UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 | ||
FORM 10-Q
| ☒ | |||||||||||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||||
For the quarterly period ended March 31, 20222023 or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||||||
Commission file number: | 001-31465 | |||||||||||||
NATURAL RESOURCE PARTNERS LP | |||||||||||||
(Exact name of registrant as specified in its charter) | |||||||||||||
Delaware | 35-2164875 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
1415 Louisiana Street, Suite 3400
Houston, Texas 77002
(Address of principal executive offices)
(Zip Code)
(713) 751-7507
(Registrant’sRegistrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Units representing limited partner interests | NRP | New York Stock Exchange | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒ 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
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.
Large Accelerated Filer | ☐ | Accelerated Filer | ☒ | |||||||||||
Non-accelerated Filer | ☐ | 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 ☒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.
TABLE OF CONTENTS
Page | ||||||||
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
(In thousands, except unit data) | (Unaudited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 17,655 | $ | 39,091 | ||||
Accounts receivable, net | 36,513 | 42,701 | ||||||
Other current assets, net | 3,216 | 1,822 | ||||||
Total current assets | $ | 57,384 | $ | 83,614 | ||||
Land | 24,008 | 24,008 | ||||||
Mineral rights, net | 408,371 | 412,312 | ||||||
Intangible assets, net | 14,613 | 14,713 | ||||||
Equity in unconsolidated investment | 295,361 | 306,470 | ||||||
Long-term contract receivable, net | 28,309 | 28,946 | ||||||
Other long-term assets, net | 7,622 | 7,068 | ||||||
Total assets | $ | 835,668 | $ | 877,131 | ||||
LIABILITIES AND CAPITAL | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 1,452 | $ | 1,992 | ||||
Accrued liabilities | 3,466 | 11,916 | ||||||
Accrued interest | 1,252 | 989 | ||||||
Current portion of deferred revenue | 7,450 | 6,256 | ||||||
Current portion of long-term debt, net | 39,055 | 39,076 | ||||||
Total current liabilities | $ | 52,675 | $ | 60,229 | ||||
Deferred revenue | 38,833 | 40,181 | ||||||
Long-term debt, net | 133,821 | 129,205 | ||||||
Other non-current liabilities | 6,124 | 5,472 | ||||||
Total liabilities | $ | 231,453 | $ | 235,087 | ||||
Commitments and contingencies (see Note 13) | ||||||||
Class A Convertible Preferred Units (202,501 and 250,000 units issued and outstanding at March 31, 2023 and December 31, 2022, respectively, at $1,000 par value per unit; liquidation preference of $1,850 per unit at March 31, 2023 and December 31, 2022) (See Note 3) | $ | 133,316 | $ | 164,587 | ||||
Partners’ capital | ||||||||
Common unitholders’ interest (12,634,642 and 12,505,996 units issued and outstanding at March 31, 2023 and December 31, 2022, respectively) | $ | 417,401 | $ | 404,799 | ||||
General partner’s interest | 6,400 | 5,977 | ||||||
Warrant holders’ interest | 47,964 | 47,964 | ||||||
Accumulated other comprehensive income (loss) | (866 | ) | 18,717 | |||||
Total partners’ capital | $ | 470,899 | $ | 477,457 | ||||
Total liabilities and partners' capital | $ | 835,668 | $ | 877,131 | ||||
| March 31, | December 31, | ||||||||||
| (In thousands, except unit data) | 2022 | 2021 | |||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 135,590 | $ | 135,520 | |||||||
| Accounts receivable, net | 32,729 | 24,538 | |||||||||
| Other current assets, net | 3,510 | 2,723 | |||||||||
| Total current assets | $ | 171,829 | $ | 162,781 | |||||||
| Land | 24,008 | 24,008 | |||||||||
| Mineral rights, net | 433,965 | 437,697 | |||||||||
| Intangible assets, net | 16,019 | 16,130 | |||||||||
| Equity in unconsolidated investment | 280,156 | 276,004 | |||||||||
| Long-term contract receivable, net | 30,783 | 31,371 | |||||||||
| Other long-term assets, net | 5,528 | 5,832 | |||||||||
| Total assets | $ | 962,288 | $ | 953,823 | |||||||
| LIABILITIES AND CAPITAL | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 1,896 | $ | 1,956 | |||||||
| Accrued liabilities | 3,388 | 10,297 | |||||||||
| Accrued interest | 8,463 | 1,213 | |||||||||
| Current portion of deferred revenue | 15,420 | 11,817 | |||||||||
| Current portion of long-term debt, net | 39,046 | 39,102 | |||||||||
| Total current liabilities | $ | 68,213 | $ | 64,385 | |||||||
| Deferred revenue | 39,126 | 50,045 | |||||||||
| Long-term debt, net | 378,163 | 394,443 | |||||||||
| Other non-current liabilities | 4,803 | 5,018 | |||||||||
| Total liabilities | $ | 490,305 | $ | 513,891 | |||||||
| Commitments and contingencies (see Note 12) | 0 | 0 | |||||||||
| Class A Convertible Preferred Units (250,000 and 269,321 units issued and outstanding at March 31, 2022 and December 31, 2021, respectively, at $1,000 par value per unit; liquidation preference of $1,850 per unit at March 31, 2022 and December 31, 2021) | $ | 164,587 | $ | 183,908 | |||||||
| Partners’ capital | |||||||||||
| Common unitholders’ interest (12,505,996 and 12,351,306 units issued and outstanding at March 31, 2022 and December 31, 2021, respectively) | $ | 250,767 | $ | 203,062 | |||||||
| General partner’s interest | 2,909 | 1,787 | |||||||||
| Warrant holders’ interest | 47,964 | 47,964 | |||||||||
| Accumulated other comprehensive income | 5,756 | 3,211 | |||||||||
| Total partners’ capital | $ | 307,396 | $ | 256,024 | |||||||
| Total liabilities and partners' capital | $ | 962,288 | $ | 953,823 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended March 31, | ||||||||
(In thousands, except per unit data) | 2023 | 2022 | ||||||
Revenues and other income | ||||||||
Royalty and other mineral rights | $ | 76,271 | $ | 71,083 | ||||
Transportation and processing services | 3,598 | 3,796 | ||||||
Equity in earnings of Sisecam Wyoming | 19,254 | 14,837 | ||||||
Gain on asset sales and disposals | 96 | — | ||||||
Total revenues and other income | $ | 99,219 | $ | 89,716 | ||||
Operating expenses | ||||||||
Operating and maintenance expenses | $ | 7,163 | $ | 8,076 | ||||
Depreciation, depletion and amortization | 4,083 | 3,868 | ||||||
General and administrative expenses | 5,845 | 4,467 | ||||||
Asset impairments | — | 19 | ||||||
Total operating expenses | $ | 17,091 | $ | 16,430 | ||||
Income from operations | $ | 82,128 | $ | 73,286 | ||||
Interest expense, net | $ | (2,853 | ) | $ | (9,387 | ) | ||
Net income | $ | 79,275 | $ | 63,899 | ||||
Less: income attributable to preferred unitholders | (6,661 | ) | (7,500 | ) | ||||
Less: redemption of preferred units | (16,228 | ) | — | |||||
Net income attributable to common unitholders and the general partner | $ | 56,386 | $ | 56,399 | ||||
Net income attributable to common unitholders | $ | 55,258 | $ | 55,271 | ||||
Net income attributable to the general partner | 1,128 | 1,128 | ||||||
Net income per common unit (see Note 5) | ||||||||
Basic | $ | 4.40 | $ | 4.45 | ||||
Diluted | 3.44 | 3.11 | ||||||
Net income | $ | 79,275 | $ | 63,899 | ||||
Comprehensive income (loss) from unconsolidated investment and other | (19,583 | ) | 2,545 | |||||
Comprehensive income | $ | 59,692 | $ | 66,444 | ||||
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (In thousands, except per unit data) | 2022 | 2021 | |||||||||||||||||||||
| Revenues and other income | |||||||||||||||||||||||
| Royalty and other mineral rights | $ | 71,083 | $ | 32,927 | |||||||||||||||||||
| Transportation and processing services | 3,796 | 2,192 | |||||||||||||||||||||
| Equity in earnings of Sisecam Wyoming | 14,837 | 1,973 | |||||||||||||||||||||
| Gain on asset sales and disposals | — | 59 | |||||||||||||||||||||
| Total revenues and other income | $ | 89,716 | $ | 37,151 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Operating and maintenance expenses | $ | 8,076 | $ | 5,552 | |||||||||||||||||||
| Depreciation, depletion and amortization | 3,868 | 5,092 | |||||||||||||||||||||
| General and administrative expenses | 4,467 | 4,110 | |||||||||||||||||||||
| Asset impairments | 19 | 4,043 | |||||||||||||||||||||
| Total operating expenses | $ | 16,430 | $ | 18,797 | |||||||||||||||||||
| Income from operations | $ | 73,286 | $ | 18,354 | |||||||||||||||||||
| Interest expense, net | $ | (9,387) | $ | (9,973) | |||||||||||||||||||
| Net income | $ | 63,899 | $ | 8,381 | |||||||||||||||||||
| Less: income attributable to preferred unitholders | (7,500) | (7,727) | |||||||||||||||||||||
| Net income attributable to common unitholders and the general partner | $ | 56,399 | $ | 654 | |||||||||||||||||||
| Net income attributable to common unitholders | $ | 55,271 | $ | 641 | |||||||||||||||||||
| Net income attributable to the general partner | 1,128 | 13 | |||||||||||||||||||||
| Net income per common unit (see Note 4) | |||||||||||||||||||||||
| Basic | $ | 4.45 | $ | 0.05 | |||||||||||||||||||
| Diluted | 3.11 | 0.05 | |||||||||||||||||||||
| Net income | $ | 63,899 | $ | 8,381 | |||||||||||||||||||
| Comprehensive income from unconsolidated investment and other | 2,545 | 732 | |||||||||||||||||||||
| Comprehensive income | $ | 66,444 | $ | 9,113 | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
NATURAL RESOURCE PARTNERS L.P. CONSOLIDATED STATEMENTS OF (Unaudited) Accumulated Other Total Common Unitholders General Warrant Comprehensive Partners' (In thousands) Units Amounts Partner Holders Income (Loss) Capital Balance at December 31, 2022 Net income (1) Redemption of preferred units Distributions to common unitholders and the general partner Distributions to preferred unitholders Issuance of unit-based awards Unit-based awards amortization and vesting, net Capital contribution Comprehensive loss from unconsolidated investment and other Balance at March 31, 2023 (1) Net income includes $6.7 million of income attributable to preferred unitholders that accumulated during the period, of which $6.5 million is allocated to the common unitholders and $0.1 million is allocated to the general partner. Accumulated Other Total Common Unitholders General Warrant Comprehensive Partners' (In thousands) Units Amounts Partner Holders Income Capital Balance at December 31, 2021 Net income (1) Distributions to common unitholders and the general partner Distributions to preferred unitholders Issuance of unit-based awards Unit-based awards amortization and vesting, net Capital contribution Comprehensive income from unconsolidated investment and other Balance at March 31, 2022 (1) Net income includes $7.5 million of income attributable to preferred unitholders that accumulated during the period, of which $7.4 million is allocated to the common unitholders and $0.2 million is allocated to the general partner. The accompanying notes are an integral part of these consolidated financial statements.PARTNERS’PARTNERS’ CAPITAL 12,506 $ 404,799 $ 5,977 $ 47,964 $ 18,717 $ 477,457 — 77,690 1,585 — — 79,275 — (15,904 ) (324 ) — — (16,228 ) — (40,082 ) (818 ) — — (40,900 ) — (7,924 ) (162 ) — — (8,086 ) 129 — — — — — — (1,178 ) — — — (1,178 ) — — 142 — — 142 — — — — (19,583 ) (19,583 ) 12,635 $ 417,401 $ 6,400 $ 47,964 $ (866 ) $ 470,899 (Unaudited) Common Unitholders General Partner Warrant Holders Accumulated
Other
Comprehensive IncomeTotal Partners' Capital (In thousands) Units Amounts Balance at December 31, 2021 12,351 $ 203,062 $ 1,787 $ 47,964 $ 3,211 $ 256,024 Net income (1)— 62,621 1,278 — — 63,899 Distributions to common unitholders and the general partner — (5,559) (113) — — (5,672) Distributions to preferred unitholders — (7,603) (155) — — (7,758) Issuance of unit-based awards 155 — — — — — Unit-based awards amortization and vesting, net — (1,754) — — — (1,754) Capital contribution — — 112 — — 112 Comprehensive income from unconsolidated investment and other — — — — 2,545 2,545 Balance at March 31, 2022 12,506 $ 250,767 $ 2,909 $ 47,964 $ 5,756 $ 307,396 12,351 $ 203,062 $ 1,787 $ 47,964 $ 3,211 $ 256,024 — 62,621 1,278 — — 63,899 — (5,559 ) (113 ) — — (5,672 ) — (7,603 ) (155 ) — — (7,758 ) 155 — — — — — — (1,754 ) — — — (1,754 ) — — 112 — — 112 — — — — 2,545 2,545 12,506 $ 250,767 $ 2,909 $ 47,964 $ 5,756 $ 307,396 (1)Net income includes $7.5 million of income attributable to preferred unitholders that accumulated during the period, of which $7.4 million is allocated to the common unitholders and $0.2 million is allocated to the general partner. Common Unitholders General Partner Warrant Holders Accumulated
Other
Comprehensive
IncomeTotal Partners' Capital (In thousands) Units Amounts Balance at December 31, 2020 12,261 $ 136,927 $ 459 $ 66,816 $ 322 $ 204,524 Net income (1)— 8,213 168 — — 8,381 Distributions to common unitholders and the general partner — (5,517) (113) — — (5,630) Distributions to preferred unitholders — (7,461) (152) — — (7,613) Issuance of unit-based awards 90 — — — — — Unit-based awards amortization and vesting, net — 215 — — — 215 Capital contribution — — 32 — — 32 Comprehensive income from unconsolidated investment and other — — — — 732 732 Balance at March 31, 2021 12,351 $ 132,377 $ 394 $ 66,816 $ 1,054 $ 200,641 (1)Net income includes $7.7 million of income attributable to preferred unitholders that accumulated during the period, of which $7.6 million is allocated to the common unitholders and $0.2 million is allocated to the general partner.
NATURAL RESOURCE PARTNERS L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, (In thousands) 2023 2022 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization Distributions from unconsolidated investment Equity earnings from unconsolidated investment Gain on asset sales and disposals Asset impairments Bad debt expense Unit-based compensation expense Amortization of debt issuance costs and other Change in operating assets and liabilities: Accounts receivable Accounts payable Accrued liabilities Accrued interest Deferred revenue Other items, net Net cash provided by operating activities Cash flows from investing activities Proceeds from asset sales and disposals Return of long-term contract receivable Capital expenditures Net cash provided by investing activities Cash flows from financing activities Debt borrowings Debt repayments Distributions to common unitholders and the general partner Distributions to preferred unitholders Redemption of preferred units Redemption of preferred units paid-in-kind Other items, net Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow information: Cash paid for interest The accompanying notes are an integral part of these consolidated financial statements. $ 79,275 $ 63,899 4,083 3,868 10,780 13,230 (19,254 ) (14,837 ) (96 ) — — 19 (610 ) 1,028 2,491 1,448 25 375 7,061 (7,579 ) (541 ) (60 ) (8,805 ) (7,156 ) 263 7,250 (154 ) (7,316 ) (1,618 ) (1,838 ) $ 72,900 $ 52,331 $ 101 $ — 598 — (2 ) — $ 697 $ — $ 94,200 $ — (89,696 ) (16,697 ) (40,900 ) (5,672 ) (7,500 ) (7,500 ) (48,085 ) — — (19,579 ) (3,052 ) (2,813 ) $ (95,033 ) $ (52,261 ) $ (21,436 ) $ 70 39,091 135,520 $ 17,655 $ 135,590 $ 2,474 $ 1,644 (Unaudited) For the Three Months Ended March 31, (In thousands) 2022 2021 Cash flows from operating activities Net income $ 63,899 $ 8,381 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Depreciation, depletion and amortization 3,868 5,092 Distributions from unconsolidated investment 13,230 3,920 Equity earnings from unconsolidated investment (14,837) (1,973) Gain on asset sales and disposals — (59) Asset impairments 19 4,043 Bad debt expense 1,028 383 Unit-based compensation expense 1,448 1,126 Amortization of debt issuance costs and other 375 269 Change in operating assets and liabilities: Accounts receivable (7,579) (3,331) Accounts payable (60) (10) Accrued liabilities (7,156) (3,034) Accrued interest 7,250 7,133 Deferred revenue (7,316) (146) Other items, net (1,838) 1,406 Net cash provided by operating activities $ 52,331 $ 23,200 Cash flows from investing activities Proceeds from asset sales and disposals $ — $ 59 Return of long-term contract receivable — 541 Net cash provided by investing activities $ — $ 600 Cash flows from financing activities Debt repayments $ (16,697) $ (16,696) Distributions to common unitholders and the general partner (5,672) (5,630) Distributions to preferred unitholders (7,500) (3,806) Redemption of preferred units paid-in-kind (19,579) — Other items (2,813) (691) Net cash used in financing activities $ (52,261) $ (26,823) Net increase (decrease) in cash and cash equivalents $ 70 $ (3,023) Cash and cash equivalents at beginning of period 135,520 99,790 Cash and cash equivalents at end of period $ 135,590 $ 96,767 Supplemental cash flow information: Cash paid for interest $ 1,644 $ 2,320 Non-cash investing and financing activities: Plant, equipment, mineral rights and other funded with accounts payable or accrued liabilities $ — $ 992 Preferred unit distributions paid-in-kind — 3,806
NATURAL RESOURCE PARTNERS L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 Sisecam Wyoming LLC ("Sisecam Wyoming"), a trona ore mining and soda ash production business. The Partnership is organized into 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 Recently Adopted Accounting Standard On January 1, 2023, NRP adopted Accounting Standards Update ("ASU") 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06)”. The ASU includes targeted improvements to earnings per share, which the Partnership adopted on a modified retrospective basis. The adoption of this ASU did not have The following table presents the Partnership's Mineral Rights segment revenues by major source: For the Three Months Ended March 31, (In thousands) 2023 2022 Coal royalty revenues Production lease minimum revenues Minimum lease straight-line revenues Carbon neutral initiative revenues Property tax revenues Wheelage revenues Coal overriding royalty revenues Lease amendment revenues Aggregates royalty revenues Oil and gas royalty revenues Other revenues Royalty and other mineral rights revenues Transportation and processing services revenues (1) Total Mineral Rights segment revenues Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $2.9 million and $3.1 million for the three months ended March 31, 2023 and 2022, respectively. The remaining transportation and processing services revenues of $0.7 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively, related to other NRP-owned infrastructure leased to and operated by third-party operators accounted for under other guidance. See Note 15. Financing Transactionfor more information. The following table details the Partnership's Mineral Rights segment receivables and liabilities resulting from contracts with customers: March 31, December 31, (In thousands) 2023 2022 Receivables Accounts receivable, net Other current assets, net (1) Other long-term assets, net (2) Contract liabilities Current portion of deferred revenue Deferred revenue Other current assets, net includes short-term notes receivables from contracts with customers. Other long-term assets, net includes long-term lease amendment fee receivables from contracts with customers. The following table shows the activity related to the Partnership's Mineral Rights segment deferred revenue: For the Three Months Ended March 31, (In thousands) 2023 2022 Balance at beginning of period (current and non-current) Increase due to minimums and lease amendment fees Recognition of previously deferred revenue Balance at end of period (current and non-current) The Partnership's non-cancelable annual minimum payments due under the lease terms of its coal and aggregates royalty leases are as follows as of March 31, Lease Term (1) Weighted Average Remaining Years Annual Minimum Payments 0 - 5 years 5 - 10 years 10+ years Total Lease term does not include renewal periods. 3. Class A Convertible Preferred Units and Warrants On March 2, 2017, NRP issued $250 million of Class A Convertible Preferred Units representing limited partner interests in NRP (the "preferred units") to certain entities controlled by funds affiliated with The Blackstone Group Inc. (collectively referred to as "Blackstone") and certain affiliates of GoldenTree Asset Management LP (collectively referred to as "GoldenTree") (together the "preferred purchasers") pursuant to a Preferred Unit and Warrant Purchase Agreement. NRP issued 250,000 preferred units to the preferred purchasers at a price of $1,000 per preferred unit (the "per unit purchase price"), less a 2.5% structuring and origination fee. The preferred units entitle the preferred purchasers to receive cumulative distributions at a rate of 12% of the purchase price per year, up to one half of which NRP may pay in additional preferred units (such additional preferred units, the "PIK units"). The preferred units have a perpetual term, unless converted or redeemed as described below. NRP also issued two tranches of warrants (the "warrants") to purchase common units to the preferred purchasers (warrants to purchase 1.75 million common units with a strike price of $22.81 and warrants to purchase 2.25 million common units with a strike price of $34.00). The warrants may be exercised by the holders thereof at any time before the eighth anniversary of the closing date. Upon exercise of the warrants, NRP may, at its option, elect to settle the warrants in common units or cash, each on a net basis. After March 2, 2022 and prior to March 2, 2025, the holders of the preferred units may elect to convert up to 33% of the outstanding preferred units in any 12-month period into common units if the volume weighted average trading price of our common units (the "VWAP") for the 30 trading days immediately prior to date notice is provided is greater than $51.00. In such case, the number of common units to be issued upon conversion would be equal to the per unit purchase price plus the value of any accrued and unpaid distributions divided by an amount equal to a 7.5% discount to the VWAP for the 30 trading days immediately prior to the notice of conversion. Rather than have the preferred units convert to common units in accordance with the provisions of this paragraph, NRP would have the option to elect to redeem the preferred units proposed to be converted for cash at a price equal to the per unit purchase price plus the value of any accrued and unpaid distributions. On or after March 2, 2025, the holders of the preferred units may elect to convert the preferred units to common units at a conversion rate equal to the Liquidation Value divided by an amount equal to a 10% discount to the VWAP for the 30 trading days immediately prior to the notice of conversion. The “liquidation value” will be an amount equal to the greater of: (1) (a) the per unit purchase price multiplied by (i) prior to March 2, 2020, 1.50, (ii) on or after March 2, 2020 and prior to March 2, 2021, 1.70 and (iii) on or after March 2, 2021, 1.85, less (b)(i) all preferred unit distributions previously made by NRP and (ii) all cash payments previously made in respect of redemption of any PIK units; and (2) the per unit purchase price plus the value of all accrued and unpaid distributions. To the extent the holders of the preferred units have not elected to convert their preferred units before March 2, 2029, NRP has the right to force conversion of the preferred units at a price equal to the liquidation value divided by an amount equal to a 10% discount to the VWAP for the 30 trading days immediately prior to the notice of conversion. In addition, NRP has the ability to redeem at any time (subject to compliance with its debt agreements) all or any portion of the preferred units and any outstanding PIK units for cash. The redemption price for each outstanding PIK unit is $1,000 plus the value of any accrued and unpaid distributions per PIK unit. The redemption price for each preferred unit is the liquidation value divided by the number of outstanding preferred units. The preferred units are redeemable at the option of the preferred purchasers only upon a change in control. The terms of the preferred units contain certain restrictions on NRP's ability to pay distributions on its common units. To the extent that either (i) NRP's consolidated Leverage Ratio, as defined in the Partnership's Fifth Amended and Restated Partnership Agreement dated March 2, 2017 (the "restated partnership agreement"), is greater than The holders of the preferred units have the right to vote with holders of NRP’s common units on an as-converted basis and have other customary approval rights with respect to changes of the terms of the preferred units. In addition, Blackstone has certain approval rights over certain matters as identified in the restated partnership agreement. GoldenTree also has more limited approval rights that will expand once Blackstone's ownership goes below the minimum preferred unit threshold (as defined below). These approval rights are not transferrable without NRP's consent. In addition, the approval rights held by Blackstone and GoldenTree will terminate at such time that Blackstone (together with their affiliates) or GoldenTree (together with their affiliates), as applicable, no longer own at least 20% of the total number of preferred units issued on the closing date, together with all PIK units that have been issued but not redeemed (the "minimum preferred unit threshold"). At the closing, pursuant to the Board Representation and Observation Rights Agreement, the Preferred Purchasers received certain board appointment and observation rights, and Blackstone appointed one director and one observer to the Board of Directors. NRP also entered into a registration rights agreement (the "preferred unit and warrant registration rights agreement") with the preferred purchasers, pursuant to which NRP is required to file (i) a shelf registration statement to register the common units issuable upon exercise of the warrants and to cause such registration statement to become effective not later than 90 days following the closing date and (ii) a shelf registration statement to register the common units issuable upon conversion of the preferred units and to cause such registration statement to become effective not later than the earlier of the fifth anniversary of the closing date or 90 days following the first issuance of any common units upon conversion of preferred units (the "registration deadlines"). In addition, the preferred unit and warrant registration rights agreement gives the preferred purchasers piggyback registration and demand underwritten offering rights under certain circumstances. The shelf registration statement to register the common units issuable upon exercise of the warrants became effective on April 20, 2017. If the shelf registration statement to register the common units issuable upon conversion of the preferred units is not effective by the applicable registration deadline, NRP will be required to pay the preferred purchasers liquidated damages in the amounts and upon the term set forth in the preferred unit and warrant registration rights agreement. Accounting for the Preferred Units and Warrants Classification The preferred units are accounted for as temporary equity on NRP's Consolidated Balance Sheets due to certain contingent redemption rights that may be exercised at the election of preferred purchasers. The warrants are accounted for as equity on NRP's Consolidated Balance Sheets. Initial Measurement The net transaction price was allocated to the preferred units and warrants based on their relative fair values at inception date. NRP allocated the transaction issuance costs to the preferred units and warrants primarily on a pro-rata basis based on their relative inception date allocated values. Subsequent Measurement Preferred Units Subsequent adjustment of the preferred units will not occur until NRP has determined that the conversion or redemption of all or a portion of the preferred units is probable of occurring. Once conversion or redemption becomes probable of occurring, the carrying amount of the preferred units will be accreted to their redemption value over the period from the date the feature is probable of occurring to the date the preferred units can first be converted or redeemed. In February 2023, the Partnership received a notice from holders of the Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 47,499 Class A Preferred Units. The Partnership chose to redeem the preferred units for $47.5 million in cash rather than issuing common units. Of the originally issued 250,000 Class A Preferred Units, 202,501 Class A Preferred Units remain outstanding as of March 31, 2023. Activity related to the preferred units is as follows: Units Financial (In thousands, except unit data) Outstanding Position Balance at December 31, 2021 Redemption of preferred units paid-in-kind Balance at December 31, 2022 Redemption of preferred units Balance at March 31, 2023 Warrants As of March 31, 2023 and December 31, 2022 there were 3.0 million warrants outstanding, which included warrants to purchase 0.75 million common units at a strike price of $22.81 and warrants to purchase 2.25 million common units with a strike price of $34.00. These warrants had a $48.0 million carrying value included in warrant holders' interest within partners' capital on the Partnership's Consolidated Balance Sheets at March 31, 2023 and December 31, 2022. Subsequent adjustment of the warrants will not occur until the warrants are exercised, at which time, NRP may, at its option, elect to settle the warrants in common units or cash, each on a net basis. The net basis will be equal to the difference between the Partnership's common unit price and the strike price of the warrant. Once warrant exercise occurs, the difference between the carrying amount of the warrants and the net settlement amount will be allocated on a pro-rata basis to the common unitholders and general partner. Embedded Features Certain embedded features within the preferred unit and warrant purchase agreement are accounted for at fair value and are remeasured each quarter. See Note 10. 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 The following table shows the cash distributions declared and paid to common and preferred unitholders during the three months ended March 31, Common Units Preferred Units Total Distribution (1) Total Distribution Month Paid Period Covered by Distribution Distribution per Unit (In thousands) Distribution per Unit (In thousands) 2023 February 2023 October 1 - December 31, 2022 February 2023 (2) January 1 - February 8, 2023 March 2023 (3) Special Distribution 2022 February 2022 October 1 - December 31, 2021 Totals include the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest. Basic net income per common unit is computed by dividing net income, after considering income attributable to preferred unitholders, the difference between the fair value of the consideration paid upon redemption and the carrying value of the preferred units 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, The dilutive effect of the warrants is calculated using the treasury stock method, which assumes that the proceeds from the exercise of these instruments are used to purchase common units at the average market price for the period. The calculation of diluted net income per common unit for the three months ended March 31, 2023 and 2022 includes the net settlement of warrants to purchase 0.75 million The following (Unaudited)2two operating segments further described in 5.6. Segment Information. The Partnership’s operations are conducted through, and its operating assets are owned by, its subsidiaries. The Partnership owns its subsidiaries through one wholly owned operating company, NRP (Operating) LLC ("Opco"). 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.10-0110-01 of Regulation S-X.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, 20212022 and notes thereto included in the Partnership's Annual Report on Form 10-K,10-K, which was filed with the SEC on March 15, 2022. Certain reclassifications3, 2023. been made to prior year amounts ina material impact on the Notes toPartnership’s Consolidated Financial Statements to conform with current year presentation. These reclassifications had no impact on previously reported total assets, total liabilities, partners' capital,Statements. See Note 5. Net Income Per Common Unit for the calculations of our basic and diluted net income or cash flows from operating, investing or financing activities.per common unit. See Note 3. Class A Convertible Preferred Units and Warrants for disclosures related to our convertible preferred units and warrants.5NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited)For the Three Months Ended March 31, (In thousands) 2022 2021 Coal royalty revenues $ 55,449 $ 15,365 Production lease minimum revenues 1,592 3,450 Minimum lease straight-line revenues 4,783 6,096 Property tax revenues 1,472 1,469 Wheelage revenues 3,717 1,781 Coal overriding royalty revenues 258 1,859 Lease amendment revenues 880 868 Aggregates royalty revenues 770 454 Oil and gas royalty revenues 1,814 1,366 Other revenues 348 219 Royalty and other mineral rights revenues $ 71,083 $ 32,927 Transportation and processing services revenues (1)3,796 2,192 Total Mineral Rights segment revenues $ 74,879 $ 35,119 $ 58,023 $ 55,449 613 1,592 4,503 4,783 2,118 — 1,470 1,472 3,869 3,717 188 258 851 880 753 770 3,588 1,814 295 348 $ 76,271 $ 71,083 3,598 3,796 $ 79,869 $ 74,879 (1) (1)Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $3.1 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively. The remaining transportation and processing services revenues of $0.7 million and $0.9 million for the three months ended March 31, 2022 and 2021, 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 for more information.5NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited)March 31, December 31, (In thousands) 2022 2021 Receivables Accounts receivable, net $ 29,131 $ 22,277 Other current assets, net (1)2,063 769 Other long-term assets, net (2)250 250 Contract liabilities Current portion of deferred revenue $ 15,420 $ 11,817 Deferred revenue 39,126 50,045 $ 32,706 $ 39,004 1,947 — 75 75 $ 7,450 $ 6,256 38,833 40,181 (1) (2) (1)Other current assets, net includes short-term notes receivables from contracts with customers.(2)Other long-term assets, net includes long-term lease amendment fee receivables from contracts with customers.For the Three Months Ended
March 31,(In thousands) 2022 2021 Balance at beginning of period (current and non-current) $ 61,862 $ 61,554 Increase due to minimums and lease amendment fees 5,059 4,358 Recognition of previously deferred revenue (12,375) (4,504) Balance at end of period (current and non-current) $ 54,546 $ 61,408 $ 46,437 $ 61,862 7,770 5,059 (7,924 ) (12,375 ) $ 46,283 $ 54,546 20222023 (in thousands):1.9 $ 21,939 3.3 7,547 12.3 27,121 7.1 $ 56,607 (1) 6Lease Term (1)Weighted Average Remaining Years Annual Minimum Payments 0 - 5 years 2.4 $ 19,021 5 - 10 years 3.9 6,772 10+ years 13.4 27,438 Total 8.3 $ 53,231 NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited)(1)3.25x, or (ii) the ratio of NRP's Distributable Cash Flow (as defined in the Restated Partnership Agreement) to cash distributions made or proposed to be made is less than 1.2x (in each case, with respect to the most recently completed four-quarter period), NRP may not increase the quarterly distribution above $0.45 per quarter without the approval of the holders of a majority of the outstanding preferred units. In addition, if at any time after January 1, 2022, any PIK units are outstanding, NRP may not make distributions on its common units until it has redeemed all PIK units for cash.7NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited) 269,321 $ 183,908 (19,321 ) (19,321 ) 250,000 $ 164,587 (47,499 ) (31,271 ) 202,501 $ 133,316 Lease term does not include renewal periods.Fair Value Measurements for further information regarding valuation of these embedded derivatives.8NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED3. (Unaudited)$7.5$6.7 million and $7.7$7.5 million during the three months ended March 31, 2022 2023 and 2021,2022, respectively, as a result of accumulated preferred unit distributions earned during the period.6NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited)the consideration paid upon redemption and the carrying value of the preferred units. As such, NRP reduced net income available to common unitholders and the general partner by $16.2 million during the three months ended March 31, 2023. 2022 2023 and 2021,2022, respectively:Cash Distributions Paid-in-kind Distributions Common Units Preferred Units Month Paid Period Covered by Distribution Distribution per Unit Total Distribution (1)(In thousands)Distribution per Unit Total Distribution
(In thousands)Total Distribution
(In units)2022 February 2022 October 1 - December 31, 2021 $ 0.45 $ 5,672 $ 30.00 $ 7,500 $ — 2021 February 2021 October 1 - December 31, 2020 $ 0.45 $ 5,630 $ 15.00 $ 3,806 3,806 $ 0.75 $ 9,571 $ 30.00 $ 7,500 — — 12.33 586 2.43 31,329 — — $ 0.45 $ 5,672 $ 30.00 $ 7,500 (1) (2) Relates to accrued distribution paid upon the redemption of 47,499 preferred units in February 2023. (3) Special distribution was made to help cover unitholder tax liabilities associated with owning NRP's common units during 2022. 9(1)Totals include the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest.NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited)4. 20222023 includes the assumed conversion of the remaining preferred units.units while it does not include the assumed conversion of the preferred units that were redeemed during the first quarter of 2023 as the inclusion of these units would be anti-dilutive. The calculation of diluted net income per common unit for the three months ended March 31, 2021 does not include2022 includes the assumed conversion of the preferred units because the impact would have been anti-dilutive.units. common common units at 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 whereas the calculation of diluted net income per common unit for the three months ended March 31, 2021 does 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.7NATURAL RESOURCE PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED(Unaudited)$34.00.tables reconciletable reconciles 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) 2022 2021 Allocation of net income Net income $ 63,899 $ 8,381 Less: income attributable to preferred unitholders (7,500) (7,727) Net income attributable to common unitholders and the general partner $ 56,399 $ 654 Less: net income attributable to the general partner (1,128) (13) Net income attributable to common unitholders $ 55,271 $ 641 Basic net income per common unit Weighted average common units—basic 12,415 12,292 Basic net income per common unit $ 4.45 $ 0.05 Diluted net income per common unit Weighted average common units—basic 12,415 12,292 Plus: dilutive effect of preferred units 6,974 — Plus: dilutive effect of warrants 531 — Plus: dilutive effect of unvested unit-based awards 240 116 Weighted average common units—diluted 20,160 12,408 Net income $ 63,899 $ 8,381 Less: income attributable to preferred unitholders — (7,727) Diluted net income attributable to common unitholders and the general partner $ 63,899 $ 654 Less: diluted net income attributable to the general partner (1,278) (13) Diluted net income attributable to common unitholders $ 62,621 $ 641 Diluted net income per common unit $ 3.11 $ 0.05
For the Three Months Ended March 31, | ||||||||
(In thousands, except per unit data) | 2023 | 2022 | ||||||
Basic net income per common unit | ||||||||
Net income attributable to common unitholders | $ | 55,258 | $ | 55,271 | ||||
Weighted average common units—basic | 12,570 | 12,415 | ||||||
Basic net income per common unit | $ | 4.40 | $ | 4.45 | ||||
Diluted net income per common unit | ||||||||
Weighted average common units—basic | 12,570 | 12,415 | ||||||
Plus: dilutive effect of preferred units | 3,778 | 6,974 | ||||||
Plus: dilutive effect of warrants | 1,255 | 531 | ||||||
Plus: dilutive effect of unvested unit-based awards | 209 | 240 | ||||||
Weighted average common units—diluted | 17,812 | 20,160 | ||||||
Net income | $ | 79,275 | $ | 63,899 | ||||
Less: income attributable to preferred unitholders | (586 | ) | — | |||||
Less: redemption of preferred units | (16,228 | ) | — | |||||
Diluted net income attributable to common unitholders and the general partner | $ | 62,461 | $ | 63,899 | ||||
Less: diluted net income attributable to the general partner | (1,249 | ) | (1,278 | ) | ||||
Diluted net income attributable to common unitholders | $ | 61,212 | $ | 62,621 | ||||
Diluted net income per common unit | $ | 3.44 | $ | 3.11 | ||||
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 2two operating segments:
Mineral Rights
—Soda Ash
—consists of the Partnership's 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin of Wyoming. Sisecam Wyoming mines trona and processes it into soda ash that is sold 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.
The following table summarizes certain financial information for each of the Partnership's business segments:
| Operating Segments | ||||||||||||||||||||||||||
| (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||||||||||||
| For the Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||
| Revenues | $ | 74,879 | $ | 14,837 | $ | — | $ | 89,716 | ||||||||||||||||||
| Operating and maintenance expenses | 8,025 | 51 | — | 8,076 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 3,868 | — | — | 3,868 | ||||||||||||||||||||||
| General and administrative expenses | — | — | 4,467 | 4,467 | ||||||||||||||||||||||
| Asset impairments | 19 | — | — | 19 | ||||||||||||||||||||||
| Interest expense, net | — | — | 9,387 | 9,387 | ||||||||||||||||||||||
| Net income (loss) | 62,967 | 14,786 | (13,854) | 63,899 | ||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||
| Revenues | $ | 35,119 | $ | 1,973 | $ | — | $ | 37,092 | ||||||||||||||||||
| Gain on asset sales and disposals | 59 | — | — | 59 | ||||||||||||||||||||||
| Operating and maintenance expenses | 5,532 | 20 | — | 5,552 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 5,092 | — | — | 5,092 | ||||||||||||||||||||||
| General and administrative expenses | — | — | 4,110 | 4,110 | ||||||||||||||||||||||
| Asset impairments | 4,043 | — | — | 4,043 | ||||||||||||||||||||||
| Interest expense, net | 23 | — | 9,950 | 9,973 | ||||||||||||||||||||||
| Net income (loss) | 20,488 | 1,953 | (14,060) | 8,381 | ||||||||||||||||||||||
Operating Segments | ||||||||||||||||
(In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||
For the Three Months Ended March 31, 2023 | ||||||||||||||||
Revenues | $ | 79,869 | $ | 19,254 | $ | — | $ | 99,123 | ||||||||
Gain on asset sales and disposals | 96 | — | — | 96 | ||||||||||||
Operating and maintenance expenses | 7,005 | 158 | — | 7,163 | ||||||||||||
Depreciation, depletion and amortization | 4,079 | — | 4 | 4,083 | ||||||||||||
General and administrative expenses | — | — | 5,845 | 5,845 | ||||||||||||
Asset impairments | — | — | — | — | ||||||||||||
Interest expense, net | — | — | 2,853 | 2,853 | ||||||||||||
Net income (loss) | 68,881 | 19,096 | (8,702 | ) | 79,275 | |||||||||||
For the Three Months Ended March 31, 2022 | ||||||||||||||||
Revenues | $ | 74,879 | $ | 14,837 | $ | — | $ | 89,716 | ||||||||
Operating and maintenance expenses | 8,025 | 51 | — | 8,076 | ||||||||||||
Depreciation, depletion and amortization | 3,868 | — | — | 3,868 | ||||||||||||
General and administrative expenses | — | — | 4,467 | 4,467 | ||||||||||||
Asset impairments | 19 | — | — | 19 | ||||||||||||
Interest expense, net | — | — | 9,387 | 9,387 | ||||||||||||
Net income (loss) | 62,967 | 14,786 | (13,854 | ) | 63,899 | |||||||||||
The Partnership accounts for its 49% investment in Sisecam Wyoming using the equity method of accounting. Activity related to this investment is as follows:
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (In thousands) | 2022 | 2021 | |||||||||||||||||||||
| Balance at beginning of period | $ | 276,004 | $ | 262,514 | |||||||||||||||||||
| Income allocation to NRP’s equity interests | 16,065 | 3,216 | |||||||||||||||||||||
| Amortization of basis difference | (1,228) | (1,243) | |||||||||||||||||||||
| Other comprehensive income | 2,545 | 732 | |||||||||||||||||||||
| Distribution | (13,230) | (3,920) | |||||||||||||||||||||
| Balance at end of period | $ | 280,156 | $ | 261,299 | |||||||||||||||||||
For the Three Months Ended March 31, | ||||||||
(In thousands) | 2023 | 2022 | ||||||
Balance at beginning of period | $ | 306,470 | $ | 276,004 | ||||
Income allocation to NRP’s equity interests (1) | 20,364 | 16,065 | ||||||
Amortization of basis difference | (1,110 | ) | (1,228 | ) | ||||
Other comprehensive income (loss) | (19,583 | ) | 2,545 | |||||
Distribution | (10,780 | ) | (13,230 | ) | ||||
Balance at end of period | $ | 295,361 | $ | 280,156 | ||||
| (1) | Amounts reclassified into income out of accumulated other comprehensive loss were $20.6 million and $1.7 million for the three months ended March 31, 2023 and 2022, respectively. |
The following table represents summarized financial information for Sisecam Wyoming as derived from their respective unaudited financial statements for the three months ended March 31, 2022 2023 and 2021:2022:
For the Three Months Ended March 31, | ||||||||
(In thousands) | 2023 | 2022 | ||||||
Net sales | $ | 207,128 | $ | 163,437 | ||||
Gross profit | 49,055 | 39,765 | ||||||
Net income | 41,560 | 32,786 | ||||||
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (In thousands) | 2022 | 2021 | |||||||||||||||||||||
| Net sales | $ | 163,437 | $ | 127,791 | |||||||||||||||||||
| Gross profit | 39,765 | 12,700 | |||||||||||||||||||||
| Net income | 32,786 | 6,563 | |||||||||||||||||||||
The Partnership’s mineral rights consist of the following:
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In thousands) | Carrying Value | Accumulated Depletion | Net Book Value | Carrying Value | Accumulated Depletion | Net Book Value | |||||||||||||||||||||||||||||
| Coal properties | $ | 670,626 | $ | (256,963) | $ | 413,663 | $ | 670,650 | $ | (253,503) | $ | 417,147 | |||||||||||||||||||||||
| Aggregates properties | 8,747 | (3,102) | 5,645 | 8,747 | (2,975) | 5,772 | |||||||||||||||||||||||||||||
| Oil and gas royalty properties | 12,354 | (9,236) | 3,118 | 12,354 | (9,115) | 3,239 | |||||||||||||||||||||||||||||
| Other | 13,151 | (1,612) | 11,539 | 13,151 | (1,612) | 11,539 | |||||||||||||||||||||||||||||
| Total mineral rights, net | $ | 704,878 | $ | (270,913) | $ | 433,965 | $ | 704,902 | $ | (267,205) | $ | 437,697 | |||||||||||||||||||||||
March 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
(In thousands) | Carrying Value | Accumulated Depletion | Net Book Value | Carrying Value | Accumulated Depletion | Net Book Value | ||||||||||||||||||
Coal properties | $ | 661,812 | $ | (272,743 | ) | $ | 389,069 | $ | 661,812 | $ | (269,037 | ) | $ | 392,775 | ||||||||||
Aggregates properties | 8,655 | (3,520 | ) | 5,135 | 8,655 | (3,410 | ) | 5,245 | ||||||||||||||||
Oil and gas royalty properties | 12,354 | (9,720 | ) | 2,634 | 12,354 | (9,600 | ) | 2,754 | ||||||||||||||||
Other | 13,145 | (1,612 | ) | 11,533 | 13,150 | (1,612 | ) | 11,538 | ||||||||||||||||
Total mineral rights, net | $ | 695,966 | $ | (287,595 | ) | $ | 408,371 | $ | 695,971 | $ | (283,659 | ) | $ | 412,312 | ||||||||||
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 $3.7$3.9 million and $4.7$3.7 million for the three months ended March 31, 2022 2023 and 2021,2022, respectively.
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. WhileAs a result of the Partnership's impairment evaluation as of analysis, the Partnership did not have any asset impairments during the three months ended March 31, 2022 incorporated2023 and recorded an estimated impact ofimmaterial impairment expense during the global COVID-19 pandemic, there is significant uncertainty as to the severity and duration of this disruption. If the impact is worse than current estimates, an additional impairment charge may be recognized in future periods.
The Partnership's debt consists of the following:
| March 31, | December 31, | ||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| 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 | |||||||||||
| 5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023 | $ | 4,730 | $ | 4,730 | |||||||
| 4.73% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2023 | 12,008 | 12,008 | |||||||||
| 5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 25,368 | 38,053 | |||||||||
| 8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 8,023 | 12,035 | |||||||||
| 5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 57,104 | 57,104 | |||||||||
| 5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 14,554 | 14,554 | |||||||||
| Total Opco Senior Notes | $ | 121,787 | $ | 138,484 | |||||||
| Total debt at face value | $ | 421,787 | $ | 438,484 | |||||||
| Net unamortized debt issuance costs | (4,578) | (4,939) | |||||||||
| Total debt, net | $ | 417,209 | $ | 433,545 | |||||||
| Less: current portion of long-term debt | (39,046) | (39,102) | |||||||||
| Total long-term debt, net | $ | 378,163 | $ | 394,443 | |||||||
March 31, | December 31, | |||||||
(In thousands) | 2023 | 2022 | ||||||
Opco credit facility | $ | 91,200 | $ | 70,000 | ||||
Opco Senior Notes | ||||||||
5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023 | $ | 2,366 | $ | 2,366 | ||||
4.73% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2023 | 6,004 | 6,004 | ||||||
5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 12,684 | 25,368 | ||||||
8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 4,011 | 8,023 | ||||||
5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 45,683 | 45,683 | ||||||
5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 11,643 | 11,643 | ||||||
Total Opco Senior Notes | $ | 82,391 | $ | 99,087 | ||||
Total debt at face value | $ | 173,591 | $ | 169,087 | ||||
Net unamortized debt issuance costs | (715 | ) | (806 | ) | ||||
Total debt, net | $ | 172,876 | $ | 168,281 | ||||
Less: current portion of long-term debt | (39,055 | ) | (39,076 | ) | ||||
Total long-term debt, net | $ | 133,821 | $ | 129,205 | ||||
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 BRP LLC and NRP Trona LLC. As of March 31, 20222023 and December 31, 2021,2022, Opco was in compliance with the terms of the financial covenants contained in its debt agreements.
Opco Credit Facility
In April 2019, August 2022, the Partnership entered into the FourthFifth Amendment (the “Fourth Amendment”)"Fifth Amendment) to the Opco Credit Facility (the "Opco Credit Facility"). The FourthFifth Amendment extended the term of the Opco Credit Facility until April 2023. August 2027. Lender commitments under the Opco Credit Facility remain at $100.0increased to $130.0 million. The Opco Credit Facility contains financial covenants requiring Opco to maintain:
• | A leverage ratio of consolidated indebtedness to EBITDDA (in each case as defined in the Opco Credit Facility) not to exceed 3.0x; provided, and |
• | an interest coverage ratio of consolidated EBITDDA to the sum of consolidated interest expense and consolidated lease expense (in each case as defined in the Opco Credit Facility) of not less than 3.5 to 1.0. |
As of consolidated indebtedness to EBITDDA (as definedDecember 31, 2022, the Partnership had $70.0 million in borrowings outstanding under the Opco Credit Facility) not to exceed 4.0x; provided, however, that if Facility. During the three months ended March 31, 2023, the Partnership increases its quarterly distribution to its common unitholders above $0.45 per common unit, the maximum leverage ratioborrowed $94.2 million and repaid $73.0 million, resulting in $91.2 million in borrowings outstanding under the Opco Credit Facility will permanently decrease from 4.0x to 3.0x; and
The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of $341.7$323.0 million
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, 20222023 and December 31, 2021,2022, the Opco Senior Notes had cumulative principal balances of $121.8$82.4 million and $138.5$99.1 million, respectively. Opco made mandatory principal payments of $16.7 million during the three months ended March 31, 2022 2023 and 2021.
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, 2022.
Fair Value of Financial Assets and Liabilities
The Partnership’s financial assets and liabilities consist of cash and cash equivalents, a 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 value and estimated fair value of the Partnership's debt and contract receivable:
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||
| (In thousands) | Fair Value Hierarchy Level | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||||||||||||||||
| Debt: | |||||||||||||||||||||||||||||
| NRP 2025 Senior Notes | 1 | $ | 296,504 | $ | 304,500 | $ | 296,236 | $ | 300,000 | ||||||||||||||||||||
Opco Senior Notes (1) | 3 | 120,705 | 123,614 | 137,309 | 138,484 | ||||||||||||||||||||||||
| Opco Credit Facility | 3 | — | — | — | — | ||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
Contract receivable, net (current and long-term) (2) | 3 | $ | 33,068 | $ | 25,732 | $ | 33,612 | $ | 26,010 | ||||||||||||||||||||
March 31, 2023 | December 31, 2022 | |||||||||||||||||||
Fair Value | Carrying | Estimated | Carrying | Estimated | ||||||||||||||||
(In thousands) | Hierarchy Level | Value | Fair Value | Value | Fair Value | |||||||||||||||
Debt: | ||||||||||||||||||||
Opco Senior Notes (1) | 3 | $ | 81,676 | $ | 77,587 | $ | 98,281 | $ | 96,060 | |||||||||||
Opco Credit Facility (2) | 3 | 91,200 | 91,200 | 70,000 | 70,000 | |||||||||||||||
Assets: | ||||||||||||||||||||
Contract receivable, net (current and long-term) (3) | 3 | $ | 30,783 | $ | 25,615 | $ | 31,371 | $ | 24,833 | |||||||||||
| (1) | The fair value of the Opco Senior Notes at March 31, 2023 and December 31, 2022 were estimated by management utilizing the present value replacement method incorporating the interest rate of the Opco Credit facility at March 31, 2023 and December 31, 2022, respectively. | |||||||||
| (2) | The fair value of the Opco Credit Facility approximates the outstanding borrowing amount because the interest rates are variable and reflective of market rates and the terms of the credit facility allow the Partnership to repay the debt at any time without penalty. |
(3) | 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, 2023 and December 31, 2022. | ||||||
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, 20222023 and December 31, 2021.2022.
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, including Quintana Infrastructure Development ("QID"), 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.
Direct general and administrative expenses charged to the Partnership by QMC, WPPLP and QID are included on the Partnership's Consolidated Statement of Comprehensive Income as follows:
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| (In thousands) | 2022 | 2021 | |||||||||||||||||||||
| Operating and maintenance expenses | $ | 1,659 | $ | 1,607 | |||||||||||||||||||
| General and administrative expenses | 1,240 | 1,186 | |||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||
(In thousands) | 2023 | 2022 | ||||||
Operating and maintenance expenses | $ | 1,719 | $ | 1,659 | ||||
General and administrative expenses | 1,320 | 1,240 | ||||||
The Partnership had accounts payable to QMC of $0.4 million on its Consolidated Balance Sheets of $0.4 million to QMC at both March 31, 20222023 and December 31, 20212022, and $0.8 million and $0.9$1.0 million of accounts payable to WPPLP at March 31, 20222023 and December 31, 2021,2022, respectively.
During the three months ended March 31, 2022 2023 and 2021,2022, the Partnership recognized $1.6$2.0 million and $0.2$1.6 million, respectively, in operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to an overriding royalty agreement with WPPLP.
Corbin J. Robertson, Jr. owns 85% of the general partner of Great Northern Properties Limited Partnership ("GNP"), a privately held company primarily engaged in owning and managing mineral properties and surface leases. As of At both March 31, 20222023 and December 31, 20212022 the Partnership had $0.0$0.03 million and $0.1 million, respectively, of accounts receivable from GNP included in accounts receivable, net on its Consolidated Balance Sheets related to amounts collected for surface leases that belong to NRP.
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, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Revenues | Percent | Revenues | Percent | ||||||||||||||||||||||||||||||||||||||||||||||
Foresight Energy Resources LLC ("Foresight") (1) (2) | $ | 11,250 | 13 | % | $ | 8,572 | 23 | % | ||||||||||||||||||||||||||||||||||||||||||
Alpha Metallurgical Resources, Inc. (1) | 27,743 | 31 | % | 8,043 | 22 | % | ||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
(In thousands) | Revenues | Percent | Revenues | Percent | ||||||||||||
Alpha Metallurgical Resources, Inc. (1) | $ | 24,218 | 24 | % | $ | 27,743 | 31 | % | ||||||||
Foresight Energy Resources LLC ("Foresight") (1) | $ | 12,529 | 13 | % | $ | 11,250 | 13 | % | ||||||||
(1) | Revenues from Alpha Metallurgical Resources, Inc. and Foresight are included within the Partnership's Mineral Rights segment. | |||||||||||||
NRP is involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, Partnership management believes these ordinary course matters will not have a material effect on the Partnership’s financial position, liquidity or operations.
During the three months ended March 31, 2023, the Partnership granted service, performance and market-based awards under its 2017 Long-Term Incentive Plan and during the three months ended March 31, 2022, the Partnership granted service-based awards. The Partnership's unit-basedservice and performance-based awards granted in 2022 and 2021 wereare valued using the closing price of NRP's common units as of the grant date.date while the Partnership's market-based awards are valued using a Monte Carlo simulation. The grant date fair value of these awards granted during the three months ended March 31, 2022 2023 and 2021 were $7.92022 was $15.9 million and $3.8$7.9 million, respectively. Total unit-based compensation expense associated with these awards was $1.4$2.5 million and $1.1$1.4 million for the three months ended March 31, 2022 2023 and 2021,2022, 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, 20222023 is $9.5$20.2 million, which is to be recognized over a weighted average period of 2.5 years. The unamortized cost associated with unvested outstanding awards as of December 31, 20212022 was $3.3$6.3 million.
A summary of the unit activity in the outstanding grants during 20222023 is as follows:
(In thousands) | Common Units | Weighted Average Grant Date Fair Value per Common Unit | ||||||
Outstanding at January 1, 2023 | 386 | $ | 28.96 | |||||
Granted | 278 | $ | 56.94 | |||||
Fully vested and issued | (184 | ) | $ | 26.30 | ||||
Outstanding at March 31, 2023 | 480 | $ | 46.20 | |||||
| (In thousands) | Common Units | Weighted Average Grant Date Fair Value per Common Unit | |||||||||
| Outstanding at January 1, 2022 | 411 | $ | 23.00 | ||||||||
| Granted | 208 | $ | 38.29 | ||||||||
| Fully vested and issued | (233) | $ | 26.74 | ||||||||
| Outstanding at March 31, 2022 | 386 | $ | 28.96 | ||||||||
The Partnership owns rail loadout and associated infrastructure at the Sugar Camp mine in the Illinois Basin operated by a subsidiary of Foresight. The infrastructure at the Sugar Camp mine is leased to a subsidiary of Foresight 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 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.
As of March 31, 20222023 and December 31, 2021,2022, NRP had the following current expected credit loss (“CECL”) allowance related to its receivables and long-term contract receivable:
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
| (In thousands) | Gross | CECL Allowance | Net | Gross | CECL Allowance | Net | ||||||||||||||||||||||||||||||||
| Receivables | $ | 39,403 | $ | (4,361) | $ | 35,042 | $ | 28,869 | $ | (3,312) | $ | 25,557 | ||||||||||||||||||||||||||
| Long-term contract receivable | 31,887 | (1,104) | 30,783 | 32,497 | (1,126) | 31,371 | ||||||||||||||||||||||||||||||||
| Total | $ | 71,290 | $ | (5,465) | $ | 65,825 | $ | 61,366 | $ | (4,438) | $ | 56,928 | ||||||||||||||||||||||||||
March 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
(In thousands) | Gross | CECL Allowance | Net | Gross | CECL Allowance | Net | ||||||||||||||||||
Receivables | $ | 42,410 | $ | (3,874 | ) | $ | 38,536 | $ | 47,237 | $ | (4,461 | ) | $ | 42,776 | ||||||||||
Long-term contract receivable | 29,325 | (1,016 | ) | 28,309 | 29,984 | (1,038 | ) | 28,946 | ||||||||||||||||
Total | $ | 71,735 | $ | (4,890 | ) | $ | 66,845 | $ | 77,221 | $ | (5,499 | ) | $ | 71,722 | ||||||||||
NRP recorded $1.0 million($0.6 million) and $0.4$1.0 million in operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to the change in the CECL allowance during the three months ended March 31, 2022 2023 and 2021,2022, respectively.
NRP has procedures in place to monitor its ongoing credit exposure through timely review of counterparty balances against contract terms and due dates, account and financing receivable reconciliation, bankruptcy monitoring, lessee audits and dispute resolution. The Partnership may employ legal counsel or collection specialists to pursue recovery of defaulted receivables.
The following represents material events that have occurred subsequent to March 31, 20222023 through the time of the Partnership’s filing of its Quarterly Report on Form 10-Q10-Q with the SEC:
Common Unit and Preferred Unit Distributions
In May 2022, 2023, the Board of Directors declared a distribution of $0.75 per common unit with respect to the first quarter of 2022.2023. The Board of Directors also declared a $6.1 million cash distribution on NRP's outstanding preferred units with respect to the first quarter of 2022 totaling $7.5 million in cash.2023.
The following review of operations for the three month periods ended March 31, 20222023 and 20212022 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, 2021.
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 was 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; future distributions on our common and preferred units; 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 levelsfuture performance by our lessees; Sisecam Wyoming LLC’s ("Sisecam 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,NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) less equity earnings from unconsolidated investment; 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 or loss, 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, 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
NoteDistributable 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;receivable; less maintenance capital expenditures. 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 assesassess 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;receivable; less maintenance and expansion capital expenditures and cash flow used in acquisition costs classified as investing or financing activities. 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.
Leverage Ratio
Leverage ratio represents the outstanding principal of our debt at the end of the period divided by the last twelve months' Adjusted EBITDA as defined above. We believe that leverage ratio is a useful measure to management and investors to evaluate and monitor our indebtedness relative to our ability to generate income to service such debt and in understanding trends in our overall financial condition. Leverage ratio may not be calculated the same for us as for other companies and is not a substitute for, and should not be used in conjunction with, GAAP financial ratios.
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 StandardsExecutive 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 Sisecam 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:
Mineral Rights
—consists of approximately 13 million acres of mineral interests and other subsurface rights across the United States. If combined in a single tract, our ownership would cover roughly 20,000 square miles. Our ownership provides critical inputs for the manufacturing of steel, electricity and basic building materials, as well as opportunities for carbon sequestration and renewable energy. We are working to strategically redefine our business as a key player in the transitional energy economy in the years to come.Soda Ash
—consists of our 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining and soda ash production business located in the Green River Basin of Wyoming. Sisecam Wyoming mines the trona and processes it into soda ash that is sold 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.
Our financial results by segment for the three months ended March 31, 20222023 are as follows:
| Operating Segments | ||||||||||||||||||||||||||
| (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||||||||||||
| Revenues and other income | $ | 74,879 | $ | 14,837 | $ | — | $ | 89,716 | ||||||||||||||||||
| Net income (loss) | $ | 62,967 | $ | 14,786 | $ | (13,854) | $ | 63,899 | ||||||||||||||||||
Adjusted EBITDA (1) | $ | 66,854 | $ | 13,179 | $ | (4,467) | $ | 75,566 | ||||||||||||||||||
| Cash flow provided by (used in) continuing operations | ||||||||||||||||||||||||||
| Operating activities | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
| Investing activities | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Financing activities | $ | (614) | $ | — | $ | (51,647) | $ | (52,261) | ||||||||||||||||||
Distributable cash flow (1) | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
Free cash flow (1) | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
Operating Segments | ||||||||||||||||
(In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||
Revenues and other income | $ | 79,965 | $ | 19,254 | $ | — | $ | 99,219 | ||||||||
Net income (loss) | $ | 68,881 | $ | 19,096 | $ | (8,702 | ) | $ | 79,275 | |||||||
Adjusted EBITDA (1) | $ | 72,960 | $ | 10,622 | $ | (5,845 | ) | $ | 77,737 | |||||||
Cash flow provided by (used in) continuing operations | ||||||||||||||||
Operating activities | $ | 73,858 | $ | 10,617 | $ | (11,575 | ) | $ | 72,900 | |||||||
Investing activities | $ | 699 | $ | — | $ | (2 | ) | $ | 697 | |||||||
Financing activities | $ | (583 | ) | $ | — | $ | (94,450 | ) | $ | (95,033 | ) | |||||
Distributable cash flow (1) | $ | 74,557 | $ | 10,617 | $ | (11,577 | ) | $ | 73,597 | |||||||
Free cash flow (1) | $ | 74,456 | $ | 10,617 | $ | (11,577 | ) | $ | 73,496 | |||||||
(1) | See "—Results of Operations" below for reconciliations to the most comparable GAAP financial measures. | |||||||||||||
Current Results/Market Commentar
Financial Results and Quarterly Distributions
We generated $52.3$72.9 million of operating cash flow and $73.5 million of free cash flow during the three months ended March 31, 2022,2023, and ended the quarter with $235.6$56.5 million of liquidity consisting of $135.6$17.7 million of cash and cash equivalents and $100.0$38.8 million of borrowing capacity under our Opco Credit Facility.
In February 2023, we declared and paid a first quarter 2022 cash distribution of $0.75 per common unit of NRP an increase comparedwith respect to $0.45 paid lastthe fourth quarter andof 2022 as well as a $7.5 million cash distribution on the preferred units. The decisionunits with respect to increasethe fourth quarter of 2022. In March 2023, we declared and paid a special cash distribution of $2.43 per common unit distributions was based on our substantial free cash flow generation, solid liquidity and positive outlook for our business lines, coupledto help cover unitholder tax liabilities associated with higher expectedowning NRP's common unitholder income tax liability for 2022 resulting from our improved financial performance.units during 2022. Future distributions on our common and preferred units will be determined on a quarterly basis by the Board of Directors. The Board of Directors considers numerous factors each quarter in determining cash distributions, including profitability, cash flow, debt service obligations, market conditions and outlook, estimated unitholder income tax liability and the level of cash reserves that the Board determines is necessary for future operating and capital needs.
In February 2023, we received a notice from holders of our Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 47,499 Class A Preferred Units. We chose to redeem the preferred units for $47.5 million in cash rather than issuing common units. Of the originally issued 250,000 Class A Preferred Units, 202,501 Class A Preferred Units remain outstanding.
Mineral Rights Business Segment
Revenues and other income in the first quarter of 2022 driven by strong demand for steel and a relatively subdued supply response for coking coal which has yet2023 increased $5.1 million, or 7%, as compared to reach pre-pandemic production levelsthe prior year period primarily due to increased metallurgical coal sales volumes and revenue from carbon neutral initiatives. Cash provided by operating activities and free cash flow increased $25.7 million and $26.3 million, respectively, compared to the prior year quarter primarily due to the timing of minimum and royalty payments and prior year recoupments.
Metallurgical coal prices remain strong relative to historical norms, although pricing has declined from the record highs seen in 2022. Continued support for pricing is expected as operators are limited in their ability to increase production due to ongoing labor shortages, transportation and global supply chain interruptions. Despitelogistics challenges, difficulty of new mine permitting, and limited access to capital. While metallurgical prices have pulled back from the negative impact on steel production resulting from COVID-19 lockdowns in China,peaks reached last year, we expect the supply-demand balance for metallurgical coalcontinue to believe met prices will remain tightwell-supported for the foreseeable futurefuture.
Thermal coal prices also reached record highs in 2022, but have declined significantly in recent months due to unusually warm weather in Europe and should provide furtherNorth America as well as lower natural gas prices. While we do not expect to see thermal prices rebound to last year’s levels, many of the factors that provided support for domestic and international prices.
We continue to explore and identify alternativecarbon neutral revenue sourcesopportunities across our large portfolio of land, mineral, and timber assets. The types of opportunities includeassets, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar, and wind energy. As announced previously, inIn the first quarter of 2023, we executed on our first subsurface carbon dioxide ("CO
Soda Ash Business Segment
Revenues and other income in the first three monthsquarter of 2022 were higher by $12.92023 increased $4.4 million, or 30%, as compared to the prior year period as
International prices remained strong in the first quarter of 2023 reflecting a continued supply constrained market for soda ash. Domestic soda ash prices were also strong during the first quarter of 2023 versus the prior year quarter due to negotiated 2023 domestic prices converging to international soda ash prices.
Results of Operations
First Three MonthsQuarter of 2023 and 2022 and 2021 Compared
Revenues and Other Income
The following table includes our revenues and other income by operating segment:
| For the Three Months Ended March 31, | Increase | Percentage Change | ||||||||||||||||||||||||
| Operating Segment (In thousands) | 2022 | 2021 | ||||||||||||||||||||||||
| Mineral Rights | $ | 74,879 | $ | 35,178 | $ | 39,701 | 113 | % | ||||||||||||||||||
| Soda Ash | 14,837 | 1,973 | 12,864 | 652 | % | |||||||||||||||||||||
| Total | $ | 89,716 | $ | 37,151 | $ | 52,565 | 141 | % | ||||||||||||||||||
For the Three Months Ended March 31, | Percentage | |||||||||||||||
Operating Segment (In thousands) | 2023 | 2022 | Increase | Change | ||||||||||||
Mineral Rights | $ | 79,965 | $ | 74,879 | $ | 5,086 | 7 | % | ||||||||
Soda Ash | 19,254 | 14,837 | 4,417 | 30 | % | |||||||||||
Total | $ | 99,219 | $ | 89,716 | $ | 9,503 | 11 | % | ||||||||
The changes in revenues and other income isare discussed for each of the operating segments below:
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) | 2022 | 2021 | |||||||||||||||||||||
| Coal sales volumes (tons) | |||||||||||||||||||||||
| Appalachia | |||||||||||||||||||||||
| Northern | 428 | 120 | 308 | 257 | % | ||||||||||||||||||
| Central | 3,251 | 2,650 | 601 | 23 | % | ||||||||||||||||||
| Southern | 361 | 100 | 261 | 261 | % | ||||||||||||||||||
| Total Appalachia | 4,040 | 2,870 | 1,170 | 41 | % | ||||||||||||||||||
| Illinois Basin | 1,502 | 2,658 | (1,156) | (43) | % | ||||||||||||||||||
| Northern Powder River Basin | 1,238 | 1,059 | 179 | 17 | % | ||||||||||||||||||
| Gulf Coast | 69 | — | 69 | 100 | % | ||||||||||||||||||
| Total coal sales volumes | 6,849 | 6,587 | 262 | 4 | % | ||||||||||||||||||
| Coal royalty revenue per ton | |||||||||||||||||||||||
| Appalachia | |||||||||||||||||||||||
| Northern | $ | 10.14 | $ | 3.64 | $ | 6.50 | 179 | % | |||||||||||||||
| Central | 11.37 | 4.22 | 7.15 | 169 | % | ||||||||||||||||||
| Southern | 17.56 | 5.28 | 12.28 | 233 | % | ||||||||||||||||||
| Illinois Basin | 2.20 | 2.06 | 0.14 | 7 | % | ||||||||||||||||||
| Northern Powder River Basin | 3.74 | 3.37 | 0.37 | 11 | % | ||||||||||||||||||
| Gulf Coast | 0.55 | — | 0.55 | 100 | % | ||||||||||||||||||
| Combined average coal royalty revenue per ton | 8.12 | 3.22 | 4.90 | 152 | % | ||||||||||||||||||
| Coal royalty revenues | |||||||||||||||||||||||
| Appalachia | |||||||||||||||||||||||
| Northern | $ | 4,341 | $ | 437 | $ | 3,904 | 893 | % | |||||||||||||||
| Central | 36,980 | 11,195 | 25,785 | 230 | % | ||||||||||||||||||
| Southern | 6,340 | 528 | 5,812 | 1,101 | % | ||||||||||||||||||
| Total Appalachia | 47,661 | 12,160 | 35,501 | 292 | % | ||||||||||||||||||
| Illinois Basin | 3,303 | 5,483 | (2,180) | (40) | % | ||||||||||||||||||
| Northern Powder River Basin | 4,632 | 3,573 | 1,059 | 30 | % | ||||||||||||||||||
| Gulf Coast | 38 | — | 38 | 100 | % | ||||||||||||||||||
| Unadjusted coal royalty revenues | 55,634 | 21,216 | 34,418 | 162 | % | ||||||||||||||||||
| Coal royalty adjustment for minimum leases | (185) | (5,851) | 5,666 | 97 | % | ||||||||||||||||||
| Total coal royalty revenues | $ | 55,449 | $ | 15,365 | $ | 40,084 | 261 | % | |||||||||||||||
| Other revenues | |||||||||||||||||||||||
| Production lease minimum revenues | $ | 1,592 | $ | 3,450 | $ | (1,858) | (54) | % | |||||||||||||||
| Minimum lease straight-line revenues | 4,783 | 6,096 | (1,313) | (22) | % | ||||||||||||||||||
| Wheelage revenues | 3,717 | 1,781 | 1,936 | 109 | % | ||||||||||||||||||
| Property tax revenues | 1,472 | 1,469 | 3 | — | % | ||||||||||||||||||
| Coal overriding royalty revenues | 258 | 1,859 | (1,601) | (86) | % | ||||||||||||||||||
| Lease amendment revenues | 880 | 868 | 12 | 1 | % | ||||||||||||||||||
| Aggregates royalty revenues | 770 | 454 | 316 | 70 | % | ||||||||||||||||||
| Oil and gas royalty revenues | 1,814 | 1,366 | 448 | 33 | % | ||||||||||||||||||
| Other revenues | 348 | 219 | 129 | 59 | % | ||||||||||||||||||
| Total other revenues | $ | 15,634 | $ | 17,562 | $ | (1,928) | (11) | % | |||||||||||||||
| Royalty and other mineral rights | $ | 71,083 | $ | 32,927 | $ | 38,156 | 116 | % | |||||||||||||||
| Transportation and processing services revenues | 3,796 | 2,192 | 1,604 | 73 | % | ||||||||||||||||||
| Gain on asset sales and disposals | — | 59 | (59) | (100) | % | ||||||||||||||||||
| Total Mineral Rights segment revenues and other income | $ | 74,879 | $ | 35,178 | $ | 39,701 | 113 | % | |||||||||||||||
For the Three Months Ended March 31, | Increase | Percentage | ||||||||||||||
(In thousands, except per ton data) | 2023 | 2022 | (Decrease) | Change | ||||||||||||
Coal sales volumes (tons) | ||||||||||||||||
Appalachia | ||||||||||||||||
Northern | 379 | 428 | (49 | ) | (11 | )% | ||||||||||
Central | 3,609 | 3,251 | 358 | 11 | % | |||||||||||
Southern | 582 | 361 | 221 | 61 | % | |||||||||||
Total Appalachia | 4,570 | 4,040 | 530 | 13 | % | |||||||||||
Illinois Basin | 1,310 | 1,502 | (192 | ) | (13 | )% | ||||||||||
Northern Powder River Basin | 1,085 | 1,238 | (153 | ) | (12 | )% | ||||||||||
Gulf Coast | 58 | 69 | (11 | ) | (16 | )% | ||||||||||
Total coal sales volumes | 7,023 | 6,849 | 174 | 3 | % | |||||||||||
Coal royalty revenue per ton | ||||||||||||||||
Appalachia | ||||||||||||||||
Northern | $ | 9.86 | $ | 10.14 | $ | (0.28 | ) | (3 | )% | |||||||
Central | 9.92 | 11.37 | (1.45 | ) | (13 | )% | ||||||||||
Southern | 14.94 | 17.56 | (2.62 | ) | (15 | )% | ||||||||||
Illinois Basin | 3.57 | 2.20 | 1.37 | 62 | % | |||||||||||
Northern Powder River Basin | 4.68 | 3.74 | 0.94 | 25 | % | |||||||||||
Gulf Coast | 0.57 | 0.55 | 0.02 | 4 | % | |||||||||||
Combined average coal royalty revenue per ton | 8.26 | 8.12 | 0.14 | 2 | % | |||||||||||
Coal royalty revenues | ||||||||||||||||
Appalachia | ||||||||||||||||
Northern | $ | 3,737 | $ | 4,341 | $ | (604 | ) | (14 | )% | |||||||
Central | 35,806 | 36,980 | (1,174 | ) | (3 | )% | ||||||||||
Southern | 8,697 | 6,340 | 2,357 | 37 | % | |||||||||||
Total Appalachia | 48,240 | 47,661 | 579 | 1 | % | |||||||||||
Illinois Basin | 4,675 | 3,303 | 1,372 | 42 | % | |||||||||||
Northern Powder River Basin | 5,075 | 4,632 | 443 | 10 | % | |||||||||||
Gulf Coast | 33 | 38 | (5 | ) | (13 | )% | ||||||||||
Unadjusted coal royalty revenues | 58,023 | 55,634 | 2,389 | 4 | % | |||||||||||
Coal royalty adjustment for minimum leases | — | (185 | ) | 185 | 100 | % | ||||||||||
Total coal royalty revenues | $ | 58,023 | $ | 55,449 | $ | 2,574 | 5 | % | ||||||||
Other revenues | ||||||||||||||||
Production lease minimum revenues | $ | 613 | $ | 1,592 | $ | (979 | ) | (61 | )% | |||||||
Minimum lease straight-line revenues | 4,503 | 4,783 | (280 | ) | (6 | )% | ||||||||||
Carbon neutral initiative revenues | 2,118 | — | 2,118 | 100 | % | |||||||||||
Wheelage revenues | 3,869 | 3,717 | 152 | 4 | % | |||||||||||
Property tax revenues | 1,470 | 1,472 | (2 | ) | (0 | )% | ||||||||||
Coal overriding royalty revenues | 188 | 258 | (70 | ) | (27 | )% | ||||||||||
Lease amendment revenues | 851 | 880 | (29 | ) | (3 | )% | ||||||||||
Aggregates royalty revenues | 753 | 770 | (17 | ) | (2 | )% | ||||||||||
Oil and gas royalty revenues | 3,588 | 1,814 | 1,774 | 98 | % | |||||||||||
Other revenues | 295 | 348 | (53 | ) | (15 | )% | ||||||||||
Total other revenues | $ | 18,248 | $ | 15,634 | $ | 2,614 | 17 | % | ||||||||
Royalty and other mineral rights | $ | 76,271 | $ | 71,083 | $ | 5,188 | 7 | % | ||||||||
Transportation and processing services revenues | 3,598 | 3,796 | (198 | ) | (5 | )% | ||||||||||
Gain on asset sales and disposals | 96 | — | 96 | 100 | % | |||||||||||
Total Mineral Rights segment revenues and other income | $ | 79,965 | $ | 74,879 | $ | 5,086 | 7 | % | ||||||||
Approximately 75% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the three months ended March 31, 2023. Total coal ro
• | Appalachia: Coal royalty revenues were essentially flat period-over-period as increased sales volumes more than offset the decrease in sales prices in the Southern Appalachia region. |
• | Illinois Basin: Coal royalty revenues increased $1.4 million primarily due to increased sales prices during the three months ended March 31, 2023, as compared to the prior year quarter. |
Other Revenues
Total other revenues increased $2.6 million during the three months ended
March 31,Soda Ash
Revenues and other income related to our Soda Ash segment increased $12.9$4.4 million
Operating Expenses
The following table presents the significant categories of our consolidated operating expenses:
| For the Three Months Ended March 31, | Increase (Decrease) | Percentage Change | ||||||||||||||||||||||||
| (In thousands) | 2022 | 2021 | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||
| Operating and maintenance expenses | $ | 8,076 | $ | 5,552 | $ | 2,524 | 45 | % | ||||||||||||||||||
| Depreciation, depletion and amortization | 3,868 | 5,092 | (1,224) | (24) | % | |||||||||||||||||||||
| General and administrative expenses | 4,467 | 4,110 | 357 | 9 | % | |||||||||||||||||||||
| Asset impairments | 19 | 4,043 | (4,024) | (100) | % | |||||||||||||||||||||
| Total operating expenses | $ | 16,430 | $ | 18,797 | $ | (2,367) | (13) | % | ||||||||||||||||||
For the Three Months Ended March 31, | Increase | Percentage | ||||||||||||||
(In thousands) | 2023 | 2022 | (Decrease) | Change | ||||||||||||
Operating expenses | ||||||||||||||||
Operating and maintenance expenses | $ | 7,163 | $ | 8,076 | $ | (913 | ) | (11 | )% | |||||||
Depreciation, depletion and amortization | 4,083 | 3,868 | 215 | 6 | % | |||||||||||
General and administrative expenses | 5,845 | 4,467 | 1,378 | 31 | % | |||||||||||
Asset impairments | — | 19 | (19 | ) | (100 | )% | ||||||||||
Total operating expenses | $ | 17,091 | $ | 16,430 | $ | 661 | 4 | % | ||||||||
Total operating expenses decreased $2.4were essentially flat period-over-period. The $1.4 million increase in general and administrative expenses, primarily duerelated to the following:
Interest Expense, Net
Interest expense, net decreased $6.5 million as a result of less debt outstanding as compared to the prior year period. Asset impairments in the first three months of 2021 primarily related to a lease termination that resulted in the full impairment of a coal property.
Adjusted EBITDA (Non-GAAP Financial Measure)
The following table reconciles net income (loss) (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:
| Operating Segments | ||||||||||||||||||||||||||
| For the Three Months Ended (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||
| Net income (loss) | $ | 62,967 | $ | 14,786 | $ | (13,854) | $ | 63,899 | ||||||||||||||||||
| Less: equity earnings from unconsolidated investment | — | (14,837) | — | (14,837) | ||||||||||||||||||||||
| Add: total distributions from unconsolidated investment | — | 13,230 | — | 13,230 | ||||||||||||||||||||||
| Add: interest expense, net | — | — | 9,387 | 9,387 | ||||||||||||||||||||||
| Add: depreciation, depletion and amortization | 3,868 | — | — | 3,868 | ||||||||||||||||||||||
| Add: asset impairments | 19 | — | — | 19 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 66,854 | $ | 13,179 | $ | (4,467) | $ | 75,566 | ||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||||||||
| Net income (loss) | $ | 20,488 | $ | 1,953 | $ | (14,060) | $ | 8,381 | ||||||||||||||||||
| Less: equity earnings from unconsolidated investment | — | (1,973) | — | (1,973) | ||||||||||||||||||||||
| Add: total distributions from unconsolidated investment | — | 3,920 | — | 3,920 | ||||||||||||||||||||||
| Add: interest expense, net | 23 | — | 9,950 | 9,973 | ||||||||||||||||||||||
| Add: depreciation, depletion and amortization | 5,092 | — | — | 5,092 | ||||||||||||||||||||||
| Add: asset impairments | 4,043 | — | — | 4,043 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 29,646 | $ | 3,900 | $ | (4,110) | $ | 29,436 | ||||||||||||||||||
Operating Segments | ||||||||||||||||
For the Three Months Ended (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||
March 31, 2023 | ||||||||||||||||
Net income (loss) | $ | 68,881 | $ | 19,096 | $ | (8,702 | ) | $ | 79,275 | |||||||
Less: equity earnings from unconsolidated investment | — | (19,254 | ) | — | (19,254 | ) | ||||||||||
Add: total distributions from unconsolidated investment | — | 10,780 | — | 10,780 | ||||||||||||
Add: interest expense, net | — | — | 2,853 | 2,853 | ||||||||||||
Add: depreciation, depletion and amortization | 4,079 | — | 4 | 4,083 | ||||||||||||
Add: asset impairments | — | — | — | — | ||||||||||||
Adjusted EBITDA | $ | 72,960 | $ | 10,622 | $ | (5,845 | ) | $ | 77,737 | |||||||
March 31, 2022 | ||||||||||||||||
Net income (loss) | $ | 62,967 | $ | 14,786 | $ | (13,854 | ) | $ | 63,899 | |||||||
Less: equity earnings from unconsolidated investment | — | (14,837 | ) | — | (14,837 | ) | ||||||||||
Add: total distributions from unconsolidated investment | — | 13,230 | — | 13,230 | ||||||||||||
Add: interest expense, net | — | — | 9,387 | 9,387 | ||||||||||||
Add: depreciation, depletion and amortization | 3,868 | — | — | 3,868 | ||||||||||||
Add: asset impairments | 19 | — | — | 19 | ||||||||||||
Adjusted EBITDA | $ | 66,854 | $ | 13,179 | $ | (4,467 | ) | $ | 75,566 | |||||||
Net income increased $46.1$15.4 million primarily due to the decrease in interest expense, net and increase in revenues and other income, both discussed above. Adjusted EBITDA increased $2.2 million as compared to the prior year quarter primarily due to a $37.2$6.1 million increase in Adjusted EBITDA within our Mineral Rights segment as a result of higher revenues and other income asand lower operating and maintenance expenses, both discussed above,above. The increase in addition toAdjusted EBITDA within our Mineral Rights segment was partially offset by a $9.3$2.6 million increasedecrease in Adjusted EBITDA within our Soda Ash segment as a result ofprimarily due to Sisecam Wyoming paying a higher cashquarterly distribution received from Sisecam Wyoming in the first three monthsquarter of 2022 as compareddiscussed above and a $1.4 decrease in Adjusted EBITDA within our Corporate and Financing segment due to the prior year period.
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) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||
March 31, 2023 | ||||||||||||||||
Cash flow provided by (used in) | ||||||||||||||||
Operating activities | $ | 73,858 | $ | 10,617 | $ | (11,575 | ) | $ | 72,900 | |||||||
Investing activities | 699 | — | (2 | ) | 697 | |||||||||||
Financing activities | (583 | ) | — | (94,450 | ) | (95,033 | ) | |||||||||
March 31, 2022 | ||||||||||||||||
Cash flow provided by (used in) | ||||||||||||||||
Operating activities | $ | 48,176 | $ | 13,195 | $ | (9,040 | ) | $ | 52,331 | |||||||
Investing activities | — | — | — | — | ||||||||||||
Financing activities | (614 | ) | — | (51,647 | ) | (52,261 | ) | |||||||||
| Operating Segments | ||||||||||||||||||||||||||
| For the Three Months Ended (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||
| Cash flow provided by (used in) continuing operations | ||||||||||||||||||||||||||
| Operating activities | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
| Investing activities | — | — | — | — | ||||||||||||||||||||||
| Financing activities | (614) | — | (51,647) | (52,261) | ||||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||||||||
| Cash flow provided by (used in) continuing operations | ||||||||||||||||||||||||||
| Operating activities | $ | 25,962 | $ | 3,888 | $ | (6,650) | $ | 23,200 | ||||||||||||||||||
| Investing activities | 600 | — | — | 600 | ||||||||||||||||||||||
| Financing activities | (132) | — | (26,691) | (26,823) | ||||||||||||||||||||||
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) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities of continuing operations | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
| Add: proceeds from asset sales and disposals | — | — | — | — | ||||||||||||||||||||||
| Add: return of long-term contract receivable | — | — | — | — | ||||||||||||||||||||||
| Distributable cash flow | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
| Less: proceeds from asset sales and disposals | — | — | — | — | ||||||||||||||||||||||
| Free cash flow | $ | 48,176 | $ | 13,195 | $ | (9,040) | $ | 52,331 | ||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities of continuing operations | $ | 25,962 | $ | 3,888 | $ | (6,650) | $ | 23,200 | ||||||||||||||||||
| Add: proceeds from asset sales and disposals | 59 | — | — | 59 | ||||||||||||||||||||||
| Add: return of long-term contract receivable | 541 | — | — | 541 | ||||||||||||||||||||||
| Distributable cash flow | $ | 26,562 | $ | 3,888 | $ | (6,650) | $ | 23,800 | ||||||||||||||||||
| Less: proceeds from asset sales and disposals | (59) | — | — | (59) | ||||||||||||||||||||||
| Free cash flow | $ | 26,503 | $ | 3,888 | $ | (6,650) | $ | 23,741 | ||||||||||||||||||
Operating Segments | ||||||||||||||||
For the Three Months Ended (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||
March 31, 2023 | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 73,858 | $ | 10,617 | $ | (11,575 | ) | $ | 72,900 | |||||||
Add: proceeds from asset sales and disposals | 101 | — | — | 101 | ||||||||||||
Add: return of long-term contract receivable | 598 | — | — | 598 | ||||||||||||
Less: maintenance capital expenditures | — | — | (2 | ) | (2 | ) | ||||||||||
Distributable cash flow | $ | 74,557 | $ | 10,617 | $ | (11,577 | ) | $ | 73,597 | |||||||
Less: proceeds from asset sales and disposals | (101 | ) | — | — | (101 | ) | ||||||||||
Free cash flow | $ | 74,456 | $ | 10,617 | $ | (11,577 | ) | $ | 73,496 | |||||||
March 31, 2022 | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 48,176 | $ | 13,195 | $ | (9,040 | ) | $ | 52,331 | |||||||
Add: proceeds from asset sales and disposals | — | — | — | — | ||||||||||||
Add: return of long-term contract receivable | — | — | — | — | ||||||||||||
Distributable cash flow | $ | 48,176 | $ | 13,195 | $ | (9,040 | ) | $ | 52,331 | |||||||
Less: proceeds from asset sales and disposals | — | — | — | — | ||||||||||||
Free cash flow | $ | 48,176 | $ | 13,195 | $ | (9,040 | ) | $ | 52,331 | |||||||
Operating cash flow, DCF and FCF increased $28.5$20.6 million, $21.3 million and $28.6$21.2 million, respectively, primarily due to the following:
• | Mineral Rights Segment |
◦ | Operating cash flow, DCF and FCF increased $25.7 million, $26.4 million and $26.3 million, respectively, primarily due to the timing of minimum and royalty payments and prior year recoupments. |
• | Soda Ash Segment |
◦ | Operating cash flow, DCF and FCF decreased $2.6 million primarily due to Sisecam Wyoming paying a higher quarterly distribution in the first quarter of 2022 as discussed above. |
• | Corporate and Financing Segment |
◦ | Operating cash flow, DCF and FCF decreased $2.5 million primarily due to increased cash paid for incentive compensation in the first quarter of 2023 because of the improved business performance in 2022 and higher cash paid for interest on credit facility borrowings in 2023. |
Liquidity and Capital Resources
Current Liquidity
As of March 31, 2022,2023, we had total liquidity of $235.6$56.5 million, consisting of $135.6$17.7 million of cash and cash equivalents and $100.0$38.8 million of
For the Three Months Ended | ||||||||||||||||||||
(In thousands) | June 30, 2022 | September 30, 2022 | December 31, 2022 | March 31, 2023 | Last 12 Months | |||||||||||||||
Net income | $ | 66,820 | $ | 74,555 | $ | 63,218 | $ | 79,275 | $ | 283,868 | ||||||||||
Less: equity earnings from unconsolidated investment | (14,643 | ) | (14,556 | ) | (15,759 | ) | (19,254 | ) | (64,212 | ) | ||||||||||
Add: total distributions from unconsolidated investment | 10,486 | 10,339 | 10,780 | 10,780 | 42,385 | |||||||||||||||
Add: interest expense, net | 8,108 | 5,141 | 3,638 | 2,853 | 19,740 | |||||||||||||||
Add: loss on extinguishment of debt | 4,048 | 2,484 | 3,933 | — | 10,465 | |||||||||||||||
Add: depreciation, depletion and amortization | 5,847 | 6,850 | 5,954 | 4,083 | 22,734 | |||||||||||||||
Add: asset impairments | 43 | 812 | 3,583 | — | 4,438 | |||||||||||||||
Adjusted EBITDA | $ | 80,709 | $ | 85,625 | $ | 75,347 | $ | 77,737 | $ | 319,418 | ||||||||||
Debt—at March 31, 2023 | $ | 173,591 | ||||||||||||||||||
Leverage Ratio | 0.5 x | |||||||||||||||||||
Cash Flows
Cash flows provided by operating activities increased $29.1$20.6 million, from $23.2 million in the three months ended March 31, 2021 to $52.3 million in the three months ended March 31, 2022 to $72.9 million in the three months ended March 31, 2023, primarily relateddue to increased revenues and other incomecash provided by operating activities within our Mineral Rights segment, partially offset by decreased cash provided by operating activities within our Soda Ash and $9.3 million of a higher cash distributions received from Sisecam Wyoming in the first three months of 2022 as compared to the prior year period.
Cash flows used in financing activities increased $25.4$42.8 million, from $26.8 million used in the three months ended March 31, 2021 to $52.3 million used in the three months ended March 31, 2022 to $95.0 million used in the three months ended March 31, 2023, primarily due to the following:
• | $73.0 million of cash used to repay a portion of the Opco Credit Facility in the first quarter of 2023; | |
| • | $48.1 million of cash used to redeem the preferred units the first quarter of 2023; and | |
| • | $35.2 million of increased cash distributions to common unitholders and the general partner as a result of increasing our quarterly cash distribution to $0.75/unit beginning in the second quarter of 2022 in addition to the special distribution paid in the first quarter of 2023. |
These increases in cash flow used were partially offset by $94.2 million of borrowings on our Opco Credit Facility in the first quarter of 2023 and $19.6 million redemption of cash used to redeem the preferred units paid-in-kind during the first quarter of 2022 in addition to $3.7 million of increased cash used for preferred unit distributions as a result of paying all of our preferred unit distributions in cash as compared to half in kind during the three months ended March 31, 2021.
Capital Resources and Obligations
Debt, Net
We had the following debt outstanding as of March 31, 20222023 and December 31, 2021:
| March 31, | December 31, | ||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| Current portion of long-term debt, net | $ | 39,046 | $ | 39,102 | |||||||
| Long-term debt, net | 378,163 | 394,443 | |||||||||
| Total debt, net | $ | 417,209 | $ | 433,545 | |||||||
March 31, | December 31, | |||||||
(In thousands) | 2023 | 2022 | ||||||
Current portion of long-term debt, net | $ | 39,055 | $ | 39,076 | ||||
Long-term debt, net | 133,821 | 129,205 | ||||||
Total debt, net | $ | 172,876 | $ | 168,281 | ||||
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
NoteOff-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
NoteSummary 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, 2021.
Recent Accounting Standards
We do not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
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 are likely to continue to be volatile. Depressed prices in the future would have a smaller reporting company, wenegative 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 our reserves are not requiredcoal, 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 include this disclosureextend 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 Sisecam Wyoming's operations. If the market price for soda ash declines, Sisecam 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.
Interest Rate Risk
Our exposure to changes in interest rates results from our Form 10-Q forborrowings under the quarterly period endedOpco Credit Facility, which is subject to variably interest rates based upon SOFR. At March 31, 2022.
Evaluation of Disclosure Controls and Procedur
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’sPartnership’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 20222023 that materially affected, or were reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
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.
During the period covered by this report, 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, 2021.
None.
None.
None.
None.
Exhibit Number | Description | ||||||||||
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). | |||||||||||
| Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley. | |||||||||||
| Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley. | |||||||||||
| Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350. | |||||||||||
| Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350. | |||||||||||
101.INS* | Inline XBRL Instance Document | ||||||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | ||||||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | ||||||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||
104* | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) | ||||||||||
* | Filed herewith | ||||||||||
** | Furnished herewith | ||||||||||
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 | By: | /s/ | ||||||||||
| Corbin J. Robertson, Jr. | ||||||||||||
Corbin J. Robertson, Jr. | ||||||||||||
Chairman of the Board and | ||||||||||||
Chief Executive Officer | ||||||||||||
(Principal Executive Officer) | ||||||||||||
Date: May | By: | /s/ | |||||||||
| Christopher J. Zolas | |||||||||||
Christopher J. Zolas | |||||||||||
Chief Financial Officer and Treasurer | |||||||||||
(Principal Financial and Accounting Officer) | |||||||||||