NOTE 3 - SEGMENT REPORTING
In alignment with our strategic goals, our Company’s continuing operations are organized and managed in two business units according to our differentiated products. The former 'U.S. Iron Ore' segment is now 'Mining and Pelletizing.' 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. In addition, the Toledo HBI business will be categorized under the segment 'Metallics.' In our Metallics segment, we are currently constructing an HBI production plant in Toledo, Ohio. We expect to complete construction and begin production in 2020.
We evaluate 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 is 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 Income from continuing operations before income taxes and a reconciliation of Net income to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
2017 |
2016 |
Revenues from product sales and services: |
|
|
|
|
|
Mining and Pelletizing |
$ |
2,332.4 |
|
|
$ |
1,866.0 |
|
|
$ |
1,554.5 |
|
|
|
|
|
|
|
Sales margin: |
|
|
|
|
|
Mining and Pelletizing |
$ |
809.6 |
|
|
$ |
467.6 |
|
|
$ |
280.1 |
|
Other operating expense |
(136.4 |
) |
|
(77.4 |
) |
|
(149.4 |
) |
Other expense |
(108.5 |
) |
|
(282.0 |
) |
|
(20.3 |
) |
Income from continuing operations before income taxes |
$ |
564.7 |
|
|
$ |
108.2 |
|
|
$ |
110.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2018 |
|
2017 |
|
2016 |
Net income |
$ |
1,128.1 |
|
|
$ |
363.1 |
|
|
$ |
199.3 |
|
Less: |
|
|
|
|
|
Interest expense, net |
(121.3 |
) |
|
(132.0 |
) |
|
(200.5 |
) |
Income tax benefit |
460.3 |
|
|
252.4 |
|
|
12.2 |
|
Depreciation, depletion and amortization |
(89.0 |
) |
|
(87.7 |
) |
|
(115.4 |
) |
Total EBITDA |
$ |
878.1 |
|
|
$ |
330.4 |
|
|
$ |
503.0 |
|
Less: |
|
|
|
|
|
Gain (loss) on extinguishment/restructuring of debt |
$ |
(6.8 |
) |
|
$ |
(165.4 |
) |
|
$ |
166.3 |
|
Impact of discontinued operations |
120.6 |
|
|
22.0 |
|
|
108.4 |
|
Foreign exchange remeasurement |
(0.9 |
) |
|
13.9 |
|
|
(17.8 |
) |
Impairment of long-lived assets |
(1.1 |
) |
|
— |
|
|
— |
|
Total Adjusted EBITDA |
$ |
766.3 |
|
|
$ |
459.9 |
|
|
$ |
246.1 |
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
Mining and Pelletizing |
$ |
852.9 |
|
|
$ |
534.9 |
|
|
$ |
342.4 |
|
Metallics |
(3.3 |
) |
|
(0.4 |
) |
|
— |
|
Corporate and Other1
|
28.5 |
|
|
(204.1 |
) |
|
160.6 |
|
Total EBITDA |
$ |
878.1 |
|
|
$ |
330.4 |
|
|
$ |
503.0 |
|
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
Mining and Pelletizing |
$ |
875.3 |
|
|
$ |
559.4 |
|
|
$ |
359.6 |
|
Metallics |
(3.3 |
) |
|
(0.4 |
) |
|
— |
|
Corporate |
(105.7 |
) |
|
(99.1 |
) |
|
(113.5 |
) |
Total Adjusted EBITDA |
$ |
766.3 |
|
|
$ |
459.9 |
|
|
$ |
246.1 |
|
|
|
|
|
|
|
1 Corporate and Other includes activity from discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2018 |
|
2017 |
|
2016 |
Depreciation, depletion and amortization: |
|
|
|
|
|
Mining and Pelletizing |
$ |
68.2 |
|
|
$ |
66.6 |
|
|
$ |
84.0 |
|
Corporate |
5.6 |
|
|
6.8 |
|
|
6.3 |
|
Total depreciation, depletion and amortization |
$ |
73.8 |
|
|
$ |
73.4 |
|
|
$ |
90.3 |
|
|
|
|
|
|
|
Capital additions1:
|
|
|
|
|
|
Mining and Pelletizing |
$ |
145.0 |
|
|
$ |
136.8 |
|
|
$ |
62.2 |
|
Metallics |
248.1 |
|
|
13.7 |
|
|
— |
|
Corporate and Other |
1.6 |
|
|
2.7 |
|
|
6.1 |
|
Total capital additions |
$ |
394.7 |
|
|
$ |
153.2 |
|
|
$ |
68.3 |
|
|
|
|
|
|
|
1 Includes capital lease additions and non-cash accruals. Refer to NOTE 16 - CASH FLOW INFORMATION.
|
A summary of assets by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
December 31,
2018 |
|
December 31, 2017 |
|
December 31, 2016 |
Assets: |
|
|
|
|
|
Mining and Pelletizing |
$ |
1,694.1 |
|
|
$ |
1,500.6 |
|
|
$ |
1,372.5 |
|
Metallics |
265.9 |
|
|
13.4 |
|
|
— |
|
Total segment assets |
1,960.0 |
|
|
1,514.0 |
|
|
1,372.5 |
|
Corporate |
1,557.2 |
|
|
1,300.6 |
|
|
396.3 |
|
Assets of discontinued operations |
12.4 |
|
|
138.8 |
|
|
155.1 |
|
Total assets |
$ |
3,529.6 |
|
|
$ |
2,953.4 |
|
|
$ |
1,923.9 |
|
Included in the consolidated financial statements are the following amounts relating to geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
2018 |
|
2017 |
|
2016 |
Revenues from product sales and services: |
|
|
|
|
|
United States |
$ |
1,847.3 |
|
|
$ |
1,504.5 |
|
|
$ |
1,236.2 |
|
Canada |
395.1 |
|
|
206.2 |
|
|
267.1 |
|
Other countries |
90.0 |
|
|
155.3 |
|
|
51.2 |
|
Total revenues from product sales and services |
$ |
2,332.4 |
|
|
$ |
1,866.0 |
|
|
$ |
1,554.5 |
|
Property, plant and equipment, net: |
|
|
|
|
|
United States |
$ |
1,286.0 |
|
|
$ |
1,033.8 |
|
|
$ |
961.0 |
|
Concentrations in Revenue
In 2018 and 2017, three customers individually accounted for more than 10% of our consolidated product revenue and in 2016, two customers individually accounted for more than 10% of our consolidated product revenue. Total product revenue from those customers represents $2.1 billion, $1.5 billion and $1.1 billion of our total consolidated product revenue in 2018, 2017 and 2016, respectively.
The following table represents the percentage of our total Revenues from product sales and services contributed by each category of products and services:
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
2017 |
|
2016 |
Revenue category: |
|
|
|
|
|
|
Product |
|
93 |
% |
|
88 |
% |
|
89 |
% |
Freight and venture partners’ cost reimbursements |
|
7 |
% |
|
12 |
% |
|
11 |
% |
Total revenues from product sales and services |
|
100 |
% |
|
100 |
% |
|
100 |
% |