The following review of operations for the three and six month periods endedJune 30, 2020 and 2019 should be read in conjunction with our consolidated financial statements and the notes to consolidated financial statements included in this Form 10-Q and with the consolidated financial statements, notes to consolidated financial statements and management's discussion and analysis included in theNatural Resource Partners L.P. Annual Report on Form 10-K for the year endedDecember 31, 2019 . As used herein, unless the context otherwise requires: "we," "our," "us" and the "Partnership" refer toNatural Resource Partners L.P. and, where the context requires, our subsidiaries. References to "NRP" and "Natural Resource Partners " refer toNatural Resource Partners L.P. only, and not toNRP (Operating) LLC or any ofNatural Resource Partners L.P.'s subsidiaries. References to "Opco" refer toNRP (Operating) LLC , a wholly owned subsidiary of NRP, and its subsidiaries.NRP Finance Corporation ("NRP Finance") is a wholly owned subsidiary of NRP and a co-issuer with NRP on the 9.125% senior notes due 2025 (the "2025 Senior Notes"). INFORMATION REGARDING FORWARD-LOOKING STATEMENTS Statements included in this 10-Q may constitute forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such forward-looking statements include, among other things, statements regarding: the effects of the global COVID-19 pandemic; our business strategy; our liquidity and access to capital and financing sources; our financial strategy; prices of and demand for coal, trona and soda ash, and other natural resources; estimated revenues, expenses and results of operations; projected production levels by our lessees;Ciner Wyoming LLC's ("Ciner Wyoming's") trona mining and soda ash refinery operations; distributions from our soda ash joint venture; the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving us, and of scheduled or potential regulatory or legal changes; and global andU.S. economic conditions. These forward-looking statements speak only as of the date hereof and are made based upon our current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. You should not put undue reliance on any forward-looking statements. See "Item 1A. Risk Factors" included in this Form 10-Q and in our Annual Report on Form 10-K for the year endedDecember 31, 2019 for important factors that could cause our actual results of operations or our actual financial condition to differ. NON-GAAP FINANCIAL MEASURES Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings (loss) from unconsolidated investment, net income attributable to non-controlling interest and gain on reserve swap; plus total distributions from unconsolidated investment, interest expense, net, debt modification expense, loss on extinguishment of debt, depreciation, depletion and amortization and asset impairments. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or loss, net income or loss attributable to partners, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance, liquidity or ability to service debt obligations. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring items that materially affect our net income (loss), the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies. In addition, Adjusted EBITDA presented below is not calculated or presented on the same basis as Consolidated EBITDA as defined in our partnership agreement or Consolidated EBITDDA as defined in Opco's debt agreements. For a description of Opco's debt agreements, see Note 8. Debt, Net in the Notes to Consolidated Financial Statements included herein as well as in "Item 8. Financial Statements and Supplementary Data-Note 12. Debt, Net" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Adjusted EBITDA is a supplemental performance measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis. 25
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Table of Contents Distributable Cash Flow Distributable cash flow ("DCF") represents net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivables; less maintenance capital expenditures and distributions to non-controlling interest. DCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. DCF may not be calculated the same for us as for other companies. In addition, DCF presented below is not calculated or presented on the same basis as distributable cash flow as defined in our partnership agreement, which is used as a metric to determine whether we are able to increase quarterly distributions to our common unitholders. DCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to asses our ability to make cash distributions and repay debt. Free Cash Flow Free cash flow ("FCF") represents net cash provided by (used in) operating activities of continuing operations plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivables; less maintenance and expansion capital expenditures, cash flow used in acquisition costs classified as investing or financing activities and distributions to non-controlling interest. FCF is calculated before mandatory debt repayments. FCF is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. FCF may not be calculated the same for us as for other companies. FCF is a supplemental liquidity measure used by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others to assess our ability to make cash distributions and repay debt. Introduction The following discussion and analysis presents management's view of our business, financial condition and overall performance. Our discussion and analysis consists of the following subjects: •Executive Overview •Results of Operations •Liquidity and Capital Resources •Off-Balance Sheet Transactions •Related Party Transactions •Summary of Critical Accounting Estimates •Recent Accounting Standards 26
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Table of Contents Executive Overview We are a diversified natural resource company engaged principally in the business of owning, managing and leasing a diversified portfolio of mineral properties inthe United States , including interests in coal and other natural resources and own a non-controlling 49% interest inCiner Wyoming LLC ("CinerWyoming "), a trona ore mining and soda ash production business. Our common units trade on theNew York Stock Exchange under the symbol "NRP." Our business is organized into two operating segments: Coal Royalty and Other-consists primarily of coal royalty properties and coal-related transportation and processing assets. Other assets include industrial mineral royalty properties, aggregates royalty properties, oil and gas royalty properties and timber. Our coal reserves are primarily located in Appalachia, theIllinois Basin and theNorthern Powder River Basin inthe United States . Our industrial minerals and aggregates properties are located in various states acrossthe United States , our oil and gas royalty assets are primarily located inLouisiana and our timber assets are primarily located inWest Virginia . Soda Ash-consists of our 49% non-controlling equity interest inCiner Wyoming , a trona ore mining and soda ash production business located in theGreen River Basin ofWyoming . Ciner Resources LP, our operating partner, mines the trona, processes it into soda ash, and distributes the soda ash both domestically and internationally into the glass and chemicals industries. Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment. The global COVID-19 pandemic has had a significant negative impact on demand for steel, electricity and glass, which translates to lower demand for the coal and soda ash we produce. We continue to employ remote work protocols and are conducting business as usual despite the pandemic. Although we are unable to predict the severity or duration of the impact on our business, we currently have approximately$210 million of liquidity. In addition, our$300 million of parent company notes does not mature until 2025. Accordingly, we believe we are well-positioned to manage through the downturn. Our financial results by segment for the six months endedJune 30, 2020 are as follows: Operating Segments Coal Royalty Corporate and (In thousands) and Other Soda Ash Financing Total Revenues and other income$ 68,011 $ 3,214 $ -$ 71,225 Net income (loss) from continuing operations$ (81,735) $ 3,169 $ (28,156) $ (106,722) Adjusted EBITDA (1)$ 54,637 $
14,165
Cash flow provided by (used in) continuing operations Operating activities$ 62,509 $ 14,166 $ (26,585) $ 50,090 Investing activities$ 637 $ - $ -$ 637 Financing activities $ - $ -$ (38,164) $ (38,164) Distributable cash flow (1)$ 64,146 $ 14,166 $ (26,585) $ 51,661 Free cash flow (1)$ 62,639 $ 14,166 $ (26,585) $ 50,220
(1)See "-Results of Operations" below for reconciliations to the most comparable GAAP financial measures.
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Table of Contents Current Results/Market Commentary Coal Royalty and Other Business Segment Our lessees sold 8.4 million tons of coal from our properties in the first six months of 2020 and we derived approximately 70% of our coal royalty revenues and approximately 65% of our coal royalty sales volumes from metallurgical coal during the same period. Revenues and other income in the first six months of 2020 were lower by$57.5 million , as compared to the prior year period. This decrease is primarily a result of a weakened market for metallurgical coal as compared to the prior year period due to a decline in global steel demand. As a result, both sales volumes and prices for metallurgical coal sold were lower in the first six months of 2020 compared to the prior year period. In addition, weaker domestic and export thermal coal markets compared to the prior year period resulted in lower revenue from our thermal coal properties. Domestic and export thermal coal markets remained challenged by lower utility demand, continued low natural gas prices and the secular shift to renewable energy. The COVID-19 pandemic has compounded already weak coal pricing and demand, and our coal lessees are seeing significant negative impacts on their businesses. During the second quarter of 2020, our largest lessee, Foresight Energy, emerged from bankruptcy. We entered into lease amendments pursuant to which Foresight agreed to pay us fixed cash payments of$48.75 million in 2020 and$42.0 million in 2021 to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between us and Foresight Energy for calendar years 2020 and 2021. Through the first six months of 2020, we received$21.2 million of the$48.75 million due to us in 2020. Beginning inJanuary 2022 , Foresight payment obligations will be calculated in accordance with the provisions of the original lease agreements, except with respect to theMacoupin mine. While theMacoupin mine is idled, Foresight will pay an annual fee of$2.0 million to us each year through 2023 to continue to lease our coal reserves atMacoupin . We recorded$132.3 million in non-cash asset impairment expense in the second quarter of 2020, primarily related to weakened coal markets that resulted in termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for our frac sand properties. Soda Ash Business SegmentCiner Wyoming was negatively impacted by the COVID-19 pandemic as lower activity in the global auto, container and construction industries reduced demand for glass and soda ash. Revenues and other income in the second quarter of 2020 were lower by$14.4 million compared to the prior year quarter primarily due to a combination of lower pricing and volumes sold. Distributions received fromCiner Wyoming were$7.1 million in the second quarter of 2020 as compared to$9.3 million in the second quarter of 2019. Global soda ash prices are down roughly 25% from a year ago, to levels that we believe are below the cost of production of the world's synthetic soda ash producers and some of the natural soda ash producers. We expect the soda ash industry to face significant headwinds until the global economy gets back on track. While we believe our facility is competitively positioned as one of the lowest cost producers of soda ash in the world, we expect soda ash markets to continue to be challenged over the next several quarters.Ciner Wyoming continues to develop plans for a significant capacity expansion capital project. However, they have delayed the timing of significant costs related to this project until they have more clarity and visibility into the impact of the COVID-19 pandemic on its business. In addition, in order to achieve greater financial flexibility during the COVID-19 pandemic,Ciner Wyoming suspended its quarterly distribution for the second quarter which would have been paid to us inAugust 2020 .Ciner Wyoming will continue to evaluate, on a quarterly basis whether to reinstate the distribution, which will be dependent in part on its cash reserves, liquidity, total debt levels and anticipated capital expenditures. Business Outlook The global COVID-19 pandemic continues to affect businesses across the world. Although we are unable to predict the severity or duration of the COVID-19 pandemic's impact on our business, we continue to maintain strong cash balances and liquidity, and efforts to de-lever and de-risk the Partnership over the past five years have prepared NRP to operate through this downturn. 28
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Table of Contents Results of Operations Second Quarter of 2020 and 2019 Compared Revenues and Other Income The following table includes our revenues and other income by operating segment: For the Three Months Ended June 30, Percentage Operating Segment (In thousands) 2020 2019 Decrease Change Coal Royalty and Other$ 34,069 $ 70,136 $ (36,067) (51) % Soda Ash (3,058) 11,333 (14,391) (127) % Total$ 31,011 $ 81,469 $ (50,458) (62) %
The changes in revenues and other income is discussed for each of the operating segments below:
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Table of Contents Coal Royalty and Other The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income: For the Three Months
Ended June
30, Increase Percentage (In thousands, except per ton data) 2020 2019 (Decrease) Change Coal sales volumes (tons) Appalachia Northern 87 1,625 (1,538) (95) % Central 2,463 3,825 (1,362) (36) % Southern 426 386 40 10 % Total Appalachia 2,976 5,836 (2,860) (49) % Illinois Basin 578 535 43 8 % Northern Powder River Basin 340 591 (251) (42) % Total coal sales volumes 3,894 6,962 (3,068) (44) % Coal royalty revenue per ton Appalachia Northern$ 2.74 $ 0.86 $ 1.88 218 % Central 4.04 6.03 (1.99) (33) % Southern 4.96 6.69 (1.73) (26) % Illinois Basin 1.97 4.51 (2.54) (56) % Northern Powder River Basin 3.15 2.75 0.40 15 % Combined average coal royalty revenue per ton 3.73 4.46 (0.73) (16) % Coal royalty revenues Appalachia Northern$ 238 $ 1,393 $ (1,155) (83) % Central 9,951 23,055 (13,104) (57) % Southern 2,111 2,581 (470) (18) % Total Appalachia 12,300 27,029 (14,729) (54) % Illinois Basin 1,137 2,411 (1,274) (53) % Northern Powder River Basin 1,071 1,624 (553) (34) % Unadjusted coal royalty revenues 14,508 31,064 (16,556) (53) % Coal royalty adjustment for minimum leases (1) (3,661) (361) (3,300) (914) % Total coal royalty revenues$ 10,847 $ 30,703 $ (19,856) (65) % Other revenues Production lease minimum revenues (1)$ 8,485 $ 15,879 $ (7,394) (47) % Minimum lease straight-line revenues (1) 4,987 3,854 1,133 29 % Property tax revenues 761 1,377 (616) (45) % Wheelage revenues 1,584 1,945 (361) (19) % Coal overriding royalty revenues 683 3,999 (3,316) (83) % Lease amendment revenues 890 4,414 (3,524) (80) % Aggregates royalty revenues 271 1,237 (966) (78) % Oil and gas royalty revenues 2,742 482 2,260 469 % Other revenues 416 726 (310) (43) % Total other revenues$ 20,819 $ 33,913 $ (13,094) (39) % Coal royalty and other$ 31,666 $ 64,616 $ (32,950) (51) % Transportation and processing services revenues 1,938 5,274 (3,336) (63) % Gain on asset sales and disposals 465 246 219 89 % Total Coal Royalty and Other segment revenues and (51) % other income$ 34,069 $ 70,136 $ (36,067)
(1)Beginning
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Table of Contents Coal Royalty Revenues Approximately 80% of coal royalty revenues and approximately 70% of coal royalty sales volumes were derived from metallurgical coal during the three months endedJune 30, 2020 . Coal royalty revenues decreased$19.9 million period-over-period primarily driven by the weakened coal markets that resulted in lower coal sales volumes and prices. The discussion of these decreases by region is as follows: •Appalachia: Sales volumes decreased 49% and coal royalty revenues decreased$14.7 million primarily due to weakened coal demand compounded by the COVID-19 pandemic. •Illinois Basin: Sales volumes increased 8% and coal royalty revenues decreased$1.3 million primarily due to weakened coal pricing compounded by the COVID-19 pandemic. •Northern PowderRiver Basin : Sales volumes decreased 42% and coal royalty revenues decreased$0.6 million primarily due to our lessee mining off of our property in accordance with its mine plan in 2020, partially offset by a 15% increase in sales prices as compared to the prior year quarter. Other Revenues Other revenues decreased$13.1 million primarily due to the following: •A$7.4 million decrease in production lease minimum revenues primarily as a result ofMacoupin lease amendment and lessee forfeitures of recoupable balances in the second quarter of 2019 from minimums paid in prior periods; •A$3.3 million decrease in coal overriding royalty revenues primarily driven by lower activity at ourWilliamson property in theIllinois Basin . •A$3.5 million decrease in lease amendment revenues year-over-year. Transportation and Processing Services Revenues Transportation and processing services revenues decreased$3.3 million primarily due to idling of theMacoupin mine where we own loadout and other transportation assets. Soda Ash Revenues and other income related to our Soda Ash segment decreased$14.4 million primarily due to a combination of lower pricing and volumes sold.Ciner Wyoming was negatively impacted by the COVID-19 pandemic as lower activity in the global auto, container and construction industries reduced demand for glass and soda ash. 31
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Table of Contents Operating and Other Expenses The following table presents the significant categories of our consolidated operating and other expenses: For the Three Months Ended June 30, Increase Percentage (In thousands) 2020 2019 (Decrease) Change Operating expenses Operating and maintenance expenses$ 8,217 $ 12,459 $ (4,242) (34) % Depreciation, depletion and amortization 2,062 3,970 (1,908) (48) % General and administrative expenses 3,621 4,196 (575) (14) % Asset impairments 132,283 - 132,283 100 % Total operating expenses$ 146,183 $ 20,625 $ 125,558 609 % Other expenses, net Interest expense, net$ 10,329 $ 12,456 $ (2,127) (17) % Loss on extinguishment of debt - 29,282 (29,282) (100) % Total other expenses, net$ 10,329 $ 41,738 $ (31,409) (75) % Total operating expenses increased$125.6 million primarily due to the following: •Asset impairments increased$132.3 million due to weakened coal markets that resulted in termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties. •Operating and maintenance expenses include costs to manage the Coal Royalty and Other and Soda Ash segments and primarily consist of royalty, tax, employee-related and legal costs and bad debt expense. These costs decreased$4.2 million compared to the prior year quarter primarily due to decreased bad debt expense period-over-period. •Depreciation, depletion and amortization expense decreased$1.9 million due to lower coal sales volumes at certain properties. Total other expenses, net decreased$31.4 million primarily due to the following: •Loss on extinguishment of debt of$29.3 million in 2019 related to the 105.25% premium paid to redeem the 2022 Senior Notes in the second quarter of 2019 as well as the write-off of unamortized debt issuance costs and debt discount related to the 2022 Senior Notes. •Interest expense, net decreased$2.1 million primarily due to lower debt balances during the second quarter of 2020 as a result of debt repayments made over the past twelve months. 32
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Table of Contents Adjusted EBITDA (Non-GAAP Financial Measure) The following table reconciles net income (loss) from continuing operations (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment: Operating Segments Coal Royalty Corporate and For the Three Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2020 Net loss from continuing operations$ (108,479)
- 3,058 - 3,058 Add: total distributions from unconsolidated investment - 7,105 - 7,105 Add: interest expense, net 15 - 10,314 10,329 Add: depreciation, depletion and amortization 2,062 - - 2,062 Add: asset impairments 132,283 - - 132,283 Adjusted EBITDA$ 25,881 $ 7,076 $ (3,621) $ 29,336 June 30, 2019 Net income (loss) from continuing operations$ 53,707 $ 11,333 $ (45,934) $ 19,106 Less: equity earnings from unconsolidated investment - (11,333) - (11,333) Add: total distributions from unconsolidated investment - 9,310 - 9,310 Add: interest expense, net - - 12,456 12,456 Add: loss on extinguishment of debt - - 29,282 29,282 Add: depreciation, depletion and amortization 3,970 - - 3,970 Adjusted EBITDA$ 57,677 $ 9,310 $ (4,196) $ 62,791 Adjusted EBITDA decreased$33.5 million primarily due to the following: •Coal Royalty and Other Segment •Adjusted EBITDA decreased$31.8 million primarily as a result of the decrease in revenues and other income driven by the weakened coal markets in the second quarter of 2020 as compared to the second quarter of 2019, partially offset by the decrease in operating and maintenance expenses as discussed above. •Soda Ash Segment •Adjusted EBITDA decreased$2.2 million as a result of lower cash distributions received fromCiner Wyoming in second quarter of 2020 as compared to the second quarter of 2019. 33
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Table of Contents Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures) The following table presents the three major categories of the statement of cash flows by business segment: Operating Segments Coal Royalty Corporate and For the Three Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2020 Cash flow provided by (used in) continuing operations Operating activities$ 31,953 $ 7,077 $ (19,095) $ 19,935 Investing activities 365 - - 365 Financing activities - - (9,978) (9,978) June 30, 2019 Cash flow provided by (used in) continuing operations Operating activities$ 55,811 $ 9,310 $ (11,762) $ 53,359 Investing activities 698 - - 698 Financing activities - - (97,989) (97,989)
The following table reconciles net cash provided by (used in) operating activities of continuing operations (the most comparable GAAP financial measure) by business segment to DCF and FCF:
Operating
Segments
Coal Royalty Corporate and For the Three Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2020 Net cash provided by (used in) operating activities of continuing operations$ 31,953
Add: proceeds from asset sales and disposals 507 - - 507 Add: return of long-term contract receivable 858 - - 858 Distributable cash flow$ 33,318 $ 7,077 $ (19,095) $ 21,300 Less: proceeds from asset sales and disposals (507) - - (507) Less: acquisition costs (1,000) - - (1,000) Free cash flow$ 31,811 $ 7,077 $ (19,095) $ 19,793 June 30, 2019 Net cash provided by (used in) operating activities of continuing operations$ 55,811
Add: proceeds from sale of assets 247 - - 247 Add: proceeds from sale of discontinued operations - - - (44) Add: return of long-term contract receivable 451 - - 451 Distributable cash flow$ 56,509 $ 9,310 $ (11,762) $ 54,013 Less: proceeds from sale of assets (247) - - (247) Less: proceeds from sale of discontinued operations - - - 44 Free cash flow$ 56,262 $ 9,310 $ (11,762) $ 53,810 34
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Table of Contents DCF and FCF decreased$32.7 million and$34.0 million , respectively, primarily due to the following: •Coal Royalty and Other Segment •DCF and FCF decreased$23.2 million and$24.5 million , respectively, primarily as a result of the weakened coal markets in the second quarter of 2020. •Soda Ash Segment •DCF and FCF decreased$2.2 million as a result of lower cash distributions received fromCiner Wyoming in the second quarter of 2019. •Corporate and Financing Segment •DCF and FCF decreased$7.3 million primarily due to the timing of interest payments on our parent company bonds that were refinanced in the second quarter of 2019. Interest is due in June and December on the new 9.125% Notes, compared to March and September on the previous 10.5% Notes. 35
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Table of Contents Results of Operations First Six Months of 2020 and 2019 Compared Revenues and Other Income The following table includes our revenues and other income by operating segment: For the Six Months Ended June 30, Percentage Operating Segment (In thousands) 2020 2019 Decrease Change Coal Royalty and Other$ 68,011 $ 125,495 $ (57,484) (46) % Soda Ash 3,214 23,015 (19,801) (86) % Total$ 71,225 $ 148,510 $ (77,285) (52) %
The changes in revenues and other income is discussed for each of the operating segments below:
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Table of Contents Coal Royalty and Other The following table presents coal sales volumes, coal royalty revenue per ton and coal royalty revenues by major coal producing region, the significant categories of other revenues and other income: For the Six Months Ended
June
30, Increase Percentage (In thousands, except per ton data) 2020 2019 (Decrease) Change Coal sales volumes (tons) Appalachia Northern 414 2,484 (2,070) (83) % Central 5,396 7,247 (1,851) (26) % Southern 648 734 (86) (12) % Total Appalachia 6,458 10,465 (4,007) (38) % Illinois Basin 1,083 1,095 (12) (1) % Northern Powder River Basin 867 1,447 (580) (40) % Total coal sales volumes 8,408 13,007 (4,599) (35) % Coal royalty revenue per ton Appalachia Northern$ 2.01 $ 2.19 $ (0.18) (8) % Central 4.47 6.03 (1.56) (26) % Southern 4.68 7.60 (2.92) (38) % Illinois Basin 3.08 4.64 (1.56) (34) % Northern Powder River Basin 3.75 2.66 1.09 41 % Combined average coal royalty revenue per ton 4.11 4.89 (0.78) (16) % Coal royalty revenues Appalachia Northern$ 831 $ 5,438 $ (4,607) (85) % Central 24,124 43,699 (19,575) (45) % Southern 3,034 5,578 (2,544) (46) % Total Appalachia 27,989 54,715 (26,726) (49) % Illinois Basin 3,336 5,081 (1,745) (34) % Northern Powder River Basin 3,248 3,855 (607) (16) % Unadjusted coal royalty revenues 34,573 63,651 (29,078) (46) % Coal royalty adjustment for minimum leases (1) (4,624) (817) (3,807) (466) % Total coal royalty revenues$ 29,949 $ 62,834 $ (32,885) (52) % Other revenues Production lease minimum revenues (1)$ 9,287 $ 18,579 $ (9,292) (50) % Minimum lease straight-line revenues (1) 8,796 7,170 1,626 23 % Property tax revenues 2,360 2,810 (450) (16) % Wheelage revenues 3,788 3,360 428 13 % Coal overriding royalty revenues 2,005 7,974 (5,969) (75) % Lease amendment revenues 1,733 5,185 (3,452) (67) % Aggregates royalty revenues 847 2,701 (1,854) (69) % Oil and gas royalty revenues 3,845 2,201 1,644 75 % Other revenues 489 1,304 (815) (63) % Total other revenues$ 33,150 $ 51,284 $ (18,134) (35) % Coal royalty and other$ 63,099 $ 114,118 $ (51,019) (45) % Transportation and processing services revenues 4,447 10,875 (6,428) (59) % Gain on asset sales and disposals 465 502 (37) (7) % Total Coal Royalty and Other segment revenues and other income$ 68,011 $ 125,495 $ (57,484) (46) %
(1)Beginning
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Table of Contents Coal Royalty Revenues Total coal royalty revenues decreased$32.9 million from 2019 to 2020 primarily driven by weakened coal markets that resulted in lower coal sales volume. The discussion of these decreases by region is as follows: •Appalachia: Sales volumes decreased 38% and revenues decreased$26.7 million primarily due to weakened coal demand compounded by the COVID-19 pandemic. •Illinois Basin: Sales volumes decreased 1% and coal royalty revenues decreased$1.7 million primarily due to weakened coal demand compounded by the COVID-19 pandemic. •Northern PowderRiver Basin : Sales volumes decreased 40% and coal royalty revenues decreased$0.6 million primarily due to our lessee mining off of our property in accordance with its mine plan in 2020, partially offset by a 41% increase in sales prices as compared to the prior year. Other Revenues Other revenues decreased$18.1 million primarily due to the following: •A$9.3 million decrease in production lease minimum revenues primarily as a result ofMacoupin lease amendment and lessee forfeitures of recoupable balances in the second quarter of 2019 from minimums paid in prior periods; •A$6.0 million decrease in coal overriding royalty revenues primarily driven by lower activity at ourWilliamson property in theIllinois Basin . •A$3.5 million decrease in lease amendment revenues year-over-year. Transportation and Processing Services Revenues Transportation and processing services revenues decreased$6.4 million primarily due to idling of theMacoupin mine where we own loadout and other transportation assets. Soda Ash
Revenues and other income related to our Soda Ash segment decreased
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Table of Contents Operating and Other Expenses The following table presents the significant categories of our consolidated operating and other expenses: For the Six Months Ended June 30, Percentage (In thousands) 2020 2019 Decrease Change Operating expenses Operating and maintenance expenses$ 13,419 $ 20,819 $ (7,400) (36) % Depreciation, depletion and amortization 4,074 8,362 (4,288) (51) % General and administrative expenses 7,534 8,546 (1,012) (12) % Asset impairments 132,283 - 132,283 100 % Total operating expenses$ 157,310 $ 37,727 $ 119,583 317 % Other expenses, net Interest expense, net$ 20,637 $ 26,630 $ (5,993) (23) % Loss on extinguishment of debt - 29,282 (29,282) (100) % Total other expenses, net$ 20,637 $ 55,912 $ (35,275) (63) % Total operating expenses increased$119.6 million primarily due to the following: •Asset impairments increased$132.3 million due to weakened coal markets that resulted in termination of certain coal leases, changes to lessee mine plans resulting in permanent moves off certain of our coal properties and decreased oil and gas drilling activity which negatively impacted the outlook for NRP's frac sand properties. •Operating and maintenance expenses decreased$7.4 million primarily due to a decrease in bad debt expense in addition to lower royalty fees related to an overriding royalty agreement withWestern Pocahontas Properties Limited Partnership ("WPPLP"). The coal royalty expense NRP pays to WPPLP is fully offset by the coal royalty revenue NRP receives from this property. •Depreciation, depletion and amortization expense decreased$4.3 million primarily due to lower coal sales volumes at certain properties. Total other expenses, net decreased$35.3 million primarily due to the following: •Loss on extinguishment of debt of$29.3 million in 2019 related to the 105.25% premium paid to redeem the 2022 Senior Notes in the second quarter of 2019 as well as the write-off of unamortized debt issuance costs and debt discount related to the 2022 Senior Notes. •Interest expense, net decreased$6.0 million primarily due to lower debt balances during the first six months of 2020 as a result of debt repayments made over the past twelve months. 39
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Table of Contents Adjusted EBITDA (Non-GAAP Financial Measure) The following table reconciles net income (loss) from continuing operations (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment: Operating Segments Coal Royalty Corporate and For the Six Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2020 Net income (loss) from continuing operations$ (81,735) $ 3,169 $ (28,156) $ (106,722) Less: equity earnings from unconsolidated investment - (3,214) - (3,214) Add: total distributions from unconsolidated investment - 14,210 - 14,210 Add: interest expense, net 15 - 20,622 20,637 Add: depreciation, depletion and amortization 4,074 - - 4,074 Add: asset impairments 132,283 - - 132,283 Adjusted EBITDA$ 54,637 $ 14,165 $ (7,534) $ 61,268 June 30, 2019 Net income (loss) from continuing operations$ 96,314 $ 23,015 $ (64,458) $ 54,871 Less: equity earnings from unconsolidated investment - (23,015) - (23,015) Add: total distributions from unconsolidated investment - 19,110 - 19,110 Add: interest expense, net - - 26,630 26,630 Add: loss on extinguishment of debt - - 29,282 29,282 Add: depreciation, depletion and amortization 8,362 - - 8,362 Adjusted EBITDA$ 104,676 $ 19,110 $ (8,546) $ 115,240 Adjusted EBITDA decreased$54.0 million primarily due to the following: •Coal Royalty and Other Segment •Adjusted EBITDA decreased$50.0 million primarily as a result of weakened coal markets in the first six months of 2020. •Soda Ash Segment •Adjusted EBITDA decreased$4.9 million as a result of lower cash distributions received fromCiner Wyoming in the first six months of 2020. 40
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Table of Contents Distributable Cash Flow ("DCF") and Free Cash Flow ("FCF") (Non-GAAP Financial Measures) The following table presents the three major categories of the statement of cash flows by business segment: Operating Segments Coal Royalty Corporate and For the Six Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2020 Cash flow provided by (used in) continuing operations Operating activities$ 62,509 $ 14,166 $ (26,585) $ 50,090 Investing activities 637 - - 637 Financing activities - - (38,164) (38,164) June 30, 2019 Cash flow provided by (used in) continuing operations Operating activities$ 98,727 $ 19,110 $ (41,646) $ 76,191 Investing activities 1,395 - - 1,395 Financing activities - - (197,841) (197,841)
The following table reconciles net cash provided by (used in) operating activities of continuing operations (the most comparable GAAP financial measure) by business segment to DCF and FCF:
Operating
Segments
Coal Royalty Corporate and For the Six Months Ended (In thousands) and Other Soda Ash Financing TotalJune 30, 2020 Net cash provided by (used in) operating activities of continuing operations$ 62,509 $
14,166
Add: proceeds from asset sales and disposals 507 - - 507 Add: proceeds from sale of discontinued operations - - - (66) Add: return of long-term contract receivable 1,130 - - 1,130 Distributable cash flow$ 64,146 $ 14,166 $ (26,585) $ 51,661 Less: proceeds from asset sales and disposals (507) - - (507) Less: proceeds from sale of discontinued operations - - - 66 Less: acquisition costs (1,000) - - (1,000) Free cash flow$ 62,639 $ 14,166 $ (26,585) $ 50,220 June 30, 2019 Net cash provided by (used in) operating activities of continuing operations$ 98,727 $ 19,110 $ (41,646) $ 76,191 Add: proceeds from asset sales and disposals 503 - - 503 Add: proceeds from sale of discontinued operations - - - (434) Add: return of long-term contract receivable 892 - - 892 Distributable cash flow$ 100,122 $ 19,110 $ (41,646) $ 77,152 Less: proceeds from asset sales and disposals (503) - - (503) Less: proceeds from sale of discontinued operations - - - 434 Free cash flow$ 99,619 $ 19,110 $ (41,646) $ 77,083 41
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Table of Contents DCF and FCF decreased$25.5 million and$26.9 million , respectively, primarily due to the following: •Coal Royalty and Other Segment •DCF and FCF decreased$36.0 million and$37.0 million , respectively, primarily as a result of the weakened coal markets in the first six months of 2020. •Soda Ash Segment •DCF and FCF decreased$4.9 million as a result of lower cash distributions received fromCiner Wyoming in the first six months of 2020. •Corporate and Financing Segment •DCF and FCF increased$15.1 million primarily due to lower cash paid for interest as a result of less outstanding debt in the first six months of 2020. Liquidity and Capital Resources Current Liquidity As ofJune 30, 2020 , we had total liquidity of$210.8 million , consisting of$110.8 million of cash and cash equivalents and$100.0 million of borrowing capacity under our Opco Credit Facility. Cash Flows Cash flows provided by operating activities decreased$24.8 million , from$76.5 million in the six months endedJune 30, 2019 to$51.8 million in the six months endedJune 30, 2020 primarily related to lower operating cash flow as a result of the weakened coal markets in addition to lower cash distributions received fromCiner Wyoming in the first six months of 2020, partially offset by less cash paid for interest in the first six months of 2020 due to less debt outstanding. Cash flows used in financing activities decreased$158.0 million , from$197.8 million in the six months endedJune 30, 2019 to$39.8 million in the six months endedJune 30, 2020 primarily due to the following: •$345.6 million used for the redemption of our 2022 Senior Notes in the second quarter of 2019; •The$49.3 million pre-payment in the first quarter of 2019 related to the sale of our construction aggregates business; •$26.2 million in debt issuance costs and other in 2019 primarily related to 2019 debt refinancings; and •$16.1 million in lower cash distributions in the first six months of 2020 as a result of the special common unit distribution paid in 2019 and suspending the common unit distribution in the second quarter of 2020. These decreases in cash flows used were partially offset by: •$300 million provided by the issuance of the 2025 Senior Notes in the second quarter of 2019. Capital Resources and Obligations Debt, Net We had the following debt outstanding as ofJune 30, 2020 andDecember 31, 2019 : June 30, December 31, (In thousands) 2020 2019
Current portion of long-term debt, net
452,101 470,422 Total debt, net$ 497,887 $ 516,198 We have been and continue to be in compliance with the terms of the financial covenants contained in our debt agreements. For additional information regarding our debt and the agreements governing our debt, including the covenants contained therein, see Note 8. Debt, Net to the Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. 42
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Table of Contents Off-Balance Sheet Transactions We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and accordingly, there are no off-balance sheet risks to our liquidity and capital resources from unconsolidated entities. Related Party Transactions The information required set forth under Note 10. Related Party Transactions to the Consolidated Financial Statements is incorporated herein by reference. Summary of Critical Accounting Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles inthe United States of America requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Recent Accounting Standards The information set forth under Note 1. Basis of Presentation to the Consolidated Financial Statements is incorporated herein by reference.
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