星空传媒

星空传媒 Inc. Reports Second-Quarter 2018 Results

• Earnings per share from continuing operations increases 171 percent to $0.76 per share
• U.S. Iron Ore realized revenue rate increases 16 percent to $113 per long ton
• Full-year U.S. Iron Ore pellet sales volume expectation increases to 21 million long tons

CLEVELAND--(BUSINESS WIRE)-- 星空传媒 Inc. (NYSE: CLF) today reported second-quarter results for the period ended June 30, 2018.

The Company reported consolidated revenues of $714 million, compared to the prior year's second-quarter revenues of $471 million. Cost of goods sold was $430 million compared to $327 million reported in the second quarter of 2017.

The Company recorded income from continuing operations of $229 million in the second quarter, or $0.76 per diluted share, compared to $84 million, or $0.28 per diluted share, in the second quarter of 2017. Net income for the quarter was $165 million, which included a $64 million, or $0.21 per diluted share, loss from discontinued operations, primarily associated with the Company's Asia Pacific Iron Ore assets. This compares to net income of $30 million in the second quarter of 2017. For the six months ended June 30, 2018, net income was $81 million, compared to $0.3 million during the same period in 2017.

For the second quarter of 2018, the Company reported adjusted EBITDA¹ of $276 million, a 103 percent increase from the prior-year's second quarter adjusted EBITDA¹ of $136 million.

Lourenco Goncalves, 星空传媒' Chairman, President and Chief Executive Officer, said, 鈥淥ur second quarter is a definitive statement about the new Cliffs and our earnings power. After almost four years of consistent execution of a well-designed and thoroughly implemented strategy, our company has become a very powerful cash-generating enterprise. With the announced sale of the Asia Pacific Iron Ore segment, we have now completed our multi-year transformation back to our roots as a supplier of high-grade iron units to the Great Lakes steel industry. This transformation has enabled us to take full advantage of our unique position within the Great Lakes steel market and, with that, the following quarters should be a continuation of this strong second quarter, with the added positive contribution of the usual favorable seasonality of warmer weather during the entire second half of the year. As a consequence, we expect to generate in 2018 a level of free cash flow that we have not seen in years." Mr. Goncalves added, 鈥淕oing forward, we expect 2019 to be a continuation of a great 2018, based on the renewed strength of American manufacturing, the multi-year positive impact of the tax reform implemented in 2018 in the United States, and our strong position as the supplier of iron ore pellets within the Great Lakes region.鈥� Mr. Goncalves concluded, "Our strategy is not only to protect our strong market position in the Great Lakes, but to grow and evolve with the continuously changing steel industry by supplying high-performance ore-based metallics to Electric Arc Furnaces, starting in 2020. This evolution should further improve our already tremendous profitability in the coming years."

U.S. Iron Ore pellet sales volume in the second quarter of 2018 was 6.0 million long tons. The 38 percent increase from the second-quarter 2017 volume of 4.3 million long tons was driven by increased customer demand and the impact of the previously disclosed adoption of the new revenue recognition accounting standard.

Realized revenues per ton of $112.60 increased 16 percent from the prior-year period, primarily as a result of increased steel pricing and pellet premiums, which are magnified by favorable contract structures.

Cash cost of goods sold and operating expense rate² in U.S. Iron Ore was $62.32 per long ton, compared to $59.30 per long ton in the prior year's second quarter. The increase was driven by higher costs related to product mix, energy rates, repairs, and royalties, as well as higher employee-related expenses.

Other Income Statement Items

During June 2018, Cliffs completed a sale of the mobile equipment in Australia to a third party and entered into a definitive agreement to sell substantially all of the remaining assets of the Asia Pacific Iron Ore business to Mineral Resources Limited. The sale to Mineral Resources Limited has not been completed due to the pendency of certain closing conditions. As a result, for the period ended June 30, 2018 management determined that the Asia Pacific Iron Ore operating segment met the criteria to be classified as held for sale and a discontinued operation under ASC 205, Presentation of Financial Statements. As such, all current and historical Asia Pacific Iron Ore operating segment results are classified within discontinued operations.

Miscellaneous-net expense of $4 million included, among other items, $5 million in charges related to the indefinite idle at Empire mine.

Outlook

U.S. Iron Ore Outlook (Long Tons)

Based on the assumption that iron ore prices, steel prices, and pellet premiums will average for the remainder of 2018 their respective year-to-date averages,听Cliffs would realize USIO revenue rates in the range of $105 to $110 per long ton. This represents an increase from the prior calculation based on the increase in hot-rolled coil steel prices, partially offset by lower iron ore prices.

As a result of strong market demand for pellets in the Great Lakes, Cliffs has increased its full-year sales volume expectation by 500,000 long tons to 21 million long tons. Its production volume expectation of 20 million long tons is being maintained.

Cliffs' full-year 2018 U.S. Iron Ore cash cost of goods sold and operating expense² expectation is being maintained at $58 - $63 per long ton.

SG&A Expenses听and Other Expectations

Cliffs' full-year 2018 SG&A expense expectation of $115 million is being maintained. Cliffs also notes that of the $115 million expectation, approximately $20 million is considered non-cash.

The Company's full-year 2018 net interest expense expectation is being lowered by $10 million to $120 million, as income on short-term instruments has increased in the current rate environment.

Full-year 2018 depreciation, depletion and amortization associated with U.S. Iron Ore and Corporate/Other is expected to be approximately $80 million.

Capital Expenditures

Cliffs provided the following updates to its 2018 capital expenditures budget:

• the Toledo HBI Project spend expectation was reduced by $25 million to $200 million due to further development and refined timing of the project spending plan;
• the sustaining capital expectation was reduced by $10 million to $75 million; and
• the Northshore Mine upgrade spend expectation of $50 million is being maintained.

Conference Call Information

星空传媒 Inc. will host a conference call this morning, July 20, 2018, at 10 a.m. ET. The call will be broadcast live and archived on Cliffs' website:

About 星空传媒 Inc.

Founded in 1847, 星空传媒 Inc. is the largest and oldest independent iron ore mining company in the United States. We are a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. By 2020, Cliffs expects to be the sole producer of hot briquetted iron (HBI) in the Great Lakes region with the development of its first production plant in Toledo, Ohio. Driven by the core values of safety, social, environmental and capital stewardship, our employees endeavor to provide all stakeholders with operating and financial transparency. For more information, visit .

Forward-Looking Statements

This release contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. As a general matter, forward-looking statements relate to anticipated trends and expectations rather than historical matters. Forward-looking statements are subject to uncertainties and factors relating to Cliffs鈥� operations and business environment that are difficult to predict and may be beyond our control. Such uncertainties and factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These statements speak only as of the date of this release, and we undertake no ongoing obligation, other than that imposed by law, to update these statements. Uncertainties and risk factors that could affect Cliffs鈥� future performance and cause results to differ from the forward-looking statements in this release include, but are not limited to: uncertainty and weaknesses in global economic conditions, including downward pressure on prices caused by oversupply or imported products, reduced market demand and risks related to U.S. government actions with respect to Section 232 of the Trade Expansion Act (as amended by the Trade Act of 1974), the North American Free Trade Agreement and/or other trade agreements, treaties or policies; continued volatility of iron ore and steel prices and other trends, including the supply approach of the major iron ore producers, affecting our financial condition, results of operations or future prospects, specifically the impact of price-adjustment factors on our sales contracts; our ability to cost-effectively achieve planned production rates or levels, including at our HBI production plant; our ability to successfully identify and consummate any strategic investments or development projects, including our HBI production plant; the impact of our customers reducing their steel production due to increased market share of steel produced using other methods or lighter-weight steel alternatives; risks related to former international operations, including our ability to successfully conclude the CCAA process in听Canada听and to close our听Asia Pacific听business in a manner that minimizes cash outflows and associated liabilities, including, among other things, our ability to successfully complete the sale of the assets of our Asia Pacific Iron Ore business and our ability to reach negotiated settlements with other third parties in Australia; our ability to successfully diversify our product mix and add new customers beyond our traditional blast furnace clientele; our actual economic iron ore reserves or reductions in current mineral estimates, including whether any mineralized material qualifies as a reserve; our ability to maintain appropriate relations with unions and employees; the outcome of any contractual disputes with our customers, joint venture partners or significant energy, material or service providers or any other litigation or arbitration; the ability of our customers and joint venture partners to meet their obligations to us on a timely basis or at all; problems or uncertainties with productivity, tons mined, transportation, mine-closure obligations, environmental liabilities, employee-benefit costs and other risks of the mining industry; our ability to reach agreement with our customers regarding any modifications to sales contract provisions, renewals or new arrangements; our actual levels of capital spending; our level of indebtedness could limit cash flow available to fund working capital, capital expenditures, acquisitions and other general corporate purposes or ongoing needs of our business; availability of capital and our ability to maintain adequate liquidity; changes in sales volume or mix; events or circumstances that could impair or adversely impact the viability of a mine and the carrying value of associated assets, as well as any resulting impairment charges; impacts of existing and increasing governmental regulation and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorization of, or from, any governmental or regulatory entity and costs related to implementing improvements to ensure compliance with regulatory changes; uncertainties associated with natural disasters, weather conditions, unanticipated geological conditions, supply or price of energy, equipment failures and other unexpected events; adverse changes in currency values, currency exchange rates, interest rates and tax laws; and the potential existence of significant deficiencies or material weakness in our internal control over financial reporting.

For additional factors affecting the business of Cliffs, refer to听Part I 鈥� Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2017. You are urged to carefully consider these risk factors.

FINANCIAL TABLES FOLLOW

¹ CLEVELAND-CLIFFS INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATION - EBITDA AND ADJUSTED EBITDA

In addition to the consolidated financial statements presented in accordance with U.S. GAAP, the Company has presented EBITDA and adjusted EBITDA on a consolidated basis. EBITDA and Adjusted EBITDA are non-GAAP financial measures that management uses in evaluating operating performance. The presentation of these measures is not intended to be considered in isolation from, as a substitute for, or as superior to, the financial information prepared and presented in accordance with U.S. GAAP. The presentation of these measures may be different from non-GAAP financial measures used by other companies. A reconciliation of these consolidated measures to their most directly comparable GAAP measures is provided in the table below.

² CLEVELAND-CLIFFS INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATION EXPLANATIONS

The Company presents cash cost of goods sold and operating expense rate per long/metric ton, which is a non-GAAP financial measure that management uses in evaluating operating performance. Cliffs believes the presentation of non-GAAP cash cost of goods sold and operating expenses is useful to investors because it excludes depreciation, depletion and amortization, which are non-cash, and freight and venture partners' cost reimbursements, which have no impact on sales margin, thus providing a more accurate view of the cash outflows related to the sale of iron ore. The presentation of this measure is not intended to be considered in isolation from, as a substitute for, or as superior to, the financial information prepared and presented in accordance with U.S. GAAP. The presentation of this measure may be different from non-GAAP financial measures used by other companies.

View source version on businesswire.com:

星空传媒 Inc.
MEDIA CONTACT:
Patricia Persico, 216-694-5316
Director, Corporate Communications
or
INVESTOR CONTACT:
Paul Finan, 216-694-6544
Director, Investor Relations

Source: 星空传媒 Inc.

Released July 20, 2018