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Natural Resource Partners L.P. Reports Third Quarter 2003 Net Income of $0.44 Per Unit

11/05/2003

Highlights:

  • Net Income of $10.1 million or $0.44 per unit
  • EBITDA of $19.4 million
  • Recently announced increase in quarterly distribution to $0.5375 per unit

HOUSTON, Nov. 5 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported net income of $10.1 million or $0.44 per unit for the third quarter ended September 30, 2003. Earnings before interest, taxes, depletion and amortization (EBITDA) were $19.4 million.

NRP reported net income of $28.3 million or $1.22 per unit for the nine month period ended September 30, 2003. EBITDA for the same nine month period was $51.2 million.

Third Quarter 2003

Third quarter 2003 sales by NRP's lessees generated $20.8 million in coal royalty revenues based on sales volumes of 12.2 million tons, for an average coal royalty revenue of $1.71 per ton. This compares to $12.7 million in coal royalty revenues based on production of 7.9 million tons, for an average coal royalty revenue of $1.62 per ton for the same three month period of 2002. The 64% increase in coal royalty revenue is due mainly to the 54% increase in production with a $0.09 per ton increase in the coal royalty rate. Acquisitions completed during the last year account for $8.1 million of the increase in coal royalty revenues and 4.6 million tons of the increase in production.

"Our lessees generally performed as expected. However, some of our lessees opted to curtail production and sales this quarter in anticipation of higher sales prices of coal in the near future. The benefit of our July acquisition of PinnOak Resources was offset this quarter by traditionally weaker production and sales volumes by our lessees due to miners' vacations and milder weather," said Nick Carter, President and Chief Operating Officer. "Additionally, the previously announced disruption in production at the Pinnacle Mine will affect NRP's fourth quarter income. Pinnacle continued to ship throughout all but the last week of the third quarter from inventory, but it is too early to determine the impact of the disruption on the fourth quarter. If Pinnacle does not sell any coal from the mine in the fourth quarter it would result in a loss of approximately $1.6 million in coal royalty revenue. Pinnacle is working diligently with both federal and state agencies, as well as its employees' union, to get the mine safely back in production as soon as possible."

Year to Date

For the nine months ended September 30, NRP's lessees sold 33.4 million tons of coal, up 55% from the same period last year. This production generated an approximate 57% increase in coal royalty revenue, or $55.4 million. This increase is primarily due to the acquisitions NRP completed during the last year.

2003 Outlook

Due to the currently idled Pinnacle Mine, NRP is slightly revising its guidance for 2003. NRP currently anticipates that net income will be between $36 and $38 million.

Distributions

NRP recently announced an increase of $0.015 to its quarterly distribution, which is now $0.5375 per unit, or $2.15 per unit on an annualized basis. This was the second distribution increase in 2003 and equates to a 5% increase in NRP's annualized distributions since going public a year ago.

Disclosure of Non-GAAP Financial Measures

NRP calculates EBITDA by adding depletion, amortization and interest expense to net income. EBITDA is not defined under generally accepted accounting principles (GAAP) and is not intended to be used in lieu of GAAP presentations of results of operations or cash provided by operating activities. EBITDA is presented because management believes it provides additional information with respect to both the performance of our fundamental business activities as well as our ability to meet our future debt service, working capital requirements and minimum distributions. Management also believes that debt holders and investment analysts commonly use EBITDA to analyze company performance. A reconciliation of EBITDA to net income as well as net cash provided by operating activities is included in the tables attached to this release.

Natural Resource Partners L.P., headquartered in Houston, TX, is a master limited partnership principally engaged in the business of owning and managing coal properties in the three major coal-producing regions of the United States: Appalachia, the Illinois Basin and the Western United States. For further information, please visit the partnership's website at www.nrplp.com .

This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements include those concerning the 2003 Outlook and the status of the Pinnacle Mine. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the company based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. These risks include, but are not limited to, decreases in demand for coal; changes in operating conditions and costs; production cuts by our lessees; commodity prices; unanticipated geologic problems; changes in the legislative or regulatory environment and other factors detailed in the Partnership's Securities and Exchange Commission filings.

-Financials follow-

                          NATURAL RESOURCE PARTNERS L.P.
                               Operating Statistics
                       (In thousands, except per ton data)
                                   (unaudited)

                                   Three Months Ended      Nine Months Ended
                                      September 30,           September 30,
                                    2003        2002        2003        2002
    Coal royalty revenues:
        Appalachia                $18,247     $10,333     $47,846     $28,859
        Illinois Basin                938         818       2,773       2,102
        Northern Powder River
         Basin                      1,611       1,555       4,774       4,214

      Total                       $20,796     $12,706     $55,393     $35,175

    Sales volumes (tons):
        Appalachia                 10,081       5,730      27,041      16,065
        Illinois Basin                818         678       2,368       1,696
        Northern Powder River
         Basin                      1,292       1,454       3,976       3,836

      Total                        12,191       7,862      33,385      21,597

    Average royalty revenue per ton:
        Appalachia                  $1.81       $1.80       $1.77       $1.80
        Illinois Basin               1.15        1.21        1.17        1.24
        Northern Powder River Basin  1.25        1.07        1.20        1.10

      Total                         $1.71       $1.62       $1.66       $1.63


                          NATURAL RESOURCE PARTNERS L.P.
                          Condensed Statement of Income
                     (In thousands, except per unit amounts)
                                   (unaudited)

                                             Three Months   Nine Months
                                                Ended          Ended
                                              Sept. 30,      Sept. 30,
                                                 2003           2003
    Revenues:
       Coal royalties                          $20,796        $55,393
       Minimums recognized as revenue              347          1,606
       Override royalties                          152            813
       Other                                     2,244          5,636
               Total revenues                   23,539         63,448

    Operating costs and expenses:
       Depletion and amortization                6,848         19,021
       General administrative and other          2,197          6,504
       Taxes other than income                   1,676          4,257
       Royalty payments                            263            962
               Total operating costs and
                expenses                        10,984         30,744
    Operating income                            12,555         32,704
    Other income (expense)
      Interest expense                          (2,499)        (4,096)
      Interest income                               56            159
      Loss from interest rate hedge                ---           (499)
    Net income                                 $10,112        $28,268

    Net income attributable to general partner    $202           $565
    Net income attributable to limited partners $9,910        $27,703
    Basic and diluted net income per limited
     partner unit
    Common                                       $0.44          $1.22
    Subordinated                                 $0.44          $1.22
    Weighted average number of units
     outstanding:
    Common                                      11,354         11,354
    Subordinated                                11,354         11,354


                          NATURAL RESOURCE PARTNERS L.P.
                             Statement of Cash Flows
                                  (In thousands)
                                   (unaudited)


                                             Three Months   Nine Months
                                                Ended         Ended
                                               Sept. 30,     Sept. 30,
                                                 2003          2003

    Cash flows from operating activities:
        Net income                             $10,112        $28,268
        Adjustments to reconcile net income
         to net cash provided by operating
         activities:
              Depletion and amortization         6,848         19,021
              Non-cash interest charge              13             14
        Change in operating assets and
         liabilities:
              Accounts receivable                 (548)        (1,105)
              Other assets                         112         (2,068)
              Accounts payable and accrued
               liabilities                       4,060          3,236
              Deferred revenue                     (24)          (241)
              Long term incentive plan             (95)           703
              Property and franchise taxes
               payable                            (671)          (580)
                  Net cash provided by
                   operating activities         19,807         47,248

        Cash flows from investing activities:
             Acquisition of property           (58,045)      (123,709)
             Cash held in escrow                58,000            ---
                  Net cash used in investing
                   activities                      (45)      (123,709)

        Cash flows from financing activities:
             Proceeds from loans                50,000        298,100
             Repayment of loans                (50,000)      (172,600)
             Distributions to partners         (12,106)       (34,024)
             Other comprehensive loss              ---           (931)
                  Net cash provided by
                   financing activities        (12,106)        90,545
        Net increase in cash                     7,656         14,084
        Cash at beginning of period             14,181          7,753
        Cash at end of period                  $21,837        $21,837

        SUPPLEMENTAL INFORMATION:
           Cash paid during the period
            for interest                          $337         $1,753


                          NATURAL RESOURCE PARTNERS L.P.
                             Condensed Balance Sheet
                                  (In thousands)

                                            September 30,   December 31,
                                                2003            2002
                                             (unaudited)
    Current assets                             $32,007        $17,307

    Property and equipment, net                479,478        374,187

    Other assets                                 3,179          1,225

                  Total assets                $514,664       $392,719

    Current liabilities                        $15,339         $3,333

    Long term debt                             173,650         57,500

    Deferred revenue                            13,011         13,252

    Accrued liabilities  (A)                       703            ---

    Partner's capital                          311,961        318,634

                  Total liabilities and
                   partners' capital          $514,664       $392,719

    Supplemental information:
    Long term debt                            $173,650        $57,500
    Partner's capital                          311,961        318,634
    Total capitalization                      $485,611       $376,134
    Long term debt/Total capitalization             36%            15%

     (A)  Associated with the Partnership's long term incentive plan


                          NATURAL RESOURCE PARTNERS L.P.
               Reconciliation of Unaudited GAAP Financial Measures
                          to Non-GAAP Financial Measures
                                  (In thousands)

                                             Three Months   Nine Months
                                                Ended         Ended
                                               Sept. 30,     Sept. 30,
                                                 2003           2003
    Reconciliation of GAAP "Net Income"
     to Non-GAAP "EBITDA"
    Net income                                 $10,112        $28,268
    Adjustments to reconcile to EBITDA
        Interest income                            (56)          (159)
        Interest expense                         2,499          4,096
        Depletion and amortization               6,848         19,021
          EBITDA                               $19,403        $51,226


    Reconcilation of GAAP "Net cash provided
     by operating activities"
     to Non-GAAP "EBITDA"

    Net cash provided by operating activities  $19,807        $47,248
    Adjustments to reconcile to EBITDA
        Changes in operating assets
         and liabilities                        (2,834)            55
        Non-cash interest expense                  (13)           (14)
        Interest (income) expense, net           2,443          3,937
          EBITDA                               $19,403        $51,226

CONTACT: Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555, or khager@nrplp.com Web site: http://www.nrplp.com (NRP)

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