Natural Resource Partners L.P. Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

Natural Resource Partners L.P. (NYSE:NRP) reported challenging financial results for Q4 and FY 2020. Net income from continuing operations was $14.7 million for Q4, up from a loss of $119.4 million in 2019, but down to a loss of $84.8 million for the year. Adjusted EBITDA declined from $199.2 million in 2019 to $104.7 million in 2020. Despite a $46 million debt reduction, coal royalties and soda ash revenues dropped significantly due to decreased demand exacerbated by the COVID-19 pandemic. The company maintained liquidity of $200 million and declared a $0.45 distribution per common unit in Q4.

Positive

• Net income from continuing operations for Q4 2020 was $14.7 million, a significant improvement from a loss of $119.4 million in Q4 2019.
• Debt was reduced by $46 million in 2020, contributing to a liquidity of $200 million at year-end, including $99.8 million in cash.
• Distributable cash flow for FY 2020 was $90.2 million, showing some financial stability amid challenges.

Negative

• Net income for FY 2020 was a loss of $84.8 million, compared to a loss of $25.4 million in FY 2019.
• Revenue from coal royalties decreased significantly due to weakened global steel demand and low coal pricing.
• Ciner Wyoming suspended distributions due to reduced cash flow, impacting NRP's revenue from soda ash.

Natural Resource Partners L.P. (NYSE:NRP) today reported fourth quarter and full year 2020 results as follows:

		For the Three Months Ended						For the Year Ended
		December 31,						December 31,
(In thousands) (Unaudited)		2020			2019			2020			2019
Net income (loss) from continuing operations		$	14,687		$	(119,448)		$	(84,819)		$	(25,414)
Asset impairments			2,668			147,730			135,885			148,214
Net income from continuing operations excluding asset impairments (1)		$	17,355		$	28,282		$	51,066		$	122,800
Adjusted EBITDA (1)			24,917			37,974			104,714			199,228
Cash flow provided by (used in) continuing operations:
Operating activities			13,155			19,394			87,568			137,319
Investing activities			776			259			1,745			8,221
Financing activities			(29,714)			(33,551)			(87,788)			(253,305)
Distributable cash flow (1) (2)			13,932			19,602			90,248			144,933
Free cash flow (1)			13,815			19,764			88,690			139,040
Cash flow cushion (last twelve months) (1)									(739)			7,762

____________________
(1)		See "Non-GAAP Financial Measures" and reconciliation tables at the end of this release.
(2)		Includes net proceeds from the sale of the construction aggregates business which are classified as investing cash flow from discontinued operations.

"While 2020 proved to be a challenging year for us all, I'm proud of the efforts and discipline of our team as they managed the business safely and effectively over the course of the year. We paid down $46 million of debt in 2020 and ended the year with $200 million of liquidity. As we look to 2021, demand for steel, energy and soda ash continues to improve and we continue to focus on maximizing unitholder value by de-levering the capital structure while maintaining strong liquidity during these uncertain times," stated Craig Nunez, NRP's President and Chief Operating Officer.

NRP's liquidity was $199.8 million at December 31, 2020, consisting of $99.8 million of cash and $100.0 million of borrowing capacity available under its revolving credit facility.

NRP declared a cash distribution of $0.45 per common unit and a distribution of $7.6 million on its preferred units for the fourth quarter of 2020. The preferred unit distribution included interest on previously paid-in-kind units and was paid one-half in cash and one-half in kind through the issuance of additional preferred units. Future distributions on NRP's common and preferred units will be determined on a quarterly basis by the Board of Directors. The Board of Directors considers numerous factors each quarter in determining cash distributions including profitability, cash flow, debt service obligations, market conditions and outlook, estimated unitholder income tax liability and the level of cash reserves that the Board determines is necessary for future operating and capital needs.

Segment Performance

Coal Royalty and Other

Revenues and other income in the fourth quarter and full year of 2020 were lower by $7.8 million and $87.3 million, respectively, and free cash flow in the fourth quarter and full year of 2020 was $5.1 million and $54.7 million lower, respectively, as compared to the prior year periods. These decreases are primarily a result of a weakened market for metallurgical coal in 2020 due to a decline in global steel demand, and as a result, both sales volumes and prices for metallurgical coal sold were lower in the fourth quarter and full year of 2020 as compared to the prior year periods. Approximately 70% of coal royalty revenues and approximately 60% of coal royalty sales volumes were derived from metallurgical coal in 2020. In addition, weaker domestic and export thermal coal markets compared to the prior year periods resulted in lower revenues from NRP's thermal coal properties. Furthermore, the COVID-19 pandemic compounded already weak coal pricing and demand, and NRP's coal lessees saw significant negative impacts on their businesses.

NRP also recorded $2.7 million and $135.9 million in non-cash asset impairment expense in the fourth quarter and full year of 2020, respectively, as compared to $147.7 million and $148.2 million in non-cash asset impairment expense for the fourth quarter and full year of 2019, respectively. Asset impairments in 2020 primarily related to weak coal markets that were compounded by the COVID-19 pandemic and resulted in the termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off of certain coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties.

Domestic and export thermal coal markets remain challenged by lower utility demand, continued low natural gas prices, the secular shift to renewable energy and the ongoing negative effects from the COVID-19 pandemic. Metallurgical coal markets also remain challenged by the uncertainties around the COVID-19 pandemic, but prices have rebounded from the lows seen in the second quarter of 2020.

In addition to actively managing its currently producing coal and hard mineral properties over the last year, NRP has also been working to identify potential alternative revenue sources across its coal and hard mineral property portfolio. The Partnership has been evaluating opportunities which may exist in its surface and mineral property assets, where coal or other hard mineral development operations have ceased or have never been developed, as locations for environmentally sustainable projects, such as carbon sequestration or renewable energy projects. While NRP does not expect these activities to generate significant revenues or cash flow over the next several years, NRP believes its large ownership footprint throughout the United States will provide opportunities to create value in this regard with minimal capital investment by the Partnership.

Soda Ash

Ciner Wyoming was negatively impacted by the COVID-19 pandemic as lower demand for glass in the global auto, beverage container and construction industries reduced demand for soda ash. Revenues and other income in the fourth quarter and full year of 2020 were lower by $4.7 million and $36.4 million, respectively, as compared to the prior year periods primarily due to a combination of lower pricing and volumes sold. Distributions received from Ciner Wyoming were lower by $6.4 million and $17.6 million in the fourth quarter and full year of 2020, respectively, as compared to prior year periods due to Ciner Wyoming's decision to suspend distributions as announced in August of 2020. While Ciner Wyoming has yet to recover to pre-COVID-19 levels, fourth quarter 2020 overall sales volumes increased 9.5% and overall production volumes increased 49.1% over the third quarter 2020 results. NRP believes Ciner Wyoming's facility is competitively positioned as one of the lowest cost producers of soda ash in the world, however, NRP expects the market to remain volatile as a result of ongoing uncertainties with the COVID-19 pandemic.

As previously mentioned, Ciner Wyoming suspended its quarterly distribution in August 2020 in an effort to achieve greater financial and liquidity flexibility during the COVID-19 pandemic and accordingly, did not pay quarterly distributions for the second, third or fourth quarters of 2020. Ciner Wyoming will continue to evaluate on a quarterly basis whether to reinstate the distribution. Ciner Wyoming’s ability to pay future quarterly distributions will be dependent in part on its cash reserves, liquidity, total debt levels and anticipated capital expenditures.

Corporate and Financing

Corporate and financing costs were $1.1 million and $38.3 million lower in the fourth quarter and full year of 2020, respectively, as compared to the prior year periods. The decrease in costs for the fourth quarter of 2020 is primarily due to lower interest expense as a result of less debt outstanding. The decrease in costs for the full year of 2020 is primarily due to the loss on extinguishment of debt of $29.3 million related to the refinancing and extension of both NRP's 2022 Senior Notes and revolving credit facility in the second quarter of 2019, as well as lower interest expense as a result of less debt outstanding. Free cash flow was $5.5 million and $21.9 million higher in the fourth quarter and full year of 2020, respectively, as compared to the prior year periods primarily due to lower cash paid for interest as a result of less debt outstanding in 2020.

As noted earlier, NRP declared a fourth quarter $7.6 million distribution on its preferred units which was paid one-half in cash and one-half in kind. The indenture governing the 2025 parent company notes restricts NRP from paying more than one-half of the quarterly distribution on the preferred units in cash if NRP's consolidated leverage ratio exceeds 3.75x, and as of December 31, 2020, NRP's leverage ratio was 4.6x. NRP expect its leverage ratio to continue to exceed 3.75x for the foreseeable future.

Conference Call

A conference call will be held today at 9:00 a.m. ET. To register for the conference call, please use this link http://www.directeventreg.com/registration/event/6473098. After registering a confirmation will be sent via email, including dial in details and unique conference call codes for entry. Registration is open through the live call, however, to ensure you are connected for the full call we suggest registering at least 10 minutes prior to the start of the call. 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 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, manages and leases a diversified portfolio of mineral properties in the United States including interests in coal, industrial minerals and other natural resources. In addition, NRP owns an equity investment in Ciner Wyoming LLC, a trona ore mining and soda ash production business.

For additional information, please contact Tiffany Sammis at 713-751-7515 or tsammis@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, among other things, statements regarding: the effects of the global COVID-19 pandemic; future distributions on the Partnership’s common and preferred units; the Partnership's business strategy; its liquidity and access to capital and financing sources; its financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected future performance by the Partnership's lessees, including Foresight Energy; Ciner Wyoming LLC’s trona mining and soda ash refinery operations; distributions from the soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving the Partnership, and of scheduled or potential regulatory or legal changes; global and U.S. economic conditions; 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

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings from unconsolidated investment, net income attributable to non-controlling interest and gain on reserve swap; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income or loss, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (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.

“Distributable cash flow” or "DCF" is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivable; less maintenance capital expenditures and distributions to non-controlling interest. DCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. DCF may not be calculated the same for us as for other companies. In addition, distributable cash flow 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 our ability to make cash distributions and repay debt.

“Free cash flow” or "FCF" is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivable; less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as investing or financing activities and distributions to non-controlling interest. FCF 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 our ability to make cash distributions and repay debt.

"Cash flow cushion" is a non-GAAP financial measure that we define as free cash flow less one-time beneficial items, mandatory Opco debt repayments, preferred unit distributions and common unit distributions. Cash flow cushion 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. Cash flow cushion is a supplemental liquidity measure used by our management to assess the Partnership's ability to make or raise cash distributions to our common and preferred unitholders and our general partner and repay debt or redeem preferred units.

"Return on capital employed" or "ROCE" is a non-GAAP financial measure that we define as net income (loss) from continuing operations plus financing costs (interest expense plus loss on extinguishment of debt) divided by the sum of equity excluding equity of discontinued operations, 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 or loss, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. 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 and Reconciliation of Non-GAAP Measures Follow-

Natural Resource Partners L.P.
Financial Tables
(Unaudited)
Consolidated Statements of Comprehensive Income (Loss)
	For the Three Months Ended									For the Year Ended
	December 31,						September 30,			December 31,
(In thousands, except per unit data)	2020			2019			2020			2020			2019
Revenues and other income
Coal royalty and other	$	31,327		$	37,032		$	25,740		$	120,166		$	191,069
Transportation and processing services		2,194			4,539			2,204			8,845			19,279
Equity in earnings of Ciner Wyoming		5,528			10,256			1,986			10,728			47,089
Gain (loss) on asset sales and disposals		116			(111)			—			581			6,498
Total revenues and other income	$	39,165		$	51,716		$	29,930		$	140,320		$	263,935
Operating expenses
Operating and maintenance expenses	$	5,595		$	5,925		$	5,781		$	24,795		$	32,738
Depreciation, depletion and amortization		3,013			3,186			2,111			9,198			14,932
General and administrative expenses		3,125			3,931			3,634			14,293			16,730
Asset impairments		2,668			147,730			934			135,885			148,214
Total operating expenses	$	14,401		$	160,772		$	12,460		$	184,171		$	212,614
Income (loss) from operations	$	24,764		$	(109,056)		$	17,470		$	(43,851)		$	51,321
Other expenses, net
Interest expense, net	$	(10,077)		$	(10,392)		$	(10,254)		$	(40,968)		$	(47,453)
Loss on extinguishment of debt		—			—			—			—			(29,282)
Total other expenses, net	$	(10,077)		$	(10,392)		$	(10,254)		$	(40,968)		$	(76,735)
Net income (loss) from continuing operations	$	14,687		$	(119,448)		$	7,216		$	(84,819)		$	(25,414)
Income from discontinued operations		—			750			—			—			956
Net income (loss)	$	14,687		$	(118,698)		$	7,216		$	(84,819)		$	(24,458)
Less: income attributable to preferred unitholders		(7,612)			(7,500)			(7,500)			(30,225)			(30,000)
Net income (loss) attributable to common unitholders and the general partner	$	7,075		$	(126,198)		$	(284)		$	(115,044)		$	(54,458)
Net income (loss) attributable to common unitholders	$	6,934		$	(123,674)		$	(279)		$	(112,743)		$	(53,369)
Net income (loss) attributable to the general partner		141			(2,524)			(5)			(2,301)			(1,089)
Income (loss) from continuing operations per common unit
Basic	$	0.57		$	(10.15)		$	(0.02)		$	(9.20)		$	(4.43)
Diluted		0.56			(10.15)			(0.02)			(9.20)			(4.43)
Net income (loss) per common unit
Basic	$	0.57		$	(10.09)		$	(0.02)		$	(9.20)		$	(4.35)
Diluted		0.56			(10.09)			(0.02)			(9.20)			(4.35)
Net income (loss)	$	14,687		$	(118,698)		$	7,216		$	(84,819)		$	(24,458)
Comprehensive income from unconsolidated investment and other		152			1,208			2,428			2,916			868
Comprehensive income (loss)	$	14,839		$	(117,490)			9,644		$	(81,903)		$	(23,590)

Natural Resource Partners L.P.
Financial Tables
(Unaudited)
Consolidated Statements of Cash Flows
	For the Three Months Ended									For the Year Ended
	December 31,						September 30,			December 31,
(In thousands)	2020			2019			2020			2020			2019
Cash flows from operating activities
Net income (loss)	$	14,687		$	(118,698)		$	7,216		$	(84,819)		$	(24,458)
Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations:
Depreciation, depletion and amortization	3,013			3,186			2,111			9,198			14,932
Distributions from unconsolidated investment	—			6,370			—			14,210			31,850
Equity earnings from unconsolidated investment	(5,528)			(10,256)			(1,986)			(10,728)			(47,089)
Loss (gain) on asset sales and disposals	(116)			111			—			(581)			(6,498)
Loss on extinguishment of debt	—			—			—			—			29,282
Income from discontinued operations	—			(750)			—			—			(956)
Asset impairments	2,668			147,730			934			135,885			148,214
Bad debt expense	86			620			258			4,001			7,462
Unit-based compensation expense	1,004			519			913			3,570			2,361
Amortization of debt issuance costs and other	832			464			1,577			1,323			3,687
Change in operating assets and liabilities:
Accounts receivable	4,859			(3,924)			4,621			12,853			(6,035)
Accounts payable	14			(412)			144			207			(1,234)
Accrued liabilities	780			1,427			791			(2,205)			(3,656)
Accrued interest	(7,559)			(12,048)			7,248			(602)			(12,029)
Deferred revenue	(461)			3,188			(273)			9,733			(732)
Other items, net	(1,124)			1,867			769			(4,477)			2,218
Net cash provided by operating activities of continuing operations	$	13,155		$	19,394		$	24,323		$	87,568		$	137,319
Net cash provided by (used in) operating activities of discontinued operations	—			(4)			—			1,706			(8)
Net cash provided by operating activities	$	13,155		$	19,390		$	24,323		$	89,274		$	137,311
Cash flows from investing activities
Proceeds from asset sales and disposals	$	116		$	(111)		$	—		$	623		$	6,500
Return of long-term contract receivable	660			392			332			2,122			1,743
Acquisition of non-controlling interest in BRP	—			—			—			(1,000)			—
Acquisition of mineral rights	—			(22)			—			—			(22)
Net cash provided by investing activities of continuing operations	$	776		$	259		$	332		$	1,745		$	8,221
Net cash provided by (used in) investing activities of discontinued operations	1			(73)			—			(65)			(629)
Net cash provided by investing activities	$	777		$	186		$	332		$	1,680		$	7,592
Cash flows from financing activities
Debt borrowings	$	—		$	—		$	—		$	—		$	300,000
Debt repayments	(20,335)			(20,335)			(6,780)			(46,176)			(463,082)
Distributions to common unitholders and general partner	(5,630)			(5,630)			(5,630)			(16,890)			(33,150)
Distributions to preferred unitholders	(3,750)			(7,500)			(7,500)			(26,363)			(30,000)
Contributions from (to) discontinued operations	1			(77)			—			1,641			(637)
Debt issuance costs and other	—			(9)			—			—			(26,436)
Net cash used in financing activities of continuing operations	$	(29,714)		$	(33,551)		$	(19,910)		$	(87,788)		$	(253,305)
Net cash provided by (used in) financing activities of discontinued operations	(1)			77			—			(1,641)			637
Net cash used in financing activities	$	(29,715)		$	(33,474)		$	(19,910)		$	(89,429)		$	(252,668)
Net increase (decrease) in cash and cash equivalents	$	(15,783)		$	(13,898)		$	4,745		$	1,525		$	(107,765)
Cash and cash equivalents at beginning of period	115,573			112,163			110,828			98,265			206,030
Cash and cash equivalents at end of period	$	99,790		$	98,265		$	115,573		$	99,790		$	98,265
Supplemental cash flow information:
Cash paid during the period for interest	$	17,118		$	22,327		$	2,490		$	39,830		$	58,597
Non-cash investing and financing activities:
Plant, equipment, mineral rights and other funded with accounts payable or accrued liabilities	$	23		$	—		$	23		$	970		$	—
Preferred unit distributions paid-in-kind	3,750			—			—			3,750			—

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Natural Resource Partners L.P.
Financial Tables
(Unaudited)
Consolidated Balance Sheets
	December 31,
(In thousands, except unit data)	2020				2019
ASSETS
Current assets
Cash and cash equivalents	$	99,790			$	98,265
Accounts receivable, net	12,322				30,869
Other current assets, net	5,080				1,244
Current assets of discontinued operations	—				1,706
Total current assets	$	117,192			$	132,084
Land	24,008				24,008
Mineral rights, net	460,373				605,096
Intangible assets, net	17,459				17,687
Equity in unconsolidated investment	262,514				263,080
Long-term contract receivable, net	33,264				36,963
Other long-term assets, net	7,067				6,989
Total assets	$	921,877			$	1,085,907
LIABILITIES AND CAPITAL
Current liabilities
Accounts payable	$	1,385			$	1,179
Accrued liabilities	7,733				8,764
Accrued interest	1,714				2,316
Current portion of deferred revenue	11,485

FAQ

What were Natural Resource Partners' financial results for Q4 2020?

NRP reported a net income of $14.7 million for Q4 2020, an improvement from a significant loss in the same quarter of 2019.

How did COVID-19 impact Natural Resource Partners' financial performance?

The pandemic negatively affected coal and soda ash demand, leading to lower revenues and asset impairments for NRP.

What is the current liquidity position of NRP as of December 31, 2020?

NRP reported a liquidity of $200 million, which includes $99.8 million in cash.

Did NRP declare any distributions for Q4 2020?

Yes, NRP declared a cash distribution of $0.45 per common unit for Q4 2020.

What is the outlook for NRP's distributable cash flow?

NRP's distributable cash flow for FY 2020 was $90.2 million, suggesting some resilience despite market challenges.