SunCoke Energy Inc (SXC) 2013 Q2 法說會逐字稿

Welcome to SunCoke Energy second quarter 2013 earnings conference call. My name is Adrian, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-answer session. Please note that this conference is being recorded. I'll now turn the call over to Ryan Osterholm. Ryan Osterholm, you may begin.

Thank you. Good morning, everyone. Thank you for joining us on SunCoke Energy and SunCoke Energy Partners second quarter 2013 earnings conference call. With me are Fritz Henderson, our Chairman and Chief Executive Officer; and Mark Newman, our Senior Vice President and Chief Financial Officer. Following the remarks made by management, the call will be opened for Q&A. This conference call is being webcast live on the Investor Relations section of our websites at www.suncoke.com and www.sxcpartners.com. There will be a replay available on our websites. If we don't get to your question during the call, please call our Investor Relations department at 630-824-1907.

Now, before I turn over the call to Fritz, let me remind you that the various remarks we make about future expectations constitute forward-looking statements and the cautionary language regarding forward-looking statements in our SEC filings apply to the remarks on our call today. These documents are available on our website as are reconciliations of any non-GAAP measures discussed on this call.

Now, I'd like to turn over the call to Fritz.

Thanks, good morning. On chart three, the quick update of our second quarter called milestones. On the operating side of the business, we had another solid Domestic Coke quarter in terms of both profitability and EBITDA per ton. We did achieve additional reductions into coal cash costs -- coal cash production costs. So, we're hitting our targets -- actually ahead of our targets for coal cash production cost. And then, finally, we did file the consent decree related to environmental projects at Haverhill and Granite City, in line with our expectation. So number of things happening in the operating side of the business, which were positive.

On the building the core or growing the business, we continue to execute on our Indiana Harbor refurbishment project. The one coke plant that we had in the quarter that was -- that actually with lower production was Indiana Harbor and part of that is that we're in the process of refurbishing that plant while we run it. We're about 40% complete with the project. We are seeing improved production in the ovens that are completed, in line with our expectations and we expect the oven repairs, which is I'll call it three-quarters of the project to be complete by the end of the year. There are other parts of that project, which will move into early next year, but that project is right on schedule. And then, we are making progress on our contract renewal with ArcelorMittal in Indiana Harbor. Nothing new to report today, but we remain highly confident that we'll reach a reasonable outcome and extend that agreement. So that's what's going on in terms of building our domestic core.

And then, finally, in terms of expanding our footprint, we did in the quarter launch our VISA SunCoke joint venture. My CFO, Mark Newman, reminds me that a year ago, in the second quarter call, we announced that our Board had approved with us proceeding with formation of an MLP. So a year later, we think about it. We took the Company, we took the MLP SXCP public in January. We just recently announcing our first distribution increase and this is our first acquisition, Lakeshore Coal Handling Corporation. So a good progress in terms of what we're doing to grow SunCoke Energy Partners. And we did request a private letter ruling on qualifying income status of iron ore processing in the quarter. So we continue to make progress in terms of building the business.

In terms of the results in the quarter, on page four, earnings per share at $0.08 reflects -- does reflect a challenging coal environment; while we are in line with our expectations for coal, it's still down year-to-year. So it is that the coal business continues to have a negative influence on both EBITDA and EPS. It did also reflect some accelerated depreciation expense in Indiana Harbor as we complete that project. And then, finally, the income that we now attribute to SXCP public shareholders.

We ended the quarter with almost $350 million of cash, $150 million -- $115 million, excuse me, attributable to SXCP with virtually undrawn revolvers, actually two of them. So we're well positioned, we think, to take advantage of growth opportunities. And then, finally, in terms of EBITDA, we today would affirm our guidance with respect to 2013, where the guidance has between $205 million and $230 million of EBITDA and $0.30 to $0.55 in terms of EPS. We did and are cooperating with AK Steel on -- and we have more to say about this later in the presentation, on their coke needs in light of their recent blast furnace outage. We've taken a number of measures, but none of them are expected to have a minimal effect on SXC going forward.

At this point, let me turn it over to Mark.

Thanks, Fritz. As Fritz said, I would characterize this as a solid quarter, which is in line with our full-year guidance and expectations. On the revenue front, we were down by about 12.4%, really reflecting the lower coal price in the pass-through on our coke agreements and on flat coke sales. Our coal sales volumes are up quite a bit in the quarter, reflecting higher production in purchased coal. But frankly, this is overwhelmed by a fairly dramatic drop in coal prices, $53 per ton, year-over-year, which really is the primary driver of our year-over-year decline in adjusted EBITDA.

As Fritz mentioned, our Domestic Coke business performed well. We do have a small contribution in this quarter from India, the India JV, which I'll talk about later. And then, finally, on the EPS front, our EPS declined $0.24 to $0.08 per share, really reflecting the impact of coal on our adjusted EBITDA and the income attributable to SXC unitholders as well as the accelerated depreciation at Indiana Harbor. I'll talk more about that later.

Turning to chart six, we have the adjusted EBITDA bridge of $52.4 million in the quarter compared to $66.8 million a year ago. As you see, our coke business is essentially flat with the negative impact of Indiana Harbor being compensated by really strong production and yield at Middletown and Haverhill. We also recorded $0.8 million of adjusted EBITDA related to our India JV and we'll talk more about India later. Coal is down by $11.9 million, again primarily reflecting price but again, as Fritz mentioned, we had fairly strong cash cost improvement in the quarter. I will -- we will explain more about what we're doing there later.

Finally, in corp. cost, we're down year-over-year about $3.1 million. I'd say, first off, we're comparing to a fairly light Q2 last year and the cost that we incurred in this quarter really primarily relates to the MLP cost, higher incentive comp, and some legal cost as well as IT spending that we made a conscious decision to do this year. Net-net, I would say, our expectation on corporate cost is slightly up for the full year, really in line with the MLP and higher incentive comp cost.

On the EPS bridge, EBITDA accounted for $0.20 of the $0.24 reduction on a year-over-year basis. Indiana Harbor accelerated depreciation accounted for $0.04. Our full-year guidance still remains at approximately $0.14. So we'd expect a lower impact from Indiana Harbor accelerated depreciation in the second half. And then, finally, net income attributable to non-controlling interests, bought the MLP in Indiana Harbor represents about $0.08 and then our taxes are better on account of the lower earnings and the higher non-controlling interest.

When we look at SXC liquidity, we have almost $350 million in cash on a consolidated basis and almost $250 million in combined revolving credit facility capacity at both SXC and SXCP. If you look in the quarter, we had a fairly significant favorable working capital. You'll recall that in Q1, we received a payment from a customer one day late. So we essentially moved a Q1 payment into Q2, which we received. We also received the cash payment of the Brazilian dividend of $9.5 million, which we accrued last Q4. We also show a favorable interest payable in the quarter. As you know, on both the SXC and SXCP notes, our payments are in Q1 and Q3 and we accrue interest, so that's favorable in the quarter, but that will unwind in Q3.

On CapEx, you'll notice, we spent $30.9 million. This is very similar to what we spent in Q1. And again, Indiana Harbor, where the refurbishment is well underway, is the primary driver for the increased CapEx, year-over-year. We'll talk more about the full-year CapEx and actually there is a schedule in the appendix that lays that out in pretty good detail.

Turning to our Domestic Coke business summary on page nine. This is another quarter of consistent earnings of $57 -- adjusted EBITDA of $57 per ton, in line with our guidance of $55 to $60 of EBITDA per ton. On the production front, you'll notice that we're down slightly year-over-year. Again, this is primarily driven by Indiana Harbor. Interestingly, Indiana Harbor is up this quarter versus Q1, but still down year-over-year as a result of the refurbishment and their production volumes are partially offset by both Haverhill and Middletown, which are helping as well on the EBITDA side. Based on our first-half production, as you'll see later, we're expecting full-year production to still remain at slightly above 4.3 million tons, even with some of the actions that we're taking related to AK Steel, which I'll talk about later.

We thought it would be helpful on chart ten to provide a little more detail as to what we've done with AK Steel as a result of their recent blast furnace outage. As Fritz mentioned earlier, we are reaffirming our full-year adjusted EBITDA, EPS guidance. So the impact to us is quite minimal. Specifically, the actions that we've taken are that we will manage production at Haverhill 2 to be consistent with the annual contract maximums that are in the Haverhill 2 contract and that's really a right that AK Steel has to enforce those contract maximums.

At Middletown, where there is no specific contract maximum in the contract, what we've agreed to do is to run second-half production in line with the nameplate capacity. And we also will provide temporary extension of payment terms on December production at Middletown of about 50,000 tons. So this will result in $20 million of receivables from AK being pushed from 2013 into early 2014. The impact -- again, we reaffirmed guidance, but the impact that we will see quite frankly is, at the Middletown, first, on payment terms, what we've agreed to do per the omnibus agreement is for the additional payment terms to be provided by SXC, SunCoke Energy and it will not impact the MLP.

Further, we are estimating today that the impact to the MLP would be approximately $2 million. Again, this all relates to the reduction of about 20,000 tons at Middletown and so based on this estimate, we would -- the MLP would be made whole to the tune of this amount. We'll actually calculate this amount on an actual basis as we go from quarter to quarter, but our estimate today is approximately $2 million. And again, this relates to the 65% of Middletown that is owned by the MLP. I would just remind our listeners as well that 58% of SXCP is owned by SXC. So a lot of these funds will ultimately come back to the parent [company].

On India Coke, this is a new segment that we've added. We now have a Brazilian Coke and an India Coke segment. We achieved EBITDA of $0.8 million and this really represents the results from March 18 to May 31. We'll report our India JV earnings one month in arrears, so this again represents through May 31, where we earned $0.8 million and achieved approximately $31 of EBITDA per ton. I'd say we're off to a bumpy start in our JV. There is both market factors affecting India relating to iron ore mining restrictions as well as a weak coke market in part due to imports of Chinese coke.

And then, we've also had some start-up -- JV start-up issues primarily around trade -- putting trade financing in place, which has led to certain delays and challenges on inbound coal imports. We expect that these difficulties will continue with us through Q3 and our focus today is really on stabilizing coal supply and ensuring we have good operation and execution at the JV with our partner VISA Steel. In addition to the $0.8 million of adjusted EBITDA, this will show up on our income statement as an equity loss of $0.2 million, reflecting our share of the JV's earnings, depreciation, interest, and taxes.

Switching gears then to coal mining, coal mining continues to be a drag on our year-over-year earnings comparison, but we're really encouraged by the continued progress from actions that we announced to investors at our Investor Day in Q4, and you'll see the fairly dramatic change in our cost from the time we met with you in Q4, where we had overall cash cost of $144 per ton.

Our Q3 EBITDA, as I mentioned earlier, is down $11.9 million, driven by a $53 per ton decline in price and then partially offset by a $19 per ton reduction in cash cost. Our focus really is on the cost side and if you noticed, while the year-over-year comparison is fairly bleak, if you look at our Q1 adjusted EBITDA to where we are today and take into account that prices are down roughly $13 per ton since Q1, I think we take certainly some comfort in our ability to moderate our losses in our coal business based on improvement in our cash cost year-to-date.

Looking at our full-year guidance on coal, we expect based on our first-half performance and the work that we're doing on the cost side that we will be in line with our full-year guidance and it's probably a little early to speculate about 2014. But obviously, prices will be down from what we will record in 2013. But with the work that we have ahead of us on the cost reduction side, our view today is that our 2014 outlook will be consistent with 2013.

Turning to chart 13, our full-year guidance, as Fritz mentioned at the beginning of the call, adjusted EBITDA, EPS, and production, all remain unchanged. We're making really two changes to our full-year guidance. One, cash flow from operations reflecting the $20 million of AK receivables that will be moved into 2014. And then, finally, on capital expenditures and investments, we intend to spend more than we had originally guided to, primarily as a result of the Lakeshore acquisition and then we're also increasing our spend in this calendar year related to the environmental remediation at Haverhill and Granite City as a result of the progress that we've made on the consent decree there.

Then, turning to chart 15, I'd like to talk a little bit about SunCoke Energy Partners. I describe this as another great quarter at SXCP. We reported net income attributable to SXCP of $15.8 million or $0.49 per unit, really driven by a strong production at Middletown and Haverhill and resulting in higher coke sales, improved yield and improved operating and maintenance cost recovery at our Middletown entity. We reported adjusted EBITDA per ton of $81 compared to $69 a year ago.

If you look at the -- I also wanted to mention too that -- as Fritz mentioned at the beginning of the call that we're continuing to work or execute against our growth strategy. We've announced the acquisition of Lakeshore, that will result in roughly a $31.4 million outlay, of which $29.6 million relates to the acquisition price. We'll make a payment of $1.8 million to DTE Energy, where we required their consent to do the transaction and to have it assigned to an SXC entity as in SXCP. We anticipate Lakeshore will contribute roughly $4 million annually in distributable cash flow and our expectation is that we will close the transaction shortly, probably towards the end of this month.

Turning to chart 16, on distributable cash flow, we reported $18.7 million in the quarter. As Fritz mentioned, we announced our first increase of distributions yesterday, a 2.4% increase over the minimum quarterly distribution to $0.4225 per unit, that will result in a $13.5 million payment, which will be paid on August 30 to holders of record on August 15. As we look out towards the rest of the year, our expectation as we communicated in Q1 is that there would be further increases in our distributions up to a 7% increase over the MQD by our Q4 payment, which will be made in February of 2014. I'd just remind our listeners that this outlook, it does not include any impact related to the Lakeshore acquisition and we will talk more about that when that transaction has been closed.

SXCP liquidity position on page 17 is strong, roughly $116 million of cash and $100 million of undrawn revolver, nothing really significant to report in terms of the elements that drove cash flow in the quarter. I will mention that the CapEx year-to-date -- the ongoing CapEx year-to-date has been about $3 million. Our -- and this is at the 100% level, our forecast for the full year is approximately $13 million or $8.5 million at the MLP level, the 65% level. So our expectation is that CapEx will pick up in the second half and obviously, when we close the Lakeshore acquisition, that will also have an impact on our liquidity.

Our full-year outlook is on chart 18. We're leaving the full-year guidance unchanged. We obviously have had a very strong first half. In the second half, we'll have the impact of AK enforcing contract maximums at Haverhill. We also have some outages planned in Q3 at Haverhill, which we have included in our full-year forecast. I just highlight one change that we've made to this chart. The adjusted EBITDA attributable to SXCP, the very first line in the chart, now includes the estimated $2.5 million of public company cost that used to be reflected below that line and we received comments from a few investors that they thought it should be in the first line, which it is now, but essentially, our guidance for the full year remains unchanged.

So with that, I'll turn it over to Fritz to wrap up the call.

Thanks, Mark. Page 20, we're sitting here halfway through 2013, outlines the second-half priority for 2013, where we try and get accomplished. Following the similar structure on operations, domestic growth, and expanding our footprint. On operations, much of the same in terms of what we've seen in the first half. I pay particular attention to what we're doing in our mining business to continue to drive down cash cost and position ourselves with the right kind of strategic flexibility as we move into next year and then executing against our environmental projects at Haverhill and Granite City remain very high priority for us.

In terms of domestic growth, I've already touched on Indiana Harbor, both refurbishing the plant as well as reaching a reasonable agreement with ArcelorMittal on the contract renewal and also receiving a reasonable return on the refurbishment capital we're spending there. As I said before, we're highly confident that will get done. The work continues in terms of permitting our next US plant.

As we mentioned before, we thought that -- we think that the permit for this plant would likely be received early next year, might be late this year, but much more likely early next year. And then, we continue to evaluate coke-making acquisitions in the US and Canada. Finally, in terms of expanding our footprint, our job is to build our presence in India and execute at that venture, continue to evaluate adjacent business lines and business opportunities and work within our two capital structures if you will to efficiently allocate capital to optimize growth.

Speaking of growth, page 21, our North American growth strategy, we separate out between cokemaking, coal handling and processing, and ferrous or iron ore processing. And cokemaking, in both about looking at opportunities that we were customers that might be able to use the coke that we would produce at our new plant, as well as evaluating coke acquisitions of existing byproduct ovens. There have been a number of discussions with a number of different parties, which are in process, but nothing new to report, nor would I expect actually that anything here would close in 2013.

On coal handling, there are things that can close in 2013. So we've already talked about Lakeshore. We continue to look at opportunities here. We've initiated discussions with potential parties. And then, finally, on iron ore processing, we have as I mentioned really upfront requested a private letter ruling on the qualifying status -- qualifying income status of certain activities in this area. We are interested in potential greenfield DRI opportunities and evaluating that, and the focus in this area is to engage with customers in developing opportunities, which might -- our preference would be to develop strategies that would put us in a position of deploying capital in a tolling or pass-through business model.

With that, wrap it up. Happy to take questions.

Thank you. (Operator Instructions). And we have Garrett Nelson from BB&T Capital Partners in line with a question. Please go ahead.

Thanks. I know you are restricted in terms of what you can talk about regarding your strategic plans following the expiration of the Sunoco tax-sharing agreement in January. But could you discuss what some of your options might be and how you might be able to further unlock value for shareholders of both the C-Corp and the MLP?

So, Garrett, you actually asked and answered the question to a degree already in terms of the restrictions. Yes, we do have certain restrictions. For the benefit of the folks on the phone call, the restrictions, it's a two-year tax-sharing agreement, that tax-sharing agreement expires January of next year. After that, we could -- we have flexibility to consider additional activities, we've been asked about future dropdowns. We have no future plan -- we have no plans for future dropdowns. But beyond January of next year, we could consider those, we've received lots of questions about coal.

The truth is, today, our focus on coal is to optimize our cost position and do all the things we can do to maximize our strategic flexibility. But again, post that expiration, we are flexible, we're able to do things with the coal business that we think are in the best interest of shareholders. Those are the two that we've received a lot of questions on. And so, I think as we look at January of 2014 is not very faraway. And -- January 18, actually, January of 2014. It's not that faraway. So I would say our focus today is really on operational excellence and we'll leave that for 2014.

Okay. And then, I just want to clarify that the 2013 guidance for SXCP on slide 18 does not include the Lakeshore acquisition and that the EBITDA and distributable cash flow numbers would be higher if doing so all else equal?

Correct, incorrect.

[It's correct].

All right, that's all I have. Thanks very much.

Thanks, Garrett.

(Operator Instructions). And we have Lucas Pipes from Brean Capital online with a question. Please go ahead.

Hello, gentlemen. This is Derek Hernandez for Lucas Pipes this morning.

Good morning, Derek.

Hi, good morning. First of all, I want to ask about how the contract negotiations with ArcelorMittal are continuing?

So they are continuing. The contract expires at the end of the third quarter. There have been dialog with ArcelorMittal really even dating back to the fourth quarter of last year. We're obviously doing this while refurbishing the plant and while running the plant. I would characterize the dialog as very constructive. We are highly confident we'll reach an acceptable -- a mutually acceptable outcome. At this point, as we look at it, where are their principal source of coal for their most important asset, there are entire offtake for an extremely important asset for us. So it's one of -- it's a situation where the both sides have an incentive to reach a reasonable outcome and I fully expect that we will reach that outcome in the third quarter and it will be a reasonable agreement for both parties.

Okay, very good. And then, moving over to your coal mining business, did I see correctly that your full-year cost guidance is still $130 per tonne?

No, that's not correct. What we said is our full-year guidance was $130. But now running close to under $120. And so I think what we believe is that as more work that we can do there to further improve that. So I think what we're highlighting is the fact that we're already past our full-year guidance that we gave back in December based on actions that we've taken in the first half.

Right. And do you have any update to that guidance yet?

We don't at this point. I think what we are indicating today is based on the improvements that we believe we can achieve in cash cost that even if there are declines in prices -- coal prices going into 2014 that we would expect 2014 to look very similar to 2013. But we're not at this point ready to commit to a full-year cash cost number.

I see. Okay, thank you very much.

You're welcome.

And we have Nathan Littlewood from Credit Suisse in line with a question. Please go ahead.

Good morning, gentlemen. Thank you for the opportunity. Listen, I just had a follow-up question on these coal cash costs. I was hoping to understand a little better how these cost reductions have been achieved and are you playing with strip ratios, material movements, or what's going on there?

So let me talk about what we've done on the cost side and then what we've done on the productivity side. On the cost side, Nathan, you might recall in the first quarter, we took some actions on reduction in force which reduced our manpower -- underground manpower about 20% and both including contracted employees as well as full-time employees. Even with that, frankly, our production has increased. And so what we've seen is even with reduced manpower that we've continued to improve our advancement per shift and our productivity per person to a pretty significant degree. So cost reduction on that side, manpower, we've seen a pretty significant reduction in cost on maintenance and repair.

We've embarked on a refurbishment program for underground equipment about two years ago, which is largely at this point completed and what we've seen is a follow-through with significantly lower maintenance and repair cost. So on the numerator side, if you will, in terms of cost, we've seen absolute reductions in cost. We've also had lower royalty cost because prices have been down. We've seen some lower transportation costs. But the big issues have been manpower and maintenance.

On the denominator side, what we've seen is continued improvement in advancement and in productivity. We've not seen improvement in yield and part of it is just because we've continued to face challenging geological conditions. But we've seen good productivity in terms of the manpower, particularly we had -- two years ago, we had a high percentage of our workforce which are Red Hat. Today, we have virtually no Red Hats and they're fully trained and productive. Last point I'd make is we've made some investments in our prep plant to improve the organic efficiency of the prep plant, including putting in a new circuit, and that's also proven to be beneficial for us. So I would say we've made progress in both the numerator and the denominator side, and I would say it's been faster than what we had thought as we entered this year. So we're confident we can do even more.

Got it, okay. So I mean it sounds like you're sort of managing this asset for margin and there's more costs that can be taken out in order to protect that margin. Should we assume that those cost reductions would stick, or if we saw recovering coal prices, are those costs likely to follow, then back out?

I would say what we're trying to do, managing for margin, actually we have a negative margin. So what we're trying to do obviously is it could have [fell] back, I guess close to break even is possible and we put our guidance out for this year, we said between zero and negative 15%. We're quite confident in being able to operate in that range. I prefer to be at zero than negative 15%, but obviously year-to-date, we're not there yet. We can continue to do more work and we do plan on it. If prices were to rise, you would see increases in royalties, but we don't think we'd be given back any of the other factors we've seen in terms of productivity or cost reduction.

Great. Thank you very much. Appreciate the color.

You're welcome.

We have Sam Dubinsky from Wells Fargo online with a question. Please go ahead.

Hi, Sam. Come up, you.

Hey, I'm sorry. Can you hear me now?

Yes, I can hear you now.

[There, yes]. I believe McCall stated publicly that they are closing down their Dofasco coke plant in 2015. Does this have any positive implications for you?

They're closing down one of the batteries at Dofasco, they did confirm that. I think what I would say, Sam, is that, we've talked a number of times about our ability to grow based upon coke plants from existing customers or new customers wearing out. So I think this is another example of a very old coke plant, whether they're commissioning a portion, it's not all the batteries, but it's a pretty significant battery there. So it's really playing out and what we thought in terms of what might happen with coke plants since they come out of production, which is why we continue to work to permit a new plant.

Okay, great. And then, just a follow-up on iron ore processing, how long does it take to get a tax opinion? And then, once you get a tax opinion, how long does it take to build a greenfield plant?

Well, I would say private letter rulings are generally about six months. So -- and we've filed earlier, so that gives you some sense of timing. And then, in terms of building a plant, a lot of it depends on what kind of plant you're building, but if you were to take a pellet plant, for example, it's -- you're typically 12 months to 18 months, I think, not that we've built one. So --

We could also buy existing assets too.

Right.

So I mean once we have clearance on the ruling, Sam, we can include this in our M&A activity, which we're really not doing today.

Okay, great, but there are assets up for sale somewhat immediately once the tax ruling goes through if positive?

There is a lot of assets out there involved in either iron ore extraction, processing, pelletizing, or transporting. So there is no shortage of assets there. What I'd say is, until we have a ruling, we're being -- trying not to get ahead of ourselves here.

Great, thank you very much.

Thank you.

(Operator Instructions). We have Mathew Barnett of Jet Capital online with a question. Please go ahead.

Hi, I just had two questions. On your cash flow from operations guidance of $120 million, can you kind of get some color why you're only expecting to generate $30 million in the back half of the year, given that historically, you've done significantly more than that?

Yes. There are a number of items, Jeff, I'm just looking at Ryan here to see if I can --

Matt.

Matt, just to see if I can remember what they are, but the Brazil dividend is certainly one. There are a number of non-traditional fuel tax credits that we pay out in Q3, that's the big one. The two are really the Brazilian dividend as well as the payout of non-traditional fuel tax credits, which we'll pay in Q3 based on the timing of Sunoco filing their tax return in September.

And lastly, you've got the timing of CapEx.

Yes.

So you've got -- there are three or four factors, which affect cash flow. Obviously, CapEx isn't in cash flow from operations. But as we think about our normal cash cycle, Mark's already talked about the working capital related items. And in our view pretty normal. I guess the last point we'd make is that as we did disclose, AK, we would have the $20 million effect in the fourth quarter if we proceed -- when we proceed to offer them terms in the last 50,000 tons.

Okay, the two items, the Brazil dividend and the non-traditional fuel tax credit, is that different this year than prior years or --?

Yes. Well, we didn't pay any non-traditional fuel tax credits last year. Again, it all ties off of Sunoco and so this year, the payment -- so you'll recall that in Q1, we made a payment to AK about $12 million related to this issue. And actually, we paid it early. We do have a payment to another customer of about $30 million in Q3. So basically, the receipt of a dividend in the first half and the payment to a customer of about $30 million on tax credits in the second half result in a sort of a poor comparison between first half and second half.

But your point is good. The dividend was the same factor last year and what's not -- what is different this year is the $30 million. Last year, it wasn't paid; this year, it will be paid.

Right.

Okay. And then, just on the CapEx, kind of increase in CapEx, seemed to be related to environmental mediation. Did those numbers go up in total versus your expectations, or is it just some of those numbers got pulled forward from 2014 to 2013?

No, it doesn't go up in total. What we found is we've commissioned -- began the commissioning of the project is that we started the project at our Haverhill plant, we had originally thought about actually taxing the project module by module in Haverhill, there are two modules in Haverhill and what we found is opportunities to economize and be efficient by picking on more of both modules at the same time. So we're not increasing the total project. What we're just doing is retiming, recall, this is also pre-funded as part of the MLP, but really it's all about being efficient in terms of how we do the preparation work at the site across two modules.

Great, thank you very much.

You're welcome.

We have no further questions at this time.

So we'll wrap up the call. Thanks again very much for your involvement and interest and for being a shareholder in SunCoke Energy and SunCoke Energy Partners. Thank you.

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