SunCoke Energy, Inc. Announces Strong Second Quarter 2019 Results
LISLE, Ill., July 30, 2019 /PRNewswire/ -- SunCoke Energy, Inc. (NYSE: SXC) today reported results for the second quarter 2019, reflecting the strong performance at our Domestic Coke segment, including disciplined cost control across our cokemaking fleet.
"We are pleased with our second quarter operational performance and the completion of the Simplification Transaction. The simplified corporate structure has increased liquidity and improved financial flexibility, which strengthens our ability to execute on strategic objectives and generate significant value for SunCoke stockholders," said Mike Rippey, President and Chief Executive Officer of SunCoke Energy, Inc. "We are focused on executing against our remaining 2019 objectives and are well-positioned to achieve our full-year Adjusted EBITDA guidance."
SECOND QUARTER CONSOLIDATED RESULTS
Three Months Ended June 30,
(Dollars in
millions) 2019 2018 Increase/
(Decrease)
---
Revenues $
407.5 $
367.0 $
40.5
Adjusted
EBITDA(1) $
63.1 $
67.3 $
(4.2)
Net income
attributable
to SXC $
2.3 $
4.2 $
(1.9)
---
(1) See definition of Adjusted EBITDA
and reconciliation elsewhere in
this release.
Revenues in the second quarter 2019 increased $40.5 million compared to the prior year period, primarily reflecting the pass-through of higher coal prices, partially offset by lower volumes in our Logistics segment.
Adjusted EBITDA in the second quarter 2019 was $63.1 million, a $4.2 million decrease from the prior year period, driven by lower volumes in our Logistics segment, partially offset by improved performance in our Domestic Coke segment.
Net income attributable to SXC was $2.3 million, or $0.03 per share, for the second quarter 2019. The results reflect lower volumes at CMT discussed above, certain transaction costs related to the Simplification Transaction and higher depreciation expense. These decreases were partially offset by the absence of the $5.4 million loss on the sale of VISA SunCoke Limited that occurred in second quarter 2018.
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) 2019 2018 Increase
---
Revenues $
378.0 $
328.7 $
49.3
Adjusted
EBITDA(1) $
56.3 $
52.9 $
3.4
Sales volumes
(thousands of
tons) 1,030 1,007 23
Adjusted
EBITDA per
ton(2) $
54.66 $
52.53 $
2.13
---
(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 $49.3 million primarily reflecting the pass-through of higher coal prices.
Adjusted EBITDA increased $3.4 million and included $2.3 million from higher volumes at Indiana Harbor, primarily due to the performance of the rebuilt ovens. Additionally, the Company demonstrated strong cost control during the period resulting in a benefit of $3.0 million as compared to the prior year period. Results also included an increase in coal cost recovery driven by higher coal prices during the current year period. These benefits were partially offset by lower coal-to-coke yields, which decreased Adjusted EBITDA by $4.0 million during the current year period, and reflected the impact from higher coal moisture levels as a result of heavy rainfall during the quarter.
Logistics
Logistics consists of the handling and mixing services of coal and other aggregates at our Convent Marine Terminal ("CMT"), Lake Terminal, Kanawha River Terminals ("KRT") and Dismal River Terminal ("DRT").
Three Months Ended June 30,
(Dollars in
millions) 2019 2018 Increase
(Decrease)
---
Revenues $
19.5 $
28.1 $
(8.6)
Intersegment sales $
6.7 $
5.5 $
1.2
Adjusted EBITDA(1) $
11.8 $
19.7 $
(7.9)
Tons handled
(thousands of
tons)(2) 5,592 6,980 (1,388)
CMT take-or-pay
shortfall tons
(thousands of
tons)(3) 858 63 795
---
(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 decreased by $8.6 million and $7.9 million, respectively, driven by lower volumes at the Convent Marine Terminal facility, resulting in deferred revenue of $5.5 million in the second quarter. As a reminder, CMT has long-term take-or-pay contracts with volume commitments covering 10 million tons of its annual capacity. Due to the nature of these contracts, the lower volumes at CMT during the first half will not have a material impact on full-year expectations. The first half 2019 take-or-pay volume shortfall at CMT generated $9.5 million in deferred revenue, which will be recognized into revenue and Adjusted EBITDA in the second half of 2019.
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 $10.0 million and $4.3 million, respectively, during the second quarter 2019, which was slightly lower than revenues and Adjusted EBITDA of $10.2 million and $4.8 million, respectively, during the second quarter 2018. The decreases were driven by unfavorable foreign currency adjustments.
Corporate and Other
Corporate and other Adjusted EBITDA loss, which include costs related to our legacy coal mining business, was $9.3 million during the second quarter 2019, an improvement of $0.8 million compared to second quarter 2018, primarily driven by lower professional service costs.
2019 OUTLOOK
Our 2019 guidance is as follows:
-- Domestic coke production is expected to be approximately 4.1 million
tons
-- Consolidated Adjusted EBITDA is expected to be between $266 to $276
million
-- Adjusted EBITDA attributable to SXC is expected to be between $226 to
$232 million
-- Capital expenditures are projected to be between $110 to $120 million,
including $40 million to $48 million related to our Indiana Harbor oven
rebuild project and approximately $6 million related to completing our
Granite City gas sharing project
-- Cash generated by operations is estimated to be between $176 million and
$191 million
-- Cash taxes are projected to be between $4 to $8 million
RELATED COMMUNICATIONS
We will host our quarterly earnings call at 10:30 a.m. Eastern Time (9:30 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 4939068.
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. Our cokemaking facilities are located in Illinois, Indiana, Ohio, Virginia and Brazil. We have more than 55 years of cokemaking experience serving the integrated steel industry. In addition, we provide export and domestic material handling services to coke, coal, steel, power and other bulk and liquids customers. Our logistics terminals have the collective capacity to mix and transload more than 40 million tons of material each year and are strategically located to reach Gulf Coast, East Coast, Great Lakes and international ports. 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 on
extinguishment of debt, changes to our contingent consideration
liability related to our acquisition of CMT, loss on the disposal of our
interest in VISA SunCoke, and/or transaction costs incurred as part of
the Simplification Transaction. EBITDA and Adjusted EBITDA do not
represent and should not be considered alternatives to net income or
operating income under accounting principles generally accepted in the
U.S. ("GAAP") and may not be comparable to other similarly titled
measures in other businesses. Management believes Adjusted EBITDA is an
important measure in assessing operating performance. 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. EBITDA and Adjusted EBITDA are not measures
calculated in accordance with GAAP, and they should not be considered a
substitute for net income 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 June 30, Six Months Ended June 30,
2019 2018 2019 2018
(Dollars and shares in millions, except per share amounts)
Revenues
Sales and other operating
revenue $
407.5 $
367.0 $
798.8 $
717.5
Costs and operating expenses
Cost of products sold and
operating expenses 327.0 282.7 634.4 553.3
Selling, general and
administrative expenses 21.9 17.6 38.6 33.5
Depreciation and amortization
expense 37.0 32.0 74.2 64.9
Total costs and operating
expenses 385.9 332.3 747.2 651.7
Operating income 21.6 34.7 51.6 65.8
Interest expense, net 15.1 15.7 29.9 31.5
Loss on extinguishment of
debt 0.3
Income before income tax
expense 6.5 19.0 21.7 34.0
Income tax expense 3.2 2.2 6.2 4.2
Loss from equity method
investment 5.4 5.4
Net income 3.3 11.4 15.5 24.4
Less: Net income attributable
to noncontrolling interests 1.0 7.2 3.4 11.5
Net income attributable to
SunCoke Energy, Inc. $
2.3 $
4.2 $
12.1 $
12.9
Earnings attributable to
SunCoke Energy, Inc. per
common share:
Basic $
0.03 $
0.06 $
0.19 $
0.20
Diluted $
0.03 $
0.06 $
0.18 $
0.20
Weighted average number of
common
shares
outstanding:(1)
Basic 65.9 64.7 65.4 64.6
Diluted 66.1 65.6 65.7 65.5
(1) The Company issued 25.5 million
shares on June 28, 2019, in
exchange for the SunCoke
Energy Partners, L.P.
outstanding common units not
already owned by SXC. The
issuance of these shares
occurred late in the second
quarter and as such had a
minimum impact on the 2019
weighted average number of
common shares outstanding.
SunCoke Energy, Inc.
Consolidated Balance Sheets
June 30, 2019 December 31, 2018
(Unaudited)
(Dollars in millions, except
par value amounts)
Assets
Cash and cash equivalents $
102.2 $
145.7
Receivables 98.9 75.4
Inventories 175.7 110.4
Income tax receivable 3.2 0.7
Other current assets 4.9 2.8
Total current assets 384.9 335.0
Properties, plants and
equipment (net of accumulated
depreciation of $901.6
million and $855.8 million at
June 30, 2019 and December
31, 2018, respectively) 1,454.8 1,471.1
Goodwill 76.9 76.9
Other intangible assets, net 151.4 156.8
Deferred charges and other
assets 14.4 5.5
Total assets $
2,082.4 $
2,045.3
Liabilities and Equity
Accounts payable $
137.2 $
115.0
Accrued liabilities 49.9 45.6
Deferred revenue 13.5 3.0
Current portion of long-term
debt and financing obligation 5.1 3.9
Interest payable 3.9 3.6
Total current liabilities 209.6 171.1
Long-term debt and financing
obligation 828.0 834.5
Accrual for black lung
benefits 46.4 44.9
Retirement benefit liabilities 24.1 25.2
Deferred income taxes 212.8 254.7
Asset retirement obligations 13.4 14.6
Other deferred credits and
liabilities 25.3 17.6
Total liabilities 1,359.6 1,362.6
Equity
Preferred stock, $0.01 par
value. Authorized 50,000,000
shares; no issued shares at
both June 30, 2019 and
December 31, 2018
Common stock, $0.01 par value.
Authorized 300,000,000
shares; issued 98,036,174 and
72,233,750 shares at June 30,
2019 and December 31, 2018,
respectively 1.0 0.7
Treasury stock, 7,477,657
shares at both June 30, 2019
and December 31, 2018 (140.7) (140.7)
Additional paid-in capital 709.7 488.8
Accumulated other
comprehensive loss (13.0) (13.1)
Retained earnings 139.5 127.4
Total SunCoke Energy, Inc.
stockholders' equity 696.5 463.1
Noncontrolling interests 26.3 219.6
Total equity 722.8 682.7
Total liabilities and equity $
2,082.4 $
2,045.3
SunCoke Energy, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2019 2018
(Dollars in millions)
Cash Flows from Operating Activities:
Net income $
15.5 $
24.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 74.2 64.9
Deferred income tax expense 1.8 0.3
Payments in excess of expense for
postretirement plan benefits (1.1) (1.1)
Share-based compensation expense 2.1 1.6
Loss on extinguishment of debt 0.3
Loss from equity method investment 5.4
Changes in working capital pertaining to
operating activities:
Receivables (23.5) (12.0)
Inventories (65.3) (5.4)
Accounts payable 23.0 16.8
Accrued liabilities 0.2 (9.0)
Deferred revenue 10.5 1.5
Interest payable 0.3 (1.3)
Income taxes (2.5)
Other 0.4 (1.1)
Net cash provided by operating activities 35.6 85.3
Cash Flows from Investing Activities:
Capital expenditures (53.1) (43.6)
Sale of equity method investment 4.0
Other investing activities 0.2 0.3
Net cash used in investing activities (52.9) (39.3)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 45.0
Repayment of long-term debt (0.6) (45.2)
Debt issuance costs (0.5)
Proceeds from revolving credit facility 175.6 92.5
Repayment of revolving credit facility (180.6) (92.5)
Repayment of financing obligation (1.4) (1.3)
Acquisition of additional interest in the
Partnership (4.2)
Cash distribution to noncontrolling
interests (14.2) (17.7)
Other financing activities (5.0) 0.7
Net cash used in financing activities (26.2) (23.2)
Net (decrease) increase in cash and cash
equivalents (43.5) 22.8
Cash and cash equivalents at beginning of
period 145.7 120.2
Cash and cash equivalents at end of period $
102.2 $
143.0
Supplemental Disclosure of Cash Flow
Information
Interest paid, net of capitalized interest
of $2.3 million and $1.3 million,
respectively $
28.0 $
30.5
Income taxes paid, net of refunds of zero
and $1.3 million, respectively $
6.5 $
4.4
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, 2019 and 2018:
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(Dollars in millions, except per ton amounts)
Sales and other operating
revenues:
Domestic Coke $
378.0 $
328.7 $
737.3 $
646.8
Brazil Coke 10.0 10.2 19.7 20.3
Logistics 19.5 28.1 41.8 50.4
Logistics intersegment sales 6.7 5.5 13.2 10.9
Elimination of intersegment
sales (6.7) (5.5) (13.2) (10.9)
Total sales and other operating
revenues $
407.5 $
367.0 $
798.8 $
717.5
Adjusted EBITDA(1):
Domestic Coke $
56.3 $
52.9 $
114.8 $
107.2
Brazil Coke 4.3 4.8 8.8 9.5
Logistics 11.8 19.7 24.5 33.3
Corporate and Other(2) (9.3) (10.1) (17.7) (18.7)
Total Adjusted EBITDA $
63.1 $
67.3 $
130.4 $
131.3
Coke Operating Data:
Domestic Coke capacity 97
utilization % 94
% 97
% 93
%
Domestic Coke production
volumes (thousands of tons) 1,030 999 2,036 1,961
Domestic Coke sales volumes
(thousands of tons) 1,030 1,007 2,034 1,981
Domestic Coke Adjusted EBITDA
per ton(3) $
54.66 $
52.53 $
56.44 $
54.11
Brazilian Coke production-
operated facility (thousands
of tons) 424 431 843 872
Logistics Operating Data:
Tons handled (thousands of
tons)(4) 5,592 6,980 11,376 12,801
CMT take-or-pay shortfall
tons (thousands of tons)(5) 858 63 1,527 126
(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 $3.8
million during the three and six
months ended June 30, 2019,
respectively, and $2.4 million
and $4.7 million during the
three and six months ended June
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.
SunCoke Energy, Inc.
Reconciliation of Non-GAAP Information
Net Income to Adjusted EBITDA
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(Dollars in millions)
Net income $
3.3 $
11.4 $
15.5 $
24.4
Add:
Depreciation and amortization
expense $
37.0 $
32.0 $
74.2 $
64.9
Interest expense, net 15.1 15.7 29.9 31.5
Loss on extinguishment of debt 0.3
Income tax expense 3.2 2.2 6.2 4.2
Contingent consideration
adjustments(1) 0.1 0.6 (0.3) 0.6
Loss from equity method investment 5.4 5.4
Simplification Transaction costs(2) 4.4 4.9
Adjusted EBITDA 63.1 67.3 130.4 131.3
Subtract: Adjusted EBITDA
attributable to noncontrolling
interest(3) 18.6 21.6 37.5 40.6
Adjusted EBITDA attributable to
SunCoke Energy, Inc. $
44.5 $
45.7 $
92.9 $
90.7
(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.
(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
Estimated 2019 Net Income
to Estimated Consolidated Adjusted EBITDA
2019
Low High
Net income $
40 $
47
Add:
Depreciation and amortization
expense 150 145
Interest expense, net 65 65
Income tax expense 6 14
Simplification Transaction
costs(1) 5 5
Adjusted EBITDA $
266 $
276
Subtract:
Adjusted EBITDA attributable to
noncontrolling interests(2) 40 44
Adjusted EBITDA attributable to
SunCoke Energy, Inc. $
226 $
232
(1) Costs expensed by the Partnership
associated with the Simplification
Transaction.
(2) Reflects noncontrolling interest in
Indiana Harbor and the portion of
the Partnership owned by public
unitholders prior to the closing
of the Simplification Transaction.
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SOURCE SunCoke Energy, Inc.
