SXC-2015.03.31-10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________  
FORM 10-Q
 ________________________________________ 

ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
OR 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 001-35243 
 ________________________________________
SUNCOKE ENERGY, INC.
(Exact name of registrant as specified in its charter)
 ________________________________________ 
 
Delaware
 
90-0640593
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1011 Warrenville Road, Suite 600
Lisle, Illinois 60532
(630) 824-1000
(Registrant’s telephone number, including area code)
 ________________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
 
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    ¨  Yes    ý  No
As of April 24, 2015, there were 65,230,501 shares of the Registrant’s $0.01 par value Common Stock outstanding.

Table of Contents

SUNCOKE ENERGY, INC.
TABLE OF CONTENTS 
 
 
 
 
Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 2015 and 2014
 
 
Consolidated Statements of Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2015 and 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
SunCoke Energy, Inc.
Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars and shares in millions, except per share amounts)
Revenues
 
 
 
 
Sales and other operating revenue
 
$
320.3

 
$
351.5

Other income
 
0.1

 
1.0

Total revenues
 
320.4

 
352.5

Costs and operating expenses
 
 
 
 
Cost of products sold and operating expenses
 
254.5

 
293.4

Selling, general and administrative expenses
 
14.5

 
21.0

Depreciation and amortization expense
 
23.8

 
24.4

Total costs and operating expenses
 
292.8

 
338.8

Operating income
 
27.6

 
13.7

Interest expense, net
 
23.3

 
12.1

Income before income tax expense (benefit) and loss from equity method investment
 
4.3

 
1.6

Income tax expense (benefit)
 
1.2

 
(1.2
)
Loss from equity method investment
 
0.7

 
0.6

Income from continuing operations
 
2.4

 
2.2

Loss from discontinued operations, net of income tax benefit of $0.1 million and
     $3.0 million, for the three months ended March 31, 2015 and 2014, respectively
 
(2.0
)
 
(6.0
)
Net income (loss)
 
0.4

 
(3.8
)
Less: Net income attributable to noncontrolling interests
 
4.4

 
4.0

Net loss attributable to SunCoke Energy, Inc.
 
$
(4.0
)
 
$
(7.8
)
Loss attributable to SunCoke Energy, Inc. per common share:
 
 
 
 
Basic:
 
 
 
 
Continuing operations
 
$
(0.03
)
 
$
(0.02
)
Discontinued operations
 
$
(0.03
)
 
$
(0.09
)
Diluted:
 
 
 
 
Continuing operations
 
$
(0.03
)
 
$
(0.02
)
Discontinued operations
 
$
(0.03
)
 
$
(0.09
)
Weighted average number of common shares outstanding:
 
 
 
 
Basic
 
66.2

 
69.7

Diluted
 
66.2

 
69.7

(See Accompanying Notes)

1
Table of Contents

SunCoke Energy, Inc.
Consolidated Statements of Comprehensive Loss
(Unaudited) 
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Net income (loss)
 
$
0.4

 
$
(3.8
)
Other comprehensive income (loss):
 
 
 
 
Reclassifications of prior service benefit, actuarial loss amortization and curtailment gain to earnings (net of related tax expense of $1.6 million and $0.4 million for the three months ended March 31, 2015 and 2014, respectively)
 
(2.4
)
 
(0.6
)
Currency translation adjustment
 
(1.1
)
 
0.8

Comprehensive loss
 
(3.1
)
 
(3.6
)
Less: Comprehensive income attributable to noncontrolling interests
 
4.4

 
4.0

Comprehensive loss attributable to SunCoke Energy, Inc.
 
$
(7.5
)
 
$
(7.6
)
(See Accompanying Notes)

2
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SunCoke Energy, Inc.
Consolidated Balance Sheets
 
 
March 31,
2015
 
December 31,
2014
 
 
(Unaudited)
 
 
 
 
(Dollars in millions, except
per share amounts)
Assets
 
 
 
 
Cash and cash equivalents
 
$
165.4

 
$
139.0

Receivables
 
59.0

 
75.4

Inventories
 
128.5

 
139.1

Income tax receivable
 
8.8

 
6.0

Deferred income taxes
 
18.4

 
26.4

Other current assets
 
6.9

 
3.6

Current assets held for sale
 
19.2

 
19.3

Total current assets
 
406.2

 
408.8

Investment in Brazilian cokemaking operations
 
41.0

 
41.0

Equity method investment in VISA SunCoke Limited
 
21.7

 
22.3

Properties, plants and equipment, net
 
1,451.8

 
1,466.6

Goodwill and other intangible assets, net
 
21.6

 
22.0

Deferred charges and other assets
 
19.7

 
19.4

Total assets
 
$
1,962.0

 
$
1,980.1

Liabilities and Equity
 
 
 
 
Accounts payable
 
$
100.2

 
$
110.9

Accrued liabilities
 
35.3

 
41.6

Interest payable
 
8.7

 
19.9

Current liabilities held for sale
 
24.1

 
37.4

Total current liabilities
 
168.3

 
209.8

Long-term debt
 
699.3

 
633.5

Accrual for black lung benefits
 
43.9

 
43.9

Retirement benefit liabilities
 
32.9

 
33.6

Deferred income taxes
 
315.6

 
321.9

Asset retirement obligations
 
15.3

 
15.1

Other deferred credits and liabilities
 
16.4

 
16.9

Total liabilities
 
1,291.7

 
1,274.7

Equity
 
 
 
 
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no issued shares at March 31, 2015 and December 31, 2014
 
—

 
—

Common stock, $0.01 par value. Authorized 300,000,000 shares; issued 71,389,447 and 71,251,529 shares at March 31, 2015 and December 31, 2014, respectively
 
0.7

 
0.7

Treasury stock, 6,161,395 and 4,977,115 shares at March 31, 2015 and December 31, 2014, respectively
 
(125.0
)
 
(105.0
)
Additional paid-in capital
 
538.4

 
543.6

Accumulated other comprehensive loss
 
(25.0
)
 
(21.5
)
Retained earnings
 
6.0

 
13.9

Total SunCoke Energy, Inc. stockholders’ equity
 
395.1

 
431.7

Noncontrolling interests
 
275.2

 
273.7

Total equity
 
670.3

 
705.4

Total liabilities and equity
 
$
1,962.0

 
$
1,980.1

(See Accompanying Notes)

3
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SunCoke Energy, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Cash Flows from Continuing Operating Activities:
 
 
 
 
Net income (loss)
 
$
0.4

 
$
(3.8
)
Adjustments to reconcile net income (loss) to net cash provided by continuing operating activities:
 
 
 
 
Loss from discontinued operations, net of tax
 
2.0

 
6.0

Depreciation and amortization expense
 
23.8

 
24.4

Deferred income tax expense (benefit)
 
3.1

 
(1.8
)
Gain on curtailment and payments in excess of expense for retirement plans
 
(4.7
)
 
(0.9
)
Share-based compensation expense
 
1.5

 
2.3

Excess tax benefit from share-based awards
 
—

 
(0.2
)
Loss from equity method investment
 
0.7

 
0.6

Loss on extinguishment of debt
 
9.4

 
—

Changes in working capital pertaining to operating activities:
 
 
 
 
Receivables
 
16.4

 
7.3

Inventories
 
10.6

 
10.9

Accounts payable
 
(10.7
)
 
(13.6
)
Accrued liabilities
 
(6.3
)
 
(20.0
)
Interest payable
 
(11.2
)
 
(10.4
)
Income taxes
 
(2.8
)
 
1.2

       Other
 
(5.6
)
 
(6.7
)
Net cash provided by (used in) continuing operating activities
 
26.6

 
(4.7
)
Cash Flows from Continuing Investing Activities:
 
 
 
 
Capital expenditures
 
(8.3
)
 
(37.5
)
Net cash used in continuing investing activities
 
(8.3
)
 
(37.5
)
Cash Flows from Continuing Financing Activities:
 
 
 
 
Proceeds from issuance of long-term debt
 
210.8

 
—

Repayment of long-term debt
 
(149.5
)
 
—

Debt issuance costs
 
(4.2
)
 
—

Proceeds from revolving facility
 
—

 
16.0

Repayment of revolving facility
 
—

 
(16.0
)
Cash distribution to noncontrolling interests
 
(9.1
)
 
(6.4
)
Shares repurchased
 
(20.0
)
 
—

Proceeds from exercise of stock options, net of shares withheld for taxes
 
(0.5
)
 
0.2

Excess tax benefit from share-based awards
 
—

 
0.2

Dividends paid
 
(3.9
)
 
—

Net cash provided by (used in) continuing financing activities
 
23.6

 
(6.0
)
Net increase (decrease) in cash and cash equivalents from continuing operations
 
41.9

 
(48.2
)
Cash Flows from Discontinued Operations:
 
 
 
 
Cash flows from discontinued operations - operating activities
 
(15.5
)
 
(6.6
)
Cash flows from discontinued operations - investing activities
 
—

 
(0.6
)
Net decrease in cash and cash equivalents from discontinued operations
 
(15.5
)
 
(7.2
)
Net increase (decrease) in cash and cash equivalents
 
26.4

 
(55.4
)
Cash and cash equivalents at beginning of period
 
139.0

 
233.6

Cash and cash equivalents at end of period
 
$
165.4

 
$
178.2

(See Accompanying Notes)

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SunCoke Energy, Inc.
Consolidated Statements of Equity
(Unaudited) 
 
Common Stock
 
Treasury Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Total  SunCoke
Energy, Inc.  Equity
 
Noncontrolling
Interests
 
Total
Equity
Shares
 
Amount
 
Shares
 
Amount
 
 
(Dollars in millions)
At December 31, 2014
71,251,529

 
$
0.7

 
4,977,115

 
$
(105.0
)
 
$
543.6

 
$
(21.5
)
 
$
13.9

 
$
431.7

 
$
273.7

 
$
705.4

Net (loss) income
—

 
—

 
—

 
—

 
—

 
—

 
(4.0
)
 
(4.0
)
 
4.4

 
0.4

Retirement benefit plans adjustment (net of related tax expense of $1.6 million)
—

 
—

 
—

 
—

 
—

 
(2.4
)
 
—

 
(2.4
)
 
—

 
(2.4
)
Currency translation adjustment
—

 
—

 
—

 
—

 
—

 
(1.1
)
 
—

 
(1.1
)
 
—

 
(1.1
)
Adjustments from changes in ownership of SunCoke Energy Partners, L.P.
—

 
—

 
—

 
—

 
(6.2
)
 
—

 
—

 
(6.2
)
 
6.2

 
—

Cash distribution to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(9.1
)
 
(9.1
)
Dividends paid
—

 
—

 
—

 
—

 
—

 
—

 
(3.9
)
 
(3.9
)
 
—

 
(3.9
)
Share-based compensation expense
—

 
—

 
—

 
—

 
1.5

 
—

 
—

 
1.5

 
—

 
1.5

Share issuances, net of shares withheld for taxes
137,918

 
—

 
—

 
—

 
(0.5
)
 
—

 
—

 
(0.5
)
 
—

 
(0.5
)
Shares repurchased
—

 
—

 
1,184,280

 
(20.0
)
 
—

 
—

 
—

 
(20.0
)
 
—

 
(20.0
)
At March 31, 2015
71,389,447

 
$
0.7

 
6,161,395

 
$
(125.0
)
 
$
538.4

 
$
(25.0
)
 
$
6.0

 
$
395.1

 
$
275.2

 
$
670.3

(See Accompanying Notes)

5
Table of Contents

SunCoke Energy, Inc.
Notes to the Consolidated Financial Statements
1. General
Description of Business
SunCoke Energy, Inc. (“SunCoke Energy”, “Company”, "we", "our" and "us") is an independent owner and operator of five cokemaking facilities in the United States ("U.S.") and operator of a cokemaking facility in Brazil, in which we have a preferred stock investment. We also have a 49 percent ownership interest in a cokemaking joint venture in India called Visa SunCoke Limited (“VISA SunCoke”). Our Coal Logistics business provides coal handling and blending services to third party customers as well as to our own cokemaking facilities. Additionally, we own coal mining operations in Virginia and West Virginia, which are reflected as discontinued operations in the Company's consolidated financial statements. See Note 2.
Our consolidated financial statements include SunCoke Energy Partners, L.P. (the "Partnership"), a publicly traded partnership. At March 31, 2015, we owned the general partner of the Partnership, which consists of a 2.0 percent ownership interest and incentive distribution rights, and owned a 56.1 percent limited partner interest in the Partnership. The remaining 41.9 percent interest in the Partnership was held by public unitholders.
Incorporated in Delaware in 2010 and headquartered in Lisle, Illinois, we became a publicly traded company in 2011 and our stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “SXC.”
Basis of Presentation
The accompanying unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim reporting. Certain information and disclosures normally included in financial statements have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In management’s opinion, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. The results of operations for the period ended March 31, 2015 are not necessarily indicative of the operating results expected for the entire year. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.
The results of our coal mining operations have been classified as discontinued operations for all periods presented. See Note 2. Unless otherwise specified, the information in the notes to the consolidated financial statements relates to our continuing operations.
New Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, "Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. It is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company early adopted this ASU during the first quarter of 2015. See Note 7.
In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 eliminates the deferral of FASB Statement No. 167, "Amendments to FASB Interpretation No. 46(R)," and makes changes to both the variable interest model and the voting model. It is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect this ASU to have a material effect on the Company's financial condition, results of operations, or cash flows.
Reclassifications
Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current year presentation.
2. Coal Discontinued Operations
In July 2014, the Company's Board of Directors authorized the Company to sell and/or otherwise dispose of the Company’s coal mining business. We have since been actively marketing this business for sale. Concurrent with this authorization, the coal mining operations were, and continue to be, reflected as discontinued operations. The related net assets are presented as held for sale in the Company’s consolidated financial statements and are stated at fair value less costs to sell.

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The coal mining net assets and results of operations for all periods presented have been reclassified to reflect discontinued operations and held for sale presentation. The Company's coal mining business was previously reported as the Coal Mining reportable segment.
Certain coal mining assets (i.e. coal preparation plant) and liabilities (i.e. black lung, workers' compensation, certain asset retirement obligations and net pension and other postretirement employee benefit obligations) are expected to be retained by the Company and are not part of the disposal group, and therefore, are reported in continuing operations in Corporate and Other as legacy items. Legacy assets totaled $10.2 million and $12.9 million and legacy liabilities totaled $86.3 million and $86.9 million at March 31, 2015 and December 31, 2014, respectively. Legacy income of $1.9 million was included in continuing operations for the three months ended March 31, 2015 and was driven by a $4.0 million postretirement benefit plan curtailment gain. See Note 8. Legacy expense was $1.5 million for the three months ended March 31, 2014 and was included in continuing operations.
During the first quarter of 2015, we reduced our severance accrual by $2.2 million as a result of changes in estimates, including the relocation of certain coal employees to other areas of our business. Additionally, we incurred $1.2 million in costs to idle mines during the first quarter of 2015. Since the third quarter of 2014, we have incurred total exit and disposal costs of $17.5 million associated with employee severance, contract termination and other one-time costs to idle mines, and we expect to incur additional exit and disposal costs of $0.5 million to $3.5 million during the remainder of 2015.
Summarized below is the major financial information of our coal business presented as held for sale on our Consolidated Balance Sheet:
 
 
March 31,
2015
 
December 31,
2014
 
 
(Dollars in millions)
Assets
 
 
 
 
Receivables
 
$
2.5

 
$
2.8

Inventories
 
7.9

 
8.8

Properties, plants and equipment, net
 
30.7

 
31.1

Lease and mineral rights, net
 
18.6

 
18.6

Other current assets
 
3.3

 
3.5

Valuation allowance
 
(43.8
)
 
(45.5
)
Total current assets held for sale
 
$
19.2

 
$
19.3

Liabilities
 
 
 
 
Accounts payable
 
$
7.6

 
$
10.4

Accrued liabilities
 
9.5

 
19.9

Asset retirement obligations
 
7.0

 
7.1

Total current liabilities held for sale
 
$
24.1

 
$
37.4


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Summarized below is the major financial information of our coal business presented as discontinued operations in our Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Revenues
 
 
 
 
Total revenues
 
$
3.6

 
$
7.1

Costs and operating expenses
 
 
 
 
Cost of products sold and operating expenses
 
7.6

 
10.5

Selling, general and administrative (income) expenses(1)
 
(1.9
)
 
1.2

Depreciation, depletion and amortization
 
—

 
4.4

Pre-tax loss from discontinued operations
 
(2.1
)
 
(9.0
)
Income tax benefit
 
0.1

 
3.0

Loss from discontinued operations, net of tax
 
$
(2.0
)
 
$
(6.0
)
(1)
The three months ended March 31, 2015 includes $2.2 million of income related to an adjustment in the coal severance accrual.
3. Dropdown Transactions
Granite City Dropdown
On January 13, 2015, the Company contributed a 75 percent interest in its Granite City, IL cokemaking facility ("Granite City") to the Partnership for a total transaction value of $245.0 million (the "Granite City Dropdown"). The remaining 25 percent interest continues to be owned by the Company. Subsequent to the Granite City Dropdown, we continued to own the general partner of the Partnership, which consists of a 2.0 percent ownership interest and incentive distribution rights, and a 56.1 percent limited partner interest in the Partnership. The remaining 41.9 percent limited partner interest in the Partnership was held by public unitholders and was reflected as a noncontrolling interest in the consolidated financial statements.
The total transaction value of $245.0 million included $50.7 million of Partnership common units issued to the Company and approximately $1.0 million of general partner interests. In addition, the Partnership assumed and repaid $135.0 million of our 7.625 percent senior notes due in 2019 ("Notes") as well as $5.6 million of accrued interest and the applicable redemption premium of $7.7 million. The Partnership withheld the remaining transaction value of $45.0 million to pre-fund our obligation to the Partnership for the anticipated cost of an environmental remediation project at Granite City. The Partnership funded the redemption of the Notes with net proceeds from a private placement of an additional $200.0 million of senior notes due in 2020 ("Partnership Notes"). See Note 7.
We accounted for the Granite City Dropdown as an equity transaction, which resulted in an increase in noncontrolling interest and a decrease in SunCoke Energy's equity of $6.2 million. The table below summarizes the effects of the changes in the Company’s ownership interest in Granite City on SunCoke Energy's equity.
 
Three Months Ended March 31, 2015
 
(Dollars in millions)
Net loss attributable to SunCoke Energy, Inc.
$
(4.0
)
Decrease in SunCoke Energy, Inc. equity for the contribution of 75 percent interest in Granite City
(6.2
)
Change from net loss attributable to SunCoke Energy, Inc. and transfers to noncontrolling interest
$
(10.2
)
Haverhill and Middletown Dropdown
On May 9, 2014, SunCoke Energy contributed an additional 33 percent interest in each of the Haverhill, OH ("Haverhill") and Middletown, OH ("Middletown") cokemaking facilities to the Partnership for total transaction value of $365.0 million (the "Haverhill and Middletown Dropdown"). After the Haverhill and Middletown Dropdown, SunCoke Energy continued to own the general partner of the Partnership, which consisted of a 2.0 percent ownership interest and incentive distribution rights, and decreased its limited partner interest in the Partnership from 55.9 percent to 54.1 percent. The

8
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remaining 43.9 percent interest in the Partnership was held by public unitholders and was reflected as a noncontrolling interest in the consolidated financial statements.
The total transaction value included 2.7 million common units totaling $80.0 million and $3.3 million of general partner interests. In addition, the Partnership assumed and repaid approximately $271.3 million of our outstanding debt and other liabilities, including a market premium of $11.4 million to complete the tender for and cancellation of certain of our Notes. The remaining transaction value of $10.4 million consisted of a $3.4 million cash payment from the Partnership and $7.0 million withheld by the Partnership to pre-fund our obligation to the Partnership for the anticipated cost of the environmental remediation project at Haverhill.
In conjunction with the Haverhill and Middletown Dropdown, the Partnership issued 3.2 million common units to the public for $88.7 million of net proceeds, which was completed on April 30, 2014, and received approximately $263.1 million of gross proceeds from the issuance of $250.0 million aggregate principal amount of 7.375 percent senior notes due 2020 through a private placement on May 9, 2014. In addition, the Partnership received $5.0 million to fund interest from February 1, 2014 to May 9, 2014, the period prior to the issuance. This interest was paid to noteholders on August 1, 2014. See Note 7.
We accounted for the Haverhill and Middletown Dropdown as an equity transaction, which resulted in a decrease in noncontrolling interest and an increase in SunCoke Energy's equity of $83.7 million during the second quarter of 2014.
4. Inventories
The components of inventories were as follows:
 
 
March 31, 2015
 
December 31, 2014
 
 
(Dollars in millions)
Coal
 
$
77.0

 
$
96.5

Coke
 
16.7

 
6.9

Materials, supplies and other
 
34.8

 
35.7

Total inventories
 
$
128.5

 
$
139.1

5. Income Taxes
At the end of each interim period, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year and the impact of discrete items, if any, and adjust the rate as necessary.
The Company's effective tax rate from continuing operations was 27.9 percent for the three months ended March 31, 2015, primarily due to income tax benefits related to the Granite City Dropdown transaction and the impact of earnings attributable to noncontrolling ownership interests in partnerships, partially offset by additional valuation allowances associated with state and local taxes.
The Company’s effective tax rate from continuing operations was 75.0 percent for the three months ended March 31, 2014, primarily due to income tax benefits of $2.0 million related to enacted reduction in Indiana statutory tax rate, $1.0 million related to tax credits and the impact of earnings that are attributable to noncontrolling ownership interests in partnerships. The income tax benefits were offset by $1.1 million of additional valuation allowances associated with state and local taxes.
The Company has not recorded income taxes on the undistributed earnings of our India joint venture because such earnings are intended to be reinvested indefinitely to finance foreign activities. These additional foreign earnings could be subject to additional tax if remitted, or deemed remitted, as a dividend. At March 31, 2015, our VISA SunCoke joint venture had a cumulative loss on unconsolidated earnings.
On January 17, 2012, SunCoke Energy and Sunoco, Inc. entered into a tax sharing agreement that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. SunCoke Energy will continue to monitor the utilization of all tax attributes subject to the tax sharing agreement as applicable tax returns are filed or as tax examinations progress and will record additional adjustments when necessary, consistent with the terms of the tax sharing agreement.

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6. Accrued Liabilities
Accrued liabilities consisted of the following:
 
 
March 31, 2015
 
December 31, 2014
 
 
(Dollars in millions)
Accrued benefits
 
$
16.2

 
$
23.2

Other taxes payable
 
10.5

 
10.3

Other
 
8.6

 
8.1

Total accrued liabilities
 
$
35.3

 
$
41.6

7. Debt
Total long-term debt, consisted of the following:
 
 
March 31, 2015
 
December 31, 2014
 
 
(Dollars in millions)
7.625% senior notes, due 2019 ("Notes")
 
$
105.0

 
$
240.0

7.375% senior notes, due 2020 (“Partnership Notes”), including original issue premium of $14.9 million and $11.5 million at March 31, 2015 and December 31, 2014, respectively.
 
614.9

 
411.5

Debt issuance costs
 
(20.6
)
 
(18.0
)
Total long-term debt
 
$
699.3

 
$
633.5

On January 13, 2015 in connection with the Granite City Dropdown, the Partnership issued an additional $200.0 million of Partnership Notes.  Proceeds of $204.0 million included an original issue premium of $4.0 million.  In addition, the Partnership received $6.8 million to fund interest from August 1, 2014 to January 13, 2014, the interest period prior to issuance. This interest was repaid to noteholders on February 1, 2015. The Partnership incurred debt issuance costs of $5.2 million, of which $1.0 million was considered a modification of debt and was recorded in interest expense, net on the Consolidated Statement of Operations and was included in other operating cash flows on the Consolidated Statement of Cash Flows.
Also, in connection with the Granite City Dropdown, the Partnership assumed and repaid $135.0 million principal amount of SunCoke Energy's outstanding Notes and paid interest of $5.6 million. The Partnership also paid a redemption premium of $7.7 million, which was included in interest expense, net on the Consolidated Statement of Operations. The Partnership assumed $2.2 million in debt issuance costs in connection with the assumption of this debt from SunCoke Energy, $0.7 million of which related to the portion of the debt extinguished and was recorded in interest expense, net on the Consolidated Statement of Operations. 
Under the Company's credit agreement dated July 26, 2011, as amended ("Credit Agreement"), the Company has a $150.0 million revolving credit facility ("Revolving Facility"). At March 31, 2015, the Revolving Facility had letters of credit outstanding of $1.5 million, leaving $148.5 million available.
The Company and the Partnership are subject to certain debt covenants that, among other things, limit the Company's and the Partnership’s ability and the ability of certain of the Company's and the Partnership’s subsidiaries to (i) incur indebtedness, (ii) pay dividends or make other distributions, (iii) prepay, redeem or repurchase certain debt, (iv) make loans and investments, (v) sell assets, (vi) incur liens, (vii) enter into transactions with affiliates and (viii) consolidate or merge. These covenants are subject to a number of exceptions and qualifications set forth in the respective agreements. Additionally, under the terms of the Credit Agreement, the Company is subject to a maximum consolidated leverage ratio of 3.75:1.00, calculated by dividing total debt by EBITDA as defined by the Credit Agreement, and a minimum consolidated interest coverage ratio of 2.75:1.00, calculated by dividing EBITDA by interest expense as defined by the Credit Agreement. Under the terms of the Partnership's revolving credit facility (the "Partnership Revolver"), the Partnership is subject to a maximum consolidated leverage ratio of 4.00:1.00, calculated by dividing total debt by EBITDA as defined by the Partnership Revolver, and a minimum consolidated interest coverage ratio of 2.50:1.00, calculated by dividing EBITDA by interest expense as defined by the Partnership Revolver. At March 31, 2015, the Company and the Partnership were in compliance with all applicable debt covenants contained in the Credit Agreement and the Partnership Revolver. We do not anticipate any violation of these covenants nor do we anticipate that any of these covenants will restrict our operations or our ability to obtain additional financing.

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On April 21, 2015, the Company amended the Credit Agreement to allow for unlimited restricted payment capacity if the Company maintains a consolidated leverage ratio less than 2.00 and has at least $75.0 million of total liquidity (cash and revolver capacity). Further, the maximum consolidated leverage ratio was decreased from 3.75:1.00 to 3.25:1.00. Additionally, the Partnership amended the Partnership Revolver to increase the maximum consolidated leverage ratio from 4.00:1.00 to 4.50:1.00.
8. Retirement Benefits Plans
Defined Benefit Pension Plan and Postretirement Health Care and Life Insurance Plans
The Company has a noncontributory defined benefit pension plan (“defined benefit plan”), which provides retirement benefits for certain of its employees. The Company also 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, pension benefits under the Company’s defined benefit plan were frozen for all participants in this plan. Postretirement medical benefits for future retirees were phased out or eliminated, effective January 1, 2011, for non-mining employees with less than ten years of service and employer costs for all those still eligible for such benefits were capped.
Effective May 30, 2014, Dominion Coal Corporation ("Dominion Coal"), a wholly-owned subsidiary of the Company, terminated its defined benefit plan, a plan that was previously offered to generally all full-time employees of Dominion Coal. Distribution of plan assets resulting from the termination of the Dominion Coal defined benefit plan will not be made until the Internal Revenue Service and Pension Benefit Guarantee Corporation determines that this termination satisfies applicable regulatory requirements. This determination is expected to occur in mid-2015, at which time settlement accounting also will occur. As a result of the termination of the Dominion Coal defined benefit plan, each participant will become fully vested in his or her benefits thereunder without regard to age and years of service. Participants with $25 thousand or less of benefits owed will have the option of receiving a lump sum payout or an annuity in full payment of such benefits. All other participants will receive an annuity in full payment of their benefits under the Dominion Coal defined benefit plan.
The termination of coal mining employees during the first quarter of 2015 triggered a postretirement benefit plan curtailment gain of $4.0 million, which represented accelerated amortization of prior service credits previously recorded in accumulated other comprehensive income.
Defined benefit plan expense consisted of the following components:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Interest cost on benefit obligations
 
$
0.4

 
$
0.4

Expected return on plan assets
 
(0.4
)
 
(0.4
)
Amortization of actuarial losses
 
0.2

 
0.1

Total expense
 
$
0.2

 
$
0.1

Postretirement benefit plans benefit consisted of the following components:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Interest cost on benefit obligations
 
$
0.3

 
$
0.4

Amortization of:
 
 
 
 
Actuarial losses
 
0.2

 
0.3

Prior service benefit
 
(0.4
)
 
(1.4
)
Curtailment gain
 
(4.0
)
 
—

Total benefit
 
$
(3.9
)
 
$
(0.7
)

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9. Commitments and Contingent Liabilities
SunCoke Energy is party to an omnibus agreement pursuant to which we will provide remarketing efforts to the Partnership upon the occurrence of certain potential adverse events under certain coke sales agreements, indemnification of certain environmental costs and preferential rights for growth opportunities.
The United States Environmental Protection Agency (the “EPA”) has issued Notices of Violations (“NOVs”) for our Haverhill and Granite City cokemaking facilities which stem from alleged violations of our air emission operating permits for these facilities. We are working in a cooperative manner with the EPA, the Ohio Environmental Protection Agency and the Illinois Environmental Protection Agency to address the allegations, and have entered into a consent decree in federal district court with these parties. The consent decree includes an approximate $2.2 million civil penalty payment, which was paid in December 2014, as well as capital projects already underway to improve the reliability of the energy recovery systems and enhance environmental performance at Haverhill and Granite City. We anticipate spending approximately $125 million related to these projects, of which we have spent approximately $78 million to date. The remaining capital is expected to be spent through the first quarter of 2017. A portion of the proceeds from the Partnership offering, the Haverhill and Middletown Dropdown and the Granite City Dropdown are being used to fund $119 million of these environmental remediation projects.
SunCoke Energy has also received NOVs and a Finding of Violation ("FOV") from the EPA related to our Indiana Harbor cokemaking facility. After initial discussions with the EPA and the Indiana Department of Environmental Management (“IDEM”), resolution of the NOVs was postponed by mutual agreement because of ongoing discussions regarding the NOVs at Haverhill and Granite City. In January 2012, the Company began working in a cooperative manner to address the allegations with the EPA, the IDEM and Cokenergy, Inc., an independent power producer that owns and operates an energy facility, including heat recovery equipment and a flue gas desulfurization system, that processes hot flue gas from our Indiana Harbor facility to produce steam and electricity and to reduce the sulfur and particulate content of such flue gas. Settlement may require payment of a penalty for alleged past violations as well as undertaking capital projects to enhance reliability and environmental performance. At this time, SunCoke Energy cannot yet assess any future injunctive relief or potential monetary penalty and any potential future citations. The Company is unable to estimate a range of probable or reasonably possible loss.
The Company is in discussions with ArcelorMittal to resolve claims by ArcelorMittal that certain shipments of coke did not meet coke quality targets. In the fourth quarter of 2013, the Company recorded an estimated liability of $2.5 million for the possible reimbursement of certain freight and handling costs incurred by ArcelorMittal and for the Company’s potential legal fees and costs in connection with this matter.
Other legal and administrative proceedings are pending or may be brought against the Company arising out of its current and past operations, including matters related to commercial and tax disputes, product liability, antitrust, employment claims, premises-liability claims, allegations of exposures of third parties to toxic substances and general 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 such matters would not be material in relation to the financial position, results of operations or cash flows of the Company at March 31, 2015.
10. Share-Based Compensation
During the three months ended March 31, 2015, we granted share-based compensation to eligible participants under the SunCoke Energy, Inc. Long-Term Performance Enhancement Plan (“SunCoke LTPEP”).
Stock Options
We granted stock options to purchase 554,294 shares of common stock during the three months ended March 31, 2015 with an exercise price equal to the closing price of our common stock on the date of grant. The stock options become exercisable in three equal annual installments beginning one year from the date of grant. The stock options expire ten years from the date of grant. All awards vest immediately upon a change in control and a qualifying termination of employment as defined by the SunCoke LTPEP.

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The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-Scholes option pricing model. The weighted-average fair value of employee stock options granted during the three months ended March 31, 2015 was $5.08 using the following weighted-average assumptions:
 
 
Three Months Ended March 31, 2015
Risk-free interest rate
 
1.67
%
Expected term
 
5 years

Volatility
 
36
%
Dividend yield
 
1.38
%
Exercise price
 
$
16.90

We based our expected volatility on our historical volatility over our entire available trading history. The risk-free interest rate assumption is based on the U.S. Treasury yield curve at the date of grant for periods which approximate the expected life of the option. The dividend yield assumption is based on the Company’s expectation of dividend payouts at the time of grant. The expected life of employee options represents the average contractual term adjusted by the average vesting period of each option tranche. The Company estimated a four percent forfeiture rate for these awards. This estimated forfeiture rate may be revised in subsequent periods if the actual forfeiture rate differs.
The Company recognized compensation expense of $0.6 million and $1.3 million for stock options during the three months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, there was $5.0 million of total unrecognized compensation cost related to nonvested stock options. This compensation cost is expected to be recognized over the next 2.1 years.
Restricted Stock Units
The Company issued 213,171 restricted stock units (“RSUs”) for shares of the Company’s common stock during the three months ended March 31, 2015 that vest in three annual installments beginning one year from the grant date. All awards vest immediately upon a change in control and a qualifying termination of employment as defined by the SunCoke LTPEP. The weighted-average fair value of the RSUs granted during the three months ended March 31, 2015 of $16.90 was based on the closing price of our common stock on the date of grant. The Company estimated a ten percent forfeiture rate for these awards. This estimated forfeiture rate may be revised in subsequent periods if the actual forfeiture rate differs.
The Company recognized compensation expense of $0.7 million and $0.8 million for RSUs during the three months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, there was $7.6 million of total unrecognized compensation cost related to nonvested RSUs. This compensation cost is expected to be recognized over the next 1.9 years.
Performance Share Units
The Company issued 146,154 performance share units ("PSUs") for shares of the Company's common stock during the three months ended March 31, 2015 that vest on December 31, 2017. All awards vest immediately upon a change in control and a qualifying termination of employment as defined by the SunCoke LTPEP. The weighted average fair value of the PSUs granted during the three months ended March 31, 2015 is $17.58 and is based on the closing price of our common stock on the date of grant as well as a Monte Carlo simulation for the portion of the award subject to a market condition. The Company estimated a zero percent forfeiture rate for these awards. This estimated forfeiture rate may be revised in subsequent periods if the actual forfeiture rate differs.
The number of PSUs ultimately awarded will be adjusted based upon the following metrics: (1) 50 percent of the award will be determined by the Company's three year total shareholder return ("TSR") as compared to the TSR of the companies making up the S&P 600; and (2) 50 percent of the award will be determined by the Company's three year average pre-tax return on capital for the Company's coke business. Each portion of the award may be adjusted between zero and 200 percent of the original units granted.
The Company recognized compensation expense of $0.2 million for PSUs during both the three months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, there was $4.3 million of total unrecognized compensation cost related to nonvested PSUs. This compensation cost is expected to be recognized over the next 2.4 years.
11. Earnings per Share
Basic earnings per share has been computed by dividing net income (loss) from continuing operations available to SunCoke Energy, Inc. by the weighted average number of shares outstanding during the period. Except where the result would

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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 (“EPS”) to those used to compute diluted EPS:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Shares in millions)
Weighted-average number of common shares outstanding-basic
 
66.2

 
69.7

Add: Effect of dilutive share-based compensation awards
 
—

 
—

Weighted-average number of shares-diluted
 
66.2

 
69.7

The potential dilutive effect of 2.3 million stock options, 0.5 million restricted stock units and 0.1 million performance share units were excluded from the computation of diluted weighted-average shares outstanding for the three months ended March 31, 2015, as the shares would have been anti-dilutive. The potential dilutive effect of 2.7 million options, 0.5 million restricted stock units and 0.1 million performance share units were excluded from the computation of diluted weighted-average shares outstanding for the three months ended March 31, 2014, as the shares would have been anti-dilutive.
Under the $150.0 million share repurchase program authorized by the Company's Board of Directors on July 23, 2014, the Company entered into a share repurchase agreement on January 28, 2015 for the buyback of $20.0 million of our common stock, leaving $55.0 million available under the authorized repurchase program. On March 18, 2015, 1.2 million shares were received for an average price of $16.89 per share.
12. Supplemental Accumulated Other Comprehensive Loss Information
Changes in accumulated other comprehensive loss, by component, are presented below:
 
Defined Benefit Plans
 
Currency Translation Adjustments
 
Total
 
(Dollars in millions)
At December 31, 2014
$
(9.4
)
 
$
(12.1
)
 
$
(21.5
)
Other comprehensive loss before reclassifications
—

 
(1.1
)
 
(1.1
)
Amounts reclassified from accumulated other comprehensive loss
(2.4
)
 
—

 
(2.4
)
Net current period other comprehensive loss
(2.4
)
 
(1.1
)
 
(3.5
)
At March 31, 2015
$
(11.8
)
 
$
(13.2
)
 
$
(25.0
)

Reclassifications out of the accumulated other comprehensive loss were as follows:(1) 
 
Three Months Ended March 31,
 
2015
 
2014
 
(Dollars in millions)
Amortization of postretirement and defined benefit plan items to net income:
 
 
 
Prior service benefit(2)
$
(0.4
)
 
$
(1.4
)
Actuarial loss(2)
0.4

 
0.4

Curtailment gain(2)
(4.0
)
 
—

Total before taxes
(4.0
)
 
(1.0
)
       Income tax expense
1.6

 
0.4

Total, net of tax
$
(2.4
)
 
$
(0.6
)
(1)
Amounts in parentheses indicate credits to net income.
(2)
These accumulated other comprehensive (income) loss components are included in the computation of postretirement benefit plan (benefit) and defined benefit plan expense. See Note 8.

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13. Fair Value Measurement
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 from the sale of 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
Certain assets and liabilities are measured at fair value on a recurring basis. The Company's cash equivalents, which amounted to $90.8 million and $88.2 million at March 31, 2015 and December 31, 2014, respectively, were measured at fair value based on quoted prices in active markets for identical assets. These inputs are classified as Level 1 within the valuation hierarchy.
Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment).
Coal Disposal Group Valuation
Since the presentation of our coal mining business as held for sale in the third quarter of 2014, the Company has continued to assess the carrying value of the disposal group in each reporting period and adjusted the carrying value to fair value less costs to sell. This resulted in a valuation allowance of $43.8 million in current assets held for sale on the Consolidated Balance Sheet at March 31, 2015. The fair value was estimated utilizing a market approach, which was considered Level 2 in the fair value hierarchy.
Certain Financial Assets and Liabilities not Measured at Fair Value
At March 31, 2015, the fair value of the Company’s long-term debt was estimated to be $723.7 million, compared to a carrying amount of $719.9 million, which includes the original issue premium. The fair value was estimated by management based upon estimates of debt pricing provided by financial institutions, which are considered Level 2 inputs.

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14. Business Segment Information
The Company reports our business through four segments: Domestic Coke, Brazil Coke, India Coke and Coal 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. Coke sales at each of the Company's five domestic cokemaking facilities are made pursuant to long-term take-or-pay agreements with ArcelorMittal, AK Steel, and U.S. Steel. Each of the coke sales agreements contains pass-through provisions for costs incurred in the cokemaking process, including coal procurement costs (subject to meeting contractual coal-to-coke yields), operating and maintenance expense, costs related to the transportation of coke to the customers, taxes (other than income taxes) and costs associated with changes in regulation, in addition to containing a fixed fee.
We also own a 49 percent interest in a cokemaking joint venture called VISA SunCoke with VISA Steel. VISA SunCoke is comprised of a 440 thousand ton heat recovery cokemaking facility and the facility's associated steam generation units in Odisha, India. We account for this investment under the equity method and recognize our share of earnings on a one-month lag. The results of our joint venture are presented below in the India Coke segment.
The Brazil Coke segment operates a cokemaking facility located in Vitória, Brazil for a project company. The Brazil Coke segment earns income from the Brazilian facility through (1) licensing and operating fees payable to us under long-term contracts with the local project company that will run through at least 2022; and (2) an annual preferred dividend on our preferred stock investment from the project company guaranteed by the Brazil subsidiary of ArcelorMittal.
Coal Logistics operations are comprised of SunCoke Lake Terminal, LLC ("Lake Terminal") located in Indiana and Kanawha River Terminals ("KRT") located in Kentucky and West Virginia. This business provides coal handling and blending services to third party customers as well as SunCoke cokemaking facilities and has a collective capacity to blend and transload more than 30 million tons of coal annually. Coal handling and blending results are presented in the Coal 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, including certain legacy coal mining assets (i.e. coal preparation plant) and liabilities (i.e. black lung, workers' compensation, certain asset retirement obligations and net pension and other postretirement employee benefit obligations), which are expected to be retained by the Company. See Note 2. The related legacy costs are included in Corporate and Other and are included in Consolidated Adjusted EBITDA but are excluded from Adjusted EBITDA from continuing operations. Interest expense, net, which consists principally of interest income and interest expense, net of capitalized interest, is also excluded from segment results. Segment assets, net of tax are those assets that are utilized within a specific segment and exclude deferred taxes and current tax receivables.

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The following table includes Adjusted EBITDA, 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:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Sales and other operating revenue:
 
 
 
 
Domestic Coke
 
$
303.1

 
$
333.5

Brazil Coke
 
9.9

 
9.3

Coal Logistics
 
7.3

 
8.7

Coal Logistics intersegment sales
 
4.7

 
4.2

Corporate and other intersegment sales
 
2.5

 
5.0

Elimination of intersegment sales
 
(7.2
)
 
(9.2
)
Total sales and other operating revenue
 
$
320.3

 
$
351.5

 
 
 
 


Adjusted EBITDA:
 
 
 
 
Adjusted EBITDA from continuing operations:
 

 


Domestic Coke
 
$
52.7

 
$
46.8

Brazil Coke
 
4.1

 
1.7

India Coke
 
(0.7
)
 
0.1

Coal Logistics
 
2.6

 
2.1

Corporate and Other
 
(9.6
)
 
(11.2
)
Total Adjusted EBITDA from continuing operations
 
49.1

 
39.5

Legacy income (costs), net(1)
 
1.9

 
(1.5
)
Adjusted EBITDA from discontinued operations
 
(3.1
)
 
(4.4
)
Adjusted EBITDA
 
$
47.9

 
$
33.6

 
 
 
 
 
Depreciation and amortization expense:
 
 
 
 
Domestic Coke(2)
 
$
18.2

 
$
21.0

Brazil Coke
 
0.2

 
0.1

Coal Logistics
 
1.8

 
1.8

Corporate and Other(3)
 
3.6

 
1.5

Total depreciation and amortization expense
 
$
23.8

 
$
24.4

 
 
 
 
 
Capital expenditures:
 
 
 
 
Domestic Coke
 
$
8.0

 
$
36.3

Brazil Coke
 
—

 
—

Coal Logistics
 
0.2

 
0.3

Corporate and Other
 
0.1

 
0.9

Total capital expenditures
 
$
8.3

 
$
37.5

(1)
Legacy income (costs), net, includes royalty revenues and costs related to coal mining assets and liabilities expected to be retained by SunCoke Energy, which are not part of the disposal group. See details of these legacy items in the table at the end of this footnote.
(2)
We revised the estimated useful life of certain assets at Indiana Harbor in connection with both the refurbishment project as well as the additional work on the oven floors and sole flues, which resulted in additional depreciation of $0.4 million and $5.6 million, or $0.01 and $0.08 per common share from continuing operations, during the three months ended March 31, 2015 and 2014, respectively.
(3)
Based on the Company plans to demolish the preparation plant, we revised the estimated useful lives of certain coal preparation plant assets located at our Jewell facility, which resulted in additional depreciation of $2.0 million, or $0.03 per common share from continuing operations, during the three months ended March 31, 2015. As the coal preparation plant will not be sold with the rest of the coal mining business, these assets and related depreciation expense are not included in the disposal group in discontinued operations but are instead included in Corporate and Other.

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The following table sets forth the Company’s total sales and other operating revenue by product or service:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Coke sales
 
$
286.5

 
$
315.8

Steam and electricity sales
 
16.6

 
17.8

Operating and licensing fees
 
9.9

 
9.3

Coal logistics
 
7.0

 
8.0

Other
 
0.3

 
0.6

Sales and other operating revenue
 
$
320.3

 
$
351.5


The following table sets forth the Company's segment assets:
 
 
March 31,
2015
 
December 31,
2014
 
 
(Dollars in millions)
Segment assets
 
 
 
 
Domestic Coke
 
$
1,610.6

 
$
1,585.5

Brazil Coke
 
61.6

 
61.6

India Coke
 
21.9

 
22.5

Coal Logistics
 
111.8

 
114.4

Corporate and Other
 
109.7

 
144.4

Segment assets, excluding tax assets and discontinued operations
 
1,915.6

 
1,928.4

Discontinued operations
 
19.2

 
19.3

Tax assets
 
27.2

 
32.4

Total assets
 
$
1,962.0

 
$
1,980.1

The Company evaluates the performance of its segments based on segment Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for impairments, costs related to exiting our coal business, interest, taxes, depreciation and amortization attributable to our equity method investment. Prior to the expiration of our nonconventional fuel tax credits in 2013, Adjusted EBITDA included an add-back of sales discounts related to the sharing of these credits with customers. Any adjustments to these amounts subsequent to 2013 have been included in Adjusted EBITDA. Our Adjusted EBITDA also includes EBITDA attributable to our equity method investment. 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.
Adjusted EBITDA from continuing operations equals consolidated Adjusted EBITDA less Adjusted EBITDA from discontinued operations less legacy costs.
Adjusted EBITDA from discontinued operations equals coal business Adjusted EBITDA excluding corporate cost allocation attributable to coal, costs related to exiting our coal business and certain retained coal-related costs reclassified as legacy costs.
Legacy costs equals royalty revenues, coal pension/other post-employment benefits, coal workers' compensation, black lung, prep. plant and certain other coal-related costs that we expect to retain after the sale of the coal business.
Management believes Adjusted EBITDA is an important measure of the operating performance of the Company's net assets and 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. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP, does not represent and should not be considered a substitute for net income as determined in accordance with GAAP. Calculations of Adjusted EBITDA may not be comparable to those reported by other companies.
Set forth below is additional detail as to how we use Adjusted EBITDA as a measure of operating performance, as well as a discussion of the limitations of Adjusted EBITDA as an analytical tool.
Operating Performance. Our management uses Adjusted EBITDA in a number of ways to assess our consolidated financial and operating performance, and we believe this measure is helpful to management in identifying trends in our

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performance. Adjusted EBITDA helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance while neutralizing the impact of capital structure on financial results. Accordingly, we believe this metric measures our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.
Limitations. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Adjusted EBITDA also has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Some of these limitations include that Adjusted EBITDA:
•
does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•
does not reflect changes in, or cash requirement for, working capital needs;
•
does not reflect our interest expense, or the cash requirements necessary to service interest on or principal payments of our debt;
•
does not reflect certain other non-cash income and expenses;
•
excludes income taxes that may represent a reduction in available cash; and
•
includes net income attributable to noncontrolling interests.
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:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Adjusted EBITDA attributable to SunCoke Energy, Inc.
 
$
29.8

 
$
24.3

Add: Adjusted EBITDA attributable to noncontrolling interests(1)
 
18.1

 
9.3

Adjusted EBITDA
 
$
47.9

 
$
33.6

Subtract:
 
 
 
 
Adjusted EBITDA from discontinued operations(2)
 
(3.1
)
 
(4.4
)
Legacy income (costs), net(3)
 
1.9

 
(1.5
)
Adjusted EBITDA from continuing operations
 
$
49.1

 
$
39.5

Subtract:
 
 
 
 
Adjustment to unconsolidated affiliate earnings(4)
 
0.3

 
1.0

Depreciation and amortization expense
 
23.8

 
24.4

Interest expense, net
 
23.3

 
12.1

Income tax expense (benefit)
 
1.2

 
(1.2
)
Sales discounts provided to customers due to sharing of nonconventional fuel tax credits(5)
 
—

 
(0.5
)
Asset impairment
 


 
—

Legacy (income) costs, net(3)
 
(1.9
)
 
1.5

Income from continuing operations
 
$
2.4

 
$
2.2

Loss from discontinued operations, net of tax
 
(2.0
)
 
(6.0
)
Net income (loss)
 
$
0.4

 
$
(3.8
)
(1)
Reflects noncontrolling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders.
(2)
See reconciliation of Adjusted EBITDA from discontinued operations below.

19
Table of Contents

 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Adjusted EBITDA from discontinued operations
 
$
(3.1
)
 
$
(4.4
)
Subtract:
 
 
 
 
Depreciation and depletion from discontinued operations
 
—

 
4.4

Income tax benefit from discontinued operations
 
(0.1
)
 
(3.0
)
Exit costs(1)
 
(1.0
)
 
0.2

Loss from discontinued operations, net of tax
 
$
(2.0
)
 
$
(6.0
)
(1)
The three months ended March 31, 2015 includes $2.2 million of income related to an adjustment in the coal severance accrual.
(3)
Legacy (income) costs, net includes royalty revenues and costs related to coal mining assets and liabilities expected to be retained by the Company which are not part of the disposal group, and therefore, are reported in continuing operations in Corporate and Other. See detail of these legacy costs in the table below.
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
(Dollars in millions)
Black lung charges
 
$
0.9

 
$
0.5

Postretirement benefit plan benefit(1)
 
(3.9
)
 
(0.2
)
Defined benefit plan expense
 
0.2

 
—

Workers compensation expense
 
0.9

 
1.2

Total legacy (income) costs, net
 
$
(1.9
)
 
$
1.5

(1)
Includes a postretirement benefit plan curtailment gain of $4.0 million, which represented accelerated amortization of prior service credits previously recorded in accumulated other comprehensive income related to the termination of coal mining employees during the first quarter of 2015.
(4)
Reflects share of interest, taxes, depreciation and amortization related to VISA SunCoke.
(5)
Sales discounts are related to nonconventional fuel tax credits, which expired in 2013. At December 31, 2013, we had $13.6 million accrued related to sales discounts to be paid to our customer at our Granite City facility. During the first quarter of 2014, we settled this obligation for $13.1 million which resulted in a gain of $0.5 million. This gain is recorded in sales and other operating revenue on our Consolidated Statement of Operations.


20
Table of Contents

15. Supplemental Condensed Consolidating Financial Information
Certain 100 percent owned subsidiaries of the Company serve as guarantors of the obligations under the Credit Agreement and $105 million Notes (“Guarantor Subsidiaries”). These guarantees are full and unconditional (subject, in the case of the Guarantor Subsidiaries, to customary release provisions as described below) and joint and several. For purposes of the following footnote, SunCoke Energy, Inc. is referred to as “Issuer.” The indenture dated July 26, 2011 among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., governs subsidiaries designated as “Guarantor Subsidiaries.” All other consolidated subsidiaries of the Company are collectively referred to as “Non-Guarantor Subsidiaries.”
The ability of the Partnership and Indiana Harbor to pay dividends and make loans to the Company is restricted under the partnership agreements of the Partnership and Indiana Harbor, respectively. The credit agreement governing the Partnership’s credit facility and the indenture governing the Partnership Notes contain customary provisions which would potentially restrict the Partnership’s ability to make distributions or loans to the Company under certain circumstances. For the year ended December 31, 2014, less than 25 percent of net assets were restricted.
In connection with the Granite City Dropdown, we entered into an amendment to our Credit Agreement. In conjunction with the amendment, we designated Gateway Energy & Coke Company, LLC and Gateway Cogeneration Company, LLC as unrestricted subsidiaries. As such, they are presented as "Non-Guarantor Subsidiaries." Prior periods have been restated to reflect this change.
The guarantee of a Guarantor Subsidiary will terminate upon:
•
a sale or other disposition of the Guarantor Subsidiary or of all or substantially all of its assets;
•
a sale of the majority of the Capital Stock of a Guarantor Subsidiary to a third party, after which the Guarantor Subsidiary is no longer a "Restricted Subsidiary" in accordance with the indenture governing the Notes;
•
the liquidation or dissolution of a Guarantor Subsidiary so long as no "Default" or "Event of Default," as defined under the indenture governing the Notes, has occurred as a result thereof;
•
the designation of a Guarantor Subsidiary as an "unrestricted subsidiary" in accordance with the indenture governing the Notes;
•
the requirements for defeasance or discharge of the indentures governing the Notes having been satisfied; and
•
the release, other than the discharge through payments by a Guarantor Subsidiary, from its guarantee under the Credit Agreement or other indebtedness that resulted in the obligation of the Guarantor Subsidiary under the indenture governing the Notes.
The following supplemental condensed combining and consolidating financial information reflects the Issuer’s separate accounts, the combined accounts of the Guarantor Subsidiaries, the combined accounts of the Non-Guarantor Subsidiaries, the combining and consolidating adjustments and eliminations and the Issuer’s consolidated accounts for the dates and periods indicated. For purposes of the following condensed combining and consolidating information, the Issuer’s investments in its subsidiaries and the Guarantor and Non-Guarantor Subsidiaries’ investments in its subsidiaries are accounted for under the equity method of accounting.

21
Table of Contents

SunCoke Energy, Inc.
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2015
(Dollars in millions)

 
 
Issuer
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Combining
and
Consolidating
Adjustments
 
Total
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Sales and other operating revenue
 
$
—

 
$
41.0

 
$
279.3

 
$
—

 
$
320.3

Equity in earnings of subsidiaries
 
—

 
6.1

 
—

 
(6.1
)
 
—

Other income
 
—

 
0.1

 
—

 
—

 
0.1

Total revenues
 
—

 
47.2

 
279.3

 
(6.1
)
 
320.4

Costs and operating expenses
 
 
 
 
 
 
 
 
 
 
Cost of products sold and operating expenses
 
—

 
32.2

 
222.3

 
—

 
254.5

Selling, general and administrative expenses
 
2.0

 
3.7

 
8.8

 
—

 
14.5

Depreciation and amortization expense
 
—

 
5.0

 
18.8

 
—

 
23.8

Total costs and operating expenses
 
2.0

 
40.9

 
249.9

 
—

 
292.8

Operating income
 
(2.0
)
 
6.3

 
29.4

 
(6.1
)
 
27.6

Interest (income) expense, net - affiliate
 
—

 
(1.8
)
 
1.8

 
—

 
—

Interest expense (income), net
 
2.8

 
(0.3
)
 
20.8

 
—

 
23.3

Total financing expense (income), net
 
2.8


(2.1
)

22.6


—

 
23.3

(Loss) Income before income tax expense and loss from equity method investment
 
(4.8
)

8.4


6.8


(6.1
)
 
4.3

Income tax (benefit) expense
 
(0.8
)
 
2.7

 
(0.7
)
 
—

 
1.2

Loss from equity method investment
 
—

 
—

 
0.7

 
—

 
0.7

(Loss) income from continuing operations
 
(4.0
)

5.7


6.8


(6.1
)
 
2.4

Loss from discontinued operations, net of income tax benefit of $0.1 million
 
—

 
(2.0
)
 
—

 
—

 
(2.0
)
Net (loss) income
 
(4.0
)

3.7


6.8


(6.1
)

0.4

Less: Net income attributable to noncontrolling interests
 
—

 
—

 
4.4

 
—

 
4.4

Net (loss) income attributable to SunCoke Energy, Inc.
 
$
(4.0
)
 
$
3.7

 
$
2.4

 
$
(6.1
)
 
$
(4.0
)
Comprehensive (income) loss
 
$
(7.5
)
 
$
1.3

 
$
5.7

 
$
(2.6
)
 
$
(3.1
)
Less: Comprehensive income attributable to noncontrolling interests
 
—

 
—

 
4.4

 
—

 
4.4

Comprehensive income attributable to SunCoke Energy, Inc.
 
$
(7.5
)
 
$
1.3

 
$
1.3

 
$
(2.6
)
 
$
(7.5
)

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Table of Contents

SunCoke Energy, Inc.
Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2014
(Dollars in millions)


 
 
Issuer
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Combining
and
Consolidating
Adjustments
 
Total
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Sales and other operating revenue
 
$
—

 
$
52.6

 
$
298.9

 
$
—

 
$
351.5

Equity in earnings of subsidiaries
 
6.6

 
14.4

 
—

 
(21.0
)
 
—

Other income
 
—

 
0.9

 
0.1

 
—

 
1.0

Total revenues
 
6.6

 
67.9

 
299.0

 
(21.0
)
 
352.5

Costs and operating expenses
 
 
 
 
 
 
 
 
 
 
Cost of products sold and operating expenses
 
—

 
40.5

 
252.9

 
—

 
293.4

Selling, general and administrative expenses
 
3.2

 
9.9

 
7.9

 
—

 
21.0

Depreciation and amortization expense
 
—

 
2.8

 
21.6

 
—

 
24.4

Total costs and operating expenses
 
3.2


53.2


282.4


—


338.8

Operating income
 
3.4

 
14.7

 
16.6

 
(21.0
)
 
13.7

Interest (income) expense, net - affiliate
 
—

 
(1.8
)
 
1.8

 
—

 
—

Interest expense (income), net
 
9.3

 
(0.4
)
 
3.2

 
—

 
12.1

Total financing expense (income), net
 
9.3


(2.2
)

5.0


—

 
12.1

(Loss) income before income tax expense and loss from equity method investment
 
(5.9
)

16.9


11.6


(21.0
)
 
1.6

Income tax expense (benefit)
 
1.9

 
(1.7
)
 
(1.4
)
 
—

 
(1.2
)
Loss from equity method investment
 
—

 
—

 
0.6

 
—

 
0.6

(Loss) income from continuing operations
 
(7.8
)

18.6


12.4


(21.0
)
 
2.2

Loss from discontinued operations, net of income tax benefit of $3.0 million
 
—

 
(6.0
)
 
—

 
—

 
(6.0
)
Net (loss) income
 
(7.8
)

12.6


12.4


(21.0
)

(3.8
)
Less: Net income attributable to noncontrolling interests
 
—

 
—

 
4.0

 
—

 
4.0

Net income attributable to SunCoke Energy, Inc.
 
$
(7.8
)
 
$
12.6

 
$
8.4

 
$
(21.0
)
 
$
(7.8
)
Comprehensive (loss) income
 
$
(7.6
)
 
$
12.0

 
$
13.2

 
$
(21.2
)
 
$
(3.6
)
Less: Comprehensive income attributable to noncontrolling interests
 
—

 
—

 
4.0

 
—

 
4.0

Comprehensive (loss) income attributable to SunCoke Energy, Inc.
 
$
(7.6
)
 
$
12.0

 
$
9.2

 
$
(21.2
)
 
$
(7.6
)





 


23
Table of Contents

SunCoke Energy, Inc.
Condensed Consolidating Balance Sheet
March 31, 2015 
(Dollars in millions, except per share amounts)
 
 
Issuer
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Combining
and
Consolidating
Adjustments
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
—

 
$
69.7

 
$
95.7

 
$
—

 
$
165.4

Receivables
 
—

 
12.3

 
46.7

 
—

 
59.0

Inventories
 
—

 
14.1

 
114.4

 
—

 
128.5

Income taxes receivable
 
28.7

 
—

 
7.9

 
(27.8
)
 
8.8

Deferred income taxes
 
2.6

 
17.7

 
0.8

 
(2.7
)
 
18.4

Other current assets
 
—

 
4.1

 
2.8

 
—

 
6.9

Current assets held for sale
 
—

 
19.2

 
—

 
—

 
19.2

Advances to affiliate
 
—

 
184.4

 
—

 
(184.4
)
 
—

Interest receivable from affiliate
 
—

 
1.8

 
—

 
(1.8
)
 
—

Total current assets
 
31.3

 
323.3

 
268.3

 
(216.7
)
 
406.2

Notes receivable from affiliate
 
—

 
89.0

 
300.0

 
(389.0
)
 
—

Investment in Brazil cokemaking operations
 
—

 
—

 
41.0

 
—

 
41.0

Equity method investment in VISA SunCoke Limited
 
—

 
—

 
21.7

 
—

 
21.7

Properties, plants and equipment, net
 
—

 
71.7

 
1,380.1

 
—

 
1,451.8

Goodwill and other intangible assets, net
 
—

 
6.7

 
14.9

 
—

 
21.6

Deferred charges and other assets
 
0.2

 
14.8

 
4.7

 
—