Suncoke energy, inc. reports second quarter 2014 results
Lisle, ill.--(business wire)--suncoke energy, inc. (nyse: sxc) today reported second quarter 2014 net loss attributable to shareholders of $49.2 million, or $0.71 per diluted share. this result includes $51.0 million, or $0.74 per share, of costs for the net after-tax impact of the $103.1 million coal mining impairment charge. excluding these non-cash charges, second quarter 2014 net income was $1.8 million, or $0.03 per diluted share. second quarter 2013 net income was $5.7 million, or $0.08 per diluted share. "excluding impairment charges, adjusted ebitda in the second quarter was driven by the contribution of our new coal logistics business and higher fees earned at indiana harbor due to last fall's contract renewal," said fritz henderson, chairman and chief executive officer of suncoke energy, inc. "our coal mining business performed as expected and benefited from a favorable contingent consideration adjustment and lower cash production costs. we continue to expect to generate full year adjusted ebitda of between $220 million and $240 million, excluding impairment and exit costs related to our coal mining business." consolidated results (1) see definition of adjusted ebitda and reconciliation elsewhere in this release. (2) total revenues fell 7.8 percent to $372.2 million in second quarter 2014 versus same prior year period due to the pass-through of lower coal prices and reduced coke sales volumes in our domestic coke segment and a nearly $16 per ton decline in average coal sales price and lower sales volumes in our coal mining segment. offsetting these declines was revenue contributed by our new coal logistics business. the second quarter 2014 operating loss of $71.4 million primarily reflects the impact of the $103.1 million non-cash coal mining impairment charge. excluding this non-cash charge, operating income increased to $31.7 million for the quarter. adjusted ebitda, which excludes the impairment charge, rose 15.5 percent to $60.5 million, benefiting from our new coal logistics business and better results in our domestic coke segment. net loss attributable to shareholders was $49.2 million in second quarter 2014, compared with net income of $5.7 million in same prior year period. the major factor affecting net income in second quarter 2014 was the non-cash coal mining impairment charge. excluding this non-cash charge, net income was $1.8 million. also impacting net income in the second quarter 2014 was $17.4 million of pre-tax costs related to our dropdown transaction with sxcp, which included $11.4 million bond tender premium, $4.0 million of debt extinguishment fees, $0.3 million of net higher interest expense and $1.7 million of transaction costs. 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 costs and lower coke sales volumes at haverhill and indiana harbor. adjusted ebitda increased $3.0 million, due to a higher fee per ton of coke sold at indiana harbor and improved performance at granite city, partly offset by lower coal-to-coke yields and higher costs at our haverhill facility. 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 increased $0.9 million to $2.5 million on higher production. india coke india coke consists of our 49 percent interest in visa suncoke, a joint venture with visa steel formed on march 18, 2013. visa suncoke owns a 440 thousand ton cokemaking facility and associated steam generation unit in odisha, india. financial results for visa suncoke are recorded on a onemonth lag and represent our 49 percent share of the joint venture's results. adjusted ebitda declined $1.3 million for a loss of $0.5 million in second quarter 2014. the adjusted ebitda loss per ton was $12 per ton. import competition from china continues to depress coke pricing in india, resulting in weak margins. india coke's net loss in second quarter 2014 was $0.9 million versus a loss of $0.2 million in the same prior year period. coal mining (excluding impact of impairment charge) coal mining consists of our metallurgical coal mining activities conducted in virginia and west virginia. a substantial portion of the metallurgical coal produced by our coal mining operations is sold to our jewell coke facility for conversion into coke. includes sales to affiliates. total coal mining revenues (including sales to affiliates) fell as a result of a nearly $16 per ton decline in average coal sales price and lower volumes. excluding sales to affiliates, segment revenues were down on lower average sales price and sales volumes. the difference between coal sales volumes and coal production in second quarter 2014 was due to an increase in raw coal purchases. adjusted ebitda reflects the negative impact of lower average sales price and volumes, offset by a $4.3 million favorable fair value adjustment to a harold keene coal co., inc. (hkcc) contingent consideration arrangement and $4 per ton reduction in cash production costs. effective third quarter 2014, the coal mining segment will be considered as "held for sale" and will be reflected as discontinued operations for future financial reporting. coal logistics the coal logistics segment consists of the coal handling and blending services operated by sxcp as a result of its acquisitions of lake terminal in third quarter 2013 and kanawha river terminals, llc (krt) in fourth quarter 2013. sxcp's coal handling and blending terminals are located in east chicago, indiana and along the ohio, big sandy and kanawha rivers in west virginia and kentucky. coal logistics handled 5,605 thousand tons of coal, contributing $5.0 million to adjusted ebitda. corporate and other corporate and other expenses in second quarter 2014 were $9.6 million, up $0.9 million compared to second quarter 2013 primarily due to expenses related to the dropdown transaction with sxcp. interest expense, net net interest expense increased $15.0 million to $27.1 million in second quarter 2014 versus second quarter 2013. of the $15.0 million increase, $11.4 million related to tender premium paid on the redemption of $160 million of our 7.625 percent senior notes and $4.0 million related to debt extinguishment fees for the early paydown of a term loan. cash flow net cash provided by operations was $14.8 million for the six months ended june 30, 2014 versus $89.0 million in same respective period in 2013, primarily reflecting the impact of lower net income, dropdown financing costs and changes in working capital. cash used in investing activities was $77.8 million in six months ended june 30, 2014 as compared with $129.1 million in same respective period in 2013, which included our $67.7 million investment in the visa suncoke joint venture. 2014 outlook our 2014 guidance is as follows: domestic coke production is expected to be approximately 4.2 million tons excluding impairment charge and costs related to the exit from our coal mining segment, consolidated adjusted ebitda is expected to be between $220 million and $240 million. adjusted ebitda attributable to sxc is expected to be between $160 million and $177 million adjusted ebitda from continuing operations is expected to be between $235 million and $255 million capital expenditures are projected to be $138 million. approximately $36 million of the projected 2014 capital expenditures were pre-funded with the proceeds from sxcp's initial public offering in january 2013 related communications we will host a investor conference call on july 24, 2014 at 11:30 a.m. eastern time (10:30 a.m. central time). this conference call will be webcast live and archived for replay on the investor relations section of www.suncoke.com. participants can listen in by dialing 1-800-351-9852 (domestic) or 1-847-413-3123 (international) and referencing confirmation 37609669. please log in or dial in at least 10 minutes prior to the start time to ensure a connection. a replay of the call will be available for two weeks by calling 1-888-843-7419 (domestic) or 1-630-652-3042 (international) and referencing confirmation 3760 9669#. upcoming events we plan to participate in the following investor conferences: citi's 2014 one-on-one mlp/midstream infrastructure conference on august 20-21, 2014 in las vegas, nv barclays 2014 ceo energy-power conference on september 2-4, 2014 in new york, ny deutsche bank’s 22nd annual leveraged finance conference on september 29-october 1, 2014 in scottsdale, az suncoke energy, inc. suncoke energy, inc. is the largest independent producer of coke in the americas, with 50 years of experience supplying coke to the integrated steel industry. our advanced, heat-recovery cokemaking process produces high-quality coke for use in steelmaking, typically captures waste heat for derivative energy resale and meets or exceeds environmental standards. our u.s. cokemaking facilities are located in virginia, indiana, ohio and illinois. outside the u.s., we have cokemaking operations in vitoria, brazil and odisha, india. our coal mining operations, which have more than 110 million tons of proven and probable reserves, are located in virginia and west virginia. in addition, through our 56 percent ownership of sxcp, we have an interest in sxcp's coal logistics business, which has the collective capacity to blend and transload more than 30 million tons of coal annually. 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 asset and goodwill impairment, sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our equity method investment. ebitda reflects sales discounts included as a reduction in sales and other operating revenue. the sales discounts represent the sharing with customers of a portion of nonconventional fuel tax credits, which reduce our income tax expense. however, we believe our adjusted ebitda would be inappropriately penalized if these discounts were treated as a reduction of ebitda since they represent sharing of a tax benefit that is not included in ebitda. accordingly, in computing adjusted ebitda, we have added back these sales discounts. 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 of the company's net assets and 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. adjusted ebitda is a measure of operating performance that is not defined by gaap, does not represent and should not be considered a substitute for net income as determined in accordance with gaap. calculations of adjusted ebitda may not be comparable to those reported by other companies. adjusted ebitda attributable to sxc equals adjusted ebitda less adjusted ebitda attributable to noncontrolling interests. adjusted ebitda per ton represents adjusted ebitda divided by tons sold. 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 the company) 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 the company, 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 the company; and changes in tax, environmental and other laws and regulations applicable to the company’s businesses. forward-looking statements are not guarantees of future performance, but are based upon the current knowledge, beliefs and expectations of company management, and upon assumptions by the company 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. the company 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, the company 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 the company. for information concerning these factors, see the company’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 the company’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. (dollars and shares in millions, except per share amounts) (dollars in millions, except per share amounts) the following tables set forth financial and operating data for the three and six months ended june 30, 2014 and 2013: consolidated - estimated 2014 adjusted ebitda to estimated net income continuing operations (excluding coal mining segment) - estimated 2014 adjusted ebitda to estimated net income
