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Item 7. Management’s Discussion and Analysis

2021-03-15 compared with 2020-02-27 · 168 added, 136 removed, 292 unchanged (51% of the section changed)

17 unchanged sentences

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").

Non-GAAP Financial Measures

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.

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 and cash flow used in acquisition costs classified as investing or financing activities.

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.

Cash Flow Cushion

Cash flow cushion 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, one-time beneficial items, mandatory Opco debt repayments, preferred unit distributions and redemption of PIK units and common unit distributions.

Cash flow cushion 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.

Cash flow cushion is a supplemental liquidity measure used by our management to assess our ability to make or raise cash distributions to our common and preferred unitholders and our general partner and repay debt or redeem preferred units.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) from continuing operations less equity earnings 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.

See " Item 8.

Financial Statements and Supplementary Data—Note 11.

Debt, Net " included elsewhere in this Annual Report on Form 10-K for a description of Opco’s debt agreements.

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.

Executive Overview

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Soda Ash —consists of our 49% non-controlling equity interest in Ciner Wyoming, a trona ore mining and soda ash production business located in the Green River Basin of Wyoming.

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.

Ciner Wyoming mines trona and processes it into soda ash that is sold both domestically and internationally into the glass and chemicals industries.

We expect royalties generated from coal mining operations on our properties and our interest in the Ciner Wyoming soda ash business to generate the substantial majority of our cash flow over the next years.

However, over the past year, we have been evaluating our existing portfolio of assets for opportunities to generate alternative sources of revenues without substantial capital investment by us.

For example, our surface and mineral acreage owned across the United States may contain geologic formations that are suitable for the long-term sequestration and storage of carbon.

To the extent a viable carbon sequestration project is developed on or near our property, we may be able to lease that property as storage in exchange for rent payments.

We are also exploring opportunities to lease our surface acreage for renewable energy projects, such as solar arrays and wind farms.

In addition, we are assessing our forest timber assets for carbon sequestration project potential whereby we would obtain and sell carbon offset credits in exchange for agreements for long-term forest preservation.

There can be no assurance, however, that any of these potential projects will succeed or generate substantial cash flow to NRP.

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.

We remain focused on strengthening our balance sheet and maintaining sufficient liquidity to manage our business through periods of volatility in commodity prices.

We devote significant amounts of cash each year to make mandatory amortization payments on the Opco Senior Notes as well as to make distributions on our preferred units and common units.

Accordingly, preserving the financial flexibility to respond to changes in market conditions while continuing to service our debt and make distributions to unitholders is one of our key objectives.

Our financial results by segment for the year ended December 31, 2020 are as follows:

Operating Segments

(In thousands)

Coal Royalty and Other

Corporate and Financing

(In thousands) Coal Royalty and Other Soda Ash Corporate and Financing Total

Revenues and other income $ 129,592 $ 10,728 $ — $ 140,320

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Adjusted EBITDA (1)

$ 104,982 $ 14,025 $ (14,293) $ 104,714

Cash flow provided by (used in) continuing operations

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Distributable cash flow (1)

$ 127,482 $ 14,037 $ (51,206) $ 90,248

Free cash flow (1)

$ 125,859 $ 14,037 $ (51,206) $ 88,690

Cash flow cushion (1)

See " Item 6.

Selected Financial Data " for additional information regarding non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.

N/A N/A N/A $ (739)

(1) See "—Results of Operations" below for reconciliations to the most comparable GAAP financial measures.

Current Results/Market Commentary

Business Outlook and Quarterly Distributions

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 that our properties produce.

While demand for metallurgical and thermal coals and soda ash began to rebound during the second half of 2020, prices remain below pre-pandemic levels, and the coal and soda ash markets remain challenged.

We are unable to predict the ultimate severity or duration of the COVID-19 pandemic or its impact on our or Ciner Wyoming's business.

We ended the year with $199.8 million of liquidity consisting of $99.8 million of cash and cash equivalents and $100.0 million of borrowing capacity under our Opco Credit Facility and generated $88.7 million of free cash flow during the year ended December 31, 2020.

As a result, we believe we have the financial flexibility to navigate the effects of the pandemic on our business.

We continue to employ remote work protocols and are conducting business as usual despite the pandemic.

Despite our liquidity level at the end of the year, our consolidated leverage ratio has risen since early 2020 and was 4.6x at December 31, 2020.

The indenture governing our 2025 parent company notes restricts us from paying more than one-half of the quarterly distribution on our preferred units in cash if our consolidated leverage ratio exceeds 3.75x.

Accordingly, the Board of Directors of our general partner has declared a distribution on our preferred units to be paid one-half in kind through the issuance of additional preferred units (“PIK units”) for the past two quarters.

To the extent our leverage ratio continues to exceed 3.75x, which we expect for the foreseeable future, we will be required to continue to pay one-half of the required preferred distributions in kind and will be unable to redeem any PIK units until our consolidated leverage ratio falls below 3.75x.

Distributions on the outstanding PIK units will accrue and accumulate at 12% per year until such PIK units are redeemed.

In addition, pursuant to the terms of our partnership agreement, to the extent we have any PIK units outstanding after January 1, 2022, we will be prohibited from paying any common unit distributions until the PIK units are redeemed in full.

Future distributions on NRP's common and preferred units will be determined on a quarterly basis by the Board of Directors.

The Board of Directors considers numerous factors each quarter in determining cash distributions, including profitability, cash flow, debt service obligations, covenants in our debt and partnership agreements, market conditions and outlook, estimated unitholder income tax liability and the level of cash reserves that the Board determines is necessary for future operating and capital needs.

Coal Royalty and Other Business Segment

Our lessees sold 23.7 million tons of coal from our properties in 2019 and we derived approximately 65% of our coal royalty revenues and approximately 50% of our coal royalty sales volumes from metallurgical coal during the year.

We experienced strong coal realizations from our lessees during the first half of 2019, but weakened coal markets and lower activity at certain of our properties negatively impacted our results in the second half of the year.

The current market downturn and lessee bankruptcies are expected to put downward pressure on our performance in the coming months.

The market for metallurgical coal weakened and prices for metallurgical coal sold from our properties declined in 2019.

The domestic market for thermal coal remains challenged by low natural gas prices, pressure over emissions and climate change and increasing use of renewable energy.

In addition, the export market for thermal coal has weakened due to a combination of lower demand from European utilities, competition from international producers and increasing supply of LNG.

While we expect thermal coal will continue to have a role in providing global economies and populations with affordable and reliable energy, we expect these headwinds facing the U.S thermal coal industry will continue.

We remain cautious about the financial position of U.S.

coal producers with over-leveraged capital structures and the state of the domestic and global coal markets generally.

The current price environment along with limited access to capital has taken a toll on a number of producers.

Four of our lessees filed for protection under the U.S.

Bankruptcy Code in 2019, and other lessees continue to face challenges.

Foresight Energy LP ("Foresight Energy"), which is our largest lessee, has agreed to a forbearance period with its lenders and is engaging with other contract counterparties to evaluate restructuring options.

To the extent Foresight Energy determines to idle operations on our properties for a prolonged period or to shut any of its mines on our properties down permanently, or to the extent we agree to amend the terms of our leases with them to facilitate their continued operations on our properties, our business could be adversely affected.

Accordingly, we remain focused on further strengthening our liquidity and balance sheet.

Demand for steel and electricity began to rebound in the third quarter and the outlook for our coal businesses has improved, though sales volumes and prices for coal sold from our properties in the fourth quarter remained below pre-pandemic levels.

We expect coal markets to remain volatile during 2021, in part as a result of ongoing uncertainties with the COVID-19 pandemic.

Our lessees sold 16.8 million tons of coal from our properties in 2020 and we derived approximately 70% of our coal royalty revenues and approximately 60% of our coal royalty sales volumes from metallurgical coal during the same period.

Revenues and other income in 2020 were lower by $87.3 million as compared to the prior year.

This decrease is primarily a result of a weakened market for metallurgical coal as compared to the prior year due to a decline in global steel demand.

As a result, both sales volumes and prices for metallurgical coal sold were lower in 2020 compared to the prior year.

Prices for metallurgical coal have rebounded from the lows seen in the second quarter, but are not currently above pre-pandemic levels.

In addition, weaker domestic and export thermal coal markets compared to the prior year period resulted in lower revenues 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.

Our thermal coal business results are largely dependent on our various lease agreements with Foresight.

In June 2020, we entered into lease amendments with Foresight 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 for calendar years 2020 and 2021.

These amendments provide us cash flow certainty for our thermal coal business through 2021.

During 2020 we received all of the $48.75 million due to us from Foresight.

Soda Ash Business Segment

Ciner Wyoming's results are primarily affected by the global supply of and demand for soda ash, which in turn directly impacts the prices Ciner Wyoming and other producers charge for its products.

Demand for soda ash in the United States is driven in a large part by economic growth and activity levels in the end markets that the glass-making industry serve, such as the automotive and construction industries.

Because the United States is a well-developed market for soda ash, we expect that domestic supply of and demand for soda ash will remain stable for the near future.

Soda ash demand in international markets has continued to grow in conjunction with GDP.

We expect that future global economic growth will positively influence global demand and pricing over the long term, which will likely result in increased exports, primarily from the United States, Turkey and to a limited extent, from China, the largest suppliers of soda ash to international markets.

Over the nearer term, Ciner Wyoming could face increased costs and competition for customers as a result of its planned exit from ANSAC at the end of 2021.

While the performance of the underlying business remains stable, Ciner Wyoming has announced that it will commence a significant capacity expansion capital project soon that it intends to fund in part by reinvesting cash that would otherwise be distributed to its partners.

As a result, we expect for the cash distributions we receive from Ciner Wyoming to remain at approximately $25 million to $28 million per year until the project is funded.

We believe that we will benefit over the long-term from increased productivity and cash distributions from Ciner Wyoming’s operations following completion of this capital project.

Business Outlook

We expect the challenges described above to continue to negatively impact our results.

However, we believe the progress made to strengthen our financial profile in recent years positions us well to navigate this downturn.

Ciner Wyoming has been negatively impacted by the COVID-19 pandemic as lower demand for glass in the global auto, beverage container, and construction industries reduced demand for soda ash.

Revenues and other income in 2020 were lower by $36.4 million compared to the prior year primarily due to a combination of lower pricing and volumes sold.

However, demand for glass began to rebound in the third quarter and the outlook for our soda ash business has improved.

While Ciner Wyoming's business has yet to recover to pre-COVID levels, overall sales volumes increased and overall production volumes increased over second quarter 2020 lows, though global prices remain depressed.

While we believe our facility is competitively positioned as one of the lowest cost producers of soda ash in the wor ld, we expect the market to remain volatile as a result of ongoing uncertainties with the COVID-19 pandemic.

In order to have financial flexibility during the COVID-19 pandemic, Ciner Wyoming suspended quarterly distributions in the third quarter of 2020.

Ciner Wyoming will continue to evaluate, on a quarterly basis, whether to reinstate the distribution.

Ciner Wyoming’s ability to pay future quarterly distributions will be dependent in part on its cash reserves, liquidity, total debt levels and anticipated capital expenditures.

When considering the significant investment required by Ciner Wyoming’s previously announced expansion project and the infrastructure improvements designed to increase overall efficiency, combined with the COVID-19 pandemic’s negative impact on Ciner Wyoming’s financial results, Ciner Wyoming has reprioritized the timing of the significant capital expenditure items in order to increase financial and liquidity flexibility until it has more clarity and visibility into the ongoing impact of the COVID-19 pandemic on its business.

Results of Operations

Year Ended December 31, 2019 and 2018 Compared

Years Ended December 31, 2020 and 2019 Compared

Revenues and Other Income

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For the Year Ended December 31,

Operating Segment (In thousands)

Increase (Decrease)

Percentage Change

Operating Segment (In thousands) 2020 2019 Decrease Percentage Change

Coal Royalty and Other $ 129,592 $ 216,846 $ (87,254) (40) %

Soda Ash 10,728 47,089 (36,361) (77) %

Total $ 140,320 $ 263,935 $ (123,615) (47) %

The changes in revenues and other income is discussed for each of the operating segments below:

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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 Year Ended December 31,

For the Year Ended December 31, Increase

(Decrease) Percentage

(In thousands, except per ton data) 2020 2019

Coal sales volumes (tons)

Northern 647 3,460 (2,813) (81) %

Central 10,111 13,377 (3,266) (24) %

Southern 889 1,670 (781) (47) %

Total Appalachia 11,647 18,507 (6,860) (37) %

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Coal royalty revenue per ton

Northern $ 2.36 $ 1.96 $ 0.40 20 %

Central 4.17 5.53 (1.36) (25) %

Southern 4.75 6.69 (1.94) (29) %

Illinois Basin 2.36 4.66 (2.30) (49) %

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Coal royalty revenues

Northern $ 1,526 $ 6,775 $ (5,249) (77) %

Central 42,207 73,960 (31,753) (43) %

Southern 4,221 11,169 (6,948) (62) %

Total Appalachia 47,954 91,904 (43,950) (48) %

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Coal royalty adjustment for minimum leases (1)

(10,145) (1,356) (8,789) (648) %

Total coal royalty revenues $ 51,868 $ 109,612 $ (57,744) (53) %

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Production lease minimum revenues (1)

$ 21,749 $ 24,068 $ (2,319) (10) %

Minimum lease straight-line revenues (1)

16,796 14,910 1,886 13 %

Property tax revenues 5,786 6,287 (501) (8) %

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Transportation and processing services revenues 8,845 19,279 (10,434) (54) %

Gain on litigation settlement

Gain on asset sales and disposals 581 6,498 (5,917) (91) %

Total Coal Royalty and Other segment revenues and other income $ 129,592 $ 216,846 $ (87,254) (40) %

(1) Effective January 1, 2020, certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications with Foresight Energy Resources LLC ("Foresight") that fixed consideration paid to us over a two-year period.

Coal Royalty Revenues

Total coal royalty revenues decreased $19.7 million from 2018 to 2019 driven primarily by lower coal sales volumes.

Total coal royalty revenues decreased $57.7 million from 2019 to 2020 driven by weakened coal markets that resulted in lower coal sales volumes and pricing.

The discussion of these decreases by region is as follows:

Sales volumes decreased 7% and revenues decreased $13.4 million year-over-year.

Northern Appalachia includes our Hibbs Run property that has significant sales volumes but a low fixed royalty rate per ton and as a result has a minimal impact on our revenues.

Excluding Hibbs Run, sales volumes from our Appalachia properties decreased approximately 11% primarily as a result of weakened coal markets and the temporary idling of certain mines due to lessee bankruptcies.

• Appalachia :

Sales volumes decreased 37% and coal royalty revenues decreased $44.0 million primarily due to weakened coal demand compounded by the COVID-19 pandemic.

• Illinois Basin :

Sales volumes decreased 20% and coal royalty revenues decreased $2.4 million primarily due to weakening of the thermal export market and lower domestic thermal coal demand in 2019 along with flooding and high water throughout the river systems that affected transportation logistics during the first half of 2019, including at the Convent Marine Terminal on the Gulf of Mexico.

Sales volumes increased 54% due to increased activity at the Hillsboro and Williamson mines, while coal royalty revenues decreased $2.3 million primarily due to the idling of our Macoupin property.

Additionally, during the year ended December 31, 2020, certain revenues previously classified as coal royalty revenues are classified as production lease minimum revenues or minimum lease straight-line revenues due to contract modifications with Foresight that fixed consideration paid to us over a two-year period.

• Northern Powder River Basin :

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Other Revenues

Total other revenues increased $31.9 million from 2018 to 2019 primarily due to:

$15.9 million increased production lease minimum revenues primarily as a result of increased lessee forfeitures of recoupable balances from minimums paid in prior periods.

$12.5 million increased minimum lease straight-line revenues primarily related to our Hillsboro property that we began to recognize in 2019 after the completion of the Hillsboro litigation settlement with Foresight.

$8.0 million of lease amendment revenues during the year ended December 31, 2019.

Other revenues decreased $13.2 million from 2019 to 2020 primarily due to the following:

• A $8.5 million decrease in coal overriding royalty revenues primarily as a result of production at the Williamson mine moving off of non-NRP owned coal (on which we receive overriding royalties) and back onto NRP-owned coal reserves.

As a result, this decrease in coal overriding royalty revenues was offset by an increase in coal royalty revenues;

• A $4.5 million decrease in lease amendment revenues year-over-year.

Transportation and Processing Services Revenues

Transportation and processing services revenues decreased $4.6 million primarily due to weakened demand for Illinois Basin coal that resulted in fewer tons being transported out of our Illinois Basin transportation and processing assets during the year ended December 31, 2019.

Gain on Litigation Settlement

Gain on litigation settlement in the year ended December 31, 2018 related to a one-time payment of $25.0 million we received from Foresight Energy to settle the Hillsboro lawsuit.

Transportation and processing services revenues decreased $10.4 million primarily due to the temporary cessation of production at the Macoupin mine where we own loadout and other transportation assets in addition to decreased production of non-NRP-owned coal at the Williamson mine where we also own loadout and other transportation assets.

Gain on Asset Sales and Disposals

Gain on asset sales and disposals increased $4.1 million from 2018 to 2019 primarily due to a disposal of certain mineral right assets during the third quarter of 2019.

Revenues and other income related to our Soda Ash segment decreased $1.2 million primarily due to Ciner Wyoming's settlement of a royalty dispute in the second quarter of 2018 that resulted in $12.7 million of income in the prior year, partially offset by an increase in production and sales volumes and increased domestic and international sales prices in the year ended December 31, 2019 compared to the prior year.

Gain on asset sales and disposals decreased $5.9 million primarily due to the disposal of certain mineral rights assets during the third quarter of 2019.

Revenues and other income related to our Soda Ash segment decreased $36.4 million primarily due to a combination of lower pricing and volumes sold.

Ciner Wyoming was negatively impacted by the COVID-19 pandemic as lower demand for glass in the global auto, beverage container, and construction industries reduced demand for soda ash.

Operating and Other Expenses

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For the Year Ended

Increase (Decrease)

Percentage Change

December 31, Decrease Percentage Change

(In thousands) 2020 2019

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Total other expenses, net $ 40,968 $ 76,735 $ (35,767) (47) %

Total operating expenses increased by $126.6 million primarily due to the following:

Asset impairments increased $129.9 million from 2018 to 2019.

Total operating expenses decreased by $28.4 million primarily due to the following:

• Asset impairments decreased $12.3 million from 2019 to 2020.

Asset impairments in the year ended December 31, 2020 were primarily 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.

Asset impairments in the year ended December 31, 2019 primarily resulted from deterioration in thermal coal markets, lessee capital constraints, thermal coal lease terminations, and expectations of further reductions in global and domestic thermal coal demand due to low natural gas prices and continued pressure on the electric power generation industry over emissions and climate change, resulting in reductions in expected cash flows (combination of lower expected coal sales volumes, sales prices, minimums and/or life of mine assumptions) on certain of our mineral rights and intangible assets.

Asset impairments in the year ended December 31, 2018 primarily related to a $13.0 million impairment of an aggregates property that we own and lease to our former construction aggregates business, which mines, produces and sells the aggregates, in addition to $5.3 million of impairments related to certain of our coal 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 increased $3.2 million primarily due to bad debt expense recognized in the second quarter of 2019 related to certain of our Coal Royalty and Other receivables, partially offset by lower legal costs and lower overriding royalty interest fees.

These costs decreased $7.9 million primarily due to a decrease in bad debt expense in addition to lower costs related to an overriding royalty agreement with Western 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 $5.7 million due to lower coal sales volumes at certain properties.

Total other expenses, net increased $6.6 million primarily due to the following:

Loss on extinguishment of debt was $29.3 million for the year ended December 31, 2019 and 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 $22.7 million primarily due to lower debt balances in 2019 as a result of debt repayments.

Income from Discontinued Operations

Income from discontinued operations decreased $16.7 million primarily as a result of the $13.1 million gain on sale of our construction aggregates business in the year ended December 31, 2018 in addition to $4.7 million of income generated by this business in 2018 prior to the sale.

• General and administrative expenses decreased $2.4 million primarily due to decreased legal expenses year-over-year.

Total other expenses, net decreased $35.8 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 $6.5 million primarily due to lower debt balances in 2020 as a result of debt repayments made over the past twelve months.

Adjusted EBITDA (Non-GAAP Financial Measure)

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Operating Segments

For the Year Ended (In thousands)

Coal Royalty and Other

Corporate and Financing

For the Year Ended (In thousands) Coal Royalty and Other Soda Ash Corporate and Financing Total

December 31, 2020

3 unchanged sentences

interest expense, net 79 — 40,889 40,968

loss on extinguishment of debt

depreciation, depletion and amortization 9,198 — — 9,198

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equity earnings from unconsolidated investment — (47,089) — (47,089)

net income attributable to non-controlling interest

total distributions from unconsolidated investment — 31,850 — 31,850

interest expense, net — — 47,453 47,453

loss on extinguishment of debt — — 29,282 29,282

depreciation, depletion and amortization 14,932 — — 14,932

3 unchanged sentences

• Coal Royalty and Other Segment

Adjusted EBITDA decreased $15.8 million primarily as a result of the decrease in revenues and other income driven by the weakened coal markets and the $25 million gain on litigation settlement in 2018.

◦ Adjusted EBITDA decreased $79.4 million primarily as a result of weaker coal markets in the year ended December 31, 2020.

• Soda Ash Segment

◦ Adjusted EBITDA decreased $17.6 million as a result of lower cash distributions received from Ciner Wyoming during the year ended December 31, 2020.

The managing partner of Ciner Wyoming decided to reduce distributions during 2019 to fund a multi-year capacity expansion project that is expected to result in higher earnings and distributions.

NRP expects to receive approximately $25 million to $28 million of annual cash distributions from Ciner Wyoming until the project is funded.

See " Item 6.

Selected Financial Data—Non-GAAP Financial Measures " for an explanation of Adjusted EBITDA.

Distributable Cash Flow ("DCF"), Free Cash Flow ("FCF") and Cash Flow Cushion (Non-GAAP Financial Measures)

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Operating Segments

For the Year Ended (In thousands)

Coal Royalty and Other

Corporate and Financing

For the Year Ended (In thousands) Coal Royalty and Other Soda Ash Corporate and Financing Total

December 31, 2020

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Operating Segments

For the Year Ended (In thousands)

Coal Royalty and Other

Corporate and Financing

For the Year Ended (In thousands) Coal Royalty and Other Soda Ash Corporate and Financing Total

December 31, 2020

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proceeds from sale of discontinued operations — — — 65

expansion capital expenditures

acquisition costs (1,000) — — (1,000)

Free cash flow $ 125,859 $ 14,037 $ (51,206) $ 88,690

4 unchanged sentences

Operating Segments

For the Year Ended (In thousands)

Coal Royalty and Other

Corporate and Financing

For the Year Ended (In thousands) Coal Royalty and Other Soda Ash Corporate and Financing Total

December 31, 2019

Net cash provided by (used in) operating activities of continuing operations $ 178,863 $ 31,601 $ (73,145) $ 137,319

distributions from unconsolidated investment in excess of cumulative earnings

proceeds from asset sales and disposals 6,500 — — 6,500

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proceeds from sale of discontinued operations — — — 629

expansion capital expenditures (22) — — (22)

Free cash flow $ 180,584 $ 31,601 $ (73,145) $ 139,040

cash flow from one-time Hillsboro litigation settlement

mandatory Opco debt repayments (68,128)

preferred unit distributions and redemption of PIK units

preferred unit distributions (30,000)

common unit distributions (33,150)

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• Coal Royalty and Other Segment

DCF and FCF decreased $30.8 million and $34.9 million , respectively, primarily due to a one-time $25 million payment we received from Foresight Energy to settle the Hillsboro lawsuit in 2018 and lower coal royalty revenues as described above, partially offset by increased cash from the receipt of lease amendment fees and Hillsboro minimum payments in 2019.

◦ DCF and FCF decreased $59.6 million and $54.7 million, respectively, primarily as a result of the weakened coal markets in the year ended December 31, 2020.

DCF was also impacted by a $5.9 million decrease in proceeds from asset sales and disposals compared to the year ended December 31, 2019.

• Soda Ash Segment

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• Corporate and Financing Segment

DCF and FCF increased $5.4 million primarily due to lower cash paid for interest in 2019 as a result of lower debt balances during 2019.

Total DCF for the year ended December 31, 2018 was also impacted by the $198.1 million proceeds from the sale of our construction aggregates business in 2018.

Cash flow cushion decreased $8.3 million as a result of the decrease in FCF discussed above (excluding the impact of the $25 million Hillsboro payment) and a $10.7 million increase in common unit distributions made in 2019 primarily as a result of a one-time special distribution of $0.85 per common unit.

These decreases in 2019 cash flow cushion were partially offset by a $12.6 million decrease in mandatory Opco debt repayments as a result of the lower principal balances on the Opco Senior Notes and a $9.1 million decrease in preferred unit distributions primarily as a result of the $8.8 million redemption of PIK units in 2018.

See " Item 6.

Selected Financial Data—Non-GAAP Financial Measures " for an explanation of distributable cash flow, free cash flow and cash flow cushion.

For discussion of our Results of Operations comparing 2018 to 2017, refer to our 2018 Annual Report on Form 10-K filed March 7, 2019 under Part II, "Item 7.

◦ DCF and FCF increased $21.9 million primarily due to lower cash paid for interest as a result of less debt outstanding in 2020.

Cash flow cushion decreased $8.5 million as a result of the decrease in FCF discussed above, partially offset by a decrease in mandatory Opco debt repayments and lower preferred unit and common unit distributions made during the year ended December 31, 2020.

For discussion of our Results of Operations comparing 2019 to 2 018, refer to our 2019 Annual Report on Form 10-K filed February 27, 2020 under Part II, "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations."

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As of December 31, 2020, we had total liquidity of $199.8 million, consisting of $99.8 million of cash and cash equivalents and $100.0 million in borrowing capacity under our Opco Credit Facility.

Year Ended December 31, 2019 and 2018 Compared

Cash flows provided by operating activities decreased $51.6 million , from $188.9 million in the year ended December 31, 2018 to $137.3 million in the year ended December 31, 2019 primarily related to a one-time $25 million payment we received from Foresight Energy in 2018 to settle the Hillsboro lawsuit, $12.6 million of lower cash distributions received from Ciner Wyoming in 2019, $10.6 million lower cash provided as a result of the sale of our construction aggregates business in the fourth quarter of 2018 and lower coal royalty revenues driven by weakened coal markets and the temporary idling of certain mines.

These decreases in cash provided by operating activities were partially offset by the collection of Hillsboro minimum payments, lease amendment fees and $6.4 million lower cash paid for interest as a result of lower debt balances in 2019.

Cash flows provided by investing activities decreased $183.0 million , from $190.6 million in the year ended December 31, 2018 to $7.6 million in the year ended December 31, 2019.

Cash flows from discontinued operations decreased $183.7 million as a result of the $198.1 million proceeds received from the sale of our construction aggregates business in December 2018, partially offset by $10.9 million of construction aggregates capital expenditures during 2018.

Cash flows from continuing operations was relatively flat year-over-year as the $4.1 million increase in proceeds from asset sales and disposals was partially offset by a portion of our distribution from Ciner Wyoming classified as an investing activity in 2018 and a lower return of our long-term contract receivable in 2019.

Cash flows used in financing activities increased $49.3 million , from $203.3 million in the year ended December 31, 2018 to $252.7 million in the year ended December 31, 2019.

In the second quarter of 2019, we extended the maturity date of the $100 million Opco Credit Facility to April 2023 and issued $300 million of a new series of 9.125% senior notes due 2025.

We used the net proceeds from this offering, together with $76 million of cash on hand to redeem all of our 2022 Senior Notes.

As a result of these transactions, our outstanding debt was reduced, our annual interest expense has decreased, and our debt maturities were extended.

Significant increases in cash flow used in financing activities included the following:

We have significant debt service obligations, including approximately $40 million of principal repayments on Opco’s senior notes in 2021.

We believe our liquidity position provides us with the flexibility to continue paying down debt and manage our business through the current market environment.

Years Ended December 31, 2020 and 2019 Compared

Cash flows provided by operating activities decreased $48.0 million, from $137.3 million in the year ended December 31, 2019 to $89.3 million in the year ended December 31, 2020 primarily related to lower operating cash flow as a result of the weakened coal markets in addition to lower cash distributions received from Ciner Wyoming in 2020, partially offset by less cash paid for interest in 2020 due to less debt outstanding.

Cash flows provided by investing activities decreased $5.9 million, from $7.6 million in the year ended December 31, 2019 to $1.7 million in the year ended December 31, 2020 primarily due to a $5.9 million decrease in proceeds from asset sales and disposals year-over-year.

Cash flows used in financing activities decreased $163.2 million, from $252.7 million in the year ended December 31, 2019 to $89.4 million in the year ended December 31, 2020 primarily due to the following:

• $345.6 million used for the redemption of our 2022 Senior Notes in the second quarter of 2019;

$36.7 million increase in payments on the Opco Senior Notes primarily as a result of the prepayment made using proceeds from the sale of our construction aggregates business;

$35.0 million less borrowings on our Opco Credit Facility in 2019 compared to the prior year period;

$26.2 million increase in debt issuance costs and other primarily related to the 2019 debt refinancings;

$10.7 million increase in common unit distributions made in 2019 primarily as a result of a one-time special distribution of $0.85 per common unit.

• The $49.3 million prepayment of our Opco Senior Notes in the first quarter of 2019 made using proceeds from the sale of our construction aggregates business;

• $26.4 million in debt issuance costs and other primarily in 2019 primarily related to the 2019 debt refinancings;

• $16.3 million in lower common unit distributions in the year ended December 31, 2020 as a result of the special common unit distribution paid in 2019 to cover common unitholders' tax liability resulting from the sale of NRP's construction aggregates business in December 2018, and the suspension of the distribution on NRP's common units with respect to the first quarter of 2020.

• $3.6 million in lower preferred unit distributions in the year ended December 31, 2020 as a result of paying half of the distribution in kind through the issuance of additional preferred units during the fourth quarter of 2020.

These increases in cash flows used in financing activities were partially offset by the following:

• $300 million provided by the issuance of the 2025 Senior Notes in the second quarter of 2019.

$95 million less cash used in 2019 compared to the prior year as a result of the repayment of the Opco Credit Facility during the fourth quarter of 2018;

$8.8 million less cash used in 2019 compared to the prior year as a result of the redemption of preferred units paid-in-kind in the first quarter of 2018.

For discussion of our Cash Flows comparing 2018 to 2017, refer to our 2018 Annual Report on Form 10-K filed March 7, 2019 under Part II, "Item 7.

For discussion of our Cash Flows comparing 2019 to 2018, refer to our 2019 Annual Report on Form 10-K filed February 27, 2020 under Part II, "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations."

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Debt, Net " in this Annual Report on Form 10-K.

Long-Term Contractual Obligations

The following table reflects our long-term, non-cancelable contractual obligations as of December 31, 2019:

Debt Obligations

The following table reflects our long-term, non-cancelable debt obligations as of December 31, 2020:

Payments Due by Period

Contractual Obligations (In thousands)

Long-term debt principal payments (1)

Long-term debt interest payments (1)

Long-term debt principal payments (including current maturities) (2)

Long-term debt interest payments (3)

Rental leases (4)

Debt Obligations (In thousands) Total 2021 2022 2023 2024 2025 Thereafter

Debt principal payments (1)

$ 300,000 $ — $ — $ — $ — $ 300,000 $ —

Debt interest payments (1)

123,188 27,375 27,375 27,375 27,375 13,688 —

Debt principal payments (including current maturities) (2)

177,880 39,396 39,396 39,396 31,028 14,332 14,332

Debt interest payments (3)

27,418 9,868 7,631 5,020 2,724 1,450 725

Total $ 628,486 $ 76,639 $ 74,402 $ 71,791 $ 61,127 $ 329,470 $ 15,057

(1) The amounts indicated in the table include principal and interest due on NRP’s 2025 Senior Notes.

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At December 31, 2020 we did not have any borrowings outstanding under the Opco Credit Facility and had $100 million in available borrowing capacity.

On January 1, 2019, Opco entered into a lease agreement for the rental of office space from Western Pocahontas Properties Limited Partnership for $0.5 million per year.

Not included in this table is approximately $0.3 million of annual operating expenses Opco is obligated to pay to Western Pocahontas Properties Limited Partnership in connection with this lease.

The lease has a five -year base term and five additional five -year renewal options.

Upon lease commencement and as of December 31, 2019 , the Partnership was reasonably certain to exercise all renewal options included in the lease and have included rental payments in the table through 2048.

Off-Balance Sheet Transactions

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Royalty-based leases.

Approximately two-thirds of the our royalty-based leases have initial terms of five to 40 years, with substantially all lessees having the option to extend the lease for additional terms.

Approximately two-thirds of our royalty-based leases have initial terms of five to 40 years, with substantially all lessees having the option to extend the lease for additional terms.

For these types of leases, the lessees generally make payments to us based on the greater of a percentage of the gross sales price or a fixed price per ton of mineral mined and sold.

Most of our coal and aggregates royalty leases require the lessee to pay quarterly or annual minimum amounts, either made in advance or arrears, which are generally recoupable through actual royalty production over certain time periods that generally range from three to five years.

In accordance with previous accounting standards in effect prior to January 1, 2018, we recognized all coal and aggregates royalty revenues over the lease term based on production.

The recognition of revenue from minimum payments was deferred until either recoupment through royalty production occurred or when the recoupment period expired for unrecouped minimums.

In accordance with the accounting standard in effect subsequent to January 1, 2018 ("ASC 606"), we have defined our coal and aggregates royalty lease performance obligation as providing the lessee the right to mine and sell our coal or aggregates over the lease term.

We have defined our coal and aggregates royalty lease performance obligation as providing the lessee the right to mine and sell our coal or aggregates over the lease term.

We then evaluated the likelihood that consideration we expected to receive from our lessees resulting from production would exceed consideration expected to be received from minimum payments over the lease term.

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Our adjusted share of the earnings or losses of Ciner Wyoming and amortization of the basis difference is recognized in equity in earnings of Ciner Wyoming on the Consolidated Statements of Comprehensive Income (Loss).

We decrease our investment

for our proportional share of distributions received from Ciner Wyoming.

We decrease our investment for our proportional share of distributions received from Ciner Wyoming.

These cash flows are reported utilizing the cumulative earnings approach.

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The technologies and economic data used by our internal reserve engineers in the estimation of our proved reserves include, but are not limited to, drill logs, geophysical logs, geologic maps including isopach, mine, and coal quality, cross sections, statistical analysis, and available public production data.

There are numerous uncertainties inherent in estimating the quantities and qualities of recoverable reserves, including many factors beyond our control.

There are numerous uncertainties inherent in estimating the quantities and qualities of recoverable reserves, including many factors

beyond our control.

Estimates of economically recoverable coal reserves depend upon a number of variable factors and assumptions, any one of which may, if incorrect, result in an estimate that varies considerably from actual results.

Asset Impairment

We have developed procedures to evaluate our long-lived assets for possible impairment periodically or whenever events or changes in circumstances indicate an asset's net book value may not be recoverable.

We have developed procedures to evaluate our long-lived assets, including intangible assets, for possible impairment periodically or whenever events or changes in circumstances indicate an asset's net book value may not be recoverable.

Potential events or circumstances include, but are not limited to, specific events such as a reduction in economically recoverable reserves or production ceasing on a property for an extended period.

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Summary of Significant Accounting Policies " in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company for the year ended December 31, 2020, we are not required to include this disclosure in our 2020 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis