SunCoke Energy Partners, L.P. Announces Fourth Quarter And Full-Year 2016 Results And Provides Full-Year 2017 Guidance

2016 CONSOLIDATED RESULTS⁽¹⁾

Three Months Ended 
December 31,

Years Ended
December 31,

(Dollars in millions)

2016

2015

Increase/
(Decrease)

2016

2015

Increase/
(Decrease)

Sales and other operating revenue

$

218.3

$

217.4

$

0.9

$

779.7

$

838.5

$

(58.8)

Net Income attributable to SXCP⁽²⁾

$

45.9

$

36.3

$

9.6

$

119.1

$

85.4

$

33.7

Adjusted EBITDA⁽³⁾

$

77.4

$

57.6

$

19.8

$

213.0

$

201.3

$

11.7

(1)

The current and prior year periods are not comparable due the contribution of Convent Marine Terminal, which was acquired on August 12, 2015.

(2)

Net income attributable to SXCP includes the impacts of SXCP's 75 percent ownership interest in Granite City from January 13, 2015 through August 12, 2015 and SXCP's 98 percent ownership interest in Granite City from August 13, 2015 through December 31, 2016, respectively.

(3)

See definition of Adjusted EBITDA and reconciliation elsewhere in this release.

Three Months Ended
December 31,

(Dollars in millions)

2016

2015

Sales and other operating revenue

$

164.6

$

182.7

$

(18.1)

Adjusted EBITDA⁽¹⁾

$

36.7

$

39.8

$

(3.1)

Sales Volume (in thousands of tons)

581

583

(2)

Adjusted EBITDA per ton⁽²⁾

$

63.17

$

68.27

$

(5.10)

(1)

See definition of Adjusted EBITDA and reconciliation to GAAP elsewhere in this release.

(2)

Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes.

•

Revenues were lower due primarily to the pass-through of lower coal prices and decreased energy sales due to a turbine failure at our Haverhill facility.

•

Adjusted EBITDA decreased $3.1 million to $36.7 million, primarily reflecting lower energy sales and increased operating costs due to the turbine failure noted above.

Three Months Ended
December 31,

(Dollars in millions)

2016

2015

Increase/
(Decrease)

Sales and other operating revenue

$

53.7

$

34.7

$

19.0

Adjusted EBITDA⁽¹⁾

45.0

21.1

23.9

Tons handled, excluding CMT (thousands of tons)⁽²⁾

3,710

4,160

(450)

Tons handled by CMT (thousands of tons)⁽²⁾

1,731

1,395

336

(1)

See definitions of Adjusted EBITDA and reconciliation elsewhere in this release.

(2)

Reflects inbound tons handled during the period.

•

Revenues were up $19.0 million, driven by a $18.0 million increase in revenue at CMT due primarily to higher deferred revenue recognized in the period related to volume short-falls over the full-year versus only a partial year in 2015, partially offset by lower volumes at KRT and Lake Terminal.

•

Adjusted EBITDA was up $23.9 million, driven primarily by a $21.9 million increase in Adjusted EBITDA at CMT resulting from higher deferred revenue recognized.

•

Adjusted EBITDA represents earnings before interest, (gain) loss on extinguishment of debt, taxes, depreciation and amortization ("EBITDA"), adjusted for changes to our contingent consideration liability related to our acquisition of CMT and the expiration of certain acquired contractual obligations.  Adjusted EBITDA does not represent and should not be considered an alternative to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses.

•

Management believes Adjusted EBITDA is an important measure of the operating performance and liquidity of the Partnership's net assets and its ability to incur and service debt, fund capital expenditures and make distributions. Adjusted EBITDA provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance and liquidity. EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, and they should not be considered an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP.

•

Adjusted EBITDA attributable to SXCP equals Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests.

•

Distributable Cash Flow equals Adjusted EBITDA plus sponsor support and Coal Logistics deferred revenue, less net cash paid for interest expense, ongoing capital expenditures, accruals for replacement capital expenditures, and cash distributions to noncontrolling interests; plus amounts received under the Omnibus Agreement and acquisition expenses deemed to be Expansion Capital under our Partnership Agreement. Distributable Cash Flow is a non-GAAP supplemental financial measure that management and external users of SXCP's financial statements, such as industry analysts, investors, lenders and rating agencies use to assess:

•

SXCP's operating performance as compared to other publicly traded partnerships, without regard to historical cost basis;

•

the ability of SXCP's assets to generate sufficient cash flow to make distributions to SXCP's unitholders;

•

SXCP's ability to incur and service debt and fund capital expenditures; and

•

the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that Distributable Cash Flow provides useful information to investors in assessing SXCP's financial condition and results of operations. Distributable Cash Flow should not be considered an alternative to net income, operating income, cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (GAAP). Distributable Cash Flow has important limitations as an analytical tool because it excludes some, but not all, items that affect net income and net cash provided by operating activities and used in investing activities. Additionally, because Distributable Cash Flow may be defined differently by other companies in the industry, our definition of Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

•

Ongoing capital expenditures ("capex") are capital expenditures made to maintain the existing operating capacity of our assets and/or to extend their useful lives. Ongoing capex also includes new equipment that improves the efficiency, reliability or effectiveness of existing assets. Ongoing capex does not include normal repairs and maintenance, which are expensed as incurred, or significant capital expenditures. For purposes of calculating distributable cash flow, the portion of ongoing capex attributable to SXCP is used.

•

Replacement capital expenditures ("capex") represents an annual accrual necessary to fund SXCP's share of the estimated costs to replace or rebuild our facilities at the end of their working lives. This accrual is estimated based on the average quarterly anticipated replacement capital that we expect to incur over the long term to replace our major capital assets at the end of their working lives. The replacement capex accrual estimate will be subject to review and prospective change by SXCP's general partner at least annually and whenever an event occurs that causes a material adjustment of replacement capex, provided such change is approved by our conflicts committee.

SunCoke Energy Partners, L.P.

Combined and Consolidated Statements of Income

Three Months Ended
December 31,

Years Ended 
December 31,

2016

2015

2016

2015

(Unaudited)

(Unaudited)

(Dollars and units in millions, except per unit amounts)

Revenues

Sales and other operating revenue

$

218.3

$

217.4

$

779.7

$

838.5

Costs and operating expenses

Cost of products sold and operating expenses

128.9

146.9

517.2

599.6

Selling, general and administrative expenses

10.2

9.6

38.7

34.3

Depreciation and amortization expense

20.4

20.4

77.7

67.4

Total costs and operating expenses

159.5

176.9

633.6

701.3

Operating income

58.8

40.5

146.1

137.2

Interest expense, net

12.0

13.8

47.7

48.2

Gain on extinguishment of debt

(0.1)

(10.1)

(25.0)

(0.7)

Income before income tax expense

46.9

36.8

123.4

89.7

Income tax expense (benefit)

0.6

(0.1)

2.0

(2.5)

Net income

$

46.3

$

36.9

$

121.4

$

92.2

Less:  Net income attributable to noncontrolling interests

0.4

0.6

2.3

6.2

Net income attributable to SunCoke Energy Partners, L.P./Previous Owner

$

45.9

$

36.3

$

119.1

$

86.0

Less:  Net income attributable to Previous Owner⁽¹⁾

—

—

—

0.6

Net income attributable to SunCoke Energy Partners, L.P.

$

45.9

$

36.3

$

119.1

$

85.4

General partner's interest in net income

$

10.0

$

3.5

$

23.6

$

8.6

Limited partners' interest in net income

$

35.9

$

32.8

$

95.5

$

77.4

Net income per common unit (basic and diluted)

$

0.78

$

0.71

$

2.07

$

1.92

Net income per subordinated unit (basic and diluted)

$

—

$

0.71

$

—

$

1.71

Weighted average common units outstanding (basic and diluted)

46.2

30.6

46.2

26.2

Weighted average subordinated units outstanding (basic and diluted)

—

15.7

—

15.7

(1)

Reflects net income generated by our Granite City facility prior to the Granite City Dropdown on January 13, 2015.

SunCoke Energy Partners, L.P.

Consolidated Balance Sheets

December 31,

2016

2015

(Unaudited)

(Dollars in millions)

Assets

Cash and cash equivalents

$

41.8

$

48.6

Receivables

39.7

40.0

Receivables from affiliates, net

—

1.4

Inventories

66.9

77.1

Other current assets

1.6

2.0

Total current assets

150.0

169.1

Restricted cash

0.5

17.7

Properties, plants and equipment (net of accumulated depreciation of $352.6 million, and $291.1million at December 31, 2016 and 2015, respectively)

1,294.9

1,326.5

Goodwill

73.5

67.7

Other intangible assets

176.7

187.4

Deferred charges and other assets

0.4

0.5

Total assets

$

1,696.0

$

1,768.9

Liabilities and Equity

Accounts payable

$

47.0

$

45.3

Accrued liabilities

11.7

10.8

Deferred revenue

2.5

2.1

Payable to affiliate, net

4.7

—

Current portion of long-term debt and financing obligation

4.9

1.1

Interest payable

14.7

17.5

Total current liabilities

85.5

76.8

Long-term debt and financing obligation

805.7

894.5

Deferred income taxes

37.9

38.0

Other deferred credits and liabilities

13.2

14.6

Total liabilities

942.3

1,023.9

Equity

Held by public:

Common units 20,800,181, and 20,787,744 units issued at December 31, 2016 and 2015, respectively)

296.9

300.0

Held by parent:

Common units 25,415,696 and 9,705,999 units issued at December 31, 2016 and 2015, respectively)

410.3

211.0

Subordinated units (issued zero units at December 31, 2016 and 15,709,697 units at December 31, 2015)

—

203.3

General partner interest

32.1

15.1

Partners' capital attributable to SunCoke Energy Partners, L.P.

739.3

729.4

Noncontrolling interest

14.4

15.6

Total equity

753.7

745.0

Total liabilities and equity

$

1,696.0

$

1,768.9

SunCoke Energy Partners, L.P.

Combined and Consolidated Statements of Cash Flows

Years Ended December 31,

2016

2015

(Dollars in millions)

Cash Flows from Operating Activities:

Net income

$

121.4

$

92.2

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

77.7

67.4

Deferred income tax benefit

(0.1)

(2.5)

Gain on extinguishment of debt

(25.0)

(0.7)

Changes in working capital pertaining to operating activities (net of the effects of acquisition):

Receivables

0.3

(8.6)

Receivables/payables from affiliate, net

4.7

3.3

Inventories

10.2

15.0

Accounts payable

2.3

(12.1)

Accrued liabilities

0.5

(1.0)

Deferred revenue

0.4

(4.4)

Interest payable

(2.8)

0.5

Other

(6.0)

0.3

Net cash provided by operating activities

183.6

149.4

Cash Flows from Investing Activities:

Capital expenditures

(37.1)

(42.3)

Acquisitions of business, net of cash received

—

(191.7)

Decrease (increase) in restricted cash

17.2

(17.7)

Other investing activities

2.1

—

Net cash used in investing activities

(17.8)

(251.7)

Cash Flows from Financing Activities:

Proceeds from issuance of common units, net of offering costs

—

30.0

Proceeds from issuance of long-term debt

—

260.8

Repayment of long-term debt

(66.1)

(231.3)

Debt issuance costs

(0.2)

(5.3)

Proceeds from revolving credit facility

28.0

232.0

Repayment of revolving credit facility

(38.0)

(50.0)

Proceeds from financing obligation

16.2

—

Repayment of financing obligation

(1.0)

—

Distributions to unitholders (public and parent)

(116.4)

(104.5)

Distributions to noncontrolling interest (SunCoke Energy, Inc.)

(3.5)

(3.6)

Common public unit repurchases

—

(12.8)

Capital contribution from SunCoke Energy Partners GP LLC

8.4

2.3

Net cash (used in) provided by financing activities

(172.6)

117.6

Net (decrease) increase in cash and cash equivalents

(6.8)

15.3

Cash and cash equivalents at beginning of year

48.6

33.3

Cash and cash equivalents at end of year

$

41.8

$

48.6

Supplemental Disclosure of Cash Flow Information

Interest paid

$

54.0

$

49.8

Income taxes paid

$

1.5

$

0.8

SunCoke Energy Partners, L.P.

Segment Operating Data

The following tables set forth financial and operating data for the three and twelve months ended December 31, 2016 and 2015:

Three Months Ended
December 31,

Years Ended
December 31,

2016

2015

2016⁽¹⁾

2015⁽¹⁾

(Dollars in millions)

Sales and other operating revenue:

Domestic Coke

$

164.6

$

182.7

$

681.8

$

763.8

Coal Logistics

53.7

34.7

97.9

74.7

Coal Logistics intersegment sales

1.4

1.5

6.1

6.5

Elimination of intersegment sales

(1.4)

(1.5)

(6.1)

(6.5)

Total

$

218.3

$

217.4

$

779.7

$

838.5

Adjusted EBITDA⁽²⁾:

Domestic Coke

$

36.7

$

39.8

$

167.0

$

177.1

Coal Logistics

45.0

21.1

63.2

38.0

Corporate and Other

(4.3)

(3.3)

(17.2)

(13.8)

Total

$

77.4

$

57.6

$

213.0

$

201.3

Coke Operating Data:

Domestic Coke capacity utilization (%)

101

103

101

105

Domestic Coke production volumes (thousands of tons)

583

595

2,334

2,423

Domestic Coke sales volumes (thousands of tons)

581

583

2,336

2,409

Domestic Coke Adjusted EBITDA per ton⁽³⁾

$

63.17

$

68.27

$

71.49

$

73.52

Coal Logistics Operating Data:

Tons handled, excluding CMT (thousands of tons)⁽⁴⁾

3,710

4,160

12,976

16,652

Tons handled by CMT (thousands of tons)⁽⁴⁾

1,731

1,395

4,493

2,212

(1)

The current and prior full year periods are not comparable due to the impact of CMT, which was acquired on August 12, 2015.

(2)

See definition of Adjusted EBITDA and reconciliation to GAAP elsewhere in this release.

(3)

Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes.

(4)

Reflects inbound tons handled during the period.

SunCoke Energy Partners, L.P.

Reconciliations of Non-GAAP Information

Net Cash Provided by Operating Activities to Net Income and Adjusted EBITDA

Three Months Ended
December 31,

Years Ended
December 31,

2016

2015

2016

2015

(Dollars in millions)

Net cash provided by operating activities

$

43.6

$

61.2

$

183.6

$

149.4

Subtract:

Depreciation and amortization expense

20.4

20.4

77.7

67.4

Gain on extinguishment of debt

(0.1)

(10.1)

(25.0)

(0.7)

Changes in working capital and other

(23.0)

14.0

9.5

(9.5)

Net income

$

46.3

$

36.9

$

121.4

$

92.2

Add:

Depreciation and amortization expense

$

20.4

$

20.4

$

77.7

$

67.4

Interest expense, net

12.0

13.8

47.7

48.2

Gain on extinguishment of debt

(0.1)

(10.1)

(25.0)

(0.7)

Income tax (benefit) expense

0.6

(0.1)

2.0

(2.5)

Contingent consideration adjustments⁽¹⁾

(1.8)

—

(10.1)

—

Non-cash reversal of acquired contractual obligation⁽²⁾

—

(3.3)

(0.7)

(3.3)

Adjusted EBITDA

$

77.4

$

57.6

$

213.0

$

201.3

Subtract:

 Adjusted EBITDA attributable to Previous Owner⁽³⁾

$

—

$

—

$

—

$

1.5

 Adjusted EBITDA attributable to noncontrolling interest⁽⁴⁾

0.7

0.8

3.3

8.3

Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.

$

76.7

$

56.8

$

209.7

$

191.5

(1)

The Partnership amended its contingent consideration terms with The Cline Group during the first quarter of 2016.  This amendment and subsequent fair value adjustments to the contingent consideration liability, resulted in gains of $1.8 million and $10.1 million recorded during the three and twelve months ended December 31, 2016, respectively, which were excluded from Adjusted EBITDA.

(2)

In association with the acquisition of CMT, we assumed certain performance obligations under existing contracts and recorded liabilities related to such obligations. These contractual performance obligation expired without the customer requiring performance. As such, the Partnership reversed the liabilities as we no longer have any obligations under the contract.

(3)

Reflects net income attributable to our Granite City facility prior to the Granite City Dropdown on January 13, 2015 adjusted for Granite City's share of interest, taxes, depreciation and amortization during the same period.

(4)

Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest's share of interest, taxes, income, and depreciation and amortization.

SunCoke Energy Partners, L.P.

Reconciliations of Non-GAAP Information

Reconciliation of Adjusted EBITDA and Distributable Cash Flow to to Net Income

Three Months Ended December 31,

Years Ended
December 31,

2016

2015

2016

2015

(Dollars in millions)

Net cash provided by operating activities

$

43.6

$

61.2

$

183.6

$

149.4

Subtract:

Depreciation and amortization expense

20.4

20.4

77.7

67.4

Gain on extinguishment of debt

(0.1)

(10.1)

(25.0)

(0.7)

Changes in working capital and other

(23.0)

14.0

9.5

(9.5)

Net income

$

46.3

$

36.9

$

121.4

$

92.2

Add:

Depreciation and amortization expense

$

20.4

$

20.4

$

77.7

$

67.4

Interest expense, net

12.0

13.8

47.7

48.2

Gain on extinguishment of debt

(0.1)

(10.1)

(25.0)

(0.7)

Income tax expense (benefit)

0.6

(0.1)

2.0

(2.5)

Contingent consideration adjustments⁽¹⁾

(1.8)

—

(10.1)

—

Non-cash reversal of acquired contractual obligation⁽²⁾

—

(3.3)

(0.7)

(3.3)

Adjusted EBITDA

$

77.4

$

57.6

$

213.0

$

201.3

Subtract:

 Adjusted EBITDA attributable to Previous Owner⁽³⁾

—

—

—

1.5

 Adjusted EBITDA attributable to noncontrolling interest⁽⁴⁾

0.7

0.8

3.3

8.3

Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.

$

76.7

$

56.8

$

209.7

$

191.5

Plus :

Coal Logistics deferred revenue⁽⁵⁾

(25.4)

(0.7)

1.5

0.4

Corporate cost holiday/deferral

—

—

13.9

—

Subtract:

Ongoing capex

4.8

9.0

14.4

20.4

Replacement capex accrual

1.9

1.9

7.6

7.2

Cash interest accrual

11.9

13.6

49.0

47.2

Cash tax accrual

0.9

(0.6)

1.8

—

Distributable cash flow

$

31.8

$

32.2

$

152.3

$

117.1

Quarterly cash distribution

$

29.5

$

28.0

$

116.4

110.2

Distribution coverage ratio⁽⁶⁾

1.08x

1.15x

1.31x

1.06x

(1)

The Partnership amended its contingent consideration terms with The Cline Group.  This amendment and subsequent fair value adjustments to the contingent consideration liability, resulted in gains of $1.8 million and $10.1 million recorded during the three and twelve months ended December 31, 2016, respectively, which were excluded from Adjusted EBITDA.

(2)

In association with the acquisition of CMT, we assumed certain performance obligations under existing contracts and recorded liabilities related to such obligations. These contractual performance obligation expired without the customer requiring performance. As such, the Partnership reversed the liabilities as we no longer have any obligations under the contract.

(3)

Reflects net income attributable to our Granite City facility prior to the Granite City Dropdown on January 13, 2015 adjusted for Granite City's share of interest, taxes, depreciation and amortization during the same period.

(4)

Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest's share of interest, taxes, income, and depreciation and amortization.

(5)

Coal Logistics deferred revenue adjusts for coal and liquid tons the Partnership did not handle, but are included in Distributable Cash Flow as the associated take-or-pay fees are billed to the customer.  Deferred revenue on take-or-pay contracts is recognized into GAAP income annually based on the terms of the contract, at which time it will be excluded from Distributable Cash Flow.

(6)

Distribution cash coverage ratio is distributable cash flow divided by total estimated distributions to the limited and general partners.

SunCoke Energy Partners, L.P.

Reconciliations of Non-GAAP Information

Estimated 2017 Consolidated Adjusted EBITDA to Estimated Net Income

and Net Cash Provided by Operating Activities

Low

High

Net Cash Provided by Operating Activities

$

142

$

162

Subtract:

Depreciation and amortization expense

86

86

Changes in working capital and other

(17)

(11)

Net income

$

73

$

87

Add:

Depreciation and amortization expense

86

86

Interest expense, net

52

48

Income tax expense

2

2

Adjusted EBITDA

$

213

$

223

Subtract: Adjusted EBITDA attributable to non controlling interest⁽¹⁾

3

3

Adjusted EBITDA attributable to SunCoke Energy Partners, L.P.

$

210

$

220

Subtract:

SXC Corp Cost Support Payback

8

8

Ongoing capex (SXCP share)

17

17

Replacement capex accrual

8

8

Cash interest accrual

48

48

Cash tax accrual⁽²⁾

3

3

Estimated distributable cash flow

$

126

$

136

(1)

Adjusted EBITDA attributable to noncontrolling interests represents SXC's 2% interest in Haverhill, Middletown and Granite City cokemaking facilities.

(2)

Cash tax impacts from the operations of Gateway Cogeneration Company LLC, which is an entity subject to income taxes for federal and state purposes at the corporate level.