Good morning. My name is Shawn and I'll be your conference operator today. At this time, I would like to welcome everyone to the SunCoke Energy third quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I'll now turn the conference over to 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 third quarter 2018 earnings. With me are Mike Rippey, President and Chief Executive Officer; 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 our Investor Relations section of our website, and a replay will be available there 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 that 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 any non-GAAP financial measures discussed on today's call. With that, I'll now turn things over to Mike.

Thanks, Andy. And thank you all for joining the call this morning. Turning to Slide 3, let's start with third quarter performance. Adjusted EBITDA was $66 million in the third quarter, a 6% year-over-year improvement. We are pleased with the overall performance of our coke and logistics businesses specifically the contribution of our Convent Marine Terminal business and a significant year-over-year improvement on our Indiana Harbor facility. During the quarter, we also began work on major planned outage in our Granite City facility, which has reflected in this quarter results as is the impact of an unrelated machinery fire at the facility. Performance at CMT has remained strong with 3.2 million tons of throughput in the third quarter, to see strong demand from our customers as they leverage CMT's unique capabilities, we expect demand to be healthy for the remainder of 2018. We will discuss Indiana Harbor in more detail later in the call but based on the success of our 2018 rebuild campaign, the resulting performance year-to-date were increasing our Indiana Harbor production guidance were approximately 950,000 tones. They are also Indiana Harbor adjusted EBITDA guidance to be between 10 million and 15 million. This is a significant improvement over expectations based on this incremental contribution we believe we are well positioned to deliver full year results at the top end of our 2018 adjusted EBITDA guidance range, $240 million to $255 million. As we wrap up the last few months of the year, we remain committed to delivering against our 2018 objectives. Our focus has been and always will be grounded in operational excellence to maximize our existing businesses to their fullest potential. Before Fay takes you through the Q3 results in detail, I want to provide a further update on Indiana Harbor and our rebuild plan for…

Thanks Mike and good morning everyone. Turning to Slide 7. Our third quarter net income attributable to SXC was an $11.5 million or $0.18 per share. EPS was flat versus the prior year period, a solid operating performance was offset by higher depreciation expense. From an adjusted EBITDA perspective, we finished the third quarter at $66 million up 6% versus 2017. The increase in performance was driven by strong operating results primarily at our Indiana Harbor and Convent Marine Terminal facilities. Moving to the detailed adjusted EBITDA bridge on Slide 8. Consolidated adjusted EBITDA was up approximately $4 million versus the prior year period. Indiana Harbors third quarter adjusted EBITDA of $3.2 million was up $7 million versus the prior year. We continue to see stable operating performance from rebuilt ovens. The improved performance drove both an increase in production and higher yield which resulted in approximately a $5 million increase in adjusted EBITDA. Additionally, Indiana Harbor received $3 million in higher O&M reimbursement. Including Indiana Harbor, our domestic coke business was down $13.6 million in the quarter versus the third quarter of 2017. They are two main drivers for the lower adjusted EBITDA when comparing quarters. The most significant driver was a major outage to perform maintenance work on heat recovery steam generators and a flue gas desulfurization unit at our Granite City facility. As a reminder, the financial impact of planned outages are included in our full-year guidance. Planned outages generally result in incremental operating and maintenance cost, lower energy revenues and lower coke volume. Timing and scope of outages vary year-to-year which in turn affects year-over-year comparability. When comparing to the prior year period, there were no major outages in the third quarter of last year. The scope and duration of the Granite City outage has increased…

Thanks, Fay. As you have heard this morning, we have made significant progress against our commitments for 2018 and are well positioned to deliver strong full-year financial results at the top end of our guidance range. Now, that the third quarter is in the books, our focus shift towards closing out the year in a strong position. With that, let's open the call for questions.

[Operator Instructions] Your first question comes from the line of Lucas Pipes with B. Riley FBR. Your line is now open.

Hey, good morning, everybody.

Good morning.

Good morning.

Great to hear on the progress at Indiana Harbor. Mike, I know you wanted to kind of keep most of the guidance for early next year but given the higher refurbishment cost for the remaining ovens, can you maybe give us a sense on the return on capital for that investment? Thank you.

Well, Lucas, you're right. We want to hold the financial guidance with regard to the Indiana Harbor until our plans are complete which we're in the process now of completing. So, we'll have that for you in the coming quarters. You could bear with us and show some patience, we'd appreciate it. But we are as we said very confident in the progress we made at the Indiana Harbor. C/D batteries are performing quite well for us. We're delighted with the progress we're making and rebuild of the A-battery. And are confident in what will be a good campaign here in 2019 and we expect -- you got the tonnage now, a $1,025,000 and will provide the financial results for the company wise production model in our next call.

Now, if again I appreciate that very much. If I were to assume something like a three year payback on a $1 million refurbishment cost, is that the right, to quote?

I don’t know that we want to speak specifically to the return on of that Lucas but you should understand that we have high expectations of the Indiana Harbor works when it's again producing at 1.2 million tons. I think if you're working on models, you can see the progress that we're making year-over-year in the presence of again the now fully rebuilt C/D, we partially built A and you can call it then in the 2020 in the end periods to 1.2 million tons to 2.0 million tons. But you can almost calculate the value of these tons as you see the progress we're making taking from what was a meaningful loss in 2017 to revised guidance to profitability this year. And look forward again to a continued progress.

Yes, okay. Now, that's very helpful, thank you. Thank you, for that. Say, I think you towards the end of the your remarks touched on a leverage targets, if I heard you right, for SXCP. Can you remind us kind of at the SXC level you obviously are ready down on a net debt to EBITDA basis of about 2.7 times. Do you have a target for SXC, maybe I just didn’t hear you right. Share your thoughts on --.

No, just quickly. Sorry Lucas, we've only specifically targeted at SXCP to bring down our leverage sort of 3.5 times.

Okay.

And obviously that will flow through to the consolidated numbers as well. But I just wanted to remind you that we plan to actually get to that target by the end of 2019.

Got it, alright. Alright, and then maybe last question from me. Mike, obviously there has been a lot of movement here in the domestic steel markets. What's your outlook in terms of industry fundamentals, what are you seeing on the ground and what could those mean for SXC over the next 12 months 24 months or so. Obviously, you're increasing effectively capacity at Indiana Harbor but any other implications from your industry outlook would be very much appreciated. Thank you.

To answer your second question. First, as you're aware our company is protected well in the presence of its take or pay contracts during periods of lower demand but similarly we don’t participate other than the more tons we produce the more tons we sell in the upside of the industry. But we are pleased that the fundamentals have improved for our customers. We want to see financially healthy customers operating with presence of high levels of demand from their end users. I don’t, a little bit crystal ball in here but fundamentally I don’t know that a lot has changed in our economy for the good or the bad. We continue to see nice progress in terms of economic recovery end use markets should continue to demonstrate year-over-year, 12 next year, its modest growth but its growth nonetheless often ever better base. So, that is tightening a bit, interest rates are coming up as we reach full employment. But the more people that are employed in our country and they're experiencing now some wage growth, they're better positioned the consumer is to pan. So, perhaps a lot of noise in the system now and causing slows a bit because interest rates were high, the cost of owning the cargoes up is interest rates rise. But our setting at is, is higher levels of income. So, we see if you have kind of up through all of the noise that's in the system, not really fundamentally, but you're aware demand modestly increases from would have been good levels this year. The industry is now operating in excess of 80% of capacity and there's no reason to think that that shouldn’t continue into the next year particularly given the next year will have the benefit of the full year, 230 to year or so. We didn’t have that at the beginning of the years though imports were higher at the beginning of the year now. So, shaping up to be I think a pretty nice year 2019, that's spectacularly better than 2018. But 2018 was a nice backdrop to work in; same would be true for our CMT assets in our outlook for the global economy and the demands for coal, globally.

Your next question comes from the line of Jeremy Sussman with Clarksons. Your line is open.

Hi, good morning. Thanks very much for taking my question. On CMT, it's on pace for about 12 million tons or so, it's based on the year-to-date average. And I know if that is cocked about 15 million tons of capacity in the past. Is that kind of the right number to think about or are there some bottlenecks that would be in place to just kind of prevent you from getting a few million tons extra out of if demand were there?

You're right. We're on, I think our guidance is a 11.5 million tons here for 2018. And so, we've seen really strong demand throughput through that facility. And the rate for the facility could handle up to 15 million tons of throughput. And so, we're able to handle that and there's nothing thus far as an impediment that would prevent it from doing that.

Understood. And are you seeing any signs of demand picking up at all even above and beyond obviously the obvious which is on Q3 of this year was up materially from Q3 of last year, of course?

I think, if you just look at kind of our coal export customers and there's been strong demand for throughput here in 2018 and that's really based on very strong pricing. And if you look at kind of where the API2 pricing is today, it's pretty health as far as the net back to our customers. And then if you just look at what the forward market looks like for 2019 and 2020 for API2 pricing, it remains pretty healthy. And so, we would anticipate that the volumes through the facility will remain healthy as well.

Now that's very helpful. Maybe just to follow-up on the netbacks. I think your slide shows netbacks sort of in the low 40s in the $41 account range. Let's think that's a bit lower than maybe the domestic price on paper. I mean, are you seeing this kind of play out in practical terms or is this demand actually negatively affected? Has this dynamic negatively affected exports or is give here this is kind of more of a paper number and certainly even if it suggests the domestic market is higher that you really haven’t seen that play out in the form of any down tick in exports, I guess?

So, I would just remind you that this is our estimate of what the netback is to our customers based on published information. The very specifics might be a bit different for each of our individual customers. Having said that, I think that just even with these assumptions that the export market continues to be buyable and the strength of that kind of in '18 and '19 I think is like I said quite healthy.

Now, that's great and a very exciting time. So, I appreciate all the color.

[Operator Instructions] Your next question comes from the line of Derek Hernandez with Seaport Global Securities. Your line is open.

Hi, good morning. Then, thanks for taking the time. Congratulations on a very strong quarter.

Thanks, Derek.

I want to follow-up very quick on CMT. Just given the volume growth that you've had recently, where you might peg the EBITDA growth target of $5 million to $10 million at this point. But maybe how far long are you there?

So, when we set that target of $5 million to $10 million of EBITDA growth, we had given the timeframe for that is over the next two years. And I think we're making steady progress on getting that new business. Specifically, we have had merging tons of over 600,000 year-to-date coming through. And so, when I look at kind of what we're accomplishing here is are getting moving different products and getting additional customers. I think we're on track here to achieve that $5 million to $10 million EBITDA contribution over the next two year period.

Got it, that's very helpful. And then if I might loopback around two Indiana Harbor, you've spoken about prior rebuild that battery rebuild ending around November of the year. Is that about what you would expect for 2019? And then, as a quick second question there. If at the time that the rebuilds are complete, would this then be operating at name play capacity at Indiana Harbor or would there be a bit of a ramp-up period following? Thanks.

So, we anticipate that the rebuild for 2018 will be completed by the end of November. And as we look forward to 2019 and the rebuild program for 2019 on the B-battery, we anticipate the same timeframe. So, we'll start whether permitting early in the year and we're targeting a completion by the end of November as well. When the entire facility has been rebuilt by the end of 2019, the run rate that we're anticipating going into 2020 is a 1.2 million to 2.0 million tons.

Got it.

Would be a 2 million or so.

And -- that's right. Then lastly from me, should we, I know you're still working on financials for '19 and there's a bit of noise there at Indiana Harbor, 2020 given that hopefully everything is very smooth and we're at capacity for the facility at that point. Should we look to historical levels for what Indiana Harbor can do on a forward 2020 plus run rate or would you point us to any specifics within your contracts that may have evolved since this period of rebuild has begun?

So, we will be producing at a run rate of 1.2 million to 2.0 million tons. Our contract at that time will the way that is structured will be reimbursed from an O&M perspective based on a budgeted agreed upon budgeted rate with our customer. So, there is a difference in reimbursement mechanism as well. I think, looking back to the prior years, there is a little bit of noise in there that may not necessarily be a good indicator to the future. There is the incremental cost of rebuilds that are included in EBITDA in each of those periods. And keep in mind, we've been on this multi-year rebuild campaign since 2015. So, it's -- so, there's noise from the O&M impact of rebuild. And then there is also differences in recovery from an O&M perspective. So, I think looking back is not necessarily the best way to figure out run rate for 2020.

I see. Well, thank you very much for all the color and good luck going forward.

Thank you.

Your next question comes from the line of [Barry Gallache] with OPEC Oil. Your line is now open.

Yes, thank you for taking my call. With the mill price of our stock being about $14.50 right now, would you consider buybacks as a good use of capital?

Our stock is not at $14.50. This is the SXCP, SXC call.

This is the SXC, I thought it was SXCP. I'm sorry.

Yes.

Would SXC consider a buyback of SXCP at the price of SXCP being $14.50 at being a good use of capital for SXC that is my question?

Okay. So, as I think, as we think about it, SXC has in the past repurchased SXCP units. We have repurchased over close to $53 million of units in the past. At SXC, management and our board are always focused on prioritizing excess cash flow in the most efficient way for SXC shareholders. SXC just announced on the call that we anticipate spending between $50 million and $60 million to fund a B-battery rebuild campaign in 2019. And we think that this is an attractive use of those excess funds at this very attractive growth project that will help stabilize our facility and significantly increase our EBITDA going forward. So, I think we continue to evaluate what's the most attractive return to shareholders and looking at we look at tuck-in acquisitions from an M&A perceptive, organic growth projects and or in other returns of capital to shareholders. But we're focused on the B-battery rebuild in 2019.

Okay, thank you very much.

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

Thank you very much for taking my follow-up question. Mike, I wanted to ask a little bit more specifically about the balance in the domestic coke markets. Would you say that it's roughly aligned or do you still see or do you see an excess amount of coke making capacity relative to glass furnace utilization? Thank you.

It's a good question, Lucas, thank you. That imbalance which had existed during the period of weaker demand for steel products continues to correct. And most recently now U.S. Steel has got both furnaces up and operating at Granite City. So, that supply and demand balances is probably if not nearly imbalance today. So, we certainly like the structure of the industry like better than we did a few years ago when our customers were operating with -- it'll be lower in the sense they do today. So, the supply demand balance is more balanced than it's spend.

Now, would it be fair to and I don’t want to put any words in your mouth but would it be fair to characterize it as imbalance but maybe on the margin coke being a little bit tight?

Now, if I had to shade it, I'd say that probably a still little bit long.

Okay.

But certainly approaching, there is a tipping point, right, but we're certainly getting closer to balance but there's not an at least to my way of thinking it deficit at this point.

Got it, okay. That's very helpful and very much appreciate it. All the best, thank you.

Thank you.

And there are no further questions at this time. I'd turn the conference back to the presenters.

Well, again we like to thank everyone for joining us this this morning and again your continued interest SunCoke Energy. The extent you have follow-on questions or questions that weren’t answered, please feel free to contact our Investor Relations team and they'd be happy to respond to those questions. So again, thanks and we'll talk again in the quarter.

And this concludes today's conference. You may now disconnect.