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Natural Resource Partners L.P. Reports Record 2005 and Strong Fourth Quarter Results

02/14/2006

Record 2005 Results:
* Net income increases 56% over 2004 to a record $91.8 million or $3.39 per unit
* Coal royalty revenues increase 33% over 2004 to a record $142.1 million
* Distributable cash flow increases 38% over 2004 to a record $112.3 million

Fourth Quarter Highlights:
* Net income increases 87% over 4Q 2004 to $25.0 million or $0.91 per unit
* Coal royalty revenues increase 38% over 4Q 2004 to $37.4 million
* Distributable cash flow increases 29% over 4Q 2004 to $27.4 million
* Distribution per unit increases 15% over 4Q 2004 to $0.7625

HOUSTON, Feb. 14 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP and NYSE: NSP) today reported record net income of $91.8 million for 2005, a 56% increase over the $59.0 million reported for 2004. Net income per unit rose 48% to $3.39 per unit. Distributable cash flow for 2005 rose 38% to a record $112.3 million from $81.5 million last year.

(Logo: http://www.newscom.com/cgi-bin/prnh/20060109/NRPLOGO )

For the fourth quarter 2005, NRP reported that net income improved by 87% to $25.0 million from $13.3 million for the same period last year, while distributable cash flow rose 29% to $27.4 million from $21.2 million in 2004. Net income per unit rose 82% to $0.91 per unit from $0.50 per unit for the quarter.

"Increased production from our properties together with higher prices realized by our lessees combined to produce a record year for NRP and our unitholders," said Chief Operating Officer Nick Carter. "We are particularly excited about the acquisitions we made during 2005, which have performed exceptionally well. They give us more diversity in our cash flow and provide a strong foundation for our future. As a result of the continued strong coal market, we were able to use $30 million of our cash to help fund these acquisitions while continuing to regularly increase our quarterly distributions to our unitholders.

"We now own in excess of two billion tons of coal, giving us a current reserve life of approximately 37 years and we are constantly looking for opportunities to increase those reserves through accretive acquisitions."

"As we look to the future, our goal is to continue to grow the partnership through acquisitions and by actively managing and developing our current assets. Consistent growth will permit us to continue to increase our distributions to our partners," said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer.

2005 Financial Results

NRP's total revenues increased 31% to a record $159.1 million in 2005 from $121.4 million for 2004. Coal royalty revenues for 2005 rose 33% to $142.1 million compared to $106.5 million last year. This increase results from both a 20% increase in average per ton royalty revenue to $2.65 and an 11% increase in production to 53.6 million tons. Appalachian production increased 7%, the Illinois Basin production decreased 11% and Northern Powder River Basin production increased approximately 85%. For 2005, approximately 31% of NRP's coal royalty revenues and 27% of its production were from metallurgical coal, which is normally priced higher than steam coal. Other revenue rose 41% to $6.5 million primarily due to significant increases in both wheelage income and oil and gas income.

Total expenses increased to $57.6 million, or 14% over 2004. Depreciation, depletion and amortization increased 12% as a result of higher production. General and administrative expenses increased 7% or $0.8 million over last year due to increased costs associated with managing a larger number of properties. Property, franchise and other taxes increased $1.3 million due to franchise taxes in additional states in which the partnership now operates. Coal royalty and override payments increased $1.3 million mainly due to increased override payments reflecting increased coal prices.

Fourth Quarter 2005 Financial Results

Fourth quarter revenues grew 35% to $42.4 million compared to $31.4 million for the same period last year. Production increases of 21% or 2.4 million tons predominantly in Northern Appalachia and the Northern Powder River Basin together with increases in average coal royalty revenues per ton of 14% to $2.66 from $2.33 helped raise coal royalty revenues by 38% to $37.4 million over the fourth quarter 2004.

Fourth quarter 2005 total expenses were basically flat at $14.8 million when compared with last year at $14.7 million. However, there were significant changes both in depreciation, depletion and amortization and general and administrative expenses. Depreciation, depletion and amortization grew by $1.0 million to $9.0 million due to higher depletion on properties recently acquired. General and administrative expenses decreased by $1.5 million for the fourth quarter compared to last year mainly due to decreases in the incentive compensation accrual. Property, franchise and other taxes increased by $0.4 million largely as a result of properties acquired.

Distributions

On January 19, 2005, NRP announced its tenth consecutive increase in its quarterly distribution, raising the distribution to $0.7625 per unit, or $3.05 per unit on an annualized basis. This represents a 15% increase in Natural Resource Partners' distributions compared to the fourth 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. 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. Such statements include comments regarding growth of the partnership and increases in distributions. 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            Year ended
                                     December 31,              December 31,
                                  2005         2004         2005         2004
    Coal royalty revenues:
      Appalachia
        Northern                $4,539       $2,045      $11,306       $7,084
        Central                 22,986       19,263       93,008       76,583
        Southern                 6,634        3,623       25,089       14,874
          Total Appalachia     $34,159      $24,931     $129,403      $98,541
      Illinois Basin               932        1,240        4,288        3,852
      Northern Powder
       River Basin               2,292          943        8,446        4,063

    Total                      $37,383      $27,114     $142,137     $106,456

    Coal Royalty Production
     (tons):
      Appalachia
        Northern                 2,400        1,252        5,977        4,179
        Central                  7,801        7,430       32,790       32,702
        Southern                 1,597        1,179        6,263        5,208
          Total Appalachia      11,798        9,861       45,030       42,089
      Illinois Basin               583          898        2,781        3,138
      Northern Powder
       River Basin               1,651          881        5,795        3,130

    Total                       14,032       11,640       53,606       48,357

    Average royalty revenue
     per ton:
      Appalachia
        Northern                 $1.89        $1.63        $1.89        $1.70
        Central                   2.95         2.59         2.84         2.34
        Southern                  4.15         3.07         4.01         2.86
          Total Appalachia        2.90         2.53         2.87         2.34
      Illinois Basin              1.60         1.38         1.54         1.23
      Northern Powder
       River Basin                1.39         1.07         1.46         1.30

     Total                       $2.66        $2.33        $2.65        $2.20



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

                                 Three months ended            Year ended
                                     December 31,              December 31,
                                  2005         2004         2005         2004
                              (unaudited)  (unaudited)  (unaudited)
    Revenues:
      Coal royalties           $37,383      $27,114     $142,137     $106,456
      Property taxes             1,983        1,388        6,516        5,349
      Minimums recognized
       as revenue                  344          483        1,709        1,763
      Override royalties           833          832        2,144        3,222
      Other                      1,831        1,535        6,547        4,642
        Total revenues          42,374       31,352      159,053      121,432
    Operating costs and
     expenses:
      Depreciation, depletion
       and amortization          9,005        7,994       33,730       30,077
      General and
       administrative            2,318        3,847       12,319       11,503
      Property, franchise
       and other taxes           2,404        2,002        8,142        6,835
      Coal royalty and
       override payments         1,023          809        3,392        2,045
        Total operating costs
         and expenses           14,750       14,652       57,583       50,460
    Income from operations      27,624       16,700      101,470       70,972
    Other income (expense)
      Interest expense          (3,128)      (2,400)     (11,044)     (11,192)
      Interest income              459          159        1,413          349
      Loss on early
       extinguishment of debt      ---       (1,135)         ---       (1,135)
    Net income                 $24,955      $13,324      $91,839      $58,994
    Net income attributable
     to: (A)
      General partner           $1,403         $458       $4,491       $1,705
      Holders of incentive
       distribution rights        $486         $103       $1,429         $281
      Limited partners         $23,066      $12,763      $85,919      $57,008
    Basic and diluted net
     income per limited
     partner unit:
      Common                     $0.91        $0.50        $3.39        $2.29
      Subordinated               $0.91        $0.50        $3.39        $2.29
    Weighted average number
     of units outstanding:
      Common                    15,407       13,987       14,345       13,447
      Subordinated               9,934       11,354       10,996       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)

                                 Three months ended            Year ended
                                     December 31,              December 31,
                                  2005         2004         2005         2004
                              (unaudited)  (unaudited)  (unaudited)
    Cash flows from
     operating activities:
      Net income               $24,955      $13,324      $91,839      $58,994
      Adjustments to reconcile
       net income to net cash
       provided by operating
       activities:
        Depreciation, depletion
         and amortization        9,005        7,994       33,730       30,077
        Non-cash interest charge    96           56          318          932
        Loss on early
         extinguishment of debt    ---        1,135          ---        1,135
      Change in operating
       assets and liabilities:
        Accounts receivable     (3,847)        (611)      (6,869)      (4,093)
        Other assets              (332)        (847)         (47)         236
        Accounts payable             6          253           84          (47)
        Accrued interest        (1,286)      (2,181)       1,268         (415)
        Deferred revenue         1,020        2,703         (996)         793
        Accrued incentive
         plan expenses            (943)       1,229        1,670        2,574
        Property, franchise
         and other taxes
         payable                 1,060          510          678          661
          Net cash provided by
           operating
           activities           29,734       23,565      121,675       90,847

    Cash flows from investing
     activities:
        Acquisition of land,
         coal and other
         mineral rights        (29,578)         ---      (99,683)     (77,733)
        Acquisition of plant
         and equipment             ---          ---       (6,019)         ---
          Net cash used in
           investing
           activities          (29,578)         ---     (105,702)     (77,733)

    Cash flows from
     financing activities:
        Proceeds from loans     19,000          ---      125,000       75,500
        Deferred financing
         costs                    (861)        (969)        (861)        (969)
        Repayments of loans        ---          ---      (59,350)    (111,850)
        Distributions to
         partners              (20,060)     (16,779)     (75,173)     (60,393)
        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)
        Redemption of fractional
         units upon conversion
         of subordinated units      (1)         ---           (1)         ---
          Net cash (used in)
           provided by financing
           activities           (1,922)     (17,748)     (10,385)       4,669
      Net (decrease) or
       increase in cash and
       cash equivalents         (1,766)       5,817        5,588       17,783
      Cash and cash equivalents
       at beginning of period   49,457       36,286       42,103       24,320
      Cash and cash equivalents
       at end of period        $47,691      $42,103      $47,691      $42,103

    SUPPLEMENTAL INFORMATION:
      Cash paid during the
       period for interest      $4,320       $4,452       $9,459      $10,603



                        Natural Resource Partners L.P.
                         Consolidated Balance Sheets
                 (In thousands, except for unit information)

                                    ASSETS

                                                   December 31,   December 31,
                                                       2005           2004
                                                   (Unaudited)
    Current assets:
      Cash and cash equivalents                      $47,691        $42,103
      Accounts receivable                             21,946         15,058
      Accounts receivable - affiliate                      6             25
      Other                                              833            786
         Total current assets                         70,476         57,972
    Land                                              14,123         13,721
    Plant and equipment, net                           5,924            ---
    Coal and other mineral rights, net               590,459        523,844
    Loan financing costs, net                          2,431          1,837
    Other assets, net                                  1,583          2,552
         Total assets                               $684,996       $599,926


                      LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
      Accounts payable                                  $677           $576
      Accounts payable - affiliate                        88            105
      Current portion of long-term debt                9,350          9,350
      Accrued incentive plan expenses -
       current portion                                 1,105          1,559
      Property, franchise and other taxes payable      4,138          3,460
      Accrued interest                                 1,534            266
        Total current liabilities                     16,892         15,316
    Deferred revenue                                  14,851         15,847
    Accrued incentive plan expenses                    5,395          3,271
    Long-term debt                                   221,950        156,300
    Partners' capital:
      Common units (outstanding: 16,825,305 in
       2005, 13,986,906 in 2004 )                    292,990        243,814
      Subordinated units (outstanding: 8,515,228
       in 2005, 11,353,658 in 2004)                  123,114        157,324
      General partner's interest                      10,024          8,802
      Holders of incentive distribution rights           582            105
      Accumulated other comprehensive loss              (802)          (853)
        Total partners' capital                      425,908        409,192
        Total liabilities and partners' capital     $684,996       $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            Year ended
                                    December 31,              December 31,
                                 2005         2004         2005         2004
                                                  (Unaudited)

    Cash flow from operations  $29,734      $23,565     $121,675      $90,847
    Less scheduled principal
     payments                      ---          ---       (9,350)      (9,350)
    Less reserves for future
     principal payments         (2,350)      (2,350)      (9,400)      (9,400)
    Add reserves used for
     scheduled principal
     payments                      ---          ---        9,400        9,400
    Distributable cash flow    $27,384      $21,215     $112,325      $81,497

SOURCE Natural Resource Partners L.P.
02/14/2006
CONTACT: Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555,
or khager@nrplp.com
Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20060109/NRPLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
Web site: http://www.nrplp.com
(NRP NSP)

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