NOTE 3 - 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 quarter of 2018 or 2017.
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 including a reconciliation of segment sales margin to Loss from Continuing Operations Before Income Taxes and a reconciliation of Net Loss to EBITDA and Adjusted EBITDA:
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|
|
|
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|
(In Millions) |
|
Three Months Ended
March 31, |
|
2018 |
|
2017 |
Revenues from product sales and services: |
|
|
|
|
|
|
|
U.S. Iron Ore |
$ |
180.0 |
|
|
75 |
% |
|
$ |
286.2 |
|
|
62 |
% |
Asia Pacific Iron Ore |
59.0 |
|
|
25 |
% |
|
175.4 |
|
|
38 |
% |
Total revenues from product sales and services |
$ |
239.0 |
|
|
100 |
% |
|
$ |
461.6 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
Sales margin: |
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|
|
|
|
|
|
U.S. Iron Ore |
$ |
61.5 |
|
|
|
|
$ |
49.0 |
|
|
|
Asia Pacific Iron Ore |
(65.1 |
) |
|
|
|
47.3 |
|
|
|
Sales margin |
(3.6 |
) |
|
|
|
96.3 |
|
|
|
Other operating expense |
(36.4 |
) |
|
|
|
(16.2 |
) |
|
|
Other expense |
(29.1 |
) |
|
|
|
(112.2 |
) |
|
|
Loss from continuing operations before income taxes |
$ |
(69.1 |
) |
|
|
|
$ |
(32.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
Three Months Ended
March 31, |
|
2018 |
|
2017 |
Net Loss |
$ |
(84.3 |
) |
|
$ |
(29.8 |
) |
Less: |
|
|
|
Interest expense, net |
(33.5 |
) |
|
(42.8 |
) |
Income tax benefit (expense) |
(15.7 |
) |
|
1.8 |
|
Depreciation, depletion and amortization |
(23.9 |
) |
|
(23.2 |
) |
EBITDA |
$ |
(11.2 |
) |
|
$ |
34.4 |
|
Less: |
|
|
|
Inventory impairments |
$ |
(18.9 |
) |
|
$ |
— |
|
Impairment of long-lived assets |
(2.6 |
) |
|
— |
|
Severance and retention costs |
(1.5 |
) |
|
— |
|
Impact of discontinued operations |
0.5 |
|
|
0.5 |
|
Foreign exchange remeasurement |
(0.3 |
) |
|
13.6 |
|
Loss on extinguishment of debt |
— |
|
|
(71.9 |
) |
Adjusted EBITDA |
$ |
11.6 |
|
|
$ |
92.2 |
|
|
|
|
|
EBITDA |
|
|
|
U.S. Iron Ore |
$ |
72.5 |
|
|
$ |
57.9 |
|
Asia Pacific Iron Ore |
(63.7 |
) |
|
51.4 |
|
Other |
(20.0 |
) |
|
(74.9 |
) |
Total EBITDA |
$ |
(11.2 |
) |
|
$ |
34.4 |
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
U.S. Iron Ore |
$ |
77.1 |
|
|
$ |
64.1 |
|
Asia Pacific Iron Ore |
(39.6 |
) |
|
53.8 |
|
Other |
(25.9 |
) |
|
(25.7 |
) |
Total Adjusted EBITDA |
$ |
11.6 |
|
|
$ |
92.2 |
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
Three Months Ended
March 31, |
|
2018 |
|
2017 |
Depreciation, depletion and amortization: |
|
|
|
U.S. Iron Ore |
$ |
15.8 |
|
|
$ |
16.4 |
|
Asia Pacific Iron Ore |
6.7 |
|
|
4.7 |
|
Other |
1.4 |
|
|
2.1 |
|
Total depreciation, depletion and amortization |
$ |
23.9 |
|
|
$ |
23.2 |
|
|
|
|
|
Capital additions1:
|
|
|
|
U.S. Iron Ore |
$ |
18.7 |
|
|
$ |
27.1 |
|
Asia Pacific Iron Ore |
— |
|
|
0.2 |
|
Other2
|
60.2 |
|
|
— |
|
Total capital additions |
$ |
78.9 |
|
|
$ |
27.3 |
|
|
|
|
|
1 Includes cash paid for capital additions of $71.4 million, including deposits of $59.0 million, and an increase in non-cash accruals of $7.5 million for the three months ended March 31, 2018 compared to cash paid for capital additions of $27.9 million, including deposits of $2.0 million, and a decrease in non-cash accruals of $0.6 million for the three months ended March 31, 2017.
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2 Includes capital additions 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) |
|
March 31,
2018 |
|
December 31,
2017 |
Assets: |
|
|
|
U.S. Iron Ore |
$ |
1,646.8 |
|
|
$ |
1,500.6 |
|
Asia Pacific Iron Ore |
78.4 |
|
|
138.8 |
|
Total segment assets |
1,725.2 |
|
|
1,639.4 |
|
Corporate and Other |
1,137.7 |
|
|
1,314.0 |
|
Total assets |
$ |
2,862.9 |
|
|
$ |
2,953.4 |
|
|