Natural Resource Partners Earnings 2019-03-31
NRP 10Q Quarterly Report
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 |
FORM 10-Q
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended March 31, 2019 or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
Commission file number: 001-31465 | |||
NATURAL RESOURCE PARTNERS L.P. | |||
(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.) | |
Houston, Texas 77002
(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 | ||
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 ý 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 | ý | |
Non-accelerated Filer | ¨ (Do not check if a smaller reporting company) | Smaller Reporting Company | ý | |
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 ý
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) | 2019 | 2018 | |||||
ASSETS | (Unaudited) | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 112,374 | $ | 101,839 | |||
Restricted cash | 17,333 | 104,191 | |||||
Accounts receivable, net | 37,023 | 32,058 | |||||
Prepaid expenses and other | 4,141 | 3,462 | |||||
Current assets of discontinued operations | 998 | 993 | |||||
Total current assets | $ | 171,869 | $ | 242,543 | |||
Land | 24,008 | 24,008 | |||||
Plant and equipment, net | 893 | 984 | |||||
Mineral rights, net | 739,570 | 743,112 | |||||
Intangible assets, net | 41,754 | 42,513 | |||||
Equity in unconsolidated investment | 249,936 | 247,051 | |||||
Long-term contracts receivable | 38,464 | 38,945 | |||||
Other assets | 5,677 | 2,491 | |||||
Total assets | $ | 1,272,171 | $ | 1,341,647 | |||
LIABILITIES AND CAPITAL | |||||||
Current liabilities | |||||||
Accounts payable | $ | 1,797 | $ | 2,414 | |||
Accrued liabilities | 6,200 | 12,347 | |||||
Accrued interest | 4,312 | 14,345 | |||||
Current portion of deferred revenue | 4,614 | 3,509 | |||||
Current portion of long-term debt, net | 46,024 | 115,184 | |||||
Current liabilities of discontinued operations | 727 | 947 | |||||
Total current liabilities | $ | 63,674 | $ | 148,746 | |||
Deferred revenue | 52,473 | 49,044 | |||||
Long-term debt, net | 541,677 | 557,574 | |||||
Other non-current liabilities | 4,720 | 1,150 | |||||
Total liabilities | $ | 662,544 | $ | 756,514 | |||
Commitments and contingencies (see Note 15) | |||||||
Class A Convertible Preferred Units (250,000 units issued and outstanding at $1,000 par value per unit; liquidation preference of $1,500 per unit) | $ | 164,587 | $ | 164,587 | |||
Partners’ capital | |||||||
Common unitholders’ interest (12,261,199 and 12,249,469 units issued and outstanding at March 31, 2019 and December 31, 2018, respectively) | $ | 378,140 | $ | 355,113 | |||
General partner’s interest | 5,476 | 5,014 | |||||
Warrant holders’ interest | 66,816 | 66,816 | |||||
Accumulated other comprehensive loss | (2,457 | ) | (3,462 | ) | |||
Total partners’ capital | $ | 447,975 | $ | 423,481 | |||
Non-controlling interest | (2,935 | ) | (2,935 | ) | |||
Total capital | $ | 445,040 | $ | 420,546 | |||
Total liabilities and capital | $ | 1,272,171 | $ | 1,341,647 | |||
The accompanying notes are an integral part of these consolidated financial statements.
1
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31, | |||||||
(In thousands, except per unit data) | 2019 | 2018 | |||||
Revenues and other income | |||||||
Coal royalty and other | $ | 49,502 | $ | 44,474 | |||
Transportation and processing services | 5,601 | 5,383 | |||||
Equity in earnings of Ciner Wyoming | 11,682 | 9,621 | |||||
Gain on asset sales | 256 | 651 | |||||
Total revenues and other income | $ | 67,041 | $ | 60,129 | |||
Operating expenses | |||||||
Operating and maintenance expenses | $ | 8,360 | $ | 6,215 | |||
Depreciation, depletion and amortization | 4,392 | 5,100 | |||||
General and administrative expenses | 4,350 | 4,336 | |||||
Asset impairments | — | 242 | |||||
Total operating expenses | $ | 17,102 | $ | 15,893 | |||
Income from operations | $ | 49,939 | $ | 44,236 | |||
Interest expense, net | $ | (14,174 | ) | $ | (17,950 | ) | |
Net income from continuing operations | $ | 35,765 | $ | 26,286 | |||
Loss from discontinued operations | (46 | ) | (1,948 | ) | |||
Net income | $ | 35,719 | $ | 24,338 | |||
Less: income attributable to preferred unitholders | (7,500 | ) | (7,500 | ) | |||
Net income attributable to common unitholders and general partner | $ | 28,219 | $ | 16,838 | |||
Net income attributable to common unitholders | $ | 27,655 | $ | 16,501 | |||
Net income attributable to the general partner | 564 | 337 | |||||
Income from continuing operations per common unit (see Note 6) | |||||||
Basic | $ | 2.26 | $ | 1.50 | |||
Diluted | 1.75 | 1.16 | |||||
Net income per common unit (see Note 6) | |||||||
Basic | $ | 2.26 | $ | 1.35 | |||
Diluted | 1.75 | 1.08 | |||||
Net income | $ | 35,719 | $ | 24,338 | |||
Comprehensive income (loss) from unconsolidated investment and other | 1,005 | (1,125 | ) | ||||
Comprehensive income | $ | 36,724 | $ | 23,213 | |||
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 Loss | Partners' Capital Excluding Non-Controlling Interest | Non-Controlling Interest | Total Capital | ||||||||||||||||||||||||
(In thousands) | Units | Amounts | ||||||||||||||||||||||||||||
Balance at December 31, 2018 | 12,249 | $ | 355,113 | $ | 5,014 | $ | 66,816 | $ | (3,462 | ) | $ | 423,481 | $ | (2,935 | ) | $ | 420,546 | |||||||||||||
Net income (1) | — | 35,005 | 714 | — | — | 35,719 | — | 35,719 | ||||||||||||||||||||||
Distributions to common unitholders and general partner | — | (5,513 | ) | (112 | ) | — | — | (5,625 | ) | — | (5,625 | ) | ||||||||||||||||||
Distributions to preferred unitholders | — | (7,350 | ) | (150 | ) | — | — | (7,500 | ) | — | (7,500 | ) | ||||||||||||||||||
Issuance of unit-based awards | 12 | 486 | — | — | — | 486 | — | 486 | ||||||||||||||||||||||
Unit-based awards amortization and vesting | — | 399 | — | — | — | 399 | — | 399 | ||||||||||||||||||||||
Comprehensive income from unconsolidated investment and other | — | — | 10 | — | 1,005 | 1,015 | — | 1,015 | ||||||||||||||||||||||
Balance at March 31, 2019 | 12,261 | $ | 378,140 | $ | 5,476 | $ | 66,816 | $ | (2,457 | ) | $ | 447,975 | $ | (2,935 | ) | $ | 445,040 | |||||||||||||
(1) | Net income includes $7.5 million attributable to Preferred Unitholders that accumulated during the period, of which $7.35 million is allocated to the common unitholders and $0.15 million is allocated to the general partner. |
Common Unitholders | General Partner | Warrant Holders | Accumulated Other Comprehensive Loss | Partners' Capital Excluding Non-Controlling Interest | Non-Controlling Interest | Total Capital | ||||||||||||||||||||||||
(In thousands) | Units | Amounts | ||||||||||||||||||||||||||||
Balance at December 31, 2017 | 12,232 | $ | 199,851 | $ | 1,857 | $ | 66,816 | $ | (3,313 | ) | $ | 265,211 | $ | (3,394 | ) | $ | 261,817 | |||||||||||||
Cumulative effect of adoption of accounting standard | — | 69,057 | 1,409 | — | — | 70,466 | — | 70,466 | ||||||||||||||||||||||
Net income (1) | — | 23,851 | 487 | — | — | 24,338 | — | 24,338 | ||||||||||||||||||||||
Distributions to common unitholders and general partner | — | (5,505 | ) | (112 | ) | — | — | (5,617 | ) | — | (5,617 | ) | ||||||||||||||||||
Distributions to preferred unitholders | — | (7,610 | ) | (155 | ) | — | — | (7,765 | ) | — | (7,765 | ) | ||||||||||||||||||
Issuance of unit-based awards | 14 | 410 | — | — | — | 410 | — | 410 | ||||||||||||||||||||||
Unit-based awards amortization and vesting | — | 197 | — | — | — | 197 | — | 197 | ||||||||||||||||||||||
Comprehensive income (loss) from unconsolidated investment and other | — | — | 8 | — | (1,125 | ) | (1,117 | ) | — | (1,117 | ) | |||||||||||||||||||
Balance at March 31, 2018 | 12,246 | $ | 280,251 | $ | 3,494 | $ | 66,816 | $ | (4,438 | ) | $ | 346,123 | $ | (3,394 | ) | $ | 342,729 | |||||||||||||
(1) | Net income includes $7.5 million attributable to Preferred Unitholders that accumulated during the period, of which $7.35 million is allocated to the common unitholders and $0.15 million is allocated to the general partner. |
The accompanying notes are an integral part of these consolidated financial statements.
3
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Cash flows from operating activities | |||||||
Net income | $ | 35,719 | $ | 24,338 | |||
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: | |||||||
Depreciation, depletion and amortization | 4,392 | 5,100 | |||||
Distributions from unconsolidated investment | 9,800 | 10,153 | |||||
Equity earnings from unconsolidated investment | (11,682 | ) | (9,621 | ) | |||
Gain on asset sales | (256 | ) | (651 | ) | |||
Loss from discontinued operations | 46 | 1,948 | |||||
Asset impairments | — | 242 | |||||
Unit-based compensation expense | 901 | 687 | |||||
Amortization of debt issuance costs and other | 1,796 | 1,154 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | (4,927 | ) | (10,027 | ) | |||
Accounts payable | (616 | ) | 869 | ||||
Accrued liabilities | (6,164 | ) | (5,042 | ) | |||
Accrued interest | (10,033 | ) | (9,777 | ) | |||
Deferred revenue | 4,534 | 5,361 | |||||
Other items, net | (678 | ) | 2,680 | ||||
Net cash provided by operating activities of continuing operations | $ | 22,832 | $ | 17,414 | |||
Net cash provided by operating activities of discontinued operations | 121 | 2,385 | |||||
Net cash provided by operating activities | $ | 22,953 | $ | 19,799 | |||
Cash flows from investing activities | |||||||
Distributions from unconsolidated investment in excess of cumulative earnings | $ | — | $ | 2,097 | |||
Proceeds from sale of assets | 256 | 656 | |||||
Return of long-term contract receivable | 441 | 487 | |||||
Net cash provided by investing activities of continuing operations | $ | 697 | $ | 3,240 | |||
Net cash used in investing activities of discontinued operations | (390 | ) | (3,413 | ) | |||
Net cash provided by (used in) investing activities | $ | 307 | $ | (173 | ) | ||
Cash flows from financing activities | |||||||
Borrowings on revolving credit facility | — | 35,000 | |||||
Repayments of loans | (86,468 | ) | (40,800 | ) | |||
Redemption of preferred units paid-in-kind | — | (8,844 | ) | ||||
Distributions to common unitholders and general partner | (5,625 | ) | (5,617 | ) | |||
Distributions to preferred unitholders | (7,500 | ) | (7,765 | ) | |||
Contributions from (to) discontinued operations | (269 | ) | 1,408 | ||||
Debt issuance costs and other | 10 | (226 | ) | ||||
Net cash used in financing activities of continuing operations | $ | (99,852 | ) | $ | (26,844 | ) | |
Net cash provided by (used in) financing activities of discontinued operations | 269 | (1,457 | ) | ||||
Net cash used in financing activities | $ | (99,583 | ) | $ | (28,301 | ) | |
4
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Net decrease in cash, cash equivalents and restricted cash | $ | (76,323 | ) | $ | (8,675 | ) | |
Cash, cash equivalents and restricted cash of continuing operations at beginning of period | $ | 206,030 | $ | 26,980 | |||
Cash, cash equivalents and restricted cash of discontinued operations at beginning of period | — | 2,847 | |||||
Cash, cash equivalents and restricted cash at beginning of period | $ | 206,030 | $ | 29,827 | |||
Cash, cash equivalents and restricted cash at end of period | $ | 129,707 | $ | 21,152 | |||
Less: cash, cash equivalents and restricted cash of discontinued operations at end of period | — | (362 | ) | ||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 129,707 | $ | 20,790 | |||
Supplemental cash flow information: | |||||||
Cash paid during the period for interest of continuing operations | $ | 23,422 | $ | 26,023 | |||
The accompanying notes are an integral part of these consolidated financial statements.
5
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 Ciner Wyoming LLC ("Ciner Wyoming"), a producer of natural soda ash. The Partnership is organized into two operating segments further described in Note 7. 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. In management's opinion, all necessary adjustments to fairly present the Partnership's results of operations, financial position and cash flows for the periods presented have been made and all such adjustments were of a normal and recurring nature. Certain reclassifications have been made to prior period amounts on the Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows to conform with current period presentation. These reclassifications had no impact on previously reported net income or cash flows from operating, investing or financing activities.
Recasting of Certain Prior Period Information
As described in Note 4. Discontinued Operations, the Partnership reclassified prior period information for the assets and liabilities, operating results and cash flows of its construction aggregates business as discontinued operations in its consolidated financial statements for all periods presented.
Restricted Cash
Restricted cash at March 31, 2019 and December 31, 2018 represents the remaining net proceeds from the sale of the Partnership's construction aggregates business that is required to be used to repay debt, make acquisitions or make capital expenditures per the terms of the Partnership's and Opco's debt agreements. In the first quarter of 2019, the Partnership used $86.5 million of restricted cash to repay principal amounts on the Opco Senior Notes, and it intends to use the remaining restricted cash to repay a portion of the 2019 amortization payments on the Opco Senior Notes.
Recently Adopted Accounting Standards
Leases
On January 1, 2019, NRP adopted Accounting Standards Codification (ASC) 842, Leases, and all the related amendments (the “new lease standard” and "ASC 842") and recognized assets and liabilities on the balance sheet for the present value of the rights and obligations created by all leases with terms of more than 12 months. This standard does not apply to leases that explore for or use minerals, oil, natural gas and similar non-regenerative resources, including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained. The guidance also required disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. The guidance was adopted on January 1, 2019 using a modified retrospective approach.
The Partnership is a lessee in one lease that is accounted for as an operating lease under the new lease standard and the adoption of the new lease standard did not have a material impact to the Partnership's consolidated financial statements. For lease agreements entered into or reassessed after the adoption of Topic 842, the Partnership elected to not combine lease and non-lease components. See Note 3. Leases for more information.
6
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Recently Issued Accounting Standards
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The new standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new standard replaces today's "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The guidance is effective for annual and interim periods beginning after December 15, 2019 and is to be adopted using a modified retrospective approach. The Partnership is currently evaluating the provisions of this guidance on its consolidated financial statements.
2. Revenues from Contracts with Customers
The following table represents the Partnership's Coal Royalty and Other segment revenues by major source:
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Coal royalty revenues | $ | 32,131 | $ | 31,002 | |||
Production lease minimum revenues | 2,700 | 2,535 | |||||
Minimum lease straight-line revenues | 3,316 | 603 | |||||
Property tax revenues | 1,433 | 1,182 | |||||
Wheelage revenues | 1,415 | 1,974 | |||||
Coal overriding royalty revenues | 3,975 | 2,872 | |||||
Lease amendment revenues | 771 | — | |||||
Aggregates royalty revenues | 1,464 | 1,091 | |||||
Oil and gas royalty revenues | 1,719 | 2,898 | |||||
Other revenues | 578 | 317 | |||||
Coal royalty and other revenues (1) | $ | 49,502 | $ | 44,474 | |||
Transportation and processing services revenues (2) | 5,601 | 5,383 | |||||
Total Coal royalty and other segment revenues | $ | 55,103 | $ | 49,857 | |||
(1) | Coal royalty and other revenues from contracts with customers as defined under ASC 606. |
(2) | Transportation and processing services revenues from contracts with customers as defined under ASC 606 was $2.9 million and $3.0 million for the three months ended March 31, 2019 and 2018, respectively. The remaining transportation and processing services revenue of $2.7 million and $2.4 million for the three months ended March 31, 2019, and 2018 respectively, related to other NRP-owned infrastructure leased to and operated by third party operators accounted for under other guidance. See Note 3. Leases for more information. |
7
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table details the Partnership's Coal Royalty and Other segment receivables and liabilities resulting from contracts with customers:
March 31, | December 31, | |||||||
(In thousands) | 2019 | 2018 | ||||||
Receivables | ||||||||
Accounts receivable, net | $ | 34,036 | $ | 29,001 | ||||
Prepaid expenses and other (1) | 3,416 | 2,483 | ||||||
Contract liabilities | ||||||||
Current portion of deferred revenue | $ | 4,614 | $ | 3,509 | ||||
Deferred revenue | 52,473 | 49,044 | ||||||
(1) | Prepaid expenses and other includes notes receivable from contracts with customers. |
The following table shows the activity related to the Partnership's Coal Royalty and Other segment deferred revenue:
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Balance at end of prior period (current and non-current) | $ | 52,553 | $ | 100,605 | |||
Cumulative adjustment for change in accounting principle | — | (65,591 | ) | ||||
Balance at beginning of period (current and non-current) | $ | 52,553 | $ | 35,014 | |||
Increase due to minimums and lease amendment fees | 11,877 | 9,026 | |||||
Recognition of previously deferred revenue | (7,343 | ) | (5,591 | ) | |||
Balance at end of period (current and non-current) | $ | 57,087 | $ | 38,449 | |||
The Partnership's non-cancelable annual minimum payments due under the lease terms of its coal and aggregates royalty and overriding royalty leases are as follows:
Lease Term (1) | Weighted Average Remaining Years as of March 31, 2019 | Annual Minimum Payments (In thousands) | ||||
0 - 5 years | 2.8 | $ | 15,681 | |||
5 - 10 years | 6.6 | 13,352 | ||||
10+ years | 13.9 | 50,135 | ||||
Total | 10.5 | $ | 79,168 | |||
(1) | Lease term does not include renewal periods. |
8
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
3. Leases
Lessee Accounting Under ASC 842
As of March 31, 2019, the Partnership had one operating lease for an office building that is owned by Western Pocahontas Properties Limited Partnership ("WPPLP"), an affiliate of the Partnership as further discussed in Note 13. Related Party Transactions. On January 1, 2019, the Partnership entered into a new lease of the building with a five-year base term and five additional five-year renewal options. Upon adoption and as of March 31, 2019, the Partnership was reasonably certain to exercise all renewal options included in the lease and capitalized the right-of-use asset and corresponding lease liability on its Consolidated Balance Sheets using the present value of the future lease payments over 30 years. The Partnership's right-of-use asset and lease liability included within Other assets and Other non-current liabilities, respectively, on its Consolidated Balance Sheets totaled $3.5 million at both January 1, 2019 and March 31, 2019, respectively. During the three months ended March 31, 2019, the Partnership incurred $0.1 million in total operating lease expenses included in both Operating and maintenance expenses and General and administrative expenses in its Consolidated Statement of Comprehensive Income.
The following table details the maturity analysis of the Partnership's operating lease liability and reconciles the undiscounted cash flows to the operating lease liability included in its Consolidated Balance Sheet:
Remaining Annual Lease Payments (In thousands) | As of March 31, 2019 | |||
2019 | $ | 362 | ||
2020 | 483 | |||
2021 | 483 | |||
2022 | 483 | |||
2023 | 483 | |||
After 2023 | 12,079 | |||
Total lease payments (1) | $ | 14,373 | ||
Less: present value adjustment (2) | (10,860 | ) | ||
Total operating lease liability | $ | 3,513 | ||
(1) | The remaining lease term of the Partnership's operating lease is 29.75 years. |
(2) | The present value of the operating lease liability on the Partnership's Consolidated Balance Sheet was calculated using a 13.5% discount rate which represents the Partnership's estimated incremental borrowing rate under the lease. As the Partnership's lease does not provide an implicit rate, the Partnership estimated the incremental borrowing rate at the time the lease was entered into by utilizing the rate of the Partnership's secured debt and adjusting it for factors that reflect the profile of borrowing over the 30-year expected lease term. |
Lessor Accounting as a Lease Under ASC 842
The Partnership owns transportation and processing infrastructure related to certain of its coal properties, including loadout and other transportation assets at the Partnership's Macoupin property in the Illinois Basin which is operated by Foresight Energy. The infrastructure at the Macoupin property is leased to a subsidiary of Foresight Energy and is accounted for as an operating lease under ASC 842. The lease with Macoupin expires in January 2108. From the inception of this lease in 2009 through January 2039, the lease provides that the Partnership is entitled to variable lease payments in the form of throughput fees determined based on the amount of coal transported and processed utilizing the Partnership's assets. These fees are included in Transportation and processing services revenues in the Partnership's Consolidated Statements of Comprehensive Income and were $1.2 million and $1.1 million in the three months ended March 31, 2019 and 2018, respectively. After January 2039, the lease provides that the Partnership is entitled to an annual rent of $10 thousand per year in place of the variable lease payments.
9
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Lessor Accounting as a Financing Transaction Under ASC 310, Receivables
The Partnership owns rail loadout and associated infrastructure at the Sugar Camp mine in the Illinois Basin operated by a subsidiary of Foresight Energy LP. The infrastructure at the Sugar Camp mine is leased to a subsidiary of Foresight Energy and is accounted for as a financing transaction (the "Sugar Camp lease"). The Sugar Camp lease expires in 2032 with renewal options for up to 80 additional years. There is no option to purchase the infrastructure at the end of the lease. Minimum payments are $5.0 million per year through the end of the lease term and represent a $1.25 million per quarter deficiency payment. The Partnership is also entitled to variable payments in the form of throughput fees determined based on the amount of coal transported and processed utilizing the Partnership's assets. In the event the Sugar Camp lease is renewed beyond 2032, payments become a fixed $10 thousand per year for the remainder of the renewed term.
The following table shows certain amounts related to the Partnership's Sugar Camp lease:
(In thousands) | March 31, 2019 | December 31, 2018 | |||||
Accounts receivable | $ | 602 | $ | 661 | |||
Contract receivable (current and long-term) | 40,331 | 40,776 | |||||
Unearned income | 24,252 | 25,058 | |||||
Projected remaining payments | $ | 65,185 | $ | 66,495 | |||
4. Discontinued Operations
In December 2018, the Partnership sold VantaCore Partners LLC, its construction aggregates business, and in July 2016, NRP Oil and Gas LLC ("NRP Oil and Gas") sold its non-operated oil and gas working interest assets. The Partnership's exit from both its construction aggregates business and non-operated oil and gas working interest business represented strategic shifts to reduce debt and focus on its Coal Royalty and Other and Soda Ash business segments. As a result, the Partnership classified the assets and liabilities, operating results and cash flows of these businesses as discontinued operations in its Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for all periods presented.
The following table presents the carrying amounts of the Partnership's assets and liabilities of discontinued operations in the Consolidated Balance Sheets:
March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||
(In thousands) | Construction Aggregates | NRP Oil and Gas | Total | Construction Aggregates | NRP Oil and Gas | Total | |||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current assets | |||||||||||||||||||||||
Accounts receivable, net | $ | 10 | $ | 988 | $ | 998 | $ | 5 | $ | 988 | $ | 993 | |||||||||||
Total assets of discontinued operations | $ | 10 | $ | 988 | $ | 998 | $ | 5 | $ | 988 | $ | 993 | |||||||||||
LIABILITIES | |||||||||||||||||||||||
Current liabilities | |||||||||||||||||||||||
Accounts payable | $ | 48 | $ | — | $ | 48 | $ | 181 | $ | — | $ | 181 | |||||||||||
Accrued liabilities | 679 | — | 679 | 766 | — | 766 | |||||||||||||||||
Total liabilities of discontinued operations | $ | 727 | $ | — | $ | 727 | $ | 947 | $ | — | $ | 947 | |||||||||||
10
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table presents summarized financial results of the Partnership's discontinued operations in the Consolidated Statements of Comprehensive Income
Three Months Ended March 31, | |||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||
(In thousands) | Construction Aggregates | NRP Oil and Gas | Total | Construction Aggregates | NRP Oil and Gas | Total | |||||||||||||||||
Revenues and other income | |||||||||||||||||||||||
Construction aggregates | $ | — | $ | — | $ | — | $ | 26,424 | $ | — | $ | 26,424 | |||||||||||
Road construction and asphalt paving services | — | — | — | 728 | — | 728 | |||||||||||||||||
Gain (loss) on asset sales | (8 | ) | — | (8 | ) | 9 | — | 9 | |||||||||||||||
Total revenues and other income | $ | (8 | ) | $ | — | $ | (8 | ) | $ | 27,161 | $ | — | $ | 27,161 | |||||||||
Operating expenses | |||||||||||||||||||||||
Operating and maintenance expenses | $ | 27 | $ | 11 | $ | 38 | $ | 26,218 | $ | 14 | $ | 26,232 | |||||||||||
Depreciation, depletion and amortization | — | — | — | 2,857 | — | 2,857 | |||||||||||||||||
Total operating expenses | $ | 27 | $ | 11 | $ | 38 | $ | 29,075 | $ | 14 | $ | 29,089 | |||||||||||
Interest expense | — | — | — | (20 | ) | — | (20 | ) | |||||||||||||||
Loss from discontinued operations | $ | (35 | ) | $ | (11 | ) | $ | (46 | ) | $ | (1,934 | ) | $ | (14 | ) | $ | (1,948 | ) | |||||
Capital expenditures related to the Partnership's discontinued operations were $3.4 million during the three months ended March 31, 2018.
5. 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. NRP recognizes both Common and Preferred distributions on the date the distribution is declared.
Common Unit Distributions
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. During the three months ended March 31, 2019 and 2018, the Partnership declared and paid a distribution of $0.45 per common unit with respect to the quarter ended December 31, 2018 and 2017, respectively.
Preferred Unit Distributions
Income available to common unitholders and the general partner is reduced by Preferred Unit distributions that accumulated during the period. During the three months ended March 31, 2019 and 2018, the Partnership paid a distribution of $30.00 per Preferred Unit with respect to the quarter ended December 31, 2018 and 2017, respectively. NRP reduced net income attributable to common unitholders and the general partner by $7.5 million during the three months ended March 31, 2019 and 2018, respectively, as a result of accumulated Preferred Unit distributions earned during the period. During the three months ended March 31, 2018, the Partnership redeemed all of the outstanding PIK Units, which resulted in an $8.8 million cash payment during the period.
11
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
6. Net Income Per Common Unit
Basic net income per common unit is computed by dividing net income, after considering income attributable to non-controlling interest, 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 and Warrants, 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 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 the dilutive effect of the Warrants for the three months ended March 31, 2018 includes the net settlement of Warrants to purchase 1.75 million common units with a strike price of $22.81 but did not include 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 calculation of the dilutive effect of the warrants for the three months ended March 31, 2019, includes both the net settlement of warrants to purchase 1.75 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.
The following table reconciles 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:
Three Months Ended March 31, | |||||||
(In thousands, except per unit data) | 2019 | 2018 | |||||
Allocation of net income | |||||||
Net income from continuing operations | $ | 35,765 | $ | 26,286 | |||
Less: income attributable to preferred unitholders | (7,500 | ) | (7,500 | ) | |||
Net income from continuing operations attributable to common unitholders and general partner | $ | 28,265 | $ | 18,786 | |||
Less: net income from continuing operations attributable to the general partner | (565 | ) | (376 | ) | |||
Net income from continuing operations attributable to common unitholders | $ | 27,700 | $ | 18,410 | |||
Net loss from discontinued operations | $ | (46 | ) | $ | (1,948 | ) | |
Less: net loss from discontinued operations attributable to the general partner | 1 | 39 | |||||
Net loss from discontinued operations attributable to common unitholders | $ | (45 | ) | $ | (1,909 | ) | |
Net income | $ | 35,719 | $ | 24,338 | |||
Less: income attributable to preferred unitholders | (7,500 | ) | (7,500 | ) | |||
Net income attributable to common unitholders and general partner | $ | 28,219 | $ | 16,838 | |||
Less: net income attributable to the general partner | (564 | ) | (337 | ) | |||
Net income attributable to common unitholders | $ | 27,655 | $ | 16,501 | |||
Basic net income (loss) per common unit | |||||||
Weighted average common units—basic | 12,255 | 12,238 | |||||
Basic net income from continuing operations per common unit | $ | 2.26 | $ | 1.50 | |||
Basic net loss from discontinued operations per common unit | $ | — | $ | (0.16 | ) | ||
Basic net income per common unit | $ | 2.26 | $ | 1.35 | |||
12
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Three Months Ended March 31, | |||||||
(In thousands, except per unit data) | 2019 | 2018 | |||||
Diluted income per common unit | |||||||
Weighted average common units—basic | 12,255 | 12,238 | |||||
Plus: dilutive effect of Warrants | 1,096 | 424 | |||||
Plus: dilutive effect of Preferred Units | 6,664 | 9,463 | |||||
Weighted average common units—diluted | 20,015 | 22,125 | |||||
Net income from continuing operations | $ | 35,765 | $ | 26,286 | |||
Less: diluted net income from continuing operations attributable to the general partner | (715 | ) | (526 | ) | |||
Diluted net income from continuing operations attributable to common unitholders | $ | 35,050 | $ | 25,760 | |||
Diluted net loss from discontinued operations attributable to common unitholders | $ | (45 | ) | $ | (1,909 | ) | |
Net income | $ | 35,719 | $ | 24,338 | |||
Less: diluted net income attributable to the general partner | (714 | ) | (487 | ) | |||
Diluted net income attributable to common unitholders | $ | 35,005 | $ | 23,851 | |||
Diluted net income from continuing operations per common unit | $ | 1.75 | $ | 1.16 | |||
Diluted net loss from discontinued operations per common unit | $ | — | $ | (0.09 | ) | ||
Diluted net income per common unit | $ | 1.75 | $ | 1.08 | |||
7. 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. that are managed accordingly. NRP has the following two operating segments:
Coal Royalty and Other—consists primarily of coal royalty and coal-related transportation and processing assets. Other assets include industrial minerals royalty properties, aggregates royalty properties, oil and gas royalty properties and timber. The Partnership's coal reserves are primarily located in Appalachia, the Illinois Basin and the Northern Powder River Basin in the United States. The Partnership's industrial minerals and aggregates properties are located in a number of states across the United States. The Partnership's oil and gas royalty assets are primarily located in Louisiana.
Soda Ash—consists of the Partnership's 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin of Wyoming. Ciner Resources LP, the Partnership's operating partner, mines the trona, processes it into soda ash, and distributes the soda ash both domestically and internationally to the glass and chemicals industries.
In December 2018, the Partnership sold its construction aggregates business which enabled it to further reduce debt and focus on its Coal Royalty and Other and Soda Ash business segments. See Note 4. Discontinued Operations for more information.
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 and royalty, information technology and shared facilities services and are included in Operating and maintenance expenses on the 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 Consolidated Statements of Comprehensive Income.
13
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
The following table summarizes certain financial information for each of the Partnership's business segments:
Operating Segments | ||||||||||||||||
(In thousands) | Coal Royalty and Other | Soda Ash | Corporate and Financing | Total | ||||||||||||
Three Months Ended March 31, 2019 | ||||||||||||||||
Revenues | $ | 55,103 | $ | 11,682 | $ | — | $ | 66,785 | ||||||||
Gain on asset sales | 256 | — | — | 256 | ||||||||||||
Operating and maintenance expenses | 8,360 | — | — | 8,360 | ||||||||||||
Depreciation, depletion and amortization | 4,392 | — | — | 4,392 | ||||||||||||
General and administrative expenses | — | — | 4,350 | 4,350 | ||||||||||||
Interest expense, net | — | — | 14,174 | 14,174 | ||||||||||||
Net income (loss) from continuing operations | 42,607 | 11,682 | (18,524 | ) | 35,765 | |||||||||||
Loss from discontinued operations | — | — | — | (46 | ) | |||||||||||
Three Months Ended March 31, 2018 | ||||||||||||||||
Revenues | $ | 49,857 | $ | 9,621 | $ | — | $ | 59,478 | ||||||||
Gain on asset sales | 651 | — | — | 651 | ||||||||||||
Operating and maintenance expenses | 6,215 | — | — | 6,215 | ||||||||||||
Depreciation, depletion and amortization | 5,100 | — | — | 5,100 | ||||||||||||
General and administrative expenses | — | — | 4,336 | 4,336 | ||||||||||||
Asset impairment | 242 | — | — | 242 | ||||||||||||
Interest expense, net | — | — | 17,950 | 17,950 | ||||||||||||
Net income (loss) from continuing operations | 38,951 | 9,621 | (22,286 | ) | 26,286 | |||||||||||
Loss from discontinued operations | — | — | — | (1,948 | ) | |||||||||||
As of March 31, 2019 | ||||||||||||||||
Total assets of continuing operations | $ | 1,001,385 | $ | 249,936 | $ | 19,852 | $ | 1,271,173 | ||||||||
Total assets of discontinued operations | — | — | — | 998 | ||||||||||||
As of December 31, 2018 | ||||||||||||||||
Total assets of continuing operations | $ | 986,680 | $ | 247,051 | $ | 106,923 | $ | 1,340,654 | ||||||||
Total assets of discontinued operations | — | — | — | 993 | ||||||||||||
14
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
8. Equity Investment
The Partnership accounts for its 49% investment in Ciner Wyoming using the equity method of accounting. Activity related to this investment is as follows:
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Balance at beginning of period | $ | 247,051 | $ | 245,433 | |||
Income allocation to NRP’s equity interests | 12,894 | 10,832 | |||||
Amortization of basis difference | (1,212 | ) | (1,211 | ) | |||
Comprehensive income (loss) from unconsolidated investment | 1,003 | (1,125 | ) | ||||
Distribution | (9,800 | ) | (12,250 | ) | |||
Balance at end of period | $ | 249,936 | $ | 241,679 | |||
The following table represents summarized financial information for Ciner Wyoming as derived from the respective unaudited financial statements for the three months ended March 31, 2019 and 2018, respectively:
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Sales | $ | 130,436 | $ | 121,219 | |||
Gross profit | 34,102 | 28,222 | |||||
Net income | 26,315 | 22,107 | |||||
9. Mineral Rights, Net
The Partnership’s mineral rights consist of the following:
March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||
(In thousands) | Cost | Accumulated Depletion | Net Book Value | Cost | Accumulated Depletion | Net Book Value | |||||||||||||||||
Coal properties | $ | 1,164,845 | $ | (454,129 | ) | $ | 710,716 | $ | 1,164,845 | $ | (451,210 | ) | $ | 713,635 | |||||||||
Aggregates properties | 24,920 | (12,349 | ) | 12,571 | 24,920 | (11,814 | ) | 13,106 | |||||||||||||||
Oil and gas royalty properties | 12,395 | (7,696 | ) | 4,699 | 12,395 | (7,632 | ) | 4,763 | |||||||||||||||
Other | 13,158 | (1,574 | ) | 11,584 | 13,158 | (1,550 | ) | 11,608 | |||||||||||||||
Total mineral rights, net | $ | 1,215,318 | $ | (475,748 | ) | $ | 739,570 | $ | 1,215,318 | $ | (472,206 | ) | $ | 743,112 | |||||||||
Depletion expense related to the Partnership’s mineral rights is included in Depreciation, depletion and amortization on the Partnership's Consolidated Statements of Comprehensive Income and totaled $3.5 million and $4.3 million for the three months ended March 31, 2019 and 2018, respectively.
15
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
10. Intangible Assets, Net
The Partnership's intangible assets consist of above-market coal royalty and related transportation contracts with subsidiaries of Foresight Energy in which the Partnership receives throughput fees for the handling and transportation of coal. The Partnership's intangible assets included on its Consolidated Balance Sheets are as follows:
March 31, | December 31, | ||||||
(In thousands) | 2019 | 2018 | |||||
Intangible assets at cost | $ | 81,109 | $ | 81,109 | |||
Less: accumulated amortization | (39,355 | ) | (38,596 | ) | |||
Total intangible assets, net | $ | 41,754 | $ | 42,513 | |||
Amortization expense included in Depreciation, depletion and amortization on the Partnership's Consolidated Statements of Comprehensive Income was $0.8 million and $0.7 million for the three months ended March 31, 2019 and 2018, respectively.
16
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
11. Debt, Net
The Partnership's debt consists of the following:
March 31, | December 31, | ||||||
(In thousands) | 2019 | 2018 | |||||
NRP LP debt: | |||||||
10.500% senior notes, with semi-annual interest payments in March and September, due March 2022, $241 million issued at par and $105 million issued at 98.75% | $ | 345,638 | $ | 345,638 | |||
Opco debt: | |||||||
Revolving credit facility | $ | — | $ | — | |||
Senior notes | |||||||
8.38% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2019 | $ | — | $ | 21,319 | |||
5.05% with semi-annual interest payments in January and July, with annual principal payments in July, due July 2020 | 13,603 | 15,290 | |||||
5.55% with semi-annual interest payments in June and December, with annual principal payments in June, due June 2023 | 11,823 | 13,414 | |||||
4.73% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2023 | 30,356 | 37,195 | |||||
5.82% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 63,834 | 89,529 | |||||
8.92% with semi-annual interest payments in March and September, with annual principal payments in March, due March 2024 | 20,059 | 27,185 | |||||
5.03% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 91,821 | 107,013 | |||||
5.18% with semi-annual interest payments in June and December, with annual principal payments in December, due December 2026 | 23,536 | 30,555 | |||||
Total Opco senior notes | $ | 255,032 | $ | 341,500 | |||
Total debt at face value | $ | 600,670 | $ | 687,138 | |||
Net unamortized debt discount | (1,167 | ) | (1,266 | ) | |||
Net unamortized debt issuance costs | (11,802 | ) | (13,114 | ) | |||
Total debt, net | $ | 587,701 | $ | 672,758 | |||
Less: current portion of long-term debt | (46,024 | ) | (115,184 | ) | |||
Total long-term debt, net | $ | 541,677 | $ | 557,574 | |||
NRP LP Debt
2022 Senior Notes
As of March 31, 2019 and December 31, 2018, NRP and NRP Finance were in compliance with the terms of the Indenture relating to their 10.500% Senior Notes due 2022 (the "2022 Senior Notes"). In April 2019, NRP and NRP Finance issued $300 million aggregate principal amount of 9.125% senior notes due 2025 ("2025 Senior Notes") and plans to use the net proceeds and cash on hand to fund the redemption of the 2022 Senior Notes in May 2019. See Note 17. Subsequent Events for more information.
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 NRP Trona LLC. As of March 31, 2019 and December 31, 2018, Opco was in compliance with the terms of the financial covenants contained in its debt agreements.
17
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Opco Credit Facility
As of March 31, 2019, the Partnership did not have any borrowings outstanding under Opco’s Third Amended and Restated Credit Agreement, as amended (the "Opco Credit Facility") and had $100 million in available borrowing capacity. In April 2019, the Partnership entered into the Fourth Amendment to the Opco Credit Facility which extended the term of the Opco Credit Facility from April 2020 to April 2023. See Note 17. Subsequent Events for more information.
The weighted average interest rate for the borrowings outstanding under the Opco Credit Facility during the three months ended March 31, 2018 was 5.91%. There were no borrowings outstanding under the Opco Credit Facility during the three months ended March 31, 2019. Debt issuance cost related to the Opco Credit Facility were $1.4 million and $1.7 million at March 31, 2019 and December 31, 2018, respectively, and have been capitalized and included in Other assets on the Partnership's Consolidated Balance Sheets.
The Opco Credit Facility is collateralized and secured by liens on certain of Opco’s assets with carrying values of $546.2 million and $548.9 million classified as Mineral rights, net and Plant and equipment, net and on the Partnership’s Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018, respectively.
Opco Senior Notes
As of March 31, 2019 and December 31, 2018, the private placement senior notes ("Opco Senior Notes") had cumulative principal balances of $255.0 million and $341.5 million, respectively. Opco made mandatory principal payments of $86.5 million, which included a $49.3 million pre-payment as a result of the sale of the Partnership's construction aggregates business during the three months ended March 31, 2019, and $40.8 million during the three months ended March 31, 2018.
The 8.38% and 8.92% Opco Senior Notes also provide 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, 2019.
12. Fair Value Measurements
Fair Value of Financial Assets and Liabilities
The Partnership’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, contracts receivable, debt, Preferred Units and Warrants. The carrying amounts reported on the Consolidated Balance Sheets for cash and cash equivalents and restricted cash approximate fair value due to their short-term nature. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three months ended March 31, 2019 or 2018. The Partnership uses available market data and valuation methodologies to estimate the fair value of debt.
The following table shows the carrying amount and estimated fair value of the Partnership's debt and contracts receivable:
March 31, 2019 | December 31, 2018 | ||||||||||||||
(In thousands) | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||
Debt: | |||||||||||||||
NRP 2022 Senior Notes (1) | $ | 334,929 | $ | 364,648 | $ | 334,024 | $ | 356,871 | |||||||
Opco Senior Notes (2) | 252,772 | 269,059 | 338,734 | 352,599 | |||||||||||
Opco Revolving Credit Facility (3) | — | — | — | — | |||||||||||
Assets: | |||||||||||||||
Contracts receivable (current and long-term) (4) | $ | 40,331 | $ | 34,405 | $ | 40,776 | $ | 34,704 | |||||||
(1) | The Level 1 fair value is based upon quotations obtained for identical instruments on the closing trading prices near period end. |
18
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
(2) | Due to no observable quoted prices on these instruments, the Level 3 fair value is estimated by management using quotations obtained for the NRP 2022 Senior Notes on the closing trading prices near period end. |
(3) | The Level 3 fair value approximates the outstanding borrowing amount because the interest rates are variable and reflective of market rates and the terms of the credit facility allow the Partnership to repay this debt at any time without penalty. |
(4) | The Level 3 fair value is determined based on the present value of future cash flow projections related to the underlying assets. |
NRP has embedded derivatives in the Preferred Units related to certain conversion options, redemption features and the change of control provision that are accounted for separately from the Preferred Units as assets and liabilities at fair value on the Partnership's Consolidated Balance Sheets. Level 3 valuation of the embedded derivatives are based on numerous factors including the likelihood of the event occurring. The embedded derivatives are revalued quarterly and changes in their fair value would be recorded in Other expense, net in the Partnership's Consolidated Statements of Comprehensive Income. The embedded derivatives had zero value as of March 31, 2019 and December 31, 2018.
13. 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 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 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 on the Partnership's Consolidated Statements of Comprehensive Income.
Direct general and administrative expenses charged to the Partnership by QMC and WPPLP are included in the Partnership's Consolidated Statement of Comprehensive Income as follows:
Three Months Ended March 31, | |||||||
(In thousands) | 2019 | 2018 | |||||
Operating and maintenance expenses | $ | 1,635 | $ | 1,675 | |||
General and administrative expenses | 963 | 931 | |||||
During the three months ended March 31, 2019 and 2018, the Partnership recognized $3.0 million and $0.6 million in Operating and maintenance expenses, respectively, on its Consolidated Statements of Comprehensive Income related to an overriding royalty agreement with WPPLP.
The Partnership had Accounts payable on its Consolidated Balance Sheets to QMC of $0.4 million and to WPPLP of $0.8 million as of March 31, 2019 and to QMC of $0.5 million and to WPPLP of $1.4 million as of December 31, 2018.
19
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Quintana Capital Group GP, Ltd.
Corbin J. Robertson, Jr. is a principal in Quintana Capital Group GP, Ltd. ("Quintana Capital"), which controls several private equity funds focused on investments in the energy business. In connection with the formation of Quintana Capital, the Partnership adopted a formal conflicts policy that establishes the opportunities that will be pursued by the Partnership and those that will be pursued by Quintana Capital. The governance documents of Quintana Capital’s affiliated investment funds reflect the guidelines set forth in the Partnership's conflicts policy. At March 31, 2019, a fund controlled by Quintana Capital owned a substantial interest in Corsa Coal Corp. ("Corsa"), a coal mining company traded on the TSX Venture Exchange that was one of the Partnership’s lessees in Tennessee. During the second quarter of 2018, Corsa assigned its lease with NRP to a third party and is no longer deemed a related party. Coal related revenues from Corsa totaled $0.2 million for the three months ended March 31, 2018.
14. Major Customers
Revenues from customers that exceeded 10 percent of total revenues for any of the periods presented below are as follows:
Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | |||||||||||||
(In thousands) | Revenues | Percent | Revenues | Percent | ||||||||||
Foresight Energy (1) | $ | 16,191 | 24 | % | $ | 12,431 | 21 | % | ||||||
Contura Energy (1) (2) | 11,111 | 17 | % | 5,505 | 9 | % | ||||||||
(1) | Revenues from Foresight Energy and Contura Energy are included within the Partnership's Coal Royalty and Other segment. |
(2) | In the fourth quarter of 2018, Contura Energy and Alpha Natural Resources merged. Revenues during the three months ended March 31, 2019 relate to the new consolidated Contura Energy while revenues during the three months ended March 31, 2018 do not include revenues from Alpha Natural Resources. |
15. Commitments and Contingencies
Legal
NRP is involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, Partnership management believes these claims will not have a material effect on the Partnership’s financial position, liquidity or operations. During the first quarter, NRP was also involved in the matters described below.
Anadarko Contingent Consideration Payment Dispute
In January 2013, NRP acquired a non-controlling 48.51% general partner interest in OCI Wyoming, L.P. ("OCI LP") and all of the preferred stock and a portion of the common stock of OCI Wyoming Co. ("OCI Co") (which in turn owned a 1% limited partner interest in OCI LP) from Anadarko Holding Company and its subsidiary, Big Island Trona Company (together, "Anadarko"). The remaining general partner interest in OCI LP and common stock of OCI Co were owned by subsidiaries of OCI Chemical Corporation.
The acquisition agreement provided for additional contingent consideration of up to $50 million to be paid by NRP if certain performance criteria were met at OCI LP as defined in the purchase and sale agreement in any of the years 2013, 2014 or 2015. For those years, NRP paid an aggregate of $11.5 million to Anadarko in full satisfaction of these contingent consideration payment obligations.
In July 2013, pursuant to a series of transactions in connection with an initial public offering by a subsidiary of OCI Chemical Corporation, the ownership structure in OCI LP was simplified. In connection with such reorganization, NRP exchanged the stock of OCI Co for a limited partner interest in OCI LP. Following the reorganization, NRP's interest in OCI LP increased to 49%, consisting of both limited and general partner interests. The restructuring did not have any impact on the operations, revenues, management or control of OCI LP.
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NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
In July 2017, Anadarko filed a lawsuit against Opco and NRP Trona LLC in the District Court of Harris County, Texas, 157th judicial district. The complaint alleged that the transactions conducted in 2013 triggered an acceleration of NRP's obligation under the purchase agreement with Anadarko to pay additional contingent consideration in full and demanded immediate payment of such amount, together with interest, court costs and attorneys’ fees. NRP does not believe the reorganization transactions triggered an obligation to pay any additional contingent consideration and is vigorously defending this lawsuit. However, the ultimate outcome cannot be predicted with certainty and the Partnership estimates a possible range of loss between $0, if it prevails, and approximately $40 million plus interest, court costs and attorneys’ fees if Anadarko prevails and is awarded the full damages it seeks.
16. Unit-Based Compensation
The 2017 LTIP awards granted in the first quarter of 2019 and 2018 were valued using the closing price of NRP's units as of the grant date. The grant date fair value of these awards granted during the three months ended March 31, 2019 and 2018 were $5.2 million and $2.2 million, respectively. Total unit-based compensation expense associated with these awards was $0.9 million and $0.6 million for the three months ended March 31, 2019 and 2018, respectively and is included in General and administrative expenses and Operating and maintenance expenses in the Partnership's Consolidated Statements of Comprehensive Income. The unamortized cost associated with unvested outstanding awards as of March 31, 2019 is $4.8 million, which is to be recognized over a weighted average period of 2.6 years. The unamortized cost associated with unvested outstanding awards as of December 31, 2018 was $1.2 million.
A summary of the unit activity in the outstanding grants during 2019 is as follows:
(In thousands) | Common Units | Weighted Average Exercise Price | ||||
Outstanding at January 1, 2019 | 55 | $ | 29.10 | |||
Granted | 126 | $ | 41.47 | |||
Fully vested and issued | (12 | ) | $ | 41.47 | ||
Forfeitures | (15 | ) | $ | 37.33 | ||
Outstanding at March 31, 2019 | 155 | $ | 37.45 | |||
17. Subsequent Events
The following represents material events that have occurred subsequent to March 31, 2019 through the time of the Partnership’s filing of its Quarterly Report on Form 10-Q with the SEC:
Distributions Declared
In April 2019, the Board of Directors of GP Natural Resource Partners LLC ("the Board") declared a distribution of $0.45 per common unit with respect to the first quarter of 2019. The Board also declared a cash distribution on NRP's Preferred Units with respect to the first quarter of 2019 totaling $7.5 million. In addition, the Board declared a one-time special cash distribution of $0.85 per common unit. The purpose of this special distribution is to cover the common unitholders’ tax liability resulting from the sale of NRP’s construction aggregates business in December 2018. The common unit distributions declared in April will be paid on May 14, 2019 to common unitholders of record on May 7, 2019.
21
NATURAL RESOURCE PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(Unaudited)
Debt Refinancings
Opco Credit Facility Amendment
In April 2019, the Partnership entered into the Fourth Amendment (the “Fourth Amendment”) to the Opco Credit Facility. The Fourth Amendment extends the term of the Opco Credit Facility until April 2023. Lender commitments under the Opco Credit Facility remain at $100.0 million. The Credit Facility contains financial covenants requiring Opco to maintain:
• | A leverage ratio of consolidated indebtedness to EBITDDA (as defined in the Opco Credit Facility) not to exceed 4.0x; 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 4.0x to 3.0x; 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. |
The amended Opco Credit Facility also provides that the Partnership may make a one-time special tax distribution to common unitholders at any time prior to October 18, 2019 without triggering the permanent decrease in the maximum leverage ratio from 4.0x to 3.0x. The purpose of the special distribution is to cover the common unitholders’ tax liability resulting from the Partnership's sale of its construction aggregates business in December 2018. As discussed above, a one-time special distribution of $0.85 per common unit was declared by the Board in April 2019.
Issuance of 2025 Senior Notes and Redemption of 2022 Senior Notes
In April 2019, NRP and NRP Finance issued $300 million aggregate principal amount of 9.125% Senior Notes due 2025 ("2025 Senior Notes") and plans to use the net proceeds and approximately $76 million of cash on hand to fund the redemption of the 2022 Senior Notes. The 2022 Senior Notes will be redeemed on May 11, 2019 at a redemption price equal to 105.250% of the principal amount of the 2022 Senior Notes, plus accrued and unpaid interest. 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, are payable semi-annually on June 30 and December 30 beginning December 30, 2019, and mature on June 30, 2025.
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 2022 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.
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. None of NRP's subsidiaries guarantee the 2025 Senior Notes.
Financial Statement Impact of Debt Refinancings
The debt refinancings are expected to result in other expense of approximately $29 million which consists of an $18 million premium to redeem the 2022 Senior Notes and of an $11 million write-off of unamortized debt issuance and debt discount costs that will be recorded on the income statement in the second quarter of 2019. In addition, the Partnership incurred approximately $6 million of deferred financing fees that will be recorded on the balance sheet in the second quarter of 2019.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following review of operations for the three month periods ended March 31, 2019 and 2018 should be read in conjunction with our consolidated financial statements and the notes to consolidated financial statements included in this Form 10-Q and with the consolidated financial statements, notes to consolidated financial statements and management’s discussion and analysis included in the Natural Resource Partners L.P. Annual Report on Form 10-K for the year ended December 31, 2018.
As used herein, unless the context otherwise requires: "we," "our," "us" and the "Partnership" refer to Natural Resource Partners L.P. and, where the context requires, our subsidiaries. References to "NRP" and "Natural Resource Partners" refer to Natural Resource Partners L.P. only, and not to NRP (Operating) LLC or any of Natural Resource Partners L.P.’s subsidiaries. References to "Opco" refer to NRP (Operating) LLC, a wholly owned subsidiary of NRP, and its subsidiaries. NRP Finance Corporation ("NRP Finance") is a wholly owned subsidiary of NRP and a co-issuer with NRP on the 10.50% senior notes due 2022 (the "2022 Senior Notes") and the 9.125% senior notes due 2025 (the "2025 Senior Notes").
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this 10-Q may constitute forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such forward-looking statements include, among other things, statements regarding: our business strategy; our liquidity and access to capital and financing sources; our financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected production levels by our lessees; Ciner Wyoming LLC’s ("Ciner Wyoming's") trona mining and soda ash refinery operations; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving us, and of scheduled or potential regulatory or legal changes; and global and U.S. economic conditions.
These forward-looking statements speak only as of the date hereof and are made based upon our current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. You should not put undue reliance on any forward-looking statements. See "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018 for important factors that could cause our actual results of operations or our actual financial condition to differ.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
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. For a description of Opco's debt agreements, see Note 11. Debt, Net in the Notes to Consolidated Financial Statements included herein as well as in "Item 8. Financial Statements and Supplementary Data—Note 13. Debt, Net" in our Annual Report on Form 10-K for the year ended December 31, 2018. 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.
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Distributable Cash Flow
Distributable cash flow ("DCF") represents 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; 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, DCF presented below 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. DCF 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
Free cash flow ("FCF") represents 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; 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. FCF 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. FCF may not be calculated the same for us as for other companies. FCF 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 the Partnership's ability to make cash distributions and repay debt.
Introduction
The following discussion and analysis presents management's view of our business, financial condition and overall performance. Our discussion and analysis consists of the following subjects:
•Executive Overview
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance Sheet Transactions
•Related Party Transactions
•Summary of Critical Accounting Estimates
•Recent Accounting Standards
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Executive Overview
We are a diversified natural resource company engaged principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and own a non-controlling 49% interest in Ciner Wyoming LLC ("Ciner Wyoming"), a producer of natural soda ash. Our common units trade on the New York Stock Exchange under the symbol "NRP". Our business is organized into two operating segments:
Coal Royalty and Other—consists primarily of coal royalty properties and coal-related transportation and processing assets. Other assets include industrial mineral royalty properties, aggregates royalty properties, oil and gas royalty properties and timber. Our coal reserves are primarily located in Appalachia, the Illinois Basin and the Northern Powder River Basin in the United States. Our industrial minerals and aggregates properties are located in a number of states across the United States. Our oil and gas royalty assets are primarily located in Louisiana.
Soda Ash—consists of our 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining operation and soda ash refinery in the Green River Basin of Wyoming. Ciner Resources LP, our operating partner, mines the trona, processes it into soda ash, and distributes the soda ash both domestically and internationally into the glass and chemicals industries.
In December 2018, we sold our construction aggregates business. Our exit from the construction aggregates business enabled us to further reduce debt, focus on our Coal Royalty and Other and Soda Ash business segments. As a result, we have classified the assets and liabilities, operating results and cash flows of the construction aggregates business as discontinued operations in the consolidated financial statements for all periods presented. See Note 4. Discontinued Operations for more information.
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.
In April 2019, we amended our revolving credit facility to extend the maturity date from April 2020 to April 2023 with lender commitments remaining at $100 million. We also issued $300 million principal amount of 9.125% senior unsecured notes due June 2025. We plan to use these net proceeds, together with approximately $76 million of cash on hand to redeem all of the outstanding 10.50% senior unsecured notes in May 2019.
We remain focused on strengthening our balance sheet and maintaining sufficient liquidity to manage our business through periods of volatility in commodity prices. We devote significant amounts of cash each year to make mandatory amortization payments on the Opco Senior Notes as well as to make distributions on our preferred units and common units. Accordingly, preserving the financial flexibility to respond to changes in market conditions while continuing to service our debt and make distributions to unitholders is one of our key objectives.
Our financial results by segment for the three months ended March 31, 2019 are as follows:
Operating Segments | ||||||||||||||||
(In thousands) | Coal Royalty and Other | Soda Ash | Corporate and Financing | Total | ||||||||||||
Revenues and other income | $ | 55,359 | $ | 11,682 | $ | — | $ | 67,041 | ||||||||
Net income (loss) from continuing operations | $ | 42,607 | $ | 11,682 | $ | (18,524 | ) | $ | 35,765 | |||||||
Adjusted EBITDA (1) | $ | 46,999 | $ | 9,800 | $ | (4,350 | ) | $ | 52,449 | |||||||
Cash flow provided by (used in) continuing operations | ||||||||||||||||
Operating activities | $ | 42,916 | $ | 9,800 | $ | (29,884 | ) | $ | 22,832 | |||||||
Investing activities | $ | 697 | $ | — | $ | — | $ | 697 | ||||||||
Financing activities | $ | — | $ | — | $ | (99,852 | ) | $ | (99,852 | ) | ||||||
Distributable cash flow (1) | $ | 43,613 | $ | 9,800 | ||||||||||||