Thank you for standing by and welcome to the SunCoke Energy, Inc. Q1 2020 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised, today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Shantanu Agrawal, Director of Investor Relations. Thank you. Please go ahead.

Thanks Jesse. Good morning and thank you for joining us to discuss SunCoke Energy's first quarter 2020 earnings. With me today are Mike Rippey, President and Chief Executive Officer and Fay West, Senior Vice President and Chief Financial Officer. Following management's prepared remarks, we will 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 the 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 are reconciliations to non-GAAP financial measures discussed on today's call. With that, I will now turn things over to Mike.

Thanks Shantanu. Good morning and thanks to all of you for joining us on our call this morning. These are unprecedented times as the COVID-19 pandemic has affected every aspect of our society. Today, I would like to discuss our response to COVID-19, including the actions we have taken to protect the health and safety of our employees and contractors to support our customers and steps we have taken to reduce costs and preserve cash. SunCoke has been designated as an essential business in every state where we operate, which allows us to continue operations at all of our facilities. We are in close contact with our critical suppliers and vendors to ensure that we will be provided the materials and services required to continue operating in an uninterrupted manner. We, at SunCoke, have been keenly focused on taking proactive and effective steps to ensure the health and safety of our workforce. As the pandemic unfolded, our internal COVID-19 task force worked to follow the guidelines of the CDC, OSHA and local health and governmental authorities to implement policies and procedures to protect our workforce and contractors. As part of this effort, we have implemented screening processes for essential employees as they enter our sites, enhance screening procedures, staggered shifts and required those who can work from home to do so. These are just a few of the actions we have taken to maintain a safe operating environment and to protect our employees. I am extremely proud of our employees as they work diligently to serve our customers with essential products and support our business. We are continually monitoring the COVID-19 pandemic as it evolves and will continue to respond to issues that may arise. Turning to our performance for the quarter. The direct impact of the pandemic on our…

Thanks Mike and good morning everyone. Turning to slide four. Our first quarter net income attributable to SXC was $0.06 per share. EPS was down $0.09 versus the prior year period, mainly driven by the performance of the logistics segment. From an adjusted EBITDA perspective, we finished the first quarter at $62.1 million, down $5.2 million versus the first quarter of 2019. The decrease was primarily due to lower throughput volumes and lower fees per ton at CMT, partially offset by higher sales volume at domestic coke. Moving to the detailed adjusted EBITDA bridge on slide five. As you can see, consolidated adjusted EBITDA was down approximately $5.2 million versus the prior year period. Our coke segment performed well this quarter. These results reflect a $6.3 million adjusted EBITDA improvement due to increased volume. This increase was partially offset by lower coal to coke yield gain due to lower coal prices. As a reminder, while we do pass-through the cost of coal to our customers, we generate incremental adjusted EBITDA from higher coal prices due to improved yield gain calculations. We continue to see sustained operating performance for the rebuild ovens at Indiana Harbor, which is the primary driver of the increase in production this quarter. In terms of our logistics segment, we saw lower throughput volumes at both CMT and KRT. In addition to the lower volumes, revised pricing also impacted profitability when compared to the prior year period. Quarter-over-quarter, the logistics segment was down $9.4 million. When adding in slightly unfavorable results at corporate and other, we ended at $62.1 million of adjusted EBITDA in Q1. Turning to slide six to discuss our domestic coke business performance in detail. First quarter adjusted EBITDA per ton was $60 on 1,069,000 tons of production. These results reflect an increase of…

Thank you Fay. Wrapping up on slide nine. As we operate in these unprecedented times, our first priority remains the safety and well-being of our employees and contractors. We will continue to do everything possible to ensure they are all well protected and able to do their essential jobs with confidence. At this time, we have not lost sight of our core business and will focus on successfully executing against our operating plan in 2020. We will continue to pursue opportunities to optimize our asset base, specifically as it relates to the Convent Marine Terminal. We have significant coal contracts expiring at the end of 2020. Successfully navigating through these renewals is a key initiative for our organization and for the long term success of SunCoke Energy. Additionally, we continue to explore opportunities in the foundry coke market as mentioned in our previous earnings call. As we have discussed, the steel industry and our customers have been adversely impacted by this pandemic and we are committed to partnering with them through these challenging times to ensure we address our customers' needs in the short term while also providing long term stability of supply. As we have progress to report, I look forward to keeping our investors and stakeholders informed throughout the year. And finally, we will keep a vigilant eye on our asset base to make sure it is properly maintained and able to operate efficiently even as operating levels may fluctuate in the near term. We are proud of the investments we have made, creating the highest quality assets in the industry which we are committed to maintaining so that we do not skip a beat as markets begin to improve. Before we end our prepared remarks, I would like to take this opportunity to thank all of our employees, contractors and suppliers who are working very hard during these difficult times to keep our business operating safely. With that, we can open the call for Q&A.

[Operator Instructions]. Your first question comes from Matthew Fields with Bank of America. Your line is open.

Hi everyone. Just a couple of nitpicky ones first. When in the quarter did you buy back the bonds?

It was about March. I think March time frame.

Early March.

Yes.

The time frame, yes.

Early March, before kind of everything went into lockdown?

That's right.

And I assume the stock repurchases were also kind of before the lockdown started in the country?

The majority of them were.

Okay. Have there been any more bond on repurchases in the second quarter yet?

No.

Okay. And then, I appreciate drawing the revolver to keep cash on the balance sheet. A lot of your peers are doing the same. When you get, I guess, more line of sight on what 2020 is going to look like, can you think about allocating some of that cash to buy back more bonds at a discount? You have a pretty significant arbitrage between the low cost revolver and your bonds that are trading at a pretty steep discount.

Right. We are monitoring where our bonds are. As you know, we drew down on the revolver just to solidify our position here at quarter-end and we will monitor what our revolving borrowings will be as we navigate through this situation.

Okay. Great. In terms of the contract restructuring that you started to mention, obviously, I know there is probably nothing that you can share too concrete detail. But what's on the table with these restructurings? Is it pricing? Is it volume? Is it maturity? Is it the very take-or-pay nature of the contract? Like what's the form of the conversations being had?

You are right, Matthew. There is very little we can say at this point in time. But it's fair to conclude that there is a menu of options that we are exploring with our customers that might include some of the items you have discussed and others as well. But we can't speculate or discuss these ongoing negotiations.

Okay. And then just to review your existing contracts, the force majeure or material adverse clauses, they don't have pandemic or business downturn language. It's more like explosion and specific kind of incidents like that to declare force majeure on your contracts, right?

We feel strongly about the force majeure protections that are provided in our contracts and should we need to, we would enforce vigorously.

Okay. And then appreciate trying to sort of keep liquidity and get leverage down. Are there any assets that you can monetize? Any thing you can do to boost cash? Maybe, I know Convent Marine Terminal was a big asset you bought for $400 million-plus a number of years ago. Is that something that you would be willing to sell? Obviously that price is probably a little lower today, but anything that you can do to kind of boost liquidity and preserve cash and take the leverage down?

Our liquidity position is quite strong right now. And as we stated, our goal is to get to three times or less. And we believe that over time our operations will allow us to accomplish that. We are looking at repositioning CMT, given the loss of lines, particularly as it relates to Murray and will continue to do so. And I think you answered your own question with regard to a sale. I think it's particularly inopportune for time for a company with good liquidity to be looking to sell assets.

Okay. Fair enough. Thanks very much and good luck.

Thank you.

Your next question comes from Matt Vittorioso with Jefferies. Your line is open.

Yes. Good morning guys.

Good morning Matt.

Good morning. On the business side, however those negotiations with customers go, it seems plausible that you will defer some volumes. I am just trying to think through how that looks for you specifically. Do you continue to produce at your current rates and just stockpile coke and defer those volumes? Or do you slow production? And if you slow production, does that impact the EBITDA per ton or the profitability of your operations?

As we indicated to Matthew, Matt, we are not going to discuss those ongoing negotiations. It's not appropriate right now. There are, of course, ways that we could reduce production for a period of time. Done it before and we could do it again.

Right. I know you guys have done it before and I am just trying to ascertain if that were the path, how does that impact your profitability? Do you actually slow production or you just hold on to it? I am not asking you specifically on any customer negotiation. I am just saying, for SunCoke, if you were to slow down deliveries, do you slow production? And what does that do to profitability?

We are not able to discuss these actions we may or may not take as a result of these discussions today.

Okay. Fine. Thank you.

Your next question comes from Lucas Pipes with B. Riley FBR. Your line is open.

Hi. Good morning everyone. Hope you all are doing well.. I wanted to ask, what are current utilization rates at your coke facilities?

They are above, I mean at the end of the quarter.

They were at 100%.

They were at 100%. Some facilities slightly above.

And today?

Well, we indicated that our April results were in line with our expectations.

So as of right now, you are still producing near kind of full capacity?

That's correct.

That's helpful. Thank you. Then I appreciate that you pulled guidance for the year, but I wondered if you could kind of maybe just comment on your free cash flow outlook, for lack of better word? But would you expect to be free cash flow positive even with some of these contract negotiations? Thank you.

So Lucas, we did pull all of our guidance, inclusive of EBITDA and CapEx and free cash flow guidance. But we could be scenario play a number of different events. But in all of those, we are free cash flow positive.

That's helpful. That's all I had for now. I appreciate the color and best of luck.

Thank you.

Okay. Thank you Lucas.

Your next question comes from Nick Jarmoszuk with Stifel. Your line is open.

Hi. Good morning. I got on the call late. I apologize if this has been addressed. It sounds like it hasn't, but to the extent that you need to idle any facilities, can you talk about whether you do hot idle, cold idle? And what sort of risks there are to the underlying furnaces in terms of metalworking, keeping the seals on the doors, et cetera?

Nick, I think it's extremely unlikely that we would be hot idling any of our facilities as result of the discussions that are taking place today with our customers. If that were and again, I cannot stress enough that's extremely unlikely. We have been a hot idle condition, we would either continue to keep the ovens warm by keeping coal in the ovens in a heated state obviously or we would keep the ovens hot with natural gas being injected.

Okay. And then given the volumes of blast furnaces that have been idled and not getting into the discussions you are having with the customers, can you talk about what sort of merchant opportunities there are for the coke that may be sitting in excess in North America? Whether it can be exported out? And what sort of market opportunity there is there?

There would be very limited opportunity right now. This pandemic that we are experiencing is a global pandemic. And the U.S. falloff in demand is not dissimilar to what's happened throughout the world.

Okay. That's all I had. Thank you.

Thank you.

Thank you.

[Operator Instructions]. There are no further questions at this time.

Okay. Good. Thank you all again for joining us in our call this morning and as always your continued interest in SunCoke and we look forward to us discussing our company as we continue to evolve and respond to the COVID-19 pandemic. Thank you again.

This concludes today's conference call. You may now disconnect.