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Cliffs Natural Resources Inc. Reports -Quarter Results

The following excerpt is from the company's SEC filing.

Earnings of

per diluted share from continuing operations driven by significant year-over-year cost savings

U.S. Iron Ore cash production costs

decrease 16 percent to

per ton

Asia Pacific Iron Ore cash production costs

decrease 49 percent to

Capital expenditures decrease 66 percent to $24 million

SG&A expense decreases 55 percent to $22 million

Cliffs Natural Resources Inc.


today reported

-quarter results for the period ended September 30, 2015.

consolidated revenues o f

$593 million


percent from the prior year's

-quarter revenues of

$980 million

. Cost of goods sold decreased by

$538 million

compared to

$724 million

reported in the

quarter of 2014.

For the

quarter of 2015, the Company recorded net income of

$6 million

compared to a net loss of

$6.9 billion

recorded in the prior-year quarter. The Company recorded a net loss attributable to Cliffs' common shareholders of

$15 million

per diluted share, compared to a net loss attributable to Cliffs' common shareholders of

$5.9 billion


per diluted share recorded in the

Lourenco Goncalves, Cliffs' Chairman, President and Chief Executive Officer, said, "Our performance this past quarter illustrates how far we have come in our turnaround story. We have been able to deliver significant cost reductions in all areas of the business through disciplined execution of the strategy instituted last year." Mr. Goncalves added, "We expect the domestic steel market to improve in 2016 as trade actions reduce the pressure of imports and firm up steel pricing. Our solid cost position coupled with stronger demand from the mills should drive better profitability for Cliffs."

quarter of 2015, adjusted EBITDA

$60 million

. Cliffs noted that this figure includes idle expenses of $33 million related to previously announced production curtailments. Excluding these idle expenses primarily associated with the Empire and United Taconite mines, Cliffs' adjusted EBITDA

would have been $93 million.

Adjusted EBITDA

by Segment (in millions)

Corporate/ Other

Q3 2015 Adjusted EBITDA

YTD 2015 Adjusted EBITDA

-quarter 2015 SG&A expenses were

decrease when compared to the

-quarter 2014 expense of

$50 million

. Although the decrease is primarily attributable to the previous year's proxy contest as well as change in control and severance-related expenses that were not repeated this year, overall SG&A expenses were further decreased by lower staff costs and reduced external services spending.

-quarter 2015 interest expense was

$62 million

35 percent

increase when compared to a

$46 million

. The increase was primarily driven by the issuance of secured notes during the first quarter of 2015. The Company noted that of the $62 million recorded, $53 million is a cash expense and the remaining $9 million is a non-cash expense.

Three Months Ended

September 30,

Nine Months Ended

Volumes - In Thousands of Long Tons

Total sales volume



Total production volume



Sales Margin - In Millions

Revenues from product sales and services



Cost of goods sold and operating expenses


Sales margin

Sales Margin - Per Long Ton

Revenues from product sales and services*



Cash production cost

Non-production cash cost

Cash cost

Depreciation, depletion and amortization

Cost of goods sold and operating expenses*

* Excludes revenues and expenses related to domestic freight, which are offsetting and have no impact on sales margin. Revenues per ton also exclude venture partner cost reimbursements.

U.S. Iron Ore pellet sales volume in the

quarter of 2015 was

5.6 million

tons, an

percent decrease when compared to the

quarter of 2014. The decrease was driven by lower U.S. steel mill demand.

Cash production cost per ton

in U.S. Iron Ore was


, down 16 percent from


in the prior year's

quarter. The decrease was driven by salaried workforce reductions and overall lower employment costs; reduced maintenance and repair costs based on cost reduction and predictive maintenance initiatives; and year-over-year lower energy rates.

Non-production cash cost per ton


included $33 million of idle costs.

Volumes - In Thousands of Metric Tons

Sales Margin - Per Metric Ton

*Excludes revenues and expenses related to freight, which are offsetting and have no impact on sales margin.

-quarter 2015 Asia Pacific Iron Ore sales volume decreased

2.9 million

tons, from

3.1 million

tons in 2014’s

quarter. The volume decrease was driven by the timing of shipments related to port maintenance activities.

in Asia Pacific Iron Ore was


, down 49 percent from


quarter. The decrease was driven by reduced mining and administrative costs, as well as favorable exchange rate variances, the latter of which was approximately $12 per ton.

Debt and Cash Flow

Total debt at the end of the third quarter of 2015 was $2.7 billion, versus a comparable $3.1 billion at the end of the prior-year quarter. Cash and cash equivalents were

$270 million

$244 million

At the end of the

quarter of 2015, Cliffs had net debt

of $2.5 billion, compared to $2.9 billion of net debt

quarter of 2014. There were no borrowings on the Company's asset-based lending facility at the end of the

quarter of 2015. The reduction in net debt

was a consequence of several actions including asset sales, exchange offers and open-market bond repurchases during the prior twelve months, including $48 million in open market purchases made in July and a $125 million tender offer completed in August 2015, which captured combined discounts totaling $79 million.

Capital expenditures during the quarter, including the discontinued coal operations, were $24 million, which is a 66 percent decrease compared to $69 million in the

quarter of 2014. Cliffs also reported depreciation, depletion and amortization of $36 million in the


Cliffs provides full-year expected revenues-per-ton ranges based on different assumptions of seaborne iron ore prices. Cliffs indicated that each different pricing assumption holds all other assumptions constant, including customer mix, as well as industrial commodity prices, freight rates, energy prices, production input costs and/or hot-band steel prices (all factors contained in certain of Cliffs' supply agreements).

The table below provides certain Platts IODEX averages for the remaining three months of 2015 and the corresponding full-year realization for the U.S. Iron Ore and Asia Pacific Iron Ore segments. The estimates consider actual Platts IODEX rates and Cliffs' revenue realizations for the first nine months of 2015. Cliffs previously furnished 2015 pricing expectations on July 29, 2015. Due primarily to improved customer mix partially offset by decreased hot-band steel price assumptions, Cliffs has increased its revenues-per-ton expectations for U.S. Iron Ore. At a fourth-quarter Platts IODEX assumption of $55 - $60 per ton, the full-year expected range of realizations has increased to $80 - $85 per ton from the previous expectation of $75 - $80 per ton.

Expectations of revenue realizations for Asia Pacific Iron Ore have not changed significantly since the end of the second quarter. Cliffs noted that over the past year, Asia Pacific Iron Ore price realizations have ranged between a $15 and $20 per ton discount to the average Platts IODEX price on a quarterly basis.

2015 Full-Year Realized Revenues-Per-Ton Range Summary

Oct. - Dec. Platts IODEX (1)

U.S. Iron Ore (2)

Asia Pacific Iron Ore (3)

$35 - $40

$40 - $45

$45 - $50

The Platts IODEX is the benchmark assessment based on a standard specification of iron ore fines with 62% iron content (C.F.R. China).

U.S. Iron Ore tons are reported in long tons of pellets.

Asia Pacific Iron Ore tons are reported in metric tons of lump and fines, F.O.B. the...