Form 8-K SunCoke Energy Partners, For: Jan 23
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): January 23, 2017
SUNCOKE ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
| Delaware | 001- 35782 | 35-2451470 | ||
| (State of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 1011 Warrenville Road, Suite 600 Lisle, Illinois |
60532 | |||
| (Address of principal executive offices) | (Zip code) | |||
Registrant’s telephone number, including area code: (630) 824-1000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
On January 26, 2017, SunCoke Energy Partners, L.P. (the “Partnership”) issued a press release announcing financial results for the fourth quarter of 2016. A copy of this press release is attached as Exhibit 99.1 and is incorporated herein by reference.
| Item 7.01. | Regulation FD Disclosure. |
As noted above, on January 26, 2017, the Partnership issued a press release announcing its financial results for the fourth quarter of 2016. Additional information concerning the Partnership’s financial results for the fourth quarter of 2016 will be presented in a slide presentation to investors during a previously announced teleconference on January 26, 2017. A copy of the slide presentation is attached as Exhibit 99.2 and is incorporated herein by reference.
The information in this report, being furnished pursuant to Items 2.02, 7.01 and 9.01 of Form 8-K, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
| Item 8.01. | Other Events. |
On January 23, 2017, the Partnership issued a press release announcing the declaration of its quarterly cash distribution. A copy of this press release is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
Safe Harbor Statement
Statements contained in the exhibits to this report that state the Partnership’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Partnership’s actual results could differ materially from those projected in such forward-looking statements. Factors that could affect those results include those mentioned in the documents that the Partnership has filed with the Securities and Exchange Commission.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit |
Description | |
| 99.1 | SunCoke Energy Partners, L.P. Press Release announcing earnings (January 26, 2017). | |
| 99.2 | SunCoke Energy Partners, L.P. Slide Presentation regarding earnings (January 26, 2017). | |
| 99.3 | SunCoke Energy Partners, L.P. Press Release, announcing quarterly cash distribution (January 23, 2017). | |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SUNCOKE ENERGY PARTNERS, L.P. | ||||
| By: | SunCoke Energy Partners GP LLC, its General Partner | |||
| By: | /s/ Fay West | |||
| Fay West | ||||
| Senior Vice President and | ||||
Date: January 26, 2017
EXHIBIT INDEX
| Exhibit |
Exhibit | |
| 99.1 | SunCoke Energy Partners, L.P. Press Release announcing earnings (January 26, 2017). | |
| 99.2 | SunCoke Energy Partners, L.P. Slide Presentation regarding earnings (January 26, 2017). | |
| 99.3 | SunCoke Energy Partners, L.P. Press Release, announcing quarterly cash distribution (January 23, 2017). | |
Exhibit 99.1
Investors and Media:
Kyle Bland: 630-824-1987
SUNCOKE ENERGY PARTNERS, L.P. ANNOUNCES FOURTH QUARTER AND FULL-YEAR 2016 RESULTS AND PROVIDES FULL-YEAR 2017 GUIDANCE
| • | Net income attributable to SXCP was $45.9 million and $119.1 million in fourth quarter and full-year 2016, respectively |
| • | Adjusted EBITDA attributable to SXCP increased $19.9 million to $76.7 million in fourth quarter 2016, primarily due to the recognition of higher CMT deferred revenue |
| • | Full-year 2016 Adjusted EBITDA attributable to SXCP increased $18.2 million to $209.7 million, in line with guidance and driving full-year distributable cash flow of $152.3 million |
| • | Repaid $10 million of borrowings in the quarter, pushing full-year 2016 total to $85 million net debt reduction |
| • | Full-year 2017 Adjusted EBITDA attributable to SXCP guidance of $210 million to $220 million |
LISLE, Ill. (January 26, 2017) - SunCoke Energy Partners, L.P. (NYSE: SXCP) today reported fourth quarter 2016 net income attributable to SXCP of $45.9 million, up $9.6 million versus the same prior year period. Fourth quarter Adjusted EBITDA attributable to SXCP was $76.7 million, up $19.9 million versus the prior year period primarily due to the recognition of CMT deferred revenue.
Full-year 2016 net income attributable to SXCP was $119.1 million, representing a $33.7 million increase versus the same prior year period. The Company delivered full-year 2016 Adjusted EBITDA attributable to SXCP of $209.7 million which was $18.2 million higher than full-year 2015 and in line with its full-year guidance of between $207 million and $217 million.
“Fourth quarter and full-year results were in line with expectations, and again illustrate the ability for our coke and coal logistics segments to consistently generate stable results,” said Fritz Henderson, President, Chairman and Chief Executive Officer of SunCoke Energy Partners, L.P. “In 2016, we set out to manage through the challenging market conditions that our customers faced while continuing to focus on de-levering our balance sheet and achieving our financial objectives. I am pleased that we have successfully delivered against these initiatives.”
Looking forward, the Company expects 2017 Adjusted EBITDA attributable to SXCP to be between $210 million and $220 million. This outlook reflects higher Coal Logistics volumes and sustained Domestic Coke performance.
Henderson continued, “As we move into 2017, we are focused on executing against our 2017 objectives and delivering value to SunCoke unitholders.”
2016 CONSOLIDATED RESULTS(1)
| Three Months Ended December 31, |
Years Ended December 31, |
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| (Dollars in millions) | 2016 | 2015 | Increase/ (Decrease) |
2016 | 2015 | Increase/ (Decrease) |
||||||||||||||||||
| Sales and other operating revenue |
$ | 218.3 | $ | 217.4 | $ | 0.9 | $ | 779.7 | $ | 838.5 | $ | (58.8 | ) | |||||||||||
| Net Income attributable to SXCP(2) |
$ | 45.9 | $ | 36.3 | $ | 9.6 | $ | 119.1 | $ | 85.4 | $ | 33.7 | ||||||||||||
| Adjusted EBITDA(3) |
$ | 77.4 | $ | 57.6 | $ | 19.8 | $ | 213.0 | $ | 201.3 | $ | 11.7 | ||||||||||||
| (1) | The current and prior year periods are not comparable due the contribution of Convent Marine Terminal, which was acquired on August 12, 2015. |
| (2) | Net income attributable to SXCP includes the impacts of SXCP’s 75 percent ownership interest in Granite City from January 13, 2015 through August 12, 2015 and SXCP’s 98 percent ownership interest in Granite City from August 13, 2015 through December 31, 2016, respectively. |
| (3) | See definition of Adjusted EBITDA and reconciliation elsewhere in this release. |
Total revenues increased $0.9 million to $218.3 million in the fourth quarter 2016, while full-year revenues decreased $58.8 million to $779.7 million. The quarter results reflect the pass-through of lower coal prices in our cokemaking business offset by the recognition of a full-year of deferred revenue at the Convent Marine Terminal (“CMT”) facility. Full-year revenues benefited from a full-year contribution of the CMT acquisition, but this was more than offset by the pass-through of lower coal prices and lower sales volumes in the Domestic Coke and Coal Logistics segments.
Net income attributable to SXCP increased $9.6 million to $45.9 million in the fourth quarter 2016, while full-year 2016 net income attributable to SXCP increased $33.7 million to $119.1 million. Both the quarter and full-year results benefited from the positive contributions of CMT as previously discussed. Additionally, the full-year results were impacted by current year gains on extinguishment of debt of $25.0 million and favorable fair value adjustments to our contingent consideration obligation of $10.1 million.
Adjusted EBITDA was $77.4 million and $213.0 million in fourth quarter and full-year 2016, respectively, an increase of $19.8 million and $11.7 million, compared to the same prior year periods. Both the quarter and full-year results benefited from increases of $21.9 million and $29.9 million, respectively, at our CMT facility as described above, partially offset by lower year-over-year operating results in our Domestic Coke segment of $3.1 million and $10.1 million in the fourth quarter and full-year 2016, respectively driven by a turbine failure at our Haverhill facility in the fourth quarter as well as lower energy sales and coal-to-coke yield gains in the full-year period.
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FOURTH QUARTER SEGMENT INFORMATION
Domestic Coke
Domestic Coke segment consists of our 98 percent interest in the Haverhill, Middletown and Granite City cokemaking facilities.
| Three Months Ended December 31, |
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| (Dollars in millions) | 2016 | 2015 | Increase/ (Decrease) |
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| Sales and other operating revenue |
$ | 164.6 | $ | 182.7 | $ | (18.1 | ) | |||||
| Adjusted EBITDA(1) |
$ | 36.7 | $ | 39.8 | $ | (3.1 | ) | |||||
| Sales Volume (in thousands of tons) |
581 | 583 | (2 | ) | ||||||||
| Adjusted EBITDA per ton(2) |
$ | 63.17 | $ | 68.27 | $ | (5.10 | ) | |||||
| (1) | See definition of Adjusted EBITDA and reconciliation to GAAP elsewhere in this release. |
| (2) | Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes. |
| • | Revenues were lower due primarily to the pass-through of lower coal prices and decreased energy sales due to a turbine failure at our Haverhill facility. |
| • | Adjusted EBITDA decreased $3.1 million to $36.7 million, primarily reflecting lower energy sales and increased operating costs due to the turbine failure noted above. |
Coal Logistics
Coal Logistics consists of the coal handling and mixing services operated by SXCP at our Convent Marine Terminal (“CMT”), Lake Terminal and Kanawha River Terminals (“KRT”). The current and prior year periods are not comparable due to the recognition of a full-year of deferred revenue at CMT in 2016.
| Three Months Ended December 31, |
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| (Dollars in millions) |
2016 | 2015 | Increase/ (Decrease) |
|||||||||
| Sales and other operating revenue |
$ | 53.7 | $ | 34.7 | $ | 19.0 | ||||||
| Adjusted EBITDA(1) |
45.0 | 21.1 | 23.9 | |||||||||
| Tons handled, excluding CMT (thousands of tons)(2) |
3,710 | 4,160 | (450 | ) | ||||||||
| Tons handled by CMT (thousands of tons)(2) |
1,731 | 1,395 | 336 | |||||||||
| (1) | See definitions of Adjusted EBITDA and reconciliation elsewhere in this release. |
| (2) | Reflects inbound tons handled during the period. |
| • | Revenues were up $19.0 million, driven by a $18.0 million increase in revenue at CMT due primarily to higher deferred revenue recognized in the period related to volume short-falls over the full-year versus only a partial year in 2015, partially offset by lower volumes at KRT and Lake Terminal. |
| • | Adjusted EBITDA was up $23.9 million, driven primarily by a $21.9 million increase in Adjusted EBITDA at CMT resulting from higher deferred revenue recognized. |
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Corporate and Other
Corporate and other costs of $4.3 million in fourth quarter 2016 increased $1.0 million over the same prior year period primarily due to an allocation of higher costs from SunCoke and unfavorable mark-to-market adjustments on deferred compensation driven by changes in the Partnership’s unit price.
RELATED COMMUNICATIONS
The Partnership will host an investor conference call today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). Investors may participate on this call by dialing 1-866-393-4306 in the U.S. or 1-617-826-1698 if outside the U.S., confirmation code 47873365. This conference call will be webcast live and archived for replay in the Investor Relations section of www.suncoke.com.
ABOUT SUNCOKE ENERGY PARTNERS, L.P.
SunCoke Energy Partners, L.P. (NYSE: SXCP) is a publicly traded master limited partnership that manufactures high-quality coke used in the blast furnace production of steel and provides export and domestic coal handling services to the coke, coal, steel and power industries. In our cokemaking business, we utilize an innovative heat-recovery technology that captures excess heat for steam or electrical power generation and have long-term, take-or-pay coke contracts that pass through commodity and certain operating costs. Our coal handling terminals have the collective capacity to blend and transload more than 45 million tons of coal each year and are strategically located to reach Gulf Coast, East Coast, Great Lakes and international ports. SXCP’s General Partner is a wholly owned subsidiary of SunCoke Energy, Inc. (NYSE: SXC), which has more than 50 years of cokemaking experience serving the integrated steel industry. To learn more about SunCoke Energy Partners, L.P., visit our website at www.suncoke.com.
DEFINITIONS
| • | Adjusted EBITDA represents earnings before interest, (gain) loss on extinguishment of debt, taxes, depreciation and amortization (“EBITDA”), adjusted for changes to our contingent consideration liability related to our acquisition of CMT and the expiration of certain acquired contractual obligations. Adjusted EBITDA does not represent and should not be considered an alternative 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 Partnership’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 an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP. |
| • | Adjusted EBITDA attributable to SXCP equals Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests. |
| • | Distributable Cash Flow equals Adjusted EBITDA plus sponsor support and Coal Logistics deferred revenue, less net cash paid for interest expense, ongoing capital expenditures, accruals for replacement capital expenditures, and cash distributions to noncontrolling interests; plus amounts received under the Omnibus Agreement and acquisition expenses deemed to be Expansion Capital under our Partnership Agreement. Distributable Cash Flow is a non-GAAP supplemental financial measure that management and external users of SXCP’s financial statements, such as industry analysts, investors, lenders and rating agencies use to assess: |
| • | SXCP’s operating performance as compared to other publicly traded partnerships, without regard to historical cost basis; |
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| • | the ability of SXCP’s assets to generate sufficient cash flow to make distributions to SXCP’s unitholders; |
| • | SXCP’s ability to incur and service debt and fund capital expenditures; and |
| • | the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. |
We believe that Distributable Cash Flow provides useful information to investors in assessing SXCP’s financial condition and results of operations. Distributable Cash Flow should not be considered an alternative to net income, operating income, cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (GAAP). Distributable Cash Flow has important limitations as an analytical tool because it excludes some, but not all, items that affect net income and net cash provided by operating activities and used in investing activities. Additionally, because Distributable Cash Flow may be defined differently by other companies in the industry, our definition of Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
| • | Ongoing capital expenditures (“capex”) are capital expenditures made to maintain the existing operating capacity of our assets and/or to extend their useful lives. Ongoing capex also includes new equipment that improves the efficiency, reliability or effectiveness of existing assets. Ongoing capex does not include normal repairs and maintenance, which are expensed as incurred, or significant capital expenditures. For purposes of calculating distributable cash flow, the portion of ongoing capex attributable to SXCP is used. |
| • | Replacement capital expenditures (“capex”) represents an annual accrual necessary to fund SXCP’s share of the estimated costs to replace or rebuild our facilities at the end of their working lives. This accrual is estimated based on the average quarterly anticipated replacement capital that we expect to incur over the long term to replace our major capital assets at the end of their working lives. The replacement capex accrual estimate will be subject to review and prospective change by SXCP’s general partner at least annually and whenever an event occurs that causes a material adjustment of replacement capex, provided such change is approved by our conflicts committee. |
FORWARD-LOOKING STATEMENTS
Some of the statements included in this press release constitute “forward-looking statements.” 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 SXCP) 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 SXCP, 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 SXCP; and changes in tax, environmental and other laws and regulations applicable to SXCP’s businesses.
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Forward-looking statements are not guarantees of future performance, but are based upon the current knowledge, beliefs and expectations of SXCP management, and upon assumptions by SXCP 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. SXCP 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.
SXCP 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 SXCP. For information concerning these factors, see SXCP’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 SXCP’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.
###
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SunCoke Energy Partners, L.P.
Combined and Consolidated Statements of Income
| Three Months Ended December 31, |
Years Ended December 31, |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| (Dollars and units in millions, except per unit amounts) | ||||||||||||||||
| Revenues |
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| Sales and other operating revenue |
$ | 218.3 | $ | 217.4 | $ | 779.7 | $ | 838.5 | ||||||||
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| Costs and operating expenses |
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| Cost of products sold and operating expenses |
128.9 | 146.9 | 517.2 | 599.6 | ||||||||||||
| Selling, general and administrative expenses |
10.2 | 9.6 | 38.7 | 34.3 | ||||||||||||
| Depreciation and amortization expense |
20.4 | 20.4 | 77.7 | 67.4 | ||||||||||||
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| Total costs and operating expenses |
159.5 | 176.9 | 633.6 | 701.3 | ||||||||||||
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| Operating income |
58.8 | 40.5 | 146.1 | 137.2 | ||||||||||||
| Interest expense, net |
12.0 | 13.8 | 47.7 | 48.2 | ||||||||||||
| Gain on extinguishment of debt |
(0.1 | ) | (10.1 | ) | (25.0 | ) | (0.7 | ) | ||||||||
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| Income before income tax expense |
46.9 | 36.8 | 123.4 | 89.7 | ||||||||||||
| Income tax expense (benefit) |
0.6 | (0.1 | ) | 2.0 | (2.5 | ) | ||||||||||
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| Net income |
$ | 46.3 | $ | 36.9 | $ | 121.4 | $ | 92.2 | ||||||||
| Less: Net income attributable to noncontrolling interests |
0.4 | 0.6 | 2.3 | 6.2 | ||||||||||||
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| Net income attributable to SunCoke Energy Partners, L.P./Previous Owner |
$ | 45.9 | $ | 36.3 | $ | 119.1 | $ | 86.0 | ||||||||
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| Less: Net income attributable to Previous Owner(1) |
— | — | — | 0.6 | ||||||||||||
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| Net income attributable to SunCoke Energy Partners, L.P. |
$ | 45.9 | $ | 36.3 | $ | 119.1 | $ | 85.4 | ||||||||
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| General partner’s interest in net income |
$ | 10.0 | $ | 3.5 | $ | 23.6 | $ | 8.6 | ||||||||
| Limited partners’ interest in net income |
$ | 35.9 | $ | 32.8 | $ | 95.5 | $ | 77.4 | ||||||||
| Net income per common unit (basic and diluted) |
$ | 0.78 | $ | 0.71 | $ | 2.07 | $ | 1.92 | ||||||||
| Net income per subordinated unit (basic and diluted) |
$ | — | $ | 0.71 | $ | — | $ | 1.71 | ||||||||
| Weighted average common units outstanding (basic and diluted) |
46.2 | 30.6 | 46.2 | 26.2 | ||||||||||||
| Weighted average subordinated units outstanding (basic and diluted) |
— | 15.7 | — | 15.7 | ||||||||||||
| (1) | Reflects net income generated by our Granite City facility prior to the Granite City Dropdown on January 13, 2015. |
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SunCoke Energy Partners, L.P.
Consolidated Balance Sheets
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| (Unaudited) | ||||||||
| (Dollars in millions) | ||||||||
| Assets |
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| Cash and cash equivalents |
$ | 41.8 | $ | 48.6 | ||||
| Receivables |
39.7 | 40.0 | ||||||
| Receivables from affiliates, net |
— | 1.4 | ||||||
| Inventories |
66.9 | 77.1 | ||||||
| Other current assets |
1.6 | 2.0 | ||||||
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| Total current assets |
150.0 | 169.1 | ||||||
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| Restricted cash |
0.5 | 17.7 | ||||||
| Properties, plants and equipment (net of accumulated depreciation of $352.6 million, and $291.1million at December 31, 2016 and 2015, respectively) |
1,294.9 | 1,326.5 | ||||||
| Goodwill |
73.5 | 67.7 | ||||||
| Other intangible assets |
176.7 | 187.4 | ||||||
| Deferred charges and other assets |
0.4 | 0.5 | ||||||
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| Total assets |
$ | 1,696.0 | $ | 1,768.9 | ||||
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| Liabilities and Equity |
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| Accounts payable |
$ | 47.0 | $ | 45.3 | ||||
| Accrued liabilities |
11.7 | 10.8 | ||||||
| Deferred revenue |
2.5 | 2.1 | ||||||
| Payable to affiliate, net |
4.7 | — | ||||||
| Current portion of long-term debt and financing obligation |
4.9 | 1.1 | ||||||
| Interest payable |
14.7 | 17.5 | ||||||
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| Total current liabilities |
85.5 | 76.8 | ||||||
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| Long-term debt and financing obligation |
805.7 | 894.5 | ||||||
| Deferred income taxes |
37.9 | 38.0 | ||||||
| Other deferred credits and liabilities |
13.2 | 14.6 | ||||||
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| Total liabilities |
942.3 | 1,023.9 | ||||||
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| Equity |
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| Held by public: |
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| Common units 20,800,181, and 20,787,744 units issued at December 31, 2016 and 2015, respectively) |
296.9 | 300.0 | ||||||
| Held by parent: |
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| Common units 25,415,696 and 9,705,999 units issued at December 31, 2016 and 2015, respectively) |
410.3 | 211.0 | ||||||
| Subordinated units (issued zero units at December 31, 2016 and 15,709,697 units at December 31, 2015) |
— | 203.3 | ||||||
| General partner interest |
32.1 | 15.1 | ||||||
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| Partners’ capital attributable to SunCoke Energy Partners, L.P. |
739.3 | 729.4 | ||||||
| Noncontrolling interest |
14.4 | 15.6 | ||||||
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| Total equity |
753.7 | 745.0 | ||||||
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| Total liabilities and equity |
$ | 1,696.0 | $ | 1,768.9 | ||||
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SunCoke Energy Partners, L.P.
Combined and Consolidated Statements of Cash Flows
| Years Ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| (Dollars in millions) | ||||||||
| Cash Flows from Operating Activities: |
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| Net income |
$ | 121.4 | $ | 92.2 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization expense |
77.7 | 67.4 | ||||||
| Deferred income tax benefit |
(0.1 | ) | (2.5 | ) | ||||
| Gain on extinguishment of debt |
(25.0 | ) | (0.7 | ) | ||||
| Changes in working capital pertaining to operating activities (net of the effects of acquisition): |
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| Receivables |
0.3 | (8.6 | ) | |||||
| Receivables/payables from affiliate, net |
4.7 | 3.3 | ||||||
| Inventories |
10.2 | 15.0 | ||||||
| Accounts payable |
2.3 | (12.1 | ) | |||||
| Accrued liabilities |
0.5 | (1.0 | ) | |||||
| Deferred revenue |
0.4 | (4.4 | ) | |||||
| Interest payable |
(2.8 | ) | 0.5 | |||||
| Other |
(6.0 | ) | 0.3 | |||||
|
|
|
|
|
|||||
| Net cash provided by operating activities |
183.6 | 149.4 | ||||||
|
|
|
|
|
|||||
| Cash Flows from Investing Activities: |
||||||||
| Capital expenditures |
(37.1 | ) | (42.3 | ) | ||||
| Acquisitions of business, net of cash received |
— | (191.7 | ) | |||||
| Decrease (increase) in restricted cash |
17.2 | (17.7 | ) | |||||
| Other investing activities |
2.1 | — | ||||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(17.8 | ) | (251.7 | ) | ||||
|
|
|
|
|
|||||
| Cash Flows from Financing Activities: |
||||||||
| Proceeds from issuance of common units, net of offering costs |
— | 30.0 | ||||||
| Proceeds from issuance of long-term debt |
— | 260.8 | ||||||
| Repayment of long-term debt |
(66.1 | ) | (231.3 | ) | ||||
| Debt issuance costs |
(0.2 | ) | (5.3 | ) | ||||
| Proceeds from revolving credit facility |
28.0 | 232.0 | ||||||
| Repayment of revolving credit facility |
(38.0 | ) | (50.0 | ) | ||||
| Proceeds from financing obligation |
16.2 | — | ||||||
| Repayment of financing obligation |
(1.0 | ) | — | |||||
| Distributions to unitholders (public and parent) |
(116.4 | ) | (104.5 | ) | ||||
| Distributions to noncontrolling interest (SunCoke Energy, Inc.) |
(3.5 | ) | (3.6 | ) | ||||
| Common public unit repurchases |
— | (12.8 | ) | |||||
| Capital contribution from SunCoke Energy Partners GP LLC |
8.4 | 2.3 | ||||||
|
|
|
|
|
|||||
| Net cash (used in) provided by financing activities |
(172.6 | ) | 117.6 | |||||
|
|
|
|
|
|||||
| Net (decrease) increase in cash and cash equivalents |
(6.8 | ) | 15.3 | |||||
| Cash and cash equivalents at beginning of year |
48.6 | 33.3 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents at end of year |
$ | 41.8 | $ | 48.6 | ||||
|
|
|
|
|
|||||
| Supplemental Disclosure of Cash Flow Information |
||||||||
| Interest paid |
$ | 54.0 | $ | 49.8 | ||||
| Income taxes paid |
$ | 1.5 | $ | 0.8 | ||||
9
SunCoke Energy Partners, L.P.
Segment Operating Data
The following tables set forth financial and operating data for the three and twelve months ended December 31, 2016 and 2015:
| Three Months Ended December 31, |
Years Ended December 31, |
|||||||||||||||
| 2016 | 2015 | 2016(1) | 2015(1) | |||||||||||||
| (Dollars in millions) | ||||||||||||||||
| Sales and other operating revenue: |
||||||||||||||||
| Domestic Coke |
$ | 164.6 | $ | 182.7 | $ | 681.8 | $ | 763.8 | ||||||||
| Coal Logistics |
53.7 | 34.7 | 97.9 | 74.7 | ||||||||||||
| Coal Logistics intersegment sales |
1.4 | 1.5 | 6.1 | 6.5 | ||||||||||||
| Elimination of intersegment sales |
(1.4 | ) | (1.5 | ) | (6.1 | ) | (6.5 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 218.3 | $ | 217.4 | $ | 779.7 | $ | 838.5 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA(2): |
||||||||||||||||
| Domestic Coke |
$ | 36.7 | $ | 39.8 | $ | 167.0 | $ | 177.1 | ||||||||
| Coal Logistics |
45.0 | 21.1 | 63.2 | 38.0 | ||||||||||||
| Corporate and Other |
(4.3 | ) | (3.3 | ) | (17.2 | ) | (13.8 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 77.4 | $ | 57.6 | $ | 213.0 | $ | 201.3 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Coke Operating Data: |
||||||||||||||||
| Domestic Coke capacity utilization (%) |
101 | 103 | 101 | 105 | ||||||||||||
| Domestic Coke production volumes (thousands of tons) |
583 | 595 | 2,334 | 2,423 | ||||||||||||
| Domestic Coke sales volumes (thousands of tons) |
581 | 583 | 2,336 | 2,409 | ||||||||||||
| Domestic Coke Adjusted EBITDA per ton(3) |
$ | 63.17 | $ | 68.27 | $ | 71.49 | $ | 73.52 | ||||||||
| Coal Logistics Operating Data: |
||||||||||||||||
| Tons handled, excluding CMT (thousands of tons)(4) |
3,710 | 4,160 | 12,976 | 16,652 | ||||||||||||
| Tons handled by CMT (thousands of tons)(4) |
1,731 | 1,395 | 4,493 | 2,212 | ||||||||||||
| (1) | The current and prior full year periods are not comparable due to the impact of CMT, which was acquired on August 12, 2015. |
| (1) | See definition of Adjusted EBITDA and reconciliation to GAAP elsewhere in this release. |
| (2) | Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes. |
| (3) | Reflects inbound tons handled during the period. |
10
SunCoke Energy Partners, L.P.
Reconciliations of Non-GAAP Information
Net Cash Provided by Operating Activities to Net Income and Adjusted EBITDA
| Three Months Ended December 31, |
Years Ended December 31, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (Dollars in millions) | ||||||||||||||||
| Net cash provided by operating activities |
$ | 43.6 | $ | 61.2 | $ | 183.6 | $ | 149.4 | ||||||||
| Subtract: |
||||||||||||||||
| Depreciation and amortization expense |
20.4 | 20.4 | 77.7 | 67.4 | ||||||||||||
| Gain on extinguishment of debt |
(0.1 | ) | (10.1 | ) | (25.0 | ) | (0.7 | ) | ||||||||
| Changes in working capital and other |
(23.0 | ) | 14.0 | 9.5 | (9.5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 46.3 | $ | 36.9 | $ | 121.4 | $ | 92.2 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Add: |
||||||||||||||||
| Depreciation and amortization expense |
$ | 20.4 | $ | 20.4 | $ | 77.7 | $ | 67.4 | ||||||||
| Interest expense, net |
12.0 | 13.8 | 47.7 | 48.2 | ||||||||||||
| Gain on extinguishment of debt |
(0.1 | ) | (10.1 | ) | (25.0 | ) | (0.7 | ) | ||||||||
| Income tax (benefit) expense |
0.6 | (0.1 | ) | 2.0 | (2.5 | ) | ||||||||||
| Contingent consideration adjustments(1) |
(1.8 | ) | — | (10.1 | ) | — | ||||||||||
| Non-cash reversal of acquired contractual obligation(2) |
— | (3.3 | ) | (0.7 | ) | (3.3 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | 77.4 | $ | 57.6 | $ | 213.0 | $ | 201.3 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Subtract: |
||||||||||||||||
| Adjusted EBITDA attributable to Previous Owner(3) |
$ | — | $ | — | $ | — | $ | 1.5 | ||||||||
| Adjusted EBITDA attributable to noncontrolling interest(4) |
0.7 | 0.8 | 3.3 | 8.3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA attributable to SunCoke Energy Partners, L.P. |
$ | 76.7 | $ | 56.8 | $ | 209.7 | $ | 191.5 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | The Partnership amended its contingent consideration terms with The Cline Group during the first quarter of 2016. This amendment and subsequent fair value adjustments to the contingent consideration liability, resulted in gains of $1.8 million and $10.1 million recorded during the three and twelve months ended December 31, 2016, respectively, which were excluded from Adjusted EBITDA. |
| (2) | In association with the acquisition of CMT, we assumed certain performance obligations under existing contracts and recorded liabilities related to such obligations. These contractual performance obligation expired without the customer requiring performance. As such, the Partnership reversed the liabilities as we no longer have any obligations under the contract. |
| (3) | Reflects net income attributable to our Granite City facility prior to the Granite City Dropdown on January 13, 2015 adjusted for Granite City’s share of interest, taxes, depreciation and amortization during the same period. |
| (4) | Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest’s share of interest, taxes, income, and depreciation and amortization. |
11
SunCoke Energy Partners, L.P.
Reconciliations of Non-GAAP Information
Reconciliation of Adjusted EBITDA and Distributable Cash Flow to to Net Income
| Three Months Ended December 31, |
Years Ended December 31, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (Dollars in millions) | ||||||||||||||||
| Net cash provided by operating activities |
$ | 43.6 | $ | 61.2 | $ | 183.6 | $ | 149.4 | ||||||||
| Subtract: |
||||||||||||||||
| Depreciation and amortization expense |
20.4 | 20.4 | 77.7 | 67.4 | ||||||||||||
| Gain on extinguishment of debt |
(0.1 | ) | (10.1 | ) | (25.0 | ) | (0.7 | ) | ||||||||
| Changes in working capital and other |
(23.0 | ) | 14.0 | 9.5 | (9.5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income |
$ | 46.3 | $ | 36.9 | $ | 121.4 | $ | 92.2 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Add: |
||||||||||||||||
| Depreciation and amortization expense |
$ | 20.4 | $ | 20.4 | $ | 77.7 | $ | 67.4 | ||||||||
| Interest expense, net |
12.0 | 13.8 | 47.7 | 48.2 | ||||||||||||
| Gain on extinguishment of debt |
(0.1 | ) | (10.1 | ) | (25.0 | ) | (0.7 | ) | ||||||||
| Income tax expense (benefit) |
0.6 | (0.1 | ) | 2.0 | (2.5 | ) | ||||||||||
| Contingent consideration adjustments(1) |
(1.8 | ) | — | (10.1 | ) | — | ||||||||||
| Non-cash reversal of acquired contractual obligation(2) |
— | (3.3 | ) | (0.7 | ) | (3.3 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | 77.4 | $ | 57.6 | $ | 213.0 | $ | 201.3 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Subtract: |
||||||||||||||||
| Adjusted EBITDA attributable to Previous Owner(3) |
— | — | — | 1.5 | ||||||||||||
| Adjusted EBITDA attributable to noncontrolling interest(4) |
0.7 | 0.8 | 3.3 | 8.3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA attributable to SunCoke Energy Partners, L.P. |
$ | 76.7 | $ | 56.8 | $ | 209.7 | $ | 191.5 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Plus : |
||||||||||||||||
| Coal Logistics deferred revenue(5) |
(25.4 | ) | (0.7 | ) | 1.5 | 0.4 | ||||||||||
| Corporate cost holiday/deferral |
— | — | 13.9 | — | ||||||||||||
| Subtract: |
||||||||||||||||
| Ongoing capex |
4.8 | 9.0 | 14.4 | 20.4 | ||||||||||||
| Replacement capex accrual |
1.9 | 1.9 | 7.6 | 7.2 | ||||||||||||
| Cash interest accrual |
11.9 | 13.6 | 49.0 | 47.2 | ||||||||||||
| Cash tax accrual |
0.9 | (0.6 | ) | 1.8 | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributable cash flow |
$ | 31.8 | $ | 32.2 | $ | 152.3 | $ | 117.1 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Quarterly cash distribution |
$ | 29.5 | $ | 28.0 | $ | 116.4 | 110.2 | |||||||||
| Distribution coverage ratio(6) |
1.08x | 1.15x | 1.31x | 1.06x | ||||||||||||
| (1) | The Partnership amended its contingent consideration terms with The Cline Group. This amendment and subsequent fair value adjustments to the contingent consideration liability, resulted in gains of $1.8 million and $10.1 million recorded during the three and twelve months ended December 31, 2016, respectively, which were excluded from Adjusted EBITDA. |
| (2) | In association with the acquisition of CMT, we assumed certain performance obligations under existing contracts and recorded liabilities related to such obligations. These contractual performance obligation expired without the customer requiring performance. As such, the Partnership reversed the liabilities as we no longer have any obligations under the contract. |
| (3) | Reflects net income attributable to our Granite City facility prior to the Granite City Dropdown on January 13, 2015 adjusted for Granite City’s share of interest, taxes, depreciation and amortization during the same period. |
| (4) | Reflects net income attributable to noncontrolling interest adjusted for noncontrolling interest’s share of interest, taxes, income, and depreciation and amortization. |
| (5) | Coal Logistics deferred revenue adjusts for coal and liquid tons the Partnership did not handle, but are included in Distributable Cash Flow as the associated take-or-pay fees are billed to the customer. Deferred revenue on take-or-pay contracts is recognized into GAAP income annually based on the terms of the contract, at which time it will be excluded from Distributable Cash Flow. |
| (6) | Distribution cash coverage ratio is distributable cash flow divided by total estimated distributions to the limited and general partners. |
12
SunCoke Energy Partners, L.P.
Reconciliations of Non-GAAP Information
Estimated 2017 Consolidated Adjusted EBITDA to Estimated Net Income
and Net Cash Provided by Operating Activities
| 2017 | ||||||||
| Low | High | |||||||
| Net Cash Provided by Operating Activities |
$ | 142 | $ | 162 | ||||
| Subtract: |
||||||||
| Depreciation and amortization expense |
86 | 86 | ||||||
| Changes in working capital and other |
(17 | ) | (11 | ) | ||||
|
|
|
|
|
|||||
| Net income |
$ | 73 | $ | 87 | ||||
|
|
|
|
|
|||||
| Add: |
||||||||
| Depreciation and amortization expense |
86 | 86 | ||||||
| Interest expense, net |
52 | 48 | ||||||
| Income tax expense |
2 | 2 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 213 | $ | 223 | ||||
|
|
|
|
|
|||||
| Subtract: Adjusted EBITDA attributable to non controlling interest(1) |
3 | 3 | ||||||
| Adjusted EBITDA attributable to SunCoke Energy Partners, L.P. |
$ | 210 | $ | 220 | ||||
| Subtract: |
||||||||
| SXC Corp Cost Support Payback |
8 | 8 | ||||||
| Ongoing capex (SXCP share) |
17 | 17 | ||||||
| Replacement capex accrual |
8 | 8 | ||||||
| Cash interest accrual |
48 | 48 | ||||||
| Cash tax accrual(2) |
3 | 3 | ||||||
|
|
|
|
|
|||||
| Estimated distributable cash flow |
$ | 126 | $ | 136 | ||||
|
|
|
|
|
|||||
| (1) | Adjusted EBITDA attributable to noncontrolling interests represents SXC’s 2% interest in Haverhill, Middletown and Granite City cokemaking facilities. |
| (2) | Cash tax impacts from the operations of Gateway Cogeneration Company LLC, which is an entity subject to income taxes for federal and state purposes at the corporate level. |
13
SunCoke Energy Partners, L.P. Q4 2016 Earnings and 2017 Guidance Conference Call January 26, 2017 Exhibit 99.2
Forward-Looking Statements This slide presentation should be reviewed in conjunction with the Fourth Quarter 2016 earnings and 2017 guidance release of SunCoke Energy Partners, L.P. (SXCP) and conference call held on January 26, 2017 at 10:00 a.m. ET. Some of the information included in this presentation constitutes “forward-looking statements.” All statements in this presentation that express opinions, expectations, beliefs, plans, objectives, assumptions or projections with respect to anticipated future performance of SunCoke Energy, Inc. (SXC) or SXCP, in contrast with statements of historical facts, are forward-looking statements. Such forward-looking statements are based on management’s beliefs and assumptions and on information currently available. Forward-looking statements include information concerning possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “will,” “should” or the negative of these terms or similar expressions. Although management believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this presentation are reasonable, no assurance can be given that these plans, intentions or expectations will be achieved when anticipated or at all. Moreover, such statements are subject to a number of assumptions, risks and uncertainties. Many of these risks are beyond the control of SXC and SXCP, and may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Each of SXC and SXCP 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. For more information concerning these factors, see the Securities and Exchange Commission filings of SXC and SXCP. All forward-looking statements included in this presentation are expressly qualified in their entirety by such cautionary statements. Although forward-looking statements are based on current beliefs and expectations, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date hereof. SXC and SXCP do not have any intention or obligation to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events or after the date of this presentation, except as required by applicable law. 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. SXCP Q4 2016 Earnings and 2017 Guidance Call
Simplification Transaction Update Negotiations with SXC remain ongoing; SXCP advisors have been retained Conflicts Committee/advisors financial & legal diligence ongoing Anticipate maintaining existing distribution policy during ongoing dialogue with SXC around proposed Simplification Transaction Proposed MLP Regulations Update Evaluating options for engaging with appropriate parties to address concerns with scope of final qualifying income regulations Jan. 19 – IRS issued final regulations stating that the coking of coal does not generate qualifying income (to be published in the Federal Register on Jan. 24) Jan. 20 – Regulatory freeze issued; non-emergency regulations not yet published in the Federal Register should be withdrawn immediately Jan. 24 – Final regulations circumvented regulatory freeze; now published in Federal Register and in effect Recent Business Updates SXCP Q4 2016 Earnings and 2017 Guidance Call
2016 Accomplishments Achieved Financial Objectives Delivered FY 2016 Adj. EBITDA attributable to SXCP of ~$210M, within guidance range of $207M to $217M Deployed ~$61M of excess cash(1) to de-lever balance sheet by ~$85M in FY 2016 Maintained attractive quarterly distribution throughout FY 2016 Managed Through Challenging Market Conditions Navigated through and remained responsive to industry backdrop; cyclicality did not materially impact SunCoke’s contracts nor earnings power Delivered Operating Excellence Achieved solid safety and operating performance across fleet Executed gas sharing project at Haverhill 1 Optimized Cokemaking and Coal Logistics Asset Base Achieved record results at Middletown coke facility Commissioned shiploader and secured new CMT business SXCP Q4 2016 Earnings and 2017 Guidance Call Reduced SXCP gross debt by >$100M via open market repurchases and revolver pay down by using ~$77M cash, or ~$61M net of sale leaseback proceeds.
Q4 and FY 2016 Overview Q4 and FY 2016 net income attributable to SXCP increased $9.6M and $33.7M due to Full-year contribution of CMT Gain on extinguishment of debt and favorable adjustment to contingent consideration Q4 ‘16 Adj. EBITDA attributable to SXCP of $76.7M up $19.9M due to Full-year benefit of CMT deferred revenue recognition FY ‘16 Adjusted EBITDA attributable to SXCP of ~$210M within guidance range of $207M – $217M ($ in millions) For a definition and reconciliation of Adjusted EBITDA, please see appendix. SXCP Q4 2016 Earnings and 2017 Guidance Call ($ in millions) Attrib. to NCI Attrib. to SXCP Attrib. to Previous Owner Attrib. to NCI Attrib. to SXCP Attrib. to Previous Owner
Q4 and FY 2016 Overview For a definition and reconciliation of Adjusted EBITDA, Distributable Cash Flow and Distribution Cash Coverage Ratio, please see appendix. Distribution Cash Coverage Ratio excluding $13.9M sponsor support in FY 2016. SXCP Q4 2016 Earnings and 2017 Guidance Call ($ in millions) x x 1.19x x x (2) Q4 2016 DCF of $31.8M comparable to prior year period FY 2016 DCF of $152.3M up $35.2M, with strong coverage ratio of 1.31x Full-year contribution of CMT Includes 1H ‘16 corporate cost and IDR holiday/deferral of ~$14M Excluding ~$14M sponsor support, would still maintain solid FY 2016 coverage ratio of 1.19x(2)
Adj. EBITDA(1) – Q4 ‘15 to Q4 ‘16 ($ in millions) Q4 2016 includes $31.5M recognition of previously deferred revenue related to take-or-pay shortfalls throughout 2016 as compared to $5.3M in Q4 2015. For a definition and reconciliation of Adjusted EBITDA, please see appendix. (1) (1) ($3.5M) – Impact of HHO turbine failure $21.9M – CMT(1) $2.6M – Lake Terminal coal ToP true-up Q4 ‘16 performance driven by benefit of CMT deferred revenue recognition SXCP Q4 2016 Earnings and 2017 Guidance Call
Adj. EBITDA(1) – FY ‘15 to FY ‘16 ($ in millions) For a definition and reconciliation of Adjusted EBITDA, please see appendix (1) (1) Anticipated with FY 2016 Guidance ($5.1M) – Lower energy sales related to HH Chemicals and scheduled outages ($3.6M) – Lower yield primarily due to lower coal prices Unanticipated impact to segment results ($3.5M) – Impact of HHO turbine failure $29.9M – Full-year contribution of CMT ($4.7M) – Domestic Coal Logistics, primarily due to lower volumes Strong improvement in FY 2016 Adjusted EBITDA driven by full-year contribution of CMT results SXCP Q4 2016 Earnings and 2017 Guidance Call Higher allocation of Corporate costs from SXC, offset by absence of deal costs and lower professional services spend Mark-to-market adjustments for BoD deferred compensation
Coke Business Summary Delivered FY 2016 Adjusted EBITDA within guidance range Cokemaking Performance (100% Basis)(1,2) /ton /ton /ton /ton /ton 583K 581K 579K 595K Sales Tons 581K Represents Haverhill, Middletown and Granite City on a 100% basis. For a definition and reconciliation of Adjusted EBITDA and Adjusted EBITDA per ton, please see appendix. Domestic Coke Adj. EBITDA(1,2) down $3.1M vs. Q4 2015 $3.5M impact from HHO turbine failure (~$6/ton) Achieved solid FY 2016 Adj. EBITDA/ton(1,2) of ~$71/t Delivered FY 2016 Coke Adjusted EBITDA(1,2) of $167M Record performance at MTO Within $160M – $170M guidance range(2) (2) SXCP Q4 2016 Earnings and 2017 Guidance Call (Coke Production, Kt)
Coal Logistics Business Summary SXCP Q4 2016 Earnings and 2017 Guidance Call Strong improvement in Q4 volumes across Coal Logistics fleet; CMT Adj. EBITDA of ~$51M within FY 2016 guidance range M M M M M (Tons Handled, Kt) Higher Q4 ‘16 volumes driving improved Adj. EBITDA Significant increase in met. and thermal coal prices during Q4 Includes $26.2M of higher deferred revenue vs. FY 2015(2) Convent contributed ~$51M to FY 2016 Adjusted EBITDA Includes 4.5M of actual volume Also includes higher than expected merchant thermal coal volumes of ~200K tons Adjusted EBITDA includes Coal Logistics when it is recognized as GAAP revenue. For a definition and reconciliation of Adjusted EBITDA, please see appendix. Q4 2016 includes $31.5M recognition of previously deferred revenue related to take-or-pay shortfalls throughout 2016 as compared to $5.3M in Q4 2015. $16.3M $3.8M $4.2M $4.3M CMT Adj. EBITDA $38.2M (1) (1) Coal Logistics Performance
FY 2016 Capital Deployment Strong cash flow generation from coke and coal logistics operations deployed primarily for de-levering, CapEx and SXCP distributions ($67.0M) – SXC(2) ($49.4M) – Public unitholders ($3.5M) – Non-controlling interests $65.0M – SXCP bond repurchases(3) $10.0M – SXCP revolver $1.1M – CMT promissory note repayment $16.2M – SXCP sale leaseback ($ in millions) Includes $5.0M of total capitalized interest and $11.2M of pre-funded capex related to the CMT shiploader. Excluding these items, FY 2016 CapEx in line with guidance Includes $60.4M for LP distributions, $4.2M for IDR payment and $2.4M for distributions to SXC for its 2% General Partner interest. Average bond repurchase price of ~$0.7259, resulting in ~$90M of face value debt repurchased during full-year 2016. Leverage for Q3 2015 and Q4 2015 calculated using Proforma FY 2015 Adjusted EBITDA attributable to SXCP of ~$229M, which included $52.5M contribution of CMT (midpoint of FY 2016 guidance) and the full year impact of a dropdown of 23% in Granite City. (1) (Attrib. SXCP) Q3 ‘15 Q4 ‘15 Q4 ‘16 Total Debt $944M $899M $813M Leverage(4) 4.12x 3.93x 3.88x Revolver Availability $77M Strong cash flow generation from coke and coal logistics operations deployed primarily for de-levering, CapEx and SXCP distributions SXCP Q4 2016 Earnings and 2017 Guidance Call
Capital Priorities +44% MQD – Minimum quarterly distribution. Actual distribution pro-rated to reflect timing of SXCP IPO. (2) Declared 16th consecutive quarterly cash distribution of $0.5940/unit Includes 9 distribution increases while maintaining solid cash coverage Reduced SXCP gross debt by >$100M in 2016 by using ~$77M cash, or ~$61M net of sale leaseback proceeds Resulted in ~$85M net de-levering Successfully achieved goal of deploying $60M excess cash for de-levering Anticipate maintaining existing distribution policy during ongoing dialogue with SXC around proposed Simplification Transaction $0.4125 MQD(1) SXCP Distribution History Successfully executed against FY 2016 capital allocation initiatives SXCP Q4 2016 Earnings and 2017 Guidance Call
2017 Guidance SXCP Q4 2016 Earnings and 2017 Guidance Call
Expected 2017 Adjusted EBITDA(1) $4 – $9 ~ $210 – $220 ($4) – $1 ($ in millions) For a definition and reconciliation of Adjusted EBITDA, please see appendix. Agreed to reduce FY 2017 production at Haverhill 2 by ~75k tons, resulting in higher fixed fee per ton (no change to contract economics). (1) (1) Improved yield benefit from higher coal pricing Absence of Haverhill turbine failure and Essar write-off Middletown set to annual run-rate performance Lower energy revenue due to Granite City gas sharing project Assumes production at contract maximums and no incremental spot sales(2) Improved KRT & CMT base volumes CMT spot business Expect FY 2017 Adj. EBITDA attributable to SXCP of $210M – $220M SXCP Q4 2016 Earnings and 2017 Guidance Call
2017 Domestic Coke Business Outlook Continue to expect solid Cokemaking operations in FY 2017; Coke Adj. EBITDA (100% basis) expected to be $163M – $168M Coke Production & Yield (100% Basis)(1) ~ ~ 2,300 – 2,350 Operational performance remains consistent across fleet Cokemaking capacity utilization remains above 100% Continue to deliver steady coke yields Expect FY 2017 production(1,2) of 2.30Mt to 2.35Mt Again assumes full-year reduction of 75K ton at Haverhill 2 (AKS); SunCoke will be made whole(2) Excluding HH2, assumes production at contract max. Does not include any incremental spot sales Represents Haverhill, Middletown and Granite City on a 100% basis. Similar to 2016, agreed to reduce FY 2017 production at Haverhill 2 by ~75k tons, resulting in higher fixed fee per ton (no change to contract economics). (Coke Production, Kt) (2) SXCP Q4 2016 Earnings and 2017 Guidance Call (2)
2017 Coal Logistics Business Outlook Anticipate continued growth in Coal Logistics from increased volumes; FY 2017 Adjusted EBITDA guidance of $67M to $72M ~22,500 ~8,500 ~ $67M – $72M M M (Tons Handled, Kt) Expect modest recovery in KRT volumes from 2016 levels Market dynamics driving significant increase in CMT volumes Expect ratable ~8Mt of base ToP volumes on compelling API2 prices Includes ~500Kt merchant business Continuing active pursuit of new business opportunities across fleet Expect to build barge unloading capability to expand CMT services Coal Logistics Performance Financial and operating data reflected as of the closing of the Convent Marine Terminal, which occurred August 12, 2015. (1) SXCP Q4 2016 Earnings and 2017 Guidance Call (1)
2017 Capital Expenditures FY 2017 CapEx outlook reflects increased spending related to Granite City gas sharing project 2017 Environmental Remediation cost at Granite City, which was pre-funded from dropdown proceeds. SXCP Q4 2016 Earnings and 2017 Guidance Call Expect to begin Granite City Gas Sharing project in 2017 Includes ~$25M of environmental CapEx Anticipate an additional ~$25M of CapEx in 2018 to complete project Anticipate ~$3M expenditures to implement CMT barge unloading capabilities
2017 Guidance & Capital Priorities In 2016, represents SXC corporate cost reimbursement and IDR holiday/deferral for Q1 and Q2. In 2017 guidance, represents repayment of Q2 2016 corporate cost reimbursement and IDR deferral. Cash tax impact from the operations of Gateway Cogeneration Company LLC, which is an entity subject to income taxes for federal and state purposes at the corporate level. FY 2017 guidance assumes distributions held constant at $0.5940 per quarter. Total distribution cash coverage ratio is estimated distributable cash flow divided by estimated distributions. Represents distributable cash flow less estimated distributions plus non-cash replacement capex accrual. Outlook assumes distributions held flat for FY 2017; Excess cash flow after distributions will fund Granite City CapEx Expect to generate between $126M to $136M of DCF in ‘17 Includes ~$8M repayment to SXC for IDR and corporate cost reimbursement deferral in Q2 Assumes distributions held flat at $0.5940/quarter for FY 2017 Cash flow after distributions(5) of $16M – $26M will be used to fund $25M of Granite City environmental CapEx SXCP Q4 2016 Earnings and 2017 Guidance Call
2017 Key Initiatives Drive strong operational & safety performance across fleet Deliver Operations Excellence Implement gas sharing technology project to drive improved environmental perfomance Begin Execution of Granite City Gas Sharing Project Continue to seek opportunities to drive incremental coke and coal logistics volumes Optimize Cokemaking and Coal Logistics Asset Base Achieve $210M – $220M Adjusted EBITDA attributable to SXCP guidance Accomplish 2017 Financial Objectives SXCP Q4 2016 Earnings and 2017 Guidance Call
Questions
Investor Relations 630-824-1987 www.suncoke.com
Appendix
Definitions Adjusted EBITDA represents earnings before interest, (gain) loss on extinguishment of debt, taxes, depreciation and amortization, adjusted for changes to our contingent consideration liability related to our acquisition of the CMT and the expiration of certain acquired contractual obligations. Adjusted EBITDA does not represent and should not be considered an alternative 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 Partnership'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 an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP. EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA attributable to SXC/SXCP represents Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests. •Adjusted EBITDA/Ton represents Adjusted EBITDA divided by tons sold/handled. SXCP Q4 2016 Earnings and 2017 Guidance Call
Definitions Distributable Cash Flow equals Adjusted EBITDA plus sponsor support and Coal Logistics deferred revenue; less net cash paid for interest expense, ongoing capital expenditures, accruals for replacement capital expenditures and cash distributions to noncontrolling interests; plus amounts received under the Omnibus Agreement and acquisition expenses deemed to be Expansion Capital under our Partnership Agreement. Distributable Cash Flow is a non-GAAP supplemental financial measure that management and external users of SXCP's financial statements, such as industry analysts, investors, lenders and rating agencies use to assess: SXCP's operating performance as compared to other publicly traded partnerships, without regard to historical cost basis; the ability of SXCP's assets to generate sufficient cash flow to make distributions to SXCP's unitholders; SXCP's ability to incur and service debt and fund capital expenditures; and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. We believe that Distributable Cash Flow provides useful information to investors in assessing SXCP's financial condition and results of operations. Distributable Cash Flow should not be considered an alternative to net income, operating income, cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable Cash Flow has important limitations as an analytical tool because it excludes some, but not all, items that affect net income and net cash provided by operating activities and used in investing activities. Additionally, because Distributable Cash Flow may be defined differently by other companies in the industry, our definition of Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. Ongoing capital expenditures (“capex”) are capital expenditures made to maintain the existing operating capacity of our assets and/or to extend their useful lives. Ongoing capex also includes new equipment that improves the efficiency, reliability or effectiveness of existing assets. Ongoing capex does not include normal repairs and maintenance, which are expensed as incurred, or significant capital expenditures. For purposes of calculating distributable cash flow, the portion of ongoing capex attributable to SXCP is used. Replacement capital expenditures (“capex”) represents an annual accrual necessary to fund SXCP’s share of the estimated costs to replace or rebuild our facilities at the end of their working lives. This accrual is estimated based on the average quarterly anticipated replacement capital that we expect to incur over the long term to replace our major capital assets at the end of their working lives. The replacement capex accrual estimate will be subject to review and prospective change by SXCP’s general partner at least annually and whenever an event occurs that causes a material adjustment of replacement capex, provided such change is approved by our conflicts committee. SXCP Q4 2016 Earnings and 2017 Guidance Call
Adjusted EBITDA and Distributable Cash Flow Reconciliations Note: Historical periods have been recast to include Granite City operations (previous owner), which are subsequently adjusted out when calculating distributable cash flow. Proforma adjustments made for changes in EBITDA and ongoing capex attributable to the partnership, cash interest costs, replacement capital accruals, Corporate cost allocations, distribution levels and units outstanding. Proforma assumes dropdown of 75% in Granite City occurred January 1, 2015. Proforma assumes distributions were not paid to units issued in conjunction with the Convent Marine Terminal acquisition and dropdown of 23% in Granite City closed August 12, 2015. Proforma assumes the Convent Marine Terminal transaction and dropdown of 23% in Granite City were completed on July 1, 2015. Assumes pro-rata, annualized EBITDA contribution from Convent Marine Terminal. The Partnership amended its contingent consideration terms with The Cline Group during the first quarter of 2016. This amendment and subsequent fair value adjustments to the contingent consideration liability, resulted in gains of $1.8 million and $10.1 million recorded during the three and twelve months ended December 31, 2016, respectively, which were excluded from Adjusted EBITDA. In association with the acquisition of CMT, we assumed certain performance obligations under existing contracts and recorded liabilities related to such obligations. These contractual performance obligation expired without the customer requiring performance. As such, the Partnership reversed the liabilities as we no longer have any obligations under the contract. Represents SXC corporate cost reimbursement holiday/deferral. Coal Logistics deferred revenue adjusts for coal and liquid tons the Partnership did not handle, but are included in Distributable Cash Flow as the associated take-or-pay fees are billed to the customer. Deferred revenue on take-or-pay contracts is recognized into GAAP income annually based on the terms of the contract, at which time it will be excluded from Distributable Cash Flow. Distribution cash coverage ratio is distributable cash flow divided by total estimated distributions to the limited and general partners. SXCP Q4 2016 Earnings and 2017 Guidance Call
2016 DCF Reconciliation Cash interest accrual assumes excess cash used to repurchase SXCP Sr. Notes periodically throughout 2016 at ~$0.70 per $1.00 face value. FY 2016 Guidance assumes SXC corporate cost reimbursement holiday/deferral for Q1 and Q2. Cash tax impact from the operations of Gateway Cogeneration Company LLC, which is an entity subject to income taxes for federal and state purposes at the corporate level. Original outlook assumes full year benefit of SXC IDR giveback and distributions held constant at $0.5940 per quarter. Current outlook assumes SXC IDR giveback/deferral for Q1 and Q2 and distributions held constant at $0.5940 per quarter. Actual capital allocation and distributions decisions to be made quarterly. Total distribution cash coverage ratio is estimated distributable cash flow divided by total estimated distributions. SXCP Q4 2016 Earnings and 2017 Guidance Call
Balance Sheet & Debt Metrics SXCP Q4 2016 Earnings and 2017 Guidance Call Represents mid-point of FY 2017 guidance for Adj. EBITDA attributable to SXCP.
Expected 2017E EBITDA Reconciliation Adjusted EBITDA attributable to noncontrolling interest represents SXC’s 2% interest in Haverhill, Middletown and Granite City cokemaking facilities. Represents repayment of SXC corporate cost/IDR deferral from Q2 2016. Coal Logistics deferred revenue adjusts for coal and liquid tons the Partnership did not handle, but are included in Distributable Cash Flow as the associated take-or-pay fees are billed to the customer. Deferred revenue on take-or-pay contracts is recognized into GAAP income annually based on the terms of the contract. Cash tax impact from the operations of Gateway Cogeneration Company LLC, which is an entity subject to income taxes for federal and state purposes at the corporate level. SXCP Q4 2016 Earnings and 2017 Guidance Call
Thermal Coal Export Profitability (in $ per metric tonne) Strengthening of API2 benchmark price should further support CMT ILB producers’ competitiveness in maintaining viable exports Netback calculation example assuming $75 per metric tonne prompt API 2 benchmark. Ocean Freight for 70,000 metric tonne US Gulf/ARA Coal Panamax freight. Consists of CN rail transportation from ILB coal mines to CMT and terminal transloading costs. (1) (2) Believe ILB export thermal solidly profitable with recent API2 price surge to mid-$80s/t Based on average ILB cash cost, netback calculation implies attractive margins CMT remains well-positioned to serve existing ILB thermal coal producers Export netback appears to exceed domestic by ~$12/t (in $ per short ton) (3) SXCP Q4 2016 Earnings and 2017 Guidance Call
Exhibit 99.3
Investors and Media:
Kyle Bland: (630) 824-1987
SUNCOKE ENERGY PARTNERS, L.P. DECLARES DISTRIBUTION OF $0.5940 PER UNIT
LISLE, Ill. (January 23, 2017) – Today, the SunCoke Energy Partners, L.P. (NYSE: SXCP) Board of Directors declared a fourth quarter 2016 cash distribution of $0.5940 per limited partnership unit, or $2.38 annualized. The fourth quarter 2016 distribution is the 16th consecutive distribution from SXCP since its IPO in January 2013 and will be payable on March 1, 2017, to unitholders of record on February 15, 2017.
Going forward, the SXCP Board of Directors anticipates maintaining the existing distribution during ongoing dialogue with SunCoke Energy, Inc. (NYSE: SXC) around the proposed Simplification Transaction announced October 31, 2016.
UPCOMING EVENTS
SXCP will host its fourth quarter 2016 earnings call at 10:00 am ET on January 26, 2017. 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 1-866-393-4306 in the U.S. or 1-617-826-1698 if outside the U.S., confirmation code 47873365.
ABOUT SUNCOKE ENERGY PARTNERS, L.P.
SunCoke Energy Partners, L.P. (NYSE: SXCP) is a publicly traded master limited partnership that manufactures high-quality coke used in the blast furnace production of steel and provides export and domestic coal handling services to the coke, coal, steel and power industries. In our cokemaking business, we utilize an innovative heat-recovery technology that captures excess heat for steam or electrical power generation and have long-term, take-or-pay coke contracts that pass through commodity and certain operating costs. Our coal handling terminals have the collective capacity to blend and transload more than 40 million tons of coal each year and are strategically located to reach Gulf Coast, East Coast, Great Lakes and international ports. SXCP’s General Partner is a wholly owned subsidiary of SunCoke Energy, Inc. (NYSE: SXC), which has more than 50 years of cokemaking experience serving the integrated steel industry. To learn more about SunCoke Energy Partners, L.P., visit our website at www.suncoke.com.
NOTICE
This statement is intended to serve as qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d) given by a publicly traded partnership for the nominee to be treated as a withholding agent. Please note that SunCoke Energy Partners, L.P.’s quarterly cash distributions are treated as partnership distributions for federal income tax purposes and that 100 percent of these distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of SunCoke Energy Partners, L.P.’s distributions to a nominee on behalf of foreign investors are subject to federal income tax withholding at the highest marginal tax rate for individuals or corporations, as applicable. Nominees, and not SunCoke Energy Partners, L.P., are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.
SXCP Q3 2016 Cash Distribution Release
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FORWARD-LOOKING STATEMENTS
Some of the statements included in this press release constitute “forward-looking statements.” 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 SXCP) 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 SXCP, 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 SXCP; and changes in tax, environmental and other laws and regulations applicable to SXCP’s businesses.
Forward-looking statements are not guarantees of future performance, but are based upon the current knowledge, beliefs and expectations of SXCP management, and upon assumptions by SXCP 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. SXCP 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.
SXCP 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 SXCP. For information concerning these factors, see SXCP’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 SXCP’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.
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