Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING

v3.19.3
SEGMENT REPORTING
 9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting Disclosure
NOTE 3 - SEGMENT REPORTING
In alignment with our strategic goals, our Company’s continuing operations are organized and managed in two operating segments according to our differentiated products. Our Mining and Pelletizing 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. Our Metallics segment includes our HBI production plant in Toledo, Ohio, which is currently under construction and expected to be completed during the first half of 2020. During the second quarter of 2019, Northshore mine began supplying DR-grade pellets to our Metallics segment, which will be used as feedstock for the HBI production plant when we begin production in 2020. All intersegment sales were eliminated in consolidation.
We evaluate performance based on sales margin, defined as revenues less cost of goods sold 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 are used by management, investors, lenders and other external users of our financial statements to assess our operating performance and to compare operating performance to other companies in the iron ore industry. In addition, management believes EBITDA and Adjusted EBITDA are useful measures to assess the earnings power of the business without the impact of capital structure and can be used to assess our ability to service debt and fund future capital expenditures in the business.
The following tables present a summary of our reportable segments including a reconciliation of segment revenues to total Revenues from product sales and services, segment sales margin to total Sales margin and a reconciliation of Net income to EBITDA and Adjusted EBITDA:    
 
(In Millions)
 
Three Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2019
 
Mining and Pelletizing
 
Metallics
 
Total
 
Mining and Pelletizing
 
Metallics
 
Total
Operating segment revenues from product sales and services
$
590.6

 
$
—

 
$
590.6

 
$
1,494.8

 
$
—

 
$
1,494.8

Elimination of intersegment revenues
(35.0
)
 
—

 
(35.0
)
 
(39.0
)
 
—

 
(39.0
)
Total revenues from product sales and services
$
555.6

 
$
—

 
$
555.6

 
$
1,455.8

 
$
—

 
$
1,455.8

 
 
 
 
 
 
 
 
 
 
 
 
Operating segment sales margin
$
165.8

 
$
—

 
$
165.8

 
$
461.3

 
$
—

 
$
461.3

Elimination of intersegment sales margin
(10.9
)
 
—

 
(10.9
)
 
(12.5
)
 
—

 
(12.5
)
Total sales margin
$
154.9

 
$
—

 
$
154.9

 
$
448.8

 
$
—

 
$
448.8

Revenues from product sales and services of $741.8 million and $1,636.1 million, respectively, and sales margin of $261.6 million and $607.6 million, respectively, related to our Mining and Pelletizing segment accounted for all of our consolidated revenues and sales margin for the three and nine months ended September 30, 2018.

 
(In Millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
90.9

 
$
437.8

 
$
229.6

 
$
518.6

Less:
 
 
 
 
 
 
 
Interest expense, net
(25.4
)
 
(29.7
)
 
(76.8
)
 
(95.5
)
Income tax expense
(4.8
)
 
(0.5
)
 
(23.1
)
 
(14.4
)
Depreciation, depletion and amortization
(22.2
)
 
(19.2
)
 
(63.1
)
 
(68.6
)
EBITDA
$
143.3

 
$
487.2

 
$
392.6

 
$
697.1

Less:
 
 
 
 
 
 
 
Impact of discontinued operations
$
(0.8
)
 
$
238.2

 
$
(1.2
)
 
$
120.4

Gain (loss) on extinguishment of debt
—

 
—

 
(18.2
)
 
0.2

Severance costs
—

 
—

 
(1.7
)
 
—

Foreign exchange remeasurement
—

 
(0.2
)
 
—

 
(0.7
)
Impairment of long-lived assets
—

 
(1.1
)
 
—

 
(1.1
)
Adjusted EBITDA
$
144.1

 
$
250.3

 
$
413.7

 
$
578.3

 
 
 
 
 
 
 
 
EBITDA:
 
 
 
 
 
 
 
Mining and Pelletizing
$
177.5

 
$
273.1

 
$
494.9

 
$
641.6

Metallics
(2.1
)
 
(1.0
)
 
(4.0
)
 
(2.5
)
Corporate and Other (including discontinued operations)
(32.1
)
 
215.1

 
(98.3
)
 
58.0

Total EBITDA
$
143.3

 
$
487.2

 
$
392.6

 
$
697.1

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Mining and Pelletizing
$
182.7

 
$
279.5

 
$
510.7

 
$
657.9

Metallics
(2.1
)
 
(1.0
)
 
(4.0
)
 
(2.5
)
Corporate
(36.5
)
 
(28.2
)
 
(93.0
)
 
(77.1
)
Total Adjusted EBITDA
$
144.1

 
$
250.3

 
$
413.7

 
$
578.3

The following table summarizes our depreciation, depletion and amortization and capital additions:
 
(In Millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Depreciation, depletion and amortization:
 
 
 
 
 
 
 
Mining and Pelletizing
$
20.8

 
$
17.8

 
$
58.9

 
$
49.2

Corporate
1.4

 
1.4

 
4.2

 
4.2

Total depreciation, depletion and amortization
$
22.2

 
$
19.2

 
$
63.1

 
$
53.4

 
 
 
 
 
 
 
 
Capital additions1:
 
 
 
 
 
 
 
Mining and Pelletizing
$
22.1

 
$
51.8

 
$
104.5

 
$
97.2

Metallics
160.5

 
40.6

 
398.0

 
143.6

Corporate
2.1

 
0.2

 
3.1

 
1.1

Total capital additions
$
184.7

 
$
92.6

 
$
505.6

 
$
241.9

 
 
 
 
 
 
 
 
1 Refer to NOTE 16 - CASH FLOW INFORMATION for additional information.

A summary of assets by segment is as follows:
 
(In Millions)
 
September 30,
2019
 
December 31,
2018
Assets:
 
 
 
Mining and Pelletizing
$
1,793.9

 
$
1,694.1

Metallics
708.5

 
265.9

Total segment assets
2,502.4

 
1,960.0

Corporate and Other (including discontinued operations)
988.8

 
1,569.6

Total assets
$
3,491.2

 
$
3,529.6