Natural Resource Partners L.P. Reports Third Quarter 2018 Results

Natural Resource Partners L.P. (NYSE:NRP) today reported third quarter of 2018 results as follows:

         
Three Months Ended Nine Months Ended
September 30, September 30,

(In thousands, except per unit data)

2018     2017 2018     2017
Net income from continuing operations (1) $ 28,565 $ 26,499 $ 91,061 $ 58,467
Adjusted EBITDA (2) 58,060 58,094 170,503 172,032
Cash flow provided by (used in) continuing operations:
Operating activities 33,427 25,800 108,017 81,394
Investing activities (1,981 ) 2,771 (3,814 ) 3,440
Financing activities (21,034 ) 51,890 (70,643 ) (3,961 )
Distributable cash flow (2) 33,782 28,883 109,373 85,760
Free cash flow (2) 30,969 28,420 102,300 82,319

_____________________

     

(1)

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Net income from continuing operations during the nine months ended September 30, 2018 included income of $12.7 from a royalty dispute settlement in our Soda Ash business segment.

(2)

See “Non-GAAP Financial Measures” and reconciliation tables at the end of this release.

 

“NRP delivered another solid quarter of operating results as we continued to see strong demand for metallurgical and thermal coal, remarked NRPs President and Chief Operating Officer, Craig Nunez. I would also like to highlight the favorable litigation settlement with Foresight Energy in October, which resulted in NRP receiving an initial payment of $25 million and a commitment from Foresight to pay us $11 million annually for 15 years beginning in 2019. We are pleased with this mutually beneficial outcome and look forward to continuing our long-term partnership with Foresight. These additional cash flows will assist in our commitment to strengthening our balance sheet.”

NRP improved its liquidity since the end of the second quarter of 2018 by $10.4 million to $118.4 million at September 30, 2018, consisting of $63.4 million of cash and $55.0 million of borrowing capacity available under its credit facility. NRP’s consolidated Debt-to-Adjusted EBITDA ratio at September 30, 2018 was 3.5x.

With respect to the third quarter of 2018, NRP declared a cash distribution of $0.45 per common unit and a cash distribution of $7.5 million on NRPs preferred units. NRP’s distribution coverage ratio over the last twelve months was 6.9x before taking into account the $30 million annual distribution on NRP’s preferred units, and 5.6x after taking into account this preferred unit distribution.

Segment Results

      Operating Business Segments    

Coal Royalty and Other

       

Construction Aggregates

 

Corporate and Financing

(In thousands)

Soda Ash Total
Three Months Ended September 30, 2018
Net income (loss) from continuing operations $ 37,751 $ 8,836 $ 2,654 $ (20,676 ) $ 28,565
Adjusted EBITDA (1) 42,998 12,250 5,995 (3,183 ) 58,060
Cash flow provided by (used in) continuing operations:
Operating activities 41,604 12,250 6,941 (27,368 ) 33,427
Investing activities 1,590 (3,571 ) (1,981 )
Financing activities (239 ) (20,795 ) (21,034 )
Distributable cash flow (1) 43,194 12,250 5,706 (27,368 ) 33,782
Free cash flow (1) 43,194 12,250 2,893 (27,368 ) 30,969
 
Three Months Ended September 30, 2017
Net income (loss) from continuing operations $ 37,992 $ 8,993 $ 3,342 $ (23,828 ) $ 26,499
Adjusted EBITDA (1) 43,297 12,250 6,402 (3,855 ) 58,094
Cash flow provided by (used in) continuing operations:
Operating activities 44,119 8,992 2,155 (29,466 ) 25,800
Investing activities 676 3,258 (1,163 ) 2,771
Financing activities 484 51,406 51,890
Distributable cash flow (1) 44,795 12,250 1,304 (29,466 ) 28,883
Free cash flow (1) 44,719 12,250 917 (29,466 ) 28,420

_________________________

(1) See “Non-GAAP Financial Measures” and reconciliation tables at the end of this release.

 

Coal Royalty and Other

During the third quarter of 2018, we continued to see strong coal pricing driven by robust export demand and stable domestic markets for metallurgical and thermal coal. While total coal production remained steady, our average coal royalty revenue per ton increased 12% driven primarily by a strong global demand for metallurgical coal. Approximately 67% of NRP’s coal royalty revenues and approximately 61% of its coal royalty production was derived from metallurgical coal during the three months ended September 30, 2018. Net income and Adjusted EBITDA were consistent with prior year.

Free cash flow decreased slightly in the third quarter of 2018 compared to the third quarter of 2017 primarily as a result of the timing of payments.

Soda Ash

Soda Ash segment results were consistent with prior year.

Construction Aggregates

Net income and Adjusted EBITDA results decreased slightly primarily due to higher operating expenses. Free cash flow increased primarily due to the timing of certain operating payments, partially offset by increased capital expenditures.

Corporate and Finance

Corporate and Finance segment results improved for the third quarter of 2018, primarily due to lower interest as a result of continued repayment of debt.

Conference Call

A conference call will be held today at 10:00 a.m. ET. To join the conference call, dial (844) 379-6938 and provide the conference code 55454890. Investors may also listen to the call via the Investor Relations section of the NRP website at www.nrplp.com. To access the replay, please visit the Investor Relations section of NRPs website.

Company Profile

Natural Resource Partners L.P., a master limited partnership headquartered in Houston, TX, is a diversified natural resource company that owns interests in coal, aggregates and industrial minerals across the United States. A large percentage of NRP’s revenues are generated from royalties and other passive income. In addition, NRP owns a construction aggregates company and an equity investment in Ciner Wyoming, a trona/soda ash operation.

For additional information, please contact Kathy H. Roberts at 713-751-7555 or [email protected]. Further information about NRP is available on the partnerships website at http://www.nrplp.com.

Forward-Looking Statements

This press release includes forward-looking statements as defined by the Securities and Exchange Commission. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership. These risks include, but are not limited to, commodity prices; decreases in demand for coal, aggregates and industrial minerals, including trona/soda ash; changes in operating conditions and costs; production cuts by our lessees; unanticipated geologic problems; our liquidity, leverage and access to capital and financing sources; changes in the legislative or regulatory environment, litigation risk, and other factors detailed in Natural Resource Partners Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Distributable cash flow is a non-GAAP financial measure that we define as net cash provided by operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from sales of assets, including those included in discontinued operations, and return of long-term contract receivables (including affiliate); less maintenance capital expenditures and distributions to non-controlling interest. Distributable cash flow 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. Distributable cash flow may not be calculated the same for us as for other companies. In addition, Distributable cash flow 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. Distributable cash flow is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the Partnership’s ability to make cash distributions to our common and preferred unitholders and our general partner and repay debt.

Free cash flow is a non-GAAP financial measure that we define as net cash provided by operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivables (including affiliate); less maintenance and expansion capital expenditures, cash flow used in mitigation payments and acquisition costs classified as financing activities and distributions to non-controlling interest. Free cash flow is calculated before mandatory debt repayments. Free cash flow 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. Free cash flow may not be calculated the same for us as for other companies. Free cash flow is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the Partnership’s ability to make cash distributions to our common and preferred unitholders and our general partner and repay debt.

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings from unconsolidated investment; plus (minus) net loss (income) attributable to non-controlling interest; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (loss), the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. In addition, Adjusted EBITDA presented below is not calculated or presented on the same basis as Consolidated EBITDA as defined in our partnership agreement or Consolidated EBITDDA as defined in Opco’s debt agreements. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

Adjusted net income attributable to NRP is a non-GAAP financial measure that we define as Net income attributable to NRP plus restructuring transaction expenses that include debt modification expense, loss on extinguishment of debt and restructuring-related incentive compensation expense, asset impairments and income (loss) from discontinued operations; less gain on sale of assets. Adjusted net income should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted net income is useful in evaluating our financial performance because restructuring transaction expenses are one time charges, gains on asset sales are not related to the operations of our business and asset impairments are non-cash charges. Excluding these from net income allows us to better compare results from ongoing operations period-over-period.

“Return on capital employed” is a non-GAAP financial measure that we define as Net income from continuing operations plus interest expense divided by the sum of equity and debt. Return on capital employed should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. Return on capital employed is a supplemental performance measure used by our management team that measures our profitability and efficiency with which our capital is employed. The measure provides an indication of operating performance before the impact of leverage in the capital structure.

Revision of Previously Issued First Quarter and Second Quarter 2018 Financial Statements

During the three months ended September 30, 2018, NRP identified an error related to the modified retrospective adoption of ASC 606 on January 1, 2018 for certain coal royalty leases that impacted its financial statements as of and for the three-months ended March 31, 2018 and as of and for the three and six-months ended June 30, 2018. Management concluded that the impact of the error was not material to the previously issued financial statements. In order to properly reflect the application of ASC 606 retrospectively, financial information for the three months ended March 31, 2018 and for the three and six months ended June 30, 2018 in the following financial tables and Reconciliation of Non-GAAP Measures and Recap of Metrics have been revised to reflect the correction of this error. See Note 2. Revenue from Contracts with Customers of the Partnership’s Third Quarter 2018 Form 10-Q for additional information.

-Financial Tables, Reconciliation of Non-GAAP Measures and Recap of Metrics Follow-

 

Natural Resource Partners L.P.

Financial Tables

 
 
Consolidated Statements of Comprehensive Income
(Unaudited)
    Three Months Ended     Nine Months Ended
September 30,     June 30, September 30,

(In thousands, except per unit data)

2018     2017 2018 2018     2017
Revenues and other income
Coal royalty and other $ 42,459 $ 43,507 $ 47,732 $ 134,428 $ 111,269
Coal royalty and otheraffiliates 59 335 188 484 23,178
Transportation and processing services 6,853 5,571 5,002 17,238 9,717
Transportation and processing servicesaffiliates 6,013
Construction aggregates 30,398 29,553 34,233 91,055 82,399
Road construction and asphalt paving services 6,250 5,157 6,176 13,154 13,087
Equity in earnings of Ciner Wyoming 8,836 8,993 16,529 34,986 27,676
Gain on asset sales, net 163   171   210   1,033   3,576  
Total revenues and other income $ 95,018 $ 93,287 $ 110,070 $ 292,378 $ 276,915
Operating expenses
Operating and maintenance expenses $ 35,134 $ 32,441 $ 38,301 $ 103,403 $ 93,089
Operating and maintenance expensesaffiliates 2,414 2,154 4,065 8,944 6,928
Depreciation, depletion and amortization 8,221 8,306 8,563 24,741 26,195
Amortization expenseaffiliate 1,008
General and administrative 2,249 2,648 2,414 8,068 10,757
General and administrativeaffiliates 934 1,207 849 2,714 3,183
Asset impairments       242   1,778  
Total operating expenses $ 48,952 $ 46,756 $ 54,192 $ 148,112 $ 142,938
Income from operations $ 46,066 $ 46,531 $ 55,878 $ 144,266 $ 133,977
Other expense, net
Interest expense, net $ (17,501 ) $ (20,032 ) $ (17,734 ) $ (53,205 ) $ (63,464 )
Debt modification expense (7,939 )
Loss on extinguishment of debt         (4,107 )
Total other expense, net $ (17,501 ) $ (20,032 ) $ (17,734 ) $ (53,205 ) $ (75,510 )
Net income from continuing operations $ 28,565 $ 26,499 $ 38,144 $ 91,061 $ 58,467
Loss from discontinued operations (24 ) (433 ) (34 ) (72 ) (507 )
Net income $ 28,541 $ 26,066 $ 38,110 $ 90,989 $ 57,960
Net loss (income) attributable to non-controlling interest 359     (869 ) (510 )  
Net income attributable to NRP $ 28,900 $ 26,066 $ 37,241 $ 90,479 $ 57,960
Less: income attributable to preferred unitholders (7,500 ) (7,650 ) (7,500 ) (22,500 ) (17,688 )
Net income attributable to common unitholders and general partner $ 21,400 $ 18,416 $ 29,741 $ 67,979 $ 40,272
Net income attributable to common unitholders $ 20,972 $ 18,046 $ 29,146 $ 66,619 $ 39,466
Net income attributable to the general partner $ 428 $ 370 $ 595 $ 1,360 $ 806
Income from continuing operations per common unit
Basic $ 1.71 $ 1.51 $ 2.38 $ 5.45 $ 3.27
Diluted $ 1.30 $ 1.08 $ 1.71 $ 4.06 $ 2.67
Net income per common unit
Basic $ 1.71 $ 1.48 $ 2.38 $ 5.44 $ 3.23
Diluted $ 1.30 $ 1.07 $ 1.71 $ 4.06 $ 2.65
Net income $ 28,541 $ 26,066 $ 38,110 $ 90,989 $ 57,960
Comprehensive income (loss) from unconsolidated investment and other 791   (268 ) (434 ) (768 ) (1,413 )
Comprehensive income $ 29,332 $ 25,798 $ 37,676 $ 90,221 $ 56,547
Comprehensive loss (income) attributable to non-controlling interest 359     (869 ) (510 )  
Comprehensive income attributable to NRP $ 29,691   $ 25,798   $ 36,807   $ 89,711   $ 56,547  
 

Natural Resource Partners L.P.

Financial Tables

 
 
Consolidated Statements of Cash Flows
(Unaudited)
 
      Three Months Ended     Nine Months Ended
September 30,     June 30, September 30,

(In thousands)

2018     2017 2018 2018     2017
Cash flows from operating activities
Net income $ 28,541 $ 26,066 $ 38,110 $ 90,989 $ 57,960
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Depreciation, depletion and amortization 8,221 8,306 8,563 24,741 26,195
Amortization expenseaffiliates 1,008
Distributions from unconsolidated investment 12,250 8,992 12,250 34,653 31,104
Equity earnings from unconsolidated investment (8,836 ) (8,993 ) (16,529 ) (34,986 ) (27,676 )
Gain on asset sales, net (163 ) (171 ) (210 ) (1,033 ) (3,576 )
Debt modification expense 7,939
Loss on extinguishment of debt 4,107
Income (loss) from discontinued operations 24 433 34 72 507
Asset impairments 242 1,778
Unit-based compensation expense 153 (26 ) 281 1,226 (23 )
Amortization of debt issuance costs and other 568 3,203 1,202 2,541 6,547
Otheraffiliates 199 (190 ) (974 )
Change in operating assets and liabilities:
Accounts receivable 2,177 5,038 (2,712 ) (7,004 ) 508
Accounts receivableaffiliates 118 49 (46 ) 139 285
Accounts payable 495 684 1,020 670 730
Accounts payableaffiliates (844 ) (272 ) (641 ) 46 (270 )
Accrued liabilities 1,397 206 1,788 (1,984 ) (7,096 )
Accrued liabilitiesaffiliates (515 )
Accrued interest (9,069 ) (8,727 ) 8,902 (9,944 ) (5,322 )
Deferred revenue 193 (4,494 ) 3,645 9,200 (5 )
Deferred revenueaffiliates (10,166 )
Other items, net (1,798 ) (4,693 ) (1,278 ) (846 ) (2,166 )
Net cash provided by operating activities of continuing operations $ 33,427 $ 25,800 $ 54,379 $ 108,017 $ 81,394
Net cash used in operating activities of discontinued operations (22 ) (76 ) (35 ) (469 ) (607 )
Net cash provided by operating activities $ 33,405 $ 25,724 $ 54,344 $ 107,548 $ 80,787
Cash flows from investing activities
Distributions from unconsolidated investment in excess of cumulative earnings $ $ 3,258 $ $ 2,097 $ 5,646
Proceeds from sale of assets 238 151 224 1,149 1,419
Return of long-term contract receivables 1,590 600 529 2,606 1,807
Return of long-term contract receivablesaffiliate 804
Acquisition of plant and equipment and other (3,809 ) (1,238 ) (2,413 ) (9,666 ) (6,236 )
Net cash provided by (used in) investing activities of continuing operations $ (1,981 ) $ 2,771 $ (1,660 ) $ (3,814 ) $ 3,440
Net cash provided by investing activities of discontinued operations   4       206  
Net cash provided by (used in) investing activities $ (1,981 ) $ 2,775 $ (1,660 ) $ (3,814 ) $ 3,646
 
Consolidated Statements of Cash FlowsContinued
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, June 30, September 30,

(In thousands)

2018 2017 2018 2018 2017
Cash flows from financing activities
Proceeds from issuance of preferred units and warrants, net $ $ $ $ $ 242,100
Proceeds from issuance of 2022 Senior Notes, net 103,688
Borrowings on credit facility 69,000 35,000 69,000
Repayments of loans (7,648 ) (8,000 ) (7,272 ) (55,720 ) (356,292 )
Redemption of preferred units paid-in-kind (8,844 )
Distributions to common unitholders and general partner (5,623 ) (5,616 ) (5,623 ) (16,863 ) (16,850 )
Distributions to preferred unitholders (7,500 ) (3,769 ) (7,500 ) (22,765 ) (5,019 )
Contributions to discontinued operations (22 ) (72 ) (35 ) (469 ) (401 )
Debt issuance costs and other (241 ) 347     (466 ) (982 ) (40,187 )
Net cash provided by (used in) financing activities of continuing operations $ (21,034 ) $ 51,890 $ (20,896 ) $ (70,643 ) $ (3,961 )
Net cash provided by financing activities of discontinued operations 22   72     35   469   401  
Net cash provided by (used in) financing activities $ (21,012 ) $ 51,962 $ (20,861 ) $ (70,174 ) $ (3,560 )
 
Net increase in cash and cash equivalents $ 10,412 $ 80,461 $ 31,823 $ 33,560 $ 80,873
Cash and cash equivalents at beginning of period 52,975   40,783   21,152   29,827   40,371  
Cash and cash equivalents at end of period $ 63,387 $ 121,244 $ 52,975 $ 63,387 $ 121,244
 
Supplemental cash flow information:
Cash paid during the period for interest from continuing operations $ 24,998 $ 26,977 $ 7,132 $ 58,153 $ 61,857
Non-cash investing and financing activities:
Plant, equipment and mineral rights funded with accounts payable or accrued liabilities $ 75 $ $ 894 $ 75 $
Issuance of 2022 Senior Notes in exchange for 2018 Senior Notes $ $ $ $ $ 240,638
 

Natural Resource Partners L.P.

Financial Tables

 
 
Consolidated Balance Sheets
      September 30,       December 31,
2018 2017

(In thousands, except unit data)

(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 63,387 $ 29,827
Accounts receivable, net 55,734 47,026
Accounts receivableaffiliates 22 161
Inventory 9,572 7,553
Prepaid expenses and other 4,665 5,838
Current assets of discontinued operations 988   991  
Total current assets 134,368 91,396
Land 24,809 25,247
Plant and equipment, net 48,148 46,170
Mineral rights, net 869,106 883,885
Intangible assets, net 46,998 49,554
Equity in unconsolidated investment 242,901 245,433
Long-term contracts receivable 39,416 40,776
Other assets 6,188 6,547
Other assetsaffiliate   156  
Total assets $ 1,411,934   $ 1,389,164  
LIABILITIES AND CAPITAL
Current liabilities
Accounts payable $ 7,467 $ 6,957
Accounts payableaffiliates 608 562
Accrued liabilities 14,005 16,890
Accrued liabilitiesaffiliates 515
Accrued interest 5,540 15,484
Current portion of deferred revenue 1,403
Current portion of long-term debt, net 75,201 79,740
Current liabilities of discontinued operations   401  
Total current liabilities 104,224 120,549
Deferred revenue 40,885 100,605
Long-term debt, net 716,514 729,608
Other non-current liabilities 1,958 2,808
Other non-current liabilitiesaffiliate     346  
Total liabilities 863,581 953,916
Commitments and contingencies
Class A Convertible Preferred Units (250,000 and 258,844 units issued and outstanding at September 30, 2018 and December 31, 2017, respectively, at $1,000 par value per unit; liquidation preference of $1,500 per unit) 164,587 173,431
Partners capital:
Common unitholders interest (12,245,920 and 12,232,006 units issued and outstanding at September 30, 2018 and December 31, 2017, respectively) 319,673 199,851
General partners interest 4,293 1,857
Warrant holders’ interest 66,816 66,816
Accumulated other comprehensive loss (4,081 ) (3,313 )
Total partners capital 386,701 265,211
Non-controlling interest (2,935 ) (3,394 )
Total capital 383,766   261,817  
Total liabilities and capital $ 1,411,934   $ 1,389,164  
 

Natural Resource Partners L.P.

Financial Tables

 
 
Consolidated Statement of Partners’ Capital
(Unaudited)
   

Common Unitholders

   

General Partner

   

Warrant Holders

   

Accumulated Other Comprehensive Loss

   

Partners’ Capital Excluding Non-Controlling Interest

   

Non-Controlling Interest

   

Total Capital

(In thousands)

Units

   

Amounts

Balance at December 31, 2017 12,232 $ 199,851 $ 1,857 $ 66,816 $ (3,313 ) $ 265,211 $ (3,394 ) $ 261,817
Cumulative effect of adoption of accounting standard 69,057 1,409 70,466 70,466
Net income (1) 88,669 1,810 90,479 510 90,989
Distributions to common unitholders and general partner (16,526 ) (337 ) (16,863 ) (16,863 )
Distributions to preferred unitholders (22,310 ) (455 ) (22,765 ) (22,765 )
Issuance of unit-based awards 14 410 410 410
Unit-based awards amortization and vesting 472 472 472
Comprehensive income (loss) from unconsolidated investment and other   50   9     (768 ) (709 ) (51 ) (760 )
Balance at September 30, 2018 12,246   $ 319,673   $ 4,293   $ 66,816   $ (4,081 ) $ 386,701   $ (2,935 ) $ 383,766  

___________________

     

(1)

 

Net income includes $22.5 million attributable to Preferred Unitholders that accumulated during the period, of which $22.1 million is allocated to the common unitholders and $0.5 million is allocated to the general partner.

 
       

Natural Resource Partners L.P.

Financial Tables

 

The tables below presents NRP’s unaudited business results by segment for the three and nine months ended September 30, 2018 and 2017 and the three months ended June 30, 2018:

 

 
Operating Business Segments

Coal Royalty and Other

       

Construction Aggregates

 

Corporate and Financing

(In thousands)

Soda Ash Total
Three Months Ended September 30, 2018
Revenues and other income $ 49,371 $ 8,836 $ 36,648 $ $ 94,855
Gains on asset sales, net     163     163
Total revenues and other income $ 49,371 $ 8,836 $ 36,811 $ $ 95,018
Net income (loss) from continuing operations $ 37,751 $ 8,836 $ 2,654 $ (20,676 ) $ 28,565
Adjusted EBITDA (1) $ 42,998 $ 12,250 $ 5,995 $ (3,183 ) $ 58,060
Distributable cash flow (1) $ 43,194 $ 12,250 $ 5,706 $ (27,368 ) $ 33,782
Free cash flow (1) $ 43,194 $ 12,250 $ 2,893 $ (27,368 ) $ 30,969
 
Three Months Ended September 30, 2017
Revenues and other income $ 49,413 $ 8,993 $ 34,710 $ $ 93,116
Gains on asset sales, net 154     17     171
Total revenues and other income $ 49,567 $ 8,993 $ 34,727 $ $ 93,287
Net income (loss) from continuing operations $ 37,992 $ 8,993 $ 3,342 $ (23,828 ) $ 26,499
Adjusted EBITDA (1) $ 43,297 $ 12,250 $ 6,402 $ (3,855 ) $ 58,094
Distributable cash flow (1) $ 44,795 $ 12,250 $ 1,304 $ (29,466 ) $ 28,883
Free cash flow (1) $ 44,719 $ 12,250 $ 917 $ (29,466 ) $ 28,420
 
Three Months Ended June 30, 2018
Revenues and other income $ 52,922 $ 16,529 $ 40,409 $ $ 109,860
Gains on asset sales, net 168     42     210
Total revenues and other income $ 53,090 $ 16,529 $ 40,451 $ $ 110,070
Net income (loss) from continuing operations $ 39,671 $ 16,529 $ 2,941 $ (20,997 ) $ 38,144
Adjusted EBITDA (1) $ 44,178 $ 12,250 $ 6,128 $ (3,263 ) $ 59,293
Distributable cash flow (1) $ 52,424 $ 12,250 $ (614 ) $ (10,082 ) $ 53,978
Free cash flow (1) $ 52,254 $ 12,250 $ (2,393 ) $ (10,082 ) $ 52,029

__________________

(1) See “Non-GAAP Financial Measures” and reconciliation tables at the end of this release.

       

Natural Resource Partners L.P.

Financial Tables (Unaudited)

 
 
Operating Business Segments

Coal Royalty and Other

       

Construction Aggregates

 

Corporate and Financing

(In thousands)

Soda Ash Total
Nine Months Ended September 30, 2018
Revenues and other income $ 152,150 $ 34,986 $ 104,209 $ $ 291,345
Gains on asset sales, net 819     214     1,033
Total revenues and other income $ 152,969 $ 34,986 $ 104,423 $ $ 292,378
Asset impairments $ 242 $ $ $ $ 242
Net income (loss) from continuing operations $ 116,414 $ 34,986 $ 3,620 $ (63,959 ) $ 91,061
Adjusted EBITDA (1) $ 131,510 $ 36,750 $ 13,025 $ (10,782 ) $ 170,503
Distributable cash flow (1) $ 135,554 $ 36,750 $ 6,051 $ (68,982 ) $ 109,373
Free cash flow (1) $ 134,728 $ 36,750 $ (196 ) $ (68,982 ) $ 102,300
 
Nine Months Ended September 30, 2017
Revenues and other income $ 150,177 $ 27,676 $ 95,486 $ $ 273,339
Gains on asset sales, net 3,367     209     3,576
Total revenues and other income $ 153,544 $ 27,676 $ 95,695 $ $ 276,915
Asset impairments $ 1,778 $ $ $ $ 1,778
Net income (loss) from continuing operations $ 115,170 $ 27,676 $ 4,439 $ (88,818 ) $ 58,467
Adjusted EBITDA (1) $ 134,601 $ 36,750 $ 14,621 $ (13,940 ) $ 172,032
Distributable cash flow (1) $ 124,158 $ 36,750 $ 6,827 $ (81,975 ) $ 85,760
Free cash flow (1) $ 123,199 $ 36,750 $ 4,345 $ (81,975 ) $ 82,319

____________________

(1) See “Non-GAAP Financial Measures” and reconciliation tables at the end of this release.

 

Natural Resource Partners L.P.

Financial Tables

 
 
Operating Statistics – Coal Royalty and Other
(Unaudited)
 
      Three Months Ended     Nine Months Ended
September 30,     June 30, September 30,

(In thousands, except per ton data)

2018     2017 2018 2018     2017
Coal production (tons)
Appalachia
Northern 349 226 916 1,490 1,672
Central 3,873 3,596 4,163 11,582 11,193
Southern 346   468   396   1,288   1,721
Total Appalachia 4,568 4,290 5,475 14,360 14,586
Illinois Basin 609 794 739 2,091 3,545
Northern Powder River Basin 855   849   808   2,896   2,708
Total coal production 6,032   5,933   7,022   19,347   20,839
 
Coal royalty revenue per ton
Appalachia
Northern $ 4.01 $ 3.26 $ 3.52 $ 3.82 $ 1.36
Central 5.37 4.77 5.65 5.57 5.09
Southern 6.82 5.73 6.85 6.98 5.95
Illinois Basin 4.89 4.32 4.72 4.56 3.68
Northern Powder River Basin 3.79 3.47 2.25 2.70 2.89
Combined average coal royalty revenue per ton 5.10 4.54 4.95 4.99 4.34
 
Coal royalty revenues
Appalachia
Northern $ 1,402 $ 737 $ 3,230 $ 5,698 $ 2,279
Central 20,786 17,154 23,520 64,538 57,027
Southern 2,359   2,683   2,712   8,985   10,242
Total Appalachia 24,547 20,574 29,462 79,221 69,548
Illinois Basin 2,973 3,431 3,485 9,533 13,055
Northern Powder River Basin 3,237   2,945   1,815   7,817   7,827
Unadjusted coal royalty revenue 30,757 26,950 34,762 $ 96,571 $ 90,430
Coal royalty adjustment for minimum leases (48 )     (98 )
Total coal royalty revenue $ 30,709   $ 26,950   $ 34,762   $ 96,473   $ 90,430
 
Other revenues
Production lease minimum revenue $ 1,769 $ 9,812 $ 2,006 $ 6,310 $ 22,556
Minimum lease straight line revenue 567 569 1,739
Property tax revenue 1,263 513 1,523 3,968 4,311
Wheelage 1,572 1,219 1,609 5,155 3,510
Coal overriding royalty revenue 3,918 3,059 3,702 10,492 5,769
Lease assignment fee 1,000 1,000
Aggregates royalty revenue 888 817 1,572 3,551 3,513
Oil and gas royalty revenues 1,427 117 1,354 5,679 2,532
Other 405   356   823   1,545   827
Total other revenues 11,809   16,893   13,158   38,439   44,018
Coal royalty and other 42,518 43,843 47,920 134,912 134,448
Transportation and processing services 6,853 5,570 5,002 17,238 15,729
Gain on asset sales, net   154   168   819   3,367
Total coal royalty and other segment revenues and other income $ 49,371   $ 49,567   $ 53,090   $ 152,969   $ 153,544
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Distributable Cash Flow and Free Cash Flow
(Unaudited)
   

Coal Royalty and Other

   

Construction Aggregates

 

Corporate and Financing

 

(In thousands)

Soda Ash Total
Three Months Ended September 30, 2018
Net cash provided by (used in) operating activities of continuing operations $ 41,604 $ 12,250 $ 6,941 $ (27,368 ) $ 33,427
Add: proceeds from sale of PP&E 238 238
Add: proceeds from sale of mineral rights
Add: return of long-term contract receivables 1,590 1,590
Less: maintenance capital expenditures     (1,473 )   (1,473 )
Distributable cash flow $ 43,194 $ 12,250 $ 5,706 $ (27,368 ) $ 33,782
Less: proceeds from the sale of assets (238 ) (238 )
Less: expansion capital expenditures (2,336 ) (2,336 )
Less: mitigation payments and acquisition costs classified as financing activities     (239 )   (239 )
Free cash flow $ 43,194   $ 12,250   $ 2,893   $ (27,368 ) $ 30,969  
 
Three Months Ended September 30, 2017
Net cash provided by (used in) operating activities of continuing operations $ 44,119 $ 8,992 $ 2,155 $ (29,466 ) $ 25,800
Add: distributions from unconsolidated investment in excess of cumulative earnings 3,258 3,258
Add: proceeds from the sale of assets 76 75 151
Add: return of long-term contract receivables 600 600
Less: maintenance capital expenditures     (926 )   (926 )
Distributable cash flow $ 44,795   $ 12,250   $ 1,304   $ (29,466 ) $ 28,883  
Less: proceeds from the sale of assets (76 ) (75 ) (151 )
Less: expansion capital expenditures     (312 )   (312 )
Free cash flow $ 44,719   $ 12,250   $ 917   $ (29,466 ) $ 28,420  
 
Three Months Ended June 30, 2018
Net cash provided by (used in) operating activities of continuing operations $ 51,725 $ 12,250 $ 486 $ (10,082 ) $ 54,379
Add: proceeds from sale of assets 170 54 224
Add: return of long-term contract receivable 529 529
Less: maintenance capital expenditures     (1,154 )   (1,154 )
Distributable cash flow $ 52,424   $ 12,250   $ (614 ) $ (10,082 ) $ 53,978  
Less: proceeds from the sale of assets (170 ) (54 ) (224 )
Less: expansion capital expenditures (1,259 ) (1,259 )
Less: mitigation payments and acquisition costs classified as financing activities     (466 )   (466 )
Free cash flow $ 52,254   $ 12,250   $ (2,393 ) $ (10,082 ) $ 52,029  
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Distributable Cash Flow and Free Cash Flow
(Unaudited)
   

Coal Royalty and Other

   

Construction Aggregates

 

Corporate and Financing

 

(In thousands)

Soda Ash Total
Nine Months Ended September 30, 2018
Net cash provided by (used in) operating activities of continuing operations $ 132,122 $ 34,653 $ 10,224 $ (68,982 ) $ 108,017
Add: distributions from unconsolidated investment in excess of cumulative earnings 2,097 2,097
Add: proceeds from the sale of assets 826 323 1,149
Add: return of long-term contract receivables 2,606 2,606
Less: maintenance capital expenditures     (4,496 )   (4,496 )
Distributable cash flow $ 135,554   $ 36,750   $ 6,051   $ (68,982 ) $ 109,373  
Less: proceeds from the sale of assets (826 ) (323 ) (1,149 )
Less: expansion capital expenditures (5,170 ) (5,170 )
Less: mitigation payments and acquisition costs classified as financing activities     (754 )   (754 )
Free cash flow $ 134,728   $ 36,750   $ (196 ) $ (68,982 ) $ 102,300  
 
Nine Months Ended September 30, 2017
Net cash provided by (used in) operating activities of continuing operations $ 120,588 $ 31,104 $ 11,677 $ (81,975 ) $ 81,394
Add: distributions from unconsolidated investment in excess of cumulative earnings 5,646 5,646
Add: proceeds from the sale of assets 959 460 1,419
Add: return of long-term contract receivables (including affiliates) 2,611 2,611
Less: maintenance capital expenditures     (5,310 )   (5,310 )
Distributable cash flow $ 124,158   $ 36,750   $ 6,827   $ (81,975 ) $ 85,760  
Less: proceeds from the sale of assets (959 ) (460 ) (1,419 )
Less: expansion capital expenditures (926 ) (926 )
Less: mitigation payments and acquisition costs classified as financing activities     (1,096 )   (1,096 )
Free cash flow $ 123,199   $ 36,750   $ 4,345   $ (81,975 ) $ 82,319  
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Adjusted EBITDA
(Unaudited)
   

Coal Royalty and Other

   

Construction Aggregates

 

Corporate and Financing

 

(In thousands)

Soda Ash Total
Three Months Ended September 30, 2018
Net income (loss) from continuing operations $ 37,751 $ 8,836 $ 2,654 $ (20,676 ) $ 28,565
Less: equity earnings from unconsolidated investment (8,836 ) (8,836 )
Add: net loss attributable to non-controlling interest 359 359
Add: total distributions from unconsolidated investment 12,250 12,250
Add: interest expense, net 8 17,493 17,501
Add: depreciation, depletion and amortization 4,888     3,333     8,221  
Adjusted EBITDA $ 42,998   $ 12,250   $ 5,995   $ (3,183 ) $ 58,060  
 
Three Months Ended September 30, 2017
Net income (loss) from continuing operations $ 37,992 $ 8,993 $ 3,342 $ (23,828 ) $ 26,499
Less: equity earnings from unconsolidated investment (8,993 ) (8,993 )
Add: total distributions from unconsolidated investment 12,250 12,250
Add: interest expense, net 59 19,973 20,032
Add: depreciation, depletion and amortization 5,305     3,001     8,306  
Adjusted EBITDA $ 43,297   $ 12,250   $ 6,402   $ (3,855 ) $ 58,094  
 
Three Months Ended June 30, 2018
Net income (loss) from continuing operations $ 39,671 $ 16,529 $ 2,941 $ (20,997 ) $ 38,144
Less: equity earnings from unconsolidated investment (16,529 ) (16,529 )
Less: net income attributable to non-controlling interest (869 ) (869 )
Add: total distributions from unconsolidated investment 12,250 12,250
Add: interest expense, net 17,734 17,734
Add: depreciation, depletion and amortization 5,376     3,187     8,563  
Adjusted EBITDA $ 44,178   $ 12,250   $ 6,128   $ (3,263 ) $ 59,293  
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Adjusted EBITDA
(Unaudited)
   

Coal Royalty and Other

   

Construction Aggregates

 

Corporate and Financing

 

(In thousands)

Soda Ash Total
Nine Months Ended September 30, 2018
Net income (loss) from continuing operations 116,414 $ 34,986 $ 3,620 $ (63,959 ) $ 91,061
Less: equity earnings from unconsolidated investment (34,986 ) (34,986 )
Less: net income attributable to non-controlling interest (510 ) (510 )
Add: total distributions from unconsolidated investment 36,750 36,750
Add: interest expense, net 28 53,177 53,205
Add: depreciation, depletion and amortization 15,364 9,377 24,741
Add: asset impairments 242         242  
Adjusted EBITDA $ 131,510   $ 36,750   $ 13,025   $ (10,782 ) $ 170,503  
 
Nine Months Ended September 30, 2017
Net income (loss) from continuing operations $ 115,170 $ 27,676 $ 4,439 $ (88,818 ) $ 58,467
Less: equity earnings from unconsolidated investment (27,676 ) (27,676 )
Add: total distributions from unconsolidated investment 36,750 36,750
Add: interest expense, net 632 62,832 63,464
Add: debt modification expense 7,939 7,939
Add: loss on extinguishment of debt 4,107 4,107
Add: depreciation, depletion and amortization 17,653 9,550 27,203
Add: asset impairments 1,778         1,778  
Adjusted EBITDA $ 134,601   $ 36,750   $ 14,621   $ (13,940 ) $ 172,032  
 
 
Adjusted Net Income Attributable to NRP
(Unaudited)
           
Three Months Ended Nine Months Ended
September 30, June 30, September 30,

(In thousands)

2018 2017 2018 2018 2017
Net income attributable to NRP $ 28,900 $ 26,066 $ 37,241 $ 90,479 $ 57,960
Add: debt modification expense 7,939
Add: loss on extinguishment of debt 4,107
Add: restructuring-related incentive compensation expense 3,847
Less: income from Ciner Wyoming’s royalty dispute settlement     (12,678 ) (12,678 )
Adjusted net income attributable to NRP $ 28,900   $ 26,066   $ 24,563   $ 77,801   $ 73,853
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Last Twelve Months Distributable Cash Flow and Free Cash Flow
(Unaudited)
   
Three Months Ended  

(In thousands)

December 31, 2017

 

March 31, 2018

 

June 30, 2018

 

September 30, 2018

Last 12 Months

Net cash provided by operating activities of continuing operations $ 46,444 $ 20,211 $ 54,379 $ 33,427 $ 154,461
Add: distributions from unconsolidated investment in excess of cumulative earnings 2,097 2,097
Add: proceeds from the sale of assets 563 687 224 238 1,712
Add: return on long-term contract receivables 399 487 529 1,590 3,005
Less: maintenance capital expenditures (1,025 ) (1,869 ) (1,154 ) (1,473 ) (5,521 )
Distributable cash flow $ 46,381   $ 21,613   $ 53,978   $ 33,782   $ 155,754  
Less: proceeds from the sale of assets (563 ) (687 ) (224 ) (238 ) (1,712 )
Less: expansion capital expenditures (39 ) (1,575 ) (1,259 ) (2,336 ) (5,209 )
Less: mitigation payments and acquisition costs classified as financing activities (197 ) (49 ) (466 ) (239 ) (951 )
Free cash flow $ 45,582   $ 19,302   $ 52,029   $ 30,969   $ 147,882  
 
Common Unit Distribution $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 1.80
 
Distribution Coverage Ratio (1) 6.9 x
 
Less: Preferred Distributions $ (30,000 )
 
Distributable cash flow after Preferred Distributions $ 125,754
 
Distribution Coverage Ratio after Preferred Distributions (2) 5.6 x

_______________________________

        (1)   Calculated as last twelve months’ DCF divided by annual common unit distributions times number of common units and general partner units outstanding.
 
(2) Calculated as last twelve months’ DCF less preferred distributions divided by annual common unit distributions times number of common units and general partner units outstanding.
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Last Twelve Months Adjusted EBITDA
(Unaudited)
   
Three Months Ended  

(In thousands)

December 31, 2017

 

March 31, 2018

 

June 30, 2018

 

September 30, 2018

Last 12 Months

Net income from continuing operations $ 30,741 $ 24,352 $ 38,144 $ 28,565 $ 121,802
Less: equity earnings from unconsolidated investment (12,781 ) (9,621 ) (16,529 ) (8,836 ) (47,767 )
Add (less): net loss (income) attributable to non-controlling interest (869 ) 359 (510 )
Add: total distributions from unconsolidated investment 12,250 12,250 12,250 12,250 49,000
Add: interest expense, net 19,257 17,970 17,734 17,501 72,462
Add: depreciation, depletion and amortization 8,790 7,957 8,563 8,221 33,531
Add: asset impairments 1,253   242       1,495  
Adjusted EBITDA $ 59,510   $ 53,150   $ 59,293   $ 58,060   $ 230,013  
 
Debtat September 30, 2018 $ 807,124
Leverage Ratio (1) 3.5 x

_______________________________

        (1)   Leverage Ratio is calculated as last twelve months’ Adjusted EBITDA divided by the outstanding principal value of our debt as of September 30, 2018.
 
 
Return on Capital Employed (“ROCE”)
(Unaudited)
   

Coal Royalty and Other

   

Construction Aggregates

 

Corporate and Financing

 

(In thousands)

Soda Ash Total
LTM Ended September 30, 2018
Net Income (loss) from continuing operations $ 156,143 $ 47,767 $ 5,609 $ (87,717 ) $ 121,802
Interest Expense, Net     89   72,373   72,462  
Return $ 156,143   $ 47,767   $ 5,698   $ (15,344 ) $ 194,264  
 
As of September 30, 2017
Partners’ Capital $ 839,431 $ 248,147 $ 176,902 $ (1,081,765 ) $ 182,715
Add: warrants 66,816 66,816
Add: discontinued operations 1,553 1,553
Less: non-controlling interest (3,394 ) (3,394 )
Less: other comprehensive loss       (3,079 ) (3,079 )
Total Partners’ Capital 839,431 248,147 176,902 (1,019,869 ) 244,611
Debt       955,869   955,869  
Capital Employed $ 839,431   $ 248,147   $ 176,902   $ (64,000 ) $ 1,200,480  
         
ROCE 18.6% 19.2% 3.2% N/A 16.2%
 
Income from Ciner Wyoming’s royalty dispute settlement 12,678 12,678
ROCE excluding income from Ciner Wyoming’s royalty dispute settlement 14.1% 15.1%
 

Natural Resource Partners L.P.

Reconciliation of Non-GAAP Measures

 
 
Last Twelve Months Segment Details
(Unaudited)
   

Coal Royalty and Other

   

Construction Aggregates

 

Corporate and Financing

 

(In thousands)

Soda Ash Total
LTM Ended September 30, 2018
Net Income (loss) from continuing operations $ 156,143 $ 47,767 $ 5,609 $ (87,717 ) $ 121,802
Net Income attributable to common unitholders N/A N/A N/A N/A 89,102
Adjusted EBITDA 178,323 49,000 18,168 (15,478 ) 230,013
DCF 181,695 49,000 9,407 (84,348 ) 155,754
FCF 180,677 49,000 2,553 (84,348 ) 147,882

ROCE (1)

18.6 % 14.1 % 3.2 % N/A 15.1 %

_______________________________

        (1)   Excludes $12.7 million of income from Ciner Wyoming’s litigation settlement in the second quarter of 2018.

Natural Resource Partners L.P.
Kathy H. Roberts, 713-751-7555
[email protected]

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