|
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. 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. In 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.
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, segment sales margin to total sales margin and a reconciliation of Net income to EBITDA and Adjusted EBITDA:ÌýÌýÌýÌý
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
Three Months Ended
June 30, 2019
|
Ìý |
Six Months Ended
June 30, 2019 |
Ìý |
Mining and Pelletizing |
Ìý |
Metallics |
Ìý |
Total |
Ìý |
Mining and Pelletizing |
Ìý |
Metallics |
Ìý |
Total |
Operating segment revenues from product sales and services |
$ |
747.2 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
747.2 |
|
Ìý |
$ |
904.2 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
904.2 |
|
Elimination of intersegment revenues |
(4.0 |
) |
Ìý |
— |
|
Ìý |
(4.0 |
) |
Ìý |
(4.0 |
) |
Ìý |
— |
|
Ìý |
(4.0 |
) |
Total revenue |
$ |
743.2 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
743.2 |
|
Ìý |
$ |
900.2 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
900.2 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Operating segment sales margin |
$ |
264.6 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
264.6 |
|
Ìý |
$ |
295.5 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
295.5 |
|
Elimination of intersegment sales margin |
(1.6 |
) |
Ìý |
— |
|
Ìý |
(1.6 |
) |
Ìý |
(1.6 |
) |
Ìý |
— |
|
Ìý |
(1.6 |
) |
Total sales margin |
$ |
263.0 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
263.0 |
|
Ìý |
$ |
293.9 |
|
Ìý |
$ |
— |
|
Ìý |
$ |
293.9 |
|
Revenues from product sales and services of $714.3 million and $894.3 million, respectively, and sales margin of $284.5 million and $346.0 million, respectively, related to our Mining and Pelletizing segment accounted for all of our consolidated revenues and sales margin for the three and six months ended JuneÌý30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
Three Months Ended
June 30, |
Ìý |
Six Months Ended
June 30, |
Ìý |
2019 |
Ìý |
2018 |
Ìý |
2019 |
Ìý |
2018 |
Net income |
$ |
160.8 |
|
Ìý |
$ |
165.1 |
|
Ìý |
$ |
138.7 |
|
Ìý |
$ |
80.8 |
|
Less: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Interest expense, net |
(26.3 |
) |
Ìý |
(32.3 |
) |
Ìý |
(51.4 |
) |
Ìý |
(65.8 |
) |
Income tax benefit (expense) |
(22.0 |
) |
Ìý |
1.8 |
|
Ìý |
(18.3 |
) |
Ìý |
(13.9 |
) |
Depreciation, depletion and amortization |
(21.0 |
) |
Ìý |
(25.5 |
) |
Ìý |
(40.9 |
) |
Ìý |
(49.4 |
) |
EBITDA |
$ |
230.1 |
|
Ìý |
$ |
221.1 |
|
Ìý |
$ |
249.3 |
|
Ìý |
$ |
209.9 |
|
Less: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Foreign exchange remeasurement |
$ |
(0.1 |
) |
Ìý |
$ |
(0.1 |
) |
Ìý |
$ |
— |
|
Ìý |
$ |
(0.5 |
) |
Impact of discontinued operations |
(0.4 |
) |
Ìý |
(54.7 |
) |
Ìý |
(0.4 |
) |
Ìý |
(117.8 |
) |
Gain (loss) on extinguishment of debt |
(17.9 |
) |
Ìý |
0.2 |
|
Ìý |
(18.2 |
) |
Ìý |
0.2 |
|
Severance costs |
— |
|
Ìý |
— |
|
Ìý |
(1.7 |
) |
Ìý |
— |
|
Adjusted EBITDA |
$ |
248.5 |
|
Ìý |
$ |
275.7 |
|
Ìý |
$ |
269.6 |
|
Ìý |
$ |
328.0 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
EBITDA: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Mining and Pelletizing |
$ |
274.6 |
|
Ìý |
$ |
296.0 |
|
Ìý |
$ |
317.4 |
|
Ìý |
$ |
368.5 |
|
Metallics |
(1.1 |
) |
Ìý |
(1.2 |
) |
Ìý |
(1.9 |
) |
Ìý |
(1.5 |
) |
Corporate and Other (including discontinued operations) |
(43.4 |
) |
Ìý |
(73.7 |
) |
Ìý |
(66.2 |
) |
Ìý |
(157.1 |
) |
Total EBITDA |
$ |
230.1 |
|
Ìý |
$ |
221.1 |
|
Ìý |
$ |
249.3 |
|
Ìý |
$ |
209.9 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Adjusted EBITDA: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Mining and Pelletizing |
$ |
280.5 |
|
Ìý |
$ |
301.3 |
|
Ìý |
$ |
328.0 |
|
Ìý |
$ |
378.4 |
|
Metallics |
(1.1 |
) |
Ìý |
(1.2 |
) |
Ìý |
(1.9 |
) |
Ìý |
(1.5 |
) |
Corporate |
(30.9 |
) |
Ìý |
(24.4 |
) |
Ìý |
(56.5 |
) |
Ìý |
(48.9 |
) |
Total Adjusted EBITDA |
$ |
248.5 |
|
Ìý |
$ |
275.7 |
|
Ìý |
$ |
269.6 |
|
Ìý |
$ |
328.0 |
|
The following table summarizes our depreciation, depletion and amortization expense and capital additions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
Three Months Ended
June 30, |
Ìý |
Six Months Ended
June 30, |
Ìý |
2019 |
Ìý |
2018 |
Ìý |
2019 |
Ìý |
2018 |
Depreciation, depletion and amortization: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Mining and Pelletizing |
$ |
19.6 |
|
Ìý |
$ |
15.6 |
|
Ìý |
$ |
38.1 |
|
Ìý |
$ |
31.4 |
|
Corporate |
1.4 |
|
Ìý |
1.4 |
|
Ìý |
2.8 |
|
Ìý |
2.8 |
|
Total depreciation, depletion and amortization |
$ |
21.0 |
|
Ìý |
$ |
17.0 |
|
Ìý |
$ |
40.9 |
|
Ìý |
$ |
34.2 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Capital additions1:
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Mining and Pelletizing |
$ |
35.6 |
|
Ìý |
$ |
26.7 |
|
Ìý |
$ |
82.4 |
|
Ìý |
$ |
45.4 |
|
Metallics |
155.1 |
|
Ìý |
43.0 |
|
Ìý |
237.5 |
|
Ìý |
103.0 |
|
Corporate |
0.9 |
|
Ìý |
0.7 |
|
Ìý |
1.0 |
|
Ìý |
0.9 |
|
Total capital additions |
$ |
191.6 |
|
Ìý |
$ |
70.4 |
|
Ìý |
$ |
320.9 |
|
Ìý |
$ |
149.3 |
|
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
1 Refer to NOTE 17 - CASH FLOW INFORMATION for additional information.
|
A summary of assets by segment is as follows:
|
|
|
|
|
|
|
|
|
Ìý |
(In Millions) |
Ìý |
JuneÌý30,
2019 |
Ìý |
DecemberÌý31,
2018 |
Assets: |
Ìý |
Ìý |
Ìý |
Mining and Pelletizing |
$ |
1,893.9 |
|
Ìý |
$ |
1,694.1 |
|
Metallics |
514.7 |
|
Ìý |
265.9 |
|
Total segment assets |
2,408.6 |
|
Ìý |
1,960.0 |
|
Corporate and Other (including discontinued operations) |
984.6 |
|
Ìý |
1,569.6 |
|
Total assets |
$ |
3,393.2 |
|
Ìý |
$ |
3,529.6 |
|
|