Natural Resource Partners L.P. Announces First Quarter 2017 Results

HOUSTON, May 10, 2017 /PRNewswire/ --

First Quarter 2017 Highlights

• Completion of recapitalization and extension of 2018 debt maturities
• Net income attributable to the common unitholders and general partner of $14.3 million
• Basic net income per common unit of $1.15
• Net cash provided by operating activities of $20.2 million
• Net income from continuing operations of $17.0 million
• Adjusted EBITDA of $51.3 million

Natural Resource Partners L.P. (NYSE:NRP) today reported net income attributable to the common unitholders and general partner for the first quarter of 2017 of $14.3 million, a decrease of $9.1 million from the first quarter of 2016.  NRP's first quarter 2017 results were impacted by costs associated with the recapitalization transactions and asset impairments, while both first quarter and fourth quarter 2016 results include impairment charges and gains on asset sales related to NRP's deleveraging activities.  Please see table (in millions) below for comparative financial information:

"The first quarter of 2017 was a transformational quarter for NRP, as we completed the recapitalization transactions that strengthened our balance sheet, extended our debt maturities, and enhanced our liquidity," said Wyatt Hogan, President and Chief Operating Officer.  "From an operations perspective, we realized the benefits of materially higher metallurgical coal pricing, as well as increased production from our Illinois Basin properties, reflecting a stronger thermal coal market.  In addition, our soda ash business posted a solid quarter relative to the first quarter of 2016."

Business Results and Outlook

The table below presents NRP's business results by segment for the three months ended March 31, 2017, March 31, 2016 and December 31, 2016:

Segment Information

Coal Royalty and Other

NRP continued to benefit from higher metallurgical coal prices in the first quarter of 2017, with substantially increased price realizations in Central and Southern Appalachia as compared to the first quarter of 2016.  Metallurgical coal prices increased significantly over the course of 2016, peaking in the fourth quarter primarily as a result of supply rationalizations in China.  While prices retreated in the first quarter of 2017 as more production came on the market, they remained significantly higher than in the comparable period in 2016.  Following another recent spike caused by Cyclone Debbie at the end of March, metallurgical coal prices are in the process of again returning to more sustainable long-term levels.  Over the remainder of 2017, NRP expects prices to remain above the lows experienced in the first half of 2016.  NRP derived approximately 59% of its coal royalty revenues and 38% of its coal production from metallurgical coal in the first quarter.  The domestic thermal coal markets have also shown modest improvements, as production cuts over the last year have rationalized coal stockpiles, and we saw increased thermal coal production from our Illinois Basin properties. Although a mild winter has tempered demand for thermal coal, natural gas prices remain higher than 2016, causing thermal coal to be more competitive for electricity generation as compared to recent years. Despite these improvements, producers of Central Appalachian thermal coal continue to face challenges, as many still have large debt burdens and their production costs remain high relative to sales prices.

Coal royalty and other revenue for the quarter was $51.2 million and coal royalty and other operating income was $35.1 million, representing sequential increases of 11% and 46% respectively.  Compared to the same period of 2016, coal royalty and other revenue declined 17% and coal royalty and other operating income declined 21%.  After adjusting for impairment charges and gains on asset sales, coal royalty and other revenue and coal royalty and other operating income posted sequential increases of 16% and 21% respectively, and year-over-year growth of 30% and 51%, respectively. 

Soda Ash

Revenues and other income related to our equity investment in Ciner Wyoming increased $0.5 million, or 5%, from $9.8 million in the three months ended March 31, 2016 to $10.3 million in the three months ended March 31, 2017.  The positive variance was primarily driven by higher sales volumes combined with lower variable and SG&A costs.  In the first quarter of 2017, Ciner also benefited from higher than anticipated ANSAC pricing in Asia, which was offset in part by lower prices in North and South America.  NRP received $12.3 million in cash distributions from Ciner Wyoming in the first quarter of both 2017 and 2016.

VantaCore

VantaCore's construction aggregates mining business is largely dependent on the strength of the local markets that it serves and is seasonal, with the first quarter being the slowest.  Revenue for the first quarter was $27.2 million, and VantaCore recorded a net loss of $1.5 million, which was in line with expectations for the quarter.

Debt Reduction and Liquidity

During the first quarter of 2017, NRP completed the recapitalization transactions to improve liquidity and strengthen its balance sheet.  As of April 3, 2017, NRP had reduced its debt by $236 million from December 31, 2016 and extended $575 million of its 2018 debt maturities as of December 31, 2016 to 2020 and 2022.  NRP remains focused on further reducing its debt and repositioning the partnership for long-term growth.  During the three months ended March 31, 2017, NRP repaid $210 million outstanding under Opco's credit facility, $40.8 million of Opco's senior notes and $0.2 million of Opco's utility local improvement obligation. These repayments were partially offset by the issuance of $105.0 million of new senior notes due 2022.  On April 3, 2017, NRP redeemed $90 million in principal amount of its 2018 notes at a price of 104.563%.  NRP expects to redeem the remaining $94 million of 2018 notes at par in October 2017 using cash on hand and borrowings under Opco's credit facility.

First Quarter 2017 Distributions

On April 25, 2017, the Board of Directors of GP Natural Resource Partners LLC declared a distribution of $0.45 per unit  to be paid by the Partnership on May 12, 2017 to common unitholders of record on May 5, 2017. In addition, the Board declared a distribution on NRP's 12.0% Class A Convertible Preferred Units with respect to the period such units were outstanding during the first quarter. One-half of the distribution on the preferred units will be paid-in-kind through the issuance of 1,250 additional preferred units.

Conference Call

A conference call will be held today at 11:00 a.m. ET.  To join the conference call, dial (844) 379-6938 and provide the conference code 99679107.  Investors may also listen to the call via the Investor Relations section of the NRP website at www.nrplp.com. 
Audio replays of the conference call will be available for approximately one week.  To access the replay, dial (855) 859-2056 and provide the conference code 99679107 or visit the Investor Relations section of NRP's website.

Company Profile

Natural Resource Partners L.P., a master limited partnership headquartered in Houston, TX, is a diversified natural resource company that owns interests in coal, aggregates and industrial minerals across the United States.  A large percentage of NRP's revenues are generated from royalties and other passive income.  In addition, NRP owns an equity investment in Ciner Wyoming, a trona/soda ash operation, and owns VantaCore, making NRP one of the top 25 aggregates producers in the United States.

For additional information, please contact Kathy H. Roberts at 713-751-7555 or [email protected].  Further information about NRP is available on the partnership's website at http://www.nrplp.com.

Non-GAAP Financial Measures

"Adjusted EBITDA" is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings from unconsolidated investment, gain on reserve swaps, fair value adjustments for warrant liabilities and income to non-controlling interest; plus distributions from equity earnings in unconsolidated investment, interest expense, debt modification expense, warrant issuance expense, 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. Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

"Distributable Cash Flow" is a non-GAAP financial measure that we define as net cash provided by operating activities of continuing operations, plus returns of unconsolidated equity investments, proceeds from sales of assets, including those included in discontinued operations, and returns of long-term contract receivables—affiliate; less maintenance capital expenditures and distributions to non-controlling interest. DCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. DCF may not be calculated the same for us as for other companies. 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 the Partnership's ability to make cash distributions to our common and preferred unitholders and our general partner and repay debt.

"Adjusted Net Income" is a non-GAAP financial measure that we define as Net income attributable to common unitholders and general partner, plus recapitalization transaction expenses and asset impairments; less fair value adjustments for warrant liabilities and gains on asset sales. Adjusted net income should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted net income is useful in evaluating our financial performance because restructuring transaction expenses are one time charges, gains on asset sales are not related to the operations of our business and asset impairments and fair value adjustments for warrant liabilities are non-cash charges and excluding these from net income allows us to better compare results period-over-period. Reconciliations of Net income attributable to common unitholders and general partner to Adjusted net income are included in the table on the first page of this release.

"Adjusted EBITDA Excluding Gains on Asset Sales" is a non-GAAP financial measure that we define as Adjusted EBITDA (a non-GAAP measure defined above) less gains on asset sales. Adjusted EBITDA excluding gains on asset sales should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted EBITDA excluding gains on asset sales is useful in evaluating our financial performance because gains on asset sales are not related to the operations of our business and excluding these from net income allows us to better compare results period-over-period. Reconciliations of Net income (loss) from continuing operations to Adjusted EBITDA and Adjusted EBITDA to Adjusted EBITDA excluding gains on asset sales are included in the tables attached to this release.

"Adjusted Coal Royalty and Other Revenue" is a non-GAAP financial measure that we define as Coal royalty and other revenues less gains on asset sales. Adjusted coal royalty and other revenue should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted coal royalty and other revenue useful in evaluating our financial performance because gains on asset sales are not related to the operations of our business and excluding these from Coal royalty and other revenue allows us to better compare results period-over-period. Reconciliations of Coal royalty and other revenue to Adjusted coal royalty and other revenue are included in the tables attached to this release.

"Adjusted Coal Royalty and Other Operating Income" is a non-GAAP financial measure that we define as Coal royalty and other operating income plus asset impairments less gains on asset sales. Adjusted coal royalty and other operating income should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted coal royalty and other operating income is useful in evaluating our financial performance because gains on asset sales are not related to the operations of our business and asset impairments are non-cash charges and excluding these from Coal royalty and other operating income allows us to better compare results period-over-period. Reconciliations of Coal royalty and other operating income to Adjusted coal royalty and other operating income are included in the tables attached to this release.

"Adjusted Revenue and Other Income" is a non-GAAP financial measure that we define as Revenue and other income less gains on asset sales. Adjusted revenue and other income should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted revenue and other income is useful in evaluating our financial performance because gains on asset sales are not related to the operations of our business and excluding these from revenues and other income allows us to better compare results period-over-period. Reconciliations of Revenue and other income  to Adjusted revenue and other income are included in the tables attached to this release.

"Adjusted Corporate and Financing Costs" is a non-GAAP financial measure that we define as Corporate and financing net loss from continuing operations plus debt modification expense, warrant issuance expense and performance based incentive compensation expense less  fair value adjustments for warrant liabilities. Adjusted corporate and financing costs should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financial activities, or other income or cash flow statement data prepared in accordance with GAAP. Our management team believes Adjusted corporate and financing costs is useful in evaluating our financial performance because debt modification expense, warrant issuance expense and performance based incentive compensation expense are one time charges and fair value adjustments for warrant liabilities are non-cash charges and excluding these from net loss allows us to better compare results period-over-period. Reconciliations of Corporate and financing net loss from continuing operations to Adjusted corporate and financing costs are included in the tables attached to this release.

Forward-Looking Statements

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission.  All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements.  These statements are based on certain assumptions made by the partnership based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the partnership.  These risks include, but are not limited to, commodity prices; decreases in demand for coal, aggregates and industrial minerals, including trona/soda ash; changes in operating conditions and costs; production cuts by our lessees; unanticipated geologic problems; our liquidity, leverage and access to capital and financing sources; changes in the legislative or regulatory environment, and other factors detailed in Natural Resource Partners' Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.                 

-Financial Tables Follow-