SunCoke Energy Inc
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 31, 2024
SXC$9.80+1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0001514705-24-000017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001514705-24-000021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 86 previous paragraphs and 90 current paragraphs.
57 unchanged; 23 reworded; 10 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Third Quarter Key Financial Results
Current report
Operating results for the three and nine months ended September 30, 2024 reflect higher transloading volumes and pricing in our Logistics segment, as well as the extinguishment of certain black lung liabilities during the current year period, which resulted in the recognition of a $9.5 million pre-tax gain. These increases were partially offset by unfavorable coal-to-coke yields on our long-term, take-or-pay agreements within our Domestic Coke segment. See detailed analysis of the quarter's results throughout this MD&A.
Current report
Recent Developments
Current report
•Granite City Contract Extension. In October 2024, the Granite City long-term, take-or-pay agreement with United States Steel Corporation (“U.S. Steel”) was extended through June 30, 2025, with an option for U.S. Steel to extend for an additional six months. Under the terms of the agreement, Granite City will supply 295 thousand tons of coke to U.S. Steel during the initial six month term. The terms of the extension includes a turn down fee, but results in significantly lower overall economics compared to the current long-term, take-or-pay agreement. Other key provisions of the agreement, including the pass-through of coal costs, remain unchanged.
Current report
Items Impacting Comparability
Current report
•U.S. Department of Labor’s Division of Coal Mine Workers Compensation (“DCMWC”) Regulatory Exemption. In August 2024, the Company reached an agreement with the DCMWC and made a payment of $36.0 million to extinguish the majority of its self-insured federal black lung liabilities. As a result of the agreement, the Company recognized a $9.5 million pre-tax gain within selling, general and administrative expenses on the Consolidated Statements of Income during the three and nine months ended September 30, 2024. The agreement resulted in a reduction of $45.5 million of the Company's black lung liability on the Consolidated Balance Sheets. See Note 7 to our consolidated financial statements for further detail.
Current report
Corporate and Other Adjusted EBITDA represented income of $1.0 million and a loss of $17.0 million for the three and nine months ended September 30, 2024, respectively, compared to a loss of $9.2 million and$26.6 million for the three and nine months ended September 30, 2023, respectively. The three and nine months ended September 30, 2024 benefited from the recognition of a $9.5 million gain, which was the result of the extinguishment of certain liabilities related to our legacy coal mining business. See Note 7 to our consolidating financial statements for further detail.
Current report
On February 1, 2013, SunCoke obtained commercial insurance for state and federal black lung claims, in excess of a deductible, for employees with a last date of employment after that date. For claims based on employment that ended prior to February 1, 2013, SunCoke was reauthorized by the U.S. Department of Labor’s Division of Coal Mine Workers Compensation (“DCMWC”) to self-insure its black lung liabilities for $8.4 million. On February 21, 2020, DCMWC made an initial security determination to increase the amount of SunCoke’s collateral requirement for self-insured claims to $40.4 million. The Company appealed the security determination to the DCMWC. On August 13, 2024, the Company and DCMWC agreed that the Company would make a lump sum payment of $36.0 million to satisfy its self-insured federal black lung liabilities, with limited exceptions estimated to be approximately $1.4 million. In exchange, the DCMWC agreed to permanently assume responsibility for payment of black lung benefits for claims based on employment that ended prior to February 1, 2013, and SunCoke received a Certificate of Exemption that eliminates the Company’s responsibility for future payments arising from claims based on employment that ended prior to February 1, 2013, excluding limited exceptions estimated to be approximately $1.4 million. As a result of the agreement, the Company no longer maintains any collateral to self-insure its former black lung liabilities incurred prior to February 1, 2013. Additionally, on January 19, 2023, the Department of Labor proposed a new rule that would require self-insured operators to post collateral in the amount of 120 percent of the company's total expected lifetime black lung liabilities as determined by the DCMWC. If finalized, the new rule would not apply to SunCoke. See Note 7 to our consolidated financial statements for further detail.
Current report
Credit Rating
Current report
In February 2024, S&P Global Ratings reaffirmed our corporate credit rating of BB- (stable). In October 2024, Moody’s Investors Service reaffirmed our corporate credit rating of B1 and changed the rating outlook from positive to stable.
Removed paragraphs (6)
Previous report
Second Quarter Key Financial Results
Previous report
Operating results for the first half of 2024 primarily reflect unfavorable coal-to-coke yields on our long-term, take-or-pay agreements and lower blast coke sales volumes. Net income benefited primarily from lower depreciation expense, lower income tax expense and lower net interest expense. Operating cash flows during the current period primarily reflect an unfavorable year-over-year change in primary working capital, primarily due to timing of customer payments. See detailed analysis of the quarter's results throughout this MD&A.
Previous report
Recent Developments and Items Impacting Comparability
Previous report
There were no recent developments that occurred, or unusual events that significantly impacted comparability to the prior year periods during the three and six months ended June 30, 2024.
Previous report
Corporate and Other Adjusted EBITDA was a loss of $9.1 million and $18.0 million, respectively, for the three and six months ended June 30, 2024, which was reasonably consistent with the same prior year periods.
Previous report
During the first quarter of 2020, the U.S. Department of Labor's Division of Coal Mine Workers' Compensation (“DCMWC”) requested SunCoke to provide additional collateral of approximately $32.0 million to secure certain of its black lung obligations. SunCoke exercised its right to appeal the DCMWC’s determination and provided additional information supporting the Company’s position in May 2020 and February 2021. If the Company’s appeal is unsuccessful, the Company may be required to provide additional collateral to receive its self-insurance reauthorization from the DCMWC, which could potentially reduce the Company’s liquidity. Additionally, on January 19, 2023, the Department of Labor issued a new proposed rule that would require self-insured companies to post collateral in the amount of 120 percent of the company's total expected lifetime black lung obligations as determined by the DCMWC. While this new proposed rule is not effective, if finalized, it could potentially reduce the Company's liquidity. We submitted comments on this proposed rule and will continue to monitor any impact to the Company. See further discussion in Note 7 to our consolidated financial statements.
Reworded paragraphs (23)
Previous wording
During the first half of 2024, our domestic coke plants continued to operate at full capacity. Our long-term, take-or-pay Domestic Coke sales agreements, which largely consume our capacity, are not impacted by the fluctuations of global coke prices. Non-contracted blast coke, which is produced utilizing capacity in excess of that reserved for long-term, take-or-pay Domestic Coke sales agreements, is sold in the global market and can be impacted by fluctuations of global coke prices.
Current wording
During the nine months ended September 30, 2024, our domestic coke plants continued to operate at full capacity. Our long-term, take-or-pay Domestic Coke sales agreements, which largely consume our capacity, are not impacted by the fluctuations of global coke prices. Non-contracted blast coke, which is produced utilizing capacity in excess of that reserved for long-term, take-or-pay Domestic Coke sales agreements, is sold in the global market and can be impacted by fluctuations of global coke prices.
Previous wording
Our Convent Marine Terminal (“CMT”) serves certain customers impacted by seaborne export market dynamics. Volumes through CMT are primarily impacted by fluctuations in both European energy needs and benchmark pricing for coal delivery into Europe, which can be impacted by weather conditions, natural gas prices, and global thermal coal supply. Our Kanawha River Terminal (“KRT”) serves two primary domestic markets, metallurgical coal trade and thermal coal trade. Metallurgical markets are primarily impacted by steel prices and blast furnace operating levels whereas thermal markets are impacted by natural gas prices and electricity demand.
Current wording
Our Convent Marine Terminal (“CMT”) serves certain customers impacted by seaborne export market dynamics. Volumes through CMT are impacted by fluctuations in global energy needs and benchmark pricing for coal delivery into Europe, which can be impacted by weather conditions, natural gas prices, and global thermal coal supply. Our Kanawha River Terminal (“KRT”) serves two primary domestic markets, metallurgical coal trade and thermal coal trade. Metallurgical markets are primarily impacted by steel prices and blast furnace operating levels whereas thermal markets are impacted by natural gas prices and electricity demand.
Previous wording
The following table sets forth amounts from the Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023, respectively:
Current wording
The following table sets forth amounts from the Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023, respectively:
Previous wording
Sales and Other Operating Revenue and Costs of Products Sold and Operating Expenses. Sales and other operating revenue and costs of products sold and operating expenses decreased for the three and six months ended June 30, 2024 compared to the same prior year periods, primarily driven by the pass-through of lower coal prices on our long-term, take-or-pay agreements and lower blast coke sales volumes.
Current wording
Sales and Other Operating Revenue and Costs of Products Sold and Operating Expenses. Sales and other operating revenue and costs of products sold and operating expenses decreased for the three and nine months ended September 30, 2024 compared to the same prior year periods, primarily driven by the pass-through of lower coal prices on our long-term, take-or-pay agreements.
Previous wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses during the three and six months ended June 30, 2024 were reasonably consistent with the same prior year periods.
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses during the three and nine months ended September 30, 2024 was primarily impacted by the recognition of a $9.5 million gain, which was the result of the extinguishment of certain liabilities related to our legacy coal mining business. See Note 7 to our consolidated financial statements for further detail.
Previous wording
Depreciation and Amortization Expense. Depreciation and amortization expense for the three and six months ended June 30, 2024 decreased as a result of the expiration of the useful lives of assets in our Domestic Coke segment placed into service in prior periods.
Current wording
Depreciation and Amortization Expense. Depreciation and amortization expense for the three and nine months ended September 30, 2024 decreased as a result of the expiration of the useful lives of assets in our Domestic Coke segment placed into service in prior periods.
Previous wording
Interest Expense, Net. Interest expense, net, benefited during the three and six months ended June 30, 2024 from lower average debt balances in the current year periods and higher interest income of $0.9 million and $1.2 million, respectively, as compared to the same prior year periods.
Current wording
Interest Expense, Net. Interest expense, net, benefited during the three and nine months ended September 30, 2024 from lower average debt balances in the current year periods and higher interest income of $0.8 million and $2.0 million, respectively, as compared to the same prior year periods.
Previous wording
Income Tax Expense. Income tax expense during the three and six months ended June 30, 2024 benefited from the release of valuation allowances established on deferred tax assets related to state net operating loss carryforwards, partially offset by the revaluation of certain deferred tax liabilities due to changes in apportioned state tax rates. See Note 4 to our consolidated financial statements for further detail.
Current wording
Income Tax Expense. Income tax expense during the three and nine months ended September 30, 2024, benefited from the absence of $8.5 million of deferred tax expense recorded in the prior year related to the establishment of a valuation allowance on deferred tax assets attributable to existing foreign tax credit carryforwards, as a result of changes in tax regulations. Additionally, the nine months ended September 30, 2024 further benefited from the release of valuation allowances established on deferred tax assets related to state net operating loss carryforwards, partially offset by the revaluation of certain deferred tax liabilities due to changes in apportioned state tax rates. See Note 4 to our consolidated financial statements for further detail.
Previous wording
(1)Volumes during the three months ended June 30, 2024 decreased due to the timing of shipments of our blast coke sales. Volumes during the three and six months ended June 30, 2024 were also negatively impacted by lower coal-to-coke yields.
Current wording
(1)Volumes during the three months ended September 30, 2024 increased due to the timing of shipments of our blast coke sales. Volumes during the three and nine months ended September 30, 2024 were negatively impacted by lower coal-to-coke yields.
Previous wording
(2)Sales and other operating revenue during the three and six months ended June 30, 2024 decreased primarily as a result of the pass-through of lower coal prices on our long-term, take-or-pay agreements. Adjusted EBITDA during the three and six months ended June 30, 2024 was negatively impacted by lower coal-to-coke yields on our long-term, take-or-pay agreements. Additionally, Adjusted EBITDA during the six months ended June 30, 2024 was negatively impacted by the lower sales pricing on our non-contracted blast coke sales, which was partially offset by the impact of lower coal prices on our non-contracted blast coke sales.
Current wording
(2)Sales and other operating revenue during the three and nine months ended September 30, 2024 decreased primarily as a result of the pass-through of lower coal prices on our long-term, take-or-pay agreements. Adjusted EBITDA during the three and nine months ended September 30, 2024 was negatively impacted by lower coal-to-coke yields on our long-term, take-or-pay agreements and lower sales pricing on our non-contracted blast coke sales, which was partially offset by the impact of lower coal prices on our non-contracted blast coke sales.
Previous wording
(3)Operating and maintenance costs during the three and six months ended June 30, 2024 increased as a result of timing of planned maintenance outages.
Current wording
(3)Operating and maintenance costs during the three and nine months ended September 30, 2024 decreased as a result of the absence of oven rebuilds in the current year. Decreases to operating and maintenance costs for the nine months ended September 30, 2024 as compared to the prior year period were more than offset by increases resulting from timing of planned maintenance outages.
Previous wording
(4)Energy and other during the three and six months ended June 30, 2024 decreased primarily due to unfavorable energy pricing.
Current wording
(4)Energy and other during the three and nine months ended September 30, 2024 decreased primarily due to unfavorable energy pricing. These decreases were partially offset by higher energy sales as a result of timing of planned maintenance outages in the prior year period.
Previous wording
During the three and six months ended June 30, 2024, sales and other operating revenues, exclusive of intersegment sales, were $20.2 million and $40.8 million, respectively, compared to $19.7 million and $40.8 million, respectively, in the corresponding prior year periods. Adjusted EBITDA, inclusive of the impact of intersegment transactions, during the three and six months ended June 30, 2024 was $12.2 million and $25.2 million, respectively, compared to $11.7 million and $25.2 million, respectively, in the corresponding prior year periods. Logistics results during the three and six months ended June 30, 2024, as compared to the same prior year periods reflect higher transloading volumes, partially offset by lower transloading pricing.
Current wording
During the three and nine months ended September 30, 2024, sales and other operating revenues, exclusive of intersegment sales, were $21.4 million and $62.2 million, respectively, compared to $15.6 million and $56.4 million, respectively, in the corresponding prior year periods. Adjusted EBITDA during the three and nine months ended September 30, 2024 was $13.7 million and $38.9 million, respectively, compared to $8.4 million and $33.6 million, respectively, in the corresponding prior year periods. Logistics results during the three and nine months ended September 30, 2024, as compared to the same prior year periods reflect higher transloading volumes and pricing.
Previous wording
During the three and six months ended June 30, 2024, sales and other operating revenue were $9.1 million and $17.4 million, respectively, which was reasonably consistent with the prior year periods. Adjusted EBITDA during three and six months ended June 30, 2024 was $2.5 million and $4.9 million, respectively, which was reasonably consistent with the same prior year periods.
Current wording
During the three and nine months ended September 30, 2024, sales and other operating revenue were $8.8 million and $26.2 million, respectively, which was reasonably consistent with $9.1 million and$25.8 million, respectively, inthe corresponding prior year periods. Adjusted EBITDA during the three and nine months ended September 30, 2024 was $2.5 million and $7.4 million, respectively, which was reasonably consistent with $2.2 million and$6.9 million, respectively, in the corresponding prior year periods.
Previous wording
Our primary liquidity needs are to fund working capital and investments, service our debt, maintain cash reserves and replace partially or fully depreciated assets and other capital expenditures. Our sources of liquidity include cash generated from operations, borrowings under our revolving credit facility (“Revolving Facility”) and, from time to time, debt and equity offerings. We believe our current resources are sufficient to meet our working capital requirements for our current business for at least the next 12 months and thereafter for the foreseeable future. As of June 30, 2024, we had $81.9 million of cash and cash equivalents and $350.0 million of borrowing availability under our Revolving Facility.
Current wording
Our primary liquidity needs are to fund working capital and investments, service our debt, maintain cash reserves and replace partially or fully depreciated assets and other capital expenditures. Our sources of liquidity include cash generated from operations, borrowings under our revolving credit facility (“Revolving Facility”) and, from time to time, debt and equity offerings. We believe our current resources are sufficient to meet our working capital requirements for our current business for at least the next 12 months and thereafter for the foreseeable future. As of September 30, 2024, we had $164.7 million of cash and cash equivalents and $350.0 million of borrowing availability under our Revolving Facility.
Previous wording
The following table sets forth a summary of the net cash provided by (used in) operating, investing and financing activities for the six months ended June 30, 2024 and 2023:
Current wording
The following table sets forth a summary of the net cash provided by (used in) operating, investing and financing activities for the nine months ended September 30, 2024 and 2023:
Previous wording
Net cash provided by operating activities decreased by $98.2 million to $0.7 million for the six months ended June 30, 2024 as compared to the corresponding prior year period. The decrease primarily reflects an unfavorable year-over-year change in primary working capital, which is comprised of accounts receivable, inventories, and accounts payable, driven by the timing of customer payments and the timing of coal purchases.
Current wording
Net cash provided by operating activities decreased by $84.7 million to $107.9 million for the nine months ended September 30, 2024 as compared to the corresponding prior year period. The decrease primarily reflects an unfavorable year-over-year change in primary working capital, which is comprised of accounts receivable, inventories, and accounts payable, driven by the timing of coal purchases and the impact of changes in coal prices. A payment of $36.0 million related to the extinguishment of certain liabilities related to our legacy coal mining business further impacted net cash provided by operating activities in the current year period. See Note 7 to our consolidated financial statements for further detail.
Previous wording
Net cash used in investing activities decreased by $16.6 million to $33.4 million for the six months ended June 30, 2024 as compared to the corresponding prior year period. The decrease was primarily driven by the absence of capital spending in connection with both an oven rebuild project and the foundry expansion project in the current year period. Additionally, the timing of payments related to ongoing capital expenditures further contributed to the decrease in the current year as compared to the same prior year period. Refer to Capital Requirements and Expenditures below for further detail.
Current wording
Net cash used in investing activities decreased by $37.8 million to $47.6 million for the nine months ended September 30, 2024 as compared to the corresponding prior year period. The decrease was primarily driven by the absence of capital spending in connection with both an oven rebuild project and the foundry expansion project in the current year period. Additionally, the timing of payments related to ongoing capital expenditures further contributed to the decrease in the current year as compared to the same prior year period. Refer to Capital Requirements and Expenditures below for further detail.
Previous wording
Net cash used in financing activities decreased by $35.2 million to $25.5 million for the six months ended June 30, 2024 as compared to the corresponding prior year period. The decrease in net cash used in financing activities was primarily driven by lower net repayments of $35.0 million on the Revolving Facility, lower cash distributions made to noncontrolling interests of $2.3 million as well as the absence of repayments on financing obligations of $1.7 million in the current year period. These decreases were offset by an increase to dividends paid of $3.5 million as compared to the prior year period, primarily as a result of an increase in the dividend per share amount.
Current wording
Net cash used in financing activities decreased by $35.6 million to $35.7 million for the nine months ended September 30, 2024 as compared to the corresponding prior year period. The decrease in net cash used in financing activities was primarily driven by lower net repayments of $35.0 million on the Revolving Facility, lower cash distributions made to noncontrolling interests of $3.7 million as well as the absence of repayments on financing obligations of $2.5 million in the current year period. These decreases were partially offset by an increase to dividends paid of $5.2 million as compared to the prior year period, primarily as a result of an increase in the dividend per share amount.
Previous wording
On May 1, 2024, SunCoke's Board of Directors declared a cash dividend of $0.10 per share of the Company's common stock. This dividend was paid on June 3, 2024, to stockholders of record on May 15, 2024.
Current wording
On July 31, 2024, SunCoke's Board of Directors declared a cash dividend of $0.12 per share of the Company's common stock. This dividend was paid on September 3, 2024, to stockholders of record on August 15, 2024.
Previous wording
•Environmental remediation project expenditures required to implement design changes to ensure that our existing facilities operate in accordance with existing environmental permits or changing regulations.
Current wording
•Environmental project expenditures required to implement design changes to ensure that our existing facilities operate in accordance with existing environmental permits or changing regulations.
Previous wording
There have been no significant changes to our accounting policies during the six months ended June 30, 2024. Please refer to our Annual Report on Form 10-K filed for the year ended December 31, 2023 for a summary of these policies.
Current wording
There have been no significant changes to our accounting policies during the nine months ended September 30, 2024. Please refer to our Annual Report on Form 10-K filed for the year ended December 31, 2023 for a summary of these policies.
Previous wording
There have been no new accounting standards material to the Company that have been adopted during the six months ended June 30, 2024.
Current wording
There have been no new accounting standards material to the Company that have been adopted during the nine months ended September 30, 2024.