SunCoke Energy, Inc. Announces Strong First Quarter 2018 Results
SunCoke Energy, Inc. Announces Strong First Quarter 2018 Results
- Net income attributable to SXC was $8.7 million, or $0.13 per share, in the current period compared to $1.0 million, or $0.02 per share, in the prior year period
- Operating cash flow was $57.3 million in the current period compared to $29.5 million in the prior year period
- Adjusted EBITDA for the quarter was $64.0 million, up $8.4 million or 15 percent, versus the prior year period driven by improved Domestic Coke performance
- Reaffirm full-year 2018 Consolidated Adjusted EBITDA guidance of $240 million to $255 million
LISLE, Ill., April 26, 2018 /PRNewswire/ -- SunCoke Energy, Inc. (NYSE: SXC) today reported results for the first quarter 2018, which reflect strong operating performance and year-over-year improvement across all segments.
"We are pleased with our first quarter 2018 operating results. We continue to execute against our objectives and our strong first quarter performance is a testament to the progress we are making. We remain on pace to achieve our full-year Adjusted EBITDA guidance," said Mike Rippey, President and Chief Executive Officer of SunCoke Energy, Inc.
Additionally, SunCoke Energy Partners, L.P. today announced its first quarter distribution of $0.40 per unit, which was a reduction from the $0.5940 per unit fourth quarter distribution.
Rippey continued, "While this will reduce the distributions SXC receives from our ownership interest in SXCP, this will allow SXCP, our largest and most significant asset, to pay down debt and strengthen its balance sheet, which will increase long-term value to shareholders. SXC maintains a solid balance sheet with significant liquidity, positive cash flows, and ability to continue to grow the business."
FIRST QUARTER CONSOLIDATED RESULTS
Three Months Ended March 31,
(Dollars in
millions) 2018 2017 Increase
----------- ---- ---- --------
Revenues $350.5 $309.7 $40.8
Adjusted
EBITDA(1) $64.0 $55.6 $8.4
Net income
attributable to
SXC $8.7 $1.0 $7.7
---------------- ---- ---- ----
(1) See definition of Adjusted EBITDA
and reconciliation elsewhere in
this release.
Revenues during the first quarter 2018 increased $40.8 million compared to the prior year period, primarily reflecting the pass-through of higher coal prices and higher sales volumes in our Domestic Coke segment.
Adjusted EBITDA during the first quarter 2018 increased $8.4 million to $64.0 million, primarily due to improved Domestic Coke performance as well as the absence of certain Corporate and Other costs incurred in the same prior year period.
Net income attributable to SXC was $8.7 million, or $0.13 per share, for the first quarter 2018, which is $7.7 million favorable to first quarter 2017 income of $1.0 million, or $0.02 per share, driven primarily by the improved operating results described above partially offset by higher interest expense due to the 2017 debt refinancing activities.
FIRST 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 March 31,
(Dollars
in
millions,
except
per ton
amounts) 2018 2017 Increase
---------- ---- ---- --------
Revenues $318.1 $278.7 $39.4
Adjusted
EBITDA(1) $54.3 $49.7 $4.6
Sales
volumes
(thousands
of tons) 974 946 28
Adjusted
EBITDA
per
ton(2) $55.75 $52.54 $3.21
-------- ------ ------ -----
(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 $39.4 million, primarily reflecting the pass-through
of higher coal prices as well as higher sales volumes.
-- Adjusted EBITDA increased $4.6 million, driven by improved operating
performance of $8.9 million at our Indiana Harbor facility primarily due
to higher sales volumes and favorable coal-to-coke yields from rebuilt
ovens. This improvement was partially offset by $1.2 million of
unfavorable coal cost recovery at our Jewell facility as well as the
timing of planned outage and maintenance costs. Additionally, higher
coal moisture from adverse weather and logistics conditions resulted in
lower production and energy revenue at our Granite City facility.
Logistics
Logistics consists of the handling and mixing services of coal and other aggregates operated by SXCP 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 March 31,
(Dollars
in
millions) 2018 2017 Increase
(Decrease)
--- ---------
Revenues $22.3 $20.2 $2.1
Intersegment
sales $5.4 $5.1 $0.3
Adjusted
EBITDA(1) $13.6 $13.1 $0.5
Tons
handled
(thousands
of
tons)(2) 5,821 5,719 102
CMT
take-
or-
pay
shortfall
tons
(thousands
of
tons)(3) 172 544 (372)
----------- --- --- ----
(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 $2.1 million and $0.5 million,
respectively, driven primarily by record sales volumes at CMT as well as
an increase in rate on CMT take-or-pay tons in the current year period.
This benefit was mostly offset by increased costs at CMT and loss of
business at KRT resulting from near historic water levels during the
first quarter 2018.
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 $10.1 million and $4.7 million,
respectively, and were reasonably consistent with the prior year period.
Corporate and Other
Corporate and other expenses, which include costs related to our legacy coal mining business, were $8.6 million in first quarter 2018, an improvement of $3.0 million versus first quarter 2017. This improvement was partially driven by the absence of the $1.5 million of costs in the prior year period associated with the termination of the proposal to acquire all of the Partnership's common units. Additionally, the current period benefited from lower black lung expenses, associated with our legacy coal mining business.
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 2998448.
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 March 31, 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 60.3 percent limited partner interest in the Partnership. Our cokemaking facilities are located in Illinois, Indiana, Ohio, Virginia, Brazil and India. 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 and/or changes to our contingent consideration
liability related to our acquisition of CMT. 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 Income
(Unaudited)
Three Months Ended March 31,
2018 2017
---- ----
(Dollars and shares in millions,
except per share amounts)
Revenues
Sales and other
operating revenue $350.5 $309.7
------ ------
Costs and
operating
expenses
Cost of products
sold and
operating
expenses 270.6 234.2
Selling, general
and
administrative
expenses 15.9 19.6
Depreciation and
amortization
expense 32.9 33.3
Total costs and
operating
expenses 319.4 287.1
----- -----
Operating income 31.1 22.6
Interest expense,
net 15.8 14.0
Loss on
extinguishment of
debt 0.3 0.1
Income before
income tax
expense 15.0 8.5
Income tax expense 2.0 66.2
---
Net income (loss) 13.0 (57.7)
Less: Net income
(loss)
attributable to
noncontrolling
interests 4.3 (58.7)
--- -----
Net income
attributable to
SunCoke Energy,
Inc. $8.7 $1.0
==== ====
Earnings
attributable to
SunCoke Energy,
Inc. per common
share:
Basic $0.13 $0.02
Diluted $0.13 $0.02
Weighted average
number of common
shares
outstanding:
Basic 64.6 64.3
Diluted 65.4 65.1
SunCoke Energy, Inc.
Consolidated Balance Sheets
March 31, 2018 December 31, 2017
-------------- -----------------
(Unaudited)
(Dollars in millions, except
par value amounts)
Assets
Cash and cash equivalents $147.0 $120.2
Receivables 75.3 68.5
Inventories 110.1 111.0
Income tax receivable 5.4 4.8
Other current assets 9.0 6.7
Total current assets 346.8 311.2
----- -----
Properties, plants and equipment
(net of accumulated
depreciation of $762.8 and
$733.2 million at March 31,
2018 and December 31, 2017,
respectively) 1,488.2 1,501.3
Goodwill 76.9 76.9
Other intangible assets, net 165.1 167.9
Deferred charges and other
assets 3.0 2.8
---
Total assets $2,080.0 $2,060.1
======== ========
Liabilities and Equity
Accounts payable $131.1 $115.5
Accrued liabilities 44.3 53.2
Deferred revenue 3.6 1.7
Current portion of long-term
debt and financing obligation 3.8 2.6
Interest payable 17.1 5.4
Total current liabilities 199.9 178.4
----- -----
Long-term debt and financing
obligation 860.2 861.1
Accrual for black lung benefits 45.4 44.9
Retirement benefit liabilities 27.7 28.2
Deferred income taxes 257.7 257.8
Asset retirement obligations 14.1 14.0
Other deferred credits and
liabilities 15.5 16.1
Total liabilities 1,420.5 1,400.5
------- -------
Equity
Preferred stock, $0.01 par
value. Authorized 50,000,000
shares; no issued shares at
both March 31, 2018 and
December 31, 2017 - -
Common stock, $0.01 par value.
Authorized 300,000,000 shares;
issued 72,076,092 and
72,006,905 shares at March 31,
2018 and December 31, 2017,
respectively 0.7 0.7
Treasury stock, 7,477,657 shares
at both March 31, 2018 and
December 31, 2017 (140.7) (140.7)
Additional paid-in capital 486.0 486.2
Accumulated other comprehensive
loss (21.3) (21.2)
Retained earnings 109.9 101.2
----- -----
Total SunCoke Energy, Inc.
stockholders' equity 434.6 426.2
Noncontrolling interests 224.9 233.4
----- -----
Total equity 659.5 659.6
----- -----
Total liabilities and equity $2,080.0 $2,060.1
======== ========
SunCoke Energy, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
2018 2017
---- ----
(Dollars in millions)
Cash Flows from Operating Activities:
Net income (loss) $13.0 $(57.7)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization expense 32.9 33.3
Deferred income tax expense 0.2 65.8
Payments in excess of expense for
postretirement plan benefits (0.6) (0.7)
Share-based compensation expense 0.8 1.6
Loss on extinguishment of debt 0.3 0.1
Changes in working capital pertaining to
operating activities:
Receivables (6.8) (1.5)
Inventories 0.9 (18.6)
Accounts payable 14.0 26.4
Accrued liabilities (8.7) (8.9)
Deferred revenue 1.9 3.1
Interest payable 11.7 (9.5)
Income taxes (0.6) (1.1)
Other (1.7) (2.8)
---- ----
Net cash provided by operating activities 57.3 29.5
---- ----
Cash Flows from Investing Activities:
Capital expenditures (15.4) (12.7)
Return of Brazilian investment - 20.5
Net cash (used in) provided by investing
activities (15.4) 7.8
----- ---
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 45.0 -
Repayment of long-term debt (44.9) (0.3)
Debt issuance costs (0.5) (0.6)
Proceeds from revolving credit facility 53.5 10.0
Repayment of revolving credit facility (53.5) (10.0)
Repayment of financing obligation (0.6) (0.6)
Acquisition of additional interest in the
Partnership (3.4) -
Cash distribution to noncontrolling
interests (10.6) (12.4)
Other financing activities (0.1) (0.3)
Net cash used in financing activities (15.1) (14.2)
----- -----
Net increase in cash, cash equivalents and
restricted cash 26.8 23.1
Cash, cash equivalents and restricted cash
at beginning of period 120.2 134.5
----- -----
Cash, cash equivalents and restricted cash
at end of period $147.0 $157.6
====== ======
Supplemental Disclosure of Cash Flow
Information
Interest paid $3.5 $22.6
Income taxes paid, net of refunds of zero
and $0.1 million in the three months ended
March 31, 2018 and 2017, respectively. $2.3 $1.5
SunCoke Energy, Inc.
Segment Financial and Operating Data
The following tables set forth financial and operating data for the three months ended March 31, 2018 and 2017:
Three Months Ended
March 31,
2018 2017
---- ----
(Dollars in millions,
except per ton amounts)
Sales and other operating
revenues:
Domestic Coke $318.1 $278.7
Brazil Coke 10.1 10.8
Logistics 22.3 20.2
Logistics intersegment sales 5.4 5.1
Elimination of intersegment
sales (5.4) (5.1)
---- ----
Total sales and other operating
revenues $350.5 $309.7
====== ======
Adjusted EBITDA(1):
Domestic Coke $54.3 $49.7
Brazil Coke 4.7 4.4
Logistics 13.6 13.1
Corporate and Other(2) (8.6) (11.6)
---- -----
Total Adjusted EBITDA $64.0 $55.6
===== =====
Coke Operating Data:
Domestic Coke capacity
utilization 92% 91%
Domestic Coke production volumes
(thousands of tons) 962 948
Domestic Coke sales volumes
(thousands of tons) 974 946
Domestic Coke Adjusted EBITDA
per ton(3) $55.75 $52.54
Brazilian Coke production-
operated facility (thousands of
tons) 441 435
Logistics Operating Data:
Tons handled (thousands of
tons)(4) 5,821 5,719
CMT take-or-pay shortfall tons
(thousands of tons)(5) 172 544
(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 incurred
Adjusted EBITDA losses of $2.3
million and $3.5 million during
the three months ended March 31,
2018 and 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 March 31,
2018 2017
---- ----
(Dollars in millions)
Net cash provided
by operating
activities $57.3 $29.5
Subtract:
Depreciation and
amortization
expense 32.9 33.3
Deferred income
tax expense 0.2 65.8
Loss on
extinguishment of
debt 0.3 0.1
Changes in working
capital and other 10.9 (12.0)
Net income (loss) $13.0 $(57.7)
----- ------
Add:
Depreciation and
amortization
expense $32.9 $33.3
Interest expense,
net(1) 15.8 13.7
Loss on
extinguishment of
debt 0.3 0.1
Income tax expense 2.0 66.2
Adjusted EBITDA 64.0 55.6
---- ----
Subtract: Adjusted
EBITDA
attributable to
noncontrolling
interest(2) 19.0 21.6
Adjusted EBITDA
attributable to
SunCoke Energy,
Inc. $45.0 $34.0
===== =====
(1) 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
Income 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.
(2) 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)
Net income $35 $50
--- ---
Add:
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.
CONTACT: Investors and Media: Andy Kellogg & Kory Kutzke, (630) 824-1907
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