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Natural Resource Partners L.P. Reports Fourth Quarter and Full Year 2004 Financial Results

02/15/2005
Fourth Quarter Highlights: * Net income increases 54% over 4Q03 to $13.3 million or $0.50 per unit * Coal royalty revenues increase 48% to $27.1 million * Distributable cash flow increases 42% to $21.2 million * Distribution per unit increases 18% to $0.6625 per unit Annual Highlights: * Net income for 2004 rises 60% over 2003 to $59.0 million or $2.29 per unit * Coal royalty revenues increase 44% to $106.5 million * Distributable cash flow increases 36% to $81.5 million

HOUSTON, Feb 15, 2005 /PRNewswire-FirstCall via COMTEX/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported net income for the fourth quarter of 2004 rose 54% to $13.3 million, or $0.50 per unit, compared to $8.6 million for the same period last year. Distributable cash flow for the fourth quarter increased 42% to $21.2 million from $14.9 million last year.

For the year ended December 31, 2004, NRP reported net income increased 60% to $59.0 million compared to $36.9 million last year, while distributable cash flow rose 36% to $81.5 million from $59.8 million in 2003. Net income per unit increased 44% to $2.29 per unit from $1.59 per unit.

Fourth Quarter Financial Results

Total revenues for the fourth quarter of 2004 increased 43% to $31.4 million from $22.0 million for the same period last year. In addition, coal royalty revenues increased 48% to $27.1 million compared to $18.4 million last year, primarily as a result of improved coal prices. Average coal royalty revenues per ton increased 39% to $2.33 from $1.68. Production by our lessees also increased 6% to 11.6 million tons over the 11.0 million tons for the same period last year.

Total expenses increased to $14.7 million, or 38% over the same period last year. Depletion and amortization increased 27% to $8.0 million resulting from increased production and higher depletion on properties acquired. General and administrative expenses increased to $3.8 million for the fourth quarter from $2.4 million for the same period last year due to increased incentive compensation expense related to the increased market value of NRP units at year end 2004 and additional personnel. Taxes other than income increased due to the addition of franchise taxes in another state and property taxes on unleased acreage related to acquisitions in 2004.

Fourth quarter financial results included a previously announced charge of $1.1 million for unamortized financing costs associated with NRP's previous credit facility. NRP entered into a new five-year, $175 million credit facility in October.

"We have seen a significant increase in our results compared to 2003. The acquisitions we have completed to date, coupled with a very strong sales environment for the coal industry, are paying real dividends for our unitholders. However, our fourth quarter production and revenues were lower than we anticipated due to the simultaneous occurrence of events experienced by several of our lessees late in the fourth quarter. These included a shortage of personnel, geologic problems, moving of longwall panels, transportation delays and greater than usual downtime during the holidays experienced at some mines," said Nick Carter, President and Chief Operating Officer. "Our lessees are working diligently to resolve these issues."

Full Year Financial Results

NRP's total revenues increased 42% to $121.4 million in 2004 from $85.5 million for the same period last year. Coal royalty revenues for 2004 rose 44% to $106.5 million compared to $73.8 million for 2003. This significant increase results from both a 33% increase in average per ton royalty revenue to $2.20 and a 9% increase in production to 48.4 million tons. The increase in production is due to a 17% increase in Appalachia as a result of acquisitions offset by a 41% decrease in the Northern Powder River Basin due to our lessee's mining on the federal government's adjacent property as a result of our checkerboard ownership in the region. Overriding royalty income nearly tripled to $3.2 million due to overrides associated with recent acquisitions. Other revenue rose 30% to $4.6 million primarily due to additional wheelage on acquisitions and increases in oil and gas income resulting from price increases.

Total expenses for 2004 increased 24% to $51.3 million over 2003. Depletion and amortization increased 22% as a result of increased production and higher depletion rates on new acquisitions. General and administrative expenses increased $2.6 million over last year due primarily to a $1.3 million increase in the incentive compensation accrual as a result of a 31% increase in the unit price in the last year and $1.3 million increase in salaries and benefits primarily associated with additional personnel. Taxes other than income increased $1.0 million due to increased property taxes and franchise tax in a new state as a result of acquisitions. Coal royalty and override payments increased $0.7 million due to increased prices on existing overrides and additional override commitments assumed through acquisitions in the last year.

Interest expense increased $3.5 million to $10.3 million due to our senior debt being outstanding for a full year in 2004 versus a partial year in 2003. The full year results also included a $1.1 million charge associated with unamortized financing costs discussed above under the fourth quarter.

Distributions

On January 21, 2005, NRP announced an increase in its quarterly distribution to $0.6625 per unit, or $2.65 per unit on an annualized basis. This represents an 18% increase in Natural Resource Partners' distributions compared to the fourth quarter of 2003.

2005 Outlook

NRP is not modifying the guidance for 2005 issued in a press release on January 21, 2005. It currently anticipates generating between $91 million and $101 million in distributable cash flow and net income between $68 million and $78 million.

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 2005 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         Year ended
                                       December 31,            December 31,
                                     2004        2003        2004       2003
    Coal royalty revenues:
       Appalachia                  $24,931     $16,009     $98,541    $63,855
       Illinois Basin                1,240         793       3,852      3,566
       Northern Powder River Basin     943       1,575       4,063      6,349

     Total                         $27,114     $18,377    $106,456    $73,770

    Coal Royalty Production (tons):
       Appalachia                    9,861       8,957      42,089     35,998
       Illinois Basin                  898         666       3,138      3,034
       Northern Powder River Basin     881       1,336       3,130      5,312

     Total                          11,640      10,959      48,357     44,344

    Average royalty revenue
     per ton:
       Appalachia                    $2.53       $1.79       $2.34      $1.77
       Illinois Basin                 1.38        1.19        1.23       1.18
       Northern Powder River Basin    1.07        1.18        1.30       1.20

     Total                           $2.33       $1.68       $2.20      $1.66



                        NATURAL RESOURCE PARTNERS L.P.

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

                                     Three months ended       Year ended
                                         December 31,         December 31,
                                       2004       2003       2004      2003
                                   (Unaudited)(Unaudited)(Unaudited)
    Revenues:
      Coal royalties                 $27,114    $18,377   $106,456   $73,770
      Property taxes                   1,388      1,550      5,349     5,069
      Minimums recognized as revenue     483        427      1,763     2,033
      Override royalties                 832        209      3,222     1,022
      Other                            1,535      1,455      4,642     3,572
        Total revenues                31,352     22,018    121,432    85,466
    Operating costs and expenses:
      Depletion and amortization       8,039      6,344     30,957    25,365
      General and administrative       3,847      2,419     11,503     8,923
      Taxes other than income          2,002      1,553      6,835     5,810
      Coal royalty payments              809        337      2,045     1,299
        Total operating costs
         and expenses                 14,697     10,653     51,340    41,397
    Income from operations            16,655     11,365     70,092    44,069
    Other income (expense)
      Interest expense                (2,355)    (2,718)   (10,312)   (6,814)
      Interest income                    159         47        349       206
      Loss from early extinguishment
       of debt                        (1,135)       ---     (1,135)      ---
      Loss on sale of oil and gas
       properties                        ---        (55)       ---       (55)
      Loss from interest rate hedge      ---        ---        ---      (499)
    Net income                       $13,324     $8,639    $58,994   $36,907
    Net income attributable to:
      General partner(A)                $458       $173     $1,705      $738
      Other holders of incentive
       distribution rights(A)           $103       $---       $281      $---
      Limited partners               $12,763     $8,466    $57,008   $36,169
    Basic and diluted net income per
     limited partner unit:
      Common                            $.50       $.37      $2.29     $1.59
      Subordinated                      $.50       $.37      $2.29     $1.59
    Weighted average number of units
     outstanding:
      Common                          13,987     11,354     13,447    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)

                                      Three months ended      Year ended
                                          December 31,        December 31,
                                        2004       2003      2004     2003
                                    (Unaudited) (Unaudited)(Unaudited)

    Cash flows from operating
     activities:
      Net income                      $13,324     $8,639   $58,994   $36,907
      Adjustments to reconcile net
       income to net cash provided
       by operating activities:
        Depletion and amortization      8,039      6,344    30,957    25,365
        Non-cash interest charge           11         12        52        26
        Loss on early extinguishment
         of debt                        1,135        ---     1,135       ---
        Loss on sale of oil and gas -
         properties                       ---         55       ---        55
      Change in operating assets and
       liabilities:
        Accounts receivable              (611)      (842)   (4,093)   (1,947)
        Other assets                     (847)     1,257       236      (811)
        Accounts payable and accrued
         liabilities                      253        323       (47)     (674)
        Accrued interest               (2,181)    (1,369)     (415)      481
        Deferred revenue                2,703      2,043       793     1,802
        Accrued incentive plan expenses 1,229        330     2,574     2,256
        Property and franchise taxes
         payable                          510        488       661     1,068
          Net cash provided by
           operating activities        23,565     17,280    90,847    64,528

    Cash flows from investing
     activities:
        Acquisition of coal and other
         mineral rights                   ---    (18,832)  (77,733) (142,541)
        Proceeds from sale of oil and
         gas properties                   ---         30       ---        30
          Net cash used in investing
           activities                     ---    (18,802)  (77,733) (142,511)

    Cash flows from financing
     activities:
        Proceeds from loans               ---     19,000    75,500   317,100
        Deferred financing costs         (969)    (2,541)     (969)   (2,541)
        Repayment of loans                ---        ---  (111,850) (172,600)
        Distributions to partners     (16,779)   (12,454)  (60,393)  (46,478)
        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, net                       ---        ---  (100,121)      ---
        Settlement of hedge included in
         accumulated other comprehensive
         loss                             ---        ---       ---      (931)
          Net cash provided by
           (used in) financing
           activities                 (17,748)     4,005     4,669    94,550
    Net increase in cash                5,817      2,483    17,783    16,567
    Cash at beginning of period        36,286     21,837    24,320     7,753
    Cash at end of period             $42,103    $24,320   $42,103   $24,320

    SUPPLEMENTAL INFORMATION:
    Cash paid during the period for
     interest                          $4,452     $4,025   $10,603    $5,778



                        NATURAL RESOURCE PARTNERS L.P.

                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                    ASSETS

                                                          Dec. 31,  Dec. 31,
                                                            2004      2003
                                                         (Unaudited)
    Current assets:
      Cash and cash equivalents                            $42,103   $24,320
      Accounts receivable                                   15,058     9,553
      Accounts receivable - affiliate                           25     1,437
      Other                                                    786     1,086
        Total current assets                                57,972    36,396
    Land                                                    13,721    13,532
    Coal and other mineral rights, net                     523,844   475,393
    Loan financing costs, net                                1,837     2,884
    Other assets, net                                        2,552     3,471
        Total assets                                      $599,926  $531,676

                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable                                        $576      $423
      Accounts payable - affiliate                             105       305
      Current portion of long-term debt                      9,350     9,350
      Accrued incentive plan expenses - current portion      1,559     1,186
      Property and franchise taxes payable                   3,460     2,799
      Accrued interest                                         266       681
        Total current liabilities                           15,316    14,744
    Deferred revenue                                        15,847    15,054
    Accrued incentive plan expenses                          3,271     1,070
    Long-term debt                                         156,300   192,650
    Partners' capital:
      Common units (outstanding: 13,986,906 in 2004,
       11,353,658 in 2003)                                 243,814   143,956
      Subordinated units (outstanding: 11,353,658)         157,324   158,633
      General partners' interest                             8,802     6,474
      Holders of incentive distribution rights                 105       ---
      Accumulated other comprehensive loss                    (853)     (905)
        Total partners' capital                            409,192   308,158
        Total liabilities and partners' capital           $599,926  $531,676



                        NATURAL RESOURCE PARTNERS L.P.

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

                                         Three months ended     Year ended
                                            December 31,        December 31,
                                           2004      2003      2004     2003
                                                     (Unaudited)
    Reconciliation of GAAP "Net cash
     provided by operating
     activities" to Non-GAAP
     "Distributable cash flow"

    Cash flow from operations            $23,565   $17,280   $90,847  $64,528
    Less scheduled principal payments        ---       ---    (9,350)     ---
    Less reserves for future principal
     payments                             (2,350)   (2,350)   (9,400)  (4,700)
    Add reserves used for scheduled
     principal payments                      ---       ---     9,400      ---
    Distributable cash flow              $21,215   $14,930   $81,497  $59,828

SOURCE Natural Resource Partners L.P.

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

http://www.prnewswire.com

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