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 revenues in the first nine months of 2017 or 2016.
We evaluate segment performance based on sales margin, defined as revenues less cost of goods sold and operating expenses identifiable to each segment. Additionally, we evaluate performance on a segment basis, as well as a consolidated basis, based on EBITDA and Adjusted EBITDA. 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 are 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 three and nine months ended September 30, 2017 and 2016, including a reconciliation of segment sales margin to Income from Continuing Operations Before Income Taxes and a reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA:
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(In Millions) |
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
Revenues from product sales and services: |
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U.S. Iron Ore |
$ |
596.7 |
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|
85 |
% |
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$ |
428.3 |
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|
77 |
% |
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$ |
1,354.2 |
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|
78 |
% |
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$ |
975.5 |
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|
72 |
% |
Asia Pacific Iron Ore |
101.7 |
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15 |
% |
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125.0 |
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23 |
% |
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375.1 |
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22 |
% |
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379.5 |
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|
28 |
% |
Total revenues from product sales and services |
$ |
698.4 |
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100 |
% |
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$ |
553.3 |
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100 |
% |
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$ |
1,729.3 |
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100 |
% |
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$ |
1,355.0 |
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100 |
% |
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Sales margin: |
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U.S. Iron Ore |
$ |
157.2 |
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$ |
66.5 |
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$ |
349.8 |
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$ |
149.7 |
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Asia Pacific Iron Ore |
3.0 |
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18.9 |
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51.2 |
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58.1 |
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Sales margin |
160.2 |
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85.4 |
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401.0 |
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207.8 |
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Other operating expense |
(30.5 |
) |
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(50.7 |
) |
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(74.8 |
) |
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(98.7 |
) |
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Other income (expense) |
(116.7 |
) |
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(66.9 |
) |
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(266.2 |
) |
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8.3 |
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Income (loss) from continuing operations before income taxes |
$ |
13.0 |
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$ |
(32.2 |
) |
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$ |
60.0 |
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$ |
117.4 |
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(In Millions) |
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
Net Income (Loss) |
$ |
52.9 |
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$ |
(27.8 |
) |
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$ |
53.2 |
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$ |
118.5 |
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Less: |
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Interest expense, net |
(28.9 |
) |
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(48.7 |
) |
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(103.1 |
) |
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(156.2 |
) |
Income tax benefit |
7.6 |
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7.1 |
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6.8 |
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1.7 |
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Depreciation, depletion and amortization |
(21.5 |
) |
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(26.8 |
) |
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(66.3 |
) |
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(88.9 |
) |
EBITDA |
$ |
95.7 |
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$ |
40.6 |
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$ |
215.8 |
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$ |
361.9 |
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Less: |
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Gain (loss) on extinguishment/restructuring of debt |
$ |
(88.6 |
) |
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$ |
(18.3 |
) |
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$ |
(165.4 |
) |
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$ |
164.1 |
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Foreign exchange remeasurement |
(2.4 |
) |
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(0.3 |
) |
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11.2 |
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(1.2 |
) |
Impact of discontinued operations |
32.3 |
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(2.7 |
) |
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(13.6 |
) |
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(0.6 |
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Severance and contractor termination costs |
— |
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— |
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— |
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(0.1 |
) |
Adjusted EBITDA |
$ |
154.4 |
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$ |
61.9 |
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$ |
383.6 |
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$ |
199.7 |
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EBITDA |
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U.S. Iron Ore |
$ |
168.9 |
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$ |
61.1 |
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$ |
381.8 |
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$ |
196.6 |
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Asia Pacific Iron Ore |
2.3 |
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21.2 |
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54.9 |
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69.6 |
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Other |
(75.5 |
) |
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(41.7 |
) |
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(220.9 |
) |
|
95.7 |
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Total EBITDA |
$ |
95.7 |
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$ |
40.6 |
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$ |
215.8 |
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$ |
361.9 |
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Adjusted EBITDA: |
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U.S. Iron Ore |
$ |
174.2 |
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$ |
65.3 |
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$ |
399.8 |
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$ |
208.6 |
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Asia Pacific Iron Ore |
4.9 |
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23.7 |
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61.7 |
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73.2 |
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Other |
(24.7 |
) |
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(27.1 |
) |
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(77.9 |
) |
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(82.1 |
) |
Total Adjusted EBITDA |
$ |
154.4 |
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$ |
61.9 |
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$ |
383.6 |
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$ |
199.7 |
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(In Millions) |
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2017 |
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2016 |
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2017 |
|
2016 |
Depreciation, depletion and amortization: |
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U.S. Iron Ore |
$ |
16.5 |
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$ |
18.8 |
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$ |
49.6 |
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$ |
65.1 |
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Asia Pacific Iron Ore |
3.3 |
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6.3 |
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11.3 |
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19.2 |
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Other |
1.7 |
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1.7 |
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5.4 |
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4.6 |
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Total depreciation, depletion and amortization |
$ |
21.5 |
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$ |
26.8 |
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$ |
66.3 |
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$ |
88.9 |
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Capital additions: |
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U.S. Iron Ore |
$ |
19.2 |
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$ |
25.8 |
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$ |
70.9 |
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$ |
39.5 |
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Asia Pacific Iron Ore |
0.8 |
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0.2 |
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1.6 |
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0.2 |
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Other |
7.1 |
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0.4 |
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7.1 |
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4.8 |
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Total capital additions1
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$ |
27.1 |
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$ |
26.4 |
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$ |
79.6 |
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$ |
44.5 |
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1 Includes cash paid for capital additions of $78.9 million and $45.8 million and an increase in non-cash accruals of $0.7 million and a decrease in non-cash accruals of $1.3 million for the nine months ended September 30, 2017 and 2016, respectively.
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A summary of assets by segment is as follows:
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(In Millions) |
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September 30,
2017 |
|
December 31,
2016 |
Assets: |
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U.S. Iron Ore |
$ |
1,467.2 |
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$ |
1,372.5 |
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Asia Pacific Iron Ore |
139.4 |
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|
155.1 |
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Total segment assets |
1,606.6 |
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|
1,527.6 |
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Corporate |
316.7 |
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|
396.3 |
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Total assets |
$ |
1,923.3 |
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$ |
1,923.9 |
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