SISECAM RESOURCES LP You should read the following management's discussion and analysis of financial condition and results of operations in conjunction with the historical unaudited condensed consolidated financial statements, and notes thereto, included elsewhere in this Report. Cautionary Statements Regarding Forward-Looking Statements This Report contains, and our other public filings and oral and written statements by us and our management may include, statements that constitute "forward-looking statements" within the meaning ofthe United States securities laws. Forward-looking statements include the information concerning our possible or assumed future results of operations, reserve estimates, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "forecast," "project," "potential," "continue," "may," "will," "could", "should" or the negative of these terms or similar expressions. Examples of forward-looking statements include, but are not limited to, statements concerning cash available for distribution and future distributions, if any, and such distributions are subject to the approval of the board of directors of our general partner and will be based upon circumstances then existing. We have based our forward-looking statements on management's beliefs and assumptions and on information currently available to us. Forward-looking statements involve risks, uncertainties and assumptions. You are cautioned not to place undue reliance on any forward-looking statements. Actual results may vary materially. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements and, therefore, affect our ability to distribute cash to unitholders, include: •the market prices for soda ash in the markets in which we sell; •the volume of natural and synthetic soda ash produced worldwide; •domestic and international demand for soda ash in the flat glass, container glass, detergent, chemical and paper industries in which our customers operate or serve; •the freight costs we pay to transport our soda ash to customers or various delivery points; •the cost of electricity and natural gas used to power our operations; •the amount of royalty payments we are required to pay to our lessors and licensor and the duration of our leases and license; •political disruptions in the markets we or our customers serve, including any changes in trade barriers; •our relationships with our customers and or our sales agent's ability to renew contracts on favorable terms to us; •the creditworthiness of our customers; •a cybersecurity event; •the short and long term impact of the COVID-19 pandemic, including the impact of government orders on our employees, suppliers, customers and operations; •the impact of the ANSAC Early Exit Agreement (as defined below) and our transition to the utilization ofCiner Group's global distribution network for some of our export operations beginning onJanuary 1, 2021 : •regulatory action affecting the supply of, or demand for, soda ash, our ability to mine trona ore, our transportation logistics, our operating costs or our operating flexibility; •new or modified statutes, regulations, governmental policies and taxes or their interpretations; and •prevailingU.S. and international economic conditions and foreign exchange rates. In addition, the actual amount of cash we will have available for distribution will depend on other factors, some of which are beyond our control, including, among other things: •the level and timing of capital expenditures we make; •the level of our operating, maintenance and general and administrative expenses, including reimbursements to our general partner for services provided to us; •the cost of acquisitions, if any; 27 -------------------------------------------------------------------------------- Table of Contents •our debt service requirements and other liabilities; •fluctuations in our working capital needs; •our ability to borrow funds and access capital markets; •restrictions on distributions contained in debt agreements to which we,Ciner Wyoming or our affiliates are a party; •the amount of cash reserves established by our general partner; and our ability to reinstate distributions in the future; and •other business risks affecting our cash levels. These factors should not be construed as exhaustive and we urge you to carefully consider the risks described in this Report, our most recent Annual Report on Form 10-K, and subsequent reports filed with theUnited States Securities and Exchange Commission (the "SEC"). You may obtain these reports from theSEC's website at www.sec.gov. All forward-looking statements included in this Report are expressly qualified in their entirety by these cautionary statements. Unless required by law, we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. References References in this Report to the "Partnership," "CINR," "Ciner Resources ," "we," "our," "us," or like terms refer toCiner Resources LP and its consolidated subsidiary,Ciner Wyoming LLC , which is referred to herein as "Ciner Wyoming ." References to "our general partner" or "Ciner GP" refer toCiner Resource Partners LLC , the general partner ofCiner Resources LP and a direct wholly-owned subsidiary ofCiner Wyoming Holding Co. ("Ciner Holdings "), which is a direct wholly-owned subsidiary ofCiner Resources Corporation ("Ciner Corp ").Ciner Corp is a direct wholly-owned subsidiary ofCiner Enterprises Inc. ("Ciner Enterprises "), which is a direct wholly-owned subsidiary ofWE Soda Ltd. , aU.K. corporation ("WE Soda"). WE Soda is a direct wholly-owned subsidiary ofKEW Soda Ltd. , aU.K. corporation ("KEW Soda"), which is a direct wholly-owned subsidiary of Akkan Enerji ve Madencilik Anonim ?irketi ("Akkan"). Akkan is directly and wholly owned byTurgay Ciner , the Chairman of theCiner Group ("Ciner Group "), a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping markets. All of our soda ash processed is currently sold to various domestic and international customers, includingAmerican Natural Soda Ash Corporation ("ANSAC"), which is an affiliate for export sales. Overview We are aDelaware limited partnership formed byCiner Holdings to own a 51.0% membership interest in, and to operate the trona ore mining and soda ash production business ofCiner Wyoming .Ciner Wyoming is currently one of the world's largest producers of soda ash, serving a global market from its facility in theGreen River Basin ofWyoming . Our facility has been in operation for more than 50 years.NRP Trona LLC , a wholly-owned subsidiary of Natural Resource Partners L.P. ("NRP") currently owns an indirect 49.0% membership interest inCiner Wyoming . Recent Developments COVID-19 Public health epidemics, pandemics or outbreaks of contagious diseases could adversely impact our business. InDecember 2019 , a novel strain of coronavirus ("COVID-19") emerged inWuhan ,Hubei Province ,China . While initially the outbreak was largely concentrated inChina and caused significant disruptions to its economy, it has now spread to many other countries and infections have been reported throughout the world, includingthe United States and markets to which our products have historically been exported. OnMarch 11, 2020 , theWorld Health Organization declared COVID-19 a pandemic. Since that time, governmental jurisdictions inthe United States and globally have taken various actions to curb the spread of COVID-19, which has resulted in disruption in the national and global economic and financial markets.
Our Response to COVID-19
We continue to closely monitor the impact of the outbreak of COVID-19 and all
governmental actions in response thereto on all aspects of our business,
including how it impacts our customers, employees, supply chain, distribution
network and cash flows. We have taken strong proactive steps to keep the safety
of our team and their families as the priority. We are executing a
comprehensive plan to help prevent the spread of the virus in our work locations
and it appears to be having a positive impact. This plan includes multiple
layers of protection for our employees including but not limited to social
distancing, working from home for certain employees, splitting shifts, increased
sanitation, restricted contractor and visitor access, temperature checks on all
contractors and third-party vendors, travel restrictions, mask wearing
requirements, and daily communication with our teams. We have conducted
proactive quarantining and contact tracing from the early days of this pandemic
and require self-reporting of any illness, in addition to
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a company doctor, weekly status meetings, tracking local resources, and industry
wide efforts. We have also prepared strong contingency plans for all our
operations with specific actions based on absentee rates. While we have not
utilized any such plans to date as they have not been needed, they are
continuously refined in case needed. We anticipate a re-opening of society when
the virus plateaus and diminishes, and we have completed re-entry plans to
implement as they become appropriate. We are using data to guide our actions
rather than firm dates, and our teams are kept up to date on these plans. Our
focus prior to and during this pandemic has been the safety of our teams and
this will continue to be our priority as we scale our operations back to normal
as the data guides us to do so. We continue to actively monitor and adhere to
applicable local, state, federal, and international governmental guideline
actions to better ensure the safety of our employees.
The impact of COVID-19
In the first quarter of 2020, we started to see the impact of COVID-19 on our operations in the form of slowing global demand and downward pricing pressure and we began at that time to utilize the flexibility of our production assets to adjust to the COVID-19 uncertainties and our customers' demands. In the second quarter of 2020, the decline in demand adversely impacted our sales and production volume, and price per ton. We experienced an approximately 33% decline in production volumes and 36% decline in sales volumes when compared to our pre-COVID-19 production and sales levels in the quarter endedMarch 31, 2020 , respectively, primarily as a result of utilizing the flexibility of our production assets to adjust to the COVID-19 uncertainties and our customers' demands in the near- and mid-term. Our international demand was impacted the most as different countries dealt with different levels of the outbreak and shutdowns. In addition, our customers in the flat glass and in particular the automotive business were significantly negatively impacted. In the third quarter of 2020, demand showed signs of recovery domestically; however, there was still a decline in the global market compared to the third quarter of 2019. Our international demand continues to be impacted the most as different countries deal with different levels of the outbreak and shutdowns, but has shown signs of recovery during the third quarter of 2020 as compared to the second quarter of 2020. While we have yet to recover to the pre-COVID levels, overall sales volumes increased 26.7% and overall production volumes increased 1.5% over second quarter 2020 results. Our production volume has trended upward consistently with our sales volume except for an unplanned weather related outage in September. So far, we have been able to utilize the flexibility of our production assets to adjust to the COVID-19 uncertainties and customers' demands, but the Partnership may experience similar declines in the near- and mid-term as the COVID-19 pandemic continues. At this time, we are unable to predict the ultimate impact that COVID-19 may have on our business, future results of operations, financial position, cash flows or ability to make distributions to unitholders. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the severity of the outbreak and actions by local, state, federal or international government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. While we have begun to see signs of recovery with some of our customers and industries, primarily in the form of government re-openings and increasing orders these recoveries are very fluid. We are actively managing the business to maintain cash flow, and we believe we have enough liquidity to meet our anticipated liquidity requirements. As ofSeptember 30, 2020 , we cannot predict the duration or the scope of the COVID-19 pandemic and its impact on our operations, and the potential negative financial impact to our results cannot be reasonably estimated but could be material. For the nine months endedSeptember 30, 2020 we have incurred$1.6 million in costs directly related to COVID-19 primarily in the form of costs related to employee safety and retention and additional inventory storage and logistics costs during the COVID-19 pandemic. Notice to Terminate Membership in ANSAC As previously disclosed, the Partnership was informed onNovember 9, 2018 thatCiner Corp , an affiliate of the Partnership, had as part of its strategic initiative to gain better direct access and control of international customers and logistics and the ability to leverage the expertise ofCiner Group , the world's largest natural soda ash producer, delivered a notice to terminate its membership in ANSAC. Such termination was expected to be effective as of the end of day onDecember 31, 2021 . OnJuly 27, 2020 , ANSAC and the members thereof entered into an agreement, effective as ofJuly 24, 2020 , that, among other things, terminatesCiner Corp's membership in ANSAC effective as ofDecember 31, 2020 (the "ANSAC termination date"), a year earlier than previously announced (the "ANSAC Early Exit Agreement"). For a limited period afterDecember 31, 2020 ,Ciner Corp will continue to sell, at substantially lower volumes, product to ANSAC for export sales purposes, with a fixed rate per ton selling, general and administrative expense, and will also purchase a limited amount of export logistics services. Between now and the ANSAC termination date,Ciner Corp continues to have full ANSAC membership benefits and services. Potential liabilities associated with exiting ANSAC are not expected to be material. 29 -------------------------------------------------------------------------------- Table of Contents Historically, by design and prior to our exit from ANSAC, ANSAC managed most of our international sales, marketing and logistics, and as a result, was our largest customer for the nine months endedSeptember 30, 2020 and 2019, accounting for 45.1% and 60.3%, respectively, of our net sales. Although ANSAC has been our largest customer for the aforementioned periods, we anticipate that the impact of such termination on our net sales, net income and liquidity will be limited. We made this determination primarily based upon the belief that we will continue to be one of the lowest cost producers of soda ash in the global market. With a low-cost position combined with better direct access and control of our customers and logistics and the ability to leverageCiner Group's expertise in these areas, we believe we will be more than able to adequately replace these net sales.
Post-ANSAC International Export Capabilities
In accordance with the ANSAC Early Exit Agreement,Ciner Corp will begin marketing soda ash on our behalf directly into international markets and building its international sales, marketing and supply chain infrastructure. We will also have access to utilize the distribution network that has already been established by the globalCiner Group . We believe that by having the option of combining our volumes withCiner Group's soda ash exports fromTurkey ,Ciner Corp's strategic exit from ANSAC will allow us to leverage globalCiner Group's , the world's largest natural soda ash producer, soda ash operations which we expect will improve our ability to optimize our market share both domestically and internationally. Being able to work with the globalCiner Group will provide us with the opportunity to better attract and more efficiently serve larger global customers. In addition, the Partnership will need access to an international logistics infrastructure that includes, among other things, a domestic port for export capabilities. These export capabilities are currently being developed by an affiliated company and options being evaluated range from continued outsourcing in the near term to developing its own port capabilities in the longer term. Suspension of Distributions In an effort to achieve greater financial and liquidity flexibility during the COVID-19 pandemic, onAugust 3, 2020 , each of the members of the board of managers ofCiner Wyoming approved a suspension of quarterly distributions to its members. In addition, effectiveAugust 3, 2020 , in connection with the quarterly distribution for the quarter endedJune 30, 2020 , each of the members of the board of directors of our general partner approved a suspension of quarterly distributions to our unitholders. EffectiveNovember 2, 2020 , the board ofCiner Wyoming unanimously approved a continuation of the suspension of quarterly distributions to the members ofCiner Wyoming . EffectiveNovember 2, 2020 , in connection with the quarterly distribution for the quarter endedSeptember 30, 2020 , each of the members of the board of directors of our general partner approved a continuation of the suspension of quarterly distributions to members and unitholders in order to increase financial and liquidity flexibility as the COVID-19 pandemic continues. Management and the board of directors of our general partner will continue to evaluate, on a quarterly basis, whether it is appropriate to reinstate the distribution to our unitholders, which will be dependent in part on our cash reserves, liquidity, total debt levels and anticipated capital expenditures. Factors Affecting Our Results of Operations Soda Ash Supply and Demand Our net sales, earnings and cash flow from operations are primarily affected by the global supply of, and demand for, soda ash, which, in turn, directly impacts the prices that we and other producers charge for our products. Historically, long-term demand for soda ash inthe United States has been driven in large part by general economic growth and activity levels in the end-markets that the glass-making industry serves, such as the automotive and construction industries. Long-term soda ash demand in international markets has grown in conjunction with GDP. We expected that over the long-term, future global economic growth will positively influence global demand, which will likely result in increased exports, primarily fromthe United States ,Turkey and to a limited extent, fromChina , the largest suppliers of soda ash to international markets. Currently, and in the near- and mid-term we expect that COVID-19 will continue to have a material impact across a variety of our customers and customer segments which will have a negative impact on demand for our products. In the third quarter of 2020, demand showed signs of recovery domestically; however, there was still a decline in the global market compared to the third quarter of 2019. Our international demand continues to be impacted the most as different countries deal with different levels of the outbreak and shutdowns, but has shown signs of recovery during the third quarter of 2020 in comparison to the second quarter 2020. While we have yet to recover to the pre-COVID levels, overall sales volumes increased 26.7% over second quarter 2020 results. We have been able to utilize the flexibility of our production assets to adjust to the COVID-19 uncertainties and customers' demands, but the Partnership may experience similar declines in the near- and mid-term as the COVID-19 pandemic continues. Sales Mix 30
-------------------------------------------------------------------------------- Table of Contents We will adjust our sales mix based upon what is the best margin opportunity for the business between domestic and international. Our operations have been and continue to be sensitive to fluctuations in freight and shipping costs and changes in international prices, which have historically been more volatile than domestic prices. Our gross profit will be impacted by the mix of domestic and international sales as a result of changes in logistics costs and our average selling prices. International Export Capabilities See the heading titled "Post-ANSAC International Export Capabilities" above for more information regarding details and developments related to the Partnership's international exporting capabilities. Energy Costs One of the primary impacts to our profitability is our energy costs. Because we depend upon natural gas and electricity to power our trona ore mining and soda ash processing operations, our net sales, earnings and cash flow from operations are sensitive to changes in the prices we pay for these energy sources. Our cost of energy, particularly natural gas, has been relatively low in recent years, and, despite the historic volatility of natural gas prices, we believe that we will continue to benefit from relatively low prices in the near future. However, we expect to continue to hedge a portion of our forecasted natural gas purchases to mitigate volatility. During 2019 and the first quarter of 2020, we continued construction on a new natural gas-fired turbine co-generation facility that is expected to provide roughly one-third of our electricity and steam demands at our mine in theGreen River Basin . The new co-generation facility began operating inMarch 2020 and in a normal production environment is expected to provide us with an improvement of up to approximately$3 million annually in energy costs and up to approximately$4 million annually once theGreen River Expansion Project is online. 31 -------------------------------------------------------------------------------- Table of Contents How We Evaluate Our Business Productivity of Operations Our soda ash production volume is primarily dependent on the following three factors: (1) operating rate, (2) quality of our mined trona ore and (3) recovery rates. Operating rate is a measure of utilization of the effective production capacity of our facility and is determined in large part by productivity rates and mechanical on-stream times, which is the percentage of actual run times over the total time scheduled. We implement two planned outages of our mining and surface operations each year, typically in the second and third quarters. During these outages, which are scheduled to last approximately one week each, we repair and replace equipment and parts. Periodically, we may experience minor unplanned outages or unplanned extensions to planned outages caused by various factors, including equipment failures, power outages or service interruptions. The quality of our mine ore is determined by measuring the trona ore recovered as a percentage of the deposit, which includes both trona ore and insolubles. Plant recovery rates are generally determined by calculating the soda ash produced divided by the sum of the soda ash produced plus soda ash that is not recovered from the process. All of these factors determine the amount of trona ore we require to produce one short ton of soda ash and liquor, which we refer to as our "ore to ash ratio." Our ore to ash ratio was 1.67: 1.0 and 1.62: 1.0 for the three and nine months endedSeptember 30, 2020 , respectively, and 1.53: 1.0 and 1.51: 1.0 for the three and nine months endedSeptember 30, 2019 , respectively. Freight and Logistics The soda ash industry is logistics intensive and involves careful management of freight and logistics costs. These freight costs make up a large portion of the total delivered cost to the customer. Delivered costs to most domestic customers and ANSAC primarily relates to rail freight services. Some domestic customers may elect to arrange their own freight and logistic services. Delivered costs to non-ANSAC international customers primarily consists of both rail freight services to the port of embarkation and the additional ocean freight to the port of disembarkation. All of our soda ash is shipped by rail or truck from ourGreen River Basin operations.Union Pacific Railroad Corporation ("Union Pacific") is our largest provider of domestic rail freight services. Our plant receives rail service exclusively from Union Pacific and shipments by rail accounted for 82.7% and 86.5% of our total freight costs during the three months endedSeptember 30, 2020 and 2019, respectively and 84.5% and 84.9% of our total freight costs during the nine months endedSeptember 30, 2020 and 2019, respectively. Our agreement with Union Pacific expires onDecember 31, 2021 . If we do not ship at least a significant portion of our soda ash production on the Union Pacific rail line during a twelve-month period, we must pay Union Pacific a shortfall payment under the terms of our transportation agreement. For each of the nine months endedSeptember 30, 2020 and 2019, we did not make any shortfall payments and do not expect to make any such payments in the future.Net Sales Net sales include the amounts we earn on sales of soda ash. We recognize revenue from our sales when control of goods transfers to the customer. Control typically transfers when goods are delivered to the carrier for shipment, which is the point at which the customer has the ability to direct the use of and obtain substantially all remaining benefits from the asset. The time at which delivery and transfer of title occurs, for the majority of our contracts with customers, is the point when the product leaves our facility, thereby rendering our performance obligation fulfilled. Substantially all of our sales are derived from sales of soda ash, which we sell through our exclusive sales agent,Ciner Corp. A small amount of our sales is derived from sales of production purge, which is a by-product liquor solution containing soda ash that is produced during the processing of trona ore. For the purposes of our discussion below, we include these transactions in domestic sales of soda ash and in the volume of domestic soda ash sold. Sales prices for sales through ANSAC include the cost of freight to the ports of embarkation for overseas export or toLaredo, Texas for sales toMexico . Sales prices for other international sales may include the cost of rail freight to the port of embarkation, the cost of ocean freight to the port of disembarkation for import by the customer and the cost of inland freight required for delivery to the customer. Cost of products sold Expenses relating to employee compensation, energy, including natural gas and electricity, royalties and maintenance materials constitute the greatest components of cost of products sold. These costs generally increase in line with increases in sales volume. Employee Compensation. See Part I, Item 1. Financial Statements - Note 6, "Employee Compensation" for information on the various benefit plans offered and administered byCiner Corp. Energy. A major item in our cost of products sold is energy, comprised primarily of natural gas and electricity. We primarily use natural gas to fuel our above-ground processing operations, including the heating of calciners, and we use electricity to power our underground mining operations, including our continuous mining machines, or continuous miners, and shuttle cars. The monthly Northwest Pipeline Rocky Mountain Index natural gas settlement prices, over the past five years, have ranged between$1.06 and 32 -------------------------------------------------------------------------------- Table of Contents$4.22 per MMBtu. The average monthly Northwest Pipeline Rocky Mountain Index natural gas settlement prices for the three and nine months endedSeptember 30, 2020 and 2019 were$1.74 and$1.77 , and$1.54 and$1.98 per MMBtu, respectively. However, we expect to continue to hedge a portion of our forecasted natural gas purchases to mitigate volatility. During 2019 and the first quarter of 2020, we continued construction on a new natural gas-fired turbine co-generation facility that is expected to provide roughly one-third of our electricity and steam demands at our mine in theGreen River Basin . The new co-generation facility began operating inMarch 2020 and in a normal production environment is expected to provide us with an improvement of up to approximately$3 million annually in energy costs, and up to approximately$4 million annually once theGreen River Expansion Project is online. Royalties. During the three and nine months endedSeptember 30, 2020 , we paid royalties to theState of Wyoming , theU.S. Bureau of Land Management andRock Springs Royalty Company LLC , an affiliate of Occidental Petroleum Corporation (formerly an affiliate of Anadarko Petroleum Corporation), which were calculated based upon a percentage of the value of soda ash and related products sold at a certain stage in the mining process. These royalty payments may be subject to a minimum domestic production volume from ourGreen River Basin facility. We are also obligated to pay annual rentals to our lessors and licensor regardless of actual sales. The royalty rates we pay to our lessors and licensor may change upon our renewal or renegotiation of such leases and license. Any increase in the royalty rates we are required to pay to our lessors and licensor through renewal or renegotiation of leases or license, or any failure by us to renew any of our leases and license, could have a material adverse impact on our results of operations, financial condition or liquidity, and, therefore, may affect our ability to distribute cash to unitholders. Selling, general and administrative expenses Selling, general and administrative expenses incurred by our affiliates on our behalf are allocated to us based on the time the employees of those companies spend on our business and the actual direct costs they incur on our behalf. Selling, general and administrative expenses incurred by ANSAC on our behalf are allocated to us based on the proportion of ANSAC's total volumes sold for a given period attributable to the soda ash sold by us to ANSAC. Pursuant to the ANSAC Early Exit Agreement, we will incur a fixed rate per ton of selling, general, and administrative expense for each ton we sell to ANSAC. OnOctober 23, 2015 , the Partnership entered into a Services Agreement (the "Services Agreement"), with our general partner andCiner Corp. Pursuant to the Services Agreement,Ciner Corp has agreed to provide the Partnership with certain corporate, selling, marketing, and general and administrative services, in return for which the Partnership has agreed to payCiner Corp an annual management fee, subject to quarterly adjustments, and reimburseCiner Corp for certain third-party costs incurred in connection with providing such services. In addition, under the joint venture agreement governingCiner Wyoming ,Ciner Wyoming reimburses us for employeeswho operate our assets and for support provided toCiner Wyoming .Ciner Group also owns and operates port facilities inTurkey , and, since 2017, one of its other North American subsidiaries has an arrangement to exclusively import soda ash into a port on theU.S east coast.Ciner Corp , which is the exclusive sales agent for the Partnership, also serves as the exclusive sales agent of that material and receives a commission on those sales. We believe by having access to that material,Ciner Corp is able to offer its customers an improved level of service, greater certainty of supply to the Partnership's end customers, and as a result lower its overall costs to serve, which are subsequently charged to the Partnership. 33 -------------------------------------------------------------------------------- Table of Contents Third Quarter 2020 Financial Highlights: •Net sales of$98.2 million decreased 28.4% from the prior-year third quarter; year-to-date of$288.8 million decreased 27.3% over the prior year. During the second and third quarters of 2020, the Partnership experienced a significant decline in sales volumes, production and pricing in response to COVID-19. •Soda ash volume produced decreased 35.3% from the prior-year third quarter, and soda ash volume sold decreased 23.8% from the prior-year third quarter; year-to-date soda ash volume produced decreased 22.8% from the prior-year, and soda ash volume sold decreased 21.0% from the prior-year. During the second and third quarters of 2020, the Partnership experienced a significant decline in production volumes and demand in response to COVID-19. •Net income of$5.4 million decreased$24.5 million from the prior-year third quarter; year-to-date of$14.2 million decreased$64.7 million over the prior year. Net income declined more than sales volumes, production, and pricing because a significant amount of our plant costs are not as efficient with these low productions levels and are not proportionally impacted by lower sales and production volume. •Adjusted EBITDA of$14.6 million decreased 61.2% from the prior-year third quarter; year-to-date of$39.8 million decreased 61.6% over the prior year. During the second and third quarters of 2020, sales and production volumes decreased significantly as a result of COVID-19. Adjusted EBITDA declined more than sales and production because a significant amount of our plant costs are not as efficient with these low productions levels and are not proportionally impacted by lower sales and production volume. •Basic earnings per unit of$0.11 for the quarter decreased 85.1% over the prior-year third quarter of$0.74 ; year-to-date basic earnings per unit of$0.28 decreased 85.3% over the prior-year. •Net cash provided by operating activities of$21.2 million decreased 47.8% over prior-year third quarter; year-to-date of$52.4 million decreased 23.4% over the prior year. •Distributable cash flow of$3.8 million decreased 76.5% compared to the prior-year third quarter; year-to-date distributable cash flow of$11.4 million decreased 75.1% over the prior year. •The distribution coverage ratio was N/A and 2.35 for the three months endedSeptember 30, 2020 and 2019, respectively; and 1.68 and 2.22 for the nine months endedSeptember 30, 2020 and 2019, respectively. There were no distributions in the third quarter. Distribution coverage ratio declined as a result of decreased Adjusted EBITDA and net income during the year. 34
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Results of Operations A discussion and analysis of the factors contributing to our results of operations is presented below for the periods and as of the dates indicated. The financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance. The following table sets forth our results of operations for the three and nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September Three Months EndedSeptember 30 , 30,
(In millions, except for operating and other data section) 2020
2019 2020 2019
Net sales:
Sales-affiliates $ 44.2 $ 80.4 $ 130.2 $ 239.7
Sales-others 54.0 56.8 158.6 157.7
Net sales $ 98.2 $ 137.2 $ 288.8 $ 397.4
Operating costs and expenses:
Cost of products sold 78.8 93.9 233.1 274.7
Depreciation, depletion and amortization expense 7.8 6.8 20.8 20.0
Selling, general and administrative expenses-affiliates 4.5 4.4 13.0 15.2
Selling, general and administrative expenses-others 0.2 0.7 3.5 4.3
Total operating costs and expenses 91.3 105.8 270.4 314.2
Operating income 6.9 31.4 18.4 83.2
Interest income - 0.1 0.1 0.3
Interest expense (1.2) (1.6) (4.0) (4.6)
Other, net (0.3) - (0.3) -
Total other expense, net (1.5) (1.5) (4.2) (4.3)
Net income 5.4 29.9 14.2 78.9
Net income attributable to non-controlling interest 3.1 15.1 8.5 40.5
Net income attributable to Ciner Resources LP $ 2.3 $ 14.8 $ 5.7 $ 38.4
Operating and Other Data:
Trona ore consumed (thousands of short tons) 770.5 1,086.3 2,584.9 3,126.0
Ore to ash ratio(1) 1.67: 1.0 1.53: 1.0 1.62: 1.0 1.51: 1.0
Ore grade(2) 86.9 % 86.4 % 86.8 % 86.6 %
Soda ash volume produced (thousands of short tons) 460.1 711.0 1,593.4 2,064.3
Soda ash volume sold (thousands of short tons) 540.3 709.0 1,630.4 2,064.5
Adjusted EBITDA(3) $ 14.6 $ 37.6 $ 39.8 $ 103.6
(1)Ore to ash ratio expresses the number of short tons of trona ore needed to
produce one short ton of soda ash and liquor and includes our deca rehydration
recovery process. In general, a lower ore to ash ratio results in lower costs
and improved efficiency.
(2)Ore grade is the percentage of raw trona ore that is recoverable as soda ash
free of impurities. A higher ore grade will produce more soda ash than a lower
ore grade.
(3)For a discussion of the non-GAAP financial measure Adjusted EBITDA, please
read "Non-GAAP Financial Measures" of this Management's Discussion and Analysis.
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Analysis of Results of Operations
The following table sets forth a summary of net sales, sales volumes and average
sales price, and the percentage change between the periods.
Three Months Ended September
30, Nine Months Ended September 30, Percent Increase/(Decrease)
(Dollars in millions, except for average sales price data) 2020 2019 2020 2019 QTD YTD Net sales: Domestic$ 53.7 $ 56.8 $ 153.1 $ 157.7 (5.5)% (2.9)% International 44.5 80.4 135.7 239.7 (44.7)% (43.4)% Total net sales$ 98.2 $ 137.2 $ 288.8 $ 397.4 (28.4)% (27.3)% Sales volumes (thousands of short tons): Domestic 243.5 237.7 676.2 660.8 2.4% 2.3% International 296.8 471.3 954.2 1,403.7 (37.0)% (32.0)% Total soda ash volume sold 540.3 709.0 1,630.4 2,064.5 (23.8)%
(21.0)%
Average sales price (per short ton) (1) Domestic$ 220.53 $ 238.96 $ 226.41 $ 238.65 (7.7)% (5.1)% International$ 149.93 $ 170.59 $ 142.21 $ 170.76 (12.1)% (16.7)% Average$ 181.75 $ 193.51 $ 177.13 $ 192.49 (6.1)% (8.0)% Percent of net sales: Domestic net sales 54.7 % 41.4 % 53.0 % 39.7 % 32.1% 33.5% International net sales 45.3 % 58.6 % 47.0 % 60.3 % (22.7)%
(22.1)%
Total percent of net sales 100.0 % 100.0 % 100.0 % 100.0 % Percent of sales volumes: Domestic volume 45.1 % 33.5 % 41.5 % 32.0 % 34.6% 29.7% International volume 54.9 % 66.5 % 58.5 % 68.0 % (17.4)% (14.0)% Total percent of volume sold 100.0 % 100.0 %
100.0 % 100.0 %
(1) Average sales price per short ton is computed as net sales divided by volumes sold.
As discussed in the "Overview" section above the impact of COVID-19 and actions taken by the Partnership in response to it had varying effects on our results of operations throughout the second and third quarters of 2020. The Partnership experienced a significant decrease in sales and production volumes due to a significant decrease in global demand and production volumes, which negatively impacted the business. Three Months EndedSeptember 30, 2020 compared to Three Months EndedSeptember 30, 2019 Consolidated Results Net sales. Net sales decreased by 28.4% to$98.2 million for the three months endedSeptember 30, 2020 from$137.2 million for the three months endedSeptember 30, 2019 , primarily driven by a decrease in soda ash volumes sold of 23.8% due to lower international demand for three months endedSeptember 30, 2020 , as compared to the three months endedSeptember 30, 2019 . The decrease in soda ash volumes sold was primarily attributable to the decline in global demand as a result of the COVID-19 pandemic. Also contributing to the decrease in net sales was a decline in international pricing, which continued the trend that began in the fourth quarter of 2019. In addition, the Partnership increased domestic sales opportunities to offset lower international demand. Additionally, during the three months endedSeptember 30, 2020 the Partnership experienced an improvement in net sales of 28.9% to$98.2 million from$76.2 million as compared to the second quarter of 2020. Both the three month periods endedSeptember 30, 2020 andJune 30, 2020 were negatively impacted by COVID-19. The primary driver was an increase in volume in both our domestic and international sales. Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 14.0% to$86.6 million for the three months endedSeptember 30, 2020 from$100.7 million for the three months endedSeptember 30, 2019 , which were primarily due to significant decreases in overall soda ash sales volumes and production in response to the COVID-19 pandemic. 36 -------------------------------------------------------------------------------- Table of Contents Additionally, during the three months endedSeptember 30, 2020 the Partnership experienced an increase in cost of products sold of 16.7% to$86.6 million from$74.2 million as compared to the second quarter of 2020. Both the three month periods endedSeptember 30, 2020 andJune 30, 2020 were negatively impacted by COVID-19. The primary driver was an increase in sales volume. Selling, general and administrative expenses. Our selling, general and administrative expenses decreased 7.8% to$4.7 million for the three months endedSeptember 30, 2020 , compared to$5.1 million for the three months endedSeptember 30, 2019 . The decrease was driven primarily by decreased employee benefit expenses and travel expenses, partially offset by higher contracted services and professional services incurred over the same period. Additionally, during the three months endedSeptember 30, 2020 the Partnership experienced a decrease in selling, general and administrative expense of 21.7% to$4.7 million from$6.0 million as compared to the second quarter of 2020. Both the three month periods endedSeptember 30, 2020 andJune 30, 2020 were negatively impacted by COVID-19. The decrease was primarily driven by lower ANSAC fees, employee benefit expenses and lower professional services. Operating income. As a result of the foregoing, operating income decreased by 78.0% to$6.9 million for the three months endedSeptember 30, 2020 from$31.4 million for the three months endedSeptember 30, 2019 . During the third quarter of 2020, production and sales decreased significantly compared to the same period in 2019. Operating results have declined by a greater percentage than production and sales due to a significant amount of fixed plant costs that are not proportionally impacted by lower sales and production volume. In addition, certain costs are higher due to cost related to employee safety and retention during the COVID-19 pandemic. Additionally, during the three months endedSeptember 30, 2020 operating income increased 272.1% to$6.9 million from an operating loss of$4.0 million as compared to the second quarter of 2020. Both the three month periods endedSeptember 30, 2020 andJune 30, 2020 were negatively impacted by COVID-19. Operating results have increased by a greater percentage than production and sales due to a significant amount of fixed plant costs that are not proportionally impacted by higher sales and production volume. Net income. As a result of the foregoing, net income decreased by 81.9% to$5.4 million for the three months endedSeptember 30, 2020 , from$29.9 million for the three months endedSeptember 30, 2019 . Nine Months EndedSeptember 30, 2020 compared to Nine Months EndedSeptember 30, 2019 Consolidated Results Net sales. Net sales decreased by 27.3% to$288.8 million for the nine months endedSeptember 30, 2020 from$397.4 million for the nine months endedSeptember 30, 2019 , primarily driven by a decrease in soda ash volumes sold of 21.0% due to lower international demand for the nine months endedSeptember 30, 2020 , as compared to the nine months endedSeptember 30, 2019 . The decrease in soda ash volumes sold were primarily attributable to the decline in global demand as a result of the COVID-19 pandemic beginning inApril 2020 . Also contributing to the decrease in net sales was a decline in international pricing, which continued the trend that began in the fourth quarter of 2019. Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense and freight costs, decreased by 13.8% to$253.9 million for the nine months endedSeptember 30, 2020 from$294.7 million for the nine months endedSeptember 30, 2019 , which were primarily due to significant decreases in overall soda ash sales volumes and production in response to COVID-19, which were partially offset by the increased cost due to usage not being effective with the decrease in production. Selling, general and administrative expenses. Our selling, general and administrative expenses decreased 15.4% to$16.5 million for the nine months endedSeptember 30, 2020 , compared to$19.5 million for the nine months endedSeptember 30, 2019 . The decrease was driven primarily by decreased affiliate expenses and employee benefit expenses, as well as lower travel expenses and professional fees incurred during the nine months of 2020. Operating income. As a result of the foregoing, operating income decreased by 77.9% to$18.4 million for the nine months endedSeptember 30, 2020 from$83.2 million for the nine months endedSeptember 30, 2019 . During the nine months endedSeptember 30, 2020 , production and sales decreased significantly. Operating results have declined by a greater percentage than production and sales due to a significant amount of fixed plant costs that are not proportionally impacted by lower sales and production volume. In addition, certain costs are higher due to cost related to employee safety and retention during the COVID-19 pandemic. Net income. As a result of the foregoing, net income decreased by 82.0% to$14.2 million for the nine months endedSeptember 30, 2020 , from$78.9 million for the nine months endedSeptember 30, 2019 . 37 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources Sources of liquidity include cash generated from operations and borrowings under credit facilities and capital calls from partners. We use cash and require liquidity primarily to finance and maintain our operations, fund capital expenditures for our property, plant and equipment, make cash distributions to holders of our partnership interests, pay the expenses of our general partner and satisfy obligations arising from our indebtedness. Our ability to meet these liquidity requirements will depend primarily on our ability to generate cash flow from operations. Our sources of liquidity include: •cash generated from our operations of which we had cash on hand of$1.7 million atSeptember 30, 2020 ; •approximately$132.5 million ($225.0 million , less$92.5 million outstanding), is available for borrowing and undrawn under the Ciner Wyoming Credit Facility (as defined herein) as ofSeptember 30, 2020 (during the nine months endedSeptember 30, 2020 , we made repayments on the Ciner Wyoming Credit Facility of$196.0 million , offset by borrowings of$159.0 million ); and •$10.0 million is available for borrowing under the Ciner Resources Credit Facility (as defined herein) as ofSeptember 30, 2020 . We continue to analyze all aspects of our spending in order to maintain liquidity at levels we believe are necessary. In the second and third quarters of 2020, we took steps to remove current non-essential spend, including limiting spending on travel, third-party services and other operating expenses. We are utilizing applicable COVID-19 related government relief programs, such as cost reimbursement or payment deferral programs. We have reviewed and taken actions to adjust our capital spending and in particular our expansion capital spending until we have more clarity and visibility into the impact of the pandemic on our long-term business. Our ability to satisfy debt service obligations, to fund planned capital expenditures and to make acquisitions, will depend on our future operating performance, which, in turn, will be affected by prevailing economic conditions, our business and other factors, some of which are beyond our control. In an effort to achieve greater financial and liquidity flexibility during the COVID-19 pandemic, onAugust 3, 2020 , each of the members of the board of managers ofCiner Wyoming approved a suspension of quarterly distributions to its members. In addition, effectiveAugust 3, 2020 , in connection with the quarterly distribution for the quarter endedJune 30, 2020 , each of the members of the board of directors of our general partner approved a suspension of quarterly distributions to our unitholders. EffectiveNovember 2, 2020 , the board ofCiner Wyoming unanimously approved a continuation of the suspension of quarterly distributions to the members ofCiner Wyoming . EffectiveNovember 2, 2020 , in connection with the quarterly distribution for the quarter endedSeptember 30, 2020 , each of the members of the board of directors of our general partner approved a continuation of the suspension of quarterly distributions to members and unitholders in order to increase financial and liquidity flexibility as the COVID-19 pandemic continues. Management and the board of directors of our general partner will continue to evaluate, on a quarterly basis, whether it is appropriate to reinstate the distribution to our unitholders, which will be dependent in part on our cash reserves, liquidity, total debt levels and anticipated capital expenditures. Although we cannot estimate the future impact of COVID-19, we believe our existing liquidity, the steps we took in the first and second quarters of 2020 to strengthen our financial position through the amended Ciner Wyoming Credit Facility and Ciner Resources Credit Facility, and the suspension of our quarterly distributions for the second and third quarters of 2020, provide the financial flexibility and sufficient liquidity to run our business effectively. We are actively managing the business to maintain cash flow and we believe with these steps we have adequate liquidity to meet our anticipated requirements during the COVID-19 pandemic. While we have begun to see signs of recovery with some of our customers and industries, primarily in the form of government re-openings and increasing sales orders, in comparison to quarter endedSeptember 30, 2020 these recoveries are very fluid. As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our operations, the potential negative financial impact to our results cannot be reasonably estimated but could be material. We will review and, when appropriate, adjust our overall approach to capital allocation and liquidity as we know more about the length and severity of the COVID-19 pandemic and how the post-pandemic recovery will unfold. See Part I, Item 2, Overview, "Recent Developments", for more information. Capital Requirements 38
-------------------------------------------------------------------------------- Table of Contents Working capital is the amount by which current assets exceed current liabilities. Our working capital requirements have been, and will continue to be, primarily driven by changes in accounts receivable and accounts payable, which generally fluctuate with changes in volumes, contract terms and market prices of soda ash in the normal course of our business. Other factors impacting changes in accounts receivable and accounts payable could include the timing of collections from customers and payments to suppliers, as well as the level of spending for maintenance and growth capital expenditures. A material adverse change in operations or available financing under the Ciner Resources Credit Facility and the Ciner Wyoming Credit Facility could impact our ability to fund our requirements for liquidity and capital resources. Historically, we have not made working capital borrowings to finance our operations. As ofSeptember 30, 2020 , we had a working capital balance of$83.8 million as compared to a working capital balance of$116.0 million as ofDecember 31, 2019 . The primary driver for the decrease in our working capital balance was a decrease in cash and cash equivalents primarily related to declines in sales as we continue to utilize the flexibility of our production assets to adjust to the COVID-19 uncertainties and our customer demands and repayments under the Ciner Wyoming Credit Facility and additionally decreases in due from affiliates primarily related to a decline in sales levels to ANSAC and timing of collections during the nine months endedSeptember 30, 2020 . Financial Assurance Regulatory Updates by theWyoming Department of Environmental Quality We have historically been subject to a self-bond agreement (the "Self-Bond Agreement") with theWyoming Department of Environmental Quality ("WDEQ") under which we committed to pay directly for reclamation costs. The amount of the self-bond was$36.2 million at bothSeptember 30, 2020 andDecember 31, 2019 . InMay 2019 , theState of Wyoming enacted legislation that limits our and other mine operators' ability to self-bond and requires us to seek other acceptable financial instruments to provide alternate assurances for our reclamation obligations byNovember 2020 . We provided such alternate assurances by timely securing a third-party surety bond effectiveOctober 15, 2020 (the "Surety Bond") for the then-applicable full self-bond amount. After we secured the Surety Bond, the Self-Bond Agreement was terminated. As of the date of this Report, the impact on our net income and liquidity due to securing the Surety Bond is immaterial and we anticipate that to continue to be the case. The amount of such assurances that we are required to provide is subject to change upon periodic re-evaluation by the WDEQ's Land Quality Division. For a discussion of risks in connection with future legislation relating to such financial assurances that could affect our business, financial condition and liquidity, please read Item IA, "Risk Factors--Risks Inherent in our Business and Industry--Our inability to acquire, maintain or renew financial assurances related to the reclamation and restoration of mining property could have a material adverse effect on our business, financial condition and results of operations," in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC onMarch 9, 2020 . Capital Expenditures Our operations require investments to expand, upgrade or enhance existing operations and to meet evolving environmental and safety regulations. We distinguish between maintenance and expansion capital expenditures. Maintenance capital expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) are made to maintain, over the long-term, our operating income or operating capacity. Examples of maintenance capital expenditures are expenditures to upgrade and replace mining equipment and to address equipment integrity, safety and environmental laws and regulations. Our maintenance capital expenditures do not include actual or estimated capital expenditures for replacement of our trona reserves. Expansion capital expenditures are incurred for acquisitions or capital improvements made to increase, over the long-term, our operating income or operating capacity. Examples of expansion capital expenditures include the acquisition and/or construction of complementary assets to grow our business and to expand existing facilities, such as projects that increase production from existing facilities or reduce costs, to the extent such capital expenditures are expected to increase our long-term operating capacity or operating income. The table below summarizes our capital expenditures, on an accrual basis: Three Months Ended Nine Months Ended September September 30, 30, (In millions) 2020 2019 2020 2019 Capital Expenditures: Maintenance$ 6.5 $ 4.6 $ 16.7 $ 9.8 Expansion 3.1 7.1 14.3 31.3 Total$ 9.6 $ 11.7 $ 31.0 $ 41.1 During the nine months endedSeptember 30, 2020 , capital expenditures decreased$10.1 million as compared to the nine months endedSeptember 30, 2019 . The decrease was primarily driven by decreases in expansion capital expenditures because of the completion of our new co-generation facility, which became operational inMarch 2020 . The decrease was partially offset by the continued increase of maintenance capital expenditures that began in the second half of 2019 at ourWyoming facility to both adequately maintain the facility's physical assets and to improve its operational reliability. 39 -------------------------------------------------------------------------------- Table of ContentsGreen River Expansion Project We continue to develop plans and execute the early phases for a potential newGreen River Expansion Project that we believe will increase production levels up to approximately 3.5 million tons of soda ash per year. We have conducted the initial basic design and are currently evaluating and pursuing the related permits and detailed cost analysis pursuant to the basic design. This project will require capital expenditures materially higher than have been recently incurred byCiner Wyoming . When considering the significant investment required by this expansion and the infrastructure improvements designed to increase our overall efficiency, combined with the COVID-19 pandemic's negative impact on our financial results, we have re-prioritized the timing of the significant expenditure items in order to increase financial and liquidity flexibility and until we have more clarity and visibility into the ongoing impact of the COVID-19 pandemic on our business. Cash Flows Discussion The following is a summary of cash provided by or used in each of the indicated types of activities: Nine Months Ended September 30, Percent (In millions) 2020 2019 Increase/(Decrease) Cash provided by (used in): Operating activities$ 52.4 $ 68.4 (23.4) % Investing activities$ (28.4) $ (49.3) (42.4) % Financing activities$ (37.2) $ (17.1) 117.5 % Operating Activities Our operating activities during the nine months endedSeptember 30, 2020 provided cash of$52.4 million , a decrease of 23.4% from the$68.4 million cash provided during the nine months endedSeptember 30, 2019 , primarily as a result of the following: •a decrease of 82.0% in net income of$14.2 million during the nine months endedSeptember 30, 2020 , compared to$78.9 million for the prior-year period; and •$16.2 million of working capital provided by operating activities during the nine months endedSeptember 30, 2020 , compared to$31.4 million of working capital used in operating activities during the nine months endedSeptember 30, 2019 . The$47.6 million increase in working capital provided by operating activities was primarily due to the$15.1 million decrease in due-from affiliates for the nine months endedSeptember 30, 2020 compared to a$30.0 million increase in due from affiliates for the nine months endedSeptember 30, 2019 primarily related to incremental sales levels to ANSAC, as well as timing of collections and timing of our funding of pension benefit plans offered and administered byCiner Corp. Investing Activities We used cash flows of$28.4 million in investing activities during the nine months endedSeptember 30, 2020 , compared to$49.3 million used during the nine months endedSeptember 30, 2019 , for capital projects as described in "Capital Expenditures" above. Financing Activities Cash used in financing activities of$37.2 million during the nine months endedSeptember 30, 2020 increased by 117.5% over the prior-year cash used in financing activities, largely due to repayments of the credit facility during the nine months endedSeptember 30, 2020 . 40 -------------------------------------------------------------------------------- Table of Contents Borrowings under the Ciner Wyoming Credit Facility were at variable interest rates. As of and for the quarter ended September 30, (Dollars in millions) 2020 Short-term borrowings from banks: Outstanding amount at period end $ 92.5 Weighted average interest rate at period end(1) 2.96 % Average daily amount outstanding for the period$ 138.7 Weighted average daily interest rate for the period(1) 2.88 % Maximum month-end amount outstanding during the period$ 145.0 (1) Weighted average interest rates set forth in the table above include the impacts of our interest rate swap contracts designated as cash flow hedges. As ofSeptember 30, 2020 , the interest rate swap contracts had an aggregate notional value of$37.5 million . 41 -------------------------------------------------------------------------------- Table of Contents Debt See Part I, Item 1, Financial Statements - Note 4, "Debt" for more information regarding the Partnership's debt obligations and related disclosures.
Contractual Obligations
During the nine months endedSeptember 30, 2020 , there were no material changes with respect to the contractual obligations disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC onMarch 9, 2020 (the "2019 Annual Report") other than as described below. •As discussed in Part I, Item 1, Financial Statements - Note 4, "Debt", onMarch 26, 2020 , we entered into the Ciner Wyoming Equipment Financing Arrangement that has an initial principal of$30 million , with monthly installment payments beginningApril 2020 throughMarch 2028 .Ciner Wyoming's balance under the Ciner Wyoming Equipment Financing Arrangement atSeptember 30, 2020 was$28.5 million ($28.3 million net of financing costs); and
•At
Off-Balance Sheet Arrangements See Part I, Item 1, Financial Statements - Note 9, Commitments and Contingencies - "Off-Balance Sheet Arrangements", for additional details. Critical Accounting Policies There have been no material changes in critical accounting policies followed by us during the nine months endedSeptember 30, 2020 from those disclosed in the 2019 Annual Report. Recently Issued Accounting Standards Accounting standards recently issued are discussed in Item 1. Financial Statements - Note 1, "Corporate Structure and Summary of Significant Accounting Policies", in the notes to unaudited condensed consolidated financial statements. Non-GAAP Financial Measures We report our financial results in accordance with generally accepted accounting principles inthe United States ("GAAP"). We also present the non-GAAP financial measures of: •Adjusted EBITDA; •distributable cash flow; and •distribution coverage ratio. We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax, depreciation, depletion and amortization, equity-based compensation expense and certain other expenses that are non-cash charges or that we consider not to be indicative of ongoing operations. Distributable cash flow is defined as Adjusted EBITDA less net cash paid for interest, maintenance capital expenditures and income taxes, each as attributable toCiner Resources LP . The Partnership may fund expansion-related capital expenditures with borrowings under existing credit facilities such that expansion-related capital expenditures will have no impact on cash on hand or the calculation of cash available for distribution. In certain instances, the timing of the Partnership's borrowings and/or its cash management practices will result in a mismatch between the period of the borrowing and the period of the capital expenditure. In those instances, the Partnership adjusts designated reserves (as provided in our partnership agreement) to take account of the timing difference. Accordingly, expansion-related capital expenditures have been excluded from the presentation of cash available for distribution. Distributable cash flow will not reflect changes in working capital balances. We define distribution coverage ratio as the ratio of distributable cash flow as of the end of the period to cash distributions payable with respect to such period. Adjusted EBITDA, distributable cash flow and distribution coverage ratio are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: •our operating performance as compared to other publicly traded partnerships in our industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods; 42 -------------------------------------------------------------------------------- Table of Contents •the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; •our ability to incur and service debt and fund capital expenditures; and •the viability of capital expenditure projects and the returns on investment of various investment opportunities. We believe that the presentation of Adjusted EBITDA, distributable cash flow and distribution coverage ratio provide useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income and net cash provided by operating activities. Our non-GAAP financial measures of Adjusted EBITDA, distributable cash flow and distribution coverage ratio should not be considered as alternatives to GAAP net income, operating income, net cash provided by operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all items that affect net income and net cash provided by operating activities. Investors should not consider Adjusted EBITDA, distributable cash flow and distribution coverage ratio in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA, distributable cash flow and distribution coverage ratio may be defined differently by other companies, including those in our industry, our definition of Adjusted EBITDA, distributable cash flow and distribution coverage ratio may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The table below presents a reconciliation of the non-GAAP financial measures of Adjusted EBITDA and distributable cash flow to the GAAP financial measures of net income and net cash provided by operating activities: 43
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Three Months Ended September Nine Months Ended September
30, 30,
(In millions, except per unit data) 2020 2019 2020 2019
Reconciliation of Adjusted EBITDA to net income:
Net income $ 5.4 $ 29.9 $ 14.2 $ 78.9
Add backs:
Depreciation, depletion and amortization expense 7.8 6.8 20.8 20.0
Interest expense, net 1.2 1.5 3.9 4.3
Equity-based compensation expense, net of forfeitures 0.2
(0.6) 0.9 0.4
Adjusted EBITDA $ 14.6
7.4 19.1 20.3 52.2
Adjusted EBITDA attributable to
Reconciliation of distributable cash flow to Adjusted EBITDA attributable toCiner Resources LP : Adjusted EBITDA attributable to Ciner Resources LP$ 7.2 $ 18.5 $ 19.5 $ 51.4 Less: Cash interest expense, net attributable to Ciner Resources LP 0.6 0.8 0.7 2.2
Less: Maintenance capital expenditures attributable to
2.8 1.5 7.4 3.5
Distributable cash flow attributable to
$ 3.8
Cash distribution declared per unit $ -$ 0.340 $ 0.340 $ 1.020 Total distributions to unitholders and general partner $ -$ 6.9 $ 6.8 $ 20.6 Distribution coverage ratio N/A 2.35 1.68 2.22
Reconciliation of Adjusted EBITDA to net cash from operating activities: Net cash provided by operating activities
$ 21.2 $ 40.6 $ 52.4 $ 68.4 Add/(less): Amortization of long-term loan financing (0.1) (0.1) (0.1) (0.2) Net change in working capital (7.7) (4.3) (16.2) 31.4 Interest expense, net 1.2 1.5 3.9 4.3 Other non-cash items - (0.1) (0.2) (0.3) Adjusted EBITDA$ 14.6
7.4 19.1 20.3 52.2
Adjusted EBITDA attributable to
0.6 0.8 0.7 2.2
Less: Maintenance capital expenditures attributable to
2.8 1.5 7.4 3.5
Distributable cash flow attributable to Ciner Resources
LP $ 3.8 $ 16.2 $ 11.4 $ 45.7
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