Apr 23, 2015
Executives
Lisa Ciota - IR Fritzerick “Fritz” A. Henderson - Chairman and CEO Fay West - SVP and CFO
Analysts
Paul Luther - Bank of America/Merrill Lynch Garrett Nelson - BB&T Capital Markets
Operator
Welcome to the SXC Earnings Call. My name is Cynthia and I'll be your operator for today's call.
[Operator Instructions]. Please note that this conference is being recorded.
I'll now turn the call over to your host, Lisa Ciota. Ms.
Ciota you may begin.
Lisa Ciota
Thank you, Cynthia and good morning, everyone. Thank you for joining us on the SunCoke Energy First Quarter 2015 Earnings Conference Call.
With me are Fritz Henderson, our Chairman and Chief Executive Officer; and Fay West, our Senior Vice President and Chief Financial Officer. Following our remarks made by management today the call will be open for Q&A.
This conference call is being webcast live on the Investor Relations section of suncoke.com, and a replay 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 later 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 on today’s call about future expectations constitute forward-looking statements and the cautionary language regarding forward-looking statements in our SEC filings apply to our remarks today. These documents are available on our website as are reconciliations to any non-GAAP measures discussed on today’s call.
Now I'll turn the call over to Fritz.
Fritzerick “Fritz” A. Henderson
Thank you Lisa and good morning everyone. Page two is a quick summary of the quarter.
The quarter for SunCoke Energy was a solid one, both from a safety, environmental and operating and financial perspective, a good start to the year for us and Fay will have, a chance to go through the normal variances but as you look at it, a good solid start for the year for SunCoke Energy. I will come back and talk about some pluses and minuses but we are pleased to see that.
We did increase our quarterly dividend earlier this week by 28% on SunCoke Energy shares in-line with the increased distribution we are receiving from SXCP, our investment in our partner -- our limited partnership, SunCoke Energy Partners. We do, as a parent, continue to maintain financial flexibility to both support growth importantly and return additional capital to shareholders.
I’ll have more to say about that later in the presentation. We continue to work the pipeline of long-term growth opportunities in a number of industrial facing verticals, and finally based upon the performance we had in the first quarter and our expectations as we are in April through the rest of the year we have recently affirmed our 2015 consolidated adjusted EBITDA guidance, reflecting both the operating performance of our plants and the strength of our long-term take or pay cokemaking contract.
At this point I will turn it over to Fay.
Fay West
Thank you Fritz. As was just mentioned the first quarter of 2015 proved to be a solid quarter across our businesses.
Adjusted EBITDA from continuing operations for the first quarter was $49.1 million and was up approximately $10 million or 24% from the prior year quarter. As you can see in the chart this increase is based on better performance, both at our coke operations and at our coal logistics operations.
Corporate costs were also lower as compared to the prior year and we will walk through the changes in adjusted EBITDA in greater details on the next slide. Moving onto EPS, in the first quarter of 2015, we reported an EPS loss of $0.03.
The current period includes transaction and financing costs related to the Granite City dropdown which occurred in January of 2015. EPS, excluding the impact of the financing and transaction cost was income of $0.06 per share.
Finally we are reaffirming our full year consolidated EBITDA adjusted guidance of $190 to $210 million. Turning to slide four, and drilling further into the first quarter results, working from the last two items in the chart we identified the drivers of year-over-year increases and adjusted EBITDA for continuing operations.
We saw year-over-year improvement in our domestic coke operations most significantly at our Indiana Harbor facilities were coal and coke yields and sales volumes were up meaningfully. As you may recall our 2014 performance across the fleet was impacted by severe weather conditions and while we did experience the coldest February on record at our Indiana Harbor facility this year the impact of weather was not as significant in the current year.
Overall the absolute trends for operating in maintenance activities at our domestic coke operations was unfavorably impacted year-over-year by the resetting of Indiana Harbor's cost factor mechanism. This contractual resetting occurred in January of 2015 and while this is an unfavorable lap to the prior year the impact was considered and included in our 2015 adjusted EBITDA guidance.
Additionally reserve volumes were up significantly over the prior year, well over 70% resulting in an increase in adjusted EBITDA. As you can see in the chart corporate costs were lower in 2015 and as the prior year included the impact of corporate restructuring charges.
This brings us to adjusted EBITDA from continuing operations of $49.1 million, a $9.6 million increase over the prior year period. Working from continuing operation to consolidated operations, legacy items contributed about $2 million in income in the quarter and these results were aided by a $4 million OPEB curtailment gain related to the downsizing of our coal mining operation.
Once again this impact was considered and included in our 2015 adjusted EBITDA guidance. Discontinued operations came in at a loss of $3.1 million in the quarter and we are pleased with the progress and implementation of our coal rationalization plants and we are well within the previously communicated adjusted EBITDA guidance for discontinued operations.
In total, our consolidated adjusted EBITDA for the first quarter was $47.9 million, up from the prior year quarter of $33.6 million. Moving to slide five, the domestic coke fleet continued to deliver stable results in the first quarter.
Adjusted EBITDA per ton was $56 for the quarter and was within our guidance range of $55 to 60 per ton. This is also a significant improvement over the prior year quarter.
Our recovery at Indiana Harbor continued to be a bit more challenging than we expected and this resulted us lowering the full year production outlook to 1.1 million tons for this facility. But our full year production guidance for the entire coke fleet remains unchanged at 4.3 million tons.
Despite these first quarter challenges we continue to have confidence in the performance of our domestic coke fleet, which supports the reaffirmation of our full year consolidated adjusted EBITDA guidance and as you could see on the next slide we ended the quarter with total cash of approximately a $165 million. This is up more than $25 million versus the fourth quarter of 2014.
Positive cash flow from operations was offset by CapEx of $8.3 million and cash used in discontinuing operations of $15.5 million. This amount included severance payments that were accrued for in 2014 and other working capital changes in the discontinued operations.
As you could see we had a cash outlay of approximately $24 million related to one, the $20 million ASR that was executed in the first quarter; and two approximately $4 million in dividend payments. These amounts were more than offset by proceeds related to our Granite City dropdown.
With revolver capacity of nearly $400 million and approximately $165 million in combined cash, we are well positioned to pursue growth opportunities and to return capital to shareholders and on that front we amended our revolver specifically to restricted payment basket capacity to allow for increased flexibility to return capital to shareholders via share repurchases or dividends. This is a first step as we transition to a more traditional GP structure.
Now I'll turn it back over to Fritz.
Fritzerick “Fritz” A. Henderson
Thanks Fay. Next chart jumps back and looks at the investment thesis behind SunCoke Energy.
We do believe we are well positioned to deliver long term shareholder returns. The business starts with our operating model, and business model plants that run well, generate stable sustainable cash flows.
The contracts themselves are long term take or pay contracts with minimal commodity risk to provide results which are stable and are not cyclical and do not move with commodity prices. Our balance sheet itself at the parent end of the MLP is conservatively levered with considerable liquidity which provides us financial flexibility to both support growth, whether it’s done at the partnership or in the event that the parent needs to invest alongside the partnership in order to do a larger transaction.
We have the flexibility to do that and return capital to shareholders both what we have announced to-date as well as what we would do in the future. Finally in terms of growth opportunities we do anticipate executing at least one additional dropdown in 2015.
We are working and I will talk about this later, we are working on the dropdown of 23% of Granite City in the second quarter but most importantly we are building a robust pipeline of long term growth targets which is for us the highest priority in terms of growth. Finally in terms of return to shareholders we have returned a $110 million to shareholders in the last 12 months at the SXC level and we anticipate -- this is a little over 10% of our market cap and we do anticipate the ability to continue to increase dividends going forward and I will talk about this relative to the dropdowns, but I think it’s very important that we can do this, whether or not we accelerate or whether or not we are patient in our dropdown strategy, and I want to come back to this in a later chart.
To the business model, the business model is summarized on page nine. All of our contracts have similar characteristics and terms of the contract provisions, obviously in long-term, take or pay, minimal commodity risk, the provisions are summarized here in the chart, for those of you who have been with us and followed us since we went public in 2011, no change in this chart.
But what does it really provide us? Well it provides us with a business that involves the customers’ obligation to take all the coke we produce up to a contract maximum.
These are long-term take or pay agreement, which provide stable cash flows during market upturns and during market downturns. We don’t participate in upturns in the market therefore and at the same time we don’t suffer cyclical downturns in our business.
That’s not the way the business is structured. Commodity risk is minimized due to pass through provisions.
No early terminations, contracts through default. We have one contract that does have an early termination provision which we have talked about extensively in the past it involves a contract with AK Steel and Haverhill II where we supplied a critical blast furnace for AK Steel in Ashland.
So it’s an asset that we think is strategic for our customer, and it is the only such contract we have on our portfolio. Finally our counterparty risk is mitigated in couple of ways.
One, we supply strategic blast furnaces for our customers and there are customers obligations or sales are to the parent Company. So our business model is focused on generating stable, sustainable, long term cash flows which was the ridge, the origin for thinking about why this was appropriately placed in an MLP, the basics of the business involved, the stability, they don’t involve growth, but they are stable and they provide us an ability to both support growth as well as distribute cash to our shareholders.
I will stop here for a second and mention that the Granite City contract that we have and I will take questions on this later, is the same framework. And as we look at our production today we are basically operating our Granite City front [ph] business as usual today.
Page 10, we do maintain the flexibility to fund growth. We have multiple levers at both the parent and the MLP to facilitate both dropdowns and importantly the fund growth opportunities.
Fay mentioned the amendment that we recently received with good support from our banking group at SXC which is really focused around restricted payment flexibility. We also received an amendment from SXCP lenders which allowed us to basically another 0.5 of turn leverage capacity so that we can run the MLP at a level 3.5 to 4 times debt to EBITDA, which is about a 0.5 turn wider from what our historical target has been.
But as we look at it, it’s a level that we are quite comfortable with relative to how we operate the MLP. We have $165 million in combined cash, we have $400 million of combined unused revolver, and we believe from a financing flexibility perspective we have the ability to compete for and execute either transformative or bolt-on acquisitions.
As we think about the M&A pipeline, it starts with, what are the guard rails, what are the criteria we use? One, strategic fit.
It needs to -- as we think about leveraging core competency we're a manufacturing company, a processing firm and we think that that core competency is something that is important as we look at acquisition opportunities. The financial fit is important to us; stable cash flows, limited commodity risk and qualifying income.
That doesn't mean you don't look at businesses, you have to look at businesses that have zero commodity risk, that needs to be limited to similar to what we have, we have an MLP which is focused around stable cash flows, with I think reasonable coverage, quite, actually quite conservative coverage even at 1.1. We think businesses, as we look at opportunity going forward, need to be consistent with the mission of the MLP and the coverage ratios and how we think about the MLP as a stable business.
It finally needs to be actionable, we need to be able to compete to acquire the business and therefore needs to be appropriately sized. The vertical are summarized at the bottom of this chart.
We have reviewed this with a number of investors over the last four to five months. This is a portfolio of verticals that we've been working for the last three or four months.
We continue to pursue these. We will be disciplined in terms of mergers and acquisitions.
I think it's important to do so, if you think about discipline in terms of being, one obviously the meeting the guardrails, but two, meeting the financial hurdles. You want a transaction that’s accretive for the MLP and it creates value for SXC.
So I think having the appropriate financial discipline and the patience to use that is an important criteria but this is something we are working on with a high sense of urgency. On capital allocation, as summarized in the next page, on the right hand side of the page is SunCoke Energy Partners, it’s pretty straightforward.
We want to maintain leverage capacity and financial flexibility in order to pursue long term growth but at the same time we just recently declared our eight consecutive per unit distribution increase. We have adjusted our coverage ratio in light of the asset’s performance and the seasoning of our MLP.
We think it’s level with, particularly with our replacement of coal [ph] we make within the MLP that we can both pursue growth as well as increase distributions going forward. And in fact we are ahead of schedule relative to the three year plan we outline when we originally indicated we planned to drop all of our assets into the MLP, all of our pumping [ph] assets in the MLP.
Looking at the parent, SunCoke Energy we intend to preserve our leverage capacity for long-term growth. This is very important as we think about the parent, we can see transactions and have looked at transactions where the parent is investing alongside SunCoke Energy Partners, in assets which would generate qualifying income and ultimately would be dropped down into the MLP.
We think it's important that the parent has the capability to do that with the MLP, but at the same time we have the flexibility to return capital to shareholders. We have increased our dividend by 28%, we plan, as we grow distributions in the MLP as well as the assets are sitting upstairs are themselves generating cash flows we think we have the flexibility to return a significant portion of free cash flow to the asset fee investor going forward and our intent is beyond the free cash flows of the business that we can return excess cash that could be generated as a result of the dropdown transaction for example to shareholders via either share repurchase or via special dividends.
But that would be something that will be considered when we did the dropdown transaction. The pathway in terms of timing is summarized on the next page, the left are the completed activities, I touched on a number of these already, so I am not going to be belabor them, but I think an important point to say, one of the two things as we talked about having a GP with more flexibility in terms of returning capital to shareholders, that we felt was important and needed to get done, one was to amend our credit facilities to provide an appropriate amount of flexibility, which we have done so and close that this week.
And the second is ultimately to redeem the bonds that exist at the parent and our plan would be with the dropdown of Granite City’s 23% interest that we would have an opportunity to do that and our target to do that is in the second quarter. At the same time once you do that we could then approach the SXC Board with respect to seeking additional share repurchase authorization.
So this is how we think about sequencing and timing and beyond the second quarter, our plan is to complete the remaining dropdowns. We will have Jewell and Brazil Coke ready in the second half of 2015.
Indiana Harbor as a practical matter is something that we would look at in 2016. We want two consecutive quarters of stable operations for Indiana Harbor before we consider dropping that into the MLP.
I will make a point here. We have estimated what the proceeds would be from executing our dropdown transaction, on a reasonable set assumption and that resulted in a $350 million to $400 million of cash that would be generated at the parent after paying down debt and after paying the appropriate taxes.
One of the things that’s important to understand is that we will take into account market conditions as we execute our dropdown transaction. Our dropdown transaction needs to be value creating for both the SXCP unitholder but also for the SXC investors.
One of the advantages of being of ahead of schedule in terms of the dropdown plan is that if we don’t find the market conditions favorable for both sets of shareholders we will be patient. And so market conditions are important to us and I have been asked for specificity around date and time.
As I said we will be ready in the second-half with respect to both Jewell and Brazil but we will also evaluate market conditions at that time and if the market conditions don’t allow for a transaction that’s attractive for both of the shareholder we will be patient. That patience however doesn’t from our perspective limit our ability to look at additional capital steps that we can take with the SXC shareholders.
The assets themselves, which will be dropdown particularly the Jewell asset is already generating cash flow upstairs at the parent. The Indiana Harbor plant as it reaches its goals will also generate cash flows and so as the cash flow direct to parent provides the capability for us to look at increases in distributions irrespective of when we would execute the specific dropdown transaction at the parent level.
We are summarizing and finalizing on page 14, the investment thesis at SunCoke Energy. We think we are well positioned to deliver long-term shareholder return.
We have a business model that’s focused around our Coke plant to generate stable cash flows. Our coal logistics business also does not have -- doesn’t have the same long-term contract but it has sticky contracts and it doesn’t involve commodity risk.
We have a strong balance sheet both at the MLP as well as the parent that allows us to both pursue growth opportunities as well as return cash to shareholders. So with that, we open for question.
Thank you very much.
Operator
Thank you. We will now begin the question-and-answer session.
[Operator Instructions]. And our first comes from Paul Luther of Bank of America/Merrill Lynch.
Paul Luther
Hi, good morning again Fritz, and Fay and Lisa.
Fritzerick “Fritz” A. Henderson
Hi, Paul.
Fay West
Good morning.
Paul Luther
Thanks for taking my questions here. First, I was wondering if you could just provide a little more color, just with respect to the future drop down in how the leverage at SXC impacts that discussion, because I know that at SXC you reported total debt of about $100 million and I just want to get a sense what that means for potential returns out of further dropdowns if you are if the amount of debt you have to exchange at the LP, how that effects the decisions?
Fritzerick “Fritz” A. Henderson
So we have a $105 million of bonds remaining at the parent. With the next dropdown transaction we would anticipate assuming it -- the Granite City 23%, you would have a portion of those bonds called, as we have done in prior dropdowns.
What we can very well do is call all the bonds so we could actually use cash at the parent or more likely use some revolver capacity at the parent to call the remaining bonds. Once we do that, they I’ll call the basket provision that are in the bonds, the bonds are extinguished.
So that’s how we would think about the $105 million of bonds that are sitting remaining upstairs at the parent.
Paul Luther
Okay. Can you talk a little bit more about Indiana Harbor and progress with respect to the output there, if you have any better sense of when you might hit those kind of stable consecutive quarters?
Fritzerick “Fritz” A. Henderson
So let’s kind of start with the fact that it’s behind where we wanted it to be. While -- I mean we saw we saw improvement in the first quarter but it was obviously not what we were looking for relative to production.
This was -- as we thought about the first quarter performance Indiana Harbor was negatively affected by a number of factors, actually most notably we came into the first quarter from the fourth quarter of last year not running at the levels we wanted to be. And then frankly it was a difficult winter for Indiana Harbor, was very cold which affected the ovens and the oven’s performance.
We were up year-over-year but not where we wanted to be. As we look into the second quarter while we are disappointed with March I should say, what have we seen?
We have seen a better oven performance, we have seen better mechanical availability, reliability. We have seen the asset itself performed significantly better from an environmental perspective, from a safety perspective, ovens per day [ph] is improving, oven temperatures are improving.
We see a lot of good leading indicators. So as we think about Indiana Harbor it has taken us longer to achieve the goals that we want.
I wouldn’t call the second quarter -- I don’t think the second quarter is going to be indicative of what the run rate should be for Indiana Harbor. I think as we get into the second half of the year we feel good about the run rate of Indiana Harbor.
But what that would say is that if we actually ran in the third and the fourth quarter the way we expect to run that we really wouldn’t consider that to be dropped down until early next year. So that’s how I tried to respond to your question.
Paul Luther
Yeah, thanks, that’s helpful. And then finally ask just at Coal Logistics and the outlook there, I think previously you had guided to EBITDA of $17 million, I think that was mentioned on the last call, just seeing that Q1 is little bit below what our run rate would be, I don’t know if that was just seasonality and weather impact, I just wanted to check in on that business too.
Fay West
I think we were impacted in the first quarter by weather, specifically since flooding [ph] kind of, that impacts their operations as well. They were better than the prior year quarter, primarily because they had some -- they really did a nice job of managing their overall operating costs and had some sales mix capability versus the last year.
At this point we are still intending our full year guidance remains unchanged for Coal Logistics.
Paul Luther
Okay, great. Thanks Fritz and Fay.
Fritzerick “Fritz” A. Henderson
Thank you
Fay West
Thank you.
Fritzerick “Fritz” A. Henderson
So Lisa advices me that there are no other questions.
Lisa Ciota
If anybody wants to queue up for questions please do so, otherwise we will conclude the call.
Operator
[Operator Instructions]. And our next question comes from Paul Luther of Bank of America Merrill Lynch.
Paul Luther
Hi, I figured I would continue. I had another one just, I appreciate the color you gave on cash return.
I was wondering how you think about dividends versus buybacks given what the stock is. I think you have a $55 million left of authorization.
In terms of dividends I believe you have pegged it against the LP and GP cash flows from partners, would you look to change that ratio, just wondering if you could just add a little more color on those things?
Fritzerick “Fritz” A. Henderson
Paul thank you very much for asking a question. I am told -- Lisa actually advices me that the queue has got another behind us, that’s good, otherwise you would have been the only person to ask me a question all morning.
I would say a couple of things. First; we did have $55 million left on the repurchase authorization.
We wouldn’t ask to refresh that for example until we actually call the bonds, because we need to do that, we need to kind of go through these steps. From my perspective I think there is a role to be played in both share repurchase as well as dividends in the capital allocation strategy.
We did -- we have pegged the SXC dividend at 33% of the SXCP from the cash flows that the parent receives from the SXCP, both GP and LP cash flows. Obviously this is a subject for Board consideration.
As we think about it we are not wedded to 33% we have flexibility beyond that. And as I think about the parent and the cash that’s generated at the parent, even pre-dropdown transaction, this is why I was -- spent some time in that chart.
We have flexibility to increase dividend above where we are today. Obviously it’s a subject that’s got to be approved by the Board.
I think there is a role to be played in the capital allocation frame with both the share repurchases as well as dividends and we have done both. I would say just the last point I would make on this subject is leverage capacity at the parent, particularly in the assets upstairs [indiscernible] it’s basically unlevered in terms of net cash.
Our approach is to preserve that leverage capacity to support growth. But the business itself generates cash.
It gives us the ability to both repurchase shares and pay an increased dividend without having to use leverage.
Paul Luther
Got it, that's helpful. Thanks again Fritz.
Fritzerick “Fritz” A. Henderson
You're welcome.
Operator
And our next question comes from Dean Graves [ph] with [indiscernible]. You may begin.
Unidentified Analyst
Hi good morning.
Frederick “Fritz” A. Henderson
Dean, are you on mute?
Unidentified Analyst
Yes, sorry I was but I figured it out. Sorry about that.
Fritz I wondered if you could first talk to us a little bit about the change in leverage, targeted ex-XTP [ph] have turned a 3.5 to 4 and served what you guy’s start process was around that and sort of why that was a level and maybe not a an even higher level for example. And then the second question unrelated, can you guys review for us the reset of the cost pass through mechanism at Indiana Harbor and why that was the case and sort of what that means up from a cost perspective.
Frederick “Fritz” A. Henderson
Okay. When we developed our 3 to 3.5 originally, I mean obviously we had a new MLP, a new non-traditional MLP in a different space.
We thought that was kind of -- we thought it was a conservative level of leverage. What Dean, what the rating agencies have indicated is below 4 is where they see us relative to our existing rating.
And so as we've matured, it is I think we've demonstrated performance we felt like 3.5 to 4 was a reasonable level to move to, one that would preserve the existing rating, one that would allow us to run the business and provide us a little more flexibility to support growth. And so that's the quick answer to the 3.5 to 4.
I think your question is it meaningfully above 4, I don't really think it's warranted and more overwrite, I'm reasonably confident it would attract negative rating action. Our credit agreements typically allow us a half of point of flex in the event of an acquisition, I think we would I think six month.
So we have some flexibility even with an existing credit agreements, not used it and we wouldn't anticipate using it unless we have something that was -- we have something that was highly attractive and we felt like we needed to do that. So I think it's prudent Dean and that's why we landed there.
Relative to the pass through mechanism, this is something that we've communicated when we talked about the Indiana Harbor contract renewal, when we set our guidance for this year, we've factored that it and actually communicated this with last year that this is going to be a headwind that we are going to face relative to the Indiana Harbor results. And what we did was when we negotiated the renewal with ArcelorMittal in middle in 2013 it involve a number of revisions, involve the higher fixed fee, involve, but it what involved from a cost standpoint was we did cost sharing in terms of -- for cost above budget, there are individuals sub categories by the way.
But in effect through the end of '14 we were working with ArcelorMittal on more of a sharing basis. We did a budget, we would share overruns -- 50.
When we got to one-one or 15 we go to a fixed number. Again there are individual sub-categories that can involve some indexation.
But in effect we're basically fixed in our O&M numbers for the next three years. And after that I think we and ArcelorMittal then sit down again and consider what the budgeted levels of cost are at the plant.
So this is something that we've known, it was something was part of the deal and was factored in when we set our guidance for 2015.
Unidentified Analyst
So as a follow up to your comment on the amendment to the leverage covenant, you mentioned you could possibly exceed it for six months. Does that mean you could exceed now the 4.5 times for six months?
Frederick “Fritz” A. Henderson
Yes.
Unidentified Analyst
Okay.
Frederick “Fritz” A. Henderson
It basically, I think of it as a -- we think of it as basically something you use in the event you have a single transaction and we have a clear glide path to come back under that number. We think 3.5 to 4 is the right number -- right place to be.
Unidentified Analyst
Okay. Thanks Fritz.
Frederick “Fritz” A. Henderson
You are welcome.
Operator
[Operator Instructions]. And our next question comes from Garrett Nelson with BB&T Capital Markets.
You may begin.
Garrett Nelson
Hi, everyone. Sorry for the lack of questions.
It's kind of a busy earnings day. But a great release and it's good to see that a lot of the fears that are out there are overblown.
Has U.S. Steel given you any indication as to how long they think Granite City will be idled?
And sorry if I missed it earlier, but where is that coke, where are they shipping that coke from your Granite City coke ovens?
Frederick “Fritz” A. Henderson
So Garrett, no need for apologies. Thank you for asking a question.
I would say a couple of things. Your question on where we shipping it interestingly we're not shipping it anywhere.
They're running one of the two blast furnaces today. So we are and their coke plant shutdown some time ago.
So we're basically supplying the blast furnace that's there. There is some inventory being -- that we've worked with U.S.
Steel to locate, places to put inventory and frankly it's business as usual today. And then on your first question, no they've not indicated -- what they’ve said publicly is the outage would continue and they would come back into production based upon market conditions.
They've not provided us any other color on that.
Garrett Nelson
Great, okay, thanks.
A - Frederick “Fritz” A. Henderson
You're welcome. Okay, so there aren't any other questions.
Again I want to thank all of you on the call. I know it is a busy day actually for you and for us.
But appreciate very much your interest in SunCoke, your investment in SunCoke. And look forward to talking to you on an ongoing basis going forward.
Thanks very much.
Operator
Thank you, ladies and gentlemen. This concludes today's conference.
Thank you for participating. You may now disconnect.