Natural Resource Partners L.P. Reports Fourth Quarter and Full Year 2018 Results

HOUSTON–(BUSINESS WIRE)–Natural Resource Partners L.P. (NYSE:NRP) today reported fourth
quarter and full year 2018 results as follows:

       
Three Months Ended Year Ended
December 31, December 31,

(In thousands, except per unit data)
(Unaudited)

2018   2017 2018   2017
Net income from continuing operations (1) $ 35,092 $ 28,665 $ 122,360 $ 82,485
Adjusted EBITDA (2) 72,936 54,280 230,241 211,483
Cash flow provided by (used in) continuing operations:
Operating activities 80,489 42,434 178,282 112,151
Investing activities 2,078 591 7,607 9,807
Financing activities 64,856 (136,465 ) (6,839 ) (134,149 )
Distributable cash flow (2) (3) 280,658 43,025 383,980 121,958
Free cash flow (2) 80,944 42,833 183,440 121,324

_________________________

          (1)   Includes $25.0 million from the Hillsboro litigation settlement in
the Coal Royalty and Other Segment for the three months and year
ended December 31, 2018 and $12.7 million from a royalty dispute
settlement in the Soda Ash segment for the year ended December 31,
2018.
(2) See “Non-GAAP Financial Measures” and reconciliation tables at the
end of this release.
(3) Includes net proceeds from sale of construction aggregates business
which are classified as investing cash flow from discontinued
operations.
 

“NRP ended the year delivering another robust quarter of financial
results, highlighted by the favorable Hillsboro settlement and the
successful sale of our construction aggregates business,” stated NRP’s
President and Chief Operating Officer, Craig Nunez. “We generated
significant amounts of cash from operations as we continued to see
strong demand for our metallurgical and thermal coal throughout 2018.
Additionally, the sale of our construction aggregates business for $205
million accelerated the de-levering and de-risking of our capital
structure as we used the net cash proceeds to repay $143 million of debt
to date, and plan to use the remaining proceeds to repay our Opco notes
as they amortize in 2019, all at par value. This has been a
transformative year for NRP and we are focused on continuing to position
the company for a more secure future.”

NRP’s liquidity was $306.0 million at December 31, 2018, consisting of
$101.8 million of cash, $104.2 million of cash restricted for debt
repayment ($49 million of which was used to repay Opco notes in January
2019) and $100.0 million of borrowing capacity available under its
credit facility. NRP’s consolidated Debt-to-Adjusted EBITDA ratio at
December 31, 2018 was 3.0x, down over 15% from 2017 and down over 40%
from the high of 5.3x at year-end 2015.

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 fourth
quarter of 2018. NRP’s distribution coverage ratio over the last twelve
months, excluding proceeds from sale of assets included in discontinued
operations, was 8.4x before taking into account the $30 million annual
distribution on NRP’s preferred units, and 7.1x after taking into
account the preferred unit distribution.

Fourth Quarter Segment Results (Unaudited)

    Operating Business Segments    

Coal Royalty
and Other

  Soda Ash

Corporate
and Financing

Total

(In thousands)

Three Months Ended December 31, 2018
Net income (loss) from continuing operations $ 44,487 $ 13,320 $ (22,715 ) $ 35,092
Adjusted EBITDA (1) 68,850 9,800 (5,714 ) 72,936
Cash flow provided by (used in) continuing operations:
Operating activities 80,272 9,800 (9,583 ) 80,489
Investing activities 2,078 2,078
Financing activities 64,856 64,856
Distributable cash flow (1) (2) 82,350 9,800 (9,583 ) 280,658

Free cash flow (1)

80,727 9,800 (9,583 ) 80,944
 
Three Months Ended December 31, 2017
Net income (loss) from continuing operations $ 39,642 $ 12,781 $ (23,758 ) $ 28,665
Adjusted EBITDA (1) 46,592 12,250 (4,562 ) 54,280
Cash flow provided by (used in) continuing operations:
Operating activities 45,550 12,250 (15,366 ) 42,434
Investing activities 591 591
Financing activities (136,465 ) (136,465 )
Distributable cash flow (1) 46,141 12,250 (15,366 ) 43,025

Free cash flow (1)

45,949 12,250 (15,366 ) 42,833

_________________________

          (1)   See “Non-GAAP Financial Measures” and reconciliation tables at the
end of this release.
(2)

Includes net proceeds from sale of construction aggregates
business which are classified as investing cash flow from
discontinued operations.

 

Coal Royalty and Other

Total coal production and the average coal royalty revenue per ton
remained stable compared to the prior year quarter as NRP continued to
see strong coal pricing driven by solid export demand and stable
domestic markets for metallurgical and thermal coal. Approximately 65%
of NRP’s coal royalty revenues and approximately 45% of its coal royalty
production was derived from metallurgical coal during the three months
ended December 31, 2018.

Net income and Adjusted EBITDA increased compared to the prior year
quarter primarily as a result of the $25 million Hillsboro litigation
settlement; Net income was partially offset by a $16.8 million increase
in non-cash asset impairments.

Distributable cash flow and Free cash flow increased compared to the
prior year quarter primarily as a result of the $25 million Hillsboro
litigation settlement and increased cash receipts from higher
metallurgical prices and production.

Soda Ash

Soda Ash segment operating performance was consistent with the prior
year quarter as improved international sales pricing during the fourth
quarter of 2018 was partially offset by increased freight costs.

Adjusted EBITDA, Distributable cash flow and Free cash flow decreased
$2.5 million due to lower fourth quarter cash distributions received
from Ciner Wyoming.

Corporate and Finance

Corporate and Finance segment Net income, Free cash flow and
Distributable cash flow results improved compared to the prior year
quarter primarily due to lower interest as a result of continued
repayment of debt.

Full Year Segment Results (Unaudited)

  Operating Business Segments    

Coal Royalty
and Other

  Soda Ash

Corporate
and Financing

Total

(In thousands)

Year Ended December 31, 2018
Net income (loss) from continuing operations $ 160,728 $ 48,306 $ (86,674 ) $ 122,360
Adjusted EBITDA (1) 200,187 46,550 (16,496 ) 230,241
Cash flow provided by (used in) continuing operations:
Operating activities 212,394 44,453 (78,565 ) 178,282
Investing activities 5,510 2,097 7,607
Financing activities (6,839 ) (6,839 )
Distributable cash flow (1) (2) 217,904 46,550 (78,565 ) 383,980

Free cash flow (1)

215,455 46,550 (78,565 ) 183,440
 
Year Ended December 31, 2017
Net income (loss) from continuing operations $ 154,604 $ 40,457 $ (112,576 ) $ 82,485
Adjusted EBITDA (1) 180,985 49,000 (18,502 ) 211,483
Cash flow provided by (used in) continuing operations:
Operating activities 166,138 43,354 (97,341 ) 112,151
Investing activities 4,161 5,646 9,807
Financing activities 517 (134,666 ) (134,149 )
Distributable cash flow (1) 170,299 49,000 (97,341 ) 121,958

Free cash flow (1)

169,665 49,000 (97,341 ) 121,324

_________________________

          (1)   See “Non-GAAP Financial Measures” and reconciliation tables at the
end of this release.
(2)

Includes net proceeds from sale of construction aggregates
business which are classified as investing cash flow from
discontinued operations.

 

Coal Royalty and Other

Full year 2018 total coal production remained stable and the average
coal royalty revenue per ton increased as a result of higher
metallurgical and thermal coal prices and higher metallurgical coal
production driven by solid export demand and stable domestic markets for
metallurgical and thermal coal, partially offset by lower thermal coal
production as a result of capital constraints and declining overall
demand for certain of our lessees, as well as temporary relocation of
certain production off of NRP’s coal reserves in the Illinois Basin.
Approximately 65% of NRP’s coal royalty revenues and approximately 55%
of its coal royalty production was derived from metallurgical coal
during the year ended December 31, 2018.

Net income and Adjusted EBITDA increased compared to the prior year
primarily as a result of the $25 million Hillsboro litigation
settlement; Net income was partially offset by a $15.3 million increase
in non-cash asset impairments.

Distributable cash flow and Free cash flow increased compared to the
prior year primarily as a result of the $25 million Hillsboro litigation
settlement in addition to increased cash receipts from higher
metallurgical prices and production and increased cash from other
revenues.

Soda Ash

Soda Ash segment operating performance increased compared to the prior
year primarily as a result of Ciner Wyoming’s litigation settlement of a
royalty dispute that resulted in $12.7 million of income. This increase
was partially offset by a $4.9 million decrease in income primarily due
to lower production and sales resulting from unexpected repairs during
scheduled outages and ore grade degradation.

Adjusted EBITDA, Distributable cash flow and Free cash flow decreased
$2.5 million compared to the prior year as a result of lower cash
distributions received from Ciner Wyoming in the fourth quarter of 2018.

Corporate and Finance

Corporate and Finance segment results improved compared to the prior
year primarily due to lower interest as a result of continued repayment
of debt and lower employee-related costs.

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
55454891. 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, a trona/soda
ash operation.

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, 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

“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 excluding discontinued operations and
one-time beneficial items less 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.

“Net income attributable to common unitholders excluding
discontinued operations and one-time beneficial items”
is a non-GAAP
financial measure that we define as Net income attributable to NRP less
gain on litigation settlements, income from discontinued operations,
income attributable to preferred unitholders and Net income attributable
to the general partner excluding discontinued operations and one-time
beneficial items. Net income attributable to common unitholders
excluding discontinued operations and one-time beneficial items 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 Net
income attributable to common unitholders excluding discontinued
operations and one-time beneficial items is useful in evaluating our
financial performance because litigation settlements are one-time
charges, gains on asset sales are not related to the operations of our
business and income attributable to preferred unitholders and the
general partner are unrelated to common unitholders. Excluding these
from net income allows us to better compare results from ongoing
operations attributable to common unitholders period-over-period.

“Return on capital employed” or “ROCE” is
a non-GAAP financial measure that we define as Net income from
continuing operations plus interest expense 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, Reconciliation of Non-GAAP Measures and Recap
of Metrics Follow-

 

Natural Resource Partners L.P.

Financial Tables

(Unaudited)

 
Consolidated Statements of Comprehensive Income
 
    Three Months Ended     Year Ended
December 31,   September 30, December 31,

(In thousands, except per unit data)

2018   2017 2018 2018   2017
Revenues and other income
Coal royalty and other $ 43,966 $ 47,130 $ 42,459 $ 178,394 $ 158,399
Coal royalty and other—affiliates 223 59 484 23,402
Transportation and processing services 6,649 4,793 6,853 23,887 14,510
Transportation and processing services—affiliates 6,012
Equity in earnings of Ciner Wyoming 13,320 12,781 8,836 48,306 40,457
Gain on litigation settlement 25,000 25,000
Gain on asset sales, net 1,622   178     2,441   3,545  
Total revenues and other income $ 90,557 $ 65,105 $ 58,207 $ 278,512 $ 246,325
Operating expenses
Operating and maintenance expenses $ 4,941 $ 3,479 $ 4,650 $ 17,894 $ 16,771
Operating and maintenance expenses—affiliates 3,446 2,253 2,140 11,615 8,112
Depreciation, depletion and amortization 6,325 5,761 4,888 21,689 22,406
Amortization expense—affiliate 1,008
General and administrative 4,770 2,756 2,249 12,838 13,513
General and administrative—affiliates 944 1,806 934 3,658 4,989
Asset impairments 18,038   1,189     18,280   2,967  
Total operating expenses $ 38,464 $ 17,244 $ 14,861 $ 85,974 $ 69,766
Income from operations $ 52,093 $ 47,861 $ 43,346 $ 192,538 $ 176,559
Other expense, net
Interest expense, net $ (17,001 ) $ (19,196 ) $ (17,493 ) $ (70,178 ) $ (82,028 )
Debt modification expense (7,939 )
Loss on extinguishment of debt         (4,107 )
Total other expense, net $ (17,001 ) $ (19,196 ) $ (17,493 ) $ (70,178 ) $ (94,074 )
Net income from continuing operations $ 35,092 $ 28,665 $ 25,853 $ 122,360 $ 82,485
Income from discontinued operations 13,966   2,042   2,688   17,687   6,182  
Net income $ 49,058 $ 30,707 $ 28,541 $ 140,047 $ 88,667
Net loss (income) attributable to non-controlling interest     359   (510 )  
Net income attributable to NRP $ 49,058 $ 30,707 $ 28,900 $ 139,537 $ 88,667
Less: income attributable to preferred unitholders (7,500 ) (7,765 ) (7,500 ) (30,000 ) (25,453 )
Net income attributable to common unitholders and general partner $ 41,558 $ 22,942 $ 21,400 $ 109,537 $ 63,214
Net income attributable to common unitholders $ 40,727 $ 22,483 $ 20,972 $ 107,346 $ 61,950
Net income attributable to the general partner $ 831 $ 459 $ 428 $ 2,191 $ 1,264
Income from continuing operations per common unit
Basic $ 2.21 $ 1.67 $ 1.50 $ 7.35 $ 4.57
Diluted $ 1.69 $ 1.18 $ 1.18 $ 5.90 $ 3.68
Net income per common unit
Basic $ 3.33 $ 1.84 $ 1.71 $ 8.77 $ 5.06
Diluted $ 2.36 $ 1.26 $ 1.30 $ 6.76 $ 3.96
 
Net income $ 49,058 $ 30,707 $ 28,541 $ 140,047 $ 88,667
Comprehensive income (loss) from unconsolidated investment and other 619   (234 ) 791   (149 ) (1,647 )
Comprehensive income $ 49,677 $ 30,473 $ 29,332 $ 139,898 $ 87,020
Comprehensive loss (income) attributable to non-controlling interest     359   (510 )  
Comprehensive income attributable to NRP $ 49,677   $ 30,473   $ 29,691   $ 139,388   $ 87,020  

Contacts

Tiffany Sammis, 713-751-7515
[email protected]

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