Cliffs Natural Resources Inc. Reports 2013 Second-Quarter Results

CLEVELAND, July 25, 2013 /PRNewswire/ -- Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) today reported second-quarter results for the period ended June 30, 2013. Consolidated revenues of $1.5 billion decreased $91 million, or 6%, from the previous year. The lower revenues were driven by an 11% decrease in global seaborne iron ore pricing to an average of $126 per ton for a 62% Fe fines product (C.F.R. China). Cost of goods sold increased by 7% to $1.2 billion, primarily driven by higher sales volumes in North American Coal and U.S. Iron Ore, unfavorable inventory adjustments and higher idle costs. This was partially offset by lower sales volumes in Eastern Canadian Iron Ore. Consolidated sales margin decreased 40% in the second quarter to $268 million, from $443 million in last year's comparable quarter.

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Joseph Carrabba, Cliffs' president and chief executive officer, said, "During the quarter, I'm pleased to report we paid down debt by $110 million and made meaningful progress in lowering our SG&A and exploration expenses. Our U.S. Iron Ore, Asia Pacific Iron Ore, and North American Coal segments once again delivered strong operational performances. Looking at the remainder of the year, we also have a positive outlook for these segments. In Eastern Canadian Iron Ore, the team remains steadfast in their efforts to improve the stability of the operations."

Operating income for the second quarter of 2013 decreased 28% to $262 million. The decrease was primarily driven by the lower consolidated sales margin, partially offset by a significant decrease in year-over-year SG&A and exploration expenses. The reduction to SG&A and exploration expenses was driven by an overall focus on cost management as well as lower spending on drilling and professional services for certain projects. The lower operating income also was partially offset by a significant increase in miscellaneous net, which was primarily comprised of a $39 million benefit related to foreign currency exchange remeasurements and a $19 million non-cash gain related to the final transfer of Cliffs' Cockatoo Island operation and the purchaser's assumption of certain asset retirement obligation liabilities.

Second-quarter 2013 results included an income tax expense of $9 million versus $42 million reported in the previous year's comparable quarter. The decrease was driven by Cliffs' expected full-year 2013 income tax effective rate of 2%, including discrete items. Also during the quarter, the Company recorded a $68 million asset impairment charge related to the write down of Cliffs' Amapa investment. Cliffs reported second-quarter 2013 net income attributable to Cliffs' common shareholders of $133 million, or $0.82 per diluted share, compared with $258 million, or $1.81 per diluted share, in the second quarter of 2012.

Subsequent to quarter end, Cliffs announced that Joseph Carrabba will be retiring as the Company's president and chief executive officer by Dec. 31, 2013. James Kirsch, who serves on Cliffs' Board, was elected non-executive chairman of the Board, replacing Mr. Carrabba as chairman. Mr. Kirsch said, "I am looking forward to working closely with Cliffs' very capable senior management team during this transition. The Board is committed to increasing shareholder value through initiatives that lower the Company's cost profile, increase productivity and sharpen the capital allocation strategy." Cliffs' Board has retained an executive search firm to assist in identifying potential chief executive officer candidates to lead the Company. Additionally, and as part of this announcement, Laurie Brlas retired as Cliffs' executive vice president and president, global operations.

U.S. Iron Ore