| 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 2017, 2016 or 2015.
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 years ended December 31, 2017, 2016 and 2015, including a reconciliation of segment sales margin to Income 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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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2017 |
|
2016 |
|
2015 |
Revenues from product sales and services: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Iron Ore |
$ |
1,866.0 |
|
|
80% |
|
$ |
1,554.5 |
|
|
74% |
|
$ |
1,525.4 |
|
|
76% |
Asia Pacific Iron Ore |
464.2 |
|
|
20% |
|
554.5 |
|
|
26% |
|
487.9 |
|
|
24% |
Total revenues from product sales and services |
$ |
2,330.2 |
|
|
100% |
|
$ |
2,109.0 |
|
|
100% |
|
$ |
2,013.3 |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
Sales margin: |
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|
|
|
|
|
|
|
|
|
U.S. Iron Ore |
$ |
465.4 |
|
|
|
|
$ |
275.7 |
|
|
|
|
$ |
227.1 |
|
|
|
Asia Pacific Iron Ore |
36.3 |
|
|
|
|
113.6 |
|
|
|
|
9.4 |
|
|
|
Sales margin |
501.7 |
|
|
|
|
389.3 |
|
|
|
|
236.5 |
|
|
|
Other operating expense |
(78.1 |
) |
|
|
|
(148.5 |
) |
|
|
|
(85.2 |
) |
|
|
Other income (expense) |
(294.2 |
) |
|
|
|
(33.8 |
) |
|
|
|
161.8 |
|
|
|
Income from continuing operations before income taxes and equity loss from ventures |
$ |
129.4 |
|
|
|
|
$ |
207.0 |
|
|
|
|
$ |
313.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2017 |
|
2016 |
|
2015 |
Net income (loss) |
$ |
363.1 |
|
|
$ |
199.3 |
|
|
$ |
(748.4 |
) |
Less: |
|
|
|
|
|
Interest expense, net |
(132.0 |
) |
|
(200.5 |
) |
|
(231.4 |
) |
Income tax benefit (expense) |
252.4 |
|
|
12.2 |
|
|
(163.3 |
) |
Depreciation, depletion and amortization |
(87.7 |
) |
|
(115.4 |
) |
|
(134.0 |
) |
Total EBITDA |
$ |
330.4 |
|
|
$ |
503.0 |
|
|
$ |
(219.7 |
) |
Less: |
|
|
|
|
|
Gain (loss) on extinguishment/restructuring of debt |
$ |
(165.4 |
) |
|
$ |
166.3 |
|
|
$ |
392.9 |
|
Impact of discontinued operations |
(18.7 |
) |
|
(19.9 |
) |
|
(892.0 |
) |
Foreign exchange remeasurement |
11.4 |
|
|
(16.8 |
) |
|
16.3 |
|
Severance and contractor termination costs |
— |
|
|
(0.1 |
) |
|
(10.2 |
) |
Supplies inventory adjustment |
(1.8 |
) |
|
— |
|
|
(16.3 |
) |
Impairment of other long-lived assets |
— |
|
|
— |
|
|
(3.3 |
) |
Total Adjusted EBITDA |
$ |
504.9 |
|
|
$ |
373.5 |
|
|
$ |
292.9 |
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
U.S. Iron Ore |
$ |
534.9 |
|
|
$ |
342.4 |
|
|
$ |
317.6 |
|
Asia Pacific Iron Ore |
40.7 |
|
|
128.3 |
|
|
35.3 |
|
Other (including discontinued operations) |
(245.2 |
) |
|
32.3 |
|
|
(572.6 |
) |
Total EBITDA |
$ |
330.4 |
|
|
$ |
503.0 |
|
|
$ |
(219.7 |
) |
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
U.S. Iron Ore |
$ |
559.4 |
|
|
$ |
359.6 |
|
|
$ |
352.1 |
|
Asia Pacific Iron Ore |
50.4 |
|
|
132.9 |
|
|
32.7 |
|
Other |
(104.9 |
) |
|
(119.0 |
) |
|
(91.9 |
) |
Total Adjusted EBITDA |
$ |
504.9 |
|
|
$ |
373.5 |
|
|
$ |
292.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2017 |
|
2016 |
|
2015 |
Depreciation, depletion and amortization: |
|
|
|
|
|
U.S. Iron Ore |
$ |
66.6 |
|
|
$ |
84.0 |
|
|
$ |
98.9 |
|
Asia Pacific Iron Ore |
14.3 |
|
|
25.1 |
|
|
25.3 |
|
Other |
6.8 |
|
|
6.3 |
|
|
6.6 |
|
Total depreciation, depletion and amortization |
$ |
87.7 |
|
|
$ |
115.4 |
|
|
$ |
130.8 |
|
|
|
|
|
|
|
Capital additions1:
|
|
|
|
|
|
U.S. Iron Ore |
$ |
136.8 |
|
|
$ |
62.2 |
|
|
$ |
58.2 |
|
Asia Pacific Iron Ore |
2.8 |
|
|
0.2 |
|
|
5.4 |
|
Other2
|
16.4 |
|
|
6.1 |
|
|
8.6 |
|
Total capital additions |
$ |
156.0 |
|
|
$ |
68.5 |
|
|
$ |
72.2 |
|
|
|
|
|
|
|
1 Includes capital lease additions and non-cash accruals. Refer to NOTE 17 - CASH FLOW INFORMATION.
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2 Includes spend related to our HBI project.
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A summary of assets by segment is as follows:
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|
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|
|
|
|
|
|
(In Millions) |
|
December 31,
2017 |
|
December 31, 2016 |
|
December 31, 2015 |
Assets: |
|
|
|
|
|
U.S. Iron Ore |
$ |
1,500.6 |
|
|
$ |
1,372.5 |
|
|
$ |
1,476.4 |
|
Asia Pacific Iron Ore |
138.8 |
|
|
155.1 |
|
|
202.5 |
|
Total segment assets |
1,639.4 |
|
|
1,527.6 |
|
|
1,678.9 |
|
Corporate |
1,314.0 |
|
|
396.3 |
|
|
441.7 |
|
Assets of discontinued operations |
— |
|
|
— |
|
|
14.9 |
|
Total assets |
$ |
2,953.4 |
|
|
$ |
1,923.9 |
|
|
$ |
2,135.5 |
|
Included in the consolidated financial statements are the following amounts relating to geographic location:
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|
|
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|
|
|
|
(In Millions) |
|
2017 |
|
2016 |
|
2015 |
Revenues from product sales and services |
|
|
|
|
|
United States |
$ |
1,504.5 |
|
|
$ |
1,236.2 |
|
|
$ |
1,206.4 |
|
China |
364.7 |
|
|
452.5 |
|
|
370.8 |
|
Canada |
206.2 |
|
|
267.1 |
|
|
282.4 |
|
Other countries |
254.8 |
|
|
153.2 |
|
|
153.7 |
|
Total revenues from product sales and services |
$ |
2,330.2 |
|
|
$ |
2,109.0 |
|
|
$ |
2,013.3 |
|
Property, Plant and Equipment, Net |
|
|
|
|
|
United States |
$ |
1,033.8 |
|
|
$ |
961.0 |
|
|
$ |
1,012.7 |
|
Australia |
17.2 |
|
|
23.4 |
|
|
46.3 |
|
Total Property, Plant and Equipment, Net |
$ |
1,051.0 |
|
|
$ |
984.4 |
|
|
$ |
1,059.0 |
|
Concentrations in Revenue
In 2017 and 2016, two customers individually accounted for more than 10% of our consolidated product revenue and in 2015, three customers individually accounted for more than 10% of our consolidated product revenue. Total product revenue from these customers represents $1.3 billion, $1.1 billion and $1.3 billion of our total consolidated product revenue in 2017, 2016 and 2015, respectively, and is attributable to our U.S. Iron Ore business segment.
The following table represents the percentage of our total Revenues from product sales and services contributed by each category of products and services in 2017, 2016 and 2015:
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|
2017 |
|
2016 |
|
2015 |
Revenue category |
|
|
|
|
|
|
Product |
|
90 |
% |
|
91 |
% |
|
91 |
% |
Freight and venture partners’ cost reimbursements |
|
10 |
% |
|
9 |
% |
|
9 |
% |
Total revenues from product sales and services |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|