UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
| Washington, D.C. 20549 | ||
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||||
For the quarterly period ended March 31, 2022 or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||||||
| Commission file number: | | |||||||||||||
| (Exact name of registrant as specified in its charter) | |||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices)
(Zip Code)
(713 ) 751-7507
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of "accelerated filer", "large accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | ☒ | ||||||||||||
| Non-accelerated Filer | ☐ (Do not check if a smaller reporting company) | Smaller Reporting Company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
NATURAL RESOURCE PARTNERS, L.P.
TABLE OF CONTENTS
| Page | ||||||||
i
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | ||||||||||
| (In thousands, except unit data) | 2022 | 2021 | |||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Other current assets, net | |||||||||||
| Total current assets | $ | $ | |||||||||
| Land | |||||||||||
| Mineral rights, net | |||||||||||
| Intangible assets, net | |||||||||||
| Equity in unconsolidated investment | |||||||||||
| Long-term contract receivable, net | |||||||||||
| Other long-term assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND CAPITAL | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Accrued interest | |||||||||||
| Current portion of deferred revenue | |||||||||||
| Current portion of long-term debt, net | |||||||||||
| Total current liabilities | $ | $ | |||||||||
| Deferred revenue | |||||||||||
| Long-term debt, net | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | $ | $ | |||||||||
| Commitments and contingencies (see Note 12) | |||||||||||
Class A Convertible Preferred Units ( | $ | $ | |||||||||
| Partners’ capital | |||||||||||
Common unitholders’ interest ( | $ | $ | |||||||||
| General partner’s interest | |||||||||||
| Warrant holders’ interest | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Total partners’ capital | $ | $ | |||||||||
| Total liabilities and partners' capital | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| (In thousands, except per unit data) | 2022 | 2021 | |||||||||
| Revenues and other income | |||||||||||
| Royalty and other mineral rights | $ | $ | |||||||||
| Transportation and processing services | |||||||||||
| Equity in earnings of Sisecam Wyoming | |||||||||||
| Gain on asset sales and disposals | |||||||||||
| Total revenues and other income | $ | $ | |||||||||
| Operating expenses | |||||||||||
| Operating and maintenance expenses | $ | $ | |||||||||
| Depreciation, depletion and amortization | |||||||||||
| General and administrative expenses | |||||||||||
| Asset impairments | |||||||||||
| Total operating expenses | $ | $ | |||||||||
| Income from operations | $ | $ | |||||||||
| Interest expense, net | $ | ( | $ | ( | |||||||
| Net income | $ | $ | |||||||||
| Less: income attributable to preferred unitholders | ( | ( | |||||||||
| Net income attributable to common unitholders and the general partner | $ | $ | |||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
| Net income attributable to the general partner | |||||||||||
| Net income per common unit (see Note 4) | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | |||||||||||
| Net income | $ | $ | |||||||||
| Comprehensive income from unconsolidated investment and other | |||||||||||
| Comprehensive income | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(Unaudited)
| Common Unitholders | General Partner | Warrant Holders | Accumulated Other Comprehensive Income | Total Partners' Capital | |||||||||||||||||||||||||||||||
| (In thousands) | Units | Amounts | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Net income (1) | — | — | — | ||||||||||||||||||||||||||||||||
| Distributions to common unitholders and the general partner | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Distributions to preferred unitholders | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of unit-based awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Unit-based awards amortization and vesting, net | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||
| Capital contribution | — | — | — | — | |||||||||||||||||||||||||||||||
| Comprehensive income from unconsolidated investment and other | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
(1)Net income includes $7.5 million of income attributable to preferred unitholders that accumulated during the period, of which $7.4 million is allocated to the common unitholders and $0.2 million is allocated to the general partner.
| Common Unitholders | General Partner | Warrant Holders | Accumulated Other Comprehensive Income | Total Partners' Capital | |||||||||||||||||||||||||||||||
| (In thousands) | Units | Amounts | |||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Net income (1) | — | — | — | ||||||||||||||||||||||||||||||||
| Distributions to common unitholders and the general partner | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Distributions to preferred unitholders | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of unit-based awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Unit-based awards amortization and vesting, net | — | — | — | — | |||||||||||||||||||||||||||||||
| Capital contribution | — | — | — | — | |||||||||||||||||||||||||||||||
| Comprehensive income from unconsolidated investment and other | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
(1)Net income includes $7.7 million of income attributable to preferred unitholders that accumulated during the period, of which $7.6 million is allocated to the common unitholders and $0.2 million is allocated to the general partner.
The accompanying notes are an integral part of these consolidated financial statements.
3
| For the Three Months Ended March 31, | |||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: | |||||||||||
| Depreciation, depletion and amortization | |||||||||||
| Distributions from unconsolidated investment | |||||||||||
| Equity earnings from unconsolidated investment | ( | ( | |||||||||
| Gain on asset sales and disposals | ( | ||||||||||
| Asset impairments | |||||||||||
| Bad debt expense | |||||||||||
| Unit-based compensation expense | |||||||||||
| Amortization of debt issuance costs and other | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued liabilities | ( | ( | |||||||||
| Accrued interest | |||||||||||
| Deferred revenue | ( | ( | |||||||||
| Other items, net | ( | ||||||||||
| Net cash provided by operating activities | $ | $ | |||||||||
| Cash flows from investing activities | |||||||||||
| Proceeds from asset sales and disposals | $ | $ | |||||||||
| Return of long-term contract receivable | |||||||||||
| Net cash provided by investing activities | $ | $ | |||||||||
| Cash flows from financing activities | |||||||||||
| Debt repayments | $ | ( | $ | ( | |||||||
| Distributions to common unitholders and the general partner | ( | ( | |||||||||
| Distributions to preferred unitholders | ( | ( | |||||||||
| Redemption of preferred units paid-in-kind | ( | ||||||||||
| Other items | ( | ( | |||||||||
| Net cash used in financing activities | $ | ( | $ | ( | |||||||
| Net increase (decrease) in cash and cash equivalents | $ | $ | ( | ||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Non-cash investing and financing activities: | |||||||||||
| Plant, equipment, mineral rights and other funded with accounts payable or accrued liabilities | $ | $ | |||||||||
| Preferred unit distributions paid-in-kind | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Nature of Business
Natural Resource Partners L.P. (the "Partnership") engages principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and owns a non-controlling 49 % interest in Sisecam Wyoming LLC ("Sisecam Wyoming"), a trona ore mining and soda ash production business. The Partnership is organized into two operating segments further described in Note 5. Segment Information. As used in these Notes to Consolidated Financial Statements, the terms "NRP," "we," "us" and "our" refer to Natural Resource Partners L.P. and its subsidiaries, unless otherwise stated or indicated by context.
Principles of Consolidation and Reporting
The accompanying unaudited Consolidated Financial Statements of the Partnership have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2021 and notes thereto included in the Partnership's Annual Report on Form 10-K, which was filed with the SEC on March 15, 2022. Certain reclassifications have been made to prior year amounts in the Notes to Consolidated Financial Statements to conform with current year presentation. These reclassifications had no impact on previously reported total assets, total liabilities, partners' capital, net income or cash flows from operating, investing or financing activities.
2. Revenues from Contracts with Customers
The following table presents the Partnership's Mineral Rights segment revenues by major source:
| For the Three Months Ended March 31, | ||||||||||||||
| (In thousands) | 2022 | 2021 | ||||||||||||
| Coal royalty revenues | $ | $ | ||||||||||||
| Production lease minimum revenues | ||||||||||||||
| Minimum lease straight-line revenues | ||||||||||||||
| Property tax revenues | ||||||||||||||
| Wheelage revenues | ||||||||||||||
| Coal overriding royalty revenues | ||||||||||||||
| Lease amendment revenues | ||||||||||||||
| Aggregates royalty revenues | ||||||||||||||
| Oil and gas royalty revenues | ||||||||||||||
| Other revenues | ||||||||||||||
| Royalty and other mineral rights revenues | $ | $ | ||||||||||||
Transportation and processing services revenues (1) | ||||||||||||||
| Total Mineral Rights segment revenues | $ | $ | ||||||||||||
5
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table details the Partnership's Mineral Rights segment receivables and liabilities resulting from contracts with customers:
| March 31, | December 31, | |||||||||||||
| (In thousands) | 2022 | 2021 | ||||||||||||
| Receivables | ||||||||||||||
| Accounts receivable, net | $ | $ | ||||||||||||
Other current assets, net (1) | ||||||||||||||
Other long-term assets, net (2) | ||||||||||||||
| Contract liabilities | ||||||||||||||
| Current portion of deferred revenue | $ | $ | ||||||||||||
| Deferred revenue | ||||||||||||||
(1)Other current assets, net includes short-term notes receivables from contracts with customers.
(2)Other long-term assets, net includes long-term lease amendment fee receivables from contracts with customers.
The following table shows the activity related to the Partnership's Mineral Rights segment deferred revenue:
| For the Three Months Ended March 31, | ||||||||||||||
| (In thousands) | 2022 | 2021 | ||||||||||||
| Balance at beginning of period (current and non-current) | $ | $ | ||||||||||||
| Increase due to minimums and lease amendment fees | ||||||||||||||
| Recognition of previously deferred revenue | ( | ( | ||||||||||||
| Balance at end of period (current and non-current) | $ | $ | ||||||||||||
The Partnership's non-cancelable annual minimum payments due under the lease terms of its coal and aggregates royalty leases are as follows as of March 31, 2022 (in thousands):
Lease Term (1) | Weighted Average Remaining Years | Annual Minimum Payments | ||||||||||||
| 0 - 5 years | $ | |||||||||||||
| 5 - 10 years | ||||||||||||||
| 10+ years | ||||||||||||||
| Total | $ | |||||||||||||
(1)Lease term does not include renewal periods.
3. Common and Preferred Unit Distributions
The Partnership makes cash distributions to common and preferred unitholders on a quarterly basis, subject to approval by the Board of Directors of GP Natural Resource Partners LLC (the "Board of Directors"). NRP recognizes both common unit and preferred unit distributions on the date the distribution is declared.
Distributions made on the common units and the general partner's general partner ("GP") interest are made on a pro-rata basis in accordance with their relative percentage interests in the Partnership. The general partner is entitled to receive 2 % of such distributions.
Income available to common unitholders and the general partner is reduced by preferred unit distributions that accumulated during the period. NRP reduced net income available to common unitholders and the general partner by $7.5 million and $7.7 million during the three months ended March 31, 2022 and 2021, respectively, as a result of accumulated preferred unit distributions earned during the period.
6
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table shows the cash distributions declared and paid to common and preferred unitholders during the three months ended March 31, 2022 and 2021, respectively:
| Cash Distributions | Paid-in-kind Distributions | |||||||||||||||||||||||||||||||||||||
| Common Units | Preferred Units | |||||||||||||||||||||||||||||||||||||
| Month Paid | Period Covered by Distribution | Distribution per Unit | Total Distribution (1) (In thousands) | Distribution per Unit | Total Distribution (In thousands) | Total Distribution (In units) | ||||||||||||||||||||||||||||||||
| 2022 | ||||||||||||||||||||||||||||||||||||||
| February 2022 | October 1 - December 31, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| 2021 | ||||||||||||||||||||||||||||||||||||||
| February 2021 | October 1 - December 31, 2020 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
(1)Totals include the amount paid to NRP's general partner in accordance with the general partner's 2 % general partner interest.
4. Net Income Per Common Unit
Basic net income per common unit is computed by dividing net income, after considering income attributable to preferred unitholders and the general partner’s general partner interest, by the weighted average number of common units outstanding. Diluted net income per common unit includes the effect of NRP's preferred units, warrants, and unvested unit-based awards if the inclusion of these items is dilutive.
The dilutive effect of the preferred units is calculated using the if-converted method. Under the if-converted method, the preferred units are assumed to be converted at the beginning of the period, and the resulting common units are included in the denominator of the diluted net income per unit calculation for the period being presented. Distributions declared in the period and undeclared distributions on the preferred units that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. The calculation of diluted net income per common unit for the three months ended March 31, 2022 includes the assumed conversion of the preferred units. The calculation of diluted net income per common unit for the three months ended March 31, 2021 does not include the assumed conversion of the preferred units because the impact would have been anti-dilutive.
The dilutive effect of the warrants is calculated using the treasury stock method, which assumes that the proceeds from the exercise of these instruments are used to purchase common units at the average market price for the period. The calculation of diluted net income per common unit for the three months ended March 31, 2022 includes the net settlement of warrants to purchase 0.75 million common units at a strike price of $22.81 and the net settlement of warrants to purchase 2.25 million common units with a strike price of $34.00 whereas the calculation of diluted net income per common unit for the three months ended March 31, 2021 does not include the net settlement of warrants to purchase 1.75 million common units at a strike price of $22.81 or the net settlement of warrants to purchase 2.25 million common units with a strike price of $34.00 because the impact would have been anti-dilutive.
7
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following tables reconcile the numerator and denominator of the basic and diluted net income per common unit computations and calculates basic and diluted net income per common unit:
| For the Three Months Ended March 31, | |||||||||||
| (In thousands, except per unit data) | 2022 | 2021 | |||||||||
| Allocation of net income | |||||||||||
| Net income | $ | $ | |||||||||
| Less: income attributable to preferred unitholders | ( | ( | |||||||||
| Net income attributable to common unitholders and the general partner | $ | $ | |||||||||
| Less: net income attributable to the general partner | ( | ( | |||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
| Basic net income per common unit | |||||||||||
| Weighted average common units—basic | |||||||||||
| Basic net income per common unit | $ | $ | |||||||||
| Diluted net income per common unit | |||||||||||
| Weighted average common units—basic | |||||||||||
| Plus: dilutive effect of preferred units | |||||||||||
| Plus: dilutive effect of warrants | |||||||||||
| Plus: dilutive effect of unvested unit-based awards | |||||||||||
| Weighted average common units—diluted | |||||||||||
| Net income | $ | $ | |||||||||
| Less: income attributable to preferred unitholders | ( | ||||||||||
| Diluted net income attributable to common unitholders and the general partner | $ | $ | |||||||||
| Less: diluted net income attributable to the general partner | ( | ( | |||||||||
| Diluted net income attributable to common unitholders | $ | $ | |||||||||
| Diluted net income per common unit | $ | $ | |||||||||
8
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
5. Segment Information
The Partnership's segments are strategic business units that offer distinct products and services to different customers in different geographies within the U.S. and that are managed accordingly. NRP has the following two operating segments:
Mineral Rights—consists of mineral interests and other subsurface rights across the United States. NRP's ownership provides critical inputs for the manufacturing of steel, electricity and basic building materials, as well as opportunities for carbon sequestration and renewable energy. The Partnership is working to strategically redefine its business as a key player in the transitional energy economy in the years to come.
Soda Ash—consists of the Partnership's 49 % non-controlling equity interest in Sisecam Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin of Wyoming. Sisecam Wyoming mines trona and processes it into soda ash that is sold both domestically and internationally to the glass and chemicals industries.
Direct segment costs and certain other costs incurred at the corporate level that are identifiable and that benefit the Partnership's segments are allocated to the operating segments accordingly. These allocated costs generally include salaries and benefits, insurance, property taxes, legal, royalty, information technology and shared facilities services and are included in operating and maintenance expenses on the Partnership's Consolidated Statements of Comprehensive Income.
Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment and are included in general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.
The following table summarizes certain financial information for each of the Partnership's business segments:
| Operating Segments | ||||||||||||||||||||||||||
| (In thousands) | Mineral Rights | Soda Ash | Corporate and Financing | Total | ||||||||||||||||||||||
| For the Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating and maintenance expenses | ||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||||
| Asset impairments | ||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Net income (loss) | ( | |||||||||||||||||||||||||
| For the Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Gain on asset sales and disposals | ||||||||||||||||||||||||||
| Operating and maintenance expenses | ||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||||
| Asset impairments | ||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Net income (loss) | ( | |||||||||||||||||||||||||
9
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
6. Equity Investment
The Partnership accounts for its 49 % investment in Sisecam Wyoming using the equity method of accounting. Activity related to this investment is as follows:
| For the Three Months Ended March 31, | |||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Income allocation to NRP’s equity interests | |||||||||||
| Amortization of basis difference | ( | ( | |||||||||
| Other comprehensive income | |||||||||||
| Distribution | ( | ( | |||||||||
| Balance at end of period | $ | $ | |||||||||
The following table represents summarized financial information for Sisecam Wyoming as derived from their respective unaudited financial statements for the three months ended March 31, 2022 and 2021:
| For the Three Months Ended March 31, | |||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| Net sales | $ | $ | |||||||||
| Gross profit | |||||||||||
| Net income | |||||||||||
7. Mineral Rights, Net
The Partnership’s mineral rights consist of the following:
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In thousands) | Carrying Value | Accumulated Depletion | Net Book Value | Carrying Value | Accumulated Depletion | Net Book Value | |||||||||||||||||||||||||||||
| Coal properties | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Aggregates properties | ( | ( | |||||||||||||||||||||||||||||||||
| Oil and gas royalty properties | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||
| Total mineral rights, net | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Depletion expense related to the Partnership’s mineral rights is included in depreciation, depletion and amortization on its Consolidated Statements of Comprehensive Income and totaled $3.7 million and $4.7 million for the three months ended March 31, 2022 and 2021, respectively.
During the three ended March 31, 2022, the Partnership recorded $0.02 million of impairment expense. During the three months ended March 31, 2021, the Partnership recorded $4.0 million of expense primarily due to a lease termination that resulted in the full impairment of a coal property. The Partnership has developed procedures to evaluate its long-lived assets for possible impairment periodically or whenever events or changes in circumstances indicate an asset's net book value may not be recoverable. Potential events or circumstances include, but are not limited to, specific events such as a reduction in economically recoverable reserves or production ceasing on a property for an extended period. This analysis is based on historic, current and future performance and considers both quantitative and qualitative information. While the Partnership's impairment evaluation as of March 31, 2022 incorporated an estimated impact of the global COVID-19 pandemic, there is significant uncertainty as to the severity and duration of this disruption. If the impact is worse than current estimates, an additional impairment charge may be recognized in future periods.
10
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
8. Debt, Net
The Partnership's debt consists of the following:
| March 31, | December 31, | ||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| NRP LP debt: | |||||||||||
| $ | $ | ||||||||||
| Opco debt: | |||||||||||
| Revolving credit facility | $ | $ | |||||||||
| Senior Notes | |||||||||||
| $ | $ | ||||||||||
| Total Opco Senior Notes | $ | $ | |||||||||
| Total debt at face value | $ | $ | |||||||||
| Net unamortized debt issuance costs | ( | ( | |||||||||
| Total debt, net | $ | $ | |||||||||
| Less: current portion of long-term debt | ( | ( | |||||||||
| Total long-term debt, net | $ | $ | |||||||||
NRP LP Debt
2025 Senior Notes
The 2025 Senior Notes were issued under an Indenture dated as of April 29, 2019 (the "2025 Indenture"), bear interest at 9.125 % per year and mature on June 30, 2025. Interest is payable semi-annually on June 30 and December 30. NRP and NRP Finance have the option to redeem the 2025 Senior Notes, in whole or in part, at any time on or after October 30, 2021, at the redemption prices (expressed as percentages of principal amount) of 104.563 % for the 12-month period beginning October 30, 2021, 102.281 % for the 12-month period beginning October 30, 2022, and thereafter at 100.000 %, together, in each case, with any accrued and unpaid interest to the date of redemption. Furthermore, before October 30, 2021, NRP may on any one or more occasions redeem up to 35 % of the aggregate principal amount of the 2025 Senior Notes with the net proceeds of certain public or private equity offerings at a redemption price of 109.125 % of the principal amount of 2025 Senior Notes, plus any accrued and unpaid interest, if any, to the date of redemption, if at least 65 % of the aggregate principal amount of the 2025 Senior Notes issued under the 2025 Indenture remains outstanding immediately after such redemption and the redemption occurs within 180 days of the closing date of such equity offering. In the event of a change of control, as defined in the 2025 Indenture, the holders of the 2025 Senior Notes may require us to purchase their 2025 Senior Notes at a purchase price equal to 101 % of the principal amount of the 2025 Senior Notes, plus accrued and unpaid interest, if any. The 2025 Senior Notes were issued at par.
11
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The 2025 Senior Notes are the senior unsecured obligations of NRP and NRP Finance. The 2025 Senior Notes rank equal in right of payment to all existing and future senior unsecured debt of NRP and NRP Finance and senior in right of payment to any of NRP's subordinated debt. The 2025 Senior Notes are effectively subordinated in right of payment to all future secured debt of NRP and NRP Finance to the extent of the value of the collateral securing such indebtedness and are structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries, including the Opco Credit Facility and each series of Opco’s existing senior notes. "Opco" refers to NRP (Operating) LLC, a wholly owned subsidiary of NRP, and its subsidiaries. None of NRP's subsidiaries guarantee the 2025 Senior Notes. As of March 31, 2022 and December 31, 2021, NRP and NRP Finance were in compliance with the terms of the Indenture relating to their 2025 Senior Notes.
Opco Debt
All of Opco’s debt is guaranteed by its wholly owned subsidiaries and is secured by certain of the assets of Opco and its wholly owned subsidiaries, other than BRP LLC and NRP Trona LLC. As of March 31, 2022 and December 31, 2021, Opco was in compliance with the terms of the financial covenants contained in its debt agreements.
Opco Credit Facility
In April 2019, the Partnership entered into the Fourth Amendment (the “Fourth Amendment”) to the Opco Credit Facility (the "Opco Credit Facility"). The Fourth Amendment extended the term of the Opco Credit Facility until April 2023. Lender commitments under the Opco Credit Facility remain at $100.0
•A leverage ratio of consolidated indebtedness to EBITDDA (as defined in the Opco Credit Facility) not to exceed 4.0 x; provided, however, that if the Partnership increases its quarterly distribution to its common unitholders above $0.45 per common unit, the maximum leverage ratio under the Opco Credit Facility will permanently decrease from 4.0 x to 3.0 x; and
•a fixed charge coverage ratio of consolidated EBITDDA to consolidated fixed charges (consisting of consolidated interest expense and consolidated lease expense) of not less than 3.5 to 1.0.
During the three months ended March 31, 2022 and 2021, the Partnership did not have any borrowings outstanding under the Opco Credit Facility and had $100.0
The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of $341.7 million and $345.0 million classified as mineral rights, net and other long-term assets, net on the Partnership’s Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021, respectively.
Opco Senior Notes
Opco has issued several series of private placement senior notes (the "Opco Senior Notes") with various interest rates and principal due dates. As of March 31, 2022 and December 31, 2021, the Opco Senior Notes had cumulative principal balances of $121.8 million and $138.5 million, respectively. Opco made mandatory principal payments of $16.7
The 8.92 % Opco Senior Notes also provides that in the event that Opco’s leverage ratio of consolidated indebtedness to consolidated EBITDDA (as defined in the Note Purchase Agreements) exceeds 3.75 to 1.00 at the end of any fiscal quarter, then in addition to all other interest accruing on these notes, additional interest in the amount of 2.00 % per annum shall accrue on the notes for the two succeeding quarters and for as long thereafter as the leverage ratio remains above 3.75 to 1.00. Opco has not exceeded the 3.75 to 1.00 ratio at the end of any fiscal quarter through March 31, 2022.
12
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
9. Fair Value Measurements
Fair Value of Financial Assets and Liabilities
The Partnership’s financial assets and liabilities consist of cash and cash equivalents, a contract receivable and debt. The carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to their short-term nature. The Partnership uses available market data and valuation methodologies to estimate the fair value of its debt and contract receivable.
The following table shows the carrying value and estimated fair value of the Partnership's debt and contract receivable:
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||
| (In thousands) | Fair Value Hierarchy Level | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | ||||||||||||||||||||||||
| Debt: | |||||||||||||||||||||||||||||
| NRP 2025 Senior Notes | 1 | $ | $ | $ | $ | ||||||||||||||||||||||||
Opco Senior Notes (1) | 3 | ||||||||||||||||||||||||||||
| Opco Credit Facility | 3 | ||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
Contract receivable, net (current and long-term) (2) | 3 | $ | $ | $ | $ | ||||||||||||||||||||||||
(1)The fair value of the Opco Senior Notes are estimated by management using quotations obtained for the NRP 2025 Senior Notes on the closing trading prices near period end, which were at 102 % and 100 % of par value at March 31, 2022 and December 31, 2021, respectively.
10. Related Party Transactions
Affiliates of our General Partner
The Partnership’s general partner does not receive any management fee or other compensation for its management of NRP. However, in accordance with the partnership agreement, the general partner and its affiliates are reimbursed for services provided to the Partnership and for expenses incurred on the Partnership’s behalf. Employees of Quintana Minerals Corporation ("QMC") and Western Pocahontas Properties Limited Partnership ("WPPLP"), affiliates of the Partnership, provide their services to manage the Partnership's business. QMC and WPPLP charge the Partnership the portion of their employee salary and benefits costs related to their employee services provided to NRP. These QMC and WPPLP employee management service costs are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income. NRP also reimburses overhead costs incurred by its affiliates, including Quintana Infrastructure Development ("QID"), to manage the Partnership's business. These overhead costs include certain rent, information technology, administration of employee benefits and other corporate services incurred by or on behalf of the Partnership’s general partner and its affiliates and are presented as operating and maintenance expenses and general and administrative expenses on the Partnership's Consolidated Statements of Comprehensive Income.
13
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Direct general and administrative expenses charged to the Partnership by QMC, WPPLP and QID are included on the Partnership's Consolidated Statement of Comprehensive Income as follows:
| For the Three Months Ended March 31, | |||||||||||
| (In thousands) | 2022 | 2021 | |||||||||
| Operating and maintenance expenses | $ | $ | |||||||||
| General and administrative expenses | |||||||||||
The Partnership had accounts payable on its Consolidated Balance Sheets of $0.4 0.8 million and $0.9 million to WPPLP at March 31, 2022 and December 31, 2021, respectively.
During the three months ended March 31, 2022 and 2021, the Partnership recognized $1.6 million and $0.2 million, respectively, in operating and maintenance expenses on its Consolidated Statements of Comprehensive Income related to an overriding royalty agreement with WPPLP.
Corbin J. Robertson, Jr. owns 85 % of the general partner of Great Northern Properties Limited Partnership ("GNP"), a privately held company primarily engaged in owning and managing mineral properties and surface leases. As of March 31, 2022 and December 31, 2021 the Partnership had $0.0 million and $0.1 million, respectively, of accounts receivable from GNP included in accounts receivable, net on its Consolidated Balance Sheets related to amounts collected for surface leases that belong to NRP.
11. Major Customers
Revenues from customers that exceeded 10 percent of total revenues for any of the periods presented below are as follows:
| For the Three Months Ended March 31, | ||||||||||||||||||||||||||