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

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

“We posted a solid quarter of financial results despite challenging coal markets,” said Craig Nunez, NRP’s President and Chief Operating Officer. “We continue to generate significant free cash flow, maintain robust liquidity and remain focused on de-levering and de-risking the Partnership.”

NRP’s liquidity was $212.2 million at September 30, 2019, consisting of $99.6 million of cash, $12.5 million of cash restricted for debt repayment and $100.0 million of borrowing capacity available under its revolving credit facility. At September 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 declared a cash distribution of $0.45 per common unit and a cash distribution of $7.5 million on its preferred units for the third quarter of 2019.

Third Quarter Segment Results

Coal Royalty and Other

Overall results in the third quarter of 2019 were relatively flat compared to the prior year quarter as increases in certain areas were offset by reduced coal royalty realizations at certain properties as follows:

• Increased performance from:
  • $6.1 million of gain on asset sales and disposals.
  • $3.4 million of 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.
  • $1.5 million of increased lease amendment revenues during the third quarter of 2019.
• Offset by decreased performance from:
  • $6.0 million of lower coal royalty revenues driven by weakened coal markets, the temporary idling of certain properties due to lessee bankruptcies and the idling of the Pinnacle mine since the fourth quarter of 2018.
  • $3.0 million of lower transportation and processing services revenues due to weakened demand for Illinois Basin coal.

The market for metallurgical coal weakened primarily due to a decline in global economic growth. The domestic market for thermal coal remained challenged by continued low natural gas prices and growing stockpiles at domestic utilities. In addition, the export market for thermal coal weakened due to a combination of lower demand from European utilities, competition from international producers and oversupply of LNG.

Approximately 60% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the three months ended September 30, 2019.

Soda Ash

Net income increased $4.8 million compared to the prior year quarter driven primarily by increased production and sales volumes and increased domestic and international sales prices.

Adjusted EBITDA, distributable cash flow and free cash flow decreased $6.1 million due to Ciner Wyoming’s distribution reduction in order to fund a capacity expansion project that is expected to improve performance of that business over the long term resulting in increased cash distributions to NRP. NRP expects to receive approximately $25 million to $28 million of annual cash distributions from Ciner Wyoming for the next two to three years.

Corporate and Financing

Net loss decreased $6.0 million primarily due to lower interest expense as a result of debt repayment.

Distributable cash flow and free cash flow increased $21.9 million primarily due to the timing of interest payments on our 2022 Senior Notes in 2018 compared to the timing of interest payments on our 2025 Senior Notes in 2019, in addition to lower interest payments on our Opco Senior Notes as a result of lower debt balances during the third quarter of 2019.

Business Outlook

Despite solid operating performance and strong liquidity, declining coal prices, lessee bankruptcies, and the distribution reduction at the Partnership’s Ciner Wyoming soda ash joint venture announced earlier in the year are expected to put downward pressure on NRP’s performance in the coming months. The Partnership expects all key performance metrics, including net income, free cash flow and cash flow cushion to be negatively impacted. However, management believes the progress made to strengthen the financial profile in recent years positions the Partnership well to operate through a sustained downturn and continue to reduce debt and make distributions to its unitholders.

Conference Call

A conference call will be held today at 10:00 a.m. ET. To join the conference call, dial (844) 583-4546 and provide the conference ID 9089977. 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 [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, plus (minus) net loss (income) attributable to non-controlling interest; plus gain on reserve swap, 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 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 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 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 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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