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Natural Resource Partners L.P. Reports Record Third Quarter Results and Raises 2004 Guidance

11/03/2004
Third Quarter Highlights: - Net income increases 92% over third quarter 2003 to $19.4 million or $0.74 per unit - Coal royalty revenues increase 46% over third quarter 2003 to $30.3 million - Distributable cash flow increases 63% over third quarter 2003 to $28.4 million - Distribution increases 19% over third quarter 2003 to $0.6375 per unit - 2004 earnings guidance increases to a range of $2.35 to $2.45 per unit

HOUSTON, Nov 3, 2004 /PRNewswire-FirstCall via COMTEX/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported record earnings and distributable cash flow. Net income for the third quarter of 2004 nearly doubled, increasing by 92% to $19.4 million, or $0.74 per unit, compared to $10.1 million for the same period last year. Distributable cash flow for the third quarter increased 63% to $28.4 million from $17.5 million last year. Year to date net income of $45.7 million increased 62% over last year, while distributable cash flow increased 34% to $60.3 million. Net income per unit increased 47% to $1.79 per unit from $1.22 per unit.

"The continuation of a very robust coal market helped spur NRP's earnings to a record $0.74 per unit this quarter," said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer. "Our lessees continue to benefit from these higher prices allowing NRP to once again raise guidance for the remainder of the year."

Third Quarter Financial Results

Total revenues for the third quarter 2004 increased 45% to $34.2 million from $23.5 million for the same period last year. In addition, coal royalty revenues increased 46% to $30.3 million from $20.8 million last year, due principally to improved coal prices and increased production in Appalachia. Average coal royalty revenues per ton increased 36% to $2.32 from $1.71. Production by our lessees also increased 7% to 13.1 million tons compared to 12.2 million tons for the same period last year.

Year to Date Financial Results

Year to date total revenues increased 42% to $90.1 million from $63.4 million for the same period last year. Coal royalty revenues for the first nine months of 2004 increased 43% to $79.3 million compared to $55.4 million for the comparable period last year. This significant increase is due to both a 30% increase in average royalty revenue to $2.16 per ton and a 10% increase in production to 36.7 million tons. The increase in production is due to acquisitions in Appalachia.

Distributions

On October 21, 2004, NRP announced a 6% increase in its quarterly distribution to $0.6375 per unit, or $2.55 per unit on an annualized basis. This represents a 19% increase in Natural Resource Partners' distributions compared to the third quarter of 2003. "Our recent distribution increase partially reflects the production increases associated with our acquisitions over the past year as well as our long term outlook for coal prices," said Corbin J. Robertson, Jr. "We think it is prudent to manage our distributions based on what we believe to be a sustainable coal price."

2004 Outlook

For the second time this year, NRP is significantly raising its guidance for 2004 due to a very strong coal market. NRP now anticipates coal royalty revenues of approximately $107 million to $110 million for 2004, with net income per unit increasing to between $2.35 and $2.45 per unit, up from our previous guidance of $2.10 to $2.25 per unit. A table is attached to the release with further details regarding guidance.

Disclosure of Non-GAAP Financial Measures

Distributable cash flow represents cash flow from operations less actual principal payments and cash reserves set aside for scheduled principal payments on the senior notes. Distributable cash flow is a "non-GAAP financial measure" that is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is a significant liquidity metric that is an indicator of NRP's ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to its partners. Distributable cash flow is also the quantitative standard used throughout the investment community with respect to publicly traded partnerships. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities. A reconciliation of distributable cash flow to net cash provided by operating activities is included in the tables attached to this release. Distributable cash flow may not be calculated the same for NRP as other companies.

Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is a master limited partnership that is 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 Powder River Basin.

For additional information, please contact Kathy Hager at 713-751-7555 or khager@nrplp.com . Further information about NRP is available on the partnership's website at http://www.nrplp.com .

This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements include the 2004 guidance. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership 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 partnership 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 partnership. 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 Natural Resource Partners' Securities and Exchange Commission filings. Natural Resource Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

                             - 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,
                              2004         2003         2004         2003

    Coal royalty revenues:
      Appalachia             $27,938      $18,247      $73,610      $47,846
      Illinois Basin           1,114          938        2,612        2,773
      Northern Powder
       River Basin             1,263        1,611        3,120        4,774

    Total                    $30,315      $20,796      $79,342      $55,393

    Coal Royalty
     Production (tons):
      Appalachia              11,360       10,081       32,228       27,041
      Illinois Basin             942          818        2,240        2,368
      Northern Powder
       River Basin               757        1,292        2,249        3,976

    Total                     13,059       12,191       36,717       33,385

    Average royalty revenue
     per ton:
      Appalachia               $2.46        $1.81        $2.28        $1.77
      Illinois Basin            1.18         1.15         1.17         1.17
      Northern Powder
       River Basin              1.67         1.25         1.39         1.20

    Total                      $2.32        $1.71        $2.16        $1.66


                        NATURAL RESOURCE PARTNERS L.P.

                      CONSOLIDATED STATEMENTS OF INCOME
                     (In thousands, except per unit data)

                            Three months ended         Nine months ended
                                September 30,             September 30,
                              2004         2003         2004         2003
                                              (Unaudited)

    Revenues:
      Coal royalties         $30,315      $20,796      $79,342      $55,393
      Property taxes           1,377        1,330        3,961        3,519
      Minimums recognized
       as revenue                352          347        1,280        1,606
      Override royalties         956          152        2,390          813
      Other                    1,221          914        3,107        2,117
        Total revenues        34,221       23,539       90,080       63,448
    Operating costs and
     expenses:
      Depletion and
       amortization            8,077        6,848       22,918       19,021
      General and
       administrative          2,523        2,197        7,656        6,504
      Taxes other than
       income                  1,464        1,676        4,833        4,257
      Coal royalty and
       override payments         450          263        1,236          962
        Total operating
         costs and expenses   12,514       10,984       36,643       30,744
    Income from operations    21,707       12,555       53,437       32,704
    Other income (expense)
      Interest expense        (2,417)      (2,499)      (7,957)      (4,096)
      Interest income             78           56          190          159
      Loss from interest
       rate hedge                ---          ---          ---         (499)
    Net income               $19,368      $10,112      $45,670      $28,268
    Net income attributable
     to:
      General partner (A)       $605         $202       $1,246         $565
      Other holders of
       incentive
       distribution
       rights (A)               $117         $---         $178         $---
      Limited partners       $18,646       $9,910      $44,246      $27,703
    Basic and diluted net
     income per limited
     partner unit:
      Common                    $.74         $.44        $1.79        $1.22
      Subordinated              $.74         $.44        $1.79        $1.22
    Weighted average number
     of units outstanding:
      Common                  13,987       11,354       13,266       11,354
      Subordinated            11,354       11,354       11,354       11,354

     (A)  Other holders of the incentive distribution rights (IDRs) include
          the WPP Group (25%) and NRP Investment LP (10%).  The net income
          allocated to the general partner includes the general partner's
          portion of the IDRs (65%).


                        NATURAL RESOURCE PARTNERS L.P.

                           STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (Unaudited)

                              Three months ended         Nine months ended
                                  September 30,             September 30,
                                2004         2003         2004         2003

    Cash flows from operating
     activities:
      Net income               $19,368      $10,112      $45,670      $28,268
      Adjustments to reconcile
       Operating activities:
        Depletion and
         amortization            8,077        6,848       22,918       19,021
        Non-cash interest
         charge                     14           13           41           14
        Change in operating
         assets and
         liabilities:
           Accounts receivable    (274)        (548)      (3,482)      (1,105)
           Other assets            426          112        1,083      (2,068)
           Accounts payable        122         (263)        (300)        (997)
           Accrued interest      2,180        1,759        1,766        1,850
           Deferred revenue       (118)         (24)      (1,910)        (241)
           Accrued incentive
            plan expenses          860        1,128        1,345        1,926
           Property and
            franchise taxes
            payable                136          671          151          580
             Net cash provided
              by operating
              activities        30,791       19,808       67,282       47,248

    Cash flows from investing
     activities:
      Acquisition of property     (401)     (58,045)     (77,733)    (123,709)
      Cash held in escrow          ---       58,000          ---          ---
        Net cash used in
         investing activities     (401)         (45)     (77,733)    (123,709)

    Cash flows from financing
     activities:
      Proceeds from loans          ---       50,000       75,500      298,100
      Repayment of loans           ---      (50,000)    (111,850)    (172,600)
      Distributions to
       partners                (15,663)     (12,107)     (43,614)     (34,024)
      Contributions by
       general partner             ---          ---        2,147          ---
      Proceeds from sale of
       5,250,000 common units,
       net of transaction costs    ---          ---      200,355          ---
      Redemption of 2,616,752
       common units from Arch
       Coal, Inc. net of
       transaction costs           ---          ---     (100,121)         ---
      Settlement of hedge
       included in other
       comprehensive income        ---          ---          ---         (931)
        Net cash provided by
         (used in) financing
         activities            (15,663)     (12,107)      22,417       90,545
    Net increase in cash and
     cash equivalents           14,727        7,656       11,966       14,084
    Cash and cash equivalents
     at beginning of period     21,559       14,181       24,320        7,753
    Cash and cash equivalents
     at end of period          $36,286      $21,837      $36,286      $21,837

    SUPPLEMENTAL INFORMATION:
    Cash paid during the
     period for interest          $224         $337       $6,151       $1,753


                        NATURAL RESOURCE PARTNERS L.P.

                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                    ASSETS

                                                 September 30,   December 31,
                                                      2004           2003
                                                   (Unaudited)

    Current assets:
      Cash and cash equivalents                      $36,286        $24,320
      Accounts receivable                             14,472          9,553
      Accounts receivable - affiliate                    ---          1,437
      Other                                               38          1,186
        Total current assets                          50,796         36,496
    Land                                              13,721         13,532
    Coal and other mineral rights, net               531,592        475,493
    Loan financing costs, net                          2,048          2,884
    Other assets, net                                  2,699          3,271
        Total assets                                $600,856       $531,676

                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable                                  $317           $423
      Accounts payable - affiliate                       111            305
      Current portion of long-term debt                9,350          9,350
      Accrued incentive plan expenses - current
       portion                                         1,356          1,186
      Property and franchise taxes payable             2,950          2,799
      Accrued interest                                 2,447            681
        Total current liabilities                     16,531         14,744
    Deferred revenue                                  13,144         15,054
    Accrued incentive plan expenses                    2,245          1,070
    Long-term debt                                   156,300        192,650
    Partners' capital:
      Common units (outstanding: 13,986,906 in
       2004, 11,353,658 in 2003)                     245,764        143,956
      Subordinated units (outstanding: 11,353,658)   158,759        158,633
      General partners' interest                       8,867          6,474
      Holders of incentive distribution rights           110            ---
      Accumulated other comprehensive loss              (864)          (905)
        Total partners' capital                      412,636        308,158
        Total liabilities and partners' capital     $600,856       $531,676


                        NATURAL RESOURCE PARTNERS L.P.

                  RECONCILIATION OF GAAP FINANCIAL MEASURES
                        TO NON-GAAP FINANCIAL MEASURES
                                (in thousands)

                               Three months ended        Nine months ended
                                  September 30,            September 30,
                                2004        2003         2004         2003
                                               (Unaudited)

    Reconciliation of GAAP
     "Net cash provided by
     operating activities" to
     Non-GAAP "Distributable
     cash flow"

    Cash flow from operations  $30,791     $19,808      $67,282      $47,248
    Less scheduled principal
     payments                      ---         ---       (9,350)         ---
    Less reserves for future
     principal payments         (2,350)     (2,350)      (7,050)      (2,350)
    Add reserves used for
     scheduled principal
     payments                      ---         ---        9,400          ---
    Distributable cash flow    $28,441     $17,458      $60,282      $44,898


                        NATURAL RESOURCE PARTNERS L.P.
                                   GUIDANCE
                    (in millions except per unit amounts)

                                                  Full Year 2004
                                                      (Range)

    Coal royalty production (tons)
      Appalachia                                    43.0 -   44.0
      Illinois Basin                                 2.8 -    3.0
      Northern Powder River Basin                    2.8 -    3.0
        Total                                       48.6 -   50.0

    Coal royalty revenues
      Appalachia                                  $100.0 - $103.0
      Illinois Basin                                 3.3 -    3.5
      Northern Powder River Basin                    3.8 -    4.0

    Revenues
      Coal royalty revenue                        $107.0 - $110.0
      Other revenues (A)                            13.0 -   14.0

    Expenses
      Depletion and amortization                  $ 30.0 - $ 32.0
      General and administrative                    10.0 -   11.0
      Other expenses (B)                             8.2 -    8.4
      Loss on early extinguishment of debt           1.1 -    1.1
      Interest expense (net)                        10.1 -   10.3

    Net income                                    $ 60.0 - $ 63.0

    Net income per unit                           $ 2.35 - $ 2.45

    Scheduled principal payments                  $  9.4 - $  9.4

    Distributable cash flow (C)                   $ 82.0 - $ 86.0

     (A)  Other revenues consist of property taxes, minimums, oil & gas,
          timber, overrides, wheelage and rentals.
     (B)  Other expenses include taxes other than income, override payments,
          coal royalty payments, and non-participating royalty interests.
     (C)  Distributable cash flow represents net income plus depletion and
          amortization minus scheduled principal payments on NRP senior notes.
          Distributable cash flow is a "non-GAAP financial measure" that is
          presented because management believes it is a useful adjunct to net
          cash provided by operating activities under GAAP.  Distributable
          cash flow is a significant liquidity metric which is an indicator of
          NRP's ability to generate cash flows at a level that can sustain or
          support an increase in quarterly cash distributions paid to its
          partners.  Distributable cash flow is also the quantitative standard
          used throughout the investment community with respect to publicly-
          traded partnerships.  Distributable cash flow is not a measure of
          financial performance under GAAP and should not be considered as an
          alternative to cash flows from operating, investing or financing
          activities.  We believe that "net cash provided by operating
          activities" would be the most comparable financial measure to
          distributable cash.  However, due to the substantial uncertainties
          associated with forecasting future changes to operating assets and
          liabilities, we cannot provide guidance on forward-looking net cash
          provided by operating activities or provide reconciliations of
          distributable cash flow to that measure.

SOURCE Natural Resource Partners L.P.

Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555, or khager@nrplp.com

http://www.nrplp.com

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