SunCoke Energy, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 43 Consolidated Statements of Income for the Years Ended December 31, 2022, 2021 and 2020 45 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020 46 Consolidated Balance Sheets at December 31, 2022 and 2021 47 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 48 Consolidated Statements of Equity for the Years Ended December 31, 2022, 2021 and 2020 49 Notes to Consolidated Financial Statements 51 1. General and Basis of Presentation 51 2. Summary of Significant Accounting Policies 51 3. Customer Concentrations 54 4. Income Taxes 54 5. Inventories 56 6. Properties, Plants, and Equipment 57 7. Intangible Assets 57 8. Asset Retirement Obligations 58 9. Retirement Benefit Plans 58 10. Accrued Liabilities 60 11. Debt and Financing Obligations 61 12. Commitments and Contingent Liabilities 62 13. Leases 64 14. Accumulated Other Comprehensive Loss 65 15. Share-Based Compensation 66 16. Earnings Per Share 69 17. Fair Value Measurements 69 18. Revenue From Contracts with Customers 70 19. Business Segment Information 71 42 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors SunCoke Energy, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of SunCoke Energy, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 43 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the Company’s estimated black lung benefit liability As discussed in Note 12 to the consolidated financial statements, the Company has obligations related to coal workers’ pneumoconiosis, or black lung, benefits to certain former coal miners and their dependents. As of December 31, 2022, the Company’s black lung benefit liabili ty was $58.1 million. The Company, with the assistance of an external expert, estimated the liability using an actuarial model with several assumptions. We identified the evaluation of the Company’s estimated black lung benefit liability as a critical audit matter. There was a high degree of subjective auditor judgment in evaluating the actuarial model and key assumptions in the actuarial model. The actuarial model included internally-developed assumptions related to expected claim filing patterns and expected claimant success rates. There was limited market information from which to develop these assumptions, and therefore subjective auditor judgment was required to evaluate the relevance and reliability of internally-developed information. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to estimate the black lung benefit liability, including controls related to the development of assumptions related to the expected claim filing patterns and claimant success rates. We evaluated the Company’s assumptions related to expected claim filing patterns and the claimant success rates by comparing the assumptions to industry filing patterns and claimant success rates. We performed sensitivity analyses over the expected claim filing patterns and claimant success rate assumptions to assess their impact on the Company’s estimated black lung liability. We compared the Company’s historical black lung payment estimates to actual payments to assess the accuracy of previous estimates related to its black lung benefit liability. In addition, we involved actuarial professionals with specialized skills and knowledge who assisted in evaluating the expected claim filing patterns and expected claimant success rates assumptions used by the Company to estimate its black lung benefit liability by comparing the assumptions to industry standards. /s/ KPMG LLP We have served as the Company’s auditor since 2015. Chicago, Illinois February 24, 2023 44 Table of Contents SunCoke Energy, Inc. Consolidated Statements of Income Years Ended December 31, 2022 2021 2020 (Dollars and shares in millions, except per share amounts) Revenues Sales and other operating revenue $ 1,972.5 $ 1,456.0 $ 1,333.0 Costs and operating expenses Cost of products sold and operating expenses 1,604.9 1,118.8 1,048.2 Selling, general and administrative expenses 71.4 61.8 81.4 Depreciation and amortization expense 142.5 133.9 133.7 Total costs and operating expenses 1,818.8 1,314.5 1,263.3 Operating income 153.7 141.5 69.7 Interest expense, net 32.0 42.5 56.3 Loss (gain) on extinguishment of debt, net — 31.9 ( 5.7 ) Income before income tax expense 121.7 67.1 19.1 Income tax expense 16.8 18.3 10.3 Net income 104.9 48.8 8.8 Less: Net income attributable to noncontrolling interests 4.2 5.4 5.1 Net income attributable to SunCoke Energy, Inc. $ 100.7 $ 43.4 $ 3.7 Earnings attributable to SunCoke Energy, Inc. per common share: Basic $ 1.20 $ 0.52 $ 0.04 Diluted $ 1.19 $ 0.52 $ 0.04 Weighted average number of common shares outstanding: Basic 83.8 83.0 83.0 Diluted 84.6 83.7 83.2 (See Accompanying Notes) 45 Table of Contents SunCoke Energy, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, 2022 2021 2020 (Dollars in millions) Net income $ 104.9 $ 48.8 $ 8.8 Other comprehensive income (loss): Reclassifications of actuarial loss amortization and prior service benefit to earnings (net of related tax benefit of $ 0.1 million in both 2022 and 2021, and zero for 2020) 0.4 0.3 0.1 Retirement benefit plans funded status adjustment (net of related tax (expense) benefit of $( 0.9 ) million, $( 0.3 ) million and $ 0.4 million, respectively) 3.1 1.0 ( 1.6 ) Currency translation adjustment 0.2 ( 0.9 ) ( 1.2 ) Comprehensive income 108.6 49.2 6.1 Less: Comprehensive income attributable to noncontrolling interests 4.2 5.4 5.1 Comprehensive income attributable to SunCoke Energy, Inc. $ 104.4 $ 43.8 $ 1.0 (See Accompanying Notes) 46 Table of Contents SunCoke Energy, Inc. Consolidated Balance Sheets December 31, 2022 2021 (Dollars in millions, except par value amounts) Assets Cash and cash equivalents $ 90.0 $ 63.8 Receivables, net 104.8 77.6 Inventories 175.2 127.0 Other current assets 4.0 3.5 Total current assets 374.0 271.9 Properties, plants and equipment (net of accumulated depreciation of $ 1,276.0 and $ 1,160.1 at December 31, 2022 and 2021, respectively) 1,229.3 1,287.9 Intangible assets, net 33.2 35.2 Deferred charges and other assets 18.1 20.4 Total assets $ 1,654.6 $ 1,615.4 Liabilities and Equity Accounts payable $ 159.3 $ 126.0 Accrued liabilities 61.4 53.0 Current portion of financing obligation 3.3 3.2 Total current liabilities 224.0 182.2 Long-term debt and financing obligation 528.9 610.4 Accrual for black lung benefits 52.2 57.9 Retirement benefit liabilities 16.4 21.8 Deferred income taxes 172.3 169.0 Asset retirement obligations 13.4 11.6 Other deferred credits and liabilities 24.7 27.1 Total liabilities 1,031.9 1,080.0 Equity Preferred stock, $ 0.01 par value. Authorized 50,000,000 shares; no issued shares at both December 31, 2022 and 2021 — — Common stock, $ 0.01 par value. Authorized 300,000,000 shares; issued 98,815,780 and 98,496,809 shares at December 31, 2022 and 2021, respectively 1.0 1.0 Treasury stock, 15,404,482 shares at both December 31, 2022 and 2021 ( 184.0 ) ( 184.0 ) Additional paid-in capital 728.1 721.2 Accumulated other comprehensive loss ( 13.0 ) ( 16.7 ) Retained earnings (deficit) 53.5 ( 23.4 ) Total SunCoke Energy, Inc. stockholders' equity 585.6 498.1 Noncontrolling interests 37.1 37.3 Total equity 622.7 535.4 Total liabilities and equity $ 1,654.6 $ 1,615.4 (See Accompanying Notes) 47 Table of Contents SunCoke Energy, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2022 2021 2020 (Dollars in millions) Cash Flows from Operating Activities: Net income $ 104.9 $ 48.8 $ 8.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 142.5 133.9 133.7 Deferred income tax expense 2.3 9.3 12.1 Share-based compensation expense 6.7 6.1 3.8 Loss (gain) on extinguishment of debt, net — 31.9 ( 5.7 ) Changes in working capital pertaining to operating activities: Receivables, net ( 32.3 ) ( 31.3 ) 13.2 Inventories ( 48.2 ) ( 1.1 ) 21.8 Accounts payable 27.4 29.5 ( 38.0 ) Accrued liabilities 8.4 6.3 ( 1.0 ) Other ( 2.8 ) ( 0.3 ) 9.1 Net cash provided by operating activities 208.9 233.1 157.8 Cash Flows from Investing Activities: Capital expenditures ( 75.5 ) ( 98.6 ) ( 73.9 ) Other investing activities 5.3 ( 0.7 ) ( 1.4 ) Net cash used in investing activities ( 70.2 ) ( 99.3 ) ( 75.3 ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt — 500.0 — Repayment of long-term debt — ( 609.3 ) ( 55.9 ) Proceeds from revolving facility 596.0 690.1 629.9 Repayment of revolving facility ( 676.0 ) ( 663.4 ) ( 684.9 ) Proceeds from financing obligation — — 10.0 Repayment of financing obligation ( 3.2 ) ( 2.9 ) ( 3.0 ) Debt issuance costs — ( 12.0 ) — Dividends paid ( 23.6 ) ( 20.1 ) ( 19.9 ) Shares repurchased — — ( 7.0 ) Cash distributions to noncontrolling interests ( 4.4 ) — — Other financing activities ( 1.3 ) ( 0.8 ) ( 0.4 ) Net cash used in financing activities ( 112.5 ) ( 118.4 ) ( 131.2 ) Net increase (decrease) in cash and cash equivalents 26.2 15.4 ( 48.7 ) Cash and cash equivalents at beginning of year 63.8 48.4 97.1 Cash and cash equivalents at end of year $ 90.0 $ 63.8 $ 48.4 Supplemental Disclosure of Cash Flow Information Interest paid, net of capitalized interest of zero , $ 0.5 million and $ 0.2 million, respectively $ 28.5 $ 40.0 $ 51.8 Income taxes paid, net of refunds of $ 0.5 million, $ 2.9 million and $ 3.0 million, respectively $ 14.5 $ 2.9 $ 1.1 (See Accompanying Notes) 48 Table of Contents SunCoke Energy, Inc. Consolidated Statements of Equity Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Deficit Total SunCoke Energy, Inc. Equity Non- controlling Interests Total Equity Shares Amount Shares Amount (Dollars in millions) At December 31, 2019 98,047,389 $ 1.0 13,783,182 $ ( 177.0 ) $ 712.1 $ ( 14.4 ) $ ( 30.1 ) $ 491.6 $ 26.8 $ 518.4 Net income — — — — — — 3.7 3.7 5.1 8.8 Reclassification of prior service benefit and actuarial loss amortization to earnings (net of related tax) — — — — — 0.1 — 0.1 — 0.1 Retirement benefit plans funded status adjustment (net of related tax benefit of $ 0.4 million) — — — — — ( 1.6 ) — ( 1.6 ) — ( 1.6 ) Currency translation adjustment — — — — — ( 1.2 ) — ( 1.2 ) — ( 1.2 ) Share-based compensation — — — — 3.8 — — 3.8 — 3.8 Share issuances, net of shares withheld for taxes 130,552 — — — ( 0.2 ) — — ( 0.2 ) — ( 0.2 ) Share repurchases — — 1,621,300 ( 7.0 ) — — — ( 7.0 ) — ( 7.0 ) Dividends — — — — — — ( 20.2 ) ( 20.2 ) — ( 20.2 ) At December 31, 2020 98,177,941 $ 1.0 15,404,482 $ ( 184.0 ) $ 715.7 $ ( 17.1 ) $ ( 46.6 ) $ 469.0 $ 31.9 $ 500.9 Net income — — — — — — 43.4 43.4 5.4 48.8 Reclassification of prior service benefit and actuarial loss amortization to earnings (net of related tax benefit of $ 0.1 million) — — — — — 0.3 — 0.3 — 0.3 Retirement benefit plans funded status adjustment (net of related tax expense of $ 0.3 million) — — — — — 1.0 — 1.0 — 1.0 Currency translation adjustment — — — — — ( 0.9 ) — ( 0.9 ) — ( 0.9 ) Share-based compensation — — — — 6.1 — — 6.1 — 6.1 Share issuances, net of shares withheld for taxes 318,868 — — — ( 0.6 ) — — ( 0.6 ) — ( 0.6 ) Dividends — — — — — — ( 20.2 ) ( 20.2 ) — ( 20.2 ) At December 31, 2021 98,496,809 $ 1.0 15,404,482 $ ( 184.0 ) $ 721.2 $ ( 16.7 ) $ ( 23.4 ) $ 498.1 $ 37.3 $ 535.4 (See Accompanying Notes) 49 Table of Contents SunCoke Energy, Inc. Consolidated Statements of Equity Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained (Deficit) Earnings Total SunCoke Energy, Inc. Equity Non- controlling Interests Total Equity Shares Amount Shares Amount (Dollars in millions) At December 31, 2021 98,496,809 $ 1.0 15,404,482 $ ( 184.0 ) $ 721.2 $ ( 16.7 ) $ ( 23.4 ) $ 498.1 $ 37.3 $ 535.4 Net income — — — — — — 100.7 100.7 4.2 104.9 Reclassification of prior service benefit and actuarial loss amortization to earnings (net of related tax benefit of $ 0.1 million) — — — — — 0.4 — 0.4 — 0.4 Retirement benefit plans funded status adjustment (net of related tax expense of $ 0.9 million) — — — — — 3.1 — 3.1 — 3.1 Currency translation adjustment — — — — — 0.2 — 0.2 — 0.2 Share-based compensation — — — — 8.1 — — 8.1 — 8.1 Share issuances, net of shares withheld for taxes 318,971 — — — ( 1.2 ) — — ( 1.2 ) — ( 1.2 ) Dividends — — — — — — ( 23.8 ) ( 23.8 ) — ( 23.8 ) Cash distribution to noncontrolling interests — — — — — — — — ( 4.4 ) ( 4.4 ) At December 31, 2022 98,815,780 $ 1.0 15,404,482 $ ( 184.0 ) $ 728.1 $ ( 13.0 ) $ 53.5 $ 585.6 $ 37.1 $ 622.7 (See Accompanying Notes) 50 Table of Contents SunCoke Energy, Inc. Notes to Consolidated Financial Statements 1. General and Basis of Presentation Description of Business SunCoke Energy, Inc. (“SunCoke Energy,” “SunCoke,” “Company,” “we,” “our” and “us”) is the largest independent producer of high-quality coke in the Americas, as measured by tons of coke produced each year, and has more than 60 years of coke production experience. Coke is produced by heating metallurgical coal in a refractory oven, which releases certain volatile components from the coal, thus transforming the coal into coke. Our coke is primarily used as a principal raw material in the blast furnace steelmaking process as well as in the foundry production of casted iron, and the majority of our sales are derived from blast furnace coke sales made under long-term, take-or-pay agreements. We also export coke to international customers seeking high-quality product for their blast furnaces. We have designed, developed and built, and we currently own and operate five cokemaking facilities in the United States (“U.S.”) with collective nameplate capacity to produce approximately 4.2 million tons of blast furnace coke per year. Additionally, we designed and currently operate one cokemaking facility in Brazil under licensing and operating agreements on behalf of ArcelorMittal Brasil S.A. ("ArcelorMittal Brazil”), which has approximately 1.7 million tons of annual cokemaking capacity. We also own and operate a logistics business that provides export and domestic material handling and/or mixing services to steel, coke (including some of our domestic cokemaking facilities), electric utility, coal producing and other manufacturing based customers. Our logistics terminals, which are strategically located to reach Gulf Coast, East Coast, Great Lakes and international ports, have the collective capacity to mix and/or transload more than 40 million tons of coal and other aggregates annually and has storage capacity of approximately 3 million tons. Consolidation and Basis of Presentation The consolidated financial statements of the Company and its subsidiaries were prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP") and include the assets, liabilities, revenues and expenses of the Company and all subsidiaries where we have a controlling financial interest. Intercompany transactions and balances have been eliminated in consolidation. Net income attributable to noncontrolling interest represents a 14.8 percent third-party interest in our Indiana Harbor cokemaking facility. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts could differ from these estimates. Revenue Recognition The Company sells coke as well as steam and electricity and also provides mixing and/or handling services of coal and other aggregates. The Company also receives fees for operating the cokemaking plant in Brazil and for the licensing of its proprietary technology for use at this facility as well as reimbursement of substantially all of its operating costs. See Note 18. Cash Equivalents The Company considers all highly liquid investments with a remaining maturity of three months or less at the time of purchase to be cash equivalents. These cash equivalents consist principally of money market funds. Inventories Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method, except for the Company’s materials and supplies inventory, which are determined using the average-cost method. The Company primarily utilizes the contracted sales prices under its coke sales contracts to record lower of cost or net realizable value inventory adjustments. See Note 5. Properties, Plants and Equipment Plants and equipment are depreciated on a straight-line basis over their estimated useful lives. Coke and energy plant, machinery and equipment are generally depreciated over 25 to 30 years. Logistics plant and equipment are generally depreciated over 15 to 35 years. Depreciation and amortization is excluded from cost of products sold and operating 51 Table of Contents expenses and is presented separately on the Consolidated Statements of Income. Gains and losses on the disposal or retirement of fixed assets are reflected in earnings when the assets are sold or retired. Amounts incurred that extend an asset’s useful life, increase its productivity or add production capacity are capitalized. Additionally, the Company generally capitalizes interest on capital projects with an expected construction period of one year or longer. The Company accounts for changes in useful lives, when appropriate, as a change in estimate, with prospective application only. Direct costs, such as outside labor, materials, internal payroll and benefits costs incurred during capital projects are capitalized; indirect costs are not capitalized. Normal repairs and maintenance costs are expensed as incurred. See Note 6. Intangible Assets Intangible assets are primarily comprised of permits. Intangible assets are amortized over their useful lives in a manner that reflects the pattern in which the economic benefit of the intangible asset is consumed. Intangible assets are assessed for impairment when a triggering event occurs. See Note 7. Impairment of Long-Lived Assets Long-lived assets, which includes intangible assets and properties, plants and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. A long-lived asset, or group of assets, is considered to be impaired when the undiscounted net cash flows expected to be generated by the asset are less than its carrying amount. Such estimated future cash flows are highly subjective and are based on numerous assumptions about future operations and market conditions. The impairment recognized is the amount by which the carrying amount exceeds the fair market value of the impaired asset, or group of assets. It is also difficult to precisely estimate fair market value because quoted market prices for our long-lived assets may not be readily available. 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. See Note 7. Income Taxes Income tax expense (benefit) is determined by applying the provisions of federal and state tax laws to taxable income (loss) during the period. We do business in a number of states with differing laws concerning how income subject to each state's tax structure is measured. These laws, as well as changes in tax legislation, impact what effective tax rate is applied to income generated in each state, and the Company makes estimates of how income will be apportioned among various states based on these factors. Deferred tax asset and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are projected to be recovered or settled. The Company recognizes uncertain tax positions in its financial statements when minimum recognition threshold and measurement attributes are met in accordance with current accounting guidance. See Note 4. Black Lung Benefit Liabilities The Company has obligations related to coal workers’ pneumoconiosis, or black lung, benefits of certain of our former coal miners and their dependents. We adjust our liability each year based upon actuarial calculations of our expected future payments for these benefits, including a provision for incurred but not reported losses. Adjustments are recognized in the period the adjustment occurs as a component of selling, general and administrative expense on the Consolidated Statements of Income. See Note 12. Postretirement Benefit Plan Liabilities The postretirement benefit plans, which are frozen, are unfunded and the accumulated postretirement benefit obligation is fully recognized on the Consolidated Balance Sheets. Actuarial gains (losses) and prior service costs (benefits) which have not yet been recognized in net income are recognized as a credit (charge) to accumulated other comprehensive income (loss). The credit (charge) to accumulated other comprehensive income (loss), which is reflected net of related tax effects, is subsequently recognized in net income when amortized as a component of postretirement benefit plans expense included in interest expense, net on the Consolidated Statements of Income. See Note 9. Asset Retirement Obligations The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the asset and depreciated over its remaining estimated useful life. When the assumptions used to estimate a recorded asset retirement obligation change, a revision is recorded to both the asset retirement obligation and the asset retirement cost capitalized to the extent remaining useful life exists. The Company’s asset retirement obligations primarily relate to costs associated with restoring land to its original state. See Note 8. 52 Table of Contents Leases We determine if an arrangement contains a lease at inception. We recognize right-of-use assets and lease liabilities associated with leases based on the present value of the future minimum lease payments over the lease term at the commencement date. Our leases do not provide an implicit rate of return, therefore, we use our incremental borrowing rate at the inception of the lease to calculate the present value of lease payments. Our incremental borrowing rate is determined through market sources for secured borrowings and approximates the interest rate at which we could borrow on a collateralized basis with similar terms and payments in similar economic environments. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The Company has elected to apply the short-term lease exception for all asset classes, therefore, excluding all leases with a term of less than 12 months from the balance sheet, and will recognize the lease payments in the period they are incurred. Additionally, the Company accounts for lease and non-lease components of an arrangement, such as assets and services, as a single lease component for all asset classes on existing leases. See Note 13. Shipping and Handling Costs Shipping and handling costs are included in cost of products sold and operating expenses on the Consolidated Statements of Income and are generally passed through to our customers. The Company has elected the practical expedient under Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers," to account for shipping and handling activities as a promise to fulfill the transfer of coke. See Note 18. Share-Based Compensation We measure the cost of employee services in exchange for equity instrument awards and cash awards based on the grant-date fair value of the award. Cash awards and the performance metrics of equity awards are remeasured on a quarterly basis. The market metrics of equity awards are not remeasured. The total cost is recognized over the requisite service period. Award forfeitures are accounted for as they occur. The costs of equity awards and cash awards are recorded to additional paid-in capital and accrued liabilities, respectively, on the Consolidated Balance Sheets. See Note 15. Fair Value Measurements The Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As required, the Company utilizes valuation techniques that maximize the use of observable inputs (levels 1 and 2) and minimize the use of unobservable inputs (level 3) within the fair value hierarchy included in current accounting guidance. Assets and liabilities are classified within the fair value hierarchy based on the lowest level (least observable) input that is significant to the measurement in its entirety. See Note 17. Currency Translation The functional currency of the Company’s Brazilian operations is the Brazilian real. The Company’s Brazil operations translate its assets and liabilities into U.S. dollars at the current exchange rates in effect at the end of the fiscal period. The gains or losses that result from this process are shown as cumulative translation adjustments within accumulated other comprehensive loss in the Consolidated Balance Sheets. The revenue and expense accounts of foreign operations are translated into U.S. dollars at the average exchange rates during the period. Recent Accounting Pronouncements In December, 2022 the Financial Accounting Standards Board ("FASB") issued ASU 2022-06 Reference Rate Reform (Topic 848):Deferral of the Sunset Date of Topic 848 as an amendment to previously issued ASU 2020-04 Reference Rate Reform (Topic 848):Facilitation of the Effects of Reference Rate Reform on Financial Reporting. These updates help limit the accounting impact from contract modifications due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2024. The Company does not expect the transition from LIBOR to SOFR to have a material impact on the consolidated financial statements and disclosures. Refer to Note 11 for further detail. Labor Concentrations As of December 31, 2022, we have 887 employees in the U.S. Approximately 40 percent of our domestic employees, principally at our cokemaking operations, are represented by the United Steelworkers union under various contracts. Additionally, approximately 3 percent of our domestic employees are represented by the International Union of Operating Engineers. Labor agreements at KRT, Lake Terminal, and Indiana Harbor were renewed in 2022 and will expire on April 30, 2025, June 30, 2025, and September 1, 2026, respectively. 53 Table of Contents As of December 31, 2022,we have 285 employees at the cokemaking facility in Vitória, Brazil, all of whom are represented by a union under a labor agreement . During 2022, the labor agreement at our Vitória, Brazil facility was renewed for an additional year, and it expires on October 31, 2023. 3. Customer Concentrations In 2022, the Company sold approximately 3.4 million tons of coke under long-term, take-or-pay contracts to its two primary customers in the U.S.: Cleveland-Cliffs Steel Holding Corporation and Cleveland-Cliffs Steel LLC, subsidiaries of Cleveland-Cliffs Inc. and collectively referred to as "Cliffs Steel," and United States Steel Corporation ("U.S. Steel"). The tables below show sales to the Company's significant customers: Year Ended December 31, 2022 2021 Sales and other operating revenue Percent of Company sales and other operating revenue Sales and other operating revenue Percent of Company sales and other operating revenue (Dollars in millions) Cliffs Steel (1) $ 1,182.8 60.0 % $ 994.6 68.3 % U.S. Steel (2) $ 284.8 14.4 % $ 210.0 14.4 % Years Ended December 31, 2020 Sales and other operating revenue Percent of Company sales and other operating revenue (Dollars in millions) Cliffs Steel / AM USA (1)(3) $ 687.3 51.6 % Cliffs Steel / AK Steel (1)(3) $ 355.8 26.7 % U.S. Steel (2) $ 208.2 15.6 % (1) Represents revenues included in our Domestic Coke segment. (2) Represents revenues included in our Domestic Coke and Logistics segments. (3) In March 2020, Cleveland-Cliffs Inc. completed the acquisition of AK Steel Holding Corporation ("AK Steel"), and subsequently changed the name of AK Steel to Cleveland-Cliffs Steel Holding Corporation. In December 2020, Cliffs completed the acquisition of ArcelorMittal USA LLC ("AM USA"), and subsequently changed the name of AM USA to Cleveland-Cliffs Steel LLC. As stated above, subsequent to the acquisitions we collectively refer to these subsidiaries as Cliffs Steel. The Company generally does not require any collateral with respect to its receivables due under long-term, take-or-pay contracts. Receivables due from Cliffs Steel and U.S. Steel were approximately $ 33.5 million and $ 7.1 million as of December 31, 2022, respectively, and $ 30.0 million and $ 7.3 million as of December 31, 2021, respectively. These balances comprised approximately 39 percent and 48 percent of the Company's receivables balance as of December 31, 2022 and 2021, respectively. As a result, the Company experiences concentrations of credit risk in its receivables with these customers, which may be affected by changes in economic or other conditions affecting the steel industry. 4. Income Taxes The components of income before income tax expense are as follows: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Domestic $ 107.1 $ 50.4 $ 6.1 Foreign 14.6 16.7 13.0 Total $ 121.7 $ 67.1 $ 19.1 54 Table of Contents Income tax expense consisted of the following: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Current tax expense (benefit): U.S. federal $ 4.3 $ 0.8 $ ( 4.7 ) State 5.4 3.7 ( 0.3 ) Foreign 4.8 4.5 3.2 Total current tax expense (benefit) 14.5 9.0 ( 1.8 ) Deferred tax expense (benefit): U.S. federal 8.6 11.0 3.6 State ( 6.3 ) ( 1.7 ) 8.5 Total deferred tax expense 2.3 9.3 12.1 Total $ 16.8 $ 18.3 $ 10.3 The reconciliation of income tax expense at the U.S. statutory rate to income tax expense is as follows: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Income tax expense at U.S. statutory rate $ 25.6 21.0 % $ 14.1 21.0 % $ 4.0 21.0 % Increase (reduction) in income taxes resulting from: Income attributable to noncontrolling interests in partnerships (1) ( 0.9 ) ( 0.7 ) % ( 1.1 ) ( 1.7 ) % ( 1.1 ) ( 5.6 ) % State and other income taxes, net of federal income tax effects (2) ( 0.9 ) ( 0.7 ) % 1.6 2.4 % 7.8 41.2 % Foreign income taxes (3) 4.8 4.0 % — — % — — % Impact of CARES Act (4) — — % — — % ( 1.5 ) ( 7.9 ) % R&D tax credit (5) ( 4.0 ) ( 3.4 ) % — — % — — % Non-deductible equity compensation 3.0 2.5 % 3.4 4.9 % 1.0 5.5 % Return to provision adjustments ( 0.1 ) ( 0.1 ) % ( 0.1 ) ( 0.1 ) % 1.2 6.5 % Change in valuation allowance (3) ( 11.0 ) ( 9.0 ) % 0.5 0.8 % ( 1.3 ) ( 6.9 ) % Other 0.3 0.2 % ( 0.1 ) ( 0.1 ) % 0.2 0.5 % Income tax expense at effective tax rate $ 16.8 13.8 % $ 18.3 27.2 % $ 10.3 54.3 % (1) No income tax expense is reflected in the Consolidated Statements of Income for income attributable to noncontrolling interests in our Indiana Harbor cokemaking facility. (2) Lower apportioned state tax rates required the revaluation of certain deferred tax liabilities and resulted in deferred tax benefits of $ 4.9 million and $ 1.3 million recorded during 2022 and 2021, respectively. The decrease in apportioned state tax rates in 2022 was partly driven by the dissolution of SunCoke Energy Partners Finance Corp. During 2020, lower apportioned state tax rates were primarily the result of a change in the tax filing status of our Convent Marine Terminal in Louisiana from a taxable partnership to a member of the consolidated return group resulted in the revaluation of certain deferred tax assets and deferred tax expense of $ 6.5 million. (3) During 2022, new regulations impacting foreign tax credit utilization were published, which make foreign taxes paid in future years to certain countries, including Brazil, no longer creditable in the U.S. As a result of these regulations and the impact of the Company's tax planning, SunCoke released a valuation allowance established on deferred tax assets attributable to existing foreign tax credit carryforwards, resulting in a deferred tax benefit of $ 11.3 million. Additionally, foreign income taxes paid in 2022 reflected the absence of the generation of foreign tax credits for taxes paid in Brazil due to the new regulations. 55 Table of Contents (4) On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES Act") was enacted. The enactment of the CARES Act allows the Company to carry back net operating losses generated in 2019 to each of the five years preceding 2019. As a result of the CARES Act, SunCoke recorded a tax benefit of $ 1.5 million during 2020. (5) As part of tax planning, SunCoke conducted an analysis with respect to the Company’s research and development activities, which resulted in a $ 4.0 million deferred tax benefit. The tax effects of temporary differences that comprise the net deferred income tax liability from operations are as follows: December 31, 2022 2021 (Dollars in millions) Deferred tax assets: Retirement benefit liabilities $ 4.2 $ 5.5 Black lung benefit liabilities 13.2 14.4 Share-based compensation 2.0 2.6 Federal tax credit carryforward (1) 8.7 17.6 Foreign tax credit carryforward (2) 9.2 12.3 State net operating loss carryforward, net of federal income tax effects (3) 12.9 12.6 Other liabilities not yet deductible 12.9 10.4 Total deferred tax assets 63.1 75.4 Less: valuation allowance (4) ( 9.2 ) ( 20.2 ) Deferred tax asset, net 53.9 55.2 Deferred tax liabilities: Properties, plants and equipment ( 155.4 ) ( 151.0 ) Investment in partnerships ( 70.8 ) ( 73.2 ) Total deferred tax liabilities ( 226.2 ) ( 224.2 ) Net deferred tax liability $ ( 172.3 ) $ ( 169.0 ) (1) Federal tax credit carryforward expires in 2033 through 2041. (2) Foreign tax credit carryforward expires in 2027 through 2031. (3) State net operating loss carryforward, net of federal income tax effects expires in 2032 through 2043 . (4) Primarily related to state net operating loss carryforwards. The Company's consolidated federal income tax returns have been examined by the IRS for all years through the year ended December 31, 2014. SunCoke is currently open to examination by the IRS for tax years ended December 31, 2019 and forward. State and foreign income tax returns are generally subject to examination for a period of three to five years after the filing of the respective returns. The state impact of any amended federal returns remains subject to examination by various states for a period of up to one year after formal notification of such amendments to the states. Uncertain Tax Positions During the year, the company recorded $ 0.3 million of expense related to uncertain prior year tax positions and the balance of unrecognized tax benefits at December 31, 2022 remains at approximately $ 0.3 million that, if recognized, will reduce the effective tax rate on income from continuing operations. There were no uncertain tax positions recorded at December 31, 2021 and 2020, and there were no associated interest or penalties recognized for the years ended December 31, 2022, 2021 or 2020. The Company expects that nominal unrecognized tax benefits pertaining to income tax matters will be required in the next twelve months. 56 Table of Contents 5. Inventories The Company’s inventory consists of metallurgical coal, which is the principal raw material for the Company’s cokemaking operations, coke, which is the finished good sold by the Company to its customers, and materials, supplies and other. These components of inventories, net of lower of cost or net realizable value adjustments of $ 2.6 million, were as follows: December 31, 2022 2021 (Dollars in millions) Coal $ 109.4 $ 63.5 Coke 14.3 16.6 Materials, supplies and other 51.5 46.9 Total inventories $ 175.2 $ 127.0 6. Properties, Plants, and Equipment The components of net properties, plants and equipment were as follows: December 31, 2022 2021 (Dollars in millions) Coke and energy plant, machinery and equipment $ 2,134.9 $ 2,077.3 Logistics plant, machinery and equipment 176.6 170.7 Land and land improvements 106.8 105.5 Construction-in-progress 40.7 50.8 Other 46.3 43.7 Gross investment, at cost 2,505.3 2,448.0 Less: accumulated depreciation ( 1,276.0 ) ( 1,160.1 ) Total properties, plants and equipment, net $ 1,229.3 $ 1,287.9 7. Intangible Assets Intangible assets, net, include goodwill allocated to our Domestic Coke segment of $ 3.4 million at both December 31, 2022 and 2021, and other intangibles detailed in the table below, excluding fully amortized intangible assets. There were no changes in the carrying amount of goodwill during the fiscal years ended December 31, 2022 and 2021, respectively. December 31, 2022 December 31, 2021 Weighted - Average Remaining Amortization Years Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net (Dollars in millions) Customer relationships 2 6.7 5.6 1.1 6.7 5.0 1.7 Permits 20 31.7 4.5 27.2 31.7 3.1 28.6 Other 28 1.6 0.1 1.5 1.6 0.1 1.5 Total $ 40.0 $ 10.2 $ 29.8 $ 40.0 $ 8.2 $ 31.8 The permits above represent the environmental and operational permits required to operate a coal export terminal in accordance with the U.S. Environmental Protection Agency ("EPA") and other regulatory bodies. Intangible assets are amortized over their useful lives in a manner that reflects the pattern in which the economic benefit of the asset is consumed. The permits’ useful lives were estimated to be 27 years at acquisition based on the expected useful life of the significant operating equipment at the facility. We have historical experience of renewing and extending similar arrangements at our other facilities and intend to continue to renew our permits as they come up for renewal for the foreseeable future. The permits were renewed regularly prior to our acquisition of CMT. These permits have an average remaining renewal term of approximate ly 5.4 y ears. 57 Table of Contents Total amortization expense for intangible assets subject to amortization was $ 2.0 million, $ 2.0 million and $ 2.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. Based on the carrying value of finite-lived intangible assets as of December 31, 2022, we estimate amortization expense for each of the next five years as follows: (Dollars in millions) 2023 $ 2.0 2024 1.9 2025 1.5 2026 1.5 2027 1.4 Thereafter 21.5 Total $ 29.8 8. Asset Retirement Obligations The Company has asset retirement obligations, primarily in the Domestic Coke segment, related to certain contractual obligations. These contractual obligations mostly relate to costs associated with restoring land to its original state, and may require the retirement and removal of long-lived assets from certain cokemaking properties as well as other reclamation obligations related to our former coal mining business. The Federal Surface Mining Control and Reclamation Act of 1977 and similar state statutes require that mine property be restored in accordance with specified standards and an approved reclamation plan. We do not have any unrecorded asset retirement obligations. The following table provides a reconciliation of changes in the asset retirement obligation from operations during each period: Years ended December 31, 2022 2021 Asset retirement obligation at beginning of year $ 12.3 $ 11.4 Liabilities settled — ( 0.1 ) Accretion expense (1) 0.9 0.9 Revisions in estimated cash flows 0.6 0.1 Asset retirement obligation at end of year (2) $ 13.8 $ 12.3 (1) Included in cost of products sold and operating expenses on the Consolidated Statements of Income. (2) The current portion of asset retirement obligation liabilities, which totaled $ 0.4 million and $ 0.7 million at December 31, 2022 and December 31, 2021, respectively, is classified in accrued liabilities on the Consolidated Balance Sheets. 9. Retirement Benefits Plans Postretirement Health Care and Life Insurance Plans The Company has plans which provide health care and life insurance benefits for many of its retirees (“postretirement benefit plans”). The postretirement benefit plans are unfunded and the costs are borne by the Company. Effective January 1, 2011, postretirement medical benefits for future retirees were phased out or eliminated for non-mining employees with less than ten years of service. 58 Table of Contents Postretirement benefit plans expense consisted of the following components: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Interest cost on benefit obligations $ 0.6 $ 0.5 $ 0.7 Amortization of: Actuarial losses 0.7 0.8 0.7 Prior service benefit ( 0.2 ) ( 0.4 ) ( 0.5 ) Total expense $ 1.1 $ 0.9 $ 0.9 Postretirement benefit plans expense is determined using actuarial assumptions as of the beginning of the year or using weighted-average assumptions when curtailments, settlements and/or other events require a plan remeasurement. The following assumptions were used to determine postretirement benefit plans expense: December 31, 2022 2021 2020 Discount rate 2.50 % 2.00 % 2.90 % The following amounts were recognized as components of other comprehensive income (loss) before related tax impacts: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Reclassifications to earnings of: Actuarial loss amortization $ 0.7 $ 0.8 $ 0.7 Prior service benefit amortization ( 0.2 ) ( 0.4 ) ( 0.5 ) Retirement benefit plan funded status adjustments: Actuarial gains (losses) 4.0 1.3 ( 2.0 ) $ 4.5 $ 1.7 $ ( 1.8 ) The following table sets forth the components of the changes in benefit obligations: Years Ended December 31, 2022 2021 (Dollars in millions) Benefit obligation at beginning of year $ 24.4 $ 27.5 Interest cost 0.6 0.5 Actuarial gains ( 4.0 ) ( 1.3 ) Benefits paid ( 2.2 ) ( 2.3 ) Benefit obligation at end of year (1) $ 18.8 $ 24.4 (1) The current portion of retirement benefit liabilities, which totaled $ 2.4 million and $ 2.6 million at December 31, 2022 and 2021, respectively, is classified in accrued liabilities on the Consolidated Balance Sheets. The following table sets forth the cumulative amounts not yet recognized in net income: Years Ended December 31, 2022 2021 (Dollars in millions) Cumulative amounts not yet recognized in net income: Actuarial losses $ 5.2 $ 10.0 Prior service benefits ( 0.8 ) ( 1.1 ) Accumulated other comprehensive loss (before related tax benefit) $ 4.4 $ 8.9 59 Table of Contents The expected benefit payments through 2032 for the postretirement benefit plan are as follows: (Dollars in millions) Year ending December 31: 2023 $ 2.4 2024 $ 2.3 2025 $ 2.1 2026 $ 1.9 2027 $ 1.8 2028 through 2032 $ 7.1 The measurement date for the Company’s postretirement benefit plans is December 31. The following discount rates were used to determine the benefit obligation: December 31, 2022 2021 Discount rate 5.25 % 2.50 % The health care cost trend assumption used at December 31, 2022 to compute the accumulated postretirement benefit obligation for the postretirement benefit plans was 7.00 percent, which is assumed to decline gradually to 5.00 percent in 2031 and to remain at that level thereafter. The health care cost trend assumption used at December 31, 2021 to compute the accumulated postretirement benefit obligation for the postretirement benefit plan was 6.00 percent, which is assumed to decline gradually to 5.00 percent in 2026 and to remain at that level thereafter. Defined Contribution Plans The Company has defined contribution plans which provide retirement benefits for certain of its employees. The Company’s contributions, which are principally based on the Company’s pretax income and the aggregate compensation levels of participating employees and are charged against income as incurred, amounted to $ 7.9 million, $ 6.9 million and $ 6.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. 10. Accrued Liabilities Accrued liabilities consist of following: December 31, 2022 2021 (Dollars in millions) Accrued benefits $ 29.7 $ 21.7 Current portion of postretirement benefit obligation 2.4 2.6 Other taxes payable 9.8 9.2 Current portion of black lung liability 5.9 5.4 Accrued legal 4.9 4.5 Other 8.7 9.6 Total accrued liabilities $ 61.4 $ 53.0 60 Table of Contents 11. Debt and Financing Obligations Total debt and financing obligations consisted of the following: December 31, 2022 2021 (Dollars in millions) 4.875 percent senior notes, due 2029 ("2029 Senior Notes") $ 500.0 $ 500.0 $ 350.0 revolving credit facility, due 2026 ("Revolving Facility") 35.0 115.0 5.346 percent financing obligation, due 2024 8.8 12.0 Total borrowings $ 543.8 $ 627.0 Debt issuance costs ( 11.6 ) ( 13.4 ) Total debt and financing obligation $ 532.2 $ 613.6 Less: current portion of long-term debt and financing obligation 3.3 3.2 Total long-term debt and financing obligation $ 528.9 $ 610.4 2029 Senior Notes The 2029 Senior Notes are the senior secured obligations of the Company. Interest on the 2029 Senior Notes is payable semi-annually in cash in arrears on June 30 and December 30 of each year. The Company may redeem some or all of the 2029 Senior Notes at its option, in whole or part, at the dates and amounts set forth in the applicable indenture. The applicable indenture for the 2029 Senior Notes contains covenants that, among other things, limit the Company's ability and, in certain circumstances, the ability of certain of the Company’s subsidiaries to (i) borrow money, (ii) create liens on assets, (iii) pay dividends or make other distributions on or repurchase or redeem the Company's capital stock, (iv) prepay, redeem or repurchase certain debt, (v) make loans and investments, (vi) sell assets, (vii) incur liens, (viii) enter into transactions with affiliates, (ix) enter into agreements restricting the ability of subsidiaries to pay dividends and (x) consolidate, merge or sell all or substantially all of the Company's assets. Revolving Facility The proceeds of any borrowings made under the Revolving Facility can be used to finance working capital needs, acquisitions, capital expenditures and for other general corporate purposes. The obligations under the credit agreement are guaranteed by certain of the Company’s subsidiaries and secured by liens on substantially all of the Company’s and the guarantors’ assets pursuant to a guarantee and collateral agreement. As of December 31, 2022, the Revolving Facility had an outstanding balance of $ 35.0 million, leaving $ 315.0 million available. Additionally, the Company has certain letters of credit totaling $ 22.9 million, which do not reduce the Revolving Facility's available balance. Commitment fees are based on the unused portion of the Revolving Facility at a rate of 0.20 percent. As of December 31, 2022, loans under the Revolving Facility bore interest at a variable per annum rate based upon, at SunCoke's option, either an adjusted base rate ("ABR") or an adjusted London Interbank Offered Rate ("LIBOR"), in each case plus an applicable margin. Subsequent to December 31, 2022, we amended the Revolving Facility to transition from a variable interest rate based on LIBOR to a variable interest rate based on the secured overnight financing rate ("SOFR"). After giving effect to that amendment, loans under the Revolving Facility bear interest, at SunCoke's option, at a rate per annum equal to either (i) an adjusted term SOFR rate (defined as SOFR for a specified term plus a credit spread adjustment of 10 basis points, subject to a zero percent floor) plus 1.75 percent or (ii) an ABR plus 0.75 percent. The applicable margin is subject to change based on SunCoke's consolidated leverage ratio, as defined in the credit agreement. The weighted-average interest rate for borrowings outstanding under the Revolving Facility was 3.3 percent during 2022. The Company does not expect the transition from LIBOR to SOFR to have a material impact on its consolidated financial statements and disclosures. Financing Obligation The Company has a sale-leaseback arrangement related to certain coke and logistics equipment. The arrangement has an initial period of 48 months beginning December 2020, and an early buyout option after 36 months to purchase the equipment at a fixed rate. The arrangement is accounted for as a financing transaction, resulting in a financing obligation on the Consolidated Balance Sheets. 61 Table of Contents Covenants Under the terms of the Revolving Facility, the Company is subject to a maximum consolidated leverage ratio of 4.50 :1.00 and a minimum consolidated interest coverage ratio of 2.50 :1.00. The Company's debt agreements contains other covenants and events of default that are customary for similar agreements and may limit our ability to take various actions including our ability to pay a dividend or repurchase our stock. If we fail to perform our obligations under these and other covenants, the lenders' credit commitment could be terminated and any outstanding borrowings, together with accrued interest, under the Revolving Facility could be declared immediately due and payable. The Company has a cross default provision that applies to our indebtedness having a principal amount in excess of $ 35 million. As of December 31, 2022, the Company was in compliance with all debt covenants. We do not anticipate violation of these covenants nor do we anticipate that any of these covenants will restrict our operations or our ability to obtain additional financing. Maturities As of December 31, 2022, the combined aggregate amount of maturities for long-term borrowings for each of the next five years is as follows: (Dollars in millions) 2023 $ 3.3 2024 5.5 2025 — 2026 35.0 2027 — 2028-Thereafter 500.0 Total $ 543.8 12. Commitments and Contingent Liabilities Legal Matters Between 2005 and 2012, the EPA and the Ohio Environmental Protection Agency (“OEPA”) issued Notices of Violations (“NOVs”), alleging violations of air emission operating permits for our Haverhill and Granite City cokemaking facilities. We worked in a cooperative manner with the EPA, the OEPA and the Illinois Environmental Protection Agency to address the allegations and, in November 2014, entered into a consent decree with these parties in federal district court in the Southern District of Illinois. The consent decree included a civil penalty paid in December 2014, and a commitment to undertake capital projects to improve reliability and enhance environmental performance. Although all projects regarding the consent decree have been completed, the consent decree remains in effect and is being overseen for compliance. Between 2010 and 2016, SunCoke Energy also received certain NOVs, Findings of Violations (“FOVs”), and information requests from the EPA, alleging violations of air operating permit conditions related to our Indiana Harbor cokemaking facility. To reach a settlement of these NOVs and FOVs, a consent decree with the EPA and the Indiana Department of Environmental Management was entered by the federal district court in the Northern District of Indiana during the fourth quarter of 2018. After Indiana Harbor completed all consent decree requirements, the federal district court terminated the consent decree in January, 2023. The Company is a party to certain pending and threatened claims, including matters related to commercial disputes, employment claims, personal injury claims, common law tort claims, and environmental claims. Although the ultimate outcome of these claims cannot be ascertained at this time, it is reasonably possible that some portion of these claims could be resolved unfavorably to the Company. Management of the Company believes that any liability which may arise from these claims would likely not have a material adverse impact on our consolidated financial statements. SunCoke's threshold for disclosing material environmental legal proceedings involving a government authority where potential monetary sanctions are involved is $ 1 million. 62 Table of Contents Black Lung Benefit Liabilities The Company has obligations related to coal workers’ pneumoconiosis, or black lung, to provide benefits to certain of its 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 and amended previous legislation related to coal workers’ black lung obligations, provides for the automatic extension of awarded lifetime benefits to surviving spouses and changes the legal criteria used to assess and award claims. We 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, 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 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: December 31, 2022 2021 Discount rate (1) 4.9 % 2.4 % Active claims 332 332 Total black lung liability (dollars in millions) (2) $ 58.1 $ 63.3 (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 $ 1.1 million in 2022. (2) The current portion of the black lung liability was $ 5.9 million and $ 5.4 million at December 31, 2022 and 2021, respectively, and was included in accrued liabilities on the Consolidated Balance Sheets. The following table summarizes annual black lung payments and (benefit) expense: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Payments $ 5.0 $ 4.4 $ 6.0 (Benefit) expense (1) $ ( 0.2 ) $ 3.1 $ 15.4 (1) Black lung (benefit) expense incurred in excess of annual accretion of the black lung liability reflects the impact of changes in discount rates, current filing and approval rate assumptions and/or other changes in our actuarial assumptions. On February 1, 2013, SunCoke obtained commercial insurance for black lung claims in excess of a deductible for employees with a last date of employment after that date. Also during 2013, we were reauthorized to continue to self-insure black lung liabilities incurred prior to February 1, 2013 by the U.S. Department of Labor's Division of Coal Mine Workers' Compensation (“DCMWC”) in exchange for $ 8.4 million of collateral. In July 2019, the DCMWC required that SunCoke, along with a number of other companies, file an application and supporting documentation for reauthorization to self-insure any legacy black lung obligations incurred prior to February 1, 2013. The Company provided the requested information in the fourth quarter of 2019. The DCMWC subsequently notified the Company in a letter dated February 21, 2020 that the Company was reauthorized to self-insure certain of its black lung obligations; however, the reauthorization is contingent upon the Company providing collateral of $ 40.4 million to secure certain of its black lung obligations. This proposed collateral requirement is a substantial increase from the $ 8.4 million in collateral that the Company currently provides to secure these self-insured black lung obligations. The reauthorization process provided the Company with the right to appeal the security determination. SunCoke exercised its right to appeal the DCMWC’s security determination and provided additional information supporting the Company’s position in May 2020 and February 2021. If the Company’s appeal is unsuccessful, the Company may be required to provide additional collateral to receive the self-insurance reauthorization from the DCMWC, which could potentially reduce the Company’s liquidity. Additionally, on January 19, 2023, the Department of 63 Table of Contents Labor issued a new proposed rule that would require self-insured companies to post collateral in the amount of 120 percent of the company's total expected lifetime black lung obligations as determined by the DCMWC. While this new proposed rule is not effective, if finalized, it could potentially reduce the Company's liquidity. We will submit comments on this proposed rule and continue to monitor any impact to the Company. 13. Leases The Company's operating leases consist primarily of leases for land, office space, equipment, railcars and locomotives. Certain of our long-term leases include one or more options to renew or to terminate, with renewal terms that can extend the lease term from one month to 50 years. The Company's finance leases are immaterial to our consolidated financial statements. The components of lease expense were as follows: Year ended December 31, 2022 Year ended December 31, 2021 (Dollars in millions) Operating leases: Cost of products sold and operating expenses $ 2.3 $ 1.9 Selling, general and administrative expenses 0.4 0.5 $ 2.7 $ 2.4 Short-term leases: Cost of products sold and operating expenses (1)(2) 5.5 6.0 Total lease expense $ 8.2 $ 8.4 (1) Includes expenses for month-to-month equipment leases, which are classified as short-term as the Company is not reasonably certain to renew the lease term beyond one month. (2) Includes variable lease expenses, which are immaterial to the consolidated financial statements. Supplemental balance sheet information related to leases was as follows: Financial Statement Classification December 31, 2022 December 31, 2021 (Dollars in millions) Operating ROU assets Deferred charges and other assets $ 11.3 $ 12.9 Operating lease liabilities: Current operating lease liabilities Accrued liabilities $ 2.0 $ 1.9 Noncurrent operating lease liabilities Other deferred credits and liabilities 8.5 9.8 Total operating lease liabilities $ 10.5 $ 11.7 The weighted average remaining lease term and weighted average discount rate were as follows: December 31, 2022 December 31, 2021 Weighted average remaining lease term of operating leases 5.9 years 6.7 years Weighted average discount rate of operating leases 4.2 % 4.2 % Supplemental cash flow information related to leases was as follows: Year Ended December 31, 2022 Year Ended December 31, 2021 (Dollars in millions) Operating cash flow information: Cash paid for amounts included in the measurement of operating lease liabilities $ 2.4 $ 2.7 Non-cash activity: ROU assets obtained in exchange for new operating lease liabilities $ 0.6 $ 3.9 64 Table of Contents Maturities of operating lease liabilities as of December 31, 2022 are as follows: (Dollars in millions) Year ending December 31: 2023 $ 2.4 2024 2.2 2025 2.1 2026 1.5 2027 1.2 2028-Thereafter 2.5 Total lease payments 11.9 Less: imputed interest 1.4 Total lease liabilities $ 10.5 14. Accumulated Other Comprehensive Loss The following tables set forth the changes in the balance of accumulated other comprehensive loss, net of tax, by component: Benefit Plans Currency Translation Adjustments Total (Dollars in millions) At December 31, 2020 $ ( 8.2 ) $ ( 8.9 ) $ ( 17.1 ) Other comprehensive income (loss) before reclassifications / adjustments 0.3 ( 0.9 ) ( 0.6 ) Retirement benefit plans funded status adjustment 1.0 — 1.0 Net current period change in accumulated other comprehensive loss 1.3 ( 0.9 ) 0.4 At December 31, 2021 $ ( 6.9 ) $ ( 9.8 ) $ ( 16.7 ) Other comprehensive income before reclassifications / adjustments 0.4 0.2 0.6 Retirement benefit plans funded status adjustment 3.1 — 3.1 Net current period change in accumulated other comprehensive loss 3.5 0.2 3.7 At December 31, 2022 $ ( 3.4 ) $ ( 9.6 ) $ ( 13.0 ) The tax benefit associated with the Company's benefit plans as of December 31, 2022 and 2021 was $ 1.0 million and $ 2.0 million, respectively. The increase in net income due to reclassification adjustments from accumulated other comprehensive income were as follows (1) : Years Ended December 31, 2022 2021 2020 (Dollars in millions) Amortization of benefit plans to net income: (2) Actuarial loss $ ( 0.7 ) $ ( 0.8 ) $ ( 0.6 ) Prior service benefit 0.2 0.4 0.5 Total before taxes ( 0.5 ) ( 0.4 ) ( 0.1 ) Income tax 0.1 0.1 — Total, net of tax $ ( 0.4 ) $ ( 0.3 ) $ ( 0.1 ) (1) Amounts in parentheses indicate debits to net income. 65 Table of Contents (2) These accumulated other comprehensive loss components are included in the computation of postretirement benefit plan expense and included in interest expense, net on the Consolidated Statements of Income. See Note 9. 15. Share-Based Compensation Equity Classified Awards . On May 12, 2022, the Company adopted the SunCoke Energy, Inc. Omnibus Long-Term Incentive Plan (the "Omnibus Plan"). The Omnibus Plan provides for the grant of equity-based awards including stock options and share units, or restricted stock, to the Company’s Board of Directors and certain employees selected for participation in the plan. The total number of shares of common stock authorized for issuance under the Omnibus Plan consists of (i) 2,700,000 new shares, (ii) 2,434,445 shares of common stock reserved for issuance primarily under the previous SunCoke Energy, Inc. Long-Term Performance Enhancement Plan ("SunCoke LTPEP"), which all equity based awards were issued under prior to the effective date of May 12, 2022, and (iii) any shares of common stock subject to awards granted under the SunCoke LTPEP that were outstanding on the effective date and that, on or after such date, are not issued or delivered to a participant. As of the effective date, new awards will no longer be granted under the SunCoke LTPEP. Awards previously granted under the SunCoke LTPEP, and described in further detail below, were not modified or impacted by the adoption of the Omnibus Plan. Stock Options Stock options granted by the Company vest in three equal annual installments beginning one year from the date of grant, and expire ten years from the date of grant. The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-Scholes option pricing model. There were no stock options granted by the Company during the years ended December 31, 2022, 2021 and 2020. The following table summarizes information with respect to common stock option awards outstanding as of December 31, 2022 and stock option activity during the fiscal year then ended: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (millions) Outstanding at December 31, 2021 2,087,505 $ 14.59 3.2 0.1 Exercised ( 60,618 ) $ 6.03 Expired ( 506,677 ) $ 14.23 Outstanding and Exercisable at December 31, 2022 1,520,210 $ 15.06 2.7 0.2 Intrinsic value for stock options is defined as the difference between the current market value of our common stock and the exercise price of the stock options. Total intrinsic value of stock options exercised in 2022 and 2021 was $ 0.2 million and $ 0.3 million, respectively. In 2020 the amount was immaterial . Restricted Stock Units Settled in Shares The Company issues restricted stock units ("RSUs") to be settled in shares of the Company's common stock to certain employees and members of the Board of Directors. The Company granted the following RSUs during the years ended December 31, 2022, 2021 and 2020: Number of RSUs Weighted Average Grant-Date Fair Value per Unit Grant Date Fair Value (Dollars in millions) 2022 grants 346,600 $ 7.62 $ 2.6 2021 grants 463,476 $ 6.72 $ 3.1 2020 grants 304,332 $ 6.04 $ 1.8 The RSUs granted to employees vest and become payable in three annual installments beginning one year from the date of grant. RSUs granted to the Company's Board of Directors vest upon grant, but are paid upon termination of board service. 66 Table of Contents The following table summarizes information with respect to RSUs outstanding as of December 31, 2022 and RSU activity during the fiscal year then ended: Number of RSUs Weighted Average Grant- Date Fair Value per Unit Nonvested at December 31, 2021 568,018 $ 6.70 Granted 346,600 $ 7.62 Vested ( 243,640 ) $ 6.96 Nonvested at December 31, 2022 670,978 $ 7.08 Total grant date fair value of RSUs vested was $ 1.7 million, $ 1.2 million and $ 0.6 million during 2022, 2021 and 2020, respectively. Performance Share Units The Company grants performance share units ("PSUs"), which represent the right to receive shares of the Company's common stock, contingent upon the attainment of Company performance and market goals and continued employment. The Company granted the following PSUs during the years ended December 31, 2022, 2021 and 2020: Number of PSUs Weighted Average Grant Date Fair Value per Unit Grant Date Fair Value (Dollars in millions) 2022 grant (1) 154,860 $ 8.40 $ 1.3 2021 grant (1) 177,176 $ 7.60 $ 1.3 2020 grant (1) 228,248 $ 6.70 $ 1.5 (1) The service period for the 2022, 2021, and 2020 PSUs ends on December 31, 2024, 2023 and 2022, and the awards will vest during the first quarter of 2025, 2024 and 2023, respectively. The service period for certain retiree eligible participants is accelerated. The PSU grants were split 50 /50 between the Company's three-year cumulative Adjusted EBITDA performance measure and the Company's three-year average pre-tax return on capital ("ROIC") performance measure for its coke and logistics businesses and unallocated corporate expenses. The number of PSUs ultimately awarded will be determined by the Adjusted EBITDA and ROIC performance versus targets and the Company's three-year total shareholder return ("TSR") as compared to the TSR of the companies making up the NASDAQ U.S. Benchmark Iron & Steel Index ("TSR Modifier"). The TSR Modifier can impact the payout (between 80 percent and 120 percent of the 2022 awards, and between 75 percent and 125 percent of the 2021 and 2020 awards) of the Company's final performance measure results. The 2022, 2021 and 2020 awards may vest between 25 percent and 250 percent of the original units granted. The fair value of the PSUs granted is based on the closing price of our common stock on the date of grant as well as a Monte Carlo simulation for the valuation of the TSR Modifier. The following table summarizes information with respect to unearned PSUs outstanding as of December 31, 2022 and PSU activity during the fiscal year then ended: Number of PSUs Weighted Average Grant Date Fair Value per Unit Nonvested at December 31, 2021 527,015 $ 8.38 Granted 154,860 $ 8.40 Performance adjustments ( 1,101 ) $ 10.79 Vested ( 182,028 ) $ 10.79 Nonvested at December 31, 2022 498,746 $ 7.21 67 Table of Contents Liability Classified Awards Restricted Stock Units Settled in Cash During the years ended December 31, 2022, 2021 and 2020, the Company issued 250,615 , 230,056 and 263,998 restricted stock units to be settled in cash ("Cash RSUs"), respectively, which vest in three annual installments beginning one year from the grant date. The weighted average grant date fair value of the Cash RSUs granted during the years ended December 31, 2022, 2021 and 2020, was $ 7.56 , $ 6.68 and $ 6.04 , respectively, and was based on the closing price of our common stock on the day of grant. The Cash RSU liability at December 31, 2022 was adjusted based on the closing price of our common stock on December 31, 2022 of $ 8.63 per share. The Cash RSU liability was $ 2.4 million at December 31, 2022 and was $ 1.9 million at December 31, 2021. Cash Incentive Award The Company also granted share-based compensation to eligible participants under the SunCoke Energy, Inc. Long-Term Cash Incentive Plan ("SunCoke LTCIP"), which became effective January 1, 2016. The SunCoke LTCIP is designed to provide for performance-based, cash-settled awards. All awards vest immediately upon a change in control and a qualifying termination of employment as defined by the SunCoke LTCIP. As of May 12, 2022, performance-based, cash settled awards will be granted under the new Omnibus Plan. The awards previously granted under the SunCoke LTCIP were not modified or impacted by the adoption of the Omnibus Plan. The cash incentive award liability will continue to be included in accrued liabilities and other deferred credits and liabilities on the Consolidated Balance Sheets under the Omnibus Plan. The Company issued a grant date fair value award of $ 2.0 million, $ 2.1 million and $ 2.0 million during the years ended December 31, 2022, 2021 and 2020, respectively, for which the service periods end on December 31, 2024, 2023 and 2022, respectively, and the awards will vests during the first quarter of 2025, 2024 and 2023, respectively. The service period for certain retiree eligible participants is accelerated. The 2022, 2021 and 2020 awards are split 50 /50 between the Adjusted EBITDA and ROIC metrics, consistent with the PSU awards, but is not impacted by the TSR modifier. See above for details. The cash incentive award liability at December 31, 2022 was adjusted based on the Company's three-year cumulative Adjusted EBITDA performance and adjusted average pre-tax return on capital for the Company's coke and logistics businesses and unallocated corporate expenses. The cash incentive award liability was $ 8.7 million at December 31, 2022 and $ 4.1 million at December 31, 2021. Summary of Share-Based Compensation Expense Below is a summary of the compensation expense, unrecognized compensation costs, the period for which the unrecognized compensation cost is expected to be recognized over for each award: Years Ended December 31, 2022 2021 2020 2022 2021 2020 December 31, 2022 Compensation Expense (1) Net of tax Unrecognized Compensation Cost Weighted Average Remaining Recognition Period (Dollars in millions) (Dollars in millions) (Years) Equity Awards: Stock Options $ — $ 0.1 $ 0.3 $ — $ 0.1 $ 0.3 $ — — RSUs 2.5 2.3 1.9 1.9 1.8 1.5 $ 0.4 1.7 PSUs 3.9 3.4 1.5 3.0 2.6 1.2 $ 0.7 1.7 Total equity awards $ 6.4 $ 5.8 $ 3.7 $ 4.9 $ 4.5 $ 3.0 Liability Awards: Cash RSUs $ 2.1 $ 1.7 $ 0.8 $ 1.6 $ 1.3 $ 0.6 $ 1.6 1.8 Cash incentive award 5.1 3.4 0.6 3.9 2.6 0.4 $ 2.0 1.6 Total liability awards $ 7.2 $ 5.1 $ 1.4 $ 5.5 $ 3.9 $ 1.0 (1) Compensation expense is recognized by the Company in selling, general and administrative expenses on the Consolidated Statements of Income. 68 Table of Contents The Company issued $ 0.3 million, $ 0.3 million, and $ 0.1 million of share-based compensation to the Company's Board of Directors during the years ended December 31, 2022, 2021 and 2020, respectively. 16. Earnings Per Share Basic earnings per share (“EPS”) has been computed by dividing net income available to SunCoke Energy, Inc. by the weighted average number of shares outstanding during the period. Except where the result would be anti-dilutive, diluted earnings per share has been computed to give effect to share-based compensation awards using the treasury stock method. The following table sets forth the reconciliation of the weighted-average number of common shares used to compute basic earnings per share to those used to compute diluted EPS: Years Ended December 31, 2022 2021 2020 (Shares in millions) Weighted-average number of common shares outstanding-basic 83.8 83.0 83.0 Add: effect of dilutive share-based compensation awards 0.8 0.7 0.2 Weighted-average number of shares-diluted 84.6 83.7 83.2 The following table shows stock options, restricted stock units, and performance stock units that are excluded from the computation of diluted earnings per share as the shares would have been anti-dilutive: Years Ended December 31, 2022 2021 2020 (Shares in millions) Stock options 1.6 2.5 3.2 Restricted stock units — — 0.2 Performance stock units — — 0.3 Total 1.6 2.5 3.7 17. Fair Value Measurements The Company measures certain financial and non-financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows: • Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. • Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. • Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Cash and Cash Equivalents Certain assets and liabilities are measured at fair value on a recurring basis. The Company’s cash and cash equivalents were measured at fair value at December 31, 2022 and December 31, 2021 based on quoted prices in active markets for identical assets. These inputs are classified as Level 1 within the valuation hierarchy. 69 Table of Contents Certain Financial Assets and Liabilities not Measured at Fair Value At December 31, 2022 and 2021, the fair value of the Company’s long-term debt was estimated to be $ 471.9 million and $ 625.1 million, respectively, compared to a carrying amount of $ 543.8 million and $ 627.0 million, respectively. These fair values were estimated by management based upon estimates of debt pricing provided by financial institutions which are considered Level 2 inputs. 18. Revenue from Contracts with Customers Cokemaking Our blast furnace coke sales are largely made pursuant to long-term, take-or-pay agreements. These agreements require us to produce and deliver the contracted volumes of coke and require our customers to purchase such volumes of coke up to a specified tonnage or pay the contract price for any tonnage they elect not to take. As of December 31, 2022, our coke sales agreements have approximately 10.9 million tons of unsatisfied or partially unsatisfied performance obligations, which are expected to be delivered over a weighted average remaining contract term of approximately five years . Our coke sales prices include an operating cost component, a coal cost component and a return of capital component. Operating costs under three of our coke sales agreements are fixed subject to an annual adjustment based on an inflation index. Under our other four coke sales agreements, operating costs are passed through to the respective customers subject to an annually negotiated budget, in some cases subject to a cap annually adjusted for inflation, and we share any difference in costs from the budgeted amounts with our customers. Our coke sales agreements contain pass-through provisions for coal and coal procurement costs, subject to meeting contractual coal-to-coke yields. To the extent that the actual coal-to-coke yields are less than the contractual standard, we are responsible for the cost of the excess coal used in the cokemaking process. Conversely, to the extent our actual coal-to-coke yields are higher than the contractual standard, we realize gains. The reimbursement of pass-through operating and coal costs from these coke sales agreements are considered to be variable consideration components included in the cokemaking sales price. The return of capital component for each ton of coke sold to the customer is determined at the time the coke sales agreement is signed and is effective for the term of each sales agreement. This component of our coke sales prices is intended to provide an adequate return on invested capital and may differ based on investment levels and other considerations. The actual return on invested capital at any facility is also impacted by favorable or unfavorable performance on pass-through cost items. Revenues are recognized when performance obligations to our customers are satisfied in an amount that reflects the consideration that we expect to receive in exchange for the coke. We also sell blast furnace coke into the export coke market, utilizing capacity in excess of that reserved for our long-term, take-or-pay agreements. Export coke sales are generally made on a spot basis at the current market price and do not contain the same provisions as our long-term, take-or-pay agreements. While the revenues in our Domestic Coke segment are primarily tied to blast furnace coke sales made under long-term, take-or-pay agreements, we also produce and sell foundry coke out of our Jewell cokemaking facility. Foundry coke sales are generally made under annual agreements with our customers for an agreed upon price and do not contain take-or-pay volume commitments. Logistics In our logistics business, handling and/or mixing services are provided to steel, coke (including some of our domestic cokemaking facilities), electric utility, coal producing and other manufacturing based customers. Materials are transported in numerous ways, including rail, truck, barge or ship. We do not take possession of materials handled, but rather act as intermediaries between our customers and end users, deriving our revenues from services provided on a per ton basis. The handling and mixing services consist primarily of two performance obligations, unloading and loading of materials. Revenues are recognized when the customer receives the benefits of the services provided, in an amount that reflects the consideration that we will receive in exchange for those services. Logistics services provided to our domestic cokemaking facilities are provided under contracts with terms equivalent to those of arm's-length transactions. Estimated take-or-pay revenue of approximately $ 51.4 million from all of our multi-year logistics contracts is expected to be recognized over the next four years for unsatisfied or partially unsatisfied performance obligations as of December 31, 2022. Energy Our cokemaking ovens utilize efficient, modern heat recovery technology designed to combust the coal’s volatile components liberated during the cokemaking process and use the resulting heat to create steam or electricity for sale. Our Middletown facility and the second phase of our Haverhill facility, or Haverhill II, have cogeneration plants that generate 70 Table of Contents electricity, which is either sold into the regional power market or to customers pursuant to energy sales agreements. Our Granite City facility and the first phase of our Haverhill facility, or Haverhill I, have steam generation facilities, which produce steam for sale to customers pursuant to steam supply and purchase agreements. The energy provided under these arrangements results in transfer of control over time. Revenues are recognized over time as energy is delivered to our customers, in an amount based on the terms of each arrangement. Energy generated at our remaining facilities is either used internally or provided, at minimal cost, to energy suppliers. Operating and Licensing Fees Operating and licensing fees are made pursuant to long-term contracts with ArcelorMittal Brazil, where we operate a Brazilian cokemaking facility. The licensing fees are based upon the level of production required by our customer. Operating fees include the full pass-through of the operating costs of the Brazilian facility as well as a per ton fee based on the level of production required by our customer. Revenues are recognized over time as our customers receive and consume the benefits in an amount that corresponds directly with the value provided to the customer to date. Disaggregated Sales and Other Operating Revenue The following table provides disaggregated sales and other operating revenue by product or service, excluding intersegment revenues: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Sales and other operating revenue: Cokemaking $ 1,791.3 $ 1,293.6 $ 1,218.9 Energy 61.5 56.1 43.6 Logistics 76.7 64.3 35.5 Operating and licensing fees 38.0 36.6 31.6 Other 5.0 5.4 3.4 Sales and other operating revenue $ 1,972.5 $ 1,456.0 $ 1,333.0 Disaggregated sales and other operating revenue by customer is discussed in Note 3. 19. Business Segment Information The Company reports its business through three segments: Domestic Coke, Brazil Coke and Logistics. The Domestic Coke segment includes the Jewell, Indiana Harbor, Haverhill, Granite City and Middletown cokemaking facilities. Each of these facilities produces coke, and all facilities except Jewell recover waste heat, which is converted to steam or electricity through a similar production process. The Brazil Coke segment includes the licensing and operating fees payable to us under long-term contracts with ArcelorMittal Brazil, under which we operate a cokemaking facility located in Vitória, Brazil through January, 2028. Logistics operations are comprised of CMT, KRT, Lake Terminal, which provides services to our Indiana Harbor cokemaking facility, and DRT, which provides services to our Jewell cokemaking facility. Handling and mixing results are presented in the Logistics segment. Corporate expenses that can be identified with a segment have been included in determining segment results. The remainder is included in Corporate and Other, which also includes activity from our legacy coal mining business. Segment assets are those assets utilized within a specific segment and exclude taxes. 71 Table of Contents The following table includes Adjusted EBITDA, as defined below, which is the measure of segment profit or loss reported to the chief operating decision maker for purposes of allocating resources to the segments and assessing their performance: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Sales and other operating revenue: Domestic Coke $ 1,856.9 $ 1,354.5 $ 1,265.4 Brazil Coke 38.0 36.6 31.6 Logistics 77.6 64.9 36.0 Logistics intersegment sales 28.9 27.1 22.1 Elimination of intersegment sales ( 28.9 ) ( 27.1 ) ( 22.1 ) Total sales and other operating revenue $ 1,972.5 $ 1,456.0 $ 1,333.0 Adjusted EBITDA: Domestic Coke $ 263.4 $ 243.4 $ 217.0 Brazil Coke 14.5 17.2 13.5 Logistics 49.7 43.5 17.3 Corporate and Other (1) ( 29.9 ) ( 28.7 ) ( 41.9 ) Total Adjusted EBITDA $ 297.7 $ 275.4 $ 205.9 Depreciation and amortization expense: Domestic Coke $ 126.8 $ 119.0 $ 119.1 Brazil Coke 0.2 0.4 0.5 Logistics 14.5 13.3 12.8 Corporate and Other 1.0 1.2 1.3 Total depreciation and amortization expense $ 142.5 $ 133.9 $ 133.7 Capital expenditures: Domestic Coke $ 70.3 $ 83.1 $ 60.0 Brazil Coke 0.1 0.3 0.4 Logistics 4.5 14.7 13.5 Corporate and Other 0.6 0.5 — Total capital expenditures $ 75.5 $ 98.6 $ 73.9 (1) Corporate and Other includes foundry related research and development costs of $ 3.9 million during 2020. The following table sets forth the Company’s segment assets: December 31, 2022 2021 (Dollars in millions) Segment assets: Domestic Coke $ 1,422.6 $ 1,370.6 Brazil Coke 15.7 18.0 Logistics 193.5 202.9 Corporate and Other 22.8 23.9 Total assets $ 1,654.6 $ 1,615.4 72 Table of Contents The Company evaluates the performance of its segments based on segment Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted for any impairments, restructuring costs, gains or losses on extinguishment of debt, and/or transaction costs ("Adjusted EBITDA"). EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses. Management believes Adjusted EBITDA is an important measure in assessing operating performance. Adjusted EBITDA provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance. EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, and they should not be considered a substitute for net income, or any other measure of financial performance presented in accordance with GAAP. Additionally, other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Reconciliation of Non-GAAP Financial Measures Below is the reconciliation of Adjusted EBITDA to net income, which is its most directly comparable financial measure calculated and presented in accordance with GAAP: Years Ended December 31, 2022 2021 2020 (Dollars in millions) Net income attributable to SunCoke Energy, Inc. $ 100.7 $ 43.4 $ 3.7 Add: Net income attributable to noncontrolling interests 4.2 5.4 5.1 Net income $ 104.9 $ 48.8 $ 8.8 Add: Depreciation and amortization expense 142.5 133.9 133.7 Interest expense, net 32.0 42.5 56.3 Loss (gain) on extinguishment of debt, net — 31.9 ( 5.7 ) Income tax expense 16.8 18.3 10.3 Restructuring costs (1) — — 2.5 Transaction costs (2) 1.5 — — Adjusted EBITDA $ 297.7 $ 275.4 $ 205.9 Subtract: Adjusted EBITDA attributable to noncontrolling interests (3) 8.4 9.3 9.1 Adjusted EBITDA attributable to SunCoke Energy, Inc. $ 289.3 $ 266.1 $ 196.8 (1) Charges related to a company-wide restructuring and cost-reduction initiative. (2) Costs incurred as part of the granulated pig iron project with U.S. Steel. (3) Reflects noncontrolling interests in Indiana Harbor. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.