| SEGMENT REPORTING |
NOTE 2 - SEGMENT REPORTING
Our continuing operations are organized and managed according to geographic location: U.S. Iron Ore and Asia Pacific Iron Ore. Our U.S. Iron Ore segment is a major supplier of iron ore pellets to the North American steel industry from our mines and pellet plants located in Michigan and Minnesota. The Asia Pacific Iron Ore segment is located in Western Australia and provides iron ore to the seaborne market for Asian steel producers. There were no intersegment product revenues in 2016, 2015 or 2014.
We have historically evaluated segment performance based on sales margin, defined as revenues less cost of goods sold and operating expenses identifiable to each segment. Additionally, we evaluate segment performance based on EBITDA, defined as net income (loss) before interest, income taxes, depreciation, depletion and amortization, and Adjusted EBITDA, defined as EBITDA excluding certain items such as extinguishment/restructuring of debt, impacts of discontinued operations, foreign currency remeasurement, severance and contractor termination costs, certain supplies inventory write-offs, impairment of goodwill and other long-lived assets and other costs associated with the proxy contest and change in control. These measures allow management and investors to focus on our ability to service our debt, as well as illustrate how the business and each operating segment is performing. Additionally, EBITDA and Adjusted EBITDA assist management and investors in their analysis and forecasting as these measures approximate the cash flows associated with operational earnings.
The following tables present a summary of our reportable segments for the years ended December 31, 2016, 2015 and 2014, including a reconciliation of segment sales margin to Income (Loss) from Continuing Operations Before Income Taxes and Equity Loss from Ventures and a reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA:
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|
|
|
|
|
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|
|
|
|
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|
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|
(In Millions) |
|
2016 |
|
2015 |
|
2014 |
Revenues from product sales and services: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Iron Ore |
$ |
1,554.5 |
|
|
74% |
|
$ |
1,525.4 |
|
|
76% |
|
$ |
2,506.5 |
|
|
74% |
Asia Pacific Iron Ore |
554.5 |
|
|
26% |
|
487.9 |
|
|
24% |
|
866.7 |
|
|
26% |
Total revenues from product sales and services |
$ |
2,109.0 |
|
|
100% |
|
$ |
2,013.3 |
|
|
100% |
|
$ |
3,373.2 |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
Sales margin: |
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|
|
|
|
|
|
|
|
|
|
U.S. Iron Ore |
$ |
275.7 |
|
|
|
|
$ |
227.1 |
|
|
|
|
$ |
710.4 |
|
|
|
Asia Pacific Iron Ore |
113.6 |
|
|
|
|
9.4 |
|
|
|
|
121.7 |
|
|
|
Eliminations with discontinued operations |
— |
|
|
|
|
— |
|
|
|
|
53.6 |
|
|
|
Sales margin |
389.3 |
|
|
|
|
236.5 |
|
|
|
|
885.7 |
|
|
|
Other operating expense |
(148.5 |
) |
|
|
|
(85.2 |
) |
|
|
|
(755.6 |
) |
|
|
Other income (expense) |
(33.8 |
) |
|
|
|
161.8 |
|
|
|
|
(149.8 |
) |
|
|
Income (loss) from continuing operations before income taxes and equity loss from ventures |
$ |
207.0 |
|
|
|
|
$ |
313.1 |
|
|
|
|
$ |
(19.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2016 |
|
2015 |
|
2014 |
|
|
|
|
|
|
Net income (loss) |
$ |
199.3 |
|
|
$ |
(748.4 |
) |
|
$ |
(8,311.6 |
) |
Less: |
|
|
|
|
|
Interest expense, net |
(200.5 |
) |
|
(231.4 |
) |
|
(185.2 |
) |
Income tax benefit (expense) |
12.2 |
|
|
(163.3 |
) |
|
1,302.0 |
|
Depreciation, depletion and amortization |
(115.4 |
) |
|
(134.0 |
) |
|
(504.0 |
) |
Total EBITDA |
$ |
503.0 |
|
|
$ |
(219.7 |
) |
|
$ |
(8,924.4 |
) |
Less: |
|
|
|
|
|
Gain on extinguishment/restructuring of debt |
$ |
166.3 |
|
|
$ |
392.9 |
|
|
$ |
16.2 |
|
Impact of discontinued operations |
(19.9 |
) |
|
(892.0 |
) |
|
(9,332.5 |
) |
Foreign exchange remeasurement |
(16.8 |
) |
|
16.3 |
|
|
29.0 |
|
Severance and contractor termination costs |
(0.1 |
) |
|
(10.2 |
) |
|
(23.3 |
) |
Supplies inventory write-off |
— |
|
|
(16.3 |
) |
|
— |
|
Impairment of goodwill and other long-lived assets |
— |
|
|
(3.3 |
) |
|
(635.5 |
) |
Proxy contest and change in control in SG&A |
— |
|
|
— |
|
|
(26.6 |
) |
Total Adjusted EBITDA |
$ |
373.5 |
|
|
$ |
292.9 |
|
|
$ |
1,048.3 |
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
U.S. Iron Ore |
$ |
342.4 |
|
|
$ |
317.6 |
|
|
$ |
805.6 |
|
Asia Pacific Iron Ore |
128.3 |
|
|
35.3 |
|
|
(352.9 |
) |
Other (including discontinued operations) |
32.3 |
|
|
(572.6 |
) |
|
(9,377.1 |
) |
Total EBITDA |
$ |
503.0 |
|
|
$ |
(219.7 |
) |
|
$ |
(8,924.4 |
) |
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
U.S. Iron Ore |
$ |
359.6 |
|
|
$ |
352.1 |
|
|
$ |
833.5 |
|
Asia Pacific Iron Ore |
132.9 |
|
|
32.7 |
|
|
252.9 |
|
Other |
(119.0 |
) |
|
(91.9 |
) |
|
(38.1 |
) |
Total Adjusted EBITDA |
$ |
373.5 |
|
|
$ |
292.9 |
|
|
$ |
1,048.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2016 |
|
2015 |
|
2014 |
Depreciation, depletion and amortization: |
|
|
|
|
|
U.S. Iron Ore |
$ |
84.0 |
|
|
$ |
98.9 |
|
|
$ |
107.4 |
|
Asia Pacific Iron Ore |
25.1 |
|
|
25.3 |
|
|
145.9 |
|
Other |
6.3 |
|
|
6.6 |
|
|
7.7 |
|
Total depreciation, depletion and amortization |
$ |
115.4 |
|
|
$ |
130.8 |
|
|
$ |
261.0 |
|
|
|
|
|
|
|
Capital additions1:
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|
|
|
|
U.S. Iron Ore |
$ |
62.2 |
|
|
$ |
58.2 |
|
|
$ |
48.4 |
|
Asia Pacific Iron Ore |
0.2 |
|
|
5.4 |
|
|
10.8 |
|
Other |
6.1 |
|
|
8.6 |
|
|
6.3 |
|
Total capital additions |
$ |
68.5 |
|
|
$ |
72.2 |
|
|
$ |
65.5 |
|
|
|
|
|
|
|
1 Includes capital lease additions and non-cash accruals. Refer to NOTE 17 - CASH FLOW INFORMATION.
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A summary of assets by segment is as follows:
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|
|
|
|
|
|
(In Millions) |
|
December 31,
2016 |
|
December 31, 2015 |
|
December 31, 2014 |
Assets: |
|
|
|
|
|
U.S. Iron Ore |
$ |
1,372.5 |
|
|
$ |
1,476.4 |
|
|
$ |
1,464.9 |
|
Asia Pacific Iron Ore |
155.1 |
|
|
202.5 |
|
|
306.2 |
|
Total segment assets |
1,527.6 |
|
|
1,678.9 |
|
|
1,771.1 |
|
Corporate |
396.3 |
|
|
441.7 |
|
|
666.2 |
|
Assets of Discontinued Operations |
— |
|
|
14.9 |
|
|
709.9 |
|
Total assets |
$ |
1,923.9 |
|
|
$ |
2,135.5 |
|
|
$ |
3,147.2 |
|
Included in the consolidated financial statements are the following amounts relating to geographic location:
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|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2016 |
|
2015 |
|
2014 |
Revenue |
|
|
|
|
|
United States |
$ |
1,236.2 |
|
|
$ |
1,206.4 |
|
|
$ |
1,923.2 |
|
China |
452.5 |
|
|
370.8 |
|
|
662.7 |
|
Canada |
267.1 |
|
|
282.4 |
|
|
430.5 |
|
Other countries |
153.2 |
|
|
153.7 |
|
|
356.8 |
|
Total revenue |
$ |
2,109.0 |
|
|
$ |
2,013.3 |
|
|
$ |
3,373.2 |
|
Property, Plant and Equipment, Net |
|
|
|
|
|
United States |
$ |
961.0 |
|
|
$ |
1,012.7 |
|
|
$ |
998.1 |
|
Australia |
23.4 |
|
|
46.3 |
|
|
72.4 |
|
Total Property, Plant and Equipment, Net |
$ |
984.4 |
|
|
$ |
1,059.0 |
|
|
$ |
1,070.5 |
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Concentrations in Revenue
In 2016, two customers individually accounted for more than 10% of our consolidated product revenue and in 2015 and 2014, three customers individually accounted for more than 10% of our consolidated product revenue. Total product revenue from these customers represents approximately $1.1 billion, $1.3 billion and $1.9 billion of our total consolidated product revenue in 2016, 2015 and 2014, respectively, and is attributable to our U.S. Iron Ore business segment.
The following table represents the percentage of our total revenue contributed by each category of products and services in 2016, 2015 and 2014:
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|
2016 |
|
2015 |
|
2014 |
Revenue category |
|
|
|
|
|
|
Product |
|
91 |
% |
|
91 |
% |
|
92 |
% |
Freight and venture partners’ cost reimbursements |
|
9 |
% |
|
9 |
% |
|
8 |
% |
Total revenue |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|