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Cliffs Natural Slashes Dividend, To Cut Salaries

The Associated Press

NEW YORK (AP) — Iron ore and coal miner Cliffs Natural Resources Inc. said Tuesday it will slash its dividend by more than half, launch a public offering of 12 million shares and cut salaries of virtually all its salaried personnel to save money.

Also Tuesday, the company revealed in a regulatory filing the Michigan Department of Environmental Quality has issued violation notices against two mines of which it is majority owner for the unlawful release of waste and waste water. Cliffs said the department is also considering further action.

Citing uncertainty in the coal industry and the broader economy, the company cut its quarterly dividend to 4 cents from 8.75 cents previously. The dividend will be payable on June 1 to shareholders of record as of May 22. It expects to save $22 million from the move.

Cliffs said it will cut the base pay of Chief Executive Joseph Carrabba and the directors fee for all its board members by 10 percent. All executives that are senior vice presidents or higher will see a 7 percent reduction in base pay.

Other salaried employees will take home 3 to 5 percent less, depending on the position.

The company is also suspending its 401(k) contribution for all salaried personnel. In total, it expects the salary cuts and retirement plan suspension to save $15 million this year.

It didn't say when it would reinstate its retirement plan contributions or raise salaries again, noting it is "committed to continuously monitoring the macro and industry environments and would make reinstatements as conditions warrant."

It expects to use the proceeds of the public offering for general purposes that could include capital expenses, paying down debt or "strategic transactions."

In a filing with the Securities and Exchange Commission, Cliffs said it currently expects it will have to spend between $8 million and $10 million to replace waste lines at one of the plants named by the Michigan Department of Environmental Quality. It said it has already cleaned up and made operational changes at both mines but the costs had not been significant so far.

The company also expects the department will wage a civil penalty against it for the alleged improper waste release, but it does not know how much the penalty will be. It doesn't expect, though, that it will have a material negative effect on its financial position or cash flow.

Shares fell in aftermarket activity, losing $1.52, or 5.3 percent, to reach $27.37. The stock ended the regular session up 11 cents at $28.89.