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Natural Resource Partners L.P. Reports Third Quarter 2005 Results

11/03/2005

Third Quarter Highlights:
* Net income increases 11% over 3Q04 to $21.5 million or $0.79 per unit
* Coal royalty revenues increase 13% over 3Q04 to $34.3 million
* Distributable cash flow increases 13% over 3Q04 to $32.1 million
* Quarterly distribution increases 16% over 3Q04 to $0.7375 per unit

HOUSTON, Nov. 3 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) and (NYSE: NSP) today reported third quarter 2005 net income of $21.5 million, or $0.79 per unit, an 11% increase over the $19.4 million or $0.74 per unit reported for the same period last year. Distributable cash flow for the third quarter increased to $32.1 million from $28.4 million last year.

Year-to-date, NRP reported net income increased 46% to $66.9 million from $45.7 million for the same period last year, while distributable cash flow rose 41% to $84.9 million from $60.3 million in 2004. Net income per unit rose 39% to $2.48 per unit from $1.79 per unit.

"During the first nine months of 2005 our lessees have seen most of their short term and spot coal sales rollover to higher prices. This has led to our coal royalty revenue increasing by nearly one-third. While production at many of our lessee's mines is constrained by the shortage of labor, permitting issues and transportation difficulties, our revenues and cash flows continued to increase," said Chief Operating Officer Nick Carter.

Third Quarter Financial Results

Third quarter revenues increased 13% to $38.7 million from $34.2 million for the same period last year. Increases in coal royalty revenues per ton helped to offset slightly lower production year-over-year to allow coal royalty revenues to rise 13% to $34.3 million. Average coal royalty revenues per ton rose 16% to $2.70 from $2.32 while production by NRP's lessees decreased 3% to 12.7 million tons.

Total expenses increased to $14.8 million from $12.2 million last year. Depletion and amortization grew 5% to $8.2 million due to higher depletion on properties recently acquired. General and administrative expenses increased to $3.5 million for the third quarter from $2.5 million for the same period last year due to increased costs associated with managing a larger portfolio of properties and an increase in the incentive compensation accrual. Property, franchise and other taxes increased largely as a result of properties acquired.

Nine Months Financial Results

NRP's total revenues increased 30% to $116.7 million in 2005 from $90.1 million for the same period last year. Coal royalty revenues for 2005 rose 32% to $104.8 million compared to $79.3 million for the same period in 2004. This increase results from both a 23% increase in average per ton royalty revenue to $2.65 and an 8% increase in production to 39.6 million tons. Appalachian production increased 3%, the Illinois Basin decreased 2% and Northern Powder River Basin (NPRB) production increased approximately 84%. The NPRB increased due to our lessee producing on our acreage more than the adjoining acreage. For the first nine months of 2005, approximately 32% of NRP's coal royalty revenues and 28% of its production were from metallurgical coal, which is priced higher than steam coal. Other revenue rose 52% to $4.7 million primarily due to additional wheelage income and increases in oil and gas income.

Total expenses year-to-date increased to $42.8 million, or 20% over the comparable period in 2004. Depletion and amortization increased 12% as a result of higher production. General and administrative expenses increased $2.4 million over last year due to increased costs associated with managing a larger portfolio of properties and an increase in the incentive compensation accrual.

2005 Outlook

Based on the latest data available, the partnership expects to achieve the upper end of the range for the 2005 guidance issued in August of this year. The previously announced ranges include total revenues of between $143 million and $150 million with net income of approximately $75 million to $85 million or $2.75 to $3.15 per unit. For additional detail of the August guidance, please visit the partnership's website http://www.nrplp.com/investors/guidance .

"We again saw a very busy quarter on acquisitions and closed several transactions that will yield us substantial cash flow starting principally in 2007 and continuing for many years," said Carter.

Distributions

On October 20, 2005, NRP announced its ninth consecutive increase in its quarterly distribution, raising the distribution to $0.7375 per unit, or $2.95 per unit on an annualized basis. This represents a 16% increase in Natural Resource Partners' distributions compared to the third quarter of 2004.

NSP - Subordinated Units

On August 11, the subordinated units of Natural Resource Partners began publicly trading under the ticker symbol NSP. On October 20, Natural Resource Partners announced that the initial conversion of these subordinated units would occur at the close of business on November 14, 2005 following the payment of the third quarter distribution. On that day, 25% of the subordinated units will automatically and mandatorily convert into NRP common units. For a comparison of NRP common units to NSP subordinated units, please visit the website at http://www.nrplp.com/investors/nrpvsnsp.

"The initial conversion of our subordinated units (NSP) into common units (NRP) is the result of our staff's hard work and dedication over the last three years. Since our initial public offering, we have grown our distribution approximately 44%, nearly tripled the number of leases, more than doubled the number of lessees, nearly doubled the reserves and are continuing to look for other acquisition opportunities," said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer. "Our goal is to continue to grow our distributions by growing the partnership. That includes adding to our reserves, our lessees, our coal leases and our lessees' coal production."

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      Nine months ended
                                        September 30,          September 30,
                                      2005       2004        2005        2004
    Coal royalty revenues:
      Appalachia
        Northern                     $2,198     $2,491      $6,767      $5,039
        Central                      21,950     21,358      70,022      57,320
        Southern                      7,098      4,089      18,455      11,251
          Total Appalachia          $31,246    $27,938     $95,244     $73,610
      Illinois Basin                    956      1,114       3,356       2,612
      Northern Powder River Basin     2,065      1,263       6,154       3,120

     Total                          $34,267    $30,315    $104,754     $79,342

    Coal Royalty Production (tons):
      Appalachia
        Northern                      1,161      1,340       3,577       2,927
        Central                       7,792      8,746      24,989      25,272
        Southern                      1,667      1,274       4,665       4,029
          Total Appalachia           10,620     11,360      33,231      32,228
      Illinois Basin                    624        942       2,198       2,240
      Northern Powder River Basin     1,447        757       4,144       2,249

     Total                           12,691     13,059      39,573      36,717

    Average royalty revenue per ton:
      Appalachia
        Northern                      $1.89      $1.86       $1.89       $1.72
        Central                        2.82       2.44        2.80        2.27
        Southern                       4.26       3.21        3.96        2.79
          Total Appalachia             2.94       2.46        2.87        2.28
      Illinois Basin                   1.53       1.18        1.53        1.17
      Northern Powder River Basin      1.43       1.67        1.49        1.39

     Total                            $2.70      $2.32       $2.65       $2.16



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

                                      Three months ended   Nine months ended
                                         September 30,       September 30,
                                       2005       2004     2005       2004

    Revenues:
      Coal royalties                  $34,267    $30,315  $104,754    $79,342
      Property taxes                    1,552      1,377     4,533      3,961
      Minimums recognized as revenue      431        352     1,365      1,280
      Override royalties                  487        956     1,311      2,390
      Other                             1,998      1,221     4,716      3,107
            Total revenues             38,735     34,221   116,679     90,080
    Operating costs and expenses:
      Depletion and amortization        8,221      7,800    24,725     22,083
      General and administrative        3,527      2,523    10,001      7,656
      Property, franchise
       and other taxes                  1,954      1,464     5,738      4,833
      Coal royalty
       and override payments            1,071        450     2,369      1,236
            Total operating costs
             and expenses              14,773     12,237    42,833     35,808
    Income from operations             23,962     21,984    73,846     54,272
    Other income (expense)
      Interest expense                 (2,889)    (2,694)   (7,916)    (8,792)
      Interest income                     392         78       954        190
    Net income                        $21,465    $19,368   $66,884    $45,670
    Net income attributable to: (A)
      General partner                  $1,103       $605    $3,088     $1,246
      Other holders of incentive
       distribution rights               $363       $117      $943       $178
      Limited partners                $19,999    $18,646   $62,853    $44,246
    Basic and diluted net income per
     limited partner unit:
      Common                             $.79       $.74     $2.48      $1.79
      Subordinated                       $.79       $.74     $2.48      $1.79
    Weighted average number of units
     outstanding:
      Common                           13,987     13,987    13,987     13,266
      Subordinated                     11,354     11,354    11,354     11,354

     (A)  Net income is allocated among the limited partners, the general
          partner and holders of the incentive distribution rights (IDRs)
          based upon their pro rata share of distributions.  The IDRs are
          allocated 65% to the general partner and the remaining 35% to
          affiliates of the general partner.  The IDRs allocated to the
          general partner are included in the net income attributable to the
          general partner.



                        Natural Resource Partners L.P.
                           Statements of Cash Flows
                                (In thousands)
                                 (unaudited)

                                       Three months ended   Nine months ended
                                          September 30,       September 30,
                                        2005       2004      2005      2004
    Cash flows from operating
     activities:
      Net income                      $21,465    $19,368   $66,884   $45,670
      Adjustments to reconcile net
       income to net cash provided
       by operating activities:
        Depletion and amortization      8,221      7,800    24,725    22,083
        Non-cash interest charge           97        291       222       876
      Change in operating assets and
       liabilities:
        Accounts receivable               347       (274)   (3,022)   (3,482)
        Other assets                     (316)       426       285     1,083
        Accounts payable                  202        122        78      (300)
        Accrued interest                2,385      2,180     2,554     1,766
        Deferred revenue                  315       (118)   (2,016)   (1,910)
        Accrued incentive plan
         expenses                       1,389        860     2,613     1,345
        Property, franchise and
         other taxes payable              388        136      (382)      151
          Net cash provided
           by operating activities     34,493     30,791    91,941    67,282

    Cash flows from investing
     activities:
      Acquisition of land, plant and
       equipment, coal and            (54,580)      (401)  (76,124)  (77,733)
       other mineral rights
          Net cash used in investing
           activities                 (54,580)      (401)  (76,124)  (77,733)

    Cash flows from financing
     activities:
      Proceeds from loans              88,000        ---   106,000    75,500
      Repayment of loans              (50,000)       ---   (59,350) (111,850)
      Distributions to partners       (19,216)   (15,663)  (55,113)  (43,614)
      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 of transaction costs    ---        ---       ---  (100,121)
          Net cash provided by (used in)
           financing activities        18,784    (15,663)   (8,463)   22,417
    Net increase or (decrease) in
     cash and cash equivalents         (1,303)    14,727     7,354    11,966
    Cash and cash equivalents at
     beginning of period               50,760     29,996    42,103    24,320
    Cash and cash equivalents at end
     of period                        $49,457    $44,723   $49,457   $36,286

    SUPPLEMENTAL INFORMATION:
    Cash paid during the period for
     interest                            $427       $224    $5,139    $6,151



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

                                    ASSETS

                                                          Sept. 30,  Dec. 31,
                                                            2005       2004
                                                        (Unaudited)
    Current assets:
      Cash and cash equivalents                            $49,457   $42,103
      Accounts receivable                                   18,099    15,058
      Accounts receivable - affiliate                            6        25
      Other                                                     36       786
        Total current assets                                67,598    57,972
    Land                                                    14,110    13,721
    Plant and equipment, net                                 6,011       ---
    Coal and other mineral rights, net                     569,534   523,844
    Loan financing costs, net                                2,217     1,837
    Other assets, net                                        1,726     2,552
        Total assets                                      $661,196  $599,926


                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable                                        $681      $576
      Accounts payable - affiliate                              78       105
      Current portion of long-term debt                      9,350     9,350
      Accrued incentive plan expenses - current portion      1,941     1,559
      Property, franchise and other taxes payable            3,078     3,460
      Accrued interest                                       2,820       266
              Total current liabilities                     17,948    15,316
    Deferred revenue                                        13,795    15,847
    Accrued incentive plan expenses                          5,502     3,271
    Long-term debt                                         202,950   156,300
    Partners' capital:
      Common units (outstanding: 13,986,906)               249,536   243,814
      Subordinated units (outstanding: 11,353,658)         162,191   157,324
      General partner's interest                             9,653     8,802
      Holders of incentive distribution rights                 436       105
      Accumulated other comprehensive loss                    (815)     (853)
              Total partners' capital                      421,001   409,192
              Total liabilities and partners' capital     $661,196  $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  Nine months ended
                                            September 30,     September 30,
                                            2005    2004     2005      2004
                                                     (Unaudited)

    Cash flow from operations             $34,493 $30,791  $91,941   $67,282
    Less scheduled principal payments         ---     ---   (9,350)   (9,350)
    Less reserves for future principal
     payments                              (2,350) (2,350)  (7,050)   (7.050)
    Add reserves used for scheduled
     principal payments                       ---     ---    9,400     9,400
    Distributable cash flow               $32,143 $28,441  $84,941   $60,282

SOURCE Natural Resource Partners L.P.
11/03/2005 R
CONTACT: Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555,
or khager@nrplp.com
Web site: http://www.nrplp.com
http://www.nrplp.com/investors/guidance
(NRP NSP)

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