NRP - Earnings call transcript Q3 2018 | Natural Resource Partners L.P.

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Operator

Welcome to the Natural Resource Partners L.P.

Third Quarter 2018 Earnings Conference Call.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Kathy Roberts, Natural Resource Partners' Vice President of Investor Relations. Ms. begin. may you Roberts,

Kathy Roberts

our Good quarter welcome call XXXX a available webcast Nicolas. Resource is the Partners' and on be will third conference replay site. morning, you, to and Natural being Web Thank call. Today's

President Joining Officer Chief Financial and Nunez, Chief Operating our and me Zolas, Craig today Officer. are our Chris

statements. our comments could discussed include events. Commission from forward-looking our and involve risk We cause revise forward-looking are matters materially other Securities forward-looking These undertake actual to XX-K risks and reflecting NRP's Form to NRP's of Some reasons. that any statements today may These in uncertainties our results future views about obligation for publicly and filings. or any statements Exchange update no differ

financial non-GAAP measures. Our comments also today include

do most be found to our would reconciliations GAAP get third for remind not we discuss sales details intend comparable everyone our to our coal with in I to measures on do for can XXXX reasons. included Additional respect detail press which construction that like pricing fundamentals, into quarter the lessee directly Web site. we or release, competitive are and to outlook nor particular any operations market aggregate discuss operations or or

you refer In addition, commentary soda disclosures public ash segment. specific and general I'll to questions resources, for business our regarding

Operating would to Chief Nunez, Officer. return and like I President Now, the Craig call to our over

Craig Nunez

you with have solid time thermal on NRP and Kathy. everyone cash for demand trend call. today. welcome to to us And a we metallurgical you, have to quarterly coal, for Thank of now. amounts some generate our continues back the of seen significant Good

to a XX% beneficial distributions accounting while attributable equity, EBITDA, standard. million earnings, net $XX we of of in of recorded the and still million cash increase common new strong the us holders. impact million resulting Over $XXX holders, This income common of in unit retaining unit $XX common $XX out to allowed free million performance XX $XXX million flow months, pay before of of to last

with said each a we've As can confident past our that sustainable more maybe plan of that on quarter performance passing rate we run becoming previously, we for future. are indicative

beneficial are In quarter, use ratio, the litigation looking of years. ago remain behind to regarding non-recoupable million us, results, to to this to on a We settlement defined we less each the not strong million. and make we intend margin times, laser safety and prudent $XX initial believe focus working Energy early EBITDA liquidity three positioning provide our sheet this agreed with operations. years between new companies, payments achieve cash mutually business on our proceeds liquidity brighter surrounding than minimum company of all this payment $XXX to maintaining together along a of cooperation pleased is from the years and X.X of legal with balance forward while passing litigation means strengthening look disputes our of in to With set debt continue for maintaining A say an reflected marks us that represents We This the fourth is has $XXX of in which million resolution quarter to ahead. era it next a from the and the in our our to I’m Hillsboro now future. third we our we future business, for our that sufficient is as we day. goal announced a to can two addition, generation that the settlement, We of pleased the received focused the energy Foresight announce total leverage the Macoupin step mines. to XX of first previously of Foresight to over important

quickest We the maximizing with common de-levering corresponding is believe robust our growth common units. substantial the in the of continue in intrinsic along equity, and de-risking structure, capital to the value of path to the turn and market this value

X.X quarter Our a down million and X.X currently of peak at million leverage from available million $XX we liquidity, $XXX of ended with times, cash capacity. of $XX of borrowing stands ratio consisting of the

Our coupon the our taking equity, and is into common ratio times unit account. after preferred times taking distribution before the X.X X.X account coverage into on coupon

to for reported of thermal demand third Our both quarter and coming coal from see coal robust segment met. approximately two met continue as strong another coal our we with export revenues

pay world's cash a lowest construction although, it returns. generate relatively quarter in one our to continues soda cost from results, General contributor investment Wyoming us ash as ash owning distributions aggregates business, to benefits continues positive small each soda consolidated operations. our to the Our of And

business. As flow have quarter, we our sheet, strengthening we introduced addition in last our increased in maximizing free employed on to balance cash our the productivity capital and of focus

after employed XX% the turn lawsuit ash out will With over the of capital our of performance. last to on call a soda XX the quarter gain that, Chris of stripping one-time the settlement specifics months financial on return third our I the Our over was segment. a review at benefit to

Chris Zolas

Thank everyone. good you, and Craig morning,

our NRP's with net properties, assets. aggregate Our coal portfolio ash quarter results to along construction the third and continue of demonstrate soda and of benefits thermal

of cash flow and $XX During aggregates common quarter million driven per and quarter, to were the Free and prior over $X.XX income, cash was million from primarily due year debt we less Basic $X timing earnings business. for collections million unit the royalty segment. of cash net coal third strong our and respectively. paying having cash due our $XX and from $X.XX of construction to steady and lower operations payments and from receipts generated diluted for up interest, the third cash the by quarter, also performance the

segment results. Moving our to

during were both continued met free export thermal third well, Our from coal by of domestic million the all flow markets segment tightened cash These markets. million and generating coal for million cash results to revenue, and continues $XX royalty strong of $XX $XX that perform the quarter. operations of driven

third lessees remain Appalachia the coal coal tons our during from of up Global Our in for and royalty million strong made XX% in properties quarter. coal demand the XX% and our properties our production quarter. third met coal of revenue X steel produced of our on

prior addition, segment, consistent Illinois the strength last third we regards year. in with River continued soda coal an of In in $XX and Northern thermal In received our from distributions Powder of performance coal pricing and and steady results demand General were the prior QX the We quarter in the our quarter in Basin. in in to consistent with the ash operating from Appalachia, resulted quarter, properties amount what million quarter. received third cash Wyoming the Basin

of $X income, of Our construction $X generated $X free segment during the flow million operating of and flow million cash aggregate third cash net million quarter.

partially activity with cost. period energy CapEx. to payments flow $X increased increase was Our increased and as prior quarter, to projects the sector million higher net due timing prior flow operating performance million construction this operating operating flow cash compared consistent offset receipts. Operating of cash only prior the Free increased and were by was in increased primarily by $X cash the compared the expansion quarter, offset to because

lower third compared debt $XX million in of corporate $X interest cost as quarter the in million, and less prior result lower the Our expense segment XXXX. to due year, were financing a to primarily

a receive provide further error impact this the internal per statement, during distributions, million related income its third non-cash we $X.X and In of $X.XX revenue the and NRP's we've quarter, we receive over the $XX first of million will the Due or in and quarter month. of of This $X.XX weaknesses prior for the cash this we no preferred cash this adoption turn later by error Form was During third unit resulted at and to deficiencies XX-Q. recently an our overstatement a both unitholders common distribution for have operator third million third year-to-date adoption which to regard our in on our adopted quarter cash to I'll recognition announced, new flow. a quarter designed period in of standard the to on will in balance and cash the $XX call the control identified paid back to have and material $X.X the the common Distributable re-casted adjustment new unit unitholders million been beginning revenue million, to preferred numbers our accounting unitholders remediated year. quarter. that, resulted and cash and second descriptions per $X.X flow With and the unitholders of in as standard, control sheet on questions. overstatement in

Operator

[Operator first Gertsema question from Nick Stifel. Your of the Instructions] line comes with

Nick Gertsema

the in liquidity. about do think down But balance market just coming $XX the we about talk purchases? and you if should hoping add talk open How strengthening million from that that coming Foresight, was to it in? about about how going think that's debt, paying You're you I sheet.

Craig Nunez

added initially to and then debt. it'll liquidity It pay used down be to

Nick Gertsema

any or And bonds holdcos? it's portions that there we about, of capital whether opco should the think are structure

Craig Nunez

opco. easy to is the thing the Well, payoff initially and revolver

Operator

comes line with Levin Your the global. Seaport next from question Mark of

Mark Levin

necessarily from the Couple and like stream how of to what increases maybe with quarter in versus increase like regard three distribution obviously the the but about that XXXX, didn’t that that annuity distribution receipt settlement -- all? should your of Does at maybe do quick you Foresight last last change mean almost that legal feel changed to calculus you questions, settlement we one get quarter? process this long-term It felt distribution thought cash the expect all increases. because that times from does just

Chris Zolas

for we is we target, appropriate goal ago once It set And before then Mark. in this direction times, that asses at point But needle will what that additional certainly the we a and target. we've our give of a reach landscape is that some distribution benefit. you at And to our make doesn’t three will we policy, decide we forward. right the doesn’t it No, years achieve causes our time. think X communication a decision us move going now,

Mark Levin

-- so, some next the certain refinancings to remind timing why cash over a would needs keep and can the around some the of on it lot make balance or of me of the remind and sheet? refinancing for sense the you maybe cash And year

Craig Nunez

think speaking, way. Mark, this generally it you of if Well,

operations we have; here cushion. over minus million $XX which last be look mandatory flow cushion to private had went our free about as it's the pay our If And for go current that on a outlook months long the distributions That’s the we cash down free securities That’s notes, good debt. to opco investment that opco free bigger, a pay and some but $XX amortization million what used of placement cash activities; flow. us our common gave consistent, preferred the down view of which on it as cash a we somewhat $XX commitments, cushion XX from flow those we distribution; as pay million get that remains paid million, generated cash of $XXX have of in of as to private not cushion had million $XX could excess example, mandatory to to $XX principal cash which placement over will is used generation appears big nice million it time. now as gets notes you

distribution. And bit before so on becoming like the a cushion see more to we grow that we'd aggressive start

Operator

Your Citigroup. comes Wang with of George question the next line from

George Wang

just Most quick real of answered, questions couple were questions. of a already

free at. overflow, inflow of I you looking Just this deal resolution. and different that the cash asset in incremental additional excess cash Foresight with possibly potential might guys mean with terms be

talked horizon? pay see may the we additional the and liquidity down sheet. the to try flow also possibility have Any You debt about on some balance guys deal like briefly on

Craig Nunez

of deal or of terms flows acquisitions new mean You in businesses... assets

George Wang

Right…

Craig Nunez

making. in of equity what, required lot -- tell have what I'll cushion sheet. payments require have that the need We to now. currently is to much the consistent cushion we'll excess with don't Mark's time, and mandatory we that we're at -- distributions de-levering explained stay this to as previously, our don't And question of right make in we de-lever cash focus that on we're then we you we point balance our a

not sure for and that size use acquisitions flow, unless deal the I’m would only at and borrow flow that small. we any our leverage that we're excess have would point to sure any be of not access increasing cash flow, And money, would not were it our in So take we make or we deals use would with to free be time. worth it interested small time. that us to cash it'd I’m this quite

capital until we position on and this point wouldn’t structure So I the our improve the put little bit agenda our acquisitions liquidity at high more.

George Wang

the additional And any capital markets the now? any digit, on it's tapping off liquidity, yield current you right just the that or think for do on on mid-single -- thoughts possibility table

Craig Nunez

Well, we on to don’t position I equity suffice on or whether think rich, But now, issue don’t our is a or anything we lines. to want at think these to whether levels. call this take equity its to right have we as cheap much appetite say, those

Operator

line WDH next question Capital. the Bill Your comes Hyler from with of

Bill Hyler

at the years redeem certain be should guys are was remind helpful. Blackstone we these us under what they're cash circumstances. I three, warrants you appreciate to option five I preferred you the of with very having the calls, and could conversion way, by how hoping the the with for four, the believed key these NRP features units has looking work. securities? Maybe dates I over these next

Chris Zolas

redeemed time be any can at units preferred our for cash. So

unable until to five years. unitholders However, the convert are

have to if for a convert of units the XXXX, XXXX in we threshold they So the up will in meet unit ability standard price. the third beginning option,

So upon issuing is remember common have begin can the think And conversion a units the issue will value that to that cash. to going I units or thing fixed. into that units process to that then convert preferred those in is to key redeem and on they’re notice ability we

of So million. converted a units when cash for there there either units that conversion, $XXX we'll is they million a be preferred have will there be issuing or into is value and providing -- $XXX out

Craig Nunez

is. the what is traditional strike different or the value at which the per fixed equity time the is a equity out. units a upside, the conversion deliver preferred we have the That Chris uniquely more equal And money points explained money them. in the cash of gives have than of to or common preferred the that common is conversion. These as preferred, the a higher Chris time conversion It's not the it price, the holder of equity and -- price ratio do simply, preferred price, conversion, as or that number at value that preferred set the

So, there's in holders unit no that value dilution current se per regard. for

Bill Hyler

XX two believe the exercise anytime, share about warrants, at can they those and a XX.XX there a the Is what are and And tranches? share. I that

Chris Zolas

right. that's exactly Yes,

You've common to is $XX And got on in second the unit or ballparks ability prices. in cash. to strike And we think have those I there price. other convert the tranche that the settle strike

Bill Hyler

exercise just you the if does pay a cash, -- work? And how that stock work? in them how price You mean current would convert I -- that or strike or the would

Chris Zolas

the pay difference. would We

whatever exercise So the we strike the price in net between date pay the difference prices the and exercise warrant. on the of

it's difference the the is per then if on So and unit. $XX when $X warrants they exercise price strike we pay $XX

Bill Hyler

the you next I on guess limit here. dilution it Well, reason another potentially focus need that’s the -- to over just de-leveraging several will give you flexibility years to more

Craig Nunez

Yes, agreed.

Operator

Cowen comes next of Your Company. question Amer the with Tiwana from line and

Amer Tiwana

guys in And from near pretty been have results the is flow stable what your think as be stable. going I cash well. to is, relatively question that My future hear, you

trying your contracts how to Can met Just to coal met we are sensitivity should understand and light you prices. what your shed sensitivity coal portfolio, expect? on structured some the to

Chris Zolas

our leases payments royalty is guidance speaking it's little way straightforward provided coal in sensitivity, not for tricky a generally past. the because -- minimum rates. our of terms us. and So terms and in bit of exactly structured we the straight We're are this But -- in that of

increase our impact price, As have to you $X.X revenue. we have met the XX% in about index million

Craig Nunez

basis… annual On an

Operator

this at any questions. Are time, there further remarks? no there And are closing

Craig Nunez

following look us. to your forward us question. Everyone great. ahead. good with interest again joining talking have times you Also for I for and soon, appreciate we your everyone appreciate you And to NRP, appreciate a Take you today. Thank care.

Operator

Thank conclude today's That does conference. you.

now disconnect. may You

Natural Resource Partners (NRP) 9 Nov 182018 Q3 Earnings call transcript