SISECAM RESOURCES LP References
References in this Annual Report on Form 10-K ("Report") to the "Partnership,"
"SIRE," "we," "our," "us," or like terms refer to Sisecam Resources LP (formerly
known as Ciner Resources LP ) and its subsidiary, Sisecam Wyoming LLC (formerly
known as Ciner Wyoming LLC ), which is the consolidated subsidiary of the
Partnership and referred to herein as "Sisecam Wyoming." Sisecam Chemicals
Resources LLC ("Sisecam Chemicals" formerly known as Ciner Resources
Corporation ) is 60% owned by Sisecam Chemicals USA Inc. ("Sisecam USA ") and 40%
owned by Ciner Enterprises Inc. References to "our general partner" or "Sisecam
GP" refer to Sisecam Resource Partners LLC (formerly known as Ciner Resource
Partners LLC ), the general partner of Sisecam Resources LP and a direct wholly
owned subsidiary of Sisecam Chemicals Wyoming LLC ("SCW LLC " formerly known as
Ciner Wyoming Holding Co. ), which is a direct wholly owned subsidiary of Sisecam
Chemicals. Sisecam Chemicals is a 60% owned subsidiary of Sisecam USA , which is
a direct wholly owned subsidiary of Türkiye ?i?e ve Cam Fabrikalari A.?, a
Turkish corporation ("?i?ecam Parent") which is an approximately 51%-owned
subsidiary of Turkiye Is Bankasi Turkiye Is Bankasi ("Isbank"). Sisecam Parent
is a global company operating in soda ash, chromium chemicals, flat glass, auto
glass, glassware glass packaging and glass fiber sectors. ?i?ecam Parent was
founded over 87 years ago, is based in Turkey and is one of the largest
industrial publicly listed companies on the Istanbul exchange. With production
facilities in four continents and in 14 countries, Sisecam is one of the largest
glass and chemicals producers in the world. Ciner Enterprises Inc. 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 ?irketi ("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 of our soda ash processed is sold to various domestic and
international customers.
Effective as of the end of day on December 31, 2020 , Sisecam Chemicals exited
ANSAC. As of January 1, 2021 , Sisecam Chemicals began managing the Partnership's
sales and marketing efforts for exports with the ANSAC exit being complete.
Sisecam Chemicals was able to establish business relationships with distributors
by leveraging the Ciner Group's distributor network and offering its customers
an improved level of service and greater certainty of supply to the
Partnership's end customers. In connection with the settlement agreement with
ANSAC, the Partnership met its 2022 and 2021 sales commitments to ANSAC. There
are no commitments to ANSAC beyond 2022. These 2022 and 2021 sales to ANSAC were
for export sales purposes, and required a fixed rate per ton selling, general
and administrative expense. Through in part, the Partnership's affiliates, the
Partnership has amongst other things: (i) obtained its own international
customer sales arrangements, (ii) obtained third-party export port services, and
(iii) chartered and executed its own international product delivery.
You should read the following management's discussion and analysis of financial
condition and results of operations ("MD&A") in conjunction with the historical
consolidated financial statements, and notes thereto, included elsewhere in this
Report. The Partnership has omitted from this MD&A a detailed discussion of the
year-over-year changes from the Partnership's fiscal year 2020 to the fiscal
year 2021, which can be found in the MD&A section in the Partnership's annual
report on Form 10-K for the year ended December 31, 2021 , filed with the U.S.
Securities and Exchange Commission on March 15, 2022 .
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. 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 aDelaware limited partnership that owns a 51% membership interest in, and operates the trona ore mining and soda ash production business of, SisecamWyoming . Sisecam Wyoming is currently one of the world's largest producers of soda ash, serving a global market from its facility in theGreen River Basin ofWyoming . Our facility has been in operation for more than 60 years. 57
--------------------------------------------------------------------------------
Table of Contents
Recent Developments
Take Private Transaction
OnFebruary 1, 2023 , the Partnership, our general partner,SCW LLC andSisecam Chemicals Newco LLC , aDelaware limited liability company and a wholly owned subsidiary ofSCW LLC ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as a direct wholly owned subsidiary of our general partner andSCW LLC (the "Merger"). Under the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding common unit of the Partnership, other than those held bySCW LLC and its permitted transferees, will be converted into the right to receive$25.00 per common unit in cash without any interest thereon. Immediately following the execution of the Merger Agreement,SCW LLC , which indirectly owns approximately 74% of our common units, delivered to us an irrevocable written consent adopting the Merger Agreement and approving the transactions contemplated thereby, including the Merger. As a result, we are not soliciting approval of the transaction by any other holders of our common units. Instead, we will distribute an information statement to our unitholders describing the terms and conditions of the transaction. Upon closing of the transaction, our common units will cease to be listed on theNew York Stock Exchange and will be subsequently deregistered under the Securities Exchange Act of 1934, as amended.
Quarterly Distribution
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, and we have no legal obligation to do so. OnFebruary 1, 2023 , the Partnership declared its fourth quarter 2022 quarterly distribution. OnFebruary 23, 2023 , we paid a quarterly cash distribution of$0.50 per limited partner unit to unitholders of record onFebruary 13, 2023 . The total distribution paid was$10.1 million paid to our limited partners and general partner for its general partner interests.
Financial Assurance Regulatory Updates by the
Our operations are subject to oversight by theLand Quality Division of Wyoming Department of Environmental Quality ("WDEQ"). Our principal mine permit issued by the Land Quality Division, requires the Partnership to provide financial assurances for our reclamation obligations for the estimated future cost to reclaim the area of our processing facility, surface pond complex and on-site sanitary landfill. The Partnership provides such assurances through a third-party surety bond (the "Surety Bond"). According to the annual recalculation and submittal, the Surety Bond amount was$41.8 million onDecember 31, 2022 which amount will remain$41.8 million until the recalculation is approved by WDEQ. The amount of such assurances that we are required to provide is subject to change upon annual recalculation according toDepartment of Environmental Quality's Guideline 12, annual site inspection and subsequent evaluation/approval by the WDEQ's Land Quality Division. For a discussion of risks in connection with future legislation relating to such financial assurances that could affect our business, financial condition and liquidity, see Part I, Item 1A, "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 additional information.
Expansion Opportunities
While we have decided not to proceed with theGreen River Expansion Project at this time, we continue to remain focused on increasing our production capacity and therefore are evaluating and exploring various projects to increase the productivity of the existing facility. To the extent that we decide to proceed with any expansion projects in the future, they will likely require capital expenditures materially higher than have been recently incurred by SisecamWyoming . The timing of any such expansion capital expenditures will depend on global market conditions and may also be impacted by the Partnership's financial results. If we do not make further investments in the near term or otherwise execute on one or more related initiatives, we anticipate that our deca stockpiles will be substantially depleted and our production rates will decline by approximately 200,000 short tons per year. Please read "Risk Factors-Risks Inherent in Our Business and Industry-Our deca stockpiles will substantially deplete by 2024 and our production rates will decline approximately 200,000 short tons per year if we do not make further investments or otherwise execute on one or more initiatives to prevent such decline" for more information. 58
--------------------------------------------------------------------------------
Table of Contents
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 that we and other producers charge for our products. Historically, long-term demand for soda ash inthe United States has been driven in large part by general economic growth and activity levels in the end-markets that the glass-making industry serves, such as the automotive and construction industries. Long-term soda ash demand in international markets has grown in conjunction with Gross Domestic Product. Global demand is growing in select segments, notably lithium carbonate used to manufacture lithium-ion batteries and photovoltaic glass, which is flat glass for solar panel applications. These two relatively new demand segments will be responsible for much of the growth the industry will enjoy in coming years. We expect that over the long-term, future global economic growth will positively influence global demand, which will likely result in increased exports, primarily fromthe United States ,Turkey and to a limited extent, fromChina , the largest suppliers of soda ash to international markets. Currently, and in the near mid-term we expect some impact to the global demand balance due to recessionary pressures, directly related to increasing interest rates. The supply of global soda ash was limited in 2022, while multiple projects by third parties are scheduled to begin production in 2023. Sales Mix We will adjust our sales mix based upon what is the best margin opportunity for the business between domestic and international. 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 logistics costs and our average selling prices.
International Commercial Restructuring and Expansion
As previously disclosed, Sisecam Chemicals, an affiliate of the Partnership, terminated its membership in ANSAC effectiveDecember 31, 2020 . As ofJanuary 1, 2021 , Sisecam Chemicals began managing the Partnership's sales and marketing efforts for exports with the ANSAC exit being complete. In connection with the settlement agreement with ANSAC, there was a sales commitment to ANSAC in 2022 where Sisecam Chemicals continued to sell, at substantially lower volumes than 2021 and 2020, product to ANSAC for export sales purposes, with a fixed rate per ton selling, general and administrative expense. Further, in 2023 and beyond there are no required sales to ANSAC. The ANSAC exit allowed Sisecam Chemicals to improve access to customers and gain control over placement of its sales in the international marketplace. This enhanced view of the global market allows Sisecam Chemicals to better understand supply/demand fundamentals thus allowing better decision making for its business. Sisecam Chemicals continues to optimize its distribution network leveraging strengths of existing distribution partners while expanding as our business requires in certain target areas. Although ANSAC has historically been our largest customer, the impact of Sisecam Chemicals' exit from ANSAC on our net sales, net income and liquidity was limited. With a low-cost position and improved access to international customers and control over placement of its sales in the international marketplace and logistics, we have adequately replaced these net sales made under the former agreement with ANSAC. Sisecam Chemicals' distribution network continues to develop since the ANSAC exit at the end of 2020. Sisecam Chemicals adopted a model to best serve its own requirements in the target markets of our soda ash sales. Sisecam Chemicals built relationships and established its own reputation as a seller in these markets by negotiating agreements and demonstrating supply capabilities with large and midsize consumers directly selling through distribution. These direct relationships allowed Sisecam Chemicals to establish its customer base for current and future sales.
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. Due to the historic volatility of natural gas prices, we expect to continue to hedge a portion of our forecasted natural gas purchases to mitigate volatility. During the first quarter of 2020, we completed construction of a natural gas-fired co-generation facility that provides roughly one-third of our electricity and steam demands at our mine in theGreen River Basin . This co-generation facility began operating inMarch 2020 and provided approximately 175.0 million kWh of electricity in 2022, saving the Partnership approximately$4.0 million during 2022 based on average purchased electricity costs and gas costs. In a normal production environment, the facility is expected to provide us over 180.0 million kWh of electricity annually. 59
--------------------------------------------------------------------------------
Table of Contents 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 facility 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 are scheduled to last approximately one week each, we repair and replace equipment and parts. Periodically, we may experience minor unplanned outages or unplanned extensions to planned outages caused by various factors, including equipment failures, power outages or service interruptions. The quality of our mine ore, which we refer to as our "ore grade," is determined by measuring the trona ore recovered as a percentage of the deposit, which includes both trona ore and insolubles. Our ore grade for the years endedDecember 31, 2022 and 2021 was 86.8% and 86.3%, respectively. 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 endedDecember 31, 2022 and 2021 was 1.58: 1.0 and 1.56: 1.0, respectively.
Freight and Logistics
The soda ash industry is logistics intensive and involves careful management of freight and logistics costs. This freight costs make up a large portion of the total delivered cost to the customer. Delivery costs to most domestic customers and ANSAC primarily relate to 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. Sisecam Chemicals enters into contracts with one railroad company for the majority of the domestic rail freight services that the Partnership receives and the related freight and logistics costs are allocated to the Partnership. For the year endedDecember 31, 2022 and 2021, the Partnership shipped over 90% of our soda ash to our customers initially via a single rail line owned and controlled by the railroad company. The Partnership's plant receives rail service exclusively from the railroad company and shipments by rail accounted for over 50% and over 60% of our total freight costs for the year endedDecember 31, 2022 and 2021, respectively. The decrease in the percentage of freight that is related to the railroad company is due primarily to the increased ocean freight in the year endedDecember 31, 2022 of direct international sales and their respective delivery locations. If Sisecam Chemicals does not ship at least a significant portion of our soda ash production on the railroad company's rail line during a twelve-month period, it must pay the railroad company a shortfall payment under the terms of our transportation agreement. The Partnership assists the majority of its domestic customers in arranging their freight services. During the year endedDecember 31, 2022 and 2021, Sisecam Chemicals had no shortfall payments and does not expect to make any such payments in the future. Sisecam Chemicals renewed its agreement with the railroad company inOctober 2021 , which now expires onDecember 31, 2025 .Net Sales Net sales include the amounts we earn on sales of soda ash. We recognize revenue from our sales when we satisfy the performance obligation defined in the contract with the customer. The performance obligation is typically met when goods are delivered to the carrier for shipment, which is the point at which the customer has the ability to direct the use of and obtain substantially all remaining benefits from the asset. The time at which delivery and transfer of title occurs is the point when the product leaves our facilities for domestic customers , the point when the product reaches the port of loading for ANSAC sales, and the point when the product is placed on a vessel for other international customers, thereby rendering our performance obligation fulfilled. Until the ANSAC exit onDecember 31, 2020 , the time at which delivery and transfer of title occurred for ANSAC sales had been the same as domestic customers. Substantially all of our sales are derived from sales of soda ash, which we sell through our exclusive sales agent, Sisecam Chemicals. A small amount of our sales is derived from sales of production 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. Until the end of 2020, sales prices for sales through ANSAC included the cost of freight to the ports of embarkation for overseas export or toLaredo, Texas for sales toMexico . Sales prices for other international sales may include the cost of rail freight to the port of embarkation and the cost of ocean freight to the port of disembarkation for import by the customer.
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.
60--------------------------------------------------------------------------------
Table of Contents
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 Northwest Pipeline Rocky Mountain Index natural gas settlement prices, over the past five years, have ranged between$1.29 and$11.39 . The average monthly Northwest Pipeline Rocky Mountain Index natural gas settlement prices for the years endedDecember 31, 2022 and 2021, were$6.95 and$3.90 per MMBtu, respectively. In early 2020, we constructed a new natural gas-fired turbine co-generation facility that is expected to provide roughly one-third of our electricity and steam demands at our mine in theGreen River Basin . This co-generation facility began operating inMarch 2020 and provided 175 million kWh of electricity in 2022. In a normal production environment the facility is expected to provide us over 180.0 million kWh of electricity annually. In order to mitigate the risk of gas price fluctuations, the Partnership expects to continue to hedge a portion of its forecasted natural gas purchases by entering into physical or financial gas hedges generally ranging between 50% and 80% of our expected monthly gas requirements, on a sliding scale, for approximately the next three 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 benefit plans offered and administered by Sisecam Chemicals.
Royalties. During the year endedDecember 31, 2022 , we paid royalties to theState of Wyoming , theU.S. Bureau of Land Management andSweetwater Royalties LLC . The royalties are calculated based upon a percentage of the value of soda ash and related products sold at a certain stage in the mining process. These royalty payments may be subject to a minimum domestic production volume from ourGreen River Basin facility. We are also obligated to pay annual rentals to our lessors and licensor regardless of actual sales. In addition, we pay a production tax toSweetwater County , and trona severance tax to theState 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 or renegotiation of such leases and license. Sisecam Wyoming's License Agreement, datedJuly 18, 1961 and amendedJune 28, 2018 , withSweetwater Royalties LLC (the "License Agreement"), provides among other things, (i) the term of the License Agreement throughJuly 18, 2061 and for so long thereafter as Sisecam Wyoming continuously conducts operations to mine and remove sodium minerals from the licensed premises in commercial quantities; and (ii) sets the production royalty rate for each sale of sodium mineral products produced from ore extracted from the licensed premises at eight percent (8%) of the net sales of such sodium mineral products. 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. OnDecember 11, 2020 , the Secretary of the Interior authorized an industry-wide royalty reduction from currently set rates by establishing a 2% federal royalty rate for a period of ten years for all existing and future federal soda ash or sodium bicarbonate leases. This change by the Secretary of the Interior reduced the rates on our mineral leases with theU.S. Government from 6% to 2% as ofJanuary 1, 2021 and for the following ten years. This 4% rate reduction saved over$10.2 million in royalty fees based on our mining operations in 2022.
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. The Partnership has a Services Agreement (the "Services Agreement"), with our general partner and Sisecam Chemicals. Pursuant to the Services Agreement, Sisecam Chemicals 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 Sisecam Chemicals an annual management fee, subject to quarterly adjustments, and reimburse Sisecam Chemicals for certain third-party costs incurred in connection with providing such services. In addition, under the agreement governing Sisecam Wyoming, Sisecam Wyoming reimburses us for employees who operate our assets and for support provided to Sisecam Wyoming. Effective as of the end of day onDecember 31, 2020 , Sisecam Chemicals exited ANSAC. As ofJanuary 1, 2021 , Sisecam Chemicals began managing the Partnership's sales and marketing efforts for exports with the ANSAC exit being complete. Sisecam Chemicals was able to establish business relationships with distributors by leveraging theCiner Group's distributor network and offering its customers an improved level of service and greater certainty of supply to the Partnership's end customers. In connection with the settlement agreement with ANSAC, the Partnership satisfied its 2022 and 2021 sales commitments to ANSAC which were at substantially lower volumes than prior years. These 2022 and 2021 sales to ANSAC were for export sales purposes, and required a fixed rate per ton selling, general and administrative expense. There is no further commitment to sell tons to ANSAC beyond 2022. Through in part the Partnership's affiliates, the Partnership has amongst other things: (i) obtained its own international customer sales arrangements, (ii) obtained third-party export port services, and (iii) chartered and executed its own international product delivery. 61
--------------------------------------------------------------------------------
Table of Contents 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.
The following tables set forth our results of operations for the years ended
Years Ended December 31,
($ in millions; except for operating and other data section) 2022 2021
Net sales $ 720.1 $ 540.1 Cost of products sold: Cost of products sold (excludes depreciation, depletion and amortization expense set forth separately below)
515.2 425.0
Cost of Product Sold - Affiliates 15.1 3.5
Depreciation, depletion and amortization expense 27.9 31.6
Total cost of products sold 558.2 460.1
Gross profit 161.9 80.0
Operating expenses:
Selling, general and administrative expenses-affiliates 20.0 17.2
Selling, general and administrative expenses-others 8.0 6.3
Total operating expenses 28.0 23.5
Operating income 133.9 56.5
Other income/(expenses):
Interest expense (5.8) (5.0)
Other - net (0.1) (0.1)
Total other expense, net (5.9) (5.1)
Net income $ 128.0 $ 51.4
Net income attributable to noncontrolling interest 64.7 27.0
Net income attributable to Sisecam Resources LP $ 63.3 $ 24.4
Operating and other data:
Trona ore consumed (thousands of short tons) 4,373.7 4,251.2
Ore to ash ratio (1) 1.58: 1.0 1.56: 1.0
Ore grade (2) 86.8 % 86.3 %
Soda ash volume produced (thousands of short tons) 2,760.7 2,720.5
Soda ash volume sold (thousands of short tons) 2,660.1 2,813.5
Adjusted EBITDA (3) $ 162.0 $ 88.5
(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)Ore grade is the percentage of raw trona ore that is recoverable as soda ash
free of impurities. A higher ore grade will produce more soda ash than a lower
ore grade.
(3)For a discussion of the non-GAAP financial measure Adjusted EBITDA, please
read "Non-GAAP Financial Measures" of this Management's Discussion and Analysis.
62--------------------------------------------------------------------------------
Table of Contents
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:
Year Ended December 31, Percent Increase/(Decrease)
($ in millions, except per ton data) 2022 2021 2022 vs 2021
Net sales:
Domestic $ 305.0 $ 276.8 10.2%
International 415.1 263.3 57.7%
Total net sales $ 720.1 $ 540.1 33.3%
Sales volumes (thousands of short tons):
Domestic (thousands of short tons) 1,336.5 1,300.6 2.8%
International (thousands of short tons) 1,323.6 1,512.9 (12.5)%
Total soda ash volume sold (thousands of short
tons) 2,660.1 2,813.5 (5.5)%
Average sales price (per short ton):
Domestic $ 228.20 $ 212.82 7.2%
International $ 313.06 $ 174.04 79.9%
Average $ 270.42 $ 191.97 40.9%
Percent of net sales:
Domestic sales 42.4 % 51.2 % (17.2)%
International sales 57.6 % 48.8 % 18.0%
Total percent of net sales 100.0 % 100.0 %
Percent of sales volumes:
Domestic volume 50.2 % 46.2 % 8.7%
International volume 49.8 % 53.8 % (7.4)%
Total percent of volume sold 100.0 % 100.0 %
Consolidated Results
Net sales. Net sales increased by 33.3% to $720.1 million for the year ended
December 31, 2022 from $540.1 million for the year ended December 31, 2021 ,
primarily driven by an increase in average sales price per short ton of 40.9%
due to both international and domestic sales average price increases from 2021
to 2022. The net sales were impacted by an increase in non-ANSAC international
sales which include ocean freight in both net sales and cost of product sold.
The higher sales prices were due to strong demand in the domestic and
international markets. The decline in soda ash volumes sold versus produced in
the year ended December 31, 2022 , was due to operational challenges in loading
export volumes during the year ended December 31, 2022 . We expect these unsold
volumes will be loaded and sold in the first quarter of 2023.
Cost of products sold, including depreciation, depletion and amortization and
affiliates. Cost of products sold, including depreciation, depletion and
amortization expense and affiliates, increased by 21.3% to $558.2 million for
the year ended December 31, 2022 from $460.1 million for the year ended
December 31, 2021 , primarily due to significant increases in gas prices, higher
Wyoming production tax, and higher production volumes. The increase in cost of
products sold is also due to supplier cost inflation as well as significant
increases in ocean freight rates primarily from the high demand in the global
supply chain. In addition, the increases from 2021 to 2022 are also attributable
to an increase in non-ANSAC international sales which include ocean freight in
both net sales and cost of product sold. These increases are partly offset by
lower sales volume in the year ended December 31, 2022 versus the year ended
December 31, 2021 .
Selling, general and administrative expenses and affiliates. Our selling,
general and administrative expenses and affiliates increased 19.1% to $28.0
million for the year ended December 31, 2022 , compared to $23.5 million for the
year ended December 31, 2021 . The increase was primarily due to loss on disposal
of assets partly offset by the decline in sales volume to ANSAC and therefore
lower related charge per ton for the year ended December 31, 2022 , compared to
the year ended December 31, 2021 .
Operating income. Operating income increased by 137.0% to
63--------------------------------------------------------------------------------
Table of Contents
Net income. As a result of the foregoing, net income increased by 149.0% to$128.0 million for the year endedDecember 31, 2022 , compared to$51.4 million for the year endedDecember 31, 2021 . The increase in operating income for the year endedDecember 31, 2022 was primarily due to the significant increase in sale prices and demand.
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$133.0 million ($225.0 million , less$92.0 million outstanding) was available for borrowing and undrawn under the Sisecam Wyoming Credit Facility as ofDecember 31, 2022 , subject to availability; during the year endedDecember 31, 2022 , we had borrowings of$158.0 million under the Sisecam Wyoming Credit Facility, offset by repayments of$136.0 million . Please read Part II, Item 8, Financial Statements - Note 9, "Debt," for details. We continue to analyze all aspects of our spending in order to maintain liquidity at levels we believe are necessary in order to satisfy cash requirements over the next twelve months and beyond. We are closely reviewing maintenance capital expenditures at ourWyoming facility to adequately maintain the physical assets. In addition, we are subject to business and operational risks that could adversely affect our cash flow, access to borrowings under the Sisecam Wyoming Credit Facility, and ability to make monthly installment payments under the Sisecam Wyoming Equipment Financing Arrangement. Our ability to satisfy debt service obligations, to fund planned capital expenditures, to make acquisitions and to make distributions 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. We expect our ongoing working capital and capital expenditures to be funded by cash generated from operations and borrowings under the Sisecam Wyoming Credit Facility. The amount, timing and classification of any such capital expenditures could affect the amount of cash that is available to be distributed to our unitholders.
In addition, we are subject to business and operational risks that could adversely affect our cash flow and access to borrowings under the Sisecam Wyoming Credit Facility and the Sisecam Wyoming Equipment Financing Arrangement.
We intend to pay a quarterly distribution to unitholders of record, to the extent we have sufficient cash from our operations after establishment of cash reserves, funding of any acquisitions and expansion capital expenditures, paying debt obligations and payment of fees and expenses, including payments to our general partner and its affiliates.
Working 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, and supplier cost inflation, as well as the level of spending for maintenance and growth capital expenditures. A material adverse change in operations or available financing under the Sisecam 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 ofDecember 31, 2022 , we had a working capital balance of$229.9 million as compared to a working capital balance of$134.2 million as ofDecember 31, 2021 . The primary driver for the increase in our working capital balance was an increase in accounts receivable related to increases in sales in the fourth quarter endedDecember 31, 2022 in comparison to sales in the fourth quarter endedDecember 31, 2021 .
Capital Expenditures
Our operations require investments to expand, upgrade or enhance existing
operations and to meet evolving environmental and safety regulations. We
distinguish between maintenance and expansion capital expenditures. Maintenance
capital expenditures (including expenditures for the replacement, improvement or
expansion of existing capital assets) are made to maintain, over the long-term,
our operating income or operating capacity. Examples of maintenance capital
expenditures are expenditures to upgrade and replace mining equipment and to
address equipment integrity, safety and environmental laws and regulations. Our
maintenance capital expenditures do not include actual or estimated capital
expenditures for replacement of our trona reserves. Expansion capital
64--------------------------------------------------------------------------------
Table of Contents
expenditures are incurred for acquisitions or capital improvements made to
increase, over the long-term, our operating income or operating capacity.
Examples of expansion capital expenditures include the acquisition and/or
construction of complementary assets to grow our business and to expand existing
facilities, such as projects that increase production from existing facilities
or reduce costs, to the extent such capital expenditures are expected to
increase our long-term operating capacity or operating income.
The following table summarizes our capital expenditures, on an accrual basis:
Years Ended December 31,
($ in millions) 2022 2021
Maintenance $ 26.7 $ 27.0
Expansion 0.2 0.8
Total $ 26.9 $ 27.8
The reduction in expansion capital expenditures for the year ended December 31,
2022 compared to the year ended December 31, 2021 was a result of certain
projects that were put on hold due to the Partnership's reassessment of long
term strategic plans and goals.
Cash Flows Discussion
The following is a summary of cash provided by or used in each of the indicated
types of activities:
Years Ended December 31, Percent Increase/(Decrease)
($ in millions) 2022 2021 2022 vs 2021
Cash provided by (used in):
Operating activities $ 122.2 $ 54.2 125.5%
Investing activities $ (28.3) $ (24.9) 13.7%
Financing activities $ (75.3) $ (27.1) 177.9%
Operating Activities
Cash provided by operating activities increased to $122.2 million during the
year ended December 31, 2022 compared to $54.2 million of cash provided during
the year ended December 31, 2021 primarily due to:
•an increase of 149.0% of net income of $128.0 million during the year ended
December 31, 2022 , compared to $51.4 million during the year ended December 31,
2021 , partly offset by
•an increase of $8.8 million in working capital used by operating activities to
$39.2 million during the year ended December 31, 2022 from $30.4 million for the
year ended December 31, 2021 . The increase was primarily due to higher accounts
receivable balance at December 31, 2022 as a result of higher net sales for the
three months ended December 31, 2022 compared to the same period ended
December 31, 2021 . It is partly offset by the higher balances of accounts
payable and accrued expenses as of December 31, 2022 .
Investing Activities
We used cash flows of
Financing Activities
Cash used in financing activities was
Borrowings under the Prior Sisecam Wyoming Credit Facility were at variable interest rates.
65--------------------------------------------------------------------------------
Table of Contents
As of and for the
($ in millions) quarter ended As of and for the year ended
December 31, 2022 December 31, 2022 December 31, 2021
Short-term borrowings from banks:
Outstanding amount at period ending $ 92.0 $ 92.0 $ 70.0
Weighted average interest rate at period
ending (1) 4.86 % 4.86 % 2.69 %
Average daily amount outstanding for the
period $ 101.6 $ 111.0 $ 114.3
Weighted average daily interest rate for the
period (1) 4.48 % 2.71 % 2.94 %
Maximum month-end amount outstanding during
the period $ 150.5 $ 150.5 $ 122.5
(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, 2022 , the interest rate swap contracts had an aggregate notional
value of $25.0 million .
Debt
See Part II, Item 8, Financial Statements and Supplementary Data - Note 9, "Debt," for details of our outstanding debt.
Material Cash Requirements
The following table sets forth a summary of our material cash requirements
related to our significant contractual obligations as of
Payments Due by Period
2023 2024 2025 2026 2027 Thereafter Total
($ in millions)
Long-term debt $ 8.8 $ 9.1 $ 9.3 $ 101.5 $ 3.5 $ 4.9 $ 137.1
Purchase obligations (1) 65.3 21.7 1.5 1.5 1.5 6.0 97.5
Interest payments (2) 6.3 6.1 5.8 4.7 0.3 0.2 23.4
Lease obligations (3) 0.1 0.1 0.1 0.1 0.1 1.1 1.6
Asset retirement obligation (4) - - - - - 178.1 178.1
Total $ 80.5 $ 37.0 $ 16.7 $ 107.8 $ 5.4 $ 190.3 $ 437.7
(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 2024 with year-to-year renewal options thereafter. These
commitments are designed to mitigate price volatility and assure source of
supply for our normal requirements. The amounts include financial gas swap
commitments, as well as, purchase obligations under a contract for the
transportation of gas and the contract for the transportation of gas may be
cancelled by either party upon twelve months advance written notice to the other
party. Purchase obligations also include ocean freight contracts primarily for
vessels, with annual minimum commitments of $29.8 million and $14.5 million in
2023 and 2024, respectively.
(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, 2022 .
(3) Minimum contractual rental commitments of various operating leases,
including renewal periods. Not included in the table above are the operating
lease contracts that Sisecam Chemicals 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 one
to ten years. Sisecam Chemicals' obligation related to these rail car leases are
$9.4 million in 2023, $7.9 million in 2024, $6.5 million in 2025, $5.2 million
in 2026, $2.1 million in 2027 and $0.8 million 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. Based on the information about the reclamation liability
recently obtained from WDEQ, the current estimated reclamation cost of $41.8
million is used to calculate the asset retirement obligation estimate. See Part
II, Item 8, Financial Statements and Supplementary Data - Note 14, Commitments
and Contingencies - "Mine Permit Bonding Commitment," for more information
regarding our off-balance-sheet arrangements.
Impact of Inflation
The impact of inflation became more significant during 2022 and in theU.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.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles inthe United States ("GAAP"). We also present the non-GAAP financial measures of: •Adjusted EBITDA; 66
--------------------------------------------------------------------------------
Table of Contents
•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 toSisecam Resources LP . 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 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 is a non-GAAP supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the Partnership's operating performance and liquidity. Adjusted EBITDA may provide an operating performance comparison to other publicly traded partnerships in our industry, without regard to historical cost basis or financing methods. Adjusted EBITDA may also be used to assess the Partnership's liquidity including such things as the ability of our assets to generate sufficient cash flows to make distributions to our unitholders and our ability to incur and service debt and fund capital expenditures.
Distributable cash flow and distribution coverage ratio are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the Partnership's liquidity, including:
•the ability of our assets to generate sufficient cash flow to make distributions to our unitholders and
•our ability to incur and service debt and fund capital expenditures.
We believe that the presentation of Adjusted EBITDA provides useful information
to our investors in assessing our financial conditions, results of operations
and liquidity. Distributable cash flow and distribution coverage ratio provide
useful information to investors in assessing our liquidity. The GAAP measures
most directly comparable to Adjusted EBITDA is net income and net cash provided
by operating activities. The GAAP measure most directly comparable to
distributable cash flow and distribution coverage ratio is 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 GAAP financial measures of net
income and net cash provided by operating activities to the non-GAAP financial
measures of Adjusted EBITDA and distributable cash flow:
67--------------------------------------------------------------------------------
Table of Contents
Year Ended
December 31,
($ in millions, except per unit data) 2022 2021
Reconciliation of net income to Adjusted EBITDA attributable to
$ 128.0 $ 51.4 Add backs: Depreciation, depletion and amortization expense 27.9 31.6 Interest expense, net 5.8 5.0 Equity-based compensation expense 0.3 0.5 Adjusted EBITDA 162.0 88.5
Less: Adjusted EBITDA attributable to noncontrolling interest
80.9 44.6
Adjusted EBITDA attributable to Sisecam Resources LP $
81.1
Reconciliation of net cash from operating activities to Adjusted EBITDA and distributable cash flow attributable toSisecam Resources LP : Net cash provided by operating activities$ 122.2 $ 54.2 Add/(less): Amortization of long-term loan financing (0.4) (0.6) Net change in working capital 39.2 30.4 Interest expense, net 5.8 5.0 Other non-cash items and disposal of assets, net (4.8) (0.5) Adjusted EBITDA 162.0 88.5
Less: Adjusted EBITDA attributable to noncontrolling interest
80.9 44.6
Adjusted EBITDA attributable to Sisecam Resources LP 81.1 43.9
Less: Cash interest expense, net attributable to
2.6 2.3
Less: Maintenance capital expenditures attributable to
14.3 12.6
Distributable cash flow attributable to
$
64.2
Cash distribution declared per unit $
2.00
$ 40.4 $ 20.3 Distribution coverage ratio (a) 1.59 1.43
(a) Distribution coverage ratio is calculated as distributable cash flow
attributable to
68--------------------------------------------------------------------------------
Table of Contents
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity withU.S. GAAP requires management to make certain estimates and assumptions regarding matters that are inherently uncertain and that ultimately affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. The estimates and assumptions are based on management's experience and understanding of current facts and circumstances. These estimates may differ from actual results. We believe our judgments and related estimates associated with transactions with our affiliates and revenue recognition are critical in the preparation of our consolidated financial statements. Management has discussed the development and selection of these critical accounting judgments and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosures relating to them, which are presented below.
Transactions with Affiliates
Agreements and transactions with affiliates have a significant impact on the Partnership's financial statements because the Partnership is a subsidiary and investee within two different global group structures. Agreements directly between the Partnership and other affiliates, or indirectly between affiliates that the Partnership does not control, can have a significant impact on recorded amounts or disclosures in the Partnership's financial statements, including any commitments and contingencies between the Partnership and affiliates, or potentially, third parties. For instance, Sisecam Chemicals, an upstream affiliate of the Partnership, acts as a shared service center for a variety of functions, including logistics and retirement benefits for Sisecam Wyoming and its affiliates. Sisecam Chemicals is the exclusive sales agent for the Partnership and allocates costs to the Partnership for ocean freight cost, selling, general and administrative expenses, retirement and postretirement benefits, and railcar leases. For more information related to these expenses see Item 8, "Financial Statements and Supplementary Data" Note 15, "Agreements and Transactions with Affiliates." There may be certain items that affiliates are in the process of evaluating how the Partnership may benefit or participate in the development, including participating in the related expenditures. In addition, the general partner may contract and/or develop certain transactions or assets on its own or through affiliates. Further upstream affiliates of the Partnership, including affiliates of ?i?ecam Parent may enter into agreements that limit or otherwise adversely impact the Partnership.
There is judgment in the Partnership's identification, evaluation, and disclosure of affiliate relationships, transactions, and commitments and contingencies.
69--------------------------------------------------------------------------------
Table of Contents
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 the consolidated financial statements.
70--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
