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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-20 · 256 added, 191 removed, 263 unchanged (63% of the section changed)

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Our future results and financial condition may differ materially from those we currently anticipate as a result of the factors we describe under “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors.”

Currently, such risks and uncertainties also include, among others:

SunCoke’s ability to manage its business during and after the COVID-19 pandemic;

the impact of the COVID-19 pandemic on SunCoke’s results of operations, revenues, earnings and cash flows;

SunCoke’s ability to reduce costs and capital spending in response to the COVID-19 pandemic;

SunCoke’s balance sheet and liquidity throughout and following the COVID-19 pandemic;

SunCoke’s prospects for financial performance and achievement of strategic objectives following the COVID-19 pandemic;

capital allocation strategy following the COVID-19 pandemic;

and the general impact on our industry and on the U.S.

and global economy resulting from COVID-19, including actions by domestic and foreign governments and others to contain the spread, or mitigate the severity, thereof.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based on financial data derived from the financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and certain other financial data that is prepared using a non-GAAP measure.

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(Dollars in millions)

Net income $ 8.8

Net cash provided by operating activities $ 157.8

Adjusted EBITDA

The Company delivered against our key objectives in 2019 , including:

With the new challenges of the COVID-19 pandemic, the Company revised our key objectives in 2020 and delivered against those objectives, including:

• Successfully navigated through the ongoing COVID-19 pandemic.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic.

Our facilities continued to operate during the COVID-19 pandemic due to our inclusion in the Critical Manufacturing Sector as defined by the U.S.

Department of Homeland Security and the designation as an essential business by state and local government authorities.

Our top priority has been and continues to be the safety and health of our employees and contractors.

In response to the outbreak, we established an internal task force of subject matter experts, initiated enhanced health and safety measures across our facilities and enacted a work from home program for all qualifying personnel.

We have implemented screening procedures consistent with U.S.

Centers for Disease Control and Prevention (“CDC”) recommendations, which may include screening questionnaires and temperature checks for employees, contractors, or other service providers.

Additionally, to ensure employee safety, we have also adopted protocols consistent with CDC, state, and local guidance, which include but are not limited to increased cleaning and disinfection, social distancing, physical separations, mask requirements, contact tracing and quarantine.

We continue to closely monitor the impact of the outbreak of COVID-19 on all aspects of our business, including how it has and will impact our suppliers.

We have not experienced any significant impacts or interruptions with respect to our ability to procure coal as a result of COVID-19, and we will continue to closely monitor our inventory levels to mitigate the risk of any potential supply interruptions.

• Achieved revised financial objectives.

The net loss in 2019 reflects the impact of the asset impairment charges to the Logistics segment discussed in "Items Impacting Comparability." We delivered Adjusted EBITDA of $247.9 million , which was within our revised guidance $240 million to $250 million, and operating cash flow of $181.9 million , which was above our revised guidance of $150 million to $160 million.

Our revised guidance reflected the impacts to the Logistics segment resulting from the bankruptcy of Murray American Coal, Inc.

("Murray") and the rejection of its take-or-pay contract.

Domestic Coke delivered strong results, mitigating the impact of challenges faced by our Logistics customers.

Completed last phase of oven rebuilds at Indiana Harbor.

With the completion of the final phase of our multi-year oven rebuild campaign at our Indiana Harbor cokemaking facility, we delivered Adjusted EBITDA of $24.4 million on 1,046 thousand tons of coke sales, exceeding our expectation of Adjusted EBITDA of $22 million on 1,025 thousand tons of coke sales.

The 2019 oven rebuilds cost approximately $44 million, including capital expenditures of $35 million.

These costs were below our expectation of between $50 million to $60 million, including capital expenditures of $40 million to $48 million.

Completed the Simplification Transaction.

On June 28, 2019, we acquired all of the outstanding common units of SunCoke Energy Partners, L.P.

("the Partnership") not already owned by SunCoke in exchange for newly issued SunCoke common shares (the "Simplification Transaction").

The successful completion of the Simplification Transaction provided immediate value to our shareholders and will allow the Company to maximize capital allocation strategies in the future.

Our simplified structure also allows financial flexibility for growth opportunities and eliminates the qualifying income limitations of a master limited partnership on growth.

Pursued balanced capital allocation.

Simplifying SunCoke’s structure has enabled us to utilize our solid cash flow to execute a balanced capital allocation strategy in 2019.

We returned meaningful capital to shareholders through the repurchase of 6.3 million shares during 2019 for $36.3 million and the declaration and payment of a dividend of $0.06 per share during the fourth quarter of 2019.

Additionally, we extinguished approximately $58 million of debt in 2019 and remained focused on further strengthening our balance sheet and leverage ratio

consistent with our long-term debt to Adjusted EBITDA target of 3.0 times.

We believe these activities demonstrated SunCoke's financial flexibility to maximize long-term shareholder value.

Delivered operational excellence and optimized our asset base.

We continued to improve operational performance across our cokemaking operations.

Our strong 2019 Domestic Coke results reflected the improved operating performance of the fully rebuilt ovens at our Indiana Harbor facility as well as the benefit of lower outage work at our Granite City cokemaking facility.

Despite lower volumes resulting from the challenges faced by our Logistics customers, our terminals continued to operate efficiently and safely throughout 2019.

As a result of the reduction in coke volumes during 2020 further discussed below, in August 2020, we revised our 2020 guidance range for Adjusted EBITDA from $235 million to $245 million to $190 million to $200 million as well as our guidance for cash generated from operating activities from approximately $170 million to $180 million to approximately $116 million to $136 million.

We delivered Adjusted EBITDA of $205.9 million, and generated $157.8 million of operating cash flow, both of which exceeded our revised guidance, and net income of $8.8 million.

Strong performance from our Domestic Coke operations, coupled with excellent company-wide cost management drove the financial performance in excess of the revised guidance.

See Note 20 in our consolidated financial statements for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement.

• Supported customer base and executed successful relief negotiations.

Steelmaking customers faced a challenging environment in 2020.

In response to the decline in end user demand as well as in an effort to slow the spread of COVID-19, end user manufacturers began idling plants, which directly and adversely impacted our customers.

In order to help navigate through this challenging environment, SunCoke worked with our customers to provide near-term coke supply relief in exchange for extending certain contracts.

The actions we have taken, together with our customers, addressed all the near-term contracts that were approaching expiration, further strengthened our long-term customer relationships and add meaningful certainty and stability to our business.

See further discussion of the details of these contract amendments in "Items Impacting Comparability."

In December 2020, CMT entered into a long-term, take-or-pay materials handling and storage agreement with Javelin Global Commodities (UK) Ltd (“Javelin”), which includes 4 million tons in 2021 and 3 million tons in 2022.

• Continued to pursue balanced capital allocation.

We returned meaningful capital to shareholders through the repurchase of 1.6 million shares during 2020 for $7.0 million and the declaration and payment of a dividend of $0.06 per share during each quarter of 2020.

Additionally, we reduced our total debt by approximately $110 million in 2020, and we remain focused on further strengthening our balance sheet.

• Maintained asset integrity for long-term viability.

We have ensured that our assets are safeguarded throughout the COVID-19 pandemic to minimize any potential negative financial impact in the long-term, and we ensured our asset base was properly maintained, even as operating levels fluctuated.

Our Focus and Outlook for 2021

During 2021, our primary focus will be to:

Achieve financial objectives.

We expect to deliver Adjusted EBITDA of between $235 million and $245 million and operating cash flow of between $170 million and $185 million.

With the final phase of the oven rebuild campaign complete, we anticipate Indiana Harbor will produce at near nameplate coke capacity and generate run-rate Adjusted EBITDA of approximately $50 million in 2020.

Our anticipated improvement in Domestic Coke Adjusted EBITDA is expected to be more than offset by the impact of lower volumes in our Logistics business, driven by the expectation of lower renegotiated volumes and rates with Foresight Energy LLC ("Foresight").

• Deliver operations excellence and optimize asset base.

We continue to expect strong operational and safety performance while optimizing asset utilization, as well as successfully executing on our 2021 capital plan.

We plan to spend between $70 million and $80 million on capital expenditures in 2020, which is our expectation for normal on-going capital expenditure levels.

Acquire new customers and develop business at CMT.

We are focused on revitalizing CMT with new product and customer mix.

We plan to spend approximately $80 million on capital expenditures in 2021, which is slightly higher than normal expectations for on-going capital expenditure levels.

• Support full capacity utilization via export and foundry sales.

We will work towards securing additional commitments and customers for our foundry coke and export sales agreements, enabling our Domestic Coke fleet to operate at full capacity in 2021.

• Position coke business and CMT for long-term success.

We continue to focus on revitalizing CMT with new product and customer mix.

CMT is an attractive terminal for various types of customers since it is one of the largest export terminals on the U.S.

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Repositioning CMT from primarily a coal export terminal to a broad-based and diversified terminal will be critical for the continued success of our logistics business.

Position coke business for long-term success.

The contracts at our Jewell and Haverhill Phase I cokemaking facilities both expire in December 2020.

The successful negotiation of these contracts with favorable terms to SunCoke will be a key initiative for our organization in 2020.

Pursue balanced capital allocation .

In 2019, we made significant progress on our capital allocation initiatives by reducing our debt, investing in our assets and returning meaningful capital to our shareholders.

We expect to continue to execute against these capital allocation priorities of reducing debt in 2020.

With successful relief negotiations and contract extensions executed with our coke customers in 2020, we will work towards further enhancing our customer contracts and providing long-term stability to our coke operations.

• Further stabilize and strengthen SunCoke capital structure .

In 2020, we made significant progress on our capital allocation priorities by reducing our debt, investing in our assets and returning capital to our shareholders.

Our priorities in 2021 remain unchanged.

• Achieve financial objectives.

We expect to deliver Adjusted EBITDA of between $215 million and $230 million and operating cash flow of between $160 million and $180 million.

The expected growth in Adjusted EBITDA is driven primarily from the Domestic Coke fleet operating at full capacity in 2021, as well as higher volumes at our Logistics facilities, primarily driven by our new coal handling agreement between Javelin and CMT.

Items Impacting Comparability

• Customer Contract Amendments .

As a result of the market challenges presented by the current COVID-19 global pandemic, SunCoke executed contract amendments with its steelmaking customers to provide near-term coke supply relief in exchange for extending certain contracts.

In July 2020, SunCoke reached an agreement with Cliffs Steel for a supply reduction of 200 thousand tons of coke in 2020, including a 125 thousand ton reduction at Haverhill II and a 75 thousand ton reduction at Middletown, in exchange for extending the Haverhill II contract from December 31, 2021 to June 30, 2023.

Subsequent to these amendments, in October 2020, the Haverhill II contract was further extended to June 30, 2025.

Key provisions of the agreement, including pass-through of coal costs, reimbursement of operating and maintenance expenses subject to certain metrics, and pricing remain unchanged.

Also in July 2020, SunCoke reached an agreement with AM USA, now known as Cliffs Steel, to reduce supply by approximately 300 thousand coke tons in 2020 in exchange for extending the Haverhill I and Jewell contracts to December 31, 2025.

Under the new contracts, SunCoke will produce a combined 800 thousand tons for the 2021 contract year and a combined 400 thousand tons on an annualized basis for the 2022 through 2025 contract years.

These customer contract amendments resulted in a reduction of expected 2020 Adjusted EBITDA of approximately $20 million, net of cost savings.

• Simplification Transaction.

The Partnership owns our Haverhill, Middletown, and Granite City cokemaking facilities and Convent Marine Terminal ("CMT"), Kanawha River Terminal ("KRT") and SunCoke Lake Terminal ("Lake Terminal").

The Partnership, a wholly-owned subsidiary of SunCoke, owns our Haverhill, Middletown, and Granite City cokemaking facilities and Convent Marine Terminal ("CMT"), Kanawha River Terminal ("KRT") and SunCoke Lake Terminal ("Lake Terminal").

Prior to June 28, 2019, SunCoke owned a 60.4 percent limited partner interest in the Partnership, a then publicly traded master limited partnership, as well as our 2.0 percent general partner interest.

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The remaining transaction costs were incurred by the Partnership resulting in $4.9 million and $0.4 million of expense included in selling, general and administrative expenses on the Consolidated Statements of Operations for the years ended December 31, 2019, and 2018, respectively.

Subsequent to the closing of the Simplification Transaction, SunCoke incurred $0.3 million of legal and consulting costs, which were included in selling, general and

administrative expenses on the Consolidated Statements of Operations.

Subsequent to the closing of the Simplification Transaction, SunCoke incurred $0.3 million of legal and consulting costs, which were included in selling, general and administrative expenses on the Consolidated Statements of Operations.

All transaction costs were excluded from Adjusted EBITDA.

With the closing of the Simplification Transaction, the income previously attributable to noncontrolling interest in the Partnership became 100 percent attributable to SunCoke and, therefore, will now be taxable to the Company.

• Adverse Logistics Customer Developments .

A significant portion of our logistics business has historically been from long-term, take-or-pay contracts with Murray and Foresight, which have been adversely impacted by declining coal export prices and domestic demand.

On October 29, 2019, Murray filed for Chapter 11 bankruptcy and also filed a motion to reject its contract with CMT.

The bankruptcy court issued an order authorizing Murray's motion to reject the contract on December 3, 2019, which was effective as of the bankruptcy petition date.

While the Company intends to pursue all remedies in bankruptcy court, we do not anticipate any future coal export volumes from Murray.

No take-or-pay revenues related to Murray volume shortfalls were recorded in 2019.

During 2019, Foresight engaged outside counsel and financial advisors to assess restructuring options.

On October 1, 2019, Foresight elected to exercise its 30 day grace period on its third quarter interest payment to its lenders.

The grace period was subsequently extended to February 28, 2020.

We expect to renegotiate Foresight's contract and anticipate this will result in lower volumes and lower rates in 2020.

As a result of these developments, the Company recorded non-cash, pre-tax impairment charges to the Logistics segment on the Consolidated Statements of Operations of $247.4 million, of which $73.5 million represented a full write-down of the Logistics goodwill balance, as well as a $113.3 million impairment of CMT's long-lived intangible assets and a $60.6 million impairment of CMT's properties, plants and equipment.

A significant portion of our logistics business has historically been from long-term, take-or-pay contracts with Murray American Coal, Inc.

("Murray") and Foresight Energy LLC ("Foresight"), which were adversely impacted by declining coal export prices and domestic demand.

Murray filed for Chapter 11 bankruptcy on October 29, 2019.

Foresight engaged outside counsel and financial advisors to assess restructuring options during 2019 and subsequently filed for Chapter 11 bankruptcy on March 10, 2020.

Both Murray and Foresight's contracts with CMT were subsequently rejected by the bankruptcy courts.

As a result of these developments, during 2019, the Company recorded non-cash, pre-tax impairment charges to the Logistics segment on the Consolidated Statements of Operations of $247.4 million, of which $73.5 million represented a full write-down of the Logistics goodwill balance, as well as a $113.3 million impairment of CMT's long-lived intangible assets and a $60.6 million impairment of CMT's properties, plants and equipment.

See Note 8 to our consolidated financial statements.

These non-cash impairment charges resulted in a $69.1 million income tax benefit in 2019.

Tax Legislation.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Legislation”) was enacted.

The Tax Legislation significantly revised the U.S.

corporate income tax structure, including lowering corporate income tax rates.

As a result, in 2017, SunCoke recorded net income tax benefits of $154.7 million , of which $125.0 million was attributable to the Company, resulting from the remeasurement of U.S.

deferred income tax liabilities and assets at the lower enacted corporate tax rates.

During 2018, based on an updated analysis of the foreign tax credit rules relating to the new Tax Legislation, the Company revised its estimate of the realizability of its foreign tax credits, resulting in a $4.8 million benefit on the consolidated Statements of Operations.

See Note 5 to our consolidated financial statements.

Divestiture of India Equity Method Investment.

On June 27, 2018, the Company sold its 49 percent investment in VISA SunCoke Limited ("VISA SunCoke") for cash consideration of $4.0 million.

Consequently, the Company recognized $9.0 million of accumulated currency translation losses and incurred $0.4 million of transaction costs, resulting in a net $5.4 million loss from equity method investment in 2018 on the Consolidated Statements of Operations.

Our investment in VISA SunCoke was previously accounted for as an equity method investment and was fully impaired in 2015.

Consolidated Results of Operations

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Sales and other operating revenue

$ 1,333.0 $ 1,600.3 $ (267.3)

Costs and operating expenses

Cost of products sold and operating expenses

1,048.2 1,277.6 (229.4)

Selling, general and administrative expenses

81.4 75.8 5.6

Depreciation and amortization expense

133.7 143.8 (10.1)

Long-lived asset and goodwill impairment (1)

— 247.4 (247.4)

Total costs and operating expenses

Operating (loss) income

1,263.3 1,744.6 (481.3)

Operating income (loss) 69.7 (144.3) 214.0

Interest expense, net

(Gain) loss on extinguishment of debt, net

(Loss) income before income tax (benefit) expense and loss from equity method investment

Income tax (benefit) expense

Loss from equity method investment (1)

Net (loss) income

56.3 60.3 (4.0)

Gain on extinguishment of debt, net (5.7) (1.5) (4.2)

Income (loss) before income tax expense (benefit) 19.1 (203.1) 222.2

Income tax expense (benefit) 10.3 (54.7) 65.0

Net income (loss) 8.8 (148.4) 157.2

Net income attributable to noncontrolling interests

Net (loss) income attributable to SunCoke Energy, Inc.

Net income (loss) attributable to SunCoke Energy, Inc.

$ 3.7 $ (152.3) $ 156.0

(1) See year-over-year changes described in "Items Impacting Comparability."

Sales and Other Operating Revenue and Costs of Products Sold and Operating Expenses.

Sales and other operating revenue and costs of products sold and operating expenses increased in 2019 as compared to 2018, primarily due to the pass-through of higher coal prices and higher sales volumes in our Domestic Coke segment.

These benefits were slightly offset by lower sales volumes in our Logistics segment, resulting in lower revenue and lower margins.

Costs of products sold and operating expenses further increased in 2019 due to costs associated with high water levels in our logistics business.

Sales and other operating revenue and costs of products sold and operating expenses decreased in 2020 as compared to 2019, primarily due to the pass-through of lower coal prices as well as the impact of volume relief provided to our customers impacted by the COVID-19 pandemic in our Domestic Coke segment.

Revenues further declined as a result of lower volumes in our Logistics segment.

Selling, General and Administrative Expenses.

The increase in selling, general and administrative expense in 2019 as compared to 2018 was driven by $5.5 million of higher costs associated with our legacy black lung liabilities as well as costs associated with the Simplification Transaction of $5.2 million.

These increases in expense were partially offset by lower legal costs.

The increase in selling, general and administrative expense was driven by research and development costs related to foundry coke production of $3.9 million, higher expense of $2.0 million as a result of revaluing certain legacy liabilities as well as costs incurred to resolve certain legal matters.

These increases were partly offset by lower employee related expenses during 2020 as compared to 2019 as well as the absence of $4.9 million of transaction costs incurred during 2019 .

Depreciation and Amortization Expense.

The increase in depreciation and amortization expense during 2019 was driven by depreciation expense on the completed oven rebuilds at Indiana Harbor and gas sharing project at Granite City, which was partially offset by $2.8 million of lower depreciation and amortization expense as a result of the impairment to our Logistics assets.

The decrease in depreciation and amortization expense during 2020 was partly driven by the impairment of our Logistics assets during 2019, which lowered the carrying value of those assets and decreased the related depreciation expense, as well as the absence of accelerated depreciation associated with upgrades to certain heat recovery steam generators, which was recorded in 2019.

These decreases were partially offset by depreciation in 2020 on assets newly placed in service, primarily related to the completion of rebuilt ovens at Indiana Harbor near the end of 2019, which increased depreciation $8.1 million in 2020 as compared to 2019.

Interest Expense, net.

Weighted average debt balances during 2020 and 2019 were $785.8 million and $845.0 million, respectively.

Related interest expense during 2019 and 2018 was $60.5 million and $62.6 million , respectively, or weighted average interest rates of 7.16 percent and 7.09 percent, respectively.

Interest expense in 2019 reflects the impact of lower debt balances as the Company extinguished approximately $58 million of debt during 2019.

Weighted average interest rates during 2020 and 2019 were 6.74 percent and 7.16 percent, respectively, resulting in related interest expense of $52.9 million and $60.5 million, respectively.

A reduction in LIBOR-based interest rates and lower interest rates on our revolving facility as a result of the restructuring in the third quarter of 2019, as well as

lower balances on our higher interest rate debt due to the repurchases of our Senior Notes in 2020 resulted in lower weighted average interest rates in 2020 as compared to 2019.

Income Taxes .

The income tax benefit recorded was $54.7 million in 2019, while 2018 had an income tax expense of $4.6 million .

The periods presented are not comparable as 2019 included non-cash, pre-tax impairment charges recorded to our Logistics assets, which resulted in a $69.1 million income tax benefit.

The Company's effective tax rate was 26.9 percent and 8.0 percent during 2019 and 2018, respectively.

The change in our effective tax rate reflects the impact of the Simplification Transaction as well as the absence of a $4.8 million favorable valuation allowance adjustment recorded in 2018.

See "Items Impacting Comparability" for additional discussion.

The income tax expense recorded was $10.3 million in 2020 compared to an income tax benefit of $54.7 million in 2019.

Certain discrete items, such as pre-tax impairment charges recorded to our Logistics assets discussed in "Items Impacting Comparability" and the revaluation of certain deferred tax assets discussed in Note 5 to our consolidated financial statements impacted comparability between periods.

Noncontrolling Interest.

Income attributable to noncontrolling interest represents the common public unitholders' interest in the Partnership prior to the closing of the Simplification Transaction as well as a third-party interest in our Indiana Harbor cokemaking facility.

The following table provides details into net income (loss) attributable to noncontrolling interest.

The following table provides details into net income attributable to noncontrolling interest.

Years Ended December 31,

Net income attributable to third-party interest in our Indiana Harbor cokemaking facility $ 5.1 $ 1.3

Net income attributable to the Partnership's common public unitholders — 2.6

Net income (loss) attributable to third-party interest in our Indiana Harbor cokemaking facility (2)

Net income attributable to noncontrolling interest

The decrease during 2019 as compared to 2018 is due to the Simplification Transaction, which closed on June 28, 2019, whereby all publicly held units were acquired by SunCoke.

(2) The increase during 2019 as compared to 2018 is due to improved profitability at Indiana Harbor driven by higher volumes and improved performance from the rebuilt ovens.

The completion of the Indiana Harbor oven rebuild project during 2019 improved operating results, resulting in an increase in net income attributable to third-party interest in our Indiana Harbor cokemaking facility.

Results of Reportable Business Segments

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Domestic Coke

$ 1,265.4 $ 1,489.1 $ (223.7)

31.6 38.4 (6.8)

36.0 72.8 (36.8)

Logistics intersegment sales

22.1 26.3 (4.2)

Elimination of intersegment sales

(22.1) (26.3) 4.2

Total sales and other operating revenue

$ 1,333.0 $ 1,600.3 $ (267.3)

Adjusted EBITDA (1) :

Domestic Coke

$ 217.0 $ 226.7 $ (9.7)

13.5 16.0 (2.5)

Logistics 17.3 42.6 (25.3)

Corporate and Other, including legacy costs, net (2)

(41.9) (37.4) (4.5)

Adjusted EBITDA

$ 205.9 $ 247.9 $ (42.0)

Coke Operating Data:

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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 (3)

$ 57.27 $ 54.35 $ 2.92

Brazilian Coke production—operated facility (thousands of tons) 1,396 1,641 (245)

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Tons handled (thousands of tons) (4)

14,678 21,053 (6,375)

(1) See Note 20 in our consolidated financial statements for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement for the years ended December 31, 2020, 2019 and 2018.

(2) Corporate and Other includes the activity from our legacy coal mining business, which incurred Adjusted EBITDA losses of $13.2 million and $11.2 million for the years ended December 31, 2020 and 2019, respectively.

Additionally, Corporate and Other includes foundry related research and development costs of $3.9 million during 2020.

(3) Reflects Domestic Coke Adjusted EBITDA divided by Domestic Coke sales volumes.

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The following table explains year-over-year changes in our Domestic Coke segment's sales and other operating revenues and Adjusted EBITDA results:

Sales and other operating revenue

Adjusted EBITDA

Sales and other operating revenue Adjusted EBITDA

2020 vs 2019 2020 vs 2019

(Dollars in millions)

Beginning $ 1,489.1 $ 226.7

(113.5) (34.1)

Coal cost recovery and yields (2)

(116.7) (0.3)

Operating and maintenance costs (3)

Energy and other (4)

Sales volumes increased 138 thousand tons in 2019, primarily due to improved operating performance at Indiana Harbor.

The increase in revenues reflects the pass through of higher coal prices.

Adjusted EBITDA benefited in the current year period from the absence of certain outage work, which adversely impacted Adjusted EBITDA in 2018.

Ending $ 1,265.4 $ 217.0

(1) Improved performance from rebuilt ovens at our Indiana Harbor facility increased volumes, which increased sales and other operating revenues and Adjusted EBITDA by $47.2 million and $14.1 million, respectively.

This increase was more than offset by the volume relief provided to our customers impacted by the COVID-19 pandemic beginning during the second quarter 2020.

(2) The pass through of lower coal prices resulted in the decline in revenues as well as lower coal-to-coke yields.

(3) Adjusted EBITDA benefited from lower operating and maintenance costs across the fleet as well as the absence of costs related to the Indiana Harbor oven rebuild initiative.

(4) Revenues benefited from foundry coke sales of $4.1 million as well as the pass through of higher transportation costs.

Revenues and Adjusted EBITDA decreased with lower energy production levels as a result of volume relief discussed above.

The following table explains year-over-year changes in our Logistics segment's sales and other operating revenues and Adjusted EBITDA results:

Sales and other operating revenue, inclusive of intersegment sales

Adjusted EBITDA

Sales and other operating revenue, inclusive of intersegment sales Adjusted EBITDA

2020 vs 2019 2020 vs 2019

(Dollars in millions)

Beginning $ 99.1 $ 42.6

Transloading volumes (1)

(27.5) (22.1)

Price/margin impact of mix in transloading services (6.4) (6.4)

Lower volumes were due to the decline in thermal coal export pricing, which adversely impacted certain logistics customers and contributed to the bankruptcy of Murray and the rejection of its take-or-pay contract with us.

Consequently, no take-or-pay revenues related to Murray volume shortfalls were recorded in 2019.

See "Items Impacting Comparability" for additional details.

Adjusted EBITDA was negatively affected by increased mooring costs resulting from high water levels throughout 2019.

Sales and other operating revenue decreased $2.0 million, or 5.0 percent, to $38.4 million in 2019 compared to $40.4 million in 2018, due to lower volumes at our customer's request, which also resulted in lower production bonuses.

Adjusted EBITDA decreased $2.4 million, or 13.0 percent, to $16.0 million in 2019 compared to $18.4 million in 2018, due to lower volumes and lower production bonuses discussed above.

Ending $ 58.1 $ 17.3

(1) Lower volumes were primarily the result of lower demand and depressed thermal coal export pricing, which adversely impacted major logistics customers at CMT.

The COVID-19 pandemic further impacted volumes.

(2) Ancillary revenues, primarily for costs passed through to the customer, declined with the decrease in volumes.

Adjusted EBITDA benefited from lower operating and maintenance costs.

Sales and other operating revenue decreased $6.8 million, or 18 percent, to $31.6 million in 2020 compared to $38.4 million in 2019, reflecting lower volumes as well as the impact of unfavorable changes in foreign currency rates.

Adjusted EBITDA decreased $2.5 million, or 16 percent, to $13.5 million in 2020 compared to $16.0 million in 2019, reflecting lower volumes.

Corporate and Other

Corporate and Other expenses, which include costs related to our legacy coal mining business, increased $4.5 million, or 12 percent, to $41.9 million in 2020 as compared to $37.4 million in 2019.

This increase was driven by $5.5 million of higher costs associated with our legacy black lung liabilities further discussed in "Critical Accounting Policies," mostly offset by lower legal costs.

This increase was driven by foundry related research and development costs of $3.9 million as well as higher legacy costs of approximately $2.0 million during 2020.

These increases to corporate and other expense were partly offset by lower employee related expenses.

Liquidity and Capital Resources

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Our sources of liquidity include cash generated from operations, borrowings under our revolving credit facility and, from time to time, debt and equity offerings.

We believe our current resources are sufficient to meet our working capital requirements for our current business for the foreseeable future.

As of December 31, 2019 , we had $97.1 million of cash and cash equivalents and $244.5 million of borrowing availability under our Revolving Facility.

We believe our current resources are sufficient to meet our working capital requirements for our current business for at least the next 12 months and thereafter for the foreseeable future.

However, the Company continues to evaluate whether any borrowings or other actions are needed to safeguard the business amidst the fluid market conditions and the uncertainty around the magnitude and duration of the COVID-19 pandemic.

As of December 31, 2020, we had $48.4 million of cash and cash equivalents and $299.9 million of borrowing availability under our credit facility.

We may, from time to time, seek to retire or purchase additional amounts of our outstanding equity and/or debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise.

Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

Refer to further liquidity discussion below as well as to Note 12 to our consolidated financial statements and "Part I - Item 5 - Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities."

During the first quarter of 2020, the U.S.

Department of Labor's Division of Coal Mine Workers' Compensation (“DCMWC”) requested SunCoke provide additional collateral of approximately $32 million to secure certain of its black lung obligations.

SunCoke exercised its right to appeal the DCMWC’s determination and provided additional information supporting the Company’s position in May 2020.

If the Company’s appeal is unsuccessful, the Company may be required to provide additional collateral to receive its self-insurance reauthorization from the DCMWC, which could potentially reduce the Company’s liquidity.

See further discussion in Note 13 to our consolidated financial statements.

Cash Flow Summary

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Cash Provided by Operating Activities

Net cash provided by operating activities decreased $3.9 million to $181.9 million in 2019 as compared to 2018 .

The absence of take-or-pay revenues from Murray was mostly offset by the improved operating performance of our domestic cokemaking operations as well as a favorable year-over-year change of approximately $10 million in primary working capital, which is comprised of accounts receivable, inventories and accounts payable, primarily driven by the timing of coal purchases in the fourth quarter of 2019.

Net cash provided by operating activities decreased by $24.1 million to $157.8 million in 2020 as compared to 2019, reflecting lower operating results driven by lower volumes.

Primary working capital, which is comprised of accounts receivable, inventories and accounts payable, also resulted in a $5.8 million decrease in 2020 operating cash flows as compared to 2019, reflecting timing of coal purchases in the fourth quarter of 2020.

Cash Used in Investing Activities

Net cash used in investing activities increased $14.0 million to $109.8 million in 2019 as compared to 2018 .

The current year period included higher capital spending of $9.8 million as compared to the prior year, which is primarily the result of capital spending for certain upgrades in order to improve the long-term reliability and operational performance of our assets.

The change also reflects the absence of $4.0 million of cash received for the sale of the India equity method investment in the prior year period.

Net cash used in investing activities decreased $34.5 million to $75.3 million in 2020 as compared to 2019 driven by lower capital spending further discussed in Capital Requirements and Expenditures.

Cash Used in Financing Activities

Net cash used in financing activities was $120.7 million in 2019 .

In 2019, the Company reduced total debt by $58.5 million for total cash payments of $55.1 million and also paid $2.1 million of related debt issuance costs.

Additionally, the Company repurchased shares for total cash payments of $36.3 million under the repurchase program discussed in Item 5 of Part II to our consolidated financial statements and paid dividends to stockholders of $5.1 million.

The Partnership made distribution payments to public unitholders of $14.2 million prior to the Simplification Transaction, and the Company made payments of $5.1 million in connection with the Simplification Transaction.

Net cash used in financing activities was $64.5 million in 2018, and was primarily related to the Partnership's distribution payments to public unitholders of $31.9 million , repayments on the Partnership's Revolver of $25.0 million, the Company's purchase of outstanding Partnership common units for $4.2 million and repayments on the Financing Obligation of $2.6 million.

On November 5, 2019, SunCoke's Board of Directors declared a cash dividend of $0.06 per share of the Company's common stock.

This dividend was paid on December 2, 2019, to stockholders of record on November 19, 2019.

Additionally, on January 29, 2020, SunCoke's Board of Directors declared a cash dividend of $0.06 per share of the Company's common stock.

This dividend will be paid on March 2, 2020, to stockholders of record on February 18, 2020.

Net cash used in financing activities increased $10.5 million to $131.2 million in 2020 as compared to $120.7 million in 2019.

In 2020, the Company repurchased $62.7 million face value of outstanding 2025 Senior Notes for $55.9 million of cash payment, compared to $50.0 million face value of 2025 Senior Notes repurchased for $46.6 million cash payments in 2019.

The Company repurchased shares for total cash payments of $7.0 million in 2020 compared to $36.3 million in 2019 under the repurchase program discussed in "Item 5.

Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities", and paid dividends to stockholders of $19.9 million in 2020 compared to $5.1 million in 2019.

Additionally, in 2020, the Company made net repayments of $55.0 million on the Revolving Facility, which was partially offset by $10.0 million of financing obligation proceeds, further discussed in Note 12.

The prior period also reflects distribution payments made by the Partnership to public unitholders of $14.2 million prior to the Simplification Transaction, and additional payments of $5.1 million made in connection with the Simplification Transaction.

Additionally, the Revolving Facility refinancing in the third quarter of 2019, which increased borrowings on the revolver and paid down the $43.3 million term loan, had no net impact on financing cash flows.

During each quarter of 2020, SunCoke's Board of Directors declared a quarterly cash dividend of $0.06 per share of the Company's common stock, see further discussion in "Item 5.

Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities."

Share Repurchase Programs

During 2019, the Company repurchased $36.1 million of our common stock, or 6.3 million shares, in the open market for an average price of $5.72.

Since December 31, 2019, the Company has repurchased an additional $3.3 million of our common stock, or 0.5 million shares, in the open market for an average share price of $6.25, resulting in the completion of this stock repurchase program.

On October 28, 2019, the Company's Board of Directors authorized a new program to repurchase outstanding shares of the Company’s common stock, $0.01 par value, from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with federal securities laws, for a total aggregate cost to the Company not to exceed $100.0 million.

In 2020, the Company repurchased $7 million of our common stock, or 1.6 million shares, in the open market for an average share price of $4.29, leaving $96.3 million available under the current authorized repurchase program as of December 31, 2020.

For further detail on our share repurchase programs see "Item 5.

Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities."

As of December 31, 2020, we were in compliance with all applicable debt covenants.

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In March 2020, S&P Global Ratings reaffirmed our corporate credit rating of BB- (stable).

Additionally, in May 2019, Moody’s Investors Service reaffirmed our corporate family rating of B1 (stable).

In April 2020, Moody’s Investors Service reaffirmed our corporate credit rating of B1 and changed the rating outlook to negative.

Contractual Obligations

As of December 31, 2020 significant contractual obligations related to debt were $690.5 million of principal borrowings and $205.2 million of related interest, which will be repaid through 2025.

Projected interest costs on variable rate instruments were calculated using market rates at December 31, 2020.

See Note 12 to our consolidated financial statements.

We also have contractual obligations for leases, including land, office space, equipment, railcars and locomotives.

See Note 14 to our consolidated financial statements.

Capital Requirements and Expenditures

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Ongoing capital (1)

$ 59.5 $ 94.2

Environmental remediation project (2)

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Total capital expenditures (4)

Includes $34.8 million and $33.6 million of capital expenditures in connection with the oven rebuild initiative at our Indiana Harbor facility for the years ended December 31, 2019 and 2018, respectively.

Includes $2.3 million and $3.2 million of interest capitalized in connection with the Granite City gas sharing project for the years ended December 31, 2019 and 2018, respectively.

The gas sharing projects were completed in June 2019, and we do not anticipate any further capital expenditures.

In 2020, we expect our capital expenditures to be between $70 million and $80 million .

Contractual Obligations

The following table summarizes our significant contractual obligations as of December 31, 2019 :

Payment Due Dates

(Dollars in millions)

Total borrowings:

Operating leases (2)

Purchase obligations:

Transportation and coal handling (4)

At December 31, 2019 , debt consists of $650.0 million of 2025 Senior Notes, $7.2 million of Financing Obligation and $143.3 million of Revolving Facility.

Projected interest costs on variable rate instruments were calculated using market rates at December 31, 2019 .

Our operating leases include land, office space, equipment, railcars and locomotives.

See Note 14 to our consolidated financial statements.

Certain coal procurement contracts included in the table above were not executed at December 31, 2019 .

These contracts were approximately $30 million of purchase obligations and were finalized in the first quarter of 2020 .

Transportation and coal handling services consist primarily of railroad and terminal services attributable to delivery and handling of coal purchases and coke sales.

Long-term commitments generally relate to locations for which limited transportation options exist and match the length of the related coke sales agreement.

Primarily represents open purchase orders for materials, supplies and services.

A purchase obligation is an enforceable and legally binding agreement to purchase goods or services that specifies significant terms, including:

fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

Our principal purchase obligations in the ordinary course of business consist of coal and transportation and distribution services, including railroad services.

We also have contractual obligations supporting financing arrangements of third-parties, contracts to acquire or construct properties, plants and equipment, and other contractual obligations, primarily related to services and materials.

Most of our coal purchase obligations are based on fixed prices.

These purchase obligations generally include fixed or minimum volume requirements.

Transportation and distribution obligations also typically include required minimum volume commitments.

The purchase obligation amounts in the table above are based on the minimum quantities or services to be purchased at estimated prices to be paid based on current market conditions.

Accordingly, the actual amounts may vary significantly from the estimates included in the table.

Off-Balance Sheet Arrangements

We have letters of credit disclosed in Note 12 to the consolidated financial statements as well as short-term leases discussed in Note 14 to the consolidated financial statements.

Additionally, we had outstanding surety bonds with third parties of approximately $23 million as of December 31, 2019 to secure reclamation and other performance commitments.

Other than these arrangements, the Company has not entered into any transactions, agreements or other contractual arrangements that would result in material off-balance sheet liabilities.

Impact of Inflation

Although the impact of inflation has been relatively low in recent years, it is still a factor in the U.S.

economy and may increase the cost to acquire or replace properties, plants, and equipment and may increase the costs of labor and supplies.

To the extent permitted by competition, regulations and existing agreements, we have generally passed along increased costs due to inflation to our customers in the form of higher fees and we expect to continue this practice.

$ 73.9 $ 110.1

(1) Includes $34.8 million of capital expenditures in connection with the oven rebuild initiative at our Indiana Harbor facility for the year ended December 31, 2019.

This initiative was completed at the end of 2019.

(2) Includes $2.3 million of interest capitalized in connection with the Granite City gas sharing project for the year ended December 31, 2019.

The gas sharing projects were completed in June 2019.

(3) Includes capital spending in connection with the foundry cokemaking growth project, including $0.2 million of interest capitalized for the year ended December 31, 2020.

(4) Reflects actual cash payments during the periods presented for our capital requirements.

In 2021, we expect our capital expenditures to be approximately $80 million.

Critical Accounting Policies

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Significant items that are subject to such estimates and assumptions consist of:

(1) accounting for impairments of goodwill and long-lived assets and (2) black lung benefit obligations.

(1) black lung benefit obligations and (2) accounting for impairments of goodwill and long-lived assets.

Although our management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results may differ to some extent from the estimates on which our consolidated financial statements have been prepared at any point in time.

Despite these inherent limitations, our management believes the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and consolidated financial statements and footnotes provide a meaningful and fair perspective of our financial condition.

Black Lung Benefit Liabilities

The Company has obligations related to coal workers’ pneumoconiosis, or black lung, benefits to certain of our former coal miners and their dependents.

Such benefits are provided for under Title IV of the Federal Coal Mine and Safety Act of 1969 and subsequent amendments, as well as for black lung benefits provided in the states of Virginia, Kentucky and West Virginia pursuant to workers’ compensation legislation.

The Patient Protection and Affordable Care Act (“PPACA”), which was implemented in 2010, amended previous legislation related to coal workers’ black lung obligations.

PPACA provides for the automatic extension of awarded lifetime benefits to surviving spouses and changes the legal criteria used to

assess and award claims.

We act as a self-insurer for both state and federal black lung benefits and adjust our liability each year based upon actuarial calculations of our expected future payments for these benefits.

Our independent actuarial consultants calculate the present value of the estimated black lung liability annually based on actuarial models utilizing our population of former coal miners, historical payout patterns of both the Company and the industry, actuarial mortality rates, disability incidence, medical costs, death benefits, dependents, discount rates and the current federally mandated payout rates.

The estimated liability may be impacted by future changes in the statutory mechanisms, modifications by court decisions and changes in filing patterns driven by perceptions of success by claimants and their advisors, the impact of which cannot be estimated.

The following table summarizes discount rates utilized, active claims and the total black lung liabilities:

Discount rate (1)

Active claims 309 324

Total black lung liability (dollars in millions) (2)

$ 64.6 $ 55.1

(1) The discount rate is determined based on a portfolio of high-quality corporate bonds with maturities that are consistent with the estimated duration of our black lung obligations.

A decrease of 25 basis points in the discount rate would have increased black lung expense by $1.6 million in 2020.

(2) The current portion of the black lung liability was $4.6 million at both December 31, 2020 and 2019, respectively, and was included in accrued liabilities on the Consolidated Balance Sheets.

The following table summarizes annual black lung payments and expense:

Years Ended December 31,

2020 2019 2018

(Dollars in millions)

Payments $ 6.0 $ 5.2 $ 6.3

$ 15.4 $ 10.9 $ 5.4

(1) Expenses incurred in excess of annual accretion of the black lung liability primarily reflect the impact of changes in discount rates as well as increases in expected future claims as a result of higher refiling and approval rate assumptions.

Accounting for Impairments

Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, is tested for impairment as of October 1 of each year, or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit to below its carrying value.

Goodwill allocated to our Logistics segment was zero and $73.5 million at December 31, 2019 and December 31, 2018, respectively.

A significant portion of our logistics business has historically held long-term, take-or-pay contracts with Murray and Foresight, which have been adversely impacted by declining coal export prices and domestic demand.

On October 29, 2019, Murray filed for Chapter 11 bankruptcy and also filed a motion to reject its contract with CMT, which was subsequently authorized by the bankruptcy court.

In addition, during the third quarter Foresight engaged outside counsel and financial advisors to assess restructuring options and has elected to exercise its grace period on its third quarter interest payment to its lenders, which was subsequently extended to February 28, 2020.

Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, is assessed for impairment as of October 1 of each year, or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit to below its carrying value.

A significant portion of our logistics business has historically been from long-term, take-or-pay contracts with Murray American Coal, Inc.

("Murray") and Foresight Energy LLC ("Foresight"), which were adversely impacted by declining coal export prices and domestic demand.

Murray filed for Chapter 11 bankruptcy on October 29, 2019.

Foresight engaged outside counsel and financial advisors to assess restructuring options during 2019 and subsequently filed for Chapter 11 bankruptcy on March 10, 2020.

Both Murray and Foresight's contracts with CMT were subsequently rejected by the bankruptcy courts.

The Company concluded the impact of the events discussed above could more likely than not reduce the fair value of the Logistics reporting unit below its carrying value, requiring SunCoke to perform its annual goodwill test as of September 30, 2019.

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As a result, the Company recorded a $73.5 million non-cash, pre-tax impairment charge to the Logistics segment on the Consolidated Statements of Operations during 2019, which represents a full impairment of the Logistics goodwill balance.

The Company's total goodwill balance as of December 31, 2020 was $3.4 million.

Please see Note 8 to our consolidated financial statements for further discussion on the current goodwill balance.

Long-lived Assets

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Therefore, fair market value is generally based on the present values of estimated future cash flows using discount rates commensurate with the risks associated with the assets being reviewed for impairment.

No impairments on long-lived assets were recorded in 2020.

As a result of our logistics customers' events discussed above, CMT's long-lived assets, including customer contracts, customer relationships, permits and properties, plant and equipment, were also assessed for impairment as of September 30, 2019.

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As a result, during 2019, the Company recorded a total non-cash, pre-tax long-lived asset impairment charge of $173.9 million included in long-lived asset and goodwill impairment on the Consolidated Statements of Operations, all of which was attributable to the Logistics segment.

The charge included an impairment of CMT's long-lived intangible assets and property, plants and equipment of $113.3 million and $60.6 million , respectively.

Black Lung Benefit Liabilities

The Company has obligations related to coal workers’ pneumoconiosis, or black lung, benefits to certain of our former coal miners and their dependents.

The Patient Protection and Affordable Care Act (“PPACA”), which was implemented in 2010, amended previous legislation related to coal workers’ black lung obligations.

PPACA provides for the automatic extension of awarded lifetime benefits to surviving spouses and changes the legal criteria used to assess and award claims.

We act as a self-insurer for both state and federal black lung benefits and adjust our liability each year based upon actuarial calculations of our expected future payments for these benefits.

The following table summarizes discount rates utilized, active claims and the total black lung liabilities:

Discount rate (1)

Active claims

Total black lung liability (dollars in millions) (2)

(1) The discount rate is determined based on a portfolio of high-quality corporate bonds with maturities that are consistent with the estimated duration of our black lung obligations.

A decrease of 25 basis points in the discount rate would have increased black lung expense by $1.3 million in 2019.

(2) The current portion of the black lung liability was $4.6 million and $4.5 million at December 31, 2019 and 2018 , respectively, and was included in accrued liabilities on the Consolidated Balance Sheets.

The following table summarizes annual black lung payments and expense:

Years Ended December 31,

(Dollars in millions)

Expense during 2019 reflects the impact of lower discount rates and an increase in expected future claims as a result of higher refiling and approval rate assumptions.

The charge included an impairment of CMT's long-lived intangible assets of $113.3 million and of CMT's property, plant and equipment of $60.6 million.

Recent Accounting Standards

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Below is a reconciliation of 2021 Adjusted EBITDA guidance from its closest GAAP measure:

Net income $ 15 $ 35

Depreciation and amortization expense 137 133

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(1) Reflects non-controlling interest in Indiana Harbor.

Guarantor Financial and Non-Financial Disclosures

The Company has an existing shelf registration statement, which was filed on November 8, 2019, upon the expiration of the prior shelf registration statement, for the offering of debt and/or securities on a delayed or continuous basis and is presenting these guarantor financial and non-financial disclosures in connection therewith.

The following information has been prepared and presented pursuant to amended SEC Rule 3-10 of Regulation S-X and new SEC Rule 13-01 of Regulation S-X, which were adopted by the SEC on March 2, 2020.

For purposes of the following information, SunCoke Energy, Inc.

is referred to as “Issuer.” All 100 percent owned subsidiaries of the Company, including Finance Corp.

and its consolidated subsidiaries, are expected to serve as guarantors of obligations (“Guarantor Subsidiaries”) included in the shelf registration statement, other than the Indiana Harbor partnership and certain of the Company’s corporate financing, international and legacy coal mining subsidiaries ("Non-Guarantors").

These guarantees will be full and unconditional (subject, in the case of the Guarantor Subsidiaries, to customary release provisions as described below) and joint and several.

The guarantee of a Guarantor Subsidiary will terminate upon:

• a sale or other disposition of the Guarantor Subsidiary or of all or substantially all of its assets;

• a sale of the majority of the capital stock of a Guarantor Subsidiary to a third-party, after which the Guarantor Subsidiary is no longer a “Restricted Subsidiary” in accordance with the indenture governing the notes;

• the liquidation or dissolution of a Guarantor Subsidiary so long as no “Default” or "Event of Default”, as defined under the indenture governing the notes, has occurred as a result thereof;

• the designation of a Guarantor Subsidiary as an “unrestricted subsidiary” in accordance with the indenture governing the notes;

• the requirements for defeasance or discharge of the indenture governing the notes having been satisfied;

• the release, other than the discharge through payments by a Guarantor Subsidiary, from other indebtedness that resulted in the obligation of the Guarantor Subsidiary under the indenture governing the notes.

The following tables present summarized financial information for the Issuer and the Guarantor Subsidiaries on a combined basis after intercompany balances and transactions between the Issuer and Guarantor Subsidiaries have been eliminated and excluding investment in and equity in earnings from the Non-Guarantor Subsidiaries:

Statements of Operations Issuer and Guarantor Subsidiaries

Year Ended December 31, 2020

(Dollars in millions)

Revenues $ 962.6

Costs and operating expenses 906.6

Operating income 56.0

Net loss $ (6.6)

Balance Sheets

Issuer and Guarantor Subsidiaries

December 31, 2020

(Dollars in millions)

Current receivables from Non-Guarantor subsidiaries

Other current assets

Properties, plants and equipment, net

Other non-current assets

Current liabilities

Long-term debt and financing obligations 673.9

Long-term payable to Non-Guarantor subsidiaries

Other long-term liabilities

Total liabilities

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Annual Report on Form 10-K, including, among others, in the sections entitled “Business,” “Risk Factors,” "Quantitative and Qualitative Disclosures About Market Risk" and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such forward-looking statements are based on management’s beliefs and assumptions based on information currently available.

Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance, the effects of competition and the effects of future legislation or regulations.

We have made forward-looking statements in this Annual Report on Form 10-K, including, among others, in the sections entitled “Business,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such forward-looking statements are based on management’s beliefs and assumptions and on information currently available.

Forward-looking statements include, but are not limited to, the information concerning our expectations regarding the future impact of COVID-19 and the related economic conditions on our business, financial condition and results of operations, possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance, the effects of competition, the anticipated expansion into the foundry coke market 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.

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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, including actions by foreign and domestic governments and others to contain the spread, or mitigate the severity, thereof;

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

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• 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;

our dependence on, relationships with, and other conditions affecting our suppliers;

• 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;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis