Segment Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

NOTE 12—SEGMENT INFORMATION

Segment information is prepared on the same basis that our chief operating decision-maker (“CODM”), who is our chief executive officer, manages the segments, evaluates financial results, and makes key operating decisions, and for which discrete financial information is available. As of March 31, 2017, the Company had two reportable segments: Real Alloy North America (“RANA”) and Real Alloy Europe (“RAEU”).

Measurement of segment profitability

Our CODM and management use several measures of performance for our reportable segments, including earnings before interest, taxes, depreciation and amortization and excludes certain other items (“Segment Adjusted EBITDA”). We use Segment Adjusted EBITDA as our primary financial performance metric and believe this measure provides additional information commonly used by holders of our common stock, as well as the holders of the Senior Secured Notes and parties to the revolving credit facilities with respect to the ongoing performance of our underlying business activities. In addition, Segment Adjusted EBITDA is a component of certain covenants under the Indenture governing the Senior Secured Notes.

Our Segment Adjusted EBITDA calculations represent segment earnings (loss) before interest, taxes, depreciation and amortization, unrealized gains and losses on derivative financial instruments, charges and expenses related to acquisitions, and certain other gains and losses. Segment Adjusted EBITDA as we use it may not be comparable to similarly titled measures used by other companies. We calculate Segment Adjusted EBITDA by eliminating the impact of a number of items we do not consider indicative of our ongoing operating performance and certain other items. Readers are encouraged to evaluate each adjustment shown in the reconciliation and the reasons we consider it appropriate for supplemental analysis, however, Segment Adjusted EBITDA is not a financial measurement calculated and presented in accordance with GAAP. When analyzing our operating performance, we encourage investors to use Segment Adjusted EBITDA in addition to, and not as an alternative for, net earnings (loss) derived in accordance with GAAP. Segment Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation, or as a substitute for, or superior to, our measures of financial performance prepared in accordance with GAAP.

These limitations include, but are not limited to the following:

• Segment Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• Segment Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;

• Segment Adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest and/or principal payments under the Senior Secured Notes or the revolving credit facilities;

• Segment Adjusted EBITDA does not reflect certain tax payments that may represent a reduction in cash available to us;

• Segment Adjusted EBITDA does not reflect the operating results of Corporate and Other; and

• Although depreciation and amortization are noncash charges, the assets being depreciated and amortized may have to be replaced in the future, and Segment Adjusted EBITDA does not reflect cash requirements for such replacements.

Other companies, including companies in our industry, may calculate Segment Adjusted EBITDA differently and the degree of their usefulness as a comparative measure correspondingly decreases as the number of differences in computations increase.

In addition, in evaluating Segment Adjusted EBITDA it should be noted that in the future we may incur expenses similar to the adjustments in the below presentation. Our presentation of Segment Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Segment assets and liabilities

Certain of the Company’s assets and liabilities have not been allocated to our reportable segments, including Corporate and Other cash and cash equivalents, the common stock warrant liability, deferred income taxes, and long-term debt, none of which our CODM uses to evaluate the performance of our reportable segments. Additionally, certain of the Company’s corporate administrative expenses are not allocated to the reportable segments.

Reportable segment information

The following tables show segment revenues from external customers (there were no intersegment revenues) and Segment Adjusted EBITDA for the three months ended March 31, 2017 and 2016, and reconciliations of Segment Adjusted EBITDA to net loss for each period presented. Segment Adjusted EBITDA presents only the financial performance of our segments and does not include the results of operations of Corporate and Other.

	Three Months Ended March 31, 2017
(In millions)	RANA		RAEU		Corporate and Other		Total
Revenues	$	225.6	$	111.5	$	—	$	337.1
Segment Adjusted EBITDA	$	6.3	$	6.0			$	12.3

	Three Months Ended March 31, 2016
(In millions)	RANA		RAEU		Corporate and Other		Total
Revenues	$	200.8	$	108.6	$	—	$	309.4
Segment Adjusted EBITDA	$	13.2	$	5.1			$	18.3

	Three Months Ended March 31,
(In millions)	2017			2016
Segment Adjusted EBITDA	$	12.3		$	18.3
Unrealized losses on derivative financial instruments		(0.2	)		(0.4	)
Segment depreciation and amortization		(11.5	)		(14.7	)
Amortization of inventories and supplies purchase accounting adjustments		—			(0.6	)
Corporate and Other selling, general and administrative expenses		(3.2	)		(3.3	)
Other, net		(1.0	)		(1.4	)
Operating loss		(3.6	)		(2.1	)
Interest expense, net		(11.0	)		(9.2	)
Change in fair value of common stock warrant liability		2.5			(0.6	)
Foreign exchange gains on intercompany loans		0.8			2.6
Income from equity method investment		1.1			—
Other nonoperating expense, net		(0.3	)		—
Income tax expense		(0.8	)		(0.7	)
Earnings (loss) from discontinued operations, net of income taxes		—			—
Net loss	$	(11.3	)	$	(10.0	)

The following tables present summarized balance sheet information for each of our reportable segments and reconciliations to consolidated assets and liabilities as of March 31, 2017 and December 31, 2016:

	March 31, 2017				December 31, 2016
(In millions)	RANA		RAEU		RANA		RAEU
Segment Assets
Current assets:
Cash and cash equivalents	$	7.4	$	4.4	$	11.5	$	5.7
Trade accounts receivable, net		96.1		17.8		76.2		12.2
Financing receivable		—		32.5		—		28.4
Inventories		74.9		36.9		79.3		38.9
Prepaid expenses, supplies and other    current assets		19.6		6.6		13.7		6.4
Total current assets		198.0		98.2		180.7		91.6
Property, plant and equipment, net		190.6		96.6		195.0		94.2
Equity method investment		6.1		—		5.0		—
Identifiable intangible assets, net		11.9		—		12.5		—
Goodwill		33.5		8.8		33.6		8.6
Other noncurrent assets		4.9		3.6		5.0		3.5
Total segment assets	$	445.0	$	207.2	$	431.8	$	197.9
Segment Liabilities
Current liabilities:
Trade payables	$	84.2	$	45.2	$	73.8	$	41.8
Accrued liabilities		20.6		16.2		30.0		13.4
Total current liabilities		104.8		61.4		103.8		55.2
Accrued pension benefits		—		42.8		—		42.0
Environmental liabilities		11.6		—		11.6		—
Other noncurrent liabilities		4.6		1.8		4.5		1.8
Total segment liabilities	$	121.0	$	106.0	$	119.9	$	99.0

	March 31,		December 31,
(In millions)	2017		2016
Assets:
Real Alloy North America	$	445.0	$	431.8
Real Alloy Europe		207.2		197.9
Cash and cash equivalents—Corporate and Other		6.7		10.0
Other unallocated assets		4.7		5.8
Total consolidated assets	$	663.6	$	645.5
Liabilities:
Real Alloy North America	$	121.0	$	119.9
Real Alloy Europe		106.0		99.0
Long-term debt		380.2		356.5
Common stock warrant liability		1.9		4.4
Deferred income taxes, net		2.5		2.5
Other unallocated liabilities		4.0		3.8
Total consolidated liabilities	$	615.6	$	586.1