| 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 DecemberÌý31, 2014 is comprised of our two low-volatile metallurgical coal operations that provide metallurgical coal primarily to the integrated steel industry. Effective DecemberÌý31, 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 DecemberÌý31, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
2014 |
Ìý |
2013 |
Ìý |
2012 |
Revenues from product sales and services: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
2,506.5 |
|
Ìý |
54% |
Ìý |
$ |
2,667.9 |
|
Ìý |
47% |
Ìý |
$ |
2,723.3 |
|
Ìý |
46% |
Asia Pacific Iron Ore |
866.7 |
|
Ìý |
19% |
Ìý |
1,224.3 |
|
Ìý |
22% |
Ìý |
1,259.3 |
|
Ìý |
22% |
North American Coal |
687.1 |
|
Ìý |
15% |
Ìý |
821.9 |
|
Ìý |
14% |
Ìý |
881.1 |
|
Ìý |
15% |
Eastern Canadian Iron Ore |
563.4 |
|
Ìý |
12% |
Ìý |
978.7 |
|
Ìý |
17% |
Ìý |
1,008.9 |
|
Ìý |
17% |
Other (including inter-segment revenue eliminations) |
— |
|
Ìý |
—% |
Ìý |
(1.4 |
) |
Ìý |
—% |
Ìý |
0.1 |
|
Ìý |
—% |
Total revenues from product sales and services |
$ |
4,623.7 |
|
Ìý |
100% |
Ìý |
$ |
5,691.4 |
|
Ìý |
100% |
Ìý |
$ |
5,872.7 |
|
Ìý |
100% |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Sales margin: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
710.4 |
|
Ìý |
Ìý |
Ìý |
$ |
901.9 |
|
Ìý |
Ìý |
Ìý |
$ |
976.2 |
|
Ìý |
Ìý |
Asia Pacific Iron Ore |
121.7 |
|
Ìý |
Ìý |
Ìý |
367.1 |
|
Ìý |
Ìý |
Ìý |
311.0 |
|
Ìý |
Ìý |
North American Coal |
(135.8 |
) |
Ìý |
Ìý |
Ìý |
(14.5 |
) |
Ìý |
Ìý |
Ìý |
(1.8 |
) |
Ìý |
Ìý |
Eastern Canadian Iron Ore |
(244.9 |
) |
Ìý |
Ìý |
Ìý |
(103.3 |
) |
Ìý |
Ìý |
Ìý |
(121.4 |
) |
Ìý |
Ìý |
Other (including inter-segment sales margin eliminations) |
— |
|
Ìý |
Ìý |
Ìý |
(1.9 |
) |
Ìý |
Ìý |
Ìý |
8.1 |
|
Ìý |
Ìý |
Sales margin |
451.4 |
|
Ìý |
Ìý |
Ìý |
1,149.3 |
|
Ìý |
Ìý |
Ìý |
1,172.1 |
|
Ìý |
Ìý |
Other operating income (expense) |
(9,896.7 |
) |
Ìý |
Ìý |
Ìý |
(478.3 |
) |
Ìý |
Ìý |
Ìý |
(1,480.9 |
) |
Ìý |
Ìý |
Other income (expense) |
(158.4 |
) |
Ìý |
Ìý |
Ìý |
(181.7 |
) |
Ìý |
Ìý |
Ìý |
(193.0 |
) |
Ìý |
Ìý |
Income (loss) from continuing operations before income taxes and equity income (loss) from ventures |
$ |
(9,603.7 |
) |
Ìý |
Ìý |
Ìý |
$ |
489.3 |
|
Ìý |
Ìý |
Ìý |
$ |
(501.8 |
) |
Ìý |
Ìý |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
2014 |
Ìý |
2013 |
Ìý |
2012 |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Net Income (Loss) |
$ |
(8,311.6 |
) |
Ìý |
$ |
361.8 |
|
Ìý |
$ |
(1,126.6 |
) |
Less: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Interest expense, net |
(185.2 |
) |
Ìý |
(179.1 |
) |
Ìý |
(195.6 |
) |
Income tax benefit (expense) |
1,302.0 |
|
Ìý |
(55.1 |
) |
Ìý |
(255.9 |
) |
Depreciation, depletion and amortization |
(504.0 |
) |
Ìý |
(593.3 |
) |
Ìý |
(525.8 |
) |
EBITDA |
$ |
(8,924.4 |
) |
Ìý |
$ |
1,189.3 |
|
Ìý |
$ |
(149.3 |
) |
Less: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Impairment of goodwill and other long-lived assets |
$ |
(9,029.9 |
) |
Ìý |
$ |
(250.8 |
) |
Ìý |
$ |
(1,049.9 |
) |
Impairment of equity method investment |
— |
|
Ìý |
— |
|
Ìý |
(365.4 |
) |
Loss on sale of Cliffs Logan County Coal |
(419.6 |
) |
Ìý |
— |
|
Ìý |
— |
|
Wabush mine impact |
(158.7 |
) |
Ìý |
(72.7 |
) |
Ìý |
(30.1 |
) |
Bloom Lake mine impact |
(137.9 |
) |
Ìý |
46.5 |
|
Ìý |
6.4 |
|
Foreign exchange remeasurement |
30.7 |
|
Ìý |
64.0 |
|
Ìý |
(3.2 |
) |
Proxy contest and change in control costs in SG&A |
(26.6 |
) |
Ìý |
— |
|
Ìý |
— |
|
Litigation judgment |
(96.3 |
) |
Ìý |
(9.6 |
) |
Ìý |
— |
|
Severance in SG&A |
(15.8 |
) |
Ìý |
(16.4 |
) |
Ìý |
— |
|
Total Adjusted EBITDA |
$ |
929.7 |
|
Ìý |
$ |
1,428.3 |
|
Ìý |
$ |
1,292.9 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
EBITDA: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
805.6 |
|
Ìý |
$ |
1,000.1 |
|
Ìý |
$ |
1,045.3 |
|
Asia Pacific Iron Ore |
(369.8 |
) |
Ìý |
500.4 |
|
Ìý |
387.3 |
|
North American Coal |
(1,326.8 |
) |
Ìý |
129.5 |
|
Ìý |
74.0 |
|
Eastern Canadian Iron Ore |
(7,673.9 |
) |
Ìý |
(192.8 |
) |
Ìý |
(1,103.3 |
) |
Other |
(359.5 |
) |
Ìý |
(247.9 |
) |
Ìý |
(552.6 |
) |
Total EBITDA |
$ |
(8,924.4 |
) |
Ìý |
$ |
1,189.3 |
|
Ìý |
$ |
(149.3 |
) |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Adjusted EBITDA: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
831.2 |
|
Ìý |
$ |
1,030.8 |
|
Ìý |
$ |
1,085.6 |
|
Asia Pacific Iron Ore |
264.6 |
|
Ìý |
525.7 |
|
Ìý |
402.1 |
|
North American Coal |
(28.5 |
) |
Ìý |
154.0 |
|
Ìý |
106.7 |
|
Eastern Canadian Iron Ore |
— |
|
Ìý |
— |
|
Ìý |
— |
|
Other |
(137.6 |
) |
Ìý |
(282.2 |
) |
Ìý |
(301.5 |
) |
Total Adjusted EBITDA |
$ |
929.7 |
|
Ìý |
$ |
1,428.3 |
|
Ìý |
$ |
1,292.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
2014 |
Ìý |
2013 |
Ìý |
2012 |
Depreciation, depletion and amortization: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
107.4 |
|
Ìý |
$ |
120.3 |
|
Ìý |
$ |
100.9 |
|
Asia Pacific Iron Ore |
145.9 |
|
Ìý |
153.7 |
|
Ìý |
151.9 |
|
North American Coal |
106.9 |
|
Ìý |
128.9 |
|
Ìý |
98.2 |
|
Eastern Canadian Iron Ore |
135.6 |
|
Ìý |
178.5 |
|
Ìý |
160.2 |
|
Other |
8.2 |
|
Ìý |
11.9 |
|
Ìý |
14.6 |
|
Total depreciation, depletion and amortization |
$ |
504.0 |
|
Ìý |
$ |
593.3 |
|
Ìý |
$ |
525.8 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Capital additions1:
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
48.4 |
|
Ìý |
$ |
53.3 |
|
Ìý |
$ |
168.8 |
|
Asia Pacific Iron Ore |
10.8 |
|
Ìý |
13.0 |
|
Ìý |
87.7 |
|
North American Coal |
28.8 |
|
Ìý |
55.0 |
|
Ìý |
144.1 |
|
Eastern Canadian Iron Ore |
141.2 |
|
Ìý |
625.5 |
|
Ìý |
865.2 |
|
Other |
6.3 |
|
Ìý |
5.5 |
|
Ìý |
69.5 |
|
Total capital additions |
$ |
235.5 |
|
Ìý |
$ |
752.3 |
|
Ìý |
$ |
1,335.3 |
|
ÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌý
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
DecemberÌý31,
2014 |
Ìý |
DecemberÌý31, 2013 |
Ìý |
DecemberÌý31, 2012 |
Assets: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
U.S. Iron Ore |
$ |
1,598.3 |
|
Ìý |
$ |
1,671.6 |
|
Ìý |
$ |
1,735.1 |
|
Asia Pacific Iron Ore |
274.6 |
|
Ìý |
1,078.4 |
|
Ìý |
1,506.3 |
|
North American Coal |
274.2 |
|
Ìý |
1,841.8 |
|
Ìý |
1,877.8 |
|
Eastern Canadian Iron Ore |
305.8 |
|
Ìý |
7,915.5 |
|
Ìý |
7,605.1 |
|
Other |
164.3 |
|
Ìý |
455.6 |
|
Ìý |
570.9 |
|
Total segment assets |
2,617.2 |
|
Ìý |
12,962.9 |
|
Ìý |
13,295.2 |
|
Corporate |
546.8 |
|
Ìý |
159.0 |
|
Ìý |
279.7 |
|
Total assets |
$ |
3,164.0 |
|
Ìý |
$ |
13,121.9 |
|
Ìý |
$ |
13,574.9 |
|
Included in the consolidated financial statements are the following amounts relating to geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
2014 |
Ìý |
2013 |
Ìý |
2012 |
Revenue |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
United States |
$ |
2,139.4 |
|
Ìý |
$ |
1,857.6 |
|
Ìý |
$ |
2,108.5 |
|
China |
1,049.0 |
|
Ìý |
1,909.4 |
|
Ìý |
2,008.2 |
|
Canada |
439.1 |
|
Ìý |
871.2 |
|
Ìý |
728.1 |
|
Other countries |
996.2 |
|
Ìý |
1,053.2 |
|
Ìý |
1,027.9 |
|
Total revenue |
$ |
4,623.7 |
|
Ìý |
$ |
5,691.4 |
|
Ìý |
$ |
5,872.7 |
|
Property, Plant and Equipment, Net |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
United States |
$ |
1,093.7 |
|
Ìý |
$ |
2,721.6 |
|
Ìý |
$ |
2,795.3 |
|
Australia |
72.4 |
|
Ìý |
751.0 |
|
Ìý |
1,042.4 |
|
Canada |
248.8 |
|
Ìý |
7,680.8 |
|
Ìý |
7,369.6 |
|
Total Property, Plant and Equipment, Net |
$ |
1,414.9 |
|
Ìý |
$ |
11,153.4 |
|
Ìý |
$ |
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:
|
|
|
|
|
|
|
|
|
|
|
Ìý |
Ìý |
2014 |
Ìý |
2013 |
Ìý |
2012 |
Revenue Category |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Iron ore |
Ìý |
78 |
% |
Ìý |
80 |
% |
Ìý |
81 |
% |
Coal |
Ìý |
12 |
% |
Ìý |
13 |
% |
Ìý |
13 |
% |
Freight and venture partners’ cost reimbursements |
Ìý |
10 |
% |
Ìý |
7 |
% |
Ìý |
6 |
% |
Total revenue |
Ìý |
100 |
% |
Ìý |
100 |
% |
Ìý |
100 |
% |
|