year ended December 31, 1992. The cumulative effect as of
January 1, 1992 of adopting Statement 109 increased net income by $3.8
million, or $.31 per share.
Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities
are determined based on temporary differences between financial
reporting and tax bases of assets and liabilities and are measured
using currently enacted tax rates and laws applicable when the
differences are expected to reverse. Deferred tax assets and
liabilities will be adjusted for enacted tax rate changes ($.7 million
benefit was recognized in 1993 when the tax rate changed from 34%
to 35%). Prior to the adoption of Statement 109, income tax
expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense that were reported
in different years in the financial statements and tax returns and
were measured at the tax rates in effect in the years the differences
originated.
In November, 1992, the Financial Accounting Standards Board issued
Statement 112, "Employers' Accounting for Postemployment Benefits."
Statement 112 requires accrual accounting for benefits provided to
former or inactive employees after employment but before retirement.
Although Statement 112 is effective for years beginning after
December 15, 1993, the Company has elected to adopt the provisions
of this standard for the year ended December 31, 1993. The effect
of adopting this statement was not material to the consolidated
financial statements.
In May, 1993, the Financial Accounting Standards Board issued
Statement 115, "Accounting for Certain Investments in Debt and
Equity Securities," which establishes standards of financial
accounting and reporting investments in equity securities that have
readily determinable fair values and for investments in debt
securities. This statement, which is effective for years beginning
after December 15, 1993, has been adopted for the year ended
December 31, 1993. The effect of adopting this statement was not
material to the consolidated financial statements.
NOTE B - INVESTMENTS IN ASSOCIATED COMPANIES
The Company's investments in associated companies are accounted by
the equity method and consist primarily of its 22.5625% interest
(25.05% in 1991) in Empire Iron Mining Partnership ("Empire"), 15%
interest in Hibbing Taconite Company ("Hibbing"), 33.33% interest in
Tilden Magnetite Partnership ("Tilden Magnetite"), 60% interest in
Tilden Mining Company ("Tilden"), and 7.01% interest (5.2% in 1992
and 1991) in Wabush Mines ("Wabush"). These iron ore mining ventures
are managed by the Company in North America. The other interests
in these ventures are owned by U.S., Canadian and European steel
companies. The Company's investments in associated companies also
include interests in other non-operating iron ore mining ventures
and mining service companies.
49
<PAGE> 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
Following is a summary of combined financial information of the operating iron
ore mining ventures.
(In Millions)
------------------------------
1993 1992 1991
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Gross revenue $ 896.5 $ 967.4 $ 944.2
Equity income 82.2 91.7 91.5
Financial Position
Properties - net $ 812.4 $ 848.3 $ 909.1
Other assets 95.8 114.1 114.3
Debt obligations ( 61.0) ( 91.1) (112.9)
Other liabilities (123.1) (124.5) (112.1)
-------- -------- --------
Net assets $ 724.1 $ 746.8 $ 798.4
======== ======== ========
Company's equity in
underlying net assets $ 266.8 $ 278.8 $ 299.2
Company's investment 152.2 166.8 164.9
</TABLE>
The Company manages and operates all of the iron ore ventures and
leases or subleases mineral rights to certain ventures. In addition,
the Company is required to purchase its applicable current share,
as defined, of the production decided by the venture participants.
The Company purchased $196.0 million in 1993 (1992-$214.4 million;
1991-$206.2 million) of iron ore from certain associated companies.
During 1993, the Company earned royalties and management fees of
$39.5 million (1992-$41.9 million; 1991-$42.6 million) from iron
ore mining ventures of which $10.7 million in 1993 (1992-$12.8
million; 1991-$12.5 million) was paid by the Company as a participant
in the ventures.
Costs and expenses incurred by the Company, on behalf of the
ventures, are charged to such ventures in accordance with
management and operating agreements. The Company's equity in the
income of iron ore mining ventures is credited to the cost of goods
sold and includes the amortization to income of the excess of the
Company's equity in the underlying net assets over its investment on
the straight-line method based on the useful lives of the
underlying assets. The difference between the Company's equity in
underlying net assets and recorded investment results from the
assumption of interests from former participants in the mining
ventures and from acquisition. The Company's equity in the income of
iron ore mining ventures was $23.5 million in 1993 (1992-$32.8
million; 1991-$23.5 million).
50
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
On June 5, 1992, Algoma Steel Inc. ("Algoma"), an equity
participant in Tilden Magnetite and Tilden, emerged from Canadian
reorganization proceedings. As part of Algoma's reorganization plan,
the Company entered into a Hematite Entitlement Agreement to
purchase Algoma's Tilden hematite pellet production rights in return
for certain commercial and financial benefits. Algoma also renewed
guarantee of its Tilden obligations. Algoma repaid $4.2 million to
the Company on December 30, 1993 in connection with cancellation of
the Hematite Entitlement Agreement. The agreement did not have a
material effect on the Company's consolidated financial statements.
Algoma's guarantee of its Tilden obligations remains in place.
On July 17, 1986, The LTV Corporation (including its wholly-owned,
integrated steel company subsidiary, LTV Steel Company, Inc.;
collectively, "LTV") filed for protection under Chapter 11 of the
U. S. Bankruptcy laws. At that time, through subsidiaries, LTV
held a 100% interest in LTV Steel Mining Company ("LTV Mining"), a
35% interest in Empire, a 15.6% interest in Wabush, and a 12% interest
in Tilden.
On June 28, 1989, the Company and LTV executed a settlement
agreement (the "Agreement"), which was subsequently approved by the
bankruptcy court, covering substantially all of the Company's
bankruptcy claims against LTV. The Agreement granted to the Company a
$205.0 million allowed unsecured claim, (subsequently reduced by
an assignment of $4.0 million of the allowed claim), the transfer
of a 10% ownership interest in Empire together with related debt
service and other obligations from LTV to the Company effective
January 1, 1990, the rejection by LTV of its remaining interest in
Tilden which was transferred to the Company in 1989, the dismissal of
substantially all of the Company's bankruptcy claims against LTV, the
indemnification of LTV against further liability relating to such
claims, and the rejection by LTV of certain affiliated business
ventures with the Company and the terms of various commercial
relationships with the Company. LTV's subsidiary continued its
Empire participation, including its proportionate share of Empire
debt service and related operating expense payments, as reduced by
the 1990 transfer of the 10% interest in Empire to the Company.
The Company continues to guarantee the partnership debt applicable to
LTV's remaining 25% interest in Empire which at December 31, 1993 was
$13.9 million. On June 28, 1993, LTV emerged from bankruptcy. In
addition to the items noted above, the Company received in final
settlement of its allowed claim, 2.3 million shares of LTV common
stock and 4.4 million Contingent Value Rights. The value of the
settlement reflected in the Company's operating results totalled $35.7
million before tax and $23.2 million after-tax.
LTV in bankruptcy rejected its Wabush interest. On December 20,
1991, the Wabush Participants and LTV executed a settlement
agreement for an allowed unsecured claim totalling $60.0 million,
which was approved by the bankruptcy court on April 2, 1992. The
allowed claim included LTV's share ($10.3 million including accrued
interest at June 30, 1993) of bonded debt.
51
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
On July 27, 1993, the Wabush Participants entered into an
agreement with the Wabush Iron Co. Limited Bondholders for the
retirement of the LTV and Wheeling- Pittsburgh Steel Corporation
("Wheeling") respective shares of the debt obligation ($13.2 million
including accrued interest at June 30, 1993) in exchange for (1)
transfer of $1.8 million held in trust for the benefit of the
Bondholders, (2) the LTV bankruptcy claim proceeds, and (3) other
limited and specific venture related income of the Wabush Joint
Venturers. This agreement extinguished the mortgage on the Wabush
joint venture assets.
The Company's effectively serviced share of long-term obligations
of associated companies, including current portion, was $13.6
million as of December 31, 1993 (1992-$17.0 million). In addition,
the Company guaranteed $20.8 million of Empire long- term obligations
which are effectively serviced by LTV and Wheeling (see Note H). The
fair value of the guarantees is nominal because advances against the
guarantees would be supported by ownership interests in Empire.
Effective January 1, 1992, the Company transferred 2.4875% of its
Empire interest to Wheeling which reduced the Company's effectively
serviced obligations by $2.3 million, with a corresponding
increase in guaranteed obligations, and decreased annual
maturities of long-term obligations by $.5 million. Maturities of
the Company's share of long-term obligations for the three years
after December 31, 1993 are $4.3 million in 1994 and 1995, and a
final $3.9 million in 1996. The Company's share of plant and equipment
and other property interests which secure the effectively serviced
obligations was $46.8 million at December 31, 1993.
<TABLE>
<CAPTION>
NOTE C - INVESTMENTS
The Company elected early adoption of FAS 115 for recording investments in debt and equity securities. Following is a summary
of investment securities:
December 31, 1993
(In Millions)
------------------------------------------
Estimated
Gross Unrealized Fair
Cost Gains Value
---- ---------- ---------
<S> <C> <C> <C>
Long-Term Investments
- ----------------------
Available-for-Sale
-------------------
Municipal Securities $ 6.6 $ -- $ 6.6
Other Debt Securities .2 .1 .3
------ ----- -----
Total Debt Securities 6.8 .1 6.9
Equity Securities 11.2 2.0 13.2
------ ----- -----
18.0 2.1 20.1
Held-to-Maturity
-----------------
Redeemable Equity Securities 25.0 -- 25.0
Australian Government Securities 12.4 .9 13.3
----- ----- -----
37.4 .9 38.3
----- ----- -----
Total Long-Term Investments $55.4 $ 3.0 $58.4
===== ===== =====
Marketable Securities
- ---------------------
Trading
--------
Debt and Equity Securities $93.0 $ .1 $93.1
===== ===== =====
</TABLE>
52
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of the Available-for-Sale
and Held-to-Maturity securities at December 31, 1993 are shown below.
December 31, 1993
(In Millions)
-----------------------------------
Estimated
Fair
Cost Value
-------- ----------
<S> <C> <C>
Available-for-Sale
- ------------------
Debt Instruments:
Due in one year or less $ -- $ --
Due after one year through three years .5 .5
Due after three years 6.3 6.4
-------- ---------
6.8 6.9
Equity Securities 11.2 13.2
-------- ---------
$ 18.0 $ 20.1
======== =========
Held-to-Maturity
- ----------------
Debt Instruments:
Due in one year or less $ .7 $ .7
Due after one year through three years 11.7 12.6
-------- --------
12.4 13.3
Redeemable Equity Securities 25.0 25.0
-------- --------
$ 37.4 $ 38.3
======== ========
</TABLE>
Expected maturities may differ from contractual maturities because the
issuers of certain securities have the right to prepay obligations.
On July 13, 1993, the Company received 2.3 million shares of LTV
Common Stock and other consideration in satisfaction of the Company's
bankruptcy settlement. The Company then distributed to its
shareholders 1.5 million shares of the LTV stock plus a special cash
dividend of $1.00 per share of the Company's common stock. The
Company intends to retain the remaining .8 million shares, $13.2
million fair value at December 31, 1993, as an investment.
In October, 1991, the Company invested $25.0 million in a special
nonmarketable issue of redeemable preferred stock of Weirton Steel
Corporation ("Weirton"). The terms of the preferred stock include
a 12-1/2% cumulative cash dividend, mandatory redemption at par
value of $25 million in 2003, certain rights to convert into new
equity security issues, and various protective features. Weirton
has the right to call the preferred stock, at par plus full
cumulative dividends, at any time. The estimated discounted cash
flow value of Weirton preferred stock approximates its carrying value
at December 31, 1993.
53
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE D - RESERVE FOR CAPACITY RATIONALIZATION
The Company initially established a reserve of $70 million in 1983
to provide for expected costs of reorienting its mining joint
ventures and facilities to adjust to market conditions. During 1990,
the Company increased the reserve by $24.7 million as a result of
restructuring Savage River Mines. During 1993 and 1992, $5.6
million and $5.7 million, respectively, were charged and in 1991,
$1.3 million was credited to the reserve. The balance at December
31, 1993 was $30.5 million, with $7.1 million classified as a
reduction of other current assets.
The reserve balance is principally for the eventual shutdown of
Savage River Mines, currently scheduled for early 1997, and the
holding cost and eventual permanent shutdown of the Republic Mine.
The year of Republic Mine permanent shutdown has not been
determined. The Republic Mine is being considered as a potential site
for a direct reduced iron project. The Savage River Mines shutdown
provision has been funded.
<TABLE>
<CAPTION>
NOTE E - LONG-TERM OBLIGATIONS
(In Millions)
December 31
-----------------------
1993 1992
------- -------
<S> <C> <C>
Term notes $75.0 $ 75.0
Other -- .1
------ -------
Total 75.0 75.1
Less current portion -- .1
------ -------
$75.0 $ 75.0
====== =======
</TABLE>
On May 21, 1992, the Company completed a $75.0 million, medium-term,
unsecured senior note agreement with an insurance company group.
One-third of the notes have an interest rate of 8.5 percent, and
two-thirds have an interest rate of 8.8 percent. The notes require
annual repayments of principal beginning in 1995 and 1996,
respectively, with final maturities in 1999 and 2002, respectively.
The senior unsecured note agreement requires the Company to maintain
a consolidated adjusted net worth of not less than $200.9 million for
1993 (excluding the effects of adoption of FAS 106), with such amount
to increase by a percent of net income over time, an interest
expense cash coverage ratio of 2.5 to 1, and a leverage ratio of
consolidated funded debt to consolidated total capitalization of .6 to
1. The Company was in compliance with these covenants at December 31,
1993.
On April 30, 1992, the Company entered into a $75.0 million
three-year revolving credit agreement. No borrowings are
outstanding under the revolving credit facility. The Company may
convert amounts outstanding at the end of three years to a
three-year term loan. The new revolving credit agreement contains
interest rate alternatives including LIBOR plus 1/2 percent,
certificate of deposit rates plus 5/8 percent, and prime, and
various financial covenants and restrictions. The credit agreement
requires the Company to maintain at December 31, 1993 a
consolidated tangible net worth of not less than $257.4 million
(excluding the
54
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
effect of adoption of FAS 106), with such amount to increase over time by a
percent of net income, and a leverage ratio of total debt to total debt plus
consolidated tangible net worth not to exceed .45 to 1. The Company was in
compliance with these covenants at December 31, 1993.
Aggregate maturities of long-term obligations in the five years succeeding
December 31, 1993 are $5.0 million for 1995 and $12.1 million for 1996
through 1998.
The fair value of the Company's long-term debt (which had a carrying value
of $75.0 million) at December 31, 1993, was estimated at $81.3 million based
on a discounted cash flow analysis and estimates of current borrowing rates.
NOTE F - RETIREMENT BENEFITS
The Company and its associated companies sponsor defined benefit plans
covering substantially all employees. The plans are noncontributory and
benefits generally are based on employees' years of service and average
earnings for a defined period prior to retirement. Pension costs are funded to
the extent necessary to meet Federal requirements.
<TABLE>
<CAPTION>
Pension costs, including the Company's proportionate share of the costs of associated companies, were credits of $2.7 million,
$2.1 million, and $3.7 million, in 1993, 1992, and 1991, respectively. The credits included $3.2 million, $3.0 million, and
$2.8 million in 1993, 1992, and 1991, respectively, related to an idled operation which increased the Capacity Rationalization
Reserve and were not credited to income. Components of the credits are as follows:
(In Millions)
------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during
the period $ 3.0 $ 3.1 $ 3.0
Interest cost on projected benefit
obligation 13.4 13.1 13.3
Actual return on plan assets (27.7) (10.9) (35.8)
Net amortization and deferral 8.6 ( 7.4) 15.8
------- ------- -------
$(2.7) $( 2.1) $( 3.7)
======= ======= =======
</TABLE>
Most of the Company's pension funds are held in diversified collective trusts
with the funds contributed by the other partners of the mining ventures. Plan
assets principally include diversified marketable equity securities and
corporate and government debt securities, which are selected by professional
asset managers. The following table presents a reconciliation of the funded
status of the Company's plans, including its proportionate share of the plans
of associated companies, at December 31, 1993 and 1992.
55
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
(In Millions)
----------------------------
1993 1992
------------ ---------
<S> <C> <C>
Plan assets at fair value $ 239.6 $ 221.4
Actuarial present value of benefit
obligation:
Vested benefits 168.8 146.2
Nonvested benefits 24.3 16.7
-------- --------
Accumulated benefit obligation 193.1 162.9
Effect of projected compensation levels 21.8 24.7
-------- --------
Projected benefit obligation 214.9 187.6
-------- --------
Plan assets in excess of projected
benefit obligation 24.7 33.8
Unrecognized prior service costs 10.2 3.7
Unrecognized net asset at date of adoption
of FAS 87, net of amortization (36.7) (40.1)
Unrecognized net loss 22.2 19.9
-------- --------
Prepaid cost $ 20.4 $ 17.3
======== ========
</TABLE>
The weighted average discount rate and rate of increase in
compensation levels used in determining the actuarial present value of
the projected benefit obligation were 7.25% and 4.0% at
December 31, 1993 (8.0% and 4.4% at December 31, 1992),
respectively. The expected long-term rate of return on plan assets was
8.0% in 1993 (9.0% in 1992 and 1991).
In the event of plan termination, the sponsors could be required to
fund shutdown and early retirement obligations which are not included
in the accumulated benefit obligation.
In addition to the Company's defined benefit pension plans, the
Company and its managed associated companies currently provide
retirement health care and life insurance benefits to full-time
employees who have 30 years of service with the Company or who are
age 60 with 15 years of service. These benefits are provided
through programs administered by insurance companies whose charges
are based on the benefits paid during the year. If such benefits
are continued, most of the active employees would become eligible
for these benefits when they retire. The expense applicable to
retired employees, including the Company's proportionate share of
associated companies' costs, was $3.2 million in 1991.
In 1992, the Company adopted Financial Accounting Standard 106,
"Accounting for Post-retirement Benefits Other than Pensions" (see
Note A).
56
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
The following table presents a reconciliation of the funded status of the Company's plans, including its proportionate share
of the plans of associated companies, at December 31, 1993 and 1992.
(In Millions)
------------------------------
1993 1992
-------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 55.4 $ 47.3
Fully eligible active plan participants 5.2 3.8
Other active plan participants 21.6 15.9
-------- ---------
82.2 67.0
Plan assets 0 0
-------- ---------
Accrued postretirement benefit cost 82.2 67.0
Unamortized prior service cost 0 ( .5)
Unamortized gain (loss) (11.8) 1.2
-------- ---------
Accumulated postretirement benefit obligation $ 70.4 $ 67.7
======== =========
</TABLE>
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost, including the Company's proportionate share of the costs of associated companies,
includes the following components:
(In Millions)
------------------------------
1993 1992
-------- ---------
<S> <C> <C>
Service cost $ 1.2 $ 1.0
Interest cost 5.7 5.5
-------- --------
Net periodic postretirement benefit cost $ 6.9 $ 6.5
======== ========
</TABLE>
The incremental increase in 1993 and 1992 postretirement benefit cost was
$2.8 million and $2.7 million, respectively. The weighted average annual
assumed rate of increase in the per capita cost of covered benefits was 13
percent for 1993, 11% for 1994, decreasing gradually to 5 percent for 1997
and remaining at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
changing the assumed health care cost trend rate by one percentage point in
each year would change the accumulated postretirement benefit obligation, as
of December 31, 1993 by $15.7 million, and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for 1993
by $2.1 million. Amounts include the Company's proportionate share of the
costs of associated companies. As part of the 1993 labor contracts at Empire,
Hibbing, and Tilden Magnetite, Voluntary Employee Benefit Association Trusts
("VEBAs") will be established. Funding of the VEBAs will begin in 1994 and
cover a portion of the postretirement benefit obligations of these
associated companies. As a participant, the Company's minimum annual
contribution is $.7 million per year. The Company's estimated actual
contribution will approximate $1.3 million per year based on its share of tons
produced.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25 percent at December 31, 1993 (8.5
percent at December 31, 1992).
57
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE G - INCOME TAXES
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1993 and 1992 are as follows:
(In Millions)
-----------------------
1993 1992
------- ------
<S> <C> <C>
Deferred tax assets:
Post-retirement benefits other than pensions $21.1 $22.5
Other liabilities 10.6 5.2
Deferred development 7.1 3.7
Reserve for capacity rationalization 6.9 9.9
Product inventories 4.0 7.0
Accounts receivable 3.9 3.1
Current liabilities 3.7 3.3
Plant and equipment 1.5 4.3
All other 2.1 5.2
------ ------
Total deferred tax assets 60.9 64.2
Deferred tax liabilities:
Investment in associated companies 28.9 34.0
All other 11.4 6.7
------ ------
Total deferred tax liabilities 40.3 40.7
------ ------
Net deferred tax assets $20.6 $23.5
====== ======
</TABLE>
<TABLE>
<CAPTION>
COMPONENTS OF PROVISION FOR INCOME TAXES FROM
CONTINUING OPERATIONS ARE AS FOLLOWS:
(In Millions)
------------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Current $19.0 $12.4 $37.8
Deferred 2.1 (1.8) (21.5)
----- ----- -----
$21.1 $10.6 $16.3
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
COMPONENTS OF DEFERRED TAX PROVISION FOR YEAR
ENDED DECEMBER 31, 1991 ARE AS FOLLOWS:
(In Millions)
-------------
1991
-------
<S> <C>
Recovery from bankruptcy claims $(24.2)
Deferred foreign development costs ( 3.8)
Effect of associated companies ( 2.7)
Effect of alternative minimum tax
credit carryforwards 4.0
Depreciation 1.4
Pensions ( .1)
Investment tax credit carryovers
recognized 3.1
Inventory reserves ( 1.3)
Other items - net 2.1
------
$(21.5)
=======
</TABLE>
58
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
<TABLE>
<CAPTION>
RECONCILIATION OF EFFECTIVE INCOME TAX RATE AND UNITED STATES FEDERAL STATUTORY RATE IS AS FOLLOWS:
(In Millions)
----------------------------------
1993 1992 1991
---- ---- ------
<S> <C> <C> <C>
Statutory tax rate 35.0% 34.0% 34.0%
Increase (decrease) due to:
Percentage depletion in excess
of cost depletion (4.5) (10.9) (5.7)
Effect of foreign taxes -- .2 ( .9)
Prior years' tax adjustment (2.9) 2.2 ( .1)
Corporate dividends received (1.0) ( 1.8) ( .3)
Investment Credit Employee
Stock Ownership
Plan contribution -- -- (2.1)
Other items - net 1.2 1.9 (1.6)
----- ------ ------
Effective tax rate 27.8% 25.6% 23.3%
===== ====== ======
</TABLE>
In 1991, the Company recorded $2.3 million as a reduction in
Federal income tax and charged administrative, selling, and general
expenses as compensation expense for investment tax credit
benefits realized pursuant to the Company's Investment Credit
Employee Stock Ownership Plan. No tax reduction or corresponding
investment tax credit benefits were realized in 1993 or 1992.
NOTE H - BANKRUPTCY SETTLEMENTS
On January 8, 1991, the Company declared a $46.9 million ($4.00
per share) special dividend paid on February 15, 1991, principally
representing recoveries and anticipated recoveries from Wheeling
and Sharon Steel Corporation following their emergence from
bankruptcy in 1990.
Following a 1986 filing, LTV emerged from bankruptcy in June,
1993. In final settlement of its allowed claim, the Company
received 2.3 million shares of LTV Common Stock and 4.4 million
Contingent Value Rights, valued at $31.6 million and $4.1 million,
respectively, resulting in a total gain in 1993 of $35.7 million
($23.2 million after-tax, or $1.93 per share).
On July 13, 1993, the Company distributed to its common stockholders,
a special dividend of 1.5 million shares of LTV Common Stock, valued
at $20.4 million, and $12.0 million ($1.00 per share) cash. The
Company currently intends to retain the remaining .8 million shares
of LTV stock as an investment.
NOTE I - SALE OF ASSETS
In 1991, the Company sold its forest lands and associated assets in
the Upper Peninsula of Michigan, resulting in an after-tax gain of
$14.4 million or $1.22 per share.
The Company completed its exit from the coal business with the sale
of Turner Elkhorn Mining Company in early 1993 resulting in an
after-tax loss of $.4 million.
59
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE J - STOCK PLANS
The 1987 Incentive Equity Plan authorizes the Company to make grants
and awards of stock options, stock appreciation rights and
restricted or deferred stock awards to officers and key employees,
for up to 750,000 Common Shares (plus an additional 89,045 Common
Shares reserved for issuance, but not issued, under the Company's 1979
Restricted Stock Plan). The 1992 Incentive Equity Plan authorizes
the Company to issue up to 595,000 Common Shares upon the exercise
of Options 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. Such shares may be shares of
original issuance or treasury shares or a combination of both. Stock
options may be granted at a price not less than the fair market
value of the stock on the date the option is granted and must be
exercisable not later than ten years and one day after the date of
grant. Stock appreciation rights may be granted either at or after
the time of grant of a stock option. Common shares may be awarded or
sold to certain employees with restrictions as to disposition over
specified periods. The market value of the awards, as determined on
the date of award, is charged to expense when the restrictions on
the common shares are removed. Option prices were adjusted in 1991
and 1993 to recognize the effect of special dividends.
<TABLE>
<CAPTION>
Stock option and restricted award transactions are summarized as follows:
1993 1992 1991
--------------------- --------------------- ----------------------
Stock options: Shares Price Shares Price Shares Price
-------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
beginning of year 160,650 $6.68-37.50 229,433 $6.68-28.13 422,783 $ 6.68-28.13
Granted 5,000 32.56 5,000 37.50 -0- --
Exercised (60,525) 6.68-26.31 (66,783) 6.68-26.31 (191,683) 6.68-26.31
Cancelled -0- -- ( 7,000) 21.77 ( 1,667) 21.77-26.19
-------- -------- ---------
Options outstanding at end of year 105,125 8.51-34.80 160,650 6.68-37.50 229,433 6.68-28.13
Options exercisable at end of year 105,125 8.51-34.80 114,275 6.68-37.50 125,183 6.68-28.13
Restricted awards:
Awarded and restricted at beginning
of year 10,990 20,083 21,977
Awarded during the year 15,277 500 12,059
Cancelled -0- -0- 334
Awarded and restricted at end of year 20,218 10,990 20,083
Reserved for future grants or awards at end
of year 576,224 596,501 -0-
</TABLE>
60
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
Cleveland-Cliffs Inc and Consolidated Subsidiaries
NOTE K - SHAREHOLDERS' EQUITY
As of December 31, 1993, the Company is authorized to issue
up to 500,000 shares of Class A voting preferred stock,
without par value, and up to 4,000,000 shares of Class B
non-voting preferred stock, without par value.
A share purchase right ("Right") is attached to each of
the Company's Common Shares outstanding as of December 31,
1993, or subsequently issued. Each Right entitles the holder
to buy from the Company one one-hundredth of one Common
Share at an exercise price per whole share of $42.50. The
Rights become exercisable if a person or group acquires, or
tenders for, 20% or more of the Company's Common Shares.
The Company is entitled to redeem the Rights at 5 cents per
Right at any time until ten days after any person or group
has acquired 20% of the Common Shares and in certain
circumstances thereafter. If a party owning 20% or more of
the Company's Common Shares merges with the Company or
engages in certain other transactions with the Company,
each Right, other than Rights held by the acquiring party,
entitles the holder to buy $85.00 worth of the shares of the
surviving company at a 50% discount. The Rights expire on
September 18, 1997 and are not exercisable until the
occurrence of certain triggering events, which include the
acquisition of, or a tender or exchange offer for, 15% or
more of the Company's Common Shares. There are 168,279
Common Shares reserved for these Rights.
NOTE L - LITIGATION
The Company and its associated companies are
periodically involved in litigation incidental to their
operations. Management believes that any pending
litigation will not result in a material liability in
relation to the Company's consolidated financial statements.
61
<PAGE> 1
<TABLE>
<CAPTION>
QUARTERLY RESULTS OF OPERATIONS-(Unaudited) Exhibit 13(h)
(In Millions Except Per Share Amounts)
1993
--------------------------------------------------------------------
Quarters
-----------------------------------------------------
First Second Third Fourth Year
----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Total Revenues $43.3 $121.7 $87.6 $103.3 $355.9
Gross Profit 3.4 19.2 12.3 20.1 55.0
Net Income (Loss)
Amount (.1) 33.5 7.2 14.0 54.6
Per Common Share (.01) 2.79 .60 1.17 4.55
</TABLE>
Second quarter results included income of $34.8 million
pre-tax ($23.0 million after tax) from the bankruptcy
recovery; third quarter results included the effect of
the six-week strike, $6.9 million pre-tax ($5.4 million
after tax); and fourth quarter results included a $1.3
million tax credit representing a prior year adjustment.
<TABLE>
<CAPTION>
1992
---------------------------------------------------------------------
Quarters
-----------------------------------------------------
First Second Third Fourth Year
----- ------ ----- ------ -------
<S> <C> <C> <C> <C> <C>
Total Revenues $53.4 $ 93.7 $107.7 $72.2 $327.0
Gross Profit 9.5 24.3 20.9 14.9 69.6
Net Income (Loss)
Amount (33.6) 11.7 14.5 (.5) (7.9)
Per Common Share (2.80) .98 1.21 (.05) (.66)
</TABLE>
First quarter results included a $38.7 million, or $3.23
per share, after-tax charge for the cumulative effect of
accounting changes; second quarter results included a $5.0
million pre-tax ($3.7 million after tax) provision for
doubtful accounts receivable; third quarter results included
$2.3 million after-tax income from unusual transactions; and
fourth quarter results included a $12.5 million pre-tax
($9.3 million after tax) additional provision for doubtful
accounts receivable and a $1.1 million tax credit due to a
prior year tax adjustment.
--------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON SHARE PRICE PERFORMANCE AND DIVIDENDS
Price Performance
-----------------------------------------------
1993 1992 Dividends
----------------- ----------------- --------------------
High Low High Low 1993 1992
------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $36-7/8 $32-1/2 $40-3/8 $35-7/8 $ .30 $ .275
Second Quarter 34-7/8 31-1/2 39-1/4 33 .30 .30
Third Quarter 35-5/8 28-3/4 34-3/4 29-1/2 3.00* .30
Fourth Quarter 37-1/2 31 38-1/2 32-3/8 .30 .30
------ ------
Year 37-1/2 28-3/4 40-3/8 29-1/2 $3.90 $1.175
====== ======
<FN>
*Includes a $2.70 per share special dividend.
</TABLE>
62
<PAGE> 1
INVESTOR AND CORPORATE INFORMATION Exhibit 13(i)
STOCK EXCHANGE INFORMATION
The principal market for Cleveland-Cliffs Inc common shares
(ticker symbol CLF) is the New York Stock Exchange. The
common shares are also listed on the Chicago Stock Exchange.
63
<PAGE> 1
<TABLE>
<CAPTION>
11-YEAR SUMMARY OF FINANCIAL AND OTHER STATISTICAL DATA Exhibit 13(j)
Cleveland-Cliffs Inc and Consolidated Subsidiaries
1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------------
FINANCIAL
(In Millions Except Per Share Amounts)
<S> <C> <C> <C> <C>
For The Year
Net Income (Loss):
Continuing Operations (a) $ 54.6 $ (7.9) $ 53.8 $ 73.8
Discontinued Operations - - - -
----------------------------------------------
Total 54.6 (7.9) 53.8 73.8
Net Income (Loss) Per Common Share:
Continuing Operations (a) 4.55 (.66) 4.55 6.31
Discontinued Operations - - - -
----------------------------------------------
Total 4.55 (.66) 4.55 6.31
Cash Flow (Deficit) From Continuing Operations (22.8) 26.3 92.1 22.6
Revenues From Continuing Operations 355.9 327.0 363.3 400.2
Cash Dividends:
Per Common Share 2.20 1.18 5.03 .80
Per Preferred Share - - - -
Non-Cash Dividends:
Per Common Share 1.70 (b) - - -
Capital Expenditures (c) 5.0 5.2 7.3 11.2
At Year-End
Working Capital 186.0 188.9 139.7 169.8
Total Assets 545.4 537.2 478.7 510.9
Long-Term Debt:
Consolidated 75.0 75.1 41.2 53.0
Effectively Serviced (c) 88.6 92.1 65.0 82.4
Shareholders' Equity 280.7 269.6 290.8 290.8
Book Value Per Common Share 23.27 22.47 24.40 24.88
<FN>
(a) Results have been affected by non-recurring items including net bankruptcy recoveries of $23.2
million and $47.1 million in 1993 and 1990, respectively, and a $38.7 million after-tax charge for
accounting changes in 1992. See Management's Discussion and Analysis.
(b) Non-cash distribution of 1.5 million shares ($20.4 million) of LTV Corporation common stock.
(c) Includes the Company's share of associated companies.
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
OPERATIONS
Iron Ore Production From Mines Managed by Cliffs
(Millions of Gross Tons)
United States 27.8 28.4 27.6 25.5
Canada 4.5 4.5 4.5 6.2
Australia 1.5 1.5 1.3 2.2
----------------------------------------------
Total 33.8 34.4 33.4 33.9
- -------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
Common Shares Outstanding (Millions):
Average For Year 12.0 12.0 11.8 11.7
At Year-End 12.1 12.0 11.9 11.7
Common Shares Sales Price Range:
High $ 37 1/2 $ 40 3/8 $ 36 1/2 $ 35
Low 28 3/4 29 1/2 25 19 5/8
Employees At Year-End (d) 5,973 6,388 6,500 6,695
<FN>
(d) Includes employees of managed mining ventures.
At December 31, 1993, the Company had 3,722 record holders of its common shares.
</TABLE>
64
<PAGE> 2
<TABLE>
<CAPTION>
1989 1988 1987 1986 1985 1984 1983
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 62.5 $ 42.6 $ 30.2 $ (19.0) $ 28.3 $ 24.8 $ 4.8
(1.9) (3.4) (17.5) (22.7) (11.1) (0.7) .1
- ------------------------------------------------------------------------------
60.6 39.2 12.7 (41.7) 17.2 24.1 4.9
5.37 3.12 1.88 (1.94) 2.13 2.00 .39
(.17) (.26) (1.31) (1.82) (.90) (.06) -
- ------------------------------------------------------------------------------
5.20 2.86 .57 (3.76) 1.23 1.94 .39
79.8 56.1 21.1 9.1 39.7 39.3 25.7
372.4 317.5 412.0 241.0 267.9 321.3 259.8
.40 - - .35 1.00 1.00 1.00
- 2.00 2.00 2.00 .68 - -
- .79 - - - - -
14.6 8.4 2.0 3.4 4.4 10.5 4.2
104.7 45.0 220.3 110.0 114.0 77.3 72.0
415.2 390.6 665.6 527.2 511.7 481.5 500.7
71.3 119.6 153.5 80.5 35.4 50.0 62.4
93.4 145.7 183.5 305.3 200.9 234.9 297.4
226.0 168.6 395.4 325.5 363.9 316.7 307.1
19.36 14.53 21.02 22.16 25.24 25.52 24.77
- ------------------------------------------------------------------------------
31.0 31.1 27.1 10.6 12.5 12.9 9.3
8.3 7.9 7.2 2.0 2.1 2.1 1.6
2.3 2.4 2.0 - 14.7 15.3 13.1
- ------------------------------------------------------------------------------
41.6 41.4 36.3 12.6 29.3 30.3 24.0
- ------------------------------------------------------------------------------
11.6 13.2 13.4 12.4 12.4 12.4 12.4
11.7 11.6 16.4 12.4 12.4 12.4 12.4
$ 34 $ 28 $ 21 3/8 $ 19 3/8 $ 22 1/4 $ 26 $ 25 1/4
25 3/4 14 1/4 9 1/4 6 16 5/8 17 18 1/8
7,522 7,638 8,328 8,972 6,387 7,248 7,203
</TABLE>
65
<PAGE> 1
<TABLE>
Exhibit 21
<CAPTION>
Subsidiaries of Cleveland-Cliffs Inc
------------------------------------
Jurisdiction
of
Incorporation
or
Name of Subsidiary Organization
------------------ ------------
<S> <C>
Cleveland-Cliffs Company (1) Ohio
Cleveland-Cliffs Ore Corporation (1), (2), (3) Ohio
Cliffs Biwabik Ore Corporation (2) Minnesota
Cliffs Copper Corp. Ohio
Cliffs Empire, Inc. (1), (4) Michigan
Cliffs Engineering, Inc. (1) Colorado
Cliffs Forest Products Company (1) Michigan
Cliffs Fuel Service Company (1) Michigan
Cliffs IH Empire, Inc. (1) Michigan
Cliffs Marquette, Inc. (1), (3) Michigan
Cliffs MC Empire, Inc. (1), (4) Michigan
Cliffs Mining Company Delaware
Cliffs Mining Services Company Delaware
Cliffs Oil Shale Corp. (1) Colorado
Cliffs of Canada Limited (1) Ontario, Canada
Cliffs Reduced Iron Corporation Delaware
Cliffs Resources, Inc. (5) Delaware
Cliffs Synfuel Corp. (1) Utah
Cliffs Tilden, Inc. (1), (2) Michigan
Cliffs TIOP, Inc. (1), (6), (7) Michigan
Empire-Cliffs Partnership (4) Michigan
Empire Iron Mining Partnership (8) Michigan
Escanaba Properties Company (1), (9) Michigan
Escanaba Properties Partnership (9) Michigan
FCDC Coal, Inc. (10) Delaware
Hibbing Taconite Company, a joint venture (11) Minnesota
J&L-Cliffs Ore Partnership (2), (12) Ohio
Kentucky Coal Company Delaware
Lake Superior & Ishpeming Railroad Company (5) Michigan
Lasco Development Company (5) Michigan
Marquette Iron Mining Partnership (3) Michigan
Mattagami Mining Co. Limited (13) Ontario, Canada
Mesabi Radio Corporation (13) Minnesota
Minerais Midway Ltee-Midway Ore Company Ltd. (13) Quebec, Canada
Mines Hilton Ltee-Hilton Mines, Ltd. (13) Quebec, Canada
Northwest Iron Co. Ltd. (14) Delaware
Peninsula Land Corporation (13) Michigan
_____________________________________________________
See footnote explanation on pages 67-68.
</TABLE>
66
<PAGE> 2
<TABLE>
<CAPTION>
Jurisdiction
of
Incorporation
or
Name of Subsidiary Organization
------------------ ------------
<S> <C>
Pickands Erie Corporation (13) Minnesota
Pickands Hibbing Corporation (13) Minnesota
Pickands Mather & Co. International Delaware
Pickands Mather Services Inc. (13) Delaware
Pickands Radio Co. Ltd. (13) Quebec, Canada
Robert Coal Company (15) Delaware
Seignelay Resources, Inc. (13) Delaware
Syracuse Mining Company (13) Minnesota
Tetapaga Mining Company Limited (1) Ohio
Tilden Iron Ore Partnership (6), (12) Michigan
Tilden Magnetite Partnership (7) Michigan
Tilden Mining Company, a joint venture (2), (6), (12) Michigan
The Cleveland-Cliffs Iron Company Ohio
The Cleveland-Cliffs Steamship Company (1) Delaware
The Mesaba-Cliffs Mining Company (16) Minnesota
Turner Elkhorn Mining Company (10) Delaware
Virginia Eastern Shore Land Co. (1) Delaware
</TABLE>
________________________________________________________________________________
(1) The named subsidiary is a wholly-owned subsidiary
of The Cleveland-Cliffs Iron Company, which in turn
is a wholly-owned subsidiary of Cleveland-Cliffs
Inc.
(2) J&L-Cliffs Ore Partnership is an Ohio partnership
and a 36% associate in the Tilden Mining Company,
a joint venture. Cleveland-Cliffs Ore Corporation
and Cliffs Tilden, Inc., wholly-owned subsidiaries
of The Cleveland-Cliffs Iron Company, have a
combined 100% interest in the J&L-Cliffs Ore
Partnership. Cleveland-Cliffs Ore Corporation also
owns 100% of Cliffs Biwabik Ore Corporation.
(3) Marquette Iron Mining Partnership is a Michigan
partnership. Cleveland-Cliffs Ore Corporation and
Cliffs Marquette, Inc., wholly-owned subsidiaries
of The Cleveland-Cliffs Iron Company, have a
combined 100% interest in Marquette Iron Mining
Partnership.
(4) Empire-Cliffs Partnership is a Michigan
partnership. Cliffs MC Empire, Inc. and Cliffs
Empire, Inc., wholly-owned subsidiaries of The
Cleveland-Cliffs Iron Company, have a combined
100% interest in Empire-Cliffs Partnership.
(5) Cliffs Resources, Inc. owns a 99.2% interest in
Lake Superior & Ishpeming Railroad Company.
Lasco Development Company is a wholly-owned
subsidiary of Lake Superior & Ishpeming Railroad
Company.
67
<PAGE> 3
(6) Tilden Iron Ore Partnership is a Michigan
partnership and a 64% associate in the Tilden Mining
Company, a joint venture. Cliffs TIOP, Inc., a
wholly-owned subsidiary of The Cleveland-Cliffs
Iron Company, has a 37.5% interest in the Tilden
Iron Ore Partnership.
(7) Tilden Magnetite Partnership is a Michigan
partnership. Cliffs TIOP, Inc., a wholly-owned
subsidiary of The Cleveland-Cliffs Iron Company,
has a 33.333% interest in the Tilden Magnetite
Partnership.
(8) Empire Iron Mining Partnership is a Michigan
partnership. The Cleveland-Cliffs Iron Company has
a 22.56% indirect interest in the Empire Iron Mining
Partnership.
(9) Escanaba Properties Partnership is a Michigan
partnership. Escanaba Properties Company, a
wholly-owned subsidiary of The Cleveland-Cliffs
Iron Company, has a 87.5% interest in the
Escanaba Properties Partnership.
(10) Cliffs Mining Company, a wholly-owned subsidiary of
Cleveland-Cliffs Inc, owned a 100% interest in
Turner Elkhorn Mining Company, which in turn owned a
100% interest in FCDC Coal, Inc. Both Turner
Elkhorn Mining Company and FCDC Coal, Inc. were sold
on February 26, 1993.
(11) Cliffs Mining Company has a 10% and Pickands
Hibbing Corporation has a 5% interest in Hibbing
Taconite Company, a joint venture.
(12) Tilden Mining Company is a joint venture in which
Tilden Iron Ore Partnership is a 64% associate
and J&L-Cliffs Ore Partnership is a 36% associate.
(13) The named subsidiary is a wholly-owned
subsidiary of Cliffs Mining Company, which in
turn is a wholly-owned subsidiary of
Cleveland-Cliffs Inc.
(14) Cliffs Mining Company owns a 72.4% interest in
Northwest Iron Co. Ltd.
(15) The named subsidiary is a wholly-owned
subsidiary of Kentucky Coal Company, which in
turn is a wholly-owned subsidiary of
Cleveland-Cliffs Inc.
(16) The Cleveland-Cliffs Iron Company owns a 86.4%
interest in The Mesabi-Cliffs Mining Company.
68
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in
Post-Effective Amendment Number 1 to the Registration
Statement (Form S-8 No. 33-4555) pertaining to the Restricted
Stock Plan of Cleveland-Cliffs Inc, in the Registration
Statement (Form S-8 No. 33-208033) pertaining to the 1987
Incentive Equity Plan of Cleveland-Cliffs Inc and in
the Registration Statement (Form S-8 No. 33-48357)
pertaining to the 1992 Incentive Equity Plan and the related
prospectuses of our report dated February 14, 1994, with
respect to the consolidated financial statements and
schedules of Cleveland-Cliffs Inc and consolidated
subsidiaries included in this Annual Report (Form 10-K) for
the year ended December 31, 1993.
Ernst & Young
Cleveland, Ohio
March 28, 1994
69
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the
undersigned Directors and officers of Cleveland-Cliffs Inc, an Ohio
corporation ("Company"), hereby constitute and appoint M. Thomas
Moore, John S. Brinzo, Frank L. Hartman, and John E. Lenhard and each
of them, their true and lawful attorney or attorneys-in-fact, with
full power of substitution and revocation, for them and in their
name, place and stead, to sign on their behalf as a Director or
officer of the Company, or both, as the case may be, an Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 on Form 10-K for the fiscal year ended December 31,
1993, and to sign any and all amendments to such Annual Report,
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney or attorneys-in-fact, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all that said
attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Executed as of the 8th day of March, 1994.
/s/M. T. Moore /s/S. B. Oresman
--------------------- -----------------------
M. T. Moore S. B. Oresman, Director
Chairman, President, Chief
Executive Officer and Director
(Principal Executive Officer) /s/A. Schwartz
------------------------
A. Schwartz, Director
/s/R. S. Colman
----------------------
R. S. Colman, Director
/s/S. K. Scovil
-----------------------
S. K. Scovil, Director
/s/E. M. de Windt
----------------------
E. M. de Windt, Director
/s/J. H. Wade
-----------------------
J. H. Wade, Director
/s/J. D. Ireland III
----------------------
J. D. Ireland III, Director
/s/A. W. Whitehouse
-----------------------
A. W. Whitehouse, Director
/s/G. F. Joklik
----------------------
G. F. Joklik, Director
/s/J. S. Brinzo
-----------------------
J. S. Brinzo
Senior Executive-Finance
/s/L. L. Kanuk (Principal Financial Oficer)
----------------------
L. L. Kanuk, Director
/s/J. A. Trethewey
-----------------------
J. A. Trethewey
/s/G. H. Lamphere Vice President and Controller
---------------------- (Principal Accounting Officer)
G. H. Lamphere, Director
70
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 99(a)
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
Schedule I - Marketable Securities
(Dollars in Millions)
Market Value
Principal of each issue Amount at which
Name of issuer and amount of Cost of at balance carried in the
title of each issue bonds each issue sheet date balance sheet
------------------- --------- ---------- ------------- ----------------
DECEMBER 31, 1993:
<S> <C> <C> <C> <C>
U.S. Government $ 39.0 $ 39.3 $ 39.3 $ 39.3
Ohio state obligations 5.0 5.0 5.1 5.1
Other state obligations 7.5 7.7 7.7 7.7
Salem, Ohio hospital
revenue bonds 2.8 2.8 2.8 2.8
Other municipal
obligations 9.0 9.2 9.2 9.2
Corporate bonds 10.1 10.1 10.1 10.1
Short-term
investment funds 7.3 7.3 7.3 7.3
Repurchase agreements 6.6 6.6 6.6 6.6
Commercial paper 5.0 5.0 5.0 5.0
-------- --------- --------- ---------
Total $ 92.3 $ 93.0 $ 93.1 $ 93.1
======== ========= ========= =========
</TABLE>
71
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 99(b)
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts
(Dollars in Millions)
Additions
-------------------
Charged
Balance at to Cost Charged Balance at
Beginning and to Other End
Classification Of Year Expenses Accounts Deductions Of Year
-------------- --------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Reserve for Capacity
Rationalization $ 36.1 $ -- $ 1.3 $ 6.9 $ 30.5
Allowance for Doubtful
Accounts 20.8 -- -- 1.3 19.5
Other 8.3 -- 5.4 -- 13.7
Year Ended December 31, 1992:
Reserve for Capacity
Rationalization $ 35.6 $ -- $ 4.9 $ 4.4 $ 36.1
Allowance for Doubtful
Accounts 3.1 17.5 0.2 -- 20.8
Other 12.0 3.5 -- 7.2 8.3
Year Ended December 31, 1991:
Reserve for Capacity
Rationalization $ 37.1 $ -- $ 1.5 $ 3.0 $ 35.6
Allowance for Doubtful
Accounts 1.3 1.3 0.5 -- 3.1
Other 3.7 11.0 -- 2.7 12.0
<FN>
Additions charged to other accounts in 1993, 1992 and 1991 were charged to revenues.
Deductions to the reserve for capacity rationalization represent charges associated with idle
expense in 1993, 1992 and 1991.
</TABLE>
72
<PAGE> 1
<TABLE>
Exhibit 99(c)
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
Schedule X - Supplementary Income Statement Information
(Dollars in Millions)
<CAPTION>
Charged to Costs and Expenses
Year Ended December 31:
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs $ 17.7 $ 18.8 $ 18.8
Taxes, other than payroll
and income taxes $ 4.4
Royalties $ 9.2 $ 7.3 $ 7.5
Amounts for taxes, other than payroll and income taxes (1993 and 1992),
depreciation and amortization of intangible assets,
preoperating costs and similar deferrals and advertising costs
are not presented because such amounts are each less than 1% of
total sales and revenues.
</TABLE>
73
<PAGE> 1
Exhibit 99(d)
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Associates
Tilden Mining Company
We have audited the accompanying statement of financial position of
Tilden Mining Company (a joint venture) as of December 31, 1993 and
1992, and the related statements of costs and expenses charged to
associates, associates' account, and cash flows for each of the
three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the index at
Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Tilden
Mining Company (a joint venture) at December 31, 1993 and 1992, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set
forth therein.
Ernst & Young
Cleveland, Ohio
February 14, 1994
74
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 99(e)
STATEMENT OF FINANCIAL POSITION
TILDEN MINING COMPANY (A JOINT VENTURE)
December 31
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 116,325 $ 15,574
Receivable from associates:
Tilden Magnetite Partnership -0- 296,500
Advance adjustment - Note A -0- -0-
------------ ------------
-0- 296,500
Inventories - Note A:
Iron ore concentrates 2,950,425 3,528,022
Supplies 1,232,118 568,098
Fluxstone 454,063 619,805
------------- ------------
4,636,606 4,715,925
------------- ------------
TOTAL CURRENT ASSETS 4,752,931 5,027,999
PROPERTIES - Note A:
Land 2,844,737 2,844,737
Plant and equipment 549,459,673 551,271,698
Allowance for depreciation (282,243,073) (270,486,869)
------------- -------------
TOTAL PROPERTIES 270,061,337 283,629,566
OTHER ASSETS
Advance adjustment - Specific tax 1,420,877 1,562,216
------------- -------------
TOTAL OTHER ASSETS 1,420,877 1,562,216
------------- -------------
TOTAL ASSETS $276,235,145 $290,219,781
============= =============
</TABLE>
75
<PAGE> 2
<TABLE>
<CAPTION>
December 31
1993 1992
------------ ------------
<S> <C> <C>
LIABILITIES AND ASSOCIATES' ACCOUNT
CURRENT LIABILITIES
The Cleveland-Cliffs Iron Company:
Royalties payable $ 2,802,542 $ 447,395
Accounts payable 68,944 14,372
------------- ------------
2,871,486 461,767
Payables to associates:
Tilden Magnetite Partnership 2,777 -0-
Working Capital Adjustment - Note A 834,236 3,981,506
Trade accounts payable 241,531 267,126
State and local taxes 1,444,352 1,065,955
Other current liabilities 13,900 15,600
------------- ------------
TOTAL CURRENT LIABILITIES 5,408,282 5,791,954
LONG-TERM OBLIGATIONS
Specific tax 765,526 798,261
------------- ------------
TOTAL LONG-TERM OBLIGATIONS 765,526 798,261
ASSOCIATES' ACCOUNT 270,061,337 283,629,566
COMMITMENTS - Note D
------------- -------------
TOTAL LIABILITIES AND ASSOCIATES' ACCOUNT $276,235,145 $290,219,781
============= =============
<FN>
See notes to financial statements.
</TABLE>
76
<PAGE> 3
<TABLE>
STATEMENT OF COSTS AND EXPENSES CHARGED TO ASSOCIATES
TILDEN MINING COMPANY (A JOINT VENTURE)
<CAPTION>
Year Ended December 31
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
COSTS AND EXPENSES CHARGED TO
ASSOCIATES - Note C
Cost of producing pellets and
other operating costs $ 77,110,203 $ 51,406,680 $ 20,890,382
Depreciation 13,547,941 13,699,766 14,185,955
Charges from The Cleveland-Cliffs
Iron Company:
Royalty 8,410,456 5,659,592 2,463,448
Management fee 1,517,664 953,660 388,266
------------- ------------- --------------
9,928,120 6,613,252 2,851,714
Development and stripping 7,162,173 3,786,290 1,847,234
State and local taxes 1,918,963 1,391,537 820,879
Research 660,146 264,963 111,346
Miscellaneous (income) expense-net (99,459) 15,032 (417,265)
-------------- ------------- --------------
TOTAL COSTS AND EXPENSES
CHARGED TO ASSOCIATES $ 110,228,087 $ 77,177,520 $ 40,290,245
============== ============= ==============
<FN>
See notes to financial statements.
</TABLE>
77
<PAGE> 4
<TABLE>
STATEMENT OF ASSOCIATES' ACCOUNT
TILDEN MINING COMPANY (A JOINT VENTURE)
<CAPTION>
Year Ended December 31
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Balance as of January 1 $ 283,629,566 $ 297,351,518 $ 311,348,338
Associates' contribution:
Contribution 97,504,006 67,443,629 29,157,532
Advance adjustment - Note A -0- -0- 62,383
Working capital adjustment - Note A (834,236) (3,981,506) (2,923,348)
-------------- -------------- --------------
Total Associates' Contribution 96,669,770 63,462,123 26,296,567
Associates' withdrawal:
Cost and expenses charged
to associates (110,228,087) (77,177,520) (40,290,245)
Other (9,912) (6,555) (3,142)
-------------- -------------- --------------
Total Associates' Withdrawal (110,237,999) (77,184,075) (40,293,387)
-------------- -------------- --------------
Balance as of December 31 $ 270,061,337 $ 283,629,566 $ 297,351,518
============== ============== ==============
<FN>
See notes to financial statements.
</TABLE>
78
<PAGE> 5
<TABLE>
STATEMENT OF CASH FLOWS
TILDEN MINING COMPANY (A JOINT VENTURE)
<CAPTION>
Year Ended December 31
1993 1992 1991
-------------- ------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Costs and expenses charged to associates $(110,228,087) $(77,177,520) $ (40,290,245)
Adjustments to reconcile costs and
expenses charged to associates to
net cash from (used) in operations:
Depreciation 13,547,942 13,699,766 14,185,955
Other ( 32,736) (125,819) (111,658)
Loss (gain) on sale of assets (143,796) 2,395 (371,569)
Changes in operating assets
(increase) decrease
Accounts receivable -0- 167,777 (167,777)
Receivable from associates 79,319 (223,451) (10,666)
Inventories 296,501 (1,875,134) 2,986,864
Changes in operating liabilities
increase (decrease)
Payable to The Cleveland-Cliffs
Iron Company 2,409,719 448,380 (737,783)
Payable to associates 2,777 (62,099) (7,709,604)
Payables and accrued expenses 351,103 517,955 (607,881)
-------------- ------------- --------------
Total changes in operating assets
and liabilities 3,139,419 (1,026,572) (6,246,847)
-------------- ------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (93,717,258) (64,627,750) (32,834,364)
INVESTING ACTIVITIES
Proceeds from sale of equipment 164,083 19,790 638,639
-------------- ------------- --------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 164,083 19,790 638,639
FINANCING ACTIVITIES
Lease payments -0- -0- (516,485)
Associates' contributions 93,663,838 64,540,468 32,797,092
Other (9,912) (6,555) (3,142)
-------------- ------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 93,653,926 64,533,913 32,277,465
-------------- ------------- --------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 100,751 (74,047) 81,740
Cash and cash equivalents at
beginning of year 15,574 89,621 7,881
-------------- ------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 116,325 $ 15,574 $ 89,621
============== ============ ==============
<FN>
See notes to financial statements.
</TABLE>
79
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
TILDEN MINING COMPANY (A JOINT VENTURE)
NOTE A-SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENTS: The financial statements have been prepared
principally for use by the associates (see Note B) in recording their
respective interests in the accounts of the Tilden Mining Company (a
joint venture) ("Venture"). Since the Venture does not generate
revenue, no provision is made for income taxes as the Venture's
costs and expenses charged to the associates are included in the
financial statements of each associate based upon defined allocation
percentages.
CASH EQUIVALENTS: The Venture considers investments in highly liquid
debt instruments with an initial maturity of three months or less to
be cash equivalents.
INVENTORIES: Iron ore concentrates are stated at average cost of
production, exclusive of depreciation and development. Supplies and
fluxstone are stated at the lower of average cost or market.
PROPERTIES AND DEPRECIATION: Property is stated on the basis of
cost and is depreciated over the estimated useful life,
principally by the straight-line method. Depreciation commences when
assets are placed in service.
EXPLORATION, RESEARCH AND DEVELOPMENT COSTS: Exploration,
research and continuing mine development costs are charged to
operations as incurred.
ADVANCE ADJUSTMENTS: Advance adjustments arise from differences in
monthly contributions and actual cost allocations.
WORKING CAPITAL ADJUSTMENT: The Venture agreement as revised by the
Tilden Mine Joint Venture Amendatory Agreement ("Amendatory
Agreement") dated January 1, 1984, provides for the adjustment of
defined working capital to zero at the end of each month through
charges or credits to the Associates' Account.
<TABLE>
<CAPTION>
NOTE B-ORGANIZATION
The Tilden Joint Venture was formed in 1971 and began original operation of the Tilden mine facility in 1974.
The Tilden Joint Venture Agreement, as amended by the Amendatory Agreement, provides that the associates'
investment will be maintained in accordance with their ownership. Ownership percentages at December 31, 1993 and
1992 were as follows:
<S> <C>
Tilden Iron Ore Partnership ("TIOP") 64%
J & L - Cliffs Ore Partnership ("JCOP") 36
-----
100%
=====
</TABLE>
80
<PAGE> 7
<TABLE>
NOTES TO FINANCIAL STATEMENTS - Continued
TILDEN MINING COMPANY (A JOINT VENTURE)
<CAPTION>
NOTE B-ORGANIZATION-Continued
Ownership percentages of TIOP and JCOP as of December 31, 1993 and 1992 were as follows:
<S> <C>
TIOP:
Cannelton Iron Ore Company 46.875%
Cliffs TIOP, Inc. 37.500
Stelco Coal Company 15.625
--------
100.000%
========
JCOP:
Cliffs Tilden, Inc. 62.500%
Cleveland-Cliffs Ore Corporation 37.500
--------
100.000%
========
</TABLE>
Cliffs TIOP, Inc., Cliffs Tilden, Inc. and Cleveland-Cliffs Ore
Corporation are wholly-owned subsidiaries of The Cleveland-Cliffs
Iron Company ("Cleveland- Cliffs"). The Cleveland-Cliffs Iron
Company is a wholly-owned subsidiary of Cleveland-Cliffs Inc.
Cleveland-Cliffs is the manager of the Venture, TIOP and JCOP.
Cannelton Iron Ore Company ("Cannelton") is a wholly-owned
subsidiary of Algoma Steel Inc. ("Algoma").
Under the terms of the Venture agreement, the associates are
responsible with respect to obligations of the Venture only
severally in their respective ownership percentages. TIOP separately
entered into financing arrangements which are secured by a lien on
its share of the Venture's facilities and production therefrom.
In January, 1991, Cannelton defaulted on its obligation to fund its
share of the Tilden Mine production costs, and cured its default in
February, 1991. During the period of default, Cleveland-Cliffs
accelerated its share of funding and production in order to
maintain the scheduled production rate. In February, 1991, Algoma
sought and obtained protection from creditors under the Canadian
Companies' Creditor's Arrangement Act.
In January, 1992, Algoma filed its Plan of Arrangement Under the
Companies' Creditor's Arrangement Act (Canada) and the Business
Corporation Act (Ontario) in the Ontario Court of Justice, covering
its restructuring plan. The Plan was approved by the Court on April
16, 1992 and on June 5, 1992, Algoma emerged from Canadian
reorganization proceedings. Cannelton is continuing to fund its share
of the Venture's costs which is guaranteed by Algoma.
81
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS - Continued
TILDEN MINING COMPANY (A JOINT VENTURE)
NOTE B-ORGANIZATION-Continued
In February, 1994, Cleveland-Cliffs expects to reach agreement in
principle with Algoma and Stelco Inc. ("Stelco") to restructure and
simplify the operation of the Tilden Mine effective January 1,
1994. The principal terms of the new agreement are (1) the
participants' tonnage entitlement and cost-sharing will be based on
a 6.0 million ton target normal production level instead of the
previous 4.0 million ton base production level, (2) Cleveland-Cliffs'
interest in and responsibility for cost obligations of Tilden
Magnetite Partnership ("TMP") increases from 33.33% to 40.0% with
corresponding decreases for Algoma (from 50% to 45%) and for Stelco
(from 16.67% to 15%), (3) a partner may take additional production
with certain fees paid to the Partnership, (4) TMP will pay
an increased royalty to Cleveland-Cliffs, and (5) the Venture
and TMP will be merged into one entity. The agreement is not
expected to have a significant financial effect on the Tilden
Mine or the participants. The new Tilden arrangements reflect an
underlying plan of operating improvements and will allow a
lengthening of the magnetite ore reserve life. Additional capital
and development expenditures are expected in connection with the
improvement plan.
NOTE C-OPERATIONS
The Amendatory Agreement permits associates to individually nominate
production levels different than their respective ownership shares.
Each associate is obligated for defined base costs in proportion to
ownership shares and incremental costs in proportion to nominated
production share. In addition, the Amendatory Agreement provides
for annual adjustments between the associates to equalize the
charge for incremental costs and to compensate for nomination by an
associate of production in excess of ownership share.
Effective January 1, 1988, the associates of the Venture entered
into various agreements with TMP, a partnership formed by the
partners in the Venture. Under these agreements TMP is entitled to
the use of certain of the Venture's mining equipment and
concentrating and pelletizing facilities and TMP agreed to bear
certain defined base costs associated with such equipment and
facilities. Also under these agreements, TMP processes hematite
ore for the Venture, with the incremental costs of such
production as defined in the agreements (including a defined capital
cost allowance) being charged to the Venture. Base costs as defined
in the agreements are borne by TMP by agreement with the Venture.
Cleveland-Cliffs is the manager of TMP.
During 1993 the Venture was charged $96.1 million (1992 - $63.2
million; 1991 - $26.4 million) by TMP for processing hematite ore.
The associates have a lease agreement with Cleveland-Cliffs, owner
of the mineral interest in the land on which hematite ore mining
activities have been conducted by the Venture, which provides for
royalty payments based on iron ore pellets produced. Effective
January 1, 1988, the associates of the Venture entered into a
sublease agreement with TMP to permit TMP to extract magnetite ore
with respect to such mineral interests.
82
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - Continued
TILDEN MINING COMPANY (A JOINT VENTURE)
NOTE C-OPERATIONS-Continued
The labor contract covering TMP hourly employees expired on August
1, 1993. A six-year, no-strike agreement was reached with the United
Steelworkers of America after a six-week strike idled production
facilities.
The agreement follows the wage and signing bonus pattern of the
earlier settlements by major steel companies, granting higher
pension benefits during the six-year term, increasing vacation
time and incentive pay, and allowing certain work force
productivity gains. On-going employment costs per hour are expected
to rise approximately 10 percent by July 31, 1996. At that time,
the agreements can be reopened for limited economic and other
matters, subject to binding arbitration or conformity to certain
steel company contract changes.
NOTE D-COMMITMENTS
The Venture is obligated for the purchase of electric energy
requirements of the Venture through the Tilden Mine Power Contract
entered into with Wisconsin Electric Power Company ("Wisconsin
Electric"). The Tilden Mine Power Contract has a primary term of ten
years through 1997.
The associates, TMP and Wisconsin Electric entered into an
amendment to the Tilden Mine Power Contract and an Auxiliary Power
Purchase Contract. Under these agreements, TMP will bear the
entire base, or demand portion of the electric energy charge
assessed by Wisconsin Electric; TMP and the Venture will bear the
incremental portion of electric energy charges based on electric
power supplied for magnetite and hematite ore processing,
respectively; and TMP will be able to access certain excess
electric energy capacity as required by its operations. The minimum
annual payment under the amended Tilden Mine Power Contract to be
paid by TMP is $7.6 million for demand charges for the year 1994.
NOTE E-RETIREMENT BENEFITS
In accordance with agreements with TMP, pension, health care and life
insurance benefits are obligations of TMP.
NOTE F-PENDING LITIGATION
The Venture is periodically involved in litigation incidental to its
operations. Management believes that any pending litigation will not
result in a material liability in relation to the Venture's financial
statements.
83
<PAGE> 10
<TABLE>
TILDEN MINING COMPANY
Schedule V - Property, Plant and Equipment
(Dollars in Millions)
<CAPTION>
Balance At Other Balance At
Beginning Additions Additions End
Classification Of Year At Cost Retirements (Deductions) Of Year
-------------- --------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Plant and Equipment $ 551.3 $ -- $ 1.8 $ -- $ 549.5
Land 2.8 -- -- -- 2.8
-------- -------- -------- --------- --------
Totals $ 554.1 $ -- $ 1.8 $ -- $ 552.3
======== ======== ======== ========= ========
Year Ended December 31, 1992:
Plant and Equipment $ 551.5 $ -- $ 0.2 $ -- $ 551.3
Land 2.8 -- -- -- 2.8
-------- -------- -------- --------- --------
Totals $ 554.3 $ -- $ 0.2 $ -- $ 554.1
======== ======== ======== ========= ========
Year Ended December 31, 1991:
Plant and Equipment $ 565.1 $ -- $ 9.5 $ ( 4.1) $ 551.5
Land 2.8 -- -- -- 2.8
-------- -------- -------- --------- ---------
Totals $ 567.9 $ -- $ 9.5 $ ( 4.1) $ 554.3
======== ======== ======== ========= ========
</TABLE>
<TABLE>
------------------------------------------------------------------------------------------------------------------------------
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment
(Dollars in Millions)
<CAPTION>
Balance At Other Balance At
Beginning Additions Additions End
Classification Of Year At Cost Retirements (Deductions) Of Year
-------------- --------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Plant and Equipment $ 270.5 $ 13.5 $ 1.8 $ -- $ 282.2
======== ======== ======== ========= ========
Year Ended December 31, 1992:
Plant and Equipment $ 256.9 $ 13.7 $ 0.1 $ -- $ 270.5
======== ======== ======== ========= ========
Year Ended December 31, 1991:
Plant and Equipment $ 256.0 $ 14.2 $ 9.1 $ ( 4.2) $ 256.9
======== ======== ======== ========= ========
<FN>
The annual provision for depreciation has been computed principally using rates ranging from 2% to 33%.
</TABLE>
84
<PAGE> 11
<TABLE>
<CAPTION>
TILDEN MINING COMPANY
Schedule X - Supplementary Income Statement Information
(Dollars in Millions)
Charged to Costs and Expenses
Year Ended December 31:
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs $ 22.1 $ 14.5 $ 5.6
Taxes, other than payroll
and income taxes $ 1.9 $ 1.4 $ 0.8
Royalties $ 8.4 $ 5.7 $ 2.5
</TABLE>
Amounts for depreciation and amortization of tangible
assets, preoperating costs and similar deferrals and
advertising costs are not presented because such amounts are
each less than 1% of total costs and expenses.
85
<PAGE> 12
APPENDIX A - IMAGE AND GRAPHIC MATERIAL
---------------------------------------
Items 1 and 2 - Business and Properties (Map)
---------------------------------------------
The map is entitled, "Cleveland-Cliffs Inc and
Associated Companies Location of Iron Ore Operations". The
map has an outline of the United States and an outline of
Tasmania (Australia). Located specifically on the map are
arrows and dots representing the location of the properties
described in the Table on page 6 to this report.
Item 7 - Management's Discussion and Analysis of Financial
----------------------------------------------------------
Condition and Results of Operations (Graphs)
--------------------------------------------
Graph A
-------
This graph is captioned "Cumulative Earnings & Dividends".
The graph contains two lines depicting cumulative earnings
and cumulative dividends over the five-year period
1989-1993. Cumulative earnings were $60.6 million, $134.4
million, $188.2 million, $219.0 million and $273.6
million, respectively, for the years 1989-1993.
Cumulative dividends were $4.7 million, $14.0 million,
$73.1 million, $87.2 million, and $113.6 million,
respectively, for the years 1989-1993. The graph also
indicates that the cumulative payout ratio of dividends to
earnings was 8%, 10%, 39%, 40%, and 42%, respectively, for the
years 1989-1993.
<TABLE>
<CAPTION>
Graph B
-------
This graph is captioned "Components of Invested Capital". The graph contains five bars depicting the components of
invested capital at December 31, 1989, 1990, 1991, 1992, and 1993, each bar reflecting Effectively Serviced Debt
and Shareholders' Equity, as follows:
Amount (In Millions) Percent
--------------------------------------------- ---------------------------------------------
Effectively Effectively
Serviced Shareholders' Serviced Shareholders'
December 31 Debt Equity Total Debt Equity Total
----------- ----------- ------------- ------ ---------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
1989 $93.4 $226.0 $319.4 29% 71% 100%
1990 82.4 290.8 373.2 22 78 100
1991 65.0 290.8 355.8 18 82 100
1992 92.1 269.6 361.7 26 74 100
1993 88.6 280.7 369.3 24 76 100
</TABLE>
86
