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Natural Resource Partners L.P. Reports Record Second Quarter Revenues and Increases Guidance

08/04/2010

Second Quarter 2010 Highlights:
-- Distributable cash flow of $63.8 million, up 30% from 2Q09
-- Record revenues of $79.6 million, up 34% from 2Q09
-- Net income attributable to the limited partners of $28.1 million, up 484% from 2Q09
-- Net income per unit of $0.38, up 443% from 2Q09
-- Distribution of $0.54 per unit
-- Year-to-date metallurgical coal accounts for 33% of coal production and 40% of coal royalty revenues

HOUSTON, Aug 04, 2010 /PRNewswire via COMTEX/ --

Natural Resource Partners L.P. (NYSE: NRP)today reported that improved coal markets led to record revenues and significantly higher second quarter 2010 results. Distributable cash flow, a non-GAAP measure, increased 30% over the second quarter of 2009 to $63.8 million. Net income attributable to the limited partners of $28.1 million increased $23.3 million or 484% over the same period last year. Net income per unit increased significantly to $0.38 from the $0.07 per unit reported for the second quarter 2009. Adjusting for a one-time write-off in 2009, net income attributable to limited partners increased $15.2 million and net income per unit in 2010 doubled that of 2009. Reconciliations of distributable cash flow to GAAP and adjusted net income per unit are provided in the tables at the end of the release.

"NRP's financial performance improved for both the quarter and the first half, as prices realized by our lessees for both metallurgical and steam coal were higher than those experienced since the start of this recession. As a result of the higher prices, revenues and coal royalty realizations per ton were at record levels for the second quarter," said Nick Carter, President and Chief Operating Officer. "The metallurgical coal market is much stronger than a year ago and has stabilized at relatively high levels and the steam coal market is improving fairly significantly. The cold winter and the hot summer weather experienced so far in the coal consuming regions of the country have led to lower stockpiles at the utilities and increasing demand."

                         Three     Three      %
    Highlights          Months    Months   Change
                         Ended     Ended    Three
                       June 30,  June 30,  Months
                           2010      2009  ------
                           ----      ----
                       (in thousands except per unit, per ton and %)
    Revenues
    Total revenues:     $79,587   $59,487       34%
    Coal production:     11,767    11,784        -
    Coal royalty
     revenues:          $57,832   $46,380       25%
    Average coal
     royalty revenue
     per ton:             $4.91     $3.94       25%
    Revenues other
     than coal
     royalties          $21,755   $13,107       66%

    Net income
    Net income to
     limited
     partners:          $28,054    $4,804      484%
    Net income per
     unit:                $0.38     $0.07      443%
    Average units
     outstanding:        74,028    66,946       11%

    Distributable
     cash flow:         $63,792   $49,068       30%


                          Six       Six        %
    Highlights          Months    Months    Change
                         Ended     Ended      Six
                       June 30,  June 30,   Months
                           2010      2009   ------
                           ----      ----
                       (in thousands except per unit, per ton and %)
    Revenues
    Total revenues:    $143,106  $126,220        13%
    Coal production:     22,569    24,266       (7%)
    Coal royalty
     revenues:         $104,993   $98,987         6%
    Average coal
     royalty revenue
     per ton:             $4.65     $4.08        14%
    Revenues other
     than coal
     royalties          $38,113   $27,233        40%

    Net income
    Net income to
     limited
     partners:          $44,918   $26,402        70%
    Net income per
     unit:                $0.63     $0.40        58%
    Average units
     outstanding:        71,752    65,924         9%

    Distributable
     cash flow:         $97,614   $84,561        15%


Revenues

Second Quarter

NRP reported record quarterly revenues for the second quarter 2010 of $79.6 million, a $20.1 million increase, or 34%, over the second quarter 2009 mainly due to increases in the realized prices for coal. While production in the second quarter was virtually flat with that of last year's second quarter, average coal royalty revenue per ton increased 25% over the same quarter last year to a record $4.91. NRP's lessees realized higher prices for both steam and metallurgical coal in the second quarter.

Revenues other than coal royalties increased 66%, or approximately $8.6 million, from the second quarter last year mainly due to:

  • increased throughput on the coal processing and transportation assets generating an $847 thousand increase in fees;
  • an increase of approximately $1.1 million in oil and gas royalties mainly due to the new venture with International Paper;
  • a $3.1 million quarterly non-recoupable minimum recognized as income for each quarter of 2010, which after this year, will only be recognized as revenues when recouped through production;
  • $1.8 million from additional production on override royalty properties; and
  • a $1.9 million payment for granting a right-of-way easement in the second quarter 2010.

Six Months

The improvements seen in the second quarter are reflected in the six month numbers. The increases in realized prices for coal more than offset the slight decline in production for the six month period. Metallurgical coal accounted for 33% of NRP's production and 40% of its coal royalty revenues for the first six months of 2010.

Operating Expenses

Second Quarter

NRP incurred total operating costs and expenses of $27.6 million in the second quarter of 2010, down by $4.2 million or 13% mainly due to lower depreciation, depletion and amortization expense realized in the second quarter of 2010 versus the second quarter 2009. In addition, the second quarter of 2009 included a one-time write-off of $8.2 million associated with a closed mine. Second quarter 2010 general and administrative expenses also included $1.2 million for costs associated with the formation of the venture with International Paper.

Six Months

Operating costs for the first six months of 2010, net of depreciation, depletion and amortization, were virtually flat with that of the prior year first six months.

Net income

Second Quarter

Net income to the limited partners increased significantly to $28.1 million in the second quarter 2010 over the second quarter 2009 of $4.8 million. Net income per unit increased to $0.38 per unit even though there was an 11% increase in the average number of units outstanding in the second quarter 2010 versus the same period last year. Excluding the write-off of a mine in the second quarter of 2009, earnings per unit for the second quarter of 2009 would have been $0.19, resulting in the second quarter 2010 earnings doubling over that of 2009.

Distributable cash flow

Second Quarter

Distributable cash flow increased $14.7 million, or 30% over the second quarter of 2009, to $63.8 million in the second quarter of 2010 due to the improved revenues period over period.

Second Quarter 2010 compared to First Quarter 2010

                                     2Q10                1Q10     % Change
                                (in thousands, except per ton
                                        and per unit)
    Total revenues:               $79,587             $63,519           25%
    Coal production:               11,767              10,802            9%
    Coal royalty
     revenues:                    $57,832             $47,161           23%
    Average coal royalty
     revenue per ton:               $4.91               $4.37           12%
    Revenues other than
     coal royalty:                $21,755             $16,358           33%
    Net income to
     limited partners:            $28,054             $16,864           66%
    Net income per unit:            $0.38               $0.24           58%
    Average units
     outstanding:                  74,028              69,451            7%
    Distributable cash
     flow:                        $63,792             $33,822           89%


Revenues

Total revenues for the second quarter 2010 improved 25% over the first quarter 2010, to a record $79.6 million, mainly due to improvements in coal royalty revenues. Coal production increased 9% while average coal royalty revenue per ton increased 12% to a record of $4.91. NRP experienced increased production in all regions except the Northern Powder River Basin. The largest increases occurred in Central Appalachia and the Illinois Basin where production increased approximately 600 thousand tons in each region. Increased shipments in Central Appalachia were equally split between metallurgical and steam coal production as the markets began to improve. The increase in the Illinois Basin was due to improved production following a longwall move that occurred predominantly in the first quarter. Revenues other than coal royalty increased $5.4 million primarily due to increased throughput on the coal processing and transportation assets accounting for a $2.3 million increase, approximately $900 thousand from the one month of the new joint venture and $1.9 million from the right of way easement discussed earlier. Aggregate royalties were basically flat for the two periods but a negative accrual adjustment for the aggregates bonus received with respect to the 2009 performance of the DuPont Washington property caused the reduction in the total.

Operating Expenses

Operating expenses for the second quarter of 2010 were comparable with the first quarter except for depreciation, depletion and amortization, which included increased amortization of certain intangibles due to increased production for the second quarter and changes in estimate on our contract amortization.

Net income

Net income to the limited partners increased 66% in the second quarter to $28.1 million, reflecting the improved production and the pricing experienced in the coal industry this quarter, while per unit increased slightly less than net income on a percentage basis, due to the additional units issued in early April.

Distributable cash flow

Distributable cash flow increased 89% this quarter to $63.8 million from last quarter due to the improvements in revenues as well as increased minimums received this quarter.

Current Market

The coal markets have improved significantly over the last six months. Metallurgical coal prices increased substantially in the first half of the year and have now stabilized at prices approximately twice that of a year ago. In addition, the steam coal stockpiles at utilities are significantly lower than six to nine months ago. The weather over the last nine months in the coal producing region has contributed significantly to the lowering of these stockpiles. Demand for steam coal has been increasing domestically and, while the growth in demand for metallurgical coal has slowed somewhat recently, it has improved significantly over the last year. Utilizations at steel mills have improved domestically and there has been strong demand globally.

Guidance - Update

                              Revised              Original
                           2010 Guidance        2010 Guidance
                               (Range)             (Range)
                               -------             -------


    Coal royalty
     revenues           $195.0   -     $210.0 $175.0   -     $205.0
    Coal production(mm
     tons)                42.0   -       48.0   41.0   -       50.0
    Total revenues      $265.0   -     $295.0 $235.0   -     $285.0

    Distributable cash
     flow(1)            $190.0   -     $210.0 $150.0   -     $185.0
    Net income per unit  $1.00   -      $1.20  $0.75   -      $1.25



       (1) Estimated distributable cash flow includes $37.1 million for
       minimums received in 2010
    that have not been recognized as revenue.


NRP is narrowing the ranges and increasing its guidance for the remainder of the year due to the record revenues experienced in the first half of 2010. While NRP has modestly reduced its production forecast for the second half, improved pricing for metallurgical as well as steam coal has allowed it to increase all other guidance.

Metallurgical coal accounts for 37% of total coal royalty revenues and 32% of production for the revised forecast.

Acquisitions and Liquidity

As previously announced, early in the second quarter 2010 NRP issued 4,576,700 units generating $112.5 million in proceeds, $74 million of which was used to repay the outstanding balance on the credit facility at that time and the remainder was used to fund acquisitions in the second quarter.

During the second quarter, NRP completed four acquisitions totaling $72.7 million, $66.5 million of which was funded during the quarter. An additional $2.7 million has been paid since the end of the quarter and another $3.5 million will be paid before year-end. The largest of these acquisitions was the $42.5 million invested in the new venture with International Paper that will own, manage and develop the more than 7 million mineral acres formerly owned by International Paper. The remaining three acquisitions included aggregate properties in California and Georgia and the construction of a limestone processing facility in Indiana for a combined purchase price of $30.2 million.

"With the equity offering completed at the beginning of the second quarter, the $265 million that we have available on our credit facility, the $78 million in cash at the end of the second quarter, and the improvements in the coal markets, NRP believes it has the capital available to fund its committed capital obligations and maintain its distribution at the current level through the remainder of 2010," said Dwight Dunlap, Chief Financial Officer.

Distributions

As reported on July 21, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.54 per unit, unchanged from the first quarter 2010.

Company Profile

Natural Resource Partners L.P. is a master limited partnership headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is principally engaged in the business of owning and managing mineral reserve properties. NRP primarily owns coal, aggregate and oil and gas reserves across the United States that generate royalty income for the partnership.

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.

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

                                          Three Months Ended
                                               June 30,
                                               --------
                                             2010          2009
                                             ----          ----
                                              (unaudited)
    Coal Royalties:
    Coal royalty revenues:
            Appalachia
                Northern                   $4,924        $2,890
                Central                    38,526        30,308
                Southern                    6,074         4,809
                                            -----         -----
                    Total Appalachia      $49,524       $38,007
            Illinois Basin                  6,819         6,570
            Northern Powder River
             Basin                          1,489         1,803
                                            -----         -----

    Total                                 $57,832       $46,380
                                          =======       =======

    Coal royalty production
     (tons):
            Appalachia
                Northern                    1,251           967
                Central                     6,971         6,989
                 Southern                     833           798
                                              ---           ---
                    Total Appalachia        9,055         8,754
            Illinois Basin                  1,751         1,956
            Northern Powder River
             Basin                            961         1,074
                                              ---         -----

      Total                                11,767        11,784
                                           ======        ======

    Average royalty revenue
     per ton:
            Appalachia
         Northern                           $3.94         $2.99
         Central                             5.53          4.34
         Southern                            7.29          6.03
                    Total Appalachia         5.47          4.34
            Illinois Basin                   3.89          3.36
            Northern Powder River
             Basin                           1.55          1.68

        Combined average
         royalty revenue per
         ton                                $4.91         $3.94

    Aggregates:
    Royalty revenues                       $1,064        $1,047
    Aggregate royalty bonus                 $(714)         $300
    Production:                               778           791
    Average base royalty
     per ton:                               $1.37         $1.32


                                             For the Six Months
                                                    Ended
                                                  June 30,
                                                  --------
                                               2010          2009
                                               ----          ----
                                                (unaudited)
    Coal Royalties:
    Coal royalty revenues:
            Appalachia
                Northern                     $9,340        $5,933
                Central                      70,334        68,186
                Southern                     10,275         9,906
                                             ------         -----
                    Total Appalachia        $89,949       $84,025
            Illinois Basin                   11,029        10,821
            Northern Powder River
             Basin                            4,015         4,141
                                              -----         -----

    Total                                  $104,993       $98,987
                                           ========       =======

    Coal royalty production
     (tons):
            Appalachia
                Northern                      2,498         2,066
                Central                      13,367        14,978
                 Southern                     1,534         1,639
                                              -----         -----
                    Total Appalachia         17,399        18,683
            Illinois Basin                    2,898         3,282
            Northern Powder River
             Basin                            2,272         2,301
                                              -----         -----

      Total                                  22,569        24,266
                                             ======        ======

    Average royalty revenue
     per ton:
            Appalachia
         Northern                             $3.74         $2.87
         Central                               5.26          4.55
         Southern                              6.70          6.04
                    Total Appalachia           5.17          4.50
            Illinois Basin                     3.81          3.30
            Northern Powder River
             Basin                             1.77          1.80

        Combined average
         royalty revenue per
         ton                                  $4.65         $4.08

    Aggregates:
    Royalty revenues                         $1,880        $1,977
    Aggregate royalty bonus                   $(639)       $1,020
    Production:                               1,383         1,481
    Average base royalty
     per ton:                                 $1.36         $1.33


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


                                                For the Six Months
                            Three Months Ended                        Ended
                                 June 30,                 June 30,
                                 --------                 --------
                               2010             2009      2010        2009
                               ----             ----      ----        ----
                               (Unaudited)              (Unaudited)
    Revenues:
      Coal royalties        $57,832          $46,380  $104,993     $98,987
      Aggregate
       royalties                350            1,347     1,241       2,997
      Coal processing
       fees                   2,693            2,400     4,337       4,300
      Transportation
       fees                   4,043            3,489     6,818       5,585
      Oil and gas
       royalties              2,087              953     3,186       2,446
      Property taxes          2,782            2,514     5,433       5,725
      Minimums
       recognized as
       revenue                3,418               67     6,792         290
      Override
       royalties              3,157            1,336     6,124       3,884
      Other                   3,225            1,001     4,182       2,006
                              -----            -----     -----       -----
            Total revenues   79,587           59,487   143,106     126,220
    Operating costs
     and expenses:
      Depreciation,
       depletion and
       amortization          16,485           21,996    27,853      35,074
      General and
       administrative         6,794            5,834    13,342      13,340
      Property,
       franchise and
       other taxes            3,498            3,151     7,232       7,126
      Transportation
       costs                    557              473       822         741
      Coal royalty
       and override
       payments                 301              372       993         861
                                ---              ---       ---         ---
            Total operating
             costs and
             expenses        27,635           31,826    50,242      57,142
                             ------           ------    ------      ------
    Income from
     operations              51,952           27,661    92,864      69,078
    Other income
     (expense)
      Interest
       expense              (10,346)         (10,675)  (21,075)    (18,754)
      Interest income             4               96        12         178
                                ---              ---       ---         ---
    Income before
     non-
     controlling
     interest                41,610           17,082    71,801      50,502
                             ------           ------    ------      ------
        Non-
         controlling
         interest                 -                -         -           -
                                ---              ---       ---         ---
    Net income              $41,610          $17,082   $71,801     $50,502
                            =======          =======   =======     =======
     Net income
      attributable
      to:
      General partner          $573              $98      $917        $539
                               ====              ===      ====        ====
      Holders of
       incentive
       distribution
       rights               $12,983          $12,180   $25,966     $23,561
                            =======          =======   =======     =======
      Limited
       partners             $28,054           $4,804   $44,918     $26,402
                            =======           ======   =======     =======

    Basic and
     diluted net
     income per
     limited
     partner unit:            $0.38            $0.07     $0.63       $0.40
                              =====            =====     =====       =====

    Weighted
     average number
     of units
     outstanding:            74,028           66,946    71,752      65,924
                             ======           ======    ======      ======




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


                                          Three Months Ended
                                               June 30,
                                               --------
                                            2010                2009
                                            ----                ----
                                              (Unaudited)
    Cash flows from operating
     activities:
      Net income                         $41,610             $17,082
      Adjustments to reconcile net
       income to net
           cash provided by operating
            activities:
         Depreciation, depletion and
          amortization                    16,485              21,996
         Non-cash interest charge, net       141                 128
         Loss from disposition of assets
       Change in operating assets and
        liabilities:
         Accounts receivable              (2,966)              5,328
         Other assets                       (101)                  -
         Accounts payable and accrued
          liabilities                        331                 148
         Accrued interest                  6,814               7,054
         Deferred revenue                  7,628               2,798
         Accrued incentive plan expenses   1,181               2,034
         Property, franchise and other
          taxes payable                      549                 559
                                             ---                 ---
          Net cash provided by operating
           activities                     71,672              57,127
                                          ------              ------

    Cash flows from investing
     activities:
       Acquisition of land, coal and
        other mineral rights             (64,261)                  -
       Acquisition or construction of
        plant and equipment               (2,102)                  -
                                          ------                 ---
          Net cash used in investing
           activities                    (66,363)                  -
                                         -------                 ---

    Cash flows from financing
     activities:
       Proceeds from loans                35,000                   -
       Proceeds from issuance of units   110,436                   -
       Capital contribution by general
        partner                            2,350                   -
       Deferred financing costs                -                   -
       Repayments of loans               (83,350)             (9,350)
       Retirement of obligation related
        to acquisitions                                      (20,000)
       Costs associated with issuance
        of units                            (152)                (21)
       Distributions to partners         (54,039)            (47,370)
                                         -------             -------
          Net cash (used in) provided by
           financing activities           10,245             (76,741)
                                          ------             -------
     Net  increase or (decrease) in
      cash and cash equivalents           15,554             (19,614)
     Cash and cash equivalents at
      beginning of period                 62,856             101,109
                                          ------             -------
     Cash and cash equivalents at end
      of period                          $78,410             $81,495
                                         =======             =======

     SUPPLEMENTAL INFORMATION:
        Cash paid during the period for
         interest                         $3,370              $3,480
                                          ======              ======

     Non-cash investing activities:
         Mineral rights to be received   $13,249                  $-
         Liability assumed in
          acquisitions                         -               1,170
         Equity issued for acquisitions        -              95,910
         Non-controlling interest         (7,355)                  -
    Non-cash financing activities:        $1,723                  $-
         Obligation related to purchase
          of reserves and
       infrastructure


                                              For the Six Months Ended
                                                      June 30,
                                                      --------
                                                     2010             2009
                                                     ----             ----
                                                     (Unaudited)
    Cash flows from operating
     activities:
      Net income                                  $71,801          $50,502
      Adjustments to reconcile net
       income to net
           cash provided by operating
            activities:
         Depreciation, depletion and
          amortization                             27,853           35,074
         Non-cash interest charge, net                291            1,010
         Loss from disposition of assets                -                -
       Change in operating assets and
        liabilities:
         Accounts receivable                       (5,085)           1,865
         Other assets                                 119              267
         Accounts payable and accrued
          liabilities                                  98             (247)
         Accrued interest                            (322)           3,909
         Deferred revenue                          20,641            8,310
         Accrued incentive plan expenses           (1,340)           1,568
         Property, franchise and other
          taxes payable                              (503)          (1,579)
                                                     ----           ------
          Net cash provided by operating
           activities                             113,553          100,679
                                                  -------          -------

    Cash flows from investing
     activities:
       Acquisition of land, coal and
        other mineral rights                     (110,411)         (95,641)
       Acquisition or construction of
        plant and equipment                        (2,102)          (1,157)
                                                   ------           ------
          Net cash used in investing
           activities                            (112,513)         (96,798)
                                                 --------          -------

    Cash flows from financing
     activities:
       Proceeds from loans                         81,000          303,000
       Proceeds from issuance of units            110,436                -
       Capital contribution by general
        partner                                     2,350                -
       Deferred financing costs                         -             (661)
       Repayments of loans                        (98,542)        (160,542)
       Retirement of obligation related
        to acquisitions                            (2,969)         (60,000)
       Costs associated with issuance
        of units                                     (152)             (21)
       Distributions to partners                  (97,387)         (94,090)
                                                  -------          -------
          Net cash (used in) provided by
           financing activities                    (5,264)         (12,314)
                                                   ------          -------
     Net  increase or (decrease) in
      cash and cash equivalents                    (4,224)          (8,433)
     Cash and cash equivalents at
      beginning of period                          82,634           89,928
                                                   ------           ------
     Cash and cash equivalents at end
      of period                                   $78,410          $81,495
                                                  =======          =======

     SUPPLEMENTAL INFORMATION:
        Cash paid during the period for
         interest                                 $21,070          $13,760
                                                  =======          =======

     Non-cash investing activities:
         Mineral rights to be received            $13,249               $-
         Liability assumed in
          acquisitions                                  -            1,170
         Equity issued for acquisitions                 -           95,910
         Non-controlling interest                  (7,355)               -
    Non-cash financing activities:                 $6,200          $59,220
         Obligation related to purchase
          of reserves and
       infrastructure


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

                                ASSETS

                                                                December
                                                  June 30,         31,
                                                        2010         2009
                                                        ----         ----
                                                (unaudited)
    Current assets:
       Cash and cash equivalents                     $78,410      $82,634
       Accounts receivable, net of
        allowance for doubtful accounts               29,144       27,141
       Accounts receivable - affiliate                 7,424        4,342
       Other                                             498          930

         Total current assets                        115,476      115,047
    Land                                              24,343       24,343
    Plant and equipment, net                          62,295       64,351
    Coal and other mineral rights, net             1,251,551    1,151,835
    Intangible assets                                165,072      164,554
    Loan financing costs, net                          2,663        2,891
    Other assets, net                                    882          569

        Total assets                              $1,622,282   $1,523,590
                                                  ==========   ==========

    LIABILITIES AND PARTNERS' CAPITAL

    Current liabilities:
        Accounts payable and accrued
         liabilities                                    $944         $914
        Accounts payable - affiliates                    247          179
        Obligation related to acquisitions             6,200        2,969
        Current portion of long-term debt             31,518       32,235
        Accrued incentive plan expenses -
         current portion                               4,209        4,627
        Property, franchise and other taxes
         payable                                       5,661        6,164
        Accrued interest                               9,978       10,300
                                                                   ------
              Total current liabilities               58,757       57,388
    Deferred revenue                                  87,659       67,018
    Accrued incentive plan expenses                    6,449        7,371
    Long-term debt                                   609,762      626,587
    Partners' capital:
          Common units (74,027,836 in 2010,
           69,451,136 in 2009)                       825,160      747,437
        General partner's interest                    14,728       13,409
        Holders of incentive distribution
         rights                                       12,983        4,977
        Non-controlling interest                       7,355            -
        Accumulated other comprehensive loss            (571)        (597)
                                                        ----         ----
              Total partners' capital                859,655      765,226
                                                         ---      -------
              Total liabilities and partners'
               capital                            $1,622,282   $1,523,590
                                                  ==========   ==========



                            Natural Resource Partners L.P.
                     Reconciliation of GAAP Financial Measurements
                          to Non-GAAP Financial Measurements
                                    (In thousands)

    Reconciliation of GAAP "Net cash provided by operating activities"
    To Non-GAAP "Distributable cash flow"


                                                For the Six Months
                       Three Months Ended                            Ended
                            June 30,                June 30,
                            --------                --------
                           2010           2009      2010           2009
                           ----           ----      ----           ----
                          (unaudited)              (unaudited)

    Net cash provided
     by operating
     activities         $71,672        $57,127  $113,553       $100,679
    Less scheduled
     principal
     payments            (9,350)        (9,350)  (24,542)        (9,542)
    Less reserves for
     future principal
     payments            (7,880)        (8,059)  (15,939)       (16,118)
    Add reserves used
     for scheduled
     principal
     payments             9,350          9,350    24,542          9,542
                          -----          -----    ------          -----
    Distributable cash
     flow               $63,792        $49,068   $97,614        $84,561
                        =======        =======   =======        =======



      Reconciliation of GAAP "Net income attributable to the limited partners"
       To Non-GAAP "Adjusted net income attributable to the limited partners"


                                              For the Six Months
                            Three Months Ended                    Ended
                                 June 30,              June 30,
                                 --------              --------
                                   2010          2009     2010      2009
                                   ----          ----     ----      ----
                               (unaudited)            (unaudited)

    Non-GAAP
    GAAP net income             $41,610       $17,082  $71,801   $50,502
    Add write-off of
     property due to mine
     closure                                    8,195              8,195
                                    ---         -----      ---     -----
    Adjusted net income         $41,610       $25,277  $71,801   $58,697
                                =======       =======  =======   =======
    Adjusted net income
     attributable to:
      General partner              $573          $262     $917      $703
                                   ====          ====     ====      ====
      Holders of incentive
       distribution rights:     $12,983       $12,180  $25,966   $23,561
                                =======       =======  =======   =======
      Limited partners          $28,054       $12,835  $44,918   $34,433
                                =======       =======  =======   =======

    Adjusted basic and
     diluted net income per
     limited partner unit         $0.38         $0.19    $0.63     $0.52
                                  =====         =====    =====     =====

    Weighted average number
     of units outstanding:       74,028        66,946   71,752    65,924
                                 ======        ======   ======    ======



SOURCE Natural Resource Partners L.P.

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