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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-24 · 106 added, 82 removed, 190 unchanged (50% of the section changed)

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

For a reconciliation of the non-GAAP measure to its most comparable GAAP component, see "Non-GAAP Financial Measures" in this Item and Note 19 to our consolidated financial statements.

For a reconciliation of the non-GAAP measure to its most comparable GAAP component, see “Non-GAAP Financial Measures” in this Item 7.

Our MD&A is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows.

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Adjusted EBITDA (1)

(1) See Note 19 in our consolidated financial statements for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement.

The Company delivered strong financial results for the year ended 2022.

Favorable pricing on export coke sales in our Domestic Coke segment and higher price realization and volumes within our Logistics segment drove record Adjusted EBITDA performance in 2022.

We also increased our participation in the foundry coke market, while continuing to deliver on our long-term, take-or-pay coke contracts.

(1) See “Non-GAAP Financial Measures” in this Item 7 below for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement.

Operating results during the year ended December 31, 2023 primarily reflects lower margin on our non-contracted blast coke sales, unfavorable energy pricing at our Haverhill facility and lower transloading volumes in our Logistics segment.

These decreases were partially offset by favorable coal-to-coke yields on our long-term, take-or-pay agreements and favorable pricing on our foundry coke sales.

Net income for the current year period was further impacted by the establishment of a valuation allowance on deferred tax assets attributable to existing foreign tax credit carryforwards.

Operating cash flows during the current period primarily reflect a favorable year-over-year change in primary working capital.

We returned meaningful capital to our shareholders through the declaration and payment of a dividend during each quarter of 2023, increasing from $0.08 per share during the first half of the year to $0.10 per share during the second half of the year, representing a quarterly increase of 25 percent.

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Recent Developments

• Granulated Pig Iron Project.

On June 28, 2022, the Company entered into a non-binding letter of intent with U.S.

The letter of intent sets out the principal terms and conditions upon which SunCoke would acquire two blast furnaces from U.S.

Steel's Granite City Works facility and construct a granulated pig iron facility with an annual capacity of 2 million tons to be sold to U.S.

Steel for a ten year initial term.

Items Impacting Comparability

• 2021 Debt Refinancing.

During the second quarter of 2021, the Company refinanced its debt obligations.

The Company issued $500.0 million of 4.875 percent senior notes, due in 2029 ("2029 Senior Notes"), amended and extended the maturity of its revolving credit facility ("Revolving Facility") to June 2026 and reduced the Revolving Facility capacity by $50.0 million to $350.0 million.

The Company used the proceeds of the 2029 Senior Notes along with borrowings under the Company's Revolving Facility to purchase and redeem all of the 7.500 percent senior notes, due in 2025 ("2025 Senior Notes").

As a result of the debt refinancing and revolver amendment, the year ended December 31, 2021 included a loss on extinguishment of debt on the Consolidated Statement of Income of $31.9 million, which consisted of the premium paid of $22.0 million and the write-off of unamortized debt issuance costs of $6.9 million and the remaining original issue discount of $3.0 million.

• 2023 Indiana Harbor Contract Renewal.

In April 2023, the Indiana Harbor long-term, take-or-pay agreement with Cliffs Steel was extended to September 30, 2035.

Under the extended agreement, Indiana Harbor will continue to supply 1,220 thousand tons to Cliffs Steel annually.

Reimbursement of certain operating and maintenance expenses under the contract are fixed subject to annual adjustment based on an inflation index.

Other key provisions of the agreement, including the pass-through of coal costs, remain unchanged.

Consolidated Results of Operations

The following section includes year-over-year analysis of consolidated results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

See "Analysis of Segment Results" later in this section for further details of these results.

See “Analysis of Segment Results” later in this Item 7 for further details of these results.

Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K for the year-over-year analysis of consolidated results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

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27.3 32.0 (4.7)

Loss on extinguishment of debt — 31.9 (31.9)

Income before income tax expense 97.8 121.7 (23.9)

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Net income attributable to noncontrolling interests

4.2 5.4 (1.2)

Net income attributable to SunCoke Energy, Inc.

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

Sales and other operating revenue and costs of products sold and operating expenses increased in 2022 as compared to 2021, primarily driven by the pass-through of higher coal prices in our Domestic Coke segment, which also resulted in lower margins.

Additionally, revenues further benefited from favorable pricing on export coke sales in our Domestic Coke segment, which partially offset the impact of higher coal prices on margins.

Selling, General and Administrative Expen ses.

The increase in selling, general and administrative expense primarily reflects higher employee related expenses, higher cost of professional services, and transaction costs incurred as part of the granulated pig iron project.

These higher costs were partially offset by valuation adjustments as a result of changes in discount rates on certain legacy liabilities, which decreased legacy costs by $3.3 million as compared to the prior year.

Sales and other operating revenue and costs of products sold and operating expenses increased in 2023 as compared to 2022, primarily driven by the pass-through of higher coal prices in our Domestic Coke segment.

Additionally, revenues further benefited from higher volumes on our long-term, take-or-pay agreements.

These increases to sales and other operating revenue were partially offset by lower volumes and unfavorable pricing on our non-contracted blast coke sales.

Selling, General and Administrative Expenses.

The decrease in selling, general and administrative expense primarily reflects lower employee related expenses, lower cost of professional services and lower transaction costs incurred as part of the granulated pig iron project.

These lower costs were partially offset by valuation adjustments primarily as a result of changes in discount rates on certain legacy liabilities, which increased legacy costs by $5.7 million as compared to the prior year.

Depreciation and Amortization Expense.

Depreciation and amortization expense increased as a result of depreciable assets placed into service since the prior year period.

Interest Expen se, net.

Interest expense, net, benefited in 2022 from a lower interest rate on the outstanding senior notes, which decreased to 4.875 percent from 7.500 percent as a result of the debt refinancing that occurred during the second quarter of 2021, as well as lower average debt balances during the current year period.

Depreciation and amortization expense was reasonably consistent with the prior year period.

Interest Expense, net.

Interest expense, net, benefited in 2023 from lower average debt balances during the current year period and higher interest income of $2.0 million.

Income Tax Expense.

Income tax expense during 2022 reflects the net impact of Foreign Tax Credit regulations signed in 2022 further described in Note 4 to our consolidated financial statements, which had a net result of an income tax benefit of $6.5 million during the current year period.

Additionally, the current year period reflects the recognition of research and development credits and lower apportioned state income tax rates, which resulted in an income tax benefits of $4.0 million and $6.4 million, respectively, including the related revaluation of certain deferred tax liabilities.

Income tax expense during 2023 primarily reflects the establishment of a valuation allowance on deferred tax assets attributable to existing foreign tax credit carryforwards, which was a portion of a valuation allowance released during the third quarter of 2022, resulting in $8.4 million of deferred tax expense.

The establishment of the valuation allowance during 2023 was the result of changes in tax regulations.

See Note 4 to our consolidated financial statements for further detail.

Noncontrolling Interest.

Net i ncome attributable to noncontrolling interest represents a 14.8 percent third-party interest in our Indiana Harbor cokemaking facility and fluctuates with the financial performance of that facility.

Net i ncome attributable to noncontrolling interests represents a 14.8 percent third-party interest in our Indiana Harbor cokemaking facility and fluctuates with the financial performance of that facility.

Results of Reportable Business Segments

We report our business results through three segments:

We report our business results through three reportable segments:

• Domestic Coke consists of our Jewell facility, located in Vansant, Virginia, our Indiana Harbor facility, located in East Chicago, Indiana, our Haverhill facility, located in Franklin Furnace, Ohio, our Granite City facility located in Granite City, Illinois, and our Middletown facility located in Middletown, Ohio.

• Brazil Coke consists of operations in Vitória, Brazil, where we operate the ArcelorMittal Brazil cokemaking facility.

• Logistics consists of Convent Marine Terminal ("CMT"), located in Convent, Louisiana, Kanawha River Terminal ("KRT"), located in Ceredo and Belle, West Virginia, SunCoke Lake Terminal ("Lake Terminal"), located in East Chicago, Indiana, and Dismal River Terminal ("DRT"), located in Vansant, Virginia.

Lake Terminal and DRT are located adjacent to our Indiana Harbor and Jewell cokemaking facilities, respectively.

The operations of each of our segments are described in Part I of this document.

• Logistics consists of CMT, located in Convent, Louisiana, KRT, located in Ceredo and Belle, West Virginia, and Lake Terminal, located in East Chicago, Indiana.

Lake Terminal is located adjacent to our Indiana Harbor cokemaking facility.

The operations of each of our reportable segments are described in Part I of this Annual Report on Form 10-K.

The Company elected to combine Dismal River Terminal (“DRT”) operations into the Jewell cokemaking operations in the Domestic Coke segment beginning January 1, 2023.

The DRT results were included in the Logistics segment in 2022 and are not recast.

Corporate expenses that can be identified with a segment have been included in determining segment results.

The remainder is included in Corporate and Other.

Management believes Adjusted EBITDA is an important measure of operating performance and uses it as the primary basis for the chief operating decision maker to evaluate the performance of each of our reportable segments.

The remainder is included in Corporate and Other, including activity from our legacy coal mining business, which is not considered a reportable segment and, therefore, not included in our segment information in Note 19.

However, we have included Corporate and Other within our operating data below.

Management believes Adjusted EBITDA is an important measure of operating performance, which is used by the chief operating decision maker as one of the measurements to evaluate the performance of each of our reportable segments.

Adjusted EBITDA should not be considered a substitute for the reported results prepared in accordance with GAAP.

See Note 19 to our consolidated financial statements.

See the “Non-GAAP Financial Measures” section below for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement.

Segment Operating Data

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Corporate and Other, net (2)

(32.4) (29.9) (2.5)

Total Adjusted EBITDA $ 268.8 $ 297.7 $ (28.9)

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Tons handled (thousands of tons) 20,483 22,291 (1,808)

(1) See Note 19 in our consolidated financial statements for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement.

(1) See the “Non-GAAP Financial Measures” section below for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement.

(2) Corporate and Other, net is not a reportable segment.

(3) The production of foundry coke tons does not replace blast furnace coke tons on a ton for ton basis, as foundry coke requires longer coking time.

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Beginning $ 1,856.9 $ 263.4

(46.4) (13.9)

Operating and maintenance costs (3)

Operating and maintenance costs N/A (0.1)

Energy and other (3)

Ending $ 1,954.0 $ 247.8

(1) Volumes decreased during 2022 primarily due to changes in the mix of production.

(2) Revenues increased primarily as a result of the pass-through of higher coal prices on our long-term, take-or-pay agreements, which also had a favorable impact on Adjusted EBITDA due to higher coal-to-coke yield gains on higher coal prices.

Favorable pricing on export coke sales also increased revenues and was the primary driver of the increase to Adjusted EBITDA during 2022.

(3) Higher operating and maintenance costs includes the impact of planned maintenance outages and higher cost of fuel.

(4) Favorable energy pricing at our Haverhill II facility increased both revenue and Adjusted EBITDA.

This increase to Adjusted EBITDA was more than offset by higher allocation of corporate costs.

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

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

(1) Higher volumes on our long-term, take-or-pay agreements increased both revenues and Adjusted EBITDA during 2023.

These higher volumes were mostly offset by lower volumes on non-contracted blast coke sales.

(2) Revenues increased primarily as a result of the pass-through of higher coal prices on our long-term, take-or-pay agreements.

Adjusted EBITDA decreased primarily due to lower margins on our non-contracted blast coke sales.

These decreases to Adjusted EBITDA were partially offset by favorable coal-to-coke yields on our long-term, take-or-pay agreements and favorable pricing on foundry coke sales.

(3) Energy and other decreased primarily as a result of unfavorable energy pricing at our Haverhill facility.

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

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

2023 vs 2022 2023 vs 2022

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Ending $ 74.0 $ 44.3

(1) Volumes improved as a result of increased demand driven by the strong domestic metallurgical and thermal coal markets.

(2) Revenues and Adjusted EBITDA increased as a result of favorable pricing at CMT driven by the strong export coal market.

(3) Other decreases in Adjusted EBITDA reflect higher operating and maintenance costs.

Sales and other operating revenue increased $1.4 million, or 4 percent, to $38.0 million in 2022 compared to $36.6 million in 2021.

Adjusted EBITDA decreased $2.7 million, or 16 percent, to $14.5 million in 2022 compared to $17.2 million in 2021.

Sales and other operating revenue and Adjusted EBITDA reflect the impact of lower volumes, including the absence of production bonuses for meeting certain volume targets received in the prior year.

The impact of lower volumes on sales and other operating revenue was more than offset by the pass-through of higher reimbursable operating and maintenance costs as well as favorable translation adjustments.

Intersegment sales and other operating revenue in our Logistics segment were $22.1 million and $28.9 million as of December 31, 2023 and 2022, respectively.

Adjusted EBITDA presented above is inclusive of the impact of intersegment transactions.

(1) Volumes decreased as a result of lower demand at CMT driven by weakened thermal coal markets and the short-term idling of a customer mine during the fourth quarter of 2023.

Additionally, Adjusted EBITDA in the current year period reflects the absence of DRT volumes.

(2) Revenues and Adjusted EBITDA increased as a result of higher transloading pricing.

(3) Revenues and Adjusted EBITDA decreased as a result of unfavorable ancillary revenue, which was a result of lower volumes at CMT.

This decrease in Adjusted EBITDA was more than offset by the absence of costs associated with DRT in the current year period.

Sales and other operating revenue decreased $2.8 million, or 7 percent, to $35.2 million in 2023 compared to $38.0 million in 2022.

Adjusted EBITDA decreased $5.4 million, or 37 percent, to $9.1 million in 2023 compared to $14.5 million

Decreases in sales and other operating revenue and Adjusted EBITDA were primarily due to the absence of technology fees, which expired at the end of 2022.

Corporate and Other

Corporate and Other expenses, increased $1.2 million, or 4 percent, to $29.9 million in 2022 as compared to $28.7 million in 2021.

The increase was driven by higher employee related expenses and higher cost of professional services.

These increased costs were mostly offset by valuation adjustments as a result of changes in discount rates on certain legacy liabilities, which decreased legacy costs by $3.3 million.

Corporate and Other Adjusted EBITDA decreased $2.5 million, or 8 percent, to a loss of $32.4 million in 2023 compared to a loss of $29.9 million in 2022.

This decrease was primarily driven by valuation adjustments as a result of changes in discount rates on certain legacy liabilities, which increased legacy costs by $5.7 million, partially offset by lower employee related expenses and lower cost of professional services in the current year period.

Non-GAAP Financial Measures

In addition to the GAAP results provided in the Annual Report on Form 10-K, we have provided a non-GAAP financial measure, Adjusted EBITDA.

Our management, as well as certain investors, uses this non-GAAP measure to analyze our current and expected future financial performance.

In addition to the GAAP results provided in this Annual Report on Form 10-K, we have provided a non-GAAP financial measure, Adjusted EBITDA.

Our management, as well as certain investors, use this non-GAAP measure to analyze our current and expected future financial performance.

This measure is not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.

See Note 19 in our consolidated financial statements for both the definition of Adjusted EBITDA and the reconciliation from GAAP to the non-GAAP measurement for 2022, 2021 and 2020.

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 a 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,

2023 2022 2021

(Dollars in millions)

Net income $ 63.5 $ 104.9 $ 48.8

Depreciation and amortization expense 142.8 142.5 133.9

Interest expense, net 27.3 32.0 42.5

Loss on extinguishment of debt — — 31.9

Income tax expense 34.3 16.8 18.3

Transaction costs (1)

Adjusted EBITDA $ 268.8 $ 297.7 $ 275.4

(1) Costs incurred as part of the granulated pig iron project with U.S.

Liquidity and Capital Resources

Our primary liquidity needs are to fund working capital, fund investments, service our debt, maintain cash reserves and replace partially or fully depreciated assets and other capital expenditures.

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

Our sources of liquidity include cash generated from operations, borrowings under our revolving credit facility (“Revolving Facility”) and, from time to time, debt and equity offerings.

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

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The amounts involved may be material.

Refer to further liquidity discussion below as well as "Part II - Item 5 - Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities."

Refer to further liquidity discussion in “Part II - Item 5 - Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities.”

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

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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.

We submitted comments on this proposed rule and continue to monitor any impact to the Company.

See further discussion in Note 12 to our consolidated financial statements.

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Cash Provided by Operating Activities

Net cash provided by operating activities decreased by $24.2 million to $208.9 million in 2022 as compared to 2021.

The decrease primarily reflects unfavorable year-over-year changes in primary working capital, which is comprised of accounts receivable, inventories and accounts payable, driven by higher coal prices.

This decrease was partially offset by

higher operating results in our Domestic Coke segment, primarily driven by favorable pricing on export coke sales, and in our Logistics segment, driven by favorable pricing and higher transloading volumes.

Net cash provided by operating activities increased $40.1 million to $249.0 million in 2023 as compared to 2022.

The increase primarily reflects a favorable year-over-year change in primary working capital, which is comprised of accounts receivable, inventories, and accounts payable, driven by the timing of receipts from customers and the impact of the changes in coal prices.

The current year period was further impacted by an increase in deferred income tax expense relating to new regulations impacting foreign tax credit utilization.

See Note 4 to our consolidated financial statements for further detail on the change in deferred income tax expense.

These favorable impacts were partially offset by lower operating results and higher payments made for employee related expenses in the current period.

Cash Used in Investing Activities

Net cash used in investing activities decreased $29.1 million to $70.2 million in 2022 as compared to 2021 primarily driven by the timing of payments related to capital expenditures as well as the completion of certain foundry cokemaking expansion projects in 2021.

Net cash used in investing activities increased $39.0 million to $109.2 million in 2023 as compared to 2022 primarily driven by ongoing capital expenditures related to upgrades of our assets in order to improve long-term reliability and operational performance as well as increased spending on the foundry expansion project in the current year period.

Refer to Capital Requirements and Expenditures below for further detail.

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Net cash used in financing activities decreased $22.8 million to $89.7 million in 2023 as compared to $112.5 million in 202 2.

T his decrease was primarily driven by the absence of costs associated with the debt refinancing that took place during the second quarter of 2021, which consisted of a $22.0 million premium and $12.0 million of debt issuance costs.

These decreases were partly offset by higher current period net repayments on the Company's debt of $19.7 million, excluding the impact of funding of the debt refinancing in the prior period, and $4.4 million of cash distributions made to noncontrolling interests.

Additionally, dividends paid in 2022 increased $3.5 million as compared to the dividends paid in the prior year as a result of an increase in the dividend per share amount.

This decrease in net cash used in financing activities was primarily driven by lower net repayments of $45.0 million on the Revolving Facility in the current year period.

This decrease was offset by an increase in dividends paid of $7.1 million as compared to the prior year period, primarily as a result of an increase in the dividend per share amount, as well as higher cash distributions made to noncontrolling interests of $7.4 million in the current year period.

The current year period was also impacted by higher repayments on financing obligations of $5.6 million, resulting from the early buyout on a sale leaseback arrangement, discussed further in Note 11 to our consolidated financial statements.

In addition to the $30.7 million in dividends paid to our shareholders during 2023, on February 1, 2024, SunCoke's Board of Directors declared a cash dividend of $0.10 per share of the Company's common stock.

This dividend will be paid on March 1, 2023, to stockholders of record of February 16, 2023.

This dividend will be paid

on March 1, 2024, to stockholders of record on February 15, 2024.

See further discussion in “Item 5.

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We do not anticipate a violation of these covenants nor do we anticipate that any of these covenants will restrict our operations or our ability to obtain additional financing.

See Note 11 to the consolidated financial statements for details on debt covenants.

See Note 11 to our consolidated financial statements for details on debt covenants.

Credit Rating

In May 2023, S&P Global Ratings reaffirmed our corporate credit rating of BB- (stable).

In June 2022, Moody’s Investors Service reaffirmed our corporate credit rating of B1 and upgraded the outlook from stable to positive.

In November 2023, Moody’s Investors Service reaffirmed our corporate credit rating of B1 (positive).

Contractual Obligations

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As of December 31, 2023, significant contractual obligations related to debt were $500 m illion of principal borrowings and $134.1 million of related interest, which will be repaid through 2029.

Projected interest costs on variable rate instruments were calculated using market rates at December 31, 2022.

See Note 11 to our consolidated financial statements.

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Critical Accounting Policies and Estimates

A summary of our significant accounting policies is included in Note 2 to the consolidated financial statements.

A summary of our significant accounting policies is included in Note 2 to our consolidated financial statements.

Our management believes that the application of these policies on a consistent basis enables us to provide the users of our financial statements with useful and reliable information about our operating results and financial condition.

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities.

The preparation

of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities.

The Company's black lung benefit obligations is an item that is subject to such estimates and assumptions.

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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 further described in Note 12 to our consolidated financial statements.

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.

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

Our independent actuarial consultants calculate the present value of the black lung liability annually in the fourth quarter, unless there are changes in facts and circumstances that could materially alter the amount of the liability.

(Dollars in millions)

Discount rate (1)

Active claims 311 332

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

Total black lung liability, discounted (2)

$ 58.2 $ 58.1

Total black lung liability, undiscounted $ 96.0 $ 88.4

(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.

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(2) The current portion of the black lung liability was $5.0 million and $5.9 million at December 31, 2023 and 2022, respectively, and was included in accrued liabilities on the Consolidated Balance Sheets.

The following table summarizes annual black lung payments and (benefit) expense:

The following table summarizes the annual black lung payments and expense (benefit):

Years Ended December 31,

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Payments $ 5.4 $ 5.0 $ 4.4

(Benefit) expense (1)

Expense (benefit) (1)

$ 5.5 $ (0.2) $ 3.1

(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.

(1) Black lung expense (benefit) 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.

Recent Accounting Standards

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

What changed 10-K

Item 7. Management’s Discussion and Analysis