25. Business Segment Information

The Company is an independent owner and operator of five cokemaking facilities in the eastern and midwestern regions of the U.S. The Company is also the operator of a cokemaking facility for a project company in Brazil in which it has a preferred stock investment and is a 49 percent joint venture partner in a cokemaking operation in India. In addition to its cokemaking operations, the Company has metallurgical coal mining operations in the eastern U.S. as well as coal handling and/or mixing operations in the eastern and midwestern regions of the U.S.

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 and Indiana Harbor 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 own a 49 percent interest in VISA SunCoke and account for this investment under the equity method. 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 recognized our share of earnings in VISA SunCoke on a one month lag and began recognizing such earnings in the second quarter of 2013. During 2015, we impaired our investment in VISA SunCoke to zero and, consequently, beginning in the fourth quarter of 2015, we no longer include our share of VISA SunCoke in our financial results.

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 CMT located in Louisiana, Lake Terminal located in Indiana and KRT located in Kentucky and West Virginia. This business provides coal handling and/or mixing services to third-party customers as well as SunCoke cokemaking facilities and has a collective capacity to mix and transload more than 40 million tons of coal annually. Coal handling and mixing results are presented in the Coal Logistics segment.

The Coal Mining segment conducts coal mining operations near the Company’s Jewell cokemaking facility with mines located in Virginia and West Virginia, which are currently mined by contractors. A substantial portion of the coal production is sold to the Jewell cokemaking facility for conversion into coke. Some coal is also sold to other cokemaking facilities within the Domestic Coke segment. Intersegment coal revenues for sales to the Domestic Coke segment are reflective of the contract price that the facilities within the Domestic Coke segment charge their customers, which approximate the market prices for this quality of metallurgical coal.

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 expense (i.e. black lung, workers compensation, and net pension and other postretirement employee benefit obligations). Interest expense, net, which consists principally of interest expense, net of capitalized interest and interest income, 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.

The following table includes Adjusted EBITDA, which is the measure of segment profit or loss and liquidity reported to the chief operating decision maker for purposes of allocating resources to the segments and assessing their performance:



	Years Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Sales and other operating revenue:
Domestic Coke	$	1,243.6		$	1,388.3		$	1,528.7
Brazil Coke	34.0			37.0			35.4
Coal Logistics	60.8			36.2			8.1
Coal Logistics intersegment sales	20.4			18.8			5.5
Coal Mining	12.9			29.2			61.3
Coal Mining intersegment sales	101.0			136.0			136.7
Elimination of intersegment sales	(121.4		)	(154.8		)	(142.2		)
Total sales and other operating revenue	$	1,351.3		$	1,490.7		$	1,633.5

Adjusted EBITDA:
Adjusted EBITDA
Domestic Coke	$	210.1		$	247.9		$	243.2
Brazil Coke	22.4			18.9			16.1
India Coke	(1.9		)	(3.1		)	0.9
Coal Logistics	38.4			14.3			4.7
Coal Mining	(18.9		)	(16.0		)	(15.1		)
Corporate and Other, including legacy costs, net⁽¹⁾	(64.3		)	(51.3		)	(34.7		)
Adjusted EBITDA	$	185.8		$	210.7		$	215.1

Depreciation and amortization expense:
Domestic Coke⁽²⁾	$	81.6		$	81.3		$	68.1
Brazil Coke	0.6			0.5			0.4
Coal Logistics	14.0			7.6			1.8
Coal Mining⁽³⁾	10.1			13.9			23.2
Corporate and Other	2.8			3.0			2.5
Total depreciation and amortization expense	$	109.1		$	106.3		$	96.0

Capital expenditures:
Domestic Coke	$	67.6		$	109.2		$	121.2
Brazil Coke	—			0.9			0.8
Coal Logistics	6.0			2.9			0.2
Coal Mining	1.7			8.8			20.1
Corporate and Other	0.5			3.4			3.3
Total capital expenditures	$	75.8		$	125.2		$	145.6

(1) Legacy costs, net include costs associated with former mining employee-related liabilities prior to the implementation of our current contractor mining business, net of certain royalty revenues. See details of these legacy items below.



	Years Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Black lung (expense) benefit	$	(9.8	)	$	(14.3	)	$	0.3
Postretirement benefit plan benefit	3.6			3.7			1.0
Defined benefit plan (expense) benefit	(13.1		)	(0.2		)	0.1
Workers compensation expense	(2.3		)	(4.6		)	(2.0		)
Other	(0.4		)	0.7			0.6
Total legacy costs, net	$	(22.0	)	$	(14.7	)	$	—

(2) We revised the estimated useful lives at our domestic cokemaking facilities, resulting in additional depreciation of $10.2 million, $15.6 million and $9.5 million, or $0.16, $0.23 and $0.14 per common share from operations, during 2015, 2014 and 2013, respectively.

(3) We revised the estimated useful lives of certain coal preparation plant assets in our Coal Mining segment, which resulted in additional depreciation of $4.9 million and $1.0 million, or $0.08 and $0.01 per common share, during 2015 and 2014, respectively.



	Years Ended December 31,
	2015		2014
	(Dollars in millions)
Segment assets
Domestic Coke	$	1,534.2	$	1,577.9
Brazil Coke	58.8		61.6
India Coke	—		22.5
Coal Logistics	532.0		114.4
Coal Mining	20.5		45.9
Corporate and Other	98.4		131.4
Segment assets, excluding tax assets	2,243.9		1,953.7
Tax assets	11.6		6.0
Total Assets	$	2,255.5	$	1,959.7

The following table sets forth the Company’s total sales and other operating revenue by product or service:



	Years Ended December 31,
	2015		2014		2013
	(Dollars in millions)
Sales and other operating revenue:
Coke sales	$	1,182.0	$	1,323.1	$	1,462.9
Steam and electricity sales	61.5		65.7		65.6
Operating and licensing fees	34.0		37.0		35.4
Coal logistics	58.8		33.9		7.2
Metallurgical coal sales	11.0		24.0		61.0
Other	4.0		7.0		1.4
Sales and other operating revenue	$	1,351.3	$	1,490.7	$	1,633.5

The Company evaluates the performance of its segments based on segment Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization (“EBITDA”) adjusted for impairments, coal rationalization costs, sales discounts, Coal Logistics deferred revenue and interest, taxes, depreciation and amortization attributable to our equity method investment. Prior to the expiration of our nonconventional fuel tax credits in November 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. Coal Logistics deferred revenue adjusts for differences between the timing of recognition of take-or-pay shortfalls into revenue for GAAP purposes versus the timing of payments from our customers. This adjustment aligns Adjusted EBITDA more closely with cash flow. 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.

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. Set forth below is additional discussion of the limitations of Adjusted EBITDA as an analytical tool.

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 items such as depreciation and amortization;


•	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 and net cash provided by operating activities, which are its most directly comparable financial measures calculated and presented in accordance with GAAP:



	Years Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Adjusted EBITDA attributable to SunCoke Energy, Inc.	$	104.6		$	150.0		$	173.9
Add: Adjusted EBITDA attributable to noncontrolling interest⁽¹⁾	81.2			60.7			41.2
Adjusted EBITDA	$	185.8		$	210.7		$	215.1
Subtract:
Adjustment to unconsolidated affiliate earnings⁽²⁾	$	20.8		$	33.5		$	3.2
Coal rationalization costs⁽³⁾	0.6			18.5			—
Depreciation and amortization expense	109.1			106.3			96.0
Interest expense, net	56.7			63.2			52.3
Income tax (benefit) expense	(8.8		)	(58.8		)	6.7
Sales discount provided to customers due to sharing of nonconventional fuels tax credits⁽⁴⁾	—			(0.5		)	6.8
Asset and goodwill impairment	—			150.3			—
Coal Logistics deferred revenue⁽⁵⁾	(2.9		)	—			—
Net income (loss)	$	10.3		$	(101.8	)	$	50.1
Add:
Asset and goodwill impairment	$	—		$	150.3		$	—
Depreciation and amortization expense	109.1			106.3			96.0
Deferred income tax (benefit) expense	(5.6		)	(64.4		)	1.6
Loss on extinguishment of debt	0.5			15.4			—
Changes in working capital and other	26.8			6.5			3.6
Net cash provided by operating activities	$	141.1		$	112.3		$	151.3


(1)	Reflects non-controlling interest in Indiana Harbor and the portion of the Partnership owned by public unitholders.


(2)	Reflects share of interest, taxes, depreciation and amortization related to VISA SunCoke. The years ended December 31, 2015 and 2014 also reflect impairments of our investment in VISA SunCoke of $19.4 million and $30.5 million, respectively.


(3)	Coal rationalization costs include employee severance, contract termination costs and other costs to idle mines incurred during the execution of our coal rationalization plan.


(4)	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. The gain was recorded in sales and other operating revenue on our Combined and Consolidated Statement of Operations.


(5)	Coal Logistics deferred revenue adjusts for differences between the timing of recognition of take-or-pay shortfalls into revenue for GAAP purposes versus the timing of payments from our customers. This adjustment aligns Adjusted EBITDA more closely with cash flow.