SunCoke Energy(SXC) - 2020 Q4 - Annual Report

PART I Business Overview SunCoke Energy, Inc. is the largest independent coke producer in the Americas with over 60 years of experience, also operating a logistics business Company Overview SunCoke Energy, Inc. is the largest independent producer of high-quality coke in the Americas, with over 60 years of cokemaking experience - SunCoke Energy, Inc. is the largest independent producer of high-quality coke in the Americas, with over 60 years of cokemaking experience[9] - The company also owns and operates a logistics business, providing handling and/or blending services for steel, coke, power, coal production, and other manufacturing customers[9] - The company was incorporated in Delaware in 2010, went public in 2011, and its stock trades on the New York Stock Exchange under the ticker “SXC”[10] Cokemaking Operations SunCoke operates six cokemaking facilities in the US and Brazil, utilizing efficient heat recovery technology, with sales primarily through long-term take-or-pay contracts - SunCoke owns and operates five cokemaking facilities in the U.S. with a total annual capacity of approximately 4.2 million tons, and operates one in Brazil for ArcelorMittal Brasil S.A. with an annual capacity of approximately 1.7 million tons[10] - The company's coke ovens utilize efficient waste heat recovery technology, burning coal volatile matter to generate heat for power or steam sales, differing from byproduct cokemaking[10][11][12] - The company began exploring the foundry coke market in 2020, with commercial production and sales expected to commence in 2021 on a small scale[10] - Coke sales are primarily conducted through long-term take-or-pay contracts, with contracted volumes largely covering domestic capacity, thus minimizing the impact of spot coke prices on revenue[13] - In 2020, Cleveland-Cliffs Inc. acquired AK Steel and AM USA, consolidating the customer base into “Cliffs Steel”[14] Cokemaking Facility Overview | Facility | Location | Customer | Year of Start Up | Contract Expiration | Annual Cokemaking Nameplate Capacity (thousands of tons) | Use of Waste Heat | | :------- | :------- | :------- | :--------------- | :------------------ | :----------------------------------------------------- | :---------------- | | Jewell | Vansant, Virginia | Cliffs Steel | 1962 | Dec 2025 | 720 | Partially used for thermal coal drying | | Indiana Harbor | East Chicago, Indiana | Cliffs Steel | 1998 | Oct 2023 | 1,220 | Heat for power generation | | Haverhill I | Franklin Furnace, Ohio | Cliffs Steel | 2005 | Dec 2025 | 550 | Process steam | | Haverhill II | Franklin Furnace, Ohio | Cliffs Steel | 2008 | June 2025 | 550 | Power generation | | Granite City | Granite City, Illinois | U.S. Steel | 2009 | Dec 2024 | 650 | Steam for power generation | | Middletown | Middletown, Ohio | Cliffs Steel | 2011 | Dec 2032 | 550 | Power generation | | Vitória | Vitória, Brazil | ArcelorMittal Brazil | 2007 | Jan 2023 | 1,700 | Steam for power generation | - Coke sales agreements include pass-through provisions for coal and procurement costs, along with fixed fees or budgeted allocations for operating costs, mitigating risks from coal price volatility and inflationary costs[17][18] - In the first half of 2020, U.S. steel production utilization declined by approximately 25% due to COVID-19, but recovered significantly in the second half, reaching 75% in January 2021, with continued recovery expected throughout 2021[19] Logistics Operations The logistics business provides coal and aggregate handling and blending services, facing market challenges in 2020 but securing new long-term contracts - Logistics operations include Convent Marine Terminal (CMT), Kanawha River Terminal (KRT), Lake Terminal, and Dismal River Terminal (DRT)[21] - Total capacity allows for blending and/or transloading over 40 million tons of coal and other aggregates annually, with approximately 3 million tons of storage capacity[22] - Revenue is derived from per-ton handling and/or blending services, without ownership of the materials processed[22] - In the first half of 2020, declining API2 and API6 coal prices negatively impacted CMT export volumes; the market recovered in Q4, with CMT coal export volumes projected at 4 to 5 million tons for 2021[23] - KRT serves both metallurgical and thermal coal markets, was impacted by market challenges in 2020, and is projected to handle approximately 10 million tons in 2021[24] - Long-term contracts with Murray and Foresight were rejected due to bankruptcy; CMT signed a new long-term take-or-pay agreement with Javelin Global Commodities in December 2020 for 4 million tons in 2021 and 3 million tons in 2022[25] Seasonality Cokemaking revenue is not seasonal, but profitability relates to coal-to-coke yield, while logistics demand is influenced by the domestic power market and river levels - Cokemaking operations revenue is not seasonal, but profitability is linked to coal-to-coke yield, which is typically more favorable in the third quarter[26] - Logistics business demand is influenced by changes in the domestic power market (thermal coal) and Mississippi River water levels (CMT operating costs)[26] Raw Materials Metallurgical coal, the primary raw material for coke production, is sourced from third parties with costs typically passed on to customers - Metallurgical coal is the primary raw material for coke production, sourced entirely from third parties, with ample supply available[27] - Approximately 1.4 tons of metallurgical coal are required to produce one ton of coke; 5.4 million tons were purchased in 2020[28] - Metallurgical coal purchases are typically under one-year contracts, with costs passed through to customers, and procurement decisions often involve customer participation[28] Transportation and Freight Inbound metallurgical coal costs are usually passed to customers, while coke sales delivery methods vary by agreement and facility - Inbound metallurgical coal transportation costs are generally passed through to customers[29] - Coke sales delivery methods vary by agreement and facility, with Jewell and Haverhill using rail, and Middletown, Indiana Harbor, and Granite City primarily delivering directly to customer blast furnaces via conveyor belts[30] - Most transportation and freight costs for the logistics segment are paid directly by customers to transportation providers[30] Research and Development and Intellectual Property and Proprietary Rights R&D focuses on improving cokemaking technology, developing new products like foundry coke, and enhancing waste heat recovery, supported by patents - R&D projects aim to improve existing cokemaking technology, develop new products (e.g., foundry coke), and enhance waste heat recovery processes, with several patents already obtained[31] - At the Vitória cokemaking facility in Brazil, the company receives a per-ton licensing fee and an annual licensing fee through a license and operating agreement[32] Competition The cokemaking business faces intense competition from integrated steel producers' byproduct coke ovens, while logistics terminals compete with other facilities and transportation modes - The cokemaking business faces intense competition, primarily from blast furnace steel producers' captive byproduct coke ovens[33] - The company's heat recovery cokemaking process offers advantages, including producing higher quality coke, utilizing waste heat for power or steam generation, and reducing environmental impact[11][36] - Domestic cokemaking operations account for approximately 30% of the U.S. blast furnace coke market capacity, with most capacity secured by long-term contracts[36] - CMT is one of the largest export terminals on the U.S. Gulf Coast, accounting for approximately 55% of thermal coal exports from the region in 2020[37] - KRT features fully automated, computer-controlled blending capabilities and access to CSX and Norfolk Southern railroads, as well as the Ohio River system[39] Human Capital Management The company prioritizes human capital management, emphasizing core values, diversity, employee development, and safety performance - The company culture is built on core values of excellence, innovation, commitment, integrity, and stewardship[42][45] - As of December 31, 2020, the company had approximately 841 employees in the U.S. (about 41% unionized) and 292 employees in Brazil (all unionized)[43][44] - The company is committed to Diversity, Equity, and Inclusion (DEI), with women comprising approximately 11% of the global workforce and minorities approximately 17% of the U.S. workforce[45] - Employee turnover was less than 1% in 2020, and the leadership team averages 20 years of leadership experience and over 10 years with SunCoke[51] - Comprehensive health, welfare, and retirement plans are provided, along with professional training and employee development opportunities[52][57] - Performance management and incentive programs incorporate financial, environmental, and safety metrics, with a high proportion of performance-based compensation[58] - Safety is a top priority, with a Total Recordable Incident Rate (TRIR) of 0.81 in 2020, which is below industry averages (1.3 for petroleum and coal products manufacturing, 2.4 for steel mills)[61][62] Employee and Contractor Total Recordable Incident Rate (TRIR) | Year | Employee TRIR | Contractor TRIR | | :--- | :------------ | :-------------- | | 2018 | 0.59 | 1.03 | | 2019 | 0.9 | 0.8 | | 2020 | 1.08 | 0.38 | Ethics & Compliance The company maintains a Code of Business Conduct and Ethics for all personnel, requiring annual training and providing channels for anonymous reporting - The company has a Code of Business Conduct and Ethics applicable to all employees, officers, and directors, requiring annual training completion[64] - Employees can anonymously report violations through various channels, and the company is committed to non-retaliation[65] Legal and Regulatory Requirements Operations are subject to extensive government regulations, including environmental laws and mining safety, with potential for increased compliance costs - The company's operations are subject to extensive government regulations, including environmental laws such as the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, CERCLA, and mining safety disclosures[66][73][75][77] - Cokemaking facilities utilize Maximum Achievable Control Technology (MACT) standards to limit hazardous air pollutant emissions, with some standards based on data from SunCoke's Jewell facility[69] - Stricter National Ambient Air Quality Standards (NAAQS) could require the company to install additional pollution control equipment, increasing operating costs[69] - As of December 31, 2020, asset retirement obligations related to estimated mine reclamation costs were $2 million, which are unfunded[72] - Greenhouse Gas (GHG) emission reporting rules apply, and future related legislation and regulations could lead to increased operating and capital costs[77] - The company has an obligation of $64.6 million for black lung benefits related to its legacy coal operations as of December 31, 2020[83] - Failure to comply with regulations could result in administrative, civil, and criminal penalties, as well as cleanup and site restoration costs[79] Information about our Executive Officers This section provides biographical information and roles for the company's executive officers as of February 25, 2021 Executive Officer List (as of February 25, 2021) | Name | Age | Title | | :--- | :-- | :--------------------------------------------------- | | Michael G. Rippey | 63 | President and Chief Executive Officer | | Fay West | 51 | Senior Vice President and Chief Financial Officer | | Katherine T. Gates | 44 | Senior Vice President, Chief Legal Officer and Chief Human Resources Officer | | P. Michael Hardesty | 58 | Senior Vice President, Commercial Operations, Business Development, Terminals and International Coke | | Allison S. Lausas | 41 | Vice President, Controller and Treasurer | | John F. Quanci | 59 | Vice President, Chief Technology Officer | - Michael G. Rippey was appointed President and Chief Executive Officer on December 1, 2017, having previously held senior positions at Nippon Steel & Sumitomo Metal Corporation and ArcelorMittal USA[84] - Fay West was appointed Senior Vice President and Chief Financial Officer in October 2014, previously serving as Vice President and Controller at SunCoke Energy, Inc[85] - Katherine T. Gates was appointed Senior Vice President, Chief Legal Officer, and Chief Human Resources Officer on November 14, 2019, also responsible for environmental and sustainability functions[86] Risk Factors The company faces multiple risks including high customer concentration, operational disruptions, intense competition, stringent environmental regulations, and debt-related financial risks - The company's cokemaking and logistics businesses are highly dependent on a few customers, and any loss or default could materially adversely affect financial condition[93][94][95] - Cokemaking and logistics operations face operational risks, including equipment failures, natural disasters, fires, and explosions, which could lead to production interruptions and increased costs[97][98] - The cokemaking business faces competition from alternative steelmaking technologies (e.g., electric arc furnaces) and alternative coke production technologies, which could reduce coke demand[100] - The logistics business faces competition from natural gas replacing thermal coal, new coal handling facilities, and truck transportation[101] - The company's operations are subject to extensive laws and regulations by federal, state, and local authorities, with high compliance costs and increasingly stringent regulations potentially leading to fines, operational restrictions, and increased costs[102][103] - Failure to timely obtain, maintain, or renew permits or leases required for operations could result in significant reductions in production, cash flow, or profitability[105][106] - The company faces risks of uninsured or underinsured losses and liabilities, particularly environmental and pollution risks, as well as cybersecurity risks[107] - Implementing growth strategies, future acquisitions, and/or divestitures carries risks, potentially failing to achieve anticipated benefits or facing integration challenges[108][110] - Impairment of the carrying value of long-lived assets could adversely affect the business, financial condition, and results of operations[111][112][113] - New or more stringent greenhouse gas emission standards and the physical impacts of climate change could increase operating costs and adversely affect the business and customers[116][117] - The COVID-19 pandemic and other similar outbreaks could disrupt the company's operations and those of its customers and suppliers, continuing to adversely affect cash flow, financial condition, and results of operations[120] - Modifications or terminations of coke supply agreements, global steel industry overcapacity, and failure to meet minimum production or quality requirements could adversely affect the cokemaking business's cash flow and profitability[121][123][124][125] - The growth and success of the logistics business depend on sufficient throughput, and a long-term decline in coal demand could adversely affect its operating results and cash flow[137][140] - The company faces significant debt maturities ($690.5 million within the next five years), and its high debt level may limit financial flexibility and increase vulnerability to adverse economic and industry conditions[142][143][144][145][146] - Employee health and safety regulations related to legacy coal mining operations and benefits for retired coal miners (e.g., black lung benefits) continue to impose significant costs on the company[147] - Other general risks include continued financial market uncertainty, labor disputes, failure to attract and retain key personnel, litigation, and cybersecurity breaches and information system failures[148][151][152][153][154][157] Unresolved Staff Comments There are no unresolved staff comments in this report - None[159] Properties SunCoke owns land for several cokemaking facilities and logistics terminals, leases other facilities and office space, and retains legacy coal mining assets - The company owns the land for its Jewell, Haverhill, Granite City, and Middletown cokemaking facilities, as well as the KRT and CMT logistics terminals[160] - The company leases the Indiana Harbor cokemaking facility, DRT, KRT terminals, and its corporate headquarters office space in Lisle, Illinois[161][165] - The company retains approximately 5,000 acres of land, mineral rights, and coal mining rights, which are legacy assets from its former coal mining operations[161] Legal Proceedings SunCoke is involved in various legal and administrative proceedings, but management believes the outcomes will not materially impact the company's financial position - The company is involved in various ongoing or potential legal and administrative proceedings, including commercial disputes, employment claims, personal injury claims, toxic exposure allegations, and general environmental claims[163] - Management believes that as of December 31, 2020, any resulting liabilities will not have a material adverse effect on the company's financial condition, results of operations, or cash flows[163] Mine Safety Disclosures Despite divesting most coal mining assets, the company remains responsible for reclamation at legacy sites and operates MSHA-regulated logistics assets - The company divested most of its coal mining assets in April 2016 but remains responsible for reclamation at certain legacy coal mining sites[164] - The company owns logistics assets that are subject to regulation by the Mine Safety and Health Administration (MSHA)[164] - Information regarding mine safety violations and other regulatory matters is included in Exhibit 95.1 to Form 10-K[164] PART II Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities SunCoke's common stock trades on the NYSE under "SXC", with dividends declared quarterly and a stock repurchase program in place - The company's common stock (SXC) trades on the New York Stock Exchange[167] - As of February 19, 2021, the company had 82,806,106 shares of common stock outstanding and 9,228 stockholders of record[5][170] Dividends Declared (2020-2021) | Date Declared | Record Date | Dividend Per Share | Payment Date | | :------------ | :---------- | :----------------- | :----------- | | Jan 29, 2020 | Feb 18, 2020 | $0.0600 | March 2, 2020 | | May 7, 2020 | May 21, 2020 | $0.0600 | June 4, 2020 | | Aug 3, 2020 | Aug 18, 2020 | $0.0600 | September 1, 2020 | | Nov 6, 2020 | Nov 20, 2020 | $0.0600 | December 1, 2020 | | Feb 4, 2021 | Feb 19, 2021 | $0.0600 | March 1, 2021 | - The company completed its $150 million stock repurchase program in the first quarter of 2020[172] - Under a new $100 million repurchase program, $3.7 million (1.1 million shares) were repurchased in Q1 2020, with $96.3 million remaining available; repurchases were suspended in Q4 2020[173] Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses SunCoke Energy's 2020 financial performance, operational achievements, strategic outlook for 2021, and key accounting policies - This discussion and analysis is based on GAAP financial data and certain non-GAAP financial data, with reconciliations provided for non-GAAP measures to their most comparable GAAP components[176] - In 2020, the company reported net income of $8.8 million, cash flow from operations of $157.8 million, and Adjusted EBITDA of $205.9 million[178] - The company successfully operated during the COVID-19 pandemic and exceeded its revised financial targets[178][183] 2020 Overview The company maintained operations during COVID-19, exceeded revised financial targets, supported customers through contract revisions, and reduced total debt - The company maintained continuous operations during the COVID-19 pandemic, designated as a critical manufacturing sector and essential business[178] - Adjusted EBITDA for 2020 was $205.9 million, and cash flow from operations was $157.8 million, both exceeding revised guidance targets[178][183] - The company supported its customer base and successfully negotiated contract revisions by providing coke supply relief in exchange for contract extensions[183] - Capital was returned to shareholders through the repurchase of 1.6 million shares ($7 million) and quarterly dividends of $0.06 per share; total debt was reduced by approximately $110 million in 2020[183] - Assets were properly maintained, preserving their long-term integrity despite fluctuating operating levels[183] Our Focus and Outlook for 2021 The 2021 focus is on operational excellence, asset optimization, capital structure strengthening, and executing an $80 million capital expenditure plan - The primary focus for 2021 is achieving operational excellence, optimizing asset utilization, and successfully executing an approximately $80 million capital expenditure plan[182][183][225] - The company aims to secure additional commitments and customers through foundry coke and export sales to support full utilization of the domestic coke fleet[183] - Repositioning CMT from a primary coal export terminal to a diversified terminal is key for the continued success of the logistics business[183] - 2021 financial targets include Adjusted EBITDA projected between $215 million and $230 million, and cash flow from operations between $160 million and $180 million[183][244] Items Impacting Comparability Comparability is affected by 2020 contract revisions, the 2019 simplification transaction, and significant non-cash impairment charges in the logistics segment in 2019 - In 2020, the company negotiated contract revisions with steel customers, providing short-term coke supply relief in exchange for contract extensions, resulting in an approximate $20 million reduction in 2020 Adjusted EBITDA[184][185][186] - In the 2019 simplification transaction, the company acquired all outstanding units of SunCoke Energy Partners, L.P., making it a wholly-owned subsidiary, treated as a non-cash equity transaction[186] - The bankruptcy of logistics customers (Murray and Foresight) led to a $247.4 million non-cash, pre-tax impairment charge in the logistics segment in 2019, including goodwill and long-lived asset impairments[187] Consolidated Results of Operations (2020 vs. 2019) Consolidated sales and operating revenue decreased due to lower coal prices and reduced volumes, while net income improved significantly due to the absence of 2019 impairment charges Consolidated Results of Operations (2020 vs. 2019) | Metric | 2020 (Millions USD) | 2019 (Millions USD) | Increase (Decrease) (Millions USD) | | :-------------------------------------- | :------------------ | :------------------ | :--------------------------------- | | Sales and other operating revenue | $1,333.0 | $1,600.3 | $(267.3) | | Total costs and operating expenses | $1,263.3 | $1,744.6 | $(481.3) | | Operating income (loss) | $69.7 | $(144.3) | $214.0 | | Net income (loss) | $8.8 | $(148.4) | $157.2 | | Net income (loss) attributable to SunCoke Energy, Inc. | $3.7 | $(152.3) | $156.0 | - Sales and other operating revenue decreased by $267.3 million, primarily due to lower coal prices (pass-through costs), reduced volumes in the domestic coke business due to COVID-19, and lower logistics volumes[190] - Total costs and operating expenses decreased by $481.3 million, primarily due to the absence of the $247.4 million long-lived asset and goodwill impairment charge recorded in 2019[190] - Selling, general, and administrative expenses increased by $5.6 million, mainly driven by $3.9 million in R&D costs for foundry coke production and $2 million for the revaluation of certain legacy liabilities, partially offset by reduced employee-related expenses[191] - Depreciation and amortization expense decreased by $10.1 million, primarily due to the 2019 logistics asset impairment reducing asset carrying values and the absence of accelerated depreciation in 2019, partially offset by depreciation from new assets placed in service in 2020 (Indiana Harbor coke battery rebuild)[192] - Net interest expense decreased by $4 million, primarily due to lower weighted average debt balances and interest rates in 2020[193][194] Results of Reportable Business Segments (2020 vs. 2019) Domestic Coke, Brazil Coke, and Logistics segments experienced revenue and Adjusted EBITDA declines primarily due to COVID-19 impacts, lower volumes, and unfavorable exchange rates Segment Financial and Operating Data (2020 vs. 2019) | Metric | 2020 (Millions USD) | 2019 (Millions USD) | Increase (Decrease) (Millions USD) | | :-------------------------------------- | :------------------ | :------------------ | :--------------------------------- | | Sales and other operating revenue: | | | | | Domestic Coke | $1,265.4 | $1,489.1 | $(223.7) | | Brazil Coke | $31.6 | $38.4 | $(6.8) | | Logistics | $36.0 | $72.8 | $(36.8) | | Adjusted EBITDA: | | | | | Domestic Coke | $217.0 | $226.7 | $(9.7) | | Brazil Coke | $13.5 | $16.0 | $(2.5) | | Logistics | $17.3 | $42.6 | $(25.3) | | Corporate and Other, including legacy costs, net | $(41.9) | $(37.4) | $(4.5) | | Operating Data: | | | | | Domestic Coke capacity utilization (%) | 91 | 98 | (7) | | Domestic Coke production volumes (thousands of tons) | 3,840 | 4,168 | (328) | | Domestic Coke sales volumes (thousands of tons) | 3,789 | 4,171 | (382) | | Domestic Coke Adjusted EBITDA per ton | $57.27 | $54.35 | $2.92 | | Brazilian Coke production (thousands of tons) | 1,396 | 1,641 | (245) | | Logistics Tons handled (thousands of tons) | 14,678 | 21,053 | (6,375) | - Domestic Coke sales and other operating revenue and Adjusted EBITDA decreased, primarily due to volume relief provided during the COVID-19 pandemic and lower coal prices, partially offset by improved performance following the Indiana Harbor coke battery rebuild[204][205] - Logistics sales and other operating revenue and Adjusted EBITDA significantly decreased, primarily due to reduced transloading volumes, depressed thermal coal export prices, and the impact of the COVID-19 pandemic[206] - Brazil Coke sales and other operating revenue and Adjusted EBITDA decreased, primarily due to lower volumes and unfavorable foreign currency exchange rate movements[209] - Corporate and Other expenses increased by $4.5 million, driven primarily by $3.9 million in foundry-related R&D costs and $2 million in increased legacy costs[210] Liquidity and Capital Resources The company's liquidity is primarily from operating cash flow and its revolving credit facility, with $48.4 million in cash and $299.9 million available on the credit line as of December 31, 2020 - The company's primary sources of liquidity are cash generated from operating activities and its revolving credit facility[211] - As of December 31, 2020, the company had $48.4 million in cash and cash equivalents and $299.9 million available under its revolving credit facility[211] - Net cash flow from operating activities was $157.8 million in 2020, a $24.1 million decrease from 2019, primarily due to lower operating performance and changes in working capital[214] - Net cash flow from investing activities was $75.3 million in 2020, a $34.5 million decrease from 2019, primarily due to lower capital expenditures[215] - Net cash flow from financing activities was $131.2 million in 2020, a $10.5 million increase from 2019, reflecting debt repurchases, dividend payments, and net repayments on the revolving credit facility[216][217] - The company repurchased $62.7 million in face value of 2025 Senior Notes for $55.9 million in cash in 2020[216] - Dividends of $19.9 million were paid to shareholders in 2020[216] - The company repurchased $7 million (1.6 million shares) of common stock in 2020[219] - As of December 31, 2020, the company was in compliance with all applicable debt covenants[220] - Company credit ratings are S&P BB- (stable) and Moody's B1 (negative outlook)[221] Debt Maturities (as of December 31, 2020) | Year | Amount (Millions USD) | | :--- | :-------------------- | | 2021 | $3.0 | | 2022 | $3.2 | | 2023 | $3.3 | | 2024 | $93.7 | | 2025 | $587.3 | | 2026-Thereafter | $0.0 | | Total | $690.5 | Capital Expenditures (2019-2020) | Type | 2020 (Millions USD) | 2019 (Millions USD) | | :-------------------------- | :------------------ | :------------------ | | Ongoing capital | $59.5 | $94.2 | | Environmental remediation project | $0.0 | $15.9 | | Expansion capital | $14.4 | $0.0 | | Total capital expenditures | $73.9 | $110.1 | - Expected capital expenditures for 2021 are approximately $80 million[225] Critical Accounting Policies Key accounting policies involve significant estimates and assumptions related to black lung benefit obligations and impairment of goodwill and long-lived assets - Critical accounting policies involve significant estimates and assumptions regarding black lung benefit obligations and impairment of goodwill and long-lived assets[226] - Black lung benefit liability was $64.6 million as of December 31, 2020 (compared to $55.1 million in 2019), with an expense of $15.4 million in 2020 (compared to $10.9 million in 2019)[231][233][380][383] - In 2019, the logistics segment recorded a $73.5 million goodwill impairment charge due to customer bankruptcies and declining forecasts, resulting in the full impairment of the goodwill balance[236][347] - In 2019, CMT (Logistics segment) recorded a $173.9 million non-cash, pre-tax impairment charge for long-lived assets, including $113.3 million for intangible assets and $60.6 million for property, plant, and equipment[240][350] - No long-lived asset impairment was recorded in 2020[239] Non-GAAP Financial Measures Adjusted EBITDA is a non-GAAP financial measure used by management and investors to analyze financial performance, with a reconciliation provided to GAAP net income - Adjusted EBITDA is a non-GAAP financial measure used by company management and investors to analyze current and future financial performance[242][432] - Adjusted EBITDA is defined as EBITDA, adjusted for impairments, (gain) loss on debt extinguishment, contingent consideration adjustments, restructuring costs, and simplification transaction costs[430] 2021 Adjusted EBITDA Guidance Reconciliation | Metric | Low (Millions USD) | High (Millions USD) | | :-------------------------------------- | :----------------- | :------------------ | | Net income | $15 | $35 | | Add: Depreciation and amortization expense | $137 | $133 | | Add: Interest expense, net | $55 | $50 | | Add: Income tax expense | $8 | $12 | | Adjusted EBITDA | $215 | $230 | | Subtract: Adjusted EBITDA attributable to noncontrolling interest | $9 | $9 | | Adjusted EBITDA attributable to SunCoke Energy, Inc. | $206 | $221 | Guarantor Financial and Non-Financial Disclosures SunCoke Energy, Inc. and its 100% owned guarantor subsidiaries are expected to guarantee debt issued under a shelf registration statement, with summarized financial information provided - SunCoke Energy, Inc. (the Issuer) and its 100% owned subsidiaries (Guarantor Subsidiaries) are expected to guarantee debt issued under a shelf registration statement[246] - These guarantees are full and unconditional, subject to customary release provisions[246][247] Condensed Consolidating Statement of Operations (Issuer and Guarantor Subsidiaries) (2020) | Metric | Amount (Millions USD) | | :---------------------- | :-------------------- | | Revenues | $962.6 | | Costs and operating expenses | $906.6 | | Operating income | $56.0 | | Net loss | $(6.6) | Condensed Consolidating Balance Sheet (Issuer and Guarantor Subsidiaries) (as of December 31, 2020) | Asset/Liability | Amount (Millions USD) | | :---------------------------------- | :-------------------- | | Assets: | | | | Cash | $44.6 | | Current receivables from Non-Guarantor subsidiaries | $14.2 | | Other current assets | $162.1 | | Properties, plants and equipment, net | $1,176.7 | | Other non-current assets | $54.8 | | Total assets | $1,452.4 | | Liabilities: | | | | Current liabilities | $126.5 | | Long-term debt and financing obligations | $673.9 | | Long-term payable to Non-Guarantor subsidiaries | $189.4 | | Other long-term liabilities | $240.6 | | Total liabilities | $1,230.4 | Quantitative and Qualitative Disclosures About Market Risk SunCoke faces market risks from changes in coal prices, interest rates, and foreign currency exchange rates, particularly for its Brazilian operations - The company's primary market risks include changes in coal prices, interest rates, and foreign currency exchange rates[257] - Coal costs, the largest component of coke prices for domestic cokemaking operations, are generally passed through to customers, thus having minimal impact on profitability unless target coal-to-coke yields are not met or spot sales occur[259][260] - The company is exposed to interest rate risk due to floating-rate borrowings, such as its revolving credit facility, which had an outstanding balance of $88.3 million as of December 31, 2020[261] - Brazilian operations are affected by changes in the Brazilian Real exchange rate, with a 10% change in exchange rates estimated to impact net income by approximately $0.3 million in 2020[263] Financial Statements and Supplementary Data This section presents SunCoke Energy's audited consolidated financial statements for 2020, 2019, and 2018, along with related notes and the auditor's report - This section includes the consolidated statements of operations, comprehensive income (loss), balance sheets, cash flows, and changes in equity for the years ended December 31, 2020, 2019, and 2018[265] - KPMG LLP issued an unqualified opinion on the company's consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2020[267] - The company changed its accounting method for leases effective January 1, 2019, adopting ASU 2016-02, Leases (Topic 842), and its subsequent amendments[268] - The evaluation of the company's estimated black lung benefit liability was identified as a critical audit matter, involving highly subjective judgments regarding actuarial models and key assumptions[277] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in accountants or disagreements with them on accounting and financial disclosure in this report - None[435] Controls and Procedures Management, including the CEO and CFO, affirmed the effectiveness of disclosure controls and procedures and internal control over financial reporting as of December 31, 2020 - As of December 31, 2020, the company's disclosure controls and procedures were deemed effective at a reasonable assurance level[436] - As of December 31, 2020, the company's internal control over financial reporting was deemed effective based on the COSO 2013 framework[438] - Despite the impact of COVID-19, with many employees working remotely, no material changes occurred in internal control over financial reporting during 2020[440] Other Information There is no other information required to be disclosed in this report - None[441] PART III Directors, Executive Officers and Corporate Governance The required disclosures for this item are incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders[443] Executive Compensation The required executive compensation disclosures are incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - The information required for executive compensation is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders[444] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The required disclosures for security ownership are incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - The information required for security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders[445] Certain Relationships and Related Transactions, and Director Independence The required disclosures for certain relationships and related transactions and director independence are incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - The information required for certain relationships and related transactions and director independence is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders[446] Principal Accounting Fees and Services The required disclosures for principal accounting fees and services are incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - The information required for principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders[447] PART IV Exhibits, Financial Statement Schedules This section lists the exhibits filed as part of the report and notes the omission of financial statement schedules due to information being presented elsewhere or not applicable - The consolidated financial statements are listed in Item 8 of the report[450] - Financial statement schedules have been omitted because the required information is presented elsewhere in the report or is not applicable[451] - The exhibit list includes various agreements, plans, and certifications, such as the Certificate of Incorporation, Credit Agreement, Incentive Plans, and Coke Supply Agreements[452][453][454][456][458][461] Form 10-K Summary A Form 10-K summary is not provided in this report - None[460]