Annual report pursuant to Section 13 and 15(d)

SEGMENT REPORTING

v2.4.1.9
SEGMENT REPORTING
 12 Months Ended
Dec. 31, 2014
Segment Reporting [Abstract]  
SEGMENT REPORTING
NOTE 2 - SEGMENT REPORTING
Our Company’s operations are organized and managed according to product category and geographic location: U.S. Iron Ore, Asia Pacific Iron Ore, North American Coal and Eastern Canadian Iron Ore. The U.S. Iron Ore segment is comprised of our interests in five U.S. mines that provide iron ore to the integrated steel industry. The Asia Pacific Iron Ore segment is located in Western Australia and provides iron ore to the seaborne market for Asian steel producers. The North American Coal segment as of December 31, 2014 is comprised of our two low-volatile metallurgical coal operations that provide metallurgical coal primarily to the integrated steel industry. Effective December 31, 2014, we sold our CLCC assets, which consisted of two high-volatile metallurgical coal mines and one thermal coal mine. As such, the results below include the CLCC results through the day of the sale completion. The Eastern Canadian Iron Ore segment is comprised of two Eastern Canadian mines that primarily provided iron ore to the seaborne market for Asian steel producers. Refer to NOTE 21 - SUBSEQUENT EVENTS for further discussion of our Bloom Lake mine, which is in the Eastern Canadian Iron Ore segment. There were no intersegment revenues in 2014 or 2012. Inter-segment revenues for 2013 were eliminated in consolidation.
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, beginning in the third quarter of 2014, concurrent with the change in control on July 29, 2014, management began to 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 impairment charges, impacts of permanently idled, closed or sold facilities, foreign currency remeasurement, severance and other costs associated with the acceleration of vesting and payout of outstanding equity grants due to the majority change in our Board of Directors, litigation judgments and intersegment corporate allocations of SG&A costs. Management uses and believes that investors benefit from referring to these measures in evaluating operating and financial results, as well as in planning, forecasting and analyzing future periods as these financial measures approximate the cash flows associated with the operational earnings.
The following tables present a summary of our reportable segments for the years ended December 31, 2014, 2013 and 2012, including a reconciliation of segment sales margin to Income (Loss) from Continuing Operations Before Income Taxes and Equity Income (Loss) from Ventures and a reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA:
 
(In Millions)
 
2014
 
2013
 
2012
Revenues from product sales and services:
 
 
 
 
 
 
 
 
 
 
 
U.S. Iron Ore
$
2,506.5

 
54%
 
$
2,667.9

 
47%
 
$
2,723.3

 
46%
Asia Pacific Iron Ore
866.7

 
19%
 
1,224.3

 
22%
 
1,259.3

 
22%
North American Coal
687.1

 
15%
 
821.9

 
14%
 
881.1

 
15%
Eastern Canadian Iron Ore
563.4

 
12%
 
978.7

 
17%
 
1,008.9

 
17%
Other (including inter-segment revenue eliminations)
—

 
—%
 
(1.4
)
 
—%
 
0.1

 
—%
Total revenues from product sales and services
$
4,623.7

 
100%
 
$
5,691.4

 
100%
 
$
5,872.7

 
100%
 
 
 
 
 
 
 
 
 
 
 
 
Sales margin:
 
 
 
 
 
 
 
 
 
 
 
U.S. Iron Ore
$
710.4

 
 
 
$
901.9

 
 
 
$
976.2

 
 
Asia Pacific Iron Ore
121.7

 
 
 
367.1

 
 
 
311.0

 
 
North American Coal
(135.8
)
 
 
 
(14.5
)
 
 
 
(1.8
)
 
 
Eastern Canadian Iron Ore
(244.9
)
 
 
 
(103.3
)
 
 
 
(121.4
)
 
 
Other (including inter-segment sales margin eliminations)
—

 
 
 
(1.9
)
 
 
 
8.1

 
 
Sales margin
451.4

 
 
 
1,149.3

 
 
 
1,172.1

 
 
Other operating income (expense)
(9,896.7
)
 
 
 
(478.3
)
 
 
 
(1,480.9
)
 
 
Other income (expense)
(158.4
)
 
 
 
(181.7
)
 
 
 
(193.0
)
 
 
Income (loss) from continuing operations before income taxes and equity income (loss) from ventures
$
(9,603.7
)
 
 
 
$
489.3

 
 
 
$
(501.8
)
 
 
 
(In Millions)
 
2014
 
2013
 
2012
 
 
 
 
 
 
Net Income (Loss)
$
(8,311.6
)
 
$
361.8

 
$
(1,126.6
)
Less:
 
 
 
 
 
Interest expense, net
(185.2
)
 
(179.1
)
 
(195.6
)
Income tax benefit (expense)
1,302.0

 
(55.1
)
 
(255.9
)
Depreciation, depletion and amortization
(504.0
)
 
(593.3
)
 
(525.8
)
EBITDA
$
(8,924.4
)
 
$
1,189.3

 
$
(149.3
)
Less:
 
 
 
 
 
Impairment of goodwill and other long-lived assets
$
(9,029.9
)
 
$
(250.8
)
 
$
(1,049.9
)
Impairment of equity method investment
—

 
—

 
(365.4
)
Loss on sale of Cliffs Logan County Coal
(419.6
)
 
—

 
—

Wabush mine impact
(158.7
)
 
(72.7
)
 
(30.1
)
Bloom Lake mine impact
(137.9
)
 
46.5

 
6.4

Foreign exchange remeasurement
30.7

 
64.0

 
(3.2
)
Proxy contest and change in control costs in SG&A
(26.6
)
 
—

 
—

Litigation judgment
(96.3
)
 
(9.6
)
 
—

Severance in SG&A
(15.8
)
 
(16.4
)
 
—

Total Adjusted EBITDA
$
929.7

 
$
1,428.3

 
$
1,292.9

 
 
 
 
 
 
EBITDA:
 
 
 
 
 
U.S. Iron Ore
$
805.6

 
$
1,000.1

 
$
1,045.3

Asia Pacific Iron Ore
(369.8
)
 
500.4

 
387.3

North American Coal
(1,326.8
)
 
129.5

 
74.0

Eastern Canadian Iron Ore
(7,673.9
)
 
(192.8
)
 
(1,103.3
)
Other
(359.5
)
 
(247.9
)
 
(552.6
)
Total EBITDA
$
(8,924.4
)
 
$
1,189.3

 
$
(149.3
)
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
U.S. Iron Ore
$
831.2

 
$
1,030.8

 
$
1,085.6

Asia Pacific Iron Ore
264.6

 
525.7

 
402.1

North American Coal
(28.5
)
 
154.0

 
106.7

Eastern Canadian Iron Ore
—

 
—

 
—

Other
(137.6
)
 
(282.2
)
 
(301.5
)
Total Adjusted EBITDA
$
929.7

 
$
1,428.3

 
$
1,292.9

 
(In Millions)
 
2014
 
2013
 
2012
Depreciation, depletion and amortization:
 
 
 
 
 
U.S. Iron Ore
$
107.4

 
$
120.3

 
$
100.9

Asia Pacific Iron Ore
145.9

 
153.7

 
151.9

North American Coal
106.9

 
128.9

 
98.2

Eastern Canadian Iron Ore
135.6

 
178.5

 
160.2

Other
8.2

 
11.9

 
14.6

Total depreciation, depletion and amortization
$
504.0

 
$
593.3

 
$
525.8

 
 
 
 
 
 
Capital additions1:
 
 
 
 
 
U.S. Iron Ore
$
48.4

 
$
53.3

 
$
168.8

Asia Pacific Iron Ore
10.8

 
13.0

 
87.7

North American Coal
28.8

 
55.0

 
144.1

Eastern Canadian Iron Ore
141.2

 
625.5

 
865.2

Other
6.3

 
5.5

 
69.5

Total capital additions
$
235.5

 
$
752.3

 
$
1,335.3

                                         
1 Includes capital lease additions and non-cash accruals. Refer to NOTE 17 - CASH FLOW INFORMATION.
A summary of assets by segment is as follows:
 
(In Millions)
 
December 31,
2014
 
December 31, 2013
 
December 31, 2012
Assets:
 
 
 
 
 
U.S. Iron Ore
$
1,598.3

 
$
1,671.6

 
$
1,735.1

Asia Pacific Iron Ore
274.6

 
1,078.4

 
1,506.3

North American Coal
274.2

 
1,841.8

 
1,877.8

Eastern Canadian Iron Ore
305.8

 
7,915.5

 
7,605.1

Other
164.3

 
455.6

 
570.9

Total segment assets
2,617.2

 
12,962.9

 
13,295.2

Corporate
546.8

 
159.0

 
279.7

Total assets
$
3,164.0

 
$
13,121.9

 
$
13,574.9


Included in the consolidated financial statements are the following amounts relating to geographic location:
 
(In Millions)
 
2014
 
2013
 
2012
Revenue
 
 
 
 
 
United States
$
2,139.4

 
$
1,857.6

 
$
2,108.5

China
1,049.0

 
1,909.4

 
2,008.2

Canada
439.1

 
871.2

 
728.1

Other countries
996.2

 
1,053.2

 
1,027.9

Total revenue
$
4,623.7

 
$
5,691.4

 
$
5,872.7

Property, Plant and Equipment, Net
 
 
 
 
 
United States
$
1,093.7

 
$
2,721.6

 
$
2,795.3

Australia
72.4

 
751.0

 
1,042.4

Canada
248.8

 
7,680.8

 
7,369.6

Total Property, Plant and Equipment, Net
$
1,414.9

 
$
11,153.4

 
$
11,207.3


Concentrations in Revenue
In 2014, two customers accounted for more than 10 percent of our consolidated product revenue. In 2013 and 2012, one customer in each year individually accounted for more than 10 percent of our consolidated product revenue. Total revenue from these customers accounted for more than 10 percent of our consolidated product revenues and represents approximately $1.6 billion, $1.0 billion and $0.9 billion of our total consolidated product revenue in 2014, 2013 and 2012, respectively, and is attributable to our U.S. Iron Ore, North American Coal and Eastern Canadian Iron Ore business segments.
The following table represents the percentage of our total revenue contributed by each category of products and services in 2014, 2013, and 2012:
 
 
2014
 
2013
 
2012
Revenue Category
 
 
 
 
 
 
Iron ore
 
78
%
 
80
%
 
81
%
Coal
 
12
%
 
13
%
 
13
%
Freight and venture partners’ cost reimbursements
 
10
%
 
7
%
 
6
%
Total revenue
 
100
%
 
100
%
 
100
%