SunCoke Energy Inc (SXC) 2015 Q3 法說會逐字稿

Welcome to the Q3 SXC earnings call. My name is Paulette and I will be your operator for today's call. (Operator Instructions). Please note that this conference is being recorded. I will now turn the call over to Lisa Ciota. Lisa, you may begin.

Thank you, Paulette. Good morning, everyone, and thank you for joining us on an early morning call to discuss SunCoke Energy's third-quarter 2015 earnings. With me are Fritz Henderson, our Chairman, President and CEO, and Fay West, Senior Vice President and Chief Financial Officer. Following our remarks made by management today we will open the call for Q&A.

This conference call is being webcast live on the Investor Relation's section of SunCoke.com and a replay will be available for a few weeks. If we don't get to your questions on the call today, please feel free to give me a call this afternoon at 630-824-1907.

Now before I turn the call over to Fritz, let me remind you that the various remarks we make today regarding future expectations constitute forward-looking statements. The cautionary language regarding forward-looking statements in our SEC filings apply to these remarks. These documents are available on our website, as are any reconciliations to non-GAAP items discussed on today's call. And now I will turn the call over to Fritz.

Thank you, Lisa, and good morning, thanks to everyone for joining the call. We made our decision to report our third-quarter results earlier than we typically do in order for investors to have as much information as soon as possible. So again, thank you very much for joining us this morning.

As we look at the third quarter, a number of things took place in the third quarter at SunCoke. First, the Convent Marine Terminal acquisition was both completed and the integration steps were completed as well, which really builds and strengthens our coal logistics platform.

We executed $16 million of share repurchases against the existing authorization we have and we declared a second consecutive $0.15 quarterly dividend. Fay will have more to say about that.

In the quarter we initiated a number of steps and took a fresh look at our Indiana Harbor plant as the plant continues to have both continued challenges and continues to post unacceptable performance. I will have more to say about that later in the call.

The organization also had a number of changes in the third quarter. With the departure of Mike [Thompson] and Barry [Elswick], we took that opportunity to flatten the organization in the quarter. We also manage the transition of General Counsel from Denise Cade to [Catherine Gates]. So the Company made a number of important changes in management and I want to thank Denise and congratulate Catherine on her promotion.

In terms of guidance, given what has happened with Indiana Harbor we are revising our guidance today to $180 million to $190 million, which reflects both the Convent acquisition but also significant underperformance in Indiana Harbor. Fay will have more to say about that later in the presentation.

And then I will wrap up talking about, again, our value proposition at SunCoke and what our business model and what our value proposition is towards our customers and so forth. At this point I will turn it over to Fay.

Thanks, Fritz. For the quarter consolidated adjusted EBITDA of $50.2 million was down $14 million versus the prior year. And this is due primarily to the impact of our performance at Indiana Harbor as well as other items that impact comparability which I will discuss on the next slide.

These items were partially offset by the performance of our Convent Marine Terminal facility which contributed $5.4 million to third-quarter results and is expected to deliver full-year 2015 adjusted EBITDA of approximately $20 million, which is in line with our prior guidance.

Looking at EPS we reported a loss of $0.36 per share which reflects the impact of a $19.4 million non-cash impairment charge related to our VISA SunCoke joint venture in India. Similar to the impairment charge we took last year, the market conditions continue to deteriorate and we have now written our investment down to zero.

Turning to slide 4, and working from left to right on the chart, we identified the drivers of year-over-year changes in adjusted EBITDA. Most notably you can see the $11.4 million impact from cost under recovery and lower volumes at Indiana Harbor, which was partially driven by the oven rebuild pilot program that Fritz will discuss later in the presentation.

In addition to Indiana Harbor a few items impacting comparability include the previously disclosed idling of the Haverhill chemicals facility as well as one time deal cost and severance costs that were incurred in the third quarter.

Partially offsetting these items was the beneficial impact we are already experiencing from our Convent Marine Terminal acquisition which contributed $5.4 million to results. In total our consolidated adjusted EBITDA for the third quarter was $50.2 million, down from the prior year quarter of $64.2 million.

Flipping to the domestic coke summary on page 5, given the operational challenges at Indiana Harbor our domestic coke fleet delivered results below expectations finishing with adjusted EBITDA per ton of $54 on 1.049 million tons of production.

Overall we continue to have confidence in the long-term performance of our domestic coke segment as a whole, but in the near-term we are reducing our full-year adjusted EBITDA per ton guidance range to be between $50 and $55 per ton, down from the previous range of $55 to $60 per ton.

Moving to slide 6, our liquidity position remains strong as we continue to actively manage our balance sheet in order to preserve flexibility as two of our customers are working through contract negotiations with their labor forces.

We ended the quarter with approximately $103 million in cash and remaining revolver capacity up $213 million. We generated positive cash from operations although working capital was impacted by the timing of the cash payment from a customer. The payment was received on October 1, one day later than anticipated and was delayed due to administrative issues.

Cash flow from operations was offset by capital expenditures which were in line on a consolidated basis and the net cash from the CMT acquisition. Further, we paid out nearly $50 million in executing our capital allocation strategy. With combined liquidity of $316 million we are well-positioned to manage through any potential challenges while we continue to execute our strategy.

Turning to the next slide, we continue to be committed to leveraging our unique structure and creating value for shareholders. During the quarter we executed approximately $[16] million in share repurchases at a level that we believe is highly undervalued.

As a reminder, we have $39 million of share repurchase authorizations remaining for SXC and going forward we intend to opportunistically execute against the remaining portion of this authorization.

We also declared a quarterly dividend of $0.15 per share which was consistent with the prior quarter and represents a 100% increase from where we started the year.

And lastly, we anticipate that the remaining SXC bonds will be taken out in the fourth quarter as we have already called our retained portion of the bonds totaling approximately $60 million.

And we anticipate that sometime in the fourth quarter SXCP will redeem the approximately $45 million portion of the SXC bonds they assumed as part of the 23% drop-down of Granite City. The redemption of these bonds will provide more flexibility to execute on our go forward capital allocation strategy.

Looking at our revised adjusted EBITDA guidance on the next page, as we mentioned earlier, we are revising our 2015 adjusted EBITDA guidance to be between $180 million and $190 million.

When excluding Indiana Harbor you can see that the rest of our business has remained in balance as strong performance at Middletown, Jewell and Brazil has offset the unfavorable impact of Haverhill Chemicals facility idling and some other nonoperational charges including Black Lung, severance and deal costs.

However as you can see, Indiana Harbor's underperformance is driving our downward revision in our outlook for the year as volume shortfalls and costs under recovery have yielded disappointing results.

Partially offsetting the Indiana Harbor performance is the approximately $20 million benefit that we expect from the Convent Marine Terminal acquisition. I will now turn it back over to Fritz.

Thanks, Fay. Before talking about slide 9 I wanted to provide some overall comments about Indiana Harbor. When I look back not just in the quarter but over the last three years, performance at the plant has not been acceptable under any measure. We have invested about $130 million of capital in that plant from 2013 to what we expect to do in 2015.

While Indiana Harbor does have some unique challenges we are not making excuses today. We are not getting the job done in terms of profitability, cash flow and what we expect to achieve in terms of production yields and the various other operating metrics at the plant.

The asset today is in much better condition than it was in 2013. If you look at the physical plant, the environmental performance, there are a number of significant improvements in the infrastructure and the capability of the plant. But as I said, we are not hitting the numbers in terms of production yields, O&M cost and therefore EBITDA.

So, the logical question is why and what will we do differently going forward. There's four points I want to make before touching on the information you see on page 9 and 10.

First point I want to make is we plan to transition this from a project to a plant. What does that mean? Typically when you do a project you complete the spending and you expect to have results. We have spent capital at the plant but we have not been able to bring the plant to the 1.2 million rate.

As we think about going forward we plan to take a more balanced approach. The ongoing spending and the management of the projects from the plant are going to be incorporated within the operations of the plant.

The emphasis going forward is going to be on stability in the operation and operational performance, not necessarily in hitting the 1.2 million rate. Whether or not we hit the 1.2 million rate will be a function of our ability to demonstrate stability in the operations day to day.

The focus is going to be on minimizing variation and building process capability in the plant. This is something you do in plants and something we do in our other plants and something that we are going to be focused on almost exclusively at our Indiana Harbor plant.

Second important point, we are going to go slower in some areas in order to accelerate progress. What does that mean? The plant as I have look back over the past three years can only incorporate a certain amount of change.

As we look, for example, last year we undertook the investment in repairing about 42 ovens, the floors and the flues. As we look back in 2015 a more holistic approach to oven repairs is in order and would generate a better return and I will have more to say about that when I talk about the chart.

If you look at the commissioning of the pusher/charger machines for example, the first machine that was commissioned late last year and into the winter this year was not done well. The commissioning had lots of difficulties, lots of problems.

As we have looked at the commissioning of the second machine, which began on or about July of this year, and we expect to complete this month in October, we have factored in the lessons learned from the first PCM commissioning.

We factored in the improvements that we made in the machine into this machine and the objective is to do this in a deliberate way so that when the machine converts over to the second battery that it's expected to service this month that we do so in a much more fluid fashion.

Third, there is going to be a constant focus at the plant in continuous improvement once stability is established. As you look at the oven repairs that I'm going to talk about in a minute, it's not just about improving the performance of those specific ovens, it is also about improving the overall reliability across the battery.

And so, as we minimize variation in individual ovens it gives the team at the plant an ability to more effectively adjust for those ovens that haven't been repaired. And so, it is about continuous improvement once process stability has been established.

Fourth and finally, we intend to apply greater discipline in both CapEx as well as in O&M. What we will do as we look at the initiatives we are undertaking, and I'll have more to say about this in a bit, is we are going to measure the results first, we are going to monitor those results and then we are going to incorporate changes step by step in the plants in terms of both spending as well as O&M.

And so, in these four areas these are conceptual points, but these are four important areas where we do plan to change from what has been done in the past.

So wrapping it up then you might ask, okay, well when will the plant be stable. How much will be spent? How much can be generated in terms of production and EBITDA? And what about the customer? I would say a couple things.

First, the balanced approach is in effect now. I will have more to say about 2016 on December 17 when we have our Analyst Day and we talk about guidance for 2016. For now in the fourth quarter of 2015 what we have factored into Indiana Harbor is approximately the rate we have been running this year which is approximately breakeven.

The first benchmarking of the plant and the results of this revised approach you will see in the first quarter of next year where we need to post significant we better results in the first quarter of 2016 versus the first quarter of 2015 as we exercise the plant, as we manage the plant to stability in winter, which is historically -- the last two years has been a very difficult period for us in the plant.

And finally with respect to the customer, we have capacity within the system to be able to meet the customer's needs and we intend to continue to leverage that capacity as we achieve process stability and improve the results at Indiana Harbor.

So, with those introductory comments I would turn your attention back to page 9. We did in the third quarter step back and look at the overall performance or underperformance of the plant and we conducted a comprehensive review both of the refurbishment project itself as well as plant operations.

The workforce continues to be very actively engaged in the turnaround activities which is a positive. The plant itself improved -- last year, particularly in 2014, the plant saw significant improvements in material handling and yield. We need to continue with that focus in 2015 and 2016.

There is a systematic planned maintenance activity and process underway and that process is gaining traction at the plant with a major emphasis on equipment reliability and asset care.

We are executing a comprehensive winterization approach for 2016. When look at the plant's performance in winter of 2015 versus winter of 2014 it was better. If you look at how we plant performed versus our other plants in winterization it was nowhere near as good as what we did at our other plants. We can significantly improve the activity. I can't control winter but we can control our readiness for winter.

And then finally, we are implementing additional measures to both control costs as well as benchmark those costs both O&M as well as capital across our plants in order to be more disciplined in that area.

We are maintaining continuous communication with our customers, as I mentioned before, in meeting their needs. And as we think about previous oven and plant refurbishment efforts, they haven't delivered the results. And as I said before, we need to take a different approach for stabilizing Indiana Harbor.

So as we look at our lessons learned on page 10, we have done a number of unique one-of-a-kind things, for us at least, with respect to the plant and we undertook something additional in the third quarter.

If you look on the left side of this chart to some degree it summarizes what has been done as well as summarizes where we are today. We have replaced the stacks, we have rebuilt exoskeletons at the plant to restore the integrity of the oven structures.

We have commissioned the first pusher/charger machine already and the second one is expected to be completed, the commissioning is expected to be completed in October. We have repaired and replaced common tunnels to optimize oven draft and to allow us to increase charge weights as the ovens allow us to.

As I mentioned, we did repair floors and sole flues for 42 individual ovens. We have seen improvement in those, but we have not seen the full improvement that we expected. What we have seen however is our ability -- we have seen an ability to stabilize coking rates and push cycles. What do we need to do beyond this in terms of ovens and oven health?

We did in the third quarter pilot a test rebuild of 34 ovens in the month of September. If you look at your production in third quarter of 2014 versus third quarter of 2015, round numbers we produced 275,000 tons in the third quarter of 2014 which is about 90,000, 91,000 tons per month. If you look at the third quarter 2015 we produced about 245,000 tons which is about 80,000 to 81,000 tons per month.

Part of that reflected the ovens we took out of service and we rebuilt and we rebuild them in an entire block. And we not only repaired the floors and the sole flues but we rebricked the walls and we closed up a number of frankly gashes in the oven walls that were present in those ovens, which has improved -- if we looked at it, it's provided for a much more controlled environment in the plant.

The other thing we did was we controlled the start up of those ovens in the third quarter. We did a better job at both reheating the ovens, bringing them back into service. And as we look at initial results -- and again, I stress the word initial results -- they are encouraging but very early stages.

We see more stable coking rates, we've seen more stable push cycles, we have been able to increase charge weights and coke production has come. We have also seen -- and this is one of the points I was making before -- greater stability in the remaining ovens within those coke batteries.

So, it is about making individual repairs, doing it in an intelligent way and then looking for progress both in those ovens as well as the cost of the remaining battery.

We do plan an additional 14 oven blocks during the fourth quarter this year, that has been built into our guidance, and we are going to monitor those pilot ovens further as we go into 2016.

I anticipate in 2016 -- and we will build it in the capital plan -- further oven rebuilds like this in 2016, but we are not going to finalize our plan until we see demonstrated performance across the -- we are now 48 ovens we will have rebuilt over at least multiple months.

So wrapping it up, in looking at our value proposition to our customers, we do think we remain in an advantaged position across the steel value chain from a cost, quality and logistics perspective.

We do have long-term take or pay contracts which require customers to take all the coke we produce up to contract maximum. One of the key provisions of our contracts is pass-through, pass-through of commodity cost that substantially limits the commodity risk, in this case met coal, within our contracts.

We are a low-cost source of coke for our customers. We provide an attractive alternative to them relative to investment in their own coke plants. From a technology perspective we do capture both steam as well as power across our plants. And we are the only company to have built a greenfield facility -- coke making facility in the last 25 years in the US.

We do have an advantaged environmental signature. Our technology is considered MACT by the EPA. Our heat recovery ovens don't produce byproduct chemicals for example. In terms of the asset base we have, obviously we have challenges at Indiana Harbor, but our Jewell plant, for example, the oldest plant in the system, continues to produce on a reliable basis and be very, very low cost.

And our newer asset base involves lower CapEx requirements as well as demonstrated -- the plants have demonstrated stable reliable operations.

And then finally, we are logistically advantaged to serve the customers' needs. Their blast furnaces -- important strategic blast furnaces via conveyor, rail or truck. We provide the flexibility across our system to supply multiple customer facilities.

I already mentioned the case of Indiana Harbor; we have been able to supply the customers' needs from other facilities when we have run short at Indiana Harbor. And we have been able to work with our customers to supply from multiple sites to optimize their logistics cost.

So wrapping it up, operational excellence is the base of our business. We have not been operationally excellent at our Indiana Harbor plant. I spent a lot of time this morning talking about what we are going to do differently.

Across the rest of our plants, as Fay showed, they have -- notwithstanding the challenges we have had in our business our plants have continued to perform at a very high level and have been able to offset some of the headwinds we have seen in the business. But we have not been able to offset the headwinds we have seen at Indiana Harbor.

We are positioned in a unique way within the steel value chain. We provide coke we believe on an advantaged basis and we believe we are a preferred supplier of coke to our customers both today and longer-term.

And then finally, relative to capital allocation, we remain committed to being disciplined in executing our capital allocation strategy with a balanced approach to returning cash to shareholders. So at this point I would like to open it up for questions.

(Operator Instructions). Pavan Hoskote, Goldman Sachs

Thanks a lot, good morning, guys. Appreciate the detailed update on Indiana Harbor. I wanted to follow up though on the recent idling of operations at Granite City. Can you give us a bit of an update on how you are seeing the supply and demand balance for domestic coke over the next few years?

And then on a related note, can you discuss the level of confidence you have in your take or pay contracts if steel markets remain challenged for longer?

Two questions there. Let me deal that Granite City and then deal with your broader question -- actually you have three questions, nature of coke balance, security of our contracts and Granite City. So let me deal with Granite City first.

The announcements made by US steel about a potential temporary idling of their blast furnace there, the issuance of temporary Warrant Act notices, I stress the word temporary, this seems (inaudible) was what we went through earlier this year -- very similar.

What we have done at the plant is we continued to meet the customers' coke needs for the one blast furnace that has been running at the site. We have maintained normal operations there. We will continue to work with the customer. And to the extent that they do idle that plant and they wish to ship coke to other facilities we will do so, that is at their cost.

We have not seen any significant deviation or departure in our operations at the plant. We don't anticipate it. We have a long-term take or pay agreement with US steel.

Interestingly in the first announcement on Granite City earlier this year they articulated they -- US steel articulated themselves that at the reduced rate they were running at the time between their own (inaudible) coke battery and our Granite City operations they were in balance.

So, we don't anticipate any significant changes in our Granite City plant and we will monitor and work with the customer at Granite City.

The coke balance across the system. What you have seen is you have seen a number of Coke plants permanently shut down in 2015. You have seen US Steel permanently shut down their Gary plant -- Coke plant I should say. You have seen US Steel permanently shut down their Granite City Coke plant.

There is a question about what might happen with the US Steel Coke plants that are in Canada and I can't answer that question today. We are just monitoring what is happening there. But as you think about overall coke balance I think you need to think about what happens with blast furnace utilization rates, what decisions do the customers take with respect to their own byproduct coke plants, and then finally where do we fit in.

We think we are in an advantaged position. We are continuously communicating with our customers. We will have more to say about this more broadly I think when we talk about our 2016 targets. That is the right time to talk about it in terms of what our operating rates are expected to be for next year.

But the short answer is we don't expect any major changes in our business as we go into 2016 from 2015, other than expecting better results ourselves from our Indiana Harbor plant.

So your third question is on the nature of our contracts, our contracts have been as you think about the downturn in the steel industry in 2008 and 2009, we continued to increase production through that period of time.

If you think about the last 12 months which is a tumultuous period for our customers, we have continued to operate our plants and our customers have continued to respect our contracts. We don't see any reason to take a different view today.

We believe we are in an advantaged position with our customers, both in terms of the investments we have made, the locations, the cost of our coke, the quality of our coke, the importance of our byproduct in this case power or steam to a number of our customers' sites and we anticipate that will continue going forward.

Great, thanks for that. And then on a separate note, given that you have now completed the Convent Terminal acquisition, can you talk about what you are seeing broadly in terms of trends in Illinois basin coal exports? And then how confident are you in consistent export volumes going forward?

I would say that plant also has take-or-pay contracts. When you look at where we are running today -- I'm going back to the Convent chart -- we had in the third quarter, obviously we closed on the deal later in August, but we had both transloaded volumes as well as we did have accrued volumes or what we would consider take or pay volumes.

We had in the quarter 800,000 transloaded volumes and 200,000 we will call it accrued volumes -- accrued tons are basically those that would be covered by take or pay. So you have seen softness.

We'll have more to say about 2016 also in December, but what we have seen and what we anticipate in the fourth quarter is that we will run the plant at or around where we have been running it. There will be some take-or-pay tons, all of which are factored into the guidance that we provided both 20 million for 2015 and the 60 million annualized rate.

I think certainly API 2 has been low. You have seen challenges in that system and so therefore what we have seen is both a pretty significant baseload of volume at Convent, but also there are going to be some take or pay tons.

Great, thanks a lot.

You are welcome.

(Operator Instructions). Lucas Pipes, FBR.

Good morning again. So I wanted to follow up a little bit more on Indiana Harbor. And I appreciate that we will probably get most of my questions answered in December, but to the extent possible --. I believe in the past you have guided to $35 million to $45 million of EBITDA long-term at Indiana Harbor. How do you look at this long-term guidance today?

More to say about that in December, Lucas. The plant itself, if you look at 1.2 million tons, if it ran the way it was expected to and met all of its guidelines, met all of its targets, that is the rate at which the plant would run.

But it's not run at that point and until it is stable we are not going to talk about what the long-term capability is of the plant. We will have more to say about that in December.

Okay. And then just to circle back on the CapEx. You mentioned what has been invested so far and I appreciate your sentiment as to the need to improve performance on the back of that investment. But listing the priorities today what do you think you still have to spend?

We will have as we look into next year -- and again we will have more to say about this in December -- but we are completing several rebuilds of quench towers at Indiana Harbor, we are building some material handling investment into the plant. We are doing some normal ongoing CapEx in the plant in order to improve its performance and environmental signature.

And the last piece is we do anticipate and we will likely build into our 2016 plan some additional oven rebuilds similar to what we have done in the pilot test. But the nature and what we plan to build into the capital plan for 2016 -- we will have more to say about it in December and frankly I will have another two months of performance to assess before landing on what that number is.

All right. I appreciate that. I'm very much looking forward to December.

Thanks.

Garrett Nelson, BB&T Capital Markets.

Good morning, everyone. With the drop-down of the remainder of Granite City during the quarter can you talk about how you are thinking about the timeline and sequence of additional drop downs? I assume the timeline for Indiana Harbor has been pushed out as you work through the challenges there, but any detail on future drop downs would be great.

I would say the timeline, Garrett, is interrupted. And if you look at the yield at the MLP, it is dislocated from anything that would be rational. And so, until we see some correction in that yield, we don't anticipate dropping assets down into the MLP. It would just not be smart for either SXCP or SXC to do that.

I would say operationally obviously Indiana Harbor, even if the yield were improved, is delayed. Jewell however continues to operate very effectively. We have done the work necessary in Brazil.

So, if we saw the yield more normalized we could execute according to the plan and we'd push off Indiana Harbor. But right now the yield suggests that we will not be doing drop downs until we see a significant correction in the yield going forward.

Sure. All right, Thanks for the detail.

(Operator Instructions). [Kevin Maw], [Nationwide].

Good morning. Thank you for taking my questions. I would like just some more detail behind the total debt number. The 941 number, did that consist of the seller financing from the terminal?

I will let Fay answer that question. But the quick answer to that question is, yes. I will have Fay walk you through what is in the total debt.

So we have a schedule that actually lays that out. Our total debt at SXC is $999 million, attributable to SXCP is $941 million and there is $58 million at SXC.

Included in the $941 million is the seller financing that was attributable to the Convent acquisition. And there is also $45 million of bonds that were assumed by SXCP as part of the Granite City transaction. What is remaining at SXC are the bonds that have been called and will be redeemed on October 22.

Okay. And is the goal to kind of maintain that 3.5 to 4 times leverage going forward?

Yes, that is the --.

That is our plan.

That's the plan and particularly we are going to call the bonds at the parent -- we already have actually, excuse me. So those will be redeemed shortly, actually this month. And then at the MLP, the 3.5 to 4 is our target leverage ratio.

We do anticipate, as I mentioned, earlier this morning in the SXCP call, Kevin, that we would use the coverage that comes from the Convent acquisition to both repurchase units and de-lever. I think a 10th of a turn is $20 million of debt roughly. So I think we have got capability to both stay within that range, de-lever in small steps and repurchase units and that is what we intend to do.

Great. And any kind of comments on the rating agencies regarding outlook?

I will let Fay answer that question.

Both Moody's and S&P reconfirmed our rating, Moody's in July and S&P most recently. And they are comfortable with ratings -- with our leverage targets below 4.0 -- at 4.0 and below.

Great, and both agencies have stable outlook at this point, right?

Correct.

Great. Thank you very much.

Thank you.

Paul Luther, Bank of America.

Thanks for taking my questions. Can you just give us maybe a quick update on the coal mining operations? I get you are not in position to give a 2016 update, but can you talk about your capacity maybe to cut costs further if prices continue to climb? Or if you have options to further look to purchase coal for the Jewell coke facility and further rationalize coal?

Good questions. We will have more to say about this in December; I feel like a broken record in that regard. But what we are doing today is we are executing in line with what we identified for 2015. Coal prices are declining as we go into next year. We anticipate they will decline and we are evaluating what additional measures we can take.

We have flexibility given the steps we have taken to both purchase as well as contract mine. That is what we have done this year and we will continue to evaluate if purchasing coal can meet our quality targets and are more cost-effective we'll continue to push that way.

I mean, one of the reasons we did what we did in terms of frankly separating our entire hourly workforce and going to a contract mining model is to give us the flexibility to do that.

Okay, got it. Thank you very much.

You are welcome.

And we are showing no further questions.

All right, just wrapping it up, again, I want to thank everybody for joining us this morning. Really want to thank my team actually for pulling forward earnings by 10 days -- don't expect this to be a trend for us, but I think this is something that we felt was important given the news within the Company and what we wanted to try to get accomplished.

We wanted to get the information out into the market as quickly as we possibly could. We will have more to say about 2016 obviously in our Investor Day on December 17 and look forward to seeing you then. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.