Third Quarter 2006 Highlights:
* Net income of $25.3 million, or $0.85 per unit
* Coal royalty revenues of $36.9 million
* Distributable cash flow of $31.0 million
* Increased distribution to $0.85 per unit
* Increased revenue and distributable cash flow guidance for the year
HOUSTON, Nov. 2 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P.
(NYSE: NRP) and (NYSE: NSP) today reported net income of $25.3 million for the
third quarter 2006, up 18% from the $21.5 million reported for the same period
in 2005. Net income per unit increased to $0.85 from $0.79 per unit in 2005.
Distributable cash flow for the third quarter 2006 decreased slightly to
$31.0 million from $32.1 million a year ago.
For the first nine months of 2006, NRP reported net income of
$78.8 million, also up 18% over the same period last year. Net income per
unit rose to $2.72 from $2.48 for 2005 while distributable cash flow increased
12% over last year to $95.5 million.
"Our lessees reported higher prices in the third quarter than we had
anticipated, resulting in a much better quarter," said President and Chief
Operating Officer Nick Carter. "Although there has been much written about
coal prices being lower, especially in Central Appalachia, we are not seeing
that trend in the prices reported to us by our lessees. We believe this is
due to the diversity and quality of our properties and lessees and to the
excellent job our lessees do in mining and selling our coal."
Third Quarter 2006 Financial Results
NRP reported a 7% increase in third quarter 2006 total revenues to
$41.5 million from $38.7 million last year. Third quarter 2006 coal royalty
revenues rose 8% to $36.9 million from $34.3 million last year, primarily due
to a 7% increase in average royalty revenue per ton to a record $2.88 per ton.
NRP experienced significant average royalty revenue per ton increases in all
regions except Southern Appalachia, where the average royalty revenue per ton
dropped $0.34 due to production from lower royalty rate leases. Average
royalty revenue per ton in the Northern Powder River Basin included an upward
annual price adjustment. A decrease in production in the Illinois Basin was
more than offset by a slight increase in the Northern Powder River Basin.
Total third quarter 2006 expenses decreased approximately 13% to
$12.9 million from the $14.8 million reported in the third quarter last year.
Depreciation, depletion and amortization was $1.2 million lower due to
production from lower cost properties and an approximate $800 thousand
decrease in coal royalty and override payments by NRP due to the expiration of
one override and another override being temporarily reduced due to production
from adjacent properties.
While net income increased significantly for the quarter, changes in
working capital led to a decrease in distributable cash flow of approximately
$1.1 million for the third quarter 2006 versus 2005.
Year-to-date Financial Results
Total revenues for the nine month period increased 11% to $129.0 million
from $116.7 million. Year to date coal royalty revenues improved 7% to
$112.5 million compared to $104.8 million last year. This primarily results
from a 6% increase in average coal royalty per ton to $2.80 per ton from the
$2.65 per ton reported last year. Similar to our quarter results, production
was consistent with our forecast, and was essentially flat as compared to the
first nine months of 2005. Year to date approximately 24% of NRP's production
and 29% of its coal royalty revenue was from metallurgical coal. Revenues
other than coal royalty revenue grew 38% to a total of $16.5 million mainly
due to increases in oil and gas royalties of $1.4 million, or 65%, over last
year. In addition, we received $2.6 million related to the sale of timber
assets in the first and second quarters of this year.
Total expenses were down approximately $2.0 million or 5% to $40.8 million
year to date. Depreciation, depletion and amortization decreased 11% as a
result of lower depletion rates. General and administrative expenses
increased 10%, or $1.0 million, over last year primarily due to increased
costs associated with managing a larger number of properties and incentive
compensation accruals. Property, franchise and other taxes increased
$0.7 million due to property and franchise taxes in additional states in which
the partnership now operates. Coal royalty and override payments by NRP were
down approximately $1.1 million, or 47%, due to the expiration of one override
payment and the temporary reduction of another due to production occurring on
adjacent property.
Distributions; Expected Conversion of NSP Units
On October 17, 2006, NRP announced its thirteenth consecutive increase in
its quarterly distribution, raising the distribution to $0.85 per unit, or
$3.40 per unit on an annualized basis, for both NRP and NSP. This represents
a 15% increase in Natural Resource Partners' distributions compared to the
third quarter of 2005. This distribution will be paid on November 14 to
holders of record on November 1. Following the payment of the distribution in
November, one-third of the currently outstanding subordinated units that trade
under the ticker symbol "NSP" will convert into common units and begin trading
under the "NRP" ticker symbol.
2006 Guidance
NRP is increasing its 2006 guidance due to higher than anticipated prices
for coal sold by its lessees during the third quarter. We now anticipate
higher revenues than previously stated at the end of the second quarter.
Following are some updated key projections for 2006:
Range
Coal Royalty Revenues ($ millions) 142.0 - 146.0
Total Revenues ($ millions) 165.0 - 169.0
Net Income ($ millions) 98.0 - 102.0
Net Income per unit ($ per unit) 3.35 - 3.45
Distributable Cash Flow ($ millions) 118.0 - 122.0
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 Nine months ended
September 30, September 30,
2006 2005 2006 2005
Coal royalty revenues:
Appalachia
Northern $2,292 $2,198 $8,330 $6,767
Central 24,568 21,950 74,953 70,022
Southern 5,471 7,098 16,088 18,455
Total Appalachia $32,331 $31,246 $99,371 $95,244
Illinois Basin 808 956 4,465 3,356
Northern Powder
River Basin 3,763 2,065 8,703 6,154
Total $36,902 $34,267 $112,539 $104,754
Coal royalty production (tons):
Appalachia
Northern 1,177 1,161 4,391 3,577
Central 7,873 7,792 24,050 24,989
Southern 1,395 1,667 4,256 4,665
Total Appalachia 10,445 10,620 32,697 33,231
Illinois Basin 368 624 2,507 2,198
Northern Powder
River Basin 1,985 1,447 4,983 4,144
Total 12,798 12,691 40,187 39,573
Average royalty revenue per ton:
Appalachia
Northern $1.95 $1.89 $1.90 $1.89
Central 3.12 2.82 3.12 2.80
Southern 3.92 4.26 3.78 3.96
Total Appalachia 3.10 2.94 3.04 2.87
Illinois Basin 2.20 1.53 1.78 1.53
Northern Powder
River Basin 1.90 1.43 1.75 1.49
Total $2.88 $2.70 $2.80 $2.65
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,
2006 2005 2006 2005
Revenues:
Coal royalties $36,902 $34,267 $112,539 $104,754
Oil and gas royalties 853 1,056 3,500 2,126
Property taxes 1,532 1,552 4,827 4,533
Minimums recognized
as revenue 633 431 1,254 1,365
Override royalties 283 487 767 1,311
Other 1,288 942 6,114 2,590
Total revenues 41,491 38,735 129,001 116,679
Operating costs and expenses:
Depreciation, depletion
and amortization 7,009 8,221 22,098 24,725
General and administrative 3,475 3,527 11,010 10,001
Property, franchise and
other taxes 2,142 1,954 6,486 5,738
Coal royalty and override
payments 296 1,071 1,250 2,369
Total operating costs
and expenses 12,922 14,773 40,844 42,833
Income from operations 28,569 23,962 88,157 73,846
Other income (expense)
Interest expense (3,960) (2,889) (11,253) (7,916)
Interest income 665 392 1,938 954
Net income $25,274 $21,465 $78,842 $66,884
Net income attributable
to: (A)
General partner $2,641 $1,103 $6,989 $3,088
Holders of incentive
distribution rights $1,150 $363 $2,914 $943
Limited partners $21,483 $19,999 $68,939 $62,853
Basic and diluted net income
per limited partner unit:
Common $0.85 $0.79 $2.72 $2.48
Subordinated $0.85 $0.79 $2.72 $2.48
Weighted average number of
units outstanding:
Common 16,825 13,987 16,825 13,987
Subordinated 8,515 11,354 8,515 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,
2006 2005 2006 2005
Cash flows from operating
activities:
Net income $25,274 $21,465 $78,842 $66,884
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, depletion
and amortization 7,009 8,221 22,098 24,725
Non-cash interest charge 97 97 288 222
Gain from sale of assets --- --- (2,634) ---
Change in operating assets
and liabilities:
Accounts receivable (2,332) 347 (2,439) (3,022)
Other assets 282 (316) 525 285
Accounts payable 255 202 235 78
Accrued interest 1,020 2,385 2,237 2,554
Deferred revenue 625 315 1,033 (2,016)
Accrued incentive plan
expenses 996 1,389 2,506 2,613
Property, franchise and
other taxes payable 158 388 (147) (382)
Net cash provided by
operating activities 33,384 34,493 102,544 91,941
Cash flows from investing
activities:
Acquisition of land, plant
and equipment, coal and
other mineral rights (54,401) (54,580) (105,839) (76,124)
Proceeds from sale of
assets --- --- 4,761 ---
Net cash used
in investing
activities (54,401) (54,580) (101,078) (76,124)
Cash flows from financing
activities:
Proceeds from loans 53,000 88,000 103,000 106,000
Repayments of loans --- (50,000) (24,350) (59,350)
Distributions to
partners (23,819) (19,216) (67,023) (55,113)
Net cash provided by
(used in) financing
activities 29,181 18,784 11,627 (8,463)
Net (decrease) or
increase in cash and
cash equivalents 8,164 (1,303) 13,093 7,354
Cash and cash equivalents
at beginning of period 52,620 50,760 47,691 42,103
Cash and cash equivalents
at end of period $60,784 $49,457 $60,784 $49,457
SUPPLEMENTAL INFORMATION:
Cash paid during the period
for interest $2,841 $427 $8,702 $5,139
Natural Resource Partners L.P.
Consolidated Balance Sheets
(In thousands, except for unit information)
ASSETS
September 30, December 31,
2006 2005
(Unaudited)
Current assets:
Cash and cash equivalents $60,784 $47,691
Accounts receivable 24,332 21,946
Accounts receivable - affiliate 59 6
Other 307 833
Total current assets 85,482 70,476
Land 12,461 14,123
Plant and equipment, net 25,070 5,924
Coal and other mineral rights, net 655,078 590,459
Loan financing costs, net 2,182 2,431
Other assets, net 1,095 1,583
Total assets $781,368 $684,996
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $817 $677
Accounts payable - affiliate 183 88
Current portion of long-term debt 9,350 9,350
Accrued incentive plan expenses -
current portion 5,326 1,105
Property, franchise and other taxes payable 3,991 4,138
Accrued interest 3,771 1,534
Total current liabilities 23,438 16,892
Deferred revenue 15,884 14,851
Accrued incentive plan expenses 3,680 5,395
Long-term debt 300,600 221,950
Partners' capital:
Common units (outstanding: 16,825,307) 298,571 292,990
Subordinated units (outstanding: 8,515,228) 126,351 123,114
General partner's interest 12,058 10,024
Holders of incentive distribution rights 1,549 582
Accumulated other comprehensive loss (763) (802)
Total partners' capital 437,766 425,908
Total liabilities and partners' capital $781,368 $684,996
Natural Resource Partners L.P.
Reconciliation of GAAP "Net cash provided by operating activities"
To Non-GAAP "Distributable cash flow"
(In thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30
2006 2005 2006 2005
Cash flow from operations $33,384 $34,493 $102,544 $91,941
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 $31,034 $32,143 $95,544 $84,941
SOURCE Natural Resource Partners L.P.
CONTACT:
Kathy Hager of Natural Resource Partners L.P.,
+1-713-751-7555,
or
khager@nrplp.com
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