NPR(NRP) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS This section presents the Partnership's unaudited consolidated financial statements, including balance sheets, income, capital, and cash flow statements, with detailed notes Consolidated Balance Sheets Total assets decreased to $820.3 million from $877.1 million, mainly due to reduced cash and mineral rights, with liabilities rising and partners' capital increasing | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $820,259 | $877,131 | $(56,872) | | Cash and cash equivalents | $10,730 | $39,091 | $(28,361) | | Mineral rights, net | $404,741 | $412,312 | $(7,571) | | Total Liabilities | $240,400 | $235,087 | $5,313 | | Total Partners' Capital | $499,760 | $477,457 | $22,303 | Consolidated Statements of Comprehensive Income Q2 revenues decreased 8.7% while net income rose 5.2%; six-month revenues were stable with net income up 14.4% | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Total Revenues & Other Income | $91,260 | $99,933 | (8.7%) | $190,479 | $189,649 | 0.4% | | Total Operating Expenses | $17,434 | $20,957 | (16.8%) | $34,525 | $37,387 | (7.6%) | | Net Income | $70,334 | $66,820 | 5.2% | $149,609 | $130,719 | 14.4% | | Basic Net Income per Common Unit | $2.93 | $4.65 | (37.0%) | $7.32 | $9.10 | (19.6%) | | Diluted Net Income per Common Unit | $2.49 | $3.29 | (24.3%) | $5.96 | $6.50 | (8.3%) | Consolidated Statements of Partners' Capital Partners' capital increased from $477.5 million to $499.8 million, driven by net income, partially offset by distributions and preferred unit redemptions | Metric (in thousands) | Balance at Dec 31, 2022 | Balance at June 30, 2023 | Change | | :-------------------- | :---------------------- | :----------------------- | :----- | | Common Unitholders | $404,799 | $444,838 | $40,039 | | General Partner | $5,977 | $6,913 | $936 | | Warrant Holders | $47,964 | $47,964 | $0 | | Accumulated Other Comprehensive Income (Loss) | $18,717 | $45 | $(18,672) | | Total Partners' Capital | $477,457 | $499,760 | $22,303 | Consolidated Statements of Cash Flows Net cash from operating activities rose significantly to $154.3 million, offset by increased cash used in financing for preferred unit redemptions and distributions | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | | Net Cash Provided by Operating Activities | $154,250 | $115,454 | $38,796 | | Net Cash Provided by Investing Activities | $1,304 | $909 | $395 | | Net Cash Used in Financing Activities | $(183,915) | $(192,527) | $8,612 | | Net Decrease in Cash and Cash Equivalents | $(28,361) | $(76,164) | $47,803 | | Cash and Cash Equivalents at End of Period | $10,730 | $59,356 | $(48,626) | Notes to Consolidated Financial Statements These notes detail accounting policies, segment performance, debt, and other financial disclosures, providing crucial context to the statements Note 1. Basis of Presentation The Partnership operates in mineral rights and soda ash segments, with financial statements prepared under GAAP for interim reporting, adopting ASU 2020-06 with no material impact - The Partnership's business includes owning, managing, and leasing diversified mineral properties in the U.S., and a 49% non-controlling interest in Sisecam Wyoming, a trona ore mining and soda ash production business[23] - Financial statements are prepared in accordance with GAAP for interim financial information and Rule 10-01 of Regulation S-X[24] - Adopted ASU 2020-06 on January 1, 2023, which did not have a material impact on the Consolidated Financial Statements[25] Note 2. Revenues from Contracts with Customers Mineral Rights segment revenues decreased for both three and six months ended June 30, 2023, primarily due to lower coal royalty revenues | Revenue Source (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :---------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Coal royalty revenues | $47,960 | $62,945 | (23.8%) | $105,983 | $118,394 | (10.5%) | | Royalty & other mineral rights revenues | $61,007 | $79,333 | (23.1%) | $137,278 | $150,416 | (8.7%) | | Transportation & processing services | $3,270 | $5,612 | (41.7%) | $6,868 | $9,408 | (27.0%) | | Total Mineral Rights segment revenues | $64,277 | $84,945 | (24.3%) | $144,146 | $159,824 | (9.8%) | | Deferred Revenue Activity (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | $46,437 | $61,862 | | Increase due to minimums & lease amendment fees | $10,810 | $7,997 | | Recognition of previously deferred revenue | $(13,609) | $(17,573) | | Balance at end of period | $43,638 | $52,286 | Note 3. Class A Convertible Preferred Units and Warrants NRP redeemed 128,333 preferred units for $128.3 million in cash during H1 2023, reducing outstanding preferred units to 121,667, with 3.0 million warrants remaining - In February, May, and June 2023, NRP redeemed a total of 128,333 Class A Preferred Units for $128.3 million in cash[47] - As of June 30, 2023, 121,667 Class A Preferred Units remain outstanding, down from 250,000 at December 31, 2022[47][48] - 3.0 million warrants to purchase common units remain outstanding with a carrying value of $48.0 million[49] Note 4. Common and Preferred Unit Distributions The Partnership declared common unit distributions of $0.75 per unit and a special distribution of $2.43 per unit, alongside preferred unit distributions, impacting net income | Distribution Type | Period Covered | Distribution per Unit | Total Distribution (in thousands) | | :---------------- | :------------- | :-------------------- | :-------------------------------- | | Common Units | Oct 1 - Dec 31, 2022 | $0.75 | $9,571 | | Common Units | Special Distribution | $2.43 | $31,329 | | Common Units | Jan 1 - Mar 31, 2023 | $0.75 | $9,669 | | Preferred Units | Oct 1 - Dec 31, 2022 | $30.00 | $7,500 | | Preferred Units | Jan 1 - Feb 8, 2023 | $12.33 | $586 | | Preferred Units | Jan 1 - Mar 31, 2023 | $30.00 | $6,075 | | Preferred Units | April 1 - May 5, 2023 | $11.33 | $406 | | Preferred Units | April 1 - June 2, 2023 | $20.33 | $915 | - Net income available to common unitholders and the general partner was reduced by $27.6 million and $43.8 million during the three and six months ended June 30, 2023, respectively, due to preferred unit redemptions[53] Note 5. Net Income Per Common Unit Basic net income per common unit decreased to $2.93 for Q2 2023 and $7.32 for the six months, with diluted EPS also declining due to preferred unit redemptions | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Basic Net Income per Common Unit | $2.93 | $4.65 | (37.0%) | $7.32 | $9.10 | (19.6%) | | Diluted Net Income per Common Unit | $2.49 | $3.29 | (24.3%) | $5.96 | $6.50 | (8.3%) | | Weighted Average Common Units—Basic | 12,635 | 12,506 | 1.0% | 12,603 | 12,461 | 1.1% | | Weighted Average Common Units—Diluted | 16,316 | 19,913 | (18.1%) | 17,064 | 19,696 | (13.4%) | - The calculation of diluted net income per common unit for the three and six months ended June 30, 2023, includes the assumed conversion of remaining preferred units, but excludes redeemed units as their inclusion would be anti-dilutive[58] Note 6. Segment Information The Partnership's Mineral Rights segment saw decreased revenues and net income, while the Soda Ash segment experienced significant revenue and net income growth for both periods - Mineral Rights segment focuses on owning, managing, and leasing mineral properties, including coal and other natural resources, with a strategic shift towards carbon sequestration and renewable energy[61] - Soda Ash segment consists of a 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining and soda ash production business[62] | Segment Financials (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Mineral Rights Revenues | $64,277 | $84,945 | (24.3%) | $144,146 | $159,824 | (9.8%) | | Mineral Rights Net Income (Loss) | $52,510 | $69,408 | (24.4%) | $121,391 | $132,375 | (8.3%) | | Soda Ash Revenues | $26,978 | $14,643 | 84.2% | $46,232 | $29,480 | 56.8% | | Soda Ash Net Income (Loss) | $26,964 | $14,620 | 84.4% | $46,060 | $29,406 | 56.6% | Note 7. Equity Investment The Partnership's 49% equity investment in Sisecam Wyoming decreased to $290.9 million from $306.5 million, reflecting income allocation, amortization, and distributions, despite Sisecam Wyoming's strong sales and income growth | Sisecam Wyoming Financials (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net Sales | $201,365 | $189,068 | 6.5% | $408,493 | $352,505 | 15.9% | | Gross Profit | $64,554 | $40,279 | 60.3% | $113,609 | $80,044 | 41.9% | | Net Income | $57,574 | $32,253 | 78.5% | $99,134 | $65,039 | 52.4% | | Equity Investment Activity (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | $306,470 | $276,004 | | Income allocation to NRP's equity interests | $48,576 | $31,869 | | Distribution | $(43,130) | $(23,716) | | Balance at end of period | $290,900 | $280,300 | Note 8. Mineral Rights, Net The net book value of mineral rights decreased slightly to $404.7 million from $412.3 million, primarily due to depletion expense, with immaterial impairment expenses recorded | Mineral Rights (in thousands) | June 30, 2023 Net Book Value | December 31, 2022 Net Book Value | Change | | :---------------------------- | :--------------------------- | :------------------------------- | :----- | | Coal properties | $385,658 | $392,775 | $(7,117) | | Aggregates properties | $5,037 | $5,245 | $(208) | | Oil and gas royalty properties | $2,513 | $2,754 | $(241) | | Other | $11,533 | $11,538 | $(5) | | Total mineral rights, net | $404,741 | $412,312 | $(7,571) | - Depletion expense related to mineral rights totaled $3.6 million and $5.4 million for the three months ended June 30, 2023 and 2022, respectively, and $7.5 million and $9.1 million for the six months ended June 30, 2023 and 2022, respectively[69] Note 9. Debt, Net Total debt, net, increased to $182.4 million from $168.3 million, driven by increased Opco Credit Facility borrowings, partially offset by Opco Senior Notes payments, with the Partnership remaining compliant with covenants | Debt (in thousands) | June 30, 2023 | December 31, 2022 | Change | | :---------------------------- | :------------ | :---------------- | :----- | | Opco Credit Facility | $103,034 | $70,000 | $33,034 | | Total Opco Senior Notes | $80,025 | $99,087 | $(19,062) | | Total debt at face value | $183,059 | $169,087 | $13,972 | | Total debt, net | $182,436 | $168,281 | $14,155 | - In May 2023, the Opco Credit Facility was amended, increasing lender commitments from $130.0 million to $155.0 million[73] - The Partnership borrowed $165.0 million and repaid $132.0 million under the Opco Credit Facility during the six months ended June 30, 2023, resulting in $103.0 million outstanding[73] Note 10. Fair Value Measurements The Partnership measures financial assets and liabilities at fair value, with Opco Senior Notes estimated by present value replacement and Opco Credit Facility approximating carrying value; embedded derivatives had zero value | Financial Instrument (in thousands) | June 30, 2023 Carrying Value | June 30, 2023 Estimated Fair Value | December 31, 2022 Carrying Value | December 31, 2022 Estimated Fair Value | | :---------------------------------- | :--------------------------- | :--------------------------------- | :------------------------------- | :------------------------------------- | | Opco Senior Notes | $79,402 | $75,848 | $98,281 | $96,060 | | Opco Credit Facility | $103,034 | $103,034 | $70,000 | $70,000 | | Contract receivable, net | $30,182 | $25,254 | $31,371 | $24,833 | - Embedded derivatives in the preferred units related to conversion options, redemption features, and change of control provisions had zero value as of June 30, 2023, and December 31, 2022[80] Note 11. Related Party Transactions The Partnership reimburses general partner affiliates for employee management and overhead, recorded as operating and maintenance, and general and administrative expenses, with overriding royalty expense also impacting operations | Related Party Expense (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating and maintenance expenses | $1,712 | $1,698 | $3,431 | $3,357 | | General and administrative expenses | $1,253 | $1,225 | $2,573 | $2,465 | - Overriding royalty expense related to an agreement with WPPLP was $2.0 million and $2.7 million for the three months ended June 30, 2023 and 2022, respectively, and $4.0 million and $4.3 million for the six months ended June 30, 2023 and 2022, respectively[84] Note 12. Major Customers Alpha Metallurgical Resources, Inc. and Foresight Energy Resources LLC were major customers, contributing significant portions of total revenues within the Mineral Rights segment | Major Customer | 3 Months Ended June 30, 2023 Revenues (in thousands) | 3 Months Ended June 30, 2023 Percent | 6 Months Ended June 30, 2023 Revenues (in thousands) | 6 Months Ended June 30, 2023 Percent | | :------------- | :--------------------------------------------------- | :----------------------------------- | :--------------------------------------------------- | :----------------------------------- | | Alpha Metallurgical Resources, Inc. | $19,685 | 22% | $43,903 | 23% | | Foresight Energy Resources LLC | $12,324 | 14% | $24,853 | 13% | Note 13. Commitments and Contingencies Management believes current legal proceedings will not materially affect the Partnership's financial position, liquidity, or operations - Management believes that current legal proceedings will not materially affect the Partnership's financial position, liquidity, or operations[87] Note 14. Unit-Based Compensation Total unit-based compensation expense increased to $2.6 million for Q2 2023 and $5.1 million for the six months, with $18.2 million in unamortized cost remaining | Unit-Based Compensation Expense (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total unit-based compensation expense | $2,600 | $1,300 | $5,100 | $2,800 | - The unamortized cost associated with unvested outstanding awards as of June 30, 2023, is $18.2 million, to be recognized over a weighted average period of 2.3 years[88] Note 15. Financing Transaction The Partnership leases rail loadout and infrastructure at the Sugar Camp mine, accounted for as a financing transaction, with the lease expiring in 2032 and including minimum annual payments of $5.0 million - The Sugar Camp lease, accounted for as a financing transaction, expires in 2032 with renewal options for up to 80 additional years[90] - Minimum payments are $5.0 million per year, plus variable throughput fees based on coal transported and processed[90] Note 16. Credit Losses The Partnership maintains a CECL allowance for receivables, recording a $0.2 million reversal in operating and maintenance expenses for Q2 2023 | CECL Allowance (in thousands) | June 30, 2023 Gross | June 30, 2023 Allowance | June 30, 2023 Net | December 31, 2022 Gross | December 31, 2022 Allowance | December 31, 2022 Net | | :---------------------------- | :------------------ | :-------------------- | :---------------- | :---------------------- | :-------------------------- | :-------------------- | | Receivables | $42,974 | $(3,699) | $39,275 | $47,237 | $(4,461) | $42,776 | | Long-term contract receivable | $28,652 | $(993) | $27,659 | $29,984 | $(1,038) | $28,946 | | Total | $71,626 | $(4,692) | $66,934 | $77,221 | $(5,499) | $71,722 | - NRP recorded a reversal of $0.2 million in operating and maintenance expenses related to the change in the CECL allowance for the three months ended June 30, 2023[92] Note 17. Subsequent Events In August 2023, the Board declared a common unit distribution of $0.75 per unit for Q2 2023 and a $3.7 million cash distribution on preferred units - In August 2023, the Board of Directors declared a distribution of $0.75 per common unit for Q2 2023[94] - A $3.7 million cash distribution on outstanding preferred units was also declared for Q2 2023[94] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Partnership's financial performance, liquidity, and capital resources, including segment results and non-GAAP measures Introduction This section provides management's discussion and analysis of the Partnership's financial condition and results of operations, to be read with the consolidated financial statements - The discussion covers the three and six month periods ended June 30, 2023 and 2022, and should be read with the Consolidated Financial Statements and Notes[95] Information Regarding Forward-Looking Statements The report contains forward-looking statements about future distributions, business strategy, and commodity prices, subject to risks that could cause actual results to differ materially - Forward-looking statements include those regarding future distributions, business strategy, liquidity, commodity prices, and regulatory changes[97] - Actual results could differ materially from forward-looking statements due to various risks and uncertainties[98] Non-GAAP Financial Measures This section defines and explains the Partnership's non-GAAP financial measures, including Adjusted EBITDA, DCF, FCF, and Leverage Ratio, highlighting their supplemental nature - Adjusted EBITDA is defined as net income (loss) less equity earnings from unconsolidated investment; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments[99] - Distributable Cash Flow (DCF) represents net cash provided by (used in) operating activities plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, and return of long-term contract receivable; less maintenance capital expenditures[100] - Free Cash Flow (FCF) represents net cash provided by (used in) operating activities plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivable; less maintenance and expansion capital expenditures and cash flow used in acquisition costs[102] - Leverage ratio represents the outstanding principal of debt at the end of the period divided by the last twelve months' Adjusted EBITDA[103] Executive Overview The Partnership is a diversified natural resource company with two operating segments: Mineral Rights and Soda Ash, with this overview summarizing financial results and market commentary - The Partnership's business is organized into two operating segments: Mineral Rights and Soda Ash[105] - Mineral Rights segment includes approximately 13 million acres of mineral interests, with a strategic focus on carbon sequestration and renewable energy[105] - Soda Ash segment consists of a 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining and soda ash production business[106] Current Results/Market Commentary The Partnership generated strong operating and free cash flow for H1 2023, maintained a low leverage ratio, redeemed significant Class A Preferred Units, and declared quarterly distributions - Generated $154.3 million of operating cash flow and $155.4 million of free cash flow during the six months ended June 30, 2023[109] - Ended the quarter with $62.7 million of liquidity, including $10.7 million of cash and $52.0 million of borrowing capacity, and a leverage ratio of 0.6x[109] - Redeemed 128,333 Class A Preferred Units for $128.3 million in cash during the first half of 2023, leaving 121,667 units outstanding[112] Mineral Rights Business Segment Revenues for the Mineral Rights segment decreased by 10% in H1 2023 due to lower coal prices, yet cash flow increased due to payment timing, as the segment explores carbon neutral opportunities - Revenues and other income decreased $15.9 million (10%) in the first six months of 2023, primarily due to decreased metallurgical coal sales prices[114] - Cash provided by operating activities and free cash flow increased $10.4 million and $11.0 million, respectively, compared to the prior year period, mainly due to the timing of minimum and royalty payments and prior year recoupments[114] - The Partnership is exploring opportunities for carbon neutral revenue across its land, mineral, and timber assets[116] Soda Ash Business Segment The Soda Ash segment's revenues and other income increased by 57% in H1 2023, driven by strong demand and higher sales prices, with cash flow significantly rising due to early and higher distributions - Revenues and other income increased $16.8 million (57%) in the first six months of 2023, driven by strong demand in domestic and international markets and higher sales prices[117] - Cash provided by operating activities and free cash flow increased $19.3 million due to early timing and higher distribution amounts from Sisecam Wyoming[117] - Global soda ash prices have fallen, but Sisecam Wyoming's domestic sales prices are expected to remain strong in H2 2023 due to negotiated contracts[118] Results of Operations This section details the Partnership's financial performance for the three and six months ended June 30, 2023, versus 2022, analyzing changes in revenues, expenses, and non-GAAP measures Second Quarter of 2023 and 2022 Compared For Q2 2023, total revenues decreased by 9% year-over-year, primarily due to the Mineral Rights segment, while net income increased by 5.2%, with Adjusted EBITDA and cash flows also rising | Operating Segment (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Increase (Decrease) | Percentage Change | | :------------------------------- | :--------------------------- | :--------------------------- | :------------------ | :---------------- | | Mineral Rights | $64,282 | $85,290 | $(21,008) | (25)% | | Soda Ash | $26,978 | $14,643 | $12,335 | 84% | | Total | $91,260 | $99,933 | $(8,673) | (9)% | - Coal royalty revenues decreased $15.0 million (24%) in Q2 2023, primarily due to decreased metallurgical coal sales prices in Appalachia and lower sales volumes in the Illinois Basin[122] - Revenues and other income for the Soda Ash segment increased $12.3 million (84%) in Q2 2023, primarily due to higher sales prices driven by strong demand[124] | Expense Category (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Increase (Decrease) | Percentage Change | | :------------------------------ | :--------------------------- | :--------------------------- | :------------------ | :---------------- | | Total Operating Expenses | $17,434 | $20,957 | $(3,523) | (17)% | | Total Other Expenses, Net | $3,492 | $12,156 | $(8,664) | (71)% | | Adjusted EBITDA (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Increase (Decrease) | Percentage Change | | :----------------------------- | :--------------------------- | :--------------------------- | :------------------ | :---------------- | | Mineral Rights | $56,366 | $75,298 | $(18,932) | (25)% | | Soda Ash | $32,336 | $10,463 | $21,873 | 209% | | Corporate and Financing | $(5,643) | $(5,052) | $(591) | (12)% | | Total Adjusted EBITDA | $83,059 | $80,709 | $2,350 | 3% | | Cash Flow Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Increase (Decrease) | | :------------------------------ | :--------------------------- | :--------------------------- | :------------------ | | Operating activities | $81,350 | $63,123 | $18,227 | | Distributable cash flow | $81,957 | $64,032 | $17,925 | | Free cash flow | $81,952 | $63,686 | $18,266 | First Six Months of 2023 and 2022 Compared For H1 2023, total revenues remained stable, with net income significantly increasing due to strong Soda Ash performance and reduced expenses, despite a decline in the Mineral Rights segment | Operating Segment (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Increase (Decrease) | Percentage Change | | :------------------------------- | :--------------------------- | :--------------------------- | :------------------ | :---------------- | | Mineral Rights | $144,247 | $160,169 | $(15,922) | (10)% | | Soda Ash | $46,232 | $29,480 | $16,752 | 57% | | Total | $190,479 | $189,649 | $830 | 0% | - Coal royalty revenues decreased $12.4 million (10%) for the six months ended June 30, 2023, primarily due to decreased metallurgical coal sales prices in Appalachia and lower sales volumes in the Illinois Basin[133] - Revenues and other income for the Soda Ash segment increased $16.8 million (57%) for the six months ended June 30, 2023, primarily due to higher sales prices driven by strong demand[134] | Expense Category (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Increase (Decrease) | Percentage Change | | :------------------------------ | :--------------------------- | :--------------------------- | :------------------ | :---------------- | | Total Operating Expenses | $34,525 | $37,387 | $(2,862) | (8)% | | Total Other Expenses, Net | $6,345 | $21,543 | $(15,198) | (71)% | | Adjusted EBITDA (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Increase (Decrease) | Percentage Change | | :----------------------------- | :--------------------------- | :--------------------------- | :------------------ | :---------------- | | Mineral Rights | $129,326 | $142,152 | $(12,826) | (9)% | | Soda Ash | $42,958 | $23,642 | $19,316 | 82% | | Corporate and Financing | $(11,488) | $(9,519) | $(1,969) | (21)% | | Total Adjusted EBITDA | $160,796 | $156,275 | $4,521 | 3% | | Cash Flow Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Increase (Decrease) | | :------------------------------ | :--------------------------- | :--------------------------- | :------------------ | | Operating activities | $154,250 | $115,454 | $38,796 | | Distributable cash flow | $155,554 | $116,363 | $39,191 | | Free cash flow | $155,448 | $116,017 | $39,431 | Liquidity and Capital Resources The Partnership maintained $62.7 million in total liquidity with a 0.6x leverage ratio, as operating cash flows increased significantly and financing cash flows decreased due to debt management Current Liquidity As of June 30, 2023, the Partnership had $62.7 million in total liquidity, including $10.7 million cash and $52.0 million borrowing capacity, with a leverage ratio of 0.6x - Total liquidity was $62.7 million as of June 30, 2023, consisting of $10.7 million of cash and cash equivalents and $52.0 million of borrowing capacity under the Opco Credit Facility[109] - The leverage ratio was 0.6x as of June 30, 2023[109][142] Cash Flows Cash flows from operating activities increased by $38.8 million to $154.3 million, while cash used in financing decreased by $8.6 million due to debt repayments and preferred unit redemptions - Cash flows provided by operating activities increased $38.8 million to $154.3 million for the six months ended June 30, 2023[143] - Cash used in financing activities decreased $8.6 million to $183.9 million, influenced by $165.0 million in new borrowings, $132.0 million in Opco Credit Facility repayments, $128.3 million in preferred unit redemptions, and $35.3 million in increased common unitholder distributions[144] Capital Resources and Obligations Total debt, net, increased to $182.4 million from $168.3 million, with the Partnership remaining in compliance with all financial covenants in its debt agreements | Debt (in thousands) | June 30, 2023 | December 31, 2022 | Change | | :---------------------------- | :------------ | :---------------- | :----- | | Current portion of long-term debt, net | $36,743 | $39,076 | $(2,333) | | Long-term debt, net | $145,693 | $129,205 | $16,488 | | Total debt, net | $182,436 | $168,281 | $14,155 | - The Partnership has been and continues to be in compliance with the terms of the financial covenants contained in its debt agreements[144] Off-Balance Sheet Transactions The Partnership has no off-balance sheet arrangements with unconsolidated entities or related parties, indicating no associated off-balance sheet risks - The Partnership does not have any off-balance sheet arrangements with unconsolidated entities or related parties[145] Related Party Transactions Information regarding related party transactions is incorporated by reference from Note 11 to the Consolidated Financial Statements - Information on related party transactions is incorporated by reference from Note 11[146] Summary of Critical Accounting Estimates There have been no significant changes to the Partnership's critical accounting estimates from those disclosed in its Annual Report on Form 10-K for 2022 - No significant changes to critical accounting estimates from the Annual Report on Form 10-K for the year ended December 31, 2022[147] Recent Accounting Standards The Partnership does not anticipate any material effect on its financial statements from recently issued, but not yet effective, accounting standards - No material effect is expected from recently issued, but not yet effective, accounting standards[148] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership is exposed to market risks primarily from commodity price fluctuations in coal and soda ash, and interest rate changes on its variable-rate debt Commodity Price Risk The Partnership's financial results are highly dependent on volatile coal and soda ash prices, with depressed prices potentially reducing revenues and triggering asset impairment - Revenues, operating results, financial condition, and ability to borrow funds are substantially dependent on prevailing commodity prices, particularly coal[149] - Historically, coal and soda ash prices have been volatile, and future depressed prices could significantly reduce revenues and potentially trigger asset impairment or debt covenant violations[149][151] Interest Rate Risk The Partnership is exposed to interest rate risk through its Opco Credit Facility, where a 1% increase would raise annual interest expense by approximately $1.0 million - Exposure to interest rate changes results from borrowings under the Opco Credit Facility, which is subject to variable interest rates based on SOFR[152] - A 1% increase in interest rates would increase annual interest expense by approximately $1.0 million, assuming the $103.0 million outstanding at June 30, 2023, remained constant[152] ITEM 4. CONTROLS AND PROCEDURES Management concluded that the Partnership's disclosure controls were effective as of June 30, 2023, with no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures The CEO and CFO concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2023, ensuring timely and accurate financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023[153] - These controls provide reasonable assurance that required information is recorded, processed, summarized, and reported within specified time periods[153] Changes in the Partnership's Internal Control Over Financial Reporting There were no material changes in the Partnership's internal control over financial reporting during the first six months of 2023 - No material changes in internal control over financial reporting occurred during the first six months of 2023[154] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Partnership is involved in various legal proceedings in the ordinary course of business, which management believes will not materially affect its financial position - The Partnership is involved in various legal proceedings arising in the ordinary course of business[156] - Management believes these matters will not have a material effect on the Partnership's financial position, liquidity, or operations[156] ITEM 1A. RISK FACTORS There were no material changes to the risk factors previously disclosed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[157] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds during the reporting period - None[158] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities during the reporting period - None[159] ITEM 4. MINE SAFETY DISCLOSURES There were no mine safety disclosures required for the reporting period - None[160] ITEM 5. OTHER INFORMATION No other information was required to be disclosed under this item - None[161] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including partnership agreements, credit facility amendments, and certifications - Includes Fifth Amended and Restated Agreement of Limited Partnership, Sixth Amendment to the Third Amended and Restated Credit Agreement, and certifications of CEO and CFO[162]