Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SunCoke Energy, Inc. | d8k.htm |
| EX-99.1 - PRESS RELEASE - SunCoke Energy, Inc. | dex991.htm |
 Q2 ‘11
Earnings Conference Call August 3, 2011
Exhibit 99.2 |
 Safe Harbor
Statement This slide presentation should be reviewed in conjunction with
SunCoke’s Second Quarter 2011 earnings conference call held on August
3, 2011 at 5:00 p.m. ET. You may listen to the audio portion of the conference call by phone or on the website and an
audio recording will be available after the call’s completion by calling
1-888-843-7419 and entering conference ID 30289205#. This slide
presentation should also be reviewed together with SunCoke’s Form 10-Q for the quarter ended June 30, 2011 filed
with the Securities and Exchange Commission today.
Statements in this presentation that are not historical facts are
forward-looking statements intended to be covered by the safe harbor
provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based upon assumptions by SunCoke concerning
future conditions, any or all of which ultimately may prove to be
inaccurate, and upon the current knowledge, beliefs and expectations of SunCoke management. These forward-
looking statements are not guarantees of future performance.
Forward looking statements are inherently uncertain and involve significant risks
and uncertainties that could cause actual results to differ materially from
those described during this presentation. Such risks and uncertainties include economic, business,
competitive and/or regulatory factors affecting SunCoke’s business, as well as
uncertainties related to the outcomes of pending or future
litigation.
In
accordance
with
the
safe
harbor
provisions
of
the
Private
Securities
Litigation
Reform
Act
of
1995,
SunCoke
has included in its filings with the Securities and Exchange Commission, cautionary
language identifying important factors (though not necessarily all such
factors) that could cause future outcomes to differ materially from those set forth in the forward looking
statements. For more information concerning these factors, see SunCoke's Securities
and Exchange Commission filings. SunCoke expressly disclaims any obligation
to update or alter its forward looking statements, whether as a result of new
information, future events or otherwise. For more information concerning these
factors, see SunCoke's Securities and Exchange Commission filings, available
on SunCoke's website at www.suncoke.com in the
Investor Relations section. This presentation includes certain non-GAAP
financial measures intended to supplement, not substitute for, comparable GAAP
measures. Reconciliations of non-GAAP financial measures to GAAP financial
measures are provided in the Appendix at the end of the presentation.
Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those
measures provided in the Appendix, or on our website at www.suncoke.com.
Second Quarter 2011 Earnings Conference Call
1 |
 Separation
Update •
Completed Initial Public Offering (NYSE: SXC)
•
Issued $700 million aggregate of Long-Term Debt and entered into a
$150 million Revolving Credit Facility
•
$400 million Senior Notes
•
$300 million Secured Term Loan Credit Facility
•
Repaid intercompany payable to Sunoco of $575 million with
balance of the net proceeds retained for general corporate purposes
•
$150 million Revolver currently undrawn
•
Established Executive Management Team and Three Independent
Board Members
•
Sunoco intends to distribute SunCoke shares to Sunoco
shareholders on or before 12 months from IPO
Second Quarter 2011 Earnings Conference Call
2 |
 Second Quarter
Overview (1) For a reconciliation of Adjusted EBITDA to net income and
operating income, please see the appendix. •
Continue to advance domestic and international growth opportunities
Second Quarter 2011 Earnings Conference Call
3
Q2 ‘11 vs. Q2 ’10
•
Year-over-year quarterly results reflect unfavorable impact of
ArcelorMittal settlement, and relocation and public company readiness
costs •
Net Income Attributable to Net Parent Investment of $22.4 million in Q2 ‘11
vs. $44.3 million in Q2 ’10
•
Adjusted EBITDA
(1)
of $37.6 million in Q2 ‘11 vs. $68.7 million in Q2 ’10
•
Improvement over Q1 ‘11 driven by stronger Indiana Harbor performance
and better utilization rates across all Coke Operations
•
Adjusted EBITDA
(1)
of $37.6 million in Q2 ‘11 vs. $26.6 million in Q1 ’11
Q2
‘11
vs.
Q1
’11 |
     Q2 ‘11
Financial Results ($ in millions)
Q2 '11
Q2 '10
Q1 '11
Q2 '11 vs.
Q2 '10
Q2 '11 vs.
Q1 '11
Revenue
$378.0
$349.3
$333.3
$28.7
$44.7
Operating Income
$21.4
$57.9
$4.3
($36.5)
$17.1
Net Income Attributable to
Net Parent Investment
$22.4
$44.3
$11.8
($21.9)
$10.6
Adjusted EBITDA
(1)
$37.6
$68.7
$26.6
($31.1)
$11.0
Coke Sales Volumes
927
909
872
18
55
Coal Sales Volumes
334
314
386
20
(52)
(1) For a reconciliation of Adjusted EBITDA to net income and operating income,
please see the appendix. Second Quarter 2011 Earnings Conference Call
4 |
 Q2 2010 to Q2
2011 Adjusted EBITDA Reconciliation
(1)
Excluding settlement impact, Adjusted EBITDA improvement from Haverhill and Granite City was
offset by operational issues at Indiana Harbor and Coal Mining and relocation and public
company readiness costs ($ in millions)
(1) For a reconciliation of Adjusted EBITDA to net income and operating income,
please see the appendix. Second Quarter 2011 Earnings Conference Call
5
$68.7
$37.6
$5.2
$2.5
($19.3)
($5.9)
($3.8)
($7.9)
($1.9)
$0
$10
$20
$30
$40
$50
$60
$70
Q2 2010A
Adjusted
EBITDA
ArcelorMittal
Settlement Impact
Indiana Harbor
Performance
(Costs and Yield)
Haverhill Operating
Cost Recovery and
Lower Operating
Expenses
Granite City
Improvement
(Steam Sales)
Coal Mining
(Excluding Transfer
Pricing Increase)
Higher Corp. Costs
for Relocation and
Public Company
Readiness
Other Items
Q2 2011A
Adjusted
EBITDA |
 Q1 2011 to Q2
2011 Adjusted EBITDA Reconciliation
(1)
Adjusted EBITDA improvement driven by the absence of coke cover loss and improvements at Indiana
Harbor and Haverhill, partially offset by higher relocation and public company readiness
costs ($ in millions)
(1) For a reconciliation of Adjusted EBITDA to net income and operating income,
please see the appendix. Second Quarter 2011 Earnings Conference Call
6
$26.6
$37.6
$11.4
$3.9
$2.0
($5.5)
($0.8)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Q1 2011A
Adjusted
EBITDA
Coke Cover and Inventory
Loss at Indiana Harbor
Other Indiana Harbor
Improvements
Haverhill
Improvements
Higher Corp
Costs
Other Items
Q2 2011A
Adjusted
EBITDA |
 178
174
177
280
256
301
272
266
276
153
165
168
Q2 '10
Q1 '11
Q2 '11
Jewell
Indiana Harbor
Haverhill
Granite City
Domestic Coke Financial Summary
(Jewell Coke & Other Domestic Coke)
Domestic Coke Production
Domestic
Coke
Pro
Forma
Adjusted
EBITDA
(1)
,
Pro
Forma
for
ArcelorMittal Settlement and Coal Transfer Price
(Tons in thousands)
($ in millions, except per ton amounts)
883
861
922
$37
$19
$36
Pro Forma Adjusted EBITDA / ton
(1) For a reconciliation of ProForma Adjusted EBITDA to operating income, please
see the appendix.
Second Quarter 2011 Earnings Conference Call
7
$14
$11
$11
$23
$8
$25
$ 41/ton
$ 22/ton
$ 39/ton
Q2 '10
Q1 '11
Q2 '11
Jewell Coke Segment
Other Domestic Coke Segment
Other
Domestic
Coke:
705
Other
Domestic
Coke:
687
Other
Domestic
Coke:
745 |
 $104
$114
$126
$49
$133
$85
$152
$152
$162
$104
$131
$155
Q2 '10
Q1 '11
Q2 '11
Proforma Sales Price (2)
Average Sales Price
314
386
334
265
335
340
23
51
24
Q2 '10
Q1 '11
Q2 '11
Coal sales
Coal production
Coal purchases
Coal Mining Financial Summary
Coal Sales, Production and Purchases
Avg.
Sales
Price/Ton
(1)
and
Cost/Ton
Coal Mining Pro Forma Adjusted EBITDA
(5)
, Pro Forma for
Coal Transfer Price Impact
(Tons in thousands)
($ in millions, except per ton amounts)
Pro Forma Adjusted EBITDA
Pro Forma Adjusted EBITDA / ton
Coal
cash
cost
(3)
($ per ton)
(1)
Average Sales Price is the weighted average sales price for all coal sales volumes, includes
sales to affiliates and sales to Jewell Coke established via a transfer pricing
agreement. The transfer price per ton to Jewell Coke was $103.86, $133.57 and $156.12
for Q2 ‘10, Q1 ‘11 and Q2 ‘11,respectively. (2)
Pro
Forma
Sales
Price
is
the
Average
Sales
Price
adjusted
to
set
the
internal
transfer
price
on
Jewell
Coke
coal purchase volumes equal to the Jewell Coke coal component contract price. The per ton coal
cost component
included
in
the
Jewell
Coke
contract
was
approximately
$162,
$165
and
$165
for
Q2
‘10,
Q1 ‘11
and Q2 ‘11, respectively.
(3)
Mining and preparation costs, excluding depreciation, depletion and amortization, divided by
coal production volume.
(4)
Costs of purchased raw coal divided by purchased coal volume.
Second Quarter 2011 Earnings Conference Call
8
$15
$12
$11
$49/ton
$32/ton
$34/ton
Q2 '10
Q1 '11
Q2 '11
(5) For a reconciliation of ProForma Adjusted EBITDA to operating income, please
see the appendix.
Purchased coal cost
(4) |
 $49
$110
$181
$17
$18
$50
$0
$50
$100
$150
$200
$250
First Half '10
First Half '11
Full Year '11E
Capital Expenditures
Expansion
Ongoing
Capital Expenditures
($ in millions)
•
Capital Expenditures increased $62M from first half of 2010, primarily related
to
Middletown Operations
-
Capital Expenditures for Q1 ‘11 and Q2 ’11 were $59.5M and $68.5M,
respectively -
Middletown facility, $165 million in 2011
-
Coal expansion project, $16 million in 2011
$231
$128
$66
Second Quarter 2011 Earnings Conference Call
10
•
Estimated 2011 Capital Expenditures of approximately $231 million
-
2011 Expansion Capital Expenditures: |
 Cash Flows and
Financial Position •
Issued $700M in debt in the form of $300M Term
Loan and $400M Senior Notes
Capital Structure
•
Sufficient liquidity (cash and undrawn revolver) to
support growth strategy and allow opportunistic
acquisitions
Liquidity
•
Will continue to invest operating cash flows into
expansion projects
Growth Funding
•
Dividends or share buybacks not considered at this
time
Dividend Policy
Second Quarter 2011 Earnings Conference Call
10 |
 Key Drivers of
Near Term Growth (2012/2013) Second Quarter 2011 Earnings Conference
Call 11
Middletown
•
Plant is approximately 95% complete and 90% staffed and is on track
to commence operations in Q4
Indiana Harbor
•
No anticipated contractual production shortfall in 2012/2013
•
$50M –
$100M estimated spending to support contract extension
•
Contract renewal negotiations in process
Coal Expansion
•
Expect to reach 350K tons annualized rate in 2012 and 500K
annualized rate by mid-2013
•
Executed contract mining agreement with Revelation Energy, LLC to
mine approximately 1.3 million tons of surface reserves over 3 years
|
 Key Drivers of
Longer Term Growth (2013 and Beyond)
•
International
–
Brazil,
China
and
India
•
Steel is growing in emerging economies, led by China and India
•
India is attractive for us given expected growth in primary coke
demand and coke supply/demand balance
•
Signed Memorandum of Understanding with Global Coke
•
Next U.S. Coke Plant
•
Permitting process in Kentucky underway
•
Also assessing alternative sites in other states
•
Expect plant to be 1.1 million tons in capacity with portion reserved for
market coke sales
•
Engineering design targeting CAPEX/ton reductions over Middletown
Second Quarter 2011 Earnings Conference Call
12 |
 Questions
Second Quarter 2011 Earnings Conference Call
13 |
 Appendix
Second Quarter 2011 Earnings Conference Call
14 |
 Management
Team Name
Position
Years of industry
experience
Previous experience
Fritz Henderson
Chief Executive Officer
26
General Motors
Michael Thomson
President and Chief Operating Officer
28
Public Service Enterprise Group, Corning
Mark Newman
Senior Vice President and Chief Financial
Officer
25
Ally Financial, General Motors
Denise Cade
Senior Vice President, General Counsel
and Corporate Secretary
21
PPG Industries, Shaw Pittman LLP
Matthew McGrath
Senior Vice President, Corporate Strategy
and Business Development
21
Public Service Enterprise Group
Michael White
Senior Vice President, Operations
30
Sunoco, Lyondell-Equistar, Exxon
Jim Mullins
Vice President, Coal Operations
35
Arch Coal, Island Creek Coal
Fay West
Vice President and Controller
19
United Continental, PepsiAmericas
Ryan Osterholm
Director, Finance and Investor Relations
13
Public Service Enterprise Group
SunCoke’s management team represents a combination of deep industry knowledge,
international experience and broad management/technical skills
Second Quarter 2011 Earnings Conference Call
15 |
 Board of
Directors Name
Affiliation
Employment History
Board affiliations
Fritz Henderson
SunCoke Energy
SunCoke Energy, Inc; General Motors
Compuware Corp.
Alvin Bledsoe
Independent
PricewaterhouseCoopers LLP
Crestwood Midstream Partners
Robert Darnall
Independent
Inland Steel Industries; Ispat North America, Inc.
Stacy Fox
Sunoco
Sunoco, Inc.; Roxbury Group; Collins & Aikman
Corporation
Peter Hamilton
Independent
Brunswick Corporation
Spectra Energy Corp.
Michael Hennigan
Sunoco
Sunoco Logistics Partners L.P.; Sunoco, Inc.
Brian MacDonald
Sunoco
Sunoco, Inc.; Dell, Inc.
Sunoco Logistics and American
Red Cross (Southeastern, PA
chapter)
Charmian Uy
Sunoco
Sunoco, Inc.; American Express; General Motors
Dennis Zeleny
Sunoco
Sunoco, Inc.; Sunoco Logistics Partners L.P.;
Caremark RX, LLC
Second Quarter 2011 Earnings Conference Call
16 |
 Definitions
•
Adjusted
EBITDA
represents
earnings
before
interest,
taxes,
depreciation,
depletion
and
amortization
(“EBITDA”)
adjusted for sales discounts and the deduction of income attributable to
non-controlling interests in our Indiana Harbor cokemaking
operations.
EBITDA
reflects
sales
discounts
included
as
a
reduction
in
sales
and
other
operating
revenue.
The sales discounts represent the sharing with our customers of a portion of
nonconventional fuels tax credits, which reduce our income tax expense.
However, we believe that 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
which
is
not
included
in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these
sales discounts. Our Adjusted EBITDA also reflects the deduction of income
attributable to noncontrolling interest in our Indiana Harbor cokemaking
operations. 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 of other businesses.
Management believes Adjusted EBITDA is an important measure of the operating
performance of the company’s assets and is indicative of the
Company’s ability to generate cash from operations. •
Pro
Forma
Adjusted
EBITDA
represents
Adjusted
EBITDA
adjusted
for
the
ArcelorMittal
settlement
impact
and
coal
transfer price impacts. The Jewell Coke and Coal Mining results have been adjusted
to set the internal transfer price to equal the coal component contract
price in Jewell Coke’s coke sales price for coal sales volumes sold to Jewell Coke
under the transfer pricing agreement. Management believes Pro Forma Adjusted
EBITDA provides transparency into the underlying profitability of
these respective segments for the periods presented. Second Quarter 2011
Earnings Conference Call 17 |
 EBITDA
Reconciliation, $MM For The Three Months Ended June 30, 2011
Second Quarter 2011 Earnings Conference Call
18
Jewell Coke
Other
Domestic
Coke
International
Coke
Coal Mining
Corporate
and Other
Total
Net Income
$23,993
Add: depreciation, depletion and amortization
14,605
Subtract: interest income (primarily from affiliates)
(5,763)
Add:
interest
cost
-
affiliate
1,723
Subtract: capitalized interest
(399)
Add (Subtract): income tax expense (benefit)
1,881
EBITDA
$12,892
$23,695
$843
$9,144
($10,534)
$36,040
Add: sales discounts provided to customers due to sharing of nonconventional fuels tax
credits 3,174
3,174
(1,573)
(1,573)
Adjusted EBITDA
$12,892
$25,296
$843
$9,144
($10,534)
$37,641
Add (Subtract): coal transfer price impact
(2,334)
2,334
-
Pro Forma Adjusted EBITDA without ArcelorMittal settlement and coal transfer price impacts
$10,558
$25,296
$843
$11,478
($10,534)
$37,641
Sales Volumes (thousands of tons)
170
757
412
334
Pro Forma Adjusted EBITDA per Ton
$62
$33
$34
Operating Income
$11,559
$14,059
$788
$5,964
($10,935)
$21,435
Depreciation
Expense
1,333
9,636
55
3,180
401
14,605
EBITDA
$12,892
$23,695
$843
$9,144
($10,534)
$36,040
Domestic Coke Weighted
Average = $39
Add (Subtract): net (income) loss attributable to noncontrolling interests
|
 EBITDA
Reconciliation, $MM For The Three Months Ended June 30, 2010
Second Quarter 2011 Earnings Conference Call
19
Domestic Coke Weighted
Average = $41
Jewell Coke
Other
Domestic
Coke
International
Coke
Coal Mining
Corporate
and Other
Total
Net Income
$47,550
Add: depreciation, depletion and amortization
11,107
Subtract: interest income (primarily from affiliates)
(6,039)
Add: interest cost -
affiliate
1,701
Subtract: capitalized interest
(127)
Add (Subtract): income tax expense (benefit)
14,774
EBITDA
$53,044
$18,716
$7
$107
($2,908)
$68,966
Add: sales discounts provided to customers due to sharing of nonconventional fuels tax
credits 2,980
2,980
(3,256)
(3,256)
Adjusted EBITDA
$53,044
$18,440
$7
$107
($2,908)
$68,690
(23,600)
4,300
(19,300)
Add (Subtract): coal transfer price impact
(15,219)
15,219
-
Pro Forma Adjusted EBITDA without ArcelorMittal settlement and coal transfer price impacts
$14,225
$22,740
$7
$15,326
($2,908)
$49,390
Sales Volumes (thousands of tons)
191
718
422
314
Pro Forma Adjusted EBITDA per Ton
$74
$32
$49
Operating Income
$51,945
$10,793
($18)
($1,818)
($3,043)
$57,859
Depreciation Expense
1,099
7,923
25
1,925
135
11,107
EBITDA
$53,044
$18,716
$7
$107
($2,908)
$68,966
Add (Subtract): net (income) loss attributable to noncontrolling interests
Add (Subtract): pro forma impact of ArcelorMittal settlement |
 EBITDA
Reconciliation, $MM For The Three Months Ended March 31, 2011
Second Quarter 2011 Earnings Conference Call
20
Jewell Coke
Other
Domestic
Coke
International
Coke
Coal Mining
Corporate
and Other
Total
Net Income
$5,655
Add: Depreciation, depletion and amortization
13,020
Subtract: interest income (primarily from affiliates)
(5,717)
Add: interest cost - affiliate
1,500
Subtract: capitalized interest
(312)
Add (Subtract): income tax expense (benefit)
3,139
EBITDA
$19,054
($857)
$988
$4,296
($6,196)
$17,285
Add: sales discounts provided to customers due to sharing of nonconventional fuels tax
credits
3,125
3,125
Add (Subtract): Net (income) loss attributable to noncontrolling interests
6,171
6,171
Adjusted EBITDA
$19,054
$8,439
$988
$4,296
($6,196)
$26,581
Add (Subtract): coal transfer price impact
(8,042)
8,042
-
Proforma Adjusted EBITDA without ArcelorMittal settlement and coal
transfer price impacts $11,012
$8,439
$988
$12,338
($6,196)
$26,581
Sales Volumes (thousands of tons)
175
697
362
386
Proforma Adjusted EBITDA per Ton
$63
$12
$32
Operating Income
$17,953
($9,472)
$935
$1,577
($6,728)
$4,265
Depreciation Expense
1,101
8,615
53
2,719
532
13,020
EBITDA
$19,054
($857)
$988
$4,296
($6,196)
$17,285
Domestic Coke Weighted
Average = $22 |
 Media releases and SEC filings are available
on our website at www.suncoke.com
Contact Investor Relations for more information: 630-824-1907
Second Quarter 2011 Earnings Conference Call
21 |