Sunoco 2011 Annual Report Download - page 52

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As a result of these divestments, Sunoco’s chemicals operations have been classified as discontinued
operations for all periods presented in the consolidated financial statements herein (see Note 2 to the
Consolidated Financial Statements under Item 8).
Discontinued chemicals operations had pretax earnings of $1, $56 and $1 million in 2011, 2010 and 2009,
respectively.
Coke
The Coke business, through SunCoke Energy, Inc. (“SunCoke Energy”) and its affiliates, makes high-
quality, blast-furnace coke at its Jewell facility in Vansant, VA, at its Indiana Harbor facility in East Chicago, IN,
at its Haverhill facility in Franklin Furnace, OH, at its Gateway facility in Granite City, IL and at its Middletown
facility in Middletown, OH. SunCoke Energy is the operator of a cokemaking facility in Vitória, Brazil, which is
owned by a project company in which a Brazilian subsidiary of ArcelorMittal is the major shareholder. SunCoke
also produces metallurgical coal from mines in Virginia and West Virginia, primarily for use at the Jewell
cokemaking facility. All of the cokemaking plants except for the Jewell plant produce steam and/or electricity.
The third-party investor in the Indiana Harbor cokemaking operations is currently entitled to a noncontrolling
interest amounting to 15 percent of the partnership’s net income (see below). On July 26, 2011, an IPO of
13.34 million shares of SunCoke Energy common stock was completed at an offering price of $16 per share.
Sunoco maintained an 81-percent controlling financial interest in SunCoke Energy until its remaining shares
were distributed to Sunoco shareholders by means of a spin-off on January 17, 2012. SunCoke Energy generally
assumed all liabilities associated with Sunoco’s cokemaking and coal businesses prior to the date of the spin-off.
SunCoke Energy is also responsible for all tax liabilities related to Sunoco’s cokemaking and coal businesses
prior to the spin-off. However, SunCoke Energy is not entitled to any refunds which may occur that are
applicable to such periods. The results of operations of the Coke business will be classified as discontinued
operations in the consolidated financial statements effective with the distribution date.
2011 2010 2009
Pretax income (millions of dollars) ........................................ $ 62 $ 176 $ 193
Coke production (thousands of tons):
United States ....................................................... 3,761 3,593 2,868
Brazil ............................................................. 1,442 1,636 1,263
Coke pretax segment results decreased $114 million in 2011 primarily attributable to lower coke sales
revenues as a result of the Jewell contract restructuring with ArcelorMittal in January 2011 and the recognition of
a $13 million contract loss in connection with agreements to purchase coke from third-parties to cover a
projected 2011 production shortfall at the Indiana Harbor facility. Higher general and administrative costs largely
associated with the relocation of the corporate offices and additional staffing costs related to becoming a public
company also contributed to the decline in earnings. These factors were somewhat offset by improved results
from the company’s coal mining operations.
Coke segment income decreased $17 million in 2010 primarily due to lower results from the Jewell coal and
coke and Indiana Harbor operations. Partially offsetting these negative factors were higher results from the
Haverhill and Gateway operations which were driven by higher margins and volumes.
In January 2011, SunCoke Energy acquired Harold Keene Coal Co., Inc., based in Honaker, VA, for $52
million. The purchase price included a net cash payment of $38 million and contingent consideration totaling $14
million primarily related to the estimated fair value of contingent royalty payments to the seller if certain
minimum production levels are met for a period of up to 20 years. The assets acquired, which are adjacent to
SunCoke Energy’s existing mining operations, include two active underground mines and one active surface and
highwall mine currently producing between 250 and 300 thousand tons of coal annually.
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