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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2017
OR
For the transition period from _______ to ________
Commission file number: 001-36062
CINER RESOURCES LP
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
Incorporation or Organization)
46-2613366
(I.R.S. Employer
Identification No.)
Five Concourse Parkway
Suite 2500
Atlanta, Georgia 30328
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (770) 375-2300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common units representing limited partnership interests
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨
No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨
No þ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes þ
No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ
No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer þ
Non-accelerated filer ¨
(Do not check if a
smaller reporting company)
Smaller reporting company ¨
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ¨
No þ
The aggregate market value, as of June 30, 2017 , of the common units held by non-affiliates of the registrant, based on the reported closing price of such units on
the New York Stock Exchange on such date ( $27.40 per common unit), was approximately $139.2 million .
The registrant had 19,725,696 common units and 399,000 general partner units outstanding at March 2, 2018 , the most recent practicable date.
Documents Incorporated by Reference: None
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CINER RESOURCES LP
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
References in this Annual Report on Form 10-K (“Report”) to the “Predecessor,” “we,” “our,” “us,” or like terms, when used in a historical context (periods
prior to September 18, 2013, the closing date of our initial public offering (“IPO”), refer to Ciner Wyoming Holding Co., a Delaware company (“Ciner Holdings”)
and its subsidiary, our predecessor for accounting purposes. References in this Report to “CINR,” the “Partnership,” “we,” “our,” “us,” or like terms, when used in
the present tense or prospectively (starting September 18, 2013), refer to Ciner Resources LP, a Delaware limited partnership, and its subsidiary. References to
“Ciner Wyoming” refer to Ciner Wyoming LLC, a Delaware limited liability company and consolidated subsidiary of the Partnership. References to “our general
partner” or “Ciner GP” refer to Ciner Resource Partners LLC, a Delaware limited liability company and the general partner of Ciner Resources LP and a direct
wholly-owned subsidiary of Ciner Holdings, which is a direct wholly-owned subsidiary of Ciner Resources Corporation, a Delaware corporation (“Ciner Corp”).
Ciner Corp is a direct wholly-owned subsidiary of Ciner Enterprises Inc., a Delaware corporation (“Ciner Enterprises”), which is a direct wholly-owned subsidiary
of WE Soda Ltd., a U.K. corporation (“WE Soda”). WE Soda is a direct wholly-owned subsidiary of KEW Soda Ltd., a U.K. corporation (“KEW Soda”), which is
a direct wholly-owned subsidiary of Akkan Enerji ve Madencilik Anonim Şirketi (“Akkan”). Akkan is directly and wholly owned by Turgay Ciner, the Chairman
of the Ciner Group (“Ciner Group”), a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping
markets. All our soda ash processed is currently sold to various domestic and international customers, including American Natural Soda Ash Corporation
(“ANSAC”) and Ciner Ic ve Dis Ticaret Anonim Sirketi (“CIDT”), both of which are our affiliates for export sales.
We include cross references to captions elsewhere in this Annual Report on Form 10-K, which we refer to as this “Report,” where you can find related
additional information. The following table of contents tells you where to find these captions.
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Cautionary Statement Concerning Forward-Looking Statements
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Item 15.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
Glossary of Industry Terms
Exhibit Index
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Number
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5
17
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43
43
43
44
47
49
61
62
89
89
89
90
94
99
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Report contains, and our other public filings and oral and written statements by us and our management may include, statements that constitute
“forward-looking statements” within the meaning of the United States securities laws. Forward-looking statements include the information concerning our possible
or assumed future results of operations, reserve estimates, business strategies, financing plans, competitive position, potential growth opportunities, potential
operating performance, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not
historical facts and in some cases may be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “seek,”
“anticipate,” “estimate,” “predict,” “forecast,” “project,” “potential,” “continue,” “may,” “will,” “could,” “should” or the negative of these terms or similar
expressions. Examples of forward-looking statements include, but are not limited to, statements concerning cash available for distribution and future distributions,
if any, and such distributions are subject to the approval of the board of directors of our general partner and will be based upon circumstances then existing. We
have based our forward-looking statements on management’s beliefs and assumptions and on information currently available to us.
Forward-looking statements involve risks, uncertainties and assumptions. You should not put undue reliance on any forward-looking statements. After the
date of this Report, we do not have any intention or obligation to update any forward-looking statement, whether as a result of new information or future events,
and expressly disclaim any obligation to do so except as required by applicable law.
The risk factors discussed in Item 1A. “Risk Factors” and the factors discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” could cause our actual results to differ materially from those expressed in forward-looking statements. These factors should not be
construed as exhaustive and there may also be other risks that we are unable to predict at this time. All forward-looking statements included in this Report are
expressly accompanied and qualified in their entirety by these cautionary statements.
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Item 1. Business
Overview
PART I
The Partnership was formed in April 2013 by Ciner Holdings. The Partnership owns a controlling interest comprised of 51.0% membership interest in Ciner
Wyoming, which is one of the largest and lowest cost producers of natural soda ash in the world, serving a global market from our facility in the Green River Basin
of Wyoming. Our facility has been in operation for more than 50 years.
The following table sets forth certain operating data regarding our business:
Operating and Other Data:
Trona ore consumed
Ore to ash ratio (1)
Soda ash volume produced
Soda ash volume sold
Year Ended December 31,
2017
2016
2015
2014
2013
(thousands of short tons, except for ratio data)
4,001.3
4,050.4
4,040.3
3,869.5
3,921.5
1.50: 1.0
1.50: 1.0
1.52: 1.0
1.52: 1.0
1.59: 1.0
2,666.9
2,705.4
2,695.3
2,735.7
2,662.9
2,655.4
2,543.9
2,548.3
2,461.5
2,492.2
(1) Ore to ash ratio expresses the number of short tons of trona ore used to produce one short ton of soda ash and liquor and includes our deca rehydration
recovery process. In general, a lower ore to ash ratio results in lower costs and improved efficiency.
Trona, a naturally occurring soft mineral, is also known as sodium sesquicarbonate and consists primarily of sodium carbonate, or soda ash, sodium
bicarbonate and water. We process trona ore into soda ash, which is an essential raw material in flat glass, container glass, detergents, chemicals, paper and other
consumer and industrial products. The vast majority of the world’s accessible trona reserves are located in the Green River Basin. According to historical
production statistics, approximately one-quarter of global soda ash is produced by processing trona, with the remainder being produced synthetically through
chemical processes. The processing of soda ash from trona is the cheapest manner in which to produce soda ash. The costs associated with procuring the materials
needed for synthetic production are greater than the costs associated with mining trona for trona-based production. In addition, trona-based production consumes
less energy and produces fewer undesirable by-products than synthetic production.
Our principal executive offices are located at Five Concourse Parkway, Suite 2500, Atlanta, Georgia 30328, and our telephone number is (770) 375-2300.
We make available, free of charge on our website at www.ciner.us.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission, or the
SEC. A hard copy of our annual report on Form 10-K may also be requested free of charge by emailing investorrelations@ciner.us.com.
Our website also includes our Code of Conduct, our Corporate Governance Guidelines, our Internal Reporting and Whistleblower Protection Policy, our
Insider Trading Policy and the charters of our Audit Committee and Conflicts Committee. The information on our website, or information about us on any other
website, is not incorporated by reference into this Report. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC.
Our Competitive Strengths
We believe that the following competitive strengths enable us and will continue to allow us to execute our business strategies successfully and to achieve our
objective of generating and growing cash available for distribution to our unitholders:
Cost
Advantages
of
Producing
Soda
Ash
from
Trona.
We believe that as a producer of soda ash from trona, we have a significant competitive advantage
compared to synthetic producers of soda ash. The manufacturing and processing costs for producing soda ash from trona are lower than other manufacturing
techniques partly because the costs associated with procuring the materials needed for synthetic production are greater than the costs associated with mining trona
for trona-based production. In addition, we believe trona-based production consumes less energy and produces fewer undesirable by-products than synthetic
production. Stronger economic conditions globally in 2017 have led to an increase in commodity prices in general. This trend has also led to an increase in the
input costs of manufacturing synthetic soda ash last year. Also, our inland freight costs have been rising since 2014, likely at a faster pace than what has been
experienced by our competitors in other regions of the world. In spite of this and based on our estimates and industry sources, we believe the average cost of
production per short ton of soda ash (before freight and logistics costs) from trona is approximately 40% to 50% the cost per short ton of soda ash from synthetic
production. In addition, synthetic producers of soda ash incur additional costs associated with storing or disposing of, or attempting to resell, the by-products the
synthetic
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processes produce. Even after taking into account the higher freight costs associated with our soda ash exports, we believe we can be cost competitive with
synthetic soda ash operations in most parts of the world, which are typically located closer to customers than we are. We believe that our competitive cost structure,
including logistics costs, allows us to be competitive in many parts of the world on a landed cost basis.
Synergies
created
from
Ciner
Group.
Since Ciner Group’s acquisition of our business, Ciner Group is now the largest global producer of natural soda ash
derived from trona-based sources, with production assets in both Turkey and the US. Ciner Group has long-standing relationships with many global customers that
we believe will improve our positioning with key customer accounts in North America and Europe. Ciner Group also owns and operates port facilities in Turkey,
and recently one of its other North American subsidiaries entered into an agreement to exclusively import soda ash into a port on the east coast of the US. Ciner
Corp, which is the exclusive sales agent for the Partnership, will serve as the exclusive marketer of that material. We believe by having access to that material,
Ciner will be able to offer its customers an improved level of service, greater certainty of supply and over time lower our overall cost to serve. In addition, we
believe there are opportunities to leverage technologies across the group to enhance our relative competitive cost position.
Substantial
Reserve
Life
from
Significant
Reserves.
As of December 31, 2017 , Hollberg Professional Group (“HPG”), an independent mining and
geological consulting firm, estimated we had proven and probable reserves of approximately 240.1 million short tons of trona, which is equivalent to 131.2 million
short tons of soda ash. Based on our current mining rate of 4.0 million short tons of trona per year, we have enough proven and probable trona reserves to continue
mining trona using current methods for approximately 60 years. Please see Item 1, Business, “Trona Reserves” for more information.
Certain
Operational
Advantages
Compared
to
Other
U.S.
Trona-Based
Producers.
We believe we have certain operational advantages over other soda ash
producers in the Green River Basin due to the operational characteristics of our facilities as described below. These advantages are manifested in our high
productivity and efficiency rates.
•
•
Location of our mining beds and high purity trona. Our mining beds are located 800 to 1100 feet below the surface, which is significantly closer to the
surface than the mining beds of other operators in the Green River Basin. The relatively shallow depth of our beds compared to other Green River Basin
trona mines contributes to favorable ground conditions and improved mining efficiency. We have a competitive advantage because we can mine and roof
bolt continuously while mining. In addition, the trona in our mining beds has a higher concentration of soda ash as compared to the trona mined at other
locations in the Green River Basin, which is typically imbedded or mixed with greater amounts of halite and other impurities. Our trona ore is generally
composed of approximately 85% to 89% pure trona.
Advantageous facility layout. Our surface site includes a high capacity network of ponds that we use to recapture soda ash lost in processing trona
through a process we introduced in 2009 called deca rehydration (“DECA”). Primarily as a result of this process, we have been able to reduce our ore to
ash ratio by 5.7% over the past five years. While other producers in the Green River Basin also utilize deca rehydration, our pond complex enables us to
spread deca-saturated water over a large surface area, which facilitates evaporation and access to the resulting deca. Additionally, we can transfer water
from one pond to another, a process we call “de-watering,” leaving the first pond dry. De-watering enables us to use front loaders and other hauling
equipment to move dry deca from that “de-watered” pond to our processing facility. Other producers in the area instead need to utilize costly dredging
techniques to extract deca from their ponds, and the recovered deca is wet, and therefore requires more energy to process than dry deca. Introducing dry
deca into our process has also reduced our energy consumption per short ton of soda ash produced. Please read “Risk Factors-Risks Inherent in Our
Business and Industry- Mining development, exploration and processing operations pose numerous hazards and uncertainties that may negatively affect
our business ” for more information about this process.
Partly due to these operational advantages over other domestic producers, we believe we have the most efficient soda ash production facility in the Green
River Basin both in terms of short tons of soda ash produced per employee and in energy consumed per short ton of soda ash produced. In 2017 , we used
approximately 3.7 MMBtus of energy per short ton of soda ash processed, as compared to an average of 5.5 MMBtus of energy for the other three operators in the
Green River Basin according to the Wyoming Department of Environmental Quality and our internal estimates. For the year ended December 31, 2017 , we
produced approximately 5,603 short tons of soda ash per employee. Based on historical production statistics we believe this production metric exceeds that of the
other three operators in the Green River Basin.
Safety
Is
a
Value
and
the
Most
Important
Part
Of
Our
Business.
At Ciner we pride ourselves on our safety record, and we are continually one of the leaders in
the U.S. Mining Industry in relation to low incident rates and workplace injuries. We maintain a rigorous safety program, which includes training programs, site
audit programs and hazard identification programs. Ciner Corp and its affiliates, our employees and all contractors who operate our assets or work at our facility
are involved in our safety programs. As a direct result of our commitment to safety we have achieved many recognitions such as the Sentinels of Safety by the
National Mining Association, The Industrial Minerals Association-North America Safety Achievement Award (Large Category) three times, Safe Sam Award by
the Wyoming Mining Association, and the Wyoming State Mine Inspector’s Large Mine award multiple times. In October 2016, we achieved 2,000,000 man hours
without a lost time injury. During the year ended December 31, 2017 , our facility had two lost work day injuries and five recordable injuries as reported by
MSHA. We also boast and support some of the nation’s best
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rescue teams. Our mine rescue team has been National Mine Rescue Champions seven times, and our surface rescue team has won multiple competitions, including
an international mine rescue competition, and has been an International Champion as well.
Stable
Customer
Relationships.
We have an extensive base of more than 70 domestic customers in industries such as flat glass, container glass,
detergents, chemicals, paper and other consumer and industrial products. We have long-term relationships with many of our customers due to our competitive
pricing, reliable shipping and high quality soda ash. For the year ended December 31, 2017 , the majority of our domestic net sales were made to customers with
whom we have done business for over ten years. We believe that these relationships lead to stable cash flows. We have a strong, long-standing relationship with
our primary export customer, ANSAC. ANSAC is a cooperative that serves as the primary international distribution channel for us and two other U.S.
manufacturers of trona-based soda ash. ANSAC is one of the largest purchasers and exporters of soda ash in the world and, as a result, is able to leverage its
economies of scale in the markets it serves. We believe that our customer relationships lead to more stable cash flows and allow us to plan production activity more
accurately.
Experienced
Management
and
Workforce.
Our facility has been in continuous operation for over 50 years. We are able to build on the collective
knowledge gained from our experience during this period to continually improve our operations and introduce innovative processes. In addition, many members of
Ciner Wyoming’s senior management team have more than 20 years of relevant industry experience. Our executives lead a highly productive workforce with an
average tenure of approximately 14.9 years. We believe our institutional knowledge, coupled with the relative seniority of our workforce, engenders a strong sense
of teamwork and collegiality, which has led to one of the safest and most efficient operations in the industry today.
Our Business Strategies
Our primary business objective is to generate stable cash flows, allowing us to make quarterly cash distributions to our common unitholders and, over time,
to increase those quarterly cash distributions. To achieve our objective, we intend to execute the following key business strategies:
Capitalize
on
the
Growing
Demand
for
Soda
Ash.
Since 2013, we have invested just over $66.0 million for de-bottlenecking projects that have improved
our production capacity by 249,000 tons per year. We intend to continue these efforts over the next several years by investing approximately $15.0 million to $20.0
million annually to grow our capacity up to 3,000,000 tons, which would be roughly an additional 330,000 tons over current production. We believe that as one of
the leading low-cost producers of trona-based soda ash, we are well-positioned to capitalize on the worldwide growth of soda ash. While consumption of soda ash
within the United States is expected to remain relatively stable in the near future, overall worldwide demand for soda ash, based on third-party historical production
statistics, is projected to grow from an estimated 57.1 million metric tons (equivalent to approximately 62.9 million short tons) in 2017 to almost 63.1 million
metric tons (equivalent to approximately 69.5 million short tons) in 2022 , which represents a compounded annual growth rate of 2.5% . Through ANSAC and our
own exports, as well as our long-standing relationship with domestic customers, we believe that as global demand increases, we will be well positioned to maintain
our market share in the principal markets in which we operate.
Continuous
Improvement
Initiatives
to
Lower
Our
Operating
Expenses
and
Increase
Utilization.
We are working to build a culture of continuous
improvement. We implemented initiatives in 2017 to improve the consistency of our ore flow to the surface for processing into soda ash and revamped our
preventive maintenance practices. Both of these should lead to lowering our overall cost to produce and increase the consistency and overall output of our
production. We plan to continue more initiatives in 2018 with a focus on lowering our overall cost of production.
Leverage
Our
Sponsor’s
Capability
to
Build
a
Global
Soda
Ash
Brand.
When combining Ciner Wyoming’s production in Wyoming with Ciner Group’s
two producing locations in Turkey, the Ciner Group globally produces more than 6.5 million tons, making it the world’s largest producer of low cost natural soda
ash. Our sponsor’s platform includes unique low cost technology, logistics assets including ports and bulk ships, and world class cost competitive production
assets geographically located to serve most key markets around the world. Starting in 2018, our sponsor has entered into an agreement for a new port on the
eastern seaboard of the US to import soda ash for supply to select customers on the east coast. Ciner Corp, which is the sales agent for the Partnership, will serve
as the exclusive marketing agent for that material and will have inventory to ship from not only Wyoming, but also this new port on the east coast that will
ultimately improve security of supply to our customers in the region. We believe this will help Ciner Corp offer a unique value proposition to our customers and
ultimately improve the cash flow and profitability of our domestic business.
Maintain
Financial
Flexibility.
We intend to pursue a disciplined financial policy and seek to maintain a conservative capital structure that we believe will
provide enhanced stability to our existing cash flows and allow us to consider attractive growth projects and strategic acquisitions in all market environments. See
Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Debt” for additional
information.
Expand
Operations
Strategically.
In addition to capacity expansions and process improvements at our current facility, we plan to grow our business
through various methods as they become available to us. This would include acquisitions of other businesses
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that are involved in mining and processing minerals, such as soda ash, or logistics assets that could improve our efficiencies and grow our cash flows.
We can provide no assurance that we will be able to utilize our strengths described above. For further discussion of the risks that we face, see Item 1A, “Risk
Factors.”
Our Organizational Structure
The following chart depicts our ownership structure as of March 2, 2018 and approximate ownership percentages:
On February 22, 2018, Akkan transferred its direct 100% ownership in Ciner Enterprises to KEW Soda, a U.K. company, which transferred such
ownership to WE Soda, a U.K. company. WE Soda is 100% owned by KEW Soda, and KEW Soda is wholly owned by Akkan. This reorganization is a part of
Ciner Group’s strategy to combine the global soda ash business under a common structure in the U.K.
Our Operations
Our Green River Basin surface operations are situated on approximately 880 acres in Wyoming, and our mining operations consist of approximately
23,500 acres of leased and licensed subsurface mining area. Our facility is accessible by both road and rail. We use seven large continuous mining machines and
fourteen underground shuttle cars in our mining operations. Our processing assets consist of material sizing units, conveyors, calciners, dissolver circuits, thickener
tanks, drum filters, evaporators and rotary dryers.
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The following map provides an aerial overview of our surface operations:
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The following map shows the known sodium leasing area within the Green River Basin, including the boundaries of our leased and licensed subsurface
mining area:
The Green River Basin geological formation holds the largest, and one of the highest purity, known deposits of trona ore in the world. Our reserves contain
trona deposits having a purity between 85% to 89% by weight, which means that insoluble impurities and water make up approximately 11% to 15% of our trona.
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Our mining leases and license are located in two mining beds, designated by the U.S. Geological Survey as beds 24 and 25 , at depths of 800 to 1100 feet,
respectively, below the surface. Mining these beds affords us several competitive advantages. First, the depth of our beds is shallower than other actively mined
beds in the Green River Basin, which allows us to use a continuous mining technique to mine trona and roof bolt the ceiling simultaneously. In addition, mining
two beds that are on top of one another allows for production efficiencies because we are able to use a single hoisting shaft to service both beds.
The following graphic shows a cross-section of the strategic areas of the Green River Basin where we mine trona:
Source: Management.
We remove insoluble materials and other impurities by thickening and filtering the liquor. We then add activated carbon to our filters to remove organic
impurities, which can cause color contamination in the final product. The resulting clear liquid is then crystallized in evaporators, producing sodium carbonate
monohydrate. The crystals are then drawn off and passed through a centrifuge to remove excess water. We then dry the resulting material in a product dryer to form
anhydrous sodium carbonate, or soda ash. The resulting processed soda ash is then stored in on-site storage silos to await shipment by bulk rail or truck to
distributors and end customers. Our storage silos can hold up to 65,000 short tons of processed soda ash at any given time. Our facility is in good working
condition and has been in service for over 50 years.
Deca
Rehydration
. The evaporation stage of our trona ore processing produces a precipitate and natural by-product called deca. “Deca”, short for sodium
carbonate decahydrate, is one part soda ash and ten parts water. Solar evaporation causes deca to crystallize and precipitate to the bottom of the four main surface
ponds at our Green River Basin facility. In 2009 we implemented a process called deca rehydration, which enables us to recover soda ash from the deca-rich
purged liquor as a by-product of our refining process. We capture the soda ash contained in deca by allowing the deca crystals to evaporate in the sun and
separating the dehydrated crystals from the soda ash. We then blend the separated deca crystals with partially processed trona ore at the dissolving stage of our
production process described above. This process enables us to reduce our waste storage needs and convert what is typically a waste product into a usable raw
material. Primarily as a result of this process, we have been able to reduce our ore to ash ratio by 5.7% over the past five years. Please read “Risk Factors-Risks
Inherent in Our Business and Industry- Mining development, exploration and processing operations pose numerous hazards and uncertainties that may negatively
affect our business ” for more information about this process.
Energy
Consumption.
We believe we have one of the most efficient mining and soda ash production surface operations in the world. In 2017 , we used
approximately 3.7 MMBtus of energy in the form of electricity and natural gas to produce each short ton of soda ash. In addition, we believe this to be the lowest
energy consumption of any soda ash producer in North America. We and other producers of soda ash in the Green River Basin benefit from relatively low cost and
stable supplies of coal and natural gas in Wyoming, which further enhances our competitive cost advantage over other regions of the world. To reduce the impact
of the
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volatility in natural gas prices, we hedge a portion of our natural gas consumption requirements, which enables us to set the price for a portion of our forecasted
natural gas purchases.
Shipping
and
Logistics.
All of our soda ash is shipped by rail or truck from our Green River Basin operations. For the year ended December 31, 2017 , we
shipped approximately 95.6% of our soda ash to our customers initially via a single rail line owned and controlled by Union Pacific Railroad Company (“Union
Pacific”), and our plant receives rail service exclusively from Union Pacific. Our agreement with Union Pacific expires on December 31, 2018 and there can be no
assurance that it will be renewed on terms favorable to us or at all. The rail freight rate we are charged under our agreement increases annually based on a
published index tied to certain rail industry metrics. If we do not ship a significant portion of our soda ash production on the Union Pacific rail line during a twelve-
month period, we must pay Union Pacific a shortfall payment under the terms of our transportation agreement. For the year ended December 31, 2017 and 2016 ,
we assisted the majority of our domestic customers in arranging their freight services. During 2017 and 2016 , we had no shortfall payments and do not expect such
payments in the future. We lease a fleet of more than 2,000 hopper cars that serve as dedicated modes of shipment to our domestic customers. For export, we ship
our soda ash on unit trains consisting of more than 100 cars to two primary ports: Port Arthur, Texas and Portland, Oregon. From these ports, our soda ash is loaded
onto ships for delivery to ports all over the world. ANSAC provides logistics and support services for all of our export sales. For domestic sales, Ciner Corp
provides similar services.
Customers
Our largest customer is ANSAC, which buys soda ash from us (through our sales agent) and other of its member companies for export to its customers. For
the year ended December 31, 2017 , ANSAC and CIDT accounted for approximately 44.7% and 16.5% of our net sales, respectively. No other individual customer
accounted for more than 10% of our net sales. ANSAC takes soda ash orders directly from its overseas customers and then purchases soda ash for resale from its
member companies pro rata based on each member’s allocated volumes. ANSAC is the exclusive distributor for its members to the markets it serves. However,
Ciner Corp, on our behalf, negotiates directly with, and we export to, customers in markets not served by ANSAC. In 2017 , we had more than 70 domestic
customers. During 2017, international sales were made through ANSAC as well as to CIDT, both of which are our export affiliates. We began selling soda ash in
late 2016 to CIDT and continued into 2017. These sales were in markets not served by ANSAC. Our current 2018 outlook does not anticipate any further sales to
CIDT.
For customers other than ANSAC, our sales agent typically enters into contracts, on our behalf, having terms ranging from one to three years . Under these
contracts, our customers generally agree to purchase either minimum estimated volumes of soda ash or a certain percentage of their soda ash requirements.
Although we do not have a “take or pay” arrangement with our customers, substantially all of our sales are made pursuant to written agreements and not through
spot sales.
Our customers, including end users to whom ANSAC makes sales overseas, consist primarily of:
•
•
Glass manufacturing companies, which account for 50% or more of the consumption of soda ash around the world; and
Chemical and detergent manufacturing companies.
For accounts in North America, Ciner Corp, on our behalf, typically enters into sales contracts with our customers having terms of one to three years .
Pursuant to these contracts, we supply an estimated annual tonnage of soda ash to a customer at a fixed price for a given calendar year. Generally speaking, we
have long-term relationships with the majority of our customers, meaning we have been a supplier to them for more than ten years.
Leases and License
We are party to several mining leases and one license, as noted in the table below, which give us subsurface mining rights. Some of our leases are renewable
at our option upon expiration. We pay royalties to the State of Wyoming, the U.S. Bureau of Land Management and Rock Springs Royalty Company (“Rock
Springs”), an affiliate of Anadarko Petroleum, which are calculated based upon a percentage of the quantity or gross value of soda ash and related products at a
certain stage in the mining process, or a certain sum per each ton of such products. These royalty payments are typically subject to a minimum domestic production
volume from our Green River Basin facility, although we are obligated to pay minimum royalties or annual rentals to our lessors and licensor regardless of actual
sales.
The royalty rates we pay to our lessors and licensor may change upon our renewal of such leases and license. Under our license with Rock Springs, the
applicable royalty rate may vary based on a most favored nation clause in the license. The applicable royalty rate in the license may be adjusted if we pay a higher
royalty rate to certain other mineral rights owners in Sweetwater County, Wyoming. The extent to which Rock Springs may increase the applicable royalty rate is
currently the subject of litigation in Wyoming. Any increase in the royalty rates we are required to pay to our lessors and licensor, or any failure by us to renew any
of our leases and license, could have a material adverse impact on our results of operations, financial condition or liquidity, and, therefore, may affect our ability to
distribute cash to unitholders. See Item 3, “Legal Proceedings” for more information.
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Table of Contents
The following is a summary of the material terms of our leases and our license as of December 31, 2017 :
Name of Lessor or
Licensor
License with Rock Springs
Leases with the U.S. Government
Leases with the State of Wyoming
Number of
Leases or
Licenses as of
December 31,
2017
1
4
5
Total
Approximate
Acreage as of
December 31,
2017
12,445 acres
Expiration
Date Range
Renewals
N/A
Renewed until 2061
7,934 acres
2018-2027
3,079 acres
2019
These leases will renew so long as we
file an application for renewal with the
Department of the Interior, Bureau of
Land Management, within 90 days of
expiration of the leases (2)
No contractual right to renewal, but
leases have been historically renewed
for consecutive 10-year periods
Year of
Commencement
1962
1961
Royalty Rate
8% of net sales (1)
6% of gross output
1969
6% of gross value
(1) Royalty rate increase from 7% in 2014 to 8% in October 2015 is currently the subject of litigation in Wyoming. See Item 3, “Legal Proceedings,” for
additional information.
(2) Renewals are typically for ten -year periods.
The foregoing descriptions of the material terms of our leases and our license do not purport to be complete descriptions of our leases and our license, and are
qualified in their entirety by reference to the full text of the leases and license, copies of which have been filed or incorporated by reference as exhibits to this
Report. See Part IV, Item 15 , “ Exhibits and Financial Statement Schedules— Exhibit Index ” for more information.
Trona Reserves
As of December 31, 2017 , we had estimated proven and probable reserves of approximately 240.1 million short tons, which is equivalent to 131.2 million
short tons of soda ash. The estimates of our proven and probable reserves were prepared by HPG for the year ended December 31, 2017 . Based on our current
mining rate of 4.0 million short tons of trona per year, we have enough proven and probable trona reserves to continue mining trona using current methods for
approximately 60 years.
HPG calculated a mineral reserve estimate on our trona mineral assets, which are contained in beds 24 and 25 of the Green River Basin, at depths of 800 and
1100 feet below the surface, respectively. HPG estimates are based on geological data generated from historical exploration drill holes, borings within the mine
space, and mine observations and measurements, including core samples. In addition, HPG reviewed and analyzed our reserve base maps and current mining plans,
and developed a life of mine plan with respect to the predicted life of our reserves using a non-subsidence design.
Our trona reserve estimates include reserves that can be economically and legally extracted and processed into soda ash at the time of their determination.
Our trona reserves are categorized as “proven (measured) reserves” and “probable (indicated) reserves,” which are defined as follows:
•
•
Proven (Measured) Reserves —Reserves for which: (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes;
grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
Probable (Indicated) Reserves —Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven
(measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
For purposes of categorizing our proven reserves, HPG estimates applied exploration and mine measurements and drill hole data within a one-quarter mile
radius, and required at least 8-feet of trona thickness and a trona ore grade of at least 85% (with 15% of clays, shales and other impurities). For purposes of
categorizing our probable reserves, HPG estimates applied exploration and mine measurements and drill hole data within a three-quarter mile radius, and required
at least 8-feet of trona thickness and a trona ore grade of at least 85% (with 15% of clays, shales and other impurities). To assess the economic viability of our
reserves, HPG reviewed our cost of products sold and average sales price of soda ash for the three years ended December 31, 2017 .
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Table of Contents
In determining whether our reserves meet these proven and probable standards, HPG applied certain assumptions regarding the remaining life of our
reserves, including, among other things, that:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our cost of products sold per short ton will remain consistent with our cost of products sold for the three years ended December 31, 2017 , which was
approximately $79 per short ton of soda ash;
the weighted average net sales per short ton will remain consistent with our weighted average net sales price per short ton for three years ended
December 31, 2017 , which was approximately $180 per short ton of soda ash;
we will achieve an annual mining rate of approximately 4.0 million short tons of trona;
we will process soda ash with a 90% recovery rate without accounting for our deca rehydration process;
the ore to ash ratio for the stated trona reserves is 1.835:1.0 (short tons of trona run-of-mine to short tons of soda ash, excluding our deca rehydration
recovery process);
our run-of-mine ore estimate contains dilution from the mining process;
we will, in approximately 20-30 years, make necessary equipment modifications to operate at a seam height of 7-feet, although our current mining limit is
9.5 to 10 feet;
we will, within the next one to six years, conduct “two-seam mining,” which means to perform continuous mining simultaneously on beds 24 and 25 in
close proximity;
our mining costs will remain consistent with 2017 levels until we begin two-seam mining at which time our mining costs may increase as much as 50%
for those short tons that are mined using that method;
our processing costs will remain consistent with 2017 levels;
we will continue to conduct only conventional mining using the room and pillar method and a non-subsidence mine design;
we have and will continue to have valid leases and license in place with respect to the reserves, and that these leases and license can be renewed for the
life of the mine based on our extensive history of renewing leases and license;
we have and will continue to have the necessary permits to conduct mining operations with respect to the reserves; and
we will maintain the necessary tailings storage capacity to maintain tailings disposal between the mine and surface placement for the life-of-mine.
Our reserves are subject to leases with the State of Wyoming and the U.S. Bureau of Land Management and a license with Rock Springs. See “Leases and
License” above for a summary of these leases and our license, including expiration date ranges.
The following table presents our estimated proven and probable trona reserves at December 31, 2017 :
Right of Access and
Extraction
License with Rock Springs
Leases with the U.S. Government
Leases with the State of Wyoming
Total (5)
Proven
Trona
Reserves
59.4
50.1
6.9
116.4
Average
Run-of-Mine
Grade of
Proven
Trona
Reserves
(% Trona) (1)
Average
Run-of-Mine
Grade of
Probable
Trona
Reserves
(% Trona) (1)
Probable Trona
Reserves
(In millions of short tons except percentages) (4)
Total Proven and
Probable Trona
Reserves (2)
Soda Ash Produced
from Total Proven
and Probable Trona
Reserves (3)
88.8%
89.0%
89.4%
88.9%
57.7
47.9
18.1
123.7
89.0%
88.7%
88.7%
88.9%
117.1
98.0
25.0
240.1
63.9
53.5
13.7
131.1
(1) For purposes of these estimates, the minimum grade for reported tonnage is 85% .
(2) The average run-of-mine trona grade, or the percentage of the raw trona mined that comprises soda ash, of our proven and probable trona reserves is
approximately 88.9% . These estimates assume out-of-seam dilution of 4 inches. The price used to estimate our proven and probable trona reserves was
our historical average CIF (carriage, insurance and freight) sales price for the three years ended December 31, 2017 , which was approximately $180 per
short ton of soda ash.
(3) Soda ash conversion assumes a 90% recovery rate, resulting in an ore to ash ratio of 1.835:1.0 .
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(4) The sums of some of the rows and columns may not foot due to rounding.
(5) Except percentages, which are averages.
Our reserve estimates will change from time to time as a result of mining activities, analysis of new engineering and geologic data, modification of mining
plans or mining methods and other factors. For addition information, see Item 1A, Risk Factors, “Risks Inherent in Our Business and Industry” for more
information regarding risks surrounding our reserves.
Competition
Soda ash is a commodity natural resource traded globally with numerous producers and consumers worldwide. We compete with both North American and
international soda ash producers, including Ciner Group’s Turkish operations. There are two ways to consider how we compete: (1) versus our fellow North
American competitors; and (2) versus our worldwide competitors. Against our principal North American competitors, which include subsidiaries of Genesis,
Solvay and Tata in the Green River Basin and Searles Valley Minerals in California, we believe we have a number of competitive advantages, including
operational advantages that improve our relative cost position, life of our mineral reserves, our strong safety record, customer relationships and an experienced
management team and workforce. Against our principal worldwide competitors, Solvay, Tata and various Chinese producers, virtually all of their production is
manufactured from synthetic processes and we believe, as a producer of soda ash from trona, we have competitive advantages, even after considering the fact that
we generally have higher logistics costs to move the soda ash from Wyoming to regions around the world. The costs associated with procuring the materials needed
for synthetic production are greater than the costs associated with mining trona. In addition, we believe trona-based production consumes less energy and produces
fewer undesirable by-products than synthetic production. See “Our Competitive Strengths” above for additional information.
Insurance
Because all of our operations are conducted at a single facility, an event such as an explosion, fire, equipment malfunction or severe weather conditions could
significantly disrupt our trona mining or soda ash production operations and our ability to supply soda ash to our customers. These hazards can also cause personal
injury and loss of life, pollution or environmental damage and suspension of our surface and subsurface operations. To mitigate this risk, Ciner Enterprises or its
affiliates maintains, on our behalf, property, casualty and business interruption insurance in amounts and with coverage and deductibles that we believe are
adequate for our current operations. We continually evaluate our policy limits and deductibles as they relate to the overall cost and scope of our insurance coverage
to account for changes or growth in our business.
Environmental Matters
Our mining and processing operations, which have been conducted at our Green River Basin facility for many years, are subject to strict regulation by
federal, state and local authorities with respect to protection of the environment. We have a rigorous compliance program to ensure that our facilities comply with
environmental laws and regulations. However, we are involved from time to time in administrative and judicial proceedings and inquiries relating to environmental
matters. Modifications or changes in enforcement of existing laws and regulations or the adoption of new laws and regulations in the future, particularly with
respect to environmental or climate change, or changes in the operation of our business or the discovery of additional or unknown environmental contamination,
could require expenditures which might be material to our results of operations or financial conditions.
We summarize below certain environmental laws applicable to us that regulate discharges of substances into the air and water, the management and disposal
of hazardous substances and wastes, the clean-up of contaminated sites, the protection of groundwater quality and availability, plant and wildlife protection, and
climate change. Our failure to comply with any of the below laws may result in the assessment of administrative, civil and criminal penalties, the imposition of
clean-up and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement
measures that could have the effect of limiting production from our operations.
Clean
Air
Act
The federal Clean Air Act and comparable state laws restrict the emission of air pollutants from many sources. Under the Clean Air Act, our facility has been
issued a Title V operating permit, which regulates emissions to air from our operations. In particular, our operations are subject to technology-based standards
pursuant to the Clean Air Act’s New Source Performance Standards for Nonmetallic Mineral Processing Plants, which limit particulate matter emissions. Under
associated clean air act regulations this operation is also subject to Best Available Control Technology (BACT) requirements. In addition, our boilers are subject to
technology-based standards pursuant to the Clean Air Act’s National Emission Standards for Hazardous Air Pollutants for Major Source: Industrial, Commercial
and Institutional Boilers and Process Heaters, which were published in final form in January 2013. These laws and regulations may require us to obtain pre-
approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply
with stringent air permit requirements or utilize specific equipment or technologies to control emissions of certain pollutants.
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Table of Contents
Clean
Water
Act
The Federal Water Pollution Control Act, which we refer to as the Clean Water Act, and comparable state laws impose restrictions and controls regarding the
discharge of pollutants into regulated waters. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued
by the federal EPA or the state. We do not discharge any wastewater from our operations into the Green River, the nearest river system to our Green River Basin
facility. However, the discharge of storm water runoff from our facility is governed by a general permit issued by the Wyoming Department of Environmental
Quality. In particular, the general permit requires our compliance with a Storm Water Pollution Prevention Plan. We periodically monitor groundwater wells at our
processing facility, most of which are proximate to our surface pond complex, for salinity, conductivity and other parameters pursuant to permits issued by the
Wyoming Department of Environmental Quality. Permitted interceptor trenches are used to collect saline groundwater to prevent discharge and impact to the
Green River.
Resource
Conservation
and
Recovery
Act
The federal Resource Conservation and Recovery Act, or RCRA, and analogous state laws, impose requirements for the careful generation, handling,
storage, treatment and disposal of nonhazardous and hazardous solid wastes. Based on the amount of hazardous waste our operations generate (less than 100
kilograms per month), we have been classified under RCRA as a conditionally exempt small quantity generator.
Comprehensive
Environmental
Response,
Compensation,
and
Liability
Act
The federal Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA (otherwise known as “Superfund”), and comparable
state laws impose liability in connection with the release of hazardous substances into the environment. CERCLA imposes liability, without regard to fault or the
legality of the original conduct, on certain classes of persons that are considered to have contributed to the release of a hazardous substance into the environment.
These persons include the current and past owner or operator of the disposal site or the site where the release occurred and those who disposed or arranged for the
disposal of the hazardous substances at the site where the release occurred. Under CERCLA, such persons may be subject to joint and several liability for the costs
of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources. Wyoming’s Environmental Quality Act
also creates the potential for liability in connection with the release of hazardous substances into the environment, and has been construed to impose liability
without regard to fault. We have not received notice that we are a potentially responsible party at any Superfund site.
Climate
Change
Legislation
and
Regulations
In response to findings that emissions of carbon dioxide, methane and other greenhouse gases, or GHGs, present an endangerment to public health and the
environment, the EPA has adopted rules requiring the monitoring and annual reporting of GHG emissions from specified sources, including soda ash processors
like us. We are monitoring and reporting GHG emissions from our operations, and we believe we are in substantial compliance with the rules. In the past, the U.S.
Congress has considered, but not enacted, legislation that would impose requirements to reduce emissions of GHGs. The State of California has enacted regulations
establishing a so-called GHG “cap-and-trade” system designed to reduce GHG emissions. Our operations are not currently subject to any federal or state
requirement to reduce GHG emissions. Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG
emissions would impact our business, any such future laws and regulations limiting, or otherwise imposing a tax or financial penalty for, emissions of GHGs from
our equipment and operations might be material to our results of operations or financial conditions.
Wyoming
Department
of
Environmental
Quality—Land
Quality
Division
Our operations are subject to oversight by the Land Quality Division of the Wyoming Department of Environmental Quality. In particular, our principal mine
permit issued by the Land Quality Division requires us to “self-bond” for the estimated future cost to reclaim the area of our processing facility, surface pond
complex and on-site sanitary landfill. As of December 31, 2017 , the amount of the self-bond was $32.9 million . The amount of the bond is subject to change
based upon periodic re-evaluation by the Land Quality Division. Also, our ability to self-bond may be impacted by future legislation. Please see Item IA, “Risk
Factors--Risks Inherent in Our Business and Industry-- Our inability to acquire, maintain or renew financial assurances related to the reclamation and restoration
of mining property could have a material adverse effect on our business, financial condition and results of operations .” for more information.
Mining and Workplace Safety
The U.S. Mine Safety and Health Administration, or MSHA, is the primary regulatory organization governing safety matters associated with trona ore mining.
Accordingly, MSHA regulates underground mines and the industrial mineral processing facilities associated with trona ore mines. MSHA administers the
provisions of the Federal Mine Safety and Health Act of 1977 and enforces compliance with that statute’s mandatory safety and health standards. As part of
MSHA’s oversight, representatives perform at least four unannounced inspections annually for our entire facility. In 2016, we had two citations issued by MSHA
that resulted in a
16
Table of Contents
shutdown of a portion of our operations and loss of production; however, these citations have since been vacated and no assessment was levied.
We also are subject to the requirements of the U.S. Occupational Safety and Health Act, or OSHA, and comparable state statutes that regulate the protection
of the health and safety of workers. In addition, the OSHA Hazard Communication Standard requires that information be maintained about hazardous materials
used or produced in operations and that this information be provided to employees, state and local government authorities and the public.
Our Green River Basin facility maintains a rigorous safety program. Ciner Corp and its affiliates’ employees and contractors who operate our assets are
required to complete 40 hours of initial training, as well as eight-hour annual refresher sessions. These training programs cover all of the potential site-specific
hazards present at the facility. As a direct result of our commitment to safety, the Green River Basin facility has had an exceptional safety record in recent years.
During the year ended December 31, 2017 , our facility had two lost work-day injuries and five recordable injuries as reported by MSHA. Over the five years
ended December 31, 2017 , the Green River Basin facility averaged 1.6 lost work day injuries per year and averaged 5.4 recordable injuries per year as reported by
MSHA, which we believe to be better than the industry average.
Employees/Labor Relations
The personnel who operate our assets are employees of Ciner Corp and its affiliates. Under the joint venture agreement governing Ciner Wyoming, Ciner
Wyoming reimburses us for employees who operate our assets and for support provided to Ciner Wyoming. As of December 31, 2017 , Ciner Corp and its affiliates
had approximately 476 full-time employees, of which 426 are employees that operate the mine at our facility in the Green River Basin. None of these employees
was covered by a collective bargaining agreement as of December 31, 2017 , and we did not experience any labor strikes or other significant labor problems during
2017 .
In addition, under the Services Agreement, dated October 25, 2015, among the Partnership or General Partner and Ciner Corp (the “Service Agreement”),
Ciner Corp has agreed to provide the Partnership with certain corporate, selling, marketing, and general and administrative services, in return for which the
Partnership has agreed to pay Ciner Corp an annual management fee and reimburse Ciner Corp for certain third-party costs incurred in connection with providing
such services.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we are an emerging
growth company, unlike other public companies, we will not be required to:
•
•
•
•
•
•
provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;
present more than two years of audited financial statements, selected financial data and related Management’s Discussion and Analysis of
Financial Condition and Results of Operations in this Report;
comply with certain new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB;
comply with certain new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise;
provide disclosures regarding executive compensation required of larger public companies; or
obtain unitholder approval of any golden parachute payments not previously approved.
We will cease to be an emerging growth company when any of the following conditions apply:
• we have $1.07 billion or more in annual revenues;
•
at least $700 million in market value of our common units are held by non-affiliates;
• we issue more than $1.0 billion of non-convertible debt over a three-year period; or
•
the last day of the fiscal year following the fifth anniversary of our initial public offering has passed.
In addition, an emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to private
companies. However, we have made the irrevocable election to “opt out” of such extended transition period, and as a result, we will comply with any new or
revised accounting standards on the relevant dates on which non-emerging growth companies must adopt such standards. December 31, 2018 will be the latest date
that we will be an emerging growth company.
Glossary of Industry Terms
Industry terms are defined in the Glossary of Industry Terms, included at the end of this Report.
17
Table of Contents
ITEM 1A. Risk
Factors
Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are
similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the following risk factors together with all of the
other information included in this Report in evaluating an investment in our common units.
If any of the following risks were to occur, our business, financial condition, results of operations and our ability to distribute cash could be materially
adversely affected. In that case, we might not be able to make distributions on our common units, the trading price of our common units could decline, and you
could lose all or part of your investment.
Risks Inherent in Our Business and Industry
We
may
not
have
sufficient
cash
from
operations
following
the
establishment
of
cash
reserves
and
payment
of
fees
and
expenses,
including
cost
reimbursements
to
our
general
partner
and
its
affiliates,
to
enable
us
to
pay
any
quarterly
distribution
on
our
units.
We may not have sufficient available cash each quarter to pay the quarterly distribution at the current distribution level of $0.5670 per unit, or $2.268 per
unit on an annualized basis, at the minimum quarterly distribution level, or at all. In order to pay the quarterly distribution at the current distribution level, we will
require available cash of approximately $11.4 million per quarter, or $45.6 million per year, based on the number of common and general partner units currently
outstanding.
The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from
quarter to quarter based on several factors, some of which are beyond our control, including, among other things:
•
•
•
•
•
•
•
•
•
•
•
•
the market prices for soda ash in the markets in which we sell;
the volume of natural and synthetic soda ash produced worldwide;
domestic and international demand for soda ash in the flat glass, container glass, detergent, chemical and paper industries in which our customers
operate or serve;
the freight costs we pay to transport our soda ash to customers or various delivery points;
the cost of electricity and natural gas used to power our operations;
the amount of royalty payments we are required to pay to our lessors and licensor and the duration of our leases and license;
political disruptions in the international markets we or our customers serve, including any changes in trade barriers;
our relationships with our customers and our or our sales agent’s ability to renew contracts;
the creditworthiness of our customers;
regulatory action affecting the supply of, or demand for, soda ash, our ability to mine trona ore, our transportation logistics, our operating costs
or our operating flexibility;
new or modified statutes, regulations, governmental policies and taxes or their interpretations; and
prevailing U.S. and international economic conditions and foreign exchange rates.
In addition, the actual amount of cash we will have available for distribution will depend on other factors, some of which are beyond our control,
including, among other things:
•
•
•
•
•
•
the level and timing of capital expenditures we make;
the level of our operating, maintenance and general and administrative expenses, including reimbursements to our general partner for services
provided to us;
the cost of acquisitions, if any;
our debt service requirements and other liabilities;
fluctuations in our working capital needs;
our ability to borrow funds and access capital markets;
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Table of Contents
•
•
•
restrictions on distributions contained in debt agreements to which we, Ciner Wyoming or our affiliates are a party;
the amount of cash reserves established by our general partner; and
other business risks affecting our cash levels.
Soda
ash
prices
have
been
and
in
the
future
may
be
volatile,
and
lower
soda
ash
prices
will
negatively
affect
our
financial
position
and
results
of
operations.
Our only product is soda ash, and the market price of soda ash directly affects the profitability of our operations. If the market price for soda ash declines,
our revenue may decrease. Historically, the global market and, to a lesser extent, the domestic market for soda ash have been volatile, and those markets are likely
to remain volatile in the future. In the past, we have reduced production to mitigate the impact of low soda ash prices. Volatility in soda ash prices can make it
difficult to predict the cash we may have on hand at any given time, and a prolonged period of low soda ash prices may materially and adversely affect our
financial position, liquidity (including our borrowing capacity under the Ciner Wyoming Credit Facility), ability to finance planned capital expenditures and results
of operations.
Prices for soda ash may fluctuate in response to relatively minor changes in the supply of and demand for soda ash, market uncertainty and other factors
beyond our control. These factors include, among other things:
•
•
•
•
•
•
•
•
•
overall economic conditions;
additional supply from suppliers selling into markets that we serve;
the level of customer demand, including in the glassmaking industry;
the level of production and exports of soda ash globally;
the level of production of materials used to produce soda ash, including trona ore or synthetic materials, globally;
the cost of energy consumed in the production of soda ash, including the price of natural gas, electricity and coal;
the impact of non-ANSAC members increasing their capacity and exports;
domestic and foreign governmental relations, regulations and taxes; and
political conditions or hostilities and unrest in regions where we export soda ash.
A
substantial
portion
of
our
costs
are
attributable
to
transportation
and
freight
costs.
Increases
in
freight
costs
could
increase
our
costs
significantly
and
adversely
affect
our
results
of
operations.
Most soda ash is sold inclusive of transportation costs, which make up a substantial portion of the total delivered cost to the customer. We transport our soda
ash by rail or truck and ocean vessel. As a result, our business and financial results are sensitive to increases in rail freight, trucking and ocean vessel rates.
Increases in transportation costs, including increases resulting from emission control requirements, port taxes and fluctuations in the price of fuel, could make soda
ash a less competitive product for glass manufacturers when compared to glass substitutes or recycled glass, or could make our soda ash less competitive than soda
ash produced by competitors that have other means of transportation or are located closer to their customers. Our rail freight rates may increase year-over-year.
Also, we may be unable to pass on our freight and other transportation costs in full because market prices for soda ash are generally determined by supply and
demand forces.
A
significant
portion
of
our
international
sales
of
soda
ash
are
to
ANSAC,
a
U.S.
export
cooperative,
and
therefore
adverse
developments
at
ANSAC
or
its
customers,
or
in
any
of
the
markets
in
which
we
make
direct
international
sales,
could
adversely
affect
our
ability
to
compete
in
certain
international
markets.
We, along with two other U.S. trona-based soda ash producers, utilize ANSAC as our exclusive export vehicle for sales to customers in all countries
excluding Canada, South Africa and members of the European Community and European Free Trade Area, which provides us with the benefits of large purchases
of soda ash and significant economies of scale in managing international sales and logistics. Because ANSAC makes sales to its end customers directly and then
allocates a portion of such sales to each member, we do not have direct access to ANSAC’s customers and we have no direct control over the credit or other terms
ANSAC extends to its customers. As a result, we are indirectly vulnerable to ANSAC’s customer relationships and the credit and other terms ANSAC extends to
its customers, and if ANSAC ceased to exist, we would face costs and risks of securing those customers and related logistics arrangements on favorable terms. Any
adverse change in ANSAC’s customer relationships could have a direct impact on ANSAC’s ability to make sales and our ability to make sales to ANSAC. In
addition, to the extent ANSAC extends credit or other favorable terms to its end customers and those customers subsequently default under sales contracts or
otherwise fail to perform, we would have no direct recourse against them.
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Furthermore, from time to time international competition authorities have conducted inquiries into the potentially anti-competitive nature of ANSAC’s
activities. The Secretariat of Economic Law of the Ministry Justice of Brazil has commenced an investigation into ANSAC’s activities in Brazil. Ciner Corp and
the two other members of ANSAC have been named in these investigations. An unfavorable outcome in any such investigation could result in our having to pay
fines or penalties, either on behalf of Ciner Corp or through ANSAC, or otherwise adversely affect the ability of ANSAC to continue serving export markets. In the
event of an unfavorable outcome in any such investigation, the withdrawal of one or more members of ANSAC or the dissolution of ANSAC, we could be forced
to use alternative methods to facilitate additional direct export sales and may be obligated to pay our respective portion of the net assets or deficit of the
cooperative. Any of these developments could lead us to incur additional costs and may result in lower pricing for our export sales, which could have a negative
impact on our results of operations, financial condition and our ability to distribute cash to our unitholders. For more information about ANSAC, see Item 1 ,
“Business—Customers.”
An
increase
in
natural
gas
prices,
or
an
interruption
in
our
natural
gas
supply,
would
negatively
impact
our
competitive
cost
position
when
compared
to
other
foreign
and
domestic
soda
ash
producers.
We rely on natural gas as the main energy source in our soda ash production process, and therefore the cost of natural gas is a significant component of the
total production cost for our soda ash. The monthly Henry Hub natural gas settlement prices, over the past five years, have ranged between $1.73 and $6.00 . For
the years ended December 31, 2017 and 2016 , the average monthly Henry Hub natural gas settlement prices were $2.99 and $2.52 per MMBtu, respectively.
Furthermore, the price of natural gas could increase as a result of reduced domestic drilling and production activity. Drilling and production operations are subject
to extensive federal, state, local and foreign laws and government regulations concerning, among other things, emissions of pollutants and greenhouse gases,
hydraulic fracturing, and the handling of natural gas and other substances used in connection with natural gas operations, such as drilling fluids and wastewater. In
addition, natural gas operations are subject to extensive federal, state and local taxation. More stringent legislation, regulation or taxation of natural gas drilling
activity in the United States could directly curtail such activity or increase the cost of drilling, resulting in reduced levels of drilling activity and therefore increased
natural gas prices.
Any material increase in natural gas prices could adversely impact our operations by making us less competitive with other soda ash producers who do not
use natural gas as a key input. If U.S. natural gas prices were to increase to a level where foreign soda ash producers were able to improve their competitive
position on a unit cost basis, this would negatively affect our competitive cost position.
All
of
our
operations
are
conducted
at
one
facility.
Any
adverse
developments
at
our
facility
could
have
a
material
adverse
effect
on
our
results
of
operations
and
therefore
our
ability
to
make
cash
distributions
to
our
unitholders.
Because all of our operations are conducted at a single facility, an event such as an explosion, fire, equipment malfunction or severe weather conditions that
adversely affect our facility could significantly disrupt our trona mining or soda ash production operations and our ability to supply soda ash to our customers. For
example, in the the fourth quarter of 2016, MSHA required us to make temporary operational modifications, which caused us to lose a significant amount of ore
production. While Ciner Enterprises or its affiliates maintains business interruption insurance, our policy includes a time element deductible, per occurrence, and is
subject to customary limitations and exclusions. Any sustained disruption in our ability to meet our obligations under our sales agreements could have a material
adverse effect on our results of operations and therefore our ability to distribute cash to unitholders.
Due
to
our
lack
of
product
diversification,
adverse
developments
in
the
soda
ash
industry
would
adversely
affect
our
results
of
operations
and
our
ability
to
make
cash
distributions
to
our
unitholders.
We rely exclusively on the revenues generated from the production and sale of soda ash. An adverse development in the market for soda ash in U.S. or
foreign markets would have a significantly greater impact on our operations and cash available for distribution to our unitholders than it would on other companies
that have a more diverse asset and product base. Some of the soda ash producers with which we compete sell a more diverse range of products to broader markets.
For
the
year
ended
December
31,
2017
,
approximately
95.6%
of
our
soda
ash
was
shipped
via
rail,
and
we
rely
on
one
rail
line
to
service
our
facility
under
a
contract
that
expires
in
2018
.
Interruptions
of
service
on
this
rail
line
could
adversely
affect
our
results
of
operations
and
our
ability
to
make
cash
distributions
to
our
unitholders.
For the year ended December 31, 2017 , we shipped approximately 95.6% of our soda ash from our facility on a single rail line owned and controlled by
Union Pacific. Our current transportation contract with Union Pacific expires on December 31, 2018 . There can be no assurance that this contract will be renewed
on terms favorable to us or at all. For the year ended December 31, 2017 and 2016 , we assisted the majority of our domestic customers in arranging their freight
services. Rail operations are subject to various risks that may result in a delay or lack of service at our facility, including mechanical problems, extreme weather
conditions, work stoppages, labor strikes, terrorist attacks and operating hazards. Moreover, if Union Pacific’s financial condition
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were adversely affected, it could decide to cease or suspend service to our facility. If we are unable to ship soda ash by rail, it would be impracticable to ship all of
our soda ash by truck and it would be cost-prohibitive to construct a rail connection to the closest alternative rail line that is approximately 140 miles from our
facility. Any delay or failure in the rail services on which we rely could have a material adverse effect on our financial condition and results of operations and our
ability to make distributions to our unitholders. Moreover, if we do not ship a significant portion of our soda ash production on the Union Pacific rail line during a
twelve-month period, we must pay Union Pacific a shortfall payment under the terms of our transportation agreement.
A
significant
portion
of
the
demand
for
soda
ash
comes
from
glass
manufacturers
and
other
industrial
end
users
whose
businesses
can
be
adversely
affected
by
economic
downturns.
A significant portion of the demand for soda ash comes from glass manufacturers and other industrial customers. Companies that operate in the industries
that glass manufacturers serve, including the automotive, construction and glass container industries, may experience significant fluctuations in demand for their
own end products because of economic conditions, changes in consumer demand, or increases in raw material and energy costs. In addition, many large end users
of soda ash depend upon the availability of credit on favorable terms to make purchases of raw materials such as soda ash. As interest rates increase or if our
customers’ creditworthiness deteriorates, this credit may be expensive or difficult to obtain. If these customers cannot obtain credit on favorable terms, they may be
forced to reduce their purchases of soda ash. These and other factors may lead some customers to seek renegotiation or cancellation of their existing arrangements
with us, which could have a material adverse effect on our results of operations and our ability to distribute cash to unitholders.
If
the
percentage
of
our
international
sales
increases
as
a
percentage
of
total
sales,
our
gross
margin
could
decrease
and
the
average
trade
credit
payment
period
of
our
customers
could
increase,
which
could
adversely
affect
our
financial
position
and
our
ability
to
distribute
cash
to
our
unitholders.
From 2016 to 2017 , our international sales of soda ash as a percentage of total sales increased from 59.5% to 61.2% . Our gross margin for international
sales is lower than our gross margin for domestic sales because our average price of soda ash sold internationally is lower than our average price of soda ash sold
domestically. Lower margins could adversely affect our financial position and our ability to distribute cash to our unitholders.
We typically receive payment for our domestic sales more quickly than we receive payment for our international sales. Therefore, an increase in our
international sales and a decrease in domestic sales would extend the average time period for our receipt of payment for our soda ash, which could expose us to
greater credit risk from our customers, increase our working capital requirements and negatively affect the amount of cash available for distribution to our
unitholders.
Ciner
Corp,
on
our
behalf,
typically
enters
into
contracts
and
exclusive
arrangements
with
our
customers
that
have
terms
of
one
to
three
years,
and
our
customers
are
not
obligated
to
purchase
any
amount
of
soda
ash
from
us.
The terms of our customer contracts vary by geography. Most of our domestic contracts have terms of one to three years. Our European contracts typically
have a term of one year, and some Asian contracts have only a three-month term. We understand that ANSAC’s customer contract terms also vary by region.
Moreover, our customer contracts are not exclusive dealing or take-or-pay arrangements. Additionally, we may lose a customer for any number of reasons,
including as a result of a merger or acquisition, the selection of another provider of soda ash, business failure or bankruptcy of the customer or dissatisfaction with
our performance or pricing. Loss of any of our major customers could adversely affect our business, results of operations and cash flow.
Increased
use
of
glass
substitutes
and
recycled
glass
may
affect
demand
for
soda
ash,
which
could
adversely
affect
our
result
of
operations.
Increased use of glass substitutes or recycled glass in the container industry could have a material adverse effect on our results of operations and financial
condition. Container glass production is one of the principal end markets for soda ash. Competition from increased use of glass substitutes, such as plastic and
recycled glass, has had a negative effect on demand for soda ash. Demand for soda ash by the glass container industry has generally declined over the last ten years.
We believe that the use of containers made with alternative materials such as plastic and aluminum will continue to affect negatively the growth in domestic
demand for soda ash.
We
are
exposed
to
trade
credit
risk
in
the
ordinary
course
of
our
business
activities.
We extend credit to our customers as a normal part of our business and as such are subject to the credit risk of our customers, including the risk of loss
resulting from nonpayment or nonperformance. Typical industry contract terms are net 30 days from the date of shipment for domestic U.S. customers and 120-150
days from the date of shipment for international customers. We have experienced nonperformance by our customers and counterparties in the past, and we take
reserves for accounts more than 90 days past due. We have offered extended credit terms to our affiliate, CIDT, and charge interest on its past due receivables and
as such have not taken any reserves against affiliate receivables. Some of our customers and counterparties may be highly leveraged and subject to their own
operating and regulatory risks. Our credit procedures and policies may not be adequate to eliminate customer
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Table of Contents
credit risk, and we may not adequately assess the creditworthiness of existing or future customers. In addition, even if our procedures work properly, our customers
may experience unanticipated deterioration of their creditworthiness. Material nonpayment or nonperformance by our customers could have a material adverse
effect on our financial condition and results of operations and on our ability to distribute cash to our unitholders.
We
face
intense
competition,
including
from
companies
that
have
capital
resources
greater
than
ours
and
that
have
more
diversified
operations.
We face competition from a number of soda ash producers in the United States, Europe and Asia, some of which have greater market share and greater
financial, production and other resources than we do. Some of our competitors are diversified global corporations that have many lines of business. Some of our
competitors have greater capital resources and may be in a better position to withstand a long term deterioration in the soda ash market. Other competitors, even if
smaller in size, may have greater experience and stronger relationships in their local markets. Competitive pressures could make it more difficult for us to retain
our existing customers and attract new customers, which could have a material adverse effect on our business, financial condition, results of operations and ability
to distribute cash to our unitholders. Competition could also intensify the negative impact of factors that decrease demand for soda ash in the markets we serve,
such as adverse economic conditions, weather, higher fuel costs and taxes or other governmental or regulatory actions that directly or indirectly increase the cost or
limit the use of soda ash. In addition, China is the largest producer of synthetic soda ash in the world and historically has exported only a small percentage of its
production. If Chinese producers, which we believe are supported by government subsidies, and other producers were to begin producing significantly more
quantities of soda ash than are produced today then the supply of soda ash in the global market could materially increase and put downward pressure on pricing.
Unfavorable
economic
conditions
may
reduce
demand
for
our
products,
which
could
adversely
affect
our
results
of
operations.
Worldwide soda ash demand correlates to global economic growth. Worsening economic conditions or factors that negatively affect the economic health of
the United States and other parts of the world into which we or ANSAC sells soda ash could reduce our revenues and adversely affect our results of operations. We
believe that deterioration of economic conditions or a prolonged period of economic weakness would have an adverse impact on our results of operations, business
and financial condition, as well as our ability to distribute cash to our unitholders.
Our
reserve
data
are
estimates
based
on
assumptions
that
may
be
inaccurate
and
are
based
on
existing
economic
and
operating
conditions
that
may
change
in
the
future,
which
could
materially
and
adversely
affect
the
quantities
and
value
of
our
reserves.
Our reserve estimates may vary substantially from the actual amounts of minerals we are be able to recover economically from our reserves. There are
numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond our control. Estimates of reserves necessarily depend upon a
number of variables and assumptions, any one of which may, if incorrect, result in an estimate that varies considerably from actual results. These factors and
assumptions relate to:
•
•
•
•
future prices of soda ash, mining and production costs, capital expenditures and transportation costs;
future mining technology and processes;
the effects of regulation by governmental agencies; and
geologic and mining conditions, which may not be identified by available exploration data and may differ from our experiences in areas where we
currently mine.
Actual production, revenue and expenditures with respect to our reserves will likely vary from our estimates, and these variations may be material.
Restrictions
in
the
agreements
governing
Ciner
Wyoming’s
indebtedness,
including
the
Ciner
Wyoming
Credit
Facility,
could
limit
its
operations
and
adversely
affect
our
business,
financial
condition,
results
of
operations
and
ability
to
make
quarterly
cash
distributions
to
our
unitholders.
On August 1, 2017 Ciner Wyoming entered into a $225.0 million senior unsecured revolving credit facility (the “Ciner Wyoming Credit Facility”). The
Ciner Wyoming Credit Facility contains various covenants and restrictive provisions that limit (subject to certain exceptions) Ciner Wyoming’s ability to:
• make distributions on or redeem or repurchase its units;
•
incur or guarantee additional debt;
• make certain investments and acquisitions;
•
incur certain liens or permit them to exist;
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Table of Contents
•
enter into certain types of transactions with affiliates of Ciner Wyoming;
• merge or consolidate with another company; and
•
transfer, sell or otherwise dispose of assets.
The Ciner Wyoming Credit Facility also contains covenants requiring Ciner Wyoming to maintain certain financial ratios. Ciner Wyoming is subject to a
consolidated interest coverage ratio (as defined in the Ciner Wyoming Credit Facility) of not less than 3.00 to 1.00 and a consolidated leverage ratio (as defined in
the Ciner Wyoming Credit Facility) of not greater than 3.00 to 1.00. Ciner Wyoming’s ability to meet those financial ratios and tests can be affected by events
beyond our control, and we cannot assure you that Ciner Wyoming will meet those ratios and tests.
In addition, the Ciner Wyoming Credit Facility contains events of default customary for transactions of this nature, including (1) failure to make payments
required under the Ciner Wyoming Credit Facility, (2) events of default resulting from Ciner Wyoming’s failure to comply with covenants and financial ratios in
the Ciner Wyoming Credit Facility, (3) the institution of insolvency or similar proceedings against Ciner Wyoming, (4) the occurrence of a default under any other
material indebtedness Ciner Wyoming may have, and (5) the occurrence of a change of control.
Under the Ciner Wyoming Credit Facility, a change of control is triggered if Ciner Corp and its wholly-owned subsidiaries, in the aggregate, directly or
indirectly, cease to own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or equivalent governing body) of Ciner
GP (or any entity that performs the functions of our general partner). In addition, a change of control would be triggered if we cease to own at least 50.1% of the
economic interests in Ciner Wyoming or cease to have the ability to elect a majority of the members of Ciner Wyoming’s board of managers.
The provisions of the Ciner Wyoming Credit Facility may affect Ciner Wyoming’s ability to obtain future financing and pursue attractive business
opportunities and its flexibility in planning for, and reacting to, changes in business conditions. In addition, Ciner Wyoming’s failure to comply with the provisions
of the Ciner Wyoming Credit Facility could result in an event of default, which could enable its lenders, subject to the terms and conditions of the Ciner Wyoming
Credit Facility, to terminate all outstanding commitments and declare any outstanding principal of that debt, together with accrued and unpaid interest, to be
immediately due and payable. If the payment of Ciner Wyoming’s debt is accelerated, its assets may be insufficient to repay such debt in full. As a result, our
results of operations and, therefore, our ability to distribute cash to unitholders, could be materially and adversely affected, and our unitholders could experience a
partial or total loss of their investment. Please read Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources—Debt—Ciner Wyoming Credit Facility” for more information.
If
we
are
not
able
to
renew
our
leases
and
license,
it
will
have
a
material
adverse
effect
on
us.
Under
the
terms
of
our
subsurface
mining
leases
and
license,
we
are
required
to
make
minimum
royalty
payments
or
annual
rentals,
and
the
royalty
rates
we
are
required
to
pay
may
change
with
little
or
no
notice
to
us.
All of our reserves are held under leases with the State of Wyoming and the U.S. Bureau of Land Management and a license with Rock Springs. As of
December 31, 2017 , leases covering approximately 14.5% of our acreage are scheduled to expire over the next five years. If we are not able to renew our leases
and license, it will have a material adverse effect on our results of operations and cash available for distribution to unitholders. Each of those leases and the license
requires that minimum royalties or annual rentals be paid regardless of production levels. If our operations do not meet production goals, then it could have an
adverse effect on our ability to pay cash distributions due to the ongoing requirement to pay minimum royalty payments despite a lack of production and the
corresponding net sales.
The royalty rates we pay to our lessors and licensor may change upon our renewal of such leases and license. Under our license with Rock Springs, the
applicable royalty rate may vary based on a most favored nation clause in the license. The applicable royalty rate in the license may be adjusted if we pay a higher
royalty rate to certain other mineral rights owners in Sweetwater County, Wyoming. The extent to which Rock Springs may increase the applicable royalty rate is
currently the subject of litigation in Wyoming. Any increase in the royalty rates we are required to pay to our lessors and licensor, or any failure by us to renew any
of our leases and license, could have a material adverse impact on our results of operations, financial condition or liquidity, and, therefore, may affect our ability to
distribute cash to unitholders.
We
may
not
achieve
the
acquisition
component
of
our
growth
strategy.
Acquisitions are a component of our growth strategy. We can offer no assurance that we will be able to identify any acquisition opportunities, that we will be
able to grow our business through acquisitions, or that any assets or business we acquire will perform in accordance with our expectations or that our assessment
concerning the value, strengths and weaknesses of assets or business acquired will prove to be correct. We have not made any acquisitions in the past, and there are
currently a limited number of producers in North America with businesses similar to ours and potentially legal and regulatory hurdles, such as extensive evaluation
under antitrust laws to determine whether the acquisition would be permissible. In connection with future
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acquisitions, if any, we may incur debt and contingent liabilities, increased interest expense and amortization expense and significant charges relative to integration
costs. In addition, our financial condition and results of operations would be adversely affected if we overpay for acquisitions.
Acquisitions involve a number of special risks, including:
unforeseen difficulties extending internal control over financial reporting and performing the required assessment at the newly acquired business or assets;
potential adverse short-term effects on operating results through increased costs or otherwise;
diversion of management’s attention and failure to recruit new, and retain existing, key personnel of the acquired business or assets;
failure to implement infrastructure, logistics and systems integration successfully; and
the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities, any of which could have a material
adverse effect on our business, financial condition and results of operations.
•
•
•
•
•
Defects
in
title
or
loss
of
any
leasehold
interests
in
our
properties
could
limit
our
ability
to
conduct
mining
operations
on
these
properties
or
result
in
significant
unanticipated
costs.
All of our trona reserves are leased or licensed. A title defect in our leased, licensed or owned property or the loss of any lease or license upon expiration of
its term, upon a default or otherwise could adversely affect our ability to mine the associated reserves and/or process the trona that we mine. In some cases, we rely
on title information or representations and warranties provided by our lessors, licensor or grantors. We cannot rely on any such representations or warranties with
respect to the surface land on which our facility is located because we acquired the surface land in 1991 by quitclaim deed. We have no title insurance for our
interests in this property. Any challenge to our title or leasehold interests could delay our operations and could ultimately result in the loss of some or all of our
interest in the property. From time to time we also may be in default with respect to leases or the license for properties on which we have mining operations. In
such events, we may have to close down or alter significantly the sequence of such mining operations, which may adversely affect our future soda ash production
and future revenues. If we mine on property that we do not own, lease or license, we could incur liability for such mining and be subject to regulatory sanction and
penalties. Also, in any such case, the investigation and resolution of title issues would divert management’s time from our business, and our results of operations
could be adversely affected. As a result, our results of operations, business and financial condition, as well as our ability to pay distributions to our unitholders may
be materially adversely affected.
Mining
development,
exploration
and
processing
operations
pose
numerous
hazards
and
uncertainties
that
may
negatively
affect
our
business.
Mining and processing operations involve many hazards and uncertainties, including, among other things:
•
•
•
•
•
•
•
seismic activity;
ground failures;
industrial accidents;
environmental contamination or leakage;
fires and explosions;
unusual and unexpected rock formations or water conditions;
flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of nature; and
• mechanical equipment failure and facility performance problems.
These occurrences could damage or destroy our properties or production facilities, or result in personal injury or wrongful death claims, environmental
damage to our properties or the properties of others, delays in, or prohibitions on, mining or processing, increased production costs, asset write downs, monetary
losses and legal liability, which could have an adverse effect on our results of operations and financial condition. In particular, underground mining and related
processing activities present inherent risks of injury to persons and damage to equipment. Our insurance policies provide limited coverage for some of these risks
but will not fully cover these risks. Please read “Risk Factors — Risks Inherent in Our Business and Industry — Our business is subject to inherent risk, including
risk relating to natural disasters, and our insurance coverage for such risks may not be adequate or available to us . If an accident or event occurs that is not fully
insured, it could materially affect our business. ”
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Significant mine accidents could occur, potentially resulting in a mine shutdown or leading to liabilities, which could have a material adverse effect on our results
of operations, financial condition and cash flows.
Moreover, based on the projected rate at which we are expected to continue to produce soda ash via deca rehydration, it is estimated that around the end of
2020 we could need to produce approximately 200,000 short tons of soda ash per year by other means, which would require additional and material capital
expenditures and may increase production costs, shorten the reserve life of our mine and increase our ore-to-ash ratio.
We
may
be
unable
to
obtain,
maintain
or
renew
permits
necessary
for
our
operations,
which
could
impair
our
ability
to
conduct
our
operations
and
limit
our
ability
to
make
distributions
to
unitholders.
Our facility and operations require us to obtain a number of permits that impose strict regulations on various environmental and operational matters in
connection with mining trona ore and producing soda ash. These include permits issued by various federal, state and local agencies and regulatory bodies. The
permitting rules, and the interpretations of these rules, are complex, change frequently and are subject to discretionary interpretations by our regulators, all of
which may make compliance difficult or impractical and may impair our existing operations or the development of future facilities. The public, including non-
governmental organizations, environmental groups and individuals, have certain statutory rights to comment upon and submit objections to requested permits and
environmental impact statements prepared in connection with applicable regulations and otherwise engage in the permitting process, including bringing citizen’s
lawsuits to challenge the issuance or renewal of permits, the validity of environmental impact statements or the performance of mining activities. If permits are not
issued or renewed in a timely fashion or at all or are conditioned in a manner that restricts our ability to conduct our operations economically, our cash flows may
decline, which could limit our ability to distribute cash to unitholders.
Equipment
upgrades,
equipment
failures
and
deterioration
of
assets
may
lead
to
production
curtailments,
shutdowns
or
additional
expenditures.
Our operations depend upon critical equipment that require scheduled upgrades and maintenance and may suffer unanticipated breakdowns or failures. As a
result, our mining operations and processing may be interrupted or curtailed, which could have a material adverse effect on our results of operations.
As our mine ages and we deplete our trona reserves, in order to maintain current production rates over the next five to ten years, we expect to need to use
smaller mining equipment or two seam mining technique, which will increase our mining costs. In addition, our maintenance capital expenditures do not include
actual or estimated capital expenditures for replacement of our trona reserves.
In addition, assets critical to our trona ore mining and soda ash production operations may deteriorate due to wear and tear or otherwise sooner than we
currently estimate. Such deterioration may result in additional maintenance spending and additional capital expenditures. If these assets do not generate the amount
of future cash flows that we expect, and we are not able to procure replacement assets in an economically feasible manner, our future results of operations may be
materially and adversely affected.
If any of the equipment on which we depend were severely damaged or were destroyed by fire, abnormal wear and tear, flooding, or otherwise, we may be
unable to replace or repair it in a timely manner or at a reasonable cost, which would impact our ability to produce and ship soda ash, which would have a material
adverse effect our results of operations, financial condition and our ability to distribute cash to our unitholders.
We
may
record
impairment
charges
on
our
assets,
including
our
reserves,
that
would
adversely
impact
our
results
of
operations
and
financial
condition.
We are required to perform impairment tests on our assets, including our trona reserves, whenever events or changes in circumstances modify the estimated
useful life of or estimated future cash flows from an asset that would indicate that the carrying amount of such asset may not be recoverable or whenever
management’s plans change with respect to such asset. An impairment in one period may not be reversed in a later period even if prices increase. If we are required
to recognize impairment charges in the future, our results of operations and financial condition may be materially and adversely affected.
A
shortage
of
skilled
workers
could
reduce
our
labor
productivity
and
increase
our
costs,
which
could
negatively
affect
our
business.
Our mining and processing operations require personnel with specialized skills and experience. Our ability to be productive and profitable will depend upon
our ability to employ and retain skilled workers. If we experience shortages of skilled workers in the future, our labor costs and overall productivity could be
materially and adversely affected. If our labor costs increase or if we experience materially increased health and benefits costs, our results of operations could be
materially and adversely affected.
Severe
weather
conditions
could
have
a
material
adverse
impact
on
our
business.
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Our business could be materially adversely affected by severe weather conditions. Severe weather conditions may affect our mining and processing
operations by resulting in weather-related damage to our facility and equipment or impact our ability to transport soda ash from our facility. In addition, severe
weather conditions could hinder our operations by causing us to halt or delay our operations, which could have a material adverse effect on our results of operations
and financial condition.
Our
business
is
subject
to
inherent
risk,
including
risk
relating
to
natural
disasters,
and
our
insurance
coverage
for
such
risks
may
not
be
adequate
or
available
to
us.
If
an
accident
or
event
occurs
that
is
not
fully
insured,
it
could
materially
affect
our
business.
We are covered by insurance policies maintained by Ciner Enterprises or its affiliates. These insurance policies provide limited coverage for some, but not
all, of the potential risks and liabilities associated with our businesses. For some risks, we do not obtain insurance or are covered by Ciner Enterprises’, or its
affiliates’, policies if we believe the cost of available insurance is excessive relative to the risks presented. As a result of market conditions, premiums and
deductibles for certain insurance policies can increase substantially, and certain types of insurance may become unavailable or available only for reduced amounts
of coverage. As a result, we may not be able to renew our or its existing insurance policies or procure other desirable insurance on commercially reasonable terms,
if at all. In addition, we cannot insure against certain environmental, safety and pollution risks. Even where insurance coverage applies, insurers may contest their
obligations to make payments. Our insurance coverage may not be adequate to cover us against losses we incur, and coverage under these policies may be depleted
or may not be available to us to the extent that we otherwise exhaust its coverage limits. Our results of operations, and therefore our ability to distribute cash to
unitholders, could be materially and adversely affected by losses and liabilities from uninsured or under-insured events, as well as by delays in the payment of
insurance proceeds or the failure by insurers to make payments.
We also may incur costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations. We must compensate
employees for work-related injuries. If we do not make adequate provision for our workers’ compensation liabilities, such claims could harm our future operating
results. If we are required to pay for these fines, costs and liabilities, our financial condition, results of operations, and therefore our ability to distribute cash to
unitholders, could be adversely affected.
We
may
be
subject
to
litigation,
the
disposition
of
which
could
have
a
material
adverse
effect
on
our
results
of
operations.
The nature of our operations exposes us to possible litigation claims, including disputes with customers and providers of shipping services. Some of the
lawsuits may seek fines or penalties and damages in large amounts, or seek to restrict our business activities. Because of the uncertain nature of litigation and
coverage decisions, we cannot predict the outcome of these matters or whether insurance claims may mitigate any damages to us. Litigation is very costly, and the
costs associated with prosecuting and defending litigation matters could have a material adverse effect on our results of operations.
Expansion
or
improvement
of
our
existing
facilities
may
not
result
in
revenue
increases
and
will
be
subject
to
regulatory,
environmental,
political,
legal
and
economic
risks,
which
could
adversely
affect
our
results
of
operations
and
financial
condition.
One of the ways we may grow our business is through the expansion or improvement of our existing facility. The construction of additions or modifications
to our existing facility involve numerous regulatory, environmental, political, legal and economic uncertainties that are beyond our control. Such expansion or
improvement projects may also require the expenditure of significant amounts of capital, and financing may not be available on economically acceptable terms or
at all. If we undertake these projects, they may not be completed on schedule, at the budgeted cost, or at all. Moreover, our revenue may not increase immediately
upon the expenditure of funds on a particular project. As a result, we may not be able to realize our expected investment return, which could adversely affect our
results of operations and financial condition.
We
conduct
our
operations
through
a
joint
venture,
which
subjects
us
to
additional
risks
that
could
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.
Ciner Wyoming is a joint venture with an affiliate of NRP. We may also enter into other joint venture arrangements with third parties in the future. NRP has,
and these third parties may have, obligations that are important to the success of the joint venture, such as the obligation to pay their share of capital and other costs
of the joint venture. The performance of these third party obligations, including the ability of our joint venture partner in Ciner Wyoming, to satisfy their respective
obligations, is outside our control. If these parties do not satisfy their obligations under the arrangement, our business may be adversely affected.
Our joint venture arrangement may involve risks not otherwise present without such partner, including, for example:
•
•
our joint venture partner shares certain blocking rights over transactions between Ciner Wyoming and its affiliates, including us;
our joint venture partner may take actions contrary to our instructions or requests or contrary to our policies or objectives;
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•
•
although we control Ciner Wyoming, we owe contractual duties to Ciner Wyoming and its other owners, which may conflict with our interests and the
interests of our unitholders; and
disputes between us and our joint venture partner may result in delays, litigation or operational impasses.
The risks described above or any failure to continue our joint venture or to resolve disagreements with our joint venture partner could adversely affect our
ability to transact the business that is the subject of such joint venture, which would, in turn, negatively affect our financial condition, results of operations and
ability to distribute cash to our unitholders.
Restrictions
in
the
Revolving
Credit
Facility
could
adversely
affect
our
business,
financial
condition,
results
of
operations
and
ability
to
make
quarterly
cash
distributions
to
our
unitholders.
On August 1, 2017, the Partnership entered into a $10.0 million senior secured revolving credit facility (the “Revolving Credit Facility”). The Revolving
Credit Facility contains various covenants and restrictive provisions that limit (subject to certain exceptions) our ability (and the ability of our subsidiaries,
including Ciner Wyoming) to:
• make distributions on or redeem or repurchase units;
•
incur or guarantee additional debt;
• make certain investments and acquisitions;
•
•
incur certain liens or permit them to exist;
enter into certain types of transactions with our affiliates;
• merge or consolidate with another company; and
•
transfer, sell or otherwise dispose of assets.
The Revolving Credit Facility also contains a covenant requiring us to maintain a consolidated leverage ratio (as defined in the Revolving Credit Facility) of
not greater than 3.00 to 1.00 and a consolidated interest coverage ratio of not less than 3.00 to 1.00. Our ability to meet that financial ratio and test can be affected
by events beyond our control, and we cannot assure you that we will meet that ratio and test.
In addition, the Revolving Credit Facility contains events of default customary for transactions of this nature, including (1) failure to make payments required
under the Revolving Credit Facility, (2) events of default resulting from our failure to comply with covenants and financial ratios in the Revolving Credit Facility,
(3) the institution of insolvency or similar proceedings against us, (4) the occurrence of a default under any other material indebtedness we (or any of our
subsidiaries) may have, including the Ciner Wyoming Credit Facility, and (5) the occurrence of a change of control. In addition, our obligations under the
Revolving Credit Facility are secured by a pledge of substantially all of our assets (subject to certain exceptions), including the membership interests in Ciner
Wyoming held by us.
Under the Revolving Credit Facility, a change of control is triggered if Ciner Corp and its wholly-owned subsidiaries, in the aggregate, directly or indirectly,
cease to own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or equivalent governing body) of, Ciner Holdings or
Ciner GP (or any entity that performs the functions of our general partner). In addition, a change of control would be triggered if we cease to own at least 50.1% of
the economic interests in Ciner Wyoming or cease to have the ability to elect a majority of the members of Ciner Wyoming’s board of managers.
The provisions of the Revolving Credit Facility may affect our ability to obtain future financing and pursue attractive business opportunities and our
flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of the Revolving Credit Facility
could result in an event of default, which could enable our lenders to, subject to the terms and conditions of the Revolving Credit Facility, terminate all outstanding
commitments and declare any outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of
our debt is accelerated, our assets may be insufficient to repay such debt in full, the lenders could foreclose on our assets, including without limitation our
ownership interests in Ciner Wyoming, and our unitholders could experience a partial or total loss of their investment. Please read Part II, Item 8, Financial
Statements and Supplementary Data - Note 9, “Debt-Revolving Credit Facility.”
Our
level
of
indebtedness
may
increase,
reducing
our
financial
flexibility.
In the future, we may incur significant indebtedness in order to make future acquisitions or to develop or expand our facilities and mining capabilities. Our
level of indebtedness could affect our operations in several ways, including:
•
a significant portion of our cash flows could be used to service our indebtedness;
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•
•
•
•
•
a high level of debt would increase our vulnerability to general adverse economic and industry conditions;
the covenants contained in the agreements governing our outstanding indebtedness will limit our ability to borrow additional funds, dispose of assets, pay
distributions and make certain investments;
a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged, and therefore may be able to take
advantage of opportunities that our indebtedness would prevent us from pursuing;
our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and our industry; and
a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, distributions
or for general corporate or other purposes.
A high level of indebtedness increases the risk that we may default on our debt obligations. Our ability to meet our debt obligations and to reduce our level of
indebtedness depends on our future performance. General economic conditions and financial, business and other factors affect our operations and our future
performance. Many of these factors are beyond our control. We may not be able to generate sufficient cash flows to pay the interest on our debt, and future working
capital, borrowings or equity financing may not be available to pay or refinance such debt. Factors that will affect our ability to raise cash through an offering of
our units or a refinancing of our debt include financial market conditions, the value of our assets and our performance at the time we need capital.
Restrictions
in
the
Ciner
Enterprises
Credit
Agreement
could
limit
our
ability
to
grow
the
business
and
our
ability
to
distribute
cash
to
our
unitholders.
We and Ciner Wyoming are indirectly affected by certain prohibitions and limitations contained in a credit agreement (which expires on October 23, 2025) to
which Ciner Enterprises (as borrower), and Ciner Holdings and Ciner Corp (as guarantors), are a party (as amended and restated or otherwise modified, the “Ciner
Enterprises Credit Agreement”).
Specifically, Ciner Enterprises has agreed (subject to certain exceptions in addition to those described below) that it will not, and will not permit any of its
subsidiaries, including Ciner Wyoming and us, to:
• make distributions on or redeem or repurchase equity interests, other than distributions to our and Ciner Wyoming’s unitholders;
•
incur or guarantee additional debt, other than debt incurred under the Revolving Credit Facility or the Ciner Wyoming Credit Facility, among certain other
types of permitted debt;
• make certain investments and acquisitions, other than acquisitions by each of Ciner Wyoming and us, in an amount not to exceed $10 million and
$2 million, respectively, and other exceptions set forth therein;
•
•
incur certain liens or permit them to exist, other than, with respect to our and Ciner Wyoming’s liens, an aggregate amount outstanding at any time equal
to $200,000 and $1 million, respectively;
enter into certain types of transaction with affiliates, other than transactions between Ciner Wyoming and us;
• merge or consolidate with another company; or
•
transfer, sell or otherwise dispose of assets, other than our and Ciner Wyoming’s dispositions of assets with a net book value not to exceed $500,000 and
$2.5 million, respectively, in any given year.
Due to its ownership and control of our general partner, Ciner Enterprises has the ability to prevent Ciner Wyoming and us from taking actions that would
cause Ciner Enterprises to violate any covenants in, or otherwise to be in default under, the Ciner Enterprises Credit Agreement. In deciding whether to prevent
Ciner Wyoming or us from taking any such action, Ciner Enterprises will have no fiduciary duty to us or our unitholders. Moreover, if we or Ciner Wyoming
desire to take any action, to the extent such action would not be permitted under the Ciner Enterprises Credit Agreement, Ciner Enterprises would be required to
seek the consent of the lenders under the Ciner Enterprises Credit Agreement. Ciner Enterprises’ compliance with the covenants in the Ciner Enterprises Credit
Agreement may restrict our and Ciner Wyoming’s ability to undertake certain actions that might otherwise be considered beneficial to us, including borrowing
under the Revolving Credit Facility or the Ciner Wyoming Credit Facility to finance operations or expansions or to distribute cash to our and their respective
unitholders.
Under the Ciner Enterprises Credit Agreement, a change of control is triggered if Ciner Enterprises and its wholly-owned subsidiaries, in the aggregate,
directly or indirectly, cease to own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or equivalent governing body)
of, Ciner Corp, Ciner Holdings or Ciner GP (or any entity that performs the functions of our general partner). In addition, a change of control would be triggered if
we cease to own at least 51%
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of the economic interests in Ciner Wyoming or cease to have the ability to elect a majority of the members of Ciner Wyoming’s board of managers.
Any debt instruments that Ciner Enterprises or any of its affiliates enter into in the future, including any amendments to the Ciner Enterprises Credit
Agreement, may include additional or more restrictive limitations that may impact our ability to conduct our business. These additional restrictions could adversely
affect our ability to finance our future operations or capital needs or engage in, expand or pursue our business activities.
Ciner
Holdings,
the
sole
member
of
our
general
partner,
is
a
guarantor
under,
and
its
equity
interests
and
assets
are
pledged
as
collateral
under,
the
Ciner
Enterprises
Credit
Agreement;
in
the
event
Ciner
Enterprises
is
unable
to
meet
its
obligations
under
that
facility,
or
is
declared
bankrupt,
Ciner
Enterprises’
lenders
may
gain
control
of
our
general
partner
or,
in
the
case
of
bankruptcy,
our
partnership
may
be
dissolved.
Ciner Holdings, the sole member of our general partner, is a guarantor under the Ciner Enterprises Credit Agreement, and all Ciner Holdings’ assets
(including its membership interests in our general partner) are subject to a lien under the Ciner Enterprises Credit Agreement. In the event Ciner Enterprises is
unable to satisfy its obligations under the Ciner Enterprises Credit Agreement and the lenders foreclose on their collateral, the lenders will own our general partner,
and effectively all of its assets, which include the general partner interest in us and our incentive distribution rights. In such event, the lenders would own the entity
that controls our management and operation. Moreover, in the event Ciner Enterprises becomes insolvent or is declared bankrupt, our general partner also may be
deemed insolvent or declared bankrupt. Under the terms of our partnership agreement, the bankruptcy or insolvency of our general partner may cause a dissolution
of our partnership.
We
are
subject
to
stringent
environmental
laws
and
regulations
that
may
expose
us
to
significant
costs
and
liabilities.
Our operations are subject to stringent and complex federal, state and local environmental laws and regulations that govern the discharge of materials into the
environment or otherwise relate to environmental protection. Examples of these laws include:
•
•
•
•
•
•
the federal Clean Air Act and analogous state laws that impose obligations related to air emissions;
the federal Comprehensive Environmental Response, Compensation and Liability Act, known as CERCLA or the Superfund law, and analogous state
laws that regulate the cleanup of hazardous substances that may be or have been released at properties currently or previously owned or operated by us or
at locations to which our wastes are or have been transported for disposal;
the federal Water Pollution Control Act, or the Clean Water Act, and analogous state laws that regulate discharges from our facilities into state and federal
waters, including wetlands and the Green River;
the federal Resource Conservation and Recovery Act, or RCRA, and analogous state laws that impose requirements for the storage, treatment and disposal
of solid and hazardous waste from our facilities;
the Endangered Species Act, or ESA; and
the Toxic Substances Control Act, or TSCA, and analogous state laws that impose requirements on the use, storage and disposal of various chemicals and
chemical substances at our facility.
These laws and regulations may impose numerous obligations that are applicable to our operations, including the acquisition of permits to conduct regulated
activities, the incurrence of capital or operating expenditures to limit or prevent releases of materials from our facility, and the imposition of substantial liabilities
and remedial obligations for pollution resulting from our operations. Numerous governmental authorities, such as the U.S. Environmental Protection Agency, or the
EPA, and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring
difficult and costly corrective actions. Failure to comply with these laws, regulations and permits may result in the assessment of administrative, civil and criminal
penalties, the imposition of remedial obligations and the issuance of injunctions limiting or preventing some or all of our operations. In addition, we may
experience a delay in obtaining or be unable to obtain required permits or regulatory authorizations, which may cause us to lose potential and current customers,
interrupt our operations and limit our growth and revenue. In addition, future changes in environmental or other laws may result in additional compliance
expenditures that have not been pre-funded and which could adversely affect our business and results of operations and our ability to make cash distributions to our
unitholders.
There is a risk that we may incur costs and liabilities in connection with our operations due to historical industry operations and waste disposal practices, our
handling of wastes and potential emissions and discharges related to our operations. Private parties, including the owners of the properties on which we operate,
may have the right to pursue legal actions to require remediation of contamination or enforce compliance with environmental requirements as well as to seek
damages for personal injury or property damage. For example, an accidental release from our facility could subject us to substantial liabilities arising
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Table of Contents
from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage and
fines or penalties for related violations of environmental laws or regulations. In addition, changes in environmental laws occur frequently, and any such changes
that result in more stringent and costly waste handling, storage, transport, disposal or remediation requirements could have a material adverse effect on our
operations or financial position. We may not be able to recover all or any of these costs from insurance. Please read Item 1, “Business—Environmental Matters”
and Item 13, “Certain Relationships and Related Transactions, and Director Independence—Indemnification Agreement” for more information.
The
adoption
of
climate
change
legislation
at
the
global,
federal,
state
or
local
level
could
result
in
increased
operating
costs
and
reduced
demand
for
the
soda
ash
we
produce.
Many nations have agreed to limit emissions of “greenhouse gases,” or GHGs, pursuant to the United Nations Framework Convention on Climate Change,
also known as the “Kyoto Protocol.” Methane, a primary component of natural gas, and carbon dioxide, a by-product of the burning of coal, oil, natural gas and
refined petroleum products, are GHGs regulated by the Kyoto Protocol. The United States signed, but did not ratify, the Kyoto Protocol. In December 2015, the
United States was one of 195 countries to sign the so-called Paris Agreement. The Paris Agreement came into effect in November 2016. However, in June 2017,
the Trump administration announced plans to withdraw from the Paris Agreement. President Trump also issued an executive order on promoting energy
independence and economic growth. Recently, the EPA issued a report covering plans on how to implement the president’s executive order including plans to
review and possibly repeal all greenhouse-gas related regulations, including the Clean Power Plan.
The U.S. Congress has from time to time considered adopting legislation to reduce emissions of GHGs, and almost one-half of the states have already taken
legal measures to reduce emissions of GHGs, primarily through the planned development of GHG emission inventories and/or regional GHG “cap and trade”
programs. Although the U.S. Congress has not adopted such legislation at this time, many states continue to pursue regulations to reduce GHG emissions. Most of
these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and
natural gas processing plants, to acquire and surrender emission allowances corresponding with their annual emissions of GHGs. These programs work by reducing
the number of allowances available for purchase each year until the overall GHG emission reduction goal is achieved. As the number of GHG emission allowances
declines each year, the cost or value of allowances is expected to escalate significantly. Restrictions on GHG emissions that may be imposed in various states could
adversely affect the soda ash industry.
In addition, there has been public discussion that climate change may be associated with extreme weather conditions, such as more intense hurricanes,
thunderstorms, tornados and snow or ice storms, as well as rising sea levels. Another possible consequence of climate change is increased volatility in seasonal
temperatures. Some studies indicate that climate change could cause some areas to experience temperatures substantially colder than their historical averages.
Extreme weather conditions can interfere with our production and increase our costs, and damage resulting from extreme weather may not be fully insured.
However, at this time, we are unable to determine the extent to which climate change may lead to increased storm or weather hazards affecting our operations.
We
are
subject
to
strict
laws
and
regulations
regarding
employee
and
process
safety,
and
failure
to
comply
with
these
laws
and
regulations
could
have
a
material
adverse
effect
on
our
results
of
operations,
financial
condition
and
ability
to
distribute
cash
to
unitholders.
We are subject to a number of federal and state laws and regulations related to safety, including the Occupational Safety and Health Administration, or
OSHA, the Mine Safety and Health Administration, or MSHA, and comparable state statutes, the purposes of which are to protect the health and safety of workers.
In addition, OSHA requires that we maintain information about hazardous materials used or produced in our operations and that we provide this information to
employees, state and local governmental authorities, and local residents. Failure to comply with OSHA and MSHA requirements and related state regulations,
including general industry standards, record keeping requirements and monitoring and control of occupational exposure to regulated substances, could have a
material adverse effect on our results of operations, financial condition and ability to make cash distributions if we are subjected to significant penalties, fines or
compliance costs, including any shutdown of one or more of our miners or the shutdown of our mine.
The
amount
of
cash
we
have
available
for
distribution
to
holders
of
our
units
depends
primarily
on
our
cash
flow
and
not
solely
on
profitability,
which
may
prevent
us
from
making
cash
distributions
during
periods
when
we
record
net
income.
The amount of cash we have available for distribution depends primarily upon our cash flow, including cash flow from reserves and working capital or other
borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, we may pay cash distributions during periods when we record net
losses for financial accounting purposes and may not pay cash distributions during periods when we record net income.
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Table of Contents
Failure
to
maintain
effective
quality
control
systems
at
our
mining,
processing
and
production
facilities
could
have
a
material
adverse
effect
on
our
business
and
operations.
The performance and quality of our products are critical to the success of our business. These factors depend significantly on the effectiveness of our quality
control systems, which, in turn, depends on a number of factors, including the design of our quality control systems, our quality-training program and our ability to
ensure that employees that operate our assets adhere to our quality control policies and guidelines. Any significant failure or deterioration of our quality control
systems could have a material adverse effect on our business, financial condition and results of operations.
Our
inability
to
acquire,
maintain
or
renew
financial
assurances
related
to
the
reclamation
and
restoration
of
mining
property
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
Mining operations are generally obligated under federal, state and local laws to restore property in accordance with regulatory standards and an approved
reclamation plan after it has been mined, and generally must also maintain financial assurances, such as surety bonds, to secure such obligations. To fulfill the
financial assurances requirement, the Wyoming Department of Environmental Quality (“WDEQ”) allows us to “self-bond,” which commits us to pay directly for
reclamation costs rather than obtaining a traditional surety bond. As of December 31, 2017 , the amount of our self-bond agreement with the WDEQ was $32.9
million . The Land Quality Division of the WDEQ periodically re-evaluates the amount of the bond; so the current amount is subject to increase. Currently, the
Land Quality Division of the WDEQ is considering legislation that would limit self-bonding to no more than 70% of the required financial assurances. If such
legislation is passed and becomes applicable to trona operations we may be required to purchase a surety bond for an amount up to the total reclamation costs.
Our inability to secure financial assurances satisfactory to WDEQ could subject us to fines and penalties as well as the revocation of our operating permits.
Such inability could result from a variety of factors, including:
•
•
•
•
•
the State of Wyoming’s future decision to require mining operations to maintain surety bonds instead of self-bonds;
continued increases in the amount of our self-bond;
the lack of availability, high expense, or unreasonable terms of financial assurances;
the ability of future financial assurance counterparties to require collateral; and
the exercise by financial assurance counterparties of any rights to refuse to renew the financial assurance instruments.
Our inability to acquire, maintain, or renew necessary financial assurances related to the reclamation and restoration of mining property could have a material
adverse effect on our business, financial condition, and results of operations.
Federal
or
state
regulatory
agencies
have
the
authority
to
order
certain
of
our
mines
to
be
temporarily
or
permanently
closed
under
certain
circumstances,
which
could
materially
and
adversely
affect
our
ability
to
meet
our
customers’
demands.
Federal or state regulatory agencies have the authority under certain circumstances following significant health and safety incidents, to order a mine to be
temporarily or permanently closed. If this occurred, we may also be required to incur significant operating or capital expenditures to re-open the mine. In the event
that these agencies order the closing of our Green River Basin facility, our soda ash sales contracts generally permit us to issue force majeure notices which
suspend our obligations to deliver soda ash under these contracts. However, our customers may challenge our issuances of force majeure notices. If these
challenges are successful, we may have to purchase soda ash from third-party sources, if it is available, to fulfill these obligations, incur capital expenditures to re-
open the mine and/or negotiate settlements with the customers, which may include price reductions, the reduction of commitments, the extension of time for
delivery or the termination of customers’ contracts. Any of these actions could have a material adverse effect on our business and results of operations.
Risks Inherent in an Investment in Us
Ciner
Enterprises
indirectly
owns
and
controls
our
general
partner,
which
has
sole
responsibility
for
conducting
our
business
and
managing
our
operations.
Our
general
partner
and
its
affiliates,
including
Ciner
Enterprises,
have
conflicts
of
interest
with
us
and
our
unitholders
and
limited
duties
to
us
and
our
unitholders,
and
they
may
favor
their
own
interests
to
the
detriment
of
us
and
our
unitholders.
Ciner Enterprises indirectly owns and controls our general partner and Ciner Holdings will appoint all of the directors of our general partner, who in turn will
appoint all of our general partner’s officers. Although our general partner has a duty to manage us in a manner that is beneficial to us and our unitholders, the
executive officers and directors of our general partner have a fiduciary duty to manage our general partner in a manner beneficial to Ciner Enterprises. Therefore,
conflicts of interest will arise between Ciner Enterprises or any of its affiliates, including our general partner, on the one hand, and us or any of our unitholders, on
the
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Table of Contents
other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of its affiliates over the interests of our common
unitholders. These conflicts include the following situations:
•
•
neither our partnership agreement nor any other agreement requires Ciner Enterprises to pursue a business strategy that favors us, and the directors and
officers of Ciner Enterprises have a fiduciary duty to make these decisions in the best interests of Ciner Enterprises, which may be contrary to our
interests. Ciner Enterprises may choose to shift the focus of its investment and growth to areas not served by our assets;
our general partner is allowed to take into account the interests of parties other than us, such as Ciner Enterprises, in exercising certain rights under our
partnership agreement, which may effectively limit its duty to our unitholders;
• many of the officers and three of the directors of our general partner are also officers and/or directors of Ciner Corp, a subsidiary of Ciner Enterprises, and
will owe fiduciary duties to Ciner Corp and Ciner Enterprises. The officers of our general partner that are also officers of Ciner Corp will devote
significant time to the business of Ciner Corp and will be compensated by Ciner Corp accordingly;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its
duties, limits our general partner’s liabilities and restricts the remedies available to our unitholders for actions that, without such limitations, might
constitute breaches of fiduciary duty;
except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;
our largest customer is ANSAC, of which our affiliate, Ciner Corp, is one of three members, and certain officers of our general partner periodically serve
as chairman of ANSAC;
Ciner Enterprises and its affiliates are not limited in their ability to compete with us and may compete directly with us for acquisition opportunities and
customers. For example, we expect to face competition from Ciner Group’s trona-based soda ash production in Turkey in the next several years as new
capacity is brought online;
our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the level
of reserves, each of which can affect the amount of cash that we distribute to our unitholders;
our general partner determines the amount and timing of any capital expenditure and whether a capital expenditure is classified as a maintenance capital
expenditure, which reduces operating surplus, or an expansion or investment capital expenditure, which does not reduce operating surplus. Our
partnership agreement does not set a limit on the amount of maintenance capital expenditures that our general partner may determine to be necessary or
appropriate. Please read Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —
Liquidity and
Capital Resources —
Capital Expenditures” for a discussion regarding when a capital expenditure constitutes a maintenance capital expenditure or an
expansion capital expenditure. This determination can affect the amount of cash that is distributed to our unitholders;
our general partner may cause us to borrow funds to pay cash distributions, even if the purpose or effect of the borrowing is to make incentive
distributions;
our partnership agreement permits us to classify up to $20.0 million as operating surplus, even if it is generated from asset sales, non-working capital
borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions or to our general partner in
respect of the incentive distribution rights;
our general partner determines which costs incurred by it and its affiliates are reimbursable by us;
our partnership agreement does not restrict our general partner from causing us to pay our general partner or its affiliates for any services rendered to us or
from entering into additional contractual arrangements with its affiliates on our behalf;
our general partner intends to limit its liability regarding our contractual and other obligations;
our general partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of the common units;
our general partner controls the enforcement of obligations that it and its affiliates owe to us, including Ciner Corp’s obligations under the services
agreement, dated October 25, 2015, among the Partnership, or general partner and Ciner Corp “the Service Agreement” and its commercial agreement
with us;
our general partner decides whether to retain separate counsel, accountants or others to perform services for us;
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Table of Contents
•
•
our general partner may transfer its incentive distribution rights without unitholder approval; and
our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general
partner’s incentive distribution rights without the approval of the conflicts committee of the board of directors of our general partner or the unitholders.
Any such election may result in lower distributions to the common unitholders in certain situations.
We
expect
that
we
will
distribute
substantially
all
of
our
available
cash,
which
could
limit
our
ability
to
grow
and
make
acquisitions.
We expect that we will distribute substantially all of our available cash to our unitholders and may rely primarily upon external financing sources, including
commercial bank borrowings and the issuance of debt and equity securities, to fund any acquisitions and expansion capital expenditures. If we are unable to finance
growth externally, our cash distribution policy will impair our ability to grow.
In addition, because we intend to distribute substantially all of our available cash, we may not grow as quickly as businesses that reinvest their cash to expand
ongoing operations. Moreover, our maintenance capital expenditures do not include actual or estimated capital expenditures for replacement of our trona reserves.
To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units
may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement or the
Revolving Credit Facility on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial
borrowings or other debt to finance our growth strategy will increase our interest expense, which, in turn, may impact the cash that we have available to distribute
to our unitholders.
Our
partnership
agreement
does
not
contain
a
requirement
for
us
to
pay
distributions
to
our
unitholders,
and
we
do
not
guarantee
that
we
will
pay
the
minimum
quarterly
distribution
(as
defined
in
our
partnership
agreement)
or
any
distribution
on
the
units
in
any
quarter.
Our partnership agreement does not contain a requirement for us to pay distributions to our unitholders, and we do not guarantee that we will pay the
minimum quarterly distribution or any distribution on the units in any quarter.
Our
partnership
agreement
replaces
our
general
partner’s
fiduciary
duties
to
holders
of
our
common
units
with
contractual
standards
governing
its
duties.
Our partnership agreement contains provisions that eliminate and replace the fiduciary standards to which our general partner would otherwise be held by
Delaware law regarding fiduciary duty and replace those duties with several different contractual standards. For example, our partnership agreement permits our
general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, free of any duties to us and our
unitholders other than the implied contractual covenant of good faith and fair dealing, which means that a court will enforce the reasonable expectations of the
partners where the language in the partnership agreement does not provide for a clear course of action. This provision entitles our general partner to consider only
the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or
our limited partners. Examples of decisions that our general partner may make in its individual capacity include:
•
•
•
•
•
•
•
•
how to allocate business opportunities among us and its affiliates;
whether to exercise its limited call right;
whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the board of directors of our general partner;
how to exercise its voting rights with respect to the units it owns;
whether to exercise its registration rights;
whether to elect to reset target distribution levels;
whether to transfer the incentive distribution rights or any units it owns to a third party; and
whether or not to consent to any merger, consolidation or conversion of the partnership or amendment to the partnership agreement.
By purchasing a common unit, a unitholder is treated as having consented to the provisions in the partnership agreement, including the provisions discussed
above.
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Table of Contents
Our
partnership
agreement
restricts
the
remedies
available
to
holders
of
our
units
for
actions
taken
by
our
general
partner
that
might
otherwise
constitute
breaches
of
fiduciary
duty.
Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise
constitute breaches of fiduciary duty under Delaware law regarding fiduciary duty under state fiduciary duty law. For example, our partnership agreement provides
that:
•
•
•
•
whenever our general partner, the board of directors of our general partner or any committee thereof (including the conflicts committee) makes a
determination or takes, or declines to take, any other action in their respective capacities, our general partner, the board of directors of our general partner
and any committee thereof (including the conflicts committee), as applicable, is required to make such determination, or take or decline to take such other
action, in good faith, meaning that it subjectively believed that the decision was in the best interests of our partnership, and, except as specifically
provided by our partnership agreement, will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any
other law, rule or regulation, or at equity;
our general partner will not have any liability to us or our unitholders for a decision made in its capacity as a general partner so long as such decisions are
made in good faith;
our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission
unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers
and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge
that the conduct was criminal; and
our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our limited partners if a transaction with
an affiliate or the resolution of a conflict of interest is:
◦
◦
◦
◦
approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such
approval;
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its
affiliates;
determined by the board of directors of our general partner to be on terms no less favorable to us than those generally being provided to or
available from unrelated third parties; or
determined by the board of directors of our general partner to be fair and reasonable to us, taking into account the totality of the relationships
among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
In connection with a situation involving a transaction with an affiliate or a conflict of interest, any determination by our general partner or the conflicts
committee must be made in good faith. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the
conflicts committee and the board of directors of our general partner determines that the resolution or course of action taken with respect to such affiliate
transaction or conflict of interest satisfies either of the standards set forth in the third and fourth bullets above, then it will be presumed that, in making its decision,
the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership challenging such determination,
the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
Ciner
Enterprises
and
other
affiliates
of
our
general
partner
are
not
restricted
in
their
ability
to
compete
with
us.
Our partnership agreement provides that our general partner will be restricted from engaging in any business activities other than acting as our general
partner and those activities incidental to its ownership of interests in us. Affiliates of our general partner, including Ciner Enterprises and its other subsidiaries, are
not prohibited from owning assets or engaging in businesses that compete directly or indirectly with us. Ciner Enterprises may make investments in and purchases
of entities that acquire, own and operate other soda ash producing assets. Ciner Enterprises will be under no obligation to make any acquisition opportunities
available to us. Moreover, while Ciner Enterprises may offer us the opportunity to buy additional assets from it, it is under no contractual obligation to accept any
offer we might make with respect to such opportunity.
Pursuant to the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our general partner or
any of its affiliates, including its executive officers and directors and Ciner Enterprises. Any such person or entity that becomes aware of a potential transaction,
agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person
or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or
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Table of Contents
acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may
create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our common
unitholders.
Our
general
partner,
or
any
transferee
holding
a
majority
of
the
incentive
distribution
rights,
may
elect
to
cause
us
to
issue
common
units
to
it
in
connection
with
a
resetting
of
the
minimum
quarterly
distribution
(as
defined
in
our
partnership
agreement)
and
target
distribution
levels
related
to
its
incentive
distribution
rights,
without
the
approval
of
the
conflicts
committee
of
our
general
partner
or
the
holders
of
our
common
units.
This
election
could
result
in
lower
distributions
to
holders
of
our
common
units
in
certain
situations.
The holder or holders of a majority of the incentive distribution rights, which is initially our general partner, have the right, at any time when there are no
subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0%) for each of the prior four consecutive
fiscal quarters (and the amount of each such distribution did not exceed adjusted operating surplus for each such quarter), to reset the minimum quarterly
distribution and the initial target distribution levels at higher levels based on our cash distribution at the time of the exercise of the reset election. Following such a
reset election, the minimum quarterly distribution will be reset to an amount equal to the average cash distribution per unit for the two fiscal quarters immediately
preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”), and the target distribution levels will be reset to
correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution. Our general partner has the right to transfer the
incentive distribution rights at any time, in whole or in part, and any transferee holding a majority of the incentive distribution rights will have the same rights as
our general partner with respect to resetting target distributions.
In the event of a reset of our minimum quarterly distribution and target distribution levels, our general partner will be entitled to receive, in the aggregate, a
number of common units equal to that number of common units that would have entitled the holder of such units to an aggregate quarterly cash distribution in the
two-quarter period prior to the reset election equal to the distribution to our general partner on the incentive distribution rights in the quarter prior to the reset
election prior two quarters. Our general partner will also be issued the number of general partner units necessary to maintain its general partner interest in us that
existed immediately prior to the reset election (approximately 2.0%). We anticipate that our general partner would exercise this reset right to facilitate acquisitions
or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion. However, our general partner or
a transferee could also exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to
its incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on target
distribution levels that are less certain in the then-current business environment. This risk could increase if our incentive distribution rights have been transferred to
a third-party. As a result, a reset election may cause our common unitholders to experience dilution in the amount of cash distributions that they otherwise would
have received had we not issued new common units to our general partner in connection with resetting the target distribution levels.
Holders
of
our
common
units
have
limited
voting
rights
and
are
not
entitled
to
appoint
our
general
partner
or
its
directors,
which
could
reduce
the
price
at
which
our
common
units
will
trade.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited
ability to influence management’s decisions regarding our business. Unitholders will have no right on an annual or ongoing basis to appoint our general partner or
its board of directors. The board of directors of our general partner, including the independent directors, is chosen entirely by Ciner Holdings as a result of its
ownership in our general partner and not by our unitholders. As a result of these limitations, the secondary market price at which the common units will trade could
decline because of the absence or reduction of a takeover premium in the trading price. Unlike publicly traded corporations, we will not conduct annual meetings of
our unitholders to appoint directors or to conduct other matters routinely conducted at annual meetings of stockholders of corporations. Our partnership agreement
also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the
unitholders’ ability to influence the manner or direction of management.
Even
if
holders
of
our
common
units
are
dissatisfied,
they
cannot
initially
remove
our
general
partner
without
its
consent.
If our unitholders are dissatisfied with the performance of our general partner, they will have limited ability to remove our general partner. The vote of the
holders of at least 66 2 / 3 % of all outstanding common units voting together as a single class is required to remove our general partner. As of March 2, 2018 ,
Ciner Holdings owned 14,551,000 common units, which constitutes an aggregate of 73.8% of the common units in us.
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Table of Contents
Our
general
partner
interest
or
the
control
of
our
general
partner
may
be
transferred
to
a
third
party
without
unitholder
consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets or otherwise without
the consent of our unitholders. Furthermore, our partnership agreement does not restrict the ability of Ciner Enterprises or, another entity that controls Ciner
Enterprises, to transfer or otherwise dispose of the corresponding indirect ownership interest in our general partner to a third party. In such a situation, the new
owner of our general partner would be in a position to replace the board of directors and executive officers of our general partner with its own designees and
thereby exert significant control over the decisions taken by the board of directors and executive officers of our general partner. This effectively permits a “change
of control” without the vote or consent of our unitholders.
The
incentive
distribution
rights
held
by
our
general
partner,
or
indirectly
held
by
Ciner
Enterprises,
may
be
transferred
to
a
third
party
without
unitholder
consent.
Our general partner or Ciner Enterprises may transfer the incentive distribution rights to a third party at any time without the consent of our unitholders. If
Ciner Enterprises transfers the incentive distribution rights to a third party but retains its ownership interest in our general partner, our general partner may not have
the same incentive to grow our partnership and increase quarterly distributions to unitholders over time as it would if Ciner Enterprises had retained ownership of
the incentive distribution rights. For example, a transfer of incentive distribution rights by Ciner Enterprises could reduce the likelihood of Ciner Enterprises
accepting offers made by us to purchase assets owned by it, as it would have less of an economic incentive to grow our business, which in turn would impact our
ability to grow our asset base.
Our
general
partner
has
a
limited
call
right
that
may
require
unitholders
to
sell
their
common
units
at
an
undesirable
time
or
price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to
any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the
greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call
right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the
date such notice is first mailed. We refer to this right in this Report as the limited call right. As a result, unitholders may be required to sell their common units at
an undesirable time or price and may receive no return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units.
Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call
right. There is no restriction in our partnership agreement that prevents our general partner from issuing additional common units and exercising its limited call
right. If our general partner exercised its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no
longer be subject to the reporting requirements of the Exchange Act. As of March 2, 2018 , Ciner Holdings owned an aggregate of 73.8% of our common units.
We
may
issue
additional
units,
including
units
ranking
senior
to
common
units,
without
unitholder
approval,
which
would
dilute
existing
unitholder
ownership
interests.
Our partnership agreement does not limit the number of additional limited partner interests we may issue at any time without the approval of our unitholders.
Any additional partnership interests that we issue may be senior to the common units in right of distribution, liquidation and voting. The issuance of additional
common units or other equity interests of equal or senior rank will have the following effects:
•
•
•
•
•
•
•
•
our existing unitholders’ proportionate ownership interest in us will decrease;
the amount of cash available for distribution on each unit may decrease;
because the amount payable to holders of incentive distribution rights is based on a percentage of the total cash available for distribution, the distributions
to holders of incentive distribution rights will increase even if the per unit distribution on common units remains the same;
the ratio of taxable income to distributions may increase;
the relative voting strength of each previously outstanding unit may be diminished;
the market price of the common units may decline;
the amounts available for distributions to our common unitholders may be reduced or eliminated; and
the claims of the common unitholders to our assets in the event of our liquidations may be subordinated.
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Table of Contents
Our
general
partner
intends
to
limit
its
liability
regarding
our
obligations.
Our general partner intends to limit its liability under contractual arrangements so that the counterparties to such arrangements have recourse only against our
assets, and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to
our general partner. Our partnership agreement permits our general partner to limit its liability, even if we could have obtained more favorable terms without the
limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such
reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.
Our
partnership
agreement
restricts
the
voting
rights
of
unitholders
owning
20%
or
more
of
our
common
units.
Our partnership agreement restricts unitholders’ voting rights by providing that any units held by a person or group that owns 20% or more of any class of
units then outstanding, other than our general partner and its affiliates, their transferees and persons who acquired such units with the prior approval of the board of
directors of our general partner, cannot vote on any matter.
Cost
reimbursements
due
to
our
general
partner
and
its
affiliates
for
services
provided
to
us
or
on
our
behalf
will
reduce
our
earnings
and
therefore
our
ability
to
distribute
cash
to
our
unitholders.
The
amount
and
timing
of
such
reimbursements
will
be
determined
by
our
general
partner.
Prior to making any distribution on the common units, we will reimburse our general partner and its affiliates for all expenses they incur and payments they
make on our behalf. Our partnership agreement does not set a limit on the amount of expenses for which our general partner and its affiliates may be reimbursed.
These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf pursuant to the
Services Agreement and expenses allocated to our general partner by its affiliates. Our partnership agreement provides that our general partner will determine in
good faith the expenses that are allocable to us, including those allocated to us pursuant to the Services Agreement. The reimbursement of expenses and payment of
fees, if any, to our general partner and its affiliates will reduce our earnings and therefore our ability to distribute cash to our unitholders.
Your
liability
may
not
be
limited
if
a
court
finds
that
unitholder
action
constitutes
control
of
our
business.
A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the
partnership that are expressly made without recourse to the general partner. Our partnership is organized under Delaware law, and we conduct business primarily in
Wyoming and Georgia. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly
established in some jurisdictions. You could be liable for any and all of our obligations as if you were a general partner if a court or government agency were to
determine that:
•
•
we were conducting business in a state but had not complied with that particular state’s partnership statute; or
your right to act with other unitholders to remove or replace the general partner, to approve some amendments to our partnership agreement or to take
other actions under our partnership agreement constitute “control” of our business.
Unitholders
may
have
liability
to
repay
distributions
and
in
certain
circumstances
may
be
personally
liable
for
the
obligations
of
the
partnership.
Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware
Revised Uniform Limited Partnership Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value
of our assets. Delaware law provides that, for a period of three years from the date of the impermissible distribution, limited partners who received a distribution
and who knew at the time of such distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Transferees of
common units are liable both for the obligations of the transferor to make contributions to the partnership that were known to the transferee at the time of transfer
and for those obligations that were unknown if the liabilities could have been determined from the partnership agreement. Liabilities to partners on account of their
partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
For
as
long
as
we
are
an
emerging
growth
company,
we
will
not
be
required
to
comply
with
certain
reporting
requirements,
including
certain
accounting
standards,
an
auditor
attestation
report
on
management’s
assessment
of
internal
control
over
financial
reporting,
and
disclosure
about
our
executive
compensation,
that
apply
to
other
public
companies.
We are classified as an emerging growth company. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for
emerging growth companies, including certain requirements relating to accounting standards and compensation disclosure. For as long as we are an emerging
growth company, unlike other public companies, we will not be
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required to (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting
pursuant to Section 404(b) of the Sarbanes Oxley Act of 2002; (2) comply with any new requirements adopted by the Public Company Accounting Oversight
Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional
information about the audit and the financial statements of the issuer; (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the
SEC determines otherwise; (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold unitholder advisory
votes on executive compensation. We have chosen to “opt out” of the extended transition period for complying with new or revised accounting standards, and as a
result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth
companies. The JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is
irrevocable. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units.
We
are
an
emerging
growth
company
and
we
cannot
be
certain
if
the
reduced
disclosure
requirements
applicable
to
emerging
growth
companies
will
make
our
common
units
less
attractive
to
investors.
We are an emerging growth company, as defined in the JOBS Act, and we have taken advantage and may in the future take advantage of certain temporary
exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict if investors will find our common units
less attractive if we continue to rely on this exemption. If some investors find our common units less attractive as a result, there may be a less active trading market
for our common units, and the secondary market price of our common units may be more volatile.
The
New
York
Stock
Exchange
does
not
require
a
publicly-traded
partnership
like
us
to
comply
with
certain
of
its
corporate
governance
requirements.
Our common units are listed on the NYSE under the symbol “CINR.” Because we are a publicly-traded partnership, the NYSE does not require us to have a
majority of independent directors on our general partner’s board of directors or to establish a compensation committee or a nominating and corporate governance
committee. For example, while our independent directors advise on Ciner Corp’s compensation of our executive officers, such compensation decisions are not
ultimately approved by a committee composed solely of independent directors. Accordingly, unitholders do not have the same protections afforded to certain
corporations that are subject to all of the NYSE corporate governance requirements.
We
incur
increased
costs
as
a
result
of
being
a
publicly-traded
partnership.
As a publicly-traded partnership, we incur significant legal, accounting and other expenses that we did not incur prior to becoming public. In addition, the
Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules implemented by the SEC and the NYSE, require
publicly-traded entities to adopt various corporate governance practices that further increase our costs. These compliance requirements and costs will further
increase once we are no longer an “emerging growth company,” as defined in the JOBS Act, which will occur December 31, 2018 at the latest, as we will need to
comply with additional disclosure and reporting requirements, including an attestation report on internal control over financing reporting as of December 31, 2018
issued by our independent registered public accounting firm, and providing additional information regarding executive compensation in our Form 10-K for the
period ended December 31, 2018. Before we are able to make distributions to our unitholders, we must first pay or reserve cash for our expenses, including the
costs of being a publicly-traded partnership. As a result, the amount of cash we have available for distribution to our unitholders is affected by the costs associated
with being a public company.
The
market
price
of
our
common
units
could
be
adversely
affected
by
sales
of
substantial
amounts
of
our
common
units
in
the
public
markets,
including
sales
by
our
existing
unitholders.
Under our partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any common units or other
limited partner interests proposed to be sold by our general partner or any of its affiliates or their assignees if an exemption from the registration requirements of
the Securities Act is not otherwise available. These registration rights continue for two years following any withdrawal or removal of our general partner. The sale
or disposition of a substantial number of our common units in the public markets could have a material adverse effect on the price of our common units or could
impair our ability to obtain capital through an offering of equity securities. We do not know whether any such sales would be made in the public market or in
private placements, nor do we know what impact such potential or actual sales would have on our unit price in the future.
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Our
unitholders
who
fail
to
furnish
certain
information
requested
by
our
general
partner
or
who
our
general
partner,
upon
receipt
of
such
information,
determines
are
not
eligible
citizens
are
not
entitled
to
receive
distributions
or
allocations
of
income
or
loss
on
their
common
units
and
their
common
units
will
be
subject
to
redemption.
Our general partner may require each limited partner to furnish information about his nationality, citizenship or related status. If a limited partner fails to
furnish information about his nationality, citizenship or other related status within 30 days after a request for the information or our general partner determines after
receipt of the information that the limited partner is not an eligible citizen, the limited partner may be treated as a non-citizen assignee. A non-citizen assignee does
not have the right to direct the voting of his units and may not receive distributions in kind upon our liquidation. Furthermore, we have the right to redeem all of the
common units of any holder that is not an eligible citizen or fails to furnish the requested information. The redemption price will be paid in cash or by delivery of a
promissory note, as determined by our general partner.
We
are
dependent
on
information
technology
and
our
systems
and
infrastructure
face
certain
risks,
including
cybersecurity
risks
and
data
leakage
risks.
We are dependent on information technology systems and infrastructure. Any significant breakdown, invasion, destruction or interruption of these systems
by employees, others with authorized access to our systems, or unauthorized persons could negatively impact operations. There is also a risk that we could
experience a business interruption, theft of information, or reputational damage as a result of a cyber-attack, such as an infiltration of a data center, or data leakage
of confidential information either internally or at our third-party providers. While we have invested in the protection of our data and information technology to
reduce these risks and periodically test the security of our information systems network, there can be no assurance that our efforts will prevent breakdowns or
breaches in our systems that could adversely affect our business.
The
implementation
of
our
replacement
Enterprise
Resource
Planning
information
systems
may
negatively
impact
our
operations.
We are currently in the process of implementing a replacement Enterprise Resource Planning (“ERP”) business solution to replace our existing ERP system
for financial reporting and other services. It is our intent through this ERP implementation to integrate the major facets of our organization in order to improve
planning, development, processes, sales, human resources management and other applications as they affect our evolving business model. Any failure(s) during the
implementation process of this replacement ERP solution to develop, implement or maintain effective internal controls or to improve our internal controls could
harm our operating results or cause us to fail to meet our reporting obligations. Given the difficulties inherent in the design and operation of internal controls over a
replacement ERP system implementation, we can provide no assurance as to our, or our independent registered public accounting firm’s conclusions about the
effectiveness of our internal controls, and we may incur significant costs in our efforts to comply with Section 404 once we cease to be an emerging growth
company. Ineffective internal controls could subject us to regulatory scrutiny and a loss of confidence in our reported financial information, which could have an
adverse effect on our business and would likely have a negative effect on the trading price of our common units.
Tax Risks to Common Unitholders
Our
tax
treatment
depends
on
our
status
as
a
partnership
for
U.S.
federal
income
tax
purposes,
as
well
as
our
not
being
subject
to
a
material
amount
of
entity-
level
taxation
by
individual
states.
If
the
Internal
Revenue
Service
(“IRS”)
were
to
treat
us
as
a
corporation
for
U.S.
federal
income
tax
purposes
or
we
were
otherwise
subject
to
a
material
amount
of
entity-level
taxation,
then
our
ability
to
distribute
cash
to
our
unitholders
could
be
substantially
reduced.
The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal
income tax purposes. Despite the fact that we are organized as a limited partnership under Delaware law, we will be treated as a corporation for U.S. federal
income tax purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations, we believe we satisfy the qualifying income
requirement. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax
purposes or otherwise subject us to taxation as an entity.
If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our taxable income at the corporate tax
rate and we would also likely pay additional state and local income taxes at varying rates. Distributions to our unitholders would generally be taxed again as
corporate distributions, which would be taxable as dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and
profits as determined for U.S. federal income tax purposes, and no income, gains, losses, deductions or credits recognized by us would flow through to our
unitholders. Because tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced.
At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or
other forms of taxation. Imposition of a material amount of any of these taxes in the jurisdictions in
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Table of Contents
which we own assets or conduct business could substantially reduce the cash available for distribution to our unitholders.
If we were treated as a corporation for U.S. federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be a
material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.
Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation
or otherwise subjects us to entity-level taxation for U.S. federal, state or local income tax purposes, the target distribution amounts may be adjusted to reflect the
impact of that law on us.
The
tax
treatment
of
publicly
traded
partnerships
or
an
investment
in
our
common
units
could
be
subject
to
potential
legislative,
judicial
or
administrative
changes
and
differing
interpretations,
possibly
on
a
retroactive
basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by
administrative, legislative or judicial changes or differing interpretations at any time. For example, from time to time, members of Congress have proposed and
considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including elimination of partnership tax
treatment for publicly traded partnerships.
We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any modification to the U.S. federal income tax laws
may be applied retroactively and could make it more difficult or impossible to meet the exception for certain publicly traded partnerships to be treated as
partnerships for U.S. federal income tax purposes. and could negatively impact the value of an investment in our common units.
In addition, Treasury Regulations under Section 7704(d)(1)(E) of the Code that apply to taxable years beginning on or after January 19, 2017 interpret the
scope of the qualifying income requirement for publicly traded partnerships by providing industry-specific guidance. We believe the income that we treat as
qualifying satisfies the requirements under these regulations. However, there are no assurances that the regulations will not be revised to take a position that is
contrary to our interpretation of current law.
Unitholders
are
required
to
pay
taxes
on
their
respective
shares
of
our
income
even
if
they
do
not
receive
any
cash
distributions
from
us.
Each unitholder is treated as a partner to whom we will allocate taxable income even if the unitholder does not receive any cash distributions from us.
Unitholders are required to pay U.S. federal income taxes and, in some cases, state and local income taxes, on their respective shares of our taxable income,
whether or not they receive cash distributions from us. Our unitholders may not receive cash distributions from us equal to their respective shares of our taxable
income or even equal to the actual tax due from them with respect to that income.
Tax
gain
or
loss
on
the
disposition
of
our
common
units
could
be
more
or
less
than
expected.
If our unitholders sell their common units, they will recognize a gain or loss equal to the difference between the amount realized and our unitholders tax basis
in those common units. Because distributions in excess of their allocable share of our net taxable income result in a decrease in their tax basis in their common
units, the amount, if any, of such prior excess distributions with respect to the units they sell will, in effect, become taxable income to them if they sell such units at
a price greater than their tax basis in those units, even if the price they receive is less than their original cost. Furthermore, a substantial portion of the amount
realized, whether or not representing gain, may be taxed as ordinary income due to potential recapture of depreciation, depletion or certain other expense
deductions and certain other items. In addition, because the amount realized includes a unitholder’s share of our liabilities, if they sell their units, they may incur a
tax liability in excess of the amount of cash they receive from the sale.
Unitholders
may
be
subject
to
limitations
on
their
ability
to
deduct
interest
expense
we
incur.
Pursuant to recently enacted legislation our ability to deduct business interest expense will be limited for federal income tax purposes to an amount equal to
our business interest income and 30% of our “adjusted taxable income” during the taxable year computed without regard to any business interest income or
expense, and in the case of taxable years beginning before 2022, any deduction allowable for depreciation, amortization, or depletion. Business interest expense
that we are not entitled to fully deduct will be allocated to each unitholder as excess business interest and can be carried forward by the unitholder to successive
taxable years and used to offset any excess taxable income allocated by us to the unitholder. Any excess business interest expense allocated to a unitholder will
reduce the unitholder’s tax basis in its partnership interest in the year of the allocation even if the expense does not give rise to a deduction to the unitholder in that
year.
Tax-exempt
entities
face
unique
tax
issues
from
owning
common
units
that
may
result
in
adverse
tax
consequences
to
them.
Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts, or “IRAs”, raises issues unique to
them. For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans,
will be unrelated business taxable income and will be taxable to them.
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Tax-exempt entities with multiple unrelated trades or businesses cannot aggregate losses from one unrelated trade or business to offset income from another to
reduce total unrelated business taxable income. As a result, it may not be possible for tax-exempt entities to utilize losses from an investment in us to offset
unrelated business taxable income from another unrelated trade or business and vice versa. Tax-exempt entities should consult a tax advisor before investing in our
common units.
Non-U.S.
unitholders
will
be
subject
to
U.S.
federal
income
taxes
and
withholding
with
respect
to
income
and
gain
from
owning
our
common
units.
Non-U.S. persons are generally taxed and subject to U.S. federal income tax filing requirements on income effectively connected with a U.S. trade or
business. Income allocated to our unitholders and, under recently enacted legislation, any gain from the sale of our units will generally be considered to be
“effectively connected” with a U.S. trade or business. As a result, distributions to a non-U.S. unitholder will be subject to withholding at the highest applicable
effective tax rate and a non-U.S. unitholder who sells or otherwise disposes of a common unit will also be subject to federal income tax on the gain realized from
the sale or disposition of that unit.
Recently enacted legislation also imposes a federal income tax withholding obligation of 10% of the amount realized upon a non-U.S. person’s sale or
exchange of an interest in a partnership that is engaged in a U.S. trade or business. However, application of this withholding rule to dispositions of publicly traded
partnership interests has been temporarily suspended by the IRS until regulations or other guidance have been issued. Non-U.S. persons should consult a tax
advisor before investing in our common units.
If
the
IRS
contests
the
U.S.
federal
income
tax
positions
we
take,
the
market
for
our
common
units
may
be
adversely
impacted
and
our
cash
flow
available
for
distribution
to
our
unitholders
might
be
substantially
reduced.
The IRS may adopt positions that differ from the conclusions of our counsel expressed in this Annual Report or from the positions we take, and the IRS’s
position may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel’s conclusions or the
positions we take and such positions may not ultimately be sustained. A court may not agree with some or all of our counsel’s conclusions or the positions we take.
Any contest by the IRS may materially and adversely impact the market for our common units and the price at which they trade. In addition, our costs of any
contest with the IRS will be borne indirectly by our unitholders and our general partner because the costs will reduce our distributable cash flow.
Legislation applicable to partnership tax years beginning after 2017 alters the procedures for auditing large partnerships and for assessing and collecting
taxes due (including penalties and interest) as a result of a partnership-level federal income tax audit. If the IRS makes audit adjustments to our partnership tax
returns, to the extent possible under the new rules our general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to
the IRS in the year in which the audit is completed or, if we are eligible, issue a revised information statement to each unitholder and former unitholder with respect
to an audited and adjusted partnership tax return. Although our general partner may elect to have our unitholders and former unitholders take such audit adjustment
into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can
be no assurance that such election will be practical, permissible or effective in all circumstances. If we make payments of taxes and any penalties and interest
directly to the IRS in the year in which the audit is completed, our cash available for distribution to our unitholders might be substantially reduced, in which case
our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if the unitholders did not own units in us during the tax
year under audit.
We
treat
each
purchaser
of
our
common
units
as
having
the
same
tax
benefits
without
regard
to
the
actual
common
units
purchased.
The
IRS
may
challenge
this
treatment,
which
could
adversely
affect
the
value
of
the
common
units.
Because we cannot match transferors and transferees of common units, our depreciation, depletion and amortization positions may not conform to all aspects
of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. It
also could affect the timing of these tax benefits or the amount of gain from the sale of common units and could have a negative impact on the value of our
common units or result in audit adjustments to a unitholder’s tax returns.
We
prorate
our
items
of
income,
gain,
loss
and
deduction
between
transferors
and
transferees
of
our
units
based
upon
the
ownership
of
our
units
on
the
first
day
of
each
month,
instead
of
on
the
basis
of
the
date
a
particular
unit
is
transferred.
The
IRS
may
challenge
this
treatment,
which
could
change
the
allocation
of
items
of
income,
gain,
loss
and
deduction
among
our
unitholders.
We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units based upon the ownership of
our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. Although Treasury Regulations allow
publicly traded partnerships to use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, such tax items must
be prorated on a daily basis and these regulations do not specifically authorize all aspects our proration method. If the IRS were to successfully challenge our
proration method, we may be required to change the allocation of items of income, gain, loss, and deduction among our unitholders.
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A
unitholder
whose
common
units
are
the
subject
of
a
securities
loan
(e.g.,
a
loan
to
a
“short
seller”
to
cover
a
short
sale
of
common
units)
may
be
considered
as
having
disposed
of
those
common
units.
If
so,
the
unitholder
would
no
longer
be
treated
for
tax
purposes
as
a
partner
with
respect
to
those
common
units
during
the
period
of
the
loan
and
may
recognize
gain
or
loss
from
the
disposition.
Because there is no tax concept of loaning a partnership interest, a unitholder whose common units are the subject of a securities loan may be considered as
having disposed of the loaned units. In that case, the unitholder may no longer be treated for tax purposes as a partner with respect to those common units during
the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our
income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as
to those common units could be fully taxable as ordinary income. Our unitholders desiring to assure their status as partners and avoid the risk of gain recognition
from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit
their brokers from loaning their common units.
We
have
adopted
certain
valuation
methodologies
in
determining
a
unitholder’s
allocations
of
income,
gain,
loss
and
deduction.
The
IRS
may
challenge
these
methodologies
or
the
resulting
allocations,
and
such
a
challenge
could
adversely
affect
the
value
of
our
common
units.
In determining the items of income, gain, loss and deduction allocable to our unitholders, we must routinely determine the fair market value of our assets.
Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates ourselves using a
methodology based on the market value of our common units as a means to determine the fair market value of our assets. The IRS may challenge these valuation
methods and the resulting allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the timing or amount of taxable income or loss being allocated to our
unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units
or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
As
a
result
of
investing
in
our
common
units,
our
unitholders
may
become
subject
to
state
and
local
taxes
and
return
filing
requirements
in
jurisdictions
where
we
operate
or
own
or
acquire
properties.
In addition to U.S. federal income taxes, our unitholders may be subject to other taxes, including state and local income taxes, unincorporated business taxes
and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or control property now or in the future, even
if they do not live in any of those jurisdictions. Further, unitholders may be subject to penalties for failure to comply with those requirements. As we make
acquisitions or expand our business, we may own assets or conduct business in additional states or foreign jurisdictions that impose a personal income tax. It is a
unitholder’s responsibility to file all U.S. federal, foreign, state and local tax returns.
Changes
in
accounting
standards
issued
by
the
Financial
Accounting
Standards
Board
(“FASB”)
could
have
a
material
effect
on
our
balance
sheet,
revenue
and
result
of
operations,
and
could
require
a
significant
expenditure
of
time,
attention
and
resources,
especially
by
senior
management.
Our accounting and financial reporting policies conform to GAAP, which are periodically revised and/or expanded. The application of accounting principles is also
subject to varying interpretations over time. Accordingly, we are required to adopt new or revised accounting standards or comply with revised interpretations that
are issued from time to time by various parties, including accounting standard setters and those who interpret the standards, such as the FASB and the SEC and our
independent registered public accounting firm. Such new financial accounting standards may result in significant changes that could adversely affect our financial
condition and results of operations.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing GAAP regarding revenue recognition.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires all operating leases with lease terms longer than twelve months be recorded as lease
assets and lease liabilities on our consolidated balance sheets. Implementing changes required by new standards, requirements or laws likely will require a
significant expenditure of time, attention and resources. It is impossible to completely predict the impact, if any, on us of future changes to accounting standards
and financial reporting and corporate governance requirements.
Refer to Note 2 “Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements” of the Notes to the Consolidated Financial
Statements for further discussion of these new accounting standards, including the implementation status and potential impact to our consolidated financial
statements.
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Table of Contents
ITEM 1B. Unresolved
Staff
Comments
None .
ITEM 2. Properties
In addition to the information provided below, information regarding our properties is included in Item 1. “Business — Our Operations,” “Leases and
License” and “Trona Reserves” and is incorporated by reference in this Item.
Our Green River Basin facility is situated on approximately 880 acres in the Green River Basin of Wyoming. We own the surface land and its
improvements in fee, which we acquired pursuant to a quitclaim deed in 1991. See Item 1A, “Risk Factors —
Risks Inherent in Our Business and Industry —
Defects in title or loss of any leasehold interests in our properties could limit our ability to conduct mining operations on these properties or result in significant
unanticipated costs ” for more information. We have operated our facility since 1996, prior to which Rhône-Poulenc was the operator. In addition, we have
approximately 23,500 acres of subsurface leased/licensed mining areas. Four ponds on the property of our Green River Basin facility enable us to store the by-
products from our refining process. We draw the water necessary for our refining processes from the nearby Green River. Our mining assets consist of two mining
beds with five active mining faces at any one given time. The mine is served by three separate mine shafts.
Our general partner leases 21,688 square feet of office space for its headquarters in Atlanta, Georgia.
We believe that our facilities are adequate for our current and anticipated needs.
Item 3. Legal
Proceedings
From time to time we are party to various claims and legal proceedings related to our business. Although the outcome of these proceedings cannot be
predicted with certainty, management does not currently expect any of the legal proceedings we are involved in to have a material effect on our business, financial
condition and results of operations. We cannot predict the nature of any future claims or proceedings, nor the ultimate size or outcome of existing claims and legal
proceedings and whether any damages resulting from them will be covered by insurance.
On February 2, 2016, Ciner Wyoming LLC filed suit against Rock Springs Royalty Company (“RSRC”) in the Third Judicial District Court in Sweetwater
County, Wyoming, Case No. C-16-77-L, seeking, among other things, to recover approximately $30 million in royalty overpayments. The royalty payments arose
under our license with RSRC, an affiliate of Anardarko Petroleum Corporation, to mine sodium minerals from lands located in Sweetwater County, Wyoming
(“License”). The License sets the applicable royalty rate based on a most favored nation clause, where either the royalty rate is set at the same royalty rate we pay
to other licensors in Sweetwater County for sodium minerals, or, if certain conditions are met, the royalty rate is set by the rate paid by a third party to Anadarko
Petroleum Corporation under a separate license. In the lawsuit, we claim that RSRC has, for at least the last 10 years, been charging an arbitrarily high royalty rate
in contradiction of the License terms. Although we intend to vigorously pursue collection of the full amount owed to us by RSRC, we cannot provide assurance as
to what amount, if any, we may be able to collect. At this early stage of the litigation it is not possible to predict whether settlement of this claim is a possibility.
Item 4. Mine
Safety
Disclosures
Information regarding mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Report.
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Item 5. Market
for
Registrant’s
Common
Equity,
Related
Stockholder
Matters
and
Issuer
Purchases
of
Equity
Securities
Our common units are listed on the New York Stock Exchange ("NYSE") under the symbol “CINR.” As of March 2, 2018 , Ciner Holdings owned
14,551,000 common units. The closing sales price of our common units on NYSE on March 2, 2018 was $27.20 . Ciner Holdings has approximately 74%
ownership interest in us and the public owned 5,026,979 common units which constitutes an approximately 25% ownership interest in us. There are nine record
holders of our outstanding common units as of March 2, 2018 .
PART II
The following table sets forth, for the periods indicated, the range of the high and low sales prices of our common units and cash distributions declared per
unit.
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Quarter Ended
2017
2016
Sales Price per Common Units
High
Low
Quarterly Cash
Distribution
Declared per Unit
Distribution Date
Record Date
$
26.25 $
24.16 $
27.97
29.30
32.22
23.57
27.00
27.23
$
32.00 $
28.36 $
39.10
30.61
26.45
27.51
25.26
18.81
0.5670
0.5670
0.5670
0.5670
0.5670
0.5670
0.5670
0.5640
2/27/2018
11/20/2017
8/21/2017
5/15/2017
2/12/2018
11/6/2017
8/7/2017
5/1/2017
2/13/2017
11/11/2016
8/12/2016
5/13/2016
1/31/2017
10/28/2016
7/29/2016
4/29/2016
Distributions of Available Cash from Operating Surplus and Capital Surplus
General
Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute our available cash to unitholders of record on the
applicable record date.
Definition
of
Available
Cash
Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter:
less, the amount of cash reserves established by our general partner to:
•
•
•
provide for the proper conduct of our business (including reserves for our future capital expenditures and for anticipated future credit needs
subsequent to that quarter);
comply with applicable law, any of our debt instruments or other agreements; or
provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our
general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from
distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current
quarter);
plus, if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter, resulting
from working capital borrowings made subsequent to the end of such quarter.
The purpose and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash received by us after the end of the quarter but on or
before the date of determination of available cash for the quarter, including cash on hand from working capital borrowings made after the end of the quarter but on
or before the date of determination of available cash for that quarter, to pay distributions to unitholders. Under our partnership agreement, working capital
borrowings are generally borrowings that are made under a credit facility, commercial paper facility or similar financing arrangement, and in all cases are used
solely for working capital purposes or to pay distributions to partners, and with the intent of the borrower to repay such borrowings within 12 months with funds
other than from additional working capital borrowings.
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Any distributions we make will be characterized as made from “operating surplus” or “capital surplus.” Distributions of available cash from operating
surplus are made differently than distributions of available cash that we would make from capital surplus. Operating surplus distributions will be made to first our
unitholders. If our quarterly distributions exceed the first target distribution level described below, then operating surplus distributions will also be made to the
holder of our incentive distribution rights (“IDRs”). We do not anticipate that we will make any distributions from capital surplus. If we do make any capital
surplus distribution, however, we will distribute such amount pro rata to all unitholders. The holder of the IDRs would generally not participate in any capital
surplus distributions with respect to those rights.
In determining operating surplus and capital surplus, we will only take into account our proportionate share of our interest in our consolidated
subsidiaries, so long as they are not wholly owned, as well as our proportionate share of entities accounted for under the equity method.
Operating
Surplus
We define operating surplus as:
• $20.0 million; plus
•
all of our cash receipts, including amounts received by us from OCI Enterprises under the Omnibus Agreement for periods prior to the consummation of
the Transaction, and, Ciner Corp under the Service Agreement for periods subsequent to the consummation of the Transaction, in each case, to the extent such
amounts offset operating expenditures or lost revenue, and excluding cash from interim capital transactions (as defined below) and, under certain circumstances,
the termination of hedge contracts; plus
• working capital borrowings, if any, made after the end of a period but on or before the date of determination of operating surplus for the period; plus
•
cash distributions paid in respect of equity issued (including incremental distributions on IDRs), to finance all or a portion of replacement, improvement
or expansion capital expenditures in respect of the period from such financing until the earlier to occur of (1) the date the related capital improvement commences
commercial service and (2) the date that it is abandoned or disposed of; plus
•
cash distributions paid in respect of debt or equity issued (including incremental distributions on IDRs) to pay the construction period interest on debt
incurred, or to pay construction period distributions on equity issued, to finance the expansion capital expenditures referred to above, in each case, in respect of the
period from such financing until the earlier to occur of (1) the date the capital asset is placed in service and (2) the date that it is abandoned or disposed of; less
•
all of our operating expenditures (as defined below); less
•
the amount of cash reserves or our proportionate share of cash reserves in the case of subsidiaries that are not wholly owned established by our general
partner to provide funds for future operating expenditures; less
•
all working capital borrowings not repaid within twelve months after having been incurred, or repaid within such twelve-month period with the proceeds
of additional working capital borrowings; less
•
any cash loss realized on disposition of an investment capital expenditure.
We will include in operating surplus, when collected, cash receipts equal to our proportionate share of accounts receivable that are retained by Ciner Corp
(or OCI Enterprises for periods prior to the Transaction).
As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders and is not limited to cash
generated by our operations. For example, it includes a basket of $20.0 million that will enable us, if we choose, to distribute as operating surplus cash we receive
in the future from non-operating sources such as asset sales, issuances of securities and long-term borrowings that would otherwise be distributed as capital surplus.
In addition, by including, as described above, certain cash distributions on equity interests in operating surplus, we will increase operating surplus by the amount of
any such cash distributions. As a result, we may also distribute as operating surplus up to the amount of any such cash that we receive from non-operating sources.
The proceeds of working capital borrowings increase operating surplus, and repayments of working capital borrowings are generally operating expenditures,
as described below. Therefore, we will reduce operating surplus when we repay working capital borrowings. However, if we do not repay a working capital
borrowing during the twelve-month period following such borrowing, it will be deemed to be repaid at the end of such period, thereby decreasing operating surplus
at such time. When such working capital borrowing is, in fact, repaid, it will be excluded from operating expenditures because operating surplus will have been
previously reduced by the deemed repayment.
We define operating expenditures in our partnership agreement, which generally means all of our cash expenditures, including:
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•
taxes,
•
reimbursement of expenses to our general partner or its affiliates,
• payments made in the ordinary course of business under interest rate hedge agreements or commodity hedge agreements (provided that (1) with respect
to amounts paid in connection with the initial purchase of an interest rate hedge contract or a commodity hedge contract, we will amortize such amounts over the
life of the applicable interest rate hedge contract or commodity hedge contract, and (2) we will include in operating expenditures payments made in connection
with the termination of any interest rate hedge contract or commodity hedge contract prior to the expiration of its stipulated settlement or termination date of such
contracts in equal quarterly installments over the remaining scheduled life of such contract),
•
compensation of officers and directors of our general partner,
•
repayment of working capital borrowings,
• debt service payments, and
• payments made in the ordinary course of business under any hedge contracts.
However, operating expenditures will not include:
•
repayment of working capital borrowings deducted from operating surplus pursuant to the penultimate bullet point of the definition of operating surplus
above when such repayment actually occurs;
• payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness, other than working capital borrowings;
•
expansion capital expenditures;
•
investment capital expenditures;
• payment of transaction expenses relating to interim capital transactions;
• distributions to our partners (including distributions in respect of our IDRs); or
•
repurchases of equity interests except to fund obligations under employee benefit plans.
Capital
Surplus
Capital surplus is defined in our partnership agreement as any available cash distributed in excess of our operating surplus. Accordingly, we will generate
capital surplus generally only by the following (which we refer to as “interim capital transactions”):
• borrowings, refinancings or refundings of indebtedness other than working capital borrowings and other than for items purchased on open account or for
a deferred purchase price in the ordinary course of business;
•
sales of our equity and debt securities;
•
sales or other dispositions of assets, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of
normal retirement or replacement of assets; and
•
capital contributions received.
Quarterly Distributions
On February 1, 2018 , the Partnership declared its fourth quarter 2017 quarterly distribution. The quarterly cash distribution of $0.5670 per unit was paid on
February 27, 2018 to unitholders of record on February 12, 2018 .
Percentage Allocations of Distributions from Operating Surplus
The following table illustrates the percentage allocations of distributions from operating surplus between the unitholders and our general partner based on
the specified target distribution levels. The amounts set forth under the column heading “Marginal Percentage Interest in Distributions” are the percentage interests
of our general partner and the unitholders in any distributions from operating surplus we distribute up to and including the corresponding amount in the column
“Total Quarterly Distribution per Unit Target Amount.” The percentage interests shown for our unitholders and our general partner for the minimum quarterly
distribution also apply to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our
general partner (1) include a 2.0% general partner interest, (2) assume that our general partner has contributed any additional capital necessary to maintain its 2.0%
general partner interest, (3) assume that our general partner has not transferred its IDRs and (4) assume there are no arrearages on common units.
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Minimum Quarterly Distribution
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Total Quarterly
Distribution per Unit
Target Amount
$0.5000
above $0.5000 up to $0.5750
above $0.5750 up to $0.6250
above $0.6250 up to $0.7500
above $0.7500
Marginal Percentage
Interest in
Distributions
Unitholders
General Partner
98.0%
98.0%
85.0%
75.0%
50.0%
2.0%
2.0%
15.0%
25.0%
50.0%
Securities Authorized for Issuance under Equity Compensation Plan
See Item 12 , “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information relating to
compensation plans under which the Partnership’s securities are authorized for issuance.
During the three months ended December 31, 2017 , the Partnership did not repurchase any of its equity securities.
Item 6. Selected
Financial
Data
The following table provides selected historical financial data of the Partnership and our Predecessor for the periods and as of the dates indicated. The
financial data provided should be read in conjunction with management’s discussion and analysis of financial condition and results of operations and our audited
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As a result of the restructuring in connection with our
IPO (the “Restructuring”), the historical results of our Predecessor have been restated to reflect the combination of the ownership interests in Ciner Wyoming
previously held by our Predecessor adjusted for certain push-down accounting effects. Prior to the completion of the Restructuring, non-controlling interests in the
consolidated financial statements of our Predecessor represented the 1.0% limited partner interest in Ciner Wyoming (formerly OCI Wyoming LLC) owned by
OCI Wyoming Co. (“Wyoming Co.”) and the 48.51% general partner interest in Ciner Wyoming owned by NRP. Subsequent to the Restructuring and IPO, but
prior to the conversion of Ciner Wyoming from a Delaware LP to a Delaware LLC, non-controlling interests in the consolidated financial statements of the
Partnership consisted of 39.37% general partner interest and 9.63% limited partner interest in Ciner Wyoming owned by NRP. The selected consolidated financial
data for the year ended December 31, 2013 includes the combined results of our Predecessor through September 17, 2013 and the Partnership for the period from
September 18, 2013 (the closing date of our IPO) through December 31, 2013, all derived from the Partnership’s 2013 audited financial statements.
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Statement of operations data:
(In millions, except per unit data)
Results of Operations:
Net sales
For the years ended December 31,
2017
2016
2015
2014
2013
$
497.3 $
475.2 $
486.4 $
465.0 $
442.1
Cost of products sold, including freight costs, depreciation, depletion and amortization
expense
383.8
361.7
356.1
347.7
349.0
Selling, general and administrative expenses
Impairment and loss on disposal of assets, net
Operating income
Total other income/(expense), net
Income before provision for income taxes
Provision for income taxes (3)
Net income
Net income attributable to non-controlling interest
Net income attributable to Ciner Resources LP
22.4
1.6
89.5
(3.1)
86.4
—
23.3
0.3
89.9
(3.6)
86.3
—
20.0
0.2
110.1
(3.9)
106.2
—
20.3
1.0
96.0
(4.1)
91.9
—
$
86.4 $
86.3 $
106.2 $
91.9 $
44.8
44.9
54.7
47.4
$
41.6 $
41.4 $
51.5 $
44.5 $
Less: Predecessor net income prior to initial public offering on September 18, 2013
—
—
—
—
Net income attributable to Ciner Resources LP subsequent to initial public offering
$
41.6 $
41.4 $
51.5 $
44.5 $
Net income per limited partner unit:
Net income per limited partner unit (basic)
Net income per limited partner unit (diluted)
Limited partner units outstanding:
Weighted average limited partner units outstanding (basic)
Weighted average limited partner units outstanding (diluted)
Cash distribution declared per unit (1)
Adjusted EBITDA (2)
Distributable cash flow (1)(2)
Distribution coverage ratio (1)(2)
$
$
$
$
$
2.08 $
2.08 $
2.58 $
2.23 $
2.07 $
2.08 $
2.58 $
2.23 $
19.6
19.7
19.6
19.6
19.6
19.6
19.6
19.6
2.27 $
2.27 $
2.19 $
2.06 $
120.1 $
116.5 $
133.9 $
120.5 $
104.4
52.0 $
50.4 $
56.8 $
53.5 $
1.14
1.10
1.27
1.29
14.0
1.23
13.2
—
79.9
(2.2)
77.7
7.1
70.6
44.3
26.3
13.3
13.0
0.65
0.65
19.6
19.6
0.57
(1) For the year ended December 31, 2013, cash distribution declared per unit, distributable cash flow and distribution coverage ratio are as of the period from
September 18, 2013, the closing date of our IPO, through December 31, 2013.
(2) Adjusted EBITDA is defined as net income (loss) plus net interest expense, income tax, depreciation, depletion and amortization and certain other
expenses that are non-cash charges or that we consider not to be indicative of ongoing operations. Please see non-GAAP reconciliations in, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures” for additional information.
(3) The Partnership is a limited partnership and generally is not subject to federal or certain state income taxes. The Predecessor was subject to income taxes,
and as such, the year ended December 31, 2013 (prior to IPO), includes income tax expense of the Predecessor.
Balance sheet data (at period end):
(In millions)
Total assets
Long-term debt
Partners’ capital attributable to Ciner Resources LP
Non-controlling interests
Total equity
As of December 31,
2017
2016
2015
2014
2013
$
453.2 $
413.1 $
423.2 $
447.4 $
138.0
148.4
99.8
248.2
89.4
153.3
105.9
259.2
110.0
156.0
107.2
263.2
145.0
147.6
100.9
248.5
442.2
155.0
144.6
96.7
241.3
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Cash flow data (at period end):
(In millions)
Cash provided by (used in):
Operating activities
Investing activities (primarily capital expenditures)
Financing activities
For the years ended December 31,
2017
2016
2015
2014
2013
$
79.3 $
128.3 $
150.2 $
106.1 $
100.3
(24.7)
(44.1)
(25.3)
(35.7)
(103.7)
(125.1)
(27.2)
(94.8)
(16.2)
(59.9)
Item 7. Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
References
References in this Annual Report on Form 10-K (“Report”) to the “Predecessor,” “we,” “our,” “us,” or like terms, when used in a historical context (periods
prior to September 18, 2013, the closing date of our initial public offering (“IPO”), refer to Ciner Wyoming Holding Co., a Delaware company (“Ciner Holdings”)
and its subsidiary, our predecessor for accounting purposes. References in this Report to “CINR,” the “Partnership,” “we,” “our,” “us,” or like terms, when used in
the present tense or prospectively (starting September 18, 2013), refer to Ciner Resources LP, a Delaware limited partnership, and its subsidiary. References to
“Ciner Wyoming” refer to Ciner Wyoming LLC, a Delaware limited liability company and consolidated subsidiary of the Partnership. References to “our general
partner” or “Ciner GP” refer to Ciner Resource Partners LLC, a Delaware limited liability company and the general partner of Ciner Resources LP and a direct
wholly-owned subsidiary of Ciner Holdings, which is a direct wholly-owned subsidiary of Ciner Resources Corporation, a Delaware corporation (“Ciner Corp”).
Ciner Corp is a direct wholly-owned subsidiary of Ciner Enterprises Inc., a Delaware corporation (“Ciner Enterprises”), which is a direct wholly-owned subsidiary
of WE Soda Ltd., a U.K. corporation (“WE Soda”). WE Soda is a direct wholly-owned subsidiary of KEW Soda Ltd., a U.K. corporation (“KEW Soda”), which is
a direct wholly-owned subsidiary of Akkan Enerji ve Madencilik Anonim Şirketi (“Akkan”). Akkan is directly and wholly owned by Turgay Ciner, the Chairman
of the Ciner Group (“Ciner Group”), a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping
markets. All our soda ash processed is currently sold to various domestic and international customers, including American Natural Soda Ash Corporation
(“ANSAC”) and Ciner Ic ve Dis Ticaret Anonim Sirketi (“CIDT”), both of which are our affiliates for export sales.
You should read the following management's discussion and analysis of financial condition and results of operations in conjunction with the historical
consolidated financial statements, and notes thereto, included elsewhere in this Report.
Overview
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and notes to consolidated financial statements included elsewhere in this Report, as well as the historical consolidated financial statements and notes
thereto of Ciner Holdings, our Predecessor. The following discussion and analysis contains forward-looking statements that reflect our future plans, estimates,
beliefs and expected performance. Our actual results and financial condition may differ materially from those implied or expressed by these forward-looking
statements. Please read “Cautionary Statement Concerning Forward-Looking Statements” and the risk factors discussed in Item 1A " Risk Factors" of this Report.
We are a Delaware limited partnership formed by Ciner Holdings to own 51% membership interest in, and to operate the trona ore mining and soda ash
production business of, Ciner Wyoming. Ciner Wyoming is currently one of the world’s largest producers of soda ash, serving a global market from its facility in
the Green River Basin of Wyoming. Our facility has been in operation for more than 50 years.
NRP Trona LLC, a wholly owned subsidiary of Natural Resource Partners LP ("NRP") currently owns a 49% membership interest in Ciner Wyoming.
On October 23, 2015, Ciner Enterprises indirectly acquired OCI Enterprises Inc.’s (“OCI Enterprises”) approximately 73% limited partner interest in the
Partnership, as well as its 2% general partner interest and related incentive distribution rights (the “Transaction”). Prior to the Transaction, OCI Enterprises
indirectly owned and controlled our general partner. The Transaction did not involve the sale or purchase of any of our common units held by the public. As a
result of the closing of the Transaction, Ciner Enterprises indirectly owns and controls our general partner, and OCI Enterprises no longer has any direct or indirect
ownership or control in the Partnership or our general partner.
Factors Affecting Our Results of Operations
Soda
Ash
Supply
and
Demand
Our net sales, earnings and cash flow from operations are primarily affected by the global supply of, and demand for soda ash, which, in turn, directly
impacts the prices we and other producers charge for our products.
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Demand for soda ash in the United States is driven in large part by general economic growth and activity levels in the end-markets that the glass-making
industry serve, such as the automotive and construction industries. Because the United States is a well-developed market, we expect that domestic demand levels
will remain stable for the near future. Because future U.S. capacity growth is expected to come from the four major producers in the Green River Basin, we also
expect that U.S. supply levels will remain relatively stable in the near term.
Soda ash demand in international markets has continued to grow in conjunction with GDP. We expect that future global economic growth will positively
influence global demand, which will likely result in increased exports, primarily from the United States, Turkey and to a limited extent, from China, the largest
suppliers of soda ash to international markets. However, in the near term, new supply coming on-line, primarily in Turkey, may exceed any new growth in demand
and could have an impact on international pricing.
Sales
Mix
We expect to grow our domestic market share in the near future while also remaining focused on international markets. Our operations have been and
continue to be sensitive to fluctuations in freight and shipping costs and changes in international prices, which have historically been more volatile than domestic
prices. Our gross profit will be impacted by the mix of domestic and international sales as a result of changes in input costs and our average selling prices.
Energy
Costs
One of the primary impacts to our profitability is our energy costs. Because we depend upon natural gas and electricity to power our trona ore mining and
soda ash processing operations, our net sales, earnings and cash flow from operations are sensitive to changes in the prices we pay for these energy sources. Our
cost of energy, particularly natural gas, has been relatively low in recent years, and, despite the historic volatility of natural gas prices, we believe that we will
continue to benefit from relatively low prices in the near future. However, we expect to continue to hedge a portion of our forecasted natural gas purchases to
mitigate volatility.
See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk - Commodity Price Risks,” for additional information.
How We Evaluate Our Business
Productivity
of
Operations
Our soda ash production volume is primarily dependent on the following three factors: (1) operating rate, (2) quality of our mined trona ore and (3) recovery
rates. Operating rate is a measure of utilization of the effective production capacity of our facilities and is determined in large part by productivity rates and
mechanical on-stream times, which is the percentage of actual run times over the total time scheduled. We implement two planned outages of our mining and
surface operations each year, typically in the second and third quarters. During these outages, which last approximately one week, we repair and replace equipment
and parts. Periodically, we may experience minor unplanned outages caused by various factors, including equipment failures, power outages or service
interruptions. The quality of our mine ore is determined by measuring the trona ore recovered as a percentage of the deposit, which includes both trona ore and
insolubles. Plant recovery rates are generally determined by calculating the soda ash produced divided by the sum of the soda ash produced plus soda ash that is not
recovered from the process. All of these factors determine the amount of trona ore we require to produce one short ton of soda ash and liquor, which we refer to as
our “ore to ash ratio.” Our ore to ash ratio for the years ended December 31, 2017 , 2016 and 2015 , was 1.50: 1.0 , 1.50: 1.0 and 1.52: 1.0 , respectively.
Freight
and
Logistics
The soda ash industry is logistics intensive and involves careful management of freight and logistics costs. These freight costs make up a large portion of the
total delivered cost to the customer. Delivered costs to most domestic customers and ANSAC primarily consists of rail freight services. Some domestic customers
may elect to arrange their own freight and logistic services. Delivered costs to non-ANSAC international customers primarily consists of both rail freight services
to the port of embarkation and the additional ocean freight to the port of disembarkation.
Union Pacific is our largest provider of domestic rail freight services and accounted for 74.3% , 83.1% and 83.9% of our total freight costs for the years
ended December 31, 2017 , 2016 and 2015 , respectively. The decline in the percentage of freight that is related to Union Pacific is due to the increase in
international freight services. Our agreement with Union Pacific generally requires that the freight rate we are charged be increased annually based on a published
index tied to certain rail industry metrics. We generally pass on to our customers increases in our freight costs but we may be unsuccessful in doing so in the future.
Net
Sales
Net sales include the amounts we earn on sales of soda ash. We recognize revenue from our sales when there is persuasive evidence of an arrangement
between us and the customer, products have been delivered to the customer, selling price is fixed, determinable or reasonably estimated and collection is
reasonably assured. Substantially all of our sales are derived from sales of soda ash, which we sell through our exclusive sales agent, Ciner Corp. A small amount
of our sales is derived from sales of production
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purge, which is a by-product liquor solution containing soda ash that is produced during the processing of trona ore. For the purposes of our discussion below, we
include these transactions in domestic sales of soda ash and in the volume of domestic soda ash sold.
Sales prices for sales through ANSAC include the cost of freight to the ports of embarkation for overseas export or to Laredo, Texas for sales to Mexico.
Sales prices for other international sales may include the cost of rail freight to the port of embarkation, the cost of ocean freight to the port of disembarkation for
import by the customer and the cost of inland freight required for delivery to the customer.
In November 2016, Ciner Corp, on behalf of Ciner Wyoming, entered into a soda ash sales agreement with CIDT to sell soda ash to markets not served by
ANSAC. Sales to CIDT include the cost of rail freight to the port of embarkation and the additional ocean freight to the port of disembarkation.
Cost
of
products
sold
Expenses relating to employee compensation, energy, including natural gas and electricity, royalties and maintenance materials constitute the greatest
components of cost of products sold. These costs generally increase in line with increases in sales volume.
Energy. A major item in our cost of products sold is energy, comprised primarily of natural gas and electricity. We primarily use natural gas to fuel our
above-ground processing operations, including the heating of calciners, and we use electricity to power our underground mining operations, including our
continuous mining machines, or continuous miners, and shuttle cars. The monthly Henry Hub natural gas settlement prices, over the past five years, have ranged
between $1.73 and $6.00 . The average monthly Henry Hub natural gas settlement prices for the years ended December 31, 2017 and 2016 , were $2.99 and $2.52
per MMBtu, respectively. In order to mitigate the risk of gas price fluctuations, we hedge a portion of our forecasted natural gas purchases by entering into physical
or financial gas hedges generally ranging between 20% and 80% of our expected monthly gas requirements, on a sliding scale, for approximately the next five
years. See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk - Commodity Price Risks,” for additional information.
Employee Compensation. See Item 8, Financial Statements and Supplementary Data—Note 11, “Employee Compensation,” for information on the various
plans.
Royalties. We pay royalties to the State of Wyoming, the U.S. Bureau of Land Management and Rock Springs Royalty Company (“Rock Springs”), an
affiliate of Anadarko Petroleum, which are calculated based upon a percentage of the quantity or gross value of soda ash and related products at a certain stage in
the mining process, or a certain sum per each ton of such products. These royalty payments are typically subject to a minimum domestic production volume from
our Green River Basin facility, although we are obligated to pay minimum royalties or annual rentals to our lessors and licensor regardless of actual sales. We also
pay a production tax to Sweetwater County, and trona severance tax to the State of Wyoming that is calculated based on a formula that utilizes the volume of trona
ore mined and the value of the soda ash produced.
The royalty rates we pay to our lessors and licensor may change upon our renewal of such leases and license. Under our license with Rock Springs, the
applicable royalty rate may vary based on a most favored nation clause in the license. The applicable royalty rate in the license may be adjusted if we pay a higher
royalty rate to certain other mineral rights owners in Sweetwater County, Wyoming. The extent to which Rock Springs may increase the applicable royalty rate is
currently the subject of litigation in Wyoming. Any increase in the royalty rates we are required to pay to our lessors and licensor, or any failure by us to renew any
of our leases and license, could have a material adverse impact on our results of operations, financial condition or liquidity, and, therefore, may affect our ability to
distribute cash to unitholders. See Part I, Item 3, “Legal Proceedings,” for additional information.
Selling,
general
and
administrative
expenses
Selling, general and administrative expenses incurred by our affiliates on our behalf are allocated to us based on the time the employees of those
companies spend on our business and the actual direct costs they incur on our behalf. Selling, general and administrative expenses incurred by ANSAC on our
behalf are allocated to us based on the proportion of ANSAC’s total volumes sold for a given period attributable to the soda ash sold by us to ANSAC. On October
23, 2015, the Partnership entered into a Services Agreement (the “Services Agreement”), among the Partnership, our general partner and Ciner Corp. Pursuant to
the Services Agreement, Ciner Corp has agreed to provide the Partnership with certain corporate, selling, marketing, and general and administrative services, in
return for which the Partnership has agreed to pay Ciner Corp an annual management fee, subject to quarterly adjustments, and reimburse Ciner Corp for certain
third-party costs incurred in connection with providing such services. In addition, under the joint venture agreement governing Ciner Wyoming, it reimburses us
for employees who operate our assets and for support provided to Ciner Wyoming.
Results of Operations
A discussion and analysis of the factors contributing to our results of operations is presented below for the periods and as of the dates indicated. The
financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations, but
should not serve as the only criteria for predicting our future performance.
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The following tables set forth our results of operations for the years ended December 31, 2017 , 2016 and 2015 .
(In millions; except for operating and other data section)
Net sales
Cost of products sold:
Cost of products sold
Depreciation, depletion and amortization expense
Freight costs
Total cost of products sold
Gross profit
Operating expenses:
Selling, general and administrative expenses
Impairment and loss on disposal of assets, net
Total operating expenses
Operating income
Other income/(expenses):
Interest income
Interest expense
Other - net
Total other income/(expense), net
Net income
Net income attributable to non-controlling interest
Net income attributable to Ciner Resources LP
Operating and Other Data:
Trona ore consumed (thousands of short tons)
Ore to ash ratio (1)
Soda ash volume produced (thousands of short tons)
Soda ash volume sold (thousands of short tons)
Adjusted EBITDA (2)
Years Ended December 31,
2017
2016
2015
$
497.3 $
475.2 $
486.4
211.0
27.1
145.7
383.8
113.5
22.4
1.6
24.0
89.5
1.7
(4.6)
(0.2)
(3.1)
216.0
26.1
119.6
361.7
113.5
23.3
0.3
23.6
89.9
—
(3.6)
—
(3.6)
$
86.4 $
44.8
$
41.6 $
86.3 $
44.9
41.4 $
210.3
23.7
122.1
356.1
130.3
20.0
0.2
20.2
110.1
—
(4.0)
0.1
(3.9)
106.2
54.7
51.5
4,001.3
4,050.4
1.50: 1.0
1.50: 1.0
2,666.9
2,705.4
2,695.3
2,735.7
$
120.1 $
117.1 $
4,040.3
1.52: 1.0
2,662.9
2,655.4
135.0
(1) Ore to ash ratio expresses the number of short tons of trona ore needed to produce one short ton of soda ash and liquor and includes our deca rehydration
recovery process. In general, a lower ore to ash ratio results in lower costs and improved efficiency.
(2) For a discussion of the non-GAAP financial measure Adjusted EBITDA, please read “Non-GAAP Financial Measures” of this Management’s Discussion
and Analysis.
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Analysis of Results of Operations
The following table sets forth a summary of net sales, sales volumes and average sales price, and the percentage change between the periods:
($ in millions, except per ton data)
Net sales ($ in millions):
Domestic
International
Total net sales
Sales volumes (thousands of short tons):
Domestic (thousands of short tons)
International (thousands of short tons)
Total soda ash volume sold (thousands of short tons)
Average sales price (per short ton):
Domestic
International
Average
Percent of net sales:
Domestic sales
International sales
Total percent of net sales
2017
compared
to
2016
Consolidated Results
Years Ended
December 31,
2017
2016
2015
Percent Increase/(Decrease)
2017 vs 2016 2016 vs 2015
$
$
$
192.8
304.5
497.3
$
$
$
192.6
282.6
475.2
$
$
$
194.0
292.4
486.4
877.4
1,828.0
2,705.4
888.3
1,847.4
2,735.7
851.9
1,803.5
2,655.4
$
$
$
219.74
166.58
183.82
$
$
$
216.77
152.99
173.70
$
$
$
227.78
162.11
183.18
0.1 %
7.7 %
4.7 %
(1.2)%
(1.1)%
(1.1)%
1.4 %
8.9 %
5.8 %
(0.7)%
(3.4)%
(2.3)%
4.3 %
2.4 %
3.0 %
(4.8)%
(5.6)%
(5.2)%
38.8%
61.2%
40.5%
59.5%
39.9%
60.1%
100.0%
100.0%
100.0%
Net sales . Net sales increased by 4.7% to $497.3 million for the twelve months ended December 31, 2017 from $475.2 million for the twelve months ended
December 31, 2016 , driven by an increase in total average sales price of 5.8% , partially offset by a decrease in soda ash volumes sold of 1.1% . The increased
international average sales price reflects the increase in freight costs driven by higher non-ANSAC export sales volume, primarily to CIDT. The decrease in sales
volumes are primarily due to lower production output compared to the prior period.
Cost of products sold. Cost of products sold, including freight costs, depreciation, depletion and amortization expense, increased by 6.1% to $383.8 million
for the twelve months ended December 31, 2017 from $361.7 million for the twelve months ended December 31, 2016 , primarily due to an increase in freight
costs of 21.8% to $145.7 million for the twelve months ended December 31, 2017 , compared to $119.6 million for the twelve months ended December 31, 2016 .
The increase in freight costs was driven by higher non-ANSAC export sales volumes, primarily to CIDT. The higher incremental freight costs on non-ANSAC
export sales is also reflected in the higher average international sales price. In the twelve months ended December 31, 2016 , international sales primarily consisted
of transactions to ANSAC. During the twelve months ended December 31, 2017 we also had higher maintenance expense that was partially offset by lower
employee benefit costs, primarily resulting from changes to our postretirement plan.
Selling, general and administrative expenses. Our selling, general and administrative expenses decreased 3.9% to $22.4 million for the twelve months ended
December 31, 2017 , compared to $23.3 million for the twelve months ended December 31, 2016 . The decrease was primarily driven by lower selling and
administrative fees relating to our affiliate, ANSAC, and a higher proportion of employee time spent on Ciner Corp related activities in 2017.
Impairment and loss on disposal of assets, net . During the twelve months ended December 31, 2017 , we incurred a $1.6 million asset impairment charge
relating to certain assets, which became obsolete as a result of energy sourcing initiatives at our Wyoming facility.
Gross profit. Gross profit remained flat at $113.5 million for the year ended December 31, 2017 , compared to the year ended December 31, 2016 .
Operating income. As a result of the foregoing, operating income decreased slightly by 0.4% to $89.5 million for the twelve months ended December 31,
2017 , compared to $89.9 million for the twelve months ended December 31, 2016 .
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Net income. As a result of the foregoing, net income increased slightly by 0.1% to $86.4 million for the twelve months ended December 31, 2017 ,
compared to $86.3 million for the twelve months ended December 31, 2016 .
2016
compared
to
2015
Consolidated Results
Net sales . Net sales decreased by 2.3% to $475.2 million for the year ended December 31, 2016 from $486.4 million for the year ended December 31, 2015.
The change in net sales was driven by a decrease in total average sales price of 5.2%, partly offset by an increase in soda ash volumes sold of 3.0%.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense, increased by 1.6% to $361.7 million for the year
ended December 31, 2016 from $356.1 million for the year ended December 31, 2015, primarily as a result of the following:
•
an increase of 27.4% in materials costs to $18.6 million for year ended December 31, 2016, compared to $14.6 million for the year ended
December 31, 2015, due primarily to the 3.0% increase in soda ash volumes sold, as well as an increase in the DECA harvesting costs during 2016
compared to 2015;
•
an increase of 16.1% in royalties paid to $25.2 million for the year ended December 31, 2016, as compared to $21.7 million for the year ended
December 31, 2015, driven by increased sales volumes and increased royalty rates beginning in fourth quarter 2015 for both federal leases and license
with Rock Springs. The federal royalty rate increased to 6% from 4% as a result of the Helium Stewardship Act of 2013 expiring in September 2015 and
the royalty rate for the license with Rock Springs increased to 8% from 7%; partly offset by
•
a decrease of 2.0% in freight costs to $119.6 million for the year ended December 31, 2016, as compared to $122.1 million for the year ended
December 31, 2015, due primarily to lower volumes sold into the Europe market during the year 2016 versus 2015.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased 16.5% to $23.3 million for the year ended
December 31, 2016 compared to $20.0 million for the year ended December 31, 2015, primarily due to a higher proportion of employee time spent on OCI
Enterprises related activities in 2015, and as a result, these selling, general and administrative expenses were charged to non CINR consolidated entities.
Gross profit. Gross profit decreased by 12.9% to $113.5 million for the year ended December 31, 2016, compared to $130.3 million for the year ended
December 31, 2015, primarily due to lower average sales price and increased cost of products sold during the year 2016 compared to 2015 as discussed above.
Operating income. As a result of the foregoing, operating income decreased by 18.3% to $89.9 million for the year ended December 31, 2016 compared to
$110.1 million for the year ended December 31, 2015.
Net income. As a result of the foregoing, net income decreased by 18.7% to $86.3 million for the year ended December 31, 2016, compared to $106.2
million for the year ended December 31, 2015.
Liquidity and Capital Resources
Sources of liquidity include cash generated from operations and borrowings under credit facilities and capital calls from partners. We use cash and require
liquidity primarily to finance and maintain our operations, fund capital expenditures for our property, plant and equipment, make cash distributions to holders of
our partnership interests, pay the expenses of our general partner and satisfy obligations arising from our indebtedness. Our ability to meet these liquidity
requirements will depend on our ability to generate cash flow from operations.
Our sources of liquidity include:
•
cash generated from our operations;
• Approximately $75.4 million ( $225.0 million , less $138.0 million outstanding and less standby letters of credit of $11.6 million ) is available
for borrowing and undrawn under the Ciner Wyoming Credit Facility as of December 31, 2017 , subject to availability; during the twelve months ended
December 31, 2017 , we had borrowings of $88.5 million on the Ciner Wyoming Credit Facility, offset by repayments of $28.5 million ; and
• $10.0 million available for borrowing under the Revolving Credit Facility as of December 31, 2017 , subject to availability.
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We expect our ongoing working capital and capital expenditures to be funded by cash generated from operations and borrowings under the Ciner Wyoming
Credit Facility. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements, long-term capital
expenditure requirements and to make quarterly cash distributions. However, we are subject to business and operational risks that could adversely affect our cash
flow and access to borrowings under the Revolving Credit Facility and the Ciner Wyoming Credit Facility. Our ability to satisfy debt service obligations, to fund
planned capital expenditures and to make acquisitions will depend upon our future operating performance, which, in turn, will be affected by prevailing economic
conditions, our business and other factors, some of which are beyond our control.
On February 1, 2018 the Partnership declared a cash distribution approved by the board of directors of its general partner. The cash distribution for the fourth
quarter of 2017 of $0.5670 per unit was paid on February 27, 2018 to unitholders of record on February 12, 2018 . See Part II, Item 8, Financial Statements and
Supplementary Data - Note 3, “Net income per unit and cash distribution”, for more information.
We intend to pay a sustainable quarterly distribution and continue to grow our quarterly distribution to unitholders of record over time, to the extent we have
sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its
affiliates. We do not have a legal obligation to pay this distribution.
Capital
Requirements
Working capital is the amount by which current assets exceed current liabilities. Our working capital requirements have been, and will continue to be,
primarily driven by changes in accounts receivable and accounts payable, which generally fluctuate with changes in volumes, contract terms and market prices of
soda ash in the normal course of our business. Other factors impacting changes in accounts receivable and accounts payable could include the timing of collections
from customers and payments to suppliers, as well as the level of spending for maintenance and growth capital expenditures. A material adverse change in
operations or available financing under the Revolving Credit Facility and the Ciner Wyoming Credit Facility could impact our ability to fund our requirements for
liquidity and capital resources. Historically, we have not made working capital borrowings to finance our operations. As of December 31, 2017 , we had a working
capital balance of $127.7 million as compared to a working capital balance of $80.6 million as of December 31, 2016 .
Capital
Expenditures
Our operations require investments to expand, upgrade or enhance existing operations and to meet evolving environmental and safety regulations. We
distinguish between maintenance and expansion capital expenditures. Maintenance capital expenditures (including expenditures for the construction or
development of new capital assets or the replacement, improvement or expansion of existing capital assets) are made to maintain, over the long term, our operating
income or operating capacity. Examples of maintenance capital expenditures are expenditures to upgrade and replace mining equipment and to address equipment
integrity, safety and environmental laws and regulations. Our maintenance capital expenditures do not include actual or estimated capital expenditures for
replacement of our trona reserves. Expansion capital expenditures are incurred for acquisitions or capital improvements made to increase, over the long term, our
operating income or operating capacity. Examples of expansion capital expenditures include the acquisition and/or construction of complementary assets to grow
our business and to expand existing facilities, such as projects that increase production from existing facilities, to the extent such capital expenditures are expected
to increase our long-term operating capacity or operating income.
The following table below summarizes our capital expenditures, on an accrual basis:
($ in millions)
Maintenance
Expansion
Total
Years Ended December 31,
2017
2016
2015
11.1 $
10.8
21.9 $
10.7 $
15.5
26.2 $
16.1
18.0
34.1
$
$
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Cash
Flows
Discussion
The following is a summary of cash provided by or used in each of the indicated types of activities:
($ in millions)
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Operating Activities
Years Ended December 31,
Percent Increase/(Decrease)
2017
2016
2015
2017 vs 2016
2016 vs 2015
$
79.3 $
128.3 $
(24.7)
(44.1)
(25.3)
(103.7)
150.2
(35.7)
(125.1)
(38.2)%
(2.4)%
(57.5)%
(14.6)%
(29.1)%
(17.1)%
Our operating activities during the twelve months ended December 31, 2017 provided cash of $79.3 million , a decrease of 38.2% from the $128.3 million
cash provided during the twelve months ended December 31, 2016 , primarily as a result of the following:
•
$37.8 million of working capital used in operating activities during the twelve months ended December 31, 2017 , compared to $14.2 million of working
capital provided by operating activities during the twelve months ended December 31, 2016 . The $52.0 million increase in working capital used in
operating activities was primarily due to the $37.7 million increase in due-from affiliates.
Investing Activities
We used cash flows of $24.7 million in investing activities during the twelve months ended December 31, 2017 , compared to $25.3 million during the
twelve months ended December 31, 2016 , for capital projects as described in “Capital Expenditures” above.
Financing Activities
Cash used in financing activities of $44.1 million during the twelve months ended December 31, 2017 decreased by 57.5% over the prior-year, largely due
to net borrowings of long-term debt of $50.3 million during the twelve months ended December 31, 2017 compared to the $12 million in net repayments during the
twelve months ended December 31, 2016 , partly offset by, the increase in distributions paid during the twelve months ended December 31, 2017 of $94.4 million
compared to the twelve months ended December 31, 2016 of $91.7 million .
Borrowings under the Ciner Wyoming Credit Facility were at variable interest rates.
($ in millions)
Short-term borrowings from banks:
Outstanding amount at period ending
Weighted average interest rate at period ending (1)
Average daily amount outstanding for the period
Weighted average daily interest rate for the period (1)
Maximum month-end amount outstanding during the period
As of and for the
quarter ended
As of and for the
year ended
As of and for the year
ended
As of and for the year
ended
December 31,
2017
December 31,
2016
December 31,
2015
$
$
$
138.0
$
138.0
$
3.08%
3.08%
134.7
$
112.5
$
2.97%
3.03%
142.0
$
142.0
$
78.0
$
3.00%
81.5
$
3.04%
88.5
$
90.0
2.90%
113.7
2.80%
125.0
(1)Weighted average interest rates set forth in the table above include the impacts of our interest rate swap contracts designated as cash flow hedges. As of
December 31, 2017 , the interest rate swap contracts had an aggregate notional value of $70.0 million .
Debt
See in Part II, Item 8, Financial Statements and Supplementary Data - Note 9, “Debt”, for details of our outstanding debt.
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Contractual
Obligations
The following table sets forth a summary of our significant contractual obligations as of December 31, 2017 :
($ in millions)
Long-term debt
Purchase obligations (1)
Interest payments (2)
Lease obligations (3)
Asset retirement Obligation (4)
Total
2018
2019
2020
2021
2022
Thereafter
Total
Payments Due by Period
$
11.4 $
— $
— $
— $
138.0 $
— $
149.4
27.1
23.2
19.2
4.3
0.1
—
4.3
0.1
—
4.3
0.1
—
9.7
4.3
0.1
—
8.3
2.5
0.1
—
3.8
—
1.4
145.1
$
42.9 $
27.6 $
23.6 $
14.1 $
148.9 $
150.3 $
91.3
19.7
1.9
145.1
407.4
(1) Purchase obligations primarily include agreement to purchase goods or services that are enforceable and legally binding and that specify all significant
terms. We have certain long-term utility contracts with various terms extending through 2022. These commitments are designed to assure source of
supply for our normal requirements. The amounts include physical and financial natural gas hedge commitments, as well as, purchase obligations
under a contract for the transportation of gas, which may be canceled by either upon 12 months’ advance written notice to the other party.
(2) Long-term debt interest payments set forth in the table above are based on our contractual rates, or in the case of variable interest rate obligations, the
weighted average interest rates as of December 31, 2017 .
(3) Minimum contractual rental commitments of various operating leases, including renewal periods. Not included in the table above are the operating
lease contracts that Ciner Corp, on behalf of the Partnership, typically enters into with various lessors for railcars to transport product to customer
locations and warehouses. Rail car leases under these contractual commitments range for periods from 1 to P10Y years. Ciner Corp's obligation related
to these rail car leases are $12.1 million in 2018 , $11.1 million in 2019 , $8.5 million in 2020 , $5.9 million in 2021 , $3.8 million in 2022 and $6.2
million in 2023 and thereafter.
(4) Asset retirement obligations are the liability for the present value of cost we estimate we will incur to retire certain assets. The amount reported in the
Contractual Obligations table above, represents the undiscounted estimated cost to retire such assets. The estimated average timing of these obligations
is in excess of thirty years.
Impact
of
Inflation
Although the impact of inflation has slowed in recent years, it is still a factor in the U.S. economy and may increase our cost to acquire or replace properties,
plant and equipment. Inflation may also increase our costs of labor and supplies. To the extent permitted by competition, regulation and existing agreements, we
pass along increased costs to our customers in the form of higher selling prices, and we expect to continue this practice.
Off-Balance
Sheet
Arrangements
See Part II, Item 8, Financial Statements and Supplementary Data - Note 14, Commitments and Contingencies - “Off-Balance-Sheet Arrangements”, for
more information regarding our off-balance-sheet arrangements.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). We also present the non-GAAP
financial measures of:
• Adjusted EBITDA;
• distributable cash flow; and
• distribution coverage ratio.
We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax, depreciation, depletion and amortization, equity-based
compensation expense and certain other expenses that are non-cash charges or that we consider not to be indicative of ongoing operations. Distributable cash flow
is defined as Adjusted EBITDA less net cash paid for interest, maintenance capital expenditures and income taxes, each as attributable to Ciner Resources LP. For
the twelve months ended December 31, 2017 , we amended our definition of distributable cash flow to include cash interest received as an offset to cash paid for
interest and have adjusted all prior periods accordingly. The Partnership may fund expansion-related capital expenditures with borrowings under existing credit
facilities such that expansion-related capital expenditures will have no impact on cash on hand or the calculation of cash available for distribution. In certain
instances, the timing of the Partnership’s borrowings and/or its cash management practices
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will result in a mismatch between the period of the borrowing and the period of the capital expenditure. In those instances, the Partnership adjusts designated
reserves (as provided in the partnership agreement) to take account of the timing difference. Accordingly, expansion-related capital expenditures have been
excluded from the presentation of cash available for distribution. Distributable cash flow will not reflect changes in working capital balances. We define
distribution coverage ratio as the ratio of distributable cash flow as of the end of the period to cash distributions payable with respect to such period.
Adjusted EBITDA, distributable cash flow and distribution coverage ratio are non-GAAP supplemental financial measures that management and external
users of our unaudited condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
•
our operating performance as compared to other publicly traded partnerships in our industry, without regard to historical cost basis or,
in the case of Adjusted EBITDA, financing methods;
•
•
•
the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
our ability to incur and service debt and fund capital expenditures; and
the viability of capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of Adjusted EBITDA, distributable cash flow and distribution coverage ratio provide useful information to investors in
assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net
income and net cash provided by operating activities. Our non-GAAP financial measures of Adjusted EBITDA, distributable cash flow and distribution coverage
ratio should not be considered as alternatives to GAAP net income, operating income, net cash provided by operating activities, or any other measure of financial
performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because
they exclude some, but not all items that affect net income and net cash provided by operating activities. Investors should not consider Adjusted EBITDA,
distributable cash flow and distribution coverage ratio in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted
EBITDA, distributable cash flow and distribution coverage ratio may be defined differently by other companies, including those in our industry, our definition of
Adjusted EBITDA, distributable cash flow and distribution coverage ratio may not be comparable to similarly titled measures of other companies, thereby
diminishing its utility.
The table below presents a reconciliation of the non-GAAP financial measures of Adjusted EBITDA and distributable cash flow to the GAAP financial
measures of net income and net cash provided by operating activities:
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Table of Contents
(In
millions,
except
per
unit
data)
Reconciliation of Adjusted EBITDA to net income:
Net income
Add backs:
Year Ended
December 31,
2017
2016
2015
$
86.4 $
86.3 $
106.2
Depreciation, depletion and amortization expense
27.1
26.1
23.7
Asset impairment charges
Interest expense, net
Restructuring charges and other, net (included in selling, general and administrative expense)
Equity-based compensation expense
Adjusted EBITDA
Less: Adjusted EBITDA attributable to non-controlling interest
Adjusted EBITDA attributable to Ciner Resources LP
Reconciliation of distributable cash flow to Adjusted EBITDA attributable to Ciner Resources LP:
Adjusted EBITDA attributable to Ciner Resources LP
Less: Cash interest expense, net attributable to Ciner Resources LP
Less: Maintenance capital expenditures attributable to Ciner Resources LP
Distributable cash flow attributable to Ciner Resources LP
Cash distribution declared per unit
Total distributions to unitholders and general partner
Distribution coverage ratio
Reconciliation of Adjusted EBITDA to net cash from operating activities:
Net cash provided by operating activities
Add/(less):
Amortization of long-term loan financing
Net change in working capital
Interest expense, net
Restructuring charges and other, net (included in selling, general and administrative expense)
Other non-cash items
Adjusted EBITDA
Less: Adjusted EBITDA attributable to non-controlling interest
Adjusted EBITDA attributable to Ciner Resources LP
Less: Cash interest expense, net attributable to Ciner Resources LP
Less: Maintenance capital expenditures attributable to Ciner Resources LP
1.6
2.9
0.8
1.3
—
3.6
0.5
0.6
120.1
60.4
117.1
59.3
$
59.7 $
57.8 $
$
59.7 $
57.8 $
1.8
5.9
1.6
5.8
$
52.0 $
50.4 $
—
4.0
—
1.1
135.0
67.7
67.3
67.3
2.1
8.4
56.8
$
$
2.268 $
2.265 $
2.191
45.6 $
45.4 $
1.14
1.10
43.8
1.27
$
79.3 $
128.3 $
150.2
(0.4)
37.8
2.9
0.8
(0.3)
(0.4)
(14.2)
3.6
—
(0.2)
120.1
117.1
60.4
59.7
1.8
5.9
59.3
57.8
1.6
5.8
(0.4)
(17.8)
4.0
—
(1.0)
135.0
67.7
67.3
2.1
8.4
56.8
Distributable cash flow attributable to Ciner Resources LP
$
52.0 $
50.4 $
Critical Accounting Policies and Estimates
Our significant accounting policies are disclosed in Item 8, "Financial Statements and Supplementary Data - Note 2 , “Summary of Significant
Accounting Policies.” The accounting policies and estimates that we believe are the most critical to an understanding of our results of operations and financial
condition are those that require complex management judgment regarding matters that are highly uncertain at the time policies were applied and estimates were
made. These accounting policies and estimates are discussed below; however, the additional accounting policy detail in the footnote previously referenced is
important to the discussion of each of the topics. Different estimates reasonably could have been used in the current period that would have had a material effect on
these consolidated financial statements, and changes in these estimates are likely to occur from period-to-period in the future.
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Table of Contents
Revenue Recognition - We recognize revenue when the earnings process is complete, which is generally upon transfer of title. This transfer typically
occurs upon shipment to the customer, which is normally free on board (“FOB”) terms or upon receipt by the customer. In all cases, we apply the following criteria
in recognizing revenue: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed, determinable or reasonably
estimated sales price has been agreed with the customer; and (4) collectability is reasonably assured. Customer rebates and discounts are accounted for as sales
deductions. We record amounts billed for shipping and handling fees as revenue. Costs incurred for shipping and handling are recorded as costs of products sold.
Recently Issued Accounting Standards
Accounting standards recently issued are discussed in Part II, Item 8. "Financial Statements and Supplementary Data" - Note 2 - Summary of Significant
Accounting Policies, in the notes to consolidated financial statements.
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Table of Contents
Supplementary Selected Quarterly Financial Data
The following is selected unaudited condensed consolidated data for Ciner Resources LP for the quarters indicated:
($ in millions, except per unit data)
Q4 -17
Q3 -17
Q2 -17
Q1 -17
Q4 -16
Q3 -16
Q2 -16
Net sales
Cost of products sold
Gross profit
Operating expenses
Operating income
Other income/(expense), net
Net income
Net income attributable to non-controlling interest
$
128.5 $
122.5 $
119.7 $
126.6 $
123.1 $
121.0 $
116.7 $
95.2
33.3
5.8
27.5
(0.3)
27.2
13.9
95.0
27.5
7.3
20.2
(0.9)
19.3
10.1
95.5
24.2
5.8
18.4
(0.9)
17.5
9.3
98.1
28.5
5.1
23.4
(1.0)
22.4
11.5
96.7
26.4
5.2
21.2
(0.8)
20.4
10.5
90.5
30.5
6.5
24.0
(0.9)
23.1
12.0
88.1
28.6
6.0
22.6
(0.8)
21.8
11.4
Net income attributable to Ciner Resources LP
$
13.3 $
9.2 $
8.2 $
10.9 $
9.9 $
11.1 $
10.4 $
Q1 -16
114.4
86.4
28.0
5.8
22.2
(1.1)
21.1
11.0
10.1
Operating and Other Data:
Trona ore consumed (thousands of short tons)
1,059.3
1,025.0
933.2
983.9
1,056.5
1,019.4
973.1
1,001.4
Ore to ash ratio (1)
1.53: 1.0
1.51: 1.0
1.45: 1.0
1.51: 1.0
1.57: 1.0
1.48: 1.0 1.46: 1.0 1.51: 1.0
Soda ash volume produced (thousands of short tons)
Soda ash volume sold (thousands of short tons)
692.4
706.7
680.0
676.6
643.0
651.3
651.5
670.8
674.2
702.4
690.1
696.6
668.7
676.6
662.4
660.1
Net income per limited partner unit:
Common - Public and Ciner Holdings (basic)
Subordinated - Ciner Holdings (basic)
Common - Public and Ciner Holdings (diluted)
Subordinated - Ciner Holdings (diluted)
$
$
$
$
Limited partner units outstanding:
Weighted average common units outstanding (basic)
Weighted average subordinated units outstanding (basic)
Weighted average common units outstanding (diluted)
Weighted average subordinated units outstanding (diluted)
0.67 $
0.46 $
0.41 $
0.54 $
0.49 $
0.56 $
0.52 $
— $
— $
— $
— $
— $
0.55 $
0.52 $
0.66 $
0.46 $
0.41 $
0.54 $
0.49 $
0.56 $
0.52 $
— $
— $
— $
— $
— $
0.55 $
0.52 $
19.6
—
19.7
—
19.7
—
19.7
—
19.7
—
19.7
—
19.7
—
19.7
—
19.6
—
19.6
—
9.8
9.8
9.8
9.8
9.8
9.8
9.8
9.8
0.51
0.51
0.51
0.51
9.8
9.8
9.8
9.8
Cash distribution declared per unit
$
0.5670 $ 0.5670 $ 0.5670 $ 0.5670 $ 0.5670 $
0.5670 $ 0.5670 $ 0.5640
(1) Ore to ash ratio expresses the number of short tons of trona ore needed to produce one short ton of soda ash and liquor and includes our deca rehydration
recovery process.
ITEM 7A. Quantitative
and
Qualitative
Disclosures
about
Market
Risk
Our exposure to the financial markets consists of changes in interest rates relative to the balance of our outstanding debt obligations and derivatives that
we have employed from time to time to manage our exposure to changes in market interest rates, foreign currency rate and commodity prices. We do not use
financial instruments or derivatives for trading or other speculative purposes.
Interest Rate Risks
The aggregate principal amount of variable rate debt we had outstanding under our debt instruments as of December 31, 2017 was $149.4 million (as of
December 31, 2016 : $98.0 million ). This debt had a weighted average interest rate, inclusive of designated interest rate swap contracts, of 2.99% as of
December 31, 2017 (as of December 31, 2016 : 3.00% ). Based on the variable rate debt in our debt instruments as of December 31, 2017 , a change in interest rate
of 1% would result in an increase or a decrease of our annual interest expense of approximately $1.1 million .
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Table of Contents
We have entered into interest rate swap contracts designed to hedge our exposure to possible increases in interest rates. These contracts allow us to pay a
fixed interest rate to the counterparties in exchange for our receipt of payments, from the counterparties, with floating interest rates, thereby allowing us to
effectively fix our interest rate payments on our variable rate debt. These contracts had an aggregate notional value of $70.0 million and a fair value liability of less
than $0.1 million as of December 31, 2017 (as of December 31, 2016 : an aggregate notional value of $72.0 million ; a fair value liability of $0.4 million ).
Foreign
Exchange
Rate
Risks
Our sales to ANSAC are denominated in U.S. dollars but our sales to other international customers may be denominated in a foreign currency, which
exposes us to foreign currency fluctuations.
Commodity Price Risks
Energy costs represent a large part of our cost of products sold. Natural gas is a large component of that expense. We purchase natural gas primarily from
two suppliers: BP Energy and Enstor . The purchase price we pay does not include the cost of freight so we must arrange and pay for the cost of transporting the
natural gas from the gas compressor facility approximately 20 miles from the plant to our facility. We have a separate contract for the transportation of gas. We pay
a fixed amount to reserve capacity on a daily basis. In order to mitigate the risk of gas price fluctuations, we hedge a portion of our forecasted natural gas purchases
by entering into physical or financial gas hedges generally ranging between 20% and 80% of our expected monthly gas requirements, on a sliding scale, for
approximately the next five years. We can give no assurance that we will continue this practice. Historically, we have taken physical delivery under our physical
gas contract and we intend to take physical delivery in the future. In addition, to manage our exposure to fluctuating natural gas prices, we enter into financial gas
forward purchase contracts. We generally designate our financial gas forward contracts with financial counter-parties as cash flow hedges. Any outstanding
contracts are valued at market with the offset going to other comprehensive income (loss), and any material hedge ineffectiveness is recognized in cost of goods
sold. Any gain or loss is recognized in cost of goods sold in the same period or periods during which the hedged transaction affects earnings. The aggregate
notional value of our financial gas forward purchase contracts at December 31, 2017 was $37.0 million and net fair value liability of $7.2 million . As of
December 31, 2016 , the aggregate notional value and fair value liability were $31.0 million and $2.8 million, respectively.
ITEM 8. Financial
Statements
and
Supplementary
Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Annual Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Equity for the years ended December 31, 2017, 2016 and 2015
Notes to the Consolidated Financial Statements
62
Page
Number
63
63
64
65
66
67
68
Table of Contents
Management’s Annual Report on Internal Control over Financial Reporting
The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f)
under the Exchange Act. Our internal control system is designed under the supervision of the Partnership’s principal executive officer and principal financial
officer to provide reasonable assurance to the Partnership’s management and our general partner’s Board of Directors regarding the preparation and fair
presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 . In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control—
Integrated Framework. Based on this assessment, our management has concluded that as of December 31, 2017 our internal control over financial reporting is
effective.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Partners of
Ciner Resources LP
Atlanta, Georgia
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ciner Resources LP (a majority-owned subsidiary of Ciner Wyoming Holding Co.) and
its subsidiary (the “Partnership”) as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive income, cash flows,
and equity for each of the three years in the period ended December 31, 2017 and the related notes (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2017 and 2016, and the results
of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
March 9, 2018
We have served as the Partnership’s auditor since 2008.
63
Table of Contents
(In millions)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable -affiliates
Accounts receivable, net
Inventory
Other current assets
Total current assets
Property, plant and equipment, net
Other non-current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable
Due to affiliates
Accrued expenses
Total current liabilities
Long-term debt
Other non-current liabilities
Total liabilities
CINER RESOURCES LP
CONSOLIDATED BALANCE SHEETS
December 31,
2017
December 31,
2016
$
$
$
$
30.2
98.3
34.2
19.8
1.8
184.3
249.3
19.6
453.2
$
$
11.4
14.5
3.0
27.7
56.6
138.0
10.4
205.0
148.3
3.8
(3.7)
148.4
99.8
248.2
19.7
61.6
33.4
19.0
2.3
136.0
256.1
21.0
413.1
8.6
15.0
4.2
27.7
55.5
89.4
9.0
153.9
151.0
3.9
(1.6)
153.3
105.9
259.2
413.1
Commitments and Contingencies (See Note 14)
Equity:
Common unitholders - Public and Ciner Holdings (19.7 units issued and outstanding at December 31, 2017 and
December 31, 2016, respectively)
General partner unitholders - Ciner Resource Partners LLC (0.4 units issued and outstanding at December 31, 2017
and December 31, 2016, respectively)
Accumulated other comprehensive loss
Partners’ capital attributable to Ciner Resources LP
Non-controlling interest
Total equity
Total liabilities and partners’ equity
$
453.2
$
See accompanying notes.
64
CINER RESOURCES LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Table of Contents
(In millions, except per unit data)
Net sales:
Sales - Affiliates
Sales - others
Total net sales
Cost of products sold:
Cost of products sold
Depreciation, depletion and amortization expense
Freight costs
Total cost of products sold
Gross profit
Operating expenses:
Selling, general and administrative expenses—affiliates
Selling, general and administrative expenses—others
Impairment and loss on disposal of assets, net
Total operating expenses
Operating income
Other income/(expenses):
Interest income
Interest expense
Other - net
Total other income/(expense), net
Net income
Net income attributable to non-controlling interest
Net income attributable to Ciner Resources LP
Other comprehensive income/(loss):
Income (loss) on derivative financial instruments
Comprehensive income
Comprehensive income attributable to non-controlling interest
Comprehensive income attributable to Ciner Resources LP
Net income per limited partner unit:
Net income per limited partner unit (basic)
Net income per limited partner unit (diluted)
Limited partner units outstanding:
Weighted average limited partner units outstanding (basic)
Weighted average limited partner units outstanding (diluted)
See accompanying notes.
65
Years Ended December 31,
2017
2016
2015
$
304.5 $
271.2 $
192.8
497.3
204.0
475.2
211.0
27.1
145.7
383.8
113.5
16.9
5.5
1.6
24.0
89.5
1.7
(4.6)
(0.2)
(3.1)
216.0
26.1
119.6
361.7
113.5
18.7
4.6
0.3
23.6
89.9
—
(3.6)
—
(3.6)
265.3
221.1
486.4
210.3
23.7
122.1
356.1
130.3
15.7
4.3
0.2
20.2
110.1
—
(4.0)
0.1
(3.9)
$
86.4 $
86.3 $
106.2
44.8
44.9
$
41.6 $
41.4 $
(4.0)
82.4
42.9
0.9
87.2
45.3
$
39.5 $
41.9 $
$
$
2.08 $
2.07 $
2.08 $
2.08 $
19.6
19.7
19.6
19.6
54.7
51.5
(3.4)
102.8
53.0
49.8
2.58
2.58
19.6
19.6
Table of Contents
CINER RESOURCES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Years Ended December 31,
2017
2016
2015
$
86.4 $
86.3 $
106.2
Depreciation, depletion and amortization expense
Impairment and loss on disposal of assets, net
Equity-based compensation expense
Other non-cash items
Changes in operating assets and liabilities:
(Increase)/decrease in:
Accounts receivable - net
Accounts receivable - affiliates
Inventory
Other current and other non-current assets
Increase/(decrease) in:
Accounts payable
Due to affiliates
Accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Net cash used in investing activities
Cash flows from financing activities:
Borrowings on Ciner Wyoming credit facility
Repayments on Ciner Wyoming credit facility
Repayments on other long-term debt
Debt issuance costs
Distributions to common unitholders
Distributions to subordinated unitholders
Distributions to general partner
Distributions to non-controlling interest
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
Interest paid during the year
Supplemental disclosure of non-cash investing activities:
Capital expenditures on account
27.5
1.6
1.3
0.3
0.2
(37.7)
0.5
(0.2)
1.7
(1.2)
(1.1)
79.3
(24.7)
(24.7)
88.5
(28.5)
(8.6)
(1.1)
(44.5)
—
(0.9)
(49.0)
(44.1)
10.5
19.7
26.5
0.3
0.6
0.4
0.4
2.4
7.0
0.2
1.1
(0.4)
3.5
24.1
0.2
1.1
0.8
1.7
25.9
(3.7)
(0.9)
1.8
(1.1)
(5.9)
128.3
150.2
(25.3)
(25.3)
15.0
(27.0)
—
—
(22.2)
(22.0)
(0.9)
(46.6)
(103.7)
(0.7)
20.4
(35.7)
(35.7)
5.0
(40.0)
—
—
(21.2)
(21.2)
(0.9)
(46.8)
(125.1)
(10.6)
31.0
20.4
4.1
3.0
$
$
$
30.2 $
19.7 $
4.1 $
3.2 $
1.0 $
3.9 $
See accompanying notes.
66
Table of Contents
(In millions)
Balance at January 1, 2015
Partnership net income
Other comprehensive income/(loss)
Equity-based compensation plan activity
Distributions
Non-cash contribution from parent
Balance at December 31, 2015
Net income
Other comprehensive income
Equity-based compensation plan activity
Distributions
Conversion of subordinated units to common units
Balance at December 31, 2016
Partnership net income
Other comprehensive income/(loss)
Equity-based compensation plan activity
Distributions
Balance at December 31, 2017
CINER RESOURCES LP
CONSOLIDATED STATEMENTS OF EQUITY
Limited Partners
Common
Units
Subordinated Units
General
Partner
Accumulated
Other
Comprehensive
Loss
Partners’ Capital
Attributable to
Ciner Resources
LP Equity
Noncontrolling
Interests
Total
Equity
$
106.3 $
25.3
—
0.5
(21.2)
—
37.9
25.2
—
—
(21.2)
1.3
$
3.8 $
0.4
$
147.6 $
100.9 $
248.5
1.0
—
—
(0.9)
—
—
(1.7)
—
—
—
51.5
(1.7)
0.5
(43.3)
1.3
54.7
(1.7)
—
106.2
(3.4)
0.5
(46.8)
(90.1)
—
1.3
$
110.8 $
43.3
$
4.0 $
(2.1)
$
156.0 $
107.2 $
263.2
25.2
—
0.5
(22.2)
36.7
15.4
—
—
(22.0)
(36.7)
0.8
—
—
(0.9)
—
—
0.5
—
—
—
41.4
0.5
0.5
(45.1)
—
44.9
0.4
—
86.3
0.9
0.5
(46.6)
(91.7)
—
—
$
151.0 $
— $
3.9 $
(1.6)
$
153.3 $
105.9 $
259.2
40.8
—
1.0
(44.5)
—
—
—
—
0.8
—
—
(0.9)
—
(2.1)
—
—
41.6
(2.1)
1.0
(45.4)
44.8
(1.9)
—
86.4
(4.0)
1.0
(49.0)
(94.4)
$
148.3 $
— $
3.8 $
(3.7)
$
148.4 $
99.8 $
248.2
The sums of some of the rows and columns in the prior years may not sum due to rounding.
See accompanying notes.
67
Table of Contents
1. GENERAL
Nature
of
Operations
CINER RESOURCES LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As used in this Report, the terms “Ciner Resources LP,” “the “Partnership,” “CINR,” “we,” “us,” or “our” may refer to Ciner Resources LP, formerly OCI
Resources LP, a publicly traded Delaware limited partnership formed in April 2013 by Ciner Wyoming Holding Co. (“Ciner Holdings” or ), formerly OCI
Wyoming Holding Co. Ciner Holdings, a wholly-owned subsidiary of Ciner Resources Corporation (“Ciner Corp”), formerly OCI Chemical Corporation, wholly-
owned Ciner Resource Partners LLC (our “general partner” or “Ciner GP”), formerly OCI Resource Partners LLC. Ciner Corp is a direct wholly-owned subsidiary
of Ciner Enterprises Inc. (“Ciner Enterprises”), which is directly wholly-owned by WE Soda Ltd. (“WE Soda”), which is directly wholly-owned by KEW Soda
Ltd. (“KEW Soda”), which is directly wholly-owned by Akkan Enerji ve Madencilik Anonim Şirketi (“Akkan”), which in turn is directly wholly-owned by Turgay
Ciner, the Chairman of the Ciner Group, a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping
markets. Ciner Wyoming LLC (“Ciner Wyoming”), formerly OCI Wyoming LLC, is in the business of mining trona ore to produce soda ash, and a majority-
owned subsidiary of the Partnership. The Partnership’s operations consist solely of its investment in Ciner Wyoming. The Partnership owns a controlling interest
comprised of 51.0% membership interest in Ciner Wyoming. All our soda ash processed is sold to various domestic and European customers, and to Ciner Ic ve
Dis Ticaret Anonim Sirketi (“CIDT”) and American Natural Soda Ash Corporation (“ANSAC”) which are affiliates for export sales. All mining and processing
activities take place in one facility located in the Green River Basin of Wyoming.
NRP Trona LLC, a wholly owned subsidiary of Natural Resource Partners LP (“NRP”), currently owns a 49.0% membership interest in Ciner Wyoming.
On February 22, 2018, Akkan transferred its direct 100% ownership in Ciner Enterprises to KEW Soda, a UK company, which transferred such ownership
to WE Soda, a UK company. WE Soda is 100% owned by KEW Soda, and KEW Soda is wholly owned by Akkan. This reorganization is a part of Ciner Group’s
strategy to combine the global soda ash business under a common structure in the UK.
Completed
Sale
Transaction
On October 23, 2015 , Ciner Enterprises acquired 100% of OCI Chemical Corporation in a stock purchase transaction from OCI Enterprises Inc. (“OCI
Enterprises”) (the “Transaction”). OCI Chemical Corporation was subsequently renamed Ciner Resources Corporation. Ciner Corp owns indirectly the Partnership,
through Ciner Holdings’, approximately 73% limited partner interest, and approximately 2% general partner interest and 100% of the related incentive distribution
rights currently held by our general partner. As a result of the closing of the Transaction, OCI Enterprises no longer has any direct or indirect ownership interest in
the Partnership or our general partner.
In connection with the closing of the Transaction, Ciner Enterprises (as borrower), and Ciner Holdings and Ciner Corp (as guarantors), entered into a credit
agreement (as amended and restated or otherwise modified, the “Ciner Enterprises Credit Agreement”), which expires on October 23, 2025 and is secured by
certain assets, including the common units of the Partnership owned by Ciner Holdings.
On November 5, 2015 , in connection with the closing of the Transaction, the Partnership changed its name from OCI Resources LP to Ciner Resources LP.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of
Presentation
and
Significant
Accounting
Policies
The accompanying consolidated financial statements of the Partnership and its subsidiary have been prepared in conformity with U.S. generally accepted
accounting principles and reflect all adjustments, consisting of normal recurring accruals, which are necessary for fair presentation of the results of operations,
financial position and cash flows for the periods presented. All significant intercompany transactions, balances, revenue and expenses have been eliminated in
consolidation and unless otherwise noted, the financial information for the Partnership is presented before non-controlling interest.
Reclassifications
To conform to the presentation as of December 31, 2017, we made a reclassification in the consolidated balance sheet as of December 31, 2016 to include
$46.5 million of “Accounts receivable - ANSAC”, $9.0 million of “Accounts receivable - other affiliate” and $6.1 million of “Due from affiliates, net” within
“Accounts receivable -affiliates”. This reclassification had no effect on “Total current assets” as of December 31, 2016. We also made a corresponding
reclassification in the statements of cash flows for the years ended December 31, 2016 and 2015 to include changes within “Accounts receivable -affiliates” to
include $5.7 million and
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$18.2 million of “Accounts receivable - ANSAC”, $9.0 million of “Accounts receivable - other affiliate” and $5.7 million and $7.7 million of “Due from affiliates,
net” within “Accounts receivable -affiliates” among the changes in operating assets and liabilities. These reclassifications had no effect on net cash provided by
operating activities for any period.
Non-Controlling
Interests
In connection with the conversion of Ciner Wyoming from a Delaware limited partnership (“LP”) to a Delaware limited liability company (“LLC”), in June
2014, NRP’s general partner interest and limited partnership interest were converted into a single-class of membership interests in Ciner Wyoming, which currently
consists of 49.0% membership interest in Ciner Wyoming. Prior to the conversion of Ciner Wyoming from a Delaware LP to a Delaware LLC, non-controlling
interests in the consolidated financial statements of the Partnership consisted of 39.37% general partner interest and 9.63% limited partner interest in Ciner
Wyoming owned by NRP.
Use
of
Estimates
The preparation of consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the
dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Revenue
Recognition
For the year ended December 31, 2017 , we recognize revenue when the earnings process is complete, which is generally upon transfer of title. This transfer
typically occurs upon shipment to the customer, which is normally free on board (“FOB”) terms or upon receipt by the customer. In all cases, we apply the
following criteria in recognizing revenue: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed, determinable or
reasonably estimated sales price has been agreed with the customer; and (4) collectability is reasonably assured. Customer rebates and discounts are accounted for
as sales deductions. We record amounts billed for shipping and handling fees as revenue. Costs incurred for shipping and handling are recorded as costs of products
sold.
Freight
Costs
The Partnership includes freight costs billed to customers for shipments administered by the Partnership in gross sales. The related freight costs along with
cost of products sold are deducted from gross sales to determine gross profit.
Cash
and
Cash
Equivalents
The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents
consist primarily of money market deposit accounts.
Accounts
Receivable
Accounts receivable are carried at the original invoice amount less an estimate for doubtful receivables. We generally do not require collateral against
outstanding accounts receivable.The allowance for doubtful accounts is based on specifically identified amounts that the Partnership believes to be uncollectible.
An additional allowance is recorded based on certain percentages of aged receivables, which are determined based on management’s assessment of the general
financial conditions affecting the Partnership’s customer base. We determined that no allowance for doubtful accounts was required against receivables from
affiliates as of December 31, 2017 and 2016. If actual collection experience changes, revisions to the allowance may be required. Accounts receivable are written
off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. During the years ended 2017 , 2016 and 2015
, there were no significant accounts receivable bad debt expenses, write-offs or recoveries.
Inventory
Inventory is carried at the lower of cost or market. Cost is determined using the first-in, first-out method for raw material and finished goods inventory and
the weighted average cost method for stores inventory. Costs include raw materials, direct labor and manufacturing overhead. Market is based on current
replacement cost for raw materials and net realizable value for stores inventory and finished goods.
• Raw material inventory includes material, chemicals and natural resources being used in the mining and refining process.
• Finished goods inventory is the finished product soda ash.
•
Stores inventory includes parts, materials and operating supplies which are typically consumed in the production of soda ash and currently
available for future use. Inventory expected to be consumed within the year is classified as current assets and remainder is classified as non-current assets.
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Property,
Plant,
and
Equipment
Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of depreciable
assets, using the straight-line method. The estimated useful lives applied to depreciable assets are as follows:
Land improvements
Depletable land
Buildings and building improvements
Internal-use computer software
Machinery and equipment
Furniture and fixtures
Useful Lives
10 years
15-60 years
10-30 years
3-5 years
5-20 years
10 years
The Partnership’s policy is to evaluate property, plant, and equipment for impairment whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. An indicator of potential impairment would include situations when the estimated future undiscounted cash flows are less than the
carrying value. The amount of any impairment then recognized would be calculated as the difference between estimated fair value and the carrying value of the
asset.
Derivative
Instruments
and
Hedging
Activities
The Partnership may enter into derivative contracts from time to time to manage exposure to the risk of exchange rate changes on its foreign currency
transactions, the risk of changes in natural gas prices, and the risk of the variability in interest rates on borrowings. Gains and losses on derivative contracts
qualifying for hedge accounting are reported as a component of the underlying transactions. The Partnership follows hedge accounting for its hedging activities. All
derivative instruments are recorded on the balance sheet at their fair values. The accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. The Partnership designates its derivatives based upon criteria established for hedge accounting under generally
accepted accounting principles. For a derivative designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the
offsetting gain or loss on the hedged item attributed to the risk being hedged. For a derivative designated as a cash flow hedge, the effective portion of the
derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into earnings when
the hedged exposure affects earnings. Any significant ineffective portion of the gain or loss is reported in earnings immediately. For derivatives not designated as
hedges, the gain or loss is reported in earnings in the period of change. The natural gas physical forward contracts are accounted for under the normal purchases
and normal sales scope exception.
Income
Tax
We are organized as a pass-through entity for federal income tax purposes and therefore are not subject to federal or certain state income taxes. As a result,
our partners are responsible for federal income taxes based on their respective share of taxable income. Net income for financial statement purposes may differ
significantly from taxable income reportable to unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and
the taxable income allocation requirements under the partnership agreement.
Technical
Termination
of
the
Partnership
for
U.S.
Federal
Income
Tax
Purposes
In 2015, the Partnership experienced a technical termination as a result of the Transaction, which also resulted in a technical termination of Ciner Wyoming,
for U.S. federal income tax purposes.
The technical termination did not affect our consolidated financial statements nor did it affect our classification or Ciner Wyoming’s classification as a
partnership or otherwise affect the nature or extent of our “qualifying income” for U.S. federal income tax purposes. Our 2015 taxable year for all then unitholders
ended on October 23, 2015 and resulted in a deferral of depreciation deductions that were otherwise allowable in computing the taxable income of our unitholders.
This deferral of depreciation deductions resulted in an increased taxable income (or reduced taxable loss) to certain of our unitholders in 2015. We did not view
this deferral of depreciation deductions to have had a material adverse impact on our public common unitholders.
As of December, 31, 2017 , the Partnership has not participated in any transactions or experienced a sale or exchange of 50% or more of the total interest in
our capital and profits interests within a twelve-month period.
Reclamation
Costs
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The Partnership is obligated to return the land beneath its refinery and tailings ponds to its natural condition upon completion of operations and is required to
return the land beneath its rail yard to its natural condition upon termination of the various lease agreements.
The Partnership accounts for its land reclamation liability as an asset retirement obligation, which requires that obligations associated with the retirement of
a tangible long-lived asset be recorded as a liability when those obligations are incurred, with the amount of the liability initially measured at fair value. Upon
initially recognizing a liability for an asset retirement obligation, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the estimated useful life of the
related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.
The estimated original liability calculated in 1996 for the refinery and tailing ponds was calculated based on the estimated useful life of the mine, which was
80 years , and on external and internal estimates as to the cost to restore the land in the future and state regulatory requirements. During 2017 , 2016 and 2015 , the
remaining life was 66 , 67 and 68 years, respectively. In 2018 , the mining reserve will be amortized over a remaining life of 60 years. The decline in estimated
mining reserves estimated remaining life is based on the results of a recent independent mine reserve analysis conducted as of December 31, 2017. The
independent mine reserve analysis is routine and performed approximately every three years.The liability was discounted using a weighted average credit-adjusted
risk-free rates of approximately 6% and is being accreted throughout the estimated life of the related assets to equal the total estimated costs with a corresponding
charge being recorded to cost of products sold.
During 2011 , the Partnership constructed a rail yard to facilitate loading and switching of rail cars. The Partnership is required to restore the land on which
the rail yard is constructed to its natural conditions. The original estimated liability for restoring the rail yard to its natural condition was calculated based on the
land lease life of 30 years and on external and internal estimates as to the cost to restore the land in the future. The liability is discounted using a credit-adjusted
risk-free rate of 4.25% and is being accreted throughout the estimated life of the related assets to equal the total estimated costs with a corresponding charge being
recorded to cost of products sold.
Fair
Value
of
Financial
Instruments
Fair value is determined using a valuation hierarchy, generally by reference to an active trading market, quoted market prices or model-derived valuations
for the same or similar financial instruments. See Note 17, “Fair Value Measurements,” for more information.
Equity-Based
Compensation
We recognize compensation expense related to equity-based awards, with service conditions, granted to employees based on the estimated fair value of the
awards on the date of grant, net of estimated forfeitures. The grant date fair value of the equity-based awards is generally recognized on a straight-line basis over
the requisite service period, which is generally the vesting period of the respective awards. Equity-based awards with market conditions are fair valued using a
Monte Carlo Simulation model. See Note 12, “Equity-Based Compensation - TR Performance Unit Awards,” for additional information.
Subsequent
Events
We have evaluated subsequent events through the filing of this Annual Report on Form 10-K. See Note 18, “Subsequent Events” for additional information.
Recently
Issued
Accounting
Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) that requires
companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or
service. The Partnership should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting
periods within that reporting period. The Partnership has completed its evaluation of the provisions of this ASU and does not expect our adoption of ASU 2014-09
to materially change the amount or timing of revenues recognized by us, nor expect it to materially affect our financial position. The majority of our revenues
generated are recognized upon delivery and transfer of title to the product to our customers. The time at which delivery and transfer of title occurs, for the majority
of our contracts with customers, is the point when the product leaves our facility, thereby rendering our performance obligation fulfilled. The FASB issued various
amendments to ASU 2014-09, one of which includes allowing entities to elect to account for shipping and handling activities performed after the control of a good
has been transferred to the customer as a fulfillment cost versus an obligation of a promised service. The Partnership has made an accounting policy election upon
adoption to account for shipping and handling activities as fulfillment costs, which is not expected to have a material impact on our financial statements. The
Partnership adopted this ASU effective January 1, 2018, as permitted by the ASU, using the modified retrospective method.
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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The update amends existing standards for accounting for leases by lessees, with
accounting for leases by lessors remaining largely unchanged from current guidance. The update requires that lessees recognize a lease liability and a right of use
asset for all leases (with the exception of short-term leases) at the commencement date of the lease and disclose key information about leasing arrangements. The
update is effective for interim and annual periods beginning after December 15, 2018 and must be adopted using a modified retrospective transition. The ASU No.
2016-02 provides for certain practical expedients and early adoption is permitted. The Partnership is evaluating the potential impact the adoption of ASU No. 2016-
02 will have on its consolidated financial statements.
In August 2017, FASB issued ASU 2017-12, Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities. This ASU aims to
improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements.
In addition, this ASU make certain targeted improvements to simplify the application of the existing hedge accounting guidance. This ASU is effective for us
beginning in the first quarter of 2019, with early application permitted. The Partnership is evaluating the effect the standard will have on its consolidated financial
statements.
In May 2017, the FASB issued ASU 2017-09–Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 provides
guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance
is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. We do not believe the updated requirements will
materially impact the Partnership’s consolidated financial statements.
3. NET INCOME PER UNIT AND CASH DISTRIBUTION
Allocation
of
Net
Income
Net income per unit applicable to limited partners is computed by dividing limited partners’ interest in net income attributable to Ciner Corp, after deducting
the general partner’s interest and any incentive distributions, by the weighted average number of outstanding common and subordinated units. Our net income is
allocated to the general partner and limited partners in accordance with their respective partnership percentages, after giving effect to priority income allocations
for incentive distributions, if any, to our general partner, pursuant to our partnership agreement. Earnings in excess of distributions are allocated to the general
partner and limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions
declared and are not based on the net income allocations used in the calculation of net income per unit.
In addition to the common units, we have also identified the general partner interest and incentive distribution rights (“IDRs”) as participating securities and
use the two-class method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average number of common units
outstanding during the period. Anti-dilutive units outstanding were immaterial for all periods presented.
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The net income attributable to common and subordinated unitholders and the weighted average units for calculating basic and diluted net income per common
and subordinated units were as follows:
(In millions, except per unit data)
Net income attributable to Ciner Resources LP
Less: General partner’s interest in net income
Limited partners’ interest in net income
Weighted average limited partner units outstanding:
Common - Public and Ciner Holdings (basic)
Subordinated - Ciner Holdings (basic)
Total weighted average limited partner units outstanding (basic)
Common - Public and Ciner Holdings (diluted)
Subordinated - Ciner Holdings (diluted)
Total weighted average limited partner units outstanding (diluted)
Net income per limited partner unit:
Common - Public and Ciner Holdings (basic)
Subordinated - Ciner Holdings (basic)
Net income per limited partner units (basic)
Common - Public and Ciner Holdings (diluted)
Subordinated - Ciner Holdings (diluted)
Net income per limited partner units (diluted)
The calculation of limited partners’ interest in net income is as follows:
(In millions, except per unit data)
Net income attributable to common unitholders:
Distributions (1)
(Distributions in excess of net income)/undistributed earnings
Common unitholders’ interest in net income
Net income attributable to subordinated unitholders:
Distributions (1)
(Distributions in excess of net income)/undistributed earnings
Subordinated unitholders’ interest in net income
(1) Distributions declared per unit for the year
Conversion
of
subordinated
units
Year Ended December 31,
2017
2016
2015
$
$
41.6 $
0.8
40.8 $
41.4 $
0.8
40.6 $
19.6
—
19.6
19.7
—
19.7
2.08 $
— $
2.08 $
2.07 $
— $
2.07 $
12.3
7.3
19.6
12.3
7.3
19.6
2.06 $
2.11 $
2.08 $
2.06 $
2.11 $
2.08 $
$
$
$
$
$
$
Year Ended December 31,
2017
2016
2015
$
$
$
$
44.5 $
(3.7)
40.8 $
— $
—
— $
27.9 $
(2.7)
25.2 $
16.6 $
(1.2)
15.4 $
2.268
2.265
51.5
1.0
50.5
9.8
9.8
19.6
9.8
9.8
19.6
2.58
2.58
2.58
2.58
2.58
2.58
21.5
3.8
25.3
21.4
3.8
25.2
2.191
Upon payment of the quarterly distribution for the third quarter of 2016, the conditions for conversion of the Partnership’s subordinated units were satisfied.
Accordingly, effective on November 14, 2016, the Partnership’s 9,775,500 subordinated units converted into common units on a one -for-one basis. For purposes
of calculating net income per common and subordinated units, the conversion of the subordinated units were deemed to have occurred on October 1, 2016.
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Quarterly
Distribution
On February 1, 2018 , the Partnership declared its fourth quarter 2017 quarterly distribution. The quarterly cash distribution of $0.5670 per unit was paid on
February 27, 2018 to unitholders of record on February 12, 2018 .
Our general partner has considerable discretion in determining the amount of available cash, the amount of distributions and the decision to make any
distribution. Although our partnership agreement requires that we distribute all of our available cash quarterly, there is no guarantee that we will make quarterly
cash distributions to our unitholders at our current quarterly distribution level, at the minimum quarterly distribution level or at any other rate, and we have no legal
obligation to do so. However, our partnership agreement does contain provisions intended to motivate our general partner to make steady, increasing and
sustainable distributions over time.
General
Partner
Interest
and
Incentive
Distribution
Rights
Our partnership agreement provides that our general partner initially will be entitled to 2.0% of all distributions that we make prior to our liquidation. Our
general partner has the right, but not the obligation, to contribute up to a proportionate amount of capital to us in order to maintain its 2.0% general partner interest
if we issue additional units. Our general partner’s approximate 2.0% interest, and the percentage of our cash distributions to which our general partner is entitled
from such approximate 2.0% interest, will be proportionately reduced if we issue additional units in the future (other than the issuance of common units upon a
reset of the IDRs), and our general partner does not contribute a proportionate amount of capital to us in order to maintain its approximate 2.0% general partner
interest. Our partnership agreement does not require that our general partner fund its capital contribution with cash. It may, instead, fund its capital contribution by
contributing to us common units or other property.
IDRs represent the right to receive increasing percentages ( 13.0% , 23.0% and 48.0% ) of quarterly distributions from operating surplus after we have
achieved the minimum quarterly distribution and the target distribution levels. Our general partner currently holds the IDRs, but may transfer these rights
separately from its general partner interest, subject to certain restrictions in our partnership agreement.
Percentage
Allocations
of
Distributions
from
Operating
Surplus
The following table illustrates the percentage allocations of distributions from operating surplus between the unitholders and our general partner based on
the specified target distribution levels. The amounts set forth under the column heading "Marginal Percentage Interest in Distributions" are the percentage interests
of our general partner and the unitholders in any distributions from operating surplus we distribute up to and including the corresponding amount in the column
"Total Quarterly Distribution per Unit Target Amount." The percentage interests shown for our unitholders and our general partner for the minimum quarterly
distribution also apply to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our
general partner (1) include a 2.0% general partner interest, (2) assume that our general partner has contributed any additional capital necessary to maintain its 2.0%
general partner interest, (3) assume that our general partner has not transferred its incentive distribution rights and (4) assume there are no arrearages on common
units.
Minimum Quarterly Distribution
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Marginal Percentage
Interest in
Distributions
Unitholders
General Partner
98.0%
98.0%
85.0%
75.0%
50.0%
2.0%
2.0%
15.0%
25.0%
50.0%
Total Quarterly
Distribution per Unit
Target Amount
$0.5000
above $0.5000 up to $0.5750
above $0.5750 up to $0.6250
above $0.6250 up to $0.7500
above $0.7500
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4. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following as of December 31:
(In millions)
Trade receivables
Other receivables
Allowance for doubtful accounts
Total
5. INVENTORY
Inventory consisted of the following as of December 31:
(In millions)
Raw materials
Finished goods
Stores inventory, current
Total
6. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment, net consisted of the following as of December 31:
(In millions)
Land and land improvements
Depletable land
Buildings and building improvements
Internal-use computer software
Machinery and equipment
Mining reserves
Total
Less accumulated depreciation, depletion and amortization
Total net book value
Construction in progress
Total property, plant, and equipment, net
2017
2016
$
$
27.5 $
6.7
34.2
—
34.2 $
27.3
6.2
33.5
(0.1)
33.4
2017
2016
10.1 $
3.2
6.5
19.8 $
7.7
5.8
5.5
19.0
$
$
2017
2016
$
0.3 $
3.0
135.0
5.3
652.6
65.3
861.5
(644.7)
216.8
32.5
$
249.3 $
0.3
3.0
133.1
5.1
627.2
65.3
834.0
(622.3)
211.7
44.4
256.1
Depreciation, depletion and amortization expense on property, plant, and equipment was $27.1 million , $26.1 million and $23.7 million for the years ended
December 31, 2017 , 2016 and 2015 , respectively.
7. OTHER NON-CURRENT ASSETS
Other non-current assets consisted of the following as of December 31:
(In millions)
Stores inventory, non-current
Deferred financing costs and other
Total
75
2017
2016
18.6 $
1.0
19.6 $
20.7
0.3
21.0
$
$
Table of Contents
8. ACCRUED EXPENSES
Accrued expenses consisted of the following as of December 31:
(In millions)
Accrued energy costs
Accrued royalty costs
Accrued employee compensation
Accrued other taxes
Accrued derivatives
Other accruals
Total
9. DEBT
2017
2016
5.2
4.5
6.8
4.8
1.9
4.5
5.6
4.6
7.1
4.8
0.4
5.2
$
27.7 $
27.7
Long-term debt consisted of the following as of December 31:
(In millions)
Variable Rate Demand Revenue Bonds, principal due October 1, 2018, interest payable monthly, bearing an interest rate
of 1.82% at December 31, 2017 and 0.87% December 31, 2016
Variable Rate Demand Revenue Bonds, principal due August 1, 2017, interest payable monthly, bearing an interest rate
of 0.87% at December 31, 2016
Former Ciner Wyoming Credit Facility, unsecured principal expiring on July 18, 2018, variable interest rate as a weighted
average rate of 2.36% at December 31, 2016
Ciner Wyoming Credit Facility, unsecured principal expiring on August 1, 2022, variable interest rate as a weighted
average rate of 3.08% at December 31, 2017
Total Debt
Current portion of long-term debt
Total long-term debt
Aggregate maturities required on long-term debt at December 31, 2017 are due in future years as follows:
2018
2019, 2020, 2021
2022
Thereafter
Total
Demand
Revenue
Bond
2017
2016
$
11.4 $
—
—
138.0
149.4 $
11.4
138.0 $
$
Amount
$
$
11.4
8.6
78.0
—
98.0
8.6
89.4
11.4
—
138.0
—
149.4
The Variable Rate Demand Revenue Bond is held by Ciner Wyoming. The revenue bond requires the Partnership to maintain standby letters of credit
totaling $11.6 million and $20.3 million at December 31, 2017 and December 31, 2016 , respectively. The letter of credit requires compliance with certain
covenants, including minimum net worth, maximum debt to net worth, and interest coverage ratio. As of December 31, 2017 and December 31, 2016 , Ciner
Wyoming was in compliance with these debt covenants.
Ciner
Wyoming
Credit
Facility
On August 1, 2017, Ciner Wyoming entered into a Credit Agreement (“Ciner Wyoming Credit Facility”) with each of the lenders listed on the respective
signature pages thereof and PNC Bank, National Association, as administrative agent, swing line lender and a Letter of Credit (“ L/C”) issuer. The Ciner Wyoming
Credit Facility replaces the former Credit Facility, dated as of July 18, 2013, by and among Ciner Wyoming, the lenders party thereto and Bank of America, N.A.,
as administrative agent, swing line lender and L/C issuer, as amended (the “Former Ciner Wyoming Credit Facility”), which was terminated on August 1, 2017
upon entry into the Ciner Wyoming Credit Facility. This arrangement was accounted for as a modification of debt in accordance with Accounting Standards
Codification (“ASC”) 470-50.
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The Ciner Wyoming Credit Facility is a $225.0 million senior unsecured revolving credit facility with a syndicate of lenders, which will mature on the fifth
anniversary of the closing date of such credit facility. The Ciner Wyoming Credit Facility provides for revolving loans to fund working capital requirements,
capital expenditures, to consummate permitted acquisitions and for all other lawful partnership purposes. The Ciner Wyoming Credit Facility has an accordion
feature that allows Ciner Wyoming to increase the available revolving borrowings under the facility by up to an additional $75.0 million , subject to Ciner
Wyoming receiving increased commitments from existing lenders or new commitments from new lenders and the satisfaction of certain other conditions. In
addition, the Ciner Wyoming Credit Facility includes a sublimit up to $20.0 million for same-day swing line advances and a sublimit up to $40.0 million for letters
of credit. Ciner Wyoming’s obligations under the Ciner Wyoming Credit Facility are unsecured.
The Ciner Wyoming Credit Facility contains various covenants and restrictive provisions that limit (subject to certain exceptions) Ciner Wyoming’s ability
to:
incur or guarantee additional debt;
• make distributions on or redeem or repurchase units;
•
• make certain investments and acquisitions;
incur certain liens or permit them to exist;
•
•
enter into certain types of transactions with affiliates of Ciner Wyoming;
• merge or consolidate with another company; and
transfer, sell or otherwise dispose of assets.
•
The Ciner Wyoming Credit Facility also requires quarterly maintenance of a consolidated leverage ratio (as defined in the Ciner Wyoming Credit Facility)
of not more than 3.00 to 1.00 and a consolidated interest coverage ratio (as defined in the Ciner Wyoming Credit Facility) of not less than 3.00 to 1.00.
The Ciner Wyoming Credit Facility contains events of default customary for transactions of this nature, including (i) failure to make payments required
under the Ciner Wyoming Credit Facility, (ii) events of default resulting from failure to comply with covenants and financial ratios in the Ciner Wyoming Credit
Facility, (iii) the occurrence of a change of control, (iv) the institution of insolvency or similar proceedings against Ciner Wyoming and (v) the occurrence of a
default under any other material indebtedness Ciner Wyoming may have. Upon the occurrence and during the continuation of an event of default, subject to the
terms and conditions of the Ciner Wyoming Credit Facility, the administrative agent at the request of shall, or with the consent of the Required Lenders (as defined
in the Ciner Wyoming Credit Facility) may terminate all outstanding commitments under the Ciner Wyoming Credit Facility and may declare any outstanding
principal of the Ciner Wyoming Credit Facility debt, together with accrued and unpaid interest, to be immediately due and payable.
Under the Ciner Wyoming Credit Facility, a change of control is triggered if Ciner Resources Corporation and its wholly-owned subsidiaries, directly or
indirectly, cease to own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or similar governing body) of the General
Partner (or any entity that performs the functions of the Partnership’s general partner). In addition, a change of control would be triggered if the Partnership ceases
to own at least 50.1% of the economic interests in Ciner Wyoming or cease to have the ability to elect a majority of the members of Ciner Wyoming’s board of
managers.
Loans under the Ciner Wyoming Credit Facility bear interest at Ciner Wyoming’s option at either:
•
a Base Rate, which equals the highest of (i) the federal funds rate in effect on such day plus 0.50% , (ii) the administrative agent’s
prime rate in effect on such day or (iii) one-month LIBOR plus 1.0% , in each case, plus an applicable margin; or
•
Eurodollar Rate plus an applicable margin.
The unused portion of the Ciner Wyoming Credit Facility is subject to an unused line fee ranging from 0.225% to 0.300% per annum based on Ciner
Wyoming’s then current consolidated leverage ratio.
At December 31, 2017, Ciner Wyoming was in compliance with all financial covenants of the Ciner Wyoming Credit Facility.
Revolving
Credit
Facility
On August 1, 2017, the Partnership entered into a Credit Agreement (the “Revolving Credit Facility”) with each of the lenders listed on the respective
signature pages thereof and PNC Bank, National Association, as administrative agent, swing line lender and an L/C issuer. The Revolving Credit Facility replaces
the former Credit Facility, dated as of July 18, 2013, by and among the Partnership, the lenders party thereto and Bank of America, N.A., as administrative agent,
swing line lender and L/C issuer, as amended (the “Former Revolving Credit Facility”), which was terminated on August 1, 2017 upon entry into the Ciner
Resources Credit Facility.
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The Revolving Credit Facility is a $10.0 million senior secured revolving credit facility with a syndicate of lenders, which will mature on the fifth
anniversary of the closing date of such credit facility. The Revolving Credit Facility provides for revolving loans to be available to fund distributions on the
Partnership’s units and working capital requirements and capital expenditures, to consummate permitted acquisitions and for all other lawful partnership purposes.
The Revolving Credit Facility includes a sublimit up to $5.0 million for same-day swing line advances and a sublimit up to $5.0 million for letters of credit. The
Partnership’s obligations under the Revolving Credit Facility are guaranteed by each of the Partnership’s material domestic subsidiaries other than Ciner Wyoming
LLC (“Ciner Wyoming”). In addition, the Partnership’s obligations under the Revolving Credit Facility are secured by a pledge of substantially all of the
Partnership’s assets (subject to certain exceptions), including the membership interests held in Ciner Wyoming by the Partnership.
The Revolving Credit Facility contains various covenants and restrictive provisions that limit (subject to certain exceptions) the Partnership’s ability to (and
the ability of the Partnership’s subsidiaries, including without limitation, Ciner Wyoming to):
incur or guarantee additional debt;
• make distributions on or redeem or repurchase units;
•
• make certain investments and acquisitions;
incur certain liens or permit them to exist;
•
•
enter into certain types of transactions with affiliates;
• merge or consolidate with another company; and
transfer, sell or otherwise dispose of assets.
•
The Revolving Credit Facility also requires quarterly maintenance of a consolidated leverage ratio (as defined in the Revolving Credit Facility) of not more
than 3.00 to 1.00 and a consolidated interest coverage ratio (as defined in the Revolving Credit Facility) of not less than 3.00 to 1.00.
In addition, the Revolving Credit Facility contains events of default customary for transactions of this nature, including (i) failure to make payments
required under the Revolving Credit Facility, (ii) events of default resulting from failure to comply with covenants and financial ratios, (iii) the occurrence of a
change of control, (iv) the institution of insolvency or similar proceedings against the Partnership or its material subsidiaries and (v) the occurrence of a default
under any other material indebtedness the Partnership (or any of its subsidiaries) may have, including the Ciner Wyoming Credit Facility. Upon the occurrence and
during the continuation of an event of default, subject to the terms and conditions of the Revolving Credit Facility, the lenders may terminate all outstanding
commitments under the Revolving Credit Facility and may declare any outstanding principal of the Revolving Credit Facility debt, together with accrued and
unpaid interest, to be immediately due and payable.
Under the Revolving Credit Facility, a change of control is triggered if Ciner Resources Corporation and its wholly-owned subsidiaries, directly or
indirectly, cease to own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or similar governing body) of, Ciner
Wyoming Holding Co. or Ciner Resource Partners LLC (or any entity that performs the functions of the Partnership’s general partner). In addition, a change of
control would be triggered if the Partnership ceases to own at least 50.1% of the economic interests in Ciner Wyoming or ceases to have the ability to elect a
majority of the members of Ciner Wyoming’s board of managers.
Loans under the Revolving Credit Facility bear interest at our option at either:
•
a Base Rate, which equals the highest of (i) the federal funds rate in effect on such day plus 0.50 %, (ii) the administrative agent’s
prime rate in effect on such day or (iii) one-month LIBOR plus 1.0% , in each case, plus an applicable margin; or
• Eurodollar Rate plus an applicable margin.
The unused portion of the Revolving Credit Facility is subject to an unused line fee ranging from 0.225% to 0.300% based on our then current consolidated
leverage ratio.
At December 31, 2017, the Partnership was in compliance with all financial covenants of the Revolving Credit Facility.
Former
Ciner
Wyoming
Credit
Facility
At December 31, 2016, Ciner Wyoming had a $190.0 million senior unsecured revolving credit facility, as amended on October 30, 2014 and May 25, 2016
(as amended, the “Former Ciner Wyoming Credit Facility”), with a syndicate of lenders, which would mature in July 2018. The Former Ciner Wyoming Credit
Facility provides for revolving loans to fund working capital requirements,
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capital expenditures, to consummate permitted acquisitions and for all other lawful partnership purposes. The Former Ciner Wyoming Credit Facility has an
accordion feature that allows Ciner Wyoming to increase the available revolving borrowings under the facility by up to an additional $75.0 million , subject to
Ciner Wyoming receiving increased commitments from existing lenders or new commitments from new lenders and the satisfaction of certain other conditions. In
addition, the Former Ciner Wyoming Credit Facility includes a sublimit up to $20.0 million for same-day swing line advances and a sublimit up to $40.0 million
for letters of credit. Ciner Wyoming’s obligations under the Former Ciner Wyoming Credit Facility are unsecured.
The Former Ciner Wyoming Credit Facility contains various covenants and restrictive provisions that limit (subject to certain exceptions) Ciner Wyoming’s
ability to:
incur or guarantee additional debt;
• make distributions on or redeem or repurchase units;
•
• make certain investments and acquisitions;
incur certain liens or permit them to exist;
•
•
enter into certain types of transactions with affiliates of Ciner Wyoming;
• merge or consolidate with another company; and
transfer, sell or otherwise dispose of assets.
•
The Former Ciner Wyoming Credit Facility also requires quarterly maintenance of a consolidated leverage ratio (as defined in the Ciner Wyoming Credit
Facility) of not more than 3.00 to 1.00 and a consolidated fixed charge coverage ratio (as defined in the Former Ciner Wyoming Credit Facility) of not less than
1.00 to 1.00. The Former Ciner Wyoming Credit Facility also requires that consolidated capital expenditures, as defined in the Former Ciner Wyoming Credit
Facility, not exceed $50 million in any fiscal year.
In addition, the Former Ciner Wyoming Credit Facility contains events of default customary for transactions of this nature, including (i) failure to make
payments required under the Former Ciner Wyoming Credit Facility, (ii) events of default resulting from failure to comply with covenants and financial ratios in
the Former Ciner Wyoming Credit Facility, (iii) the occurrence of a change of control, (iv) the institution of insolvency or similar proceedings against Ciner
Wyoming and (v) the occurrence of a default under any other material indebtedness Ciner Wyoming may have. Upon the occurrence and during the continuation of
an event of default, subject to the terms and conditions of the Former Ciner Wyoming Credit Facility, the lenders may terminate all outstanding commitments
under the Former Ciner Wyoming Credit Facility and may declare any outstanding principal of the Former Ciner Wyoming Credit Facility debt, together with
accrued and unpaid interest, to be immediately due and payable.
Under the Former Ciner Wyoming Credit Facility, a change of control is triggered if Ciner Corp and its wholly-owned subsidiaries, directly or indirectly,
cease to own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or similar governing body) of Ciner GP (or any
entity that performs the functions of our general partner). In addition, a change of control would be triggered if we cease to own at least 50.1% of the economic
interests in Ciner Wyoming or cease to have the ability to elect a majority of the members of Ciner Wyoming’s board of managers.
Ciner Wyoming was in compliance with all covenants and restrictions under its long-term debt agreements as of December 31, 2016.
Loans under the Former Ciner Wyoming Credit Facility bear interest at Ciner Wyoming’s option at either:
•
a Base Rate, which equals the highest of (i) the federal funds rate in effect on such day plus 0.50% , (ii) the administrative agent’s prime rate in
effect on such day or (iii) one-month LIBOR plus 1.0% , in each case, plus an applicable margin; or
•
a LIBOR Rate plus an applicable margin.
The unused portion of the Former Ciner Wyoming Credit Facility is subject to an unused line fee ranging from 0.275% to 0.350% per annum based on Ciner
Wyoming’s then current consolidated leverage ratio.
Former
Revolving
Credit
Facility
At December 31, 2016, we had a $10.0 million senior secured revolving credit facility, as amended on October 30, 2014 and May 25, 2016 (as amended, the
“Former Revolving Credit Facility”), with a syndicate of lenders, which would mature in July 2018. The Former Revolving Credit Facility provides for revolving
loans to be available to fund distributions on the Partnership’s units and working capital requirements and capital expenditures, to consummate permitted
acquisitions and for all other lawful partnership purposes. The Former Revolving Credit Facility includes a sublimit up to $5.0 million for same-day swing line
advances and a sublimit up to $5.0 million for letters of credit. Our obligations under the Former Revolving Credit Facility are guaranteed by each of our material
domestic subsidiaries other than Ciner Wyoming, and to the extent no material adverse tax consequences would result, foreign wholly-owned subsidiaries. As of
December 31, 2016, our only subsidiary was Ciner Wyoming. In addition, our obligations
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under the Former Revolving Credit Facility are secured by a pledge of substantially all of our assets (subject to certain exceptions), including the membership
interests held in Ciner Wyoming by us.
The Former Revolving Credit Facility contains various covenants and restrictive provisions that limit (subject to certain exceptions) our ability to (and the
ability of our subsidiaries, including without limitation, Ciner Wyoming to):
incur or guarantee additional debt;
• make distributions on or redeem or repurchase units;
•
• make certain investments and acquisitions;
incur certain liens or permit them to exist;
•
•
enter into certain types of transactions with affiliates;
• merge or consolidate with another company; and
transfer, sell or otherwise dispose of assets.
•
The Former Revolving Credit Facility also requires quarterly maintenance of a consolidated fixed charge coverage ratio (as defined in the Revolving Credit
Facility) of not less than 1.00 to 1.00. The Former Revolving Credit Facility also requires that consolidated capital expenditures, as defined in the Former
Revolving Credit Facility, not exceed $50 million in any fiscal year.
In addition, the Former Revolving Credit Facility contains events of default customary for transactions of this nature, including (i) failure to make payments
required under the Former Revolving Credit Facility, (ii) events of default resulting from failure to comply with covenants and financial ratios, (iii) the occurrence
of a change of control, (iv) the institution of insolvency or similar proceedings against us or our material subsidiaries and (v) the occurrence of a default under any
other material indebtedness we (or any of our subsidiaries) may have, including the Former Ciner Wyoming Credit Facility. Upon the occurrence and during the
continuation of an event of default, subject to the terms and conditions of the Former Revolving Credit Facility, the lenders may terminate all outstanding
commitments under the Former Revolving Credit Facility and may declare any outstanding principal of the Former Revolving Credit Facility debt, together with
accrued and unpaid interest, to be immediately due and payable.
Under the Former Revolving Credit Facility, a change of control is triggered if Ciner Corp and its wholly-owned subsidiaries, directly or indirectly, cease to
own all of the equity interests, or cease to have the ability to elect a majority of the board of directors (or similar governing body) of, Ciner Holdings or Ciner GP
(or any entity that performs the functions of our general partner). In addition, a change of control would be triggered if we cease to own at least 50.1% of the
economic interests in Ciner Wyoming or ceases to have the ability to elect a majority of the members of Ciner Wyoming’s board of managers.
The Partnership was in compliance with all covenants and restrictions under its long-term debt agreements as of December 31, 2016.
Loans under the Former Revolving Credit Facility bear interest at our option at either:
•
a Base Rate, which equals the highest of (i) the federal funds rate in effect on such day plus 0.50% , (ii) the administrative agent’s prime rate in
effect on such day or (iii) one-month LIBOR plus 1.0% , in each case, plus an applicable margin; or
•
a LIBOR Rate plus an applicable margin.
The unused portion of the Revolving Credit Facility is subject to an unused line fee ranging from 0.275% to 0.350% based on our then current consolidated
leverage ratio.
Ciner
Enterprises
Credit
Agreement
In addition, there are restrictions in the Credit Agreement by and among Ciner Enterprises (as borrower), Ciner Holdings and Ciner Corp. (each as
guarantors), and the lenders party thereto (as amended and restated or otherwise modified, the “Ciner Enterprises Credit Agreement”) that affect the Partnership.
Specifically, Ciner Enterprises has agreed (subject to certain exceptions in addition to those described below) that it will not, and will not permit any of its
subsidiaries, including Ciner Wyoming and us, to:
• make distributions on or redeem or repurchase equity interests, other than distributions to our and Ciner Wyoming’s unitholders;
•
incur or guarantee additional debt, other than debt incurred under the Revolving Credit Facility or the Ciner Wyoming Credit Facility, among certain other
types of permitted debt;
• make certain investments and acquisitions, other than acquisitions by each of Ciner Wyoming and us, in an amount not to exceed $10 million and $2
million , respectively, and other exceptions set forth therein;
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•
•
incur certain liens or permit them to exist, other than, with respect to our and Ciner Wyoming’s liens, an aggregate amount outstanding at any time equal
to $0.2 million and $1 million , respectively;
enter into certain types of transaction with affiliates, other than transactions between Ciner Wyoming and us;
• merge or consolidate with another company; or
•
transfer, sell or otherwise dispose of assets, other than our and Ciner Wyoming’s dispositions of assets with a net book value not to exceed $0.5 million
and $2.5 million , respectively, in any given year.
10. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consisted of the following as of December 31:
(In millions)
Reclamation reserve
Derivative instruments and hedges, fair value liabilities
Other
Total
A reconciliation of the Partnership’s reclamation reserve liability is as follows:
(In millions)
Reclamation reserve balance at beginning of year
Accretion expense
Reclamation adjustments (1)
Reclamation reserve balance at end of year
2017
2016
5.1 $
5.3
— $
10.4 $
2017
2016
5.5 $
0.3
(0.7) $
5.1 $
5.5
3.4
0.1
9.0
4.5
0.2
0.8
5.5
$
$
$
$
$
$
(1) The reclamation adjustments are primarily a result of changes in the self-bond agreement with the Wyoming Department of Environmental Quality. See Note
14 “Commitments and Contingencies” for additional information on our reclamation reserve.
11. EMPLOYEE COMPENSATION
The Partnership participates in various benefit plans offered and administered by Ciner Corp (administered by OCI Enterprises prior to the Transaction) and
is allocated its portions of the annual costs related thereto. The specific plans are as follows:
Retirement
Plans
-
Benefits provided under the pension plan for salaried employees and pension plan for hourly employees (collectively, the “Retirement
Plans”) are based upon years of service and average compensation for the highest 60 consecutive months of the employee’s last 120 months of service, as defined.
Each plan covers substantially all full-time employees hired before May 1, 2001. The retirement plans had an accumulated benefit obligation of $57.4 million and
$61.5 million at December 31, 2017 and 2016 , respectively. The funding policy is to contribute an amount within the range of the minimum required and the
maximum tax-deductible contribution. The Partnership’s allocated portion of the Retirement Plan’s net periodic pension costs as of December 31, 2017 , 2016 and
2015 were $1.4 million , $2.0 million and $7.7 million . The decrease in pension costs during 2017 was primarily driven by improved discount rates while the
decrease in 2016 was driven by lower overall pension cost at the Ciner Corp level as a result of the retirement plans being fair valued in connection with Ciner
Enterprises’ acquisition of Ciner Corp.
Savings
Plan
- The 401(k) retirement plan (the “401(k) Plan”) covers all eligible hourly and salaried employees. Eligibility is limited to all domestic
residents and any foreign expatriates who are in the United States indefinitely. The plan permits employees to contribute specified percentages of their
compensation, while the Partnership makes contributions based upon specified percentages of employee contributions. Participants hired on or subsequent to
May 1, 2001, will receive an additional contribution from the Partnership based on a percentage of the participant’s base pay. Contributions made to the 401(k)
Plan for as of December 31, 2017 , 2016 and 2015 were $3.7 million , $1.6 million and $2.6 million , respectively. The increase during 2017 was primarily due to
the incremental contributions that were not made in the 2016 comparative period due the the acquisition of the Partnership’s parent company and the accelerated
payouts in 2015.
Postretirement
Benefits
- Most of the Partnership’s employees are eligible for postretirement benefits other than pensions if they reach retirement age while
still employed.
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The postretirement benefits are accounted for on an accrual basis over an employee’s period of service. The postretirement plan, excluding pensions, are not
funded, and Ciner Corp has the right to modify or terminate the plan. The post-retirement benefits had a benefits obligation of $11.5 million and $20.6 million at
December 31, 2017 and December 31, 2016 , respectively. The decrease in the obligation as of December 31, 2017 as compared to December 31, 2016 is due to the
Partnership amending its postretirement benefit plan to increase eligibility requirements at which participants may begin receiving benefits, implemented a subsidy
rather than a premium for the benefit plan, and eliminating plan eligibility for individuals hired after December 31, 2016 .
The Partnership’s allocated portion of postretirement (benefit) costs as of December 31, 2017 , 2016 and 2015 were $(2.8) million , $1.4 million and $0.5
million , respectively. The postretirement benefit for the Partnership in 2017 is due to the aforementioned changes made to the postretirement benefit plans during
2017.
12. EQUITY - BASED COMPENSATION
In July 2013, our general partner established the Ciner Resource Partners LLC 2013 Long-Term Incentive Plan (the “Plan” or “LTIP”). The Plan is intended
to provide incentives that will attract and retain valued employees, officers, consultants and non-employee directors by offering them a greater stake in our success
and a closer identity with us, and to encourage ownership of our common units by such individuals. The Plan provides for awards in the form of common units,
phantom units, distribution equivalent rights (“DERs”), cash awards and other unit-based awards.
All employees, officers, consultants and non-employee directors of us and our parents and subsidiaries are eligible to be selected to participate in the Plan.
As of December 31, 2017 , subject to further adjustment as provided in the Plan, a total of 0.7 million common units were available for awards under the Plan. Any
common units tendered by a participant in payment of the tax liability with respect to an award, including common units withheld from any such award, will not be
available for future awards under the Plan. Common units awarded under the Plan may be reserved or made available from our authorized and unissued common
units or from common units reacquired (through open market transactions or otherwise). Any common units issued under the Plan through the assumption or
substitution of outstanding grants from an acquired company will not reduce the number of common units available for awards under the Plan. If any common units
subject to an award under the Plan are forfeited, any common units counted against the number of common units available for issuance pursuant to the Plan with
respect to such award will again be available for awards under the Plan.
Non-employee
Director
Awards
During the twelve months ended December 31, 2017 , a total of 7,887 common units were granted and fully vested to non-employee directors, and 7,251
were grants during the twelve months ended December 31, 2016 . The grant date average fair value per unit of these awards was $28.53 and $26.24 for the
twelve months ended December 31, 2017 and 2016 , respectively. The total fair value of these awards were approximately $0.2 million during the twelve months
ended December 31, 2017 and 2016 , respectively.
Time
Restricted
Unit
Awards
We grant restricted unit awards in the form of common units to certain employees which vest over a specified period of time, usually between one to three
years, with vesting based on continued employment as of each applicable vesting date. Award recipients are entitled to distributions subject to the same restrictions
as the underlying common unit. The awards are classified as equity awards, and are accounted for at fair value at grant date.
The following table presents a summary of activity on the Time Restricted Unit Awards for the years ended December 31:
2017
2016
(Units in whole numbers)
Unvested at the beginning of year
Granted (1)
Vested
Forfeited
Grant-Date
Average Fair
Value per
Unit (1)
Grant-Date
Average Fair
Value per
Unit (1)
Number of
Units
22.50
28.41
22.50
24.90
— $
39,170
—
—
—
22.50
—
—
Number of
Units
39,170 $
80,370
(13,055)
(11,694)
Unvested at the end of the year
94,791 $
27.22
39,170 $
22.50
(1) Determined by dividing the aggregate grate date fair value of awards by the number of awards issued. No estimated forfeiture rate was applied to the
awards as of December 31, 2017 as all awards granted are expected to vest.
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Total
Return
Performance
Unit
Awards
We grant TR Performance Unit Awards to certain employees. The TR Performance Unit Awards represent the right to receive a number of common units at
a future date based on the achievement of market-based performance requirements in accordance with the TR Unit Performance Award agreement, and also include
Distribution Equivalent Rights (“DERs”). DERs are the right to receive an amount equal to the accumulated cash distributions made during the period with respect
to each common unit issued upon vesting. The TR Performance Unit Awards vest at the end of the performance period, usually between two to three years from the
date of the grant. Performance is measured on the achievement of a specified level of total return, or TR, relative to the TR of a peer group comprised of other
limited partnerships. The potential payout ranges from 0 - 200% of the grant target quantity and is adjusted based on our TR performance relative to the peer group.
For purposes of the table below the number of units are included at target quantity.
We utilized a Monte Carlo simulation model to estimate the grant date fair value of TR Performance Unit Awards granted to employees. These type of
awards, with market conditions, require the input of highly subjective assumptions, including expected volatility and expected distribution yield. Historical and
implied volatilities were used in estimating the fair value of these awards.
The following table presents a summary of activity on the TR Performance Unit Awards for the years ended December 31:
(Units in whole numbers)
Unvested at the beginning of year
Granted
Forfeited
Unvested at the end of the year
2017
2016
Number of
Units
Grant-Date
Average Fair
Value per Unit
(1)
Number of
Units
Grant-Date
Average Fair
Value per Unit
(1)
5,787 $
22,849
(2,459)
26,177 $
43.93
42.73
43.47
42.93
— $
5,787
—
5,787 $
—
43.93
—
43.93
(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.
Unrecognized
Compensation
Expense
A summary of the Partnership’s unrecognized compensation expense for its un-vested restricted time and performance based units, and the weighted-
average periods over which the compensation expense is expected to be recognized are as following:
Time-based units
Performance-based units
Total
Year Ended
December 31, 2017
Year Ended
December 31, 2016
Unrecognized
Compensation
Expense
(In millions)
Weighted
Average to be
Recognized
(In years)
Unrecognized
Compensation
Expense
(In millions)
Weighted
Average to be
Recognized
(In years)
1.7
0.8
2.5
2.03 $
1.88
$
0.5
0.2
0.7
1.60
2.08
$
$
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13. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated
Other
Comprehensive
loss
Accumulated other comprehensive loss, attributable to Ciner Resources LP, includes unrealized gains and losses on derivative financial instruments.
Amounts recorded in accumulated other comprehensive loss as of December 31, 2017 , 2016 and 2015 , and changes within the period, consisted of the following:
(In millions)
Balance at January 1, 2015
Other comprehensive loss before reclassification
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income
Balance at December 31, 2015
Other comprehensive loss before reclassification
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive income
Balance at December 31, 2016
Other comprehensive loss before reclassification
Amounts reclassified from accumulated other comprehensive loss
Net current period other comprehensive loss
Balance at December 31, 2017
Other
Comprehensive
Income/(Loss)
Gains and Losses on
Cash Flow Hedges
$
$
$
$
$
$
(0.4)
(2.4)
0.7
(1.7)
(2.1)
(0.5)
1.0
0.5
(1.6)
(2.8)
0.7
(2.1)
(3.7)
Other comprehensive income/(loss), including portion attributable to non-controlling interest, is derived from adjustments to reflect the unrealized
gains/(loss) on derivative financial instruments.
The components of other comprehensive income/(loss) consisted of the following for the years ended December 31:
(In millions)
Unrealized gain/(loss) on derivatives:
Mark to market adjustment on interest rate swap contracts
Mark to market adjustment on natural gas forward contracts
Income/(loss) on derivative financial instruments
Reclassifications
for
the
period
2017
2016
2015
$
0.4 $
(4.4)
$
(4.0) $
0.4 $
0.5
0.9 $
—
(3.4)
(3.4)
The components of other comprehensive income/(loss), attributable to Ciner Resources LP, that have been reclassified consisted of the following for the
years ended December 31:
(In millions)
2017
2016
2015
Affected Line Items on the
Consolidated Statements of
Operations and
Comprehensive Income
Details about other comprehensive income/(loss) components:
Gains and losses on cash flow hedges:
Interest rate swap contracts
Natural gas forward contracts
Total reclassifications for the period
$
$
$
0.2 $
0.5 $
0.7 $
0.4 $
0.6 $
1.0 $
0.5 Interest expense
0.2 Cost of products sold
0.7
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14. COMMITMENTS AND CONTINGENCIES
Lease
Commitments
The Partnership leases mineral rights from the U.S. Bureau of Land Management, the state of Wyoming, Rock Springs Royalty Corp, an affiliate of
Anadarko Petroleum, and other private parties. All of these leases provide for royalties based upon production volume. The remaining leases provide for minimum
lease payments as detailed in the table below. The Partnership has a perpetual right of first refusal with respect to these leases and intends to continue renewing the
leases as has been its practice.
The Partnership entered into a 10 year rail yard switching and maintenance agreement with a third party, Watco Companies, LLC (“Watco”), on
December 1, 2011. Under the agreement, Watco provides rail-switching services at the Partnership’s rail yard. The Partnership’s rail yard is constructed on land
leased by Watco from Rock Springs Grazing Association and on land by which Watco holds an easement from Anadarko Land Corp; the Rock Springs Grazing
Association land lease is renewable every 5 years for a total period of 30 years , while the Anadarko Land Corp. easement lease is perpetual. The Partnership has an
option agreement with Watco to assign these leases to the Partnership at any time during the land lease term. An annual rental of $15 thousand is paid under the
easement and an annual rental of $60 thousand is paid under the lease.
The Partnership entered into two track lease agreements, collectively, not to exceed 10 years with Union Pacific for certain rail tracks used in connection
with the rail yard.
As of December 31, 2017 , the total minimum contractual rental commitments under the Partnership’s various operating leases, including renewal periods,
are as follows:
(In millions)
2018
2019
2020
2021
2022
Thereafter
Total
Leased
Land
Track
Leases
0.10
0.10
0.10
0.10
0.10
1.40
0.10
0.10
0.10
—
—
—
$
1.9 $
0.3 $
Total
Minimum
Lease
Payments
0.20
0.20
0.20
0.10
0.10
1.40
2.2
Ciner Corp, on behalf of the Partnership, typically enters into operating lease contracts with various lessors for railcars to transport product to customer
locations and warehouses. Rail car leases under these contractual commitments range for periods from 1 to 10 years. Ciner Corp's obligation related to these rail car
leases are $12.1 million in 2018 , $11.1 million in 2019 , $8.5 million in 2020 , $5.9 million in 2021 , $3.8 million in 2022 and $6.2 million in 2023 and thereafter.
Total lease expense was approximately $14.6 million , $14.5 million and $12.4 million for the years ended December 31, 2017 , 2016 and 2015 , respectively.
Purchase
Commitments
We have natural gas supply contracts to mitigate volatility in the price of natural gas. As of December 31, 2017 , these contracts totaled approximately
$29.6 million for the purchase of a portion of our natural gas requirements over approximately the next five years. The supply purchase agreements have specific
commitments of $14.3 million in 2018 , $8.4 million in 2019 and $6.9 million in 2020 . We have a separate contract that expires in 2021, for transportation of
natural gas with an average annual cost of approximately $3.8 million per year.
Legal
Proceedings
From time to time we are party to various claims and legal proceedings related to our business. Although the outcome of these proceedings cannot be
predicted with certainty, management does not currently expect any of the legal proceedings we are involved in to have a material effect on our business, financial
condition and results of operations. We cannot predict the nature of any future claims or proceedings, nor the ultimate size or outcome of existing claims and legal
proceedings and whether any damages resulting from them will be covered by insurance.
Off-Balance
Sheet
Arrangements
We have a self-bond agreement with the Wyoming Department of Environmental Quality under which we commit to pay directly for reclamation costs at
our Green River, Wyoming plant site. The amount of the bond was $32.9 million as of December 31, 2017 and $38.2 million as of December 31, 2016 , which is
the amount we would need to pay the State of Wyoming for reclamation costs if we cease mining operations currently. The amount of this self-bond is subject to
change upon periodic re-evaluation by the Land Quality Division.
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15. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
Ciner Corp is the exclusive sales agent for the Partnership and through its membership in ANSAC, Ciner Corp is responsible for promoting and increasing
the use and sale of soda ash and other refined or processed sodium products produced. ANSAC operates on a cooperative service-at-cost basis to its members such
that typically any annual profit or loss is passed through to the members. In the event an ANSAC member exits or the ANSAC cooperative is dissolved, the exiting
members are obligated for their respective portion of the residual net assets or deficit of the cooperative. All actual sales and marketing costs incurred by Ciner
Corp are charged directly to the Partnership. Selling, general and administrative expenses also include amounts charged to the Partnership by its affiliates
principally consisting of salaries, benefits, office supplies, professional fees, travel, rent and other costs of certain assets used by the Partnership. Prior to the
closing of the Transaction on October 23, 2015, under the Omnibus Agreement the Partnership reimbursed OCI Enterprises and its affiliates for the expenses
incurred by them in providing services to the Partnership, and we also reimbursed OCI Enterprises for certain direct operating expenses they paid on our behalf.
Subsequent to the closing of the Transaction, on October 23, 2015 the Partnership entered into a Services Agreement (the “Services Agreement”), among the
Partnership, our general partner and Ciner Corp. Pursuant to the Services Agreement, Ciner Corp has agreed to provide the Partnership with certain corporate,
selling, marketing, and general and administrative services, in return for which the Partnership has agreed to pay Ciner Corp an annual management fee and
reimburse Ciner Corp for certain third-party costs incurred in connection with providing such services. In addition, under the joint venture agreement governing
Ciner Wyoming, Ciner Wyoming reimburses us for employees who operate our assets and for support provided to Ciner Wyoming. These transactions do not
necessarily represent arm's length transactions and may not represent all costs if the Company operated on a standalone basis. In November 2016, Ciner Corp, on
behalf of Ciner Wyoming, entered into a soda ash sales agreement with CIDT, an affiliate of Ciner Group, that sells soda ash to markets not served by ANSAC.
The terms of our sales agreement with CIDT are generally similar to our agreements with other international customers. The receivables associated with these sales
are recorded in accounts receivable - affiliates line item on the balance sheet and interest earned is recorded in the interest income line item in the Statement of
Operations and Comprehensive Income. CIDT is ultimately owned and controlled by the Ciner Group.
As a result of the closing of the Transaction discussed in Note 2 - “Summary of Significant Accounting Policies,” Ciner Enterprises owns indirectly and
controls the Partnership, therefore, OCI Enterprises and subsidiaries, including OCI Alabama LLC, are no longer related parties of the Partnership as of the
Transaction date. The following table includes transactions with OCI Enterprises and subsidiaries prior to the Transaction date.
The total costs charged to the Partnership by affiliates were as follows:
(In millions)
OCI Enterprises
Ciner Corp
ANSAC (1)
Total selling, general and administrative expenses - Affiliates
Years Ended December 31,
2017
2016
2015
$
$
— $
14.5
2.4
16.9 $
— $
14.9
3.8
18.7 $
6.1
5.8
3.8
15.7
(1) ANSAC allocates its expenses to its members using a pro rata calculation based on sales.
Cost of products sold includes logistics services charged by ANSAC. For the years ended December 31, 2017 , 2016 and 2015 these costs were $19.8
million , $3.3 million and $8.2 million , respectively. The increase in freight costs charged by ANSAC was largely due to an increase in non-ANSAC international
sales, primarily sales to CIDT, during the year ended December 31, 2017 compared to 2016 . When we elect to use ANSAC to provide freight services for our
other non-ANSAC international sales, ANSAC separately and directly charges the Partnership for such services.
Net sales to affiliates were as follows:
(In millions)
ANSAC
OCI Alabama LLC
CIDT
Total
Years Ended December 31,
2017
2016
2015
222.2 $
262.2 $
—
82.3
—
9.0
304.5 $
271.2 $
261.0
4.3
—
265.3
$
$
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The Partnership had accounts receivable from affiliates and due to affiliates as follows:
(In millions)
ANSAC
CIDT
Ciner Resources Corporation
Ciner Europe
Total
As of December 31,
2017
2016
2017
2016
Accounts receivable from affiliates
Due to affiliates
57.7
32.9
7.7
—
46.5 $
1.3 $
9.0
3.9
2.2
—
1.7
—
$
98.3 $
61.6 $
3.0 $
2.5
—
1.7
—
4.2
16. MAJOR CUSTOMERS AND SEGMENT REPORTING
Our operations are similar in geography, nature of products we provide, and type of customers we serve. As the Partnership earns substantially all of its
revenues through the sale of soda ash mined at a single location, we have concluded that we have one operating segment for reporting purposes.
The net sales by geographic area consisted of the following:
(In millions)
Domestic
International
ANSAC
CIDT
Other
Total international
Total net sales
17. FAIR VALUE MEASUREMENTS
Years Ended December 31,
2017
2016
2015
$
192.8 $
192.6 $
194.0
222.2
82.3
—
304.5
262.2
9.0
11.4
282.6
$
497.3 $
475.2 $
261.0
—
31.4
292.4
486.4
The Partnership measures certain financial and non-financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants
on the measurement date. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of
unobservable inputs.
A three-level valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three
levels are defined as follows:
Ÿ Level 1-inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.
Ÿ
Level 2-inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in
which all significant inputs are observable for substantially the full term of the asset or liability.
Ÿ Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.
Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, derivative financial instruments and long-
term debt. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value because of the nature of such
instruments. Our long-term debt and derivative financial instruments are measured at their fair values with Level 2 inputs based on quoted market values for similar
but not identical financial instruments.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Derivative Financial Instruments
We have entered into interest rate swap contracts, designated as cash flow hedges, to mitigate our exposure to possible
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increases in interest rates. These contracts are for periods consistent with the exposure being hedged and will mature on July 18, 2018, the maturity date of the
long-term debt under the Ciner Wyoming credit facility. These contracts had an aggregate notional value of $70.0 million at December 31, 2017 and $72.0 million
at December 31, 2016 , respectively.
We enter into natural gas forward contracts, designated as cash flow hedges, to mitigate volatility in the price of natural gas related to a portion of the
natural gas we consume. These contracts generally have various maturities through 2022 . These contracts had an aggregate notional value of $37.0 million and
$31.0 million at December 31, 2017 and December 31, 2016 , respectively.
The following table presents the fair value of derivative assets and liability derivatives and the respective locations on our unaudited condensed
consolidated balance sheets as of December 31, 2017 and December 31, 2016 :
(In millions)
Derivatives designated as hedges:
Assets
Liabilities
2017
2016
2017
2016
Balance
Sheet
Location
Fair Value
Balance
Sheet
Location Fair Value
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Interest rate swap contracts - current
$
—
$
—
Accrued
Expenses
$
—
Accrued
Expenses
$
0.4
Natural gas forward contracts - current
Natural gas forward contracts - non-current
Foreign exchange forward contracts
Total derivatives designated as hedging
instruments
Other
Current
Assets
—
—
—
—
$
$
Accrued
Expenses
0.6
Other non-
current
liabilities
—
Accrued
Expenses
1.9
Other non-
current
liabilities
5.3
$
$
—
0.6
$
$
—
7.2
$
$
—
3.4
—
3.8
Financial Assets and Liabilities not Measured at Fair Value
The carrying value of our long-term debt materially reflects the fair value of our long-term debt as rates are variable and its key terms are similar to
indebtedness with similar amounts, durations and credit risks. See Note 9 “Debt” for additional information on our debt arrangements.
18. SUBSEQUENT EVENTS
Distribution
Declaration
On February 6, 2018 , the members of the Board of Managers of Ciner Wyoming, approved a cash distribution to the members of Ciner Wyoming in the
aggregate amount of $25.0 million . This distribution was payable and paid on February 8, 2018 .
On February 1, 2018 , the Partnership declared a cash distribution approved by the board of directors of its general partner. The cash distribution for the
fourth quarter of 2017 of $0.5670 per unit was paid on February 27, 2018 to unitholders of record on February 12, 2018 .
Effective February 22, 2018, Akkan transferred its direct 100% ownership in Ciner Enterprises to KEW Soda, a U.K. company, which transferred such
ownership to WE Soda, a U.K. company. WE Soda is 100% owned by KEW Soda and KEW Soda is wholly owned by Akkan.This reorganization is a part of Ciner
Group’s strategy to combine the global soda ash business under a common structure in the U.K.
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Item 9. Changes
in
and
Disagreements
with
Accountants
on
Accounting
and
Financial
Disclosure
None.
Item 9A. Controls
and
Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Partnership’s management, the Partnership’s principal executive officer and
principal financial officer have concluded that the Partnership’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act were effective as of December 31, 2017 to ensure that information required to be disclosed by the Partnership in reports that it files or submits under
the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and
forms and (ii) accumulated and communicated to the Partnership’s management, including its principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Partnership’s internal control over financial reporting during the fourth quarter of fiscal year December 31, 2017 , which were
identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially
affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Management Annual Report on Internal Control over Financial Reporting
The report of management required under this Item 9A is contained in Item 8. Financial Statements and Supplementary Data, Management’s Annual Report
on Internal Control over Financial Reporting.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting,
and will not be required to do so for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act of 2012. See Part I, Item 1,
Business, “Emerging Growth Company Status,” for additional information.
Item 9B. Other
Information
Not applicable
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Item 10. Directors,
Executive
Officers
and
Corporate
Governance
PART III
Our general partner manages our operations and activities on our behalf through its directors and officers. Ciner Holdings, an indirect, wholly-owned
subsidiary of Ciner Enterprises, owns all of the membership interests in our general partner and has the right to appoint the entire board of directors of our general
partner, including our independent directors. Our unitholders are not entitled to elect the directors of our general partner’s board of directors or to directly or
indirectly participate in our management or operations. In addition, our general partner owes certain duties to our unitholders as well as a fiduciary duty to its
owners. References to “our directors” or “our executive officers” refer to the directors or executive officers of our general partner.
The Board of Directors of Our General Partner
The board of directors of our general partner (the “Board”) oversees our operations. The Board’s directors hold office until their successors have been
elected or qualified or until the earlier of their death, resignation, removal or disqualification. Executive officers serve at the discretion of the Board. There are no
family relationships among any of our directors or executive officers. The Board held seven meetings during the fiscal year ended December 31, 2017 .
Our common units are traded on the NYSE. The NYSE does not require publicly traded partnerships listed on its exchange, such as ours, to have, and we
do not intend to have, a majority of independent directors on the Board or to establish a compensation committee or a nominating and corporate governance
committee.
At the date of this Report, the Board consists of the following members: Kirk H. Milling, Atilla Ciner, Doğan Pençe, Oğuz Erkan, Michael E. Ducey,
Thomas W. Jasper and Angela A. Minas. The Board has determined that each of Michael E. Ducey, Thomas W. Jasper and Angela A. Minas qualifies as an
independent director under applicable SEC rules and regulations and the rules of the NYSE. Under the NYSE's listing standards, a director will not be deemed
independent unless the Board affirmatively determines that the director has no material relationship with us. Based upon information requested from and provided
by each director concerning his or her background, diversity, personal characteristics, business experience and affiliations, including commercial, industrial,
banking, consulting, legal, accounting, charitable and familial relationships, the Board has determined that each of its independent directors has no material
relationship with Ciner Enterprises or us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us, and is therefore
independent under the NYSE's listing standards and applicable SEC rules and regulations.
Director Experience and Qualifications
In identifying and evaluating candidates as possible director-nominees of our general partner, Ciner Holdings will assess the experience and personal
characteristics of the possible nominee against the following individual qualifications, which Ciner Holdings may modify from time to time:
•
•
•
•
•
•
•
•
•
•
possesses integrity, competence, insight, creativity and dedication together with the ability to work with colleagues while challenging one
another to achieve superior performance;
has attained prominence in his or her field of endeavor;
possesses broad business experience;
has ability to exercise sound business judgment;
is able to draw on his or her past experience relative to significant issues facing us;
has experience in our industry or in another industry or endeavor with practical application to our needs;
has sufficient time and dedication for preparation as well as participation in board and committee deliberations;
has no conflict of interest;
meets such standards of independence and financial knowledge as may be required or desirable; and
possesses attributes deemed appropriate given the then current needs of the board.
Executive Officers of Our General Partner
The Board appoints all of our executive officers, all of whom are employed by Ciner Corp and devote such portion of their productive time to our
business and affairs as is required to manage and conduct our operations. Our executive officers manage the day-to-day affairs of our business and conduct our
operations. We will also utilize a significant number of employees of Ciner Corp to operate our business and provide us with general and administrative services.
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Directors, Executive Officers and Other Significant Employees of Our General Partner
The following table shows information for the current directors and executive officers of our general partner:
Name
Kirk H. Milling
Scott R. Humphrey
Nicole C. Daniel
Chris L. DeBerry
Atilla Ciner
Doğan Pençe
Oğuz Erkan
Michael E. Ducey
Thomas W. Jasper
Angela A. Minas
Age
51
47
49
50
34
49
40
69
69
53
Position
Chairman of the Board, President and Chief Executive Officer of our General Partner
Chief Financial Officer of our General Partner
Vice President, General Counsel and Secretary of our General Partner
Chief Accounting Officer of our General Partner
Director of our General Partner
Director of our General Partner
Director of our General Partner
Director of our General Partner
Director of our General Partner
Director of our General Partner
Kirk H. Milling was appointed as a director and President and Chief Executive Officer of our general partner in April 2013, and as Chairman of the Board in
October 2015. He has served in positions of increasing responsibility for Ciner since 1999. He has also been a Director of American Natural Soda Ash Corporation
(ANSAC) since 2001. Mr. Milling also served as Chairman of ANSAC from 2011 to 2013 and was reappointed as Chairman in February 2017. Mr. Milling has a
Bachelor of Science in Biochemistry from Texas A&M University and a Master of Business Administration from the University of Connecticut. We believe that
Mr. Milling’s many years of senior level experience in the chemical industry provide him with a deep understanding of Ciner Wyoming’s industry, business needs
and strategies, and qualify him to serve as a member of the board of directors and as President and Chief Executive Officer of our general partner.
Scott R. Humphrey was appointed Chief Financial Officer of our general partner in August 2017. Mr. Humphrey was the Partnership’s Director of Finance
and Treasurer from August 2015 to August 2017, and worked as the Partnership’s Director of Investor Relations from August 2013 until August 2015. Prior to
joining the Partnership, Mr. Humphrey worked as Treasury Director at Schweitzer-Mauduit from 2009 until 2013. Mr. Humphrey earned his BS in Finance from
Boston College and his MBA from Georgetown University. He is also a Certified Treasury Professional. We believe that Mr. Humphrey's financial acumen and
knowledge of business matters, provide him with the necessary skills to be Chief Financial Officer of our general partner.
Nicole C. Daniel was appointed Vice President, General Counsel and Secretary of our general partner in July 2013. She has been a director of ANSAC since
October 2016. Prior to joining our general partner, from 2002 to 2013, Ms. Daniel was with Albemarle Corporation, a specialty chemical company, most recently
serving as Vice President, Deputy General Counsel and Chief Compliance Officer. Ms. Daniel received a Bachelor of Arts degree in Government from The
College of William and Mary and a Juris Doctor from Indiana University Maurer School of Law.
Chris L. DeBerry was appointed Chief Accounting Officer of our general partner in July 2017. Mr. DeBerry served as Controller of the Partnership from
October 2014 to July 2017. Prior to joining the Partnership, Mr. DeBerry served as the Assistant Corporate Controller with Axiall Corporation from September
2006 to August 2014. Mr. DeBerry earned his Masters of Accounting and Bachelors of Science in Accounting degrees from Florida State University and is a
certified public accountant in the state of Georgia. We believe that Mr. DeBerry's financial acumen and knowledge of business matters provide him with the
necessary skills to be Chief Accounting Officer of our general partner.
Atilla Ciner was appointed as a director of our general partner in September 2017. Mr. Ciner is also Vice President of the Ciner Group. Most recently, he
was Vice President at Eti Soda from 2016 to June 2017. Previously, he was Chairman and President of Ciner Yapi Teknik, a construction planning, engineering and
excavation business for the mining industry in Turkey from 2012 through 2016. Mr. Ciner is the son of Turgay Ciner, the Chairman and ultimate beneficial owner
of the Ciner Group. Mr. Atilla Ciner holds a Bachelor’s degree in Journalism from Yeditepe University and is fluent in both Turkish and English languages. We
believe that Mr. Ciner’s acumen and knowledge of business matters provide him with the necessary skills to be a member of the board of directors of our general
partner.
Doğan Pençe was reappointed as a director of our general partner in April 2017. He previously served as director of our general partner from October 2015
to July 2016. Mr. Pençe has also been a board member responsible for finance and strategy for Park Holding A.S. of the Ciner Group since December 2009, and he
was the Group CFO of Park Holding from December
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2009 to March 2016. Prior to joining Park Holding, Mr. Pençe served as Executive Vice President of Credits VakifBank A.S., one of the largest banks in Turkey.
Mr. Pençe holds a Bachelor’s degree in Political Science from Istanbul University. We believe that Mr. Pençe’s financial acumen and knowledge of business
matters provide him with the necessary skills to be a member of the board of directors of our general partner.
Oğuz Erkan was appointed as a director of our general partner in July 2016. Since November 2015, Mr. Erkan has served as Director of International
Operations & Coordination at our ultimate U.S. parent company, Ciner Enterprises Inc. From January 2015 to November 2015, Mr. Erkan served as Director for
Ciner Group in London, UK. Prior to this assignment, from June 2012 until January 2015 Mr. Erkan served as General Manager of Kasimpasa AS, a subsidiary of
Ciner Group, and from 2009 to 2012 he served as a Project Director for Middle East and North Africa. Mr. Erkan holds a Bachelor’s Degree in Marketing and
Bachelor’s Degree in International Business from Northwest Missouri State University. We believe that Mr. Erkan’s familiarity with Ciner Group’s businesses and
his business acumen provide him with the necessary skills to be a member of the board of directors of our general partner.
Michael E. Ducey was appointed as a director of our general partner in September 2014 and as lead independent director in February 2017. Mr. Ducey is the
retired President, CEO and Director of Compass Minerals International, Inc., the second largest salt producer in North America and the largest in the U.K. Prior to
joining Compass Minerals, he was a 30-year veteran of Borden Chemical, Inc., where he worked in various management, sales, marketing, planning and
commercial development roles culminating in President, CEO and Director. He serves on the board of HaloSource, Inc., Fenner PLC and Apollo Global
Management LLC. Mr. Ducey is a graduate of Otterbein College, where he earned a Bachelor of Arts; he earned a Master of Business Administration from the
University of Dayton. We believe that Mr. Ducey’s comprehensive corporate background and experience in the mining industry, and his experience serving on
various boards and committees, add significant value to the board of directors of our general partner.
Thomas W. Jasper was appointed as a director of our general partner in January 2016 and as chair of the conflicts committee in February 2017. Mr. Jasper
has served as Managing Partner of Manursing Partners, LLC, since 2011, and also previously served as Chief Executive Officer of Primus Guaranty, Ltd. from
2001 to 2010. Prior to joining Primus, Mr. Jasper served for 17 years as a key executive of Salomon Brothers, Inc. and its successor companies. Mr. Jasper’s
accomplishments at Salomon included: establishing its interest rate swap business, running its Debt Capital Markets platform, serving as Chief Operating Officer
of the Asia Pacific Region based in Hong Kong and as Global Treasurer. In 1984 while at Salomon, Mr. Jasper co-founded the International Swaps and Derivatives
Association and served as its first Co-Chairman. Mr. Jasper currently serves on the Board of Directors and as Chair of the Audit Committee of the Blackstone
funds Blackstone/GSO Senior Loan Fund, Blackstone/GSO Long-Short Credit Income Fund, Blackstone/GSO Strategic Credit Fund, Blackstone/GSO Floating
Rate Enhanced Income Fund and Blackstone Real Estate Investment Fund. Mr. Jasper also serves on the board of three non-profits: Phoenix House Foundation,
where he is Chairman of the Board; Wellspring Foundation and the SMU Cox School of Business. He received his BBA from Southern Methodist University and
his MBA from the University of Texas. We believe that Mr. Jasper’s financial acumen and knowledge of business matters provide him with the necessary skills to
be a member of the board of directors of our general partner.
Angela A. Minas was appointed as a director of our general partner in December 2013 and as chairperson of the audit committee in January 2016. Ms. Minas
also currently serves on the Board of Directors and as Chair of the Audit Committee of the general partner of CNX Midstream Partners LP and as a member of the
Board of Directors of the general partner of Westlake Chemical Partners LP. She also currently serves as a member of the Council of Overseers at the Rice
University Graduate Business School. From March 2013 to August 2014, she was Vice President and Chief Financial Officer of Nemaha Oil and Gas, LLC, a Pine
Brook Road Partners portfolio company. Ms. Minas served as Vice President and Chief Financial Officer for DCP Midstream Partners from September 2008 to
May 2012. She served as Chief Financial Officer, Chief Accounting Officer and Treasurer of Constellation Energy Partners from September 2006 to March 2008.
Prior to her experience in the MLP sector, Ms. Minas served as Senior Vice President, Global Consulting and Vice President, US Consulting for Science
Applications International Corp. She was a Partner with Arthur Andersen LLP from 1997 through 2002. Ms. Minas is a graduate of Rice University, where she
earned a Bachelor of Arts in Managerial Studies and a Master of Business Administration with a concentration in Finance and Accounting. We believe that Ms.
Minas’ previous experience with public master limited partnerships and the natural resource industry, as well as her knowledge of financial statements, provide her
with the necessary skills to be a member of the board of directors of our general partner.
Committees of the Board of Directors
The Board has established an audit committee and a conflicts committee. Michael E. Ducey, Thomas W. Jasper and Angela A. Minas are the members of
the audit committee, and Angela A. Minas serves as chairperson. Michael E. Ducey, Thomas W. Jasper and Angela A. Minas are the members of our conflicts
committee and Thomas W. Jasper serves as the chairman. The Board will determine whether to refer a matter to the conflicts committee on a case-by-case basis in
accordance
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with our partnership agreement. We do not have a compensation committee, but rather the Board approves equity grants to and compensation of our directors, and
Ciner Corp approves compensation of our officers subject to our review and approval under the Services Agreement. We do not have a nominating and corporate
governance committee in view of the fact that Ciner Holdings, which owns our general partner, controls appointments to the Board.
Audit
Committee
We are required to have an audit committee of at least three members who meet the independence and experience standards established by the NYSE and
the Exchange Act. In accordance with the rules of the NYSE, we have appointed three independent directors. The Board has determined that each director
appointed to the audit committee is “financially literate,” and Michael E. Ducey and Thomas W. Jasper, who are members of the audit committee, and Angela A.
Minas, who serves as chairperson of the audit committee, each has “accounting or related financial management expertise” and constitutes an “audit committee
financial expert” in accordance with SEC and NYSE rules and regulations. The audit committee operates pursuant to a written charter, an electronic copy of which
is available on our website at www.ciner.us.com under the Investor Overview - Governance Documents tab.
The audit committee assists the Board in its oversight of the integrity of our financial statements and our compliance with legal and regulatory
requirements and partnership policies and controls. The audit committee operates under a written charter and has been given the sole authority to (1) retain and
terminate our independent registered public accounting firm, (2) approve all auditing services and related fees and the terms thereof performed by our independent
registered public accounting firm, (3) establish policies and procedures for pre-approval of all audit, non-audit and internal control related services to be rendered
by our independent registered public accounting firm and (4) review and evaluate all related party transactions or dealings with parties related to us and disclosures
of such transactions or dealings in our annual report on Form 10-K. The audit committee is also responsible for confirming the independence and objectivity of our
independent registered public accounting firm. Our independent registered public accounting firm has been given unrestricted access to the audit committee and
our management, as necessary. The audit committee met eight times during the fiscal year ended December 31, 2017 .
Conflicts
Committee
The conflicts committee reviews specific matters that may involve conflicts of interest between our general partner or any of its affiliates, on the one
hand, and us, our partners and any of our subsidiaries, on the other hand, in accordance with the terms of our partnership agreement. The conflicts committee
operates pursuant to a written charter, an electronic copy of which is available on our website at www.ciner.us.com under the Investor Overview - Governance
Documents tab. The members of the conflicts committee may not be officers or employees of our general partner or directors, officers or employees of its affiliates,
including Ciner Holdings; may not hold an ownership interest in our general partner or its affiliates other than common units or awards under any long-term
incentive plan, equity compensation plan or similar plan implemented by our general partner or the partnership; and must meet the independence standards
established by the NYSE and the Exchange Act to serve on an audit committee of a board of directors. Any matters approved by the conflicts committee will be
conclusively deemed to be in our best interest, approved by all of our partners and not a breach by our general partner of any duties it may owe us or our
unitholders. Any unitholder challenging any matter approved by the conflicts committee will have the burden of proving that the members of the conflicts
committee did not believe that the matter was in the best interests of our partnership. Moreover, any acts taken or omitted to be taken in reliance upon the advice or
opinions of experts such as legal counsel, accountants, appraisers, management consultants and investment bankers, where our general partner (or any members of
the Board including any member of the conflicts committee) reasonably believes the advice or opinion to be within such person's professional or expert
competence, shall be conclusively presumed to have been done or omitted in good faith. The conflicts committee did not meet in 2017 .
Board Leadership Structure and Role in Risk Oversight
The Board does not mandate the separation of the offices of chairperson of the Board and chief executive officer. Instead, that relationship is defined and
governed by the first amended and restated limited liability company agreement, as amended, of our general partner, which permits the same person to hold both
offices. The Board believes that whether the offices of Chairperson of the Board and Chief Executive Officer are combined or separated should be decided by the
Board, from time to time, in its business judgment after considering relevant circumstances. Mr. Milling currently serves as Chairman of the Board. Directors of
the Board are designated or elected by Ciner Holdings. Accordingly, unlike holders of common stock in a corporation, our unitholders have only limited voting
rights on matters affecting our business or governance, subject in all cases to any specific unitholder rights contained in our partnership agreement.
Our corporate governance guidelines provide that the Board is responsible for reviewing the process for assessing the major risks facing us and the
options for their mitigation. This responsibility is largely satisfied by our audit committee, which
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is responsible for reviewing and discussing with management and our independent registered public accounting firm our major risk exposures and the policies
management has implemented to monitor such exposures, including our financial risk exposures and risk management policies.
Executive Sessions of Independent Directors and Lead Independent Director
Effective on February 10, 2017, the Board appointed Mr. Michael E. Ducey as the Board’s Lead Independent Director. Under our Corporate Governance
Guidelines, the Lead Independent Director is responsible for:
•
presiding at executive sessions of the independent directors of the Board;
• working with the committee chairs to set agendas and lead the discussion of regular meetings of the directors outside the presence of
management;
•
•
providing feedback regarding these meetings to the Chairman of the Board; and
otherwise serves as a liaison between the independent directors and the Chairman of the Board.
The Board holds regular executive sessions in which the independent directors of the Board meet without any members of management present. The
purpose of these executive sessions is to promote open and candid discussion among the independent directors. Pursuant to our Corporate Governance Guidelines,
we have our Lead Independent Director preside over these executive sessions.
Communication with the Board of Directors
A holder of our units or other interested party who wishes to communicate with the non-management directors or independent directors of our general
partner may do so by contacting our corporate secretary at the address or phone number appearing on the front page of this Report. Communications will be relayed
to the intended recipient of the Board except in instances where it is deemed unnecessary or inappropriate to do so. Any communications withheld will nonetheless
be recorded and available for any director who wishes to review them.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of our records, we believe all reports required to be filed during the 2017 fiscal year pursuant to Section 16(a) of the Exchange Act
were filed on a timely basis, except for a Form 4 filed on August 7, 2017 for Mr. Scott R. Humphrey.
Code of Conduct
We have adopted a code of conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or
persons performing similar functions, as well as other employees. We intend to disclose any amendments to or waivers of the code of conduct on behalf of our
Chief Executive Officer, Chief Financial Officer and persons performing similar functions on our website at www.ciner.us.com under the Investor Overview -
Governance Documents tab. Additionally, the Board has adopted corporate governance guidelines for the directors and the Board. The code of conduct and the
corporate governance guidelines may be found on our website at www.ciner.us.com under the Investor Overview - Governance Documents tab.
ITEM 11. Executive
Compensation
We are an “emerging growth company” as defined under the Jumpstart Our Business Startups (JOBS) Act. As such, we are permitted to meet the
disclosure requirements of Item 402 of Regulation S-K by providing the reduced disclosure required of a “smaller reporting company.”
Compensation Overview
We are managed by our general partner and do not directly employ any of the persons responsible for managing our business, and, as permitted by the
NYSE’s rules applicable to publicly traded partnerships, we do not have a compensation committee.
The executive officers of our general partner are employees of Ciner Corp. It is Ciner Corp that determines and approves the compensation of the
employees that perform services on our behalf, including our general partner’s executive officers, other than awards that may be granted under the Plan. We
reimburse Ciner Corp for such services and compensation, and our reimbursement is governed by the Services Agreement, under which we have agreed to pay
Ciner Corp an annual
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management fee, subject to quarterly adjustments, and to reimburse Ciner Corp for certain third-party costs incurred in connection with providing such services,
with estimates of such proposed annual fees and costs subject to initial review and approval by our Board. The annual management fee proposed by Ciner Corp is
determined based on the estimated time the employees are expected to spend on our business.
For 2017 , our general partners’ named executive officers (“NEOs”) were:
•
•
•
Kirk Milling, Chairman of the Board, President and Chief Executive Officer
Scott R. Humphrey, Chief Financial Officer
Nicole Daniel, Vice President, General Counsel and Secretary
All of the NEOs are employed by Ciner Corp, and neither we nor our general partner have entered into any employment agreements with these officers.
Summary Compensation Table
The following table summarizes the compensation paid to the NEOs for the fiscal years ended December 31, 2017 and 2016 , respectively.
Salary
Bonus
Unit Awards
Non-Equity
Incentive Plan
Compensation ($) (2)
All Other
Compensation
($)
Total
($)
($) (1)
Name and Principal Position
Kirk H. Milling, Chairman of the
Board, President and Chief
Executive Officer
Year
2017
($)
422,065
2016
417,620
Scott R. Humphrey, Chief Financial
Officer
2017
220,962
Nicole C. Daniel, Vice President,
General Counsel and Secretary
2017
266,924
2016
292,644
($)
—
—
—
—
—
560,127
214,454
36,062
1,232,708
612,096
321,679
593,123
260,101
36,537
65,478
122,064
21,014
24,251
24,545
26,175
16,368
1,090,504
632,664
1,008,286
590,127
(1) The amounts shown in the “Unit Awards” column reflect the full aggregate grant date fair value of the performance-based unit awards and the restricted unit
awards granted to the NEOs during 2017 , as determined in accordance with ASC Topic 718, and as determined without regard to potential forfeitures (the
amounts shown do not reflect the actual value that may be recognized by each NEO). For the restricted unit awards, the fair value per unit is equal to the
closing sale price of our common units on the NYSE on the dates of the applicable grants ($28.46 on April 28, 2017 and $26.04 on August 4, 2017). The
performance-based unit awards contain a relative total shareholder return vesting condition, which are considered market-based awards under applicable
accounting guidance. The grant date fair value for the performance-based unit awards was based on a per share price of $43.14 on April 28, 2017 and
$38.73 on August 4, 2017, which was determined based on the probability of achieving the performance target utilizing a Monte Carlo simulation model,
and the amounts in the table above reflect the value of the performance-based unit awards at the target (or 100%) level. The table below provides the
potential value of the performance-based unit awards at the threshold, target and maximum levels:
Name
Kirk H. Milling
Scott Humphrey
Nicole Daniel
Performance-Based Unit Awards Granted April 28, 2017
Value at Threshold Level
(50%)
Value at Target Level (100%)
Value at Maximum Level
(200%)
$168,742
$20,837
$86,755
$337,484
$41,673
$173,509
95
$674,968
$83,346
$347,018
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Name
Scott Humphrey
Performance-Based Unit Awards Granted August 4, 2017
Value at Threshold Level
(50%)
Value at Target Level (100%)
Value at Maximum Level
(200%)
$9,799
$19,597
$39,195
For a discussion of the valuation assumptions applicable to the Unit Awards, please see Note 12 to our financial statements included in this Annual Report
on Form 10-K for the year ended December 31, 2017 .
(2)
The amounts shown in this column reflect awards that were provided under the compensation program of Ciner Corp that were allocated to us, and
reimbursable by us, under the Services Agreement.
Narrative Disclosure to the Summary Compensation Table
The summary compensation table summarizes total compensation for services rendered by the NEOs during the period from January 1, 2017 through
December 31, 2017 . Other than for awards granted under the Ciner Resource Partners LLC 2013 Long-Term Incentive Plan (the “Plan”), our Board has the ability
under the Services Agreement to initially review and approve the estimated annual management fee (including the compensation of the NEOs) to be allocated to us
for such services. Other than for awards granted under the Plan, the amounts reflected in the columns of the summary compensation table reflect the amounts we
incurred for such services from the NEOs, in accordance with our Services Agreement with Ciner Corp. We believe these expenses accurately reflect amounts paid
to the NEOs as compensation for the services provided to us.
Overview
Ciner Corp determines and approves the compensation of the employees that perform services on our behalf, including our NEOs, other than awards that
may be granted under the Plan. Ciner Corp seeks to use its compensation program to attract and retain the best possible executive talent, to tie annual and long-term
cash and equity incentive awards to achievement of measurable corporate and individual performance goals and objectives, and to align executives' incentives with
unitholder value creation. We have agreed to reimburse Ciner Corp for such services and compensation by paying Ciner Corp an annual management fee and
reimbursing Ciner Corp for certain third-party costs incurred in connection with providing such services, with estimates of such proposed annual fees and costs
subject to initial review and approval by our Board. The NEOs have been eligible to participate under the same plans that Ciner Corp offers to its other employees
with respect to medical, dental, vision, disability and life insurance plans, a profit sharing plan and a defined contribution plan that is tax-qualified under Section
401(k) of the Internal Revenue Code. Neither we nor our general partner has entered into employment agreements or severance agreements with the NEOs.
2013 Long-Term Incentive Plan
On July 25, 2013, in connection with our initial public offering, we adopted the Plan. The Plan is intended to provide incentives that will attract and retain
valued employees, officers, consultants and non-employee directors by offering them a greater stake in our success and a closer identity with us, and to encourage
ownership of our common units by such individuals. The Plan provides for awards in the form of common units, phantom units, distribution equivalent rights, cash
awards and other unit-based awards. Awards granted under the Plan are approved by the Board. All employees, officers, consultants and non-employee directors of
us and our parents and subsidiaries are eligible to be selected to participate in the Plan.
As of December 31, 2017 , and subject to adjustments as provided in the Plan, there were a total of 700,688 common units available for issuance under the
Plan. Any common units tendered by a participant in payment of the tax liability with respect to an award, including common units withheld from any such award,
will not be available for future awards under the Plan. Common units awarded under the Plan may be reserved or made available from our authorized and unissued
common units or from common units reacquired (through open market transactions or otherwise). Any common units issued under the Plan through the assumption
or substitution of outstanding grants from an acquired company will not reduce the number of common units available for awards under the Plan. If any common
units subject to an award under the Plan are forfeited, any common units counted against the number of common units available for issuance pursuant to the Plan
with respect to such award will again be available for awards under the Plan.
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We intend to grant time restricted unit awards and TR performance unit awards, in 2018 , as part of our annual compensation cycle.
Outstanding Equity Awards at Fiscal Year-End 2017
The following table summarizes the outstanding equity awards held by the NEOs for the fiscal year ended December 31, 2017 .
Mr. Milling
Mr. Humphrey
Ms. Daniel
Number of Units
That have not
Vested (#)
Market Value
of Units That
have not
Vested ($)(1)
Equity Incentive
Plan Awards:
Number of
Unearned Units
That have not
Vested (#)
Equity Incentive Plan
Awards: Market Value
of Unearned Units That
have not Vested (2)($)
Grant Date
2/19/2016
4/29/2016
8/31/2016
4/28/2017
10,529 (3)
2,504 (4)
7,823 (5)
4/28/2017
8/4/2017
8,687 (5)
506 (6)
2/19/2016
4/29/2016
8/31/2016
4/28/2017
5,825 (3)
674 (4)
14,744 (5)
$
$
$
$
$
$
$
$
264,383
62,875
196,436
3,756 (7)
7,823 (8)
218,131
12,706
966 (8)
506 (9)
146,266
16,924
370,222
1,010 (7)
4,022 (8)
$
$
$
$
$
$
94,313
196,436
24,256
12,706
25,361
100,992
(1) The market value is based on the closing price of our common units on the New York Stock Exchange on
December 29, 2017, which was $25.11.
(2) Calculated by multiplying the number of performance-based units reported in the preceding column by the
closing price of our common units on the New York Stock Exchange on December 29, 2017, which was
$25.11.
(3) Represents restricted common units that were awarded pursuant to the Plan on February 19, 2016 that have not
yet vested. One third of such restricted common units vested on March 15, 2017, and the remaining two thirds of
the restricted common units vest on March 15, 2018, subject to accelerated vesting in certain circumstances.
(4) Represents restricted common units that were awarded pursuant to the Plan on April 29, 2016 that have not yet
vested. The restricted common units vest in substantially equal increments on January 1, 2017, January 1,
2018 and January 1, 2019, subject to accelerated vesting in certain circumstances.
(5) Represents restricted common units that were awarded pursuant to the Plan on April 28, 2017 that have not yet
vested. The restricted common units vest in substantially equal increments on March 15, 2018, March 15,
2019 and March 15, 2020, subject to accelerated vesting in certain circumstances.
(6) Represents restricted common units that were awarded pursuant to the Plan on August 4, 2017 that have not yet
vested. The restricted common units vest in substantially equal increments on March 15, 2018, March 15,
2019 and March 15, 2020, subject to accelerated vesting in certain circumstances.
(7) These performance-based units were awarded under the Plan to the NEOs on August 31, 2016, and vest, if at
all, based on total unit return to our common unit holders relative to a peer group over a three year period and
continued employment of the NEO through December 31, 2018. Vesting fully accelerates upon a change in
control of the Partnership or the General Partner, or the death or disability of the NEO. The peer group
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consists of 26 other publicly traded partnerships. Vested units are settled in our common units, with the
number of units payable determined by multiplying the target number provided in the award agreement by a
performance percentage, which may range from 0% to 200% depending on the relative performance of our
common units to the performance of the peer group. Upon any vesting, the NEO will also receive a cash
payment equal to distribution equivalents that were accumulated from the date of grant, multiplied by the
above percentage.
(8) These performance-based units were awarded under the Plan to the NEOs on April 28, 2017, and vest, if at
all, based on total unit return to our common unit holders relative to a peer group over a three year period and
continued employment of the NEO through December 31, 2019. Vesting fully accelerates upon a change in
control of the Partnership or the General Partner, or the death or disability of the NEO. The peer group
consists of 44 other publicly traded partnerships. Vested units are settled in our common units, with the
number of units payable determined by multiplying the target number provided in the award agreement by a
performance percentage, which may range from 0% to 200% depending on the relative performance of our
common units to the performance of the peer group. Upon any vesting, the NEO will also receive a cash
payment equal to distribution equivalents that were accumulated from the date of grant, multiplied by the
above percentage.
(9) These performance-based units were awarded under the Plan to the NEOs on August 4, 2017, and vest, if at
all, based on total unit return to our common unit holders relative to a peer group over a three year period and
continued employment of the NEO through December 31, 2019. Vesting fully accelerates upon a change in
control of the Partnership or the General Partner, or the death or disability of the NEO. The peer group
consists of 44 other publicly traded partnerships. Vested units are settled in our common units, with the
number of units payable determined by multiplying the target number provided in the award agreement by a
performance percentage, which may range from 0% to 200% depending on the relative performance of our
common units to the performance of the peer group. Upon any vesting, the NEO will also receive a cash
payment equal to distribution equivalents that were accumulated from the date of grant, multiplied by the
above percentage.
Director Compensation
Officers or employees of Ciner Corp or its affiliates who also serve as directors of our general partner do not receive additional compensation for their
service as a director of our general partner. Directors of our general partner who are not officers or employees of Ciner Corp or its affiliates receive compensation
as “non-employee directors.” Our annual retainer for our non-employee directors consists of approximately $150,000, of which $75,000 is paid in the form of an
annual cash retainer and the remaining $75,000 is paid in a grant of common units under the Plan. The lead director, audit committee chair and the conflicts
committee chair are paid additional annual retainers of $10,000, $15,000 and $10,000, respectively. Each non-employee director that does not participate as a non-
employee director for the entire year, receives a prorated retainer reflecting their partial year of non-employee director service with us.
The following table summarizes the compensation paid to our non-employee directors for the fiscal year ended December 31, 2017 .
Name
Fees Earned or Paid in Cash
Unit Awards
All Other Compensation
($)(1)
($)(2)
($)
Michael E. Ducey
Thomas W. Jasper
Angela A. Minas
85,000
85,000
90,000
74,664
74,664
74,664
Total
($)
159,664
159,664
164,664
—
—
—
(1)
(2)
The amounts shown in this column reflect the director cash retainers and committee chair fees paid for non-employee director board service
based on when the service was effective.
The amounts shown in this column reflect the aggregate grant date fair value, as determined in accordance with the Financial Accounting
Standards Board ASC Topic 718 (without regard to potential forfeitures), for awards of common units as follows: Michael E. Ducey (with 2,629
common units); Thomas W. Jasper (with 2,629 common units); and Angela A. Minas (with 2,629 common units).
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We have established ownership guidelines for our non-management directors with the goal of promoting ownership of units and aligning the interests of
our directors with those of our unitholders. The guidelines require non-management directors to hold three times their annual cash retainer in our units within five
years of the date the person first becomes a director.
Each non-employee director will be reimbursed for out-of-pocket expenses in connection with attending such meetings. Each director will be fully
indemnified by us for actions associated with being a director to the fullest extent permitted under Delaware law.
Compensation Committee Interlocks and Insider Participation
As a limited partnership, we are not required by the NYSE to establish a compensation committee. Although the board of directors of our general partner
does not currently intend to establish a compensation committee, it may do so in the future.
ITEM 12. Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Stockholder
Matters
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common units as of March 2, 2018 owned by:
•
•
•
•
each person known by us to be a beneficial owner of more than 5% of our units;
each of the directors of our general partner;
each of the named executive officers of our general partner; and
all directors and executive officers of our general partner as a group.
The amounts and percentage of units beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which
includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of
such security. Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all units shown as
beneficially owned by them, subject to community property laws where applicable.
Percentage of total units beneficially owned is based on 19,725,696 common units and 399,000 general partner units outstanding. The list of beneficial
owners is presented in the following table below:
Name of Beneficial Owner (1)
Ciner Wyoming Holding Co. (2)
Ciner Resource Partners LLC (2)
Kirk H. Milling
Scott R. Humphrey
Nicole C. Daniel
Chris L. DeBerry
Michael E. Ducey
Thomas W. Jasper
Angela A. Minas
Dogan Pençe
Atilla Ciner
Oğuz Erkan
All directors and executive officers as a group
(10 people)
Common
Units
Beneficially
Owned(2)
14,551,000
—
47,588
9,193
27,914
7,770
8,617
5,546
20,774
—
—
—
127,402
Percentage of
Common
Units
Beneficially
Owned
General Partner’
Units
Beneficially
Owned
Percentage of
General Partner
Units
Beneficially
Owned
74%
—
—
399,000
—
100.0%
*
*
*
*
*
*
*
*
*
*
99
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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* Beneficial ownership represents less than 1% of the Partnership’s outstanding common units.
(1) Unless otherwise indicated, the address for all beneficial owners is Five Concourse Parkway, Suite 2500, Atlanta, Georgia 30328.
(2) Ciner Holdings, the sole member of our general partner, owns 14,551,000 common units representing limited partner interests and 100% of the
membership interests of our general partner, and our general partner (Ciner Resource Partners LLC) owns 399,000 general partner units representing
general partner interests in us. Turgay Ciner owns all of the ownership interests of Akkan Enerji ve Madencilik Anonim Sirketi, which owns all of the
ownership interests in Ciner Enterprises, which owns all of the ownership interests of Ciner Corp, which owns all of the ownership interests of Ciner
Holdings, the sole member of our general partner. Each of Turgay Ciner, Akkan Enerji ve Madencilik Anonim Sirketi, Ciner Enterprises and Ciner Corp
may, therefore, be deemed to beneficially own the units held by Ciner Holdings and the general partner. The business address of the general partner, Ciner
Holdings, Ciner Corp and Ciner Enterprises is Five Concourse Parkway, Suite 2500, Atlanta, Georgia 30328. The business address of Akkan is
ªehitmuhtar Cad., 38/1 Taksim, Beyoglu Istanbul, Turkey. The business address of Mr. Ciner is Paşalimanı Caddesi, No:73, 34670 Paşalimanı, Üsküdar,
Istanbul, Turkey. The amounts disclosed in this column also include restricted units awarded to our executive officers that are unvested.
Equity Compensation Plan Information
The following table summarizes information about our equity compensation plans as of December 31, 2017 :
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Number of Securities
Weighted Average
Number of Securities
to be Issued Upon Exercise
Exercise Price of
Remaining Available
of Outstanding Options,
Outstanding Options,
For Future Issuance Under
Warrants and Rights
Warrants and Rights
Equity Compensation Plan
—
—
—
—
—
700,688
For a description of our equity compensation plan, please see the discussion under “Item 11. Executive Compensation” above.
ITEM 13 . Certain
Relationships
and
Related
Transactions,
and
Director
Independence
As of March 2, 2018 , Ciner Holdings owns 14,551,000 common units representing a 74% ownership interest in us, and owns and controls our general
partner. In addition, our general partner owns general partner units representing an approximate 2.0% general partner interest in us and all of our incentive
distribution rights.
The terms of the transactions and agreements disclosed in this section were determined by and among affiliated entities and, consequently, are not the result
of arm’s length negotiations. These terms and agreements are not necessarily at least as favorable to us as the terms that could have been obtained from unaffiliated
third parties.
Distributions and Payments to Our General Partner and Its Affiliates
The following table summarizes the distributions and payments to be made by us to our general partner and its affiliates in connection with the formation,
ongoing operation and any liquidation of Ciner Resources LP.
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Operational
Stage
Distributions to our general partner and its affiliates
Payments to our general partner and its affiliates
Withdrawal or removal of our general partner
Liquidation
Stage
We will generally make cash distributions 98.0% to our unitholders, pro rata, including our
general partner and its affiliates as the holders of an aggregate of 14,551,000 common units,
and approximately 2.0% to our general partner. In addition, if distributions exceed the
minimum quarterly distribution and other higher target distribution levels, our general
partner will be entitled to increasing percentages of the distributions, up to 48.0% of the
distributions we make above the highest target distribution level.
Ciner Corp will receive a management fee in connection with our general partner’s
management of us (as described in the section “Reimbursement of General and
Administrative Expenses” below), and, prior to making any distribution on our common
units, we will reimburse Ciner Enterprises and certain of its affiliates, including
Ciner Holdings and Ciner Corp, for all expenses they incur and payments they make on our
behalf pursuant to the Services Agreement. Our partnership agreement does not set a limit
on the amount of expenses for which our general partner and such affiliates may be
reimbursed. These expenses may include salary, bonus, incentive compensation and other
amounts paid to persons who perform services for us or on our behalf and expenses
allocated to our general partner by such affiliates. Our partnership agreement provides that
our general partner will determine in good faith the expenses that are allocable to us.
If our general partner withdraws or is removed, its general partner interest and its incentive
distribution rights will either be sold to the new general partner for cash or converted into
common units, in each case for an amount equal to the fair market value of those interests.
Liquidation
Upon our liquidation, the partners, including our general partner, will be
entitled to receive liquidating distributions according to their particular
capital account balances.
Indemnification Agreement
On October 23, 2015, in connection with the consummation of the Transaction, the Partnership amended and restated in its entirety, and renamed, that
Omnibus Agreement (as amended and restated, the “Indemnification Agreement”), dated September 18, 2013, among the Partnership, our general partner and OCI
Enterprises. Pursuant to the Indemnification Agreement, OCI Enterprises agreed to continue to indemnify the Partnership for issues arising out of, including but not
limited to, certain tax liabilities relating to the period before the Partnership’s initial public offering and assets retained by OCI Enterprises and its affiliates.
Services Agreement
Further, in connection with the closing of the Transaction on October 23, 2015, the Partnership entered into the Services Agreement among the Partnership,
our general partner and Ciner Corp. Pursuant to the Services Agreement, Ciner Corp agreed to provide the Partnership with certain corporate, selling, marketing,
and general and administrative services, in return for which the Partnership has agreed to pay Ciner Corp an annual management fee, subject to quarterly
adjustments, and reimburse Ciner Corp for certain third-party costs incurred in connection with providing such services.
Trademark License Agreement
In connection with the closing of the Transaction on October 23, 2015, the Partnership also entered into the Trademark License Agreement, among Park
Holding, Akkan, Ciner Enterprises, Ciner Corp, Ciner Holding, the Partnership, our general partner and Ciner Wyoming. The Trademark License Agreement
governs the use of “Ciner” as part of the names used by the Partnership and the other related parties thereto following the Transaction, and as a trademark and
service mark, for the Partnership’s products and services.
Reimbursement of General and Administrative Expense
Under the Services Agreement, we pay Ciner Corp for services provided to us, and we also reimburse Ciner Corp for certain third-party costs incurred in
connection with providing such services. We also reimburse Ciner Corp for our allocable portion of the premiums on any insurance policies covering our assets and
for any additional state income, franchise or similar tax paid by Ciner Enterprises resulting from the inclusion of us (and our subsidiaries) in a combined state
income, franchise or similar tax report with Ciner Corp as required by applicable law.
Transactions with Affiliates
Ciner Corp and Ciner Wyoming are party to a sales agency agreement dated June 17, 2015. Under the sales agency agreement, Ciner Corp contracts with
customers, including ANSAC and Ciner Group, for the sale of the soda ash that Ciner Wyoming produces,
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and Ciner Wyoming delivers soda ash directly to the customers. Though Ciner Corp is the contractual party with customers, any risk of loss related to soda ash is
passed directly to Ciner Wyoming, except in circumstances where the buyer takes ownership of soda ash at the shipping point. Ciner Wyoming invoices the
customers, and risk of loss from collecting accounts receivable remains with Ciner Wyoming. Ciner Wyoming also bears any risk of loss from liability claims
related to soda ash. Ciner Corp receives sales proceeds directly from customers on behalf of Ciner Wyoming, and Ciner Corp then transfers the total proceeds of
the sales directly to Ciner Wyoming, less Ciner Corp’s actual costs of sales and marketing. Ciner Corp’s costs are allocated to Ciner Wyoming by OCI Enterprises
(prior to the Transaction) and Ciner Corp (subsequent to the Transaction) based on the amount of time spent by Ciner Corp providing such services. For the years
ended December 31, 2017 , 2016 and 2015 , these charges amounted to approximately $14.5 million , $14.9 million and $5.8 million , respectively. Ciner Corp also
contracts with various land and sea carriers for freight transportation on behalf of Ciner Wyoming. All such actual freight costs are charged directly to Ciner
Wyoming.
Substantially all of Ciner Wyoming’s selling and marketing expenses and general and administrative expenses are expenses charged to Ciner Wyoming by
Ciner Corp for actual expenses incurred by it on behalf of Ciner Wyoming and include expenses relating to salaries, benefits, office supplies, professional fees,
travel, computers and rent.
Ciner Corp, on behalf of Ciner Wyoming, also makes sales of soda ash to Ciner Ic ve Dis Ticaret Anonim Sirketi, or CIDT, an affiliate of Ciner Group that
sells soda ash to markets not served by ANSAC. These sales of soda ash to CIDT were approved, in 2016, by the Board of Ciner Wyoming (formerly OCI
Wyoming LLC) and by the Audit Committee pursuant to the Related Persons Transaction Policy of the general partner. For the year ended December 31, 2017 ,
sales to CIDT were approximately $82.3 million . See Item 8, Financial Statements and Supplementary Data, Note 15 , “Agreements and Transactions with
Affiliates,” for more information.
Ciner Corp is a member company of ANSAC and had an approximate 33.2% , 41.1% and 41.9% participation interest at December 31, 2017 , 2016 and
2015 , respectively. Kirk Milling, the Chief Executive Officer of Ciner Corp and Chairman of the Board and Chief Executive Officer of our General Partner, has
served as a director of ANSAC since 2001, and Nicole Daniel, the Vice President, General Counsel and Secretary of Ciner Corp and our General Partner, has
served as a director of ANSAC since October 2016. We made approximately 44.7% , 55.2% and 53.7% of our total net sales for the years ended December 31,
2017 , 2016 and 2015 , respectively, through Ciner Corp’s membership in ANSAC. In addition, ANSAC provides logistics and support services for all of our
export sales.
The personnel who operate our assets are employees of Ciner Corp and its affiliates. Ciner Corp directly charges us for the payroll and benefit costs
associated with employees and carried the obligations for other employee-related benefits in its financial statements. We are allocated a portion of Ciner Corp’s
defined benefit pension plan liability and postretirement benefit liability for the employees providing services to us based on an actuarial assessment of that
liability. See Item 8, Financial Statements and Supplementary Data, Note 11, “Employee Compensation,” for more information. In addition, under the joint venture
agreement governing Ciner Wyoming, Ciner Wyoming reimburses us for employees who operate our assets and for support provided to Ciner Wyoming.
Procedures for Review, Approval and Ratification of Transactions with Related Persons
As disclosed under “Item 10. Directors, Executive Officers and Corporate Governance,” our audit committee has been given the sole authority, under the
audit committee charter, to review and evaluate any related party transactions or dealings with parties related to us and disclosures of such transactions or dealings
in our annual report on Form 10-K, and our conflicts committee is responsible, under the conflicts committee charter, with reviewing specific matters that may
involve conflicts of interest between our general partner or any of its affiliates, on the one hand, and us, our partners and any of our subsidiaries, on the other hand,
in accordance with the terms of our partnership agreement. Any matters approved by our conflicts committee in good faith will be deemed to be approved by all of
our partners and not a breach by our general partner of any duties it may owe us or our unitholders.
Director Independence
See “Item 10. Directors, Executive Officers and Corporate Governance” for information regarding the directors of our general partner and independence
requirements applicable for the Board of Directors of our general partner and its committees.
ITEM 14. Principal
Accounting
Fees
and
Services
The Audit Committee has ratified Deloitte & Touche LLP, Independent Registered Public Accounting Firm, to audit the books, records and accounting of
Ciner Resources LP for the year ended December 31, 2017 . The Audit Committee in its discretion may select a different registered public accounting firm at any
time during the year if it determines that such a change will be in the best interests of us and our unitholders.
102
Table of Contents
Audit Fees
The following table presents approximate fees billed by Deloitte & Touche LLP for the audit of our annual consolidated financial statements and other
services rendered for the years ended December 31, 2017 and December 31, 2016 .
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Total
Year ended December 31,
Year ended December 31,
2017
2016
$
$
683,396 $
—
367,065
—
1,050,461 $
743,084
—
515,089
—
1,258,173
(1) Audit fees represent fees for professional services rendered in connection with (i) the audit of our annual financial statements, (ii) the review of
our quarterly financial statements and (iii) those services normally provided in connection with statutory and regulatory filings or engagements
including consents and other services related to SEC matters.
(2) Audit-related fees represent fees for assurance and related services. This category primarily includes services relating to fees for audit of
employee benefits plans.
(3) Tax fees represent fees for professional services rendered in connection with tax compliance. For the year ended December 31, 2017 and 2016 ,
$284,507 and $288,497 of the above tax fees were related to K-1 services.
(4) All other fees represent fees for services not classifiable under the other categories listed in the table above.
Pre-Approval Policy
As outlined in its charter, the audit committee of the board of directors of our general partner is responsible for reviewing and approving, in advance, all audit
services, internal control related services and permissible non-audit services to be provided to us by our independent registered public accounting firm. During the
year ended December 31, 2017 , all of the services performed for us by Deloitte & Touche LLP were pre-approved by the audit committee of the board of directors
of our general partner.
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Table of Contents
Item 15. Exhibits,
Financial
Statement
Schedules
(a) the following documents are included with the filing of this report:
PART IV
1. The financial statements filed as part of this Report are listed in Part II, Item 8, “Financial Statements and Supplementary Data.”
2. No financial statement schedules are required to be filed as part of this Report because all such schedules have been
omitted. Such omission has been made on the basis that information is provided in the financial statements or related footnotes in Part II, Item 8,
“Financial Statements and Supplementary Data,” or is not required to be filed as the information is not applicable.
3. The exhibits listed on the Exhibit Index are included with this Report and incorporated by reference into this Item.
Item 16. Form
10-K
Summary
None.
104
Table of Contents
Exhibit Number
Exhibit Index
Description
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Certificate of Limited Partnership of Ciner Resources LP (formerly known as OCI Resources LP) dated April 22, 2013 (incorporated by
reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Certificate of Amendment of the Certificate of Limited Partnership of Ciner Resources LP (formerly known as OCI Resources LP)
effective November 5, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC
on November 5, 2015
First Amended and Restated Agreement of Limited Partnership of Ciner Resources LP (formerly known as OCI Resources LP) dated as of
September 18, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on
September 18, 2013)
Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Ciner Resources LP (formerly known as OCI
Resources LP) dated as of May 2, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with
the SEC on May 7, 2014)
Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Ciner Resources LP (formerly known as OCI
Resources LP) dated as of November 5, 2015 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K,
filed with the SEC on November 5, 2015)
Amendment No. 3 to the First Amended and Restated Agreement of Limited Partnership of Ciner Resources LP, dated April 28, 2017
(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 2, 2017)
Certificate of Formation of OCI Resource Partners LLC dated April 22, 2013 (incorporated by reference to Exhibit 3.3 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013).
Certificate of Amendment to the Certificate of Formation of Ciner Resource Partners LLC (formerly known as OCI Resource Partners
LLC) effective November 5, 2015 (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K, filed with the
SEC on November 5, 2015)
Amended and Restated Limited Liability Company Agreement of Ciner Resource Partners LLC (formerly known as OCI Resource Partners
LLC) dated as of September 18, 2013 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed with
the SEC on September 18, 2013)
3.10
Amendment No. 1 to the Amended and Restated Limited Liability Company Agreement of Ciner Resource Partners LLC (formerly known
as OCI Resource Partners LLC) dated November 5, 2015 (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on
Form 8-K, filed with the SEC on November 5, 2015)
In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments respecting long-term debt of the Registrant have been omitted but will be
furnished to the SEC upon request.
10.1
10.2
10.3
10.4
10.5
10.6
Contribution, Assignment and Assumption Agreement dated effective as of July 18, 2013 by and between Ciner Wyoming Holding Co.
(formerly known as OCI Wyoming Holding Co.) and Ciner Resources LP (formerly known as OCI Resources LP) (incorporated by
reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-189838) filed with the SEC on July 22,
2013)
Credit Agreement dated as of July 18, 2013 among Ciner Resources LP (formerly known as OCI Resources LP), as borrower, Bank of
America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to
Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-189838) filed with the SEC on July 22, 2013)
First Amendment to Credit Agreement, dated as of October 30, 2014, among Ciner Resources LP (formerly known as OCI Resources LP),
as borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto
(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 4, 2014)
Second Amendment to Credit Agreement, First Amendment to Notes, First Amendment to Security Agreement and First Amendment to
Fee Letter, dated as of May 25, 2016, among Ciner Resources LP (formerly known as OCI Resources LP), as borrower, Bank of America,
N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2016).
Credit Agreement dated as of July 18, 2013 among Ciner Wyoming LLC (formerly known as OCI Wyoming LLC), as borrower, Bank of
America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to
Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-189838) filed with the SEC on July 22, 2013)
First Amendment to Credit Agreement, dated as of October 30, 2014, among Ciner Wyoming LLC (formerly known as OCI Wyoming
LLC), as borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 4, 2014)
105
Table of Contents
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16*
10.17*
10.18*
10.19
Second Amendment to Credit Agreement, First Amendment to Notes and First Amendment to Fee Letter, dated as of May 25, 2016, among
Ciner Wyoming LLC (formerly known as OCI Wyoming LLC), as borrower, Bank of America, N.A., as administrative agent, swing line
lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on
Form 8-K filed with the SEC on May 25, 2016).
Ciner Resources Credit Agreement, dated as of August 1, 2017, among Ciner Resources LP, as borrower, PNC Bank, National Association,
as administrative agent, swing line lender and an l/c issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K, filed with the SEC on August 1, 2017)
Ciner Wyoming Credit Agreement, dated as of August 1, 2017, among Ciner Wyoming LLC, as borrower, PNC Bank, National
Association, as administrative agent, swing line lender and an l/c issuer, and the other lenders party thereto (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on August 1, 2017)
Sodium Lease (WYW101824), dated June 1, 2008, between the United States Department of the Interior Bureau of Land Management and
Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Sodium/Trona and Associated Mineral Salts Mining Lease No. 0-42571, dated August 2, 2009, between the State of Wyoming and Ciner
Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Sodium/Trona and Associated Mineral Salts Mining Lease No. 0-42570, dated August 2, 2009, between the State of Wyoming and Ciner
Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Sodium/Trona and Associated Mineral Salts Mining Lease No. 0-26012, dated November 2, 2009, between the State of Wyoming and
Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Sodium/Trona and Associated Mineral Salts Mining Lease No. 0-25779, dated September 2, 2009, between the State of Wyoming and
Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Sodium/Trona and Associated Mineral Salts Mining Lease No. 0-25971, dated November 2, 2009, between the State of Wyoming and
Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
Sodium Lease (WYW079420), dated December 1, 2017, between the United States Department of the Interior Bureau of Land
Management and Ciner Wyoming, LLC
Sodium Lease (WYW0111730), dated December 1, 2017, between the United States Department of the Interior Bureau of Land
Management and Ciner Wyoming, LLC
Sodium Lease (WYW0111731), dated December 1, 2017, between the United States Department of the Interior Bureau of Land
Management and Ciner Wyoming, LLC
License Agreement, dated July 18, 1961, between Union Pacific Railroad Company and Stauffer Chemical Company of Wyoming (as
amended by Amendment of License Agreement, dated September 20, 2010, between Ciner Wyoming LLC (formerly known as OCI
Wyoming LLC), as successor by assignment from Stauffer Chemical Company of Wyoming, and Rock Springs Royalty Company LLC, as
successor in interest to Union Pacific Railroad Company) (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-189838) filed with the SEC on July 8, 2013)
10.20
Contribution, Assignment and Assumption Agreement dated as of September 18, 2013 by and among OCI Wyoming Co., Ciner Resource
Partners LLC (formerly known as OCI Resource Partners LLC), Ciner Resources LP (formerly known as OCI Resources LP), Ciner
Wyoming Holding Co. (formerly known as OCI Wyoming Holding Co.) and Ciner Resources Corporation (formerly known as
OCI Chemical Corporation) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC
on September 18, 2013)
10.21++
10.22++
Ciner Resource Partners LLC (formerly known as OCI Resource Partners LLC) 2013 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-189838) filed with the SEC on September 3, 2013)
Form of Ciner Resource Partners LLC (formerly known as OCI Resource Partners LLC) 2013 Long-Term Incentive Plan Restricted Unit
Award Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 2,
2014)
10.23++
Form of Ciner Resource Partners LLC (formerly known as OCI Resource Partners LLC) 2013 Long-Term Incentive Plan Director Unit
Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on November 4, 2014)
106
Table of Contents
10.24++
Form of Ciner Resource Partners LLC (formerly known as OCI Resource Partners LLC) 2013 Long-Term Incentive Plan TR Performance
Unit Award (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 6, 2014)
10.25
10.26
10.27
10.28
10.29
Limited Liability Company Agreement of Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) dated as of June 30, 2014
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed with the SEC on July 2, 2014)
Amendment No. 1 to Limited Liability Company Agreement of Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) dated as of
November 5, 2015 (incorporated by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K, filed with the SEC on
March 11, 2016)
Services Agreement, dated as of October 23, 2015, among Ciner Resources LP (formerly known as OCI Resources LP), Ciner Resource
Partners LLC (formerly known as OCI Resource Partners LLC), and Ciner Resources Corporation (formerly known as OCI Chemical
Corporation) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 26,
2015)
OCI Indemnification Agreement, dated as of October 23, 2015, among Ciner Resources LP (formerly known as OCI Resources LP), Ciner
Resource Partners LLC (formerly known as OCI Resource Partners LLC), and OCI Enterprises Inc. (incorporated by reference to Exhibit
10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 26, 2015)
Trademark License Agreement, dated as of October 23, 2015, among Park Holding A.S., Ciner Enterprises Inc., Ciner Resources
Corporation (formerly known as OCI Chemical Corporation), Ciner Wyoming Holding Co. (formerly known as OCI Wyoming Holding
Co.), Ciner Resource Partners LLC (formerly known as OCI Resource Partners LLC), Ciner Resources LP (formerly known as OCI
Resources LP), and Ciner Wyoming LLC (formerly known as OCI Wyoming LLC) (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K, filed with the SEC on October 26, 2015)
21.1 * List of Subsidiaries of Registrant
23.1* Consent of Deloitte & Touche LLP, dated March 9, 2018
23.2*
Consent of Hollberg Professional Group, PC, dated March 9, 2018
31.1*
31.2*
32.1**
32.2**
Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title
18 of the United States Code, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title
18 of the United States Code, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95.1* Mine Safety Disclosures
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith.
** Furnished herewith. Not considered to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section, and are not deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.
++Management contract or compensatory plan or arrangement required to be filed as an exhibit to this 10-K pursuant to Item 15.
107
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
CINER RESOURCES LP (Registrant)
By: Ciner Resource Partners LLC, its General Partner
By:
/s/ Kirk H. Milling
Kirk H. Milling
President, Chief Executive Officer and Chairman of the
Board of Directors of Ciner Resource Partners LLC, our
General Partner
(Principal Executive Officer)
Date: March 9, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacity and on the dates indicated.
Signature
Title
Date
/s/ Kirk H. Milling
Kirk H. Milling
/s/ Scott R. Humphrey
Scott R. Humphrey
/s/ Chris L. DeBerry
Chris L. DeBerry
/s/ Atilla Ciner
Atilla Ciner
/s/ Dogan Pençe
Dogan Pençe
/s/ Oğuz Erkan
Oğuz Erkan
/s/ Michael E. Ducey
Michael E. Ducey
/s/ Thomas W. Jasper
Thomas W. Jasper
/s/ Angela A. Minas
Angela A. Minas
President, Chief Executive Officer and Chairman of the Board of Directors of Ciner Resource
Partners LLC, our General Partner
(Principal Executive Officer)
March 9, 2018
Chief Financial Officer of Ciner Resource Partners LLC, our General Partner
(Principal Financial Officer)
March 9, 2018
Chief Accounting Officer of Ciner Resource Partners LLC, our General Partner
(Principal Accounting Officer)
March 9, 2018
(Director of Ciner Resource Partners LLC, our General Partner)
March 9, 2018
(Director of Ciner Resource Partners LLC, our General Partner)
March 9, 2018
(Director of Ciner Resource Partners LLC, our General Partner)
March 9, 2018
(Director of Ciner Resource Partners LLC, our General Partner)
March 9, 2018
(Director of Ciner Resource Partners LLC, our General Partner)
March 9, 2018
(Director of Ciner Resource Partners LLC, our General Partner)
March 9, 2018
108
Table of Contents
ANSAC:
American Natural Soda Ash Corporation, a U.S. export cooperative organized under the provisions of the Webb-Pomerene Act of 1918.
GLOSSARY OF INDUSTRY TERMS
Calciner:
A large furnace used to heat and bring about thermal decomposition of trona.
Continuous
Miner:
A machine with a large rotating steel drum equipped with tungsten carbide teeth that scrapes trona from a mining bed seam.
Deca:
Sodium carbonate decahydrate, a natural by-product of trona ore processing.
Effective
Capacity:
The volume of soda ash that can be generated using current operational resources, taking into account scheduled and unscheduled downtime
and idled capacity.
Liquor:
A solution consisting of sodium carbonate dissolved in water.
Longwall
Mining:
A mining method employing heavy machinery to cut and remove trona from the wide face of a mine and hoist it to the surface. Longwall
mining provides high production rates with low operating costs but requires large areas of medium to thick seams.
Mining
Bed:
A layer or stratum of trona.
Mining
Face:
The exposed area of an underground mine from which trona is extracted.
MMBtu:
Million British thermal units.
MSHA:
Mine Safety and Health Administration.
Nameplate
Capacity:
Maximum potential output of a mining facility.
Non-subsidence
mining:
Any one of several mining techniques designed to prevent or avoid the collapse of the surface above the mine. Room and pillar mining,
which leaves “pillars” to support the roof of a mine, is a form of non-subsidence mining.
Operating
Rate:
The amount of soda ash produced in a given year as a percentage of effective capacity for that year.
Ore
to
Ash
Ratio:
The number of short tons of trona ore it takes to produce one short ton of soda ash.
Purged
Liquor:
Liquor expelled into collection ponds during trona ore processing.
Recovery
Rate:
An amount, expressed as a percentage, calculated by dividing the volume of dry soda ash produced by the sum of the volume of dry soda ash
produced and the losses experienced in the refinery process.
Reserves:
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
Room
and
Pillar
Mining:
A mining method wherein underground mineral seams are mined in a network of “rooms.” As these rooms are cut and formed,
continuous miners simultaneously load trona onto shuttle cars for hoisting to the surface. “Pillars” composed of trona are left behind in these rooms to support the
roofs of the mines. Room and pillar mining is often used to mine smaller blocks or center seams.
Run-of-Mine:
The amount of trona removed directly from the mine prior to processing.
Seam:
Trona deposits occur in layers typically separated by layers of rock. Each layer of trona is called a “seam.”
Soda
Ash:
Sodium carbonate (Na 2 CO 3 ) in a powder form.
Solution
Mining:
A mining method in which ore is extracted by dissolving it in a leaching solution and pumping the dissolved ore to the surface for processing.
Solution mining is used in situations where minimal seam width or deep mining beds prohibit the use of conventional underground mining techniques.
Tailings
Disposal:
Disposal of materials left over after the process of separating the soluble portion of trona ore from the non-soluble portion of trona ore.
Trona:
Sodium sesquicarbonate (Na 2 CO 3 -NaHCO 3 -2H 2 O), a naturally occurring soft mineral, consisting primarily of sodium carbonate, or soda ash, sodium
bicarbonate and water.
Trona
Ore:
Trona that has been removed from the ground.
109
Company
Ciner Wyoming LLC
CINER RESOURCES LP
Subsidiaries
Delaware
Jurisdiction of Organization
Exhibit 21.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 333-1911598 on Form S-8 and No. 333-211819 on Form S-3 of our report dated
March 9, 2018 , relating to the consolidated financial statements of Ciner Resources LP and its subsidiary, appearing in the Annual Report on Form 10-K of Ciner
Resources LP for the year ended December 31, 2017 .
Exhibit 23.1
/s/ Deloitte & Touche LLP
Atlanta, Georgia
March 9, 2018
Consent of Hollberg Professional Group, PC
We hereby consent to the reference to our firm in the form and context in which they appear in this Annual Report on Form 10-K of Ciner Resources LP for the
fiscal year ended December 31, 2017. We hereby further consent to the use of the information contained in our report to Ciner Wyoming LLC, dated January 31,
2018. We further consent to the incorporation by reference of references to our firm and to our report, dated January 31, 2018, in Ciner Resources LP’s
Registration Statements on (i) Form S-8 (No. 333-191598) and (ii) Form S-3 (No. 333-211819).
Exhibit 23.2
/s/ Kurt Hollberg
Hollberg Professional Group, PC
Englewood, Colorado
March 9, 2018
Certification Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a)
As Adopted Pursuant to Section 302 of the Sarbanes‑‑Oxley Act of 2002
Exhibit 31.1
I, Kirk H. Milling, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Ciner Resources LP (the "registrant") ;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date:
March 9, 2018
/s/ Kirk H. Milling
Kirk H. Milling
President, Chief Executive Officer and Chairman of the
Board of Directors of Ciner Resource Partners LLC,
the General Partner of Ciner Resources LP
(Principal Executive Officer)
Certification Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a)
As Adopted Pursuant to Section 302 of the Sarbanes‑‑Oxley Act of 2002
Exhibit 31.2
I, Scott R. Humphrey, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Ciner Resources LP (the "registrant") ;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date:
March 9, 2018
/s/ Scott R. Humphrey
Scott R. Humphrey
Chief Financial Officer of Ciner Resource Partners LLC,
the registrant’s General Partner
(Principal Financial Officer)
CERTIFICATION OF KIRK H. MILLING
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES‑‑OXLEY ACT OF 2002
Exhibit 32.1
In connection with Ciner Resources LP’s (the “Partnership”) Annual Report on Form 10-K for the year ended December 31, 2017 , as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Kirk H. Milling, Chief Executive Officer (Principal Executive Officer) of the Partnership's general
partner, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes‑Oxley Act of 2002, that, to my knowledge:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Partnership.
Date:
March 9, 2018
/s/ Kirk H. Milling
Kirk H. Milling
President, Chief Executive Officer and Chairman of the
Board of Directors of Ciner Resource Partners LLC,
the General Partner of Ciner Resources LP
(Principal Executive Officer)
CERTIFICATION OF SCOTT R. HUMPHREY
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES‑‑OXLEY ACT OF 2002
Exhibit 32.2
In connection with Ciner Resources LP’s (the “Partnership”) Annual Report on Form 10-K for the year ended December 31, 2017 , as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Scott R. Humphrey, Chief Financial Officer (Principal Financial Officer) of the Partnership's general
partner, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes‑Oxley Act of 2002, that, to my knowledge:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Partnership.
Date:
March 9, 2018
/s/ Scott R. Humphrey
Scott R. Humphrey
Chief Financial Officer of Ciner Resource Partners LLC,
the registrant’s General Partner
(Principal Financial Officer)
MINE SAFETY DISCLOSURES
Exhibit 95.1
Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), contains reporting requirements regarding coal or
other mine safety. We operate a mine in conjunction with our Green River, Wyoming facility, which is subject to regulation by the Mine Safety and Health
Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”), and is therefore subject to these reporting requirements.
Presented in the table below is information regarding certain mining safety and health citations, orders and violations, if any, which MSHA has issued with respect
to our operation as required by Dodd-Frank. In evaluating this information, consideration should be given to the fact that citations and orders can be contested and
appealed, and in that process, may be reduced in severity, penalty amount or sometimes dismissed (vacated) altogether.
The letters used as column headings in the table below correspond to the explanations provided underneath the table as to the information set forth in each
column with respect to the numbers of violations, orders, citations or dollar amounts, as the case may be, during the calendar year 2017 unless otherwise indicated.
All section references in the table below refer to provisions of the Mine Act.
(1)
For each coal or other mine, of which the issuer or a subsidiary of the issuer is an operator:
(A)
(B)
(C)
(D)
(E)
(F)
(H)
Mine or Operating Name
Section 104
S&S
Citations (#)
Section
104(b)
Orders (#)
Section
104(d)
Citations and
Orders (#)
Section 110(b)
(2) Violations
(#)
Section
107(a)
Orders (#)
Total Dollar
Value of MSHA
Assessments
Proposed ($)
(G)
Total
Number of
Mining
Related
Fatalities (#)
Received
Notice of
Potential to
Have
Pattern
Under
Section
104(e)
(yes/no)
Received
Notice of
Pattern of
Violations
Under Section
104(e) (yes/no)
Legal
Actions
Pending as
of Last Day
of Period (#)
Legal
Actions
Initiated
During
Period (#)
Legal
Actions
Resolved
During
Period (#)
Ciner Wyoming LLC
37
2
—
—
— $
45,632
—
no
no
1
—
—
(A)
The total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause
and effect of a coal or other mine safety or health hazard under section 104 of the Mine Act for which the operator received a citation
from MSHA.
(B)
The total number of orders issued under section 104(b) of the Mine Act.
(C)
(D)
(E)
(F)
(G)
(H)
The total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety
standards under section 104(d) of the Mine Act.
The total number of flagrant violations under section 110(b)(2) of the Mine Act.
The total number of imminent danger orders issued under section 107(a) of the Mine Act.
The total dollar value of proposed assessments from the MSHA under the Mine Act, regardless of whether such proposed assessments
are being contested or were dismissed or reduced prior to the date of filing the periodic report.
The total number of mining related fatalities.
Any pending legal action before the Federal Mine Safety and Health Review Commission involving such coal or other mines.
a.
All cases included in the number listed were pending before the Office of Administrative Law Judges of the
Federal Mine Safety and Health Review Commission on December 31, 2017.
(2)
A list of such coal or other mines, of which the issuer or a subsidiary of the issuer is an operator, that received written notice from MSHA of
(A) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially
contributed to the cause and effect of coal or other mine health and safety hazards under section 104(e) of the Mine Act, or (B) the potential
to have such a pattern.
NONE
(3)
Any pending legal action before the Federal Mine Safety and Health Review Commission involving such coal or other mine.
SEE COLUMN (H) OF SECTION (1) ABOVE