NPR(NRP) - 2023 Q1 - Quarterly Report

Part I. Financial Information Item 1. Consolidated Financial Statements This section presents Natural Resource Partners L.P.'s unaudited consolidated financial statements for Q1 2023, including balance sheets, income, and cash flow Consolidated Balance Sheets As of March 31, 2023, total assets were $835.7 million, a decrease from $877.1 million at the end of 2022, primarily due to a reduction in cash and cash equivalents Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $835,668 | $877,131 | | Cash and cash equivalents | $17,655 | $39,091 | | Mineral rights, net | $408,371 | $412,312 | | Equity in unconsolidated investment | $295,361 | $306,470 | | Total Liabilities | $231,453 | $235,087 | | Current portion of long-term debt, net | $39,055 | $39,076 | | Long-term debt, net | $133,821 | $129,205 | | Total Partners' Capital | $470,899 | $477,457 | Consolidated Statements of Comprehensive Income For Q1 2023, net income significantly increased to $79.3 million from $63.9 million in Q1 2022, driven by higher revenues and lower interest expense Q1 Performance Comparison (in thousands, except per unit data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Royalty and other mineral rights | $76,271 | $71,083 | | Total revenues and other income | $99,219 | $89,716 | | Income from operations | $82,128 | $73,286 | | Interest expense, net | $(2,853) | $(9,387) | | Net income | $79,275 | $63,899 | | Net income attributable to common unitholders | $55,258 | $55,271 | | Basic net income per common unit | $4.40 | $4.45 | | Diluted net income per common unit | $3.44 | $3.11 | Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $72.9 million in Q1 2023, while net cash used in financing activities rose sharply to $95.0 million due to distributions, debt repayments, and preferred unit redemption Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $72,900 | $52,331 | | Net cash provided by investing activities | $697 | $0 | | Net cash used in financing activities | $(95,033) | $(52,261) | | Net (decrease) increase in cash | $(21,436) | $70 | - Key financing activities in Q1 2023 included $94.2 million in debt borrowings, $89.7 million in debt repayments, $40.9 million in distributions to common unitholders, and $48.1 million for the redemption of preferred units[20] Notes to Consolidated Financial Statements The notes provide detailed information supporting the financial statements, including business nature, revenue recognition, preferred units, and subsequent events - The Partnership's business consists of owning, managing, and leasing a diversified portfolio of mineral properties and a 49% non-controlling interest in Sisecam Wyoming, a soda ash production business[22] - In February 2023, the Partnership redeemed 47,499 Class A Preferred Units for $47.5 million in cash, leaving 202,501 units outstanding[45] - In May 2023, subsequent to the quarter end, the Board of Directors declared a common unit distribution of $0.75 per unit and a $6.1 million cash distribution on preferred units for Q1 2023[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial results, covering segment performance, liquidity, capital resources, and non-GAAP measures Executive Overview and Current Results The company generated $72.9 million in operating cash flow and ended Q1 2023 with $56.5 million in liquidity, achieving a 0.5x leverage ratio Q1 2023 Financial Highlights | Metric | Value | | :--- | :--- | | Operating Cash Flow | $72.9 million | | Free Cash Flow | $73.5 million | | Quarter-End Liquidity | $56.5 million | | Leverage Ratio | 0.5x | - In March 2023, a special cash distribution of $2.43 per common unit was paid to help cover unitholder tax liabilities associated with 2022 performance[110] Results of Operations Total revenues increased 11% year-over-year to $99.2 million in Q1 2023, with net income rising to $79.3 million primarily due to lower interest expense Segment Revenue and Other Income (in thousands) | Operating Segment | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Mineral Rights | $79,965 | $74,879 | 7% | | Soda Ash | $19,254 | $14,837 | 30% | | Total | $99,219 | $89,716 | 11% | - Approximately 75% of coal royalty revenues were derived from metallurgical coal in Q1 2023[121] - Carbon neutral initiative revenues were $2.1 million in Q1 2023, primarily from a subsurface CO2 storage transaction[121] - Adjusted EBITDA increased to $77.7 million in Q1 2023 from $75.6 million in Q1 2022[126] Liquidity and Capital Resources As of March 31, 2023, the Partnership had $56.5 million in liquidity and a 0.5x leverage ratio, with cash flow from operations increasing by $20.6 million year-over-year Leverage Ratio Calculation (as of March 31, 2023) | Metric | Value (in thousands) | | :--- | :--- | | Debt at March 31, 2023 | $173,591 | | Last 12 Months Adjusted EBITDA | $319,418 | | Leverage Ratio | 0.5x | - Cash flows used in financing activities increased by $42.8 million year-over-year, primarily due to a $73.0 million repayment on the Opco Credit Facility, a $48.1 million redemption of preferred units, and a $35.2 million increase in common unit distributions[133][138] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include commodity price volatility for coal and soda ash, and interest rate risk on its variable-rate debt - The company's revenues and financial condition depend substantially on prevailing commodity prices for coal and soda ash, which have been historically volatile[139][141] - The company is exposed to interest rate risk through its Opco Credit Facility; a hypothetical 1% increase in interest rates would raise annual interest expense by about $0.9 million on the $91.2 million outstanding balance as of March 31, 2023[142] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures are effective in providing reasonable assurance that required information is recorded, processed, and reported in a timely manner[143] - There were no material changes in the Partnership's internal control over financial reporting during the first quarter of 2023[144] Part II. Other Information Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings that management does not believe will materially affect its financial position, liquidity, or operations - The company is involved in ordinary course legal proceedings that are not expected to have a material impact[146] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K were reported - No material changes from the risk factors disclosed in the 2022 Form 10-K were reported[147] Other Items (Items 2, 3, 4, 5) The report indicates no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures, and no other information to report - The company reported 'None' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[148][149][150][151] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and interactive data files