What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-03 · 90 added, 230 removed, 219 unchanged (59% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following review of operations for the three and nine month periods ended September 30, 2022 and 2021 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 the Natural Resource Partners L.P.

The following review of operations for the three month periods ended March 31, 2023 and 2022 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 the Natural Resource Partners L.P.

Annual Report on Form 10-K for the year ended December 31, 2022.

5 unchanged sentences

References to "Opco" refer to NRP (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").

NRP Finance Corporation ("NRP Finance") is a wholly owned subsidiary of NRP and was a co-issuer with NRP on the 9.125% senior notes due 2025 (the "2025 Senior Notes").

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

9 unchanged sentences

estimated revenues, expenses and results of operations;

projected production levels by our lessees;

projected future performance by our lessees;

Sisecam Wyoming LLC’s ("Sisecam Wyoming's") trona mining and soda ash refinery operations;

12 unchanged sentences

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.

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 or loss, 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, the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDA reported by different companies.

6 unchanged sentences

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;

Distributable cash flow ("DCF") represents net cash provided by (used in) operating activities plus distributions from unconsolidated investment in excess of cumulative earnings, proceeds from asset sales and disposals, including sales of discontinued operations, and return of long-term contract receivable;

less maintenance capital expenditures.

2 unchanged sentences

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.

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 assess 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;

Free cash flow ("FCF") represents net cash provided by (used in) operating activities plus distributions from unconsolidated investment in excess of cumulative earnings and return of long-term contract receivable;

less maintenance and expansion capital expenditures and cash flow used in acquisition costs classified as investing or financing activities.

3 unchanged sentences

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.

Leverage Ratio

Leverage ratio represents the outstanding principal of our debt at the end of the period divided by the last twelve months' Adjusted EBITDA as defined above. We believe that leverage ratio is a useful measure to management and investors to evaluate and monitor our indebtedness relative to our ability to generate income to service such debt and in understanding trends in our overall financial condition.

Leverage ratio may not be calculated the same for us as for other companies and is not a substitute for, and should not be used in conjunction with, GAAP financial ratios. 

The following discussion and analysis presents management's view of our business, financial condition and overall performance.

18 unchanged sentences

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.

Our financial results by segment for the nine months ended September 30, 2022 are as follows:

Our financial results by segment for the three months ended March 31, 2023 are as follows:

Operating Segments

13 unchanged sentences

Current Results/Market Commentary

Business Outlook and Quarterly Distributions

We generated $199.0 million of free cash flow during the nine months ended September 30, 2022 and ended the quarter with $190.9 million of liquidity consisting of $60.9 million of cash and cash equivalents and $130.0 million of borrowing capacity under our Opco Credit Facility.

During the third quarter of 2022 we refinanced, upsized, and extended our Opco Credit Facility to $130 million due 2027.

Also during the third quarter, we permanently retired an additional $60.5 million of 2025 Senior Notes, bringing our total 2025 Senior Note repurchases through the third quarter of 2022 to $178.6 million.

These notes were purchased on the open market at a weighted average price of 102.436%, a discount to the redemption price at the time of 104.563%.

In October 2022, we redeemed the outstanding $121.4 million 2025 Senior Notes at a redemption price of 102.281% using cash on hand and $70 million in borrowings under our Opco Credit Facility.

These debt repurchases and the redemption of our outstanding 2025 Senior Notes will save approximately $27.4 million annually in interest costs.

As of September 30, 2022 our leverage ratio was 0.8x.

In November 2022, the Board of Directors declared a cash distribution of $0.75 per common unit of NRP with respect to the third quarter of 2022.

The Board of Directors also declared a $7.5 million cash distribution on the preferred units with respect to the third quarter.

Financial Results and Quarterly Distributions

We generated $72.9 million of operating cash flow and $73.5 million of free cash flow during the three months ended March 31, 2023, and ended the quarter with $56.5 million of liquidity consisting of $17.7 million of cash and cash equivalents and $38.8 million of borrowing capacity under our Opco Credit Facility.

As of March 31, 2023 our leverage ratio was 0.5 x.

In February 2023, we declared and paid a cash distribution of $0.75 per common unit of NRP with respect to the fourth quarter of 2022 as well as a $7.5 million cash distribution on the preferred units with respect to the fourth quarter of 2022.

In March 2023, we declared and paid a special cash distribution of $2.43 per common unit to help cover unitholder tax liabilities associated with owning NRP's common units during 2022.

Future distributions on our 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, 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.

In February 2023, we received a notice from holders of our Class A Preferred Units exercising their right to either convert or redeem, at the election of NRP, an aggregate of 47,499 Class A Preferred Units.

We chose to redeem the preferred units for $47.5 million in cash rather than issuing common units. Of the originally issued 250,000 Class A Preferred Units, 202,501 Class A Preferred Units remain outstanding.

Mineral Rights Business Segment

Metallurgical and thermal coal prices remain supported by ongoing tightness in the supply-demand balance for coal.

Many operators are limited in their ability to increase production due to ongoing labor shortages, global supply chain interruptions, and access to capital.

Thermal coal prices are further supported by the European Union's ban on Russian coal due to the war in Ukraine, as well as increased natural gas prices and demand for electricity.

While metallurgical markets are seeing weakened demand for steel, and thermal markets continue to face ongoing environmental and political pressures, supply constraints should provide continued support for metallurgical and thermal coal prices for the foreseeable future.

Our lessees sold 24.2 million tons of coal from our properties in the first nine months of 2022, and we derived approximately 75% of our coal royalty revenues and approximately 45% of our coal royalty sales volumes from metallurgical coal during the same period.

We continue to identify alternative revenue sources across our large portfolio of land and mineral assets.

We own the rights to sequester carbon dioxide ("CO 2 ") on approximately 3.5 million acres of pore space in the southern United States. As announced previously, in the first quarter of 2022 we executed our first subsurface CO 2  sequestration lease on 75,000 acres of underground pore space we own in southwest Alabama with the potential to store over 300 million metric tons of CO 2 .

In October of 2022, we announced our second subsurface CO 2 transaction with the execution of a lease for approximately 65,000 acres of pore space we control near southeast Texas with estimated storage capacity of at least 500 million metric tons of CO 2 .

In total, we have approximately 140,000 acres of pore space under lease for carbon sequestration with estimated CO 2  storage capacity of 800 million metric tons. While the timing and likelihood of additional cash flows being realized from these activities is uncertain, we believe our large ownership footprint throughout the United States will provide additional opportunities to create value in this regard and position us as a key beneficiary of the transitional energy economy with minimal capital investment. 

Revenues and other income in the first quarter of 2023 increased $5.1 million, or 7%, as compared to the prior year period primarily due to increased metallurgical coal sales volumes and revenue from carbon neutral initiatives.

Cash provided by operating activities and free cash flow increased $25.7 million and $26.3 million, respectively, compared to the prior year quarter primarily due to the timing of minimum and royalty payments and prior year recoupments. 

 Metallurgical coal prices remain strong relative to historical norms, although pricing has declined from the record highs seen in 2022.

Continued support for pricing is expected as operators are limited in their ability to increase production due to ongoing labor shortages, transportation and logistics challenges, difficulty of new mine permitting, and limited access to capital. While metallurgical prices have pulled back from the peaks reached last year, we continue to believe met prices will remain well-supported for the foreseeable future. 

Thermal coal prices also reached record highs in 2022, but have declined significantly in recent months due to unusually warm weather in Europe and North America as well as lower natural gas prices.

While we do not expect to see thermal prices rebound to last year’s levels, many of the factors that provided support to prices over the last year still exist.

Boycotts of Russian coal continue to force European buyers to source coal from other regions, including the U.S.

Operators will continue to be burdened by labor shortages, pressure from governments, regulators, activists, and capital providers, which will limit ability to increase thermal production to meet demand.

China appears to be relaxing its three-year ban on Australian coal imports with the recent approvals for several Chinese companies to buy Australian coal.

Additional demand from a Chinese economy emerging from a zero-COVID policy should provide additional support for prices.

We expect these factors to keep thermal prices elevated relative to historical levels for the foreseeable future.

 We continue to explore and identify carbon neutral revenue opportunities across our large portfolio of land, mineral, and timber assets, including the sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar, and wind energy.

In the first quarter of 2023, we executed a new solar lease. 

Soda Ash Business Segment

Revenues and other income in the first nine months of 2022 were higher by $32.8 million compared to the prior year period primarily as a result of increased international sales prices.

Free cash flow in the first nine months of 2022 increased $30.1 million as compared to the prior year period due to Sisecam Wyoming reinstating its regular quarterly cash distributions beginning in the fourth quarter of 2021.

Supply interruptions in China and input cost inflation which significantly increased the global marginal cost of soda ash production led to historically high soda ash prices in the third quarter of 2022.

Though soda ash demand weakened in many parts of the world during the third quarter due to slowing global economic growth and lower construction activity in China, Sisecam Wyoming remained sold-out as it took advantage of its low-cost position to profitably export soda ash.

Consequently, Sisecam Wyoming delivered strong financial results in the third quarter of 2022.

Revenues and other income in the first quarter of 2023 increased $4.4 million, or 30%, as compared to the prior year period primarily due to increased sales prices.

Cash provided by operating activities and free cash flow in the first quarter of 2023 decreased $2.6 million as compared to the prior year period as Sisecam Wyoming paid a higher regular quarterly distribution in the first quarter of 2022 as compared to the first quarter of 2023. 

International prices remained strong in the first quarter of 2023 reflecting a continued supply constrained market for soda ash.

Domestic soda ash prices were also strong during the first quarter of 2023 versus the prior year quarter due to negotiated 2023 domestic prices converging to international soda ash prices.

Results of Operations

Third Quarter of 2022 and 2021 Compared

First Quarter of 2023 and 2022 Compared

Revenues and Other Income

The following table includes our revenues and other income by operating segment:

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Operating Segment (In thousands)

3 unchanged sentences

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 September 30,

For the Three Months Ended March 31,

(In thousands, except per ton data)

32 unchanged sentences

Coal Royalty Revenues

Approximately 65% of coal royalty revenues and approximately 40% of coal royalty sales volumes were derived from metallurgical coal during the three months ended September 30, 2022.

Approximately 75% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the three months ended March 31, 2023.

Total coal royalty revenues increased $2.6 million as compared to the prior year quarter.

The discussion by region is as follows:

 Coal royalty revenues increased $10.7 million primarily due to increased coal sales prices and volumes in Central Appalachia during the three months ended September 30, 2022, as compared to the prior year quarter.

 Coal royalty revenues were essentially flat period-over-period as increased sales volumes more than offset the decrease in sales prices in the Southern Appalachia region. 

Illinois Basin:

 Coal royalty revenues increased $2.7 million primarily due to increased sales volumes and prices during the three months ended September 30, 2022 as compared to the prior year quarter. Revenues recognized from Foresight in 2021 were fixed as a result of the lease amendment the Partnership entered into with Foresight pursuant to which Foresight agreed to pay NRP fixed cash payments to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between the Partnership and Foresight.

Revenues from Foresight in 2022 represent traditional royalty and minimum payments.

Northern Powder River Basin:

 Coal royalty revenues decreased $0.1 million primarily due to decreased sales volumes as our lessee mined less on our property during the third quarter of 2022 as compared to the prior year quarter in accordance with its mine plan.

 Coal royalty revenues increased $1.4 million primarily due to increased sales prices during the three months ended March 31, 2023, as compared to the prior year quarter.

Other Revenues

Total other revenues increased $13.5 million during the three months September 30, 2022 as compared to the prior year quarter primarily due to an $8.6 million increase in carbon neutral initiatives and a $5.0 million increase in oil and gas royalty revenues.

The increase in carbon neutral initiatives is due to the recognition of revenue related to carbon neutral transactions including subsurface CO 2 storage and geothermal.

The increase in oil and gas royalty revenues is primarily related to new wells and increased natural gas prices as compared to the prior year period.

Transportation and Processing Services Revenues

Transportation and processing services revenues increased $3.8 million during the three months ended September 30, 2022 as compared to the prior year period primarily due to the lease amendment with Foresight whereas transportation and processing revenues were based on the recognition of a fixed amount in 2021.

Revenues from Foresight in 2022 represent traditional royalty and minimum payments and were greater than the fixed revenue from 2021.

Revenues and other income related to our Soda Ash segment increased $7.9 million compared to the prior year quarter primarily as a result of increased international sales prices.

Operating and Other Expenses

The following table presents the significant categories of our consolidated operating and other expenses:

For the Three Months Ended September 30,

Total other revenues increased $2.6 million during the three months ended March 31, 2023, as compared to the prior year quarter primarily due to a $2.1 million increase in carbon neutral initiative revenues.

Carbon neutral initiative revenues recognized in 2023 primarily related to a subsurface CO 2 storage transaction.

Revenues and other income related to our Soda Ash segment increased $4.4 million compared to the prior year quarter primarily as a result of increased sales prices compared to the prior year quarter.

Operating Expenses

The following table presents the significant categories of our consolidated operating expenses:

For the Three Months Ended March 31,

(In thousands)

5 unchanged sentences

Total operating expenses

Other expenses, net

Total operating expenses were essentially flat period-over-period.

The $1.4 million increase in general and administrative expenses, primarily related to increased incentive compensation expense, was partially offset by a $0.9 million decrease in operating and maintenance expenses, primarily driven by a decrease in bad debt expense.

Interest Expense, Net

Loss on extinguishment of debt

Total other expenses, net

Total operating expenses increased $2.4 million primarily due to increased depreciation, depletion and amortization expense as a result of higher Illinois Basin coal royalty sales volumes during the three months ended September 30, 2022, as compared to the prior year period.

Total other expenses, net decreased $2.0 million primarily due to a $4.5 million decrease in interest expense, net as a result of less debt outstanding as compared to the prior year period, partially offset by a $2.5 million loss on early extinguishment of debt related to the premiums and fees incurred and write-off of debt issuance costs associated with the retirement of the 2025 Senior Notes during the three months ended September 30, 2022.

Interest expense, net decreased $6.5 million as a result of less debt outstanding as compared to the prior year quarter. 

Adjusted EBITDA (Non-GAAP Financial Measure)

4 unchanged sentences

Corporate and Financing

September 30, 2022

March 31, 2023

Net income (loss)

2 unchanged sentences

interest expense, net

loss on extinguishment of debt

depreciation, depletion and amortization

1 unchanged sentence

Adjusted EBITDA

September 30, 2021

March 31, 2022

Net income (loss)

2 unchanged sentences

interest expense, net

loss on extinguishment of debt

depreciation, depletion and amortization

1 unchanged sentence

Adjusted EBITDA

Adjusted EBITDA increased $47.9 million primarily due to a $38.0 million increase in Adjusted EBITDA within our Mineral Rights segment as a result of higher revenues and other income as discussed above, in addition to a $10.4 million increase in Adjusted EBITDA within our Soda Ash segment due to Sisecam Wyoming reinstating its regular quarterly cash distributions beginning in the fourth quarter of 2021 as discussed above.

Net income increased $15.4 million primarily due to the decrease in interest expense, net and increase in revenues and other income, both discussed above.

Adjusted EBITDA increased $2.2 million as compared to the prior year quarter primarily due to a $6.1 million increase in Adjusted EBITDA within our Mineral Rights segment as a result of higher revenues and other income and lower operating and maintenance expenses, both discussed above.

The increase in Adjusted EBITDA within our Mineral Rights segment was partially offset by a $2.6 million decrease in Adjusted EBITDA within our Soda Ash segment primarily due to Sisecam Wyoming paying a higher quarterly distribution in the first quarter of 2022 as discussed above and a $1.4 decrease in Adjusted EBITDA within our Corporate and Financing segment due to higher general and administrative expenses as discussed above.

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

4 unchanged sentences

Corporate and Financing

September 30, 2022

Cash flow provided by (used in) continuing operations

March 31, 2023

Cash flow provided by (used in)

Operating activities

1 unchanged sentence

Financing activities

September 30, 2021

Cash flow provided by (used in) continuing operations

March 31, 2022

Cash flow provided by (used in)

Operating activities

1 unchanged sentence

Financing activities

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:

The following table reconciles net cash provided by (used in) operating activities (the most comparable GAAP financial measure) by business segment to DCF and FCF:

Operating Segments

2 unchanged sentences

Corporate and Financing

September 30, 2022

Net cash provided by (used in) operating activities of continuing operations

March 31, 2023

Net cash provided by (used in) operating activities

proceeds from asset sales and disposals

4 unchanged sentences

Free cash flow

September 30, 2021

Net cash provided by (used in) operating activities of continuing operations

March 31, 2022

Net cash provided by (used in) operating activities

proceeds from asset sales and disposals

3 unchanged sentences

Free cash flow

DCF and FCF increased $52.7 million and $52.4 million, respectively, primarily due to the following:

Operating cash flow, DCF and FCF increased $20.6 million, $21.3 million and $21.2 million, respectively, primarily due to an increase in cash flow within our Mineral Rights segment, partially offset by a decrease in cash flow within our Soda Ash and Corporate and Financing segments.

The discussion by segment is as follows:

Mineral Rights Segment

DCF and FCF increased $42.3 million and $42.0 million, respectively, primarily due to the segment's increase in revenues and other income as discussed above.

Operating cash flow, DCF and FCF increased $25.7 million, $26.4 million and $26.3 million, respectively, primarily due to the timing of minimum and royalty payments and prior year recoupments. 

Soda Ash Segment

DCF and FCF increased $10.3 million as a result of Sisecam Wyoming reinstating its regular quarterly cash distributions beginning in the fourth quarter of 2021 as discussed above.

Results of Operations

First Nine Months of 2022 and 2021 Compared

Revenues and Other Income

The following table includes our revenues and other income by operating segment:

For the Nine Months Ended September 30,

Operating Segment (In thousands)

Mineral Rights

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

Mineral Rights

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 Nine Months Ended September 30,

(In thousands, except per ton data)

Coal sales volumes (tons)

Total Appalachia

Illinois Basin

Northern Powder River Basin

Total coal sales volumes

Coal royalty revenue per ton

Illinois Basin

Northern Powder River Basin

Combined average coal royalty revenue per ton

Coal royalty revenues

Total Appalachia

Illinois Basin

Northern Powder River Basin

Unadjusted coal royalty revenues

Coal royalty adjustment for minimum leases

Total coal royalty revenues

Other revenues

Production lease minimum revenues

Minimum lease straight-line revenues

Carbon neutral initiative revenues

Wheelage revenues

Property tax revenues

Coal overriding royalty revenues

Lease amendment revenues

Aggregates royalty revenues

Oil and gas royalty revenues

Other revenues

Total other revenues

Royalty and other mineral rights

Transportation and processing services revenues

Gain on asset sales and disposals

Total Mineral Rights segment revenues and other income

Coal Royalty Revenues

Total coal royalty revenues increased $104.7 million during the nine months ended September 30, 2022, as compared to the prior year period.

The discussion by region is as follows:

 Coal royalty revenues increased $80.8 million primarily due to increased coal sales prices and volumes during the nine months ended September 30, 2022, as compared to the prior year period.

Illinois Basin:

 Coal royalty revenues increased $2.3 million primarily due to higher sales volumes and increased sales prices during the nine months ended September 30, 2022, as compared to the prior year period. Revenues recognized from Foresight in 2021 were fixed as a result of the lease amendment the Partnership entered into with Foresight pursuant to which Foresight agreed to pay NRP fixed cash payments to satisfy all obligations arising out of the existing various coal mining leases and transportation infrastructure fee agreements between the Partnership and Foresight.

Revenues from Foresight in 2022 represent traditional royalty and minimum payments.

Northern Powder River Basin:

 Coal royalty revenues increased $3.5 million primarily due to increased sales volumes as our lessee mined more on our property during the nine months ended September 30, 2022 as compared to the prior year period in accordance with its mine plan.

Other Revenues

Other revenues increased $12.7 million during the nine months ended September 30, 2022 as compared to the prior year period primarily due to the following:

An $8.6 million increase in carbon neutral initiatives due to the recognition of revenue related to carbon neutral transactions including subsurface CO 2 storage and geothermal.

A $7.5 million increase in oil and gas royalty revenues primarily due to new wells and increased natural gas prices.

A $5.5 million increase in wheelage revenues as a result of higher production in 2022 from the properties that pay us a wheelage fee as compared to the prior year period.

These increases were partially offset by a $6.7 million decrease in production lease minimum revenues primarily as a result of breakage revenues recognized in the first nine months of 2021. 

Transportation and Processing Services Revenues

Transportation and processing services revenues increased $8.8 million during the nine months ended September 30, 2022 as compared to the prior year period primarily due to the lease amendment with Foresight whereas transportation and processing revenues were based on the recognition of a fixed amount in 2021.

Revenues from Foresight in 2022 represent traditional royalty and minimum payments and were greater than the fixed revenue from 2021.

Revenues and other income related to our Soda Ash segment increased $32.8 million primarily as a result of increased international sales prices.

Operating and Other Expenses

The following table presents the significant categories of our consolidated operating and other expenses:

For the Nine Months Ended September 30,

Operating cash flow, DCF and FCF decreased $2.6 million primarily due to Sisecam Wyoming paying a higher quarterly distribution in the first quarter of 2022 as discussed above. 

Corporate and Financing Segment 

Operating cash flow, DCF and FCF decreased $2.5 million primarily due to increased cash paid for incentive compensation in the first quarter of 2023 because of the improved business performance in 2022 and higher cash paid for interest on credit facility borrowings in 2023. 

Liquidity and Capital Resources

Current Liquidity

As of March 31, 2023, we had total liquidity of $56.5 million, consisting of $17.7 million of cash and cash equivalents and $38.8 million of borrowing capacity under our Opco Credit Facility.

We have debt service obligations, including approximately $23 million of principal repayments on Opco’s senior notes, throughout the remainder of 2023.

The following table calculates our leverage ratio as of March 31, 2023: 

For the Three Months Ended

(In thousands)

Operating expenses

Operating and maintenance expenses

Depreciation, depletion and amortization

General and administrative expenses

Asset impairments

Total operating expenses

Other expenses, net

Interest expense, net

Loss on extinguishment of debt

Total other expenses, net

Total operating expenses increased $7.6 million primarily due to a $6.9 million increase in operating and maintenance expenses as compared to the prior year period primarily as a result of higher costs related to an overriding royalty agreement with WPPLP, partially offset by a decrease in bad debt expense.

The coal royalty expense we pay to WPPLP is fully offset by the coal royalty revenue we receive from this property. Total operating expenses also increased as a result of a $2.5 million increase in general and administrative expenses primarily due to increased long-term incentive expense incurred during the nine months ended September 30, 2022.

These increases were partially offset by a $3.2 million decrease in asset impairments as compared to the prior year period.

Asset impairments in 2021 primarily related to a lease termination that resulted in the full impairment of a coal property.

Total other expenses, net was essentially flat year-over-year.

The $6.7 million decrease in interest expense, net resulting from less debt outstanding was partially offset by a $6.5 million loss on early extinguishment of debt related to the premiums and fees incurred and write-off of debt issuance costs associated with the retirement of the 2025 Senior Notes during the nine months ended September 30, 2022. 

Adjusted EBITDA (Non-GAAP Financial Measure)

The following table reconciles net income (loss) (the most comparable GAAP financial measure) to Adjusted EBITDA by business segment:

Operating Segments

For the Nine Months Ended (In thousands)

Mineral Rights

Corporate and Financing

June 30, 2022

September 30, 2022

Net income (loss)

December 31, 2022

March 31, 2023

Last 12 Months

equity earnings from unconsolidated investment

5 unchanged sentences

Adjusted EBITDA

September 30, 2021

Net income (loss)

equity earnings from unconsolidated investment

total distributions from unconsolidated investment

interest expense, net

depreciation, depletion and amortization

asset impairments

Adjusted EBITDA

Adjusted EBITDA increased $147.4 million primarily due to a $119.7 million increase in Adjusted EBITDA within our Mineral Rights segment as a result of higher revenues and other income as discussed above, in addition to a $30.2 million increase in Adjusted EBITDA within our Soda Ash segment as a result of higher distributions received from Sisecam Wyoming in the first nine months of 2022 as compared to the prior year period as discussed above.

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

For the Nine Months Ended (In thousands)

Mineral Rights

Corporate and Financing

September 30, 2022

Cash flow provided by (used in) continuing operations

Operating activities

Investing activities

Financing activities

September 30, 2021

Cash flow provided by (used in) continuing operations

Operating activities

Investing activities

Financing activities

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

For the Nine Months Ended (In thousands)

Mineral Rights

Corporate and Financing

September 30, 2022

Net cash provided by (used in) operating activities of continuing operations

proceeds from asset sales and disposals

return of long-term contract receivable

maintenance capital expenditures

Distributable cash flow

proceeds from asset sales and disposals

Free cash flow

September 30, 2021

Net cash provided by (used in) operating activities of continuing operations

proceeds from asset sales and disposals

return of long-term contract receivable

Distributable cash flow

proceeds from asset sales and disposals

acquisition costs

Free cash flow

DCF and FCF increased $131.2 million and $131.8 million, respectively, primarily due to the following:

Mineral Rights Segment

DCF and FCF increased $102.5 million and $103.0 million, respectively, primarily due to the segment's increase in revenues and other income as discussed above.

Soda Ash Segment

DCF and FCF increased $30.1 million as a result of higher cash distributions received from Sisecam Wyoming in the first nine months of 2022 as compared to the prior year period as discussed above.

Liquidity and Capital Resources

Current Liquidity

As of September 30, 2022, we had total liquidity of $190.9 million, consisting of $60.9 million of cash and cash equivalents and $130.0 million of borrowing capacity under our Opco Credit Facility.

We have debt service obligations, including approximately $20 million of principal repayments on Opco’s senior notes throughout the remainder of 2022.

As discussed previously, through the date of this report, we have permanently retired all of our 9.125% Senior Notes due 2025 and have $70 million drawn on our Opco Credit Facility. We believe our liquidity position provides us with the flexibility to continue paying down debt and manage our business.

Cash flows provided by operating activities increased $131.3 million, from $66.6 million in the nine months ended September 30, 2021 to $198.0 million in the nine months ended September 30, 2022, primarily related to increased revenues and other income within our Mineral Rights segment and $30.1 million of higher cash distributions received from Sisecam Wyoming in the first nine months of 2022 as compared to the prior year period.

Cash flows used in financing activities increased $225.0 million, from $49.3 million used in the nine months ended September 30, 2021 to $274.3 million used in the nine months ended September 30, 2022, primarily due to the following:

$178.6 million of cash used to retire a portion of our 2025 Senior Notes during the nine months ended September 30, 2022;

$19.6 million of cash used to redeem the preferred units paid-in-kind during the first quarter of 2022;

$10.9 million of increased cash used for preferred unit distributions as a result of paying all of our preferred unit distributions in cash in 2022 as compared to half in kind during the nine months ended September 30, 2021;

$9.1 million of increased cash used for other items, net which primarily related to the premiums paid related to the repayment of the 2025 Senior Notes during the nine months ended September 30, 2022;

$7.8 million of increased cash used for distributions to common unitholders and the general partner as a result of increasing our common unit distribution to $0.75/unit beginning in the second quarter of 2022.

Debt—at March 31, 2023

Leverage Ratio

Cash flows provided by operating activities increased $20.6 million, from $52.3 million in the three months ended March 31, 2022 to $72.9 million in the three months ended March 31, 2023, primarily due to increased cash provided by operating activities within our Mineral Rights segment, partially offset by decreased cash provided by operating activities within our Soda Ash and Corporate and Financing segments, all discussed above. 

Cash flows used in financing activities increased $42.8 million, from $52.3 million used in the three months ended March 31, 2022 to $95.0 million used in the three months ended March 31, 2023, primarily due to the following:

$73.0 million of cash used to repay a portion of the Opco Credit Facility in the first quarter of 2023;

$48.1 million of cash used to redeem the preferred units the first quarter of 2023;

$35.2 million of increased cash distributions to common unitholders and the general partner as a result of increasing our quarterly cash distribution to $0.75/unit beginning in the second quarter of 2022 in addition to the special distribution paid in the first quarter of 2023.

These increases in cash flow used were partially offset by $94.2 million of borrowings on our Opco Credit Facility in the first quarter of 2023 and $19.6 million of cash used to redeem the preferred units paid-in-kind during the first quarter of 2022. 

Capital Resources and Obligations

We had the following debt outstanding as of September 30, 2022 and December 31, 2021:

September 30,

We had the following debt outstanding as of March 31, 2023 and December 31, 2022:

(In thousands)

15 unchanged sentences

We do not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to include this disclosure in our Form 10-Q for the quarterly period ended September 30, 2022.

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-Q

Item 2. Management’s Discussion and Analysis