SunCoke Energy, Inc. Announces Strong Second Quarter 2018 Results
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.
"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 $733.2 respectively)
and million
equipment at
(net June
of 30,
accumulated 2018
depreciation and
of December
$792.1 31,
and 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, at
$0.01 both
par June
value. 30,
Authorized 2018
50,000,000 and
shares; December
no 31,
issued 2017
shares - -
Common
stock, 72,006,905 respectively
$0.01 shares
par at
value. June
Authorized 30,
300,000,000 2018
shares; and
issued December
72,205,859 31,
and 0.7 0.7
Treasury
stock, 31,
7,477,657 2017
shares
at
both
June
30,
2018
and
December (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.
