Second Quarter Highlights: - Record distributable cash flow of $43.5 million, up 44% over 2Q06 - Record revenues of $51.1 million, up 25% - Net income attributable to limited partners of $18.1 million, down 17% to $0.28 per unit - Increases distribution for sixteenth consecutive quarter to $0.465 per unit - Lowers distributable cash flow guidance to $135-$150 million for remainder of 2007 due to production delays at three newly acquired operationsHOUSTON, Aug 06, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Natural Resource Partners L.P.
(NYSE: NRP) (NYSE: NSP) today reported record distributable cash flow, a non-
GAAP measure, of $43.5 million, up 44% from the $30.2 million reported for the
second quarter 2006. Net income attributable to the limited partners decreased
to $18.1 million, or $0.28 per unit, for the second quarter of 2007, compared
to $21.8 million, or $0.43 per unit, for the second quarter of 2006.
"The performance of the majority of our lessees is at or above forecast
and we expect coal prices to continue to improve over the remainder of the
year, but our year-end results will be negatively impacted by operational
issues associated with properties acquired in two recent transactions," said
Nick Carter, President and Chief Operating Officer. "We expect improvements to
occur at these operations over the next year, however, and we remain
optimistic about 2008."
Highlights
2Q07 1Q07 2Q06
(in thousands except per ton and per unit)
Coal Production: 13,573 13,510 13,374
Coal Royalty Revenues: $ 40,733 $ 40,973 $ 36,527
Average coal royalty
revenue per ton: $ 3.00 $ 3.03 $ 2.73
Total revenues: $ 51,097 $ 50,207 $ 40,982
Net income to limited
partners: $ 18,145 $ 17,779 $ 21,848
Average units outstanding
in quarter: 64,886 63,295 50,681
Net income per unit: $ 0.28 $ 0.28 $ 0.43
Distributable cash flow: $ 43,511 $ 28,343 $ 30,210
Second Quarter and Year-to-Date Results
Excluding the properties acquired in the Cline and Dingess-Rum
acquisitions, both production and revenues were ahead of NRP's first half
forecast, bolstered by the strong performance of the other assets we acquired
during the last year.
Total revenues increased 25% to a record $51.1 million for the second
quarter of 2007, compared to $41.0 million reported for the same period last
year. Second quarter 2007 coal royalty revenues increased 12% to $40.7 million
from $36.5 million last year as the partnership continued to experience
increased coal royalty revenues per ton in all regions, with an overall
average coal royalty revenue per ton of $3.00. Total production for the
partnership in the second quarter was 13.6 million tons compared to
13.4 million tons in 2006.
Total revenues increased 16% over the first six months of 2006 to
$101.3 million, while distributable cash flow increased 11% over the same
period. Coal royalty revenues increased 8% to $81.7 million, largely the
result of improved pricing, as NRP's total production remained essentially
flat over the six month comparative period at approximately 27 million tons.
Aggregate royalties, coal processing fees, and transportation fees, new
lines of business for NRP, generated approximately $3.9 million in the second
quarter of 2007.
Total expenses increased $9.0 million to $22.0 million in the second
quarter. Depreciation, depletion and amortization, a non-cash item, accounted
for $5.3 million, or approximately 60% of the increase, primarily as a result
of acquisitions during the last year. General and administrative expenses
increased by $2.2 million due to accruals under our long term incentive plan
and additional staff. Property, franchise and other taxes increased
$1.4 million mainly due to taxes on properties acquired since last year, a
significant portion of which are offset by reimbursements from our lessees,
which are recorded in revenues.
Interest expense increased $3.4 million over second quarter last year to
$7.1 million due to additional borrowings associated with acquisitions
completed during the last year.
While total revenues for the second quarter increased by $10.1 million,
net income attributable to the limited partners decreased $3.7 million to
$18.1 million. For the six month period, net income attributable to the
limited partners decreased 24% to $35.9 million, or $0.56 per unit. The
decreases in net income are mainly due to increases in depreciation, depletion
and amortization as well as interest on NRP's recent acquisitions. In
addition, approximately 14.2 million additional units were issued during the
time period, and as distributions to all unitholders increase, a larger
percentage of the total distributions and net income is allocated to the
holders of the incentive distribution rights, including NRP's general partner.
Discussion of Recently Acquired Properties
The Cline properties we acquired have experienced delays while ramping up
to full production. The Gatling operation in Northern Appalachia encountered
initial unexpected geologic problems, but as mining has progressed, conditions
have improved significantly. In addition, Cline is making operational changes
in an effort to achieve the production levels originally anticipated. Those
production levels likely will not be reached, however, until sometime in 2008.
At the Williamson operation in Illinois, the mine is currently at full
production during the development phase of the longwall, but the delays that
occurred in the early mine development will result in the longwall not
starting production until early 2008. In addition, because NRP's royalty is
paid when coal is shipped rather than when mined and Cline has been
stockpiling coal at the mine as it negotiates sales contracts with utilities,
NRP's revenues from Williamson were lower than expected in the first half.
NRP expects to receive significantly higher royalty payments and
transportation fees from the Williamson mine in the second half of the year as
several contracts were recently finalized.
Similarly, as reported in the first quarter, one of our lessees on the
properties acquired from Dingess-Rum encountered difficult operating
conditions in its longwall mine and is in the process of changing the mine
plan. The change will cause a reduction in production levels and coal royalty
revenues in the short term, but NRP anticipates that this mine will return to
full operation with the longwall sometime in 2008. The lessee's surface mines
also experienced temporary shut-downs in the second quarter resulting from
several factors, including lower shipments, stockpiles at capacity, and the
recent judicial decision in West Virginia regarding the permitting of valley
fills. Most of the mines have now resumed normal production and are expected
to produce for the remainder of 2007.
"We remain confident that these acquisitions will be large positive
contributors to revenues when these issues have been resolved," said Corbin J.
Robertson, Jr., Chairman and Chief Executive Officer. "The reserves that we
acquired are economically recoverable and should provide significant
distributable cash flow in the future."
Outlook and Updated Guidance
The Williamson mine is now producing at the development rate forecasted
and the longwall will be in production in early 2008, which is 3 months later
than originally forecasted. Production at the Gatling operation is
increasing, and Cline is making the appropriate adjustments to achieve the
projected production rate in 2008. The mine change plans at the Dingess-Rum
property will occur over the next year and when completed, NRP projects that
production will return to the forecasted levels.
"We believe that the right operational decisions are being made by our
lessees and we will continue to closely monitor these mines," said Nick
Carter.
Primarily as a result of the production issues at the Gatling, Williamson
and Dingess-Rum properties, offset somewhat by improving prices on other
operations, NRP is lowering guidance for the remainder of the year. NRP now
anticipates 2007 total revenues to range from $205 million to $224 million,
with 2007 distributable cash flow between $135 million and $150 million. A
table is attached with further guidance on various financial metrics.
Distributions
On July 18, the partnership announced its sixteenth consecutive increase
in its quarterly distribution to $0.465 per unit or $1.86 on an annualized
basis, a 2.2% increase over the first quarter 2007 distribution and a 13.4%
increase over the second quarter distribution last year. The distribution
will be paid on August 14, 2007 to unitholders of record on August 1, 2007.
Capital Structure and Acquisitions
In the second quarter, three events affected the capital structure of the
partnership: an acquisition, a two-for-one unit split, and a change in the New
York Stock Exchange rules. On April 2, 2007, NRP issued an additional
250,000 units and paid $10.2 million in cash for the Mettiki coal reserve
acquisition from Western Pocahontas Properties, a partnership controlled by
our chairman, Corbin J. Robertson, Jr. On April 18, the partnership completed
a two-for-one split on all outstanding units. Finally, as a result of a
change in the New York Stock Exchange listing standards on May 22, 2007, the
currently outstanding Class B units automatically converted into common units.
NRP currently has 53,537,502 common units and 11,353,634 subordinated units
outstanding following all the transactions listed above.
In a separate transaction, NRP paid $8.4 million of a total of
$16.2 million for a coal preparation plant located in Eckman, WV that is
currently under construction.
Company Profile
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, and coal handling and transportation infrastructure in the
three major coal producing regions of the United States: Appalachia, the
Illinois Basin and the Powder River Basin. In addition, the partnership also
manages aggregate reserves, oil and gas properties and timber assets across
the United States. The common units are traded on the New York Stock Exchange
(NYSE) under the symbol NRP and the subordinated units are traded on the NYSE
under the symbol NSP.
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.
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.
Forward Looking Statements
This press release may include "forward-looking statements" as defined by
the Securities and Exchange Commission. Such statements include the 2007
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.
Natural Resource Partners L.P.
Operating Statistics
(In thousands except per ton data)
(Unaudited)
Three months ended For the six months ended
June 30, June 30,
2007 2006 2007 2006
Coal Royalties:
Coal royalty revenues:
Appalachia
Northern $4,353 $2,730 $7,123 $6,038
Central 28,339 24,543 58,586 50,385
Southern 4,989 5,133 9,028 10,617
Total Appalachia $37,681 $32,406 $74,737 $67,040
Illinois Basin 1,365 1,704 2,479 3,656
Northern Powder
River Basin 1,687 2,417 4,490 4,941
Total $40,733 $36,527 $81,706 $75,637
Coal royalty production (tons):
Appalachia
Northern 1,901 1,482 3,235 3,214
Central 8,855 7,982 18,095 16,176
Southern 1,297 1,436 2,330 2,862
Total Appalachia 12,053 10,900 23,660 22,252
Illinois Basin 659 977 1,161 2,140
Northern Powder
River Basin 861 1,497 2,261 2,998
Total 13,573 13,374 27,082 27,390
Average royalty revenue per ton:
Appalachia
Northern $2.29 $1.84 $2.20 $1.88
Central 3.20 3.07 3.24 3.11
Southern 3.85 3.58 3.87 3.71
Total Appalachia 3.13 2.97 3.16 3.01
Illinois Basin 2.07 1.74 2.14 1.71
Northern Powder
River Basin 1.96 1.61 1.99 1.65
Combined average
royalty revenue
per ton $3.00 $2.73 $3.02 $2.76
Aggregates:
Royalty revenues $1,944 -- $3,689 --
Production: 1,531 -- 2,872 --
Average base
royalty per ton: $1.27 -- $1.28 --
Natural Resource Partners L.P.
Consolidated Statements of Income
(In thousands, except per unit data)
Three months ended For the six months ended
June 30, June 30,
2007 2006 2007 2006
(Unaudited) (Unaudited)
Revenues:
Coal royalties $40,733 $36,527 $81,706 $75,637
Aggregate royalties 1,944 -- 3,689 --
Coal processing fees 1,112 -- 2,030 --
Transportation fees 845 1,306 --
Oil and gas royalties 1,278 928 2,536 2,647
Property taxes 2,645 1,546 4,873 3,295
Minimums recognized
as revenue 331 250 785 621
Override royalties 1,023 181 2,041 484
Other 1,186 1,550 2,338 4,826
Total revenues 51,097 40,982 101,304 87,510
Operating costs and expenses:
Depreciation, depletion
and amortization 12,527 7,236 24,279 15,089
General and
administrative 5,559 3,420 12,193 7,535
Property, franchise
and other taxes 3,524 2,099 6,625 4,344
Transportation costs 27 -- 70 --
Coal royalty and
override payments 382 263 668 954
Total operating
costs and expenses 22,019 13,018 43,835 27,922
Income from operations 29,078 27,964 57,469 59,588
Other income (expense)
Interest expense (7,133) (3,675) (14,460) (7,293)
Interest income 686 755 1,503 1,273
Net income $22,631 $25,044 $44,512 $ 53,568
Net income attributable to: (1)
General partner $3,074 $2,253 $5,893 $4,348
Holders of incentive
distribution rights $1,412 $943 $2,695 $1,764
Limited partners $18,145 $21,848 $ 35,924 $ 47,456
Basic and diluted net income per limited partner unit:
Common $0.28 $0.43 $0.56 $0.94
Subordinated $0.28 $0.43 $0.56 $0.94
Class B $0.28 $-- $0.56 $--
Weighted average number of units outstanding:
Common 52,925 33,651 51,914 33,651
Subordinated 11,354 17,030 11,354 17,030
Class B 607 -- 826 --
(1) 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 For the six months ended
June 30, June 30,
2007 2006 2007 2006
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $22,631 $25,044 $ 44,512 $53,568
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion
and amortization 12,527 7,236 24,279 15,089
Non-cash interest
charge 115 91 209 191
Gain from sale
of assets -- (458) -- (2,634)
Change in operating assets and liabilities:
Accounts receivable 1,273 (103) (2,799) (107)
Other assets 336 (25) 557 243
Accounts payable and
accrued liabilities (492) (57) (294) (20)
Accrued interest 3,031 (689) 2,597 1,217
Deferred revenue 4,016 1,040 7,917 408
Accrued incentive
plan expenses 2,562 1,139 (633) 1,510
Property, franchise and
other taxes payable (138) (708) 259 (305)
Net cash provided
by operating
activities 45,861 32,510 76,604 69,160
Cash flows from investing activities:
Acquisition of land,
plant and equipment,
coal and other
mineral rights (18,661) (16,438) (32,633) (51,438)
Current payable
assumed in
business combination (1,154) -- -- --
Proceeds from sale
of timber assets -- 829 -- 4,761
Cash placed in
restricted accounts (72) -- (6,314) --
Net cash used in
investing
activities (19,887) (15,609) (38,947) (46,677)
Cash flows from financing activities:
Proceeds from loans 18,400 -- 255,400 50,000
Deferred financing
costs (179) -- (1,286) --
Repayments of loans (9,350) (9,350) (235,542) (24,350)
Distributions
to partners (36,338) (22,299) (70,464) (43,204)
Contribution by
general partner 330 -- 2,645 --
Net cash used in
financing
activities (27,137) (31,649) (49,247) (17,554)
Net (decrease) or
increase in cash
and cash equivalents (1,163) (14,748) (11,590) 4,929
Cash and cash
equivalents at
beginning of period 55,617 67,368 66,044 47,691
Cash and cash
equivalents at
end of period $54,454 $52,620 $54,454 $52,620
SUPPLEMENTAL INFORMATION:
Cash paid during the
period for interest $3,979 $4,261 $11,627 $ 5,861
Non-cash investing activities:
Units issued for assets
and liabilities $7,119 $-- $350,741 $--
Liability assumed in
business combination 39 -- 1,989 --
Natural Resource Partners L.P.
Consolidated Balance Sheets
(In thousands)
ASSETS
June 30, December 31,
2007 2006
(Unaudited)
Current assets:
Cash and cash equivalents $54,454 $66,044
Restricted cash 6,314 --
Accounts receivable,
net of allowance for doubtful accounts 25,607 23,357
Accounts receivable - affiliate 570 21
Other 514 1,411
Total current assets 87,459 90,833
Land 24,522 17,781
Plant and equipment, net 55,245 29,615
Coal and other mineral rights, net 1,015,616 798,135
Intangible assets 111,511 --
Loan financing costs, net 3,300 2,197
Other assets, net 1,032 932
Total assets $1,298,685 $939,493
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $2,736 $1,041
Accounts payable - affiliate 105 105
Current portion of long-term debt 9,542 9,542
Accrued incentive plan expenses -
current portion 4,127 5,418
Property, franchise and other taxes payable 4,589 4,330
Accrued interest 6,443 3,846
Total current liabilities 27,542 24,282
Deferred revenue 28,571 20,654
Asset retirement obligation 39 --
Accrued incentive plan expenses 5,237 4,579
Long-term debt 474,149 454,291
Partners' capital:
Common units 667,095 338,912
Subordinated units 79,973 83,772
General partner's interest 16,412 12,138
Holders of incentive distribution rights 392 1,616
Accumulated other comprehensive loss (725) (751)
Total partners' capital 763,147 435,687
Total liabilities and partners' capital $1,298,685 $939,493
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 For the six months ended
June 30, June 30,
2007 2006 2007 2006
Cash flow from
operations $45,861 $32,510 $76,604 $69,160
Less scheduled
principal payments (9,350) (9,350) (9,350) (9,350)
Less reserves
for future
principal payments (2,400) (2,350) (4,800) (4,700)
Add reserves used
for scheduled
principal payments 9,400 9,400 9,400 9,400
Distributable
cash flow $43,511 $30,210 $71,854 $64,510
Natural Resource Partners L.P.
Updated Guidance
August 6, 2007
(dollars and tons in millions except per unit amounts)
Full Year 2007
Regional Statistics (Range)
Coal royalty production (tons)
Northern Appalachia 7.0 - 7.5
Central Appalachia 35.0 - 38.0
Southern Appalachia 4.5 - 5.5
Appalachia 46.5 - 51.0
Illinois Basin 2.5 - 4.0
Northern Powder River Basin 5.0 - 6.0
Total 54.0 - 61.0
Aggregate production (tons) 5.0 - 5.5
Coal royalty revenues
Northern Appalachia $15.5 - $17.5
Central Appalachia 113.0 - 117.0
Southern Appalachia 20.0 - 22.0
Appalachia $148.5 - $156.5
Illinois Basin 6.5 - 8.5
Northern Powder River Basin 9.0 - 10.0
Total $164.0 - $175.0
Revenues
Coal royalty revenues $164.0 - 175.0
Aggregate revenues 7.0 - 7.5
Coal processing and
transportation fees 10.0 - 15.0
Other revenues (1) 24.0 - 26.0
Total Revenues $205.0 - $223.5
Expenses
Coal transportation expenses $0.2 - $0.6
Depreciation, depletion,
and amortization 48.0 - 58.0
General and administrative 20.0 - 23.0
Other expenses (2) 12.0 - 14.0
Total operating expenses 80.2 95.6
Interest expense (net) $24.0 - $26.0
Net income $95.0 $105.0
Net income per unit $1.20 - $1.35
Principal payments $13.4 - $13.4
Distributable cash flow (3) $135.0 - $150.0
(1) Other revenues consist of minimums recognized as revenue, oil and gas
revenues, property taxes, override royalties, wheelage, rentals and
timber.
(2) Other expenses include property, franchise and other taxes as well as
coal royalty and override payments.
(3) Distributable cash flow represents net income plus depreciation,
depletion and amortization minus scheduled and reserved for 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.
Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555, khager@nrplp.com
http://www.nrplp.com