NATURAL RESOURCE PARTNERS LP
10-Ks and 10-Qs
SECURITIES AND EXCHANGE COMMISSION
|
Washington, D.C. 20549
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FORM 10-Q
|
ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
||
For the quarterly period ended
March 31, 2020
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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NATURAL RESOURCE PARTNERS L.P.
|
|||
|
(Exact name of registrant as specified in its charter)
|
|||
|
Delaware
|
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35-2164875
|
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(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
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
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Trading Symbol(s)
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Name of each exchange on which registered
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||
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Common Units representing limited partner interests
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NRP
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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 every Interactive Data File required to be submitted 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
|
¨
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Accelerated Filer
|
|
ý
|
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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
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Page
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i
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
|
March 31,
|
December 31,
|
||||||
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(In thousands, except unit data)
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2020
|
2019
|
|||||
|
ASSETS
|
(Unaudited)
|
||||||
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Current assets
|
|||||||
|
Cash and cash equivalents
|
$
|
100,506
|
|
$
|
98,265
|
|
|
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Accounts receivable, net
|
34,113
|
|
30,869
|
|
|||
|
Prepaid expenses and other, net
|
1,166
|
|
1,244
|
|
|||
|
Current assets of discontinued operations
|
—
|
|
1,706
|
|
|||
|
Total current assets
|
$
|
135,785
|
|
$
|
132,084
|
|
|
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Land
|
24,008
|
|
24,008
|
|
|||
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Mineral rights, net
|
603,208
|
|
605,096
|
|
|||
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Intangible assets, net
|
17,607
|
|
17,687
|
|
|||
|
Equity in unconsolidated investment
|
261,224
|
|
263,080
|
|
|||
|
Long-term contract receivable, net
|
34,816
|
|
36,963
|
|
|||
|
Other assets, net
|
6,774
|
|
6,989
|
|
|||
|
Total assets
|
$
|
1,083,422
|
|
$
|
1,085,907
|
|
|
|
LIABILITIES AND CAPITAL
|
|||||||
|
Current liabilities
|
|||||||
|
Accounts payable
|
$
|
1,272
|
|
$
|
1,179
|
|
|
|
Accrued liabilities
|
6,004
|
|
8,764
|
|
|||
|
Accrued interest
|
9,376
|
|
2,316
|
|
|||
|
Current portion of deferred revenue
|
6,021
|
|
4,608
|
|
|||
|
Current portion of long-term debt, net
|
45,767
|
|
45,776
|
|
|||
|
Current liabilities of discontinued operations
|
—
|
|
65
|
|
|||
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Total current liabilities
|
$
|
68,440
|
|
$
|
62,708
|
|
|
|
Deferred revenue
|
54,065
|
|
47,213
|
|
|||
|
Long-term debt, net
|
454,110
|
|
470,422
|
|
|||
|
Other non-current liabilities
|
4,804
|
|
4,949
|
|
|||
|
Total liabilities
|
$
|
581,419
|
|
$
|
585,292
|
|
|
|
Commitments and contingencies (see Note 12)
|
|||||||
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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
|
|
|
|
Partners’ capital
|
|||||||
|
Common unitholders’ interest (12,261,199 units issued and outstanding at March 31, 2020 and December 31, 2019)
|
$
|
273,847
|
|
$
|
271,471
|
|
|
|
General partner’s interest
|
3,305
|
|
3,270
|
|
|||
|
Warrant holders’ interest
|
66,816
|
|
66,816
|
|
|||
|
Accumulated other comprehensive loss
|
(3,617
|
)
|
(2,594
|
)
|
|||
|
Total partners’ capital
|
$
|
340,351
|
|
$
|
338,963
|
|
|
|
Non-controlling interest
|
(2,935
|
)
|
(2,935
|
)
|
|||
|
Total capital
|
$
|
337,416
|
|
$
|
336,028
|
|
|
|
Total liabilities and capital
|
$
|
1,083,422
|
|
|
$
|
1,085,907
|
|
The accompanying notes are an integral part of these consolidated financial statements.
1
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
For the Three Months Ended March 31,
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||||||
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(In thousands, except per unit data)
|
2020
|
2019
|
|||||
|
Revenues and other income
|
|||||||
|
Coal royalty and other
|
$
|
31,433
|
|
$
|
49,502
|
|
|
|
Transportation and processing services
|
2,509
|
|
5,601
|
|
|||
|
Equity in earnings of Ciner Wyoming
|
6,272
|
|
11,682
|
|
|||
|
Gain on asset sales and disposals
|
—
|
|
256
|
|
|||
|
Total revenues and other income
|
$
|
40,214
|
|
|
$
|
67,041
|
|
|
Operating expenses
|
|||||||
|
Operating and maintenance expenses
|
$
|
5,202
|
|
$
|
8,360
|
|
|
|
Depreciation, depletion and amortization
|
2,012
|
|
4,392
|
|
|||
|
General and administrative expenses
|
3,913
|
|
4,350
|
|
|||
|
Total operating expenses
|
$
|
11,127
|
|
$
|
17,102
|
|
|
|
Income from operations
|
$
|
29,087
|
|
$
|
49,939
|
|
|
|
Interest expense, net
|
$
|
(10,308
|
)
|
$
|
(14,174
|
)
|
|
|
Net income from continuing operations
|
$
|
18,779
|
|
$
|
35,765
|
|
|
|
Loss from discontinued operations
|
—
|
|
(46
|
)
|
|||
|
Net income
|
$
|
18,779
|
|
$
|
35,719
|
|
|
|
Less: income attributable to preferred unitholders
|
(7,500
|
)
|
(7,500
|
)
|
|||
|
Net income attributable to common unitholders and general partner
|
$
|
11,279
|
|
$
|
28,219
|
|
|
|
Net income attributable to common unitholders
|
$
|
11,053
|
|
$
|
27,655
|
|
|
|
Net income attributable to the general partner
|
226
|
|
564
|
|
|||
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Income from continuing operations per common unit (see Note 4)
|
|||||||
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Basic
|
$
|
0.90
|
|
$
|
2.26
|
|
|
|
Diluted
|
0.52
|
|
1.75
|
|
|||
|
Net income per common unit (see Note 4)
|
|||||||
|
Basic
|
$
|
0.90
|
|
$
|
2.26
|
|
|
|
Diluted
|
0.52
|
|
1.75
|
|
|||
|
Net income
|
$
|
18,779
|
|
$
|
35,719
|
|
|
|
Comprehensive income (loss) from unconsolidated investment and other
|
(1,023
|
)
|
1,005
|
|
|||
|
Comprehensive income
|
$
|
17,756
|
|
$
|
36,724
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
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
|
|||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||
|
(In thousands)
|
Units
|
Amounts
|
||||||||||||||||||||||||||||
|
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)
|
—
|
|
(3,833
|
)
|
(78
|
)
|
—
|
|
—
|
|
(3,911
|
)
|
—
|
|
(3,911
|
)
|
||||||||||||||
|
Net income
(1)
|
—
|
|
18,403
|
|
376
|
|
—
|
|
—
|
|
18,779
|
|
—
|
|
18,779
|
|
||||||||||||||
|
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
|
)
|
||||||||||||||
|
Unit-based awards amortization and vesting
|
—
|
|
673
|
|
—
|
|
—
|
|
—
|
|
673
|
|
—
|
|
673
|
|
||||||||||||||
|
Comprehensive loss from unconsolidated investment and other
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,023
|
)
|
(1,023
|
)
|
—
|
|
(1,023
|
)
|
||||||||||||||
|
Balance at March 31, 2020
|
12,261
|
|
$
|
273,847
|
|
$
|
3,305
|
|
$
|
66,816
|
|
$
|
(3,617
|
)
|
$
|
340,351
|
|
$
|
(2,935
|
)
|
$
|
337,416
|
|
|||||||
|
(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.
|
|
|
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
|
||||||||||||||||||||||||||||
|
Balance at December 31, 2018
|
12,249
|
|
$
|
355,113
|
|
$
|
5,014
|
|
$
|
66,816
|
|
$
|
(3,462
|
)
|
$
|
423,481
|
|
$
|
(2,935
|
)
|
$
|
420,546
|
|
|||||||
|
Net income
(1)
|
—
|
|
35,005
|
|
714
|
|
—
|
|
—
|
|
35,719
|
|
—
|
|
35,719
|
|
||||||||||||||
|
Distributions to common unitholders and general partner
|
—
|
|
(5,513
|
)
|
(112
|
)
|
—
|
|
—
|
|
(5,625
|
)
|
—
|
|
(5,625
|
)
|
||||||||||||||
|
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
|
—
|
|
399
|
|
—
|
|
—
|
|
—
|
|
399
|
|
—
|
|
399
|
|
||||||||||||||
|
Comprehensive income from unconsolidated investment and other
|
—
|
|
—
|
|
10
|
|
—
|
|
1,005
|
|
1,015
|
|
—
|
|
1,015
|
|
||||||||||||||
|
Balance at March 31, 2019
|
12,261
|
|
$
|
378,140
|
|
$
|
5,476
|
|
$
|
66,816
|
|
$
|
(2,457
|
)
|
$
|
447,975
|
|
$
|
(2,935
|
)
|
$
|
445,040
|
|
|||||||
|
(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.
3
|
|
For the Three Months Ended March 31,
|
||||||
|
(In thousands)
|
2020
|
2019
|
|||||
|
Cash flows from operating activities
|
|||||||
|
Net income
|
$
|
18,779
|
|
$
|
35,719
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
|
|||||||
|
Depreciation, depletion and amortization
|
2,012
|
|
4,392
|
|
|||
|
Distributions from unconsolidated investment
|
7,105
|
|
9,800
|
|
|||
|
Equity earnings from unconsolidated investment
|
(6,272
|
)
|
(11,682
|
)
|
|||
|
Gain on asset sales and disposals
|
—
|
|
(256
|
)
|
|||
|
Loss from discontinued operations
|
—
|
|
46
|
|
|||
|
Bad debt expense
|
(190
|
)
|
10
|
|
|||
|
Unit-based compensation expense
|
729
|
|
901
|
|
|||
|
Amortization of debt issuance costs and other
|
448
|
|
1,796
|
|
|||
|
Change in operating assets and liabilities:
|
|||||||
|
Accounts receivable
|
(5,073
|
)
|
(4,937
|
)
|
|||
|
Accounts payable
|
93
|
|
(616
|
)
|
|||
|
Accrued liabilities
|
(2,861
|
)
|
(6,164
|
)
|
|||
|
Accrued interest
|
7,060
|
|
(10,033
|
)
|
|||
|
Deferred revenue
|
8,265
|
|
4,534
|
|
|||
|
Other items, net
|
60
|
|
(678
|
)
|
|||
|
Net cash provided by operating activities of continuing operations
|
$
|
30,155
|
|
$
|
22,832
|
|
|
|
Net cash provided by operating activities of discontinued operations
|
1,706
|
|
121
|
|
|||
|
Net cash provided by operating activities
|
$
|
31,861
|
|
$
|
22,953
|
|
|
|
Cash flows from investing activities
|
|||||||
|
Proceeds from asset sales and disposals
|
$
|
—
|
|
$
|
256
|
|
|
|
Return of long-term contract receivable
|
272
|
|
441
|
|
|||
|
Net cash provided by investing activities of continuing operations
|
$
|
272
|
|
$
|
697
|
|
|
|
Net cash used in investing activities of discontinued operations
|
(66
|
)
|
(390
|
)
|
|||
|
Net cash provided by investing activities
|
$
|
206
|
|
$
|
307
|
|
|
|
Cash flows from financing activities
|
|||||||
|
Debt repayments
|
$
|
(16,696
|
)
|
$
|
(86,468
|
)
|
|
|
Distributions to common unitholders and general partner
|
(5,630
|
)
|
(5,625
|
)
|
|||
|
Distributions to preferred unitholders
|
(7,500
|
)
|
(7,500
|
)
|
|||
|
Contributions from (to) discontinued operations
|
1,640
|
|
(269
|
)
|
|||
|
Debt issuance costs and other
|
—
|
|
10
|
|
|||
|
Net cash used in financing activities of continuing operations
|
$
|
(28,186
|
)
|
$
|
(99,852
|
)
|
|
|
Net cash provided by (used in) financing activities of discontinued operations
|
(1,640
|
)
|
269
|
|
|||
|
Net cash used in financing activities
|
$
|
(29,826
|
)
|
$
|
(99,583
|
)
|
|
|
Net increase (decrease) in cash and cash equivalents
|
$
|
2,241
|
|
$
|
(76,323
|
)
|
|
|
Cash and cash equivalents at beginning of period
|
98,265
|
|
206,030
|
|
|||
|
Cash and cash equivalents at end of period
|
$
|
100,506
|
|
$
|
129,707
|
|
|
|
Supplemental cash flow information:
|
|||||||
|
Cash paid during the period for interest
|
$
|
3,039
|
|
$
|
23,422
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
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
two
operating segments further described in
Note 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 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, 2019 and notes thereto included in the Partnership's Annual Report on Form 10-K, which was filed with the SEC on February 27, 2020.
Recently Adopted Accounting Standards
Credit Losses
On January 1, 2020, the Partnership adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), and all the related amendments ("the new credit loss standard"). The Partnership recognized a
$3.9 million
cumulative effect of adoption in the opening balance of partners' capital on January 1, 2020 as a result of the adoption of the new credit loss standard. See
Note 15. Credit Losses
for more information.
5
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
2. Revenues from Contracts with Customers
The following table presents the Partnership's Coal Royalty and Other segment revenues by major source:
|
For the Three Months Ended March 31,
|
||||||||
|
(In thousands)
|
2020
|
2019
|
||||||
|
Coal royalty revenues
|
$
|
19,102
|
|
$
|
32,131
|
|
||
|
Production lease minimum revenues
|
802
|
|
2,700
|
|
||||
|
Minimum lease straight-line revenues
|
3,809
|
|
3,316
|
|
||||
|
Property tax revenues
|
1,599
|
|
1,433
|
|
||||
|
Wheelage revenues
|
2,204
|
|
1,415
|
|
||||
|
Coal overriding royalty revenues
|
1,322
|
|
3,975
|
|
||||
|
Lease amendment revenues
|
843
|
|
771
|
|
||||
|
Aggregates royalty revenues
|
576
|
|
1,464
|
|
||||
|
Oil and gas royalty revenues
|
1,103
|
|
1,719
|
|
||||
|
Other revenues
|
73
|
|
578
|
|
||||
|
Coal royalty and other revenues
(1)
|
$
|
31,433
|
|
$
|
49,502
|
|
||
|
Transportation and processing services revenues
(2)
|
2,509
|
|
5,601
|
|
||||
|
Total coal royalty and other segment revenues
|
$
|
33,942
|
|
$
|
55,103
|
|
||
|
(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
$1.2 million
and
$2.9 million
for the three months ended
March 31, 2020
and
2019
, respectively. The remaining transportation and processing services revenues of
$1.3 million
and
$2.7 million
for the three months ended
March 31, 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 Transaction
and
Note 16. Leases
for more information.
|
The following table details the Partnership's Coal Royalty and Other segment receivables and liabilities resulting from contracts with customers:
|
March 31,
|
December 31,
|
|||||||
|
(In thousands)
|
2020
|
2019
|
||||||
|
Receivables
|
||||||||
|
Accounts receivable, net
|
$
|
30,726
|
|
$
|
27,915
|
|
||
|
Prepaid expenses and other, net
(1)
|
249
|
|
90
|
|
||||
|
Contract liabilities
|
||||||||
|
Current portion of deferred revenue
|
$
|
6,021
|
|
$
|
4,608
|
|
||
|
Deferred revenue
|
54,065
|
|
47,213
|
|
||||
|
(1)
|
Prepaid expenses and other, net includes notes receivable from contracts with customers.
|
6
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 Three Months Ended March 31,
|
|||||||
|
(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
|
17,153
|
|
11,877
|
|
|||
|
Recognition of previously deferred revenue
|
(8,888
|
)
|
(7,343
|
)
|
|||
|
Balance at end of period (current and non-current)
|
$
|
60,086
|
|
$
|
57,087
|
|
|
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
March 31, 2020
(in thousands):
|
Lease Term
(1)
|
Weighted Average Remaining Years
|
Annual Minimum Payments
(2)
|
||||
|
0 - 5 years
|
2.6
|
$
|
15,036
|
|
||
|
5 - 10 years
|
5.9
|
14,802
|
|
|||
|
10+ years
|
13.8
|
30,587
|
|
|||
|
Total
|
9.1
|
$
|
60,425
|
|
||
|
(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 14. Financing Transaction
for more information.
|
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 available to common unitholders and the general partner is reduced by preferred unit distributions that accumulated during the period. NRP reduced net income available to common unitholders and the general partner by
$7.5 million
during the
three
months ended
March 31, 2020
and
2019
as a result of accumulated preferred unit distributions earned during the period.
The following table shows the distributions declared and paid to common and preferred unitholders during the
three
months ended
March 31, 2020
and
2019
, respectively:
|
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)
|
|||||||||||||
|
February 2020
|
October 1 - December 31, 2019
|
$
|
0.45
|
|
$
|
5,630
|
|
$
|
30.00
|
|
$
|
7,500
|
|
|||||
|
February 2019
|
October 1 - December 31, 2018
|
$
|
0.45
|
|
$
|
5,625
|
|
$
|
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.
|
7
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
4. Net Income Per Common Unit
Basic net income per common unit is computed by dividing net income, after considering income attributable to preferred unitholders and the general partner’s general partner interest, by the weighted average number of common units outstanding. Diluted net income 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 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 per common unit for the three months ended
March 31, 2020
and 2019 included 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 the dilutive effect of the warrants for the three months ended March 31, 2019 includes both the net settlement of warrants to purchase
1.75 million
common units with 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
. The calculation of diluted net income per common unit for the
three
months ended
March 31, 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 following tables reconcile the numerator and denominator of the basic and diluted net income per common unit computations and calculates basic and diluted net income per common unit:
|
|
For the Three Months Ended March 31,
|
||||||
|
(In thousands, except per unit data)
|
2020
|
2019
|
|||||
|
Allocation of net income
|
|||||||
|
Net income from continuing operations
|
$
|
18,779
|
|
$
|
35,765
|
|
|
|
Less: income attributable to preferred unitholders
|
(7,500
|
)
|
(7,500
|
)
|
|||
|
Net income from continuing operations attributable to common unitholders and general partner
|
$
|
11,279
|
|
$
|
28,265
|
|
|
|
Less: net income from continuing operations attributable to the general partner
|
(226
|
)
|
(565
|
)
|
|||
|
Net income from continuing operations attributable to common unitholders
|
$
|
11,053
|
|
|
$
|
27,700
|
|
|
Net loss from discontinued operations
|
$
|
—
|
|
$
|
(46
|
)
|
|
|
Add: net loss from discontinued operations attributable to the general partner
|
—
|
|
1
|
|
|||
|
Net loss from discontinued operations attributable to common unitholders
|
$
|
—
|
|
$
|
(45
|
)
|
|
|
Net income
|
$
|
18,779
|
|
$
|
35,719
|
|
|
|
Less: income attributable to preferred unitholders
|
(7,500
|
)
|
(7,500
|
)
|
|||
|
Net income attributable to common unitholders and general partner
|
$
|
11,279
|
|
$
|
28,219
|
|
|
|
Less: net income attributable to the general partner
|
(226
|
)
|
(564
|
)
|
|||
|
Net income attributable to common unitholders
|
$
|
11,053
|
|
|
$
|
27,655
|
|
|
Basic net income (loss) per common unit
|
|||||||
|
Weighted average common units—basic
|
12,261
|
|
12,255
|
|
|||
|
Basic net income from continuing operations per common unit
|
$
|
0.90
|
|
$
|
2.26
|
|
|
|
Basic net loss from discontinued operations per common unit
|
$
|
—
|
|
$
|
—
|
|
|
|
Basic net income per common unit
|
$
|
0.90
|
|
$
|
2.26
|
|
|
8
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
|
|
For the Three Months Ended March 31,
|
||||||
|
(In thousands, except per unit data)
|
2020
|
2019
|
|||||
|
Diluted income (loss) per common unit
|
|||||||
|
Weighted average common units—basic
|
12,261
|
|
12,255
|
|
|||
|
Plus: dilutive effect of preferred units
|
23,187
|
|
6,664
|
|
|||
|
Plus: dilutive effect of warrants
|
—
|
|
1,096
|
|
|||
|
Weighted average common units—diluted
|
35,448
|
|
20,015
|
|
|||
|
Net income from continuing operations
|
$
|
18,779
|
|
$
|
35,765
|
|
|
|
Less: diluted net income from continuing operations attributable to the general partner
|
(376
|
)
|
(715
|
)
|
|||
|
Diluted net income from continuing operations attributable to common unitholders
|
$
|
18,403
|
|
$
|
35,050
|
|
|
|
Diluted net loss from discontinued operations attributable to common unitholders
|
$
|
—
|
|
$
|
(45
|
)
|
|
|
Net income
|
$
|
18,779
|
|
$
|
35,719
|
|
|
|
Less: diluted net income attributable to the general partner
|
(376
|
)
|
(714
|
)
|
|||
|
Diluted net income attributable to common unitholders
|
$
|
18,403
|
|
$
|
35,005
|
|
|
|
Diluted net income from continuing operations per common unit
|
$
|
0.52
|
|
$
|
1.75
|
|
|
|
Diluted net loss from discontinued operations per common unit
|
$
|
—
|
|
$
|
—
|
|
|
|
Diluted net income per common unit
|
$
|
0.52
|
|
$
|
1.75
|
|
|
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
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. 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 various states across the United States. The Partnership's oil and gas royalty assets are primarily located in 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 refinery 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.
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.
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.
9
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 March 31, 2020
|
||||||||||||||||
|
Revenues
|
$
|
33,942
|
|
$
|
6,272
|
|
$
|
—
|
|
$
|
40,214
|
|
||||
|
Operating and maintenance expenses
|
5,186
|
|
16
|
|
—
|
|
5,202
|
|
||||||||
|
Depreciation, depletion and amortization
|
2,012
|
|
—
|
|
—
|
|
2,012
|
|
||||||||
|
General and administrative expenses
|
—
|
|
—
|
|
3,913
|
|
3,913
|
|
||||||||
|
Interest expense, net
|
—
|
|
—
|
|
10,308
|
|
10,308
|
|
||||||||
|
Net income (loss) from continuing operations
|
26,744
|
|
6,256
|
|
(14,221
|
)
|
18,779
|
|
||||||||
|
For the Three Months Ended March 31, 2019
|
||||||||||||||||
|
Revenues
|
$
|
55,103
|
|
$
|
11,682
|
|
$
|
—
|
|
$
|
66,785
|
|
||||
|
Gain on asset sales and disposals
|
256
|
|
—
|
|
—
|
|
256
|
|
||||||||
|
Operating and maintenance expenses
|
8,360
|
|
—
|
|
—
|
|
8,360
|
|
||||||||
|
Depreciation, depletion and amortization
|
4,392
|
|
—
|
|
—
|
|
4,392
|
|
||||||||
|
General and administrative expenses
|
—
|
|
—
|
|
4,350
|
|
4,350
|
|
||||||||
|
Interest expense, net
|
—
|
|
—
|
|
14,174
|
|
14,174
|
|
||||||||
|
Net income (loss) from continuing operations
|
42,607
|
|
11,682
|
|
(18,524
|
)
|
35,765
|
|
||||||||
|
Loss from discontinued operations
|
—
|
|
—
|
|
—
|
|
(46
|
)
|
||||||||
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:
|
|
For the Three Months Ended March 31,
|
|||||||
|
(In thousands)
|
2020
|
2019
|
||||||
|
Balance at beginning of period
|
$
|
263,080
|
|
$
|
247,051
|
|
||
|
Income allocation to NRP’s equity interests
|
7,493
|
|
12,894
|
|
||||
|
Amortization of basis difference
|
(1,221
|
)
|
(1,212
|
)
|
||||
|
Other comprehensive income (loss)
|
(1,023
|
)
|
1,003
|
|
||||
|
Distribution
|
(7,105
|
)
|
(9,800
|
)
|
||||
|
Balance at end of period
|
|
$
|
261,224
|
|
$
|
249,936
|
|
|
The following table represents summarized financial information for Ciner Wyoming as derived from their respective unaudited financial statements for the three months ended
March 31, 2020
and
2019
:
|
For the Three Months Ended March 31,
|
|||||||
|
(In thousands)
|
2020
|
2019
|
|||||
|
Net sales
|
$
|
114,423
|
|
$
|
130,436
|
|
|
|
Gross profit
|
21,417
|
|
34,102
|
|
|||
|
Net income
|
15,292
|
|
26,315
|
|
|||
10
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
7. Mineral Rights, Net
The Partnership’s mineral rights consist of the following:
|
|
March 31, 2020
|
December 31, 2019
|
|||||||||||||||||||||
|
(In thousands)
|
Carrying Value
|
Accumulated Depletion
|
Net Book Value
|
Carrying Value
|
Accumulated Depletion
|
Net Book Value
|
|||||||||||||||||
|
Coal properties
|
$
|
981,352
|
|
$
|
(422,042
|
)
|
$
|
559,310
|
|
$
|
981,352
|
|
$
|
(420,448
|
)
|
$
|
560,904
|
|
|||||
|
Aggregates properties
|
41,486
|
|
(13,474
|
)
|
28,012
|
|
41,486
|
|
(13,357
|
)
|
28,129
|
|
|||||||||||
|
Oil and gas royalty properties
|
12,395
|
|
(8,064
|
)
|
4,331
|
|
12,395
|
|
(7,887
|
)
|
4,508
|
|
|||||||||||
|
Other
|
13,156
|
|
(1,601
|
)
|
11,555
|
|
13,156
|
|
(1,601
|
)
|
11,555
|
|
|||||||||||
|
Total mineral rights, net
|
$
|
1,048,389
|
|
$
|
(445,181
|
)
|
$
|
603,208
|
|
$
|
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 and totaled
$1.9 million
and
$3.5 million
for the
three
months ended
March 31, 2020
and
2019
, respectively.
The Partnership's recorded
zero
impairment expense during the three months ended March 31, 2020. 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 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 future performance and considers both quantitative and qualitative information. While the Partnership's impairment evaluation as of March 31, 2020 incorporated an estimated impact of the global COVID-19 pandemic, there is significant uncertainty as to the severity and duration of this disruption. If the impact is worse than we currently estimate, an impairment charge may be recognized in future periods.
11
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
8. Debt, Net
The Partnership's debt consists of the following:
|
March 31,
|
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
|
$
|
—
|
|
$
|
—
|
|
|
|
Senior Notes
|
|||||||
|
5.05% with semi-annual interest payments in January and July, with annual principal payments in July, due July 2020
|
$
|
6,780
|
|
$
|
6,780
|
|
|
|
5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023
|
9,458
|
|
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
|
$
|
207,359
|
|
$
|
224,056
|
|
|
|
Total debt at face value
|
$
|
507,359
|
|
$
|
524,056
|
|
|
|
Net unamortized debt issuance costs
|
(7,482
|
)
|
(7,858
|
)
|
|||
|
Total debt, net
|
$
|
499,877
|
|
$
|
516,198
|
|
|
|
Less: current portion of long-term debt
|
(45,767
|
)
|
(45,776
|
)
|
|||
|
Total long-term debt, net
|
$
|
454,110
|
|
$
|
470,422
|
|
|
NRP LP Debt
2025 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.
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.
12
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
March 31, 2020
, NRP and NRP Finance were in compliance with the terms of the Indenture relating to their 2025 Senior Notes.
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
March 31, 2020
and
December 31, 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 extended 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
4.0
x; 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
4.0
x to
3.0
x; 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.
|
During the three months ended
March 31, 2020
and 2019, the Partnership did not have any borrowings outstanding under the Opco Credit Facility and had
$100 million
in available borrowing capacity at both March 31, 2020 and December 31, 2019.
The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of
$398.7 million
and
$399.7 million
classified as mineral rights, net and other assets, net on the Partnership’s Consolidated Balance Sheets as of
March 31, 2020
and
December 31, 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
March 31, 2020
and
December 31, 2019
, the Opco Senior Notes had cumulative principal balances of
$207.4 million
and
$224.1 million
, respectively. Opco made mandatory principal payments of
$16.7 million
during the
three
months ended
March 31, 2020
and
$86.5 million
during the
three
months ended
March 31, 2019
, which included a
$49.3 million
pre-payment as a result of the sale of the Partnership's construction aggregates business.
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
March 31, 2020
.
13
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
9. Fair Value Measurements
Fair Value of Financial Assets and Liabilities
The Partnership’s financial assets and liabilities consist of cash and cash equivalents, contract receivable and debt. The carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to their short-term nature. 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 amount and estimated fair value of the Partnership's debt and contract receivable:
|
|
March 31, 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
|
$
|
294,353
|
|
$
|
209,250
|
|
$
|
294,084
|
|
$
|
269,250
|
|
||||
|
Opco Senior Notes
(1)
|
3
|
205,524
|
|
144,633
|
|
222,114
|
|
201,090
|
|
||||||||
|
Opco Credit Facility
|
3
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
|
Assets:
|
|||||||||||||||||
|
Contract receivable (current and long-term)
(2)
|
3
|
$
|
36,747
|
|
$
|
27,692
|
|
$
|
38,945
|
|
$
|
33,460
|
|
||||
|
(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
70%
of par value at March 31, 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 March 31, 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 expenses, net on the Partnership's Consolidated Statements of Comprehensive Income. The embedded derivatives had
zero
value as of
March 31, 2020
and
December 31, 2019
.
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. 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.
14
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Direct general and administrative expenses charged to the Partnership by QMC and WPPLP are included on the Partnership's Consolidated Statement of Comprehensive Income as follows:
|
For the Three Months Ended March 31,
|
||||||||
|
(In thousands)
|
2020
|
2019
|
||||||
|
Operating and maintenance expenses
|
$
|
1,623
|
|
$
|
1,635
|
|
||
|
General and administrative expenses
|
898
|
|
963
|
|
||||
The Partnership had accounts payable to QMC of
$0.4 million
and
$0.1 million
to WPPLP on its Consolidated Balance Sheets as of both
March 31, 2020
and
December 31, 2019
.
During the three months ended
March 31, 2020
and
2019
, the Partnership recognized
$0.1 million
and
$3.0 million
in operating and maintenance expenses, respectively, on its Consolidated Statements of Comprehensive Income related to an overriding royalty agreement with WPPLP. At
December 31, 2019
, the Partnership had
$0.1 million
of accounts payable to WPPLP related to this agreement.
Industrial Minerals Group LLC
Corbin J. Robertson, III, a Director of GP Natural Resource Partners LLC, owns 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. Coal royalty related revenues from Industrial Minerals totaled
$1.6 million
and
$0.2 million
for the
three
months ended
March 31, 2020
and
2019
, respectively. The Partnership had accounts receivable from Industrial Minerals of
$2.6 million
and
$0.7 million
on its Consolidated Balance Sheets as of
March 31, 2020
and
December 31, 2019
, respectively.
11. Major Customers
Revenues from customers that exceeded 10 percent of total revenues for any of the periods presented below are as follows:
|
|
For the Three Months Ended March 31,
|
|||||||||||||
|
|
2020
|
2019
|
||||||||||||
|
(In thousands)
|
Revenues
|
Percent
|
Revenues
|
Percent
|
||||||||||
|
Foresight Energy
(1)
|
$
|
8,661
|
|
22
|
%
|
$
|
16,191
|
|
24
|
%
|
||||
|
Contura Energy
(1)
|
8,571
|
|
21
|
%
|
11,111
|
|
17
|
%
|
||||||
|
(1)
|
Revenues from Foresight Energy and Contura Energy are included within the Partnership's Coal Royalty and Other segment.
|
12. Commitments and Contingencies
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.
In November 2019, the District Court of Harris County, Texas, 157th Judicial District, issued a ruling in the contingent consideration payment dispute that Anadarko Holding Company and its subsidiary, Big Island Trona Company (together, "Anadarko") brought against NRP in July 2017. The Trial Court ruled in NRP’s favor in all respects and ordered that Anadarko take nothing. Anadarko did not appeal the trial court ruling, and accordingly this lawsuit was concluded in the first quarter of 2020 with
no
liability to the Partnership.
15
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
13. Unit-Based Compensation
The Partnership's unit-based awards granted in 2020 and 2019 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
three months ended March 31, 2020
and
2019
were
$3.5 million
and
$5.2 million
, respectively. Total unit-based compensation expense associated with these awards was
$0.7 million
and
$0.9 million
for the
three months ended March 31, 2020
and
2019
, respectively and is included in general and administrative expenses and operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income. The unamortized cost associated with unvested outstanding awards as of
March 31, 2020
is
$5.8 million
, which is to be recognized over a weighted average period of
2.3 years
. The unamortized cost associated with unvested outstanding awards as of
December 31, 2019
was
$3.5 million
.
A summary of the unit activity in the outstanding grants during
2020
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
|
—
|
|
$
|
—
|
|
|
|
Forfeitures
|
—
|
|
$
|
—
|
|
|
|
Outstanding at March 31, 2020
|
360
|
|
$
|
26.08
|
|
|
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 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 through 2032:
|
March 31,
|
December 31,
|
||||||
|
(In thousands)
|
2020
|
2019
|
|||||
|
Accounts receivable, net
|
$
|
804
|
|
$
|
540
|
|
|
|
Contract receivable, net (current and long-term)
|
36,747
|
|
38,945
|
|
|||
|
Unearned income
|
21,120
|
|
21,889
|
|
|||
|
Projected remaining payments, net
|
$
|
58,671
|
|
$
|
61,374
|
|
|
15. Credit Losses
The Partnership is exposed to credit losses through collection of its short-term 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.
16
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
As of March 31, 2020, NRP recorded the following current expected credit loss (“CECL”) related to its receivables:
|
(In thousands)
|
Gross
|
CECL Allowance
|
Net
|
|||||||||
|
Short-term receivables
|
$
|
36,276
|
|
$
|
(1,914
|
)
|
$
|
34,362
|
|
|||
|
Long-term contract receivable
|
36,442
|
|
(1,626
|
)
|
34,816
|
|
||||||
|
Total
|
$
|
72,718
|
|
$
|
(3,540
|
)
|
$
|
69,178
|
|
|||
NRP recorded
$(0.4) million
in operating and maintenance expenses on its Consolidated Statement of Comprehensive Income related to a decrease in CECL allowance during the three months ended March 31, 2020.
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 reconciliation, bankruptcy monitoring, lessee audits and dispute resolution. The Partnership may employ legal counsel or collection specialist to pursue recovery of defaulted receivables.
16. Leases
Lessee Accounting
As of
March 31, 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
March 31, 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 Sheets 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 assets and other non-current liabilities, respectively, on its Consolidated Balance Sheets totaled
$3.5 million
at both December 31, 2019 and
March 31, 2020
. During the
three
months ended
March 31, 2020
and 2019, the Partnership incurred total operating lease expenses of
$0.1 million
included in both operating and maintenance expenses and general and administrative expenses on its Consolidated Statements of Comprehensive Income.
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 March 31, 2020
|
|||
|
2020
|
$
|
362
|
|
|
|
2021
|
483
|
|
||
|
2022
|
483
|
|
||
|
2023
|
483
|
|
||
|
2024
|
483
|
|
||
|
After 2024
|
11,597
|
|
||
|
Total lease payments
(1)
|
$
|
13,891
|
|
|
|
Less: present value adjustment
(2)
|
(10,387
|
)
|
||
|
Total operating lease liability
|
$
|
3,504
|
|
|
|
(1)
|
The remaining lease term of the Partnership's operating lease is
28.75
years.
|
|
(2)
|
The present value of the operating lease liability on the Partnership's Consolidated Balance Sheets 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.
|
17
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Lessor Accounting
The
Partnership 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
$1.0 million
and
$1.2 million
in the
three
months ended March 31, 2020 and
2019
, respectively. After January 2039, the lease provides that the Partnership is entitled to an annual rent of
$10 thousand
per year in place of the variable lease payments.
17. Subsequent Events
The following represents material events that have occurred subsequent to
March 31, 2020
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
In April 2020, NRP announced it would suspend the common unit distribution and would pay-in-kind one-half of the preferred unit distribution with respect to the
first
quarter of 2020.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following review of operations for the
three
month periods ended
March 31, 2020
and
2019
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, 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, 2019
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 from continuing operations less equity earnings from unconsolidated investment, net income attributable to non-controlling interest and gain on reserve 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 8. Debt, Net
in the Notes to Consolidated Financial Statements included herein as well as in "Item 8. Financial Statements and Supplementary Data—Note 12. Debt, Net" in our Annual Report on Form 10-K for the year ended
December 31, 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.
19
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 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 asses 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 receivables; less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as 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 our 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
20
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 trona ore mining and soda ash production business. Our common units trade on the New York Stock Exchange under the symbol "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 various states across the United States, our oil and gas royalty assets are primarily located in 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.
The global COVID-19 pandemic continues to affect businesses across the world. We continue to employ remote work protocols and are conducting business as usual despite the pandemic. While the COVID-19 pandemic did not have a material impact on our first quarter results, we are starting to see the effects of the declining demand for steel, electricity and soda ash on our business. We expect reduced demand will continue and that our results will be negatively impacted in the coming months. Although we are unable to predict the severity or duration of the impact on our business, we currently have approximately $200 million of liquidity. In addition, our $300 million of parent company notes does not mature until 2025. Accordingly, we believe we are well-positioned to manage through the downturn.
Our financial results by segment for the
three
months ended
March 31, 2020
are as follows:
|
Operating Segments
|
||||||||||||||||
|
(In thousands)
|
Coal Royalty and Other
|
Soda Ash
|
Corporate and Financing
|
Total
|
||||||||||||
|
Revenues and other income
|
$
|
33,942
|
|
$
|
6,272
|
|
$
|
—
|
|
$
|
40,214
|
|
||||
|
Net income (loss) from continuing operations
|
$
|
26,744
|
|
$
|
6,256
|
|
$
|
(14,221
|
)
|
$
|
18,779
|
|
||||
|
Adjusted EBITDA
(1)
|
$
|
28,756
|
|
$
|
7,089
|
|
$
|
(3,913
|
)
|
$
|
31,932
|
|
||||
|
Cash flow provided by (used in) continuing operations
|
||||||||||||||||
|
Operating activities
|
$
|
30,556
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,155
|
|
||||
|
Investing activities
|
$
|
272
|
|
$
|
—
|
|
$
|
—
|
|
$
|
272
|
|
||||
|
Financing activities
|
$
|
—
|
|
$
|
—
|
|
$
|
(28,186
|
)
|
$
|
(28,186
|
)
|
||||
|
Distributable cash flow
(1)
|
$
|
30,828
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,361
|
|
||||
|
Free cash flow
(1)
|
$
|
30,828
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,427
|
|
||||
|
(1)
|
See "—Results of Operations" below for reconciliations to the most comparable GAAP financial measures.
|
21
Current Results/Market Commentary
Coal Royalty and Other Business Segment
Our lessees sold
4.5 million
tons of coal from our properties in the first quarter of 2020 and we derived approximately
65%
of our coal royalty revenues and approximately
60%
of our coal royalty sales volumes from metallurgical coal during the
three
months ended
March 31, 2020
. Revenues and other income in the first quarter of 2020 were lower by
$21.4 million
and distributable cash flow and free cash flow were
$12.8 million
and
$12.5 million
lower, respectively, as compared to the prior year period. This decrease is primarily a result of a weakened market for metallurgical coal as compared to the prior year period due to a decline in global steel demand. As a result, both sales volumes and prices for metallurgical coal sold were lower in the first quarter of 2020 compared to the prior year period. In addition, weaker domestic and export thermal coal markets compared to the prior year period resulted in lower revenue from our thermal coal properties. Domestic and export thermal coal markets remained challenged by lower utility demand, continued low natural gas prices and the secular shift to renewable energy.
A number of mines on NRP's properties have been temporarily idled as our coal lessees face not only reduced demand but workforce safety concerns and supply chain disruptions due to the COVID-19 pandemic. NRP believes that lessees who have idled mines will continue to sell coal from inventory, which should result in continued royalty payments to NRP over the near term. However, the pandemic has compounded already weak coal pricing and demand, and even those lessees who continue to operate are seeing significant negative impacts on their businesses.
Additionally, NRP's largest lessee, Foresight Energy, filed for bankruptcy in March 2020 and has continued to operate since the filing. In its bankruptcy filings, Foresight disclosed that it intends to restructure its finances in a plan process. Foresight entered into agreements with its pre-petition lenders to support its restructuring plan process. In addition, Foresight reached agreement with certain of its other key contract counterparties, including NRP, to enter into amendments to the counterparties’ agreements such that Foresight will be able to implement its restructuring plan. In its bankruptcy filings, Foresight announced its intention to continue to operate the Sugar Camp, Williamson, and Hillsboro mining complexes. While Foresight’s filings announced the idling of the Macoupin mine, Foresight recommenced longwall production at its lower-cost Hillsboro mine during the first quarter. NRP expects that any adverse impacts from the idling of the Macoupin mine will be partially offset by benefits from the increased production at the Hillsboro mine. Foresight’s ability to operate profitably and emerge from bankruptcy will continue to be impacted by weakened demand for thermal coal and the global COVID-19 pandemic.
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, we expect that domestic supply of and demand for soda ash will remain stable 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 suppliers of soda ash to international markets.
Revenues and other income in the first quarter of 2020 were lower by
$5.4 million
compared to the prior year quarter primarily due to lower international demand that resulted in lower international soda ash pricing and volumes sold.
Ciner Wyoming started to see the impact of COVID-19 on its operations towards the end of the first quarter in the form of slowing global demand and downward pricing pressure, and while Ciner Wyoming believes this did not have a material adverse effect on its first quarter results it will have a negative impact on subsequent quarters. The extent and duration to which COVID-19 will impact demand is highly uncertain and cannot be predicted with confidence at this time. Ciner Wyoming has focused on safety during this pandemic and is actively managing the business to maintain cash flow and believes it has enough liquidity to meet its anticipated liquidity requirements.
Ciner Wyoming has announced that it will commence a significant capacity expansion capital project soon that it intends to fund in part by reinvesting cash that would otherwise be distributed to its partners. Prior to COVID-19, plans were for NRP to receive approximately $25 million to $28 million of annual cash distributions from Ciner Wyoming until the project is completed. However, due to the COVID-19 pandemic we are unable to predict the ultimate impact that it may have on future distributions we receive. 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.
22
Business Outlook
We expect the challenges described above to continue to negatively impact our results. NRP continues to maintain strong cash balances and liquidity, and efforts to de-lever and de-risk the Partnership over the past five years have prepared NRP to operate through this downturn.
Results of Operations
First
Three
Months of
2020
and
2019
Compared
Revenues and Other Income
The following table includes our revenues and other income by operating segment:
|
For the Three Months Ended March 31,
|
Decrease
|
Percentage
Change |
|||||||||||||
|
Operating Segment (In thousands)
|
2020
|
2019
|
|||||||||||||
|
Coal Royalty and Other
|
$
|
33,942
|
|
$
|
55,359
|
|
$
|
(21,417
|
)
|
(39
|
)%
|
||||
|
Soda Ash
|
6,272
|
|
11,682
|
|
(5,410
|
)
|
(46
|
)%
|
|||||||
|
Total
|
$
|
40,214
|
|
$
|
67,041
|
|
$
|
(26,827
|
)
|
(40
|
)%
|
||||
The changes in revenues and other income is discussed for each of the operating segments below:
23
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 March 31,
|
Increase
(Decrease) |
Percentage
Change |
|||||||||||
|
(In thousands, except per ton data)
|
2020
|
2019
|
||||||||||||
|
Coal sales volumes (tons)
|
||||||||||||||
|
Appalachia
|
||||||||||||||
|
Northern
|
327
|
|
859
|
|
(532
|
)
|
(62
|
)%
|
||||||
|
Central
|
2,933
|
|
3,422
|
|
(489
|
)
|
(14
|
)%
|
||||||
|
Southern
|
222
|
|
348
|
|
(126
|
)
|
(36
|
)%
|
||||||
|
Total Appalachia
|
3,482
|
|
4,629
|
|
(1,147
|
)
|
(25
|
)%
|
||||||
|
Illinois Basin
|
505
|
|
560
|
|
(55
|
)
|
(10
|
)%
|
||||||
|
Northern Powder River Basin
|
527
|
|
856
|
|
(329
|
)
|
(38
|
)%
|
||||||
|
Total coal sales volumes
|
4,514
|
|
6,045
|
|
(1,531
|
)
|
(25
|
)%
|
||||||
|
Coal royalty revenue per ton
|
||||||||||||||
|
Appalachia
|
||||||||||||||
|
Northern
|
$
|
1.81
|
|
$
|
4.71
|
|
$
|
(2.90
|
)
|
(62
|
)%
|
|||
|
Central
|
4.83
|
|
6.03
|
|
(1.20
|
)
|
(20
|
)%
|
||||||
|
Southern
|
4.16
|
|
8.61
|
|
(4.45
|
)
|
(52
|
)%
|
||||||
|
Illinois Basin
|
4.35
|
|
4.77
|
|
(0.42
|
)
|
(9
|
)%
|
||||||
|
Northern Powder River Basin
|
4.13
|
|
2.61
|
|
1.52
|
|
58
|
%
|
||||||
|
Combined average coal royalty revenue per ton
|
4.44
|
|
5.39
|
|
(0.95
|
)
|
(18
|
)%
|
||||||
|
Coal royalty revenues
|
||||||||||||||
|
Appalachia
|
||||||||||||||
|
Northern
|
$
|
593
|
|
$
|
4,045
|
|
$
|
(3,452
|
)
|
(85
|
)%
|
|||
|
Central
|
14,173
|
|
20,644
|
|
(6,471
|
)
|
(31
|
)%
|
||||||
|
Southern
|
923
|
|
2,997
|
|
(2,074
|
)
|
(69
|
)%
|
||||||
|
Total Appalachia
|
15,689
|
|
27,686
|
|
(11,997
|
)
|
(43
|
)%
|
||||||
|
Illinois Basin
|
2,199
|
|
2,670
|
|
(471
|
)
|
(18
|
)%
|
||||||
|
Northern Powder River Basin
|
2,177
|
|
2,231
|
|
(54
|
)
|
(2
|
)%
|
||||||
|
Unadjusted coal royalty revenues
|
20,065
|
|
|
32,587
|
|
|
(12,522
|
)
|
(38
|
)%
|
||||
|
Coal royalty adjustment for minimum leases
|
(963
|
)
|
(456
|
)
|
(507
|
)
|
(111
|
)%
|
||||||
|
Total coal royalty revenues
|
$
|
19,102
|
|
|
$
|
32,131
|
|
$
|
(13,029
|
)
|
(41
|
)%
|
||
|
Other revenues
|
||||||||||||||
|
Production lease minimum revenues
|
$
|
802
|
|
$
|
2,700
|
|
$
|
(1,898
|
)
|
(70
|
)%
|
|||
|
Minimum lease straight-line revenues
|
3,809
|
|
3,316
|
|
493
|
|
15
|
%
|
||||||
|
Property tax revenues
|
1,599
|
|
1,433
|
|
166
|
|
12
|
%
|
||||||
|
Wheelage revenues
|
2,204
|
|
1,415
|
|
789
|
|
56
|
%
|
||||||
|
Coal overriding royalty revenues
|
1,322
|
|
3,975
|
|
(2,653
|
)
|
(67
|
)%
|
||||||
|
Lease amendment revenues
|
843
|
|
771
|
|
72
|
|
9
|
%
|
||||||
|
Aggregates royalty revenues
|
576
|
|
1,464
|
|
(888
|
)
|
(61
|
)%
|
||||||
|
Oil and gas royalty revenues
|
1,103
|
|
1,719
|
|
(616
|
)
|
(36
|
)%
|
||||||
|
Other revenues
|
73
|
|
578
|
|
(505
|
)
|
(87
|
)%
|
||||||
|
Total other revenues
|
$
|
12,331
|
|
$
|
17,371
|
|
$
|
(5,040
|
)
|
(29
|
)%
|
|||
|
Coal royalty and other
|
$
|
31,433
|
|
$
|
49,502
|
|
$
|
(18,069
|
)
|
(37
|
)%
|
|||
|
Transportation and processing services revenues
|
2,509
|
|
5,601
|
|
(3,092
|
)
|
(55
|
)%
|
||||||
|
Gain on asset sales and disposals
|
—
|
|
256
|
|
(256
|
)
|
(100
|
)%
|
||||||
|
Total Coal Royalty and Other segment revenues and other income
|
$
|
33,942
|
|
$
|
55,359
|
|
$
|
(21,417
|
)
|
(39
|
)%
|
|||
24
Coal Royalty Revenues
Total coal royalty revenues
decreased
$13.0 million
from 2019 to 2020 primarily driven by weakened coal markets that resulted in lower coal sales volume. The discussion of these
decreases
by region is as follows:
|
•
|
Appalachia:
Sales volumes decreased
25%
and revenues
decreased
$12.0 million
primarily as a result of weakened met coal markets.
|
|
•
|
Illinois Basin:
Sales volumes
decreased
10%
and coal royalty revenues
decreased
$0.5 million
primarily due to weakening of the thermal coal export market and lower domestic thermal coal demand in 2020.
|
|
•
|
Northern Powder River Basin:
Sales volumes
decreased
38%
and coal royalty revenues
decreased
$0.1 million
primarily due to our lessee mining off of our property in accordance with its mine plan in 2020, partially offset by a
58%
increase in sales prices as compared to the prior year quarter.
|
Other Revenues
Other revenues decreased
$5.0 million
primarily due to a
$2.7 million
decrease in coal overriding royalty revenues driven by lower activity at our Williamson property in the Illinois Basin during the three months ended March 31, 2010 as compared to the prior year quarter.
Transportation and Processing Services Revenues
Transportation and processing services revenues
decreased
$3.1 million
primarily due to weakened demand for Illinois Basin coal that resulted in fewer tons being transported out of our Illinois Basin transportation and processing assets during the three months ended March 31, 2020 as compared to the prior year quarter.
Soda Ash
Revenues and other income related to our Soda Ash segment
decreased
$5.4 million
compared to the prior year quarter primarily due to lower international demand that resulted in lower international soda ash pricing and volumes sold.
Operating Expenses
The following table presents the significant categories of our consolidated operating expenses:
|
For the Three Months Ended March 31,
|
Decrease
|
Percentage
Change |
|||||||||||||
|
(In thousands)
|
2020
|
2019
|
|||||||||||||
|
Operating expenses
|
|||||||||||||||
|
Operating and maintenance expenses
|
$
|
5,202
|
|
$
|
8,360
|
|
$
|
(3,158
|
)
|
(38
|
)%
|
||||
|
Depreciation, depletion and amortization
|
2,012
|
|
4,392
|
|
(2,380
|
)
|
(54
|
)%
|
|||||||
|
General and administrative expenses
|
3,913
|
|
4,350
|
|
(437
|
)
|
(10
|
)%
|
|||||||
|
Total operating expenses
|
$
|
11,127
|
|
$
|
17,102
|
|
$
|
(5,975
|
)
|
(35
|
)%
|
||||
Total operating expenses
decreased
$6.0 million
primarily due to the following:
|
•
|
Operating and maintenance expenses include costs to manage the Coal Royalty and Other and Soda Ash business segments and primarily consist of royalty, tax, employee-related and legal costs and bad debt expense. These costs
decreased
$3.2 million
primarily due to lower royalty fees related to an overriding royalty agreement with Western Pocahontas Properties Limited Partnership ("WPPLP"). As a result, the coal royalty expense NRP pays to WPPLP is fully offset by the coal royalty revenue NRP receives from this property.
|
|
•
|
Depreciation, depletion and amortization expense
decreased
$2.4 million
due to lower coal sales volumes at certain properties.
|
Interest Expense, Net
Interest expense, net
decreased
$3.9 million
primarily due to lower debt balances during the first
three
months of 2020 as a result of debt repayments made over the past twelve months.
25
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
|
||||||||||||
|
March 31, 2020
|
||||||||||||||||
|
Net income (loss) from continuing operations
|
$
|
26,744
|
|
$
|
6,256
|
|
$
|
(14,221
|
)
|
$
|
18,779
|
|
||||
|
Less: equity earnings from unconsolidated investment
|
—
|
|
(6,272
|
)
|
—
|
|
(6,272
|
)
|
||||||||
|
Add: total distributions from unconsolidated investment
|
—
|
|
7,105
|
|
—
|
|
7,105
|
|
||||||||
|
Add: interest expense, net
|
—
|
|
—
|
|
10,308
|
|
10,308
|
|
||||||||
|
Add: depreciation, depletion and amortization
|
2,012
|
|
—
|
|
—
|
|
2,012
|
|
||||||||
|
Adjusted EBITDA
|
$
|
28,756
|
|
$
|
7,089
|
|
$
|
(3,913
|
)
|
$
|
31,932
|
|
||||
|
March 31, 2019
|
||||||||||||||||
|
Net income (loss) from continuing operations
|
$
|
42,607
|
|
$
|
11,682
|
|
$
|
(18,524
|
)
|
$
|
35,765
|
|
||||
|
Less: equity earnings from unconsolidated investment
|
—
|
|
(11,682
|
)
|
—
|
|
(11,682
|
)
|
||||||||
|
Add: total distributions from unconsolidated investment
|
—
|
|
9,800
|
|
—
|
|
9,800
|
|
||||||||
|
Add: interest expense, net
|
—
|
|
—
|
|
14,174
|
|
14,174
|
|
||||||||
|
Add: depreciation, depletion and amortization
|
4,392
|
|
—
|
|
—
|
|
4,392
|
|
||||||||
|
Adjusted EBITDA
|
$
|
46,999
|
|
$
|
9,800
|
|
$
|
(4,350
|
)
|
$
|
52,449
|
|
||||
Adjusted EBITDA
decreased
$20.5 million
primarily due to the following:
|
•
|
Coal Royalty and Other Segment
|
|
◦
|
Adjusted EBITDA
decreased
$18.2 million
primarily as a result of the decrease in revenues and other income driven by the weakened coal markets in the first
three
months of 2020.
|
|
•
|
Soda Ash Segment
|
|
◦
|
Adjusted EBITDA
decreased
$2.7 million
as a result of lower cash distributions received from Ciner Wyoming in the first
three
months of 2020.
|
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
|
||||||||||||
|
March 31, 2020
|
||||||||||||||||
|
Cash flow provided by (used in) continuing operations
|
||||||||||||||||
|
Operating activities
|
$
|
30,556
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,155
|
|
||||
|
Investing activities
|
272
|
|
—
|
|
—
|
|
272
|
|
||||||||
|
Financing activities
|
—
|
|
—
|
|
(28,186
|
)
|
(28,186
|
)
|
||||||||
|
March 31, 2019
|
||||||||||||||||
|
Cash flow provided by (used in) continuing operations
|
||||||||||||||||
|
Operating activities
|
$
|
42,916
|
|
$
|
9,800
|
|
$
|
(29,884
|
)
|
$
|
22,832
|
|
||||
|
Investing activities
|
697
|
|
—
|
|
—
|
|
697
|
|
||||||||
|
Financing activities
|
—
|
|
—
|
|
(99,852
|
)
|
(99,852
|
)
|
||||||||
26
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
|
||||||||||||
|
March 31, 2020
|
||||||||||||||||
|
Net cash provided by (used in) operating activities of continuing operations
|
$
|
30,556
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,155
|
|
||||
|
Add: proceeds from sale of discontinued operations
|
—
|
|
—
|
|
—
|
|
(66
|
)
|
||||||||
|
Add: return of long-term contract receivable
|
272
|
|
—
|
|
—
|
|
272
|
|
||||||||
|
Distributable cash flow
|
$
|
30,828
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,361
|
|
||||
|
Less: proceeds from sale of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|||||
|
Free cash flow
|
$
|
30,828
|
|
$
|
7,089
|
|
$
|
(7,490
|
)
|
$
|
30,427
|
|
||||
|
March 31, 2019
|
||||||||||||||||
|
Net cash provided by (used in) operating activities of continuing operations
|
$
|
42,916
|
|
$
|
9,800
|
|
$
|
(29,884
|
)
|
$
|
22,832
|
|
||||
|
Add: proceeds from asset sales and disposals
|
256
|
|
—
|
|
—
|
|
256
|
|
||||||||
|
Add: proceeds from sale of discontinued operations
|
—
|
|
—
|
|
—
|
|
(390
|
)
|
||||||||
|
Add: return of long-term contract receivable
|
441
|
|
—
|
|
—
|
|
441
|
|
||||||||
|
Distributable cash flow
|
$
|
43,613
|
|
$
|
9,800
|
|
$
|
(29,884
|
)
|
$
|
23,139
|
|
||||
|
Less: proceeds from asset sales and disposals
|
(256
|
)
|
—
|
|
—
|
|
(256
|
)
|
||||||||
|
Less: proceeds from sale of discontinued operations
|
—
|
|
—
|
|
—
|
|
390
|
|
||||||||
|
Free cash flow
|
$
|
43,357
|
|
$
|
9,800
|
|
$
|
(29,884
|
)
|
$
|
23,273
|
|
||||
DCF and FCF
increased
$7.2 million
primarily due to the following:
|
•
|
Corporate and Financing Segment
|
|
◦
|
DCF and FCF
increased
$22.4 million
primarily due to the timing of interest payments on our parent company bonds that were refinanced in the second quarter of 2019. Interest is due in June and December on the new 9.125% Notes, compared to March and September on the previous 10.5% Notes.
|
This increase in DCF and FCF was partially offset by:
|
•
|
Coal Royalty and Other Segment
|
|
◦
|
DCF and FCF
decreased
$12.8 million
and
$12.5 million
, respectively, primarily as a result of the decrease in coal royalty revenues driven by the weakened coal markets in the first
three
months of 2020.
|
|
•
|
Soda Ash Segment
|
|
◦
|
DCF and FCF
decreased
$2.7 million
as a result of lower cash distributions received from Ciner Wyoming in the first
three
months of 2020.
|
27
Liquidity and Capital Resources
Current Liquidity
As of
March 31, 2020
, we had total liquidity of
$200.5 million
, consisting of
$100.5 million
of cash and cash equivalents and
$100.0 million
of borrowing capacity under our Opco Credit Facility.
Cash Flows
Cash flows provided by operating activities
increased
$8.9 million
, from
$23.0 million
in the
three
months ended
March 31, 2019
to
$31.9 million
in the
three
months ended
March 31, 2020
primarily related to the timing of interest payments on our parent company bonds that were refinanced in the second quarter of 2019 and lower cash paid for interest on our Opco Senior Notes as a result of debt repayments made over the past twelve months. This increase was partially offset by lower operating cash flow as a result of the decrease in coal royalty revenues driven by the weakened coal markets in addition to lower cash distributions received from Ciner Wyoming the first
three
months of 2020.
Cash flows used in financing activities
decreased
$69.8 million
, from
$99.6 million
in the
three
months ended
March 31, 2019
to
$29.8 million
in the
three
months ended
March 31, 2020
primarily due to lower principal payments made on our Opco Senior Notes in the first quarter of 2020 as a result of the
$49.3 million
pre-payment in the first quarter of 2019 related to the sale of our construction aggregates business.
Capital Resources and Obligations
Debt, Net
We had the following debt outstanding as of
March 31, 2020
and
December 31, 2019
:
|
March 31,
|
December 31,
|
||||||
|
(In thousands)
|
2020
|
2019
|
|||||
|
Current portion of long-term debt, net
|
$
|
45,767
|
|
$
|
45,776
|
|
|
|
Long-term debt, net
|
454,110
|
|
470,422
|
|
|||
|
Total debt, net
|
$
|
499,877
|
|
$
|
516,198
|
|
|
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 8. Debt, Net
to the Consolidated 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 10. Related Party Transactions
to the Consolidated 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 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, 2019
.
Recent Accounting Standards
The information set forth under
Note 1. Basis of Presentation
to the Consolidated Financial Statements is incorporated herein by reference.
28
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 March 31, 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
March 31, 2020
, we did not have any borrowings outstanding under the Opco Credit Facility.
29
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
three
months of
2020
that materially affected, or were reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
30
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.
In November 2019, the District Court of Harris County, Texas, 157th Judicial District, issued a ruling in the contingent consideration payment dispute that Anadarko Holding Company and its subsidiary, Big Island Trona Company (together, "Anadarko") brought against NRP in July 2017. The Trial Court ruled in NRP’s favor in all respects and ordered that Anadarko take nothing. Anadarko did not appeal the trail court ruling, and accordingly, this lawsuit was concluded in the first quarter of 2020 with no liability to us.
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, 2019
.
The COVID-19 pandemic has adversely affected our business, and the ultimate effect on our financial condition, results of operations, and ability to make cash distributions to unitholders will depend on future developments, which are highly uncertain and cannot be predicted.
The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. In addition, the pandemic has resulted in travel restrictions, business closures and the institution of quarantining and other restrictions on movement in many communities and global trading markets. Coal markets faced substantial challenges prior to the pandemic, and widespread increases in unemployment and decreases in electricity and steel demand are expected to further reduce demand and prices for coal. In addition, demand for and prices of soda ash have decreased, as global manufacturing has slowed. If the reduced demand for and prices of coal and/or soda ash continue for a prolonged period, our financial condition, results of operations, and cash distributions to unitholders may be materially and adversely affected.
The COVID-19 pandemic may also have the effect of heightening many of the other risks described in Item 1A, “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2019, including, but not limited to, those relating to our ability to pay cash distributions and service our debt, and the ability of our coal lessees and Ciner Wyoming to operate profitably. The extent to which the COVID-19 pandemic adversely affects our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.
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.
31
ITEM 6. EXHIBITS
|
Exhibit
Number
|
|
Description
|
|
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).
|
|
|
Limited Waiver dated February 28, 2020 by Natural Resource Partners L.P., GP Natural Resource Partners LLC, NRP (GP) LP, and NRP (Operating) LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 3, 2020).
|
||
|
Right of First Offer Agreement dated as of February 28, 2020 by and among Pocahontas Royalties LLC, Natural Resource Partners L.P., GP Natural Resource Partners LLC, NRP (GP) LP, and NRP (Operating) LLC. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on March 3, 2020).
|
||
|
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*
|
XBRL Instance Document
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
*
|
Filed herewith
|
|
|
**
|
Furnished herewith
|
|
32
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: May 11, 2020
|
|||
|
By:
|
|
/s/ CORBIN J. ROBERTSON, JR.
|
|
|
|
Corbin J. Robertson, Jr.
|
||
|
|
Chairman of the Board and
|
||
|
|
Chief Executive Officer
|
||
|
|
(Principal Executive Officer)
|
||
|
Date: May 11, 2020
|
|||
|
By:
|
|
/s/ CHRISTOPHER J. ZOLAS
|
|
|
|
Christopher J. Zolas
|
||
|
|
Chief Financial Officer and Treasurer
|
||
|
|
(Principal Financial and Accounting Officer)
|
||
33
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Consolidated Financial StatementsItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits