What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-03-07 · 72 added, 89 removed, 289 unchanged (36% of the section changed)

15 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 was a co-issuer with NRP on the 9.125% senior notes due 2025 (the "2025 Senior Notes").

Non-GAAP Financial Measures

43 unchanged sentences

Net income (loss)

Asset impairments

Net income (loss) excluding asset impairments

Adjusted EBITDA (1)

Cash flow provided by (used in) continuing operations

Cash flow provided by (used in)

Operating activities

6 unchanged sentences

Business Outlook and Quarterly Distributions

We generated $311.0 million of operating cash flow and $313.4 million of free cash flow during the year ended December 31, 2023, and ended the year w ith $71.2 million of liq uidity consisting of $12.0 million of cash and cash equivalents a nd $59.2 million of borrowing capacity under our Opco Credit Facility.

We generated $248.5 million of operating cash flow and $251.2 million of free cash flow during the year ended December 31, 2024, and ended the year with $116.7 million of liquidity consisting of $30.4 million of cash and cash equivalents and $86.3 million of borrowing capacity under our Opco Credit Facility.

As of December 31, 2024 our leverage ratio was 0.6x.

In 2023, we received notices from holders of the Class A Convertible Preferred Units representing limited partner interests in NRP (the "preferred units") exercising their right to either convert or redeem, at our election, an aggregate of 83,333 preferred units.

We chose to redeem the preferred units for $83.3 million in cash rather than converting them into common units.

In 2023, we also executed negotiated transactions with holders of the preferred units pursuant to which we repurchased and retired an aggregate of 95,001 preferred units for $95.0 million in cash.

Of the originally issued 250,000 preferred units, 71,666 preferred units remain outstanding as of December 31, 2023.

Following these redemptions and repurchases, the subject units were retired and no longer remain outstanding and Blackstone ceased to own any preferred units.

All rights of Blackstone related to its ownership of preferred units ceased, including Blackstone's right to appoint a board designee.

In 2023, we negotiated transactions with holders of the warrants to purchase common units (the "warrants") pursuant to which we repurchased and retired an aggregate of 752,500 warrants with a strike price of $22.81 and 710,000 warrants with a strike price of $34.00 for approximately $56.1 million in cash.

In January and February 2024, holders of our warrants exercised a total of 1,219,665 warrants with a strike price of $34.00.

We settled the warrants on a net basis with a total of $56 million in cash and 198,767 common units.

Following these transactions, of the originally issued 4,000,000 warrants, 320,335 warrants with a strike price of $34.00 remain outstanding.

In February 2024, we exercised our option under the Opco Credit Facility to increase the total aggregate commitment under the Opco Credit Facility twice, initially by $30 million from $155.0 million to $185.0 million and subsequently by $15.0 million from $185.0 million to $200.0 million.

In the first quarter of 2024, holders of our warrants to purchase common units (the "warrants") exercised a total of 1,219,665 warrants with a strike price of $34.00.

We settled these warrants on a net basis with a total of $55.7 million in cash and 198,767 common units.

In the second quarter of 2024, holders of our warrants exercised the remaining 320,335 warrants with a strike price of $34.00.

We settled these warrants on a net basis with $10.0 million in cash and 89,059 common units.

Following these transactions, of the originally issued 4.0 million warrants, after giving effect to these settlements and all prior settlements, no warrants remain outstanding.

In May 2024, we executed a negotiated transaction with holders of our Class A Preferred Units ("preferred units") pursuant to which we repurchased an aggregate of 40,000 preferred units for $40.0 million in cash.

In September 2024, we redeemed the remaining 31,666 preferred units for $31.7 million in cash.

Of the originally issued 250,000 preferred units, after giving effect to these redemptions and all prior redemptions, no preferred units remain outstanding.

In 2024, we exercised our option under the Opco Credit Facility to increase the total aggregate commitment under the Opco Credit Facility twice, initially by $30.0 million from $155.0 million to $185.0 million and subsequently by $15.0 million from $185.0 million to $200.0 million.

These increases in the total aggregate commitment were made pursuant to an accordion feature of the Opco Credit Facility.

In connection with the initial increase, a new lender joined the lending group with a commitment of $30.0 million.

The Opco Credit Facility otherwise continues to operate under its existing terms and conditions in all material respects.

In February 2024, the Board of Directors declared a cash distribution of $0.75 per common unit of NRP with respect to the fourth quarter of 2023 as well as a $2.15 million cash distribution on the preferred units with respect to the fourth quarter of 2023.

In October 2024, we entered into the Seventh Amendment to the Opco Credit Facility which extended the maturity from August 2027 to October 2029.

The Seventh Amendment also removed reference to the preferred units and warrants, which are no longer outstanding, and includes modifications to Opco's ability to declare and make certain restricted payments.

In February 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the fourth quarter of 2023 as well as a $2.15 million cash distribution on the preferred units with respect to the fourth quarter of 2023.

We paid a special cash distribution of $2.44 per common unit of NRP in March 2024 to help cover unitholder tax liabilities associated with owning NRP's common units in 2023.

In May 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the first quarter of 2024 as well as a $2.15 million cash distribution on the preferred units with respect to the first quarter of 2024.

In August 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the second quarter of 2024 as well as a $0.95 million cash distribution on the preferred units with respect to the second quarter of 2024.

In November 2024, we paid a cash distribution of $0.75 per common unit of NRP with respect to the third quarter of 2024.

In February 2025, the Board of Directors declared a cash distribution of $0.75 per common unit of NRP with respect to the fourth quarter of 2024.

Additionally, NRP has announced it will pay special cash distribution of $1.21 in March 2025 to help cover unitholder tax liabilities associated with owning NRP's common units in 2024.

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

Future distributions on our common 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 of Directors determines is necessary for future operating and capital needs.

Mineral Rights Business Segment

Revenues and other income during the year ended December 31, 2023 decreased $32.6 million, or 10%, as compared to the prior year primarily due to decreased metallurgical coal sales prices, decreased revenues from oil and gas royalties, lower transportation and processing services revenues and certain carbon neutral initiative transactions entered into in 2022.

Cash provided by operating activities and free cash flow decreased $2.8 million and $2.1 million, respectively, compared to the prior year period primarily due to the lower revenues during the year ended December 31, 2023 as compared to the prior year period.

Metallurgical and thermal coal prices saw significant variability in 2023, and were off the record highs seen in 2022, but finished the year strong relative to historical norms.

We believe limitations from ongoing labor shortages, access to capital, and inflationary pressures should provide continued price support for metallurgical and thermal coal in 2024, despite headwinds from lower steel demand and the long-term secular decline in thermal energy production.

We continue to explore and identify carbon neutral revenue sources across our large portfolio of surface, mineral, and timber assets, including the permanent sequestration of carbon dioxide underground and in standing forests, and the generation of electricity using geothermal, solar and wind energy, as well as lithium production.

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 provides additional opportunities to create value in this regard with minimal capital investment by us.

Revenues and other income during the year ended December 31, 2024 decreased $46.7 million, or 16%, as compared to the prior year.

Cash provided by operating activities and free cash flow during the year ended December 31, 2024 decreased $17.8 million and $17.6 million, respectively, compared to the prior year.

These decreases were primarily due to lower metallurgical coal sales prices and lower thermal coal sales prices and volumes as compared to the prior year, partially offset by one-time carbon neutral revenues and cash flow in 2024.

Metallurgical and thermal coal prices remained weak throughout 2024, primarily due to muted steel demand impacting metallurgical coal and mild weather, high inventory levels, and low natural gas prices impacting thermal coal.

While we do not expect significant changes in these factors or to pricing in 2025, metallurgical and thermal coal pricing is still higher compared to long-term historical norms.

It appears a new price floor has resulted from input cost inflation as well as ongoing labor shortages and operators' limited access to capital.

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

We were notified that the previously announced underground carbon sequestration lease agreement executed in 2022 would not be renewed for another lease term and has been terminated as per the lessee's rights in the agreement.

Soda Ash Business Segment

Revenues and other income during the year ended December 31, 2023 were higher by $13.6 million, or 23%, as compared to the prior year primarily due to higher sales prices driven by strong demand domestically, partially offset by lower soda ash production and sales volumes.

Cash provided by operating activities and free cash flow during the year ended December 31, 2023 increased $36.5 million as compared to the prior year period due to higher distributions received from Sisecam Wyoming in 2023 stemming from Sisecam Wyoming's strong operating performance in the first half of the year.

Strong sales prices at Sisecam Wyoming for the year ended December 31, 2023 more than offset input cost inflation, supply chain difficulties, and the influx of supply from China in the latter part of the year.

However, we believe this increase in global soda ash production will result in an oversupplied market and a decline in soda ash prices in 2024.

Revenues and other income during the year ended December 31, 2024 decreased $55.3 million, or 75%, as compared to the prior year primarily due to lower international soda ash sales prices due to increased global soda ash capacity and weaker global demand for new construction and automobiles.

Cash provided by operating activities and free cash flow during the year ended December 31, 2024 decreased $42.6 million as compared to the prior year as the decline in revenues and other income resulted in lower cash distributions received from Sisecam Wyoming during the year ended December 31, 2024.

We expect soda ash prices to remain low for the foreseeable future as it will take several years for the market to absorb the influx of new global capacity.

However, many producers are currently operating below cost of production as the market is experiencing its lowest sales prices in decades.

As this challenging market persists, distributions from Sisecam Wyoming are expected to be below historical levels.

Results of Operations

29 unchanged sentences

Minimum lease straight-line revenues

Carbon neutral initiative revenues

Carbon neutral revenues

Wheelage revenues

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Illinois Basin :

Coal royalty revenues increased $1.5 million primarily due to higher thermal coal sales prices, partially offset by lower coal sales volumes as compared to the prior year.

Coal royalty revenues decreased $16.4 million primarily due to lower thermal coal sales volumes and prices as compared to the prior year.

Northern Powder River Basin :

Coal royalty revenues increased $3.2 million due to increased sales volumes and higher coal sales prices during the year ended December 31, 2023, as compared to the prior year.

The increase in sales volumes was due to our lessee mining more on our property during 2023 as compared to 2022 in accordance with its mine plan.

Coal royalty revenues decreased $6.9 million primarily due to decreased sales volumes during the year ended December 31, 2024, as compared to the prior year.

The decrease in sales volumes was due to our lessee mining less on our property during 2024 as compared to 2023 in accordance with its mine plan.

Other Revenues

Other revenues decreased $19.3 million during the year ended December 31, 2023 as compared to the prior year primarily due to the following:

An $8.8 million d ecrease in oil and gas revenues primarily as a result of decreased natural gas prices as compared to the prior year;

A $5.6 million decreas e in carbon neutral initiative revenues as compared to the prior year.

Carbon neutral initiative revenues recognized in 2023 primarily related to subsurface CO 2 storage and forest offset credits.

Carbon neutral initiative revenues recognized in 2022 primarily related to subsurface CO 2 storage and geothermal energy transactions;

A $2.5 million decrease in production lease minimum revenues primarily as a result of a decrease in breakage revenues as compared to the prior year.

Other revenues increased $14.4 million during the year ended December 31, 2024 as compared to the prior year primarily driven by carbon neutral revenues received from a third party related to its creation of California Air Resources Board carbon offset credits from our properties.

Transportation and Processing Services Revenues

1 unchanged sentence

The fee per ton associated with the transportation and processing of the non-NRP coal is less than the fee per ton associated with the transportation and processing of NRP coal.

Revenues and other income related to our Soda Ash segment increased $13.6 million c ompared to the prior year primarily due to higher sales prices driven by strong demand domestically, partially offset by lower soda ash production and sales volumes.

Operating and Other Expenses

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

Revenues and other income related to our Soda Ash segment decreased $55.3 million c ompared to the prior year primarily due to lower international soda ash sales prices due to increased global soda ash capacity and weaker global demand for new construction and automobiles.

Operating Expenses

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

For the Year Ended December 31,

6 unchanged sentences

Total operating expenses

Other expenses, net

Interest expense, net

Loss on extinguishment of debt

Total other expenses, net

Total operating expenses decreased $6.3 million primarily due to the following:

A $2.6 million decrease in operating and maintenance expenses primarily as a result of lower overriding royalty expense from an agreement with Western Pocahontas Properties Limited Partnership ("WPPLP") in 2023 as compared to 2022.

Total operating expenses decreased $8.7 million primarily due to a $4.3 million decrease in operating and maintenance expenses during the year ended December 31, 2024 and a $3.0 million decrease in depreciation, depletion and amortization compared to the prior year.

The decrease in operating and maintenance expenses was primarily due to lower overriding royalty expense from an agreement with WPPLP during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This overriding royalty expense is fully offset by coal royalty revenue we receive from this property.

A $3.9 million decrease in asset impairments as compared to the prior year.

A $4.0 million decrease in depreciation, depletion and amortization expense primarily driven by lower Illinois Basin coal royalty sales volumes during the year ended December 31, 2023, as compared to the prior year.

These decreases were partially offset by a $4.3 million increase in general and administrative expenses primarily due to higher long-term incentive expense during the year ended December 31, 2023, as compared to the prior year.

Total other expenses, net decreas ed $22.6 million pri marily due to a $12.2 million decrease in interest expense, net as a result of less debt outstanding during 2023 as compared to the prior year, and a $10.5 million decrease related to the loss on early extinguishment of debt related to the retirement of the 2025 Senior Notes during the year ended December 31, 2022.

This decrease in operating and maintenance expense was partially offset by higher bad debt expense during the year ended December 31, 2024 as compared to the prior year.

The decrease in depreciation, depletion and amortization was primarily due to lower coal production from certain Illinois Basin and Northern Powder River Basin properties during the year ended December 31, 2024 as compared to the prior year.

Interest Expense, Net

Interest expense, net increased $1.5 million primarily due to higher borrowings outstanding on the Opco Credit Facility during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Adjusted EBITDA (Non-GAAP Financial Measure)

17 unchanged sentences

interest expense, net

loss on extinguishment of debt

depreciation, depletion and amortization

1 unchanged sentence

Adjusted EBITDA

Net income increased $9.9 million primarily due to the decrease in operating and other expenses, net, partially offset by the decrease in revenues and other income, both discussed above.

Adjusted EBITDA increased $2.4 million primarily due to a $36.5 million increase in Adjusted EBITDA within our Soda Ash segment as a result of higher cash distributions received from Sisecam Wyoming during the year ended December 31, 2023 as compared to the prior year due to Sisecam Wyoming's strong operating performance in the first half of 2023.

This increase was partially offset by a $29.9 million decrease in Adjusted EBITDA within our Mineral Rights segment as a result of lower revenues and other income during the year ended December 31, 2023 as discussed above and a $4.3 million decrease in Adjusted EBITDA within our Corporate and Financing segment as a result of the increase in general and administrative expenses during the year ended December 31, 2023 as discussed above.

Net income decreased $94.8 million as compared to the prior year primarily due to the decrease in revenues and other income as discussed above.

Adjusted EBITDA decreased $84.2 million as compared to the prior year primarily due to a $42.5 million decrease in Adjusted EBITDA within our Mineral Rights segment as a result of lower revenues and other income during the year ended December 31, 2024 as discussed above and a $42.6 million decrease in Adjusted EBITDA within our Soda Ash segment primarily due to lower distributions received from Sisecam Wyoming during the year ended December 31, 2024.

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

23 unchanged sentences

return of long-term contract receivable

maintenance capital expenditures

Distributable cash flow

1 unchanged sentence

Free cash flow

Operating Segments

Corporate and

For the Year Ended (In thousands)

Mineral Rights

December 31, 2023

6 unchanged sentences

Free cash flow

Cash provided by operating activities, DCF and FCF increased $44.1 million, $46.9 million and $45.0 million, respectively from 2022 to 2023.

Cash provided by operating activities, DCF and FCF decreased $62.5 million, $60.4 million and $62.3 million, respectively from 2023 to 2024.

The discussion by segment is as follows:

Mineral Rights Segment:

Cash provided by operating activities, DCF and FCF decreased $2.8 million, $0.2 million and $2.1 million, respectively primarily due to the segment's decrease in revenues and other income as discussed above.

Cash provided by operating activities, DCF and FCF decreased $17.8 million, $15.7 million and $17.6 million, respectively, primarily due to lower metallurgical coal sales prices and lower thermal coal sales prices and volumes during 2024 as compared to the prior year, partially offset by cash received from one-time carbon neutral revenues in 2024.

Soda Ash Segment:

Cash provided by operating activities, DCF and FCF increased $36.5 million as a result of higher cash distributions received from Sisecam Wyoming in 2023 driven by Sisecam Wyoming's strong operating performance in the first half of 2023.

Cash provided by operating activities, DCF and FCF decreased $42.6 million primarily due to lower distributions received from Sisecam Wyoming in 2024 as compared to 2023.

Corporate and Financing Segment:

Cash used in operating activities decreased $10.4 million and DCF and FCF increased $10.5 million primarily due to lower cash paid for interest in 2023 as a result of the retirement of the 2025 Senior Notes in 2022.

Cash used in operating activities increased $2.1 million primarily due to higher cash paid for interest resulting from higher borrowings outstanding on the Opco Credit Facility during the year ended December 31, 2024.

For discussion of our Results of Operations comparing 2023 to 2022, refer to our 2023 Annual Report on Form 10-K filed March 7, 2024 under Part II, "Item 7.

12 unchanged sentences

Year Ended December 31, 2024 and 2023 Compared

Cash flows provided by operating activities increased $44.1 million, from $266.8 million during the year ended December 31, 2022 to $311.0 million during the year ended December 31, 2023 due to increased cash flow within our Soda Ash and Corporate and Financing segments, partially offset by decreased cash flow within our Mineral Rights segment, all discussed above.

Cash flows provided by operating activities decreased $62.5 million, from $311.0 million during the year ended December 31, 2023 to $248.5 million during the year ended December 31, 2024 primarily due to decreased cash flow within our Mineral Rights and Soda Ash segments, all discussed above.

Cash flows used in financing activities decreased $105.9 million, from $343.5 million used during the year ended December 31, 2023 to $237.5 million used during the year ended December 31, 2024 primarily due to the following:

$300.0 million of cash used to retire the 2025 Senior Notes in 2022;

$178.8 million o f increased borrowings on the Opco Credit Facility in 2023;

$19.3 million of cash used to redeem the preferred units paid-in-kind in 2022;

$9.1 million of decreased cash used for other items, net primarily due to the premiums paid related to the retirement of the 2025 Senior Notes in 2022;

$8.2 million of decreased cash used for preferred unit distributions as a result of the preferred unit redemptions in 2023.

$106.7 million of decreased cash used for the redemption of preferred units in 2024 as compared to 2023;

$81.4 million of decreased debt repayments in 2024 as compared to 2023;

$15.7 million decreased distributions to preferred unitholders in 2024 as compared to 2023.

These decreases in cash flow used were partially offset by the following:

$178.3 million of cash used to redeem the preferred units in 2023;

$223.0 million of cash used to repay a portion of the Opco Credit Facility in 2023;

$56.1 million of cash used to settle certain of our warrants in 2023;

$35.5 million of increased cash distributions to common unitholders and the general partner as a result of the special cash distribution of $2.43/unit made in the first quarter of 2023 in addition to increasing our common unit distributions to $0.75/unit beginning in the second quarter of 2022.

$81.0 million of decreased borrowings on the Opco Credit Facility in 2024 as compared to 2023;

$9.6 million of increased cash used for the warrant settlements in 2024 as compared to 2023;

$4.9 million of increased cash used for other items, net in 2024 as compared to 2023;

$2.2 million of increased distributions to common unitholders and the general partner in 2024 as compared to 2023.

For discussion of our Cash Flows comparing 2023 to 2022, refer to our 2023 Annual Report on Form 10-K filed March 7, 2024 under Part II, "Item 7.

18 unchanged sentences

The amounts indicated in the table include interest due on Opco’s senior notes.

Preferred Units and Warrants

As of December 31, 2023 there were 71,666 preferred units outstanding.

As of December 31, 2022 there were 250,000 preferred units outstanding.

As of December 31, 2023 there were 1,540,000 warrants with a strike price of $34.00 outstanding.

As of December 31, 2022 there were 3,002,500 warrants outstanding, which included warrants to purchase 752,500 common units at a strike price of $22.81 and warrants to purchase 2,250,00 common units with a strike price of $34.00.

For more information on our preferred units and warrants, see " Item 8.

Financial Statements and Supplementary Data—Note 4.

Class A Convertible Preferred Units and Warrants " in this Annual Report on Form 10-K.

Despite rising costs beginning in 2021 and continuing into 2024, inflation did not have a material impact on operations for the years ended December 31, 2024, 2023 and 2022.

49 unchanged sentences

The fair value of the impaired investment is based on quoted market prices, or upon the present value of expected cash flows using discount rates believed to be consistent with those used by principal market participants, plus market analysis of comparable assets owned by the investee, if appropriate.

Recent Accounting Standards

In November 2023, the FASB issued ASU No.

2023-07 — Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures ("ASU 2023-07").

Recently Adopted Accounting Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07—Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures ("ASU 2023-07").

The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses.

The guidance is effective for annual and interim periods beginning after December 15, 2023 and is to be adopted retrospectively to all prior periods presented in the financial statements.

We do not expect the adoption of ASU 2023-07 to have a material effect on our Consolidated Financial Statements.

The adoption of ASU 2023-07 with our 2024 Form 10-K did not have a material impact on our Consolidated Financial Statements.

See " Item 8.

Financial Statements and Supplementary Data—Note 7.

S egment Information " for more information.

Recent Accounting Standards

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures ("ASU 2024-03").

ASU 2024-03 is intended to improve disclosures about a public business entity's expenses and provide more detailed information to investors about the types of expenses in commonly presented expense captions.

The guidance is effective for annual periods beginning after December 15, 2026 and quarterly periods beginning after December 31, 2027 and can be adopted prospectively to financial statements issued for reporting periods after the effective date or retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the potential impact of this guidance on our disclosures.

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