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Section 1: 10-Q (10-Q)

felp-10q_20170331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File Number: 001-36503

 

Foresight Energy LP

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

80-0778894

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

211 North Broadway, Suite 2600, Saint Louis, MO

 

63102

(Address of principal executive offices)

 

(Zip code)

Registrant’s telephone number, including area code: (314) 932-6160

 

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      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 (§ 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      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer           Non-accelerated filer  

  

Smaller reporting company        

 

 

 

 

 

 

 

 

 (do not check if a smaller reporting company)

  

Emerging growth company  

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No    

As of May 12, 2017, the registrant had 75,733,016 common units and 64,954,691 subordinated units outstanding.

 

 

 

 


 

 

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016

3

Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016

4

Unaudited Condensed Consolidated Statement of Partners’ Capital for the Three Months Ended March 31, 2017

5

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.Controls and Procedures

30

PART II

 

OTHER INFORMATION

 

Item 1.Legal Proceedings

30

Item 1A.Risk Factors

30

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.Defaults Upon Senior Securities

30

Item 4.Mine Safety Disclosures

30

Item 5.Other Information

30

Signatures

31

Item 6.Exhibits

32

 

 

2


PART I – FINANCIAL INFORMATION.

 

Item 1. Financial Statements.

 

Foresight Energy LP

Unaudited Condensed Consolidated Balance Sheets

 

(Successor)

 

 

 

(Predecessor)

 

 

March 31,

 

 

 

December 31,

 

 

2017

 

 

 

2016

 

 

(In Thousands)

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

4,235

 

 

 

$

103,690

 

Accounts receivable

 

35,210

 

 

 

 

54,905

 

Due from affiliates

 

19,293

 

 

 

 

16,891

 

Financing receivables - affiliate

 

2,961

 

 

 

 

2,904

 

Inventories, net

 

49,539

 

 

 

 

43,052

 

Prepaid royalties

 

4,800

 

 

 

 

3,136

 

Deferred longwall costs

 

 

 

 

 

13,310

 

Coal derivative assets

 

2,576

 

 

 

 

7,650

 

Other prepaid expenses and current assets

 

17,901

 

 

 

 

21,443

 

Contract-based intangibles

 

39,822

 

 

 

 

 

Total current assets

 

176,337

 

 

 

 

266,981

 

Property, plant, equipment and development, net

 

2,607,144

 

 

 

 

1,318,937

 

Due from affiliates

 

947

 

 

 

 

1,843

 

Financing receivables - affiliate

 

66,473

 

 

 

 

67,235

 

Prepaid royalties

 

 

 

 

 

13,765

 

Other assets

 

2,270

 

 

 

 

20,250

 

Contract-based intangibles

 

10,928

 

 

 

 

 

Total assets

$

2,864,099

 

 

 

$

1,689,011

 

Liabilities and partners’ capital (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt and capital lease obligations

$

67,778

 

 

 

$

368,993

 

Current portion of sale-leaseback financing arrangements

 

1,499

 

 

 

 

1,372

 

Accrued interest

 

4,839

 

 

 

 

29,760

 

Accounts payable

 

68,295

 

 

 

 

60,971

 

Accrued expenses and other current liabilities

 

38,165

 

 

 

 

43,592

 

Asset retirement obligations

 

8,167

 

 

 

 

7,273

 

Due to affiliates

 

9,253

 

 

 

 

20,904

 

Contract-based intangibles

 

23,640

 

 

 

 

 

Total current liabilities

 

221,636

 

 

 

 

532,865

 

Long-term debt and capital lease obligations

 

1,299,998

 

 

 

 

1,022,070

 

Sale-leaseback financing arrangements

 

190,169

 

 

 

 

190,497

 

Asset retirement obligations

 

37,438

 

 

 

 

37,644

 

Warrant liability

 

 

 

 

 

51,169

 

Other long-term liabilities

 

4,857

 

 

 

 

9,359

 

Contract-based intangibles

 

109,508

 

 

 

 

 

Total liabilities

 

1,863,606

 

 

 

 

1,843,604

 

Limited partners' capital (deficit):

 

 

 

 

 

 

 

 

Common unitholders (75,733 and 66,105 units outstanding as of March 31, 2017 and December 31, 2016, respectively)

 

596,469

 

 

 

 

100,628

 

Subordinated unitholders (64,955 units outstanding as of March 31, 2017 and December 31, 2016)

 

404,024

 

 

 

 

(255,221

)

Total partners' capital (deficit)

 

1,000,493

 

 

 

 

(154,593

)

Total liabilities and partners' capital (deficit)

$

2,864,099

 

 

 

$

1,689,011

 

 

See accompanying notes.

 

3


 

Foresight Energy LP

Unaudited Condensed Consolidated Statements of Operations

 

 

(Predecessor)

 

 

Three Months Ended

 

 

March 31,

 

 

2017

 

 

2016

 

 

(In Thousands, Except per Unit Data)

 

Revenues

 

 

 

 

 

 

 

Coal sales

$

227,813

 

 

$

163,097

 

Other revenues

 

2,581

 

 

 

2,988

 

Total revenues

 

230,394

 

 

 

166,085

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of coal produced (excluding depreciation, depletion and amortization)

 

117,762

 

 

 

89,177

 

Cost of coal purchased

 

7,973

 

 

 

550

 

Transportation

 

37,726

 

 

 

25,798

 

Depreciation, depletion and amortization

 

39,298

 

 

 

36,417

 

Accretion on asset retirement obligations

 

710

 

 

 

844

 

Selling, general and administrative

 

6,554

 

 

 

5,719

 

Transition and reorganization costs

 

 

 

 

5,940

 

Loss on commodity derivative contracts

 

1,492

 

 

 

523

 

Other operating expense (income), net

 

451

 

 

 

(88

)

Operating income

 

18,428

 

 

 

1,205

 

Other expenses:

 

 

 

 

 

 

 

Interest expense, net

 

43,380

 

 

 

32,995

 

Debt restructuring costs

 

 

 

 

9,710

 

Change in fair value of warrants

 

(9,278

)

 

 

 

Loss on early extinguishment of debt

 

95,510

 

 

 

107

 

Net loss

 

(111,184

)

 

 

(41,607

)

Less: net income attributable to noncontrolling interests

 

 

 

 

97

 

Net loss attributable to controlling interests

 

(111,184

)

 

 

(41,704

)

Net loss attributable to predecessor

 

(111,184

)

 

 

(41,704

)

Net loss attributable to successor

$

 

 

$

 

 

 

 

 

 

 

 

 

Net loss available to limited partner units - basic and diluted:

 

 

 

 

 

 

 

Common unitholders

$

(56,259

)

 

$

(20,890

)

Subordinated unitholders

$

(54,925

)

 

$

(20,814

)

 

 

 

 

 

 

 

 

Net loss per limited partner unit - basic and diluted:

 

 

 

 

 

 

 

Common unitholders

$

(0.85

)

 

$

(0.32

)

Subordinated unitholders

$

(0.85

)

 

$

(0.32

)

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - basic and diluted:

 

 

 

 

 

 

 

Common units

 

66,533

 

 

 

65,193

 

Subordinated units

 

64,955

 

 

 

64,955

 

 

 

 

 

 

 

 

 

Distributions declared per limited partner unit

$

 

 

$

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

4


Foresight Energy LP

Unaudited Condensed Consolidated Statement of Partners’ Capital

 

 

Limited Partners

 

 

 

 

 

 

Common

 

 

Number of

 

 

Subordinated

 

 

Number of

 

 

Total Partners'

 

 

Unitholders

 

 

Common Units

 

 

Unitholders

 

 

Subordinated Units

 

 

Capital (Deficit)

 

 

(In Thousands, Except Unit Data)

 

Predecessor balance at January 1, 2017

$

100,628

 

 

 

66,104,673

 

 

$

(255,221

)

 

 

64,954,691

 

 

$

(154,593

)

Net loss attributable to predecessor

 

(56,259

)

 

 

 

 

 

(54,925

)

 

 

 

 

 

(111,184

)

Issuance of common units to Murray Energy (affiliate)

 

60,586

 

 

 

9,628,108

 

 

 

 

 

 

 

 

 

60,586

 

Reclassification of warrants

 

41,888

 

 

 

 

 

 

 

 

 

 

 

 

41,888

 

Equity-based compensation

 

318

 

 

 

 

 

 

 

 

 

 

 

 

318

 

Issuance of equity-based awards

 

 

 

 

235

 

 

 

 

 

 

 

 

 

 

Predecessor balance at March 31, 2017

 

147,161

 

 

 

75,733,016

 

 

 

(310,146

)

 

 

64,954,691

 

 

 

(162,985

)

Pushdown accounting adjustments

 

449,308

 

 

 

 

 

 

714,170

 

 

 

 

 

 

1,163,478

 

Successor balance at March 31, 2017

$

596,469

 

 

 

75,733,016

 

 

$

404,024

 

 

 

64,954,691

 

 

$

1,000,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

5


Foresight Energy LP

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

(Predecessor)

 

 

Three Months Ended

 

 

March 31,

 

 

2017

 

 

2016

 

 

(In Thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(111,184

)

 

$

(41,607

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

39,298

 

 

 

36,417

 

Amortization of debt discount and deferred issuance costs

 

6,365

 

 

 

1,727

 

Equity-based compensation

 

318

 

 

 

3,992

 

Loss on commodity derivative contracts

 

1,492

 

 

 

523

 

Settlements of commodity derivative contracts

 

3,724

 

 

 

5,119

 

Realized gains on commodity derivative contracts included in investing activities

 

(3,520

)

 

 

 

Transition and reorganization expenses paid by Foresight Reserves (affiliate)

 

 

 

 

2,000

 

Change in fair value of warrants

 

(9,278

)

 

 

 

Debt extinguishment expense

 

95,510

 

 

 

107

 

Other

 

1,321

 

 

 

1,465

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

19,695

 

 

 

16,902

 

Due from/to affiliates, net

 

(13,157

)

 

 

13,064

 

Inventories

 

(917

)

 

 

(10,237

)

Prepaid expenses and other current assets

 

(2,375

)

 

 

(4,247

)

Prepaid royalties

 

(241

)

 

 

891

 

Commodity derivative assets and liabilities

 

(532

)

 

 

1,707

 

Accounts payable

 

7,324

 

 

 

(3,239

)

Accrued interest

 

(9,803

)

 

 

12,769

 

Accrued expenses and other current liabilities

 

(3,430

)

 

 

(695

)

Other

 

1,782

 

 

 

(2,436

)

Net cash provided by operating activities

 

22,392

 

 

 

34,222

 

Cash flows from investing activities

 

 

 

 

 

 

 

Investment in property, plant, equipment and development

 

(19,908

)

 

 

(5,040

)

Return of investment on financing arrangements with Murray Energy (affiliate)

 

705

 

 

 

653

 

Settlement of certain coal derivatives

 

3,520

 

 

 

 

Proceeds from sale of property, plant and equipment

 

1,898

 

 

 

83

 

Net cash used in investing activities

 

(13,785

)

 

 

(4,304

)

Cash flows from financing activities

 

 

 

 

 

 

 

Net change in borrowings under revolving credit facility

 

(352,500

)

 

 

 

Net change in borrowings under A/R securitization program

 

7,000

 

 

 

(19,800

)

Proceeds from other long-term debt

 

1,234,438

 

 

 

 

Payments on other long-term debt and capital lease obligations

 

(970,721

)

 

 

(11,097

)

Proceeds from issuance of common units to Murray Energy (affiliate)

 

60,586

 

 

 

 

Debt extinguishment costs

 

(57,645

)

 

 

 

Debt issuance costs paid

 

(27,328

)

 

 

 

Other

 

(1,892

)

 

 

(339

)

Net cash used in financing activities

 

(108,062

)

 

 

(31,236

)

Net decrease in cash and cash equivalents

 

(99,455

)

 

 

(1,318

)

Cash and cash equivalents, beginning of period

 

103,690

 

 

 

17,538

 

Cash and cash equivalents, end of period

$

4,235

 

 

$

16,220

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash financing activities:

 

 

 

 

 

 

 

Non-cash capital contribution from Foresight Reserves LP (affiliate)

$

 

 

$

813

 

Reclassification of warrant liability to partners' capital

$

41,888

 

 

$

 

 

See accompanying notes.


6


Foresight Energy LP

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Organization, Nature of Business and Basis of Presentation

 

Foresight Energy LLC (“FELLC”), a perpetual-term Delaware limited liability company, was formed in September 2006 for the development, mining, transportation and sale of coal. Prior to June 23, 2014, Foresight Reserves, LP (“Foresight Reserves”) owned 99.333% of FELLC and a member of FELLC’s management owned 0.667%. On June 23, 2014, in connection with the initial public offering (“IPO”) of Foresight Energy LP (“FELP”), Foresight Reserves and a member of management contributed their ownership interests in FELLC to FELP for which they were issued common and subordinated units in FELP. Because this transaction was between entities under common control, the contributed assets and liabilities of FELLC were recorded in the combined consolidated financial statements of FELP at FELLC’s historical cost. FELP has been managed by Foresight Energy GP LLC (“FEGP”) subsequent to the IPO.

 

On April 16, 2015, Murray Energy Corporation (“Murray Energy”) and Foresight Reserves completed a transaction whereby Murray Energy acquired a 34% voting interest in FEGP and all of the outstanding subordinated units of FELP, representing a 50% ownership percentage of the Partnership’s limited partner units. On March 28, 2017, following the completion of a debt refinancing (see Note 8), Murray Energy exercised its option (the “FEGP Option”) to acquire an additional 46% voting interest in FEGP from Foresight Reserves and Michael J. Beyer (“Beyer”) pursuant to the terms of an option agreement, dated April 16, 2015, among Murray Energy, Foresight Reserves and Beyer, as amended, thereby increasing Murray Energy’s voting interest in FEGP to 80%. The aggregate exercise price of the FEGP Option was $15 million. Murray Energy’s acquisition of the incremental ownership in FEGP resulted in its obtaining control of FELP. Per Accounting Standards Update (“ASC”) 805-50-25-4, Murray Energy, as the acquirer of FELP through FEGP, has the option to apply pushdown accounting in the separate financial statements of the acquiree. Murray Energy elected to adopt pushdown accounting in our stand alone financial statements and therefore we will reflect purchase accounting adjustments in our consolidated financial statements (see Note 3).

 

Also, due to the application of "push down" accounting, our condensed consolidated financial statements and certain footnote disclosures are presented in two distinct periods to indicate the application of two different bases of accounting between the periods presented. The periods prior to the acquisition date are identified as “Predecessor” and the period after the acquisition date is identified as “Successor”. For accounting purposes, management has designated the acquisition date as March 31, 2017 (the “Acquisition Date”), as the operating results and change in financial position for the intervening period is not material.

 

As used hereafter in this report, the terms “Foresight Energy LP,” “FELP,” the “Partnership,” “we,” “us” or like terms, refer to the consolidated results of Foresight Energy LP and its consolidated subsidiaries and affiliates, unless the context otherwise requires or where otherwise indicated.

 

The Partnership operates in a single reportable segment and currently has four underground mining complexes in the Illinois Basin: Williamson Energy, LLC (“Williamson”); Sugar Camp Energy, LLC (“Sugar Camp”); Hillsboro Energy, LLC (“Hillsboro”); and Macoupin Energy, LLC (“Macoupin”). Mining operations at our Hillsboro complex have been idled since March 2015 due to a combustion event. In April 2016, we temporarily sealed the entire mine to reduce the oxygen flow paths into the mine. We are uncertain as to when production will resume at this operation. Our mined coal is sold to a diverse customer base, including electric utility and industrial companies primarily in the eastern United States, as well as overseas markets.

The accompanying condensed consolidated financial statements contain all significant adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary to present fairly, the Partnership’s condensed consolidated financial position, results of operations and cash flows for all periods presented. In preparing the condensed consolidated financial statements, management used estimates and assumptions that may affect reported amounts and disclosures. To the extent there are material differences between the estimates and actual results, the impact to the Partnership’s financial condition or results of operations could be material. The unaudited condensed consolidated financial statements do not include footnotes and certain financial information as required annually under U.S. generally accepted accounting principles (“U.S. GAAP”) and, therefore, should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K filed with the SEC on March 1, 2017. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of results that can be expected for any future period, including the year ending December 31, 2017. Intercompany transactions are eliminated in consolidation.

 

7


2. New Accounting Standards

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Compensation – Stock Compensation, which was issued to simplify the accounting for share-based payment transactions, including income tax consequences, the classification of awards as equity or liabilities, an option to recognize gross equity-based compensation expense with actual forfeitures recognized as they occur and the classification on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2016. We adopted this update during the first quarter of 2017 and it had an immaterial impact on our condensed consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory: Simplifying the Measurement of Inventory, which simplifies the measurement of inventories valued under most methods. Under this new guidance, inventories valued under these methods would be valued at the lower of cost and net realizable value, with net realizable value defined as the estimated selling price less reasonable costs to sell the inventory. We adopted this update during the first quarter of 2017 and it did not have an impact on our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In July 2015, the FASB delayed the effective date until annual and interim periods beginning after December 31, 2017. We intend to adopt ASU 2014-09 as of January 1, 2018 using the modified retrospective approach. While we have not yet completed our review of the impact of the new standard, we do not currently anticipate a material impact on our revenue recognition practices. We are continuing to evaluate the disclosure requirements under this standard as well as additional changes, modifications or interpretations which may impact our current conclusions.

 

No other new accounting pronouncement issued or effective during the fiscal year which was not previously disclosed in our Annual Report on Form 10-K had, or is expected to have, a material impact on our consolidated financial statements or related disclosures.

 

3. Pushdown Accounting

 

Pursuant to the acquisition by Murray Energy of the controlling interest in FEGP, management, with the assistance of a third party valuation firm, has preliminarily estimated the fair value of FELP’s assets and liabilities as of the Acquisition Date. Given that the valuation being performed by the third party valuation firm is not yet complete, the value of certain assets and liabilities are preliminary in nature and will be adjusted as additional analysis is performed and as additional information is obtained about the facts and circumstances that existed at the acquisition date. As a result, material adjustments to this preliminary allocation may occur as the valuation and the related "push down" accounting is finalized (such finalization to be completed within one year of the Acquisition Date, per the terms of ASC 805-50-25-4). The carrying values of certain of FELP's assets and liabilities, including the sale leaseback financing arrangements, in this preliminary estimate were assumed to approximate their fair values. FELP’s identifiable intangibles at this time consist primarily of a preliminary assessment on certain favorable and unfavorable contracts. The condensed consolidated balance sheet as of March 31, 2017 represents the preliminary allocation of the assets and liabilities of FELP.

 

The preliminary net purchase accounting adjustments to record the assets and liabilities of FELP to fair value as of the Acquisition Date resulted in a $1.2 billion net increase to net assets, and was comprised of the following preliminary adjustments from carrying value:

 

 

(Successor)

 

 

March 31, 2017

 

 

(In Thousands)

 

Working capital and certain other long-term asset accounts

$

(33,702

)

Mineral rights, land and land rights (1)

 

1,678,795

 

Plant, equipment and development (1)

 

(367,933

)

Intangibles, net

 

(82,398

)

Deferred debt issuance costs

 

(33,879

)

Long-term liabilities

 

2,595

 

Pushdown accounting adjustment

$

1,163,478

 

 

(1) – The development costs of the mine were reduced to zero as part of the fair value adjustment and the corresponding value of mineral rights assets was increased to reflect the future cash flows that the developed mines are expected to generate. As a result, the value of the plant, equipment and development asset category decreased significantly and the value of the mineral rights category increased significantly.

8


The following table presents each major class of intangible assets preliminarily identified as of March 31, 2017:

 

 

(Successor)

 

 

March 31, 2017

 

 

(In Thousands)

 

Favorable sales contracts, net

$

10,503

 

Unfavorable royalty agreements

 

(66,684

)

Unfavorable transportation agreements

 

(26,217

)

Total intangibles, net

$

(82,398

)

 

4. Commodity Derivative Contracts

 

The Partnership has commodity price risk for its coal sales as a result of changes in the market value of its coal. To minimize this risk, we enter into fixed price coal supply sales agreements and coal derivative swap contracts.

As of March 31, 2017 and December 31, 2016, we had outstanding coal derivative swap contracts to fix the selling price on 0.2 million tons and 0.5 million tons, respectively. Swaps are designed so that the Partnership receives or makes payments based on a differential between fixed and variable prices for coal. The coal derivative contracts are economic hedges to certain future unpriced (indexed) sales commitments through 2017. The coal derivative contracts are indexed to the Argus API 2 price index, the benchmark price for coal imported into northwest Europe. The coal derivative contracts are accounted for as freestanding derivatives and any gains or losses resulting from adjusting these contracts to fair value are recorded into earnings. We record the fair value of all positions with a given counterparty on a gross basis in the condensed consolidated balance sheets (see Note 11).

We have master netting agreements with all of our counterparties that allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default. We manage counterparty risk through the utilization of investment grade commercial banks, diversification of counterparties and our counterparty netting arrangements.

 

We received $3.5 million in proceeds during the three months ended March 31, 2017 from the settlement of derivatives that were reclassified from an operating cash flow activity to an investing activity in the condensed consolidated statement of cash flows because the derivative contracts were settled prior to the expiration of their contractual maturities and prior to the delivery date of the underlying sales contracts.

 

5. Accounts Receivable

Accounts receivable consist of the following:

 

 

(Successor)

 

 

 

(Predecessor)

 

 

March 31,

2017

 

 

 

December 31,

2016

 

 

(In Thousands)

 

 

 

(In Thousands)

 

Trade accounts receivable

$

27,417

 

 

 

$

42,862

 

Other receivables

 

7,793

 

 

 

 

12,043

 

Total accounts receivable

$

35,210

 

 

 

$

54,905

 

 

 

6. Inventories

Inventories consist of the following:

 

 

(Successor)

 

 

 

(Predecessor)

 

 

March 31, 2017

 

 

 

December 31,

2016

 

 

(In Thousands)

 

 

 

(In Thousands)

 

Parts and supplies

$

17,786

 

 

 

$

18,712

 

Raw coal

 

4,398

 

 

 

 

4,907

 

Clean coal

 

27,355

 

 

 

 

19,433

 

Total inventories

$

49,539

 

 

 

$

43,052

 

 

9


 

7. Property, Plant, Equipment and Development, Net

Property, plant, equipment and development, net consist of the following:

 

 

(Successor)

 

 

 

(Predecessor)

 

 

March 31,

2017

 

 

 

December 31,

2016

 

 

(In Thousands)

 

 

 

(In Thousands)

 

Mineral rights, land and land rights

$

1,773,488

 

 

 

$

99,909

 

Plant and equipment

 

833,656

 

 

 

 

2,318,697

 

Total property, plant, equipment and development

 

2,607,144

 

 

 

 

2,418,606

 

Less: accumulated depreciation, depletion and amortization

 

 

 

 

 

(1,099,669

)

Property, plant, equipment and development, net

$

2,607,144

 

 

 

$

1,318,937

 

 

In conjunction with pushdown accounting, property, plant, equipment and development, net was measured at the preliminary estimate of fair value as of the Acquisition Date, which also impacted how value was assigned between the categories within property, plant, equipment and development (see Note 3).

 

8. Long-Term Debt and Capital Lease Obligations

Long-term debt and capital lease obligations consist of the following:

 

 

(Successor)

 

 

 

(Predecessor)

 

 

March 31,

2017

 

 

 

December 31,

2016

 

 

(In Thousands)

 

 

 

(In Thousands)

 

Prior Second Lien Notes

$

 

 

 

$

349,100

 

2017 Exchangeable PIK Notes

 

 

 

 

 

299,859

 

Prior Revolving Credit Facility ($450.0 million capacity)

 

 

 

 

 

352,500

 

Prior Term Loan due 2020

 

 

 

 

 

295,667

 

2023 Second Lien Notes

 

425,000

 

 

 

 

 

New Term Loan due 2022

 

825,000

 

 

 

 

 

Revolving Credit Facility ($170.0 million capacity)

 

 

 

 

 

 

Trade A/R Securitization

 

21,200

 

 

 

 

14,200

 

5.78% longwall financing arrangement

 

39,217

 

 

 

 

39,217

 

5.555% longwall financing arrangement

 

36,094

 

 

 

 

41,250

 

Capital lease obligations

 

36,800

 

 

 

 

41,457

 

Subtotal - Total long-term debt and capital lease obligations principal outstanding

 

1,383,311

 

 

 

 

1,433,250

 

Unamortized deferred financing costs and debt discounts

 

(15,535

)

 

 

 

(42,187

)

Total long-term debt and capital lease obligations

 

1,367,776

 

 

 

 

1,391,063

 

Less: current portion

 

(67,778

)

 

 

 

(368,993

)

Non-current portion of long-term debt and capital lease obligations

$

1,299,998

 

 

 

$

1,022,070

 

 

On March 27, 2017, Murray Energy contributed $60.6 million in cash (the “Murray Investment”) to FELP in exchange for 9.6 million common units of FELP. The cash was utilized to redeem, pursuant to an equity claw redemption provision, $54.5 million of the then outstanding Second Lien Senior Secured Notes due 2021 (the “Prior Second Lien Notes”) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest.

 

On March 28, 2017 (the “Closing Date”), FELP, together with its wholly-owned subsidiaries Foresight Energy LLC (the “Borrower” or “FELLC”) and Foresight Energy Finance Corporation (the “Co-Issuer” and together with FELLC, the “Issuers”) and certain of the Issuers’ subsidiaries, completed a series of transactions to refinance certain previously outstanding indebtedness (the “Refinancing Transactions”). The new debt issued was as follows:

 

10


 

On the Closing Date, the Issuers issued $425.0 million aggregate principal amount of Second Lien Senior Secured Notes due 2023 (the “2023 Second Lien Notes”) and

 

On the Closing Date, the Borrower entered into a new credit agreement (the “New Credit Agreement”) providing for new senior secured first-priority credit facilities (the “New Credit Facilities”) consisting of a new senior secured first-priority $825.0 million term loan with a five-year maturity (the “New Term Loan”) and a new senior secured first-priority $170.0 million revolving credit facility with a maturity of four years, including both a letter of credit sub-facility and a swing-line loan sub-facility (the “Revolving Credit Facility”).

 

We incurred third-party professional fees totaling $27.3 million related to the new indebtedness.

 

The Partnership retired the following indebtedness in the Refinancing Transactions:

 

 

the remaining Prior Second Lien Notes at a redemption price equal to the principal amount thereof plus the applicable premium as of, and accrued and unpaid;

 

the Second Lien Senior Secured Exchangeable PIK Notes due 2017 (the “Exchangeable PIK Notes”) at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest; and

 

the Partnership’s outstanding credit facilities (the “Prior Credit Facilities”), including the revolving credit facility (the “Prior Revolving Credit Facility”) and the term loan (the “Prior Term Loan”), including, in each case, accrued and unpaid interest.

 

As a result of the Restructuring Transactions, a loss on the early extinguishment of debt of $95.5 million was recognized during the three months ended March 31, 2017 for the incurrence of $57.6 million in make-whole/equity-claw premiums and other cash costs to retire the Prior Second Lien Notes early and the write-off of $37.9 million of unamortized debt discounts and debt issuance costs related to the retired indebtedness.

 

Description of the New Credit Facilities

 

On the Closing Date, the Borrower entered into a New Credit Agreement providing for new senior secured first-priority credit facilities consisting of a new senior secured first-priority $825.0 million term loan with a maturity of five years and a new senior secured first-priority $170.0 million revolving credit facility with a maturity of four years, including both a letter of credit sub-facility and a swing-line loan sub-facility. The New Term Loan was issued at an initial discount of $12.4 million, which is being amortized using the effective interest method over the term of the loan. Amounts outstanding under the New Credit Facilities bear interest as follows:

 

                in the case of the New Term Loan, at the Borrower’s option, at (a) LIBOR (subject to a LIBOR floor of 1.00%) plus 5.75% per annum; or (b) a base rate plus 4.75% per annum; and

                  in the case of borrowings under the Revolving Credit Facility, at the Borrower’s option, at (a) LIBOR (subject to a floor of zero) plus an applicable margin ranging from 5.25% to 5.50% per annum or (b) a base rate plus an applicable margin ranging from 4.25% to 4.50% per annum, in each case, such applicable margins to be determined based on our net first lien secured leverage ratio.

 

In addition to paying interest on the outstanding principal under the New Credit Facilities, we are required to pay a quarterly commitment fee with respect to the unused portions of our Revolving Credit Facility and customary letter of credit fees. The New Credit Facilities require scheduled quarterly amortization payments on the New Term Loan in an aggregate annual amount equal to 1.0% of the original principal amount of the New Term Loan, with the balance to be paid at maturity.

 

The New Credit Facilities also require us to prepay outstanding borrowings, subject to certain exceptions, with:

 

                  75% (which will be reduced to 50%, 25% and 0% based on satisfaction of specified net secured leverage ratio tests) of our annual excess cash flow, as defined under the New Credit Facilities; 

                  100% of the net cash proceeds of non-ordinary course asset sales and other dispositions of property, in each case subject to certain exceptions and customary reinvestment rights; 

                  100% of the net cash proceeds of insurance (other than insurance proceeds relating to the Deer Run mine), in each case subject to certain exceptions and customary reinvestment rights; and 

                  100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the New Credit Facilities.

 

We may voluntarily repay outstanding loans under the New Credit Facilities at any time, without prepayment premium or penalty, except in connection with a repricing transaction in respect of the New Term Loan, in each case subject to customary “breakage” costs with respect to Eurodollar Rate loans. All obligations under the New Credit Facilities are guaranteed by FELP on a limited recourse

11


basis (where recourse is limited to its pledge of stock of the Borrower) and are or will be unconditionally guaranteed, jointly and severally, on a senior secured first-priority basis by each of the Borrower’s existing and future direct and indirect, wholly-owned domestic restricted subsidiaries (which do not currently include Hillsboro Energy LLC), subject to certain exceptions.

 

The New Credit Facilities require that, commencing as of the end of the second fiscal quarter in 2017, we comply on a quarterly basis with a maximum net first lien secured leverage ratio of 3.75:1.00, stepping down by 0.25x in each of the first quarters of 2019 and 2021, which financial covenant is solely for the benefit of the lenders under the Revolving Credit Facility. The New Credit Facilities also contain certain customary affirmative covenants and events of default, including relating to a change of control.

 

As of March 31, 2017, we had no borrowings outstanding under our Revolving Credit Facility, and available borrowing capacity under the Revolving Credit Facility, net of outstanding letters of credit of $11.5 million, was $158.5 million.

 

Description of the 2023 Second Lien Notes

 

On the Closing Date, the Issuers issued $425.0 million aggregate principal amount of 2023 Second Lien Notes pursuant to an indenture (the “Indenture”), dated as of the Closing Date, by and among the Issuers, the guarantors party thereto and the trustee. The 2023 Second Lien Notes have a maturity date of April 1, 2023 and bear interest at a rate of 11.50% per annum, payable in cash semi-annually on April 1 and October 1 (commencing on October 1, 2017). The 2023 Second Lien Notes were issued at an initial discount of $3.2 million, which is being amortized using the effective interest method over the term of 2023 Second Lien Notes. The obligations under the 2023 Second Lien Notes are unconditionally guaranteed, jointly and severally, on a senior secured second-priority basis by each of the wholly-owned domestic subsidiaries of the Issuers that guarantee the New Credit Facilities (which do not include Hillsboro Energy LLC). The Indenture contains certain usual and customary negative covenants and events of default, including related to a change in control.

 

Prior to April 1, 2020, the Issuers may redeem the 2023 Second Lien Notes in whole or in part at a price equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, plus the applicable “make-whole” premium. In addition, prior to April 1, 2020, the Issuers may redeem up to 35% of the aggregate principal amount of the 2023 Second Lien Notes at a price equal to 111.50% of the aggregate principal amount of the 2023 Second Lien Notes redeemed with the proceeds from a qualified equity offering, subject to at least 50% of the aggregate principal amount of the 2023 Second Lien Notes remaining outstanding after giving effect to any such redemption. On or after April 1, 2020, the Issuers may redeem the Notes at a price equal to: (i) 105.750% of the aggregate principal amount of the 2023 Second Lien Notes redeemed prior to April 1, 2021; (ii) 102.875% of the aggregate principal amount of the 2023 Second Lien Notes redeemed on or after April 1, 2021 but prior to April 1, 2022; and (iii) 100.000% of the aggregate principal amount of the 2023 Second Lien Notes redeemed thereafter.

 

Long-term Debt and Capital Lease Obligation Contractual Maturities

 

The following table summarizes the contractual principal maturities of long-term debt and capital lease obligations as of March 31, 2017:

 

(Successor)

 

 

Long-Term Debt

 

 

Capital Lease Obligations

 

 

(In Thousands)

 

April 1, 2017 - March 31, 2018

$

53,546

 

 

$

14,232

 

April 1, 2018 - March 31, 2019

 

42,393

 

 

 

11,635

 

April 1, 2019 - March 31, 2020

 

25,322

 

 

 

10,933

 

April 1, 2020 - March 31, 2021

 

8,250

 

 

 

 

April 1, 2021 - March 31, 2022

 

792,000

 

 

 

 

Thereafter

 

425,000

 

 

 

 

Total

$

1,346,511

 

 

$

36,800

 

 

9. Related-Party Transactions

 

Overview

 

Affiliated entities of FELP principally include: (a) Murray Energy, owner of a 80% interest in our general partner (effective March 28, 2017) and owner of all of the outstanding subordinated limited partner units, (b) Entities owned and controlled by Chris Cline, the former majority owner and former chairman of our general partner and (c) Natural Resource Partners LP (“NRP”) and its affiliates, for which Chris Cline directly and indirectly beneficially owned a 31% and 4% interest in the general and limited partner interests of NRP, respectively. On May 9, 2017, the affiliate owned by Chris Cline sold its holdings in NRP’s general partner.  As a result, NRP and its affiliates will not be treated as related parties after May 9, 2017. We routinely engage in transactions in the normal course of business with Murray Energy and its subsidiaries, NRP and its subsidiaries and Foresight Reserves and its affiliates. These

12


transactions include, among others, production royalties, transportation services, administrative arrangements, coal handling and storage services, supply agreements, service agreements, land leases and sale-leaseback financing arrangements. We also acquire mining equipment from subsidiaries of Murray Energy.

 

Murray Investments

 

On April 16, 2015, Foresight Reserves and Murray Energy executed a purchase and sale agreement whereby Murray Energy paid Foresight Reserves $1.37 billion to acquire a 34% voting interest in FEGP, 77.5% of FELP’s incentive distribution rights (“IDR”) and nearly 50% of the outstanding limited partner units in FELP, including all of the outstanding subordinated units. Murray Energy is also a holder of 17,556 of FELP’s outstanding warrants as of March 31, 2017. On March 27, 2017, Murray Energy contributed $60.6 million in cash (the “Murray Investment”) to us in exchange for 9,628,108 common units of FELP. On March 28, 2017, following completion of the Refinancing Transactions, Murray Energy exercised its FEGP Option to acquire an additional 46% voting interest in FEGP from Foresight Reserves and Beyer pursuant to the terms of an option agreement, dated April 16, 2015, among Murray Energy, Reserves and Beyer, as amended, thereby increasing Murray Energy’s voting interest in the General Partner to 80%. The aggregate exercise price of the FEGP Option was $15 million. FEGP will continue to govern the Partnership subsequent to this transaction.

 

Following the exercise of the FEGP Option, pursuant to the operating agreement of the General Partner, all members of the board of directors of the General Partner (the “Board”), other than Paul Vining, are deemed appointed by Murray Energy and can be removed and replaced by Murray Energy at its sole discretion. Murray Energy is entitled to appoint a majority of the Board. On March 28, 2017, Chris Cline resigned from the Board, and from his role as Principal Strategy Advisor. In connection with the departure of Mr. Cline, effective March 28, 2017, Robert D. Moore will serve as Chairman of the Board and Mr. Robert E. Murray became a member of the Board. Mr. Murray currently serves as the Executive Vice President of Marketing and Sales at Murray Energy. These changes came by way of the amended general partner operating agreement that went into effect upon the exercise of the FEGP Option.

 

Murray Management Services Agreement

 

On April 16, 2015, a management services agreement (“MSA”) was executed between FEGP and Murray American Coal, Inc. (the ”Manager”), a wholly-owned subsidiary of Murray Energy, pursuant to which the Manager provides certain management and administration services to FELP for a quarterly fee of $3.5 million ($14.0 million on an annual basis), subject to contractual adjustments. To the extent that FELP or FEGP directly incurs costs for any services covered under the MSA, then the Manager’s quarterly fee is reduced accordingly. Also, to the extent that the Manager utilizes outside service providers to perform any of the services under the MSA, then the Manager is responsible for those outside service provider costs. The initial term of the MSA extends through December 31, 2022 and is subject to termination provisions. Upon the exercise of the FEGP Option, the General Partner entered into an amended and restated MSA pursuant to which the quarterly fee for the Manager to provide certain management and administration services to FELP was increased to $5.0 million ($20.0 million on an annual basis) and is subject to future contractual escalations and adjustments. After taking into account the contractual adjustments for direct costs incurred by FELP, the amount of net expense due to the Manager for the three months ended March 31, 2017 and 2016 was $2.5 million and $2.1 million, respectively.

 

Murray Energy Transport Lease and Overriding Royalty Agreements

 

For the three months ended March 31, 2017 and 2016, we recorded other revenues of $1.6 million and $1.8 million, respectively, under the transport lease (the “Transport Lease”) with American Energy Corporation (“American Energy”), a subsidiary of Murray Energy. The total remaining minimum payments under the Transport Lease was $90.0 million at March 31, 2017, with unearned income equal to $32.2 million. As of March 31, 2017, the outstanding Transport Lease financing receivable was $57.8 million, of which $2.8 million was classified as current in the condensed consolidated balance sheet.

 

For the three months ended March 31, 2017 and 2016, we recorded other revenues of $0.8 million and $0.7 million, respectively, under the overriding royalty agreement (the “ORRA”) with Murray Energy subsidiaries’ American Energy and Consolidated Land Company. The total remaining minimum payments under the ORRA was $31.6 million at March 31, 2017, with unearned income equal to $20.0 million. As of March 31, 2017, the outstanding ORRA financing receivable was $11.6 million, of which $0.2 million was classified as current in the condensed consolidated balance sheet.

 

Other Murray Transactions

 

During the three months ended March 31, 2017 and 2016, we purchased $2.1 million and $0.4 million, respectively, in equipment, supplies and rebuild services from affiliates of Murray Energy. During the three months ended March 31, 2017 and 2016, we provided $0.1 million and $0.3 million, respectively, in equipment, supplies and rebuild services to affiliates of Murray Energy.

 

From time to time, we purchase and sell coal to Murray Energy and its affiliates to, among other things, meet each of our customer contractual obligations. We also sell coal to Javelin Global Commodities Limited (“Javelin”), an international commodities marketing

13


and trading joint venture owned by Murray Energy, Uniper (formerly E.ON Global Commodities SE), and management of Javelin. During the three months ended March 31, 2017 and 2016, we purchased $8.0 million and $0.6 million, respectively, in coal from Murray Energy and its affiliates and we sold $60.7 million and $0 million, respectively, of coal to Murray Energy and its affiliates, including Javelin. During the three months ended March 31, 2017 and 2016, we also paid Javelin $0.7 million and $0 million, respectively, in sales commissions. As of March 31, 2017, we had commitments to sell $18.0 million in coal to Murray Energy and its affiliates (including Javelin).

 

During the three months ended March 31, 2017 and 2016, Murray Energy transported coal under our transportation agreement with a third-party rail company resulting in usage fees owed to the third-party rail company of $0.2 million and $3.6 million, respectively. These usage fees were billed to Murray Energy, resulting in no impact to our condensed consolidated statements of operations. The usage of the railway line with this third-party rail company by Murray Energy counts toward the minimum annual throughput volume requirement with the third-party rail company, thereby reducing the Partnership’s exposure to contractual liquidated damage charges.

 

During the three months ended March 31, 2017 and 2016, we earned $0.2 million and $0.5 million, respectively, in other revenues for Murray Energy’s usage of our Sitran terminal.

 

From time to time we also reimburse Murray Energy for costs paid by them on our behalf, including certain insurance premiums.

 

Reserves Investor Group

 

In connection with the August 2016 debt restructuring transactions, the Reserves Investor Group (as defined below) acquired $179.9 million of Exchangeable PIK Notes and $15.2 million of the Prior Second Lien Notes. The Reserves Investor Group includes Christopher Cline, the four trusts established for the benefit of Mr. Cline’s children (the “Cline Trust”), Michael J. Beyer, the former Chief Executive Officer of FEGP, and owner of 0.66% of the voting and 0.225% of the economic interests of FEGP, and certain other limited liability companies owned or controlled by individuals with limited partner interests in Foresight Reserves through indirect ownership. As part of the Refinancing Transactions, the Reserves Investor Group’s outstanding principal and accrued and unpaid interest was repaid consistent with the unaffiliated owners of those debt facilities. The Cline Trust acquired $20.0 million of 2023 Second Lien Notes and $10.0 million of the New Term Loan on consistent terms as the unaffiliated owners of these notes. The Cline Trust is also a holder of 17,556 of FELP’s outstanding warrants as of March 31, 2017.

Mineral Reserve Leases

 

Our mines have a series of mineral reserve leases with Colt, LLC and Ruger, LLC (“Ruger”), subsidiaries of Foresight Reserves. Each of these leases have initial terms of 10 years with six renewal periods of five years each, at the election of the lessees, and generally require the lessees to pay the greater of $3.40 per ton or 8.0% of the gross sales price, as defined in the respective agreements, of such coal. We also have overriding royalty agreements with Ruger pursuant to which we pay royalties equal to 8.0% of the gross selling prices, as defined in the agreements. Each of these mineral reserve leases generally require a minimum annual royalty payment, which is recoupable only against actual production royalties from future tons mined during the period of ten years following the date on which any such royalty is paid.

 

We also lease mineral reserves under lease agreements with subsidiaries of NRP, including WPP LLC (“WPP”), HOD LLC (“HOD”), and Independence Energy, LLC (“Independence”). The initial terms of these agreements vary, however, each carries an option by the lessee to extend the leases until all merchantable and mineable coal has been mined and removed. Royalty payments under these arrangements are generally determined based on the greater of a minimum per ton amount (ranging from $2.50 per ton to $5.40 per ton) or a percentage of the gross sales price (generally 8.0% - 9.0%), as defined in the respective agreements. We are also subject under certain of these mineral reserve agreements to overriding royalties and/or wheelage fees. Our mineral reserve leases with NRP subsidiaries also require minimum quarterly or annual royalties which are generally recoupable on future tons mined and sold during the preceding five-year period from the excess tonnage royalty payments on a first paid, first recouped basis.

 

In April 2017, Williamson entered into the eighth amendment to the coal mining lease agreement with WPP which primarily served to, for the remainder of 2017 only, (a) include an overriding royalty payment provision equal to the greater of 5% of the gross selling price of the coal, as defined in the agreement, or $1.56 per ton, and (b) increase the quarterly minimum deficiency payment from $2.0 million to $2.1 million.

 

In July 2015, we provided notice to WPP declaring a force majeure event at our Hillsboro mine due to elevated carbon monoxide levels as a result of a mine fire, which has required the stoppage of mining operations since March 2015. As a result of the force majeure event, we have not made $53.5 million in minimum deficiency payments to WPP in accordance with the force majeure provisions of the royalty agreement. WPP is asserting that the stoppage of mining operations as a result of the combustion event does not constitute an event of force majeure under the royalty agreement (see Note 12).

 

14


Sale-Leaseback Financing Arrangements

 

In 2009, Macoupin sold certain of its coal reserves and rail facility assets to WPP and leased them back. The gross proceeds from this transaction were $143.5 million. As Macoupin has continuing involvement in the assets sold, the transaction is treated as a financing arrangement. At March 31, 2017, the outstanding balance of the sale-leaseback financing arrangement was $141.7  million and the effective interest rate was 13.7%.

 

In 2012, Sugar Camp sold certain rail facility assets to HOD and leased them back. The gross proceeds from this transaction were $50.0 million. As Sugar Camp has continuing involvement in the assets sold, the transaction is treated as a financing arrangement. At March 31, 2017, the outstanding balance of the sale-leaseback financing arrangement was $50.0 million and the effective interest rate was 13.7%.

 

Limited Partnership Agreement

The Partnership’s general partner manages the Partnership’s operations and activities as specified in the partnership agreement. The general partner of the Partnership is managed by its board of directors. Murray Energy and Foresight Reserves have the right to select the directors of the general partner. The members of the board of directors of the general partner are not elected by the unitholders and are not subject to reelection by the unitholders. The officers of the general partner manage the day-to-day affairs of the Partnership’s business. The partnership agreement provides that the Partnership will reimburse its general partner for all direct and indirect expenses incurred or payments made by the general partner on behalf of the Partnership.

 

The following table summarizes certain affiliate amounts included in our condensed consolidated balance sheets:

 

 

 

 

(Successor)

 

 

 

(Predecessor)

 

Affiliated Company

 

Balance Sheet Location

 

March 31,

2017

 

 

 

December 31,

2016

 

 

 

 

 

(In Thousands)

 

 

 

(In Thousands)

 

Murray Energy and affiliated entities (1)

 

Due from affiliates - current

 

$

19,099

 

 

 

$

16,784

 

NRP and affiliated entities

 

Due from affiliates - current

 

 

98

 

 

 

 

107

 

Foresight Reserves and affiliated entities

 

Due from affiliates - current

 

 

96

 

 

 

 

 

Total

 

 

 

$

19,293

 

 

 

$

16,891

 

 

 

 

 

 

 

 

 

 

 

 

 

Murray Energy and affiliated entities

 

Financing receivables - affiliate - current

 

$

2,961

 

 

 

$

2,904

 

Total

 

 

 

$

2,961

 

 

 

$

2,904

 

 

 

 

 

 

 

 

 

 

 

 

 

Murray Energy and affiliated entities

 

Due from affiliates - noncurrent

 

$

947

 

 

 

$

1,843

 

Total

 

 

 

$

947

 

 

 

$

1,843

 

 

 

 

 

 

 

 

 

 

 

 

 

Murray Energy and affiliated entities

 

Financing receivables - affiliate - noncurrent

 

$

66,473

 

 

 

$

67,235

 

Total

 

 

 

$

66,473

 

 

 

$

67,235

 

 

 

 

 

 

 

 

 

 

 

 

 

Foresight Reserves and affiliated entities (2)

 

Prepaid royalties - current and noncurrent

 

$

3,335

 

 

 

$

7,599

 

NRP and affiliated entities (2)

 

Prepaid royalties - current and noncurrent

 

 

1,465

 

 

 

 

1,246

 

Total

 

 

 

$

4,800

 

 

 

$

8,845

 

 

 

 

 

 

 

 

 

 

 

 

 

NRP and affiliated entities

 

Sales-leaseback financing arrangements - current and noncurrent

 

$

191,668

 

 

 

$

191,869

 

 

 

 

 

 

 

 

 

 

 

 

 

NRP and affiliated entities

 

Accrued interest

 

$

2,947

 

 

 

$

2,930

 

 

 

 

 

 

 

 

 

 

 

 

 

Murray Energy and affiliated entities (1)

 

Due to affiliates - current

 

$

4,139

 

 

 

$

17,021

 

Foresight Reserves and affiliated entities (3)

 

Due to affiliates - current

 

 

2,631

 

 

 

 

1,373

 

NRP and affiliated entities

 

Due to affiliates - current

 

 

2,483

 

 

 

 

2,510

 

Total

 

 

 

$

9,253

 

 

 

$

20,904

 

 

(1) – Includes amounts due to/from from Javelin, a joint venture partially owned by Murray Energy.

15


(2) – Prepaid royalties as of March 31, 2017 are recorded at fair value in accordance with the application of push down accounting. See Note 3. Prepaid royalties with Foresight Reserves and affiliated entities and NRP and affiliated entities is presented net of a reserve of $74,575 and $33,965, respectively, as of December 31, 2016.

(3) – Includes amounts due to/from a joint venture partially owned by an affiliate of The Cline Group. On March 31, 2017, The Cline Group sold its interest in the joint venture to the unaffiliated member therefore this joint venture will not be an affiliated party prospectively.

 

A summary of certain expenditures and expenses (revenues) incurred with affiliated entities is as follows for the three months ended March 31, 2017 and 2016:

 

(Predecessor)

 

 

 

Three Months Ended

 

 

 

March 31, 2017

 

 

March 31, 2016

 

 

 

(In Thousands)

Coal sales – Murray Energy and affiliated entities (including Javelin) (1)

$

(60,749

)

 

$

30

 

 

Overriding royalty and lease revenues – Murray Energy and affiliated entities (2)

$

(2,355

)

 

$

(2,470

)

 

Terminal revenues - Murray Energy and affiliated entities (2)

$

(226

)

 

$

(518

)

 

Royalty expense NRP and affiliated entities (3)

$

3,669

 

 

$

2,843

 

 

Royalty expense – Foresight Reserves and affiliated entities (3)

$

1,521