SunCoke Energy, Inc. Reports Third Quarter 2019 Results

Three Months Ended September 30,

(Dollars in millions)

2019

2018

Increase

Revenues

$

404.3

$

364.5

$

39.8

Adjusted EBITDA⁽¹⁾

$

66.7

$

66.0

$

0.7

Net (loss) income attributable to SXC

$

(163.0)

$

11.5

$

(174.5)

(1)

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

Three Months Ended September 30,

(Dollars in millions, except per ton amounts)

2019

2018

Increase

Revenues

$

378.5

$

326.8

$

51.7

Adjusted EBITDA⁽¹⁾

$

59.8

$

49.1

$

10.7

Sales volumes (thousands of tons)

1,057

1,012

45.0

Adjusted EBITDA per ton⁽²⁾

$

56.58

$

48.52

$

8.06

(1)

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

(2)

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

Three Months Ended September 30,

(Dollars in millions, except per ton amounts)

2019

2018

Increase
(Decrease)

Revenues

$

16.2

$

28.0

$

(11.8)

Intersegment sales

$

6.1

$

5.7

$

0.4

Adjusted EBITDA⁽¹⁾

$

9.6

$

21.0

$

(11.4)

Tons handled (thousands of tons)⁽²⁾

4,706

6,943

(2,237)

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

1,717

42

1,675

(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.  The Company has established a reserve against the shortfall tons billed during the three and nine months ended September 30, 2019 as collection is not probable.  As the obligations related to these billings had not been satisfied, the related deferred revenue was also reduced by an equal amount, resulting in no impact to net income (loss) for the three and nine months ended September 30, 2019.

SunCoke Energy, Inc.

Consolidated Statements of Operations

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

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

Revenues

Sales and other operating revenue

$

404.3

$

364.5

$

1,203.1

$

1,082.0

Costs and operating expenses

Cost of products sold and operating expenses

319.4

283.3

953.8

836.6

Selling, general and administrative expenses

14.3

15.7

52.9

49.2

Depreciation and amortization expense

35.6

35.4

109.8

100.3

Long-lived asset and goodwill impairment

247.4

—

247.4

—

Total costs and operating expenses

616.7

334.4

1,363.9

986.1

Operating (loss) income

(212.4)

30.1

(160.8)

95.9

Interest expense, net

15.7

15.4

45.6

46.9

(Gain) loss on extinguishment of debt, net

(1.5)

—

(1.5)

0.3

(Loss) income before income tax (benefit) expense

(226.6)

14.7

(204.9)

48.7

Income tax (benefit) expense

(63.5)

(2.4)

(57.3)

1.8

Loss from equity method investment

—

—

—

5.4

Net (loss) income

(163.1)

17.1

(147.6)

41.5

Less: Net (loss) income attributable to noncontrolling interests

(0.1)

5.6

3.3

17.1

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

$

$

11.5

$

$

24.4

(Loss) earnings attributable to SunCoke Energy, Inc. per common share:

Basic

$

(1.81)

$

0.18

$

(2.05)

$

0.38

Diluted

$

(1.81)

$

0.18

$

(2.05)

$

0.37

Weighted average number of common

     shares outstanding:

Basic

89.9

64.7

73.7

64.7

Diluted

89.9

65.5

73.7

65.5

SunCoke Energy, Inc.

Consolidated Balance Sheets

September 30, 2019

December 31, 2018

(Unaudited)

(Dollars in millions, except
par value amounts)

Assets

Cash and cash equivalents

$

93.7

$

145.7

Receivables, net

62.7

75.4

Inventories

157.0

110.4

Income tax receivable

3.1

0.7

Other current assets

4.2

2.8

Total current assets

320.7

335.0

Properties, plants and equipment (net of accumulated depreciation of $907.4 million and $855.8 million at September 30, 2019 and December 31, 2018, respectively)

1,389.5

1,471.1

Goodwill

3.4

76.9

Other intangible assets, net

35.4

156.8

Deferred charges and other assets

17.2

5.5

Total assets

$

1,771.2

$

2,045.3

Liabilities and Equity

Accounts payable

$

119.8

$

115.0

Accrued liabilities

46.1

45.6

Deferred revenue

2.1

3.0

Current portion of long-term debt and financing obligation

2.9

3.9

Interest payable

14.4

3.6

Total current liabilities

185.3

171.1

Long-term debt and financing obligation

780.0

834.5

Accrual for black lung benefits

46.9

44.9

Retirement benefit liabilities

23.7

25.2

Deferred income taxes

146.9

254.7

Asset retirement obligations

13.5

14.6

Other deferred credits and liabilities

23.1

17.6

Total liabilities

1,219.4

1,362.6

Equity

Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no issued shares at both September 30, 2019 and December 31, 2018

—

—

Common stock, $0.01 par value. Authorized 300,000,000 shares; issued 98,040,372 and 72,233,750 shares at September 30, 2019 and December 31, 2018, respectively

1.0

0.7

Treasury stock, 9,544,132 and 7,477,657 shares at September 30, 2019 and December 31, 2018, respectively

(153.9)

(140.7)

Additional paid-in capital

710.9

488.8

Accumulated other comprehensive loss

(13.9)

(13.1)

Retained (deficit) earnings

(23.5)

127.4

Total SunCoke Energy, Inc. stockholders' equity

520.6

463.1

Noncontrolling interests

26.2

219.6

Total equity

550.2

682.7

Total liabilities and equity

$

1,769.6

$

2,045.3

SunCoke Energy, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

2019

2018

(Dollars in millions)

Cash Flows from Operating Activities:

Net (loss) income

$

(147.6)

$

41.5

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

Long-lived asset and goodwill impairment

247.4

—

Depreciation and amortization expense

109.8

100.3

Deferred income tax benefit

(64.2)

(4.0)

Payments in excess of expense for postretirement plan benefits

(1.5)

(1.8)

Share-based compensation expense

3.3

2.2

(Gain) loss on extinguishment of debt, net

(1.5)

0.3

Loss from equity method investment

—

5.4

Changes in working capital pertaining to operating activities:

  Receivables

12.7

(7.0)

  Inventories

(46.6)

(7.0)

  Accounts payable

6.0

30.6

  Accrued liabilities

(1.3)

(7.3)

  Deferred revenue

(0.9)

0.9

  Interest payable

10.8

11.3

  Income taxes

(2.4)

2.1

       Other

(3.5)

3.1

Net cash provided by operating activities

120.5

170.6

Cash Flows from Investing Activities:

Capital expenditures

(81.5)

(70.7)

Sale of equity method investment

—

4.0

Other investing activities

0.2

0.3

Net cash used in investing activities

(81.3)

(66.4)

Cash Flows from Financing Activities:

Proceeds from issuance of long-term debt

—

45.0

Repayment of long-term debt

(90.5)

(45.4)

Debt issuance costs

(2.0)

(0.5)

Proceeds from revolving credit facility

392.6

127.2

Repayment of revolving credit facility

(354.3)

(152.2)

Repayment of financing obligation

(2.1)

(1.9)

Acquisition of additional interest in the Partnership

—

(4.2)

Cash distribution to noncontrolling interests

(14.2)

(24.8)

Shares repurchased

(13.2)

—

Other financing activities

(7.5)

0.8

Net cash used in financing activities

(91.2)

(56.0)

Net (decrease) increase in cash and cash equivalents

(52.0)

48.2

Cash and cash equivalents at beginning of period

145.7

120.2

Cash and cash equivalents at end of period

$

93.7

$

168.4

Supplemental Disclosure of Cash Flow Information

Interest paid, net of capitalized interest of $2.3 million and $2.2 million, respectively

$

32.3

$

32.4

Income taxes paid, net of refunds of zero and $3.2 million, respectively

$

8.8

$

3.4

SunCoke Energy, Inc.

Segment Financial and Operating Data

The following tables set forth financial and operating data for the three and nine months ended September 30, 2019 and 2018:

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

(Dollars in millions, except per ton amounts)

Sales and other operating revenues:

Domestic Coke

$

378.5

$

326.8

$

1,115.8

$

973.6

Brazil Coke

9.6

9.7

29.3

30.0

Logistics

16.2

28.0

58.0

78.4

Logistics intersegment sales

6.1

5.7

19.3

16.6

Elimination of intersegment sales

(6.1)

(5.7)

(19.3)

(16.6)

Total sales and other operating revenues

$

404.3

$

364.5

$

1,203.1

$

1,082.0

Adjusted EBITDA⁽¹⁾:

Domestic Coke

$

59.8

$

49.1

$

174.6

$

156.3

Brazil Coke

3.9

4.5

12.7

14.0

Logistics

9.6

21.0

34.1

54.3

Corporate and Other⁽²⁾

(6.6)

(8.6)

(24.3)

(27.3)

Total Adjusted EBITDA

$

66.7

$

66.0

$

197.1

$

197.3

Coke Operating Data:

Domestic Coke capacity utilization

99

%

95

%

98

%

94

%

Domestic Coke production volumes (thousands of tons)

1,059

1,011

3,095

2,972

Domestic Coke sales volumes (thousands of tons)

1,057

1,012

3,091

2,993

Domestic Coke Adjusted EBITDA per ton⁽³⁾

$

56.58

$

48.52

$

56.49

$

52.22

Brazilian Coke production—operated facility (thousands of tons)

427

454

1,270

1,326

Logistics Operating Data:

Tons handled (thousands of tons)⁽⁴⁾

4,706

6,943

16,082

19,744

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

1,717

42

3,244

147

(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 $2.0 million and $5.8 million during the three and nine months ended September 30, 2019, respectively, and $2.9 million and $7.6 million during the three and nine months ended September 30, 2018, 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.  The Company has established a reserve against the shortfall tons billed during the three and nine months ended September 30, 2019 as collection is not probable.  As the obligations related to these billings had not been satisfied, the related deferred revenue was also reduced by an equal amount, resulting in no impact to net income (loss) for the three and nine months ended September 30, 2019.

SunCoke Energy, Inc.

Reconciliation of Non-GAAP Information

Net (Loss) Income to Adjusted EBITDA

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

(Dollars in millions)

Net (loss) income

$

(163.1)

$

17.1

$

(147.6)

$

41.5

Add:

Long-lived asset and goodwill impairment

247.4

—

247.4

—

Depreciation and amortization expense

35.6

35.4

109.8

100.3

Interest expense, net

15.7

15.4

45.6

46.9

(Gain) loss on extinguishment of debt, net

(1.5)

—

(1.5)

0.3

Income tax (benefit) expense

(63.5)

(2.4)

(57.3)

1.8

Contingent consideration adjustments⁽¹⁾

(3.9)

0.5

(4.2)

1.1

Loss from equity method investment

—

—

—

5.4

Simplification Transaction costs⁽²⁾

—

—

4.9

—

Adjusted EBITDA

66.7

66.0

197.1

197.3

Subtract: Adjusted EBITDA attributable to noncontrolling interest⁽³⁾

1.6

21.0

39.1

61.6

Adjusted EBITDA attributable to SunCoke Energy, Inc.

$

65.1

$

45.0

$

158.0

$

135.7

(1)

In connection with the CMT acquisition, the Company entered into a contingent consideration arrangement that requires the Company to make future payments to the seller based on future volume over a specified threshold, price and contract renewals.  Contingent consideration adjustments were primarily the result of modifications to the volume forecast.  Customer events during the third quarter of 2019 drove a decrease in our forecast such that the contingent consideration liability was reduced to zero.

(2)

Costs expensed by the Partnership associated with the Simplification Transaction.

(3)

Reflects noncontrolling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders prior to the closing of the Simplification Transaction.

SunCoke Energy, Inc.

Reconciliation of Non-GAAP Information

Net Loss to Adjusted Net Income Attributable to SunCoke Energy, Inc.

Three Months Ended
September 30,

(Dollars in millions)

Net loss attributable to SunCoke Energy, Inc.

$

(163.0)

Add:

Long-lived asset and goodwill impairment

247.4

Contingent consideration adjustments⁽¹⁾

(3.9)

Related income tax benefit⁽²⁾

(68.7)

Adjusted net income attributable to SunCoke Energy, Inc.

$

11.8

Adjusted earnings attributable to SunCoke Energy, Inc. per common share:

Basic

0.13

Diluted

0.13

Weighted average number of common shares outstanding:

Basic

89.9

Diluted

89.9

(1)

In connection with the CMT acquisition, the Company entered into a contingent consideration arrangement that requires the Company to make future payments to the seller based on future volume over a specified threshold, price and contract renewals.  Customer events during the third quarter of 2019 drove a decrease in our forecast such that the contingent consideration liability was reduced to zero.

(2)

Reflects the tax impacts of long-lived asset and goodwill impairment and the contingent consideration adjustment.

SunCoke Energy, Inc.

Reconciliation of Non-GAAP Information

Estimated 2019 Net Loss

to Estimated Consolidated Adjusted EBITDA

2019

Low

High

Net loss

$

(158)

$

(151)

Add:

Long-lived asset and goodwill impairment

247

247

Depreciation and amortization expense

150

145

Interest expense, net

60

60

Gain on extinguishment of debt, net

(2)

(2)

Income tax benefit

(58)

(50)

Contingent consideration adjustments⁽¹⁾

(4)

(4)

Simplification Transaction costs⁽²⁾

5

5

Adjusted EBITDA

$

240

$

250

Subtract:

 Adjusted EBITDA attributable to noncontrolling interests⁽³⁾

40

44

Adjusted EBITDA attributable to SunCoke Energy, Inc.

$

200

$

206

(1)

In connection with the CMT acquisition, the Company entered into a contingent consideration arrangement that requires the Company to make future payments to the seller based on future volume over a specified threshold, price and contract renewals.  Customer events during the third quarter of 2019 drove a decrease in our forecast such that the contingent consideration liability was reduced to zero.

(2)

Costs expensed by the Partnership associated with the Simplification Transaction.

(3)

Reflects noncontrolling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders prior to the closing of the Simplification Transaction.