sxc-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________________________

FORM 10-Q

_____________________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35243

_____________________________________________________________________

SUNCOKE ENERGY, INC.

(Exact name of registrant as specified in its charter)

______________________________________________________________________


Delaware						90-0640593
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1011 Warrenville Road, Suite 600

Lisle, Illinois 60532

(Address of principal executive offices, including zip code)

(630) 824-1000

(Registrant’s telephone number, including area code)

____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SXC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ý No

As of April 28, 2023, there were 83,720,154 shares of the Registrant’s Common Stock, par value $0.01 per share outstanding.

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SUNCOKE ENERGY, INC.

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PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements			1

Consolidated Statements of Income (Unaudited) For the Three Months Ended March 31, 2023 and 2022			1

Consolidated Statements of Comprehensive Income (Unaudited) For the Three Months Ended March 31, 2023 and 2022			2

Consolidated Balance Sheets at March 31, 2023 (Unaudited) and December 31, 2022			3

Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2023 and 2022			4

Consolidated Statements of Equity (Unaudited) For the Three Months Ended March 31, 2023 and 2022			5

Notes to the Consolidated Financial Statements			6

1. General			6

2. Inventories			6

3. Intangible Assets			7

4. Income Taxes			7

5. Accrued Liabilities			8

6. Debt and Financing Obligation			8

7. Commitments and Contingent Liabilities			8

8. Share-Based Compensation			9

9. Earnings per Share			11

10. Fair Value Measurement			11

11. Revenue from Contracts with Customers			12

12. Business Segment Information			13





Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16

Item 3. Quantitative and Qualitative Disclosures about Market Risk			23

Item 4. Controls and Procedures			24

PART II – OTHER INFORMATION

Item 1. Legal Proceedings			24

Item 1A. Risk Factors			24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			24

Item 3. Defaults Upon Senior Securities			24

Item 4. Mine Safety Disclosures			25

Item 5. Other Information			25

Item 6. Exhibits			26

Signature			27

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Quarterly Report on Form 10-Q, including, among others, in the sections entitled “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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. Such forward-looking statements are based on management’s beliefs, expectations and assumptions based upon information currently available, and include, but are not limited to, statements concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities (including, among other things, anticipated expansion into the foundry coke market), the influence of competition, and the effects of future legislation or regulations. Forward-looking statements also include statements regarding the potential, assumed, or expected future impacts of COVID-19 and related economic conditions on our business, financial condition and results of operations, and/or potential operating performance. In addition, statements in this Quarterly Report on Form 10-Q concerning future dividend declarations are subject to approval by our Board of Directors and will be based upon circumstances then existing. Forward-looking statements are not guarantees of future performance, but are based upon the current knowledge, beliefs and expectations of SunCoke management, and upon assumptions by SunCoke concerning future conditions, any or all of which ultimately may prove to be inaccurate.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements. We do not have any intention or obligation to update any forward-looking statement (or its associated cautionary language), whether as a result of new information or future events, after the date of this Quarterly Report on Form 10-Q, except as required by applicable law.

The risk factors discussed in “Risk Factors” in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q could cause our results to differ materially from those expressed in the forward-looking statements made in this Quarterly Report on Form 10-Q. There also may be other risks that are currently unknown to us or that we are unable to predict at this time. Such risks and uncertainties include, without limitation:

•the potential operating and financial impacts on our operations, or those of our customers and suppliers, and the general impact on our industry and on the U.S. and global economy, resulting from COVID-19 or any other widespread contagion;

•actual or potential impacts of the Russia-Ukrainian crisis on global commodity prices, inflationary pressures, and state sponsored cyber activity;

•the effect of inflation on wages and operating expenses;

•volatility and cyclical downturns in the steel industry and in other industries in which our customers and/or suppliers operate;

•changes in the marketplace that may affect our cokemaking business, including the supply and demand for our coke products, as well as increased imports of coke from foreign producers;

•volatility, cyclical downturns and other change in the business climate and market for coal, affecting customers or potential customers for our logistics business;

•changes in the marketplace that may affect our logistics business, including the supply and demand for thermal and metallurgical coal;

•severe financial hardship or bankruptcy of one or more of our major customers, or the occurrence of a customer default or other event affecting our ability to collect payments from our customers;

•our ability to repair aging coke ovens to maintain operational performance;

•age of, and changes in the reliability, efficiency and capacity of the various equipment and operating facilities used in our cokemaking operations, and in the operations of our subsidiaries major customers, business partners and/or suppliers;

•changes in the expected operating levels of our assets;

•changes in the level of capital expenditures or operating expenses, including any changes in the level of environmental capital, operating or remediation expenditures;

•changes in levels of production, production capacity, pricing and/or margins for coal and coke;

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•changes in product specifications for the coke that we produce or the coals we mix, store and transport;

•our ability to meet minimum volume requirements, coal-to-coke yield standards and coke quality standards in our coke sales agreements;

•variation in availability, quality and supply of metallurgical coal used in the cokemaking process, including as a result of non-performance by our suppliers;

•effects of geologic conditions, weather, natural disasters and other inherent risks beyond our control;

•effects of adverse events relating to the operation of our facilities and to the transportation and storage of hazardous materials or regulated media (including equipment malfunction, explosions, fires, spills, impoundment failure and the effects of severe weather conditions);

•the existence of hazardous substances or other environmental contamination on property owned or used by us;

•required permits and other regulatory approvals and compliance with contractual obligations and/or bonding requirements in connection with our cokemaking, logistics operations, and/or former coal mining activities;

•the availability of future permits authorizing the disposition of certain mining waste and the management of reclamation areas;

•risks related to environmental compliance;

•our ability to comply with applicable federal, state or local laws and regulations, including, but not limited to, those relating to environmental matters;

•risks related to labor relations and workplace safety;

•availability of skilled employees for our cokemaking, and/or logistics operations, and other workplace factors;

•our ability to service our outstanding indebtedness;

•our indebtedness and certain covenants in our debt documents;

•our ability to comply with the covenants and restrictions imposed by our financing arrangements;

•changes in the availability and cost of equity and debt financing;

•impacts on our liquidity and ability to raise capital as a result of changes in the credit ratings assigned to our indebtedness;

•competition from alternative steelmaking and other technologies that have the potential to reduce or eliminate the use of coke;

•our dependence on, relationships with, and other conditions affecting our customers and/or suppliers;

•consolidation of major customers;

•nonperformance or force majeure by, or disputes with, or changes in contract terms with, major customers, suppliers, dealers, distributors or other business partners;

•effects of adverse events relating to the business or commercial operations of our customers and/or suppliers;

•changes in credit terms required by our suppliers;

•our ability to secure new coal supply agreements or to renew existing coal supply agreements;

•effects of railroad, barge, truck and other transportation performance and costs, including any transportation disruptions;

•our ability to enter into new, or renew existing, long-term agreements upon favorable terms for the sale of coke, steam, or electric power, or for handling services of coal and other aggregates (including transportation, storage and mixing);

•our ability to enter into new, or renew existing, agreements upon favorable terms for logistics services;

•our ability to successfully implement domestic and/or international growth strategies;

•our ability to identify acquisitions, execute them under favorable terms, and integrate them into our existing business operations;

•our ability to realize expected benefits from investments and acquisitions;

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•our ability to enter into joint ventures and other similar arrangements under favorable terms;

•our ability to consummate assets sales, other divestitures and strategic restructuring in a timely manner upon favorable terms, and/or realize the anticipated benefits from such actions;

•our ability to consummate investments under favorable terms, including with respect to existing cokemaking facilities, which may utilize by-product technology, and integrate them into our existing businesses and have them perform at anticipated levels;

•our ability to develop, design, permit, construct, start up, or operate new cokemaking facilities in the U.S. or in foreign countries;

•disruption in our information technology infrastructure and/or loss of our ability to securely store, maintain, or transmit data due to security breach by hackers, employee error or malfeasance, terrorist attack, power loss, telecommunications failure or other events;

•the accuracy of our estimates of reclamation and other environmental obligations;

•risks related to obligations under mineral leases retained by us in connection with the divestment of our legacy coal mining business;

•risks related to the ability of the assignee(s) to perform in compliance with applicable requirements under mineral leases assigned in connection with the divestment of our legacy coal mining business;

•proposed or final changes in existing, or new, statutes, regulations, rules, governmental policies and taxes, or their interpretations, including those relating to environmental matters and taxes;

•proposed or final changes in accounting and/or tax methodologies, laws, regulations, rules, or policies, or their interpretations, including those affecting inventories, leases, post-employment benefits, income, or other matters;

•changes in federal, state, or local tax laws or regulations, including the interpretations thereof;

•claims of noncompliance with any statutory or regulatory requirements;

•changes in insurance markets impacting cost, level and/or types of coverage available, and the financial ability of our insurers to meet their obligations;

•inadequate protection of our intellectual property rights;

•volatility in foreign currency exchange rates affecting the markets and geographic regions in which we conduct business; and

•historical consolidated financial data may not be reliable indicators of future results.

The factors identified above are believed to be important factors, but not necessarily all of the important factors, that could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Other factors not discussed herein also could have material adverse effects on us. All forward-looking statements included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by the foregoing cautionary statements.

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PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

SunCoke Energy, Inc.

Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,
	2023		2022

	(Dollars and shares in millions, except per share amounts)
Revenues
Sales and other operating revenue	$	487.8	$	439.8
Costs and operating expenses
Cost of products sold and operating expenses	402.0		338.0
Selling, general and administrative expenses	18.8		18.0
Depreciation and amortization expense	35.3		35.2
Total costs and operating expenses	456.1		391.2
Operating income	31.7		48.6
Interest expense, net	7.2		8.0
Income before income tax expense	24.5		40.6
Income tax expense	6.8		10.0
Net income	17.7		30.6
Less: Net income attributable to noncontrolling interests	1.4		1.1
Net income attributable to SunCoke Energy, Inc.	$	16.3	$	29.5
Earnings attributable to SunCoke Energy, Inc. per common share:
Basic	$	0.19	$	0.35
Diluted	$	0.19	$	0.35
Weighted average number of common shares outstanding:
Basic	84.5		83.2
Diluted	84.9		84.2

(See accompanying notes to the consolidated financial statements)

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SunCoke Energy, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,
	2023		2022

	(Dollars in millions)
Net income	$	17.7	$	30.6
Other comprehensive income:
Reclassifications of prior service benefit and actuarial loss amortization to earnings, net of tax	0.1		0.1
Currency translation adjustment	0.1		1.3
Comprehensive income	17.9		32.0
Less: Comprehensive income attributable to noncontrolling interests	1.4		1.1
Comprehensive income attributable to SunCoke Energy, Inc.	$	16.5	$	30.9

(See accompanying notes to the consolidated financial statements)

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SunCoke Energy, Inc.

Consolidated Balance Sheets


	March 31, 2023		December 31, 2022
	(Unaudited)
	(Dollars in millions, except par value amounts)
Assets
Cash and cash equivalents	$	83.3	$	90.0
Receivables, net	81.2		104.8
Inventories	234.8		175.2
Other current assets	10.5		4.0
Total current assets	409.8		374.0
Properties, plants and equipment (net of accumulated depreciation of $1,310.3 million and $1,276.0 million at March 31, 2023 and December 31, 2022, respectively)	1,207.8		1,229.3
Intangible assets, net	32.7		33.2
Deferred charges and other assets	19.0		18.1
Total assets	$	1,669.3	$	1,654.6
Liabilities and Equity
Accounts payable	$	172.7	$	159.3
Accrued liabilities	45.6		60.8
Current portion of financing obligation	3.4		3.3
Interest payable	6.1		—
Income tax payable	4.0		0.6
Total current liabilities	231.8		224.0
Long-term debt and financing obligation	528.4		528.9
Accrual for black lung benefits	52.7		52.2
Retirement benefit liabilities	15.9		16.4
Deferred income taxes	175.1		172.3
Asset retirement obligations	13.6		13.4
Other deferred credits and liabilities	23.5		24.7
Total liabilities	1,041.0		1,031.9
Equity
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no issued shares at both March 31, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value. Authorized 300,000,000 shares; issued 99,124,637 and 98,815,780 shares at March 31, 2023 and December 31, 2022, respectively	1.0		1.0
Treasury stock, 15,404,482 shares at both March 31, 2023 and December 31, 2022	(184.0)		(184.0)
Additional paid-in capital	726.3		728.1
Accumulated other comprehensive loss	(12.8)		(13.0)
Retained earnings	63.0		53.5
Total SunCoke Energy, Inc. stockholders’ equity	593.5		585.6
Noncontrolling interest	34.8		37.1
Total equity	628.3		622.7
Total liabilities and equity	$	1,669.3	$	1,654.6

(See accompanying notes to the consolidated financial statements)

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SunCoke Energy, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2023		2022

	(Dollars in millions)
Cash Flows from Operating Activities
Net income	$	17.7	$	30.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	35.3		35.2
Deferred income tax expense	2.8		5.3
Share-based compensation expense	1.6		1.1