<PAGE> 1
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,1995
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ .
Commission File Number:1-8944
CLEVELAND-CLIFFS INC
(Exact name of registrant as specified in its charter)
Ohio 34-1464672
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
1100 Superior Avenue, Cleveland, Ohio 44114-2589
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 694-5700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
As of July 31, 1995, there were 11,893,967 Common Shares (par value $1.00 per
share) outstanding.
==============================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
(In Millions, Except Per Share Amounts)
-----------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Product sales and services $103.3 $71.9 $154.6 $112.0
Royalties and management fees 12.9 11.5 21.8 19.5
----------- ----------- ----------- -----------
Total operating revenues 116.2 83.4 176.4 131.5
Investment income (securities) 2.1 1.5 4.7 2.7
Other income 0.6 0.1 1.4 0.3
----------- ----------- ----------- -----------
TOTAL REVENUES 118.9 85.0 182.5 134.5
COSTS AND EXPENSES:
Cost of goods sold and operating expenses 89.8 63.8 139.6 103.3
Administrative, selling and general expenses 3.7 4.3 6.8 8.5
Interest expense 1.5 1.7 3.2 3.3
Other expenses 12.2 1.2 14.1 2.4
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES 107.2 71.0 163.7 117.5
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 11.7 14.0 18.8 17.0
INCOME TAXES (CREDITS) :
Currently payable 3.1 3.9 5.0 4.7
Deferred (12.3) (0.3) (12.1) (0.3)
----------- ----------- ----------- -----------
TOTAL INCOME TAXES (9.2) 3.6 (7.1) 4.4
----------- ----------- ----------- -----------
NET INCOME $20.9 $10.4 $25.9 $12.6
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE $1.75 $0.86 $2.16 $1.04
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
2
<PAGE> 3
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
(In Millions)
------------------------------
June 30, December 31,
ASSETS 1995 1994
------ ------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $122.0 $140.6
Marketable securities 0.6 0.8
------------- ------------
122.6 141.4
Accounts receivable - net 42.4 65.9
Inventories:
Finished products 48.6 24.5
Work in process 0.9 0.6
Supplies 16.9 14.6
------------- ------------
66.4 39.7
Deferred income taxes 14.7 14.7
Other 11.4 7.4
------------- ------------
TOTAL CURRENT ASSETS 257.5 269.1
PROPERTIES 257.4 248.7
Less allowances for depreciation and depletion (141.0) (138.3)
------------- ------------
TOTAL PROPERTIES 116.4 110.4
INVESTMENTS IN ASSOCIATED COMPANIES 148.5 151.7
OTHER ASSETS
Long-term investments 26.1 27.1
Deferred income taxes 14.9 8.7
Other 47.3 43.1
------------- ------------
TOTAL OTHER ASSETS 88.3 78.9
------------- ------------
TOTAL ASSETS $610.7 $610.1
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of long-term obligations $12.1 $5.0
Other 82.5 94.6
------------- ------------
TOTAL CURRENT LIABILITIES 94.6 99.6
LONG-TERM OBLIGATIONS 57.9 70.0
POST EMPLOYMENT BENEFITS 68.3 68.0
RESERVE FOR CAPACITY RATIONALIZATION 23.2 25.7
OTHER LIABILITIES 46.2 35.4
SHAREHOLDERS' EQUITY
Preferred Stock
Class A - No Par Value
Authorized - 500,000 shares; Issued - None - -
Class B - No Par Value
Authorized - 4,000,000 shares; Issued - None - -
Common Shares - Par Value $1 a share
Authorized - 28,000,000 shares 16.8 16.8
Issued - 16,827,941 shares
Capital in excess of par value of shares 64.9 63.1
Retained income 361.9 343.8
Foreign currency translation adjustments 0.2 0.9
Net unrealized gain on marketable securities 0.5 1.5
Cost of 4,935,849 Common Shares in treasury
(1994 - 4,728,081) (121.3) (113.4)
Unearned Compensation (2.5) (1.3)
------------- ------------
TOTAL SHAREHOLDERS' EQUITY 320.5 311.4
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $610.7 $610.1
============= ============
</TABLE>
See notes to financial statements
3
<PAGE> 4
CLEVELAND-CLIFFS INC
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Increase (Decrease)
in Cash and Cash
Equivalents for
Six Months Ended
June 30,
(In Millions)
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $25.9 $12.6
Depreciation and amortization:
Consolidated 3.5 1.0
Share of associated companies 5.7 5.6
Changes in capacity rationalization reserve (1.4) 1.2
Tax credit (12.2)
Changes in environmental reserve 9.1 (1.4)
Other (1.2) 0.7
----------- -----------
Total Before Changes in Operating Assets and Liabilities 29.4 19.7
Changes in operating assets and liabilities
Short-term marketable securities 0.2 41.2
Other (14.8) (17.7)
----------- -----------
NET CASH FROM OPERATING ACTIVITIES 14.8 43.2
INVESTMENT ACTIVITIES
Capital expenditures:
Consolidated (9.1) (0.8)
Share of associated companies (1.9) (2.3)
Purchase of long-term investments (0.2) (2.0)
Other (0.8)
----------- -----------
NET CASH (USED BY) INVESTMENT ACTIVITIES (12.0) (5.1)
FINANCING ACTIVITIES
Repurchase of common stock (8.0)
Principal payment of long-term debt (5.0)
Dividends (7.8) (7.2)
Other 0.1 0.3
----------- -----------
NET CASH (USED BY) FINANCING ACTIVITIES (20.7) (6.9)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (0.7) 0.5
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18.6) 31.7
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 140.6 67.9
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $122.0 $99.6
=========== ===========
Income taxes paid $7.6 $10.9
Interest paid on debt obligations $3.3 $3.3
<FN>
See notes to financial statements
</TABLE>
4
<PAGE> 5
CLEVELAND-CLIFFS INC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and should be read in conjunction
with the financial statement footnotes and other information in the Company's
1994 Annual Report on Form 10-K. In management's opinion, the quarterly
unaudited financial statements present fairly the Company's financial position
and results. References to the "Company" mean Cleveland-Cliffs Inc and
consolidated subsidiaries, unless otherwise indicated. Quarterly results are
not necessarily representative of annual results due to seasonal and other
factors.
Certain prior year amounts have been reclassified to conform to current
year classifications.
NOTE B - SHAREHOLDERS' EQUITY
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 839,045 Common Shares.
The 1992 Incentive Equity Plan authorizes the Company to issue up to 595,000
Common Shares upon the exercise of Option Rights, as Restricted Shares, in
payment of Performance Shares or Performance Units that have been earned, as
Deferred Shares, or in payment of dividend equivalents paid with respect to
awards made under the Plan. Such shares may be shares of original issuance or
treasury shares or a combination of both. Transactions since December 31, 1994
are summarized as follows:
<TABLE>
<CAPTION>
Stock Options: 1987 Plan 1992 Plan
--------- ---------
<S> <C> <C>
Options outstanding as of 12/31/94 68,682 13,500
Granted -0- 4,500
Exercised (6,532) (500)
Cancelled -0- -0-
------- -------
Options outstanding as of 6/30/95 62,150 17,500
Options exercisable as of 6/30/95 62,150 13,000
Restricted Awards:
Awarded and restricted as of 12/31/94 3,996 9,268
Awarded -0- -0-
Vested (775) (275)
Cancelled -0- -0-
------- -------
Awarded and Restricted as of 6/30/95 3,221 8,993
Performance Shares:
Allocated as of 12/31/94 -0- 41,317
Allocated -0- 47,450
Forfeited -0- -0-
------- -------
Performance Shares as of 6/30/95 -0- 88,767
Reserved for future grants or awards
as of 6/30/95 4,501 465,456
</TABLE>
5
<PAGE> 6
NOTE C - INVESTMENTS IN ASSOCIATED COMPANIES
In February, 1994, the Company reached general agreement with Algoma Steel
Inc. ("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 are
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 has increased from 33.33% to 40.0% with an
associated increase in the Company's obligation for its share of mine costs,
(3) the Company is receiving a higher royalty, (4) the Company has the right to
supply any additional iron ore pellet requirements of Algoma from Tilden or the
Company, and (5) any partner may take additional production with payment of
certain fees to the Partnership. The parties implemented the general agreement
effective January 1, 1994 and have executed the definitive agreement which is
in escrow pending receipt by Algoma of a required third party consent. The
agreement has not had a material financial effect on the Company's consolidated
financial statements.
NOTE D - ENVIRONMENTAL MATTERS
The Company has a formal code of environmental conduct which promotes
environmental protection and restoration. The Company's obligations for defined
environmental problems at active mining operations and 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 financial reserve.
During the first six months of 1995, the Company provided $10.7 million of
additional environmental reserves and made net payments of $1.6 million. The
additional environmental provision reflected the Company's comprehensive review
of estimated restoration expense at all known sites, which occurred in the
second quarter. Given the Company's experience with rising cost estimates as
studies and work were completed at identified sites, it was determined that a
higher reserve was prudent.
At June 30, 1995, the Company has an environmental reserve of $21.1
million, of which $4.7 million is current. The reserve includes the Company's
obligations related to:
- Federal and State Superfund and Clean Water Act sites where the
Company is named as a potential responsible party, including
Cliffs-Dow and Kipling sites in Michigan, the Arrowhead Refinery
site in Minnesota, the Summitville mine site in Colorado, and the
Rio Tinto mine site in Nevada, all of which sites are independent
of the Company's iron mining operations. The reserves are based on
the Company's share of engineering study estimates prepared by
outside consultants engaged by the potential responsible parties.
The Company continues to evaluate the recommendations of the
studies and other means for site clean-up. Significant site
clean-up activities have taken place at Cliffs-Dow since late
1993. A Consent Decree has been reached among the federal and
state governments and approximately 224 individuals and companies
with respect to the Arrowhead site. Clean-up began in 1995 with
significant funding provided by the federal and state governments. The
6
<PAGE> 7
Consent Decree has been entered by the U.S. District Court. The
Company's share of Arrowhead costs is expected to total
approximately $145,000 which includes $31,000 of funded
remediation costs and $114,000 of incurred legal and other costs.
- Wholly-owned active and idle operations, including the recently
acquired Northshore mine and Silver Bay power plant in Minnesota
and the idled Republic mine and processing facilities in Michigan.
The Northshore/Silver Bay reserve is based on an environmental
investigation conducted by the Company and an outside consultant
in connection with the purchase and reflects expected future
Company expenditures, primarily for asbestos abatement and power
plant fly ash disposal. The Republic Mine reserve primarily
reflects the cost of underground fuel oil storage tank removal and
related soil remediation.
- Other sites, including current and former operations, for which
reserves are based on the Company's estimated cost of
investigation and remediation of sites where expenditures may be
incurred.
Environmental expenditures under current laws and regulations are not expected
to materially impact the Company's consolidated financial statements.
NOTE E - INVESTMENTS
On October 4, 1994, the Financial Accounting Standards Board issued
Statement 119 entitled, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments", which requires expanded footnote
disclosure about certain financial instruments. Presently, the Company's
exposure to risk associated with derivative instruments is limited to forward
foreign exchange contracts. These forward exchange contracts are hedging
transactions that have been entered into with the objective of managing the
risk of currency fluctuations with respect to the on-going obligations of the
Company's Australian and Canadian operations denominated in those currencies.
Gains and losses are recognized in the same period as the hedged transactions.
At June 30, 1995, the Company had $23.7 million of forward exchange contracts
with a fair value, based on June 30, 1995 forward rates, of $22.9 million.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
RESULTS OF OPERATIONS
---------------------
COMPARISON OF SECOND QUARTER AND FIRST SIX MONTHS - 1995 AND 1994
-----------------------------------------------------------------
Net income for the second quarter was $20.9 million, or $1.75 per share,
and first half earnings were $25.9 million, or $2.16 per share. Both periods
were affected by two special second quarter items: a $12.2 million tax credit
resulting from the settlement of prior years' tax issues, and a $6.7 million
after-tax increase in the reserve for environmental expenditures.
Excluding the special items, second quarter earnings were $15.4 million,
or $1.29 per share, compared to $10.4 million, or $.86 a share, in the second
quarter of 1994. Earnings for the first half of 1995, excluding the special
items, were $20.4 million, or $1.70 a share. In the first six months of 1994,
earnings were $12.6 million, or $1.04 a share. The increases in second quarter
and first half earnings before the special items were mainly due to increased
sales volume, higher royalties and management fees, and higher investment
income.
The special tax credit of $12.2 million, or $1.02 per share, reflects the
settlement of certain tax issues which had previously been reserved. The $6.7
million, or $.56 per share, after-tax increase in the reserve for environmental
expenditures, resulted from the Company's comprehensive review of estimated
environmental restoration expense. These exposures predominantly involve
inactive sites that are not associated with current mining operations.
* * *
The Company's managed mines in North America produced 9.8 million tons of
iron ore in the second quarter of 1995 compared with 8.7 million tons in 1994.
First half production was 18.8 million tons in 1995 versus 16.4 million tons in
1994. Full year production is expected to be approximately 40.0 million tons, a
4.8 million ton increase from 1994. The Company's share of scheduled production
is approximately 10.0 million tons in 1995 compared with 6.8 million tons in
1994. Higher production in 1995 principally reflects the acquisition of
Northshore Mining Company on September 30, 1994.
The Company's North American pellet sales in the second quarter of 1995
were 2.6 million tons compared with 1.7 million tons in 1994. First half sales
were 3.8 million tons in 1995 versus 2.4 million tons in 1994. The Company's
pellet sales, including resale of purchased ore, for the year 1995 are
projected to be approximately 10.0 million tons versus 8.2 million tons in
1994. Sales volume in excess of production volume in 1994 was satisfied from
inventory and purchased ore. Higher sales in 1995 reflect the acquisition of
Northshore and shipment timing. Pellet inventory at June 30, 1995 was 1.4
million tons versus 1.2 million tons one year ago.
LIQUIDITY
---------
At June 30, 1995, the Company had cash and marketable securities of $122.6
million, including $11.7 million dedicated to fund Australian mine obligations.
Since December 31, 1994, cash and marketable securities have decreased
$18.8 million due to capital expenditures, $11.0 million, repurchase of common
8
<PAGE> 9
stock $8.0 million, dividends, $7.8 million, and debt payment, $5.0 million,
partially offset by cash flow from operating activities, $14.6 million.
A $5.0 million annual payment on the Company's $75.0 million, medium-term,
unsecured senior notes was made on May 1, 1995. Scheduled payments of principal
are $12.1 million in each of years 1996 and 1997.
Effective March 1, 1995, the Company terminated its $75 million three-year
revolving credit agreement, which was scheduled to expire on April 30, 1995,
and entered into a five-year, $100 million agreement. No borrowings are
outstanding under the agreement.
As announced in January, 1995, the Company commenced the periodic
repurchase of up to 600,000 shares of its common stock. Through July 31, the
Company has repurchased 214,300 shares.
McLouth Steel Products Company ("McLouth"), a significant customer,
continues to be substantially undercapitalized. The Company has periodically
extended financial support to McLouth in the form of deferred payment terms and
other considerations. Estimated sales to McLouth for the year 1995 of 1.4
million tons represent 14 percent of the Company's sales volume and a higher
percentage contribution to income before fixed cost absorption. As of August 7,
1995, the Company had consigned inventory valued at $1.6 million to McLouth in
accordance with long-standing practice. The Company has no earnings exposure
related to the consigned inventory. Outstanding receivable balances, secured by
liens on certain McLouth fixed assets, total $5.1 million on August 7, 1995.
Pursuant to the Coal Industry Retiree Health Benefit Act of 1992 ("Benefit
Act"), the Trustees of the UMWA Combined Benefit Fund have assigned
responsibility to the Company for premium payments with respect to retirees,
dependents and "orphans" (unassigned beneficiaries), representing less than
one-half of one percent of all "assigned beneficiaries". The Company is making
premium payments under protest and is contesting the assignments that it
believes were incorrect. At June 30, 1995, the Company continues to pay
premiums on 338 assigned retirees and dependents and 116 "orphans".
Additionally, in December, 1993, a complaint was filed in U. S. District Court
by the Trustees of the United Mine Workers of America 1992 Benefit Plan against
the Company demanding the payment of premiums on additional beneficiaries
related to two formerly operated joint venture coal mines. The Company is
actively contesting the complaint. Monthly premium payments on 81 assigned
beneficiaries are being paid into an escrow account (80% by a former joint
venture participant and 20% by the Company) by joint agreement with the
Trustees, pending outcome of the litigation. At June 30, 1995, the coal retiree
reserve maintained by the Company is $11.0 million, of which $.9 million is
current. In the second quarter of 1995, the Company increased its coal retiree
reserve by $.2 million (reflecting accretion of discount), and made payments of
$.2 million. The reserve is reflected at present value, utilizing an assumed
discount rate of 8.5%. Constitutional and other legal challenges to various
provisions of the Benefit Act by other former coal producers are pending in the
Federal Courts.
The Company and the Internal Revenue Service ("IRS") have reached
agreement settling issues raised during the examination of the Company's
Federal income tax returns for the tax years 1986 through 1988. As a result of
the settlement and its related impact on the tax years 1989 through 1993, the
Company will make additional tax and interest payments of $12.4 million in the
third quarter of 1995 and be entitled to tax and interest refunds of $5.3
million. Additional cash
9
<PAGE> 10
benefits of the tax settlement will be realized for tax years 1994 and
thereafter. Accordingly, a tax credit of $12.2 million was recorded in the
second quarter of 1995.
The income tax settlement favorably resolves a number of difficult IRS
audit issues primarily arising from the Company's restructuring program in the
late 1980s when mining partnerships were reorganized to cope with steel company
bankruptcies and non-core businesses were divested. During that period, the
Company had reserved the potential tax liabilities.
CAPITALIZATION
--------------
Long-term obligations effectively serviced by the Company at June 30,
1995, including the current portion, totalled $80.0 million. The Company
guarantees Empire mine debt obligations of LTV Steel Company, Inc. and
Wheeling-Pittsburgh Steel Corporation ("Wheeling") which totalled $13.7 million
at June 30, 1995. The following table sets forth information concerning
long-term obligations guaranteed and effectively serviced by the Company.
<TABLE>
<CAPTION>
(Millions)
------------------------------------------------------------------
June 30, 1995 December 31, 1994
----------------------------- -----------------------------
Total Total
Long-Term Long-Term
Obligations Obligations Obligations Obligations
Effectively and Effectively and
Serviced Guarantees Serviced Guarantees
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Consolidated $ 70.0 $ 70.0 $ 75.0 $ 75.0
Share of Unconsolidated
Affiliates 10.0 23.7* 9.2 22.9*
------ ------- ------- -------
Total $ 80.0 $ 93.7 $ 84.2 $ 97.9
====== ======= ======= =======
Ratio to Shareholders'
Equity .2:1 .3:1 .3:1 .3:1
<FN>
* Includes $13.7 million of Empire Mine debt obligations which are
serviced by LTV and Wheeling.
</FN>
</TABLE>
At June 30, 1995, the Company was in compliance with all financial
covenants and restrictions related to its medium-term, unsecured senior note
agreement.
The fair value of the Company's long term debt (which had a carrying
value of $70.0 million) at June 30, 1995, was estimated at $74.2 million based
on a discounted cash flow analysis and estimates of current borrowing rates.
Due to the current level of interest rates, the Company is evaluating
refinancing the outstanding $70.0 million unsecured senior notes. At present
interest rates, a make-whole payment to current lenders would be recorded as an
extraordinary after-tax charge of approximately $2.5 million in the period
refinancing occurs.
10
<PAGE> 11
Following is a summary of common shares outstanding:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
March 31 12,031,392 12,079,885 11,992,804
June 30 11,892,092 12,080,560 12,008,065
September 30 12,091,310 12,038,092
December 31 12,099,860 12,064,117
</TABLE>
ACTUARIAL ASSUMPTIONS
---------------------
As a result of decreases in long-term interest rates during 1995, the
Company is re-evaluating the interest rates used to calculate its pension and
other post-retirement benefit ("OPEB") obligations. Financial accounting
standards require that the discount rates used to calculate the actuarial
present value of such benefits reflect the market rate of interest on high
quality fixed income securities. A discount rate of 8.5% was used to calculate
the Company's pension and OPEB obligations as of December 31, 1994. A decrease
in the discount rate assumption would not affect 1995 financial results;
however, in 1996 and subsequent years, the Company would recognize a non-cash
increase in pension and OPEB expense. The Company does not anticipate changing
the long-term rate of return assumption on pension assets (currently 8.5%) in
the near-term.
OUTLOOK
-------
Despite a summer slump in steel shipments and price discounting for
flat-rolled steel, steelmakers continue to operate their mills at high levels
of capacity. Steel imports have not dropped from 1994 levels; however, the
steel industry continues to expect a decline as the year progresses.
Iron ore production at Cliffs-managed mines in North America is
expected to total approximately 40 million tons for the full year 1995,
unchanged from the beginning of the year. Likewise, the Company's related sales
projection remains unchanged at 10.0 million tons.
OTHER DEVELOPMENTS
------------------
- In June, the announced $6 million pellet expansion project at
Northshore Mining Company was completed on schedule. On an
annualized basis, the expansion adds about 900,000 tons of
pellets, a 25 percent expansion of Northshore production.
- The Company continues to evaluate technologies toward development
of a reduced iron business. Resolution of technical feasibility
and commercial issues on potential projects is expected to require
the balance of the year.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
---------------------------------------------------------
The Company's Annual Meeting of Shareholders was held on May 9, 1995. At
the meeting the Company's shareholders acted upon the election of Directors and
a proposal to ratify the appointment of the Company's independent public
accountants. In the election of Directors, all 11 nominees named in the
Company's Proxy Statement, dated March 23, 1995, were elected to hold office
until the next Annual Meeting of Shareholders and until their respective
successors are elected. Each nominee received the number of votes set opposite
his or her name:
<TABLE>
<CAPTION>
NOMINEES FOR WITHHELD
------------------------ ---------- --------
<S> <C> <C>
Robert S. Colman 10,643,011 33,513
James D. Ireland III 10,643,076 33,449
G. Frank Joklik 10,642,936 33,589
E. Bradley Jones 10,642,891 33,634
Leslie L. Kanuk 10,642,635 33,890
M. Thomas Moore 10,642,051 34,474
Stephen B. Oresman 10,643,076 33,449
Alan Schwartz 10,642,731 33,793
Samuel K. Scovil 10,642,680 33,845
Jeptha H. Wade 10,642,857 33,667
Alton W. Whitehouse, Jr. 10,642,891 33,634
</TABLE>
Votes cast in person and by proxy at such meeting for and against the
adoption of the proposal to ratify the appointment of the firm of Ernst & Young
LLP, independent public accountants to examine the books of account and other
records of the Company and its consolidated subsidiaries for the year 1995 were
as follows: 10,655,292 Common Shares were cast for the adoption of the
proposal; 6,755 Common Shares were cast against the adoption of the proposal;
and 14,477 Common Shares abstained from voting on the proposal.
There were no broker non-votes with respect to the election of directors
or the ratification of the independent public accountants.
Item 5. Other Information
-------------------------
On July 11, 1995, Mr. John C. Morley, recently retired President and Chief
Executive Officer of Reliance Electric Company, was elected to the Board of
Directors of the Company.
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) List of Exhibits - Refer to Exhibit Index on page 14.
(b) There were no reports on Form 8-K filed during the three months ended
June 30, 1995.
12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEVELAND-CLIFFS INC
Date August 10, 1995 By /s/ J. S. Brinzo
____________________________
J. S. Brinzo
Senior Executive-Finance and
Principal Financial Officer
13
<PAGE> 14
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- ----------------------------------------------------- ---------
<S> <C> <C>
4(q) First Amendment to Note Agreement, dated June 7, 1995, Filed
among Cleveland-Cliffs Inc and all of the Purchasers Herewith
named therein
11 Statement re computation of earnings per share Filed
Herewith
27 Consolidated Financial Data Schedule submitted for Filed
Securities and Exchange Commission information only Herewith
</TABLE>
14
<PAGE> 1
Exhibit 4(q)
FIRST AMENDMENT TO NOTE AGREEMENT
This First Amendment to the Note Agreement (the "Amendment") is entered into as
of the seventh day of June, 1995, between CLEVELAND-CLIFFS INC, an Ohio
corporation (the "Company"), having an address at 1100 Superior Avenue,
Cleveland, Ohio 44114-2589, and each Purchaser named in Schedule I to the Note
Agreement, dated as of May 1, 1992 ("Note Agreement").
R E C I T A L S :
The Company has requested that the Note Agreement be amended in certain
particulars as set forth in this Amendment.
Terms used herein but not defined herein shall have the meaning set forth in
the Note Agreement.
NOW, THEREFORE, in consideration of the premises set forth above and in
consideration of the mutual covenants and conditions herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged:
1. RECITALS INCORPORATED. The Recitals set forth above are incorporated
herein by reference.
2. AMENDMENT TO THE NOTE AGREEMENT.
2.1 Section 5.2 of the Note Agreement is deleted in its entirety and the
following inserted in lieu thereof:
"SECTION 5.2. INSURANCE. The Company will maintain, and will cause
each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or
similar business and owning and operating similar properties. The Company
will provide an officer's certificate each quarter to the holders of the
Notes stating that the Company is in compliance with this Section 5.2.
Such officer's certificate shall be furnished by an authorized financial
officer of the Company at the same time as the officer's certificates
required in Section 5.15(g) of the Note Agreement."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company, by its
execution and delivery of this Amendment, hereby represents and warrants to the
Purchasers as follows:
1
<PAGE> 2
3.1 As of the date of this Amendment, no Default or Event of Default under
the Note Agreement, or under any other agreement to which the Company is
subject, exists or is continuing, after giving effect to the amendment set
forth herein.
3.2 The representations and warranties of the Company referred to in
Section 3.1 of the Note Agreement are true and correct and complete in all
material respects as if made on the date hereof, except as to those
representations and warranties made as of a specific date, which are true and
correct and materially complete as of such date.
3.3 No dissolution proceedings with respect to the Company have been
commenced or are contemplated, and there has been no material adverse change in
the business, condition or operations (financial or otherwise) of the Company,
taken as a whole, since May 1, 1992.
3.4 This Amendment has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company.
3.5 The Company has not modified any agreement with any creditor of the
Company, other than by this Amendment, unless the Company has disclosed the
terms of such modification to the Purchasers in writing.
4. MISCELLANEOUS.
4.1 Except as expressly set forth in this Amendment, the terms of this
Amendment shall not operate as a waiver by the Purchasers of any provisions of,
or otherwise prejudice, remedies or powers under the Note Agreement, the Notes
or applicable law and shall not operate as a waiver of or otherwise prejudice
any rights it may have against any other Person. Except as set forth in this
Amendment, none of the terms or provisions of either the Note Agreement or the
Notes shall be deemed to be modified hereby, and each of the Note Agreement and
the Notes, as modified herein, shall continue in full force and effect.
4.2 Delivery of this Amendment is conditioned upon satisfaction of the
terms set forth in Section 7.1 of the Note Agreement.
4.3 All headings and captions preceding the text of the several sections of
this Amendment are intended solely for convenience of reference and shall not
constitute a part of this Amendment, nor shall they affect its meaning,
construction or effect.
4.4 This Amendment embodies the entire agreement and understanding among
the Company and the Purchasers with regard to the matters set forth herein,
and supersedes all prior agreements and undertakings relating to such matters.
4.5 This Amendment shall be governed by, and construed and enforced in
accordance with the law of the State of Illinois.
4.6 This Amendment may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their authorized officers as of the date first written above.
CLEVELAND-CLIFFS INC
By: Cynthia B. Bezik
-------------------------
Its: Treasurer
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, as holder of $25,000,000 8.51% Series
A Notes and $18,000,000 8.84% Series B Notes
By: Sarah J. Pitts By: Austin Ramzy
------------------------- -----------------------------
Its: Counsel Its: Assistant Director
Investment Securities
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY $15,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
FEDERATED LIFE INSURANCE COMPANY $1,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
FEDERATED MUTUAL INSURANCE COMPANY $1,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
LIFE OF MARYLAND, INC. $2,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
3
<PAGE> 4
LIFE INSURANCE COMPANY OF THE SOUTHWEST $4,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT F $1,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
THE RELIABLE LIFE INSURANCE COMPANY $1,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
NATIONAL TRAVELERS LIFE COMPANY $1,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
MUTUAL TRUST LIFE INSURANCE COMPANY $1,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
4
<PAGE> 5
THE BALTIMORE LIFE INSURANCE COMPANY $2,000,000
By MIMLIC Asset Management Company
By: Loren A. Haugland
-------------------------
Its: Vice President
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
OF PHILADELPHIA Amount of Note: $1,500,000.00
By: James Kestner
-------------------------
Its: Vice President
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY
OF AMERICA Amount of Note: $1,500,000.00
By: James Kestner
-------------------------
Its: Vice President
5
<PAGE> 1
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
CLEVELAND-CLIFFS INC AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
(In Millions,
Except Per
Share Amounts)
Six Months
Ended June 30,
-------------------
1995 1994
---- ----
<S> <C> <C>
Primary and fully diluted earnings per share:
Average shares outstanding 12.0 12.1
Net effect of dilutive stock options - based on
treasury stock method using average market price - -
----- -----
Average shares and equivalents 12.0 12.1
===== =====
Net income applicable to average shares and equivalents: $25.9 $12.6
===== =====
Income per share: $2.16 $1.04
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from statements
of consolidated income, consolidated financial position and computation of
earnings per share and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000764065
<NAME> CLEVELAND-CLIFFS INC
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 122
<SECURITIES> 1
<RECEIVABLES> 42
<ALLOWANCES> 20
<INVENTORY> 66
<CURRENT-ASSETS> 258
<PP&E> 257
<DEPRECIATION> (141)
<TOTAL-ASSETS> 611
<CURRENT-LIABILITIES> 95
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> 304
<TOTAL-LIABILITY-AND-EQUITY> 611
<SALES> 155
<TOTAL-REVENUES> 183
<CGS> 140
<TOTAL-COSTS> 146
<OTHER-EXPENSES> 14
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 19
<INCOME-TAX> (7)
<INCOME-CONTINUING> 26
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 2.16
</TABLE>
