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Cliffs Natural Resources Inc. Reports Second-Quarter 2009 Earnings.

Article Excerpt
* Company Reports $390 Million in Revenue and Net Income of $0.36 Per Diluted Share

* North American Iron Ore Achieves Sales Margin of $34 Million in Challenging Economic Environment

* Asia Pacific Iron Ore Poised to Ship Record Volume in 2009

CLEVELAND -- Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) today reported second-quarter results for the period ended June 30, 2009. Consistent with weaker year-over-year global demand for steelmaking raw materials, consolidated revenues in the quarter were $390.3 million, down 61% from $1.01 billion in the same quarter last year. The decrease in revenues was driven by lower volume across business segments, combined with lower pricing in iron ore.

Joseph A. Carrabba, Cliffs' chairman, president and chief executive officer, said, "Cliffs continues to manage its businesses through the economic downturn and position the Company for a resurgence in steel demand in the U.S. and Europe. We have begun to see signs of stabilization in the North American steelmaking industry and continue to balance production with current demand, with the second quarter likely marking a low-point in production for 2009. In the meantime, we continue to look for opportunistic ways to advance our strategy to diversify the enterprise in terms of geography, minerals and end-markets. On a positive note, our Asia Pacific iron ore business is poised to ship more than 8 million tonnes in 2009, for what is expected to be a record year."

Operating loss for the second quarter was $17.3 million, versus operating income of $409.4 million in the same quarter last year. Operating income was lower year over year due to reduced sales volumes and price realizations. The second-quarter operating loss included $17.3 million in retroactive pricing adjustments to first-quarter sales due to the timing of estimated international pricing settlements for iron ore. Margins were also lower as a result of idle costs and reduced production volume in North America. The Company indicated that lower year-over-year employment costs, including variable compensation, as well as disciplined spending, helped it achieve a 55% decrease in selling, general and administrative expenses to $23.4 million from $52.1 million in the second quarter last year.

Net income attributable to Cliffs' shareholders in second-quarter 2009 was $45.5 million, or $0.36 per diluted share, compared with $270.2 million, or $2.57 per diluted share, in the second quarter last year. Income reported in second-quarter 2009 was primarily driven by $79.3 million pre-tax, or $0.44 per diluted share after-tax, of positive mark-to-market adjustments related to currency hedging, along with an income tax benefit of $17.6 million. Cliffs said a greater amount of income was derived from tax jurisdictions with a lower rate than the U.S. statutory rate. This, combined with a greater proportional benefit, relative to earnings, for percentage depletion of U.S. mineral reserves, resulted in the income tax benefit.

Impact of Adjustments Resulting from Estimated Iron Ore Benchmark Settlements

Cliffs noted that second-quarter results in 2008 and 2009 include retroactive adjustments to sales that occurred...

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