Exhibit 99(a)
CLEVELAND-CLIFFS INC
[LOGO NEWS RELEASE] 1100 Superior Avenue
Cleveland, Ohio 44114-2589
CLEVELAND-CLIFFS REPORTS 1999 EARNINGS
Cleveland, OH - January 20, 2000 - Cleveland-Cliffs Inc (NYSE:CLF) today
reported 1999 earnings of $4.8 million, or $.43 per diluted share. Earnings in
1998 were $57.4 million, or $5.06 per diluted share. Fourth quarter 1999
earnings were $5.0 million, or $.45 per diluted share, which compared with $19.9
million, or $1.76 per diluted share, in the fourth quarter of 1998.
Cliffs' Chairman and Chief Executive Officer, John S. Brinzo, said,
"The decrease in full year earnings was primarily due to production curtailments
undertaken in the second half of the year to balance production with the
significantly lower sales volume in 1999, and a decrease in the price
realization on 1999 sales. Fourth quarter earnings were down mainly due to a
lower price realization in 1999. Iron ore pellet inventories, which peaked at
5.3 million tons prior to labor contract settlements at the end of July, were
reduced to 1.4 million tons at year-end, a .2 million ton decrease from the
beginning of 1999. While actions taken to control inventory in 1999 were very
difficult, the Company is now well positioned for 2000."
Cliffs' iron ore pellet sales were 8.9 million tons in 1999 versus 12.1
million tons in 1998. As previously disclosed, the reduction in sales was
largely attributable to blast furnace outages at Rouge Industries and Weirton
Steel. Fourth quarter 1999 sales were 3.9 million tons versus 3.1 million tons
in 1998. The average price realization on full year 1999 sales was 8 percent
below the 1998 realization primarily due to the decrease in the international
pellet price that is an escalator or de-escalator in many of Cliffs' multi-year
sales contracts. The lower realization in the fourth quarter reflects the
decline of the international price and the mix of sales under various contracts.
Administrative expenses were lower in both reporting periods, including
the effect of lower management incentive compensation expense, cost reduction
initiatives, and a 10 percent reduction of corporate staff in the first quarter
of 1999. Interest expense increased in the quarter and for the full year since
interest was being capitalized in 1998 and early in 1999 during construction of
the hot-briquetted iron (HBI) plant in Trinidad and Tobago.
IRON ORE
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Iron ore pellet production at Cliffs-managed mines was 36.2 million tons
in 1999 versus 40.3 million tons in 1998. Fourth quarter production was 9.3
million tons, down from 10.1 million tons in 1998. Following is a summary of
1999 and 1998 production tonnage by mine for the fourth quarter and full year:
(Tons in Millions)
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Fourth Quarter Year
---------------------------------- ---------------------------------
1999 1998 1999 1998
-------------- ---------------- --------------- -------------
Empire 1.7 2.0 7.1 8.1
Hibbing 2.0 1.9 6.8 7.8
LTV Steel Mining 1.7 1.6 7.0 7.1
Northshore .9 1.2 3.9 4.4
Tilden 1.6 1.9 6.2 6.9
Wabush 1.4 1.5 5.2 6.0
-------------- ---------------- --------------- -------------
Total 9.3 10.1 36.2 40.3
============== ================ =============== =============
Although certain of Cliffs' steel company partners reduced production
for their accounts, the lower output in 1999 was primarily due to curtailments
for Cliffs' account. The production curtailments largely occurred in the third
quarter, but production did not resume at the Empire and Tilden Mines in
Michigan until the middle of October, and the Company's wholly-owned Northshore
Mine in Minnesota kept its smallest pelletizing furnace out of service until the
middle of December.
FERROUS METALLICS
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The pre-tax costs of ferrous metallics activities, which include the
equity loss in Cliffs and Associates Limited, our joint venture in Trinidad and
Tobago, were $3.5 million for the fourth quarter and $11.7 million for the full
year. Comparable costs in 1998 were $1.4 million in the fourth quarter and $5.1
million for the full year.
OUTLOOK
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Commenting on the business outlook, Brinzo said, "We took aggressive
actions in 1999 to position Cliffs for 2000, and expect margins on pellet sales
will improve in 2000 due to higher production volume and continued unit cost
reduction. While improvements in global steel markets are likely to cause a
modest increase in the international pellet price in 2000, the average price
realization on Cliffs' sales is projected to be about the same as 1999,
reflecting the mix of multi-year contracts. We expect year 2000 results will
include a recovery from our business interruption insurance claim related to the
loss of sales to Rouge Industries in 1999. Cliffs lost over one million tons of
sales as a result of an explosion at the power plant which supplies Rouge."
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Cliffs and its steel company partners have made their initial pellet
production nominations for 2000. While the nominations are subject to change,
the six North American mines managed by Cliffs are currently scheduled to
operate at capacity levels and produce a record 42 million tons of pellets.
Cliffs' iron ore pellet sales in 2000 are expected to exceed eleven
million tons, with the projected increase from 1999 sales largely due to an
expected recovery of sales volume to Rouge Industries and Weirton Steel. Brinzo
said, "We are working hard to contract additional sales so that the Company's
11.8 million ton production capacity can be fully utilized. In 1999, we
successfully negotiated multi-year extensions to sales agreements with three
steel customers representing about 30 percent of our sales capacity."
Thomas J. O'Neil, Cliffs' President and Chief Operating Officer, said,
"Prior to initiating production curtailments in the second half of 1999, our
mines were having an excellent operating year. Comprehensive cost reduction
plans initiated in 1998 were yielding encouraging results with operating costs
below 1998 cost levels. We regained momentum on our cost reduction progress late
in the fourth quarter of 1999 and are aggressively pursuing additional cost
reduction objectives as we begin 2000. In the year ahead, we expect our actions
to reduce costs and improve quality will increase the competitive status of our
mines."
Brinzo said, "We continue to address start-up challenges at our Cliffs
and Associates Limited HBI plant in Trinidad and Tobago. The plant has produced
sufficient reduced iron to demonstrate that the Circored(R) process technology
will yield a product that meets the quality specifications that were expected,
including high metalization rates. However, the start-up and commissioning of
the plant has been difficult, and we have not been able to achieve sustained
levels of briquette production. While we are confident that we will succeed, we
expect the extended start-up curve to delay the date when we introduce
CIRCAL(TM) briquettes into the market. "
Commenting further, Brinzo said, "We are actively pursuing our strategy
that is focused on improving the competitiveness of our existing operations,
expanding our iron ore pellet business, and developing a significant ferrous
metallics business. We are dedicated to building a company that delivers
enhanced shareholder value over the long-term."
* * * *
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
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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 is beginning
production of hot briquetted iron at a joint venture plant in Trinidad and
Tobago.
This news release contains forward-looking statements regarding
financial performance, pricing, sales volume, and operating levels, which could
differ significantly from current expectations due to inherent risks such as
lower demand for steel, iron ore, and ferrous metallics products, higher steel
imports, processing difficulties, or other factors. Although the Company
believes that its forward-looking statements are based on reasonable
assumptions, such statements are subject to risks and uncertainties, which could
cause actual results to differ materially. For further discussion of factors
that could cause actual results to differ materially from those reflected in the
forward looking statements, see the Company's Annual Report and reports on 10K
and 10Q.
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 (800)
778-3888.
News releases and other information on the Company are available on the Internet
at http://www.cleveland-cliffs.com
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CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED INCOME
Fourth Quarter Year
--------------------- ---------------------
(In Millions Except Per Share Amounts) 1999 1998 1999 1998
- -------------------------------------- --------- --------- --------- --------
REVENUES
Product sales and services $ 129.0 $ 115.6 $ 305.7 $ 444.1
Royalties and management fees 15.5 12.9 48.5 49.7
--------- --------- -------- ---------
Total Operating Revenues 144.5 128.5 354.2 493.8
Interest income .9 1.7 3.3 5.4
Other income 1.3 1.4 3.9 4.7
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TOTAL REVENUES 146.7 131.6 361.4 503.9
COSTS AND EXPENSES
Cost of goods sold and operating expenses 128.0 99.2 319.0 398.0
Administrative, selling and general expenses 4.9 5.7 16.1 18.7
Equity loss in Cliffs and Associates Limited 3.3 .7 9.1 2.3
Interest expense 1.3 3.7 .4
Other expenses 2.3 4.9 8.8 12.7
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TOTAL COSTS AND EXPENSES 139.8 110.5 356.7 432.1
--------- --------- -------- ---------
INCOME BEFORE INCOME TAXES 6.9 21.1 4.7 71.8
INCOME TAXES (CREDIT) 1.9 1.2 (.1) 14.4
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NET INCOME $ 5.0 $ 19.9 $ 4.8 $ 57.4
========= ========= ======== =========
NET INCOME PER COMMON SHARE
Basic $ .45 $ 1.77 $ .43 $ 5.10
Diluted $ .45 $ 1.76 $ .43 $ 5.06
AVERAGE NUMBER OF SHARES
Basic 10.8 11.1 11.1 11.2
Diluted 10.9 11.3 11.1 11.3
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CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED CASH FLOWS
Fourth Quarter Year
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(In Millions, Brackets Indicate Decrease in Cash) 1999 1998 1999 1998
- ------------------------------------------------- --------- ------- --------- ------
OPERATING ACTIVITIES
Net income $ 5.0 $ 19.9 $ 4.8 $ 57.4
Depreciation and amortization:
Consolidated 3.1 1.4 10.3 7.8
Share of associated companies 2.9 3.1 12.0 12.5
Equity loss in Cliffs and Associates Limited 3.3 .7 9.1 2.3
Provision for deferred income taxes .9 (2.5) (.2) 3.1
Tax credit (3.5) (3.5)
Other 3.8 (1.2) .1 (4.5)
------- ------- ------- -------
Total before changes in operating assets and
liabilities 19.0 17.9 36.1 75.1
Changes in operating assets and liabilities 40.4 14.6 (31.3) 17.0
------- ------- ------- -------
Net cash from operating activities 59.4 32.5 4.8 92.1
INVESTING ACTIVITIES
Purchase of property, plant and equipment:
Consolidated (3.5) (5.7) (15.7) (24.5)
Share of associated companies (1.4) .9 (5.4) (7.2)
Investment and advances to Cliffs and
Associates Limited (3.9) (8.9) (12.5) (19.7)
Other .2 1.5
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Net cash (used by) investing activities (8.8) (13.5) (33.6) (49.9)
FINANCING ACTIVITIES
Dividends (4.1) (4.2) (16.7) (16.3)
Repurchases of Common Shares (12.0) (17.2) (11.5)
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Net cash (used by) financing activities (16.1) (4.2) (33.9) (27.8)
------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 34.5 $ 14.8 $ (62.7) $ 14.4
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CLEVELAND-CLIFFS INC
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(In Millions)
----------------------------------------
Dec. 31 Sept. 30 Dec. 31
1999 1999 1998
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ASSETS
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CURRENT ASSETS
Cash and cash equivalents $ 67.6 $ 33.1 $ 130.3
Accounts receivable - net 81.5 47.0 58.8
Inventories 52.6 126.6 59.6
Other 14.3 16.4 11.2
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TOTAL CURRENT ASSETS 216.0 223.1 259.9
PROPERTIES - NET 153.9 154.1 150.0
INVESTMENTS IN ASSOCIATED COMPANIES 233.4 229.2 235.4
OTHER ASSETS 75.3 82.2 78.2
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TOTAL ASSETS $ 678.6 $ 688.6 $ 723.5
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LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES $ 79.5 $ 77.1 $ 89.2
LONG-TERM DEBT 70.0 70.0 70.0
POSTEMPLOYMENT BENEFIT LIABILITIES 68.1 65.7 70.5
OTHER LIABILITIES 53.7 57.1 56.2
SHAREHOLDERS' EQUITY 407.3 418.7 437.6
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 678.6 $ 688.6 $ 723.5
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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.
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