UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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ý☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20192020 or
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¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | Commission file number: 001-31465 | |
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| | Commission file number: | 001-31465 | |
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NATURAL RESOURCE PARTNERS L.P.LP |
| (Exact name of registrant as specified in its charter) | |
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Delaware | | 35-2164875 |
(State or other jurisdiction of incorporation or organization)
| | (I.R.S. Employer Identification No.)
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1201 Louisiana Street, Suite 3400
Houston, Texas 77002
(Address of principal executive offices)
(Zip Code)
(713) 751-7507
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Units representing limited partner interests | | NRP | | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý☒ No¨ ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of "accelerated filer", "large accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer | ¨☐ | Accelerated Filer | | ý☒ |
Non-accelerated Filer | ¨☐ (Do not check if a smaller reporting company)
| Smaller Reporting Company | | ¨☐ |
| | Emerging Growth Company | | ¨☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨☐ No ¨☐
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
NATURAL RESOURCE PARTNERS, L.P.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
| | | September 30, | | December 31, | | September 30, | | December 31, |
(In thousands, except unit data) | 2019 | | 2018 | (In thousands, except unit data) | 2020 | | 2019 |
ASSETS | (Unaudited) | | | ASSETS | (Unaudited) | | |
Current assets | | | | Current assets | |
Cash and cash equivalents | $ | 99,636 |
| | $ | 101,839 |
| Cash and cash equivalents | $ | 115,573 | | | $ | 98,265 | |
Restricted cash | 12,527 |
| | 104,191 |
| |
| Accounts receivable, net | 27,447 |
| | 32,058 |
| Accounts receivable, net | 17,462 | | | 30,869 | |
Prepaid expenses and other | 3,111 |
| | 3,462 |
| |
Other current assets, net | | Other current assets, net | 3,972 | | | 1,244 | |
Current assets of discontinued operations | 988 |
| | 993 |
| Current assets of discontinued operations | 0 | | | 1,706 | |
Total current assets | $ | 143,709 |
| | $ | 242,543 |
| Total current assets | $ | 137,007 | | | $ | 132,084 | |
Land | 24,008 |
| | 24,008 |
| Land | 24,008 | | | 24,008 | |
Plant and equipment, net | 762 |
| | 984 |
| |
| Mineral rights, net | 733,154 |
| | 743,112 |
| Mineral rights, net | 465,870 | | | 605,096 | |
Intangible assets, net | 40,461 |
| | 42,513 |
| Intangible assets, net | 17,601 | | | 17,687 | |
Equity in unconsolidated investment | 258,063 |
| | 247,051 |
| Equity in unconsolidated investment | 256,834 | | | 263,080 | |
Long-term contract receivable | 37,473 |
| | 38,945 |
| |
Other assets | 6,274 |
| | 2,491 |
| |
Long-term contract receivable, net | | Long-term contract receivable, net | 33,791 | | | 36,963 | |
Other long-term assets, net | | Other long-term assets, net | 7,447 | | | 6,989 | |
Total assets | $ | 1,243,904 |
| | $ | 1,341,647 |
| Total assets | $ | 942,558 | | | $ | 1,085,907 | |
LIABILITIES AND CAPITAL | | | | LIABILITIES AND CAPITAL | | | |
Current liabilities | | | | Current liabilities | |
Accounts payable | $ | 1,591 |
| | $ | 2,414 |
| Accounts payable | $ | 1,372 | | | $ | 1,179 | |
Accrued liabilities | 7,290 |
| | 12,347 |
| Accrued liabilities | 6,859 | | | 8,764 | |
Accrued interest | 14,364 |
| | 14,345 |
| Accrued interest | 9,273 | | | 2,316 | |
Current portion of deferred revenue | 5,047 |
| | 3,509 |
| Current portion of deferred revenue | 11,035 | | | 4,608 | |
Current portion of long-term debt, net | 45,789 |
| | 115,184 |
| Current portion of long-term debt, net | 39,072 | | | 45,776 | |
Current liabilities of discontinued operations | 174 |
| | 947 |
| Current liabilities of discontinued operations | 0 | | | 65 | |
Total current liabilities | $ | 74,255 |
| | $ | 148,746 |
| Total current liabilities | $ | 67,611 | | | $ | 62,708 | |
Deferred revenue | 43,587 |
| | 49,044 |
| Deferred revenue | 50,980 | | | 47,213 | |
Long-term debt, net | 490,378 |
| | 557,574 |
| Long-term debt, net | 452,401 | | | 470,422 | |
Other non-current liabilities | 4,843 |
| | 1,150 |
| Other non-current liabilities | 5,020 | | | 4,949 | |
Total liabilities | $ | 613,063 |
| | $ | 756,514 |
| Total liabilities | $ | 576,012 | | | $ | 585,292 | |
Commitments and contingencies (see Note 14) | | | | |
Class A Convertible Preferred Units (250,000 units issued and outstanding at $1,000 par value per unit; liquidation preference of $1,500 per unit) | $ | 164,587 |
| | $ | 164,587 |
| |
Commitments and contingencies (see Note 12) | | Commitments and contingencies (see Note 12) | |
Class A Convertible Preferred Units (250,000 units issued and outstanding at September 30, 2020 and December 31, 2019, at $1,000 par value per unit; liquidation preference of $1,700 per unit at September 30, 2020 and $1,500 per unit at December 31, 2019) | | Class A Convertible Preferred Units (250,000 units issued and outstanding at September 30, 2020 and December 31, 2019, at $1,000 par value per unit; liquidation preference of $1,700 per unit at September 30, 2020 and $1,500 per unit at December 31, 2019) | $ | 164,587 | | | $ | 164,587 | |
Partners’ capital | | | | Partners’ capital | |
Common unitholders’ interest (12,261,199 and 12,249,469 units issued and outstanding at September 30, 2019 and December 31, 2018, respectively) | $ | 400,266 |
| | $ | 355,113 |
| |
Common unitholders’ interest (12,261,199 units issued and outstanding at September 30, 2020 and December 31, 2019) | | Common unitholders’ interest (12,261,199 units issued and outstanding at September 30, 2020 and December 31, 2019) | $ | 134,545 | | | $ | 271,471 | |
General partner’s interest | 5,909 |
| | 5,014 |
| General partner’s interest | 428 | | | 3,270 | |
Warrant holders’ interest | 66,816 |
| | 66,816 |
| Warrant holders’ interest | 66,816 | | | 66,816 | |
Accumulated other comprehensive loss | (3,802 | ) | | (3,462 | ) | |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | 170 | | | (2,594) | |
Total partners’ capital | $ | 469,189 |
| | $ | 423,481 |
| Total partners’ capital | $ | 201,959 | | | $ | 338,963 | |
Non-controlling interest | (2,935 | ) | | (2,935 | ) | Non-controlling interest | 0 | | | (2,935) | |
Total capital | $ | 466,254 |
| | $ | 420,546 |
| Total capital | $ | 201,959 | | | $ | 336,028 | |
Total liabilities and capital | $ | 1,243,904 |
|
| $ | 1,341,647 |
| Total liabilities and capital | $ | 942,558 | | | $ | 1,085,907 | |
The accompanying notes are an integral part of these consolidated financial statements.
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands, except per unit data) | 2019 | | 2018 | | 2019 | | 2018 | (In thousands, except per unit data) | 2020 | | 2019 | | 2020 | | 2019 |
Revenues and other income | | | | | | | | Revenues and other income | | | | | | | |
Coal royalty and other | $ | 39,919 |
| | $ | 42,518 |
| | $ | 154,037 |
| | $ | 134,912 |
| Coal royalty and other | $ | 25,740 | | | $ | 39,919 | | | $ | 88,839 | | | $ | 154,037 | |
Transportation and processing services | 3,865 |
| | 6,853 |
| | 14,740 |
| | 17,238 |
| Transportation and processing services | 2,204 | | | 3,865 | | | 6,651 | | | 14,740 | |
Equity in earnings of Ciner Wyoming | 13,818 |
| | 8,836 |
| | 36,833 |
| | 34,986 |
| Equity in earnings of Ciner Wyoming | 1,986 | | | 13,818 | | | 5,200 | | | 36,833 | |
Gain on asset sales and disposals | 6,107 |
| | — |
| | 6,609 |
| | 819 |
| Gain on asset sales and disposals | 0 | | | 6,107 | | | 465 | | | 6,609 | |
Total revenues and other income | $ | 63,709 |
| | $ | 58,207 |
| | $ | 212,219 |
|
| $ | 187,955 |
| Total revenues and other income | $ | 29,930 | | | $ | 63,709 | | | $ | 101,155 | | | $ | 212,219 | |
| | | | | | | | |
Operating expenses | | | | | | | | Operating expenses | |
Operating and maintenance expenses | $ | 5,994 |
| | $ | 6,790 |
| | $ | 26,813 |
| | $ | 21,122 |
| Operating and maintenance expenses | $ | 5,781 | | | $ | 5,994 | | | $ | 19,200 | | | $ | 26,813 | |
Depreciation, depletion and amortization | 3,384 |
| | 4,888 |
| | 11,746 |
| | 15,364 |
| Depreciation, depletion and amortization | 2,111 | | | 3,384 | | | 6,185 | | | 11,746 | |
General and administrative expenses | 4,253 |
| | 3,183 |
| | 12,799 |
| | 10,782 |
| General and administrative expenses | 3,634 | | | 4,253 | | | 11,168 | | | 12,799 | |
Asset impairments | 484 |
| | — |
| | 484 |
| | 242 |
| Asset impairments | 934 | | | 484 | | | 133,217 | | | 484 | |
Total operating expenses | $ | 14,115 |
|
| $ | 14,861 |
|
| $ | 51,842 |
| | $ | 47,510 |
| Total operating expenses | $ | 12,460 | | | $ | 14,115 | | | $ | 169,770 | | | $ | 51,842 | |
| | | | | | | | |
Income from operations | $ | 49,594 |
|
| $ | 43,346 |
|
| $ | 160,377 |
| | $ | 140,445 |
| |
Income (loss) from operations | | Income (loss) from operations | $ | 17,470 | | | $ | 49,594 | | | $ | (68,615) | | | $ | 160,377 | |
| | | | | | | | |
Other expenses, net | | | | | | | | Other expenses, net | |
Interest expense, net | $ | (10,431 | ) | | $ | (17,493 | ) | | $ | (37,061 | ) | | $ | (53,177 | ) | Interest expense, net | $ | (10,254) | | | $ | (10,431) | | | $ | (30,891) | | | $ | (37,061) | |
| Loss on extinguishment of debt | — |
| | — |
| | (29,282 | ) | | — |
| Loss on extinguishment of debt | 0 | | | 0 | | | 0 | | | (29,282) | |
Total other expenses, net | $ | (10,431 | ) |
| $ | (17,493 | ) |
| $ | (66,343 | ) | | $ | (53,177 | ) | Total other expenses, net | $ | (10,254) | | | $ | (10,431) | | | $ | (30,891) | | | $ | (66,343) | |
| | | | | | | | |
Net income from continuing operations | $ | 39,163 |
|
| $ | 25,853 |
|
| $ | 94,034 |
| | $ | 87,268 |
| |
Net income (loss) from continuing operations | | Net income (loss) from continuing operations | $ | 7,216 | | | $ | 39,163 | | | $ | (99,506) | | | $ | 94,034 | |
Income from discontinued operations | 7 |
| | 2,688 |
| | 206 |
| | 3,721 |
| Income from discontinued operations | 0 | | | 7 | | | 0 | | | 206 | |
Net income | $ | 39,170 |
|
| $ | 28,541 |
|
| $ | 94,240 |
| | $ | 90,989 |
| |
Net loss (income) attributable to non-controlling interest | — |
| | 359 |
| | — |
| | (510 | ) | |
Net income attributable to NRP | $ | 39,170 |
| | $ | 28,900 |
| | $ | 94,240 |
| | $ | 90,479 |
| |
Net income (loss) | | Net income (loss) | $ | 7,216 | | | $ | 39,170 | | | $ | (99,506) | | | $ | 94,240 | |
| Less: income attributable to preferred unitholders | (7,500 | ) | | (7,500 | ) | | (22,500 | ) | | (22,500 | ) | Less: income attributable to preferred unitholders | (7,500) | | | (7,500) | | | (22,613) | | | (22,500) | |
Net income attributable to common unitholders and general partner | $ | 31,670 |
|
| $ | 21,400 |
|
| $ | 71,740 |
| | $ | 67,979 |
| |
Net income (loss) attributable to common unitholders and general partner | | Net income (loss) attributable to common unitholders and general partner | $ | (284) | | | $ | 31,670 | | | $ | (122,119) | | | $ | 71,740 | |
| | | | | | | | |
Net income attributable to common unitholders | $ | 31,036 |
| | $ | 20,972 |
| | $ | 70,305 |
| | $ | 66,619 |
| |
Net income attributable to the general partner | 634 |
| | 428 |
| | 1,435 |
| | 1,360 |
| |
Net income (loss) attributable to common unitholders | | Net income (loss) attributable to common unitholders | $ | (279) | | | $ | 31,036 | | | $ | (119,677) | | | $ | 70,305 | |
Net income (loss) attributable to the general partner | | Net income (loss) attributable to the general partner | (5) | | | 634 | | | (2,442) | | | 1,435 | |
| | | | | | | | |
Income from continuing operations per common unit (see Note 5) | | | | | | | | |
Income (loss) from continuing operations per common unit (see Note 4) | | Income (loss) from continuing operations per common unit (see Note 4) | |
Basic | $ | 2.53 |
| | $ | 1.50 |
| | $ | 5.72 |
| | $ | 5.14 |
| Basic | $ | (0.02) | | | $ | 2.53 | | | $ | (9.76) | | | $ | 5.72 | |
Diluted | 1.66 |
| | 1.18 |
| | 3.91 |
| | 3.89 |
| Diluted | (0.02) | | | 1.66 | | | (9.76) | | | 3.91 | |
| | | | | | | | |
Net income per common unit (see Note 5) | | | | | | | | |
Net income (loss) per common unit (see Note 4) | | Net income (loss) per common unit (see Note 4) | |
Basic | $ | 2.53 |
| | $ | 1.71 |
| | $ | 5.73 |
| | $ | 5.44 |
| Basic | $ | (0.02) | | | $ | 2.53 | | | $ | (9.76) | | | $ | 5.73 | |
Diluted | 1.66 |
| | 1.30 |
| | 3.92 |
| | 4.06 |
| Diluted | (0.02) | | | 1.66 | | | (9.76) | | | 3.92 | |
| | | | | | | | |
Net income | $ | 39,170 |
|
| $ | 28,541 |
|
| $ | 94,240 |
| | $ | 90,989 |
| |
Net income (loss) | | Net income (loss) | $ | 7,216 | | | $ | 39,170 | | | $ | (99,506) | | | $ | 94,240 | |
Comprehensive income (loss) from unconsolidated investment and other | (520 | ) | | 791 |
| | (340 | ) | | (768 | ) | Comprehensive income (loss) from unconsolidated investment and other | 2,428 | | | (520) | | | 2,764 | | | (340) | |
Comprehensive income | $ | 38,650 |
| | $ | 29,332 |
| | $ | 93,900 |
| | $ | 90,221 |
| |
Comprehensive loss (income) attributable to non-controlling interest | — |
| | 359 |
| | — |
| | (510 | ) | |
Comprehensive income attributable to NRP | $ | 38,650 |
|
| $ | 29,691 |
|
| $ | 93,900 |
| | $ | 89,711 |
| |
Comprehensive income (loss) | | Comprehensive income (loss) | $ | 9,644 | | | $ | 38,650 | | | $ | (96,742) | | | $ | 93,900 | |
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The accompanying notes are an integral part of these consolidated financial statements.
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(Unaudited)
| | | Common Unitholders | | General Partner | | Warrant Holders | | Accumulated Other Comprehensive Loss | | Partners' Capital Excluding Non-Controlling Interest | | Non-Controlling Interest | | Total Capital | | Common Unitholders | | General Partner | | Warrant Holders | | Accumulated Other Comprehensive Income (Loss) | | Partners' Capital Excluding Non-Controlling Interest | | Non-Controlling Interest | | Total Capital |
| |
(In thousands) | Units | | Amounts | | (In thousands) | Units | | Amounts | |
Balance at December 31, 2018 | 12,249 |
| | $ | 355,113 |
| | $ | 5,014 |
| | $ | 66,816 |
| | $ | (3,462 | ) | | $ | 423,481 |
| | $ | (2,935 | ) | | $ | 420,546 |
| |
Balance at December 31, 2019 | | Balance at December 31, 2019 | 12,261 | | | $ | 271,471 | | | $ | 3,270 | | | $ | 66,816 | | | $ | (2,594) | | | $ | 338,963 | | | $ | (2,935) | | | $ | 336,028 | |
Cumulative effect of adoption of accounting standard (see Note 15) | | Cumulative effect of adoption of accounting standard (see Note 15) | — | | | (3,833) | | | (78) | | | — | | | — | | | (3,911) | | | — | | | (3,911) | |
Net income (1) | — |
| | 35,005 |
| | 714 |
| | — |
| | — |
| | 35,719 |
| | — |
| | 35,719 |
| Net income (1) | — | | | 18,403 | | | 376 | | | — | | | — | | | 18,779 | | | — | | | 18,779 | |
Distributions to common unitholders and general partner | — |
| | (5,513 | ) | | (112 | ) | | — |
| | — |
| | (5,625 | ) | | — |
| | (5,625 | ) | Distributions to common unitholders and general partner | — | | | (5,517) | | | (113) | | | — | | | — | | | (5,630) | | | — | | | (5,630) | |
Distributions to preferred unitholders | — |
| | (7,350 | ) | | (150 | ) | | — |
| | — |
| | (7,500 | ) | | — |
| | (7,500 | ) | Distributions to preferred unitholders | — | | | (7,350) | | | (150) | | | — | | | — | | | (7,500) | | | — | | | (7,500) | |
Issuance of unit-based awards | 12 |
| | 486 |
| | — |
| | — |
| | — |
| | 486 |
| | — |
| | 486 |
| |
| Unit-based awards amortization and vesting | | Unit-based awards amortization and vesting | — | | | 673 | | | — | | | — | | | — | | | 673 | | | — | | | 673 | |
| Comprehensive loss from unconsolidated investment and other | | Comprehensive loss from unconsolidated investment and other | — | | | — | | | — | | | — | | | (1,023) | | | (1,023) | | | — | | | (1,023) | |
Balance at March 31, 2020 | | Balance at March 31, 2020 | 12,261 | | | $ | 273,847 | | | $ | 3,305 | | | $ | 66,816 | | | $ | (3,617) | | | $ | 340,351 | | | $ | (2,935) | | | $ | 337,416 | |
Net loss (2) | | Net loss (2) | — | | | (122,991) | | | (2,510) | | | — | | | — | | | (125,501) | | | — | | | (125,501) | |
| Distributions to preferred unitholders | | Distributions to preferred unitholders | — | | | (7,461) | | | (152) | | | — | | | — | | | (7,613) | | | — | | | (7,613) | |
| Acquisition of non-controlling interest in BRP | | Acquisition of non-controlling interest in BRP | — | | | (4,747) | | | (97) | | | — | | | — | | | (4,844) | | | 2,935 | | | (1,909) | |
Unit-based awards amortization and vesting | — |
| | 399 |
| | — |
| | — |
| | — |
| | 399 |
| | — |
| | 399 |
| Unit-based awards amortization and vesting | — | | | 869 | | | — | | | — | | | — | | | 869 | | | — | | | 869 | |
Comprehensive income from unconsolidated investment and other | — |
| | — |
| | 10 |
| | — |
| | 1,005 |
| | 1,015 |
| | — |
| | 1,015 |
| Comprehensive income from unconsolidated investment and other | — | | | — | | | — | | | — | | | 1,359 | | | 1,359 | | | — | | | 1,359 | |
Balance at March 31, 2019 | 12,261 |
| | $ | 378,140 |
| | $ | 5,476 |
| | $ | 66,816 |
| | $ | (2,457 | ) | | $ | 447,975 |
| | $ | (2,935 | ) | | $ | 445,040 |
| |
Balance at June 30, 2020 | | Balance at June 30, 2020 | 12,261 | | | $ | 139,517 | | | $ | 546 | | | $ | 66,816 | | | $ | (2,258) | | | $ | 204,621 | | | $ | 0 | | | $ | 204,621 | |
Net income (1) | — |
| | 18,964 |
| | 387 |
| | — |
| | — |
| | 19,351 |
| | — |
| | 19,351 |
| Net income (1) | — | | | 7,072 | | | 144 | | | — | | | — | | | 7,216 | | | — | | | 7,216 | |
Distributions to common unitholders and general partner | — |
| | (15,939 | ) | | (326 | ) | | — |
| | — |
| | (16,265 | ) | | — |
| | (16,265 | ) | Distributions to common unitholders and general partner | — | | | (5,518) | | | (112) | | | — | | | — | | | (5,630) | | | — | | | (5,630) | |
Distributions to preferred unitholders | — |
| | (7,350 | ) | | (150 | ) | | — |
| | — |
| | (7,500 | ) | | — |
| | (7,500 | ) | Distributions to preferred unitholders | — | | | (7,350) | | | (150) | | | — | | | — | | | (7,500) | | | — | | | (7,500) | |
| Unit-based awards amortization and vesting | — |
| | 460 |
| | — |
| | — |
| | — |
| | 460 |
| | — |
| | 460 |
| Unit-based awards amortization and vesting | — | | | 824 | | | — | | | — | | | — | | | 824 | | | — | | | 824 | |
Comprehensive loss from unconsolidated investment and other | — |
| | — |
| | — |
| | — |
| | (825 | ) | | (825 | ) | | — |
| | (825 | ) | |
Balance at June 30, 2019 | 12,261 |
| | $ | 374,275 |
| | $ | 5,387 |
| | $ | 66,816 |
| | $ | (3,282 | ) | | $ | 443,196 |
| | $ | (2,935 | ) | | $ | 440,261 |
| |
Net income (1) | — |
| | 38,386 |
| | 784 |
| | — |
| | — |
| | 39,170 |
| | — |
| | 39,170 |
| |
Distributions to common unitholders and general partner | — |
| | (5,518 | ) | | (112 | ) | | — |
| | — |
| | (5,630 | ) | | — |
| | (5,630 | ) | |
Distributions to preferred unitholders | — |
| | (7,350 | ) | | (150 | ) | | — |
| | — |
| | (7,500 | ) | | — |
| | (7,500 | ) | |
Unit-based awards amortization and vesting | — |
| | 473 |
| | — |
| | — |
| | — |
| | 473 |
| | — |
| | 473 |
| |
Comprehensive loss from unconsolidated investment and other | — |
| | — |
| | — |
| | — |
| | (520 | ) | | (520 | ) | | — |
| | (520 | ) | |
Balance at September 30, 2019 | 12,261 |
| | $ | 400,266 |
| | $ | 5,909 |
| | $ | 66,816 |
| | $ | (3,802 | ) | | $ | 469,189 |
| | $ | (2,935 | ) | | $ | 466,254 |
| |
Comprehensive income from unconsolidated investment and other | | Comprehensive income from unconsolidated investment and other | — | | | — | | | — | | | — | | | 2,428 | | | 2,428 | | | — | | | 2,428 | |
Balance at September 30, 2020 | | Balance at September 30, 2020 | 12,261 | | | $ | 134,545 | | | $ | 428 | | | $ | 66,816 | | | $ | 170 | | | $ | 201,959 | | | $ | 0 | | | $ | 201,959 | |
(1)Net income includes $7.5 million attributable to preferred unitholders that accumulated during the period, of which $7.35 million is allocated to the common unitholders and $0.15 million is allocated to the general partner.
| |
(1) | Net income includes $7.5 million attributable to preferred unitholders that accumulated during the period, of which $7.35 million is allocated to the common unitholders and $0.15 million is allocated to the general partner. |
(2)Net loss includes $7.6 million attributable to preferred unitholders that accumulated during the period, of which $7.46 million is allocated to the common unitholders and $0.15 million is allocated to the general partner.
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(Unaudited)
| | | Common Unitholders | | General Partner | | Warrant Holders | | Accumulated Other Comprehensive Loss | | Partners' Capital Excluding Non-Controlling Interest | | Non-Controlling Interest | | Total Capital | | Common Unitholders | | General Partner | | Warrant Holders | | Accumulated Other Comprehensive Loss | | Partners' Capital Excluding Non-Controlling Interest | | Non-Controlling Interest | | Total Capital |
| |
(In thousands) | Units | | Amounts | | (In thousands) | Units | | Amounts | |
Balance at December 31, 2017 | 12,232 |
| | $ | 199,851 |
| | $ | 1,857 |
| | $ | 66,816 |
| | $ | (3,313 | ) | | $ | 265,211 |
| | $ | (3,394 | ) | | $ | 261,817 |
| |
Cumulative effect of adoption of accounting standard | — |
| | 69,057 |
| | 1,409 |
| | — |
| | — |
| | 70,466 |
| | — |
| | 70,466 |
| |
Balance at December 31, 2018 | | Balance at December 31, 2018 | 12,249 | | | $ | 355,113 | | | $ | 5,014 | | | $ | 66,816 | | | $ | (3,462) | | | $ | 423,481 | | | $ | (2,935) | | | $ | 420,546 | |
Net income (1) | — |
| | 23,851 |
| | 487 |
| | — |
| | — |
| | 24,338 |
| | — |
| | 24,338 |
| Net income (1) | — | | | 35,005 | | | 714 | | | — | | | — | | | 35,719 | | | — | | | 35,719 | |
Distributions to common unitholders and general partner | — |
| | (5,505 | ) | | (112 | ) | | — |
| | — |
| | (5,617 | ) | | — |
| | (5,617 | ) | Distributions to common unitholders and general partner | — | | | (5,513) | | | (112) | | | — | | | — | | | (5,625) | | | — | | | (5,625) | |
Distributions to preferred unitholders | — |
| | (7,610 | ) | | (155 | ) | | — |
| | — |
| | (7,765 | ) | | — |
| | (7,765 | ) | Distributions to preferred unitholders | — | | | (7,350) | | | (150) | | | — | | | — | | | (7,500) | | | — | | | (7,500) | |
Issuance of unit-based awards | 14 |
| | 410 |
| | — |
| | — |
| | — |
| | 410 |
| | — |
| | 410 |
| Issuance of unit-based awards | 12 | | | 486 | | | — | | | — | | | — | | | 486 | | | — | | | 486 | |
Unit-based awards amortization and vesting | — |
| | 197 |
| | — |
| | — |
| | — |
| | 197 |
| | — |
| | 197 |
| Unit-based awards amortization and vesting | — | | | 399 | | | — | | | — | | | — | | | 399 | | | — | | | 399 | |
Comprehensive income (loss) from unconsolidated investment and other | — |
| | — |
| | 8 |
| | — |
| | (1,125 | ) | | (1,117 | ) | | — |
| | (1,117 | ) | |
Balance at March 31, 2018 | 12,246 |
| | $ | 280,251 |
| | $ | 3,494 |
| | $ | 66,816 |
| | $ | (4,438 | ) | | $ | 346,123 |
| | $ | (3,394 | ) | | $ | 342,729 |
| |
| Comprehensive income from unconsolidated investment and other | | Comprehensive income from unconsolidated investment and other | — | | | — | | | 10 | | | — | | | 1,005 | | | 1,015 | | | — | | | 1,015 | |
Balance at March 31, 2019 | | Balance at March 31, 2019 | 12,261 | | | $ | 378,140 | | | $ | 5,476 | | | $ | 66,816 | | | $ | (2,457) | | | $ | 447,975 | | | $ | (2,935) | | | $ | 445,040 | |
Net income (1) | — |
| | 36,496 |
| | 745 |
| | — |
| | — |
| | 37,241 |
| | 869 |
| | 38,110 |
| Net income (1) | — | | | 18,964 | | | 387 | | | — | | | — | | | 19,351 | | | 0 | | | 19,351 | |
Distributions to common unitholders and general partner | — |
| | (5,510 | ) | | (113 | ) | | — |
| | — |
| | (5,623 | ) | | — |
| | (5,623 | ) | Distributions to common unitholders and general partner | — | | | (15,939) | | | (326) | | | — | | | — | | | (16,265) | | | — | | | (16,265) | |
Distributions to preferred unitholders | — |
| | (7,350 | ) | | (150 | ) | | — |
| | — |
| | (7,500 | ) | | — |
| | (7,500 | ) | Distributions to preferred unitholders | — | | | (7,350) | | | (150) | | | — | | | — | | | (7,500) | | | — | | | (7,500) | |
| Unit-based awards amortization and vesting | — |
| | 136 |
| | — |
| | — |
| | — |
| | 136 |
| | — |
| | 136 |
| Unit-based awards amortization and vesting | — | | | 460 | | | — | | | — | | | — | | | 460 | | | — | | | 460 | |
Comprehensive income (loss) from unconsolidated investment and other | — |
| | 50 |
| | 1 |
| | — |
| | (434 | ) | | (383 | ) | | (51 | ) | | (434 | ) | |
Balance at June 30, 2018 | 12,246 |
| | $ | 304,073 |
| | $ | 3,977 |
| | $ | 66,816 |
| | $ | (4,872 | ) | | $ | 369,994 |
| | $ | (2,576 | ) | | $ | 367,418 |
| |
Net income (loss) (1) | — |
| | 28,322 |
| | 578 |
| | — |
| | — |
| | 28,900 |
| | (359 | ) | | 28,541 |
| |
Comprehensive loss from unconsolidated investment and other | | Comprehensive loss from unconsolidated investment and other | — | | | — | | | — | | | — | | | (825) | | | (825) | | | — | | | (825) | |
Balance at June 30, 2019 | | Balance at June 30, 2019 | 12,261 | | | $ | 374,275 | | | $ | 5,387 | | | $ | 66,816 | | | $ | (3,282) | | | $ | 443,196 | | | $ | (2,935) | | | $ | 440,261 | |
Net income (1) | | Net income (1) | — | | | 38,386 | | | 784 | | | — | | | — | | | 39,170 | | | — | | | 39,170 | |
Distributions to common unitholders and general partner | — |
| | (5,511 | ) | | (112 | ) | | — |
| | — |
| | (5,623 | ) | | — |
| | (5,623 | ) | Distributions to common unitholders and general partner | — | | | (5,518) | | | (112) | | | — | | | — | | | (5,630) | | | — | | | (5,630) | |
Distributions to preferred unitholders | — |
| | (7,350 | ) | | (150 | ) | | — |
| | — |
| | (7,500 | ) | | — |
| | (7,500 | ) | Distributions to preferred unitholders | — | | | (7,350) | | | (150) | | | — | | | — | | | (7,500) | | | — | | | (7,500) | |
| Unit-based awards amortization and vesting | — |
| | 139 |
| | — |
| | — |
| | — |
| | 139 |
| | — |
| | 139 |
| Unit-based awards amortization and vesting | — | | | 473 | | | — | | | — | | | — | | | 473 | | | — | | | 473 | |
Comprehensive income from unconsolidated investment and other | — |
| | — |
| | — |
| | — |
| | 791 |
| | 791 |
| | — |
| | 791 |
| |
Balance at September 30, 2018 | 12,246 |
| | 319,673 |
| | 4,293 |
| | 66,816 |
| | (4,081 | ) | | 386,701 |
| | (2,935 | ) | | 383,766 |
| |
Comprehensive loss from unconsolidated investment and other | | Comprehensive loss from unconsolidated investment and other | — | | | — | | | — | | | — | | | (520) | | | (520) | | | — | | | (520) | |
Balance at September 30, 2019 | | Balance at September 30, 2019 | 12,261 | | | $ | 400,266 | | | $ | 5,909 | | | $ | 66,816 | | | $ | (3,802) | | | $ | 469,189 | | | $ | (2,935) | | | $ | 466,254 | |
| |
(1) | (1)Net income includes $7.5 million attributable to preferred unitholders that accumulated during the period, of which $7.35 million is allocated to the common unitholders and $0.15 million is allocated to the general partner. |
The accompanying notes are an integral part of these consolidated financial statements.
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| | | | | | | |
| Nine Months Ended September 30, |
(In thousands) | 2019 | | 2018 |
Cash flows from operating activities | | | |
Net income | $ | 94,240 |
| | $ | 90,989 |
|
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: | | | |
Depreciation, depletion and amortization | 11,746 |
| | 15,364 |
|
Distributions from unconsolidated investment | 25,480 |
| | 34,653 |
|
Equity earnings from unconsolidated investment | (36,833 | ) | | (34,986 | ) |
Gain on asset sales and disposals | (6,609 | ) | | (819 | ) |
Loss on extinguishment of debt | 29,282 |
| | — |
|
Income from discontinued operations | (206 | ) | | (3,721 | ) |
Asset impairments | 484 |
| | 242 |
|
Unit-based compensation expense | 1,842 |
| | 1,144 |
|
Amortization of debt issuance costs and other | 3,223 |
| | 4,021 |
|
Change in operating assets and liabilities: | | | |
Accounts receivable | 4,731 |
| | (6,283 | ) |
Accounts payable | (822 | ) | | 90 |
|
Accrued liabilities | (5,083 | ) | | (3,193 | ) |
Accrued interest | 19 |
| | (9,944 | ) |
Deferred revenue | (3,920 | ) | | 9,200 |
|
Other items, net | 351 |
| | 1,036 |
|
Net cash provided by operating activities of continuing operations | $ | 117,925 |
| | $ | 97,793 |
|
Net cash provided by (used in) operating activities of discontinued operations | (4 | ) | | 9,755 |
|
Net cash provided by operating activities | $ | 117,921 |
| | $ | 107,548 |
|
| | | |
Cash flows from investing activities | | | |
Distributions from unconsolidated investment in excess of cumulative earnings | $ | — |
| | $ | 2,097 |
|
Proceeds from asset sales and disposals | 6,611 |
| | 826 |
|
Return of long-term contract receivable | 1,351 |
| | 2,606 |
|
Net cash provided by investing activities of continuing operations | $ | 7,962 |
| | $ | 5,529 |
|
Net cash used in investing activities of discontinued operations | (556 | ) | | (9,343 | ) |
Net cash provided by (used in) investing activities | $ | 7,406 |
| | $ | (3,814 | ) |
| | | |
Cash flows from financing activities | | | |
Debt borrowings | $ | 300,000 |
| | $ | 35,000 |
|
Debt repayments | (442,747 | ) | | (55,720 | ) |
Redemption of preferred units paid-in-kind | — |
| | (8,844 | ) |
Distributions to common unitholders and general partner | (27,520 | ) | | (16,863 | ) |
Distributions to preferred unitholders | (22,500 | ) | | (22,765 | ) |
Contributions to discontinued operations | (560 | ) | | (2,275 | ) |
Debt issuance costs and other | (26,427 | ) | | (228 | ) |
Net cash used in financing activities of continuing operations | $ | (219,754 | ) | | $ | (71,695 | ) |
Net cash provided by financing activities of discontinued operations | 560 |
| | 1,521 |
|
Net cash used in financing activities | $ | (219,194 | ) | | $ | (70,174 | ) |
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| | | | | | | |
| Nine Months Ended September 30, |
(In thousands) | 2019 | | 2018 |
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (93,867 | ) | | $ | 33,560 |
|
| | | |
Cash, cash equivalents and restricted cash of continuing operations at beginning of period | $ | 206,030 |
| | $ | 26,980 |
|
Cash and cash equivalents of discontinued operations at beginning of period | — |
| | 2,847 |
|
Cash, cash equivalents and restricted cash at beginning of period | $ | 206,030 |
| | $ | 29,827 |
|
| | | |
| | | |
Cash, cash equivalents and restricted cash at end of period | $ | 112,163 |
| | $ | 63,387 |
|
Less: cash and cash equivalents of discontinued operations at end of period | — |
| | (4,780 | ) |
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 112,163 |
| | $ | 58,607 |
|
| | | |
Supplemental cash flow information: | | | |
Cash paid during the period for interest of continuing operations | $ | 36,270 |
| | $ | 58,153 |
|
which $7.35 million is allocated to the common unitholders and $0.15 million is allocated to the general partner.The accompanying notes are an integral part of these consolidated financial statements.
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| For the Nine Months Ended September 30, |
(In thousands) | 2020 | | 2019 |
Cash flows from operating activities | | | |
Net income (loss) | $ | (99,506) | | | $ | 94,240 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations: | | | |
Depreciation, depletion and amortization | 6,185 | | | 11,746 | |
Distributions from unconsolidated investment | 14,210 | | | 25,480 | |
Equity earnings from unconsolidated investment | (5,200) | | | (36,833) | |
Gain on asset sales and disposals | (465) | | | (6,609) | |
| | | |
Loss on extinguishment of debt | 0 | | | 29,282 | |
Income from discontinued operations | 0 | | | (206) | |
Asset impairments | 133,217 | | | 484 | |
Bad debt expense | 3,915 | | | 6,842 | |
Unit-based compensation expense | 2,566 | | | 1,842 | |
Amortization of debt issuance costs and other | 491 | | | 3,223 | |
Change in operating assets and liabilities: | | | |
Accounts receivable | 7,994 | | | (2,111) | |
Accounts payable | 193 | | | (822) | |
Accrued liabilities | (2,985) | | | (5,083) | |
Accrued interest | 6,957 | | | 19 | |
Deferred revenue | 10,194 | | | (3,920) | |
Other items, net | (3,353) | | | 351 | |
Net cash provided by operating activities of continuing operations | $ | 74,413 | | | $ | 117,925 | |
Net cash provided by (used in) operating activities of discontinued operations | 1,706 | | | (4) | |
Net cash provided by operating activities | $ | 76,119 | | | $ | 117,921 | |
| | | |
Cash flows from investing activities | | | |
| | | |
Proceeds from asset sales and disposals | $ | 507 | | | $ | 6,611 | |
Return of long-term contract receivable | 1,462 | | | 1,351 | |
Acquisition of non-controlling interest in BRP | (1,000) | | | 0 | |
| | | |
Net cash provided by investing activities of continuing operations | $ | 969 | | | $ | 7,962 | |
Net cash used in investing activities of discontinued operations | (66) | | | (556) | |
Net cash provided by investing activities | $ | 903 | | | $ | 7,406 | |
| | | |
| | | |
| | | |
Cash flows from financing activities | | | |
| | | |
| | | |
Debt borrowings | $ | 0 | | | $ | 300,000 | |
| | | |
Debt repayments | (25,841) | | | (442,747) | |
Distributions to common unitholders and general partner | (11,260) | | | (27,520) | |
Distributions to preferred unitholders | (22,613) | | | (22,500) | |
| | | |
| | | |
Contributions from (to) discontinued operations | 1,640 | | | (560) | |
Debt issuance costs and other | 0 | | | (26,427) | |
Net cash used in financing activities of continuing operations | $ | (58,074) | | | $ | (219,754) | |
Net cash provided by (used in) financing activities of discontinued operations | (1,640) | | | 560 | |
Net cash used in financing activities | $ | (59,714) | | | $ | (219,194) | |
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| For the Nine Months Ended September 30, |
(In thousands) | 2020 | | 2019 |
| | | |
Net increase (decrease) in cash and cash equivalents | $ | 17,308 | | | $ | (93,867) | |
| | | |
Cash and cash equivalents at beginning of period | 98,265 | | | 206,030 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Cash and cash equivalents at end of period | $ | 115,573 | | | $ | 112,163 | |
| | | |
Supplemental cash flow information: | | | |
Cash paid during the period for interest | $ | 22,712 | | | $ | 36,270 | |
| | | |
| | | |
Plant, equipment, mineral rights and other funded with accounts payable or accrued liabilities | $ | 947 | | | $ | 0 | |
| | | |
| | | |
The accompanying notes are an integral part of these consolidated financial statements.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Nature of Business
Natural Resource Partners L.P. (the "Partnership") engages principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and owns a non-controlling 49% interest in Ciner Wyoming LLC ("Ciner Wyoming"), a trona ore mining and soda ash production business. The Partnership is organized into two2 operating segments further described in Note 6.5. Segment Information. As used in these Notes to Consolidated Financial Statements, the terms "NRP," "we," "us" and "our" refer to Natural Resource Partners L.P. and its subsidiaries, unless otherwise stated or indicated by context. Principles of Consolidation and Reporting
The accompanying unaudited consolidated financial statementsConsolidated Financial Statements of the Partnership have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 20182019 and notes thereto included in the Partnership's Annual Report on Form 10-K, which was filed with the SEC on March 7, 2019. In management's opinion, all necessary adjustments to fairly present the Partnership's results of operations, financial position and cash flows for the periods presented have been made and all such adjustments were of a normal and recurring nature. Certain reclassifications have been made to prior period amounts on the Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows to conform with current period presentation. These reclassifications had no impact on previously reported total assets, total liabilities, partners' capital, net income or cash flows from operating, investing or financing activities.
Recasting of Certain Prior Period Information
As described in Note 3. Discontinued Operations, the Partnership reclassified prior period information for the assets and liabilities, operating results and cash flows of its construction aggregates business as discontinued operations in its consolidated financial statements for all periods presented.Restricted Cash
Restricted cash at September 30, 2019 and December 31, 2018 represents the remaining net proceeds from the sale of the Partnership's construction aggregates business and other asset sales and disposals that is required to be used to repay debt, make acquisitions or make capital expenditures per the terms of the Partnership's and Opco's debt agreements. In the first nine months of 2019, the Partnership used $97.1 million of restricted cash to repay principal amounts on Opco's private placement senior notes (the "Opco Senior Notes") and it intends to use the remaining $12.5 million of restricted cash to repay a portion of the remaining principal payments on the Opco Senior Notes in 2019.February 27, 2020.
Recently Adopted Accounting Standards
LeasesCredit Losses
On January 1, 2019, NRP2020, the Partnership adopted Accounting Standards Codification (ASC) 842, Leases,ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), and all the related amendments (the “new lease standard” and "ASC 842"("the new credit loss standard") and. The Partnership recognized assets and liabilities on its Consolidated Balance Sheet fora $3.9 million cumulative effect of adoption in the present valueopening balance of the rights and obligations created by all leases with terms of more than 12 months. This standard does not apply to leases that explore for or use minerals, oil, natural gas and similar non-regenerative resources, including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained. The guidance also required disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. The guidance was adopted by NRPpartners' capital on January 1, 2019 using2020 as a modified retrospective approach.
The Partnership is a lessee in one lease that is accounted for as an operating lease under the new lease standard, andresult of the adoption of the new
lease standard did not have a material impact to the Partnership's consolidated financial statements. For leasecredit loss standard. See Note 15. Credit Losses for more information.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
agreements entered into or reassessed after the adoption of ASC 842, the Partnership elected to not combine lease and non-lease components. See Note 17. Leases for more information.Recently Issued Accounting Standards
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The new standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new standard replaces today's "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The guidance is effective for annual and interim periods beginning after December 15, 2019 and is to be adopted using a modified retrospective approach. The Partnership is continuing to evaluate the provisions of this guidance on its consolidated financial statements, but based on its analysis to date, the Partnership does not expect this standard to have a material effect on its consolidated financial statements.
2. Revenues from Contracts with Customers
The following table representspresents the Partnership's Coal Royalty and Other segment revenues by major source:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
Coal royalty revenues | | $ | 24,727 |
| | $ | 30,709 |
| | $ | 87,561 |
| | $ | 96,473 |
|
Production lease minimum revenues | | 2,752 |
| | 1,769 |
| | 21,331 |
| | 6,310 |
|
Minimum lease straight-line revenues | | 3,982 |
| | 567 |
| | 11,152 |
| | 1,739 |
|
Property tax revenues | | 1,606 |
| | 1,263 |
| | 4,416 |
| | 3,968 |
|
Wheelage revenues | | 1,675 |
| | 1,572 |
| | 5,035 |
| | 5,155 |
|
Coal overriding royalty revenues | | 2,189 |
| | 3,918 |
| | 10,163 |
| | 10,492 |
|
Lease amendment revenues | | 1,535 |
| | — |
| | 6,720 |
| | — |
|
Aggregates royalty revenues | | 954 |
| | 888 |
| | 3,655 |
| | 3,551 |
|
Oil and gas royalty revenues | | 374 |
| | 1,427 |
| | 2,575 |
| | 5,679 |
|
Other revenues | | 125 |
| | 405 |
| | 1,429 |
| | 1,545 |
|
Coal royalty and other revenues (1) | | $ | 39,919 |
| | $ | 42,518 |
| | $ | 154,037 |
| | $ | 134,912 |
|
Transportation and processing services revenues (2) | | 3,865 |
| | 6,853 |
| | 14,740 |
| | 17,238 |
|
Total Coal Royalty and Other segment revenues | | $ | 43,784 |
| | $ | 49,371 |
| | $ | 168,777 |
| | $ | 152,150 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands) | | 2020 | | 2019 | | 2020 | | 2019 |
Coal royalty revenues (1) | | $ | 10,610 | | | $ | 24,727 | | | $ | 40,559 | | | $ | 87,561 | |
Production lease minimum revenues (1) | | 4,267 | | | 2,752 | | | 13,554 | | | 21,331 | |
Minimum lease straight-line revenues (1) | | 3,553 | | | 3,982 | | | 12,349 | | | 11,152 | |
Property tax revenues | | 1,896 | | | 1,606 | | | 4,256 | | | 4,416 | |
Wheelage revenues | | 1,680 | | | 1,675 | | | 5,468 | | | 5,035 | |
Coal overriding royalty revenues | | 1,314 | | | 2,189 | | | 3,319 | | | 10,163 | |
Lease amendment revenues | | 858 | | | 1,535 | | | 2,591 | | | 6,720 | |
Aggregates royalty revenues | | 221 | | | 954 | | | 1,068 | | | 3,655 | |
Oil and gas royalty revenues | | 1,078 | | | 374 | | | 4,923 | | | 2,575 | |
Other revenues | | 263 | | | 125 | | | 752 | | | 1,429 | |
Coal royalty and other revenues | | $ | 25,740 | | | $ | 39,919 | | | $ | 88,839 | | | $ | 154,037 | |
Transportation and processing services revenues (2) | | 2,204 | | | 3,865 | | | 6,651 | | | 14,740 | |
Total coal royalty and other segment revenues | | $ | 27,944 | | | $ | 43,784 | | | $ | 95,490 | | | $ | 168,777 | |
| |
(1) | Coal royalty and other revenues from contracts with customers as defined under ASC 606. |
| |
(2) | Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $1.7 million and $3.6 million for the three months ended September 30, 2019 and 2018, respectively, and $7.3 million and $9.6 million for the nine months ended September 30, 2019 and 2018, respectively. The remaining transportation and processing services revenues of $2.2 million and $3.3 million for the three months ended September 30, 2019, and 2018, respectively, and $7.5 million and $7.6 million for the nine months ended September 30, 2019 and 2018, respectively, related to other NRP-owned infrastructure leased to and operated by third party operators accounted for under other guidance. See Note 16. Financing Transaction and Note 17. Leases for more information. |
(1)Effective January 1, 2020, certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications to certain leases that fixed consideration paid to the Partnership over a two year period.
Table(2)Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $1.2 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively and $3.7 million and $7.3 million for the nine months ended September 30, 2020 and 2019, respectively. The remaining transportation and processing services revenues of Contents$1.0 million and $2.2 million for the three months ended September 30, 2020 and 2019, respectively, and $2.9 million and $7.5 million for the nine months ended September 30, 2020 and 2019, respectively, related to other NRP-owned infrastructure leased to and operated by third-party operators accounted for under other guidance. See Note 14. Financing TransactionNATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
for more information.
The following table details the Partnership's Coal Royalty and Other segment receivables and liabilities resulting from contracts with customers:
| | | | September 30, | | December 31, | | September 30, | | December 31, |
(In thousands) | | 2019 | | 2018 | (In thousands) | | 2020 | | 2019 |
Receivables | | | | | Receivables | | | | |
Accounts receivable, net | | $ | 24,758 |
| | $ | 29,001 |
| Accounts receivable, net | | $ | 15,371 | | | $ | 27,915 | |
Prepaid expenses and other (1) | | 2,852 |
| | 2,483 |
| |
Other current assets, net (1) | | Other current assets, net (1) | | 3,696 | | | 90 | |
Other long-term assets, net (2) | | Other long-term assets, net (2) | | 691 | | | 0 | |
| | | | | |
Contract liabilities | | | | | Contract liabilities | |
Current portion of deferred revenue | | $ | 5,047 |
| | $ | 3,509 |
| Current portion of deferred revenue | | $ | 11,035 | | | $ | 4,608 | |
Deferred revenue | | 43,587 |
| | 49,044 |
| Deferred revenue | | 50,980 | | | 47,213 | |
(1)Other current assets, net includes short-term notes receivables from contracts with customers.
| |
(1) | Prepaid expenses and other includes notes receivable from contracts with customers. |
(2)Other long-term assets, net includes long-term notes receivables from contracts with customers.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table shows the activity related to the Partnership's Coal Royalty and Other segment deferred revenue:
| | | | | | | | | | | | | | | |
| | | For the Nine Months Ended September 30, |
(In thousands) | | | | | 2020 | | 2019 |
| | | | | | | |
| | | | | | | |
Balance at beginning of period (current and non-current) | | | | | $ | 51,821 | | | $ | 52,553 | |
Increase due to minimums and lease amendment fees | | | | | 38,005 | | | 37,315 | |
Recognition of previously deferred revenue | | | | | (27,811) | | | (41,234) | |
Balance at end of period (current and non-current) | | | | | $ | 62,015 | | | $ | 48,634 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
(In thousands) | 2019 | | 2018 |
Balance at end of prior period (current and non-current) | $ | 52,553 |
| | $ | 100,605 |
|
Cumulative adjustment for change in accounting principle | — |
| | (65,591 | ) |
Balance at beginning of period (current and non-current) | $ | 52,553 |
| | $ | 35,014 |
|
Increase due to minimums and lease amendment fees | 37,315 |
| | 23,534 |
|
Recognition of previously deferred revenue | (41,234 | ) | | (16,260 | ) |
Balance at end of period (current and non-current) | $ | 48,634 |
| | $ | 42,288 |
|
The Partnership's non-cancelable annual minimum payments due under the lease terms of its coal and aggregates royalty and overriding royalty leases are as follows as of September 30, 2020 (in thousands):
|
| | | | | | |
Lease Term (1) | | Weighted Average Remaining Years as of September 30, 2019 | | Annual Minimum Payments (2) |
0 - 5 years | | 2.2 | | $ | 12,439 |
|
5 - 10 years | | 6.4 | | 9,426 |
|
10+ years | | 12.1 | | 46,737 |
|
Total | | 9.6 | | $ | 68,602 |
|
| | | | | | | | | | | | | | |
Lease Term (1) | | Weighted Average Remaining Years | | Annual Minimum Payments (2) |
0 - 5 years | | 3.7 | | $ | 14,792 | |
5 - 10 years | | 5.7 | | 7,478 | |
10+ years | | 13.5 | | 30,922 | |
Total | | 9.3 | | $ | 53,192 | |
| |
(1) | Lease term does not include renewal periods. |
| |
(2) | Annual minimum payments do not include $5.0 million from a coal infrastructure lease that is accounted for as a financing transaction. See Note 16. Financing Transaction for additional information. |
(1)Lease term does not include renewal periods.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
3. Discontinued Operations
In December 2018, the Partnership sold VantaCore Partners LLC, its construction aggregates business,annual fixed consideration owed to NRP in 2020 and in July 2016, the Partnership sold its non-operated oil and gas working interest assets. The Partnership's exit2021 resulting from both its construction aggregates business and non-operated oil and gas working interest business represented strategic shifts to reduce debt and focus on its Coal Royalty and Other and Soda Ash business segments. As a result, the Partnership classified the assets and liabilities, operating results and cash flows of these businesses as discontinued operations in its Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for all periods presented.
The following table presents the carrying amounts of the Partnership's assets and liabilities of discontinued operations in the Consolidated Balance Sheets:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2019 | | December 31, 2018 |
(In thousands) | Construction Aggregates | | NRP Oil and Gas | | Total | | Construction Aggregates | | NRP Oil and Gas | | Total |
ASSETS | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
Accounts receivable, net | $ | — |
| | $ | 988 |
| | $ | 988 |
| | $ | 5 |
| | $ | 988 |
| | $ | 993 |
|
Total assets of discontinued operations | $ | — |
| | $ | 988 |
| | $ | 988 |
| | $ | 5 |
| | $ | 988 |
| | $ | 993 |
|
LIABILITIES | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | |
Accounts payable | $ | 42 |
| | $ | — |
| | $ | 42 |
| | $ | 181 |
| | $ | — |
| | $ | 181 |
|
Accrued liabilities | 132 |
| | — |
| | 132 |
| | 766 |
| | — |
| | 766 |
|
Total liabilities of discontinued operations | $ | 174 |
| | $ | — |
| | $ | 174 |
| | $ | 947 |
| | $ | — |
| | $ | 947 |
|
The following tables present summarized financial results of the Partnership's discontinued operations in the Consolidated Statements of Comprehensive Income:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2019 | | 2018 |
(In thousands) | Construction Aggregates | | NRP Oil and Gas | | Total | | Construction Aggregates | | NRP Oil and Gas | | Total |
Revenues and other income | | | | | | | | | | | |
Construction aggregates | $ | — |
| | $ | — |
| | $ | — |
| | $ | 30,398 |
| | $ | — |
| | $ | 30,398 |
|
Road construction and asphalt paving services | — |
| | — |
| | — |
| | 6,250 |
| | — |
| | 6,250 |
|
Oil and gas | — |
| | 2 |
| | 2 |
| | — |
| | (1 | ) | | (1 | ) |
Gain on asset sales and disposals | 5 |
| | — |
| | 5 |
| | 163 |
| | — |
| | 163 |
|
Total revenues and other income | $ | 5 |
| | $ | 2 |
| | $ | 7 |
| | $ | 36,811 |
| | $ | (1 | ) | | $ | 36,810 |
|
Operating expenses | | | | | | | | | | | |
Operating and maintenance expenses | $ | — |
| | $ | — |
| | $ | — |
| | $ | 30,758 |
| | $ | 23 |
| | $ | 30,781 |
|
Depreciation, depletion and amortization | — |
| | — |
| | — |
| | 3,333 |
| | — |
| | 3,333 |
|
Total operating expenses | $ | — |
| | $ | — |
| | $ | — |
| | $ | 34,091 |
| | $ | 23 |
| | $ | 34,114 |
|
Interest expense | — |
| | — |
| | — |
| | (8 | ) | | — |
| | (8 | ) |
Income (loss) from discontinued operations | $ | 5 |
| | $ | 2 |
| | $ | 7 |
| | $ | 2,712 |
| | $ | (24 | ) | | $ | 2,688 |
|
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2019 | | 2018 |
(In thousands) | Construction Aggregates | | NRP Oil and Gas | | Total | | Construction Aggregates | | NRP Oil and Gas | | Total |
Revenues and other income | | | | | | | | | | | |
Construction aggregates | $ | — |
| | $ | — |
| | $ | — |
| | $ | 91,055 |
| | $ | — |
| | $ | 91,055 |
|
Road construction and asphalt paving services | — |
| | — |
| | — |
| | 13,154 |
| | — |
| | 13,154 |
|
Oil and gas | — |
| | 2 |
| | 2 |
| | — |
| | (3 | ) | | (3 | ) |
Gain on asset sales and disposals | 243 |
| | — |
| | 243 |
| | 214 |
| | — |
| | 214 |
|
Total revenues and other income | $ | 243 |
| | $ | 2 |
| | $ | 245 |
| | $ | 104,423 |
| | $ | (3 | ) | | $ | 104,420 |
|
Operating expenses | | | | | | | | | | | |
Operating and maintenance expenses | $ | 27 |
| | $ | 12 |
| | $ | 39 |
| | $ | 91,225 |
| | $ | 69 |
| | $ | 91,294 |
|
Depreciation, depletion and amortization | — |
| | — |
| | — |
| | 9,377 |
| | — |
| | 9,377 |
|
Total operating expenses | $ | 27 |
| | $ | 12 |
| | $ | 39 |
| | $ | 100,602 |
| | $ | 69 |
| | $ | 100,671 |
|
Interest expense | — |
| | — |
| | — |
| | (28 | ) | | — |
| | (28 | ) |
Income (loss) from discontinued operations | $ | 216 |
| | $ | (10 | ) | | $ | 206 |
| | $ | 3,793 |
| | $ | (72 | ) | | $ | 3,721 |
|
Capital expenditures related to the Partnership's discontinued operations were $9.7 millioncontract modifications entered into during the
nine months ended September 30, 2018.second quarter of 2020. Additionally, $5.0 million of this $40.0 million annual fixed consideration amount relates to a coal infrastructure lease that is accounted for as a financing transaction. See Note 14. Financing Transaction for more information.4.
3. Common and Preferred Unit Distributions
The Partnership makes cash distributions to common and preferred unitholders on a quarterly basis, subject to approval by the Board of Directors of GP Natural Resource Partners LLC (the "Board of Directors"). NRP recognizes both common unit and preferred unit distributions on the date the distribution is declared.
Distributions made on the common units and the general partner's general partner ("GP") interest are made on a pro-rata basis in accordance with their relative percentage interests in the Partnership. The general partner is entitled to receive 2% of such distributions.
Income (loss) available to common unitholders and the general partner is reduced by preferred unit distributions that accumulated during the period. NRP reduced net income attributable(loss) available to common unitholders and the general partner by $7.5 million during the three months ended September 30, 2020 and 2019, and 2018$22.6 million and $22.5 million during the nine months ended September 30, 2020 and 2019, and 2018respectively, as a result of accumulated preferred unit distributions earned during the period. DuringIn May 2020, the Partnership paid in kind one-half of the preferred unit distribution related to the three months ended March 31, 2018,2020. In June 2020, the Partnership redeemed all of the outstanding PIK Units, which resultedpreferred units paid in an $8.8 million cash payment during the period. This $8.8 million cash payment is not included in the table below.kind.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table shows the cash distributions declared and paid to common and preferred unitholders during the nine months ended September 30, 20192020 and 2018,2019, respectively:
| | | | | Common Units | | Preferred Units | | Common Units | | Preferred Units |
Date Paid | | Period Covered by Distribution | | Distribution per Unit | | Total Distribution (1) (In thousands) | | Distribution per Unit | | Total Distribution (In thousands) | Date Paid | | Period Covered by Distribution | | Distribution per Unit | | Total Distribution (1) (In thousands) | | Distribution per Unit | | Total Distribution (In thousands) |
2020 | | 2020 | | | | | | | | | | |
February 2020 | | February 2020 | | October 1 - December 31, 2019 | | $ | 0.45 | | | $ | 5,630 | | | $ | 30.00 | | | $ | 7,500 | |
May 2020 | | May 2020 | | January 1 - March 31, 2020 | | 0 | | | 0 | | | 15.00 | | | 3,750 | |
June 2020 (2) | | June 2020 (2) | | January 1 - March 31, 2020 | | — | | | — | | | 15.45 | | | 3,863 | |
August 2020 | | August 2020 | | April 1 - June 30, 2020 | | 0.45 | | | 5,630 | | | 30.00 | | | 7,500 | |
| 2019 | | | | | | | | | 2019 | |
February 2019 | | October 1 - December 31, 2018 | | $ | 0.45 |
| | $ | 5,625 |
| | $ | 30.00 |
| | $ | 7,500 |
| February 2019 | | October 1 - December 31, 2018 | | $ | 0.45 | | | $ | 5,625 | | | $ | 30.00 | | | $ | 7,500 | |
May 2019 | | January 1 - March 31, 2019 | | 0.45 |
| | 5,630 |
| | 30.00 |
| | 7,500 |
| May 2019 | | January 1 - March 31, 2019 | | 0.45 | | | 5,630 | | | 30.00 | | | 7,500 | |
May 2019 (2) | | Special Distribution | | 0.85 |
| | 10,635 |
| | — |
| | — |
| |
May 2019 (3) | | May 2019 (3) | | Special Distribution | | 0.85 | | | 10,635 | | | — | | | — | |
August 2019 | | April 1 - June 30, 2019 | | 0.45 |
| | 5,630 |
| | 30.00 |
| | 7,500 |
| August 2019 | | April 1 - June 30, 2019 | | 0.45 | | | 5,630 | | | 30.00 | | | 7,500 | |
| | | | | | | | | |
2018 | | | | | | | | | |
February 2018 | | October 1 - December 31, 2017 | | $ | 0.45 |
| | $ | 5,617 |
| | $ | 30.00 |
| | $ | 7,765 |
| |
May 2018 | | January 1 - March 31, 2018 | | 0.45 |
| | 5,623 |
| | 30.00 |
| | 7,500 |
| |
August 2018 | | April 1 - June 30, 2018 | | 0.45 |
| | 5,623 |
| | 30.00 |
| | 7,500 |
| |
| |
(1) | Totals include the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest. |
| |
(2) | The special distribution of $0.85 per common unit was made to cover the common unitholders’ tax liability resulting from the sale of NRP’s construction aggregates business in December 2018. |
(1)Total common unit distribution includes the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest. 5.(2)Redemption of preferred units paid in kind plus accrued interest.
(3)Special distribution was made to cover the common unitholders’ tax liability resulting from the sale of NRP’s construction aggregates business in December 2018.
4. Net Income (Loss) Per Common Unit
Basic net income (loss) per common unit is computed by dividing net income (loss), after considering income attributable to non-controlling interest, preferred unitholders and the general partner’s general partner interest, by the weighted average number of common units outstanding. Diluted net income (loss) per common unit includes the effect of NRP's preferred units, warrants, and unvested unit-based awards if the inclusion of these items is dilutive.
The dilutive effect of the preferred units is calculated using the if-converted method. Under the if-converted method, the preferred units are assumed to be converted at the beginning of the period, and the resulting common units are included in the denominator of the diluted net income (loss) per unit calculation for the period being presented. Distributions declared in the period and undeclared distributions on the preferred units that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. The calculation of diluted net income (loss) per common unit for the three and nine months ended September 30, 2020 does not include the assumed conversion of the preferred units because the impact would have been anti-dilutive. The calculation of diluted net income per common unit for the three and nine months ended September 30, 2019 includes the assumed conversion of the preferred units.
The dilutive effect of the warrants is calculated using the treasury stock method, which assumes that the proceeds from the exercise of these instruments are used to purchase common units at the average market price for the period. The calculation of diluted net income (loss) per common unit for the three and nine months ended September 30, 2020 did not include the net settlement of warrants to purchase 1.75 million common units at a strike price of $22.81 or the net settlement of warrants to purchase 2.25 million common units with a strike price of $34.00 because the impact would have been anti-dilutive. The calculation of the dilutive effect of the warrants for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2018 includes the net settlement of warrants to purchase 1.75 million common units with a strike price of $22.81 but did not include the net settlement of warrants to purchase 2.25 million common units with a strike price of $34.00 because the impact would have been anti-dilutive. The calculation of diluted net income per common unitthe dilutive effect of the warrants for the nine months ended September 30, 2019 includes both the net settlement of warrants to purchase 1.75 million common units atwith a strike price of $22.81 and the net settlement of warrants to purchase 2.25 million common units with a strike price of $34.00.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table reconcilestables reconcile the numerator and denominator of the basic and diluted net income (loss) per common unit computations and calculates basic and diluted net income (loss) per common unit:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands, except per unit data) | 2019 | | 2018 | | 2019 | | 2018 |
Allocation of net income | | | | | | | |
Net income from continuing operations | $ | 39,163 |
| | $ | 25,853 |
| | $ | 94,034 |
| | $ | 87,268 |
|
Add (less): net loss (income) attributable to non-controlling interest | — |
| | 359 |
| | — |
| | (510 | ) |
Less: income attributable to preferred unitholders | (7,500 | ) | | (7,500 | ) | | (22,500 | ) | | (22,500 | ) |
Net income from continuing operations attributable to common unitholders and general partner | $ | 31,663 |
| | $ | 18,712 |
| | $ | 71,534 |
| | $ | 64,258 |
|
Less: net income from continuing operations attributable to the general partner | (634 | ) | | (374 | ) | | (1,431 | ) | | (1,285 | ) |
Net income from continuing operations attributable to common unitholders | $ | 31,029 |
|
| $ | 18,338 |
|
| $ | 70,103 |
|
| $ | 62,973 |
|
| | | | | | | |
Net income from discontinued operations | $ | 7 |
| | $ | 2,688 |
| | $ | 206 |
| | $ | 3,721 |
|
Less: net income from discontinued operations attributable to the general partner | 0 |
| | (54 | ) | | (4 | ) | | (75 | ) |
Net income from discontinued operations attributable to common unitholders | $ | 7 |
|
| $ | 2,634 |
|
| $ | 202 |
| | $ | 3,646 |
|
| | | | | | | |
Net income | $ | 39,170 |
|
| $ | 28,541 |
|
| $ | 94,240 |
| | $ | 90,989 |
|
Add (less): net loss (income) attributable to non-controlling interest | — |
| | 359 |
| | — |
| | (510 | ) |
Less: income attributable to preferred unitholders | (7,500 | ) | | (7,500 | ) | | (22,500 | ) | | (22,500 | ) |
Net income attributable to common unitholders and general partner | $ | 31,670 |
| | $ | 21,400 |
| | $ | 71,740 |
| | $ | 67,979 |
|
Less: net income attributable to the general partner | (634 | ) |
| (428 | ) |
| (1,435 | ) | | (1,360 | ) |
Net income attributable to common unitholders | $ | 31,036 |
|
| $ | 20,972 |
|
| $ | 70,305 |
|
| $ | 66,619 |
|
| | | | | | | |
Basic net income per common unit | | | | | | | |
Weighted average common units—basic | 12,261 |
| | 12,246 |
| | 12,259 |
| | 12,243 |
|
Basic net income from continuing operations per common unit | $ | 2.53 |
|
| $ | 1.50 |
|
| $ | 5.72 |
| | $ | 5.14 |
|
Basic net income from discontinued operations per common unit | $ | 0.00 |
|
| $ | 0.22 |
|
| $ | 0.02 |
| | $ | 0.30 |
|
Basic net income per common unit | $ | 2.53 |
|
| $ | 1.71 |
|
| $ | 5.73 |
| | $ | 5.44 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands, except per unit data) | 2020 | | 2019 | | 2020 | | 2019 |
Allocation of net income (loss) | | | | | | | |
Net income (loss) from continuing operations | $ | 7,216 | | | $ | 39,163 | | | $ | (99,506) | | | $ | 94,034 | |
| | | | | | | |
Less: income attributable to preferred unitholders | (7,500) | | | (7,500) | | | (22,613) | | | (22,500) | |
Net income (loss) from continuing operations attributable to common unitholders and general partner | $ | (284) | | | $ | 31,663 | | | $ | (122,119) | | | $ | 71,534 | |
Add (less): net loss (income) from continuing operations attributable to the general partner | 5 | | | (634) | | | 2,442 | | | (1,431) | |
Net income (loss) from continuing operations attributable to common unitholders | $ | (279) | | | $ | 31,029 | | | $ | (119,677) | | | $ | 70,103 | |
| | | | | | | |
Net income from discontinued operations | $ | 0 | | | $ | 7 | | | $ | 0 | | | $ | 206 | |
Less: net income from discontinued operations attributable to the general partner | 0 | | | 0 | | | 0 | | | (4) | |
Net income from discontinued operations attributable to common unitholders | $ | 0 | | | $ | 7 | | | $ | 0 | | | $ | 202 | |
| | | | | | | |
Net income (loss) | $ | 7,216 | | | $ | 39,170 | | | $ | (99,506) | | | $ | 94,240 | |
| | | | | | | |
Less: income attributable to preferred unitholders | (7,500) | | | (7,500) | | | (22,613) | | | (22,500) | |
Net income (loss) attributable to common unitholders and general partner | $ | (284) | | | $ | 31,670 | | | $ | (122,119) | | | $ | 71,740 | |
Add (less): net loss (income) attributable to the general partner | 5 | | | (634) | | | 2,442 | | | (1,435) | |
Net income (loss) attributable to common unitholders | $ | (279) | | | $ | 31,036 | | | $ | (119,677) | | | $ | 70,305 | |
| | | | | | | |
Basic net income (loss) per common unit | | | | | | | |
Weighted average common units—basic | 12,261 | | | 12,261 | | | 12,261 | | | 12,259 | |
Basic net income (loss) from continuing operations per common unit | $ | (0.02) | | | $ | 2.53 | | | $ | (9.76) | | | $ | 5.72 | |
Basic net income from discontinued operations per common unit | $ | 0.00 | | | $ | 0.00 | | | $ | 0.00 | | | $ | 0.02 | |
Basic net income (loss) per common unit | $ | (0.02) | | | $ | 2.53 | | | $ | (9.76) | | | $ | 5.73 | |
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands, except per unit data) | 2020 | | 2019 | | 2020 | | 2019 |
Diluted income (loss) per common unit | | | | | | | |
Weighted average common units—basic | 12,261 | | | 12,261 | | | 12,261 | | | 12,259 | |
Plus: dilutive effect of preferred units | 0 | | | 10,494 | | | 0 | | | 10,494 | |
Plus: dilutive effect of warrants | 0 | | | 389 | | | 0 | | | 800 | |
Plus: dilutive effect of unvested unit-based awards | — | | | 13 | | | — | | | 31 | |
Weighted average common units—diluted | 12,261 | | | 23,157 | | | 12,261 | | | 23,584 | |
| | | | | | | |
Net income (loss) from continuing operations | $ | 7,216 | | | $ | 39,163 | | | $ | (99,506) | | | $ | 94,034 | |
Less: income attributable to preferred unitholders | (7,500) | | | 0 | | | (22,613) | | | 0 | |
Diluted net income (loss) from continuing operations attributable to common unitholders and general partner | $ | (284) | | | $ | 39,163 | | | $ | (122,119) | | | $ | 94,034 | |
Add (less): diluted net loss (income) from continuing operations attributable to the general partner | 5 | | | (784) | | | 2,442 | | | (1,881) | |
Diluted net income (loss) from continuing operations attributable to common unitholders | $ | (279) | | | $ | 38,379 | | | $ | (119,677) | | | $ | 92,153 | |
| | | | | | | |
Diluted net income from discontinued operations attributable to common unitholders | $ | 0 | | | $ | 7 | | | $ | 0 | | | $ | 202 | |
| | | | | | | |
Net income (loss) | $ | 7,216 | | | $ | 39,170 | | | $ | (99,506) | | | $ | 94,240 | |
Less: income attributable to preferred unitholders | (7,500) | | | 0 | | | (22,613) | | | 0 | |
Diluted net income (loss) attributable to common unitholders and general partner | $ | (284) | | | $ | 39,170 | | | $ | (122,119) | | | $ | 94,240 | |
Add (less): diluted net loss (income) attributable to the general partner | 5 | | | (784) | | | 2,442 | | | (1,885) | |
Diluted net income (loss) attributable to common unitholders | $ | (279) | | | $ | 38,386 | | | $ | (119,677) | | | $ | 92,355 | |
| | | | | | | |
Diluted net income (loss) from continuing operations per common unit | $ | (0.02) | | | $ | 1.66 | | | $ | (9.76) | | | $ | 3.91 | |
Diluted net income from discontinued operations per common unit | $ | 0.00 | | | $ | 0.00 | | | $ | 0.00 | | | $ | 0.01 | |
Diluted net income (loss) per common unit | $ | (0.02) | | | $ | 1.66 | | | $ | (9.76) | | | $ | 3.92 | |
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands, except per unit data) | 2019 | | 2018 | | 2019 | | 2018 |
Diluted income per common unit | | | | �� | | | |
Weighted average common units—basic | 12,261 |
| | 12,246 |
| | 12,259 |
| | 12,243 |
|
Plus: dilutive effect of Preferred Units | 10,494 |
| | 9,124 |
| | 10,494 |
| | 9,124 |
|
Plus: dilutive effect of Warrants | 389 |
| | 470 |
| | 800 |
| | 474 |
|
Plus: dilutive effect of unvested unit-based awards | 13 |
| | — |
| | 31 |
| | — |
|
Weighted average common units—diluted | 23,157 |
|
| 21,840 |
|
| 23,584 |
| | 21,841 |
|
| | | | | | | |
Net income from continuing operations | $ | 39,163 |
|
| $ | 25,853 |
|
| $ | 94,034 |
| | $ | 87,268 |
|
Add (less): net loss (income) attributable to non-controlling interest | — |
| | 359 |
| | — |
| | (510 | ) |
Diluted net income from continuing operations attributable to common unitholders and general partner | $ | 39,163 |
| | $ | 26,212 |
| | $ | 94,034 |
| | $ | 86,758 |
|
Less: diluted net income from continuing operations attributable to the general partner | (784 | ) | | (524 | ) | | (1,881 | ) | | (1,735 | ) |
Diluted net income from continuing operations attributable to common unitholders | $ | 38,379 |
|
| $ | 25,688 |
|
| $ | 92,153 |
| | $ | 85,023 |
|
| | | | | | | |
Diluted net income from discontinued operations attributable to common unitholders | $ | 7 |
|
| $ | 2,634 |
|
| $ | 202 |
| | $ | 3,646 |
|
| | | | | | | |
Net income | $ | 39,170 |
|
| $ | 28,541 |
|
| $ | 94,240 |
| | $ | 90,989 |
|
Add (less): net loss (income) attributable to non-controlling interest | — |
| | 359 |
| | — |
| | (510 | ) |
Diluted net income attributable to common unitholders and general partner | $ | 39,170 |
| | $ | 28,900 |
| | $ | 94,240 |
| | $ | 90,479 |
|
Less: diluted net income attributable to the general partner | (784 | ) | | (578 | ) | | (1,885 | ) | | (1,810 | ) |
Diluted net income attributable to common unitholders | $ | 38,386 |
|
| $ | 28,322 |
|
| $ | 92,355 |
| | $ | 88,669 |
|
| | | | | | | |
Diluted net income from continuing operations per common unit | $ | 1.66 |
|
| $ | 1.18 |
|
| $ | 3.91 |
| | $ | 3.89 |
|
Diluted net income from discontinued operations per common unit | $ | 0.00 |
|
| $ | 0.12 |
|
| $ | 0.01 |
| | $ | 0.17 |
|
Diluted net income per common unit | $ | 1.66 |
|
| $ | 1.30 |
|
| $ | 3.92 |
| | $ | 4.06 |
|
6.5. Segment Information
The Partnership's segments are strategic business units that offer distinct products and services to different customers in different geographies within the U.S. and that are managed accordingly. NRP has the following two2 operating segments:
Coal Royalty and Other—consists primarily of coal royalty properties and coal-related transportation and processing assets. Other assets include industrial mineral royalty properties, aggregates royalty properties, oil and gas royalty properties and timber. The Partnership's coal reserves are primarily located in Appalachia, the Illinois Basin and the Northern Powder River Basin in the United States. The Partnership's industrial minerals and aggregates properties are located in a number ofvarious states across the United States. The Partnership's oil and gas royalty assets are primarily located in Louisiana.Louisiana and its timber assets are primarily located in West Virginia.
Soda Ash—consists of the Partnership's 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining operation and soda ash production business locatedrefinery in the Green River Basin of Wyoming. Ciner Resources LP, the Partnership's operating partner, mines the trona, processes it into soda ash, and distributes the soda ash both domestically and internationally to the glass and chemicals industries.
In December 2018, the Partnership sold its construction aggregates business which enabled it to further reduce debt and focus on its Coal Royalty and Other and Soda Ash business segments. See Note 3. Discontinued Operations for more information.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Direct segment costs and certain other costs incurred at the corporate level that are identifiable and that benefit the Partnership's segments are allocated to the operating segments accordingly. These allocated costs generally include salaries and benefits, insurance, property taxes, legal, royalty, information technology and shared facilities services and are included in operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss).
Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment and are included in general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss).
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table summarizes certain financial information for each of the Partnership's business segments:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
(In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
For the Three Months Ended September 30, 2020 | | | | | | | | |
Revenues | | $ | 27,944 | | | $ | 1,986 | | | $ | 0 | | | $ | 29,930 | |
| | | | | | | | |
| | | | | | | | |
Operating and maintenance expenses | | 5,685 | | | 96 | | | 0 | | | 5,781 | |
Depreciation, depletion and amortization | | 2,111 | | | 0 | | | 0 | | | 2,111 | |
General and administrative expenses | | 0 | | | 0 | | | 3,634 | | | 3,634 | |
Asset impairments | | 934 | | | 0 | | | 0 | | | 934 | |
Other expenses, net | | 41 | | | 0 | | | 10,213 | | | 10,254 | |
Net income (loss) from continuing operations | | 19,173 | | | 1,890 | | | (13,847) | | | 7,216 | |
| | | | | | | | |
| | | | | | | | |
For the Three Months Ended September 30, 2019 | | | | | | | | |
Revenues | | $ | 43,784 | | | $ | 13,818 | | | $ | 0 | | | $ | 57,602 | |
| | | | | | | | |
Gain on asset sales and disposals | | 6,107 | | | 0 | | | 0 | | | 6,107 | |
Operating and maintenance expenses | | 5,771 | | | 223 | | | 0 | | | 5,994 | |
Depreciation, depletion and amortization | | 3,384 | | | 0 | | | 0 | | | 3,384 | |
General and administrative expenses | | 0 | | | 0 | | | 4,253 | | | 4,253 | |
Asset impairments | | 484 | | | 0 | | | 0 | | | 484 | |
Other expenses, net | | 0 | | | 0 | | | 10,431 | | | 10,431 | |
Net income (loss) from continuing operations | | 40,252 | | | 13,595 | | | (14,684) | | | 39,163 | |
Income from discontinued operations | | 0 | | | 0 | | | 0 | | | 7 | |
| | | | | | | | |
For the Nine Months Ended September 30, 2020 | | | | | | | | |
Revenues | | $ | 95,490 | | | $ | 5,200 | | | $ | 0 | | | $ | 100,690 | |
| | | | | | | | |
Gain on asset sales and disposals | | 465 | | | 0 | | | 0 | | | 465 | |
Operating and maintenance expenses | | 19,059 | | | 141 | | | 0 | | | 19,200 | |
Depreciation, depletion and amortization | | 6,185 | | | 0 | | | 0 | | | 6,185 | |
General and administrative expenses | | 0 | | | 0 | | | 11,168 | | | 11,168 | |
Asset impairments | | 133,217 | | | 0 | | | 0 | | | 133,217 | |
Other expenses, net | | 56 | | | 0 | | | 30,835 | | | 30,891 | |
Net income (loss) from continuing operations | | (62,562) | | | 5,059 | | | (42,003) | | | (99,506) | |
| | | | | | | | |
| | | | | | | | |
For the Nine Months Ended September 30, 2019 | | | | | | | | |
Revenues | | $ | 168,777 | | | $ | 36,833 | | | $ | 0 | | | $ | 205,610 | |
| | | | | | | | |
Gain on asset sales and disposals | | 6,609 | | | 0 | | | 0 | | | 6,609 | |
Operating and maintenance expenses | | 26,590 | | | 223 | | | 0 | | | 26,813 | |
Depreciation, depletion and amortization | | 11,746 | | | 0 | | | 0 | | | 11,746 | |
General and administrative expenses | | 0 | | | 0 | | | 12,799 | | | 12,799 | |
Asset impairments | | 484 | | | 0 | | | 0 | | | 484 | |
Other expenses, net | | 0 | | | 0 | | | 66,343 | | | 66,343 | |
Net income (loss) from continuing operations | | 136,566 | | | 36,610 | | | (79,142) | | | 94,034 | |
Income from discontinued operations | | 0 | | | 0 | | | 0 | | | 206 | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
(In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
Three Months Ended September 30, 2019 | | | | | | | | |
Revenues | | $ | 43,784 |
| | $ | 13,818 |
| | $ | — |
| | $ | 57,602 |
|
Gain on asset sales and disposals | | 6,107 |
| | — |
| | — |
| | 6,107 |
|
Operating and maintenance expenses | | 5,771 |
| | 223 |
| | — |
| | 5,994 |
|
Depreciation, depletion and amortization | | 3,384 |
| | — |
| | — |
| | 3,384 |
|
General and administrative expenses | | — |
| | — |
| | 4,253 |
| | 4,253 |
|
Asset impairments | | 484 |
| | — |
| | — |
| | 484 |
|
Other expenses, net | | — |
| | — |
| | 10,431 |
| | 10,431 |
|
Net income (loss) from continuing operations | | 40,252 |
| | 13,595 |
| | (14,684 | ) | | 39,163 |
|
Income from discontinued operations | | — |
| | — |
| | — |
| | 7 |
|
| | | | | | | | |
Three Months Ended September 30, 2018 | | | | | | | | |
Revenues | | $ | 49,371 |
| | $ | 8,836 |
| | $ | — |
| | $ | 58,207 |
|
Operating and maintenance expenses | | 6,790 |
| | — |
| | — |
| | 6,790 |
|
Depreciation, depletion and amortization | | 4,888 |
| | — |
| | — |
| | 4,888 |
|
General and administrative expenses | | — |
| | — |
| | 3,183 |
| | 3,183 |
|
Other expenses, net | | — |
| | — |
| | 17,493 |
| | 17,493 |
|
Net income (loss) from continuing operations | | 37,693 |
| | 8,836 |
| | (20,676 | ) | | 25,853 |
|
Income from discontinued operations | | — |
| | — |
| | — |
| | 2,688 |
|
| | | | | | | | |
Nine Months Ended September 30, 2019 | | | | | | | | |
Revenues | | $ | 168,777 |
| | $ | 36,833 |
| | $ | — |
| | $ | 205,610 |
|
Gain on asset sales and disposals | | 6,609 |
| | — |
| | — |
| | 6,609 |
|
Operating and maintenance expenses | | 26,590 |
| | 223 |
| | — |
| | 26,813 |
|
Depreciation, depletion and amortization | | 11,746 |
| | — |
| | — |
| | 11,746 |
|
General and administrative expenses | | — |
| | — |
| | 12,799 |
| | 12,799 |
|
Asset impairments | | 484 |
| | — |
| | — |
| | 484 |
|
Other expenses, net | | — |
| | — |
| | 66,343 |
| | 66,343 |
|
Net income (loss) from continuing operations | | 136,566 |
| | 36,610 |
| | (79,142 | ) | | 94,034 |
|
Income from discontinued operations | | — |
| | — |
| | — |
| | 206 |
|
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
(In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
Nine Months Ended September 30, 2018 | | | | | | | | |
Revenues | | $ | 152,150 |
| | $ | 34,986 |
| | $ | — |
| | $ | 187,136 |
|
Gain on asset sales and disposals | | 819 |
| | — |
| | — |
| | 819 |
|
Operating and maintenance expenses | | 21,122 |
| | — |
| | — |
| | 21,122 |
|
Depreciation, depletion and amortization | | 15,364 |
| | — |
| | — |
| | 15,364 |
|
General and administrative expenses | | — |
| | — |
| | 10,782 |
| | 10,782 |
|
Asset impairments | | 242 |
| | — |
| | — |
| | 242 |
|
Other expenses, net | | — |
| | — |
| | 53,177 |
| | 53,177 |
|
Net income (loss) from continuing operations | | 116,241 |
| | 34,986 |
| | (63,959 | ) | | 87,268 |
|
Income from discontinued operations | | — |
| | — |
| | — |
| | 3,721 |
|
| | | | | | | | |
As of September 30, 2019 | | | | | | | | |
Total assets of continuing operations | | $ | 969,425 |
| | $ | 258,063 |
| | $ | 15,428 |
| | $ | 1,242,916 |
|
Total assets of discontinued operations | | — |
| | — |
| | — |
| | 988 |
|
| | | | | | | | |
As of December 31, 2018 | | | | | | | | |
Total assets of continuing operations | | $ | 986,680 |
| | $ | 247,051 |
| | $ | 106,923 |
| | $ | 1,340,654 |
|
Total assets of discontinued operations | | — |
| | — |
| | — |
| | 993 |
|
7.6. Equity Investment
The Partnership accounts for its 49% investment in Ciner Wyoming using the equity method of accounting. Activity related to this investment is as follows:
| |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands) | 2019 | | 2018 | | 2019 | | 2018 | (In thousands) | 2020 | | 2019 | | 2020 | | 2019 |
Balance at beginning of period | $ | 251,135 |
| | $ | 245,524 |
| | $ | 247,051 |
| | $ | 245,433 |
| Balance at beginning of period | $ | 252,420 | | | $ | 251,135 | | | $ | 263,080 | | | $ | 247,051 | |
Income allocation to NRP’s equity interests | 15,068 |
| | 10,036 |
| | 40,511 |
| | 38,525 |
| Income allocation to NRP’s equity interests | 3,004 | | | 15,068 | | | 8,450 | | | 40,511 | |
Amortization of basis difference | (1,250 | ) | | (1,200 | ) | | (3,678 | ) | | (3,539 | ) | Amortization of basis difference | (1,018) | | | (1,250) | | | (3,250) | | | (3,678) | |
Comprehensive income (loss) from unconsolidated investment | (520 | ) | | 791 |
| | (341 | ) | | (768 | ) | |
Other comprehensive income (loss) | | Other comprehensive income (loss) | 2,428 | | | (520) | | | 2,764 | | | (341) | |
Distribution | (6,370 | ) | | (12,250 | ) | | (25,480 | ) | | (36,750 | ) | Distribution | 0 | | | (6,370) | | | (14,210) | | | (25,480) | |
Balance at end of period | $ | 258,063 |
|
| $ | 242,901 |
|
| $ | 258,063 |
| | $ | 242,901 |
| Balance at end of period | $ | 256,834 | | | $ | 258,063 | | | $ | 256,834 | | | $ | 258,063 | |
The following table represents summarized financial information for Ciner Wyoming as derived from their respective unaudited financial statements:statements for the three and nine months ended September 30, 2020 and 2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands) | 2020 | | 2019 | | 2020 | | 2019 |
Net sales | $ | 98,197 | | | $ | 137,148 | | | $ | 288,804 | | | $ | 397,378 | |
Gross profit | 11,704 | | | 36,747 | | | 35,363 | | | 103,382 | |
Net income | 6,130 | | | 30,750 | | | 17,245 | | | 82,675 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands) | 2019 | | 2018 | | 2019 | | 2018 |
Sales | $ | 137,148 |
| | $ | 123,366 |
| | $ | 397,378 |
| | $ | 354,467 |
|
Gross profit | 36,747 |
| | 26,253 |
| | 103,382 |
| | 68,497 |
|
Net income | 30,750 |
| | 20,481 |
| | 82,675 |
| | 78,623 |
|
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
8.7. Mineral Rights, Net
The Partnership’s mineral rights consist of the following:
| | | September 30, 2019 | | December 31, 2018 | | September 30, 2020 | | December 31, 2019 |
(In thousands) | Cost | | Accumulated Depletion | | Net Book Value | | Cost | | Accumulated Depletion | | Net Book Value | (In thousands) | Carrying Value | | Accumulated Depletion | | Net Book Value | | Carrying Value | | Accumulated Depletion | | Net Book Value |
Coal properties | $ | 1,147,692 |
| | $ | (459,122 | ) | | $ | 688,570 |
| | $ | 1,164,845 |
| | $ | (451,210 | ) | | $ | 713,635 |
| Coal properties | $ | 798,870 | | | $ | (354,843) | | | $ | 444,027 | | | $ | 981,352 | | | $ | (420,448) | | | $ | 560,904 | |
Aggregates properties | 41,589 |
| | (13,132 | ) | | 28,457 |
| | 24,920 |
| | (11,814 | ) | | 13,106 |
| Aggregates properties | 9,102 | | | (2,741) | | | 6,361 | | | 41,486 | | | (13,357) | | | 28,129 | |
Oil and gas royalty properties | 12,395 |
| | (7,823 | ) | | 4,572 |
| | 12,395 |
| | (7,632 | ) | | 4,763 |
| Oil and gas royalty properties | 12,354 | | | (8,416) | | | 3,938 | | | 12,395 | | | (7,887) | | | 4,508 | |
Other | 13,156 |
| | (1,601 | ) | | 11,555 |
| | 13,158 |
| | (1,550 | ) | | 11,608 |
| Other | 13,156 | | | (1,612) | | | 11,544 | | | 13,156 | | | (1,601) | | | 11,555 | |
Total mineral rights, net | $ | 1,214,832 |
| | $ | (481,678 | ) | | $ | 733,154 |
| | $ | 1,215,318 |
| | $ | (472,206 | ) | | $ | 743,112 |
| Total mineral rights, net | $ | 833,482 | | | $ | (367,612) | | | $ | 465,870 | | | $ | 1,048,389 | | | $ | (443,293) | | | $ | 605,096 | |
Depletion expense related to the Partnership’s mineral rights is included in depreciation, depletion and amortization on its Consolidated Statements of Comprehensive Income (Loss) and totaled $2.8$2.1 million and $3.9$2.8 million for the three months ended September 30, 20192020 and 2018,2019, respectively, and $9.5$6.0 million and $12.8$9.5 million for the nine months ended September 30, 20192020 and 2018,2019, respectively.
DuringThe Partnership recorded $0.9 million and $133.2 million of expense to fully impair certain properties during the three and nine months ended September 30, 2019, the Partnership recorded a gain of $6.1 million and $6.6 million,2020, respectively, included in gain on asset sales and disposals on the Consolidated Statements of Comprehensive Income primarily related to the disposalweakened coal markets that resulted in termination of certain coal mineral rights with a $0leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties. The Partnership has developed procedures to evaluate its long-lived assets for possible impairment periodically or whenever events or changes in circumstances indicate an asset's net book value.
9. Intangible Assets, Net
The Partnership's intangible assets consist of above-market coal royaltyvalue may not be recoverable. Potential events or circumstances include, but are not limited to, specific events such as a reduction in economically recoverable reserves or production ceasing on a property for an extended period. This analysis is based on historic, current and related transportation contracts with subsidiaries of Foresight Energy LP ("Foresight Energy") pursuant to which the Partnership receives royalty payments for coal salesfuture performance and throughput fees for the transportationconsiders both quantitative and processing of coal. The Partnership's intangible assets included on its Consolidated Balance Sheets are as follows:
|
| | | | | | | |
| September 30, | | December 31, |
(In thousands) | 2019 | | 2018 |
Intangible assets at cost | $ | 81,109 |
| | $ | 81,109 |
|
Less: accumulated amortization | (40,648 | ) | | (38,596 | ) |
Total intangible assets, net | $ | 40,461 |
| | $ | 42,513 |
|
Amortization expense included in depreciation, depletion and amortization onqualitative information. While the Partnership's Consolidated Statementsimpairment evaluation as of Comprehensive Income was $0.5 million and $0.9 million for the three months ended September 30, 20192020 incorporated an estimated impact of the global COVID-19 pandemic, there is significant uncertainty as to the severity and 2018, respectively and $2.1 million and $2.3 million forduration of this disruption. If the nine months ended September 30, 2019 and 2018, respectively.impact is worse than we currently estimate, an additional impairment charge may be recognized in future periods.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
10.8. Debt, Net
The Partnership's debt consists of the following:
| | | | | | | | | | | |
| September 30, | | December 31, |
(In thousands) | 2020 | | 2019 |
NRP LP debt: | | | |
9.125% senior notes, with semi-annual interest payments in June and December, due June 2025, issued at par ("2025 Senior Notes") | $ | 300,000 | | | $ | 300,000 | |
| | | |
| | | |
Opco debt: | | | |
Revolving credit facility | $ | 0 | | | $ | 0 | |
Senior Notes | | | |
5.05% with semi-annual interest payments in January and July, with annual principal payments in July, due July 2020 | $ | 0 | | | $ | 6,780 | |
5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023 | 7,094 | | | 9,458 | |
4.73% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2023 | 24,016 | | | 24,016 | |
5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 50,738 | | | 63,423 | |
8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 16,047 | | | 20,059 | |
5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 79,945 | | | 79,945 | |
5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 20,375 | | | 20,375 | |
| | | |
Total Opco Senior Notes | $ | 198,215 | | | $ | 224,056 | |
| | | |
Total debt at face value | $ | 498,215 | | | $ | 524,056 | |
| | | |
Net unamortized debt issuance costs | (6,742) | | | (7,858) | |
Total debt, net | $ | 491,473 | | | $ | 516,198 | |
Less: current portion of long-term debt | (39,072) | | | (45,776) | |
Total long-term debt, net | $ | 452,401 | | | $ | 470,422 | |
|
| | | | | | | |
| September 30, | | December 31, |
(In thousands) | 2019 | | 2018 |
NRP LP debt: | | | |
9.125% senior notes, with semi-annual interest payments in June and December, due June 2025 issued at par ("2025 Senior Notes") | $ | 300,000 |
| | $ | — |
|
10.500% senior notes, with semi-annual interest payments in March and September, due March 2022, $241 million issued at par and $105 million issued at 98.75% ("2022 Senior Notes") | — |
| | 345,638 |
|
Opco debt: | | | |
Revolving credit facility | $ | — |
| | $ | — |
|
Senior Notes | | | |
8.38% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2019 | $ | — |
| | $ | 21,319 |
|
5.05% with semi-annual interest payments in January and July, with annual principal payments in July, due July 2020 | 6,780 |
| | 15,290 |
|
5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023 | 9,458 |
| | 13,414 |
|
4.73% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2023 | 30,019 |
| | 37,195 |
|
5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 63,423 |
| | 89,529 |
|
8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 20,059 |
| | 27,185 |
|
5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 91,365 |
| | 107,013 |
|
5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 23,286 |
| | 30,555 |
|
Total Opco Senior Notes | $ | 244,390 |
| | $ | 341,500 |
|
Total debt at face value | $ | 544,390 |
| | $ | 687,138 |
|
Net unamortized debt discount | — |
| | (1,266 | ) |
Net unamortized debt issuance costs | (8,223 | ) | | (13,114 | ) |
Total debt, net | $ | 536,167 |
| | $ | 672,758 |
|
Less: current portion of long-term debt | (45,789 | ) | | (115,184 | ) |
Total long-term debt, net | $ | 490,378 |
| | $ | 557,574 |
|
NRP LP Debt
2025 Senior Notes
In April 2019, NRP and NRP Finance issued the 2025 Senior Notes and used the $300 million proceeds and $76 million of cash on hand to fund the redemption of the 2022 Senior Notes. The 2025 Senior Notes were issued under an Indenture dated as of April 29, 2019 (the "2025 Indenture"), bear interest at 9.125% per year and mature on June 30, 2025. Interest is payable semi-annually on June 30 and December 30 beginning December 30, 2019.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
30.
NRP and NRP Finance have the option to redeem the 2025 Senior Notes, in whole or in part, at any time on or after October 30, 2021, at the redemption prices (expressed as percentages of principal amount) of 104.563% for the 12-month period beginning October 30, 2021, 102.281% for the 12-month period beginning October 30, 2022, and thereafter at 100.000%, together, in each case, with any accrued and unpaid interest to the date of redemption. Furthermore, before October 30, 2021, NRP may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2025 Senior Notes with the net proceeds of certain public or private equity offerings at a redemption price of 109.125% of the principal amount of 2025 Senior Notes, plus any accrued and unpaid interest, if any, to the date of redemption, if at least 65% of the aggregate principal amount of the 2025 Senior Notes issued under the 2025 Indenture remains outstanding immediately after such redemption and the redemption occurs within 180 days of the closing date of such equity offering. In the event of a change of control, as defined in the 2025 Indenture, the holders of the 2025 Senior Notes may require us to purchase their 2025 Senior Notes at a purchase price equal to 101% of the principal amount of the 2025 Senior Notes, plus accrued and unpaid interest, if any. The 2025 Senior Notes were issued at par.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The 2025 Senior Notes are the senior unsecured obligations of NRP and NRP Finance. The 2025 Senior Notes rank equal in right of payment to all existing and future senior unsecured debt of NRP and NRP Finance and senior in right of payment to any of NRP's subordinated debt. The 2025 Senior Notes are effectively subordinated in right of payment to all future secured debt of NRP and NRP Finance to the extent of the value of the collateral securing such indebtedness and are structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries, including the Opco Credit Facility and each series of Opco’s existing senior notes. None of NRP's subsidiaries guarantee the 2025 Senior Notes. As of September 30, 2020 and December 31, 2019, NRP and NRP Finance were in compliance with the terms of the Indenture relating to their 2025 Senior Notes.
2022 Senior Notes
During the second quarter of 2019, the Partnership redeemed the 2022 Senior Notes at a redemption price equal to 105.250% of the principal amount of the 2022 Senior Notes, plus accrued and unpaid interest. In connection with the early redemption, the Partnership paid an $18.1 million call premium and also wrote off $10.4 million of unamortized debt issuance costs and debt discount. These expenses are included in loss on extinguishment of debt on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss).
Opco Debt
All of Opco’s debt is guaranteed by its wholly owned subsidiaries and is secured by certain of the assets of Opco and its wholly owned subsidiaries other than NRP Trona LLC. As of September 30, 20192020 and December 31, 2018,2019, Opco was in compliance with the terms of the financial covenants contained in its debt agreements.
Opco Credit Facility
In April 2019, the Partnership entered into the Fourth Amendment (the “Fourth Amendment”) to the Opco Credit Facility (the "Opco Credit Facility"). The Fourth Amendment extendsextended the term of the Opco Credit Facility until April 2023. Lender commitments under the Opco Credit Facility remain at $100.0 million. The Opco Credit Facility contains financial covenants requiring Opco to maintain:
•A leverage ratio of consolidated indebtedness to EBITDDA (as defined in the Opco Credit Facility) not to exceed 4.0x; provided, however, that if the Partnership increases its quarterly distribution to its common unitholders above $0.45 per common unit, the maximum leverage ratio under the Opco Credit Facility will permanently decrease from 4.0x to 3.0x; and
•a fixed charge coverage ratio of consolidated EBITDDA to consolidated fixed charges (consisting of consolidated interest expense and consolidated lease expense) of not less than 3.5 to 1.0.
As ofDuring the three and nine months ended September 30, 2020 and 2019, the Partnership did not have any borrowings outstanding under the Opco Credit Facility and had $100 million in available borrowing capacity.
The weighted average interest rates for the borrowings outstanding under the Opco Credit Facility during the three and nine months endedcapacity at both September 30, 2018 were 6.34%2020 and 6.18%, respectively. There were no borrowings outstanding under the Opco Credit Facility during the three and nine months ended September 30,December 31, 2019.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of $541.5$366.8 million and $548.9$399.7 million classified as mineral rights, net and plant and equipment,other long-term assets, net on the Partnership’s Consolidated Balance Sheets as of September 30, 20192020 and December 31, 2018,2019, respectively.
Opco Senior Notes
Opco has issued several series of private placement senior notes (the "Opco Senior Notes") with various interest rates and principal due dates. As of September 30, 20192020 and December 31, 2018,2019, the Opco Senior Notes had cumulative principal balances of $244.4$198.2 million and $341.5$224.1 million, respectively. Opco made mandatory principal payments of $25.8 million during the nine months ended September 30, 2020 and $97.1 million during the nine months ended September 30, 2019, which included a $49.3 million pre-payment as a result of the sale of the Partnership's construction aggregates business, during the nine months ended September 30, 2019, and $55.7 million during the nine months ended September 30, 2018.business.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The 8.92% Opco Senior Notes also provides that in the event that Opco’s leverage ratio of consolidated indebtedness to consolidated EBITDDA (as defined in the Note Purchase Agreements) exceeds 3.75 to 1.00 at the end of any fiscal quarter, then in addition to all other interest accruing on these notes, additional interest in the amount of 2.00% per annum shall accrue on the notes for the two succeeding quarters and for as long thereafter as the leverage ratio remains above 3.75 to 1.00. Opco has not exceeded the 3.75 to 1.00 ratio at the end of any fiscal quarter through September 30, 2019.2020.
11.9. Fair Value Measurements
Fair Value of Financial Assets and Liabilities
The Partnership’s financial assets and liabilities consist of cash and cash equivalents, restricted cash,a contract receivable and debt. The carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents and restricted cash approximate fair value due to their short-term nature. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and nine months ended September 30, 2019 or 2018. The Partnership uses available market data and valuation methodologies to estimate the fair value of its debt and contract receivable.
The following table shows the carrying amountvalue and estimated fair value of the Partnership's debt and contract receivable:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2020 | | December 31, 2019 |
(In thousands) | Fair Value Hierarchy Level | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value |
Debt: | | | | | | | | | |
NRP 2025 Senior Notes | 1 | | $ | 294,891 | | | $ | 263,250 | | | $ | 294,084 | | | $ | 269,250 | |
| | | | | | | | | |
Opco Senior Notes (1) | 3 | | 196,582 | | | 173,934 | | | 222,114 | | | 201,090 | |
Opco Credit Facility | 3 | | 0 | | | 0 | | | 0 | | | 0 | |
| | | | | | | | | |
| | | | | | | | | |
Assets: | | | | | | | | | |
| | | | | | | | | |
Contract receivable (current and long-term) (2) | 3 | | $ | 35,800 | | | $ | 27,255 | | | $ | 38,945 | | | $ | 33,460 | |
|
| | | | | | | | | | | | | | | | | |
| | | September 30, 2019 | | December 31, 2018 |
(In thousands) | Fair Value Hierarchy Level | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value |
Debt: | | | | | | | | | |
NRP 2025 Senior Notes | 1 | | $ | 293,824 |
| | $ | 287,250 |
| | $ | — |
| | $ | — |
|
NRP 2022 Senior Notes | 1 | | — |
| | — |
| | 334,024 |
| | 356,871 |
|
Opco Senior Notes | 3 | | 242,343 |
| | 234,003 |
| | 338,734 |
| | 352,599 |
|
Opco Credit Facility | 3 | | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | |
Assets: | | | | | | | | | |
Contract receivable (current and long-term) | 3 | | $ | 39,416 |
| | $ | 33,784 |
| | $ | 40,776 |
| | $ | 34,704 |
|
(1)The fair value of the Opco Senior Notes are estimated by management using quotations obtained for the NRP 2025 Senior Notes on the closing trading prices near period end, which were at 88% of par value at September 30, 2020.
(2)The fair value of the Partnership's contract receivable is determined based on the present value of future cash flow projections related to the underlying asset at a discount rate of 15% at September 30, 2020.
NRP has embedded derivatives in the preferred units related to certain conversion options, redemption features and the change of control provision that are accounted for separately from the preferred units as assets and liabilities at fair value on the Partnership's Consolidated Balance Sheets. Level 3 valuation of the embedded derivatives are based on numerous factors including the likelihood of the event occurring. The embedded derivatives are revalued quarterly and changes in their fair value would be recorded in other expense,expenses, net on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss). The embedded derivatives had zero0 value as of September 30, 20192020 and December 31, 2018.2019.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
12.10. Related Party Transactions
Affiliates of our General Partner
The Partnership’s general partner does not receive any management fee or other compensation for its management of NRP. However, in accordance with the partnership agreement, the general partner and its affiliates are reimbursed for services provided to the Partnership and for expenses incurred on the Partnership’s behalf. Employees of Quintana Minerals Corporation ("QMC") and Western Pocahontas Properties Limited Partnership ("WPPLP"), affiliates of the Partnership, provide their services to manage the Partnership's business. QMC and WPPLP charge the Partnership the portion of their employee salary and benefits costs related to their employee services provided to NRP. These QMC and WPPLP employee management service costs are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss). NRP also reimburses overhead costs incurred by its affiliates to manage the Partnership's business. These overhead costs include certain rent, information technology, administration of employee benefits and other corporate services incurred by or on behalf of the Partnership’s general partner and its affiliates and are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss).
Direct general and administrative expenses charged to the Partnership by QMC and WPPLP are included inon the Partnership's Consolidated Statement of Comprehensive Income (Loss) as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
(In thousands) | 2019 | | 2018 | | 2019 | | 2018 | (In thousands) | 2020 | | 2019 | | 2020 | | 2019 |
Operating and maintenance expenses | $ | 1,598 |
| | $ | 1,560 |
| | $ | 4,806 |
| | $ | 4,694 |
| Operating and maintenance expenses | $ | 1,562 | | | $ | 1,598 | | | $ | 4,729 | | | $ | 4,806 | |
General and administrative expenses | 855 |
| | 934 |
| | 2,704 |
| | 2,714 |
| General and administrative expenses | 878 | | | 855 | | | 2,657 | | | 2,704 | |
The Partnership had accounts payable to QMC of $0.4 million at both September 30, 2020 and $0.5December 31, 2019 and $0.2 million and $0.1 million to WPPLP on its Consolidated Balance Sheets as ofat September 30, 20192020 and December 31, 2018,2019, respectively.
During the three months ended September 30, 20192020 and 2018,2019, the Partnership recognized $0.3$0.2 million and $0.6$0.3 million in operating and maintenance expenses, respectively, on its Consolidated Statements of Comprehensive Income (Loss) related to an overriding royalty agreement with WPPLP. These amounts were $3.8$0.3 million and $3.5$3.8 million during the nine months ended September 30, 20192020 and 2018,2019, respectively. At September 30, 2019,2020, the Partnership had $0.1$0.4 million of other long-term assets on its Consolidated Balance SheetsSheet related to a prepaid royalty for this agreement and at December 31, 20182019, the Partnership had $1.4$0.1 million of accounts payable to WPPLP forrelated to this agreement.
Quintana Capital Group GP, Ltd.
Corbin J. Robertson, Jr. is a principal in Quintana Capital Group GP, Ltd. ("Quintana Capital"), which controls several private equity funds focused on investments in the energy business. In connection with the formation of Quintana Capital, the Partnership adopted a formal conflicts policy that establishes the opportunities that will be pursued by the Partnership and those that will be pursued by Quintana Capital. The governance documents of Quintana Capital’s affiliated investment funds reflect the guidelines set forth in the Partnership's conflicts policy. At September 30, 2019, a fund controlled by Quintana Capital owned a substantial interest in Corsa Coal Corp. ("Corsa"), a coal mining company traded on the TSX Venture Exchange that was one of the Partnership’s lessees in Tennessee. During the second quarter of 2018, Corsa assigned its lease with NRP to a third party and is no longer deemed a related party as of such date. Coal related revenues from Corsa totaled $0.4 million for the nine months ended September 30, 2018.
Industrial Minerals Group LLC
Corbin J. Robertson, III, a Director of GP Natural Resource Partners LLC, ownsowned a minority ownership interest in Industrial Minerals Group LLC (“Industrial Minerals”), which, through its subsidiaries, leases two of NRP's coal royalty properties in Central Appalachia. As of December 31, 2019, Mr. Robertson no longer held an equity interest in Industrial Minerals; accordingly, revenues are no longer classified as related party revenues as of such date. Coal royalty related revenues from Industrial Minerals totaled $0.4 million and $0.2$0.9 million for the three months ended September 30, 2019 and 2018, respectively and $0.9 million and $0.6 million for the nine months ended September 30, 2019, and 2018, respectively. The Partnership had accounts receivable from Industrial Minerals of $0.2 million and $0.1$0.7 million on its Consolidated Balance SheetsSheet as of December 31, 2019.
Quinwood Coal Company
In May 2017, a subsidiary of Alpha Natural Resources assigned two coal leases with us to Quinwood Coal Company ("Quinwood"), an entity wholly owned by Corbin J. Robertson III. Coal related revenues from Quinwood totaled $0.0 million and $0.2 million for the three and nine months ended September 30, 2019, and December 31, 2018, respectively.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
13.11. Major Customers
Revenues from customers that exceeded 10 percent of total revenues for any of the periods presented below are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2019 | | 2018 | | 2019 | | 2018 |
(In thousands) | | Revenues | | Percent | | Revenues | | Percent | | Revenues | | Percent | | Revenues | | Percent |
Foresight Energy (1) | | $ | 12,375 |
| | 21 | % | | $ | 15,035 |
| | 26 | % | | $ | 44,604 |
| | 22 | % | | $ | 40,456 |
| | 22 | % |
Contura Energy (1) (2) | | 9,190 |
| | 16 | % | | 4,709 |
| | 8 | % | | 32,915 |
| | 16 | % | | 16,091 |
| | 9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
(In thousands) | | Revenues | | Percent | | Revenues | | Percent | | Revenues | | Percent | | Revenues | | Percent |
Foresight Energy (1) (2) | | $ | 8,592 | | | 29 | % | | $ | 12,375 | | | 21 | % | | $ | 27,052 | | | 27 | % | | $ | 44,604 | | | 22 | % |
Contura Energy (1) | | 7,143 | | | 24 | % | | 9,190 | | | 16 | % | | 23,164 | | | 23 | % | | 32,915 | | | 16 | % |
| |
(1) | Revenues from Foresight Energy and Contura Energy are included within the Partnership's Coal Royalty and Other segment. |
| |
(2) | In the fourth quarter of 2018, Contura Energy and Alpha Natural Resources merged. Revenues during the three and nine months ended September 30, 2019 relate to the combined company, while revenues during the three and nine months ended September 30, 2018 do not include revenues from Alpha Natural Resources. |
(1)Revenues from Foresight Energy and Contura Energy are included within the Partnership's Coal Royalty and Other segment. 14.(2)In June 2020, the Partnership entered into lease amendments with Foresight Energy pursuant to which Foresight agreed to pay NRP fixed cash payments to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between the Partnership and Foresight Energy for calendar years 2020 and 2021.
12. Commitments and Contingencies
Legal
NRP is involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, Partnership management believes these ordinary course matters will not have a material effect on the Partnership’s financial position, liquidity or operations. During the third quarter, NRP was also involved in the matters described below.
Anadarko Contingent Consideration Payment Dispute
In January 2013, NRP acquired a non-controlling 48.51% general partner interest in OCI Wyoming, L.P. ("OCI LP") and all of the preferred stock and a portion of the common stock of OCI Wyoming Co. ("OCI Co") (which in turn owned a 1% limited partner interest in OCI LP) from Anadarko Holding Company and its subsidiary, Big Island Trona Company (together, "Anadarko"). The remaining general partner interest in OCI LP and common stock of OCI Co were owned by subsidiaries of OCI Chemical Corporation.
The acquisition agreement provided for additional contingent consideration of up to $50 million to be paid by NRP if certain performance criteria were met at OCI LP as defined in the purchase and sale agreement in any of the years 2013, 2014 or 2015. For those years, NRP paid an aggregate of $11.5 million to Anadarko in full satisfaction of these contingent consideration payment obligations.
In July 2013, pursuant to a series of transactions in connection with an initial public offering by a subsidiary of OCI Chemical Corporation, the ownership structure in OCI LP was simplified. In connection with such reorganization, NRP exchanged the stock of OCI Co for a limited partner interest in OCI LP. Following the reorganization, NRP's interest in OCI LP remained at 49%, consisting of both limited and general partner interests. The restructuring did not have any impact on the operations, revenues, management or control of OCI LP.
In July 2017, Anadarko filed a lawsuit against Opco and NRP Trona LLC in the District Court of Harris County, Texas, 157th judicial district. The complaint alleged that the transactions conducted in 2013 triggered an acceleration of NRP's obligation under the purchase agreement with Anadarko to pay additional contingent consideration in full and demanded immediate payment of such amount, together with interest, court costs and attorneys’ fees. NRP does not believe the reorganization transactions triggered an obligation to pay any additional contingent consideration and is vigorously defending this lawsuit. However, the ultimate outcome cannot be predicted with certainty and the Partnership estimates a possible range of loss between $0, if it prevails, and approximately $40 million plus interest, court costs and attorneys’ fees if Anadarko prevails and is awarded the full damages it seeks. A trial in this matter was held in October 2019. The parties are currently awaiting a ruling by the trial court.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
15.13. Unit-Based Compensation
The Partnership's unit-based awards granted in 20192020 and 20182019 were valued using the closing price of NRP's units as of the grant date. The grant date fair value of these awards granted during the nine months ended September 30, 2020 and 2019 and 2018 were $5.4$3.5 million and $2.2$5.4 million, respectively. Total unit-based compensation expense associated with these awards was $0.5$0.9 million and $0.2$0.5 million for the three months ended September 30, 20192020 and 2018,2019, respectively, and $1.8$2.6 million and $0.9$1.8 million for the nine months ended September 30, 20192020 and 2018,2019, respectively, and is included in general and administrative expenses and operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income.Income (Loss). The unamortized cost associated with unvested outstanding awards as of September 30, 20192020 is $4.0$4.4 million, which is to be recognized over a weighted average period of 2.21.8 years. The unamortized cost associated with unvested outstanding awards as of December 31, 20182019 was $1.2$3.5 million.
A summary of the unit activity in the outstanding grants during 20192020 is as follows:
| | | | | | | | | | | |
(In thousands) | Common Units | | Weighted Average Exercise Price |
Outstanding at January 1, 2020 | 157 | | | $ | 37.48 | |
Granted | 203 | | | $ | 17.20 | |
Fully vested and issued | 0 | | | $ | 0 | |
Forfeitures | (5) | | | $ | 17.20 | |
Outstanding at September 30, 2020 | 355 | | | $ | 26.20 | |
|
| | | | | | |
(In thousands) | Common Units | | Weighted Average Exercise Price |
Outstanding at January 1, 2019 | 55 |
| | $ | 29.10 |
|
Granted | 129 |
| | $ | 41.41 |
|
Fully vested and issued | (12 | ) | | $ | 41.47 |
|
Forfeitures | (15 | ) | | $ | 37.33 |
|
Outstanding at September 30, 2019 | 157 |
| | $ | 37.48 |
|
NATURAL RESOURCE PARTNERS L.P. 16.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
14. Financing Transaction
The Partnership owns rail loadout and associated infrastructure at the Sugar Camp mine in the Illinois Basin operated by a subsidiary of Foresight Energy. The infrastructure at the Sugar Camp mine is leased to a subsidiary of Foresight Energy and is accounted for as a financing transaction (the "Sugar Camp lease"). The Sugar Camp lease expires in 2032 with renewal options for up to 80 additional years. Minimum payments are $5.0 million per year through the end of the lease term. The $5.0 million due to the Partnership in 2020 and 2021 is included in the fixed cash payments from Foresight Energy resulting from contract modifications entered into during the second quarter of 2020 as discussed in Note 11. Major Customers. The Partnership is also entitled to variable payments in the form of throughput fees determined based on the amount of coal transported and processed utilizing the Partnership's assets. In the event the Sugar Camp lease is renewed beyond 2032, payments become a fixed $10 thousand per year for the remainder of the renewed term. The following table shows certain amounts related to the Partnership's Sugar Camp lease:lease through 2032:
| | | | | | | | | | | |
| September 30, | | December 31, |
(In thousands) | 2020 | | 2019 |
Accounts receivable, net | $ | 0 | | | $ | 540 | |
Contract receivable, net (current and long-term) | 35,800 | | | 38,945 | |
Unearned income | 19,704 | | | 21,889 | |
Projected remaining payments, net | $ | 55,504 | | | $ | 61,374 | |
15. Credit Losses
The Partnership is exposed to credit losses through collection of its trade receivables resulting from contracts with customers and a long-term receivable resulting from a financing transaction with a customer. The Partnership records an allowance for current expected credit losses on these receivables based on the loss-rate method. NRP assessed the likelihood of collection of its receivables utilizing historical loss rates, current market conditions that included the estimated impact of the global COVID-19 pandemic, industry and macroeconomic factors, reasonable and supportable forecasts and facts or circumstances of individual customers and properties. Examples of these facts or circumstances include, but are not limited to, contract disputes or renegotiations with the customer and evaluation of short and long-term economic viability of the contracted property. For its long-term contract receivable, management reverts to the historical loss experience immediately after the reasonable and supportable forecast period ends.
As of September 30, 2020, NRP recorded the following current expected credit loss (“CECL”) related to its receivables and long-term contract receivable:
| | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Gross | | CECL Allowance | | Net |
Receivables | | $ | 24,172 | | | $ | (2,324) | | | $ | 21,848 | |
Long-term contract receivable | | 35,370 | | | (1,579) | | | 33,791 | |
Total | | $ | 59,542 | | | $ | (3,903) | | | $ | 55,639 | |
NRP recorded $0.3 million and $0.0 million in operating and maintenance expenses on its Consolidated Statement of Comprehensive Income (Loss) related to the change in CECL allowance during the three and nine months ended September 30, 2020, respectively. In addition, the Partnership recorded $0.0 million and $3.9 million of bad debt expense due to balances deemed to be non-collectible in the three and nine months ended September 30, 2020, respectively.
NRP has procedures in place to monitor its ongoing credit exposure through timely review of counterparty balances against contract terms and due dates, account and financing receivable reconciliations, bankruptcy monitoring, lessee audits and dispute resolution. The Partnership may employ legal counsel or collection specialists to pursue recovery of defaulted receivables.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
|
| | | | | | | |
(In thousands) | September 30, 2019 | | December 31, 2018 |
Accounts receivable | $ | 347 |
| | $ | 661 |
|
Contract receivable (current and long-term) | 39,416 |
| | 40,776 |
|
Unearned income | 22,667 |
| | 25,058 |
|
Projected remaining payments | $ | 62,430 |
| | $ | 66,495 |
|
17.16. Leases
Lessee Accounting
As of September 30, 2019,2020, the Partnership had one operating lease for an office building that is owned by WPPLP. On January 1, 2019, the Partnership entered into a new lease of the building with a five-year base term and five additional five-year renewal options. Upon lease commencement and as of September 30, 2019,2020, the Partnership was reasonably certain to exercise all renewal options included in the lease and capitalized the right-of-use asset and corresponding lease liability on its Consolidated Balance SheetSheets using the present value of the future lease payments over 30 years. The Partnership's right-of-use asset and lease liability included within other long-term assets, net and other non-current liabilities, respectively, on its Consolidated Balance SheetSheets totaled $3.5 million at both January 1, 2019September 30, 2020 and September 30,December 31, 2019. During the three and nine months ended September 30, 2020 and 2019, the Partnership incurred total operating lease expensesexpense of $0.1 million and $0.4 million, respectively, included in both operating and maintenance expenses and general and administrative expenses on its Consolidated StatementStatements of Comprehensive Income.
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Income (Loss).
The following table details the maturity analysis of the Partnership's operating lease liability and reconciles the undiscounted cash flows to the operating lease liability included on its Consolidated Balance Sheet:
| | Remaining Annual Lease Payments (In thousands) | | As of September 30, 2019 | Remaining Annual Lease Payments (In thousands) | | As of September 30, 2020 |
2019 | | $ | 121 |
| |
2020 | | 483 |
| 2020 | | $ | 121 | |
2021 | | 483 |
| 2021 | | 483 | |
2022 | | 483 |
| 2022 | | 483 | |
2023 | | 483 |
| 2023 | | 483 | |
After 2023 | | 12,079 |
| |
2024 | | 2024 | | 483 | |
After 2024 | | After 2024 | | 11,597 | |
Total lease payments (1) | | $ | 14,132 |
| Total lease payments (1) | | $ | 13,650 | |
Less: present value adjustment (2) | | (10,623 | ) | Less: present value adjustment (2) | | (10,150) | |
Total operating lease liability | | $ | 3,509 |
| Total operating lease liability | | $ | 3,500 | |
(1)The remaining lease term of the Partnership's operating lease is 28.25 years.
| |
(1) | The remaining lease term of the Partnership's operating lease is 29.25 years. |
| |
(2) | (2)The present value of the operating lease liability on the Partnership's Consolidated Balance Sheet was calculated using a 13.5% discount rate which represents the Partnership's estimated incremental borrowing rate under the lease. As the Partnership's lease does not provide an implicit rate, the Partnership estimated the incremental borrowing rate at the time the lease was entered into by utilizing the rate of the Partnership's secured debt and adjusting it for factors that reflect the profile of borrowing over the 30-year expected lease term. |
Lessor Accounting
ThePartnership owns loadout and other transportation assets at the Partnership's Macoupin property in the Illinois Basin which is operated by Foresight Energy. The infrastructure at the Macoupin property is leased to a subsidiary of Foresight Energy and is accounted for as an operating lease under ASC 842. The lease with Macoupin expires in January 2108. From the inception of this lease in 2009 through January 2039, the lease provides that the Partnership is entitled to variable lease payments in the form of throughput fees determined based on the amount of coal transported and processed utilizing the Partnership's assets. These fees are included in transportation and processing services revenues on the Partnership's Consolidated Statements of Comprehensive Income and were $1.1 million and $1.4 million inBalance Sheets was calculated using a 13.5% discount rate which represents the three months ended September 30, 2019 and 2018, respectively, and $3.6 million and $3.5 million inPartnership's estimated incremental borrowing rate under the nine months ended September 30, 2019 and 2018, respectively. After January 2039,lease. As the Partnership's lease does not provide an implicit rate, the Partnership estimated the incremental borrowing rate at the time the lease provides thatwas entered into by utilizing the Partnership is entitled to an annual rent of $10 thousand per year in placerate of the variablePartnership's secured debt and adjusting it for factors that reflect the profile of borrowing over the 30-year expected lease payments.term.
18.
17. Subsequent Events
The following represents material events that have occurred subsequent to September 30, 20192020 through the time of the Partnership’s filing of its Quarterly Report on Form 10-Q with the SEC:
Common Unit and Preferred Unit Distributions Declared
In October 2019,November 2020, the Board of Directors declared a distribution of $0.45 per common unit with respect to the third quarter of 2019.2020. The Board of Directors also declared a cash distribution on NRP's Preferred Unitspreferred units with respect to the third quarter of 2019 totaling $7.5 million.2020 to be paid one-half in cash equal to $3.75 million and one-half in kind through the issuance of 3,750 additional preferred units.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following review of operations for the three and nine month periods ended September 30, 20192020 and 20182019 should be read in conjunction with our consolidated financial statements and the notes to consolidated financial statements included in this Form 10-Q and with the consolidated financial statements, notes to consolidated financial statements and management’s discussion and analysis included in the Natural Resource Partners L.P. Annual Report on Form 10-K for the year ended December 31, 2018.2019.
As used herein, unless the context otherwise requires: "we," "our," "us" and the "Partnership" refer to Natural Resource Partners L.P. and, where the context requires, our subsidiaries. References to "NRP" and "Natural Resource Partners" refer to Natural Resource Partners L.P. only, and not to NRP (Operating) LLC or any of Natural Resource Partners L.P.’s subsidiaries. References to "Opco" refer to NRP (Operating) LLC, a wholly owned subsidiary of NRP, and its subsidiaries. NRP Finance Corporation ("NRP Finance") is a wholly owned subsidiary of NRP and a co-issuer with NRP on the 9.125% senior notes due 2025 (the "2025 Senior Notes").
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this 10-Q may constitute forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such forward-looking statements include, among other things, statements regarding: the effects of the global COVID-19 pandemic; our business strategy; our liquidity and access to capital and financing sources; our financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected production levels by our lessees; Ciner Wyoming LLC’s ("Ciner Wyoming's") trona mining and soda ash refinery operations; distributions from our soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving us, and of scheduled or potential regulatory or legal changes; and global and U.S. economic conditions.
These forward-looking statements speak only as of the date hereof and are made based upon our current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. You should not put undue reliance on any forward-looking statements. See "Item 1A. Risk Factors" included in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 20182019 for important factors that could cause our actual results of operations or our actual financial condition to differ.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings (loss) from unconsolidated investment, plus (minus) net loss (income)income attributable to non-controlling interest; plusinterest and gain on reserve swap,swap; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (loss), the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. In addition, Adjusted EBITDA presented below is not calculated or presented on the same basis as Consolidated EBITDA as defined in our partnership agreement or Consolidated EBITDDA as defined in Opco's debt agreements. For a description of Opco's debt agreements, see Note 10.8. Debt, Net in the Notes to Consolidated Financial Statements included herein as well as in "Item 8. Financial Statements and Supplementary Data—Note 13.12. Debt, Net" in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.
Distributable Cash Flow
Distributable cash flow ("DCF") represents net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivable;receivables; less maintenance capital expenditures and distributions to non-controlling interest. DCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. DCF may not be calculated the same for us as for other companies. In addition, DCF presented below is not calculated or presented on the same basis as distributable cash flow as defined in our partnership agreement, which is used as a metric to determine whether we are able to increase quarterly distributions to our common unitholders. DCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assessasses our ability to make cash distributions and repay debt.
Free Cash Flow
Free cash flow ("FCF") represents net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivable;receivables; less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as investing or financing activities and distributions to non-controlling interest. FCF is calculated before mandatory debt repayments. FCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. FCF may not be calculated the same for us as for other companies. FCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the Partnership'sour ability to make cash distributions and repay debt.
Introduction
The following discussion and analysis presents management's view of our business, financial condition and overall performance. Our discussion and analysis consists of the following subjects:
•Executive Overview
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance Sheet Transactions
•Related Party Transactions
•Summary of Critical Accounting Estimates
•Recent Accounting Standards
Executive Overview
We are a diversified natural resource company engaged principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and own a non-controlling 49% interest in Ciner Wyoming LLC ("Ciner Wyoming"), a producer of naturaltrona ore mining and soda ash.ash production business. Our common units trade on the New York Stock Exchange under the symbol "NRP"."NRP." Our business is organized into two operating segments:
Coal Royalty and Other—consists primarily of coal royalty properties and coal-related transportation and processing assets. Other assets include industrial mineral royalty properties, aggregates royalty properties, oil and gas royalty properties and timber. Our coal reserves are primarily located in Appalachia, the Illinois Basin and the Northern Powder River Basin in the United States. Our industrial minerals and aggregates properties are located in a number ofvarious states across the United States. OurStates, our oil and gas royalty assets are primarily located in Louisiana.Louisiana and our timber assets are primarily located in West Virginia.
Soda Ash—consists of our 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining and soda ash production business located in the Green River Basin of Wyoming. Ciner Resources LP, our operating partner, mines the trona, processes it into soda ash, and distributes the soda ash both domestically and internationally into the glass and chemicals industries.
Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment.
We remain focused on strengthening our balance sheet and maintaining sufficient liquidity to manage our business through periods of volatility in commodity prices. We devote significant amounts of cash each year to make mandatory amortization payments on the Opco Senior Notes as well as to make distributions on our preferred units and common units. Accordingly, preserving the financial flexibility to respond to changes in market conditions while continuing to service our debt and make distributions to unitholders is one of our key objectives.
Our financial results by segment for the nine months ended September 30, 20192020 are as follows:
| | | | Operating Segments | | | | | Operating Segments | |
(In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total | (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
Revenues and other income | | $ | 175,386 |
| | $ | 36,833 |
| | $ | — |
| | $ | 212,219 |
| Revenues and other income | | $ | 95,955 | | | $ | 5,200 | | | $ | — | | | $ | 101,155 | |
Net income (loss) from continuing operations | | $ | 136,566 |
| | $ | 36,610 |
| | $ | (79,142 | ) | | $ | 94,034 |
| Net income (loss) from continuing operations | | $ | (62,562) | | | $ | 5,059 | | | $ | (42,003) | | | $ | (99,506) | |
Adjusted EBITDA (1) | | $ | 148,796 |
| | $ | 25,257 |
| | $ | (12,799 | ) | | $ | 161,254 |
| Adjusted EBITDA (1) | | $ | 76,896 | | | $ | 14,069 | | | $ | (11,168) | | | $ | 79,797 | |
| | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | | Cash flow provided by (used in) continuing operations | |
Operating activities | | $ | 139,821 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 117,925 |
| Operating activities | | $ | 91,082 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 74,413 | |
Investing activities | | $ | 7,962 |
| | $ | — |
| | $ | — |
| | $ | 7,962 |
| Investing activities | | $ | 969 | | | $ | — | | | $ | — | | | $ | 969 | |
Financing activities | | $ | — |
| | $ | — |
| | $ | (219,754 | ) | | $ | (219,754 | ) | Financing activities | | $ | — | | | $ | — | | | $ | (58,074) | | | $ | (58,074) | |
Distributable cash flow (1) | | $ | 147,783 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 125,331 |
| Distributable cash flow (1) | | $ | 93,051 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 76,316 | |
Free cash flow (1) | | $ | 141,172 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 119,276 |
| Free cash flow (1) | | $ | 91,544 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 74,875 | |
| |
(1) | See "—Results of Operations" below for reconciliations to the most comparable GAAP financial measures. |
(1)See "—Results of Operations" below for reconciliations to the most comparable GAAP financial measures.
Current Results/Market Commentary
Business Outlook and Quarterly Distributions
The global COVID-19 pandemic has had a significant negative impact on demand for steel, electricity and glass, which translates to lower demand for the coal and soda ash that our properties produce. While demand for metallurgical and thermal coals and soda ash began to rebound during the third quarter, prices remain below pre-pandemic levels. We continue to employ remote work protocols and are conducting business as usual despite the pandemic. Although we are unable to predict the ultimate severity or duration of the COVID-19 pandemic or its impact on our business, we ended the third quarter with $215.6 million of liquidity consisting of $115.6 million of cash and cash equivalents and $100.0 million of borrowing capacity under our Opco Credit Facility and generated $74.9 million of free cash flow during the nine months ended September 30, 2020. As a result, we believe we have the financial flexibility to navigate the effects of the pandemic on our business.
Despite our liquidity level at the end of the third quarter, our consolidated leverage ratio has risen since the onset of the COVID-19 pandemic and was 4.2x at September 30, 2020. The indenture governing our 2025 parent company notes restricts us from paying more than one-half of the quarterly distribution on our preferred units in cash if our consolidated leverage ratio exceeds 3.75x. Accordingly, the Board of Directors of our general partner declared a distribution on our preferred units for the third quarter of 2020 to be paid one-half in cash equal to $3.75 million and one-half in kind through the issuance of 3,750 additional preferred units. The Board also declared a cash distribution of $0.45 per common unit for the third quarter of 2020. To the extent our leverage ratio continues to exceed 3.75x, which we expect for the foreseeable future, we will be required to continue to pay one-half of the required preferred distributions in kind (“PIK units”) and will be unable to redeem any PIK units until our consolidated leverage ratio falls below 3.75x. Distributions on the outstanding PIK units will accrue and accumulate at 12% per year until such PIK units are redeemed.
Future distributions on NRP's common and preferred units will be determined on a quarterly basis by the Board of Directors. The Board of Directors considers numerous factors each quarter in determining cash distributions, including profitability, cash flow, debt service obligations, market conditions and outlook, estimated unitholder income tax liability and the level of cash reserves that the Board determines is necessary for future operating and capital needs.
Coal Royalty and Other Business Segment
Demand for steel and electricity began to rebound in the third quarter and the outlook for our coal businesses has improved, though sales volumes and prices for coal sold from our properties in the third quarter remained below pre-pandemic levels. We expect coal markets to remain volatile as a result of ongoing uncertainties with the COVID-19 pandemic.
Our resultslessees sold 12.1 million tons of coal from our properties in the first nine months of 2019 were driven by stability in both metallurgical2020 and thermal coal realizations from our lessees during the first half of the year but reduced realizations during the third quarter driven by weakened market demand and lower activity at certain of our properties. Wewe derived approximately 65%70% of our coal royalty revenues and approximately 55%65% of our coal royalty sales volumes from metallurgical coal during the nine months ended September 30, 2019. Despite solid performance throughsame period. Revenues and other income in the first nine months of 2019, declining coal prices and lessee bankruptcies are expected2020 were lower by $79.4 million as compared to put downward pressure on our performance in the coming months.
Theprior year period. This decrease is primarily a result of a weakened market for metallurgical coal weakened primarilyas compared to the prior year period due to a decline in global economic growth.steel demand. As a result, both sales volumes and prices for metallurgical coal sold were lower in the first nine months of 2020 compared to the prior year period. Prices for metallurgical coal have rebounded from the lows seen in the second quarter, but are not currently above pre-pandemic levels.
In addition, weaker domestic and export thermal coal markets compared to the prior year period resulted in lower revenues from our properties declined in the third quarter of 2019. Metallurgical coal sales volumes from our properties also declined in the third quarter of 2019 as a result of certain lessees moving off our coal reserves in the normal course of their mine plans and lower activity at certain other mines.
The domestic market for thermal coal remainsproperties. Domestic and export thermal coal markets remained challenged by lower utility demand, continued low natural gas prices and growing stockpilesthe secular shift to renewable energy. Although natural gas prices are forecasted to rise above $3/MMBtu this winter, stockpile levels at domestic utilities. In addition,utilities remain high, which we expect will temper the export market forincreased thermal coal demand that would normally result from higher natural gas prices. Our thermal coal business results are largely dependent on our various lease agreements with Foresight Energy. In June 2020, we entered into lease amendments with Foresight Energy pursuant to which Foresight agreed to pay us fixed cash payments of $48.75 million in 2020 and $42.0 million in 2021 to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between us and Foresight Energy for calendar years 2020 and 2021. These amendments provide us cash flow certainty for our thermal coal business through 2021. Through the first nine months of 2020, we received $35.0 million of the $48.75 million due to us in 2020.
Soda Ash Business Segment
Ciner Wyoming has weakenedbeen negatively impacted by the COVID-19 pandemic as lower activity in the global auto, container and construction industries reduced demand for glass and soda ash. Revenues and other income in the third quarter of 2020 were lower by $11.8 million compared to the prior year quarter primarily due to a combination of lower pricing and volumes sold. However, demand from European utilities, competition from international producers and oversupply of LNG.
We remain cautious aboutfor glass began to rebound in the financial position of U.S. coal producers with over-leveraged capital structuresthird quarter and the stateoutlook for our soda ash business has improved. While Ciner Wyoming has yet to recover to pre-COVID levels, overall sales volumes increased 26.7% and overall production volumes increased 1.5% over second quarter 2020 results, though global prices remain depressed. While we believe our facility is competitively positioned as one of the domestic and global coal markets generally. The current price environment along with limited access to capital has taken a toll on a numberlowest cost producers of producers. Four of our lessees have filed for protection under the U.S. Bankruptcy Code in the last six months, and other lessees continue to face challenges. Foresight Energy, which is our largest lessee, has agreed to a forbearance period with its lenders to evaluate their restructuring options. To the extent Foresight determines to idle operations on our properties for a prolonged period or to shut any of its mines on our properties down permanently, our business could be adversely affected. Accordingly, we remain focused on further strengthening our liquidity and balance sheet.
Soda Ash Business Segment
Ciner Wyoming's results are primarily affected by the global supply of and demand for soda ash, which in turn directly impacts the prices Ciner Wyoming and other producers charge for its products. Demand for soda ash in the United States is driven in a large part by economic growth and activity levels in the end markets that the glass-making industry serve, such as the automotive and construction industries. Because the United States is a well-developed market for soda ash,world, we expect that domestic supplythe market to remain volatile as a result of ongoing uncertainties with the COVID-19 pandemic.
In order to have financial flexibility during the COVID-19 pandemic, Ciner Wyoming suspended its quarterly distribution in August 2020 and demand for soda ash will remain stableaccordingly, did not pay quarterly distributions for the near future. Soda ash demand in international markets has continued to grow in conjunction with GDP. We expect that future global economic growth will positively influence global demand and pricing, which will likely result in increased exports, primarily from the United States, Turkey and to a limited extent, from China, the largest supplierssecond or third quarters of soda ash to international markets.
While the performance of the underlying business remains stable,2020. Ciner Wyoming has announced that it will commencecontinue to evaluate, on a quarterly basis, whether to reinstate the distribution. Ciner Wyoming’s ability to pay future quarterly distributions will be dependent in part on its cash reserves, liquidity, total debt levels and anticipated capital expenditures. In addition, Ciner Wyoming continues to develop plans for a significant capacity expansion capital project. However, they have delayed the timing of significant costs related to this project soon that it intends to fund in part by reinvesting cash that would otherwise be distributed to its partners. As a result, we expect foruntil they have more visibility into the cash distributions we receive from Ciner Wyoming to decrease to approximately $25 million to $28 million per year and be held at such levels for the next two to three years. We believe that we will benefit over the long-term from increased productivity and cash distributions from Ciner Wyoming’s operations following completion of this capital project.
Business Outlook
Despite solid performance in the first nine monthsimpact of the year, we expect the challenges described above to have an overall adverse impactCOVID-19 pandemic on our future results as compared to recent results. However, we believe the progress made to strengthen our financial profile in recent years positions us well to navigate a sustained downturn.their business
Results of Operations
Third Quarter of 20192020 and 20182019 Compared
Revenues and Other Income
The following table includes our revenues and other income by operating segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | Decrease | | Percentage Change |
Operating Segment (In thousands) | | 2020 | | 2019 | |
Coal Royalty and Other | | $ | 27,944 | | | $ | 49,891 | | | $ | (21,947) | | | (44) | % |
Soda Ash | | 1,986 | | | 13,818 | | | (11,832) | | | (86) | % |
Total | | $ | 29,930 | | | $ | 63,709 | | | $ | (33,779) | | | (53) | % |
|
| | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
Operating Segment (In thousands) | | 2019 | | 2018 | |
Coal Royalty and Other | | $ | 49,891 |
| | $ | 49,371 |
| | $ | 520 |
| | 1 | % |
Soda Ash | | 13,818 |
| | 8,836 |
| | 4,982 |
| | 56 | % |
Total | | $ | 63,709 |
| | $ | 58,207 |
| | $ | 5,502 |
| | 9 | % |
The changes in revenues and other income is discussed for each of the operating segments below:
Coal Royalty and Other
The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands, except per ton data) | 2020 | | 2019 | |
Coal sales volumes (tons) | | | | | | | |
Appalachia | | | | | | | |
Northern | 102 | | | 290 | | | (188) | | | (65) | % |
Central | 2,247 | | | 3,222 | | | (975) | | | (30) | % |
Southern | 172 | | | 438 | | | (266) | | | (61) | % |
Total Appalachia | 2,521 | | | 3,950 | | | (1,429) | | | (36) | % |
Illinois Basin | 758 | | | 551 | | | 207 | | | 38 | % |
Northern Powder River Basin | 365 | | | 532 | | | (167) | | | (31) | % |
| | | | | | | |
Total coal sales volumes | 3,644 | | | 5,033 | | | (1,389) | | | (28) | % |
| | | | | | | |
Coal royalty revenue per ton | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 3.06 | | | $ | 2.54 | | | $ | 0.52 | | | 20 | % |
Central | 3.83 | | | 5.25 | | | (1.42) | | | (27) | % |
Southern | 4.78 | | | 5.99 | | | (1.21) | | | (20) | % |
| | | | | | | |
Illinois Basin | 1.63 | | | 4.82 | | | (3.19) | | | (66) | % |
Northern Powder River Basin | 3.46 | | | 4.69 | | | (1.23) | | | (26) | % |
| | | | | | | |
Combined average coal royalty revenue per ton | 3.36 | | | 5.05 | | | (1.69) | | | (33) | % |
| | | | | | | |
Coal royalty revenues | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 312 | | | $ | 735 | | | $ | (423) | | | (58) | % |
Central | 8,602 | | | 16,929 | | | (8,327) | | | (49) | % |
Southern | 823 | | | 2,626 | | | (1,803) | | | (69) | % |
Total Appalachia | 9,737 | | | 20,290 | | | (10,553) | | | (52) | % |
Illinois Basin | 1,234 | | | 2,658 | | | (1,424) | | | (54) | % |
Northern Powder River Basin | 1,262 | | | 2,492 | | | (1,230) | | | (49) | % |
Unadjusted coal royalty revenues | 12,233 | | | 25,440 | | | (13,207) | | | (52) | % |
Coal royalty adjustment for minimum leases (1) | (1,623) | | | (713) | | | (910) | | | (128) | % |
Total coal royalty revenues | $ | 10,610 | | | $ | 24,727 | | | $ | (14,117) | | | (57) | % |
| | | | | | | |
Other revenues | | | | | | | |
Production lease minimum revenues (1) | $ | 4,267 | | | $ | 2,752 | | | $ | 1,515 | | | 55 | % |
Minimum lease straight-line revenues (1) | 3,553 | | | 3,982 | | | (429) | | | (11) | % |
Property tax revenues | 1,896 | | | 1,606 | | | 290 | | | 18 | % |
Wheelage revenues | 1,680 | | | 1,675 | | | 5 | | | — | % |
Coal overriding royalty revenues | 1,314 | | | 2,189 | | | (875) | | | (40) | % |
Lease amendment revenues | 858 | | | 1,535 | | | (677) | | | (44) | % |
| | | | | | | |
Aggregates royalty revenues | 221 | | | 954 | | | (733) | | | (77) | % |
Oil and gas royalty revenues | 1,078 | | | 374 | | | 704 | | | 188 | % |
Other revenues | 263 | | | 125 | | | 138 | | | 110 | % |
Total other revenues | $ | 15,130 | | | $ | 15,192 | | | $ | (62) | | | — | % |
Coal royalty and other | $ | 25,740 | | | $ | 39,919 | | | $ | (14,179) | | | (36) | % |
Transportation and processing services revenues | 2,204 | | | 3,865 | | | (1,661) | | | (43) | % |
Gain on asset sales and disposals | — | | | 6,107 | | | (6,107) | | | (100) | % |
Total Coal Royalty and Other segment revenues and other income | $ | 27,944 | | | $ | 49,891 | | | $ | (21,947) | | | (44) | % |
|
| | | | | | | | | | | | | | |
| For the Three Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands, except per ton data) | 2019 | | 2018 | |
Coal sales volumes (tons) | | | | | | | |
Appalachia | | | | | | | |
Northern | 290 |
| | 349 |
| | (59 | ) | | (17 | )% |
Central | 3,222 |
| | 3,873 |
| | (651 | ) | | (17 | )% |
Southern | 438 |
| | 346 |
| | 92 |
| | 27 | % |
Total Appalachia | 3,950 |
|
| 4,568 |
| | (618 | ) | | (14 | )% |
Illinois Basin | 551 |
| | 609 |
| | (58 | ) | | (10 | )% |
Northern Powder River Basin | 532 |
| | 855 |
| | (323 | ) | | (38 | )% |
Total coal sales volumes | 5,033 |
|
| 6,032 |
| | (999 | ) | | (17 | )% |
| | | | | | | |
Coal royalty revenue per ton | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 2.54 |
| | $ | 4.01 |
| | $ | (1.47 | ) | | (37 | )% |
Central | 5.25 |
| | 5.37 |
| | (0.12 | ) | | (2 | )% |
Southern | 5.99 |
| | 6.82 |
| | (0.83 | ) | | (12 | )% |
Illinois Basin | 4.82 |
| | 4.89 |
| | (0.07 | ) | | (1 | )% |
Northern Powder River Basin | 4.69 |
| | 3.79 |
| | 0.90 |
| | 24 | % |
Combined average coal royalty revenue per ton | 5.05 |
| | 5.10 |
| | (0.05 | ) | | (1 | )% |
| | | | | | | |
Coal royalty revenues | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 735 |
| | $ | 1,402 |
| | $ | (667 | ) | | (48 | )% |
Central | 16,929 |
| | 20,786 |
| | (3,857 | ) | | (19 | )% |
Southern | 2,626 |
| | 2,359 |
| | 267 |
| | 11 | % |
Total Appalachia | 20,290 |
| | 24,547 |
| | (4,257 | ) | | (17 | )% |
Illinois Basin | 2,658 |
| | 2,973 |
| | (315 | ) | | (11 | )% |
Northern Powder River Basin | 2,492 |
| | 3,237 |
| | (745 | ) | | (23 | )% |
Unadjusted coal royalty revenues | 25,440 |
|
| 30,757 |
| | (5,317 | ) | | (17 | )% |
Coal royalty adjustment for minimum leases | (713 | ) | | (48 | ) | | (665 | ) | | (1,385 | )% |
Total coal royalty revenues | $ | 24,727 |
| | $ | 30,709 |
| | $ | (5,982 | ) | | (19 | )% |
| | | | | | | |
Other revenues | | | | |
| | |
Production lease minimum revenues | $ | 2,752 |
| | $ | 1,769 |
| | $ | 983 |
| | 56 | % |
Minimum lease straight-line revenues | 3,982 |
| | 567 |
| | 3,415 |
| | 602 | % |
Property tax revenues | 1,606 |
| | 1,263 |
| | 343 |
| | 27 | % |
Wheelage revenues | 1,675 |
| | 1,572 |
| | 103 |
| | 7 | % |
Coal overriding royalty revenues | 2,189 |
| | 3,918 |
| | (1,729 | ) | | (44 | )% |
Lease amendment revenues | 1,535 |
| | — |
| | 1,535 |
| | 100 | % |
Aggregates royalty revenues | 954 |
| | 888 |
| | 66 |
| | 7 | % |
Oil and gas royalty revenues | 374 |
| | 1,427 |
| | (1,053 | ) | | (74 | )% |
Other revenues | 125 |
| | 405 |
| | (280 | ) | | (69 | )% |
Total other revenues | $ | 15,192 |
| | $ | 11,809 |
|
| $ | 3,383 |
| | 29 | % |
Coal royalty and other | $ | 39,919 |
| | $ | 42,518 |
| | $ | (2,599 | ) | | (6 | )% |
Transportation and processing services revenues | 3,865 |
| | 6,853 |
| | (2,988 | ) | | (44 | )% |
Gain on asset sales and disposals | 6,107 |
| | — |
| | 6,107 |
| | 100 | % |
Total Coal Royalty and Other segment revenues and other income | $ | 49,891 |
| | $ | 49,371 |
| | $ | 520 |
| | 1 | % |
(1)Beginning April 1, 2020 and effective January 1, 2020, certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications with Foresight Energy that fixed consideration paid to us over a two-year period.
Coal Royalty Revenues
Approximately 70% of coal royalty revenues and approximately 65% of coal royalty sales volumes were derived from metallurgical coal during the three months ended September 30, 2020. Coal royalty revenues decreased $6.0$14.1 million period-over-period primarily driven by the weakened coal markets that resulted in lower coal sales volumes.volumes and prices. The discussion of these decreases by region is as follows:
•Appalachia: Sales volumes decreased 14%36% and coal royalty revenues decreased $4.3$10.6 million primarily as a result ofdue to weakened coal markets,demand compounded by the temporary COVID-19 pandemic.
•Illinois Basin: Sales volumes increased 38% due to increased activity at the Hillsboro and Williamson mines, while coal royalty revenues decreased $1.4 million primarily due to the idling of our Macoupin property. As mentioned above, certain propertiesrevenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to lessee bankruptcies and the idling of the Pinnacle mine since the fourth quarter of 2018.
contract modifications with Foresight Energy that fixed consideration paid to us over a two-year period.Illinois•Northern Powder River Basin: Sales volumes decreased 10%31% and coal royalty revenues decreased $0.3 million primarily due to reduced demand for Illinois Basin coal.
Northern Powder River Basin: Sales volumes decreased 38% and coal royalty revenues decreased $0.7$1.2 million primarily due to our lessee mining off of our property in accordance with its mine plan in 2019.
Other Revenues
Total other revenues increased $3.4 million primarily due to $3.4 million of increased minimum lease straight-line revenues primarily related to our Hillsboro property that we began to recognize in 2019 after the completion of the Hillsboro litigation settlement with Foresight and $1.5 million of increased lease amendment revenues during the third quarter of 2019. These increases were partially offset by lower coal overriding royalty revenues due to reduced sales volumes and lower oil and gas royalty revenues driven by lower natural gas prices during the third quarter of 2019 compared to the prior year quarter.2020.
Transportation and Processing Services Revenues
Transportation and processing services revenues decreased $3.0$1.7 million primarily due to weakened demand for Illinois Basin coal that resulted in fewer tons being transported outidling of our Illinois Basinthe Macoupin mine where we own loadout and other transportation and processing assets during the third quarter of 2019.assets.
Gain on Asset Sales and Disposals
Gain on asset sales and disposals increaseddecreased $6.1 million primarily due to the disposal of certain mineral right assets during the third quarter of 2019.
Soda Ash
Revenues and other income related to our Soda Ash segment increased $5.0decreased $11.8 million primarily due to an increasea combination of lower pricing and volumes sold. Ciner Wyoming was negatively impacted by the COVID-19 pandemic as lower activity in productionthe global auto, container and sales volumesconstruction industries reduced demand for glass and increased domesticsoda ash.
Operating and international sales prices compared to the third quarter of 2018.
OperatingOther Expenses
The following table presents the significant categories of our consolidated operating and other expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands) | | 2020 | | 2019 | |
Operating expenses | | | | | | | | |
Operating and maintenance expenses | | $ | 5,781 | | | $ | 5,994 | | | $ | (213) | | | (4) | % |
Depreciation, depletion and amortization | | 2,111 | | | 3,384 | | | (1,273) | | | (38) | % |
General and administrative expenses | | 3,634 | | | 4,253 | | | (619) | | | (15) | % |
Asset impairments | | 934 | | | 484 | | | 450 | | | 93 | % |
Total operating expenses | | $ | 12,460 | | | $ | 14,115 | | | $ | (1,655) | | | (12) | % |
| | | | | | | | |
| | | | | | | | |
Other expenses, net | | | | | | | | |
Interest expense, net | | $ | 10,254 | | | $ | 10,431 | | | $ | (177) | | | (2) | % |
| | | | | | | | |
| | | | | | | | |
Total other expenses, net | | $ | 10,254 | | | $ | 10,431 | | | $ | (177) | | | (2) | % |
|
| | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands) | | 2019 | | 2018 | |
Operating expenses | | | | | | | | |
Operating and maintenance expenses | | $ | 5,994 |
| | $ | 6,790 |
| | $ | (796 | ) | | (12 | )% |
Depreciation, depletion and amortization | | 3,384 |
| | 4,888 |
| | (1,504 | ) | | (31 | )% |
General and administrative expenses | | 4,253 |
| | 3,183 |
| | 1,070 |
| | 34 | % |
Asset impairments | | 484 |
| | — |
| | 484 |
| | 100 | % |
Total operating expenses | | $ | 14,115 |
| | $ | 14,861 |
| | $ | (746 | ) | | (5 | )% |
Total operating expenses decreased $0.7$1.7 million primarily due to the following:
Operating and maintenance expenses include costs to manage the Coal Royalty and Other and Soda Ash segments and primarily consist of royalty, tax, employee-related and legal costs and bad debt expense. These costs decreased $0.8a $1.3 million compared to the prior year quarter primarily due to lower legal costs.
Depreciation,decrease in depreciation, depletion and amortization expense decreased $1.5 million due toas a result of lower coal sales volumes at certain properties.
General and administrative expenses increased $1.1 million primarily due to higher legal costs.
Interest Expense, NetInterest expense, net decreased $7.1 million primarily due to lower debt balances during the third quarter of 2019 as a result of debt repayments.
Income from Discontinued Operations
Income from discontinued operationsdecreased $2.7 million primarily as a result of the sale of our construction aggregates business in the fourth quarter of 2018. This business generated $2.7 million of net income in the third quarter of 2018.
Adjusted EBITDA (Non-GAAP Financial Measure)
The following table reconciles net income (loss) from continuing operations (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | |
For the Three Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2020 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 19,173 | | | $ | 1,890 | | | $ | (13,847) | | | $ | 7,216 | |
Less: equity earnings from unconsolidated investment | | — | | | (1,986) | | | — | | | (1,986) | |
| | | | | | | | |
| | | | | | | | |
Add: interest expense, net | | 41 | | | — | | | 10,213 | | | 10,254 | |
| | | | | | | | |
| | | | | | | | |
Add: depreciation, depletion and amortization | | 2,111 | | | — | | | — | | | 2,111 | |
Add: asset impairments | | 934 | | | — | | | — | | | 934 | |
Adjusted EBITDA | | $ | 22,259 | | | $ | (96) | | | $ | (3,634) | | | $ | 18,529 | |
| | | | | | | | |
September 30, 2019 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 40,252 | | | $ | 13,595 | | | $ | (14,684) | | | $ | 39,163 | |
Less: equity earnings from unconsolidated investment | | — | | | (13,818) | | | — | | | (13,818) | |
| | | | | | | | |
Add: total distributions from unconsolidated investment | | — | | | 6,370 | | | — | | | 6,370 | |
Add: interest expense, net | | — | | | — | | | 10,431 | | | 10,431 | |
| | | | | | | | |
| | | | | | | | |
Add: depreciation, depletion and amortization | | 3,384 | | | — | | | — | | | 3,384 | |
Add: asset impairments | | 484 | | | — | | | — | | | 484 | |
Adjusted EBITDA | | $ | 44,120 | | | $ | 6,147 | | | $ | (4,253) | | | $ | 46,014 | |
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | |
For the Three Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2019 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 40,252 |
| | $ | 13,595 |
| | $ | (14,684 | ) | | $ | 39,163 |
|
Less: equity earnings from unconsolidated investment | | — |
| | (13,818 | ) | | — |
| | (13,818 | ) |
Add: total distributions from unconsolidated investment | | — |
| | 6,370 |
| | — |
| | 6,370 |
|
Add: interest expense, net | | — |
| | — |
| | 10,431 |
| | 10,431 |
|
Add: loss on extinguishment of debt | | — |
| | — |
| | — |
| | — |
|
Add: depreciation, depletion and amortization | | 3,384 |
| | — |
| | — |
| | 3,384 |
|
Add: asset impairments | | 484 |
| | — |
| | — |
| | 484 |
|
Adjusted EBITDA | | $ | 44,120 |
|
| $ | 6,147 |
|
| $ | (4,253 | ) |
| $ | 46,014 |
|
| | | | | | | | |
September 30, 2018 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 37,693 |
| | $ | 8,836 |
| | $ | (20,676 | ) | | $ | 25,853 |
|
Less: equity earnings from unconsolidated investment | | — |
| | (8,836 | ) | | — |
| | (8,836 | ) |
Add: net loss attributable to non-controlling interest | | 359 |
| | — |
| | — |
| | 359 |
|
Add: total distributions from unconsolidated investment | | — |
| | 12,250 |
| | — |
| | 12,250 |
|
Add: interest expense, net | | — |
| | — |
| | 17,493 |
| | 17,493 |
|
Add: depreciation, depletion and amortization | | 4,888 |
| | — |
| | — |
| | 4,888 |
|
Adjusted EBITDA | | $ | 42,940 |
|
| $ | 12,250 |
| | $ | (3,183 | ) |
| $ | 52,007 |
|
Adjusted EBITDA decreased $6.0$27.5 million primarily due to lowerthe following:
•Coal Royalty and Other Segment
◦Adjusted EBITDA decreased $21.9 million primarily as a result of the weakened coal markets in the third quarter of 2020.
•Soda Ash Segment
◦Adjusted EBITDA decreased $6.2 million as a result of the suspended cash distributions receiveddistribution from Ciner Wyoming in the third quarter of 2020 as compared to the $6.4 million distribution received during the third quarter of 2019.
Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF")(Non-GAAP Financial Measures)
The following table presents the three major categories of the statement of cash flows by business segment:
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | |
For the Three Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2019 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 41,094 |
| | $ | 6,147 |
| | $ | (5,507 | ) | | $ | 41,734 |
|
Investing activities | | 6,567 |
| | — |
| | — |
| | 6,567 |
|
Financing activities | | — |
| | — |
| | (21,913 | ) | | (21,913 | ) |
| | | | | | | | |
September 30, 2018 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 41,604 |
| | $ | 12,250 |
| | $ | (27,368 | ) | | $ | 26,486 |
|
Investing activities | | 1,590 |
| | — |
| | — |
| | 1,590 |
|
Financing activities | | — |
| | — |
| | (20,798 | ) | | (20,798 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | |
For the Three Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2020 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 28,573 | | | $ | (75) | | | $ | (4,175) | | | $ | 24,323 | |
Investing activities | | 332 | | | — | | | — | | | 332 | |
Financing activities | | — | | | — | | | (19,910) | | | (19,910) | |
| | | | | | | | |
September 30, 2019 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 41,094 | | | $ | 6,147 | | | $ | (5,507) | | | $ | 41,734 | |
Investing activities | | 6,567 | | | — | | | — | | | 6,567 | |
Financing activities | | — | | | — | | | (21,913) | | | (21,913) | |
The following table reconciles net cash provided by (used in) operating activities of continuing operations (the most comparable GAAP financial measure) by business segment to DCF and FCF:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | |
For the Three Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2020 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 28,573 | | | $ | (75) | | | $ | (4,175) | | | $ | 24,323 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Add: return of long-term contract receivable | | 332 | | | — | | | — | | | 332 | |
| | | | | | | | |
| | | | | | | | |
Distributable cash flow and free cash flow | | $ | 28,905 | | | $ | (75) | | | $ | (4,175) | | | $ | 24,655 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
September 30, 2019 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 41,094 | | | $ | 6,147 | | | $ | (5,507) | | | $ | 41,734 | |
| | | | | | | | |
Add: proceeds from sale of assets | | 6,108 | | | — | | | — | | | 6,108 | |
Add: proceeds from sale of discontinued operations | | — | | | — | | | — | | | (122) | |
Add: return of long-term contract receivable | | 459 | | | — | | | — | | | 459 | |
| | | | | | | | |
| | | | | | | | |
Distributable cash flow | | $ | 47,661 | | | $ | 6,147 | | | $ | (5,507) | | | $ | 48,179 | |
Less: proceeds from sale of assets | | (6,108) | | | — | | | — | | | (6,108) | |
Less: proceeds from sale of discontinued operations | | — | | | — | | | — | | | 122 | |
| | | | | | | | |
Free cash flow | | $ | 41,553 | | | $ | 6,147 | | | $ | (5,507) | | | $ | 42,193 | |
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | |
For the Three Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2019 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 41,094 |
| | $ | 6,147 |
| | $ | (5,507 | ) | | $ | 41,734 |
|
Add: proceeds from asset sales and disposals | | 6,108 |
| | — |
| | — |
| | 6,108 |
|
Add: proceeds from sale of discontinued operations | | — |
| | — |
| | — |
| | (122 | ) |
Add: return of long-term contract receivable | | 459 |
| | — |
| | — |
| | 459 |
|
Distributable cash flow | | $ | 47,661 |
|
| $ | 6,147 |
|
| $ | (5,507 | ) |
| $ | 48,179 |
|
Less: proceeds from asset sales and disposals | | (6,108 | ) | | — |
| | — |
| | (6,108 | ) |
Less: proceeds from sale of discontinued operations | | — |
| | — |
| | — |
| | 122 |
|
Free cash flow | | $ | 41,553 |
| | $ | 6,147 |
| | $ | (5,507 | ) | | $ | 42,193 |
|
| | | | | | | | |
September 30, 2018 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 41,604 |
| | $ | 12,250 |
| | $ | (27,368 | ) | | $ | 26,486 |
|
Add: return of long-term contract receivable | | 1,590 |
| | — |
| | — |
| | 1,590 |
|
Distributable cash flow and Free cash flow | | $ | 43,194 |
| | $ | 12,250 |
| | $ | (27,368 | ) | | $ | 28,076 |
|
DCF and FCF increased $20.1decreased $23.5 million and $14.1$17.5 million, respectively, primarily due to the following:
•Coal Royalty and Other Segment
| |
◦ | DCF increased $4.5 million primarily as a result of the proceeds received for the disposal of certain assets and the collection of the Hillsboro minimum payment in the third quarter of 2019, partially offset by lower coal royalty revenues as described above. |
| |
◦ | FCF decreased $1.6 million primarily due to lower coal royalty revenues in the third quarter of 2019 as compared to the same period in 2018, partially offset by collection of the Hillsboro minimum payment in the third quarter of 2019. |
◦DCF and FCF decreased $18.8 million and $12.6 million, respectively, primarily as a result of the weakened coal markets in the third quarter of 2020. DCF was also impacted by $6.1 million in asset sale proceeds received in the third quarter of 2019.
•Soda Ash Segment
| |
◦ | ◦DCF and FCF decreased $6.1 million as a result of lower cash distributions received from Ciner Wyoming in the third quarter of 2019. |
Corporate and Financing Segment
| |
◦ | DCF and FCF increased $21.9 million primarily due to lower cash paid for interest as a result of the timing of interest payments on our 2022 Senior Notes in 2018 as compared to the timing of interest payments on our 2025 Senior Notes in 2019 and due to lower interest payments on our Opco Senior Notes as a result of lower principal balances during the third quarter of 2019. |
FCF decreased $6.2 million as a result of the suspended cash distribution from Ciner Wyoming in the third quarter of 2020 as compared to the $6.4 million distribution received during the third quarter of 2019.
Results of Operations
First Nine Months of 20192020 and 20182019 Compared
Revenues and Other Income
The following table includes our revenues and other income by operating segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, | | Decrease | | Percentage Change |
Operating Segment (In thousands) | | 2020 | | 2019 | |
Coal Royalty and Other | | $ | 95,955 | | | $ | 175,386 | | | $ | (79,431) | | | (45) | % |
Soda Ash | | 5,200 | | | 36,833 | | | (31,633) | | | (86) | % |
Total | | $ | 101,155 | | | $ | 212,219 | | | $ | (111,064) | | | (52) | % |
|
| | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
Operating Segment (In thousands) | | 2019 | | 2018 | |
Coal Royalty and Other | | $ | 175,386 |
| | $ | 152,969 |
| | $ | 22,417 |
| | 15 | % |
Soda Ash | | 36,833 |
| | 34,986 |
| | 1,847 |
| | 5 | % |
Total | | $ | 212,219 |
| | $ | 187,955 |
| | $ | 24,264 |
| | 13 | % |
The changes in revenues and other income is discussed for each of the operating segments below:
Coal Royalty and Other
The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands, except per ton data) | 2020 | | 2019 | |
Coal sales volumes (tons) | | | | | | | |
Appalachia | | | | | | | |
Northern | 516 | | | 2,774 | | | (2,258) | | | (81) | % |
Central | 7,643 | | | 10,469 | | | (2,826) | | | (27) | % |
Southern | 820 | | | 1,172 | | | (352) | | | (30) | % |
Total Appalachia | 8,979 | | | 14,415 | | | (5,436) | | | (38) | % |
Illinois Basin | 1,841 | | | 1,646 | | | 195 | | | 12 | % |
Northern Powder River Basin | 1,232 | | | 1,979 | | | (747) | | | (38) | % |
| | | | | | | |
Total coal sales volumes | 12,052 | | | 18,040 | | | (5,988) | | | (33) | % |
| | | | | | | |
Coal royalty revenue per ton | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 2.22 | | | $ | 2.23 | | | $ | (0.01) | | | — | % |
Central | 4.28 | | | 5.79 | | | (1.51) | | | (26) | % |
Southern | 4.70 | | | 7.00 | | | (2.30) | | | (33) | % |
| | | | | | | |
Illinois Basin | 2.48 | | | 4.70 | | | (2.22) | | | (47) | % |
Northern Powder River Basin | 3.66 | | | 3.21 | | | 0.45 | | | 14 | % |
| | | | | | | |
Combined average coal royalty revenue per ton | 3.88 | | | 4.94 | | | (1.06) | | | (21) | % |
| | | | | | | |
Coal royalty revenues | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 1,143 | | | $ | 6,173 | | | $ | (5,030) | | | (81) | % |
Central | 32,726 | | | 60,628 | | | (27,902) | | | (46) | % |
Southern | 3,857 | | | 8,204 | | | (4,347) | | | (53) | % |
Total Appalachia | 37,726 | | | 75,005 | | | (37,279) | | | (50) | % |
Illinois Basin | 4,570 | | | 7,739 | | | (3,169) | | | (41) | % |
Northern Powder River Basin | 4,510 | | | 6,347 | | | (1,837) | | | (29) | % |
| | | | | | | |
Unadjusted coal royalty revenues | 46,806 | | | 89,091 | | | (42,285) | | | (47) | % |
Coal royalty adjustment for minimum leases (1) | (6,247) | | | (1,530) | | | (4,717) | | | (308) | % |
Total coal royalty revenues | $ | 40,559 | | | $ | 87,561 | | | $ | (47,002) | | | (54) | % |
| | | | | | | |
Other revenues | | | | | | | |
Production lease minimum revenues (1) | $ | 13,554 | | | $ | 21,331 | | | $ | (7,777) | | | (36) | % |
Minimum lease straight-line revenues (1) | 12,349 | | | 11,152 | | | 1,197 | | | 11 | % |
Property tax revenues | 4,256 | | | 4,416 | | | (160) | | | (4) | % |
Wheelage revenues | 5,468 | | | 5,035 | | | 433 | | | 9 | % |
Coal overriding royalty revenues | 3,319 | | | 10,163 | | | (6,844) | | | (67) | % |
Lease amendment revenues | 2,591 | | | 6,720 | | | (4,129) | | | (61) | % |
| | | | | | | |
Aggregates royalty revenues | 1,068 | | | 3,655 | | | (2,587) | | | (71) | % |
Oil and gas royalty revenues | 4,923 | | | 2,575 | | | 2,348 | | | 91 | % |
Other revenues | 752 | | | 1,429 | | | (677) | | | (47) | % |
Total other revenues | $ | 48,280 | | | $ | 66,476 | | | $ | (18,196) | | | (27) | % |
Coal royalty and other | $ | 88,839 | | | $ | 154,037 | | | $ | (65,198) | | | (42) | % |
Transportation and processing services revenues | 6,651 | | | 14,740 | | | (8,089) | | | (55) | % |
Gain on asset sales and disposals | 465 | | | 6,609 | | | (6,144) | | | (93) | % |
Total Coal Royalty and Other segment revenues and other income | $ | 95,955 | | | $ | 175,386 | | | $ | (79,431) | | | (45) | % |
|
| | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands, except per ton data) | 2019 | | 2018 | |
Coal sales volumes (tons) | | | | | | | |
Appalachia | | | | | | | |
Northern | 2,774 |
| | 1,490 |
| | 1,284 |
| | 86 | % |
Central | 10,469 |
| | 11,582 |
| | (1,113 | ) | | (10 | )% |
Southern | 1,172 |
| | 1,288 |
| | (116 | ) | | (9 | )% |
Total Appalachia | 14,415 |
| | 14,360 |
| | 55 |
| | 0.4 | % |
Illinois Basin | 1,646 |
| | 2,091 |
| | (445 | ) | | (21 | )% |
Northern Powder River Basin | 1,979 |
| | 2,896 |
| | (917 | ) | | (32 | )% |
Total coal sales volumes | 18,040 |
| | 19,347 |
| | (1,307 | ) | | (7 | )% |
| | | | | | | |
Coal royalty revenue per ton | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 2.23 |
| | $ | 3.82 |
| | $ | (1.59 | ) | | (42 | )% |
Central | 5.79 |
| | 5.57 |
| | 0.22 |
| | 4 | % |
Southern | 7.00 |
| | 6.98 |
| | 0.02 |
| | 0.3 | % |
Illinois Basin | 4.70 |
| | 4.56 |
| | 0.14 |
| | 3 | % |
Northern Powder River Basin | 3.21 |
| | 2.70 |
| | 0.51 |
| | 19 | % |
Combined average coal royalty revenue per ton | 4.94 |
| | 4.99 |
| | (0.05 | ) | | (1 | )% |
| | | | | | | |
Coal royalty revenues | | | | | | | |
Appalachia | | | | | | | |
Northern | $ | 6,173 |
| | $ | 5,698 |
| | $ | 475 |
| | 8 | % |
Central | 60,628 |
| | 64,538 |
| | (3,910 | ) | | (6 | )% |
Southern | 8,204 |
| | 8,985 |
| | (781 | ) | | (9 | )% |
Total Appalachia | 75,005 |
| | 79,221 |
| | (4,216 | ) | | (5 | )% |
Illinois Basin | 7,739 |
| | 9,533 |
| | (1,794 | ) | | (19 | )% |
Northern Powder River Basin | 6,347 |
| | 7,817 |
| | (1,470 | ) | | (19 | )% |
Unadjusted coal royalty revenues | 89,091 |
|
| 96,571 |
|
| (7,480 | ) | | (8 | )% |
Coal royalty adjustment for minimum leases | (1,530 | ) | | (98 | ) | | (1,432 | ) | | (1,461 | )% |
Total coal royalty revenues | $ | 87,561 |
|
| $ | 96,473 |
| | $ | (8,912 | ) | | (9 | )% |
| | | | | | | |
Other revenues | | | | | | | |
Production lease minimum revenues | $ | 21,331 |
| | $ | 6,310 |
| | $ | 15,021 |
| | 238 | % |
Minimum lease straight-line revenues | 11,152 |
| | 1,739 |
| | 9,413 |
| | 541 | % |
Property tax revenues | 4,416 |
| | 3,968 |
| | 448 |
| | 11 | % |
Wheelage revenues | 5,035 |
| | 5,155 |
| | (120 | ) | | (2 | )% |
Coal overriding royalty revenues | 10,163 |
| | 10,492 |
| | (329 | ) | | (3 | )% |
Lease amendment revenues | 6,720 |
| | — |
| | 6,720 |
| | 100 | % |
Aggregates royalty revenues | 3,655 |
| | 3,551 |
| | 104 |
| | 3 | % |
Oil and gas royalty revenues | 2,575 |
| | 5,679 |
| | (3,104 | ) | | (55 | )% |
Other | 1,429 |
| | 1,545 |
| | (116 | ) | | (8 | )% |
Total other revenues | $ | 66,476 |
| | $ | 38,439 |
| | $ | 28,037 |
| | 73 | % |
Coal royalty and other | $ | 154,037 |
| | $ | 134,912 |
| | $ | 19,125 |
| | 14 | % |
Transportation and processing services | 14,740 |
| | 17,238 |
| | (2,498 | ) | | (14 | )% |
Gain on asset sales and disposals | 6,609 |
| | 819 |
| | 5,790 |
| | 707 | % |
Total Coal Royalty and Other segment revenues and other income | $ | 175,386 |
| | $ | 152,969 |
| | $ | 22,417 |
| | 15 | % |
(1)Beginning April 1, 2020 and effective January 1, 2020, certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications with Foresight Energy that fixed consideration paid to us over a two-year period.
Coal Royalty Revenues
CoalTotal coal royalty revenues decreased $8.9$47.0 million year-over-year.from 2019 to 2020 primarily driven by weakened coal markets that resulted in lower coal sales volumes and pricing. The discussion of these decreases by region is as follows:
•Appalachia: Sales volumes were flat year-over year whiledecreased 38% and revenues decreased $4.2$37.3 million or 5%. Northern Appalachia includes our Hibbs Run property that has significant sales volumes but a low fixed royalty rate per ton and as a result has a minimal impact on our revenues. Excluding Hibbs Run, sales volumes from our Appalachia properties decreased approximately 8% primarily as a result of due to weakened coal markets,demand compounded by the temporary idling of certain properties COVID-19 pandemic.
•Illinois Basin: Sales volumes increased 12% due to lessee bankruptciesincreased activity at the Hillsboro and Williamson mines, while coal royalty revenues decreased $3.2 million primarily due to the idling of the Pinnacle mine since the fourth quarter of 2018.
our Macoupin property. As mentioned above, certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications with Foresight Energy that fixed consideration paid to us over a two-year period.Illinois•Northern Powder River Basin: Sales volumes decreased 21%38% and coal royalty revenues decreased $1.8 million primarily due to flooding and high water throughout the river systems that affected transportation logistics during the first half of 2019, including at the Convent Marine Terminal on the Gulf of Mexico, in addition to a weakening of the thermal export market and lower domestic thermal coal demand in 2019.
Northern Powder River Basin: Sales volumes decreased 32% and coal royalty revenues decreased $1.5 million primarily due to our lessee mining off of our property in accordance with its mine plan in 2019.
2020, partially offset by a 14% increase in sales prices as compared to the prior year.Other Revenues
Total otherOther revenues increased $28.0decreased $18.2 million primarily due to:to the following:
$15.0•A $7.8 million increaseddecrease in production lease minimum revenues primarily as a result of increasedthe Macoupin lease amendment and lessee forfeitures of recoupable balances in the second quarter of 2019 from minimums paid in prior periods.periods;
$9.4•A $6.8 million increased minimum lease straight-line revenues primarily related to our Hillsboro property that we began to recognizedecrease in 2019 after the completion of the Hillsboro litigation settlement with Foresight.
$6.7 million of lease amendment revenues during the nine months ended September 30, 2019.
These increases in other revenues were partially offset by $3.1 million of lower oil and gascoal overriding royalty revenues during the nine months ended September 30, 2019revenues primarily as a result of lower natural gas pricesproduction at the Williamson mine moving off NRP's overriding royalty interest and back onto NRP's coal reserves. As a result, this decrease in coal overriding royalty revenues was offset by an increase in coal royalty revenues.
•A $4.1 million decrease in lease amendment revenues year-over-year.
Transportation and Processing Services Revenues
Transportation and processing services revenues decreased $2.5$8.1 million primarily due to weakened demand for Illinois Basin coal that resulted in fewer tons being transported outidling of our Illinois Basinthe Macoupin mine where we own loadout and other transportation and processing assets during the nine months ended September 30, 2019.assets.
Gain on Asset Sales and Disposals
Gain on asset sales and disposals increased $5.8decreased $6.1 million primarily due to the disposal of certain mineral right assets during the third quarter of 2019.
Soda Ash
Revenues and other income related to our Soda Ash segment increased $1.8decreased $31.6 million primarily due to an increase in production and sales volumes and increased domestic and international sales prices in the nine months ended September 30, 2019 compared to the prior year period, partially offsetprimarily due to a combination of lower pricing and volumes sold. Ciner Wyoming was negatively impacted by Ciner Wyoming's settlement of a royalty disputethe COVID-19 pandemic as lower activity in the second quarter of 2018 that resulted in $12.7 million of income in the prior year period.global auto, container and construction industries reduced demand for glass and soda ash.
Operating and Other Expenses
The following table presents the significant categories of our consolidated operating and other expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands) | | 2020 | | 2019 | |
Operating expenses | | | | | | | | |
Operating and maintenance expenses | | $ | 19,200 | | | $ | 26,813 | | | $ | (7,613) | | | (28) | % |
Depreciation, depletion and amortization | | 6,185 | | | 11,746 | | | (5,561) | | | (47) | % |
General and administrative expenses | | 11,168 | | | 12,799 | | | (1,631) | | | (13) | % |
Asset impairments | | 133,217 | | | 484 | | | 132,733 | | | 27,424 | % |
Total operating expenses | | $ | 169,770 | | | $ | 51,842 | | | $ | 117,928 | | | 227 | % |
| | | | | | | | |
Other expenses, net | | | | | | | | |
Interest expense, net | | $ | 30,891 | | | $ | 37,061 | | | $ | (6,170) | | | (17) | % |
| | | | | | | | |
Loss on extinguishment of debt | | — | | | 29,282 | | | (29,282) | | | (100) | % |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total other expenses, net | | $ | 30,891 | | | $ | 66,343 | | | $ | (35,452) | | | (53) | % |
|
| | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, | | Increase (Decrease) | | Percentage Change |
(In thousands) | | 2019 | | 2018 | |
Operating expenses | | | | | | | | |
Operating and maintenance expenses | | $ | 26,813 |
| | $ | 21,122 |
| | $ | 5,691 |
| | 27 | % |
Depreciation, depletion and amortization | | 11,746 |
| | 15,364 |
| | (3,618 | ) | | (24 | )% |
General and administrative expenses | | 12,799 |
| | 10,782 |
| | 2,017 |
| | 19 | % |
Asset impairments | | 484 |
| | 242 |
| | 242 |
| | 100 | % |
Total operating expenses | | $ | 51,842 |
| | $ | 47,510 |
| | $ | 4,332 |
| | 9 | % |
| | | | | | | | |
Other expenses, net | | | | | | | | |
Interest expense, net | | $ | 37,061 |
|
| $ | 53,177 |
| | $ | (16,116 | ) | | (30 | )% |
Loss on extinguishment of debt | | 29,282 |
|
| — |
| | 29,282 |
| | 100 | % |
Total other expenses, net | | $ | 66,343 |
|
| $ | 53,177 |
|
| $ | 13,166 |
| | 25 | % |
Total operating expenses increased $4.3$117.9 million primarily due to the following:
•Asset impairments increased $132.7 million due to weakened coal markets that resulted in termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties.
This increase in operating expense was partially offset by:
•Operating and maintenance expenses increased $5.7include costs to manage the Coal Royalty and Other and Soda Ash segments and primarily consist of royalty, tax, employee-related and legal costs and bad debt expense. These costs decreased $7.6 million primarily due to a decrease in bad debt expense recognized in the second quarter of 2019addition to lower royalty fees related to certain of our Coal Royalty and Other receivables, partiallyan overriding royalty agreement with Western Pocahontas Properties Limited Partnership ("WPPLP"). The coal royalty expense NRP pays to WPPLP is fully offset by lower legal costs.the coal royalty revenue NRP receives from this property.
•Depreciation, depletion and amortization expense decreased $3.6$5.6 million primarily due to lower coal sales volumes at certain properties.
General and administrative expenses increased $2.0 million primarily due to increased legal and consulting costs.
Total other expenses, net increased $13.2decreased $35.5 million primarily due to the following:
Interest expense, net decreased $16.1 million primarily due to lower debt balances during the first nine months of 2019 as a result of debt repayments.
•Loss on extinguishment of debt wasof $29.3 million for the nine months ended September 30,in 2019 and related to the 105.25% premium paid to redeem the 2022 Senior Notes in the second quarter of 2019 as well as the write-off of unamortized debt issuance costs and debt discount related to the 2022 Senior Notes.
Income from Discontinued Operations
Income from discontinued operations•Interest expense, net decreased $3.5$6.2 million primarily as a result of the sale of our construction aggregates business in the fourth quarter of 2018. This business generated $3.8 million of net income indue to lower debt balances during the first nine months of 2018.2020 as a result of debt repayments made over the past twelve months.
Adjusted EBITDA (Non-GAAP Financial Measure)
The following table reconciles net income (loss) from continuing operations (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
For the Nine Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2020 | | | | | | | | |
Net income (loss) from continuing operations | | $ | (62,562) | | | $ | 5,059 | | | $ | (42,003) | | | $ | (99,506) | |
Less: equity earnings from unconsolidated investment | | — | | | (5,200) | | | — | | | (5,200) | |
| | | | | | | | |
| | | | | | | | |
Add: total distributions from unconsolidated investment | | — | | | 14,210 | | | — | | | 14,210 | |
Add: interest expense, net | | 56 | | | — | | | 30,835 | | | 30,891 | |
| | | | | | | | |
| | | | | | | | |
Add: depreciation, depletion and amortization | | 6,185 | | | — | | | — | | | 6,185 | |
Add: asset impairments | | 133,217 | | | — | | | — | | | 133,217 | |
Adjusted EBITDA | | $ | 76,896 | | | $ | 14,069 | | | $ | (11,168) | | | $ | 79,797 | |
| | | | | | | | |
September 30, 2019 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 136,566 | | | $ | 36,610 | | | $ | (79,142) | | | $ | 94,034 | |
Less: equity earnings from unconsolidated investment | | — | | | (36,833) | | | — | | | (36,833) | |
| | | | | | | | |
Add: total distributions from unconsolidated investment | | — | | | 25,480 | | | — | | | 25,480 | |
Add: interest expense, net | | — | | | — | | | 37,061 | | | 37,061 | |
| | | | | | | | |
Add: loss on extinguishment of debt | | — | | | — | | | 29,282 | | | 29,282 | |
Add: depreciation, depletion and amortization | | 11,746 | | | — | | | — | | | 11,746 | |
Add: asset impairments | | 484 | | | — | | | — | | | 484 | |
Adjusted EBITDA | | $ | 148,796 | | | $ | 25,257 | | | $ | (12,799) | | | $ | 161,254 | |
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
For the Nine Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2019 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 136,566 |
| | $ | 36,610 |
| | $ | (79,142 | ) | | $ | 94,034 |
|
Less: equity earnings from unconsolidated investment | | — |
| | (36,833 | ) | | — |
| | (36,833 | ) |
Add: total distributions from unconsolidated investment | | — |
| | 25,480 |
| | — |
| | 25,480 |
|
Add: interest expense, net | | — |
| | — |
| | 37,061 |
| | 37,061 |
|
Add: loss on extinguishment of debt | | — |
| | — |
| | 29,282 |
| | 29,282 |
|
Add: depreciation, depletion and amortization | | 11,746 |
| | — |
| | — |
| | 11,746 |
|
Add: asset impairments | | 484 |
| | — |
| | — |
| | 484 |
|
Adjusted EBITDA | | $ | 148,796 |
| | $ | 25,257 |
| | $ | (12,799 | ) | | $ | 161,254 |
|
| | | | | | | | |
September 30, 2018 | | | | | | | | |
Net income (loss) from continuing operations | | $ | 116,241 |
| | $ | 34,986 |
| | $ | (63,959 | ) | | $ | 87,268 |
|
Less: equity earnings from unconsolidated investment | | — |
| | (34,986 | ) | | — |
| | (34,986 | ) |
Less: net income attributable to non-controlling interest | | (510 | ) | | — |
| | — |
| | (510 | ) |
Add: total distributions from unconsolidated investment | | — |
| | 36,750 |
| | — |
| | 36,750 |
|
Add: interest expense, net | | — |
| | — |
| | 53,177 |
| | 53,177 |
|
Add: depreciation, depletion and amortization | | 15,364 |
| | — |
| | — |
| | 15,364 |
|
Add: asset impairments | | 242 |
| | — |
| | — |
| | 242 |
|
Adjusted EBITDA | | $ | 131,337 |
| | $ | 36,750 |
| | $ | (10,782 | ) | | $ | 157,305 |
|
Adjusted EBITDA increased $3.9decreased $81.5 million primarily due to the following:
•Coal Royalty and Other Segment
| |
◦ | Adjusted EBITDA increased $17.5 million primarily as a result of the increase in revenues and other income, partially offset by increased operating and maintenance expenses, both discussed above. |
◦Adjusted EBITDA decreased $71.9 million primarily as a result of weakened coal markets in the first nine months of 2020.
•Soda Ash Segment
| |
◦ | Adjusted EBITDA decreased $11.5 million as a result of lower cash distributions received from Ciner Wyoming in the first nine months of 2019. |
◦Adjusted EBITDA decreased $11.2 million as a result of lower cash distributions received from Ciner Wyoming in the first nine months of 2020.
Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF")(Non-GAAP (Non-GAAP Financial Measures)
The following table presents the three major categories of the statement of cash flows by business segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
For the Nine Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2020 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 91,082 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 74,413 | |
Investing activities | | 969 | | | — | | | — | | | 969 | |
Financing activities | | — | | | — | | | (58,074) | | | (58,074) | |
| | | | | | | | |
September 30, 2019 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 139,821 | | | $ | 25,257 | | | $ | (47,153) | | | $ | 117,925 | |
Investing activities | | 7,962 | | | — | | | — | | | 7,962 | |
Financing activities | | — | | | — | | | (219,754) | | | (219,754) | |
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
For the Nine Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2019 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 139,821 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 117,925 |
|
Investing activities | | 7,962 |
| | — |
| | — |
| | 7,962 |
|
Financing activities | | — |
| | — |
| | (219,754 | ) | | (219,754 | ) |
| | | | | | | | |
September 30, 2018 | | | | | | | | |
Cash flow provided by (used in) continuing operations | | | | | | | | |
Operating activities | | $ | 132,122 |
| | $ | 34,653 |
| | $ | (68,982 | ) | | $ | 97,793 |
|
Investing activities | | 3,432 |
| | 2,097 |
| | — |
| | 5,529 |
|
Financing activities | | — |
| | — |
| | (71,695 | ) | | (71,695 | ) |
The following table reconciles net cash provided by (used in) operating activities of continuing operations (the most comparable GAAP financial measure) by business segment to DCF and FCF:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
For the Nine Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2020 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 91,082 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 74,413 | |
| | | | | | | | |
Add: proceeds from asset sales and disposals | | 507 | | | — | | | — | | | 507 | |
Add: proceeds from sale of discontinued operations | | — | | | — | | | — | | | (66) | |
Add: return of long-term contract receivable | | 1,462 | | | — | | | — | | | 1,462 | |
| | | | | | | | |
| | | | | | | | |
Distributable cash flow | | $ | 93,051 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 76,316 | |
Less: proceeds from asset sales and disposals | | (507) | | | — | | | — | | | (507) | |
Less: proceeds from sale of discontinued operations | | — | | | — | | | — | | | 66 | |
Less: acquisition costs | | (1,000) | | | — | | | — | | | (1,000) | |
| | | | | | | | |
Free cash flow | | $ | 91,544 | | | $ | 14,091 | | | $ | (30,760) | | | $ | 74,875 | |
| | | | | | | | |
September 30, 2019 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 139,821 | | | $ | 25,257 | | | $ | (47,153) | | | $ | 117,925 | |
Add: proceeds from asset sales and disposals | | 6,611 | | | — | | | — | | | 6,611 | |
Add: proceeds from sale of discontinued operations | | — | | | — | | | — | | | (556) | |
Add: return of long-term contract receivable | | 1,351 | | | — | | | — | | | 1,351 | |
Distributable cash flow | | $ | 147,783 | | | $ | 25,257 | | | $ | (47,153) | | | $ | 125,331 | |
Less: proceeds from asset sales and disposals | | (6,611) | | | — | | | — | | | (6,611) | |
Less: proceeds from sale of discontinued operations | | — | | | — | | | — | | | 556 | |
Free cash flow | | $ | 141,172 | | | $ | 25,257 | | | $ | (47,153) | | | $ | 119,276 | |
|
| | | | | | | | | | | | | | | | |
| | Operating Segments | | | | |
For the Nine Months Ended (In thousands) | | Coal Royalty and Other | | Soda Ash | | Corporate and Financing | | Total |
September 30, 2019 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 139,821 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 117,925 |
|
Add: proceeds from asset sales and disposals | | 6,611 |
| | — |
| | — |
| | 6,611 |
|
Add: proceeds from sale of discontinued operations | | — |
| | — |
| | — |
| | (556 | ) |
Add: return of long-term contract receivable | | 1,351 |
| | — |
| | — |
| | 1,351 |
|
Distributable cash flow | | $ | 147,783 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 125,331 |
|
Less: proceeds from asset sales and disposals | | (6,611 | ) | | — |
| | — |
| | (6,611 | ) |
Less: proceeds from sale of discontinued operations | | — |
|
| — |
|
| — |
|
| 556 |
|
Free cash flow | | $ | 141,172 |
| | $ | 25,257 |
| | $ | (47,153 | ) | | $ | 119,276 |
|
| | | | | | | | |
September 30, 2018 | | | | | | | | |
Net cash provided by (used in) operating activities of continuing operations | | $ | 132,122 |
| | $ | 34,653 |
| | $ | (68,982 | ) | | $ | 97,793 |
|
Add: distributions from unconsolidated investment in excess of cumulative earnings | | — |
| | 2,097 |
| | — |
| | 2,097 |
|
Add: proceeds from asset sales and disposals | | 826 |
| | — |
| | — |
| | 826 |
|
Add: return of long-term contract receivable | | 2,606 |
| | — |
| | — |
| | 2,606 |
|
Distributable cash flow | | $ | 135,554 |
| | $ | 36,750 |
| | $ | (68,982 | ) | | $ | 103,322 |
|
Less: proceeds from asset sales and disposals | | (826 | ) |
| — |
|
| — |
|
| (826 | ) |
Free cash flow | | $ | 134,728 |
| | $ | 36,750 |
| | $ | (68,982 | ) | | $ | 102,496 |
|
DCF and FCF increased $22.0decreased $49.0 million and $16.8$44.4 million, respectively, primarily due to the following:
•Coal Royalty and Other Segment
| |
◦ | DCF and FCF increased $12.2 million and $6.4 million, respectively, as a result of the collection of lease amendment fees and the Hillsboro minimum payments in the first nine months of 2019, partially offset by lower coal royalty revenues as described above. DCF also increased as a result of the proceeds received in the third quarter of 2019 related to the sale and disposal of certain assets. |
◦DCF and FCF decreased $54.7 million and $49.6 million, respectively, primarily as a result of the weakened coal markets in the first nine months of 2020. DCF was also impacted by a $6.1 million decrease in asset sale proceeds compared to the third quarter of 2019.
•Soda Ash Segment
| |
◦ | DCF and FCF decreased $11.5 million as a result of lower cash distributions received from Ciner Wyoming in the first nine months of 2019. |
◦DCF and FCF decreased $11.2 million as a result of lower cash distributions received from Ciner Wyoming in the first nine months of 2020.
•Corporate and Financing Segment
| |
◦ | DCF and FCF increased $21.8 million primarily due to lower cash paid for interest as a result of the timing of interest payments on our 2022 Senior Notes in 2018 as compared to the timing of interest payments on our 2025 Senior Notes in 2019 and lower interest paid on our Opco Senior Notes as a result of lower principal balances during the first nine months of 2019. |
◦DCF and FCF increased $16.4 million primarily due to lower cash paid for interest as a result of less outstanding debt in the first nine months of 2020.
Liquidity and Capital Resources
Current Liquidity
As of September 30, 2019,2020, we had total liquidity of $212.2$215.6 million, consisting of $99.6$115.6 million of cash and cash equivalents $12.5 million of restricted cash and $100.0 million of borrowing capacity under theour Opco Credit Facility. The $12.5 million of restricted cash is required to be used to repay debt, make acquisitions or make capital expenditures per the terms of our debt agreements. We intend to use our restricted cash to repay a portion of the remaining principal payments on our Opco Senior Notes in 2019.
Cash Flows
Cash flows provided by operating activities increased $10.4decreased $41.8 million, from $107.5 million in the nine months ended September 30, 2018 to $117.9 million in the nine months ended September 30, 2019 to $76.1 million in the nine months ended September 30, 2020 primarily related to the timing of interest payments on our 2022 Senior Notes in 2018 as compared to the timing of interest payments on our 2025 Senior Notes in 2019, lower operating cash paid for interest on our Opco Senior Notesflow as a result of lower debt balances during the first nine months of 2019, and the collection of lease amendment fees and the Hillsboro minimum payment within our Coal Royalty and Other segment. These increases were partially offset byweakened coal markets in addition to lower cash distributions received from Ciner Wyoming lower coal royalty revenues drivenin the first nine months of 2020, partially offset by weakened coal markets,less cash paid for interest in the temporary idlingfirst nine months of certain properties2020 due to lessee bankruptcies and the idling of the Pinnacle mine since the fourth quarter of 2018, and lower cash provided by operating activities of discontinued operations as a result of the sale of our construction aggregates business in the fourth quarter of 2018.less debt outstanding.
Cash flows provided by investing activities increased $11.2decreased $6.5 million, from $3.8 million used in the nine months ended September 30, 2018 to $7.4 million provided in the nine months ended September 30, 2019 primarily due to $9.7 million of capital expenditures made by our discontinued operation in the first nine months of 2018 and a $5.8 million increase in proceeds from asset sales and disposals year-over-year. These increases were partially offset by a portion of our distribution from Ciner Wyoming being classified as an investing activity in the nine months ended September 30, 2018.
Cash flows used in financing activities increased $149.0 million, from $70.2$0.9 million in the nine months ended September 30, 20182020 primarily due to a $6.1 million decrease in asset sale proceeds compared to the third quarter of 2019.
Cash flows used in financing activities decreased $159.5 million, from $219.2 million in the nine months ended September 30, 2019. In2019 to $59.7 million in the second quarter of 2019, we extended the maturity date of the $100.0 million Opco Credit Facilitynine months ended September 30, 2020 primarily due to April 2023 and issued $300 million of a new series of 9.125% senior notes due 2025. We used the net proceeds from this offering, together with $76 million of cash on hand to redeem all of our 2022 Senior Notes. As a result of these transactions, our outstanding debt was reduced, our annual interest expense has decreased, and our debt maturities were extended. Significant increases in cash flow used in financing activities included the following:
•$345.6 million used for the redemption of our 2022 Senior Notes in the second quarter of 2019;
$41.4•The $49.3 million increasepre-payment in payments on the Opco Senior Notes primarily as a resultfirst quarter of the prepayment made using proceeds from2019 related to the sale of our construction aggregates business;
•$35.026.4 million less borrowings on our Opco Credit Facilityin debt issuance costs and other in 2019 primarily related to 2019 debt refinancings; and
•$16.1 million in lower cash distributions in the first nine months of 2019 compared to the prior year period;
$26.2 million increase in debt issuance costs and other primarily related to the 2019 debt refinancings; and
$10.7 million increase in common unit distributions made in 2019 primarily2020 as a result of a one-timethe special common unit distribution paid in 2019 and suspending the common unit distribution in the second quarter of $0.85 per common unit.2020.
These increasesdecreases in cash flows used in financing activities were partially offset by the following:by:
•$300 million provided by the issuance of the 2025 Senior Notes in the second quarter of 2019; and
$8.8 million less cash used in the first nine months of 2019 compared to the prior year period as a result of the redemption of preferred units paid-in-kind in the first quarter of 2018.
2019.
Capital Resources and Obligations
Debt, Net
We had the following debt outstanding as of September 30, 20192020 and December 31, 2018:2019:
| | | | | | | | | | | |
| September 30, | | December 31, |
(In thousands) | 2020 | | 2019 |
Current portion of long-term debt, net | $ | 39,072 | | | $ | 45,776 | |
Long-term debt, net | 452,401 | | | 470,422 | |
Total debt, net | $ | 491,473 | | | $ | 516,198 | |
|
| | | | | | | |
(In thousands) | September 30, 2019 | | December 31, 2018 |
Current portion of long-term debt, net | $ | 45,789 |
| | $ | 115,184 |
|
Long-term debt, net | 490,378 |
| | 557,574 |
|
Total debt, net | $ | 536,167 |
| | $ | 672,758 |
|
We have been and continue to be in compliance with the terms of the financial covenants contained in our debt agreements. For additional information regarding our debt and the agreements governing our debt, including the covenants contained therein, see Note 10.8. Debt, Net to the consolidated financial statementsConsolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. Off-Balance Sheet Transactions
We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and accordingly, there are no off-balance sheet risks to our liquidity and capital resources from unconsolidated entities.
Related Party Transactions
The information required set forth under Note 12.10. Related Party Transactions to the consolidated financial statementsConsolidated Financial Statements is incorporated herein by reference. Summary of Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statementsConsolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Recent Accounting Standards
The information set forth under Note 1. Basis of Presentation to the consolidated financial statementsConsolidated Financial Statements is incorporated herein by reference. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, which includes adverse changes in commodity prices and interest rates as discussed below:
Commodity Price Risk
Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing commodity prices. Historically, coal prices have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile. Depressed prices in the future would have a negative impact on our future financial results. In particular, substantially lower prices would significantly reduce revenues and could potentially trigger an impairment of our coal properties or a violation of certain financial debt covenants. Because substantially all of our reserves are coal, changes in coal prices have a more significant impact on our financial results.
We are dependent upon the effective marketing of the coal mined by our lessees. Our lessees sell the coal under various long-term and short-term contracts as well as on the spot market. Current conditions in the coal industry may make it difficult for our lessees to extend existing contracts or enter into supply contracts with terms of one year or more. Our lessees’ failure to negotiate long-term contracts could adversely affect the stability and profitability of our lessees’ operations and adversely affect our future financial results. If more coal is sold on the spot market, coal royalty revenues may become more volatile due to fluctuations in spot coal prices.
The market price of soda ash and energy costs directly affects the profitability of Ciner Wyoming’s operations. If the market price for soda ash declines, Ciner Wyoming’s sales revenues will decrease. Historically, the global market and, to a lesser extent, the domestic market for soda ash have been volatile and are likely to remain volatile in the future.
The uncertainty that exists with respect to the economic impact of the global COVID-19 pandemic has introduced significant volatility in the financial markets subsequent to our quarter ended September 30, 2020. The impacts of such volatility on the Partnership cannot be predicted with confidence or reasonably estimated at this time.
Interest Rate Risk
Our exposure to changes in interest rates results from our borrowings under the Opco Credit Facility, which is subject to variable interest rates based upon LIBOR. At September 30, 2019,2020, we did not have any borrowings outstanding under the Opco Credit Facility.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
NRP carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of NRP management, including the Chief Executive Officer and Chief Financial Officer of the general partner of the general partner of NRP. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in the Partnership’s Internal Control Over Financial Reporting
There were no material changes in the Partnership’s internal control over financial reporting during the first nine months of 20192020 that materially affected, or were reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, we believe these ordinary course matters will not have a material effect on our financial position, liquidity or operations.
For more information regarding certain other legal proceedings involving the Partnership, including the lawsuit involving Anadarko, see Note 14. Commitments and Contingencies to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, Item 3. “Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2018, and Item 1A. “Risk Factors—Risks Related to Our Business—An adverse outcome in our contingent consideration payment dispute with Anadarko could have an adverse effect on our business and liquidity,” in our Annual Report on Form 10-K for the year ended December 31, 2018 which are incorporated herein by reference.ITEM 1A. RISK FACTORS
During the period covered by this report, except as provided below, there were no material changes from the risk factors previously disclosed in Natural Resource Partners L.P.’s Annual Report on Form 10-K for the year ended December 31, 20182019 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.March 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
|
| | | | | | | | | | | |
Exhibit Number
| | | Description | |
| | Purchase Agreement, dated as of January 23, 2013, by and among Anadarko Holding Company, Big Island Trona Company, NRP Trona LLC and NRP (Operating) LLC (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on January 25, 2013). |
| | Purchase and Sale Agreement dated as of November 16, 2018, by and between NRP (Operating) LLC and VantaCore Intermediate Holdings LLC (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on November 20, 2018). | |
| | | Fifth Amended and Restated Agreement of Limited Partnership of Natural Resource Partners L.P., dated as of March 2, 2017 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on March 6, 2017). | |
| | | Fifth Amended and Restated Agreement of Limited Partnership of NRP (GP) LP, dated as of December 16, 2011 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on December 16, 2011). | |
| | | Fifth Amended and Restated Limited Liability Company Agreement of GP Natural Resource Partners LLC, dated as of October 31, 2013 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on October 31, 2013). | |
| | | Certificate of Limited Partnership of Natural Resource Partners L.P. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed April 19, 2002, File No. 333-86582). | |
| | Indenture, dated April 29, 2019, by and among Natural Resource Partners L.P. and NRP Finance Corporation, as issuers, and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed on May 2, 2019). |
| | Form of 9.125% Senior Notes due 2025 (contained in Exhibit 1 to Exhibit 4.1). |
| | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley. | |
| | | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley. | |
| | | Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350. | |
| | | Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350. | |
101.INS* | | | Inline XBRL Instance Document | |
101.SCH* | | | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | | | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | | | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* | | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | | | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) | |
* | | Filed herewith | | |
* | | | Filed herewith | |
** | | | Furnished herewith | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned and thereunto duly authorized.
|
| | | | | | | | | | |
| NATURAL RESOURCE PARTNERS L.P. |
| By: | | NRP (GP) LP, its general partner |
| By: | | GP NATURAL RESOURCE |
| | | PARTNERS LLC, its general partner |
| | | |
Date: November 6, 2019 | | |
| By: | | /s/ CORBIN J. ROBERTSON, JR. |
| | | Corbin J. Robertson, Jr. |
| | | Chairman of the Board and |
| | | Chief Executive Officer |
| | | (Principal Executive Officer) |
|
| | | |
Date: November 6, 20195, 2020 | | |
| By: | | /s/ CORBIN J. ROBERTSON, JR. |
| | | Corbin J. Robertson, Jr. |
| | | Chairman of the Board and |
| | | Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | | | | | | | | | |
Date: November 5, 2020 | | |
| By: | | /s/ CHRISTOPHER J. ZOLAS |
| | | Christopher J. Zolas |
| | | Chief Financial Officer and Treasurer |
| | | (Principal Financial and Accounting Officer) |