Good morning. My name is Adam and I'll be your conference operator today. At this time, I would like to welcome everyone to the SunCoke Energy Fourth Quarter 2018 Earnings Call. [Operator Instructions] I'd now turn the conference over to Mr. Andy Kellogg, Treasurer and Director of Investor Relations. Please go ahead.

Good morning and thank you for joining us this morning to discuss SunCoke Energy's fourth quarter and full-year 2018 earnings, 2019 guidance and the announcement of SunCoke Energy and SunCoke Energy Partners Simplification Transaction. With me are Mike Rippey, President and Chief Executive Officer; and Fay West, Senior Vice President and Chief Financial Officer. Following management's prepared remarks, we'll open the call for Q&A. This conference call is being webcast live on the Investor Relations section of our website and a replay will be available later today. If we don't get to your questions on the call today, please feel free to reach out to our Investor Relations team. Before I turn things over to Mike, let me remind you that various remarks we make on today's call regarding future expectations constitute forward-looking statements. The cautionary language regarding forward-looking statements in our SEC filings apply to the remarks we make today. These documents are available on our website as a reconciliations to any non-GAAP financial measures discussed on today's call. With that, I'll now turn things over to Mike.

Thanks, Andy. Good morning and thanks to all of you for joining us on the call this morning. We have quite a few exciting developments to talk about today, not only did we post strong financial and operating results for the quarter and full-year 2018, but this morning we also announced a transformational merger that will create value for all SunCoke stakeholders going forward. SunCoke Energy has signed a merger agreement to acquire all of the SunCoke Energy Partners common units that are now currently owned by SXC. The transaction was approved by the SXCP Conflicts Committee and the Boards of both SXC and SXCP. We are pleased to announce this transaction today and believe it'll simplify the structured benefit to all stakeholders. Healthy market as a whole has remained challenge for a number of years, a problem even more pronounced for SXCP. By continued stable operational performance and material improvement in broader market conditions, SXCP's yield and effective cost of equity has remained elevated and no longer provides an advantage to cost of capital. With a simplified and consolidated ownership structure, we will be able to unlock the full potential of the enterprise which provides numerous benefits to SXC and SXCP investors. Importantly, the merger streamlines our corporate structure, creates a larger stand-alone operating company with increased float and trading liquidity that generates immediate accretion to both SXC shareholders and SXCP unitholders, lowers our cost of funding and better positions us to execute strategic growth initiatives. In addition we have been listening to shareholders, many of whom have expressed interest in SunCoke's completing the Simplification Transaction. This transaction optimizes SunCoke's significant free cash flow, will strengthen the balance sheet and pursue growth opportunities and return capital to shareholders. Moving to Slide 5, as part of the terms of the…

Thanks, Mike, and good morning everyone. Turning to Slide 13. Our fourth quarter and full year EPS was $0.03 and $0.40 per share, respectively. Variability between periods was impacted by the tax reform legislation that was enacted in 2017 as well as higher depreciation expense in the current period. The impact of these two items on a full year basis was $1.91 per share and $0.13 per share, respectively. The current year also reflects the strong operating performance across our business, which increased full year EPS by $0.32 per share. Consolidated adjusted EBITDA for the fourth quarter was $65.9 million. This reflects a significant year-over-year contribution from our Indiana Harbor facility. It also reflects that we did not recognize any deferred revenue in the quarter from our coal export customers. In 2018, CMT achieved record volumes and our coal export customers shift over their 10 million ton contractual obligation. This resulted in the recognition of higher revenues throughout the year and therefore we did not recognize any deferred revenue on take-or-pay volume shortfalls in the fourth quarter of 2018 versus the $16.4 million recognized in the fourth quarter of 2017. While this impacts quarterly comparisons, there is no impact on a full year basis. On a full year basis we delivered adjusted EBITDA of $263.2 million which, as Mike referenced, was significantly above our 2018 guidance range of $240 million to $255 million and up over 12% as compared with 2017 adjusted EBITDA of $234.7 million. Turning to Slide 14 and looking further at our fourth quarter performance, fourth quarter 2018 adjusted EBITDA was $65.9 million compared to $69.5 million in Q4 of 2017. Indiana Harbor's fourth quarter adjusted EBITDA of $3.5 million is up $12.3 million versus the prior year. We successfully completed the rebuild of 67 A-battery ovens…

Thanks Fay. Before we get into our 2019 guidance, I wanted to provide a few brief thoughts on the overall market and where we see things as we enter the new year. On steel, the balance of 2018 we saw material improvements in the domestic market. API2 benchmark price increased from approximately $650 per short ton at the beginning of the year to an average price of approximately $830 per short ton in 2018. Utilization averaged approximately 78% in 2018, up from 71% at the beginning of the year. Import market shares decreased to approximately 23% in 2018 from 27% in 2017. As we stand today we see stable demand with utilization rates around 80%. While generally we anticipate slow growth across the sector, we expect to continue to see solid steel demand from industrial, construction, consumer and energy sectors, with auto slightly lower. Looking at the current state of the coke market, we believe the market is generally imbalance and any meaningful pick-up in demand or reduction in supply may result in a coke short market. We continue to see strong demand from our customers for our high-quality, low-cost products. On the thermal coal export side, export volumes were robust in 2018 on the back of strong API2 and Newcastle prices, with a strong demand for Europe Asia and the Mediterranean regions. While we expect the US to continue to be a significant participant in the seaborne coal trade, we do anticipate volumes to be slightly lower in 2019 versus 2018. Illinois basin customers are expected to continue to benefit from attractive netback economics. They have a material advantage due to their low cost structure. In summary, we believe we are in a stable macro environment for both our coke and logistics businesses. While the macro environment does not have a material impact to our 2019 outlook due to the nature of our long-term take-or-pay contracts, continued improvement to our customers health will be a long-term benefit to us. In 2019, we expect our business to produce solid growth on the back of increased production at Indiana Harbor. Now I'll turn it over to Fay to review our 2019 adjusted EBITDA guidance.

Thanks Mike. The detailed 2019 guidance slides are presented on an as-is basis and do not reflect the Simplification Transaction that we announced today. The impact of the Simplification Transaction is not material to 2019 adjusted EBITDA and I will provide some additional information on that impact later in the presentation. On Slide 19 you could see that we expect adjusted EBITDA to grow in 2019 and are guiding to a consolidated adjusted EBITDA range of $265 million to $275 million. Our guidance range is a bit tighter than what we have historically provided, but given the continued improvement at Indiana Harbor and the stability of the balance of our operations, we feel comfortable providing guidance within this range. Domestic coke operations will fuel the majority of the year-over-year increase, which will contribute in the incremental $9 million to $15 million of adjusted EBITDA in 2019. Improved performance at our Granite City facility coupled with an increase in production at Indiana Harbor are the main drivers of this increase. Looking at our Brazil operations, we expect that they will return to a normalized run rate after a record production year in 2018, which will result in a slight reduction to adjusted EBITDA in 2019. Turning to our logistics business, we expect modest growth in adjusted EBITDA in 2019 primarily due to higher annual per ton rate on our base take-or-pay volume. And finally, we expect our corporate and other segment will be down slightly in 2019 due to higher employee-related costs and incremental legacy costs as compared to 2018. Moving on to Slide 20, in 2019 we expect our domestic coke adjusted EBITDA will be between $217 million and $223 million. The domestic coke business has delivered adjusted EBITDA growth over the last few years, which is the result of…

Thank you, Fay. Wrapping up on Slide 25. As always, operational excellence is top of mind for our organization, focused on executing against our capital plans and further improving operational performance across both coke and logistics businesses, while successfully executing the final phase of our Indiana Harbor rebuild initiative. Additionally, we are keenly focused on successfully completing the Simplification Transaction. As I laid out earlier on the call, it's an important and transformational merger for SunCoke which we believe will create value for all SunCoke stakeholders. We will also work to pursue our organic and M&A growth strategies as outlined earlier on the call, strategy focuses on business verticals that closely align with our core competencies where our knowledge and expertise can create additional value for our shareholders. Finally, we'll again be focused on executing on our commitments to shareholders by achieving our full year financial targets that we laid out today. With that, let's go ahead and open up the call for Q&A.

[Operator Instructions] And your first question comes from Matthew Fields of Bank of America. Matthew, your line is now open.

Congratulations on the announcement of the Simplification Transaction. I guess one extra benefit you didn't list is you don't have to do two conference calls anymore.

That's right.

Is there any reason that we can think of that this deal won't go through whether that's the independent Board of Directors that you've had issues with the last time or any regulatory reason that things will get blocked?

No, we don't foresee any issues. The SXCP Conflicts Committee voted unanimously to approve the transaction. The SXCP Board took that recommendation and unanimously approved the transaction from the SXCP perspective. As well the SXC Board unanimously approved the transaction. We laid out a timeline for you where we will go through all of the customary activities that you can go through, including filings with the SEC and we expect the news with the SEC to go without issue. So as we've indicated, we expect to close either later second or third quarter after we obtain those filings. We'll have a proxy filing, we'll be asking SXC common shareholders to approve the transaction as well. But no, we don't foresee any issues at all.

So the only thing that's not locked down so to speak is the SXC shareholder vote at this point?

That's correct.

And then just sort of looking on the - at a pro forma kind of consolidated transaction, please let me know if I'm wrong here, but it looks like for the bonds, you know, leverage goes from about 3.8 times or 3.9 times depending on how you calculate it to about to 3.2 times on a consolidated basis, right, when you collapse this, is that correct?

It's about right.

So, probably about half a ton there then. Just help me please if I'm understanding this, only the public units will get exchanged into SXC shares, is that right?

That's correct.

The 17.7 million SXCP units held by the public. So pro forma share count should be about 90 million SXC shares, is that right?

Right.

Correct. We're going to issue right around 24 million shares.

So the pro forma future dividend at $0.24 per year will be about $21 million, $22 million.

Your math is spot on.

Versus before SXCP was distributing about $80 million on a run-rate basis. Obviously you were getting that - some of that at the parent, but I think about $30 million was leaving the complex, is that the right way think about it?

Matt, you're thinking about it exactly right.

Moving on to Indiana Harbor, is the rebuild project done at the end of 2019?

Yes. We have 57 B ovens remaining to be rebuilt in 2019 after which the entire complex would have been rebuilt.

So all else being equal, given your guidance about $22 million of EBITDA up to $50 million and then the CapEx you are spending on this, is the right way to think about 2019 to 2020, if nothing else changes, $25 million to $30 million of extra EBITDA from Indiana Harbor and then $40 million to $45 million less CapEx for the whole complex from all else being equal?

I think that's right.

So if you add that together that's about $65 million to $75 million of extra free cash flow. What's the sort of earmarked or what's your thinking about using this free cash flow once you get to the 3x leverage target which you're pretty much almost at right now?

Well, you're correct. Our focus this year will be of course on completing the transaction. We indicated we'll begin the payment of a common dividend in the first quarter post close of the transaction and we'll be focused on de-levering. At the same time we'll be, as you touched on, one significant organic growth opportunity that's to rebuild the B. Our focus this year will be on that successful rebuild. Beyond which time we'll begin to develop a very rich list, if you will, of opportunities to trigger our business either organically or through a variety of M&A transactions. So we're building that pipeline. We're going to do so in a thoughtful way. Our Company has - we like to believe, this may sound not fully modest, but we believe that we have a good reputation with our customers for producing high-quality products and delivering them in a very reliable manner. We'll begin to look for opportunities in areas where we'll have operation and technological expertise to grow. But we will be selective toward buying assets that are high-quality assets which fits nicely with repetition that we believe we earn today. And we're not going to act in a hasty way where we might overpay. So we'll be very, very disciplined in our approach. But with this simplification we're unlocking the opportunity to do that because some of the limitations that were present prior will be eliminated post simplification.

Well, a bigger picture, your first bullet on Slide 10 of your - which is your strategic focus says growing market share in the North American coke market. It seems like most, if not all, of the blast furnace steel producers have their kind of coke supply pretty well shored up. Where do you see opportunity to grow share? And is US steel's problems are creating one of those opportunities that you see?

No, you've read what we have publicly about the very current issues of Clairton. But we see continued good market for our customers. So if end used demand for steel products rose, naturally there is opportunities for suppliers, we being here talking about coke, for coke demand to increase we would expect to satisfy that demand as well as there are opportunities and Harbor's one of them, we're organically our business in a meaningful way. Only a year ago we were making 825,000 tons annually at the Harbor. Post completion rebuild we'll at a 1.2 million tons. So there's organic growth. And we expect as a high-quality low-cost producer to capture the growth available to us in the market.

And then on other side of that, given AK Steel's decision to permanently shut down Ashland, your Haverhill contract is at the end of the 2021. So even if they cancel, you are kind of dovetailing with the end of that contract anyway. But given that they down to essentially Middletown and Dearborn at this point, how do you fit into their sort of overall coke needs beyond 2021? Is - do you see yourself as - do they need all 550,000 tons that you make at Haverhill, do they need less, do they need more, can you talk about that contract extension for us?

Well, the extension is a ways off but they're taking the full output of Haverhill. Today we need to remind ourselves while they announced their intent to permanently close later this year, the Ashland furnace has been down now for a number of years. My memory may be wrong and somebody correct me, I think it's been down since 2015. So that capacity's been out of the market. So when we talk about our believe that there's roughly a good balance between coke supply and demand in the market, Ashland hasn't been part of that equation for some time. So that announcement of a permanent closure doesn't impact the amount of demand that's present in the marketplace. I think perhaps more importantly if you look at the restart of coke blast furnace at Granite City this year in terms of demand in the marketplace, but that renewal is three years out, we're taking the coke today. There's no reason that I think they wouldn't want to continue that relationship going forward.

I guess we'll just stay tuned for how that contract negotiation plays out. Thanks very much for all the questions.

Sure.

Thank you.

Your next question comes from Lucas Pipes of B. Riley FBR. Lucas, your line is open.

Yes, thank you very much and good morning everyone, and I'd like to add my congratulations not only on the Simplification Transaction but the strong results out of Indiana Harbor. Mike, say I wanted to follow up on the CapEx side. So, ongoing guidance for 2019, $64 million to $66 million, is that kind of a number that we should continue to incur our expectations on for 2020, 2021 et cetera? Is there maybe some upward pressure, be it like more things on the gas sharing side, for example? Or are there maybe even opportunities to know that further? Thank you.

Thanks, Lucas. So when we gave our guidance for 2019 on CapEx, our range is between $110 million $120 million, this obviously includes the last phase of Indiana Harbor which is between $40 million and $48 million and some residual spend on the Granite City gas sharing. It also includes, as I mentioned on the call, some upgrades to our HRSG and FGD assets, and we'll perform those upgrades during our regulatory scheduled outages in 2019. I think our focus is long term and on the long-term performance of the assets and with any capital-intensive heavy manufacturing business like ours, maintenance events, repair work CapEx is required to maintain the health and integrity of our assets. So I just - I think when you are looking at kind of a run rate, this work that we're planning on doing here in 2019, the piggyback off of the work that we did in 2018 and we've always planned to do this work in the future over some time horizon. But based on our very extensive review that we did of our assets here, looking at of our longer horizon of about 10 years, we've concluded that it was important to pull some of that work forward so you're seeing an elevation in our CapEx spend in 2019 to accommodate that incremental work that we want to do that we've pulled forward.

So - but outside of Indiana Harbor and gas sharing, that $64 million versus $66 million could be a good run rate number to use going forward?

I think that's a good number to use.

And then I wanted to follow up on the tax synergies of $40 million. Would it be possible to provide a breakdown of that tax yield to SXCP unitholders and then the deposition benefit from the basis step up? And then, should we be thinking about that being all-cash taxes or is there a non-cash component to this as well?

So, the tax synergies are made up of two items, the first is the step up in basis. Because this is a taxable transaction, SXC will receive a step up in its tax basis. And so that's the first component. The second is, SXC as an entity will no longer receive certain tax allocations that increased our taxable income on a stand-alone basis. That's something that we referred to in the tax as remedial income and we will no longer receive that remedial income that resulted from the formation of SXCP. And so this would've - this is based on kind of partnership tax rules and it'd continue until 2029. And so those are the two components. And when we're talking about this from a cash basis. And I think you could say that probably over the time period, about 50-50, some year it's more, some year it's less depending on kind of the specifics. But it's roughly $40 million over the time period, roughly 50% of it from step-up and 50% of it from the elimination of remedial income.

And maybe one last question to sneak in. And Mike, this is to be out of curiosity and to your long experience in the steel industry, what do think has been driving the weakness in HSE prices as of late?

You're dating me now. It's been a while since I was involved in directly buying and selling steel products. But prices they might've gone a little ahead of themselves come back off a little bit. Lead times are shorter than what they have been. The distributors or inventories are in good positions as now. Big inventory overhang. There's some weakness in scrap pricing. But more recently you've heard I'm sure that most of the mills have announced round a increase I think $40. And that's being implemented as we speak. So perhaps we found a bottom. Now it seems that some years there's cyclically some weakness going into the fourth quarter. I think we probably saw some of that again this year.

I appreciate all the color and again, congratulations on a very strong year and a great outlook. Thank you.

And your final question comes from Derek Hernandez of Seaport Global Securities. Derek, your line is open.

I also would like to give you my congratulations on the results for the fourth quarter and the transaction announcement today. Very good job moving that forward. I just want to ask if you had concerns regarding support from SXC shareholders for the transaction. I know you said that the indications have been overall positive. But is that any risk in your view to the transition going forward?

No, we believe that this transaction is very good for SXC shareholders and it'll be very supportive, that's why we believe it's fair to the SXCP unitholders. So, no, we don't see any issue at all.

And since it was noted earlier in the call that the target of consolidated leverage is potentially a more near-term event, do you have any idea how you would measure this priority against potentially levering up to pursue organic or inorganic growth opportunities that may come in the near term?

Our priority will be to strive to that 3.0 ratio, not to lever up pursue growth. We believe that we can accomplish the leverage target as well with the free cash flow will we generate, pursue both organic and inorganic growth opportunities. So leveraging up to pursue growth is not in our current list of things to do.

And then with the same target, what should be consider as kind of a normalized cash minimum for SunCoke's balance sheet following the transaction?

I think we're targeting right around $100 million kind of the right cash balance, right around there. It could be slightly lower, but just right around there, Derek.

And in your presentation you mentioned potential market opportunities for your Brazil model. Do you have an idea of what the scale of these opportunities may be and potential timeline for implementation there?

Scale will be consistent with other plants that we've built off here in the US and as well Brazil. Our technology is scalable. But we are very much of the mind that Brazilian model works well for us and we would look to implement that model as constructor, operator and technology supplier throughout the world. Other parts of the world, energy costs are quite considerably higher than they are in the United States. And resultant stream electricity is available as a byproduct of our process is quite valuable. So we believe there is good applicability of our technology there in other parts of the world. The Brazilian model is one that we would look to pursue as we look more global through applying our technologies and know-how.

Excellent. And then switching over to Indiana Harbor, do you anticipate the timeline for the rebuild of the last 57 ovens to follow kind of the schedule of your last few years, which would be completion around November of 2019? And then as a quick follow-up there, with the completion of the rebuild and your view on the A-, C- and D-batteries, would there be any potential risk to normalize production at Indiana Harbor following this or are you basically expecting a run rate of 1.2 million tons going forward beyond 2019?

No, we very much expect to achieve and sustain a run rate of 1.2 million tons post-rebuild. B, and your timing is correct. We expect to complete those rebuilds in the fourth quarter of 2019, the end of November is as good as any. One thing though that you should keep in mind is that the rebuilds - rebatteries are more expensive and what was the case in A. So while we'll be fully back up at the end of November, we'll have those ovens out of service for a longer period this year which - and that's reflected fully in the guidance we provided you.

I see. Thanks. And then you also mentioned production outages across the fleet. I was just wondering if you could give us a little bit of guidance as to kind of how the weighing may be from quarter-to-quarter across the year to reach your 4.1 million ton target for 2019?

Yes, Derek, we don't give quarterly guidance. And therefore it's - the scope and timing of outage work varies quarter-over-quarter, plant-by-plant, year-over-year. But when I look at kind of 2019, the majority of your outage work is going to be, you know, second quarter and slightly in the third quarter with some outage work at Middletown in the fourth quarter. But they've consistently done that work in the fourth quarter. So I think you'll see it kind of in second and third quarter. That's when you'll see the kind of impact on kind of operations as well as production, inclusive of energy production. We won't have anything in the first quarter. There's nothing planned versus last year we did have some more work in the first quarter.

Appreciate that. It's very, very helpful. Well, thank you very much for taking the time for all my questions today and great call and great announcement today. Thanks, again.

Thank you.

And there are no further questions at this time. So I'll turn the call back over to President and CEO, Mike Rippey.

Okay. Well, thank you all for your continued interest in our Company and your participation today. If you have questions that weren't answered fully today or you think of later, please be in touch and we'll be pleased to provide any additional information you might be requesting. So again, thanks for your participation and your interest. And we look forward to a very, very good 2019, including the accomplishment of the Simplification Transaction. Thanks and have a great day.

And this does conclude today's conference call. You may now disconnect.