Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________________________
FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 9, 2018
  ______________________________________________________
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NATURAL RESOURCE PARTNERS L.P.
(Exact name of registrant as specified in its charter)
  ______________________________________________________
Delaware
(State or other jurisdiction
of incorporation or organization)
001-31465
(Commission File
Number)
35-2164875
(I.R.S. Employer
Identification No.)
 
 
 
1201 Louisiana St., Suite 3400 Houston, Texas
(Address of principal executive offices)
 

77002
(Zip code)

Registrant’s telephone number, including area code: (713) 751-7507
 ______________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company
o
 
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 ¨
 






Item 2.02.
Results of Operations and Financial Condition

In accordance with General Instruction B.2. of Form 8-K, the following information and the exhibit referenced therein are being furnished pursuant to Item 2.02 of Form 8-K and are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, are not subject to the liabilities of that section and are not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
 
On August 9, 2018, Natural Resource Partners L.P. announced via press release its earnings and operating results for the second quarter of 2018. A copy of NRP’s press release is attached hereto as Exhibit 99.1.

Item 9.01.
Financial Statements and Exhibits
(d)
Exhibits.
 
 






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
NATURAL RESOURCE PARTNERS L.P.
 
(Registrant)
 
 
 
 
 
By:
 
NRP (GP) LP
 
 
 
its General Partner
 
 
 
 
 
By:
 
GP Natural Resource Partners LLC
 
 
 
its General Partner
 
 
 
 
Date: August 9, 2018
 
 
/s/ Kathryn S. Wilson    
 
 
 
Kathryn S. Wilson
 
 
 
Vice President and General Counsel



Exhibit
Exhibit 99.1

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Natural Resource Partners L.P.
1201 Louisiana St., Suite 3400, Houston, TX 77002


NEWS RELEASE
Natural Resource Partners L.P.
Reports Second Quarter 2018 Results

HOUSTON, August 9, 2018 - Natural Resource Partners L.P. (NYSE:NRP) today reported second quarter of 2018 results as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
(In thousands, except per unit data)
2018
 
2017
 
2018
 
2018
 
2017
Net income from continuing operations (1)
$
39,123

 
$
25,857

 
$
26,088

 
$
65,211

 
$
31,968

Adjusted EBITDA (2)
60,272

 
62,670

 
54,886

 
115,158

 
113,938

 
 
 
 
 
 
 
 
 
 
Diluted net income per common unit
$
1.75

 
$
1.13

 
$
1.15

 
$
2.95

 
$
1.64

 
 
 
 
 
 
 
 
 
 
Net cash from operating activities of continuing operations
$
54,379

 
$
35,105

 
$
20,211

 
$
74,590

 
$
55,594

Net cash from investing activities of continuing operations
(1,660
)
 
2,737

 
(173
)
 
(1,833
)
 
669

Net cash from financing activities of continuing operations
(20,896
)
 
(110,004
)
 
(28,713
)
 
(49,609
)
 
(55,851
)
Distributable cash flow (2)
52,841

 
38,330

 
20,845

 
73,686

 
56,877

Free cash flow (2)
52,029

 
35,187

 
19,302

 
71,331

 
53,899

 
 
 
 
 
(1)
Net income from continuing operations during the three and six months ended June 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.
  
"Strong metallurgical and thermal coal export demand and stable domestic coal prices provided the foundation for another solid quarter of operating results. We remain steadfast on maximizing free cash flow and strengthening our balance sheet by reducing debt and improving our liquidity," said NRP President and Chief Operating Officer, Craig Nunez.
 
NRP improved its liquidity since the end of the first quarter of 2018 by $31.8 million to $108.0 million at June 30, 2018, consisting of $53.0 million of cash and $55.0 million of borrowing capacity available under its credit facility. NRP's consolidated Debt-to-Adjusted EBITDA ratio at June 30, 2018 was 3.5x.

With respect to the second quarter of 2018, NRP declared a cash distribution of $0.45 per common unit and a cash distribution of $7.5 million on NRP’s preferred units. NRP's distribution coverage ratio over the last twelve months was 6.6x before taking into account the $30 million annual distribution on NRP's preferred units, and 5.3x after taking into account this preferred unit distribution.


1


Segment Information

Coal Royalty and Other
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
(In thousands)
2018
 
2017
 
2018
 
2018
 
2017
Net income
$
40,650

 
$
42,084

 
$
40,728

 
$
81,378

 
$
77,178

Adjusted EBITDA (1)
45,157

 
47,459

 
46,070

 
91,227

 
91,304

 
 
 
 
 
 
 
 
 
 
Net cash from operating activities of continuing operations
$
51,725

 
$
38,537

 
$
38,793

 
$
90,518

 
$
76,469

Net cash from investing activities of continuing operations
699

 
2,888

 
1,143

 
1,842

 
2,894

Net cash from financing activities of continuing operations

 
17

 

 

 
33

Distributable cash flow (1)
52,424

 
41,426

 
39,936

 
92,360

 
79,363

Free cash flow (1)
52,254

 
40,134

 
39,280

 
91,534

 
78,480

 
 
 
 
 
(1)
See "Non-GAAP Financial Measures" and reconciliation tables at the end of this release.
Net income and Adjusted EBITDA for the three and six months ended June 30, 2018 remained steady compared to the prior year periods and the prior quarter. These consistent results are reflective of the strong export demand and steady domestic markets for metallurgical and thermal coal over the last twelve months. Approximately 67% of NRP's coal royalty revenues and approximately 54% of its coal royalty production was derived from metallurgical coal during the six months ended June 30, 2018.
Net cash from operating activities of continuing operations, distributable cash flow and free cash flow increased during the three and six months ended June 30, 2018 as compared to the prior year periods and the prior quarter primarily as a result of the timing of cash receipts from both coal royalty production and minimums and property tax reimbursements.
Soda Ash
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
(In thousands)
2018
 
2017
 
2018
 
2018
 
2017
Net income
$
16,529

 
$
8,389

 
$
9,621

 
$
26,150

 
$
18,683

Adjusted EBITDA (1)
12,250

 
12,250

 
12,250

 
24,500

 
24,500

 
 
 
 
 
 
 
 
 
 
Net cash from operating activities of continuing operations
$
12,250

 
$
9,862

 
$
10,153

 
$
22,403

 
$
22,112

Net cash from investing activities of continuing operations

 
2,388

 
2,097

 
2,097

 
2,388

Distributable cash flow (1)
12,250

 
12,250

 
12,250

 
24,500

 
24,500

Free cash flow (1)
12,250

 
12,250

 
12,250

 
24,500

 
24,500

 
 
 
 
 
(1)
See "Non-GAAP Financial Measures" and reconciliation tables at the end of this release.
Net income increased during the three and six months ended June 30, 2018 as compared to the prior year periods and the prior quarter primarily as a result of Ciner Wyoming's litigation settlement of its royalty dispute that resulted in $12.7 million of net income in the second quarter of 2018. This increase was partially offset by unexpected repairs during a scheduled outage in May 2018 that resulted in lower production and sales compared to prior year periods and the prior quarter. This repair was successfully completed and operations resumed prior to the end of the quarter.
 

2


Construction Aggregates
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
(In thousands)
2018
 
2017
 
2018
 
2018
 
2017
Net Income (loss)
$
2,941

 
$
2,636

 
$
(1,975
)
 
$
966

 
$
1,097

Adjusted EBITDA (1)
6,128

 
5,844

 
902

 
7,030

 
8,219

 
 
 
 
 
 
 
 
 
 
Net cash from operating activities of continuing operations
$
486

 
$
5,476

 
$
2,797

 
$
3,283

 
$
9,522

Net cash from investing activities of continuing operations
(2,359
)
 
(2,539
)
 
(3,413
)
 
(5,772
)
 
(4,613
)
Net cash from financing activities of continuing operations
(466
)
 
(1,000
)
 
(49
)
 
(515
)
 
(1,096
)
Distributable cash flow (1)
(1,751
)
 
3,424

 
191

 
(1,560
)
 
5,523

Free cash flow (1)
(2,393
)
 
1,573

 
(696
)
 
(3,089
)
 
3,428

 
 
 
 
 
(1)
See "Non-GAAP Financial Measures" and reconciliation tables at the end of this release.
The Construction Aggregates segment continues to perform consistently compared to prior year periods as demonstrated by the steady net income and Adjusted EBITDA. Net income and Adjusted EBITDA for the three months ended June 30, 2018 increased compared to the prior quarter as a result of the seasonality of the construction aggregates business. Production and sales are typically lower in the first quarter of each year due to the winter weather.
Net cash from operating activities of continuing operations, distributable cash flow and free cash flow decreased compared to the prior year comparable periods and the prior quarter primarily due to the timing of certain operating payments. We expect strong cash collections in the second half of 2018.
Corporate and Finance
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
(In thousands)
2018
 
2017
 
2018
 
2018
 
2017
Net loss
$
(20,997
)
 
$
(27,252
)
 
$
(22,286
)
 
$
(43,283
)
 
$
(64,990
)
Adjusted EBITDA (1)
(3,263
)
 
(2,883
)
 
(4,336
)
 
(7,599
)
 
(10,085
)
 
 
 
 
 
 
 
 
 
 
Net cash from operating activities of continuing operations
$
(10,082
)
 
$
(18,770
)
 
$
(31,532
)
 
$
(41,614
)
 
$
(52,509
)
Net cash from financing activities of continuing operations
(20,430
)
 
(109,021
)
 
(28,664
)
 
(49,094
)
 
(54,788
)
Distributable cash flow (1)
(10,082
)
 
(18,770
)
 
(31,532
)
 
(41,614
)
 
(52,509
)
Free cash flow (1)
(10,082
)
 
(18,770
)
 
(31,532
)
 
(41,614
)
 
(52,509
)
 
 
 
 
 
(1)
See "Non-GAAP Financial Measures" and reconciliation tables at the end of this release.

Net loss decreased $6.3 million during the three months ended June 30, 2018 as compared to the three months ended June 30, 2017 primarily due to a $4.1 million loss on the early extinguishment of debt in 2017, and $2.4 million lower net interest expense due to lower debt. Net cash from operating activities of continuing operations, distributable cash flow and free cash flow increased $8.7 million during the period primarily as a result of interest payments made in 2017 on NRP's 9.125% Senior Notes that were fully repaid in the fourth quarter of 2017.
Net loss decreased $1.3 million during the three months ended June 30, 2018 as compared to the three months ended March 31, 2018 primarily due to timing of certain general and administrative costs and lower interest expense. Net cash from operating activities of continuing operations, distributable cash flow and free cash flow increased $21.5 million during the period primarily due to the timing of interest payments.
Net loss decreased $21.7 million during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 primarily due to $12.0 million of debt modification and early extinguishment costs in connection with the 2017 recapitalization transaction and $7.2 million of lower net interest expense due to lower debt. Net cash from operating activities of continuing

3


operations, distributable cash flow and free cash flow increased $10.9 million during the period primarily as a result of lower cash paid for interest due to lower debt and lower general and administrative costs due to performance awards paid in 2017 in connection with the recapitalization transaction.
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 55454889. Investors may also listen to the call via the Investor Relations section of the NRP website at www.nrplp.com. Audio replays of the conference call will be available for approximately one week. To access the replay, dial (855) 859-2056 and provide the conference code 55454889 or visit the Investor Relations section of NRP’s 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 kroberts@nrplp.com. Further information about NRP is available on the partnership’s 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.

4


"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings from unconsolidated investment and net 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.


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


5




Natural Resource Partners L.P.
Financial Tables
Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
(In thousands, except per unit data)
2018
 
2017
 
2018
 
2018
 
2017
Revenues and other income
 
 
 
 
 
 
 
 
 
Coal royalty and other
$
48,711

 
$
32,768

 
$
45,973

 
$
94,684

 
$
67,762

Coal royalty and other—affiliates
188

 
11,338

 
237

 
425

 
22,843

Transportation and processing services
5,002

 
4,146

 
5,383

 
10,385

 
4,146

Transportation and processing services—affiliates

 
1,374

 

 

 
6,013

Construction aggregates
34,233

 
27,363

 
26,424

 
60,657

 
52,846

Road construction and asphalt paving services
6,176

 
6,192

 
728

 
6,904

 
7,930

Equity in earnings of Ciner Wyoming
16,529

 
8,389

 
9,621

 
26,150

 
18,683

Gain on asset sales, net
210

 
3,361

 
660

 
870

 
3,405

Total revenues and other income
$
111,049

 
$
94,931

 
$
89,026

 
$
200,075

 
$
183,628

Operating expenses
 
 
 
 
 
 
 
 
 
Operating and maintenance expenses
$
38,301

 
$
31,020

 
$
29,968

 
$
68,269

 
$
60,648

Operating and maintenance expenses—affiliates
4,065

 
2,219

 
2,465

 
6,530

 
4,774

Depreciation, depletion and amortization
8,563

 
8,165

 
7,957

 
16,520

 
17,889

Amortization expense—affiliate

 
240

 

 

 
1,008

General and administrative
2,414

 
2,031

 
3,405

 
5,819

 
8,109

General and administrative—affiliates
849

 
852

 
931

 
1,780

 
1,976

Asset impairments

 

 
242

 
242

 
1,778

Total operating expenses
$
54,192

 
$
44,527

 
$
44,968

 
$
99,160

 
$
96,182

 
 
 
 
 
 
 
 
 
 
Income from operations
$
56,857

 
$
50,404

 
$
44,058

 
$
100,915

 
$
87,446

Other income (expense)
 
 
 
 
 
 
 
 
 
Interest expense, net
$
(17,734
)
 
$
(20,308
)
 
$
(17,970
)
 
$
(35,704
)
 
$
(43,432
)
Debt modification expense

 
(132
)
 

 

 
(7,939
)
Loss on extinguishment of debt

 
(4,107
)
 

 

 
(4,107
)
Other expense, net
$
(17,734
)
 
$
(24,547
)
 
$
(17,970
)
 
$
(35,704
)
 
$
(55,478
)
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations
$
39,123

 
$
25,857

 
$
26,088

 
$
65,211

 
$
31,968

Income (loss) from discontinued operations
(34
)
 
133

 
(14
)
 
(48
)
 
(74
)
Net income
$
39,089

 
$
25,990

 
$
26,074

 
$
65,163

 
$
31,894

Less: net income attributable to non-controlling interest
(869
)
 

 

 
(869
)
 

Net income attributable to NRP
$
38,220

 
$
25,990

 
$
26,074

 
$
64,294

 
$
31,894

Less: income attributable to preferred unitholders
(7,500
)
 
(7,538
)
 
(7,500
)
 
(15,000
)
 
(10,038
)
Net income attributable to common unitholders and general partner
$
30,720

 
$
18,452

 
$
18,574

 
$
49,294

 
$
21,856

 
 
 
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
30,105

 
$
18,015

 
$
18,203

 
$
48,308

 
$
21,419

Net income attributable to the general partner
$
615

 
$
437

 
$
371

 
$
986

 
$
437

 
 
 
 
 
 
 
 
 
 
Income from continuing operations per common unit
 
 
 
 
 
 
 
 
 
Basic
$
2.46

 
$
1.46

 
$
1.49

 
$
3.95

 
$
1.76

Diluted
$
1.75

 
$
1.13

 
$
1.16

 
$
2.96

 
$
1.64

Net income per common unit
 
 
 
 
 
 
 
 
 
Basic
$
2.46

 
$
1.47

 
$
1.49

 
$
3.95

 
$
1.75

Diluted
$
1.75

 
$
1.13

 
$
1.15

 
$
2.95

 
$
1.64

 
 
 
 
 
 
 
 
 
 
Net income
$
39,089

 
$
25,990

 
$
26,074

 
$
65,163

 
$
31,894

Add: comprehensive loss from unconsolidated investment and other
(434
)
 
(13
)
 
(1,125
)
 
(1,559
)
 
(1,145
)
Comprehensive income
$
38,655


$
25,977

 
$
24,949

 
$
63,604

 
$
30,749

Less: comprehensive income attributable to non-controlling interest
(869
)
 

 

 
(869
)
 

Comprehensive income attributable to NRP
$
37,786

 
$
25,977

 
$
24,949

 
$
62,735

 
$
30,749


6




Natural Resource Partners L.P.
Financial Tables
Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
March 31,
 
June 30,
(In thousands)
 
2018
 
2017
 
2018
 
2018
 
2017
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
Net income
 
$
39,089

 
$
25,990

 
$
26,074

 
$
65,163

 
$
31,894

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
 
 
 
 
 
 
 
 
 
 
Depreciation, depletion and amortization
 
8,563

 
8,165

 
7,957

 
16,520

 
17,889

Amortization expense—affiliates
 

 
240

 

 

 
1,008

Distributions from unconsolidated investment
 
12,250

 
9,862

 
10,153

 
22,403

 
22,112

Equity earnings from unconsolidated investment
 
(16,529
)
 
(8,389
)
 
(9,621
)
 
(26,150
)
 
(18,683
)
Gain on asset sales, net
 
(210
)
 
(3,361
)
 
(660
)
 
(870
)
 
(3,405
)
Debt modification expense
 

 
132

 

 

 
7,939

Loss on extinguishment of debt
 

 
4,107

 

 

 
4,107

Income (loss) from discontinued operations
 
34

 
(133
)
 
14

 
48

 
74

Asset impairments
 

 

 
242

 
242

 
1,778

Unit-based compensation expense
 
281

 
(254
)
 
792

 
1,073

 
3

Amortization of debt issuance costs and other
 
1,202

 
2,371

 
771

 
1,973

 
3,344

Other—affiliates
 

 
(1,308
)
 
(190
)
 
(190
)
 
(1,173
)
Change in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
(3,737
)
 
(3,263
)
 
(5,189
)
 
(8,926
)
 
(4,530
)
Accounts receivable—affiliates
 
(46
)
 
432

 
67

 
21

 
236

Accounts payable
 
1,020

 
(940
)
 
(845
)
 
175

 
46

Accounts payable—affiliates
 
(641
)
 
(254
)
 
1,531

 
890

 
2

Accrued liabilities
 
1,788

 
646

 
(5,169
)
 
(3,381
)
 
(7,302
)
Accrued liabilities—affiliates
 

 

 
(515
)
 
(515
)
 

Accrued interest
 
8,902

 
3,676

 
(9,777
)
 
(875
)
 
3,405

Deferred revenue
 
3,691

 
3,412

 
2,346

 
6,037

 
4,489

Deferred revenue—affiliates
 

 
(7,269
)
 

 

 
(10,166
)
Other items, net
 
(1,278
)
 
1,243

 
2,230

 
952

 
2,527

Net cash provided by operating activities of continuing operations
 
$
54,379


$
35,105

 
$
20,211

 
$
74,590

 
$
55,594

Net cash used in operating activities of discontinued operations
 
(35
)
 
(247
)
 
(412
)
 
(447
)
 
(531
)
Net cash provided by operating activities
 
$
54,344

 
$
34,858

 
$
19,799

 
$
74,143

 
$
55,063

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
Distributions from unconsolidated investment in excess of cumulative earnings
 
$

 
$
2,388

 
$
2,097

 
$
2,097

 
$
2,388

Proceeds from sale of assets
 
224

 
1,655

 
687

 
911

 
1,268

Return of long-term contract receivables
 
529

 
1,207

 
487

 
1,016

 
1,207

Return of long-term contract receivables—affiliate
 

 
390

 

 

 
804

Acquisition of plant and equipment and other
 
(2,413
)
 
(2,903
)
 
(3,444
)
 
(5,857
)
 
(4,998
)
Net cash provided by (used in) investing activities of continuing operations
 
$
(1,660
)
 
$
2,737

 
$
(173
)
 
$
(1,833
)
 
$
669

Net cash provided by investing activities of discontinued operations
 

 
173

 

 

 
202

Net cash provided by (used in) investing activities
 
$
(1,660
)
 
$
2,910

 
$
(173
)
 
$
(1,833
)
 
$
871


7




Consolidated Statements of Cash Flows—Continued
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
March 31,
 
June 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
 

 

 
35,000

 
35,000

 

Repayments of loans
 
(7,272
)
 
(97,282
)
 
(40,800
)
 
(48,072
)
 
(348,292
)
Redemption of preferred units paid-in-kind
 

 

 
(8,844
)
 
(8,844
)
 

Distributions to common unitholders and general partner
 
(5,623
)
 
(5,619
)
 
(5,617
)
 
(11,240
)
 
(11,234
)
Distributions to preferred unitholders
 
(7,500
)
 
(1,250
)
 
(7,765
)
 
(15,265
)
 
(1,250
)
Contributions to discontinued operations
 
(35
)
 
(74
)
 
(412
)
 
(447
)
 
(329
)
Debt issuance costs and other
 
(466
)
 
(5,779
)
 
(275
)
 
(741
)
 
(40,534
)
Net cash used in financing activities of continuing operations
 
$
(20,896
)
 
$
(110,004
)
 
$
(28,713
)
 
$
(49,609
)
 
$
(55,851
)
Net cash provided by financing activities of discontinued operations
 
35

 
74

 
412

 
447

 
329

Net cash used in financing activities
 
$
(20,861
)
 
$
(109,930
)
 
$
(28,301
)
 
$
(49,162
)
 
$
(55,522
)
 
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
$
31,823

 
$
(72,162
)
 
$
(8,675
)
 
$
23,148

 
$
412

Cash and cash equivalents at beginning of period
 
$
21,152

 
$
112,945

 
$
29,827

 
29,827

 
40,371

Cash and cash equivalents at end of period
 
$
52,975

 
$
40,783

 
$
21,152

 
$
52,975

 
$
40,783

 
 
 
 
 
 
 
 
 
 
 
Supplemental cash flow information:
 
 
 
 
 
 
 
 
 
 
Cash paid during the period for interest from continuing operations
 
$
7,132

 
$
15,029

 
$
26,023

 
$
33,155

 
$
34,880

Non-cash investing and financing activities:
 
 
 
 
 
 
 
 
 
 
Plant, equipment and mineral rights funded with accounts payable or accrued liabilities
 
$
870

 
$

 
$
24

 
$
894

 
$

Issuance of 2022 Senior Notes in exchange for 2018 Senior Notes
 
$

 
$

 
$

 
$

 
$
240,638





8




Natural Resource Partners L.P.
Financial Tables
Consolidated Balance Sheets
 
June 30,
 
December 31,
 
2018
 
2017
(In thousands, except unit data)
(Unaudited)
 
 
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
52,975

 
$
29,827

Accounts receivable, net
59,312

 
47,026

Accounts receivable—affiliates
140

 
161

Inventory
8,048

 
7,553

Prepaid expenses and other
4,391

 
5,838

Current assets of discontinued operations
988

 
991

Total current assets
125,854

 
91,396

Land
24,809

 
25,247

Plant and equipment, net
47,917

 
46,170

Mineral rights, net
873,716

 
883,885

Intangible assets, net
47,924

 
49,554

Equity in unconsolidated investment
245,524

 
245,433

Long-term contracts receivable
39,878

 
40,776

Other assets
6,184

 
6,547

Other assets—affiliate

 
156

Total assets
$
1,411,806

 
$
1,389,164

LIABILITIES AND CAPITAL
 
 
 
Current liabilities
 
 
 
Accounts payable
$
7,801

 
$
6,957

Accounts payable—affiliates
1,453

 
562

Accrued liabilities
12,848

 
16,890

Accrued liabilities—affiliates

 
515

Accrued interest
14,609

 
15,484

Current portion of deferred revenue
2,732

 

Current portion of long-term debt, net
75,188

 
79,740

Current liabilities of discontinued operations

 
401

Total current liabilities
114,631

 
120,549

Deferred revenue
17,136

 
100,605

Long-term debt, net
723,147

 
729,608

Other non-current liabilities
2,385

 
2,808

Other non-current liabilities—affiliate

 
346

Total liabilities
857,299

 
953,916

Commitments and contingencies

 
 
Class A Convertible Preferred Units (250,000 and 258,844 units issued and outstanding at June 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 June 30, 2018 and December 31, 2017, respectively)
326,125

 
199,851

General partner’s interest
4,427

 
1,857

Warrant holders' interest
66,816

 
66,816

Accumulated other comprehensive loss
(4,872
)
 
(3,313
)
Total partners’ capital
392,496

 
265,211

Non-controlling interest
(2,576
)
 
(3,394
)
Total capital
389,920

 
261,817

Total liabilities and capital
$
1,411,806

 
$
1,389,164


9




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

 
88,448

 
1,805

 

 

 
90,253

 

 
90,253

Net income (1)

 
63,008

 
1,286

 

 

 
64,294

 
869

 
65,163

Distributions to common unitholders and general partner

 
(11,015
)
 
(225
)
 

 

 
(11,240
)
 

 
(11,240
)
Distributions to preferred unitholders

 
(14,960
)
 
(305
)
 

 

 
(15,265
)
 

 
(15,265
)
Issuance of unit-based awards
14

 
410

 

 

 

 
410

 

 
410

Unit-based awards amortization and vesting

 
333

 

 

 

 
333

 

 
333

Comprehensive loss from unconsolidated investment and other

 
50

 
9

 

 
(1,559
)
 
(1,500
)
 
(51
)
 
(1,551
)
Balance at June 30, 2018
12,246

 
$
326,125

 
$
4,427

 
$
66,816

 
$
(4,872
)
 
$
392,496

 
$
(2,576
)
 
$
389,920

 
 
 
 
 
(1)
Net income includes $15.0 million attributable to Preferred Unitholders that accumulated during the period, of which $14.7 million is allocated to the common unitholders and $0.3 million is allocated to the general partner.


10




Natural Resource Partners L.P.
Financial Tables (Unaudited)

The tables below presents NRP's unaudited business results by segment for the three and six months ended June 30, 2018 and 2017 and the three months ended March 31, 2018:
 
 
Operating Business Segments
 
 
 
 
 
Coal Royalty and Other
 
 
 
Construction Aggregates
 
Corporate and Financing
 
 
(In thousands)
 
 
Soda Ash
 
 
 
Total
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
$
53,901

 
$
16,529

 
$
40,409

 
$

 
$
110,839

Gains on asset sales, net
 
168

 

 
42

 

 
210

Total revenues and other income
 
$
54,069

 
$
16,529

 
$
40,451

 
$

 
$
111,049

Net income (loss) from continuing operations
 
$
40,650

 
$
16,529

 
$
2,941

 
$
(20,997
)
 
$
39,123

Adjusted EBITDA (1)
 
$
45,157

 
$
12,250

 
$
6,128

 
$
(3,263
)
 
$
60,272

Distributable cash flow (1)
 
$
52,424

 
$
12,250

 
$
(1,751
)
 
$
(10,082
)
 
$
52,841

Free cash flow (1)
 
$
52,254

 
$
12,250

 
$
(2,393
)
 
$
(10,082
)
 
$
52,029

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
$
49,626

 
$
8,389

 
$
33,555

 
$

 
$
91,570

Gains on asset sales, net
 
3,184

 

 
177

 

 
3,361

Total revenues and other income
 
$
52,810

 
$
8,389

 
$
33,732

 
$

 
$
94,931

Net income (loss) from continuing operations
 
$
42,084

 
$
8,389

 
$
2,636

 
$
(27,252
)
 
$
25,857

Adjusted EBITDA (1)
 
$
47,459

 
$
12,250

 
$
5,844

 
$
(2,883
)
 
$
62,670

Distributable cash flow (1)
 
$
41,426

 
$
12,250

 
$
3,424

 
$
(18,770
)
 
$
38,330

Free cash flow (1)
 
$
40,134

 
$
12,250

 
$
1,573

 
$
(18,770
)
 
$
35,187

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
$
51,593

 
$
9,621

 
$
27,152

 
$

 
$
88,366

Gains on asset sales, net
 
651

 

 
9

 

 
660

Total revenues and other income
 
$
52,244

 
$
9,621

 
$
27,161

 
$

 
$
89,026

Asset impairments
 
$
242

 
$

 
$

 
$

 
$
242

Net income (loss) from continuing operations
 
$
40,728

 
$
9,621

 
$
(1,975
)
 
$
(22,286
)
 
$
26,088

Adjusted EBITDA (1)
 
$
46,070

 
$
12,250

 
$
902

 
$
(4,336
)
 
$
54,886

Distributable cash flow (1)
 
$
39,936

 
$
12,250

 
$
191

 
$
(31,532
)
 
$
20,845

Free cash flow (1)
 
$
39,280

 
$
12,250

 
$
(696
)
 
$
(31,532
)
 
$
19,302

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

11




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
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
$
105,494

 
$
26,150

 
$
67,561

 
$

 
$
199,205

Gains on asset sales, net
 
819

 

 
51

 

 
870

Total revenues and other income
 
$
106,313

 
$
26,150

 
$
67,612

 
$

 
$
200,075

Asset impairments
 
$
242

 
$

 
$

 
$

 
$
242

Net income (loss) from continuing operations
 
$
81,378

 
$
26,150

 
$
966

 
$
(43,283
)
 
$
65,211

Adjusted EBITDA (1)
 
$
91,227

 
$
24,500

 
$
7,030

 
$
(7,599
)
 
$
115,158

Distributable cash flow (1)
 
$
92,360

 
$
24,500

 
$
(1,560
)
 
$
(41,614
)
 
$
73,686

Free cash flow (1)
 
$
91,534

 
$
24,500

 
$
(3,089
)
 
$
(41,614
)
 
$
71,331

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
Revenues and other income
 
$
100,764

 
$
18,683

 
$
60,776

 
$

 
$
180,223

Gains on asset sales, net
 
3,213

 

 
192

 

 
3,405

Total revenues and other income
 
$
103,977

 
$
18,683

 
$
60,968

 
$

 
$
183,628

Asset impairments
 
$
1,778

 
$

 
$

 
$

 
$
1,778

Net income (loss) from continuing operations
 
$
77,178

 
$
18,683

 
$
1,097

 
$
(64,990
)
 
$
31,968

Adjusted EBITDA (1)
 
$
91,304

 
$
24,500

 
$
8,219

 
$
(10,085
)
 
$
113,938

Distributable cash flow (1)
 
$
79,363

 
$
24,500

 
$
5,523

 
$
(52,509
)
 
$
56,877

Free cash flow (1)
 
$
78,480

 
$
24,500

 
$
3,428

 
$
(52,509
)
 
$
53,899

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


12




Natural Resource Partners L.P.
Financial Tables (Unaudited)

Operating Statistics - Coal Royalty and Other
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
March 31,
 
June 30,
(In thousands, except per ton data)
 
2018
 
2017
 
2018
 
2018
 
2017
Coal production (tons)
 
 
 
 
 
 
 
 
 
 
Appalachia
 
 
 
 
 
 
 
 
 
 
Northern
 
916

 
247

 
225

 
1,141

 
1,454

Central
 
4,163

 
3,897

 
3,545

 
7,709

 
7,597

Southern
 
396

 
690

 
546

 
942

 
1,253

Total Appalachia
 
5,475

 
4,834

 
4,316

 
9,792

 
10,304

Illinois Basin
 
739

 
734

 
743

 
1,482