Good morning, ladies and gentlemen, and welcome to the Natural Resource Partners LP Fourth Quarter 2019 Earnings Conference Call. As a reminder, this conference call is being recorded. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to introduce your host for today's conference, Tiffany Sammis, Natural Resource Partners, Manager of Investor Relations. Ms. Sammis, you may begin.

Thank you and good morning, and welcome to the Natural Resource Partners fourth quarter 2019 conference call. Today's call is being webcast and a replay will be available on your -- our website. Joining me today are Craig Nunez, President and Chief Operating Officer; and Chris Zolas, Chief Financial Officer. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our fourth quarter 2019 press release, which can be found on our website. I would like to remind everyone that we do not intend to discuss the operations or outlook for any particular coal lessee or get into detailed market fundamentals. In addition, I refer you to Ciner Resources' public disclosures and commentaries for specific questions regarding our Soda Ash business segment. Now, I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.

Thank you, Tiffany and welcome everyone to our quarterly call. I'm pleased to announce that NRP continues to generate significant amounts of cash, which allowed us to payoff $163 million of debt, and $62 million to common unitholders' equity before non-cash accounting impairments, and payout nearly $33 million of common unitholder distributions over the last year. Excluding discontinued operations, we recorded $139 million of free cash flow over the last 12 months, and our consolidated return on capital employed before impairments 16.1%, with the Coal segment coming in at 18.3% and Soda Ash delivering 19%. of our: I'm also very pleased to announce that the longstanding lawsuit against us by Anadarko has been resolved with the court ruling in our favor in all respects and zero liability for NRP. With this matter behind us, we have no material litigation outstanding. We are especially pleased that we have been able to continue executing on our multiyear plan to delever and derisk our business during what has turned out to be a challenging time for the coal industry in general and a financial crisis for a number of our lessees in particular. As pointed out in previous calls, a number of our lessees went bankrupt last year. And Foresight, our largest lessee has been in a forbearance agreement with its vendors since October. The fact that we have been able to generate solid operating and financial performance in spite of these developments makes it clear that the actions we took in recent years to fortify our financial position and streamline our cost structure are now paying off. We believe we are well-positioned to continue paying down debt and making distributions to our unitholders, despite the challenging business environment. Even in current benchmark prices for met and thermal coal, which are down approximately…

Thank you, Craig and good morning everyone. I'd like to start out summarizing some significant items that are impacting comparisons between 2019 and 2018. Starting with items that occurred in 2019. First, we recognize $148 million of asset impairment expense in the fourth quarter. As a reminder, asset impairment is a non-cash expense and does not have an impact on our debt covenant compliance. And second, we recognize the $29 million loss on early extinguishment of debt in connection with the refinancings of our bonds and revolving credit facility. These refinancings reduced our ongoing interest cost, extended maturities and significantly improved our liquidity and financial flexibility. Moving the items that occurred in 2018. First, we recognize $18 million of non-cash asset impairment expense. Second, our 2018 fourth quarter results were impacted by the Hillsboro litigation settlement with Foresight which resulted in the receipt of $25 million of cash that was recognized as other income in Q4 of 2018. And lastly, our full year 2018 results included a $13 million gain in our Soda Ash segment related to a royalty dispute litigation settlement. With all that being said, let's discuss our overall fourth quarter and year-end results. During the fourth quarter of 2019, we generated $19 million of operating cash flow and $28 million of net income from continuing operations, excluding the impact of asset impairments. Full year 2019 amounts $137 million of operating cash flow and $123 million of net income excluding asset impairments. Moving to our segment results. Our Coal Royalty segment generated $41 million of revenue and other income and $39 million of operating cash flow during the fourth quarter of 2019. Full year 2019 amounts were $217 million of revenue and other income and $179 million of operating cash flow. These results were lower compared to the…

Thank you. [Operator Instructions] The first question is from Mark Levin with Benchmark Company. Your line is open.

Great. Thanks very much, and congratulations on navigating through very, very challenging times. First question I has to do with just sort of housekeeping question. For 2020, the mandatory principal payment, can you share with me what that figure is?

Sure, Mark. On our Opco Senior Notes, that's about $45 million.

$45 million this year? Got it. Okay. And then, one of the things -- just looking at kind of the other revenues this year, production lease minimum as a minimum lease straight-line revenues, pretty big step up. So, in total, almost $40 million versus the year earlier, $10 million. Can you maybe give us some thoughts about how to think about going forward, given sort of all the activity that's been going on in the coal industry? Those two line items specifically.

Sure, Mark. So, like I said, in my prepared remarks, we had some significant items in 2019, that are -- that did impact comparison. One of those was those forfeitures of lessee recoupable balances that was increased about $16 million in 2019. So, that's something that was a one-time event that we can expect to continue going forward. And in regards to our minimum straight-line revenues, that's -- that was also mentioned is the additional revenue we recognized in 2019 compared to 2018, primarily driven by the Hillsboro revenue that we're now recognizing after the litigation settlement, which we do expect that to continue.

And that will -- that obviously will recur. Got it. Okay. Fair enough. And so the number will obviously be less than -- more than the 10 that you had in 2018, but less than the 38, obviously, that you got 2019.

Right.

Great. Okay. And then, just in general -- and I know it's -- Foresight is going through forbearance as one of your largest lessees. But just generally speaking, is there any -- anything you can say about how that process affects or will affect NRP in 2020?

Hi, Mark. This is Craig. What we can say, of course, is that we follow them as you are in the public markets. And to the extent they have a restructuring, a bankruptcy, a problem, something along those lines. We suspect that we'll have the same issues we've had with other bankruptcies and numerous bankruptcies we've gone through in the past. We don't have any insight at this point on exactly what that may mean for us. Will that mean that our cash flows will be reduced or will they stay the same? Or are we down? We do know that we've been quite successful throughout the past, which we've had a quite a number of bankruptcies over the last five years and restructurings with lessees, and we've been quite successful essentially maintaining our terms and maintaining our cash flows from those bankruptcies. As we've talked about it previously on the earlier calls, the key driver as to whether or not our leases continue to produce and continue to generate royalty revenues for us and minimum payments for us and alike, is the actual economic viability of the properties themselves. If the assets are profitable, then they tend to keep operating regardless of who the operator is and regardless of what the bankruptcy settlement is. And we tend to keep getting paid. If those mines were not profitable, if they were not economically viable, then those are usually the assets that get shared in the bankruptcy process. Unfortunate thing about Foresight -- and of course, we're not the operator -- but it appears that those are -- their assets are some of the lowest cost -- lowest cost mines east of the Mississippi. So, it's a pretty good asset to have.

Got it. No. Very, very helpful. And then, Craig, I knew in the past, you've not wanted to give necessarily a leverage target and I understand that -- it's clear that you want to continue to reduce debt. And I think that's prudent. But I was just curious around free cash flow cushion. I think you mentioned $8 million last year. And that being the more relevant metric in terms of what excess cash ultimately looks like. Is there a number from a free cash flow cushion perspective that -- I mean, it -- does it just simply need to be positive? Or is there a number or something that you're kind of looking to or targeting?

I don't have a target on free cash flow cushion. What I will tell you is that, my gut -- looking out at the landscape today, my gut tells me that, I think, we're going to have a positive margin, stay in the next 12 months. And I think that would be good in this environment to maintain a positive free cash flow margin, because that cushion -- excuse me -- because that means that we are continuing to delever and continuing to pay our distributions and -- so improving the balance sheet, derisking the business, despite the environment.

And it sounds like your comment -- just from your comments, it sounds like you're confident that despite the environment that you should be able to maintain the common distribution. Is that a fair statement? Or am I putting words in your mouth?

Well, my lawyers always say be careful whenever you use the word confident for anything, but that's our plan.

Got it. Okay. Fair enough. And then just the last question, and I'm fairly confident -- you won't be able to give any guidance here, but I'll ask nonetheless. Just kind of looking at your sales volume in 2019, it was roughly 23.7 versus 26.9 in 2018, and you've got some lessees that are obviously the thermal market is under threat and even the met market while prices have recovered, they're still pretty tough environment in the Atlantic basin. But 26.9 to 23.7 any thoughts as to -- as to what that number could look like in 2020? And I know you're going to say no guidance, but just maybe even generally speaking, what the expectations are -- what you see out in the landscape?

Well, my gut just tells me looking at it that I don't think we're going to have material changes on it, but that's just …

Okay.

… since we don't -- we don't operate -- we don't operate, we don't work the mine plans, per se. It's hard for us to give that guidance at all, any guidance at all on that just because we have a little more insight probably then there's someone looking from the outside in. But we don't operate and we don't make those operating decisions.

But it doesn't -- even -- and from your perspective, it doesn't look like there's a catastrophic fall, kind of -- what you can tell, obviously anything can happen, but doesn't look -- at least at this point in time is something …?

I would not envision anything, as you define it catastrophic, as you say catastrophic absence, some catastrophic, corresponding change in the economic environment.

Great.

There you go.

No. That's perfect. Thanks, Craig. Appreciate it all the color.

You got it.

[Operator Instructions] The next question is from Nick Jarmoszuk with Stifel. Your line is open.

Hi. Good morning. Given that the Opco amortizations are lower in 2020, how do you think about buyback opportunities with the Holdco notes?

Buyback opportunities with the Holdco notes?

Yes.

Well, always like to buy $1 for something less than $1 if you can. And in order to -- so looking at buying back debt would always be on the table with excess cash that we deemed that we had. And I can say that we will consider that. It's not been a big push yet, because we have been -- having a great deal of uncertainty in our operating environment. And as long as we have that, we like the idea of having a significant cash flow cushion or having a significant amount of cash liquidity on-hand, but -- that's all I can say about them.

Okay. And then on the Foresight situation, can you talk about how you are managing receivables? Are they on cash terms, or what's the age of their receivables are?

We don't ever disclose that information for any lessees, at all. I would -- I guess, what I would direct you to is our fourth quarter results. That was -- Foresight was -- as we understand, it was in the same forbearance situation in Q4 that they are in, say now. And as you can tell from our results that there was no material impact to our results in Q4 as a result of Foresight.

And one other thing you can look at is our accounts receivable balance, compare that in -- what we had in 2018 compared to what we have at the end of 2019.

Okay.

It's gone down a couple million.

Okay. So, is it fair to say that is a lessee starts becoming a stress? Do you become more active in managing that credit risk?

I guess, conceptually, yes, it's fair to say that. But I would say that we are always extremely active in managing lessees. And if we are not actively managing them, in advance of them becoming more financially stressed than we’re probably not looking ahead as well as we should be. So, we try to stay ahead of the game.

Okay. And then, while we're monitoring public developments unfold just as you are, have there been any discussions with them [ph] regarding the structure of their leases?

Well, as we said at the beginning of the call, and as we've done repeatedly over the years with every company, every lessee we've had that been in financial difficulties and bankruptcy, but -- close to bankruptcy or bankruptcy, we just cannot comment on any of that, at all, whether we are or not in discussions with them about anything. I will say that if you look back throughout the bankruptcies that we've had, there's not a lot of record of renegotiating the terms of our leases to the detriment of the company to -- of NRP.

Okay. That's all I had. Thank you.

You bet. Thanks for the questions.

There are no further questions at this time. I'll turn the call back over to Mr. Nunez for any closing remarks.

Thank you everyone for joining our call. We appreciate your interest in NRP. We've been getting a lot of calls from a number of you and we appreciate your support. Thank you, and until next quarter, take care.

Ladies and gentleman, this concludes today's conference call. Thank you for participating. You may now disconnect.