Summary of the Revised Accounting Treatment

In January 2015, Cliffs announced that Bloom Lake General Partner Limited and certain of its affiliates, including Cliffs Quebec Iron Mining ULC (collectively, the "Bloom Lake Group") commenced restructuring proceedings in Montreal, Quebec, Canada under the Companies' Creditors Arrangement Act (the "CCAA"). As a result of the filing, the Company deconsolidated the Bloom Lake Group and certain other wholly-owned subsidiaries (the "Canadian Entities") effective January 27, 2015 and historical operating results related to the former Eastern Canadian Iron Ore and Ferroalloys operating segments are included in the Company's financial statements and classified within discontinued operations.

In addition, as of March 31, 2015, management has determined that the North American Coal operating segment met the criteria to be classified as held for sale. This determination was made in light of North American Coal's treatment as a non-core, non-strategic asset that the Company expects to sell. As such, all current and historical North American Coal operating segment results are included in the Company's financial statements and classified within discontinued operations. This accounting treatment has no impact on the operating plans for the remaining two mines, which the Company expects to run at an EBITDA-neutral level until a sale is concluded.

The discussion of the Company's results that follows takes into account the impact of the North American Coal and the Canadian Entities being treated as discontinued operations.

First-Quarter Consolidated Results

First-quarter 2015 consolidated revenues of $446 million decreased 28 percent from the prior year's first quarter revenues of $616 million. The 2015 and 2014 amounts each exclude the revenue contribution from North American Coal. Cost of goods sold decreased by 14 percent to $365 million compared to $426 million reported in the first quarter of 2014. Similarly, the 2015 and 2014 amounts each exclude the amount attributable to North American Coal.

For the first quarter of 2015, Cliffs recorded net income from continuing operations attributable to Cliffs' common shareholders of $167 million, or $0.94 per diluted share. These results include the gain related to extinguishment of debt, as well as income tax valuation allowances and other items. Excluding these items, Cliffs reported first-quarter adjusted net income² from continuing operations of $2 million, or $0.02 per diluted share.

Lourenco Goncalves, Cliffs' Chairman, President and Chief Executive Officer, said, "Cliffs has delivered another strong quarter in the face of a challenging operating and commercial environment. The first quarter has confirmed the strength of our pricing structure in the USIO business, and our ability to continue to drive costs down in all operating segments - USIO, APIO and NAC." Mr. Goncalves added, "We are extremely pleased with the positive results of the recent refinancing exercise, and we will continue to be focused on reducing our debt and maximizing our liquidity."

Cliffs' first-quarter 2015 SG&A expenses were $29 million, a 22 percent decrease when compared to a first-quarter 2014 expense of $38 million, as a result of reduced headcount and other cost saving initiatives.

During the first quarter of 2015, miscellaneous - net income increased to $20 million and included a $14 million favorable impact from foreign currency exchange re-measurements, among other items.

First-quarter 2015 results included an income tax expense of $175 million versus an expense of $30 million reported in the previous year's comparable quarter. Of this amount, $166 million is related to the recording of valuation allowances for certain U.S. deferred tax assets. 

The deconsolidation of the Canadian Entities resulted in a pretax loss of $818 million, which was recorded in Loss from Discontinued Operations. The pretax loss includes the derecognition of the carrying value of the Canadian Entities and the recording of remaining interests at fair value. In addition, the company recorded an impairment charge related to North American Coal of $73 million, which was also included in Loss from Discontinued Operations.

During the quarter, the Company recorded a $314 million gain on extinguishment of debt. This included $181 million related to discount capture from the Company's previously announced exchange offers and previously disclosed open-market repurchases, as well as $147 million related to the accounting treatment of the new second lien notes, representing the discount between face value and fair value. This was partially offset by a $14 million charge due to write-offs of fees relating to the former revolving-credit facility.

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Cliffs Natural Resources Inc. is a leading mining and natural resources company in the United States. The Company is a major supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. Cliffs also operates an iron ore mining complex in Western Australia. Additionally, Cliffs produces low-volatile metallurgical coal in the U.S. from its mines located in Alabama and West Virginia. Driven by the core values of safety, social, environmental and capital stewardship, Cliffs' employees endeavor to provide all stakeholders operating and financial transparency. News releases and other information on the Company are available at: www.cliffsnaturalresources.com.