Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - SunCoke Energy, Inc. | d249789dex991.htm |
| 8-K - 8-K - SunCoke Energy, Inc. | d249789d8k.htm |
 Proposed SunCoke Energy Simplification Transaction October 31, 2016 Filed by SunCoke Energy, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934 Subject Company: SunCoke Energy Partners, L.P. Commission File No.: 1-35782 Exhibit 99.2 |
 Important Notice to Investors
2 SunCoke Simplification Transaction Conference Call SunCoke Energy, Inc. SunCoke Energy Partners, L.P. 1011 Warrenville Road, Suite 600 1011 Warrenville Road, Suite 600 Lisle, IL 60532 Lisle, IL 60532 Attention: Investor Relations Attention: Investor Relations Phone: 630-824-1907 Phone: 630-824-1987 E-mail: investorrelations@suncoke.com E-mail: investorrelations@suncoke.com IF AND WHEN APPLICABLE, INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE REGISTRATION STATEMENT, THE
PROXY STATEMENT/PROSPECTUS, AND THE OTHER DOCUMENTS FILED WITH THE SEC REGARDING
THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE, AS THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT SXC, SXCP, THE PROPOSED MERGER AND RELATED MATTERS. PARTICIPANTS IN THE TRANSACTION If and when SXC and SXCP have entered into a definitive merger agreement, SXC, SXCP, and their respective directors and executive
officers, may be deemed to be participants in the solicitation of
proxies in respect of the proposed transactions contemplated by such an agreement. Information regarding directors and executive officers of SXCP’s general partner is contained in SXCP’s Form 10-K for the
year ended December
31, 2015, which has been filed with the SEC. Information regarding SXC’s directors and executive officers is contained in SXC’s definitive proxy statement dated March 23, 2016, which is filed with the SEC. A more complete description will be available in the
registration statement and the related proxy statement/prospectus
if and when filed. This slide presentation should be reviewed in
conjunction with the press release issued on October 31, 2016 from SunCoke Energy, Inc. (“SXC”) as well as the conference call held on October 31, 2016 at 9:00 a.m. ET.
This slide presentation does not constitute an offer to sell any
securities. Any such offer will be made only by means of a prospectus pursuant to a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission(the “SEC”), and only if and when
a definitive agreement has been entered into by SXC and SunCoke Energy
Partners, L.P. (“SXCP”). The registration statement will include a proxy statement of SXC, an information statement of SXCP, an SXC prospectus and other materials. If and when available, investors
and security holders may obtain a free copy of the applicable
proxy statement, information statement, prospectus and other documents filed with the SEC containing information about SXC and SXCP, without charge, at the SEC’s website at www.sec.gov. In addition,
investors and security holders will be able to obtain free copies
of the registration statement and the proxy statement/prospectus by phone, e-mail or written request by contacting the investor relations department of SXC or SXCP at the following |
 Forward-Looking Statements
3 SunCoke Simplification Transaction Conference Call FORWARD-LOOKING STATEMENTS Although management believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements
made in this presentation are reasonable, no assurance can be
given that these plans, intentions or expectations will be achieved when anticipated or at all. Moreover, such statements are subject to a number of assumptions, risks and uncertainties. Many of
these risks are beyond the control of SXC and SXCP, and may cause
actual results to differ materially from those implied or expressed by the forward-looking statements. Each of SXC and SXCP has included in its filings with the Securities and Exchange Commission
cautionary language identifying important factors (but not
necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. For more information concerning these factors, see the Securities and
Exchange Commission filings of SXC and SXCP.
All forward-looking statements included in this presentation are expressly
qualified in their entirety by such cautionary statements.
Although forward-looking statements are based on current beliefs and expectations, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as
of the date hereof. SXC and SXCP do not have any intention
or obligation to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events or after the date of this presentation, except
as required by applicable law.
This presentation includes certain non-GAAP financial measures intended to
supplement, not substitute for, comparable GAAP measures.
Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the Appendix at the end of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures
provided in the Appendix.
Some of the information included in this presentation constitutes
“forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this
presentation that express opinions, expectations, beliefs, plans,
objectives, assumptions or projections with respect to anticipated future performance of SXC or SunCoke Energy Partners, L.P. (SXCP), in contrast with statements of historical facts, are forward-looking
statements. Such forward-looking statements are based
on management’s beliefs and assumptions and on information currently available. Forward-looking statements include information concerning possible or assumed future results of operations, business
strategies, financing plans, competitive position, potential
growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that
are not historical facts and may be identified by the use of
forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,”
“will,” “should” or the negative of these terms or similar expressions. |
 Transaction Overview
4 SunCoke Energy, Inc. (SXC) submitted a proposal to SunCoke Energy Partners, L.P. (SXCP) Conflicts Committee to acquire all outstanding units of SXCP owned by public unitholders in a 100% stock- for-unit transaction (“Simplification Transaction”) • SXCP unitholders would receive ~1.65
SXC shares for
each SXCP common unit
– Implies 5% premium to closing price on 10/28/16 and 8.8% on ex-distribution basis – Transaction taxable to SXCP unitholders and provides tax basis step-up to SXC (1) • If approved, transaction expected to close by mid-2017 • Expect existing debt capital structure to remain intact Upon closing, SXC management intends to recommend initiation of a $0.0625 quarterly dividend per share (~2.3% yield) (2) SunCoke Simplification Transaction Conference Call Pro-Forma SXC Organization Structure (1) Taxes will vary depending on individual unitholder attributes. (2) Based on closing price as of October 28, 2016. (3) See appendix for reconciliation. (4) Indiana Harbor L.P. is owned 14.8% by DTE Energy. Existing SXC Shareholders Existing SXCP Unitholders SXC Operating Subsidiaries SXCP Operating Subsidiaries SunCoke Energy Partners LP ~100% (4) 100% 98% 2% 34.9% (3) 65.1% (3) SunCoke Energy, Inc. (NYSE: SXC) SunCoke Energy Partners GP |
 Significant Benefits
5 SunCoke Simplification Transaction Conference Call Generates Significant Cash Flow Accretion • Significantly cash flow per share accretive transaction to SXC shareholders
Unlocks Substantial
Synergies Improves Financial Flexibility Expands Universe of Growth Opportunities • Creates ~$16 million
in annual cash flow synergies through public company cost
elimination and cash tax efficiencies
• Results in numerous
shareholder-friendly benefits, including simplified governance structure and improved access to capital • Enables SXC to
initiate attractive dividend and further
de-lever balance sheet • Enhances ability to fund future M&A and execute capital allocation priorities • Improves access to debt capital markets • Eliminates MLP qualifying income limitations on growth
• Addresses non-competitive MLP cost of capital • Enables growth in
near-in product and customer adjacencies |
 Immediately Cash Flow Accretive
6 SunCoke Simplification Transaction Conference Call >70% increase in Free Cash Flow (“FCF”) (1) per share driven by: • Acquisition of public unitholder distributions and access to undistributed cash flow at SXCP • Synergies Illustrative Pro-Forma FCF ~$125M with potential growth from: • Indiana Harbor performance improvement • Incremental CMT business • Lower ongoing capex post Indiana Harbor oven rebuilds $0.97 $0.25 $1.27 $0.73 Status Quo FCF / Share Impact of new share issue ($0.68) Pro-Forma FCF / Share Synergies (Tax & Cost) Acquired Cash Flow, After Tax +74% ($ per Share) (2) (1) For a reconciliation, please see appendix. (2) SXCP public unitholder distributions plus excess distributable cash flow above distributions to unitholders.
(3) See details and explanation on slide 7. Consolidation drives significant cash flow accretion per share for SXC shareholders Illustrative Pro-Forma FCF per Share (1) (1) (3) |
 Simplified Structure Unlocks Synergies
7 SunCoke Simplification Transaction Conference Call Significant cash flow synergies • Cash tax savings from tax basis step-up and elimination of remedial income • Public company cost savings Several simplification benefits • Streamlined governance structure • Access to broader pool of capital as C-Corp • Improved trading liquidity • Simplified financial reporting Public Company Cost Savings $2 Estimated Tax Basis Step-up $5-8 $7-8 Elimination of Remedial Income ($ millions) (1) (2) Cash Flow Synergies Proposed transaction results in immediate tax and cost synergies Results in ~$16M of annual cash flow synergies (1) Elimination of incremental cash taxes related to tax shield previously provided to
SXCP public unitholders.
(2) Cash tax benefit related to incremental tax depreciation as a result of the
Simplification Transaction. |
 Greater Financial Flexibility
8 SunCoke Simplification Transaction Conference Call Enhanced financial flexibility • Ability to establish sustainable dividend • Enables further (and faster) de-levering • Increases ability to fund growth Improved access to capital markets • Removes dependence on MLP equity markets to fund growth • Eliminates cash flow subordination at SXC and improves credit profile / debt capacity Pro-Forma Capital Allocation Priorities Free Cash Flow Establish Dividend Reduce Long-Term Debt / Leverage M&A Return Additional Capital to Shareholders Target Establish $0.0625 quarterly dividend Target 3.0x – 3.5x leverage Flexibility to pursue growth and distribute capital to shareholders Growth & Environmental CapEx |
 Coke & Coal Logistics Salt Wood Pellets Industrial Clays Soda Ash Limestone Customer Synergies Product Synergies Steel Services Graphite Anodes Carbon Black Activated Carbon DRI / Scrap Expanded Growth Opportunities 9 SunCoke Simplification Transaction Conference Call Core Businesses 2 nd Level Adjacencies (Industrial Materials) 1 st Level Adjacencies (Steel & Carbon) Removes MLP qualifying income limitation Focuses on and enables growth within 1 st level adjacencies • Focus on sectors in which SunCoke can add value via core competencies (i.e., businesses with customer or product synergies) • Likelihood for cost of capital advantages in 1 st level adjacencies • Maintains portfolio cohesiveness • Potential cash flow / business mix diversification enhances credit profile Simplification Transaction better positions SunCoke for growth in core and adjacent verticals M&A Framework – Moving Toward the Core Calcined Coke |
 Transaction Roadmap
10 SunCoke Simplification Transaction Conference Call Several steps needed to finalize Simplification Transaction • Negotiate transaction and execute merger agreement with SXCP Conflicts Committee
• File S-4 Registration Statement with SEC • Distribute Proxy Statement to SXC shareholders and establish record-date for
shareholder vote
• SXC shareholder vote to approve transaction including issuance of SXC shares for
exchange with SXCP unitholders
• SXCP Information Statement to unitholders – SXC owns 53.9% of SXCP common units, which is sufficient to approve transaction on SXCP unitholder’s
behalf • Receive consent from SXCP credit facility lenders (no other lender approvals
required) •
Close transaction –
subject to customary closing conditions
If approved, potential for transaction to close by mid-2017
|
 Transaction Summary
11 SunCoke Simplification Transaction Conference Call Transaction is significantly cash flow per share accretive to SXC shareholders Simplified structure results in meaningful cash flow synergies and provides numerous shareholder-friendly benefits Increased financial flexibility results in ability to initiate dividend, de-lever balance sheet and fund potential growth Elimination of MLP qualifying income restrictions facilitates pursuit of near-in adjacencies Potential for Significant Shareholder Value Creation |
 QUESTIONS |
 Investor Relations
630-824-1907
www.suncoke.com |
 APPENDIX |
 Definitions 15 SunCoke Simplification Transaction Conference Call • Adjusted EBITDA represents earnings before interest, (gain) loss on extinguishment of debt, taxes, depreciation and amortization (“EBITDA”),
adjusted for impairments, coal rationalization costs, changes to
our contingent consideration liability related to our acquisition of CMT and the expiration of certain acquired contractual obligations, and interest, taxes, depreciation and amortization and impairments 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. Management believes
Adjusted EBITDA is an important measure of the operating
performance and liquidity of the Company's net assets and its ability to incur and service debt, fund capital expenditures and make distributions. 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 and liquidity. EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, and they
should not
be considered a substitute for net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP. • EBITDA represents earnings before interest, taxes, depreciation and amortization. • Adjusted EBITDA attributable to SXC/SXCP represents Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests. • Adjusted EBITDA/Ton represents Adjusted EBITDA divided by tons sold/handled. • Coal Rationalization expense / (income) includes employee severance, contract termination costs and other costs to idle mines incurred during the execution of our coal rationalization plan. • Legacy Costs include costs associated with former mining employee-related liabilities net of certain royalty revenues. • Free Cash Flow represents Adjusted EBITDA less cash interest, cash taxes, ongoing capital expenditures plus distributions from SXCP (if
applicable) plus or minus adjustments for non-cash items.
|
 Definitions 16 SunCoke Simplification Transaction Conference Call • Distributable Cash Flow equals Adjusted EBITDA plus sponsor support and Coal Logistics deferred revenue; less net cash paid for interest
expense, ongoing capital expenditures, accruals for replacement capital expenditures and cash distributions to noncontrolling interests; plus amounts received under the Omnibus Agreement and acquisition expenses deemed to be Expansion Capital under our Partnership
Agreement. Distributable Cash Flow is a non-GAAP
supplemental financial measure that management and external users of SXCP's financial statements, such as industry analysts, investors, lenders and rating agencies use to assess:
• SXCP's operating performance as compared to other publicly traded partnerships, without regard to historical cost basis;
• the ability of SXCP's assets to generate sufficient cash flow to make distributions to SXCP's unitholders;
• SXCP's ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment
opportunities. We believe that Distributable Cash Flow provides
useful information to investors in assessing SXCP's financial condition and results of operations. Distributable Cash Flow should not be considered an alternative to net income, operating income, cash flows from operating activities, or
any other measure of financial performance or liquidity presented
in accordance with GAAP. Distributable Cash Flow has important limitations as an analytical tool because it excludes some, but not all, items that affect net income and net cash provided by operating activities and
used in investing activities. Additionally, because
Distributable Cash Flow may be defined differently by other companies in the industry, our definition of Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing its
utility. •
Ongoing capital expenditures (“capex”) are capital expenditures made to maintain the existing operating capacity of our assets and/or to extend
their useful lives. Ongoing capex also includes new equipment that improves the
efficiency, reliability or effectiveness of existing assets. Ongoing capex does not include normal repairs and maintenance, which are expensed as incurred, or significant capital expenditures, such as
growth or environmental capital expenditures. For purposes of
calculating distributable cash flow, the portion of ongoing capex attributable to SXCP is used. • Replacement capital expenditures (“capex”) represents an annual accrual necessary to fund SXCP’s share of the estimated costs to replace or
rebuild our facilities at the end of their working lives. This accrual is
estimated based on the average quarterly anticipated replacement capital that we expect to incur over the long term to replace our major capital assets at the end of their working lives. The replacement capex
accrual estimate will be subject to review and prospective change
by SXCP’s general partner at least annually and whenever an event occurs that causes a material adjustment of replacement capex, provided such change is approved by our conflicts committee.
|
 SXC 2016E Guidance Reconciliation
(1) Coal rationalization costs includes employee severance, contract termination costs and other costs to idle mines incurred during the
execution of our coal rationalization plan.
(2) Beginning in the second quarter of 2016, in response to the SEC’s May 2016 update to its guidance on the appropriate use of
non-GAAP financial measures, Adjusted EBITDA no longer
includes Coal Logistics deferred revenue until it is recognized as GAAP Revenue. (3) Represents Adjusted EBITDA attributable DTE Energy’s interest in Indiana Harbor, as well as to SXCP public unitholders. Adjusted
EBITDA attributable to SXCP includes a special deduction for the
general partner in an amount equal to the corporate cost reimbursement holiday, in this case assuming a $28 million deduction in 2016. Actual capital allocation decisions to be made quarterly.
17 SunCoke Simplification Transaction Conference Call ($ in millions) 2016E Low 2016E High Net cash provided by Operating activities $150 $170 Depreciation and amortization expense 106 106 (Gain) / loss on extinguishment of debt (20) (27) Loss on divestiture of business 14 14 Changes in working capital and other 6 3 Net Income $44 $74 Depreciation and amortization expense 106 106 Interest expense, net 62 58 (Gain) / loss on extinguishment of debt (20) (27) Income tax expense / (benefit) 6 17 Loss on divestiture of business 14 14 Coal rationalization costs (1) 2 1 Coal Logistics deferred revenue (2) - - Contingent consideration adjustments (4) (8) Adjusted EBITDA (Consolidated) $210 $235 Adjusted EBITDA attributable to noncontrolling interests (3) (105) (111) Adjusted EBITDA attributable to SXC $105 $124 |
 SXCP 2016E Guidance Reconciliation
18 SunCoke Simplification Transaction Conference Call (1) Adjusted EBITDA attributable to noncontrolling interest represents SXC’s 2% interest in Haverhill, Middletown and Granite City cokemaking
facilities. (2) Represents SXC corporate cost reimbursement holiday/deferral for Q1 and Q2 2016. Actual capital allocation and distribution decisions to
be made quarterly.
(3) Coal Logistics deferred revenue adjusts for coal and liquid tons the Partnership did not handle, but are included in
Distributable Cash Flow as the
associated take-or-pay fees are billed to the customer. Deferred
revenue on take-or-pay contracts is recognized into GAAP income annually based on the terms of the contract. (4) Cash tax impact from the operations of Gateway Cogeneration Company LLC, which is an entity subject to income taxes for federal and state
purposes at the corporate level.
($ in millions)
2016E Low 2016E High Net Cash Provided by Operating Activities $149 $163 Depreciation and amortization expense 74 74
(Gain) / Loss on debt extinguishment
(20) (27)
Changes in working capital and other
(7) (11)
Net
Income $102
$127 Depreciation and amortization expense 74 74
Interest expense, net
57 53
(Gain) / Loss on debt extinguishment
(20) (27)
Income tax expense
1 1
Contingent consideration adjustments (4) (8)
Adjusted EBITDA $210 $220 EBITDA attributable to noncontrolling interest (1) (3) (3)
Adjusted EBITDA attributable to SXCP $207 $217 Plus: Corporate cost holiday/deferral (2) 14 14
Coal Logistics deferred revenue
(3) - -
Less: Ongoing capex (SXCP share) (12) (12)
Replacement capex accrual
(8) (8)
Cash interest accrual (53) (49)
Cash tax accrual
(4) (1) (1)
Distributable cash flow $147 $161 |
 Reconciliation to Illustrative FCF/Share
19 SunCoke Simplification Transaction Conference Call (1) Based on mid-point of 2016E SXC Consolidated Adjusted EBITDA guidance.
(2) Based on mid-point of 2016E Adjusted EBITDA attributable to SXCP EBITDA guidance.
(3) Annualized cash interest based on debt outstanding as of September 30, 2016.
(4) Based on mid-point of 2016E SXC cash tax guidance. (5) Based on 2016E guidance. Ongoing capex excludes environmental and growth related capital expenditures.
(6) Adjustment for non-cash stock compensation expense based on 2016 run-rate through September 30, 2016.
(7) Assumes full-year cash flow based on current SXCP quarterly distribution rate of $0.5940/LP unit, or ~$2.38 annualized.
(8) Incremental cash taxes due to higher income which was previously allocable to SXCP public unitholders.
($ in millions, except per share amounts)
Status Quo ($ in millions, except per share amounts) Pro-Forma Adjusted EBITDA (Consolidated) (1) $223 Adjusted EBITDA (Consolidated) - Status Quo (1) $223 Adjusted EBITDA attributable to SXCP (2) (212) Cost synergies 2 SXC Asset Level EBITDA
$11 Adjusted EBITDA (Consolidated) - Pro-Forma $225 SXC cash interest, net (3) (4) Consolidated cash interest, net
(3) (55) SXC cash taxes
(4) (7) Tax synergies
14 SXC Ongoing capex
(5) (28) Consolidated cash taxes, excluding tax synergies
(8) (26) Adjustment for non-cash items
(6) 7 Consolidated Ongoing capex
(5) (40) LP distributions from SXCP
(7) 60 Adjustment for non-cash items
(6) 7 GP/IDR distributions from SXCP
(7) 8 Free Cash Flow (FCF)
$125 Free Cash Flow (FCF) $47 Pro-Forma SXC shares outstanding (millions)
98.6 SXC shares outstanding (millions)
64.2 FCF/Share -- Pro-Forma $1.27 FCF/Share -- Status Quo $0.73 |
 Reconciliation of Pro-Forma Ownership
20 SunCoke Simplification Transaction Conference Call 1.65 SXC shares per SXCP unit (millions, except per share amounts) SXCP Closing Price (At close 10/28/2016) 16.95 $
Premium Proposed to SXCP Conflicts Committee
5.0% Implied Proposal Price per Unit 17.80 $
Units held by SXCP Public Unitholders
20.8 Implied Total Purchase Price
$370 SXC Share Price (At close 10/28/16) 10.76 $
Implied SXC Shares Issued to SXCP Unitholders
34.4 Exisiting SXC Shares Outstanding
64.2 Implied Total Shares Outstanding
98.6 Pro-forma Ownership by Exisiting SXC Shareholders
65.1% Pro-forma Ownwership by Exisiting SXCP Unitholders 34.9% Memo: Implied Premium to ex-Distribution of $0.5940 8.8% |