EXHIBIT 99(b)
NEWS RELEASE Cleveland-Cliffs Inc
1100 Superior Avenue
Cleveland, Ohio 44114
CLEVELAND-CLIFFS REPORTS
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THIRD QUARTER 2001 RESULTS
--------------------------
Cleveland, OH -- October 24, 2001-- Cleveland-Cliffs Inc (NYSE:CLF) today
reported a third quarter net loss of $1.7 million, or $.16 per diluted share. In
the third quarter of 2000, Cliffs recorded net income of $6.3 million, or $.60
per diluted share.
For the first nine months of 2001, the Company reported a net loss, net of
a gain related to the cumulative effect of a change in accounting for pensions,
of $17.1 million, or $1.69 per diluted share. The net loss before the cumulative
effect of the accounting change was $26.4 million, or $2.61 per diluted share.
In the first nine months of 2000, Cliffs recorded net income of $13.8 million,
or $1.31 per diluted share.
Following is a summary of results:
(IN MILLIONS, EXCEPT PER SHARE)
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THIRD QUARTER FIRST NINE MONTHS
------------- -----------------
2001 2000 2001 2000
---- ---- ---- ----
Net Income (Loss) Before
Special Items and
Cumulative Effect of
Accounting Change $(1.7) $ 6.4 $(26.4) $ 10.5
Special Items -- ( .1) -- 3.3
-------------- ------------ ------------ -------------
Net Income (Loss) Before
Cumulative Effect
of Accounting Change:
Amount (1.7) 6.3 (26.4) 13.8
Per Share (.16) .60 (2.61) 1.31
Cumulative Effect on Prior
Years of Accounting Change:
Amount -- -- 9.3 --
Per Share -- -- .92 --
-------------- ------------ ------------ -------------
Net Income (Loss):
Amount (1.7) 6.3 (17.1) 13.8
Per Share (.16) .60 (1.69) 1.31
The lower results in 2001 were primarily due to production curtailments,
higher operating costs, an increased loss from Cliffs and Associates Limited
(CAL), lower royalties and management fees, lower sales volume and higher
interest expense. Fixed costs related to 2001 production curtailments, which are
included in cost of goods sold and operating expenses, were approximately $10
million in the third quarter and $35 million in the first nine months. Higher
energy and employee benefit costs also contributed to the increase in operating
costs for the first nine months. Iron ore pellet sales in the third quarter of
2001 were 2.9 million tons compared with 3.7 million tons in 2000. Sales for the
first nine months were 5.7 million tons in 2001 versus 7.8 million tons in 2000.
Third quarter and nine-month 2001 results benefited from the sale of
non-strategic assets, and nine-month 2001 results included a $2.8 million
pre-tax charge for restructuring activities.
OPERATIONS
----------
Iron ore pellet production at Cliffs-managed mines was 6.4 million tons in
the third quarter of 2001 versus 10.6 million tons in 2000. Nine-month
production was 19.8 million tons compared to 31.2 million tons in 2000. The
decrease in third quarter and nine-month production in 2001 was principally due
to the permanent closure of LTV Steel Mining Company at the beginning of 2001
and production curtailments. Cliffs' share of production in the third quarter
was 2.2 million tons versus 3.0 million tons in 2000, and nine-month production
was 6.8 million tons versus 8.8 million tons in 2000. Following is a summary of
production tonnages by mine for the first nine months of 2001 and 2000:
(GROSS TONS IN MILLIONS)
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TOTAL CLIFFS' SHARE
-------------------------- ------------------------
2001 2000 2001 2000
---- ---- ---- ----
Empire 4.6 5.7 1.3 1.3
Hibbing 4.0 6.2 .1 .9
LTV Steel Mining -- 5.8 -- --
Northshore 2.6 3.2 2.6 3.2
Tilden 4.5 5.8 1.8 2.4
Wabush 4.1 4.5 1.0 1.0
---------- ----------- ----------- ---------
Total 19.8 31.2 6.8 8.8
========== =========== =========== =========
The CAL hot-briquetted iron (HBI) plant in Trinidad continues to make
progress during the ramp-up of operations that started in mid-March. Following
is a summary of production and sales tonnages for the third quarter and first
nine months:
(METRIC TONS IN THOUSANDS)
--------------------------------------------------
THIRD QUARTER FIRST NINE MONTHS
------------------- -----------------------
PRODUCTION 59 118
SALES 54 96
2
ACCOUNTING CHANGE
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In the third quarter, Cliffs changed its method of accounting for
investment gains and losses on pension assets for the calculation of net
periodic pension cost. Previously, the Company utilized a method that deferred
and amortized realized and unrealized gains and losses over five years in most
plans. Under the new accounting method, the market value of plan assets will
reflect realized and unrealized gains and losses immediately. This method of
accounting, which is consistent with the practices of many other companies with
significant pension assets, will result in improved reporting as the method more
closely reflects the fair value of its pension assets at the date of reporting.
The cumulative effect of the accounting change on prior years results was a
$14.3 million pre-tax credit to income ($9.3 million after-tax). This credit was
retroactively recognized in the first quarter of 2001. The accounting change
reduced pension expense in the third quarter and first nine months of 2001 by
$.1 million.
SPECIAL ITEMS IN 2000
---------------------
Cliffs recorded an after-tax recovery on a business interruption insurance
claim of $.1 million in the third quarter and $9.9 million in the first nine
months, and an after-tax charge to recognize the decrease in the market value of
LTV Corporation shares then owned by the Company of $.2 million in the third
quarter and $6.6 million in the first nine months.
LIQUIDITY
---------
At September 30, 2001, Cliffs had cash and cash equivalents of $101.2
million with $100 million borrowed under the Company's unsecured revolving
credit facility. At the end of September, there were 4.5 million tons of pellets
in inventory at a cost of $126 million. Pellet inventory at September 30, 2000
was 2.6 million tons, or $73 million. Based on the Company's current sales
outlook, cash flow from inventory liquidation is projected to be sufficient to
permit repayment of all borrowings under the revolving credit facility by
year-end; however, normal seasonal working capital requirements will require
borrowing under this facility early in 2002.
OUTLOOK
-------
Cliffs' pellet sales in the fourth quarter are projected to range between
3.3 and 3.5 million tons. This would result in full year sales of 9.0 to 9.2
million tons, an 8 to 10 percent decline from the previous projection of 10.0
million tons. The current sales projection assumes LTV Corporation operates its
two blast furnaces in Cleveland and two furnaces in Chicago for the remainder of
the year. Fourth quarter sales to LTV are projected to be about 1.4 million
tons, or about 40 percent of fourth quarter sales. LTV continues to meet its
obligations as a 25
3
percent partner in the Empire Mine, but has neither affirmed nor rejected its
ownership in Empire.
The five mines managed by Cliffs are scheduled to produce 6.9 million tons
in the fourth quarter, and 26.1 million tons for the full year. Cliffs' share of
scheduled production is 1.6 million tons in the fourth quarter, and 8.4 million
tons for the full year. The Northshore Mine is taking an eight-week shutdown and
the Wabush Mine, a seven-week shutdown, and additional fourth quarter
curtailments are being evaluated. Production schedules at all mines for the
remainder of 2001 continue to be subject to change.
Bethlehem Steel Corporation, a 70.3 percent owner of the Hibbing Mine,
filed for protection under Chapter 11 of the U. S. Bankruptcy Code on October
15. It is expected that Bethlehem will continue to fund its Hibbing obligations
and take iron ore from the mine.
Acme Metals Incorporated, a 15.1 percent owner of the Wabush Mine, stopped
funding its share of the mine cash requirements in August. This action was
largely responsible for the production curtailment at Wabush. Acme has been
operating in Chapter 11 since September 1998.
Earlier this week, the CAL plant in Trinidad was taken down for two weeks
to complete scheduled maintenance and equipment modifications. Full year
production is currently expected to approximate 180,000 metric tons. The product
quality and market acceptance of CIRCAL(TM) briquettes has been good, and the
challenge now is to complete the ramp-up of the plant. Price realization has
weakened significantly in the fourth quarter.
On October 10, Cliffs and Minnesota Power announced an agreement to acquire
the assets of LTV Steel Mining Company from LTV Corporation. Completion of the
purchase transaction is expected in the fourth quarter.
John S. Brinzo, Cliffs' Chairman and Chief Executive Officer, said, "We
currently expect to report a loss in the fourth quarter that will exceed the
third quarter loss. Pellet sales are projected to be greater than the third
quarter, but the fixed costs associated with fourth quarter production
curtailments at the Northshore and Wabush Mines will more than offset the
favorable impact of the higher sales.
The results we have reported thus far in 2001 and expect to report in the
fourth quarter are unacceptable and require major changes in the way Cliffs
operates its iron ore business. While we expect business conditions will
continue to be extremely difficult in 2002, we are committed to improving our
financial results.
To be world class competitive, the cost and quality of our iron ore
products must meet or beat the competition and we are aggressively pursuing
changes that will lead to the accomplishment of that objective. Some of the
changes we are working on will likely involve ownership changes at the four mine
4
partnerships we manage. These partnerships, owned by Cliffs and various steel
companies, have provided a very successful model for many years, but the
priorities of our steel company partners have changed. Most of our partners need
their capital to conduct their steel business. They can no longer afford to own
and make investments in iron ore.
We firmly believe that Cliffs has a unique opportunity to become a bigger,
more powerful force in a consolidating industry by acquiring the interests of
some steel company partners. We are also evaluating the acquisition of mines not
currently managed by the Company. Cliffs will be a leader in remaking the iron
ore business in the United States."
* * * * * * * * * * * * * * * * * *
Cleveland-Cliffs is the largest supplier of iron ore products to the North
American steel industry and is developing a significant ferrous metallics
business. Subsidiaries of the Company manage and hold equity interests in five
iron ore mines in Michigan, Minnesota and Eastern Canada. Cliffs has a major
iron ore reserve position in the United States and is a substantial iron ore
merchant. References in this news release to "Cliffs" and "Company" include
subsidiaries and affiliates as appropriate in the context.
This news release contains predictive statements that are intended to be
made as "forward-looking" within the safe harbor protections of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
forward-looking statements are based on reasonable assumptions, such statements
are subject to risks and uncertainties.
Actual results may differ materially from such statements for a variety of
factors; such as displacement of iron production by North American integrated
steel producers due to electric furnace production or imports of semi-finished
steel or pig iron; changes in the financial condition of the Company's partners
and/or customers; rejection of major contracts and/or venture agreements by
customers and/or participants under provisions of the U.S. Bankruptcy Code or
similar statutes in other countries; changes in imports of steel, iron ore, or
ferrous metallic products; changes due to the ability of Cliffs and Associates
Limited to forecast revenue rates, costs and production levels; domestic or
international economic and political conditions; major equipment failure,
availability and magnitude and duration of repairs; process difficulties; and
availability and cost of key components of production (e.g., labor, electric
power, fuel, water).
Reference is made to the detailed explanation of the many factors and risks
that may cause such predictive statements to turn out differently, as set forth
in the Company's Annual Report for 2000 and Reports on Form 10-K and 10-Q and
previous news releases filed with the Securities and Exchange Commission, which
are available publicly on Cliffs' web site. The information contained in this
document speaks as of the date of this news release and may be superceded by
subsequent events.
5
Cliffs will host a conference call on third quarter 2001 results tomorrow,
October 25, at 10:00 a.m. EDT. The call will be broadcast live on Cliffs'
website at http://www.cleveland-cliffs.com. A replay of the call will be
available on the website for 30 days.
Contacts:
--------
Media: Ralph S. Berge, (216) 694-4870
Financial Community: Fred B. Rice, (800) 214-0739 or (216) 694-5459
News releases and other information on the Company are available on the Internet
at http://www.cleveland-cliffs.com
6
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED OPERATIONS
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------------- ----------------------------------
(In Millions Except Per Share Amounts) 2001 2000 2001 2000
------------------------------------- ---------------- ---------------- ---------------- ---------------
REVENUES
Product sales and services
Iron ore products $ 109.1 $ 134.6 $ 213.1 $ 280.2
HBI products 4.9 8.6
---------------- ---------------- ---------------- ---------------
Total 114.0 134.6 221.7 280.2
Royalties and management fees 12.2 15.0 31.1 39.6
---------------- ---------------- ---------------- ---------------
Total Operating Revenues 126.2 149.6 252.8 319.8
Insurance recovery .4 .3 .4 15.3
Interest income .8 .7 2.8 2.1
Other income 3.4 1.9 8.0 4.0
---------------- ---------------- ---------------- ---------------
TOTAL REVENUES 130.8 152.5 264.0 341.2
COSTS AND EXPENSES
Cost of goods sold and operating expenses
Iron ore products 116.5 132.8 256.7 280.2
HBI products 10.7 21.0
---------------- ---------------- ---------------- ---------------
Total 127.2 132.8 277.7 280.2
Administrative, selling and general expenses 3.9 5.9 11.9 14.2
Loss on long-term investment 1.1 10.2
Pre-operating loss in Cliffs and
Associates Limited 3.4 5.8 9.7
Interest expense 2.8 1.2 7.4 3.7
Other expenses .9 1.3 4.8 5.1
---------------- ---------------- ---------------- ---------------
TOTAL COSTS AND EXPENSES 134.8 145.7 307.6 323.1
---------------- ---------------- ---------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (4.0) 6.8 (43.6) 18.1
INCOME TAXES (CREDIT) (1.1) .5 (13.4) 4.3
---------------- ---------------- ---------------- ---------------
INCOME (LOSS) BEFORE MINORITY INTEREST
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (2.9) 6.3 (30.2) 13.8
MINORITY INTEREST 1.2 3.8
---------------- ---------------- ---------------- ---------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT ON PRIOR
YEARS OF CHANGE IN ACCOUNTING PRINCIPLE (1.7) 6.3 (26.4) 13.8
CUMULATIVE EFFECT ON PRIOR
YEARS OF CHANGE IN ACCOUNTING PRINCIPLE 9.3
---------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) $ (1.7) $ 6.3 $ (17.1) $ 13.8
================ ================ ================ ===============
NET INCOME (LOSS) PER COMMON SHARE
Basic and Diluted
Before cumulative effect of change in
accounting principle $ (.16) $ .60 $ (2.61) $ 1.31
Cumulative effect on prior years of
change in accounting principle .92
---------------- ---------------- ---------------- ---------------
Net income (loss) $ (.16) $ .60 $ (1.69) $ 1.31
================ ================ ================ ===============
AVERAGE NUMBER OF SHARES
Basic 10.1 10.4 10.1 10.5
Diluted 10.1 10.4 10.1 10.5
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED CASH FLOWS
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------------- --------------------------------
(In Millions, Brackets Indicate Decrease in Cash) 2001 2000 2001 2000
------------------------------------------------ -------------- -------------- --------------- ---------------
OPERATING ACTIVITIES
Net income (loss) $ (1.7) $ 6.3 $ (17.1) $ 13.8
Depreciation and amortization:
Consolidated 3.7 3.3 11.5 9.6
Share of associated companies 2.7 3.2 8.2 9.4
Loss on long-term investment 1.1 10.2
Equity loss in Cliffs and Associates Limited 3.4 9.7
Cumulative effect of change in accounting principle,
net of $5.0 million tax (9.3)
Gain on sale of assets (2.6) (5.1)
Minority interest in Cliffs and Associates Limited (1.2) (3.8)
Deferred income taxes (.2) (.9) (6.2) (4.1)
Other 1.3 (.4) 2.6 2.2
-------------- -------------- --------------- ---------------
Total before changes in operating
assets and liabilities 2.0 16.0 (19.2) 50.8
Changes in operating assets and liabilities 37.8 28.0 (12.8) (24.8)
-------------- -------------- --------------- ---------------
Net cash from (used by) operating activities 39.8 44.0 (32.0) 26.0
INVESTING ACTIVITIES
Purchase of property, plant and equipment:
Consolidated:
Cliffs and Associates Limited (.5) (6.0)
All other (2.7) (2.6) (5.4)
-------------- -------------- --------------- ---------------
Total (.5) (2.7) (8.6) (5.4)
Share of associated companies (1.2) (1.7) (2.1) (4.1)
Equity investment and advances in
Cliffs and Associates Limited (3.8) (11.3)
Proceeds from sale of assets 7.8 .5 10.5 .5
Other .3 (.4)
-------------- -------------- --------------- ---------------
Net cash from (used by) investing activities 6.4 (7.7) (.6) (20.3)
FINANCING ACTIVITIES
Dividends (1.0) (3.9) (3.1) (11.9)
Short-term borrowings 100.0
Contributions by minority shareholder in
Cliffs and Associates Limited .5 7.0
Repurchases of Common Shares (6.3) (11.8)
-------------- -------------- --------------- ---------------
Net cash from (used by) financing activities (.5) (10.2) 103.9 (23.7)
-------------- -------------- --------------- ---------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 45.7 $ 26.1 $ 71.3 $ (18.0)
============== ============== =============== ===============
CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(In Millions)
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Sept. 30, Dec. 31, Sept. 30,
2001 2000 2000
------------ ------------ -------------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 101.2 $ 29.9 $ 49.6
Trade accounts receivable - net 28.3 46.3 52.2
Receivables from associated companies 14.1 18.5 19.6
Inventories
Product 127.8 90.8 72.5
Supplies and other 22.8 22.4 16.1
------------ ------------ -------------
150.6 113.2 88.6
Other 35.4 40.1 21.1
------------ ------------ -------------
TOTAL CURRENT ASSETS 329.6 248.0 231.1
PROPERTIES - NET 264.3 272.7 150.1
INVESTMENTS IN ASSOCIATED COMPANIES 134.9 138.4 224.7
OTHER ASSETS 66.5 68.7 80.2
------------ ------------ -------------
TOTAL ASSETS $ 795.3 $ 727.8 $ 686.1
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings $ 100.0 $ $
Accounts payable and accrued expenses 93.3 102.2 85.5
------------ ------------ -------------
TOTAL CURRENT LIABILITIES 193.3 102.2 85.5
LONG-TERM DEBT 70.0 70.0 70.0
POSTEMPLOYMENT BENEFIT LIABILITIES 65.6 71.7 67.1
OTHER LIABILITIES 57.4 58.0 58.8
MINORITY INTEREST 27.1 23.9
SHAREHOLDERS' EQUITY 381.9 402.0 404.7
------------ ------------ -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 795.3 $ 727.8 $ 686.1
============ ============ =============
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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.