Natural Resource Partners L.P. Reports Second Quarter 2019 Results

HOUSTON–(BUSINESS WIRE)–Natural Resource Partners L.P. (NYSE:NRP) today reported second quarter 2019 results as follows:

“NRP continued to generate a steady stream of cash flow during the second quarter,” stated Craig Nunez, NRP’s President and Chief Operating Officer. “In addition, we further strengthened our balance sheet during the quarter by extending our $100 million revolving credit facility from 2020 to 2023 and by redeeming all of our $346 million of 10.50% bonds due 2022 through the issuance of $300 million of 9.125% bonds due 2025. During the first six months of 2019, we lowered our debt by $134 million and we continue to remain focused on free cash flow generation, return on capital employed and further de-leveraging and de-risking the Partnership.”

NRP’s liquidity was $185.8 million at June 30, 2019, consisting of $70.9 million of cash, $14.9 million of cash restricted for debt repayment and $100.0 million of borrowing capacity available under its revolving credit facility. At June 30, 2019, NRP’s consolidated Debt-to-Adjusted EBITDA ratio excluding the one-time beneficial Hillsboro settlement in the fourth quarter of 2018 was 2.6x.

NRP’s cash flow cushion for the last twelve months ended June 30, 2019, was $26.1 million. Cash flow cushion represents the amount of free cash flow left over after payment of mandatory debt amortizations and preferred and common unit distributions. NRP remains focused on this metric to preserve financial flexibility needed to weather changes in market conditions while continuing to service its debt obligations and make distributions to unitholders.

NRP declared a cash distribution of $0.45 per common unit and a cash distribution of $7.5 million on NRP’s preferred units for the second quarter of 2019.

Coal Royalty and Other

Increases in second quarter performance compared to the prior year quarter were primarily due to:

• $13.9 million increased production lease minimum revenues primarily as a result of increased lessee forfeitures of recoupable balances from minimums paid in prior periods.
• $4.4 million of lease amendment revenues during the second quarter of 2019.
• $3.3 million increased minimum lease straight-line revenues primarily related to the Hillsboro property that NRP began to recognize in 2019 after completion of the Hillsboro litigation settlement with Foresight.

These increases were partially offset by a $4.1 million decrease in coal royalty revenues driven by lower sales volumes from the idling of the Pinnacle mine in the fourth quarter of 2018, logistical issues in the Illinois Basin caused by flooding and high water throughout the river systems and the timing of mining on NRP’s Northern Powder River Basin property. In addition, operating and maintenance expenses within the segment increased $4.3 million primarily due to bad debt expense recognized in the second quarter of 2019 related to certain receivables.

NRP continued to see solid pricing for metallurgical coal due to sustained global steel demand, as well as steady pricing for thermal coal as a result of NRP lessees locking-in favorable pricing for the first half of 2019. Approximately 70% of NRP’s coal royalty revenues and approximately 50% of its coal royalty sales volumes was derived from metallurgical coal during the three months ended June 30, 2019.

Soda Ash

Net income decreased due to Ciner Wyoming’s litigation settlement of a royalty dispute that resulted in $12.7 million of income in the second quarter of 2018. Excluding the impact of this litigation settlement, net income increased $7.5 million compared to the prior year quarter driven by increased production and sales volumes and increased domestic and international sales prices.

Adjusted EBITDA, Distributable cash flow and Free cash flow decreased $2.9 million due to lower second quarter cash distributions received from Ciner Wyoming. The managing partner of NRP’s Ciner Wyoming joint venture has announced plans for a major capacity expansion project and a multi-year reduction in cash distributions, with the cash retained at the JV used to fund a portion of the expansion capital cost. The cash distributions NRP has received from Ciner Wyoming over the last two years have averaged $45 million annually. Starting this month, NRP expects for the cash distributions it receives from Ciner Wyoming to decrease to approximately $25 million to $28 million per year and be held at such levels for the next two to three years. This expansion project is intended to provide significant increases in production capacity, free cash flow and cash distributions to NRP over the long term.

Corporate and Financing

Corporate and Financing costs increased as compared to the prior year quarter primarily driven by the refinancing and extension of both NRP’s bonds and revolving credit facility in the second quarter of 2019 that resulted in a $29.3 million loss on extinguishment of debt. Additionally, Cash flow used in financing activities increased primarily as a result of the use of cash on hand to reduce the principal of NRP’s bonds by $46 million and to pay financing costs that included an $18 million call option premium related to the redemption of the $346 million bonds.

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 55454893. 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. A large percentage of NRP’s revenues are generated from royalties and other passive income. 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 [email protected]. 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 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 production levels by the Partnership’s lessees; 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, 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 sales of assets, including sales of discontinued operations, and return of long-term contract receivables (including affiliate); 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 receivables (including affiliate); less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as 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.

“Free cash flow excluding discontinued operations and one-time beneficial items” is a non-GAAP financial measure that we define as Free cash flow excluding discontinued operations and one-time beneficial items. Free cash flow excluding discontinued operations and one-time beneficial items 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 excluding discontinued operations and one-time beneficial items may not be calculated the same for us as for other companies. Free cash flow excluding discontinued operations and one-time beneficial items is a supplemental liquidity measure used by our management 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 amortization payments, 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 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, 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.

“Return on capital employed excluding discontinued operations and one-time beneficial items” is a non-GAAP financial measure that we define as Return on capital employed excluding one-time beneficial items. Return on capital employed excluding discontinued operations and one-time beneficial items 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 excluding discontinued operations and one-time beneficial items is a supplemental performance measure used by our management team that measures our profitability and efficiency with which our capital is employed excluding the impact of one-time beneficial items. The measure provides an indication of operating performance before the impact of leverage in the capital structure and excluding the impact of one-time beneficial items.

-Financial Tables and Reconciliation of Non-GAAP Measures Follow-

Contacts

Tiffany Sammis, 713-751-7515

[email protected]

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