19. Business Segment Information

The Company is an independent owner and operator of five cokemaking facilities in the eastern and midwestern regions of the United States. 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 United States as well as coal handling and blending operations in the midwest.

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 recover waste heat which is converted to steam or electricity through a similar production process. The coke production for these facilities is sold directly to integrated steel producers under contracts which provide for the pass-through of coal costs subject to contractual coal-to-coke yields plus an operating cost component and fixed fee component received for each ton of coke sold.

Prior to 2011, the results of our Jewell cokemaking facility were not comparable to our other domestic cokemaking facilities due to a difference in pricing for the coal component of coke price. Beginning in January 2011, the coal component of coke price in the Jewell Coke sales agreement was changed, and as a result the economic characteristics of Jewell became similar to the Company's other domestic cokemaking facilities. Prior to 2013, the Company elected to continue to report Jewell separately due to the differences in comparability of Jewell's results caused by different coal pricing terms in pre 2011 periods versus post 2011 periods. Beginning in January 2013, Jewell has been reflected within the Domestic Coke segment as there is now consistency in Jewell's contract terms between all periods presented. Prior periods have been restated to reflect this change.

On March 18, 2013, we completed the transaction to form a cokemaking joint venture called VISA SunCoke with VISA Steel. 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 own a 49 percent interest in VISA SunCoke and account for this investment under the equity method. We recognize our share of earnings in VISA SunCoke on a one-month lag and began recognizing such earnings in the second quarter of 2013. The results of our joint venture are presented below in the India Coke segment.

With the addition of VISA SunCoke, our operations in Brazil are no longer our only foreign coke operations and have been renamed the Brazil Coke segment. 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 2023, subject, in the case of the licensing agreement, to the issuance prior to 2014 of certain patents in Brazil that have been granted in the United States and (2) an annual preferred dividend on our preferred stock investment from the project company guaranteed by the Brazil subsidiary of ArcelorMittal.

The Company’s Coal Mining segment conducts coal mining operations near the Company’s Jewell cokemaking facility with mines located in Virginia and West Virginia. Currently, 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.

On August 30, 2013, the Partnership completed its acquisition of Lake Terminal. Located in East Chicago, Indiana, Lake Terminal has and will provide coal handling and blending services to our Indiana Harbor cokemaking operations. The results of Lake Terminal are presented in the new Coal Logistics segment below.

Overhead expenses that can be identified with a segment have been included in determining segment results. The remainder is included in Corporate and Other. Interest expense, net is also excluded from segment results. Segment assets are those assets that are utilized within a specific segment.

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



	Three Months Ended September 30, 2013
	(Dollars in millions)
	Domestic Coke		Brazil Coke			India Coke			Coal Mining			Coal Logistics		Corporate and Other			Consolidated
Sales and other operating revenue	$	364.8	$	8.2		$	—		$	16.8		$	0.1	$	—		$	389.9
Intersegment sales	$	—	$	—		$	—		$	35.7		$	1.0	$	—		$	—
Adjusted EBITDA	$	64.3	$	1.5		$	(2.1	)	$	(2.6	)	$	0.7	$	(11.1	)	$	50.7
Loss from equity method investment	$	—	$	—		$	2.3		$	—		$	—	$	—		$	2.3
Depreciation, depletion and amortization	$	16.8	$	0.1		$	—		$	5.6		$	0.2	$	0.5		$	23.2
Capital expenditures	$	29.5	$	(0.2	)	$	—		$	4.0		$	—	$	0.9		$	34.2
Total segment assets	$	1,525.8	$	51.6		$	52.8		$	176.0		$	30.0	$	286.5		$	2,122.7



	Three Months Ended September 30, 2012
	(Dollars in millions)
	Domestic Coke		Brazil Coke		Coal Mining		Corporate and Other			Consolidated
Sales and other operating revenue	$	462.9	$	8.3	$	8.9	$	—		$	480.1
Intersegment sales	$	—	$	—	$	56.2	$	—		$	—
Adjusted EBITDA	$	69.8	$	0.9	$	10.7	$	(7.7	)	$	73.7
Depreciation, depletion and amortization	$	14.1	$	—	$	4.2	$	0.6		$	18.9
Capital expenditures	$	10.9	$	0.3	$	7.7	$	1.0		$	19.9
Total segment assets	$	1,533.7	$	52.8	$	190.1	$	183.8		$	1,960.4



	Nine Months Ended September 30, 2013
	(Dollars in millions)
	Domestic Coke		Brazil Coke		India Coke			Coal Mining			Coal Logistics		Corporate and Other			Consolidated
Sales and other operating revenue	$	1,168.8	$	25.9	$	—		$	50.2		$	0.1	$	—		$	1,245.0
Intersegment sales	$	—	$	—	$	—		$	100.8		$	1.0	$	—		$	—
Adjusted EBITDA	$	186.7	$	4.7	$	(1.3	)	$	(9.8	)	$	0.7	$	(25.6	)	$	155.4
Loss from equity method investment	$	—	$	—	$	2.5		$	—		$	—	$	—		$	2.5
Depreciation, depletion and amortization	$	52.4	$	0.3	$	—		$	15.9		$	0.2	$	1.7		$	70.5
Capital expenditures	$	77.8	$	0.6	$	—		$	14.3		$	—	$	2.9		$	95.6
Total segment assets	$	1,525.8	$	51.6	$	52.8		$	176.0		$	30.0	$	286.5		$	2,122.7



	Nine Months Ended September 30, 2012
	(Dollars in millions)
	Domestic Coke		Brazil Coke		Coal Mining		Corporate and Other			Consolidated
Sales and other operating revenue	$	1,356.6	$	27.3	$	37.5	$	—		$	1,421.4
Intersegment sales	$	—	$	—	$	152.5	$	—		$	—
Adjusted EBITDA	$	187.0	$	1.7	$	27.4	$	(20.1	)	$	196.0
Depreciation, depletion and amortization	$	43.0	$	0.2	$	12.6	$	1.7		$	57.5
Capital expenditures	$	20.6	$	1.2	$	16.7	$	2.1		$	40.6
Total segment assets	$	1,533.7	$	52.8	$	190.1	$	183.8		$	1,960.4

The Company evaluates the performance of its segments based on segment Adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our equity method investment. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuels tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit that is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. 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 of the Company’s net assets.

We believe Adjusted EBITDA is an important measure of operating performance and 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. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP, does not represent and should not be considered a substitute for net income as determined in accordance with GAAP. Calculations of Adjusted EBITDA may not be comparable to those reported by other companies.

Set forth below is additional detail as to how we use Adjusted EBITDA as a measure of operating performance, as well as a discussion of the limitations of Adjusted EBITDA as an analytical tool.

Operating Performance. Our management uses Adjusted EBITDA in a number of ways to assess our consolidated financial and operating performance, and we believe this measure is helpful to management in identifying trends in our performance. Adjusted EBITDA helps management identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance while neutralizing the impact of capital structure on financial results. Accordingly, we believe this metric measures our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.

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 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 (loss) attributable to noncontrolling interests.

Below is a reconciliation of Adjusted EBITDA (unaudited) to net income, which is its most directly comparable financial measure calculated and presented in accordance with GAAP:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in millions)
Adjusted EBITDA attributable to SunCoke Energy, Inc.	$	40.8	$	72.6	$	126.4	$	194.5
Add: Adjusted EBITDA attributable to noncontrolling interests ⁽¹⁾	9.9		1.1		29.0		1.5
Adjusted EBITDA	50.7		73.7		155.4		196.0
Subtract:
Adjustments to unconsolidated affiliate earnings	0.3		—		1.3		—
Depreciation, depletion and amortization	23.2		18.9		70.5		57.5
Interest expense, net	12.1		12.2		40.0		36.0
Income tax expense	0.6		7.6		6.5		19.9
Sales discounts provided to customers due to sharing of nonconventional fuel tax credits	2.2		2.1		5.7		9.1
Net income	$	12.3	$	32.9	$	31.4	$	73.5


(1)	Reflects net income attributable to noncontrolling interest adjusted for the noncontrolling interest share of interest, taxes, depreciation and amortization.

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in millions)
Coke sales	$	348.3	$	447.0	$	1,120.0	$	1,309.3
Steam and electricity sales	16.6		16.0		49.0		47.5
Operating and licensing fees	8.2		8.4		25.9		27.4
Metallurgical coal sales	16.7		8.7		50.0		37.2
Coal logistics	0.1		—		0.1		—
Sales and other operating revenue	$	389.9	$	480.1	$	1,245.0	$	1,421.4