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Natural Resource Partners L.P. Reports Record Second Quarter 2005 Results and Increases 2005 Guidance

08/03/2005

Second Quarter Highlights:

  • Net income increases 65% over 2Q04 to $25.0 million or $0.92 per unit
  • Coal royalty revenues increase 45% over 2Q04 to $38.0 million
  • Distributable cash flow increases 90% over 2Q04 to $29.1 million
  • Quarterly distribution increases 19% over 2Q04 to $0.7125 per unit

HOUSTON, Aug. 3 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported second quarter 2005 net income rose 65% to a record $25.0 million, or $0.92 per unit, compared to $15.1 million or $0.58 per unit for the same period last year. Distributable cash flow for the second quarter increased 90% to $29.1 million, another record, from $15.3 million last year.

For the six months ended June 30, 2005, NRP reported net income increased 73% to $45.4 million compared to $26.3 million for the same period last year, while distributable cash flow rose 66% to $52.8 million from $31.8 million in 2004. Net income per unit improved 61% to $1.69 per unit from $1.05 per unit.

"The numerous accretive acquisitions we have completed since our initial public offering are cumulatively paying real benefits to our unit holders. Our growth has given us more financial flexibility with respect to future acquisition opportunities," said Chief Operating Officer Nick Carter.

Second Quarter Financial Results

Total revenues for the second quarter of 2005 increased 41% to $41.7 million from $29.5 million for the same period last year. As a result of increases in both average coal royalty revenues per ton and production, coal royalty revenues grew 45% to $38.0 million compared to $26.2 million last year. Average coal royalty revenues per ton rose 23% to $2.69 from $2.18 while production by NRP's lessees also increased 17% to 14.1 million tons over the 12.0 million tons for the same period last year. Approximately 8% of the tonnage increase is associated with acquisitions since the prior period. Other revenues increased 34% to $1.5 million primarily due to increases in both wheelage and oil and gas revenues.

Total expenses increased to $14.5 million, or 23% over the same period last year. Depletion and amortization grew 20% to $8.6 million resulting from increased production and higher depletion on properties acquired. General and administrative expenses increased to $3.2 million for the second quarter from $2.4 million for the same period last year primarily due to higher incentive compensation expense related to the improved market value of NRP units at June 30, 2005 and additional personnel.

Six Months Financial Results

NRP's total revenues increased 40% to $77.9 million in 2005 from $55.9 million for the same period last year. Coal royalty revenues for 2005 rose 44% to $70.5 million compared to $49.0 million for the same period in 2004. This significant increase results from both a 27% increase in average per ton royalty revenue to $2.62 and a 14% increase in production to 26.9 million tons. For the first six months of 2005 approximately 33% of NRP's coal royalty revenues were from metallurgical coal, which is priced higher than steam coal. This compares to approximately 31% for the 2004 time period. Appalachian production increased 8%, the Illinois Basin increased 21% and Northern Powder River Basin production increased approximately 81%. Other revenue rose 44% to $2.7 million primarily due to additional wheelage income and increases in oil and gas income.

Total expenses for the first half of 2005 increased 19% to $28.1 million over the comparable period in 2004. Depletion and amortization increased 16% as a result of higher production. General and administrative expenses increased $1.4 million over last year due primarily to a $0.9 million increase in the incentive compensation accrual as a result of the increase in the unit price.

2005 Outlook

"Our lessees have continued to reward us on the upside with increasing price realizations, leading us to increase our guidance for 2005," said Nick Carter. "We now expect total revenues to range between $143 million and $150 million generating net income of approximately $75 million to $85 million or $2.75 to $3.15 per unit." Further details are provided in the attached schedule.

Financing Activities

On July 19, 2005, NRP completed a private placement of $50 million on senior unsecured notes and committed to issue an additional $50 million of senior notes on January 19, 2006. Proceeds from the first $50 million were used to repay borrowings under the Partnership's existing revolving credit facility. The senior notes will begin amortizing in July 2008 and bear interest at 5.05% with an average life of approximately nine years.

Distributions

On July 20, 2005, NRP announced its eighth consecutive increase in its quarterly distribution, raising the distribution to $0.7125 per unit, or $2.85 per unit on an annualized basis. This represents a 19% increase in Natural Resource Partners' distributions compared to the second quarter of 2004.

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 .

Forward Looking Statements

This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. Such statements include all statements regarding the 2005 outlook. 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.

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.

                            - financials follow -



                        Natural Resource Partners L.P.
                             Operating Statistics
                      (In thousands except per ton data)
                                 (Unaudited)

                                      Three months ended    Six months ended
                                            June 30,            June 30,
                                        2005       2004     2005       2004
    Coal royalty revenues:
       Appalachia                     $34,345    $24,390  $63,997    $45,672
       Illinois Basin                   1,093        783    2,400      1,498
       Northern Powder River Basin      2,519      1,006    4,090      1,857

      Total                           $37,957    $26,179  $70,487    $49,027

    Coal Royalty Production (tons):
       Appalachia                      11,740     10,537   22,611     20,868
       Illinois Basin                     707        692    1,574      1,298
       Northern Powder River Basin      1,665        806    2,697      1,492

      Total                            14,112     12,035   26,882     23,658

    Average royalty revenue
     per ton:
       Appalachia                       $2.93      $2.31    $2.83      $2.19
       Illinois Basin                    1.55       1.13     1.52       1.15
       Northern Powder River Basin       1.51       1.25     1.52       1.24

      Total                             $2.69      $2.18    $2.62      $2.07



                        Natural Resource Partners L.P.
                      Consolidated Statements of Income
                     (In thousands, except per unit data)
                                 (unaudited)

                                      Three months ended    Six months ended
                                            June 30,            June 30,
                                        2005       2004     2005       2004

    Revenues:
      Coal royalties                  $37,957    $26,179  $70,487    $49,027
      Property taxes                    1,547      1,278    2,981      2,584
      Minimums recognized as revenue      481        165      934        928
      Override royalties                  209        757      824      1,434
      Other                             1,503      1,118    2,718      1,886
            Total revenues             41,697     29,497   77,944     55,859
    Operating costs and expenses:
      Depletion and amortization        8,625      7,214   16,504     14,283
      General and administrative        3,162      2,422    6,474      5,133
      Property, franchise and other
       taxes payable                    1,954      1,712    3,784      3,369
      Coal royalty and override
       payments                           745        398    1,298        786
            Total operating costs
             and expenses              14,486     11,746   28,060     23,571
    Income from operations             27,211     17,751   49,884     32,288
    Other income (expense)
      Interest expense                 (2,570)    (2,683)  (5,027)    (6,098)
      Interest income                     331         60      562        112
    Net income                        $24,972    $15,128  $45,419    $26,302
    Net income attributable to:
      General partner(A)               $1,155       $394   $1,985       $641
      Other holders of incentive
       distribution rights(A)            $353        $49     $580        $61
      Limited partners                $23,464    $14,685  $42,854    $25,600
    Basic and diluted net income per
     limited partner unit:
      Common                             $.92       $.58    $1.69      $1.05
      Subordinated                       $.92       $.58    $1.69      $1.05
    Weighted average number of units
     outstanding:
      Common                           13,987     13,987   13,987     12,902
      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   Six months ended
                                           June 30,            June 30,
                                       2005       2004      2005      2004

    Cash flows from operating
     activities:
      Net income                      $24,972    $15,128   $45,419   $26,302
      Adjustments to reconcile net
       income to net cash provided
       by operating activities:
       Depletion and amortization       8,625      7,214    16,504    14,283
       Non-cash interest charge            54        292       125       585
      Change in operating assets and
       liabilities:
       Accounts receivable               (979)    (1,265)   (3,369)   (3,208)
       Other assets                       351        348       601       657
       Accounts payable                   161       (218)     (124)     (422)
       Accrued interest                (2,078)    (2,430)      169      (414)
       Deferred revenue                  (176)    (1,860)   (2,331)   (1,792)
       Accrued incentive plan expenses  1,219        656     1,224       485
       Property, franchise and
        other taxes payable              (771)      (295)     (770)       15
         Net cash provided by operating
          activities                   31,378     17,570    57,448    36,491

    Cash flows from investing activities:
       Acquisition of land, coal and
        other mineral rights              ---     (1,673)  (21,544)  (77,332)
           Net cash used in investing
            activities                    ---     (1,673)  (21,544)  (77,332)

    Cash flows from financing activities:
       Proceeds from loans                ---        ---    18,000    75,500
       Repayment of loans              (9,350)    (9,350)   (9,350) (111,850)
       Distributions to partners      (18,371)   (14,918)  (35,897)  (27,951)
       Contributions by general partner   ---        ---       ---     2,147
       Proceeds from sale of 5,250,000
        common units, net
        of transaction costs              ---        (66)      ---   200,355
       Redemption of 2,616,752 common
        units from Arch Coal, Inc.,
        net of transaction costs          ---        ---       ---  (100,121)
           Net cash provided by
            (used in)
             financing activities     (27,721)   (24,334)  (27,247)   38,080
       Net increase or (decrease) in
        cash and cash equivalents       3,657     (8,437)    8,657    (2,761)
       Cash and cash equivalents at
        beginning of period            47,103     29,996    42,103    24,320
       Cash and cash equivalents at
        end of period                 $50,760    $21,559   $50,760   $21,559

    SUPPLEMENTAL INFORMATION:
    Cash paid during the period for
     interest                          $4,575     $4,821    $4,712    $5,927



                        Natural Resource Partners L.P.
                         Consolidated Balance Sheets
                                (In thousands)

                                    ASSETS

                                                         June 30, December 31,
                                                           2005      2004
                                                        (Unaudited)
    Current assets:
      Cash and cash equivalents                           $50,760   $42,103
      Accounts receivable                                  18,446    15,058
      Accounts receivable - affiliate                           6        25
      Other                                                   285       786
        Total current assets                               69,497    57,972
    Land                                                   14,110    13,721
    Coal and other mineral rights, net                    530,961   523,844
    Loan financing costs, net                               1,737     1,837
    Other assets, net                                       1,968     2,552
        Total assets                                     $618,273  $599,926

                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable                                       $479      $576
      Accounts payable - affiliate                             78       105
      Current portion of long-term debt                     9,350     9,350
      Accrued incentive plan expenses - current portion     1,685     1,559
      Property, franchise and other taxes payable           2,690     3,460
      Accrued interest                                        435       266
        Total current liabilities                          14,717    15,316
    Deferred revenue                                       15,498    15,847
    Accrued incentive plan expenses                         4,369     3,271
    Long-term debt                                        164,950   156,300
    Partners' capital:
      Common units (outstanding: 13,986,906)              248,503   243,814
      Subordinated units (outstanding: 11,353,658)        161,280   157,324
      General partner's interest                            9,439     8,802
      Holders of incentive distribution rights                345       105
      Accumulated other comprehensive loss                   (828)     (853)
        Total partners' capital                           418,739   409,192
        Total liabilities and partners' capital          $618,273  $599,926



                        Natural Resource Partners L.P.
      Reconciliation of GAAP "Net cash provided by operating activities"
                    To Non-GAAP "Distributable cash flow"
                                (in thousands)

                                         Three months ended   Six months ended
                                               June 30,           June 30,
                                            2005     2004      2005      2004
                                                       (Unaudited)

    Cash flow from operations            $31,378  $17,570   $57,448   $36,491
    Less scheduled principal payments     (9,350)  (9,350)   (9,350)   (9,350)
    Less reserves for future principal
     payments                             (2,350)  (2,350)   (4,700)   (4,700)
    Add reserves used for scheduled
     principal payments                    9,400    9,400     9,400     9,400
    Distributable cash flow              $29,078  $15,270   $52,798   $31,841



                        Natural Resource Partners L.P.
                                   Guidance
            (dollars and tons in millions except per unit amounts)


                                                           Full Year 2005
                                                              (Range)
    Coal royalty production (tons)
      Appalachia                                           42.0   -    44.0
      Illinois Basin                                        2.0   -     2.5
      Northern Powder River Basin                           5.0   -     5.5
        Total                                              49.0   -    52.0

    Coal royalty revenues
      Appalachia                                       $  120.0   - $ 123.0
      Illinois Basin                                        3.0   -     4.0
      Northern Powder River Basin                           7.0   -     8.0
        Total                                          $  130.0   - $ 135.0

    Revenues
      Coal royalty revenues                            $  130.0   -   135.0
      Other revenues (A)                                   13.0   -    15.0

    Expenses
      Depletion and amortization                       $   30.0   - $  34.0
      General and administrative                           12.0   -    14.0
      Other expenses (B)                                    9.0   -    11.0

    Other expenses
      Interest expense (net)                           $    9.0   - $  10.0

    Net income                                         $   75.0     $  85.0

    Net income per unit                                $   2.75   - $  3.15

    Scheduled principal payments                       $    9.4   - $   9.4

    Distributable cash flow (C)                        $  100.0   - $ 110.0

     (A) Other revenues consist of property taxes, minimums, oil & gas,
         timber, overrides, wheelage and rentals.
     (B) Other expenses include property, franchise and other taxes, 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 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.  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.
08/03/2005 R
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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