Look at Q3 of 2014 and you will see an income tax receivable of $25 million, then Q4 of 2014 you will find an income tax receivable of over $200 million. It looks like 2015 is setting up the same way as CLF pays withholdings throughout the year in excess of what their end of year tax liability. Much of this could be the result of the income gain on buying bonds back at a discount and the impairment charges they took. But a lot of their cash drain could be the amount that is paid into these withholdings. Won't really know until Q4 results are out.
Also, be aware that all Federal tax refunds are taxable by the state and local taxes. That is why they had a net tax receivable of $175 million ($225 million refund from the Fed and a $50 million charge from the state).
Most of these docs have to do with sale activities outlining commissions and paying for those commissions ahead of other disbursements. They must be close to the end. Most of the docs released were not in English and I am not 100% in French.
Lot of that could be putting Essar on a short leash knowing they were headed back into the CCAA. CLF has a claim for a little more than $12,000.00 against Essar which is a very low acct. receivable. CLF also heading into the winter months ships ore to the steel mills for storage and then bills them as they use it because CLF does not have enough open water storage on the Great Lakes.
Think about it, MT and Nucor could be providing the majority of the DRI pellets around the country, using CLF's DR pellets at their input.
The big ones are MT, AKS, X on a joint operation then there are several small mills. As Essar has stated, CLF is the lowest cost pellet provider that can provide the quantities and quality needed in the Great Lakes area which gives them the advantage. I do not know the specifics of the DR pellets shipped to a Great Lakes steel mill, but that 60,000 ton test run could turn into a replacement for the Essar loss. Then Nucor is still in play as they need to get their DRI production cost down from the levels they are at with Vale.
And then another Muddy Fool says CLF could double in 2016, you may as well listen to Cramer.
The income on the debt buy back is clearly stated on the 10Q which that should have resulted in a tax charge on that income. Some of that tax refund could have gone to loan the CCAA which they will get back and some of that inventory income could be carried forward because of the gain on debt repurchase. Some of their cash had to be used to pay rebates on iron ore purchases due to low steel prices. You can have a hard time figuring out these quarterly numbers as they can move numbers around to minimize quarterly taxes, but it all comes to a head with the annual earnings as that is the one that counts with the IRS. Just like last year, they posted very little earnings from Q1 through Q3 and then in Q4 had a big gain.
Their current interest charge is a big killer and they need to get that under control. I wish there were some clear cut numbers,
I am done talking, from their 10Q ownership:
And your statement regarding secured vs unsecured is just plain wrong.
Yes the bank gave you a loan to buy some land and is secured by the land, that is not what CLF did. They took and bought the land using an unsecured credit card. Now they can use some of the money to pay off that credit card, or they can just keep the credit card balance. Bottom line CLF is going to get the money from the sale of CCAA assets and it will be up to them how it will be used.
Anyway the original point of this conversation was asset value and all I am saying is their asset value is really more that what they have on the books.
I won't even get in with you about the impact on income with the purchase of those bonds at a discount as seen in the last 10Q.
Look at the bonds they bought the mine with, they are UNSECURED! I continue to argue because you keep bringing up "facts" that are not correct.
You are blending BL Partnership with CLF. CLF is a creditor that owns the asset and has taken the write offs accordingly. So if they sell the asset for $1.5, CLF gets the $1.5 billion as the secured creditor and they will balance up the purchase price of the asset minus what charges they have taken on that asset. The BL Partnership has no tax gains and all debts will disappear.
You need to read the IRS code as it applies to impairment and goodwill charges. When a company buys an asset, they write it down to zero according to their DD and A schedule, they cannot write it down below zero. When the company takes an impairment charge, they accelerate that DD an A on that asset to allow the company more write offs in the current quarter to reduce their tax liabilities. But at no point can they go negative.
Now the asset has a new value based on what they paid for it and subtracting what they wrote off to date. If they sell that asset for more than the new value, that is now income from which the IRS will collect their share of taxes.
Using your example, they buy an asset for $4 billion and write that asset down to $1.1 billion. If they sell it for $1.5 billion, they are taking a $2.5 billion loss on the asset so they should write that off. If they do that they will have written off the $2.5 billion loss plus $2.9 billion impairment charge for a total of $5.4 billion. The IRS is not willing to do that. Instead the IRS is going to tax you $400 million on the gain from the sale and CLF gets $1 billion without paying taxes on.
OK, as of Sept 30,2014 their Canadian assets were written down to $1.113 billion and I know they have taken further impairments since then, but they no longer list the asset value on their 10Q. But let's say this is the final number. If CLF walks away with $1.5 billion for all their Canadian asset sale, they will have a tax gain of $400 million as the IRS will allow you to write off 100% of your cost, no more.
Without going back into every 10Q I can't come up with what they have written down these asset to. But I know the values on their books is much less. It is all about providing cash today from tax gains and will be ok with increased taxes when they are sitting on cash from the sale of asset.
Yes they have written down their assets to almost zero which allows them to accelerate their DD and A to provide them cash from tax gains. Home builders used this strategy to get them through the big downturn in housing. Some of that acceleration in DD and A will be taken away from them when they sell those assets. Based on the $175 million they got from the sale of the Logan mine, if they get a dime for the remaining two mines, they will have to show a gain. If they get $1 billion for BL, they will have a gain. If they get $200 million for the rail and port facilities, they will have a gain.
I think they wrote down their assets too much but I understand that they wanted to get the largest tax benefit they could.
No they cannot, the price of the stock has absolutely nothing to do with staying in business. Staying in business is all about having cash in your pocket at the end of the day, you can report a loss, but you can still build cash. CLF has been able to build cash and pay down debt during these low iron ore prices. If a company was going bankrupt, they would be draining cash and increasing debt to replace this cash like Essar.
The problem is CLF is being attacked on their debt and the low iron ore prices. CLF just fails to address their debt management program and how they are cutting cost to offset the lower prices. Furthermore the market does not get information on the pricing model for iron ore pellets.
That $100 million each year is after paying their current interest expense but does not include their income expense paid to DD and A that is a non cash expense. Because of the impairment charges in the past, they have a tax advantage that brings money in each year. Think about this, iron ore prices have been low over the last year and yet CLF managed to pay down debt by almost $1 billion while maintaining $300 million in cash and an untapped credit line. And as iron ore prices fall, pellet price contracts hold up fairly well and CLF continues to cut cost to offset the loss in revenue. Instead of using your assumptions, try using last years earnings performance and project revenues and cost that balance out with their current performance.
What is hard is coming up with breaking news regarding CLF when the company does not provide much. It is bad when you have to monitor obscure french publications up in Canada to get news on the CCAA process. But it surprises me the ability of many on this board to catch information. And I ignore all these baseless attacks that pop up.