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SunCoke Energy, Inc. Reports Third Quarter 2012 Results

The climb in operating income and Adjusted EBITDA, which grew 76 percent and 62 percent, respectively, reflected the contribution of our Middletown facility, lower corporate costs and continued solid performance across all our cokemaking facilities.

The 74 percent increase in net income attributable to shareholders in third quarter 2012 was led by the contribution of our Middletown facility and lower corporate costs. This increase was partly offset by financing costs related to our standalone corporate structure.

SEGMENT RESULTS

Jewell Coke

The Jewell Coke segment consists of our cokemaking operations in Vansant, Virginia. Substantially all of the metallurgical coal used at our Jewell cokemaking facility is supplied from our coal mining operations. Beginning in first quarter 2012, the intersegment coal costs charged to the Jewell Coke segment are reflective of the contract price Jewell Coke charges its customer. Prior year periods have been adjusted to reflect this change.

             
  Three months ended September 30,
    Increase/
(In millions, except per ton amounts)   2012   2011   (Decrease)
Segment Revenues $ 74.2 $ 71.0 $ 3.2
Adjusted EBITDA (1) $ 13.6 $ 13.9 $ (0.3 )
Sales Volumes (in thousands of tons) 183 191 (8 )
Adjusted EBITDA per Ton (1)   $ 74.32   $ 72.77   $ 1.55  

(1) See definition of Adjusted EBITDA and Adjusted EBITDA per Ton and reconciliation elsewhere in this release.

  • Revenues increased by $3.2 million in third quarter 2012 due to the pass-through of higher coal costs partly offset by lower coke sales volumes. Sales volumes were down due to the timing of shipments to our customer.
  • Adjusted EBITDA declined slightly in third quarter 2012 due to lower coke sales volumes.

Other Domestic Coke

Other Domestic Coke consists of cokemaking facilities and heat recovery operations at our Indiana Harbor, Haverhill, Granite City and Middletown plants. The Middletown cokemaking facility commenced operations in October 2011. On September 30, 2011, we increased our ownership interest in the partnership that owns the Indiana Harbor cokemaking facility from 66 percent to 85 percent by acquiring the interest held by one of the unaffiliated third-party partners.

             
  Three months ended September 30,
(In millions, except per ton amounts)   2012   2011   Increase
Segment Revenues $ 388.7   $ 310.0   $ 78.7
Adjusted EBITDA (1)(2) $ 54.9 $ 34.3 $ 20.6
Sales Volumes (in thousands of tons) 933 777 156
Adjusted EBITDA per Ton (1)   $ 58.84   $ 44.14   $ 14.70

(1) See definitions of Adjusted EBITDA and Adjusted EBITDA per Ton and reconciliations elsewhere in this release.

(2) Excludes income (loss) attributable to noncontrolling interest in Indiana Harbor.

  • Our Middletown facility contributed $76.7 million to segment revenues and $16.9 million to segment Adjusted EBITDA in third quarter 2012.
  • Excluding Middletown, segment Adjusted EBITDA benefited from solid performance across all our facilities reflecting better coal-to-coke yield and operating expense recovery versus third quarter 2011, partly offset by lower energy sales. Our increased ownership interest in our Indiana Harbor facility also benefited Adjusted EBITDA by approximately $1.6 million by reducing income attributable to noncontrolling interest.

International Coke

International Coke consists of a cokemaking facility in Vitória, Brazil, which we operate for a Brazilian affiliate of ArcelorMittal. International Coke earns operating and technology licensing fees based on production, and recognizes a dividend on its preferred stock investment, generally in the fourth quarter, assuming certain minimum production levels are achieved at the facility.

  • Segment Adjusted EBITDA declined from $1.7 million to $0.9 million primarily due to lower sales volumes.

Coal Mining

Coal Mining consists of our metallurgical coal mining activities conducted in Virginia and West Virginia. A substantial portion of the metallurgical coal produced by our coal mining operations is sold to our Jewell Coke segment for conversion into metallurgical coke. Beginning in first quarter 2012, intersegment coal revenues for sales to the Jewell Coke segment are reflective of the contract price Jewell Coke charges its customer. Prior year periods have been adjusted to reflect this change.

             
  Three months ended September 30,
    Increase/
(In millions, except per ton amounts)   2012   2011   (Decrease)
Total Segment Revenues (including sales to affiliates) $ 65.1 $ 57.2 $ 7.9
Segment Revenues (excluding sales to affiliates) $ 8.9 $ 12.7 $ (3.8 )
Adjusted EBITDA (1) $ 10.7 $ 9.2 $ 1.5
Coal Production (in thousands of tons) 349 340 9
Sales Volumes (in thousands of tons) (2) 392 371 21
Sales Price per ton (excludes transportation costs) (3) $ 165.17 $ 154.85 $ 10.32
Adjusted EBITDA per Ton (1)   $ 27.30   $ 24.80   $ 2.50  

(1) See definitions of Adjusted EBITDA and Adjusted EBITDA per Ton and reconciliations elsewhere in this release.

(2) Includes production from Company and contract-operated mines.

(3) Includes sales to affiliates.

  • Coal Mining segment revenues benefited from higher average sale prices and higher internal sales volumes. The higher average sales price reflects a favorable shift in mix with mid-volatile coal representing a larger proportion of coal sold in third quarter 2012.
  • The increase in Adjusted EBITDA reflects higher sales of mid-volatile coal offset by increased production costs reflecting a change in mix of coal mined as mid-volatile coal, which generally costs more to mine, represented a larger portion of third quarter 2012 production. Additionally, the current period benefited by approximately $1.3 million due to a favorable fair value adjustment related to our Harold Keene Coal Co., Inc. contingent consideration arrangement.

Corporate and Other

Corporate expenses declined by $6.6 million to $7.7 million in third quarter 2012. The decline primarily reflects favorable comparison to third quarter 2011, which included $2.5 million of Middletown costs, $1.9 million in lower charges from Sunoco and $1.7 million of restructuring costs.

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