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Natural Resource Partners L.P. Reports Record 2008 Results

02/12/2009
    Full Year Highlights:
    - Reports record results for 2008 in every metric
    - Distributable cash flow increased 37% from 2007 to $212.7 million
    - Revenues increased 36% to $291.7 million
    - Net income attributable to limited partners rose 58% to $127.9 million
    - Net income per unit rose 56% to $1.97 per unit
    - Distributions attributable to 2008 increased 10% over 2007 to $2.07

    Fourth Quarter Highlights:
    - Distributable cash flow increased 36% from 4Q07 to $66.5 million
    - Revenues increased 32% to $75.8 million
    - Net income attributable to limited partners rose 63% to $36.0 million
    - Net income per unit improved 57% to $0.55
    - Distribution increased for twenty-second consecutive quarter to $0.535
    per unit

HOUSTON, Feb. 12 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported record results in all metrics for 2008. Distributable cash flow, a non-GAAP measure, rose 37% in 2008 to $212.7 million from the $154.8 million reported for 2007. A reconciliation of distributable cash flow to net cash provided by operating activities is provided in the tables attached. Net income attributable to the limited partners increased 58% to $127.9 million for 2008, compared to $81.0 million for 2007. Net income per unit increased 56% to $1.97 per unit in 2008 compared to 2007.

For the fourth quarter 2008, the partnership reported $66.5 million of distributable cash flow, an increase of 36% over the fourth quarter 2007. Net income attributable to the limited partners increased 63% to $36.0 million over the fourth quarter 2007. Net income per unit for the fourth quarter increased to $0.55 per unit from $0.35 per unit in the fourth quarter of 2007.

"Our lessees performed well for us in 2008, leading to record results for NRP," said Nick Carter, President and Chief Operating Officer of Natural Resource Partners L.P. "Although the industry has seen drops in demand and pricing for metallurgical coal over the last few months, our lessees have approximately 90% of their steam coal under contract for 2009, in most cases at prices higher than 2008. As reported in our 2009 guidance released last month, in spite of the downturn in the economy, NRP anticipates that 2009 revenues will exceed our 2008 revenues."

Capital Markets and Liquidity

NRP had approximately $90 million of cash available at the end of the year and has nominal capital expenditures other than acquisitions. In the guidance issued in late January, NRP forecasted generating excess cash in 2009 over its current distribution rate, which cash can be used for increasing the distribution, for additional acquisitions or for principal reduction of its credit facility. NRP currently does not have any need to raise capital through the equity markets and following the acquisition announced in late January, the partnership has approximately $109 million available under its existing credit facility, which does not expire until 2012.

"With our year-end cash balance, our currently forecasted 2009 distribution coverage ratio, credit ratios well within our debt covenants, and amortizing debt with no immediate need to refinance, NRP has the financial flexibility to take advantage of opportunities that may arise in this difficult economic climate," said Dwight Dunlap, Chief Financial Officer.

Distributions

As announced on January 21, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.535 per unit, an increase of $0.01 per unit. This increase represented a 10% increase over the same period last year and a 2% increase over the third quarter 2008 distribution. This was the twenty-second consecutive quarterly increase in the distribution.


                             Quarterly Highlights
                             --------------------
                                      4Q08         3Q08        4Q07
                                      ----         ----        ----
                               (in thousands except per ton and per unit)

    Coal production:                  15,073      14,935      15,442
    Coal royalty revenues:           $58,749     $58,323     $45,259
    Average coal royalty
     revenue per ton:                  $3.90       $3.91       $2.93
    Total revenues:                  $75,822     $76,196     $57,315
     Net income to limited
      partners:                      $36,012     $35,505     $22,142
    Average units outstanding
     in quarter:                      64,891      64,891      64,891
    Net income per unit:               $0.55       $0.55       $0.35
    Distributable cash flow:         $66,502     $53,965     $48,916

    Fourth Quarter 2008 versus Third Quarter 2008

While there were modest fluctuations both up and down in several categories, overall the fourth quarter results were in line with the third quarter. The partnership reported net income per limited partner unit of $0.55, equal to the third quarter. Total expenses declined by approximately $1.7 million mainly due to depletion on lower cost properties and a decrease in the accrual for the partnership's long-term incentive plan.

    Full Year and Fourth Quarter Results

    Revenues
    Full Year

Total revenues for the full year 2008 rose 36% over 2007 to a record $291.7 million with significant increases in coal royalty revenues, coal processing and transportation fees and override royalties as well as increases in oil and gas royalties and aggregates.

Coal royalty revenues increased $54.9 million, or 32%, over a year ago due to a 6% increase in production and a 25% increase in average royalty revenue per ton. Coal processing and transportation fees more than doubled over the full year last year, increasing to $20.4 million from $8.8 million in 2007 as additional throughput occurred at several properties as well as higher prices for coal processing. Overriding royalties nearly tripled to $11.3 million from $3.8 million due to both increased production and higher prices on override properties. In addition, oil and gas royalties increased by 61% to $7.9 million while aggregate royalties increased 23% to $9.1 million.

Metallurgical coal accounted for 30% of NRP coal royalty revenues and 22% of its production for the full year 2008.

Fourth Quarter

Total revenues increased to $75.8 million or 32% over the fourth quarter 2007 due primarily to increases in coal royalty revenues. Coal royalty revenues increased 30% over the fourth quarter of 2007 to $58.7 million primarily due to a 33% increase in the average royalty revenue per ton.

Average coal royalty revenue per ton increased $0.97 to $3.90. The most dramatic increase occurred in Appalachia, where NRP experienced a $1.27 increase per ton, or 40% due to improvements in realizations for both steam coal and met coal. The Illinois Basin also experienced a 29% increase to $2.78 over the fourth quarter of 2007.

Coal processing and transportation fees more than doubled to $6.5 million, up from $3.1 million in the fourth quarter of 2007, mainly due to additional transportation fees in the Illinois Basin, as well as a 6% increase in throughput and higher prices for production processed through the preparation plants in the fourth quarter 2008 versus the fourth quarter 2007. In addition, override royalties more than quadrupled to $3.7 million due to additional production as well as increases in realizations per ton, while oil and gas royalties more than doubled largely due to price increases but also from small production increases.

Expenses

Full Year

Total expenses for 2008 increased $8.0 million over the same period last year to $94.7 million. This rise was due to an increase in depreciation, depletion and amortization expense of $12.9 million due to a increased production coming primarily from properties with higher depletion rates per ton. Offsetting these increases was a reduction of approximately $6.1 million in general and administrative expenses due to declines in the long-term incentive plan accruals as a result of the drop in NRP's unit price this year.

Fourth Quarter

Total expenses decreased $1.2 million in the fourth quarter of 2008 when compared to the same period last year, due to modestly higher depreciation, depletion and amortization offset by a $3.0 million decrease in general and administrative expenses due to reductions in accruals under the partnership's incentive compensation plan.

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.

For additional information, please contact Kathy H. Roberts at 713-751-7555 or kroberts@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 current coal market conditions and borrowing capacity. 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.

    09-03-Financial statements follow-


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

                                  Three Months Ended For the Year Ended
                                      December 31,      December 31,
                                      2008     2007    2008     2007
                                       (unaudited)      (unaudited)
    Coal Royalties:

    Coal royalty
     revenues:
            Appalachia
                Northern              $5,236  $5,600  $17,074  $16,664
                Central               38,467  29,571  156,109  117,820
                Southern               5,142   4,156   19,839   17,832
                    Total Appalachia $48,845 $39,327 $193,022 $152,316
            Illinois Basin             6,701   3,022   21,695    7,963
            Northern Powder River
             Basin                     3,203   2,910   11,533   11,064

      Total                          $58,749 $45,259 $226,250 $171,343

    Coal royalty
     production (tons):
            Appalachia
                Northern               1,363   2,395    5,799    7,270
                Central                8,537   8,813   35,967   35,835
                Southern               1,034   1,089    4,273    4,603
                    Total Appalachia  10,934  12,297   46,039   47,708
            Illinois Basin             2,414   1,402    8,313    3,709
            Northern Powder River
             Basin                     1,725   1,743    6,218    5,815

      Total                           15,073  15,442   60,570   57,232

    Average royalty
     revenue per ton:
            Appalachia
                Northern               $3.84   $2.34    $2.94    $2.29
                Central                 4.51    3.36     4.34     3.29
                Southern                4.97    3.82     4.64     3.87
                    Total Appalachia    4.47    3.20     4.19     3.19
            Illinois Basin              2.78    2.16     2.61     2.15
            Northern Powder River
             Basin                      1.86    1.67     1.85     1.90

          Combined average
           royalty revenue per
           ton                         $3.90   $2.93    $3.74    $2.99

    Aggregates:
    Royalty revenues                  $1,243  $1,485   $6,275   $6,778
    Aggregate royalty bonus             $300    $164   $2,844     $656
    Production                           915   1,242    4,791    5,698
     Average base royalty
      per ton                          $1.36   $1.20    $1.31    $1.19



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

                               Three Months Ended  For the Year Ended
                                  December 31,       December 31,
                                 2008      2007     2008      2007
                                   (unaudited)        (unaudited)

    Revenues:
      Coal royalties            $58,749  $45,259  $226,250  $171,343
      Aggregate royalties         1,544    1,649     9,119     7,434
      Coal processing fees        3,083    1,420     8,781     4,824
      Transportation fees         3,463    1,678    11,656     3,984
      Oil and gas royalties       2,323    1,006     7,902     4,930
      Property taxes              2,040    2,449     9,800    10,285
      Minimums recognized
       as revenue                    64      253     1,257     1,951
      Override royalties          3,689      800    11,327     3,794
      Other                         867    2,801     5,573     6,440
                                    ---    -----     -----     -----
        Total revenues           75,822   57,315   291,665   214,985
    Operating costs and
     expenses:
      Depreciation,
       depletion and
       amortization              15,405   14,067    64,254    51,391
      General and
       administrative             1,151    4,168    13,922    20,048
      Property, franchise
       and other taxes            2,989    2,995    13,558    13,613
      Transportation costs          456      149     1,416       298
      Coal royalty and
       override payments            569      422     1,508     1,336
                                    ---      ---     -----     -----
        Total operating
         costs and expenses      20,570   21,801    94,658    86,686
                                 ------   ------    ------    ------
    Income from
     operations                  55,252   35,514   197,007   128,299
    Other income
     (expense)
      Interest expense           (7,020)  (7,106)  (28,356)  (28,690)
      Interest income               231      651     1,355     2,890
                                    ---      ---     -----     -----
    Net income                  $48,463  $29,059  $170,006  $102,499
                                =======  =======  ========  ========
    Net income
     attributable to:( )
      General partner            $8,433   $4,303   $28,318   $14,315
                                 ======   ======   =======   =======
      Holders of incentive
       distribution rights       $4,018   $2,614   $13,756    $7,216
                                 ======   ======   =======    ======
      Limited partners          $36,012  $22,142  $127,932   $80,968
                                =======  =======  ========   =======

    Basic and diluted
     net income per
     limited partner
     unit:                        $0.55    $0.35     $1.97     $1.26
                                  =====    =====     =====     =====

    Weighted average
     number of units
     outstanding:                64,891   64,891    64,891    64,505
                                 ======   ======    ======    ======




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

                                   Three Months Ended    For the Year Ended
                                      December 31,          December 31,
                                      ------------          ------------
                                      2008      2007       2008      2007
                                      ----      ----       ----      ----
                                       (unaudited)          (unaudited)

    Cash flows from operating
     activities:
      Net income                     $48,463   $29,059   $170,006  $102,499
      Adjustments to reconcile
       net income to net
       cash provided by
       operating activities:
         Depreciation, depletion
          and amortization            15,405    14,067     64,254    51,391
         Non-cash interest charge         12       117        278       443
         Loss from disposition of
          assets                           1    (1,236)        33    (1,236)
      Change in operating
       assets and liabilities:
        Accounts receivable            6,708     2,364     (4,586)   (5,270)
        Other assets                    (714)     (705)       178       178
        Accounts payable and
         accrued liabilities          (1,931)     (247)    (1,484)     (464)
        Accrued interest               3,342     2,596        143     2,430
        Deferred revenue                 479     4,825      4,468    15,632
        Accrued incentive plan
         expenses                     (2,535)      603     (3,041)      465
        Property, franchise and
         other taxes payable           1,583     1,781       (293)    2,085
                                       -----     -----      -----     -----
          Net cash provided by
           operating activities       70,813    53,224    229,956   168,153
                                      ------    ------    -------   -------

    Cash flows from investing
     activities:
        Acquisition of land, coal
         and other mineral rights     (5,500)  (33,891)    (5,500)  (58,124)
        Acquisition or
         construction of plant
         and equipment                  (616)     (860)   (10,568)  (16,695)
        Proceeds from sale of
         assets                            -     1,425          -     1,425
        Cash placed in restricted
         account                       6,240         -      6,240    (6,240)
                                       -----    ------      -----   -------
          Net cash used in
           investing activities          124   (33,326)    (9,828)  (79,634)
                                         ---  --------    -------  --------

    Cash flows from financing
     activities:
        Proceeds from loans                -    23,000          -   285,400
        Deferred financing costs           -         -          -    (1,292)
        Repayments of loans                1         -    (17,234) (235,942)
        Distributions to partners    (45,422)  (38,934)  (171,307) (147,033)
        Contributions by general
         partner                           -         -          -     2,645
                                    --------   -------   --------     -----
          Net cash used in
           financing activities      (45,421)  (15,934)  (188,541)  (96,222)
                                    --------  --------  ---------  --------
     Net increase or
      (decrease) in cash and
      cash equivalents                25,516     3,964     31,587    (7,703)
     Cash and cash equivalents
      at beginning of period          64,412    54,377     58,341    66,044
                                      ------    ------     ------    ------
     Cash and cash equivalents
      at end of period               $89,928   $58,341    $89,928   $58,341
                                     =======   =======    =======   =======

     SUPPLEMENTAL INFORMATION:
        Cash paid during the
         period for interest          $3,556    $4,392    $27,735   $25,771
                                      ======    ======    =======   =======

     Non-cash investing
      activities:
        Equity issued in business
         combinations                     $-        $-         $-  $330,064
        Assets contributed by
         general partner in a
         business combination              -         -          -     4,422

        Liability assumed in
         business combination              -         -          -     1,989



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


                                      ASSETS

                                                     December 31, December 31,

                                                          2008        2007
                                                          ----        ----
                                                       (unaudited)

    Current assets:
       Cash and cash equivalents                         $89,928     $58,341
       Restricted cash                                         -       6,240
       Accounts receivable, net of allowance for
        doubtful accounts                                 31,883      27,643
       Accounts receivable - affiliate                     1,351       1,005
       Other                                                 934       1,009
                                                             ---       -----
         Total current assets                            124,096      94,238
    Land                                                  24,343      24,343
    Plant and equipment, net                              67,204      61,441
    Coal and other mineral rights, net                   979,692   1,030,088
    Intangible assets                                    102,828     106,222
    Loan financing costs, net                              2,679       3,098
    Other assets, net                                        498         601
                                                             ---         ---
         Total assets                                 $1,301,340  $1,320,031
                                                      ==========  ==========

         LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
       Accounts payable and accrued liabilities             $861      $2,606
       Accounts payable - affiliate                          365         104
       Current portion of long-term debt                  17,235      17,234
       Accrued incentive plan expenses - current
        portion                                            3,179       3,993
       Property, franchise and other taxes payable         6,122       6,415
       Accrued interest                                    6,419       6,276
                                                           -----       -----
         Total current liabilities                        34,181      36,628
    Deferred revenue                                      40,754      36,286
    Accrued incentive plan expenses                        4,242       6,469
    Long-term debt                                       478,822     496,057
    Partners' capital:
          Common units                                   727,965     731,113
        General partner's interest                        15,148      14,177
        Holders of incentive distribution rights             878           -
        Accumulated other comprehensive loss                (648)       (699)
                                                           -----       -----
          Total partners' capital                        743,341     744,591
                                                         -------     -------
          Total liabilities and partners' capital     $1,301,340  $1,320,031
                                                      ==========  ==========


                          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  For the Year Ended
                                        December 31,       December 31,
                                        -------------      -------------
                                        2008      2007     2008      2007
                                        ----      ----     ----      ----
                                          (unaudited)       (unaudited)

    Net cash provided by operating
     activities                        $70,813  $53,244  $229,956  $168,153
    Less scheduled principal payments        -        -   (17,234)   (9,350)
    Less reserves for future principal
     payments                           (4,311)  (4,308)  (17,235)  (13,388)
    Add reserves used for scheduled
     principal payments                      -        -    17,234     9,400
                                             -        -    ------     -----
    Distributable cash flow            $66,502  $48,916  $212,721  $154,815
                                       =======  =======  ========  ========


SOURCE
Natural Resource Partners L.P.

CONTACT:
Kathy H. Roberts of Natural Resource Partners L.P., +1-713-751-7555, kroberts@nrplp.com

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