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SunCoke Energy, Inc. Announces Strong Second Quarter 2018 Results

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SunCoke Energy, Inc. Announces Strong Second Quarter 2018 Results

-- Net income attributable to SXC was $4.2 million, or $0.06 per share, and operating cash flow was $28.0 million in the current period

-- Adjusted EBITDA for the quarter was $67.3 million, up $19.8 million or 42 percent, versus the prior year period driven by strong Domestic Coke performance and record volumes in our Logistics business

-- Reaffirm full-year 2018 Consolidated Adjusted EBITDA guidance of $240 million to $255 million

PR Newswire

LISLE, Ill., July 26, 2018 /PRNewswire/ -- SunCoke Energy, Inc. (NYSE:SXC) today reported results for the second quarter 2018, which reflect significant year-over-year improvement across our operating segments.

SunCoke Energy, Inc.

"We are pleased with our strong second quarter 2018 operating results in both the coke and logistics businesses. We continue to execute against our 2018 objectives and remain solidly on pace to achieve our full-year Adjusted EBITDA  guidance," said Mike Rippey, President and Chief Executive Officer of SunCoke Energy, Inc.

The Company continued to execute its Indiana Harbor oven rebuild initiative during the second quarter. At the end of the second quarter, we had completed 21 of the 67 A-battery oven rebuilds and remain on schedule to complete all A-battery ovens by the end of November. Rippey commented, "We are encouraged with our progress to date. The rebuilt ovens continue to demonstrate good performance, which has resulted in significantly increased production and higher coal-to-coke yields."

SECOND QUARTER CONSOLIDATED RESULTS


Three Months Ended June 30,

(Dollars in millions)

2018


2017


Increase

Revenues

$

367.0



$

323.2



$

43.8


Adjusted EBITDA(1)

$

67.3



$

47.5



$

19.8


Net income (loss) attributable to SXC

$

4.2



$

(24.2)



$

28.4




(1)

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

Revenues during the second quarter 2018 increased $43.8 million compared to the prior year period, primarily reflecting higher sales volumes and the pass-through of higher coal prices in our Domestic Coke segment as well as record sales volumes at CMT.

Adjusted EBITDA during the second quarter 2018 increased $19.8 million to $67.3 million, primarily due to improved sales volumes at our Domestic Coke and Logistics segments.

Net income attributable to SXC was $4.2 million, or $0.06 per share, for the second quarter 2018, which was favorable by $28.4 million as compared to the second quarter 2017 loss of $24.2 million, or $0.38 per share. The improvement was driven by improved operating results in the current period discussed above as well as the absence of the loss on extinguishment of debt attributable to SXC of $11.6 million related to the Company and the Partnership's refinancing activities in the prior year period.

SECOND QUARTER SEGMENT RESULTS

Domestic Coke

Domestic Coke consists of cokemaking facilities and heat recovery operations at our Jewell, Indiana Harbor, Haverhill, Granite City and Middletown plants.


Three Months Ended June 30,

(Dollars in millions, except per ton amounts)

2018


2017


Increase

Revenues

$

328.7



$

296.5



$

32.2


Adjusted EBITDA(1)

$

52.9



$

44.0



$

8.9


Sales volumes (thousands of tons)

1,007



953



54


Adjusted EBITDA per ton(2)

$

52.53



$

46.17



$

6.36




(1)

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

(2)

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

 

  • Revenues increased $32.2 million primarily reflecting the pass-through of higher coal prices as well as higher sales volumes.
  • Adjusted EBITDA increased $8.9 million primarily driven by improved results at our Indiana Harbor facility of $5.5 million. Higher volumes and improved operating performance from our rebuilt ovens coupled with favorable contractual operating and maintenance recovery contributed to this year-over-year increase. Additionally, Adjusted EBITDA at our remaining Domestic Coke facilities increased by $3.4 million, primarily driven by $3.6 million of higher sales volumes, improved operational coal-to-coke yields and favorable energy prices. Comparisons between periods were also impacted by the timing and scope of planned outages and the absence of under-recovered coal costs from unfulfilled coal supply commitments, which provided a benefit of $3.4 million and $1.4 million, respectively, to Adjusted EBITDA as compared to the prior year period. These improvements were partially offset by $4.8 million of higher maintenance and operating costs during the second quarter 2018 compared to prior year period.

Logistics

Logistics consists of the handling and mixing services of coal and other aggregates operated by SunCoke Energy Partners, L.P. at our Convent Marine Terminal ("CMT"), Lake Terminal and Kanawha River Terminals ("KRT"). Additionally, Dismal River Terminal ("DRT") is operated by SXC.


Three Months Ended June 30,

(Dollars in millions)

2018


2017


Increase
(Decrease)

Revenues

$

28.1



$

16.2



$

11.9


Intersegment sales

$

5.5



$

5.1



$

0.4


Adjusted EBITDA(1)

$

19.7



$

10.0



$

9.7


Tons handled (thousands of tons)(2)

6,980



5,173



1,807


CMT take-or-pay shortfall tons (thousands of tons)(3)

63



956



(893)




(1)

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

(2)

Reflects inbound tons handled during the period.

(3)

Reflects tons billed under take-or-pay contracts where services have not yet been performed.

 

  • Revenues and Adjusted EBITDA increased by $11.9 million and $9.7 million, respectively, driven primarily by record sales volumes at CMT in the current year period. CMT had minimal take-or-pay shortfall tons from our long-term, take-or-pay arrangements at the end of the second quarter 2018 with no shortfall tons attributable to our two largest coal export customers.

Brazil Coke

Brazil Coke consists of a cokemaking facility in Vitória, Brazil, which we operate for an affiliate of ArcelorMittal.

  • Revenues and Adjusted EBITDA were $10.2 million and $4.8 million, respectively, and were comparable with the prior year period.

Corporate and Other

Corporate and other expenses, which include costs related to our legacy coal mining business, were $10.1 million in second quarter 2018, an improvement of $0.9 million versus second quarter 2017, primarily driven by lower employee-related costs.

2018 OUTLOOK

Our 2018 guidance is as follows:

  • Domestic coke production is expected to be approximately 3.9 million tons
  • Consolidated Adjusted EBITDA is expected to be between $240 million to $255 million
  • Adjusted EBITDA attributable to SXC is expected to be between $160 million and $171 million, reflecting the impact of public ownership in SXCP
  • Capital expenditures are projected to be approximately $95 million, including $25 to $30 million related to our Indiana Harbor oven rebuild project and approximately $35 million related to our Granite City gas sharing project
  • Cash generated by operations is estimated to be between $150 million and $165 million
  • Cash taxes are projected to be between $7 million and $14 million

RELATED COMMUNICATIONS

We will host our quarterly earnings call at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) today. The conference call will be webcast live and archived for replay in the Investors section of www.suncoke.com. Investors may participate in this call by dialing 1-833-236-5757 in the U.S. or 1-647-689-4185 if outside the U.S., confirmation code 8552559.

SUNCOKE ENERGY, INC.

SunCoke Energy, Inc. (NYSE:SXC) supplies high-quality coke to the integrated steel industry under long-term, take-or-pay contracts that pass through commodity and certain operating costs to customers.  We utilize an innovative heat-recovery cokemaking technology that captures excess heat for steam or electrical power generation.  We are the sponsor of SunCoke Energy Partners, L.P. ("Partnership") (NYSE:SXCP), a publicly traded master limited partnership.  At June 30, 2018, we owned the general partner of the Partnership, which consists of a 2.0 percent ownership interest and incentive distribution rights, and owned a 60.4 percent limited partner interest in the Partnership.  Our cokemaking facilities are located in Illinois, Indiana, Ohio, Virginia and Brazil.  To learn more about SunCoke Energy, Inc., visit our website at www.suncoke.com.

DEFINITIONS

  • Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted for any impairments, loss (gain) on extinguishment of debt, changes to our contingent consideration liability related to our acquisition of CMT and/or loss on the disposal of our interest in VISA SunCoke.  EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives 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 Company'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 a substitute for net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP.
  • Adjusted EBITDA attributable to SXC represents Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests.

FORWARD-LOOKING STATEMENTS

Some of the statements included in this press release constitute "forward-looking statements" (as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended).  Forward-looking statements include all statements that are not historical facts and may be identified by the use of such words as "believe," "expect," "plan," "project," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "will," "should" or the negative of these terms or similar expressions.  Forward-looking statements are inherently uncertain and involve significant known and unknown risks and uncertainties (many of which are beyond the control of SXC) that could cause actual results to differ materially.

Such risks and uncertainties include, but are not limited to domestic and international economic, political, business, operational, competitive, regulatory and/or market factors affecting SXC, as well as uncertainties related to: pending or future litigation, legislation or regulatory actions; liability for remedial actions or assessments under existing or future environmental regulations; gains and losses related to acquisition, disposition or impairment of assets; recapitalizations; access to, and costs of, capital; the effects of changes in accounting rules applicable to SXC; and changes in tax, environmental and other laws and regulations applicable to SXC's businesses.

Forward-looking statements are not guarantees of future performance, but are based upon the current knowledge, beliefs and expectations of SXC management, and upon assumptions by SXC concerning future conditions, any or all of which ultimately may prove to be inaccurate.  The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release.  SXC does not intend, and expressly disclaims any obligation, to update or alter its forward-looking statements (or associated cautionary language), whether as a result of new information, future events or otherwise after the date of this press release except as required by applicable law.

In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, SXC has included in its filings with the Securities and Exchange Commission cautionary language identifying important factors (but not necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by SXC.  For information concerning these factors, see SXC's Securities and Exchange Commission filings such as its annual and quarterly reports and current reports on Form 8-K, copies of which are available free of charge on SXC's website at www.suncoke.com.  All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements.  Unpredictable or unknown factors not discussed in this release also could have material adverse effects on forward-looking statements.

SunCoke Energy, Inc.

Consolidated Statements of Operations

(Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017












(Dollars and shares in millions, except per share amounts)

Revenues









Sales and other operating revenue


$

367.0



$

323.2



$

717.5



$

632.9


Costs and operating expenses









Cost of products sold and operating expenses


282.7



257.0



553.3



491.2


Selling, general and administrative expenses


17.6



24.0



33.5



43.6


Depreciation and amortization expense


32.0



33.3



64.9



66.6


Total costs and operating expenses


332.3



314.3



651.7



601.4


Operating income


34.7



8.9



65.8



31.5


Interest expense, net


15.7



15.5



31.5



29.5


Loss on extinguishment of debt




20.2



0.3



20.3


Income (loss) before income tax expense


19.0



(26.8)



34.0



(18.3)


Income tax expense


2.2



4.7



4.2



70.9


Loss from equity method investment


5.4





5.4




Net income (loss)


11.4



(31.5)



24.4



(89.2)


Less: Net income (loss) attributable to noncontrolling interests


7.2



(7.3)



11.5



(66.0)


Net income (loss) attributable to SunCoke Energy, Inc.


$

4.2



$

(24.2)



$

12.9



$

(23.2)


Earnings (loss) attributable to SunCoke Energy, Inc. per common share:









Basic


$

0.06



$

(0.38)



$

0.20



$

(0.36)


Diluted


$

0.06



$

(0.38)



$

0.20



$

(0.36)


Weighted average number of common shares outstanding:









Basic


64.7



64.3



64.6



64.3


Diluted


65.6



64.3



65.5



64.3


 

SunCoke Energy, Inc.

Consolidated Balance Sheets



June 30, 2018


December 31, 2017



(Unaudited)





(Dollars in millions, except
par value amounts)

Assets





Cash and cash equivalents


$

143.0



$

120.2


Receivables


80.5



68.5


Inventories


116.4



111.0


Income tax receivable


4.8



4.8


Other current assets


9.5



6.7


Total current assets


354.2



311.2


Properties, plants and equipment (net of accumulated depreciation of $792.1 and $733.2 million at June 30, 2018 and December 31, 2017, respectively)


1,487.9



1,501.3


Goodwill


76.9



76.9


Other intangible assets, net


162.3



167.9


Deferred charges and other assets


3.0



2.8


Total assets


$

2,084.3



$

2,060.1


Liabilities and Equity





Accounts payable


$

134.8



$

115.5


Accrued liabilities


44.4



53.2


Deferred revenue


3.2



1.7


Current portion of long-term debt and financing obligation


3.8



2.6


Interest payable


4.1



5.4


Total current liabilities


190.3



178.4


Long-term debt and financing obligation


860.0



861.1


Accrual for black lung benefits


45.9



44.9


Retirement benefit liabilities


27.1



28.2


Deferred income taxes


257.8



257.8


Asset retirement obligations


14.2



14.0


Other deferred credits and liabilities


16.6



16.1


Total liabilities


1,411.9



1,400.5


Equity





Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no issued shares at both June 30, 2018 and December 31, 2017





Common stock, $0.01 par value. Authorized 300,000,000 shares; issued 72,205,859 and 72,006,905 shares at June 30, 2018 and December 31, 2017, respectively


0.7



0.7


Treasury stock, 7,477,657 shares at both June 30, 2018 and December 31, 2017


(140.7)



(140.7)


Additional paid-in capital


487.3



486.2


Accumulated other comprehensive loss


(13.5)



(21.2)


Retained earnings


114.1



101.2


Total SunCoke Energy, Inc. stockholders' equity


447.9



426.2


Noncontrolling interests


224.5



233.4


Total equity


672.4



659.6


Total liabilities and equity


$

2,084.3



$

2,060.1


 

SunCoke Energy, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Six Months Ended June 30,



2018


2017








(Dollars in millions)

Cash Flows from Operating Activities:





Net income (loss)


$

24.4



$

(89.2)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:





Depreciation and amortization expense


64.9



66.6


Deferred income tax expense


0.3



79.8


Payments in excess of expense for postretirement plan benefits


(1.1)



(1.2)


Share-based compensation expense


1.6



3.0


Loss on extinguishment of debt


0.3



20.3


Loss from equity method investment


5.4




Changes in working capital pertaining to operating activities:





Receivables


(12.0)



(4.6)


Inventories


(5.4)



(23.9)


Accounts payable


16.8



15.6


Accrued liabilities


(9.0)



(6.2)


Deferred revenue


1.5



9.5


Interest payable


(1.3)



(9.6)


Income taxes




(11.9)


       Other


(1.1)



6.2


Net cash provided by operating activities


85.3



54.4


Cash Flows from Investing Activities:





Capital expenditures


(43.6)



(22.4)


Sale of equity method investment


4.0




Return of Brazilian investment




20.5


Other investing activities


0.3




Net cash used in investing activities


(39.3)



(1.9)


Cash Flows from Financing Activities:





Proceeds from issuance of long-term debt


45.0



620.6


Repayment of long-term debt


(45.2)



(532.2)


Debt issuance costs


(0.5)



(15.6)


Proceeds from revolving credit facility


92.5



128.0


Repayment of revolving credit facility


(92.5)



(200.0)


Repayment of financing obligation


(1.3)



(1.2)


Acquisition of additional interest in the Partnership


(4.2)



(24.6)


Cash distribution to noncontrolling interests


(17.7)



(24.6)


Other financing activities


0.7



(0.3)


Net cash used in financing activities


(23.2)



(49.9)


Net increase in cash, cash equivalents and restricted cash


22.8



2.6


Cash, cash equivalents and restricted cash at beginning of period


120.2



134.5


Cash, cash equivalents and restricted cash at end of period


$

143.0



$

137.1


Supplemental Disclosure of Cash Flow Information





Interest paid


$

31.8



$

37.2


Income taxes paid, net of refunds of $1.3 million and $0.1 million in 2018 and 2017, respectively


$

4.4



$

3.1


SunCoke Energy, Inc.
Segment Financial and Operating Data

The following tables set forth financial and operating data for the three and six months ended June 30, 2018 and 2017:




Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017












(Dollars in millions, except per ton amounts)

Sales and other operating revenues:









Domestic Coke


$

328.7



$

296.5



$

646.8



$

575.2


Brazil Coke


10.2



10.5



20.3



21.3


Logistics


28.1



16.2



50.4



36.4


Logistics intersegment sales


5.5



5.1



10.9



10.2


Elimination of intersegment sales


(5.5)



(5.1)



(10.9)



(10.2)


Total sales and other operating revenues


$

367.0



$

323.2



$

717.5



$

632.9


Adjusted EBITDA(1):









Domestic Coke


$

52.9



$

44.0



$

107.2



$

93.7


Brazil Coke


4.8



4.5



9.5



8.9


Logistics


19.7



10.0



33.3



23.1


Corporate and Other(2)


(10.1)



(11.0)



(18.7)



(22.6)


Total Adjusted EBITDA


$

67.3



$

47.5



$

131.3



$

103.1


Coke Operating Data:









Domestic Coke capacity utilization


94

%


90

%


93

%


90

%

Domestic Coke production volumes (thousands of tons)


999



950



1,961



1,898


Domestic Coke sales volumes (thousands of tons)


1,007



953



1,981



1,899


Domestic Coke Adjusted EBITDA per ton(3)


$

52.53



$

46.17



$

54.11



$

49.34


Brazilian Coke production—operated facility (thousands of tons)


431



437



872



872


Logistics Operating Data:









Tons handled (thousands of tons)(4)


6,980



5,173



12,801



10,892


CMT take-or-pay shortfall tons (thousands of tons)(5)


63



956



126



1,500




(1)

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

(2)

Corporate and Other includes the activity from our legacy coal mining business, which contributed Adjusted EBITDA losses of $2.4 million and $4.7 million during the three and six months ended June 30, 2018, respectively, as well as $2.7 million and $6.2 million million during the three and six months ended June 30, 2017, respectively.

(3)

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

(4)

Reflects inbound tons handled during the period.

(5)

Reflects tons billed under take-or-pay contracts where services have not yet been performed.

 

SunCoke Energy, Inc.

Reconciliations of Non-GAAP Information

Net Cash Provided by Operating Activities

to Net Income and Adjusted EBITDA




Three Months Ended June 30,


Six Months Ended June 30,



2018


2017


2018


2017



(Dollars in millions)

Net cash provided by operating activities


$

28.0



$

24.9



$

85.3



$

54.4


Subtract:









Depreciation and amortization expense


32.0



33.3



64.9



66.6


Deferred income tax expense


0.1



14.0



0.3



79.8


Loss on extinguishment of debt




20.2



0.3



20.3


Loss from equity method investment(1)


5.4





5.4




Changes in working capital and other


(20.9)



(11.1)



(10.0)



(23.1)


Net income (loss)


$

11.4



$

(31.5)



$

24.4



$

(89.2)


Add:









Depreciation and amortization expense


$

32.0



$

33.3



$

64.9



$

66.6


Interest expense, net(2)


15.7



15.2



31.5



28.9


Loss on extinguishment of debt




20.2



0.3



20.3


Income tax expense


2.2



4.7



4.2



70.9


Contingent consideration adjustments


0.6



0.3



0.6



0.3


Loss from equity method investment


5.4





5.4




Expiration of land deposits and write-off of costs related to potential new cokemaking facility(3)




5.3





5.3


Adjusted EBITDA


67.3



47.5



131.3



103.1


Subtract: Adjusted EBITDA attributable to noncontrolling interest(4)


21.6



17.5



40.6



39.1


Adjusted EBITDA attributable to SunCoke Energy, Inc.


$

45.7



$

30.0



$

90.7



$

64.0




(1)

In June 2018, the Company recorded a loss in connection with the disposal of our interest in VISA SunCoke Limited.

(2)

In conjunction with the adoption of ASU 2017-07, the non-service type expense associate with the postretirement benefit plans was excluded from operating income and recorded in interest expense, net on the Consolidated Statements of Operations during the periods presented.  Amounts in prior periods were immaterial, and therefore, were not reclassified in the reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities.

(3)

During the second quarter of 2017, the Company wrote-off previously capitalized engineering and land deposit costs of $5.3 million.

(4)

Reflects noncontrolling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders.

 

SunCoke Energy, Inc

Reconciliation of Non-GAAP Information

Estimated 2018 Net Cash Provided by Operating Activities to Estimated Net Income

 and Estimated Consolidated Adjusted EBITDA




2018



Low


High

Net cash provided by operating activities


$

150



$

165


Subtract:





Depreciation and amortization expense


137



129


Changes in working capital and other


(22)



(14)


Loss from equity method investment


5



5


Net income


$

30



$

45


Add:





Loss from equity method investment


5



5


Depreciation and amortization expense


137



129


Interest expense, net


63



63


Income tax expense


5



13


Adjusted EBITDA


$

240



$

255


Subtract:





 Adjusted EBITDA attributable to noncontrolling interests(1)


80



84


Adjusted EBITDA attributable to SunCoke Energy, Inc.


$

160



$

171




(1)

Reflects non-controlling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders.

 

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SOURCE SunCoke Energy, Inc.

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