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Natural Resource Partners L.P. Reports 2010 Results

02/10/2011

HOUSTON, Feb. 10, 2011 /PRNewswire via COMTEX/ --

Full Year 2010 Highlights:

  • Record revenues
  • Record distributable cash flow
  • Net income per unit of $1.54
  • Acquisitions totaling $179 million to fuel future growth
  • Elimination of incentive distribution rights

Fourth Quarter 2010 Highlights:

  • Record distributable cash flow
  • Net income per unit of $0.39
  • Distribution of $0.54 per unit

Natural Resource Partners L.P. (NYSE: NRP)today reported record revenues and distributable cash flow for the year ended December 31, 2010. Annual revenues increased 18% over 2009 to a record $301.4 million. Distributable cash flow, a non-GAAP measure, increased 27% over the full year 2009 to $227.0 million. Net income attributable to the limited partners of $125.9 million increased 59% over the same period last year. Net income per unit improved 32% to $1.54 from the $1.17 per unit reported for 2009. A reconciliation of distributable cash flow to GAAP is included in the table at the end of the release.

For the fourth quarter 2010, NRP reported revenues of $77.5 million, an increase of 18% over the fourth quarter 2009. Distributable cash flow for the fourth quarter rose to a record $75.2 million, an increase of 18% over the same quarter last year. Net income per unit for the fourth quarter 2010 was $0.39 flat with the fourth quarter of 2009.

"The coal market improved throughout the year leading us to results that greatly exceeded our initial expectations," said Nick Carter, President and Chief Operating Officer. "We generated revenue in excess of $300 million for the first time, and in 2011 we continue to see an improving market for metallurgical coal, and to a more limited extent, steam coal."


Highlights

Three
Months
Ended
Dec. 31,
2010

Three
Months
Ended
Dec. 31,
2009

%
Change
Three
Months


Year
Ended
Dec. 31,
2010

Year
Ended
Dec. 31,
2009

%
Change
Year


(in thousands except per unit, per ton and %)

Revenues








Total revenues:

$ 77,543

$ 65,902

18%


$ 301,401

$ 256,084

18%

Coal production:

12,113

11,299

7%


47,052

46,848

-

Coal royalty revenues:

$ 56,626

$ 48,327

17%


$ 221,761

$ 196,621

13%

Average coal royalty revenue per ton:

$ 4.67

$ 4.28

9%


$ 4.71

$ 4.20

12%

Revenues other than coal royalties

$ 20,917

$ 17,575

19%


$ 79,640

$59,463

34%









Net income








Net income to limited partners:

$ 41,656

$ 27,391

52%


$ 125,925

$ 78,954

59%

Net income per unit:

$ 0.39

$ 0.39

-


$ 1.54

$ 1.17

32%

Average units outstanding:

106,028

69,451

53%


81,917

67,702

21%









Distributable cash flow:

$ 75,154

$ 63,812

18%


$ 226,995

$ 178,434

27%


Revenues

Full Year

NRP had record revenues of $301.4 million for the year ended December 31, 2010, an increase of $45.3 million, or 18% over the prior year. Revenues rose primarily due to improved coal royalties, increased minimum royalties recognized as income and improved processing and transportation fees.

Coal royalty revenues for 2010 improved $25.2 million to $221.8 million over the full year 2009, due to a 12% or $0.51 improvement in coal royalty revenue per ton. Minimums recognized as revenues increased $12.9 million mainly due to a non-recoupable minimum received in 2010 with respect to the Hillsboro property in Illinois. In future years, the minimums received with respect to this property will be reflected as revenue only when recouped through production. In addition, coal processing and transportation fees rose $4.0 million or 20% increase due to improved pricing and additional throughput.

Metallurgical coal accounted for 32% of NRP's production and 38% of its coal royalty revenues for the calendar year 2010 compared to 26% of production and 33% of coal royalty revenues in 2009.

Fourth Quarter

NRP generated quarterly revenues of $77.5 million for the fourth quarter 2010, an 18% rise over the fourth quarter 2009 due to increases in both the production of and realized prices for coal. Production in the fourth quarter 2010 rose 7% to 12.1 million tons and the average coal royalty revenue per ton increased 9% over the same quarter last year to $4.67.

Revenues other than coal royalties increased 19%, or $3.3 million, from the fourth quarter 2009 mainly due to a $3.1 million quarterly non-recoupable minimum recognized as income for each quarter of 2010 with respect to the Hillsboro property in Illinois. After this year, minimums received with respect to this property will only be recognized as revenues when recouped through production;

Operating Expenses

Full Year

Operating costs for the 2010 calendar year increased 3% or $3.2 million mainly due to increased general and administrative expenses partially offset by decreased depreciation, depletion and amortization. Depreciation, depletion and amortization in 2009 included an $8.2 million write-off of a property as a result of a mine closure in 2009.

Fourth Quarter

NRP incurred total operating costs and expenses of $24.7 million in the fourth quarter of 2010, up by $2.3 million over the $22.4 million reported for the fourth quarter of 2009. This increase was mainly due to an increase in general and administrative expenses, as well as depreciation, depletion and amortization, partially offset by lower coal royalty and override payments.

Net income

Full Year

Net income to the limited partners increased $47.0 million, or 59%, for the full year of 2010 when compared to the same period in 2009, predominantly due to improved revenues. Included in the $47.0 million is a $7.5 million improvement due to the elimination of the incentive distribution rights in September 2010. Net income per unit for the calendar year 2010 rose by 32%, or $0.37 per unit, to $1.54 per unit, despite a 21% increase in the number of units outstanding during the respective time periods.

Fourth Quarter

Net income to the limited partners increased 52%, or $14.3 million, to $41.7 million in the fourth quarter 2010. Approximately a third of this increase was associated with increased revenues while $5.0 million was associated with the elimination of the incentive distribution rights announced by NRP in late September 2010. Net income per unit remained flat at $0.39 per unit even though there was a 53% increase in the average number of units outstanding in the fourth quarter 2010 versus the same period last year.

Distributable cash flow

Full Year

Distributable cash flow increased $48.6 million, or 27%, to a record $227.0 million for the year ended December 31, 2010 versus the same period last year due to improved revenues, primarily coal royalty revenues. Similar to 2009, NRP reserved $31.7 million from distributable cash flow to make regular scheduled payments on its senior notes.

Fourth Quarter

Distributable cash flow rose 18% over the fourth quarter of 2009 to a record $75.2 million for the fourth quarter of 2010, due to the improved revenues.

Fourth Quarter 2010 compared to Third Quarter 2010




4Q10

3Q10

% Change



(in thousands, except per ton and per unit)


Total revenues:


$ 77,543

$ 80,752

(4%)

Coal production:


12,113

12,367

(2%)

Coal royalty revenues:


$ 56,626

$ 60,142

(6%)

Average coal royalty revenue per ton:


$ 4.67

$ 4.86

(4%)

Revenues other than coal royalty:


$ 20,917

$ 20,610

1%

Net income to limited partners:


$ 41,656

$ 39,350

6%

GAAP net income per unit:


$ 0.39

$ 0.51

(24%)

Adjusted net income per unit:


$ 0.39

$ 0.37

5%

Average units outstanding:


106,028

77,896

36%

Distributable cash flow:


$ 75,154

$ 54,227

39%


Revenues

Total revenues for the fourth quarter 2010 declined modestly from the third quarter 2010, to $77.5 million, mainly due to a slight decrease in the realized coal royalty revenue per ton. Average coal royalty revenue per ton decreased $0.19 to $4.67 while coal production from NRP's properties declined 2% to 12.1 million tons. Revenues other than coal royalty increased modestly due to increased oil and gas royalties and coal processing fees offset by minor declines in the other categories.

Operating Expenses

Operating expenses for the fourth quarter of 2010 declined $5.7 million from the third quarter with declines in every classification. Cash expenses accounted for 43% of the decline while the remainder was associated with non-cash expenses.

Net income

Net income to the limited partners increased $2.3 million to $41.7 million in the fourth quarter, due to the decline in operating expenses during the fourth quarter. Net income per unit was $0.39 for the fourth quarter of 2010 compared to $0.37 per unit for the third quarter excluding the impact of the elimination of the incentive distribution rights.

Distributable cash flow

Distributable cash flow increased $20.9 million, or 39%, to $75.2 million due predominantly to additional receipts of minimums in the fourth quarter and a scheduled interest payment that was made on NRP's senior notes in the third quarter that lowered distributable cash flow.

Current Market

Throughout 2010 the coal markets improved. Metallurgical coal prices increased substantially in the first half of 2010 and stabilized in the second half of the year at prices approximately twice that of a year ago. In the last two months, however, the coal industry experienced significant supply disruptions from flooding in Australia, Columbia and Venezuela, and rail issues in South Africa. These disruptions have had a significant impact on spot pricing of metallurgical coal and at this time it is difficult to gauge how long supplies are going to be curtailed and the longer term impact it will have on metallurgical coal pricing. Long-term metallurgical coal supply curtailments could cause some thermal coal to shift into the metallurgical coal market, causing shortages in thermal coal as well. Demand for steam coal and for metallurgical coal has improved significantly over the last year as the economy in the United States and other countries around the globe have improved. During 2010, record coal burns at the utilities have allowed stockpiles to decline significantly from the high levels seen in 2009.

Acquisitions and Liquidity

In 2010, NRP invested approximately $179 million in acquisitions that will lead to future growth for NRP. Most of the investment was related to two projects: the Deer Run mine in the Illinois Basin and the formation of BRP, a venture with International Paper that contains the mineral rights on more than 7 million acres. Both of these projects should have increasing cash flows as NRP advances into 2012 and beyond. The Deer Run mine, currently under development, is expected to increase coal royalty production for NRP in 2011 and dramatically increase production in 2012 as the longwall production commences. BRP should begin to increase revenues as further leasing of those reserves and mineral rights occur over the next several years. NRP personnel are actively engaged in soliciting new lessees for these additional mineral rights.

Since year-end, NRP has acquired additional reserves associated with the Deer Run mine for $70 million. Commitments for the remainder of 2011 on Deer Run are anticipated to be $40 million.

In the third quarter, NRP took a major step in simplifying its corporate structure. On September 20, NRP issued 32 million units to the holders of the incentive distribution rights in exchange for the permanent retirement of those rights. This transaction not only simplifies NRP's structure but it also lowers NRP's cost of capital, which is critical to completion of acquisitions and growing the partnership's cash flows and distributions.

At year-end, NRP had a cash balance of $95.5 million and, following the $70 million acquisition completed in January 2011, NRP had $136.0 million available on its credit facility. These balances should allow NRP to fund its committed capital obligations of $40 million in 2011 and pursue additional acquisitions.

Distributions

As reported on January 19, 2011, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.54 per unit, unchanged from the third quarter 2010. NRP's distributable cash flow more than covered its distributions for 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.

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.

11-3-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,


2010


2009


2010


2009


(Unaudited)


(Unaudited)

Coal Royalties:








Coal royalty revenues:








Appalachia








Northern

$ 4,452


$ 5,028


$ 18,676


$ 14,959

Central

36,183


30,669


144,934


132,543

Southern

3,610


4,627


19,405


19,382

Total Appalachia

$ 44,245


$ 40,324


$ 183,015


$ 166,884

Illinois Basin

9,903


5,785


30,210


22,019

Northern Powder River Basin

2,396


2,218


8,444


7,718

Gulf Coast

82


-


92


-









Total

$ 56,626


$ 48,327


$ 221,761


$ 196,621









Coal royalty production (tons):








Appalachia








Northern

1,224


1,639


4,900


4,943

Central

6,639


6,070


27,056


28,032

Southern

528


795


2,824


3,233

Total Appalachia

8,391


8,504


34,780


36,208

Illinois Basin

2,466


1,651


7,753


6,656

Northern Powder River Basin

1,207


1,144


4,467


3,984

Gulf Coast

49


-


52


-









Total

12,113


11,299


47,052


46,848









Average royalty revenue per ton:








Appalachia








Northern

$ 3.64


$ 3.07


$ 3.81


$ 3.03

Central

5.45


5.05


5.36


4.73

Southern

6.84


5.82


6.87


6.00

Total Appalachia

5.27


4.74


5.26


4.61

Illinois Basin

4.02


3.50


3.90


3.31

Northern Powder River Basin

1.99


1.94


1.89


1.94

Gulf Coast

1.67


-


1.77


-

Combined average royalty revenue per ton

$ 4.67


$ 4.28


$ 4.71


$ 4.20









Aggregates:








Royalty revenues

$ 1,382


$ 883


$ 4,869


$ 4,260

Aggregate royalty bonus

$ -


$ -


$ (639)


$ 1,320

Production:

1,789


640


4,365


3,269

Average base royalty per ton:

$ 0.77


$ 1.38


$ 1.12


$ 1.30


Natural Resource Partners L.P.

Consolidated Statements of Income

(In thousands, except per unit data)



Three Months Ended

December 31,

For the Year Ended

December 31,


2010

2009

2010

2009


(Unaudited)

(Unaudited)


Revenues:





Coal royalties

$ 56,626

$ 48,327

$ 221,761

$ 196,621

Aggregate royalties

1,382

883

4,230

5,580

Coal processing fees

2,924

1,865

9,604

7,673

Transportation fees

3,461

3,883

14,564

12,517

Oil and gas royalties

3,521

3,871

7,720

7,520

Property taxes

2,285

2,600

11,270

11,636

Minimums recognized as revenue

3,625

201

14,199

1,266

Override royalties

2,509

3,290

11,258

9,251

Other

1,210

982

6,795

4,020

Total revenues

77,543

65,902

301,401

256,084

Operating costs and expenses:





Depreciation, depletion and amortization

12,930

11,986

56,978

60,012

General and administrative

7,791

5,176

29,893

23,102

Property, franchise and other taxes

3,295

3,597

15,107

14,996

Transportation costs

428

467

1,864

1,611

Coal royalty and override payments

247

1,174

1,498

2,388

Total operating costs and expenses

24,691

22,400

105,340

102,109

Income from operations

52,852

43,502

196,061

153,975

Other income (expense)





Interest expense

(10,356)

(10,592)

(41,635)

(40,108)

Interest income

10

17

35

213

Income before non-controlling interest

$ 42,506

$ 32,927

$ 154,461

$ 114,080

Non-controlling interest

$ -

$ -

-

-

Net income

$ 42,506

$ 32,927

$ 154,461

$ 114,080

Net income attributable to:





General partner

$ 850

$ 559

$ 2,570

$ 1,611

Holders of incentive distribution rights

$ -

$ 4,977

$ 25,966

$ 33,515

Limited partners

$ 41,656

$ 27,391

$ 125,925

$ 78,954






Basic and diluted net income per limited partner unit:

$ 0.39

$ 0.39

$ 1.54

$ 1.17






Weighted average number of units outstanding:

106,028

69,451

81,917

67,702












Natural Resource Partners L.P.

Statements of Cash Flows

(In thousands)



Three Months Ended

December 31,

For the Year Ended

December 31,


2010

2009

2010

2009


(Unaudited)

(Unaudited)


Cash flows from operating activities:





Net income

$ 42,506

$ 32,927

$ 154,461

$ 114,080

Adjustments to reconcile net income to net





cash provided by operating activities:





Depreciation, depletion and amortization

12,930

11,986

56,978

60,012

Non-cash interest charge, net

125

127

540

1,463

Change in operating assets and liabilities:





Accounts receivable

2,714

601

(2,627)

581

Other assets

(647)

(646)

(27)

(67)

Accounts payable and accrued liabilities

165

10

468

(133)

Accrued interest

6,969

7,064

(489)

3,850

Deferred revenue

13,237

15,958

42,491

26,264

Accrued incentive plan expenses

3,712

2,169

6,137

4,577

Property, franchise and other taxes payable

1,323

1,674

762

42

Net cash provided by operating activities

83,034

71,870

258,694

210,669






Cash flows from investing activities:





Acquisition of land, coal and other mineral rights

(55,206)

(3,768)

(166,382)

(118,754)

Acquisition or construction of plant and equipment

(1,674)

-

(5,994)

(1,157)

Disposition of assets

772

-

1,580

-

Net cash used in investing activities

(56,108)

(3,768)

(170,796)

(119,911)






Cash flows from financing activities:





Proceeds from loans

55,000

6,000

140,000

331,000

Proceeds from issuance of units

-

-

110,436

-

Capital contribution by general partner

-

-

2,350

-

Deferred financing costs

-

-

-

(661)

Repayments of loans

-

-

(106,234)

(168,235)

Retirement of obligation related to acquisitions

-

(9,000)

(9,169)

(72,000)

Costs associated with issuance of units

(67)

-

(219)

(21)

Fees associated with the elimination of the IDRs

(171)

-

(2,341)

-

Distributions to partners

(58,422)

(43,348)

(209,849)

(188,135)

Net cash (used in) provided by financing activities

(3,660)

(46,348)

(75,026)

(98,052)

Net increase or (decrease) in cash and cash equivalents

23,266

21,754

12,872

(7,294)

Cash and cash equivalents at beginning of period

72,240

60,880

82,634

89,928

Cash and cash equivalents at end of period

$ 95,506

$ 82,634

$ 95,506

$ 82,634






SUPPLEMENTAL INFORMATION:





Cash paid during the period for interest

$ 3,273

$ 3,394

$ 41,565

$ 34,710


Non-cash investing activities:





Mineral rights to be received
Liability associated with acquisitions
Equity issued for acquisitions
Non-controlling interest

$ -
325
-
-

$ -
1,170
95,910
-

$ -
1,593
-
(5,065)

$ -
1,170
95,910
-

Non-cash financing activities:
Obligation related to purchase of reserves and infrastructure

$ -

$ -

$ 6,200

$ 74,022


Natural Resource Partners L.P.

Consolidated Balance Sheets

(In thousands, except for unit information)

ASSETS


December 31,

December 31,


2010

2009


(unaudited)

(audited)

Current assets:



Cash and cash equivalents

$ 95,506

$ 82,634

Accounts receivable, net of allowance for doubtful accounts

26,195

27,141

Accounts receivable - affiliate

7,915

4,342

Other

910

930

Total current assets

130,526

115,047

Land

24,543

24,343

Plant and equipment, net

62,348

64,351

Coal and other mineral rights, net

1,281,636

1,151,835

Intangible assets

161,931

164,554

Loan financing costs, net

2,436

2,891

Other assets, net

616

569

Total assets

$1,664,036

$1,523,590

LIABILITIES AND PARTNERS' CAPITAL


Current liabilities:



Accounts payable and accrued liabilities

$ 1,388

$ 914

Accounts payable - affiliates

499

179

Obligation related to acquisitions

-

2,969

Current portion of long-term debt

31,518

32,235

Accrued incentive plan expenses - current portion

6,788

4,627

Property, franchise and other taxes payable

6,926

6,164

Accrued interest

9,811

10,300

Total current liabilities

56,930

57,388

Deferred revenue

109,509

67,018

Accrued incentive plan expenses

11,347

7,371

Long-term debt

661,070

626,587

Partners' capital:



Common units (106,027,836 in 2010, 69,451,136 in 2009)

806,529

747,437

General partner's interest

14,132

13,409

Holders of incentive distribution rights

-

4,977

Non-controlling interest

5,065

-

Accumulated other comprehensive loss

(546)

(597)

Total partners' capital

825,180

765,226

Total liabilities and partners' capital

$1,664,036

$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"



Three Months Ended
December 31,

For the Year Ended
December 31,


2010

2009

2010

2009


(unaudited)

(unaudited)






Net cash provided by operating activities

$ 83,034

$ 71,870

$ 258,694

$ 210,669

Less scheduled principal payments

-

-

(32,234)

(17,235)

Less reserves for future principal payments

(7,880)

(8,058)

(31,699)

(32,235)

Add reserves used for scheduled principal payments

-

-

32,234

17,235

Distributable cash flow

$ 75,154

$ 63,812

$ 226,995

$ 178,434


Reconciliation of GAAP "Net income attributable to the limited partners"

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




For the Year Ended
December 31




2010

2009



(unaudited)






Non-GAAP





GAAP net income



$ 154,461

$ 114,080

Add write-off of property due to mine closure



-

8,195

Adjusted net income



$ 154,461

$ 122,275

Adjusted net income attributable to:





General partner



$ 2,570

$ 1,775

Holders of incentive distribution rights:



$ 25,966

$ 33,515

Limited partners



$ 125,925

$ 86,985






GAAP basic and diluted net income per limited partner unit



$ 1.54

$ 1.17

Adjusted basic and diluted net income per limited partner unit



$ 1.54

$ 1.28






GAAP weighted average number of units outstanding:



81,917

67,702












Reconciliation of GAAP "Net income attributable to the limited partners"

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



Three Months Ended


December 31, 2010

September 30, 2010


(unaudited)

Non-GAAP



GAAP net income

$ 42,506

$ 40,153

Adjusted net income attributable to:



General partner

$ 850

$ 803

Holders of incentive distribution rights:

$ -

$ -

Limited partners

$ 41,656

$ 39,350




GAAP basic and diluted net income per limited partner unit

$ 0.39

$ 0.51

Adjusted basic and diluted net income per limited partner unit

$ 0.39

$ 0.37




GAAP weighted average number of units outstanding:

106,028

77,896

Adjustment for units issued during third quarter in exchange for the elimination of the incentive distribution rights

-

28,132

Adjusted weighted average number of units outstanding

106,028

106,028


SOURCE Natural Resource Partners L.P.

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