Attached files

file filename
EX-95.1 - EXHIBIT 95.1 - Ciner Resources LPexhibit951-september302016.htm
EX-32.2 - EXHIBIT 32.2 - Ciner Resources LPexhibit322-september302016.htm
EX-32.1 - EXHIBIT 32.1 - Ciner Resources LPexhibit321-september302016.htm
EX-31.2 - EXHIBIT 31.2 - Ciner Resources LPexhibit312-september302016.htm
EX-31.1 - EXHIBIT 31.1 - Ciner Resources LPexhibit311-september302016.htm
                                                      

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
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: 001-36062
CINER RESOURCES LP
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
Incorporation or Organization)
46-2613366
(I.R.S. Employer
Identification No.)
Five Concourse Parkway
Suite 2500
Atlanta, Georgia 30328
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (770) 375-2300
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ¨
Accelerated filer x 
Non-accelerated filer ¨
(Do not check if a
smaller reporting company)
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ¨ No x 

The registrant had 9,877,873 common units, 9,775,500 subordinated units and 399,000 general partner units outstanding at October 31, 2016, the most recent practicable date.



                                                      

CINER RESOURCES LP
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
References in this Quarterly Report on Form 10-Q (“Report”) to the “Partnership,” “CINR,” “Ciner Resources,” “we,” “our,” “us,” or like terms refer to Ciner Resources LP and its subsidiary. References to “Ciner Wyoming” refer to Ciner Wyoming LLC, the consolidated subsidiary of the Partnership. References to “our general partner” or “Ciner GP” refer to Ciner Resource Partners LLC, the general partner of Ciner Resources LP and a direct wholly-owned subsidiary of Ciner Wyoming Holding Co. (“Ciner Holdings”), which is a direct wholly-owned subsidiary of Ciner Resources Corporation (“Ciner Corp”). Ciner Corp is a direct wholly-owned subsidiary of Ciner Enterprises Inc. (“Ciner Enterprises”), which is directly owned by Akkan Enerji ve Madencilik Anonim Şirketi (“Akkan”), which in turn is directly wholly-owned by Turgay Ciner, the Chairman of the Ciner Group (“Ciner Group”), a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping markets.
We include cross references to captions elsewhere in this Report, where you can find related additional information. The following table of contents tells you where to find these captions.
 
Page Number
 
 
 
 
 
 
 

2

                                                      

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CINER RESOURCES LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
As of
(In millions)
September 30,
2016
 
December 31,
2015
 
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
29.6

 
$
20.4

Accounts receivable, net
32.0

 
33.8

Accounts receivable - ANSAC
49.9

 
52.2

Due from affiliates, net
6.3

 
11.9

Inventory
24.6

 
26.4

Other current assets
1.2

 
2.2

Total current assets
143.6

 
146.9

Property, plant and equipment, net
253.3

 
255.2

Other non-current assets
21.0

 
21.1

Total assets
$
417.9

 
$
423.2

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
8.6

 
$

Accounts payable
$
16.4

 
$
13.4

Due to affiliates
3.2

 
4.6

Accrued expenses
29.2

 
25.2

Total current liabilities
57.4

 
43.2

Long-term debt
90.9

 
110.0

Other non-current liabilities
9.1

 
6.8

Total liabilities
157.4

 
160.0

Commitments and Contingencies

 

Equity:
 
 
 
Common unitholders - Public and Ciner Holdings (9.9 units issued and outstanding at September 30, 2016 and 9.8 units issued and outstanding at December 31, 2015)
110.1

 
110.8

Subordinated unitholders - Ciner Holdings (9.8 units issued and outstanding at September 30, 2016 and December 31, 2015, respectively)
42.2

 
43.3

General partner unitholders - Ciner Resource Partners LLC (0.4 units issued and outstanding at September 30, 2016 and December 31, 2015, respectively)
4.0

 
4.0

Accumulated other comprehensive loss
(2.6
)
 
(2.1
)
Partners’ capital attributable to Ciner Resources LP
153.7

 
156.0

Non-controlling interest
106.8

 
107.2

Total equity
260.5

 
263.2

Total liabilities and partners’ equity
$
417.9

 
$
423.2

See accompanying notes.

3

                                                      


CINER RESOURCES LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions, except per unit data)
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net sales
$
121.0

 
$
117.3

 
$
352.1

 
$
360.0

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold
83.9

 
79.2

 
245.8

 
247.2

Depreciation, depletion and amortization expense
6.6

 
5.7

 
19.3

 
17.1

Selling, general and administrative expenses
6.3

 
4.5

 
18.1

 
14.1

Loss on disposal of assets, net
0.2

 

 
0.2

 

Total operating costs and expenses
97.0

 
89.4

 
283.4

 
278.4

Operating income
24.0

 
27.9

 
68.7

 
81.6

Other income/(expenses):
 
 
 
 
 
 
 
Interest expense, net
(0.9
)
 
(1.0
)
 
(2.7
)
 
(3.1
)
Other, net

 

 
(0.1
)
 
(0.6
)
Total other income/(expense), net
(0.9
)
 
(1.0
)
 
(2.8
)
 
(3.7
)
Net income
$
23.1

 
$
26.9

 
$
65.9

 
$
77.9

Net income attributable to non-controlling interest
12.0

 
13.8

 
34.3

 
40.3

Net income attributable to Ciner Resources LP
$
11.1

 
$
13.1

 
$
31.6

 
$
37.6

Other comprehensive income/(loss):

 
 
 
 
 
 
Income/(loss) on derivative financial instruments
(1.3
)
 
(2.3
)
 
(0.9
)
 
(3.9
)
Comprehensive income
21.8

 
24.6

 
65.0

 
74.0

Comprehensive income attributable to non-controlling interest
11.4

 
12.7

 
33.9

 
38.4

Comprehensive income attributable to Ciner Resources LP
$
10.4

 
$
11.9

 
$
31.1

 
$
35.6

 
 
 
 
 
 
 
 
Net income per limited partner unit:
 
 
 
 
 
 
 
Common - Public and Ciner Holdings (basic and diluted)
$
0.56

 
$
0.65

 
$
1.58

 
$
1.88

Subordinated - Ciner Holdings (basic and diluted)
$
0.55

 
$
0.65

 
$
1.58

 
$
1.88

 
 
 
 
 
 
 
 
Limited partner units outstanding:
 
 
 
 
 
 
 
Weighted average common units outstanding (basic and diluted)
9.8
 
9.8
 
9.8
 
9.8
Weighted average subordinated units outstanding (basic and diluted)
9.8
 
9.8
 
9.8
 
9.8


  See accompanying notes.


4

                                                      

CINER RESOURCES LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended 
 September 30,
(In millions)
2016
 
2015
 
 
 
 
Cash flows from operating activities:
 
 
 
Net income
$
65.9

 
$
77.9

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization expense
19.6

 
17.4

Loss on disposal of assets, net
0.2

 

Equity-based compensation expense
0.4

 
0.5

Other non-cash items
0.3

 
0.8

Changes in operating assets and liabilities:
 
 
 
(Increase)/decrease in:
 
 
 
Accounts receivable, net
1.8

 
4.7

Accounts receivable - ANSAC
2.3

 
3.0

Due from affiliates, net
5.6

 
9.5

Inventory
1.6

 
(7.4
)
Other current and other non-current assets
0.8

 
(0.3
)
Increase/(decrease) in:
 
 
 
Accounts payable
2.1

 
1.6

Due to affiliates
(1.4
)
 
(1.6
)
Accrued expenses and other liabilities
4.7

 
(3.2
)
Net cash provided by operating activities
103.9

 
102.9

Cash flows from investing activities:
 
 
 
Capital expenditures
(16.2
)
 
(28.1
)
Net cash used in investing activities
(16.2
)
 
(28.1
)
Cash flows from financing activities:
 
 
 
Due to affiliates

 
(1.3
)
Borrowings on Ciner Wyoming credit facility
7.0

 
4.0

Repayments on Ciner Wyoming credit facility
(17.5
)
 
(28.0
)
Distributions to common unitholders
(16.6
)
 
(15.8
)
Distributions to general partner
(0.6
)
 
(0.7
)
Distributions to subordinated unitholders
(16.5
)
 
(15.7
)
Distributions to non-controlling interest
(34.3
)
 
(34.6
)
Net cash used in financing activities
(78.5
)
 
(92.1
)
Net increase/(decrease) in cash and cash equivalents
9.2

 
(17.3
)
Cash and cash equivalents at beginning of period
20.4

 
31.0

Cash and cash equivalents at end of period
$
29.6

 
$
13.7

 See accompanying notes.


5

                                                      

CINER RESOURCES LP
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 
Common Units
 
Subordinated Units
 
General Partner
 
Accumulated
Other
Comprehensive
Loss
 
Partners’ Capital Attributable to Ciner Resources LP Equity
 
Non-controlling
Interests
 
Total
Equity
(In millions)
Balance at December 31, 2014
$
106.3

 
$
37.9

 
$
3.8

 
$
(0.4
)
 
$
147.6

 
$
100.9

 
$
248.5

Net income
18.4

 
18.4

 
0.8

 

 
37.6

 
40.3

 
77.9

Other comprehensive income/(loss)

 

 

 
(2.0
)
 
(2.0
)
 
(1.9
)
 
(3.9
)
Equity-based compensation plan activity
0.3

 

 

 

 
0.3

 

 
0.3

Distributions
(15.8
)
 
(15.7
)
 
(0.7
)
 

 
(32.2
)
 
(34.6
)
 
(66.8
)
Balance at September 30, 2015
$
109.2

 
$
40.6

 
$
3.9

 
$
(2.4
)
 
$
151.3

 
$
104.8

 
$
256.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
110.8

 
$
43.3

 
$
4.0

 
$
(2.1
)
 
$
156.0

 
$
107.2

 
$
263.2

Net income
15.6

 
15.4

 
0.6

 

 
31.6

 
34.3

 
65.9

Other comprehensive income/(loss)

 

 

 
(0.5
)
 
(0.5
)
 
(0.4
)
 
(0.9
)
Equity-based compensation plan activity
0.4

 

 

 

 
0.4

 

 
0.4

Distributions
(16.6
)
 
(16.5
)
 
(0.6
)
 

 
(33.7
)
 
(34.3
)
 
(68.0
)
Balance at September 30, 2016
$
110.1

 
$
42.2

 
$
4.0

 
$
(2.6
)
 
$
153.7

 
$
106.8

 
$
260.5

 
 
 
 
 
 
 
 
 
 
 
The sums of some of the rows and columns may not sum due to rounding.
 See accompanying notes.


6

                                                      

CINER RESOURCES LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CORPORATE STRUCTURE AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations

The unaudited condensed consolidated financial statements are composed of Ciner Resources LP (the “Partnership,” “CINR,” “Ciner Resources,” “we,” “us,” or “our”), a publicly traded Delaware limited partnership, and its consolidated subsidiary, Ciner Wyoming LLC (“Ciner Wyoming”), which is in the business of mining trona ore to produce soda ash. The Partnership’s operations consist solely of its investment in Ciner Wyoming. The Partnership was formed in April 2013 by Ciner Wyoming Holding Co. (“Ciner Holdings”), a wholly-owned subsidiary of Ciner Resources Corporation (“Ciner Corp”). Ciner Corp is a direct wholly-owned subsidiary of Ciner Enterprises Inc. (“Ciner Enterprises”), which is directly owned by Akkan Enerji ve Madencilik Anonim Şirketi (“Akkan”), which in turn is directly wholly-owned by Turgay Ciner, the Chairman of the Ciner Group, a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping markets. The Partnership owns a controlling interest comprised of 51.0% membership interest in Ciner Wyoming. All our soda ash processed is sold to various domestic and European customers, and to American Natural Soda Ash Corporation (“ANSAC”) which is an affiliate for export sales. All mining and processing activities take place in one facility located in the Green River Basin of Wyoming.

Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applicable to interim period financial statements and reflect all adjustments, consisting of normal recurring accruals, which are necessary for fair presentation of the results of operations, financial position and cash flows for the periods presented. All significant intercompany transactions, balances, revenue and expenses have been eliminated in consolidation. The results of operations for the period ended September 30, 2016 are not necessarily indicative of the operating results for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”). There has been no material change in the significant accounting policies followed by us during the nine month periods ended September 30, 2016 from those disclosed in the 2015 Annual Report.
Non-controlling interests

NRP Trona LLC, a wholly-owned subsidiary of Natural Resource Partners L.P. ("NRP"), currently owns a 49.0% membership interest in Ciner Wyoming.
        
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the dates of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Subsequent Events
We have evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. In August 2015, the amendments in ASU 2015-14 deferred the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application permitted only as of annual reporting period beginning after December 15, 2016, including interim reporting periods therein.We are currently assessing the impact the adoption of ASU No. 2014-09 will have on our condensed consolidated financial statements, as well as the available transition methods.

7

                                                      

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory within the scope of this update be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted by all entities as of the beginning of an interim or annual reporting period. The amendments should be applied prospectively. We do not expect the adoption of ASU No. 2015-11 to have a material impact upon our financial condition or results of operations.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). The standard amends certain aspects of recognition, measurement, presentation, and disclosure of financial assets and liabilities. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the potential impact the adoption of ASU No. 2016-01 will have on our condensed consolidated financial statements, as well as available transition methods.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The update amends existing standards for accounting for leases by lessees, with accounting for leases by lessors remaining largely unchanged from current guidance. The update requires that lessees recognize a lease liability and a right of use asset for all leases (with the exception of short-term leases) at the commencement date of the lease and disclose key information about leasing arrangements. The update is effective for interim and annual periods beginning after December 15, 2018 and must be adopted using a modified retrospective transition. The ASU No. 2016-02 provides for certain practical expedients and early adoption is permitted. The Partnership is evaluating the potential impact the adoption of ASU No. 2016-02 will have on its condensed consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation- Improvements to Employee Share-Based Payment Accounting (Topic 718), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture calculations, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period, however early adoption is permitted. The Partnership is currently evaluating the guidance to determine the Partnership’s adoption method and the effect, if any, it will have on the Partnership’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and for interim periods therein. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Partnership is evaluating the effect the standard will have on its condensed consolidated financial statements.
2. NET INCOME PER UNIT AND CASH DISTRIBUTION
Allocation of Net Income
Net income per unit applicable to limited partners (including common and subordinated unitholders) is computed by dividing limited partners’ interest in net income attributable to Ciner Resources, after deducting the general partner’s interest and any incentive distributions, by the weighted average number of outstanding common and subordinated units. Our net income is allocated to the general partner and limited partners in accordance with their respective partnership percentages, after giving effect to priority income allocations for incentive distributions, if any, to our general partner, pursuant to our partnership agreement. Earnings in excess of distributions are allocated to the general partner and limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit.
In addition to the common and subordinated units, we have also identified the general partner interest and incentive distribution rights (“IDRs”) as participating securities and use the two-class method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. Potentially dilutive and anti-dilutive units outstanding were immaterial for the three and nine months ended September 30, 2016 and September 30, 2015, respectively.

8

                                                      

The net income attributable to limited partner unitholders and the weighted average units for calculating basic and diluted net income per limited partner units were as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions, except per unit data)
2016
 
2015
 
2016
 
2015
Numerator:
 
 
 
 
 
 
 
Net income attributable to Ciner Resources LP
$
11.1

 
$
13.1

 
$
31.6

 
$
37.6

Less: General partner’s interest in net income
0.2

 
0.3

 
0.6

 
0.8

Total limited partners’ interest in net income
$
10.9

 
$
12.8

 
$
31.0

 
$
36.8

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average limited parter units outstanding:
 
 
 
 
 
 
 
Common - Public and Ciner Holdings (basic and diluted)
9.8
 
9.8
 
9.8
 
9.8
Subordinated - Ciner Holdings (basic and diluted)
9.8
 
9.8
 
9.8
 
9.8
Weighted average limited partner units outstanding
19.6
 
19.6
 
19.6
 
19.6
 
 
 
 
 
 
 
 
Net income per limited partner units:
 
 
 
 
 
 
 
Common - Public and Ciner Holdings (basic and diluted)
$
0.56

 
$
0.65

 
$
1.58

 
$
1.88

Subordinated - Ciner Holdings (basic and diluted)
$
0.55

 
$
0.65

 
$
1.58

 
$
1.88

The calculation of limited partners’ interest in net income is as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions, except per unit data)
2016
 
2015
 
2016
 
2015
Net income attributable to common unitholders:
 
 
 
 
 
 
 
Distributions (a)
$
5.6

 
$
5.4

 
$
16.8

 
$
16.0

(Distributions in excess of net income)/undistributed earnings
(0.1
)
 
1.0

 
(1.2
)
 
2.4

Common unitholders’ interest in net income
$
5.5

 
$
6.4

 
$
15.6

 
$
18.4

 
 
 
 
 
 
 
 
Net income attributable to subordinated unitholders:
 
 
 
 
 
 
 
Distributions (a)
$
5.6

 
$
5.4

 
$
16.6

 
$
16.0

(Distributions in excess of net income)/undistributed earnings
(0.2
)
 
1.0

 
(1.2
)
 
2.4

Subordinated unitholders’ interest in net income
$
5.4

 
$
6.4

 
$
15.4

 
$
18.4

 
 
 
 
 
 
 
 
(a) Distributions declared per unit for the period
$
0.5670

 
$
0.5510

 
$
1.698

 
$
1.634

Quarterly Distribution
On October 17, 2016, the Partnership declared its third quarter 2016 quarterly cash distribution of $0.5670 per unit. The quarterly cash distribution is payable on November 11, 2016 to unitholders of record on October 28, 2016.
Our general partner has considerable discretion in determining the amount of available cash, the amount of distributions and the decision to make any distribution. Although our partnership agreement requires that we distribute all of our available cash quarterly, there is no guarantee that we will make quarterly cash distributions to our unitholders at our current quarterly distribution level, at the minimum quarterly distribution level or at any other rate, and we have no legal obligation to do so. However, our partnership agreement does contain provisions intended to motivate our general partner to make steady, increasing and sustainable distributions over time.
Distributions from Operating Surplus During the Subordination Period
If we make a distribution from operating surplus for any quarter during the subordination period (beginning on September 18, 2013 and expiring on the first business day after the distribution to unitholders in respect of any quarter, beginning with the quarter ending September 30, 2016), our partnership agreement requires that we make the distribution in the following manner:
first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit an amount equal to the minimum quarterly distribution for that quarter;

9

                                                      

second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in the payment of the minimum quarterly distribution on the common units with respect to any prior quarters;
third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and
thereafter, in the manner described in “General Partner Interest and Incentive Distribution Rights” below.
End of Subordination Period
On, October 17, 2016, the board of directors of our general partner confirmed and approved that, upon payment of the quarterly distribution for the third quarter of 2016, the conditions for conversion of the Partnership’s subordinated units will be satisfied. As such, upon such payment, effective November 14, 2016, the subordination period will end and all 9,775,500 subordinated units will convert on a one-for-one basis into common units.
General Partner Interest and Incentive Distribution Rights
Our partnership agreement provides that our general partner initially will be entitled to 2.0% of all distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute up to a proportionate amount of capital to us in order to maintain its 2.0% general partner interest if we issue additional units. Our general partner’s approximate 2.0% interest, and the percentage of our cash distributions to which our general partner is entitled from such approximate 2.0% interest, will be proportionately reduced if we issue additional units in the future (other than (1) the issuance of common units upon conversion of outstanding subordinated units or (2) the issuance of common units upon a reset of the IDRs), and our general partner does not contribute a proportionate amount of capital to us in order to maintain its approximate 2.0% general partner interest. Our partnership agreement does not require that our general partner fund its capital contribution with cash. It may, instead, fund its capital contribution by contributing to us common units or other property.
IDRs represent the right to receive increasing percentages (13.0%, 23.0% and 48.0%) of quarterly distributions from operating surplus after we have achieved the minimum quarterly distribution and the target distribution levels. Our general partner currently holds the IDRs, but may transfer these rights separately from its general partner interest, subject to certain restrictions in our partnership agreement.
Percentage Allocations of Distributions from Operating Surplus
The following table illustrates the percentage allocations of distributions from operating surplus between the unitholders and our general partner based on the specified target distribution levels. The amounts set forth under the column heading “Marginal Percentage Interest in Distributions” are the percentage interests of our general partner and the unitholders in any distributions from operating surplus we distribute up to and including the corresponding amount in the column “Total Quarterly Distribution per Unit Target Amount.” The percentage interests shown for our unitholders and our general partner for the minimum quarterly distribution also apply to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner (1) include its 2.0% general partner interest, (2) assume that our general partner has contributed any additional capital necessary to maintain its 2.0% general partner interest, (3) assume that our general partner has not transferred its IDRs and (4) assume there are no arrearages on common units.
 
 
 
Marginal Percentage
Interest in
Distributions
 
Total Quarterly
Distribution per Unit
Target Amount
 
Unitholders
 
General Partner
Minimum Quarterly Distribution
$0.5000
 
98.0
%
 
2.0
%
First Target Distribution
above $0.5000 up to $0.5750
 
98.0
%
 
2.0
%
Second Target Distribution
above $0.5750 up to $0.6250
 
85.0
%
 
15.0
%
Third Target Distribution
above $0.6250 up to $0.7500
 
75.0
%
 
25.0
%
Thereafter
above $0.7500
 
50.0
%
 
50.0
%

10

                                                      

3. INVENTORY
Inventory consisted of the following:
 
As of
(In millions)
September 30,
2016
 
December 31,
2015
Raw materials
$
9.0

 
$
9.1

Finished goods
9.3

 
10.7

Stores inventory
27.0

 
27.1

Total
$
45.3

 
$
46.9

Less: Stores inventory classified as other non-current assets
(20.7
)
 
(20.5
)
Inventory - current
$
24.6

 
$
26.4

4. DEBT

Long-term debt consisted of the following:
 
As of
(In millions)
September 30,
2016
 
December 31,
2015
Variable Rate Demand Revenue Bonds, principal due October 1, 2018, interest payable monthly, bearing an interest rate of 0.99% at September 30, 2016 and 0.11% December 31, 2015
$
11.4

 
$
11.4

Variable Rate Demand Revenue Bonds, principal due August 1, 2017, interest payable monthly, bearing an interest rate of 0.99% at September 30, 2016 and 0.11% December 31, 2015
8.6

 
8.6

Ciner Wyoming credit facility, unsecured principal expiring on July 18, 2018, variable interest rate was a weighted average of 2.15% at September 30, 2016 and 2.07% at December 31, 2015
79.5

 
90.0

Total debt
$
99.5

 
$
110.0

Current portion of long-term debt
8.6

 

Total long-term debt
$
90.9

 
$
110.0


Aggregate maturities required on long-term debt at September 30, 2016 are due in future years as follows:
(In millions)
Amount
2017
$
8.6

2018
$
90.9

Total
$
99.5

On May 25, 2016, the Partnership entered into a Second Amendment to Credit Agreement, First Amendment to Notes, First Amendment to Security Agreement and First Amendment to Fee Letter (the “Ciner Resources Second Amendment”) with each of the lenders listed on the respective signature pages thereof and Bank of America, N.A., as administrative agent, swing line lender and L/C issuer. The Ciner Resources Second Amendment amends the Credit Agreement, dated as of July 18, 2013, as amended, by and among the Partnership, the lenders party thereto and Bank of America, N.A., as administrative agent, swing line lender and L/C issuer (the “Ciner Resources Credit Agreement”).    
In addition, on May 25, 2016, Ciner Wyoming entered into a Second Amendment to Credit Agreement, First Amendment to Notes and First Amendment to Fee Letter (the “Ciner Wyoming Second Amendment” and, together with the Ciner Resources Second Amendment, collectively, the “Second Amendments”) with each of the lenders listed on the respective signature pages thereof and Bank of America, N.A., as administrative agent, swing line lender and L/C issuer. The Ciner Wyoming Second Amendment amends the Credit Agreement, dated as of July 18, 2013, as amended, by and among Ciner Wyoming, the lenders party thereto and Bank of America, N.A., as administrative agent, swing line lender and L/C issuer (the “Ciner Wyoming Credit Agreement” and, together with the Ciner Resources Credit Agreement, collectively, the “Credit Agreements”).

Among other things, the Second Amendments (i) amend the Credit Agreements by modifying the consolidated fixed charge coverage ratio (the ratio of consolidated cash flow to consolidated fixed charges, each as defined in the Credit Agreements) from not less than 1.15 to 1.00 (for Ciner Wyoming) and not less than 1.10 to 1.00 (for Ciner Resources), prior to the Second Amendments, to be not less than 1.00 to 1.00 (for each Ciner Wyoming and Ciner Resources) as of the end of any fiscal quarter and (ii) prohibits financial institutions from European Economic Area member countries from serving as loan parties under the Credit Agreements.

11

                                                      

5. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consisted of the following:
 
As of
(In millions)
September 30,
2016
 
December 31,
2015
Reclamation reserve
$
5.5

 
$
4.5

Derivative instruments and hedges, fair value liabilities
3.6

 
2.3

Total
$
9.1

 
$
6.8

A reconciliation of the Partnership’s reclamation reserve liability is as follows:
 
For the period ended
(In millions)
September 30,
2016
 
December 31,
2015
Beginning reclamation reserve balance
$
4.5

 
$
4.2

Accretion expense
0.2

 
0.3

Reclamation adjustments (1)
$
0.8

 
$

Ending reclamation reserve balance
$
5.5

 
$
4.5

 
(1) The reclamation adjustments above includes a new asset retirement obligation layer of approximately $1.0 million as of September 30, 2016, as a result of the increase in the self-bond estimate. See Note 9 “Commitments and Contingencies” for additional information.
6. EMPLOYEE COMPENSATION

The Partnership participates in various benefit plans offered and administered by Ciner Corp and is allocated its portions of the annual costs related thereto. As discussed in the 2015 Annual Report, Ciner Enterprise completed a stock purchase transaction, in October 2015, therefore, prior to this transaction the benefit plans were offered and administered by OCI Enterprises Inc. The specific plans are as follows:
Retirement Plans - Benefits provided under the pension plan for salaried employees and pension plan for hourly employees (collectively, the “Retirement Plans”) are based upon years of service and average compensation for the highest 60 consecutive months of the employee’s last 120 months of service, as defined. Each plan covers substantially all full-time employees hired before May 1, 2001. The funding policy is to contribute an amount within the range of the minimum required and the maximum tax-deductible contribution. The Partnership’s allocated portion of the Retirement Plan’s net periodic pension costs were $0.4 million and $2.2 million for the three months ended September 30, 2016 and 2015, respectively, and $1.5 million and $6.6 million for the nine months ended September 30, 2016 and 2015, respectively. The decrease in pension costs during the three and nine months ended September 30, 2016 of $1.8 million and $5.1 million, respectively, was driven by lower overall pension cost at the Ciner Corp level as a result of the retirement plans being fair valued in connection with Ciner Enterprises’ acquisition of Ciner Corp.
Savings Plan - The 401(k) retirement plan (the “401(k) Plan”) covers all eligible hourly and salaried employees. Eligibility is limited to all domestic residents and any foreign expatriates who are in the United States indefinitely. The plan permits employees to contribute specified percentages of their compensation, while the Partnership makes contributions based upon specified percentages of employee contributions. Participants hired on or subsequent to May 1, 2001, will receive an additional contribution from the Partnership based on a percentage of the participant’s base pay. Contributions made to the 401(k) Plan for the three months ended September 30, 2016 and 2015 were $0.5 million and $0.3 million, respectively, and $1.3 million and $1.1 million, for the nine months ended September 30, 2016 and 2015, respectively.
Postretirement Benefits - Most of the Partnership’s employees are eligible for postretirement benefits other than pensions if they reach retirement age while still employed.
The postretirement benefits are accounted for on an accrual basis over an employee’s period of service. The postretirement plan, excluding pensions, are not funded, and Ciner Corp has the right to modify or terminate the plan. The post-retirement benefits had a benefits obligation of $23.1 million and $21.3 million at September 30, 2016 and December 31, 2015, respectively. The Partnership’s allocated portion of postretirement benefit costs were $0.3 million and $0.1 million for the three months ended September 30, 2016 and 2015, respectively, and $1.0 million and $0.4 million for the nine months ended September 30, 2016 and 2015, respectively.

12

                                                      

7. EQUITY - BASED COMPENSATION
We grant various types of equity-based awards to participants, including time restricted unit awards and total return restricted performance unit awards (“TR Performance Unit Awards”). The key terms of our restricted unit awards and TR Performance Unit Awards, including all financial disclosures, are set forth in our Annual Report on Form 10-K for the year ended December 31, 2015.
All employees, officers, consultants and non-employee directors of us and our parents and subsidiaries are eligible to be selected to participate in the Ciner Resource Partners LLC 2013 Long-Term Incentive Plan (the “Plan” or “LTIP”). As of September 30, 2016, subject to further adjustment as provided in the Plan, a total of 0.8 million common units were available for awards under the Plan. Any common units tendered by a participant in payment of the tax liability with respect to an award, including common units withheld from any such award, will not be available for future awards under the Plan. Common units awarded under the Plan may be reserved or made available from our authorized and unissued common units or from common units reacquired (through open market transactions or otherwise). Any common units issued under the Plan through the assumption or substitution of outstanding grants from an acquired company will not reduce the number of common units available for awards under the Plan. If any common units subject to an award under the Plan are forfeited, any common units counted against the number of common units available for issuance pursuant to the Plan with respect to such award will again be available for awards under the Plan.
Non-employee Director Awards
During the nine months ended September 30, 2016, a total of 7,251 common units were granted and fully vested to non-employee directors, and 11,064 were grants during the nine months ended September 30, 2015. The grant date average fair value per unit of these awards was $26.24 and $22.54 for the nine months ended September 30, 2016 and 2015, respectively. The total fair value of these awards were approximately $0.2 million and $0.2 million during the nine months ended September 30, 2016 and 2015, respectively.

Time Restricted Unit Awards
We grant restricted unit awards in the form of common units to certain employees which vest over a specified period of time, usually between one to three years, with vesting based on continued employment as of each applicable vesting date. Award recipients are entitled to distributions subject to the same restrictions as the underlying common unit. The awards are classified as equity awards, and are accounted for at fair value at grant date.
The following table presents a summary of activity on the Time Restricted Unit Awards:
 
Nine Months Ended 
 September 30, 2016
 
Nine Months Ended 
 September 30, 2015
(Units in whole numbers)
Number of Units
 
Grant-Date Average Fair Value per Unit (1)
 
Number of Units
 
Grant-Date Average Fair Value per Unit (1)
Unvested at the beginning of period

 
$

 
15,859

 
$
25.23

Granted
39,170

 
22.50

 
8,347

 
22.51

Vested

 

 
(6,652
)
 
23.70

Unvested at the end of the period
39,170

 
$
22.50

 
17,554

 
$
24.67

 
(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued. No estimated forfeiture rate was applied to the awards as of September 30, 2016, as all awards granted are expected to vest.

13

                                                      

Total Return Performance Unit Awards
We grant TR Performance Unit Awards to certain employees. The TR Performance Unit Awards represent the right to receive a number of common units at a future date based on the achievement of market-based performance requirements in accordance with the TR Unit Performance Award agreement, and also include Distribution Equivalent Rights (“DERs”). DERs are the right to receive an amount equal to the accumulated cash distributions made during the period with respect to each common unit issued upon vesting. The TR Performance Unit Awards vest at the end of the performance period, usually between two to three years from the date of the grant. Performance is measured on the achievement of a specified level of total return, or TR, relative to the TR of a peer group comprised of other limited partnerships. The potential payout ranges from 0-200% of the grant target quantity and is adjusted based on our TR performance relative to the peer group.
We utilized a Monte Carlo simulation model to estimate the grant date fair value of TR Performance Unit Awards, with market conditions, granted to employees. These type of awards require the input of highly subjective assumptions, including expected volatility and expected distribution yield. Historical and implied volatilities were used in estimating the fair value of these awards.
The following table presents a summary of activity on the TR Performance Unit Awards:
 
Nine Months Ended 
 September 30, 2016
 
Nine Months Ended 
 September 30, 2015
(Units in whole numbers)
Number of Units
 
Grant-Date Average Fair Value per Unit (1)
 
Number of Units
 
Grant-Date Average Fair Value per Unit (1)
Unvested at the beginning of period

 
$

 
7,658

 
$
35.72

Granted
5,787

 
43.93

 
7,235

 
24.64

Unvested at the end of the period
5,787

 
$
43.93

 
14,893

 
$
30.34

 
(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.
Unrecognized Compensation Expense
A summary of the Partnership’s unrecognized compensation expense for its un-vested restricted time and performance based units, and the weighted-average periods over which the compensation expense is expected to be recognized are as following:    
 
Nine Months Ended 
 September 30, 2016
 
Nine Months Ended 
 September 30, 2015
 
Unrecognized Compensation Expense
(In millions)
 
Weighted Average to be Recognized
(In years)
 
Unrecognized Compensation Expense
(In millions)
 
Weighted Average to be Recognized
(In years)
Time-based units
$
0.6

 
1.85
 
$
0.3

 
1.74
Performance-based units
0.2

 
2.34
 
0.3

 
1.75
Total
$
0.8

 
 
 
$
0.6

 
 
8. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated Other Comprehensive loss
Accumulated other comprehensive loss, attributable to Ciner Resources, includes unrealized gains and losses on derivative financial instruments. Amounts recorded in accumulated other comprehensive loss as of September 30, 2016 and December 31, 2015, and changes within the period, consisted of the following:
 
 
Gains and Losses on Cash Flow Hedges
 
 
(In millions)
 
 
 
 
Balance at December 31, 2015
 
$
(2.1
)
Other comprehensive loss before reclassification
 
(1.3
)
Amounts reclassified from accumulated other comprehensive loss
 
0.8

Net current period other comprehensive loss
 
(0.5
)
Balance at September 30, 2016
 
$
(2.6
)

14

                                                      

Other Comprehensive Income/(Loss)
Other comprehensive income/(loss), including portion attributable to non-controlling interest, is derived from adjustments to reflect the unrealized gains/(loss) on derivative financial instruments. The components of other comprehensive income/(loss) consisted of the following:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Unrealized gain/(loss) on derivatives:
 
 
 
 
 


 
 
Mark to market adjustment on interest rate swap contracts
 
$
0.5

 
$
(0.5
)
 
$
(0.2
)
 
$
(0.8
)
Mark to market adjustment on natural gas forward contracts
 
(1.8
)
 
(1.8
)
 
(0.7
)
 
(3.1
)
Income/(loss) on derivative financial instruments
 
$
(1.3
)
 
$
(2.3
)
 
$
(0.9
)
 
$
(3.9
)
Reclassifications for the period
The components of other comprehensive income/(loss), attributable to Ciner Resources, that have been reclassified consisted of the following:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
Affected Line Items on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
 
 
 
 
(In millions)
 
2016
 
2015
 
2016
 
2015
 
Details about other comprehensive income/(loss) components:
 
 
 
 
 
 
 
 
 
 
Gains and losses on cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
$
0.1

 
$
0.1

 
$
0.3

 
$
0.4

 
Interest expense
Natural gas forward contracts
 
$
0.1

 
$

 
$
0.5

 
$

 
Cost of products sold
Total reclassifications for the period
 
$
0.2

 
$
0.1

 
$
0.8

 
$
0.4

 
 
9. COMMITMENTS AND CONTINGENCIES
From time to time we are party to various claims and legal proceedings related to our business. Although the outcome of these proceedings cannot be predicted with certainty, management does not currently expect any of the legal proceedings we are involved in to have a material effect on our business, financial condition and results of operations. We cannot predict the nature of any future claims or proceedings, nor the ultimate size or outcome of existing claims and legal proceedings and whether any damages resulting from them will be covered by insurance.
Off-Balance Sheet Arrangements
We have a self-bond agreement with the Wyoming Department of Environmental Quality under which we commit to pay directly for reclamation costs. The amount of the bond was $38.2 million and $33.9 million as of September 30, 2016 and December 31, 2015, respectively, which is the amount we would need to pay the State of Wyoming for reclamation costs if we cease mining operations currently. The amount of this self-bond is subject to change upon periodic re-evaluation by the Land Quality Division.

Ciner Wyoming’s revenue bonds require it to maintain stand-by letters of credit totaling $20.3 million as of September 30, 2016.

15

                                                      

10. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
Ciner Corp is the exclusive sales agent for the Partnership and through its membership in ANSAC, Ciner Corp is responsible for promoting and increasing the use and sale of soda ash and other refined or processed sodium products produced. All actual sales and marketing costs incurred by Ciner Corp are charged directly to the Partnership. Selling, general and administrative expenses also include amounts charged to the Partnership by its affiliates principally consisting of salaries, benefits, office supplies, professional fees, travel, rent and other costs of certain assets used by the Partnership. These transactions do not necessarily represent arm's length transactions and may not represent all costs if the Partnership operated on a stand alone basis. Prior to the closing of Ciner Enterprises’ indirect acquisition of OCI Enterprises Inc.’s (“OCI Enterprises”) approximately 73% limited partner interest in the Partnership, as well as its approximate 2% general partner interest and related incentive distribution rights (the “Transaction”), under the Omnibus Agreement we reimbursed OCI Enterprises and its affiliates for the expenses incurred by them in providing services to us, and we also reimbursed OCI Enterprises for certain direct operating expenses they paid on our behalf. Subsequent to the closing of the Transaction, on October 23, 2015 the Partnership entered into a Services Agreement (the “Services Agreement”), among the Partnership, our general partner and Ciner Corp. Pursuant to the Services Agreement, Ciner Corp has agreed to provide the Partnership with certain corporate, selling, marketing, and general and administrative services, in return for which the Partnership has agreed to pay Ciner Corp an annual management fee and reimburse Ciner Corp for certain third-party costs incurred in connection with providing such services. In addition, under the joint venture agreement governing Ciner Wyoming, Ciner Wyoming reimburses us for employees who operate our assets and for support provided to Ciner Wyoming.
As a result of the Transaction, OCI Enterprises and subsidiaries, including OCI Alabama LLC, are no longer related parties of the Partnership as of the date of the Transaction. The following table includes transactions with OCI Enterprises and subsidiaries prior to the Transaction.
The total costs charged to the Partnership by affiliates were as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions)
2016
 
2015
 
2016
 
2015
OCI Enterprises Inc.
$

 
$
1.9

 
$

 
$
5.9

Ciner Corp
4.1

 
0.6

 
11.5

 
2.7

ANSAC (1)
0.9

 
0.7

 
2.7

 
2.5

Total selling, general and administrative expenses - Affiliates
$
5.0

 
$
3.2

 
$
14.2

 
$
11.1

 
(1) ANSAC allocates its expenses to its members using a pro rata calculation based on sales.
Cost of products sold includes logistics services charged by ANSAC. For the three months ended September 30, 2016 and 2015, these costs were $0.4 million and $3.0 million, respectively, and $1.2 million and $7.3 million for the nine months ended September 30, 2016 and 2015, respectively. The decreases in logistics services charged by ANSAC are largely due to shipping less soda ash tons to Europe during the three and nine months ended 2016 compared to the three and nine months ended 2015.
Net sales to affiliates were as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions)
2016
 
2015
 
2016
 
2015
ANSAC
$
69.9

 
$
63.9

 
$
199.4

 
$
190.3

OCI Alabama LLC

 
1.3

 

 
3.9

Total
$
69.9

 
$
65.2

 
$
199.4

 
$
194.2













16

                                                      

The Partnership had due from/to with affiliates as follows:
 
As of
(In millions)
September 30,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
 
Due from affiliates
 
Due to affiliates
Ciner Enterprises
$

 
$

 
$
0.3

 
$

Ciner Corp
4.7

 
7.1

 
2.1

 
1.9

Ciner Resources Europe NV
1.6

 
4.8

 

 

Other

 

 
0.8

 
2.7

Total
$
6.3

 
$
11.9

 
$
3.2

 
$
4.6

11. MAJOR CUSTOMERS AND SEGMENT REPORTING
Our operations are similar in geography, nature of products we provide, and type of customers we serve. As the Partnership earns substantially all of its revenues through the sale of soda ash mined at a single location, we have concluded that we have one operating segment for reporting purposes.
The net sales by geographic area are as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(In millions)
2016
 
2015
 
2016
 
2015
Domestic
$
48.4

 
$
47.2

 
$
144.3

 
$
145.6

International
 
 
 
 
 
 
 
ANSAC
69.9

 
63.9

 
199.4

 
190.3

Other
2.7

 
6.2

 
8.4

 
24.1

Total international
72.6

 
70.1

 
207.8

 
214.4

Total net sales
$
121.0

 
$
117.3

 
$
352.1

 
$
360.0

12. FAIR VALUE MEASUREMENTS
The Partnership measures certain financial and non-financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs.
A three-level valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
Ÿ
Level 1-inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.
 
 
Ÿ
Level 2-inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.
 
 
Ÿ
Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.
    
Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value because of the nature of such instruments. Our derivative financial instruments are measured at their fair value with Level 2 inputs based on quoted market values for similar but not identical financial instruments.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Derivative Financial Instruments    
We have entered into interest rate swap contracts, designated as cash flow hedges, to mitigate our exposure to possible increases in interest rates. These contracts are for periods consistent with the exposure being hedged and will mature on July 18, 2018, the

17

                                                      

maturity date of the long-term debt under the Ciner Wyoming credit facility. These contracts had an aggregate notional value of $72.5 million and $74.0 million at September 30, 2016 and December 31, 2015, respectively.
We enter into natural gas forward contracts, designated as cash flow hedges, to mitigate volatility in the price of natural gas related to a portion of the natural gas we consume. These contracts generally have various maturities through 2021. These contracts had an aggregate notional value of $27.9 million and $15.8 million at September 30, 2016 and December 31, 2015, respectively.
In January 2016, we entered into foreign exchange forward contracts, designated as cash flow hedges. In December 31, 2015, we also had foreign exchange forward contracts, not designated as hedging instruments. These forward contracts were entered into to reduce exposure from certain firm commitments denominated in currencies other than the U.S. dollar. These contracts are for periods consistent with the underlying currency exposure and generally have maturities of one year or less. The forward contracts are predominantly used to purchase U.S. dollars and sell Euros. The forward contracts designated as cash flow hedges had an aggregate notional value of $1.2 million at September 30, 2016. We had no similar contracts outstanding as of December 31, 2015. The forward contracts not designated as hedging instruments had an aggregate notional value of $4.2 million at December 31, 2015. We had no similar foreign exchange forward contracts that were not designated as hedging instruments outstanding as of September 30, 2016.

The following table presents the fair value of derivative assets and liability derivatives and the respective balance sheet locations as of:
 
Assets
 
Liabilities
 
September 30,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
(In millions)
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap contracts - current
 
 
$

 
 
 
$

 
Accrued Expenses
 
$
1.0

 
Accrued Expenses
 
$
0.8

Natural gas forward contracts - current
 
 

 
 
 

 
Accrued Expenses
 
0.5

 
Accrued Expenses
 
1.0

Natural gas forward contracts - non-current
 
 

 
 
 

 
Other non-current liabilities
 
3.6

 
Other non-current liabilities
 
2.3

Total derivatives designated as hedging instruments
 
 
$

 
 
 
$

 
 
 
$
5.1

 
 
 
$
4.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
 
$

 
Other current assets
 
$
0.1

 
 
 
$

 
 
 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives not designated as hedging instruments
 
 
$

 
 
 
$
0.1

 
 
 
$

 
 
 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives
 
 
$

 
 
 
$
0.1

 
 
 
$
5.1

 
 
 
$
4.1

Financial Assets and Liabilities not Measured at Fair Value
The carrying value of our long-term debt materially reflects the fair value of our long-term debt as its key terms are similar to indebtedness with similar amounts, durations and credit risks. See Note 4 “Debt” for additional information on our debt arrangements.
13. SUBSEQUENT EVENTS
Distribution Declaration

On October 17, 2016, the members of the Board of Managers of Ciner Wyoming LLC, approved a cash distribution to the members of Ciner Wyoming in the aggregate amount of $25.0 million. This distribution is payable on November 4, 2016.

On October 17, 2016, the Partnership declared a cash distribution approved by the board of directors of its general partner. The cash distribution for the third quarter of 2016 of $0.5670 per unit will be paid on November 11, 2016 to unitholders of record on October 28, 2016. The conversion of subordinated units to common units will also occur upon payment of this quarterly cash distribution.

18

                                                      

End of Subordination Period
On, October 17, 2016, the board of directors of our general partner confirmed and approved that, upon payment of the quarterly distribution for the third quarter of 2016, the conditions for conversion of the Partnership’s subordinated units will be satisfied. As such, upon such payment, effective November 14, 2016, the subordination period will end and all 9,775,500 subordinated units will convert on a one-for-one basis into common units.
 

19

                                                      

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following management's discussion and analysis of financial condition and results of operations in conjunction with the historical unaudited condensed consolidated financial statements, and notes thereto, included elsewhere in this Report.
Cautionary Statements Regarding Forward-Looking Statements
This Report contains forward-looking statements relating to the financial condition, results of operations, plans, objectives, future performance and business of the Partnership. We have based such forward-looking statements on management’s beliefs and assumptions and on information currently available to us. Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “forecast,” “potential,” “continue,” “may,” “will,” “should” or the negative of these terms or similar expressions. In particular, forward-looking statements in this Report include statements concerning future distributions, if any, and such distributions are subject to the approval of the board of directors of our general partner and will be based upon circumstances then existing. You are cautioned not to place undue reliance on any forward-looking statements. Actual results may vary materially. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements and, therefore, affect our ability to distribute cash to unitholders, include:
 
changes in general economic conditions in the United States and globally;
changes in our relationships with our customers or the loss of or adverse developments at major customers, including the American Natural Soda Ash Corporation, or ANSAC;
the demand for soda ash and the development of glass and glass making products alternatives;
changes in soda ash prices;
changes in demand for glass in the construction, automotive and beverage industries;
shifts in glass production from the United States to international locations;
the ability of our competitors to develop more efficient mining and processing techniques;
operating hazards and other risks incidental to the mining, processing and shipment of trona ore and soda ash;
natural disasters, weather-related delays, casualty losses and other matters beyond our control;
increases in electricity and natural gas prices paid by us;
inability to renew our mineral leases and license or material changes in lease or license royalties;
disruption in railroad or shipping services or increases in rail, vessel and other transportation costs;
deterioration in our labor relations;
large customer defaults;
the price and availability of debt and equity financing;
changes in interest rates;
foreign exchange rate risks, including, but not limited to, advantageous foreign exchange rates utilized by our foreign competitors in the sale of soda ash;
changes in the availability and cost of capital;
our lack of asset and geographic diversification, including reliance on a single facility for conducting our operations;
our reliance on insurance policies that may not fully cover an accident or event that causes significant damage to our facility or causes extended business interruption;
anticipated operating and recovery rates at our facility;
shutdowns (either temporary or permanent), including, without limitation, the timing and length of planned maintenance outages;
increased competition and supply from international soda ash producers, especially in China and Turkey;
risks related to the use of technology and cybersecurity;
potential increases in costs and distraction resulting from the requirements of being a publicly traded partnership;
exemptions we rely on in connection with NYSE corporate governance requirements;
risks related to our internal control over financial reporting and our disclosure controls and procedures;
risks relating to our relationships with Ciner Enterprises or its affiliates (including, but not limited to, Ciner Group in Turkey);
control of our general partner by Ciner Enterprises or its affiliates (including, but not limited to, Ciner Group in Turkey);

20

                                                      

the conflicts of interest faced by our senior management team, which operates both us and our general partner and are employed by Ciner Corp or its other affiliates;
limitations on the fiduciary duties owed by our general partner to us and our limited partners which are included in the partnership agreement;
changes in our treatment as a partnership for U.S. federal income or state tax purposes; and
the effects of existing and future laws and governmental regulations.
These factors should not be construed as exhaustive and we urge you to carefully consider the risks described in this Report, our most recent Form 10-K, and subsequent reports filed with the Securities and Exchange Commission (the "SEC"). You may obtain these reports from the SEC’s website at www.sec.gov. All forward-looking statements included in this Report are expressly qualified in their entirety by these cautionary statements. Unless required by law, we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.      
References
References in this Quarterly Report on Form 10-Q (“Report”) to the “Partnership,” “CINR,” “Ciner Resources,” “we,” “our,” “us,” or like terms refer to Ciner Resources LP and its subsidiary. References to “Ciner Wyoming” refer to Ciner Wyoming LLC, the consolidated subsidiary of the Partnership. References to “our general partner” or “Ciner GP” refer to Ciner Resource Partners LLC, the general partner of Ciner Resources LP and a direct wholly-owned subsidiary of Ciner Wyoming Holding Co. (“Ciner Holdings”), which is a direct wholly-owned subsidiary of Ciner Resources Corporation (“Ciner Corp”). Ciner Corp is a direct wholly-owned subsidiary of Ciner Enterprises Inc. (“Ciner Enterprises”), which is directly owned by Akkan Enerji ve Madencilik Anonim Şirketi (“Akkan”), which in turn is directly wholly-owned by Turgay Ciner, the Chairman of the Ciner Group (“Ciner Group”), a Turkish conglomerate of companies engaged in energy and mining (including soda ash mining), media and shipping markets.        
Overview
We are a Delaware limited partnership formed by Ciner Holdings to own a 51.0% membership interest in, and to operate the trona ore mining and soda ash production business of, Ciner Wyoming. Ciner Wyoming is currently one of the world’s largest producers of soda ash, serving a global market from its facility in the Green River Basin of Wyoming. Our facility has been in operation for more than 50 years.
NRP Trona LLC, a wholly-owned subsidiary of Natural Resource Partners L.P. (“NRP”) currently owns an indirect 49.0% membership interest in Ciner Wyoming.
On October 23, 2015, Ciner Enterprises acquired 100% of OCI Chemical Corporation in a stock purchase transaction from OCI Enterprises Inc. (“OCI Enterprises”) (the “Transaction”). OCI Chemical Corporation was subsequently renamed Ciner Resources Corporation. Ciner Corp owns indirectly the Partnership, through Ciner Holdings’, approximately 73% limited partner interest, and approximately 2% general partner interest and 100% of the related incentive distribution rights currently held by our general partner. As a result of the closing of the Transaction, OCI Enterprises no longer has any direct or indirect ownership interest in the Partnership or our general partner. On November 5, 2015, in connection with the closing of the Transaction, the Partnership changed its name from OCI Resources LP to Ciner Resources LP.
Factors Affecting Our Results of Operations
Soda Ash Supply and Demand
Our net sales, earnings and cash flow from operations are primarily affected by the global supply of, and demand for soda ash, which, in turn, directly impacts the prices we and other producers charge for our products.
Demand for soda ash in the United States is driven in large part by general economic growth and activity levels in the end-markets that the glass-making industry serve, such as the automotive and construction industries. Because the United States is a well-developed market, we expect that domestic demand levels will remain stable for the near future. Because future U.S. capacity growth is expected to come from the four major producers in the Green River Basin, we also expect that U.S. supply levels will remain relatively stable in the near term.
Soda ash demand in international markets has continued to grow, although the rate of growth has slowed recently due to sluggish economic growth in emerging markets. We expect that future global economic growth will positively influence global demand, which will likely result in increased exports, primarily from the United States, and to a limited extent, from China, the two largest suppliers of soda ash to international markets.
Sales Mix
Because demand for soda ash in the United States has remained relatively stable in recent years, we have focused on international markets to expand our business, and we expect to continue to do so in the near future. As a result, our operations have

21

                                                      

been and continue to be sensitive to fluctuations in freight and shipping costs and changes in international prices, which have historically been more volatile than domestic prices. Our gross profit will be impacted by the mix of domestic and international sales as a result of changes in input costs and our average selling prices.
Energy Costs
One of the primary impacts to our profitability is our energy costs. Because we depend upon natural gas and electricity to power our trona ore mining and soda ash processing operations, our net sales, earnings and cash flow from operations are sensitive to changes in the prices we pay for these energy sources. Our cost of energy, particularly natural gas, has been relatively low in recent years, and, despite the historic volatility of natural gas prices, we believe that we will continue to benefit from relatively low prices in the near future. However, we expect to continue to hedge a portion of our forecasted natural gas purchases to mitigate volatility.
How We Evaluate Our Business
Productivity of Operations
Our soda ash production volume is primarily dependent on the following three factors: (1) operating rate, (2) quality of our mined trona ore and (3) recovery rates. Operating rate is a measure of utilization of the effective production capacity of our facilities and is determined in large part by productivity rates and mechanical on-stream times, which is the percentage of actual run times over the total time scheduled. We implement two planned outages of our mining and surface operations each year, typically in the second and third quarters. During these outages, which last approximately one week, we repair and replace equipment and parts. Periodically, we may experience minor unplanned outages caused by various factors, including equipment failures, power outages or service interruptions. The quality of our mine ore is determined by measuring the trona ore recovered as a percentage of the deposit, which includes both trona ore and insolubles. Plant recovery rates are generally determined by calculating the soda ash produced divided by the sum of the soda ash produced plus soda ash that is not recovered from the process. All of these factors determine the amount of trona ore we require to produce one short ton of soda ash and liquor, which we refer to as our “ore to ash ratio.” Our ore to ash ratio was 1.48: 1.0 for both the three and nine months ended September 30, 2016, respectively, and 1.51: 1.0 for both the three and nine months ended September 30, 2015.
Freight and Logistics
The soda ash industry is logistics intensive and involves careful management of freight and logistics costs. These freight costs make up a large portion of the total delivered cost to the customer. Union Pacific is our largest provider of domestic rail freight services and accounted for 87.5% and 83.3% of our total freight costs during the three months ended September 30, 2016 and 2015, respectively, and 84.9% and 79.1% of our total freight costs during the nine months ended September 30, 2016 and 2015, respectively. Our agreement with Union Pacific generally requires that the freight rate we are charged be increased annually based on a published index tied to certain rail industry metrics. We generally pass on to our customers increases in our freight costs but we may be unsuccessful in doing so.
Net Sales
Net sales include the amounts we earn on sales of soda ash. We recognize revenue from our sales when there is persuasive evidence of an arrangement between us and the customer, products have been delivered to the customer, selling price is fixed, determinable or reasonably estimated and collection is reasonably assured. Substantially all of our sales are derived from sales of soda ash, which we sell through our exclusive sales agent, Ciner Corp. A small amount of our sales is derived from sales of production purge, which is a by-product liquor solution containing soda ash that is produced during the processing of trona ore. For the purposes of our discussion below, we include these transactions in domestic sales of soda ash and in the volume of domestic soda ash sold.
Sales prices for sales through ANSAC include the cost of freight to the ports of embarkation for overseas export or to Laredo, Texas for sales to Mexico. Sales prices for other international sales may include the cost of rail freight to the port of embarkation, the cost of ocean freight to the port of disembarkation for import by the customer and the cost of inland freight required for delivery to the customer.
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.
Employee Compensation. See Part I, Item 1. Financial Statements - Note 6, “Employee Compensation” for information on the various plans.
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

22

                                                      

Henry Hub natural gas settlement prices, over the past five years, have ranged between $1.73 and $6.00 per MMBtu. The monthly Henry Hub natural gas settlement prices as of September 30, 2016 and 2015 were $2.99 and $2.66 per MMBtu, respectively. In order to mitigate the risk of gas price fluctuations, we hedge a portion of our forecasted natural gas purchases by entering into physical or financial gas hedges generally ranging between 20% and 80% of our expected monthly gas requirements, on a sliding scale, for approximately the next five years.
Royalties.    We pay royalties to the State of Wyoming, the U.S. Bureau of Land Management and Rock Springs Royalty Company (“Rock Springs”), an affiliate of Anadarko Petroleum, which are calculated based upon a percentage of the quantity or gross value of soda ash and related products at a certain stage in the mining process, or a certain sum per each ton of such products. These royalty payments are typically subject to a minimum domestic production volume from our Green River Basin facility, although we are obligated to pay minimum royalties or annual rentals to our lessors and licensor regardless of actual sales. We also pay a production tax to Sweetwater County, and trona severance tax to the State of Wyoming that is calculated based on a formula that utilizes the volume of trona ore mined and the value of the soda ash produced.
The royalty rates we pay to our lessors and licensor may change upon our renewal of such leases and license. Under our license with Rock Springs, the applicable royalty rate may vary based on a most favored nation clause in the license. The applicable royalty rate in the license may be adjusted if we pay a higher royalty rate to certain other mineral rights owners in Sweetwater County, Wyoming. The extent to which Rock Springs may increase the applicable royalty rate is currently the subject of litigation in Wyoming. Any increase in the royalty rates we are required to pay to our lessors and licensor, or any failure by us to renew any of our leases and license, could have a material adverse impact on our results of operations, financial condition or liquidity, and, therefore, may affect our ability to distribute cash to unitholders. See Part II, Item 1. “Legal Proceedings” for additional information.
Selling, general and administrative expenses
Selling, general and administrative expenses incurred by our affiliates on our behalf are allocated to us based on the time the employees of those companies spend on our business and the actual direct costs they incur on our behalf. Selling, general and administrative expenses incurred by ANSAC on our behalf are allocated to us based on the proportion of ANSAC’s total volumes sold for a given period attributable to the soda ash sold by us to ANSAC. Prior to the closing of the Transaction on October 23, 2015, under the Omnibus Agreement we reimbursed OCI Enterprises and its affiliates for the expenses incurred by them in providing services to us, and we also reimbursed OCI Enterprises for certain direct operating expenses they paid on our behalf. Subsequent to the closing of the Transaction, on October 23, 2015 the Partnership entered into a Services Agreement (the “Services Agreement”), among the Partnership, our general partner and Ciner Corp. Pursuant to the Services Agreement, Ciner Corp has agreed to provide the Partnership with certain corporate, selling, marketing, and general and administrative services, in return for which the Partnership has agreed to pay Ciner Corp an annual management fee, subject to quarterly adjustments, and reimburse Ciner Corp for certain third-party costs incurred in connection with providing such services. In addition, under the joint venture agreement governing Ciner Wyoming, Ciner Wyoming reimburses us for employees who operate our assets and for support provided to Ciner Wyoming.
Third Quarter 2016 Financial Highlights:

Net sales of $121.0 million increased 3.2% over the prior-year third quarter; year-to-date net sales of $352.1 million decreased 2.2% over the prior-year.

Net income of $23.1 million decreased 14.1% over the prior-year third quarter; year-to-date net income of $65.9 million decreased 15.4% over the prior-year.

Adjusted EBITDA of $30.6 million decreased 8.9% over the prior-year third quarter; year-to-date adjusted EBITDA of $87.9 million decreased 10.4% over the prior-year.

Earnings per unit of $0.56 for the quarter decreased 13.8% over the prior-year third quarter of $0.65; year-to-date of $1.58 decreased 16.0% over the prior-year.

Quarterly distribution declared per unit of $0.567 increased by 2.9% over the prior-year third quarter;

Net cash provided by operating activities of $37.8 million decreased 8.7% over prior-year third quarter; year-to-date net cash provided by operating activities of $103.9 million increased by 1.0% over the prior-year.

Distributable cash flow of $13.4 million remained flat over the prior-year third quarter; year-to-date distributable cash flow of $39.0 million decreased by 0.3% over the prior-year. The distribution coverage ratio was 1.18 and 1.15 for the three and nine months months ended September 30, 2016, respectively.

23

                                                      

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 table sets forth our results of operations for the three and nine months ended September 30, 2016 and 2015:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
(In millions; except for operating and other data section)
 
 
 
 
 
 
 
Net sales
$
121.0

 
$
117.3

 
$
352.1

 
$
360.0

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold
83.9

 
79.2

 
245.8

 
247.2

Depreciation, depletion and amortization expense
6.6

 
5.7

 
19.3

 
17.1

Selling, general and administrative expenses
6.3

 
4.5

 
18.1

 
14.1

Loss on disposal of assets, net
0.2

 

 
0.2

 

Total operating costs and expenses
97.0

 
89.4

 
283.4

 
278.4

Operating income
24.0

 
27.9

 
68.7

 
81.6

Total other income/(expense), net
(0.9
)
 
(1.0
)
 
(2.8
)
 
(3.7
)
Net income
$
23.1

 
$
26.9

 
$
65.9

 
$
77.9

Net income attributable to non-controlling interest
12.0

 
13.8

 
34.3

 
40.3

Net income attributable to Ciner Resources LP
$
11.1

 
$
13.1

 
$
31.6

 
$
37.6

 
 
 
 
 
 
 
 
Operating and Other Data:
 
 
 
 
 
 
 
Trona ore consumed (thousands of short tons)
1,019.4

 
991.1

 
2,993.9

 
2,988.2

Ore to ash ratio(1)
1.48: 1.0

 
1.51: 1.0

 
1.48: 1.0

 
1.51: 1.0

Soda ash volume produced (thousands of short tons)
690.1

 
655.5

 
2,021.1

 
1,983.7

Soda ash volume sold (thousands of short tons)
696.6

 
637.6

 
2,033.3

 
1,951.0

Adjusted EBITDA(2)
$
30.6

 
$
33.6

 
$
87.9

 
$
98.1

 
(1)
Ore to ash ratio expresses the number of short tons of trona ore needed to produce one short ton of soda ash and liquor and includes our deca rehydration recovery process. In general, a lower ore to ash ratio results in lower costs and improved efficiency.
(2)
For a discussion of the non-GAAP financial measure Adjusted EBITDA, please read “Non-GAAP Financial Measures” of this Management’s Discussion and Analysis.


24

                                                      

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.
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
Percent Increase/(Decrease)
 
 
2016
 
2015
 
2016
 
2015
 
QTD
 
YTD
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales ($ in millions):
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
$
48.4

 
$
47.2

 
$
144.3

 
$
145.6

 
2.5%
 
(0.9)%
International
 
72.6

 
70.1

 
207.8

 
214.4

 
3.6%
 
(3.1)%
Total net sales
 
$
121.0

 
$
117.3

 
$
352.1

 
$
360.0

 
3.2%
 
(2.2)%
Sales volumes (thousands of short tons):
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
222.7

 
208.5

 
665.4

 
637.5

 
6.8%
 
4.4%
International
 
473.9

 
429.1

 
1,367.9

 
1,313.5

 
10.4%
 
4.1%
Total soda ash volume sold
 
696.6

 
637.6

 
2,033.3

 
1,951.0

 
9.3%
 
4.2%
Average sales price (per short ton):
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
$
217.12

 
$
226.36

 
$
216.82

 
$
228.31

 
(4.1)%
 
(5.0)%
International
 
$
153.29

 
$
163.49

 
$
151.91

 
$
163.24

 
(6.2)%
 
(6.9)%
Average
 
$
173.70

 
$
184.05

 
$
173.16

 
$
184.50

 
(5.6)%
 
(6.1)%
Percent of net sales:
 
 
 
 
 
 
 
 
 
 
 
 
Domestic sales
 
40.0
%
 
40.2
%
 
41.0
%
 
40.4
%
 
(0.5)%
 
1.5%
International sales
 
60.0
%
 
59.8
%
 
59.0
%
 
59.6
%
 
0.3%
 
(1.0)%
Total percent of net sales
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Three Months Ended September 30, 2016 compared to Three Months Ended September 30, 2015
Consolidated Results
Net sales. Net sales increased by 3.2% to $121.0 million for the three months ended September 30, 2016 from $117.3 million for the three months ended September 30, 2015, driven by an increase in soda ash volumes sold of 9.3%, partly offset by a decrease in total average sales price of 5.6%.
Domestic average sales price declined 4.1% in the three months ended September 30, 2016, mostly due to freight. Our efforts to increase our domestic market share also resulted in soda ash prices slightly below 2015 levels.
International average sales price declined 6.2% in the three months ended September 30, 2016. Our international sales includes both ANSAC and customers in Europe and South Africa. We made a decision to scale back our sales volume into Europe in 2016 due to unfavorable exchange rates, as our net profit from both ANSAC and domestic volumes are higher. The mix shift from Europe to additional ANSAC volume results in lower international prices as the Europe price includes freight all the way to the customer’s location.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense, increased by 6.6% to $90.5 million for the three months ended September 30, 2016 from $84.9 million for the three months ended September 30, 2015, primarily as a result of the following:
an increase in royalty costs of 36.2% to $6.4 million for the three months ended September 30, 2016, compared to $4.7 million for the three months ended September 30, 2015, due primarily to increased royalty rates beginning in fourth quarter 2015 for both federal leases and license with Rock Springs. The federal royalty rate increased to 6% from 4% as a result of the Helium Stewardship Act of 2013 expiring in September 2015 and the royalty rate for the license with Rock Springs increased to 8% from 7%;
an increase in freight costs of 5.0% to $29.5 million for the three months ended September 30, 2016, compared to $28.1 million for the three months ended September 30, 2015, due primarily to the increase soda ash volumes sold during the three months ended September 30, 2016, compared to the three months ended September 30, 2015; and
an increase in materials costs of 37.1% to $4.8 million for the three months ended September 30, 2016, compared to $3.5 million for the three months ended September 30, 2015, due primarily to the 9.3% increase in soda ash volumes sold during the third quarter 2016 compared to third quarter 2015.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased 40.0% to $6.3 million for the three months ended September 30, 2016, compared to $4.5 million for the three months ended September 30, 2015, primarily

25

                                                      

due to a higher proportion of employee time spent on OCI Enterprises related activities in 2015, and as a result, these selling, general and administrative expenses were charged to non CINR consolidated entities.
Operating income.   As a result of the foregoing, operating income decreased by 14.0% to $24.0 million for the three months ended September 30, 2016, compared to $27.9 million for the three months ended September 30, 2015.
Net income.    As a result of the foregoing, net income decreased by 14.1% to $23.1 million for the three months ended September 30, 2016, compared to $26.9 million for the three months ended September 30, 2015.

Nine Months Ended September 30, 2016 compared to Nine Months Ended September 30, 2015
Consolidated Results
Net sales. Net sales decreased by 2.2% to $352.1 million for the nine months ended September 30, 2016 from $360.0 million for the nine months ended September 30, 2015, driven by a decrease in total average sales price of 6.1%, slightly offset by an increase in soda volumes sold of 4.2%.
Domestic average sales price declined 5.0% in the nine months ended September 30, 2016, mostly due to freight. Our efforts to increase our domestic market share also resulted in soda ash prices slightly below 2015 levels.
International average sales price declined 6.9% in the nine months ended September 30, 2016. Our international sales includes both ANSAC and customers in Europe and South Africa. We made a decision to scale back our sales volume into Europe in 2016 due to unfavorable exchange rates, as our net profit from both ANSAC and domestic volumes are higher. The mix shift from Europe to additional ANSAC volume results in lower international prices as the Europe price includes freight all the way to the customer’s location.
Cost of products sold. Cost of products sold, including depreciation, depletion and amortization expense, increased by 0.3% to $265.1 million for the nine months ended September 30, 2016 from $264.3 million for the nine months ended September 30, 2015, primarily consisting of the following:
an increase in royalty costs of 25.7% to $19.1 million for the nine months ended September 30, 2016, compared to $15.2 million for the nine months ended September 30, 2015, due primarily to increased royalty rates beginning in fourth quarter 2015 for both federal leases and license with Rock Springs. The federal royalty rate increased to 6% from 4% as a result of the Helium Stewardship Act of 2013 expiring in September 2015 and the royalty rate for the license with Rock Springs increased to 8% from 7%; and
an increase in materials costs of 28.0% to $13.7 million for the nine months ended September 30, 2016, compared to $10.7 million for the nine months ended September 30, 2015, due primarily to the 4.2% increase in soda ash volumes sold during the nine months ended September 30, 2016 compared the nine months ended September 30, 2015; partly offset by
a decrease in freight costs of 4.5% to $86.8 million for the nine months ended September 30, 2016, compared to $90.9 million for the nine months ended September 30, 2015,