Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion and analysis present management’s view of our business, financial condition and overall performance and should be read in conjunction with our consolidated financial statements and footnotes included elsewhere in this filing. Our discussion and analysis consist of the following subjects:
•
Executive Overview
•
Results of Operations
•
Liquidity and Capital Resources
•
Inflation
•
Environmental Regulation
•
Related Party Transactions
•
Summary of Critical Accounting Estimates
•
Recent Accounting Standards
As used in this Item 7, unless the context otherwise requires: "we," "our," "us" and the "Partnership" refer to Natural Resource Partners L.P. and, where the context requires, our subsidiaries. References to "NRP" and "Natural Resource Partners" refer to Natural Resource Partners L.P. only, and not to NRP (Operating) LLC or any of Natural Resource Partners L.P.’s subsidiaries. References to "Opco" refer to NRP (Operating) LLC, a wholly owned subsidiary of NRP, and its subsidiaries.
38
Table of Contents
Non-GAAP Financial Measures
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) 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.
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 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, 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.
Leverage Ratio
Leverage ratio represents the outstanding principal of NRP's debt at the end of the period divided by the last twelve months' Adjusted EBITDA as defined above. NRP believes that leverage ratio is a useful measure to management and investors to evaluate and monitor the indebtedness of NRP relative to its ability to generate income to service such debt and in understanding trends in NRP’s 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.
39
Table of Contents
Executive Overview
We are a diversified natural resource company engaged principally in the business of owning, managing and leasing a diversified portfolio of mineral properties in the United States, including interests in coal and other natural resources and own a non-controlling 49% interest in Sisecam Wyoming LLC ("Sisecam Wyoming"), a trona ore mining and soda ash production business. Our common units trade on the New York Stock Exchange under the symbol "NRP." Our business is organized into two operating segments:
Mineral Rights —consists of approximately 13 million acres of mineral interests and other subsurface rights across the United States. If combined in a single tract, our ownership would cover roughly 20,000 square miles. Our ownership provides critical inputs for the manufacturing of steel, electricity and basic building materials, as well as opportunities for carbon sequestration and renewable energy. We are working to strategically redefine our business as a key player in the transitional energy economy in the years to come.
Soda Ash —consists of our 49% non-controlling equity interest in Sisecam Wyoming, a trona ore mining and soda ash production business located in the Green River Basin of Wyoming. Sisecam Wyoming mines trona and processes it into soda ash that is sold both domestically and internationally into the glass and chemicals industries.
Corporate and Financing includes functional corporate departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment.
Our financial results by segment for the year ended December 31, 2024 are as follows:
Operating Segments
Corporate and
(In thousands)
Mineral Rights
Soda Ash
Financing
Total
Revenues and other income
$
249,872
$
18,135
$
—
$
268,007
Net income (loss)
$
206,403
$
17,964
$
(40,723
)
$
183,644
Adjusted EBITDA (1)
$
222,007
$
38,610
$
(25,151
)
$
235,466
Cash flow provided by (used in)
Operating activities
$
242,168
$
38,610
$
(32,285
)
$
248,493
Investing activities
$
7,511
$
—
$
—
$
7,511
Financing activities
$
(1,086
)
$
—
$
(236,463
)
$
(237,549
)
Distributable cash flow (1)
$
249,679
$
38,610
$
(32,285
)
$
256,004
Free cash flow (1)
$
244,833
$
38,610
$
(32,285
)
$
251,158
(1)
See"—Results of Operations" below for reconciliations to the most comparable GAAP financial measures.
40
Table of Contents
Current Results/Market Commentary
Business Outlook and Quarterly Distributions
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 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 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 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, 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, 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.
41
Table of Contents
Results of Operations
Year Ended December 31, 2024 and 2023 Compared
Revenues and Other Income
The following table includes our revenues and other income by operating segment:
For the Year Ended December 31,
Percentage
Operating Segment (In thousands)
2024
2023
Decrease
Change
Mineral Rights
$
249,872
$
296,612
$
(46,740
)
(16
)%
Soda Ash
18,135
73,397
(55,262
)
(75
)%
Total
$
268,007
$
370,009
$
(102,002
)
(28
)%
The changes in revenues and other income are discussed for each of the operating segments below:
42
Table of Contents
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 Year Ended December 31,
Increase
Percentage
(In thousands, except per ton data)
2024
2023
(Decrease)
Change
Coal sales volumes (tons)
Appalachia
Northern
1,031
1,145
(114
)
(10
)%
Central
14,137
13,927
210
2
%
Southern
2,661
2,670
(9
)
(0
)%
Total Appalachia
17,829
17,742
87
0
%
Illinois Basin
5,723
8,119
(2,396
)
(30
)%
Northern Powder River Basin
2,826
4,589
(1,763
)
(38
)%
Gulf Coast
1,342
1,477
(135
)
(9
)%
Total coal sales volumes
27,720
31,927
(4,207
)
(13
)%
Coal royalty revenue per ton
Appalachia
Northern
$
3.25
$
7.15
$
(3.90
)
(55
)%
Central
7.13
8.95
(1.82
)
(20
)%
Southern
10.22
12.81
(2.59
)
(20
)%
Illinois Basin
2.26
3.61
(1.35
)
(37
)%
Northern Powder River Basin
4.87
4.50
0.37
8
%
Gulf Coast
0.80
0.66
0.14
21
%
Combined average coal royalty revenue per ton
5.74
6.83
(1.09
)
(16
)%
Coal royalty revenues
Appalachia
Northern
$
3,348
$
8,192
$
(4,844
)
(59
)%
Central
100,845
124,631
(23,786
)
(19
)%
Southern
27,185
34,205
(7,020
)
(21
)%
Total Appalachia
131,378
167,028
(35,650
)
(21
)%
Illinois Basin
12,927
29,350
(16,423
)
(56
)%
Northern Powder River Basin
13,768
20,666
(6,898
)
(33
)%
Gulf Coast
1,069
969
100
10
%
Unadjusted coal royalty revenues
159,142
218,013
(58,871
)
(27
)%
Coal royalty adjustment for minimum leases
(109
)
(2
)
(107
)
(5,350
)%
Total coal royalty revenues
$
159,033
$
218,011
$
(58,978
)
(27
)%
Other revenues
Production lease minimum revenues
$
4,365
$
3,322
$
1,043
31
%
Minimum lease straight-line revenues
16,530
19,389
(2,859
)
(15
)%
Carbon neutral revenues
15,703
2,969
12,734
429
%
Wheelage revenues
9,324
12,191
(2,867
)
(24
)%
Property tax revenues
7,100
6,219
881
14
%
Coal overriding royalty revenues
2,358
2,175
183
8
%
Lease amendment revenues
3,724
3,070
654
21
%
Aggregates royalty revenues
2,904
2,876
28
1
%
Oil and gas royalty revenues
8,566
7,387
1,179
16
%
Other revenues
4,542
1,124
3,418
304
%
Total other revenues
$
75,116
$
60,722
$
14,394
24
%
Royalty and other mineral rights
$
234,149
$
278,733
$
(44,584
)
(16
)%
Transportation and processing services revenues
10,878
14,923
(4,045
)
(27
)%
Gain on asset sales and disposals
4,845
2,956
1,889
64
%
Total Mineral Rights segment revenues and other income
$
249,872
$
296,612
$
(46,740
)
(16
)%
43
Table of Contents
Coal Royalty Revenues
Approximately 75% of coal royalty revenues and approximately 55% of coal royalty sales volumes were derived from metallurgical coal during the year ended December 31, 2024. Total coal royalty revenues decreased $59.0 million from 2023 to 2024. The discussion by region is as follows:
•
Appalachia : Coal royalty revenues decreased $35.7 million primarily due to decreased metallurgical coal sales prices during the year ended December 31, 2024, as compared to the prior year.
•
Illinois Basin : 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 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 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
Transportation and processing services revenues decreased $4.0 million during the year ended December 31, 2024 as compared to the prior year primarily due to a temporary relocation of certain production off of NRP's coal reserves. 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.
Soda Ash
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,
Percentage
(In thousands)
2024
2023
Decrease
Change
Operating expenses
Operating and maintenance expenses
$
28,036
$
32,315
$
(4,279
)
(13
)%
Depreciation, depletion and amortization
15,535
18,489
(2,954
)
(16
)%
General and administrative expenses
25,151
26,111
(960
)
(4
)%
Asset impairments
87
556
(469
)
(84
)%
Total operating expenses
$
68,809
$
77,471
$
(8,662
)
(11
)%
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. 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.
44
Table of Contents
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
Corporate and
For the Year Ended (In thousands)
Mineral Rights
Soda Ash
Financing
Total
December 31, 2024
Net income (loss)
$
206,403
$
17,964
$
(40,723
)
$
183,644
Less: equity earnings from unconsolidated investment
—
(18,135
)
—
(18,135
)
Add: total distributions from unconsolidated investment
—
38,781
—
38,781
Add: interest expense, net
—
—
15,554
15,554
Add: depreciation, depletion and amortization
15,517
—
18
15,535
Add: asset impairments
87
—
—
87
Adjusted EBITDA
$
222,007
$
38,610
$
(25,151
)
$
235,466
December 31, 2023
Net income (loss)
$
245,527
$
73,140
$
(40,232
)
$
278,435
Less: equity earnings from unconsolidated investment
—
(73,397
)
—
(73,397
)
Add: total distributions from unconsolidated investment
—
81,478
—
81,478
Add: interest expense, net
—
—
14,103
14,103
Add: depreciation, depletion and amortization
18,471
—
18
18,489
Add: asset impairments
556
—
—
556
Adjusted EBITDA
$
264,554
$
81,221
$
(26,111
)
$
319,664
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)
The following table presents the three major categories of the statement of cash flows by business segment:
Operating Segments
Corporate and
For the Year Ended (In thousands)
Mineral Rights
Soda Ash
Financing
Total
December 31, 2024
Cash flow provided by (used in)
Operating activities
$
242,168
$
38,610
$
(32,285
)
$
248,493
Investing activities
7,511
—
—
7,511
Financing activities
(1,086
)
—
(236,463
)
(237,549
)
December 31, 2023
Cash flow provided by (used in)
Operating activities
$
259,983
$
81,207
$
(30,212
)
$
310,978
Investing activities
5,426
—
(10
)
5,416
Financing activities
(583
)
—
(342,913
)
(343,496
)
45
Table of Contents
The following tables reconcile net cash provided by (used in) operating activities (the most comparable GAAP financial measure) by business segment to DCF and FCF:
Operating Segments
Corporate and
For the Year Ended (In thousands)
Mineral Rights
Soda Ash
Financing
Total
December 31, 2024
Net cash provided by (used in) operating activities
$
242,168
$
38,610
$
(32,285
)
$
248,493
Add: proceeds from asset sales and disposals
4,846
—
—
4,846
Add: return of long-term contract receivable
2,665
—
—
2,665
Distributable cash flow
$
249,679
$
38,610
$
(32,285
)
$
256,004
Less: proceeds from asset sales and disposals
(4,846
)
—
—
(4,846
)
Free cash flow
$
244,833
$
38,610
$
(32,285
)
$
251,158
December 31, 2023
Net cash provided by (used in) operating activities
$
259,983
$
81,207
$
(30,212
)
$
310,978
Add: proceeds from asset sales and disposals
2,963
—
—
2,963
Add: return of long-term contract receivable
2,463
—
—
2,463
Less: maintenance capital expenditures
—
—
(10
)
(10
)
Distributable cash flow
$
265,409
$
81,207
$
(30,222
)
$
316,394
Less: proceeds from asset sales and disposals
(2,963
)
—
—
(2,963
)
Free cash flow
$
262,446
$
81,207
$
(30,222
)
$
313,431
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 $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 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 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. Management's Discussion and Analysis of Financial Condition and Results of Operations. "
46
Table of Contents
Liquidity and Capital Resources
Current Liquidity
As of December 31, 2024, we had total liquidity of $116.7 million, consisting of $30.4 million of cash and cash equivalents and $86.3 million in borrowing capacity under our Opco Credit Facility. We have debt service obligations, including approximately $14 million of principal repayments on Opco’s senior notes in 2025. As of December 31, 2024 our leverage ratio was 0.6x. The following table calculates our leverage ratio:
(In thousands)
For the Year Ended December 31, 2024
Adjusted EBITDA
$
235,466
Debt—at December 31, 2024
$
142,347
Leverage Ratio
0.6x
Cash Flows
Year Ended December 31, 2024 and 2023 Compared
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:
•
$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; and
•
$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:
•
$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; and
•
$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. Management's Discussion and Analysis of Financial Condition and Results of Operations. "
47
Table of Contents
Capital Resources and Obligations
Debt, Net
We had the following debt outstanding as of December 31, 2024 and 2023:
December 31,
(In thousands)
2024
2023
Current portion of long-term debt, net
$
14,192
$
30,785
Long-term debt, net
127,876
124,273
Total debt, net
$
142,068
$
155,058
We have been and continue to be in compliance with the terms of the financial covenants contained in our debt agreements. For additional information regarding our debt and the agreements governing our debt, including the covenants contained therein, see " Item 8. Financial Statements and Supplementary Data—Note 11. Debt, Net " in this Annual Report on Form 10-K.
Debt Obligations
The following table reflects our long-term, non-cancelable debt obligations as of December 31, 2024:
Payments Due by Period
Debt Obligations (In thousands)
Total
2025
2026
2027
2028
2029
Thereafter
Opco:
Debt principal payments (including current maturities) (1)
$
142,347
$
14,332
$
14,331
$
—
$
—
$
113,684
$
—
Debt interest payments (2)
2,175
1,450
725
—
—
—
—
Total
$
144,522
$
15,782
$
15,056
$
—
$
—
$
113,684
$
—
(1)
The amounts indicated in the table include principal due on Opco’s senior notes and credit facility.
(2)
The amounts indicated in the table include interest due on Opco’s senior notes.
Inflation
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.
Environmental Regulation
For additional information on environmental regulation that may have a material impact on our business, see " Items 1. and 2. Business and Properties—Regulation and Environmental Matters ."
Related Party Transactions
The information required by this Item is included under " Item 8. Financial Statements and Supplementary Data—Note 13. Related Party Transactions " and " Item 13. Certain Relationships and Related Transactions, and Director Independence " in this Annual Report on Form 10-K and is incorporated by reference herein.
48
Table of Contents
Summary of Critical Accounting Estimates
Preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. See " Item 8. Financial Statements and Supplementary Data—Note 2. Summary of Significant Accounting Policies " in the audited Consolidated Financial Statements of this Form 10-K for discussion of our significant accounting policies. The following critical accounting policies are affected by estimates and assumptions used in the preparation of Consolidated Financial Statements. We evaluate our estimates and assumptions on a regular basis. Actual results could differ from those estimates.
Revenues
Mineral Rights Segment Revenues
Royalty-based leases. 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.
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.
As a result of this evaluation, revenue recognition from our royalty-based leases is based on either production or minimum payments as follows:
•
Production Leases : Leases for which we expect that consideration from production will be greater than consideration from minimums over the lease term. Revenue for these leases is recognized over time based on production as royalty revenues, as applicable. Deferred revenue from minimums is recognized as royalty revenues when recoupment occurs or as production lease minimum revenues when the recoupment period expires. In addition, we recognize breakage revenue from minimums when we determine that recoupment is remote. This breakage revenue is included in production lease minimum revenues.
•
Minimum Leases : Leases for which we expect that consideration from minimums will be greater than consideration from production over the lease term. Revenue for these leases is recognized straight-line over the lease term based on the minimum consideration amount as minimum lease straight-line revenues.
This evaluation is performed at the inception of the lease and only reassessed upon modification or renewal of the lease.
Mineral Rights
Mineral rights owned and leased are recorded at its original cost of construction or, upon acquisition, at fair value of the assets acquired. Coal and aggregates mineral rights are depleted on a unit-of-production basis by lease, based upon minerals mined in relation to the net cost of the mineral properties and estimated economic tonnage as estimated by our internal reserve engineers. The technologies and economic data used by our internal reserve engineers in the estimation of our economic tonnage 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 economic tonnage, including many factors beyond our control. Estimates of economically recoverable tonnage 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, 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 tons or production ceasing on a property for an extended period. A long-lived asset is deemed impaired when the future expected undiscounted cash flows from its use and disposition is less than the asset's net book value. Impairment is measured based on the estimated fair value, which is usually determined based upon the present value of the projected future cash flow compared to the asset's net book value. We believe our estimates of cash flows and discount rates are consistent with those of principal market participants.
We evaluate our equity investment for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investment may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value to be other than temporary, the excess of the carrying value over the estimated fair value is recognized in the financial statements as an impairment loss. 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.
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 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.
49
Table of Contents