10-Q 1 nrp20220930_10q.htm FORM 10-Q nrp20220930_10q.htm
0001171486 NATURAL RESOURCE PARTNERS LP false --12-31 Q3 2022 12,505,996 250,000 250,000 269,321 269,321 1,000 1,000 1,850 1,850 12,505,996 12,505,996 12,351,306 12,351,306 0 0 0 2 0.9 9.125 9.125 5.55 5.55 4.73 4.73 5.82 5.82 8.92 8.92 5.03 5.03 5.18 5.18 0 3.0 19.1 19.1 3.75 3.75 15 0 0.4 Lease term does not include renewal periods. Revenues from Foresight in 2021 were fixed as a result of the lease amendment the Partnership entered into with Foresight pursuant to which Foresight agreed to pay NRP fixed cash payments to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between the Partnership and Foresight. Revenues from Foresight in 2022 represent traditional royalty and minimum payments. Other current assets, net includes short-term notes receivables from contracts with customers. Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $4.9 million and $1.2 million for the three months ended September 30, 2022 and 2021, respectively, and $12.9 million and $3.7 million for the nine months ended September 30, 2022 and 2021, respectively. The remaining transportation and processing services revenues of $1.1 million and $0.9 million for the three months ended September 30, 2022 and 2021, respectively, and $2.5 million and $2.8 million for the nine months ended September 30, 2022 and 2021, respectively, related to other NRP-owned infrastructure leased to and operated by third-party operators accounted for under other guidance. See Note 14. Financing Transaction for more information. Revenues from Foresight and Alpha Metallurgical Resources, Inc. are included within the Partnership's Mineral Rights segment. 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. Other long-term assets, net includes long-term lease amendment fee receivables from contracts with customers. Included within carbon neutral initiative revenues are payments that are recognized at a point in time upon satisfaction of NRP's performance obligation. Totals include the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest. Net income includes $8.0 million of income attributable to preferred unitholders that accumulated during the period, of which $7.8 million is allocated to the common unitholders and $0.2 million is allocated to the general partner. 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. Net income includes $7.8 million of income attributable to preferred unitholders that accumulated during the period, of which $7.7 million is allocated to the common unitholders and $0.2 million is allocated to the general partner. The fair value of the Partnership's contract receivable is determined based on the present value of future cash flow projections related to the underlying asset at a discount rate of 15% at September 30, 2022 and December 31, 2021. 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 September 30, 2022 and December 31, 2021, respectively. 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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 September 30, 2022 or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     
  

Commission file number:

 001-31465

 

nrp20220630_10qimg001.jpg

NATURAL RESOURCE PARTNERS LP

 

(Exact name of registrant as specified in its charter)

 

 

Delaware

35-2164875

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1415 Louisiana Street, Suite 2400

Houston, Texas 77002

(Address of principal executive offices)

(Zip Code)

(713) 751-7507

(Registrants 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

Common Units representing limited partner interests

 

NRP

 

New York Stock Exchange

 

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 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

Accelerated Filer

 

Non-accelerated Filer

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

Part I. Financial Information

Item 1.

Consolidated Financial Statements

 
 

Consolidated Balance Sheets

1

 

Consolidated Statements of Comprehensive Income

2

 

Consolidated Statements of Partners Capital

3

 

Consolidated Statements of Cash Flows

5

 

Notes to Consolidated Financial Statements

6

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

Part II. Other Information

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

28

 

Signatures

29

 

 

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED BALANCE SHEETS

 

  

September 30,

  

December 31,

 

(In thousands, except unit data)

 

2022

  

2021

 
  

(Unaudited)

     

ASSETS

        

Current assets

        

Cash and cash equivalents

 $60,937  $135,520 

Accounts receivable, net

  34,726   24,538 

Other current assets, net

  1,228   2,723 

Total current assets

 $96,891  $162,781 

Land

  24,008   24,008 

Mineral rights, net

  421,351   437,697 

Intangible assets, net

  15,168   16,130 

Equity in unconsolidated investment

  284,806   276,004 

Long-term contract receivable, net

  29,570   31,371 

Other long-term assets, net

  7,216   5,832 

Total assets

 $879,010  $953,823 

LIABILITIES AND CAPITAL

        

Current liabilities

        

Accounts payable

 $2,179  $1,956 

Accrued liabilities

  5,913   10,297 

Accrued interest

  4,227   1,213 

Current portion of deferred revenue

  8,886   11,817 

Current portion of long-term debt, net

  89,989   39,102 

Total current liabilities

 $111,194  $64,385 

Deferred revenue

  35,882   50,045 

Long-term debt, net

  148,734   394,443 

Other non-current liabilities

  5,231   5,018 

Total liabilities

 $301,041  $513,891 

Commitments and contingencies (see Note 12)

          

Class A Convertible Preferred Units (250,000 and 269,321 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively, at $1,000 par value per unit; liquidation preference of $1,850 per unit at September 30, 2022 and December 31, 2021)

 $164,587  $183,908 

Partners’ capital

        

Common unitholders’ interest (12,505,996 and 12,351,306 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively)

 $358,332  $203,062 

General partner’s interest

  5,054   1,787 

Warrant holders’ interest

  47,964   47,964 

Accumulated other comprehensive income

  2,032   3,211 

Total partners’ capital

 $413,382  $256,024 

Total liabilities and partners' capital

 $879,010  $953,823 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

  

For the Three Months Ended September 30,

  

For the Nine Months Ended September 30,

 

(In thousands, except per unit data)

 

2022

  

2021

  

2022

  

2021

 

Revenues and other income

                

Royalty and other mineral rights

 $81,379  $47,884  $231,795  $114,422 

Transportation and processing services

  5,969   2,171   15,377   6,545 

Equity in earnings of Sisecam Wyoming

  14,556   6,672   44,036   11,246 

Gain on asset sales and disposals

  354   68   699   243 

Total revenues and other income

 $102,258  $56,795  $291,907  $132,456 
                 

Operating expenses

                

Operating and maintenance expenses

 $7,898  $8,354  $25,989  $19,076 

Depreciation, depletion and amortization

  6,850   5,182   16,565   15,145 

General and administrative expenses

  4,518   4,052   14,037   11,550 

Asset impairments

  812   57   874   4,116 

Total operating expenses

 $20,078  $17,645  $57,465  $49,887 
                 

Income from operations

 $82,180  $39,150  $234,442  $82,569 
                 

Other expenses, net

                

Interest expense, net

 $(5,141) $(9,652) $(22,636) $(29,308)

Loss on extinguishment of debt

  (2,484)     (6,532)   

Total other expenses, net

 $(7,625) $(9,652) $(29,168) $(29,308)
                 

Net income

 $74,555  $29,498  $205,274  $53,261 

Less: income attributable to preferred unitholders

  (7,500)  (7,961)  (22,500)  (23,530)

Net income attributable to common unitholders and the general partner

 $67,055  $21,537  $182,774  $29,731 
                 

Net income attributable to common unitholders

 $65,714  $21,106  $179,119  $29,136 

Net income attributable to the general partner

  1,341   431   3,655   595 
                 

Net income per common unit (see Note 4)

                

Basic

 $5.25  $1.71  $14.36  $2.36 

Diluted

  3.71   1.10   10.24   1.98 
                 

Net income

 $74,555  $29,498  $205,274  $53,261 

Comprehensive income (loss) from unconsolidated investment and other

  289   4,204   (1,179)  7,469 

Comprehensive income

 $74,844  $33,702  $204,095  $60,730 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL

(Unaudited)

 

                  

Accumulated

     
                  

Other

  

Total

 
  

Common Unitholders

  

General

  

Warrant

  

Comprehensive

  

Partners'

 

(In thousands)

 

Units

  

Amounts

  

Partner

  

Holders

  

Income

  

Capital

 

Balance at December 31, 2021

  12,351  $203,062  $1,787  $47,964  $3,211  $256,024 

Net income (1)

     62,621   1,278         63,899 

Distributions to common unitholders and the general partner

     (5,559)  (113)        (5,672)

Distributions to preferred unitholders

     (7,603)  (155)        (7,758)

Issuance of unit-based awards

  155                

Unit-based awards amortization and vesting, net

     (1,754)           (1,754)

Capital contribution

        112         112 

Comprehensive income from unconsolidated investment and other

              2,545   2,545 

Balance at March 31, 2022

  12,506  $250,767  $2,909  $47,964  $5,756  $307,396 

Net income (1)

     65,484   1,336         66,820 

Distributions to common unitholders and the general partner

     (9,379)  (191)        (9,570)

Distributions to preferred unitholders

     (7,350)  (150)        (7,500)

Unit-based awards amortization and vesting

     1,231            1,231 

Comprehensive loss from unconsolidated investment and other

              (4,013)  (4,013)

Balance at June 30, 2022

  12,506  $300,753  $3,904  $47,964  $1,743  $354,364 

Net income (1)

     73,064   1,491         74,555 

Distributions to common unitholders and the general partner

     (9,380)  (191)        (9,571)

Distributions to preferred unitholders

     (7,350)  (150)        (7,500)

Unit-based awards amortization and vesting

     1,245            1,245 

Comprehensive income from unconsolidated investment and other

              289   289 

Balance at September 30, 2022

  12,506  $358,332  $5,054  $47,964  $2,032  $413,382 
         

(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.

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL

(Unaudited)

 

                  

Accumulated

     
                  

Other

  

Total

 
  

Common Unitholders

  

General

  

Warrant

  

Comprehensive

  

Partners'

 

(In thousands)

 

Units

  

Amounts

  

Partner

  

Holders

  

Income

  

Capital

 

Balance at December 31, 2020

  12,261  $136,927  $459  $66,816  $322  $204,524 

Net income (1)

     8,213   168         8,381 

Distributions to common unitholders and the general partner

     (5,517)  (113)        (5,630)

Distributions to preferred unitholders

     (7,461)  (152)        (7,613)

Issuance of unit-based awards

  90                

Unit-based awards amortization and vesting, net

     215            215 

Capital contribution

        32         32 

Comprehensive income from unconsolidated investment and other

              732   732 

Balance at March 31, 2021

  12,351  $132,377  $394  $66,816  $1,054  $200,641 

Net income (2)

     15,074   308         15,382 

Distributions to common unitholders and the general partner

     (5,559)  (113)        (5,672)

Distributions to preferred unitholders

     (7,571)  (155)        (7,726)

Unit-based awards amortization and vesting

     515            515 

Comprehensive income from unconsolidated investment and other

              2,533   2,533 

Balance at June 30, 2021

  12,351  $134,836  $434  $66,816  $3,587  $205,673 

Net income (3)

     28,909   589         29,498 

Distributions to common unitholders and the general partner

     (5,558)  (113)        (5,671)

Distributions to preferred unitholders

     (7,687)  (156)        (7,843)

Unit-based awards amortization and vesting

     959            959 

Comprehensive income from unconsolidated investment and other

              4,204   4,204 

Balance at September 30, 2021

  12,351  $151,459  $754  $66,816  $7,791  $226,820 
         

(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.

(2)

Net income includes $7.8 million of income attributable to preferred unitholders that accumulated during the period, of which $7.7 million is allocated to the common unitholders and $0.2 million is allocated to the general partner.

(3) Net income includes $8.0 million of income attributable to preferred unitholders that accumulated during the period, of which $7.8 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.

 

 

 

 

NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

   

For the Nine Months Ended September 30,

 

(In thousands)

 

2022

   

2021

 

Cash flows from operating activities

               

Net income

  $ 205,274     $ 53,261  

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

               

Depreciation, depletion and amortization

    16,565       15,145  

Distributions from unconsolidated investment

    34,055       3,920  

Equity earnings from unconsolidated investment

    (44,036 )     (11,246 )

Gain on asset sales and disposals

    (699 )     (243 )

Loss on extinguishment of debt

    6,532        

Asset impairments

    874       4,116  

Bad debt expense

    641       1,715  

Unit-based compensation expense

    4,216       2,837  

Amortization of debt issuance costs and other

    1,887       1,899  

Change in operating assets and liabilities:

               

Accounts receivable

    (10,118 )     (12,332 )

Accounts payable

    223       89  

Accrued liabilities

    (4,831 )     (839 )

Accrued interest

    3,014       6,971  

Deferred revenue

    (17,094 )     (2,121 )

Other items, net

    1,447       3,471  

Net cash provided by operating activities

  $ 197,950     $ 66,643  
                 

Cash flows from investing activities

               

Proceeds from asset sales and disposals

  $ 699     $ 249  

Return of long-term contract receivable

    1,138       1,622  

Capital expenditures

    (59 )      

Net cash provided by investing activities

  $ 1,778     $ 1,871  
                 

Cash flows from financing activities

               

Debt repayments

  $ (197,665 )   $ (19,061 )

Distributions to common unitholders and the general partner

    (24,813 )     (16,973 )

Distributions to preferred unitholders

    (22,500 )     (11,591 )

Acquisition of non-controlling interest in BRP

          (1,000 )

Redemption of preferred units paid-in-kind

    (19,579 )      

Other items, net

    (9,754 )     (690 )

Net cash used in financing activities

  $ (274,311 )   $ (49,315 )
                 

Net increase (decrease) in cash and cash equivalents

  $ (74,583 )   $ 19,199  

Cash and cash equivalents at beginning of period

    135,520       99,790  

Cash and cash equivalents at end of period

  $ 60,937     $ 118,989  
                 

Supplemental cash flow information:

               

Cash paid for interest

  $ 18,501     $ 20,829  

Non-cash investing and financing activities:

               

Preferred unit distributions paid-in-kind

          11,591  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

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. 

 

 

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 September 30,

  

For the Nine Months Ended September 30,

 

(In thousands)

 

2022

  

2021

  

2022

  

2021

 

Coal royalty revenues

 $52,381  $32,432  $170,775  $66,095 

Production lease minimum revenues

  1,885   3,235   3,542   10,241 

Minimum lease straight-line revenues

  4,778   4,808   14,235   15,773 

Carbon neutral initiative revenues (1)

  8,600      8,600    

Property tax revenues

  1,360   1,466   4,527   4,522 

Wheelage revenues

  2,977   1,964   11,073   5,589 

Coal overriding royalty revenues

  1,367   757   2,307   3,592 

Lease amendment revenues

  759   1,519   2,450   3,159 

Aggregates royalty revenues

  884   429   2,691   1,339 

Oil and gas royalty revenues

  6,170   1,154   10,890   3,420 

Other revenues

  218   120   705   692 

Royalty and other mineral rights revenues

 $81,379  $47,884  $231,795  $114,422 

Transportation and processing services revenues (2)

  5,969   2,171   15,377   6,545 

Total Mineral Rights segment revenues

 $87,348  $50,055  $247,172  $120,967 
     
(1)

Included within carbon neutral initiative revenues are payments that are recognized at a point in time upon satisfaction of NRP's performance obligation.

(2)

Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $4.9 million and $1.2 million for the three months ended September 30, 2022 and 2021, respectively, and $12.9 million and $3.7 million for the nine months ended September 30, 2022 and 2021, respectively. The remaining transportation and processing services revenues of $1.1 million and $0.9 million for the three months ended September 30, 2022 and 2021, respectively, and $2.5 million and $2.8 million for the nine months ended September 30, 2022 and 2021, respectively, related to other NRP-owned infrastructure leased to and operated by third-party operators accounted for under other guidance. See Note 14. Financing Transaction for more information.

 

The following table details the Partnership's Mineral Rights segment receivables and liabilities resulting from contracts with customers:

 

  

September 30,

  

December 31,

 

(In thousands)

 

2022

  

2021

 

Receivables

        

Accounts receivable, net

 $30,991  $22,277 

Other current assets, net (1)

  874   769 

Other long-term assets, net (2)

  75   250 
         

Contract liabilities

        

Current portion of deferred revenue

 $8,886  $11,817 

Deferred revenue

  35,882   50,045 
     
(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.

 

 

6

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

The following table shows the activity related to the Partnership's Mineral Rights segment deferred revenue: 

 

  

For the Nine Months Ended

 
  

September 30,

 

(In thousands)

 

2022

  

2021

 

Balance at beginning of period (current and non-current)

 $61,862  $61,554 

Increase due to minimums and lease amendment fees

  11,309   6,411 

Recognition of previously deferred revenue

  (28,403)  (8,532)

Balance at end of period (current and non-current)

 $44,768  $59,433 

 

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  September 30, 2022 (in thousands): 

 

Lease Term (1)

 

Weighted Average Remaining Years

  

Annual Minimum Payments

 

0 - 5 years

 2.4  $22,229 

5 - 10 years

 3.8   7,517 

10+ years

 12.8   27,221 

Total

 7.5  $56,967 
     
(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 $8.0 million during the three months ended September 30, 2022 and 2021, respectively, and $22.5 million and $23.5 million during the nine months ended  September 30, 2022 and 2021, respectively, as a result of accumulated preferred unit distributions earned during the period.

 

The following table shows the cash distributions declared and paid to common and preferred unitholders during the nine months ended September 30, 2022 and 2021, respectively:

 

    

Cash Distributions

 

Paid-in-kind Distributions

    

Common Units

 

Preferred Units

      Total Distribution (1)   Total Distribution Total Distribution

Month Paid

 

Period Covered by Distribution

 

Distribution per Unit

 

(In thousands)

 Distribution per Unit 

(In thousands)

 

(In units)

2022

                

February 2022

 

October 1 - December 31, 2021

 $0.45 $5,672 $30.00 $7,500 

May 2022

 

January 1 - March 31, 2022

  0.75  9,570  30.00  7,500 

August 2022

 

April 1 - June 30, 2022

  0.75  9,571  30.00  7,500 
                 

2021

                

February 2021

 

October 1 - December 31, 2020

 $0.45 $5,630 $15.00 $3,806 3,806

May 2021

 

January 1 - March 31, 2021

  0.45  5,672  15.00  3,864 3,864

August 2021

 

April 1 - June 30, 2021

  0.45  5,671  15.00  3,921 3,921
     
(1)

Totals include the amount paid to NRP's general partner in accordance with the general partner's 2% general partner interest.

 

 

7

NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
 

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 and nine months ended September 30, 2022 and 2021 includes the assumed conversion of the preferred units. 

 

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 and nine months ended September 30, 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 and nine months ended  September 30, 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.

 

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 September 30,

  

For the Nine Months Ended September 30,

 

(In thousands, except per unit data)

 

2022

  

2021

  

2022

  

2021

 

Allocation of net income

                

Net income

 $74,555  $29,498  $205,274  $53,261 

Less: income attributable to preferred unitholders

  (7,500)  (7,961)  (22,500)  (23,530)

Net income attributable to common unitholders and the general partner

 $67,055  $21,537  $182,774  $29,731 

Less: net income attributable to the general partner

  (1,341)  (431)  (3,655)  (595)

Net income attributable to common unitholders

 $65,714  $21,106  $179,119  $29,136 
                 

Basic net income per common unit

                

Weighted average common units—basic

  12,506   12,351   12,476   12,332 

Basic net income per common unit

 $5.25  $1.71  $14.36  $2.36 
                 

Diluted net income per common unit

                

Weighted average common units—basic

  12,506   12,351   12,476   12,332 

Plus: dilutive effect of preferred units

  6,210   13,835   6,210   13,835 

Plus: dilutive effect of warrants

  807      759    

Plus: dilutive effect of unvested unit-based awards

  195   188   204   144 

Weighted average common units—diluted

  19,718   26,374   19,649   26,311 
                 

Net income

 $74,555  $29,498  $205,274  $53,261 

Less: income attributable to preferred unitholders

            

Diluted net income attributable to common unitholders and the general partner

 $74,555  $29,498  $205,274  $53,261 

Less: diluted net income attributable to the general partner

  (1,491)  (589)  (4,105)  (1,065)

Diluted net income attributable to common unitholders

 $73,064  $28,909  $201,169  $52,196 
                 

Diluted net income per common unit

 $3.71  $1.10  $10.24  $1.98 

 

 

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 September 30, 2022

                

Revenues

 $87,348  $14,556  $  $101,904 

Gain on asset sales and disposals

  354         354 

Operating and maintenance expenses

  7,867   31      7,898 

Depreciation, depletion and amortization

  6,850         6,850 

General and administrative expenses

        4,518   4,518 

Asset impairments

  812         812 

Other expenses, net

        7,625   7,625 

Net income (loss)

  72,173   14,525   (12,143)  74,555 
                 

For the Three Months Ended September 30, 2021

                

Revenues

 $50,055  $6,672  $  $56,727 

Gain on asset sales and disposals

  68         68 

Operating and maintenance expenses

  8,278   76      8,354 

Depreciation, depletion and amortization

  5,182         5,182 

General and administrative expenses

        4,052   4,052 

Asset impairments

  57         57 

Other expenses, net

        9,652   9,652 

Net income (loss)

  36,606   6,596   (13,704)  29,498 
                 

For the Nine Months Ended September 30, 2022

                

Revenues

 $247,172  $44,036  $  $291,208 

Gain on asset sales and disposals

  699         699 

Operating and maintenance expenses

  25,884   105      25,989 

Depreciation, depletion and amortization

  16,565         16,565 

General and administrative expenses

        14,037   14,037 

Asset impairments

  874         874 

Other expenses, net

        29,168   29,168 

Net income (loss)

  204,548   43,931   (43,205)  205,274 
                 

For the Nine Months Ended September 30, 2021

                

Revenues

 $120,967  $11,246  $  $132,213 

Gain on asset sales and disposals

  243         243 

Operating and maintenance expenses

  18,945   131      19,076 

Depreciation, depletion and amortization

  15,145         15,145 

General and administrative expenses

        11,550   11,550 

Asset impairments

  4,116         4,116 

Other expenses, net

  24      29,284   29,308 

Net income (loss)

  82,980   11,115   (40,834)  53,261 

 

 

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 September 30,

   

For the Nine Months Ended September 30,

 

(In thousands)

 

2022

   

2021

   

2022

   

2021

 

Balance at beginning of period

  $ 280,300     $ 266,433     $ 276,004     $ 262,514  

Income allocation to NRP’s equity interests

    15,732       7,989       47,601       15,060  

Amortization of basis difference

    (1,176 )     (1,317 )     (3,565 )     (3,814 )

Other comprehensive income (loss)

    289       4,204       (1,179 )     7,469  

Distribution

    (10,339 )           (34,055 )     (3,920 )

Balance at end of period

  $ 284,806     $ 277,309     $ 284,806     $ 277,309  

 

The following table represents summarized financial information for Sisecam Wyoming as derived from their respective unaudited financial statements for the three and nine months ended September 30, 2022 and 2021:

 

   

For the Three Months Ended September 30,

   

For the Nine Months Ended September 30,

 

(In thousands)

 

2022

   

2021

   

2022

   

2021

 

Net sales

  $ 190,450     $ 135,648     $ 542,955     $ 384,129  

Gross profit

  $ 39,679       23,530       119,723       50,317  

Net income

  $ 32,105       16,304       97,144       30,734  

 

 

7.    Mineral Rights, Net

 

The Partnership’s mineral rights consist of the following:

 

  

September 30, 2022

  

December 31, 2021

 

(In thousands)

 

Carrying Value

  

Accumulated Depletion

  

Net Book Value

  

Carrying Value

  

Accumulated Depletion

  

Net Book Value

 

Coal properties

 $666,604  $(265,031) $401,573  $670,650  $(253,503) $417,147 

Aggregates properties

  8,674   (3,310)  5,364   8,747   (2,975)  5,772 

Oil and gas royalty properties

  12,354   (9,479)  2,875   12,354   (9,115)  3,239 

Other

  13,151   (1,612)  11,539   13,151   (1,612)  11,539 

Total mineral rights, net

 $700,783  $(279,432) $421,351  $704,902  $(267,205) $437,697 

 

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 $6.4 million and $4.6 million for the three months ended September 30, 2022 and 2021, respectively, and $15.5 million and $13.8 million for the nine months ended September 30, 2022 and 2021, respectively.

 

During the three and nine months ended September 30, 2022 the Partnership recorded $0.8 million and $0.9 million of asset impairments, respectively. During the three months ended September 30, 2021, the Partnership did not have any material asset impairments and during the nine months ended September 30, 2021, the Partnership recorded $4.1 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 September 30, 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:

 

  

September 30,

  

December 31,

 

(In thousands)

 

2022

  

2021