Market Overview

Cliffs Natural Resources Inc. Reports YOY Capital Spending Reduced By 77% To $210M


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Cliffs Natural Resources Inc. (NYSE: CLF) today reported second-quarter results for the period ended June 30, 2014. Year-over-year consolidated revenues of $1.1 billion decreased $388 million, or 26%, from the prior year's second quarter. The lower revenues were primarily driven by significantly decreased market pricing for iron ore and metallurgical coal, as well as a 24% decrease in sales volume from the Company's U. S. Iron Ore operations. Cost of goods sold decreased by 17% to $1 billion, primarily driven by reduced volumes, lower idle costs, and favorable foreign exchange rates compared to the second quarter of 2013. Lower revenues significantly contributed to a 66% decrease in consolidated sales margin to $92 million, from $268 million in last year's comparable quarter. The consolidated sales margin also included $18 million in lower-cost-or-market adjustments in the North American Coal and Eastern Canadian Iron Ore business segments.

Gary Halverson, Cliffs' President and Chief Executive Officer, said, "We continue to take prudent and decisive actions to optimize the business in the face of continued commodity pricing pressures, which have created a challenging business climate for Cliffs and our industry. During the quarter, our team cut costs across the board and significantly reduced our capital expenditures, while enhancing our liquidity by successfully amending our revolving credit facility. We remain focused on controlling what we can control in a volatile environment, and are confident we have the right strategy to operate and extract value from our assets."

Cliffs' second-quarter 2014 SG&A and exploration expenses were $56 million and included $5 million in severance-related costs related to involuntary terminations during the quarter and $4 million in proxy-contest-related expenses. Excluding severance and proxy-contest-related costs, second-quarter 2014 SG&A and exploration expenses decreased $15 million, or 24%, when compared to the year-ago quarter.

During the second quarter of 2014, miscellaneous - net expense increased to $48 million and included $25 million in Wabush-related expenses, primarily associated with costs incurred to idle the facilities. Miscellaneous - net expense also included a $14 million penalty incurred from a minimum tonnage rail shipment contract not being met as a result of the delay in the Bloom Lake Phase II expansion, as well as an unfavorable impact of $11 million related to foreign currency exchange re-measurements.

Second-quarter 2014 results included an income tax benefit of $69 million versus an expense of $9 million reported in the previous year's comparable quarter. The benefit is attributable to the operating loss in the quarter versus operating income in the prior year's second quarter.

For the second quarter of 2014, Cliffs recorded a net loss attributable to Cliffs' common shareholders of $2 million, or $0.01 per diluted share, compared with a net income of $133 million, or $0.82 per diluted share, in the second quarter of 2013.

Posted-In: News Press Releases


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