Suncoke energy, inc. announces second quarter 2015 results and
reaffirms full year guidance
Lisle, ill.--(business wire)--suncoke energy, inc. (nyse: sxc) today reported a second quarter 2015 loss attributable to shareholders of $13.5 million, or $0.21 per share, reflecting pension termination charges of $0.17 per share and lower cost recovery at our indiana harbor facility. the second quarter 2014 net loss attributable to shareholders was $49.2 million, or $0.71 per share, including a coal mining impairment of $51.0 million, net of tax, or $0.74 per share. “we delivered second quarter results in line with annual targets, which anticipated the impact of a non-cash pension charge and lower operating cost pass-through mechanism at indiana harbor,” said fritz henderson, chairman and chief executive officer of suncoke energy, inc. “this puts us on track to achieve our 2015 consolidated adjusted ebitda guidance of $190 million to $210 million before considering the benefits anticipated from recent announcements by suncoke energy partners.” henderson continued, “these announcements, including the expected acquisition of convent marine terminal and the initiation of a unit repurchase program at sxcp, are expected to drive higher cash distributions to us as general partner and majority owner of the partnership. we remain committed to returning this incremental cash in line with our long-term strategy of returning 80 to 90 percent of our free cash flow to shareholders.” sxc also announced it entered into a contribution agreement with suncoke energy partners, l.p. (nyse: sxcp) to contribute a 23 percent interest in the granite city cokemaking operations for $67 million. this transaction is expected to close in the third quarter 2015, concurrently with the execution of long-term financing related to the convent marine terminal acquisition. in light of announcements made this morning by sxcp, we have issued our second quarter results two days early. we have also moved up our investor conference call to this morning at 10:00am et. more information can be found below. second quarter consolidated results (1) see definition of adjusted ebitda and reconciliation elsewhere in this release. revenues declined $24.0 million to $348.2 million in second quarter 2015 compared with the same prior year period, reflecting the pass-through of lower coal costs in our domestic coke segment on relatively flat sales volumes. operating income was $6.4 million in the current period and compares favorably to the prior year period, which included the coal mining impairment of $103.1 million. adjusted ebitda declined $27.4 million, primarily as a result of one-time, non-cash pension plan termination charges of $12.6 million and the absence of a one-time, non-cash gain of $4.5 million recorded in the prior year period. adjusted ebitda was further impacted by lower cost recovery at indiana harbor, net of lower spending, of $4.6 million and the timing of planned maintenance outages of approximately $4.0 million. net loss attributable to sxc was $13.5 million, or $0.21 per share, in second quarter 2015, reflecting the items described above, net of tax. prior year net loss attributable to sxc was $49.2 million, or $0.71 per share, including a coal mining impairment of $51.0 million, net of tax, or $0.74 per share. 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. (1) see definitions of adjusted ebitda and adjusted ebitda per ton and reconciliation elsewhere in this release. segment revenues were affected by the pass-through of lower coal price, partially offset by an increase in volume of 51 thousand tons. adjusted ebitda was $56.2 million, down as a result of the change in indiana harbor's cost recovery mechanism in 2015 from an annually negotiated budget amount with a cap for certain expenses to a fixed recovery per ton as well as the impact of the timing of planned maintenance outages. second quarter 2015 was also impacted by lost revenues and higher expenses associated with the previously announced planned shutdown of haverhill chemicals llc, which were in line with management’s expectations. coal logistics coal logistics consists of the coal handling and blending services operated by sxcp at lake terminal in east chicago, in, and kanawha river terminals, llc (krt), which has terminals along the ohio, big sandy, and kanawha rivers in west virginia and kentucky. coal logistics results three months ended june 30, (1) see definitions of adjusted ebitda and adjusted ebitda per ton and reconciliation elsewhere in this release. adjusted ebitda remained consistent at $5.0 million as a result of more favorable pricing and lower costs, offsetting the decrease in volume. brazil coke brazil coke consists of a cokemaking facility in vitÓria, brazil, which we operate for an affiliate of arcelormittal. brazil coke earns operating and technology licensing fees based on production and recognizes a dividend on a preferred stock investment assuming certain minimum production levels are achieved. segment adjusted ebitda remained reasonably consistent at $2.6 million. india coke india coke consists of our 49 percent interest in our visa suncoke joint venture, which owns a 440 thousand ton cokemaking facility and associated steam generation unit in odisha, india. financial results for visa suncoke are recorded on a one-month lag and represent our 49 percent share of the joint venture's results. adjusted ebitda remained relatively flat at a loss of $0.4 million in second quarter 2015. import competition from china continues to depress coke pricing in india, resulting in weak margins. coal mining coal mining consists of our metallurgical coal mining activities conducted in virginia and west virginia, currently mined by contractors. a majority of the metallurgical coal produced by our coal mining business is sold to our jewell coke facility for conversion into coke. adjusted ebitda was a loss of $5.4 million, down $5.8 million primarily as a result of a one-time, non-cash favorable $4.5 million fair value adjustment to the harold keene coal co., inc. (hkcc) contingent consideration arrangement in the prior year period. while we continue to pursue a strategic exit from our coal mining business, we no longer believe a sale is probable due to the prolonged market challenges and sharply lower prices impacting the metallurgical coal industry. instead, the company continues to significantly rationalize its mining operations to reduce ongoing costs. therefore, these operations are no longer reported as discontinued and the related assets and liabilities are reported as held and used in our coal mining segment. corporate and other corporate and other expenses in second quarter 2015 were $24.6 million, up $13.7 million versus second quarter 2014, primarily due to $12.6 million in pension plan termination charges. interest expense, net interest expense, net, decreased $14.1 million to $13.0 million in second quarter 2015, primarily related to prior year financing charges in connection with the dropdown of an additional 33 percent interest in our haverhill and middletown cokemaking operations to sxcp. cash flow cash provided by operating activities was $76.6 million for year to date 2015 compared to $25.3 million in the same respective period of 2014. the increase primarily reflects improved operating performance, adjusted for non-cash items, in the current period and working capital changes associated with lower inventory levels. cash used in investing activities was $22.5 million for year to date 2015 and was $55.3 million lower than the prior year of $77.8 million in the same respective period of 2014, which included refurbishment work at indiana harbor and higher environmental remediation capital expenditures at our haverhill cokemaking facility. dividends declared on july 16, 2015, our board of directors declared a quarterly cash dividend of $0.15 per share, up 100 percent versus the previous quarterly rate. this dividend will be paid on september 10, 2015 to stockholders of record at the close of business on august 19, 2015. 2015 outlook we reaffirm our 2015 guidance excluding expected benefits of convent marine terminal acquisition and granite city 23 percent dropdown: domestic coke production is expected to be approximately 4.3 million tons domestic coke adjusted ebitda per ton is expected to be at the lower end of our $55 per ton and $60 per ton range consolidated adjusted ebitda is expected to be between $190 million to $210 million adjusted ebitda attributable to sxc is expected to be between $115 million and $130 million, reflecting the impact of public ownership in sxcp capital expenditures are projected to be approximately $80 million cash generated by operations is estimated to be between $125 million and $145 million cash taxes are projected to be approximately $10 million related communications we will host an investor conference call at 10:00 a.m. eastern time (9:00 a.m. central time) today. this conference call will be webcast live and archived for replay in the investor relations section of www.suncoke.com. investors may participate in this call by dialing 1-800-588-4973 in the u.s. or 1-847-230-5643 if outside the u.s., confirmation code 40130618. upcoming events additionally, we plan to participate in the following investor conferences: citi mlp/midstream infrastructure conference, august 19-20, 2015, las vegas, nv deutsche bank leveraged finance conference, september 28-30, 2015, scottsdale, az suncoke energy, inc. suncoke energy, inc. (nyse: sxc) supplies high-quality coke to the integrated steel industry under long-term take-or-pay coke 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, brazil and india. we are the sponsor of suncoke energy partners, l.p. (nyse: sxcp), a publicly traded master limited partnership, holding a 2 percent general partner interest, 56 percent limited partnership interest and all of the incentive distribution rights. in addition, we own approximately 110 million tons of proven and probable coal reserves in virginia and west virginia. to learn more about suncoke energy, inc., visit our website at www.suncoke.com. definitions adjusted ebitda represents earnings before interest, taxes, depreciation, depletion and amortization (“ebitda”) adjusted for impairments, coal rationalization costs, sales discounts, and interest, taxes, depreciation and amortization attributable to our equity method investment. prior to the expiration of our nonconventional fuel tax credits in november 2013, adjusted ebitda included an add-back of sales discounts related to the sharing of these credits with customers. any adjustments to these amounts subsequent to 2013 have been included in adjusted ebitda. our adjusted ebitda also includes ebitda attributable to our equity method investment. 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 sxcp represents adjusted ebitda less adjusted ebitda attributable to noncontrolling interests. free cash flow represents distributions from sxcp plus sxc retained adjusted ebitda less cash interest, cash taxes, capital expenditures and any adjustments for any non-cash items. 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. the following tables set forth financial and operating data for the three and six months ended june 30, 2015 and 2014:
