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SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 21, 1999
CLEVELAND-CLIFFS INC
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(Exact name of registrant as specified in its charter)
OHIO 1-8944 34-1464672
- --------------- --------------- ---------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1100 Superior Avenue, Cleveland, Ohio 44114
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216-694-5700)
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
-------------
On January 21, 1999 Cleveland-Cliffs Inc published a News Release with
respect to 1998 earnings and 1998 fourth quarter earnings.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(a) Financial Statements of Business Acquired: None
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(b) Pro Forma Financial Information: None
-------------------------------
(c) Exhibits:
---------
EXHIBIT
NUMBER EXHIBIT -------------------
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99 (a) Cleveland-Cliffs Inc News Release Filed Herewith
published on January 21, 1999, with
respect to 1998 earnings and 1998
fourth quarter earnings
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, hereunto duly authorized.
CLEVELAND-CLIFFS INC
/s/ C. B. Bezik
By: ------------------------------------------
Name: C. B. Bezik
Title: Senior Vice President - Finance
Dated: February 10, 1999
2
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INDEX TO EXHIBITS
-----------------
EXHIBIT
NUMBER EXHIBIT
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99 (a) Cleveland-Cliffs Inc News Release --------------
published on January 21, 1999, Filed Herewith
with respect to 1998 earnings and
1998 fourth quarter earnings
3
<PAGE> 1
Exhibit 99(a)
CLEVELAND-CLIFFS REPORTS HIGHER 1998 EARNINGS ON
RECORD SALES AND PRODUCTION VOLUME
Cleveland, OH -- January 21, 1999 -- Cleveland-Cliffs Inc (NYSE-CLF)
today reported 1998 earnings of $57.4 million, or $5.06 per diluted share.
Earnings in 1997 were $54.9 million, or $4.80 per diluted share. Fourth quarter
1998 earnings were $19.9 million, or $1.76 per diluted share, which compared
with $17.9 million, or $1.56 per diluted share, in the fourth quarter of 1997.
Cliffs' President and Chief Executive Officer, John S. Brinzo, said,
"1998 was a year of solid accomplishments, including:
- record North American iron ore sales volume,
- record production volume at Cliffs-managed mines in North America, and
- improved operating margin on iron ore sales.
In addition, we made substantial progress on our strategic objective to develop
a significant ferrous metallics business, as we complete our joint venture plant
in Trinidad and Tobago."
The $2.5 million increase in full year earnings was principally due to
higher North American sales volume and price realization, a lower effective tax
rate, higher royalties and management fees and lower interest expense. Partly
offsetting were non-recurring 1997 Australian earnings and higher ferrous
metallics and international development expenses. Earnings attributable to the
Savage River Mine in Australia, which produced its last iron ore pellets in
December, 1996, were $6.3 million in 1997, including an after-tax credit of $3.2
million from the reversal of an excess accrual for closedown obligations. Net
income in 1997, excluding Australian earnings, was $48.6 million, or $4.25 per
diluted share.
The $2.0 million increase in fourth quarter earnings was primarily due
to lower income taxes mainly resulting from the adjustment of prior years' tax
accruals, partially offset by lower North American sales volume.
Cliffs' North American iron ore pellet sales were a record 12.1 million
tons, 16 percent higher than the 10.4 million tons sold in 1997, and 11 percent
higher than the previous record of 11.0 million tons sold in 1996. Fourth
quarter 1998 sales were 3.1 million tons versus 3.8 million tons in 1997.
Lower interest expense in 1998 resulted from increased capitalization
of interest on Cliffs' share of construction costs of the Cliffs and Associates
Limited reduced iron project. Other expenses were higher in 1998 primarily due
to increased ferrous metallics and international development activities.
Earnings in 1998 and 1997 include tax credits of $3.5 million and $5.6
million, respectively, that reflect a reassessment of current and prior years'
tax obligations resulting from audits of prior years' tax returns. The lower
effective tax rate in 1998, relative to 1997, also reflects the absence of the
higher Australian statutory tax rate and the increased benefit of depletion
allowances.
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Cliffs-managed mines produced a record 40.3 million tons of iron ore
pellets in 1998, with Cliffs' share a record 11.4 million tons. In 1997, the
mines produced 39.6 million tons, with Cliffs' share 10.9 million tons. The
increases in 1998 were mainly due to higher production at the Tilden and Wabush
mines. Following is a summary of 1998 and 1997 production tonnages by mine:
<TABLE>
<CAPTION>
(In Millions)
-------------------------------------------------------------
1998 1997
-------------------------- --------------------------
TOTAL CLIFFS' SHARE TOTAL CLIFFS' SHARE
----- ------------- ----- -------------
<S> <C> <C> <C> <C>
Empire 8.1 1.8 8.4 1.9
Hibbing 7.8 1.2 7.7 1.1
LTV Steel Mining 7.1 -- 7.7 --
Northshore 4.4 4.4 4.2 4.2
Tilden 6.9 2.7 6.0 2.4
Wabush 6.0 1.3 5.6 1.3
--- --- --- ---
40.3 11.4 39.6 10.9
==== ==== ==== ====
</TABLE>
Cliffs' 1998 average cost per ton was modestly lower than 1997.
OUTLOOK
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The fundamentals for the North American steel business, which
deteriorated sharply in the second half of 1998 due to a surge in unfairly
traded steel imports, remain weak. Industry analysts are projecting 1999 steel
production to be lower than 1998, which could affect iron ore production.
Cliffs and its steel company partners have elected to start the year
1999 operating the mines at near capacity levels. However, production rates are
subject to change during the year.
Given the state of the North American steel business, the Company
expects 1999 iron ore pellet sales volume will be lower than 1998 record sales.
The Company's sales capacity, however, is largely committed to multi-year sales
contracts. International iron ore price negotiations are currently taking place,
and due to the weakness of the Asian and European steel markets, a price
decrease is expected. A decline in the international price would impact the
prices in certain of the Company's multi-year sales contracts.
Construction of the Cliffs and Associates Limited (CAL) hot-briquetted
iron (HBI) plant in Trinidad and Tobago is near completion, and commissioning
activities are currently in progress. CAL is a joint venture owned by Cliffs,
46.5 percent, LTV Corporation, 46.5 percent, and Lurgi AG, 7 percent. CAL
intends to commence production of HBI in March. Full year production volume at
the Trinidad facility will depend on market demand.
Commenting on the business outlook, John S. Brinzo said, "Although the
demand for iron ore pellets and ferrous metallics products is outside our
control, we can control the impact on our operations by making sure that we are
producing the highest quality products at the lowest possible cost. We are
prepared for the challenges - and opportunities - ahead of us and are more fully
committed than ever to a strategy that is focused on three fundamental
objectives:
1. increase the competitiveness of our existing North American operations,
2. develop a significant ferrous metallics business, and
3. expand our iron ore and ferrous metallics businesses internationally.
Our strong financial position enables us to deal with difficult business
conditions while we employ the Company's financial resources to build
shareholder value."
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* * *
Cleveland-Cliffs is the largest supplier of iron ore products to the
North American steel industry and is developing a significant ferrous metallics
business. Subsidiaries of the Company manage six iron ore mines in North America
and hold equity interests in five of the mines. Cliffs has a major iron ore
reserve position in the United States, is a substantial iron ore merchant, and
plans to start-up a joint venture plant in Trinidad to produce high-quality iron
briquettes in the first quarter of 1999.
This news release contains forward-looking statements regarding
production and sales volume and prices for iron ore and ferrous metallics which
reflect forecasts of activity in the steel and iron ore industries. Actual
production and sales volume and prices could differ significantly from current
expectations due to inherent risks such as lower steel and iron ore demand,
higher steel imports, or other factors. This news release also contains
statements regarding the start-up and operation of the Cliffs and Associates
Limited facilities, which could change due to construction delays, process
difficulties, or market factors. Although the Company believes that the
forward-looking statements are based on reasonable assumptions, such statements
are subject to risks and uncertainties which could cause actual results to
differ materially.
CONTACTS:
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Media: David L. Gardner, (216) 694-5407
Financial Community: Fred B. Rice, (800) 214-0739 or (216) 694-5459
To obtain faxed copies of Cleveland-Cliffs Inc news releases dial
1-800-778-3888. News releases and other information on the Company are available
on the Internet at HTTP://WWW.BUSINESSWIRE.COM/CNN/CLF.HTM.
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CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Fourth Quarter Year
---------------------------- ----------------------------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
- --------------------------------------
------------ ------------- ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
Product sales and services $ 115.6 $ 135.1 $ 444.1 $ 391.4
Royalties and management fees 12.9 13.1 49.7 47.5
------------ ------------- ------------ ------------
Total Operating Revenues 128.5 148.2 493.8 438.9
Investment income (securities) 1.7 1.9 5.4 6.3
Recovery of excess closedown provision - .7 - 5.0
Other income 2.3 2.8 4.7 5.9
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TOTAL REVENUES 132.5 153.6 503.9 456.1
COSTS AND EXPENSES
Cost of goods sold and operating expenses 100.1 119.3 398.0 354.9
Administrative, selling and general expenses 5.7 4.5 18.7 17.1
Interest expense - .4 .4 2.6
Other expenses 5.6 3.8 15.0 8.9
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TOTAL COSTS AND EXPENSES 111.4 128.0 432.1 383.5
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INCOME BEFORE INCOME TAXES 21.1 25.6 71.8 72.6
INCOME TAXES 1.2 7.7 14.4 17.7
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NET INCOME $ 19.9 $ 17.9 $ 57.4 $ 54.9
============ ============= ============ ============
NET INCOME PER COMMON SHARE
Basic $ 1.77 $ 1.57 $ 5.10 $ 4.83
Diluted $ 1.76 $ 1.56 $ 5.06 $ 4.80
AVERAGE NUMBER OF SHARES
Basic 11.1 11.4 11.2 11.4
Diluted 11.3 11.5 11.3 11.5
</TABLE>
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CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Fourth Quarter Year
---------------------- ----------------------
(IN MILLIONS, BRACKETS INDICATE DECREASE IN CASH) 1998 1997 1998 1997
-----------------------------------------------
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OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income $ 19.9 $ 17.9 $ 57.4 $ 54.9
Depreciation and amortization:
Consolidated 1.4 1.5 7.8 6.7
Share of associated companies 3.1 3.1 12.5 12.2
Decrease in Savage River closedown reserve - (1.4) - (17.5)
Provision for deferred income taxes (2.5) 7.2 3.1 16.4
Tax credit (3.5) - (3.5) (5.6)
Other (.5) 4.2 (2.2) 7.2
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Total Before Changes in Operating Assets
and Liabilities 17.9 32.5 75.1 74.3
Changes in operating assets and liabilities 14.6 19.1 17.0 (32.0)
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NET CASH FROM OPERATING ACTIVITIES 32.5 51.6 92.1 42.3
INVESTING ACTIVITIES
Purchase of property, plant and equipment:
Consolidated (5.7) (3.1) (24.5) (14.1)
Share of associated companies (8.0) (12.1) (26.9) (47.8)
Purchase of Wabush interest - - - (15.0)
Other .2 .1 1.5 4.9
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NET CASH (USED BY) INVESTING ACTIVITIES (13.5) (15.1) (49.9) (72.0)
FINANCING ACTIVITIES
Dividends (4.2) (3.7) (16.3) (14.8)
Repurchases of Common Shares - (3.2) (11.5) (4.9)
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NET CASH (USED BY) FINANCING ACTIVITIES (4.2) (6.9) (27.8) (19.7)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (.1) - (.1)
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INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 14.8 $ 29.5 $ 14.4 $ (49.5)
========== ========= ========= =========
</TABLE>
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<TABLE>
<CAPTION>
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(In Millions)
-----------------------------------------
Dec. 31 Sept. 30 Dec. 31
ASSETS 1998 1998 1997
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CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 130.3 $ 115.5 $ 115.9
Accounts receivable - net 58.8 68.9 73.4
Inventories 59.6 54.7 61.4
Other 17.8 15.0 15.1
------------ ----------- -----------
TOTAL CURRENT ASSETS 266.5 254.1 265.8
PROPERTIES - NET 150.0 146.0 134.0
INVESTMENTS IN ASSOCIATED COMPANIES 235.4 225.8 218.3
OTHER ASSETS 72.1 76.7 76.2
------------ ----------- -----------
TOTAL ASSETS $ 724.0 $ 702.6 $ 694.3
============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES $ 89.2 $ 87.0 $ 91.8
LONG-TERM OBLIGATIONS 70.0 70.0 70.0
POSTEMPLOYMENT BENEFIT LIABILITIES 71.0 69.8 70.1
OTHER LIABILITIES 56.2 55.1 55.0
SHAREHOLDERS' EQUITY 437.6 420.7 407.4
------------ ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 724.0 $ 702.6 $ 694.3
============ =========== ===========
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</TABLE>
UNAUDITED FINANCIAL STATEMENTS
In management's opinion, the unaudited financial statements present
fairly the Company's financial position and results. All supplementary
information required by generally accepted accounting principles for complete
financial statements has not been included. For further information, please
refer to the Company's latest Annual Report.
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