NATURAL RESOURCE PARTNERS L.P.
601 JEFFERSON ST., SUITE 3600, HOUSTON, TX 77002
[NRP LOGO]
NEWS RELEASE
NATURAL RESOURCE PARTNERS L.P.
REPORTS RECORD RESULTS AND
RAISES 2004 GUIDANCE
SECOND QUARTER HIGHLIGHTS:
- NET INCOME INCREASES 49% TO $15.1 MILLION OR $0.58 PER UNIT
- COAL ROYALTY REVENUES INCREASE 36% TO $26.2 MILLION
- DISTRIBUTABLE CASH FLOW INCREASES 26% OVER SECOND QUARTER LAST YEAR TO
$15.3 MILLION
- DISTRIBUTION INCREASES 15% TO $0.60 PER UNIT
- PINNACLE MINE HAS RESUMED OPERATIONS
- INCREASES 2004 EARNINGS GUIDANCE TO RANGE OF $2.10 TO $2.25 PER UNIT
HOUSTON, AUGUST 5, 2004 - NATURAL RESOURCE PARTNERS L.P. (NYSE: NRP) today
reported record earnings and distributable cash flow. Net income for the second
quarter of 2004 increased 49% over the same quarter of last year to $15.1
million, or $0.58 per unit, while distributable cash flow for the second quarter
increased 26% to $15.3 million from $12.1 million last year. Year to date net
income for the first six months of the year increased 45% to $26.3 million,
while distributable cash flow increased 16% to $31.8 million. Net income per
unit increased 35% to $1.05 per unit from $0.78 per unit.
"NRP experienced record results this quarter primarily due to the improving coal
markets," said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer.
"As a result of strong demand for both metallurgical and steam coal, we have
seen a significant increase this quarter in coal prices realized by our lessees.
Because we anticipate these higher prices to remain for the rest of the year and
because Pinnacle has resumed production, we have increased our guidance for
2004."
SECOND QUARTER FINANCIAL RESULTS
Second quarter 2004 total revenues increased 35% to $29.5 million from $21.8
million for the same period last year. In addition, coal royalty revenues
increased 36% to $26.2 million from $19.2 million last year, primarily due to
improving coal prices in Appalachia. Average coal royalty revenues per ton
increased 29% to $2.18 from $1.69. Production by our lessees also increased 5%
to 12.0 million tons compared to 11.4 million tons for the same period last
year.
NRP Reports Record Second Quarter 2004 Results Page 2 of 9
YEAR TO DATE FINANCIAL RESULTS
Year to date total revenues increased 40% to $55.9 million from $39.9 million
for the same period last year. Coal royalty revenues for the first half of 2004
increased 42% to $49.0 million compared to $34.6 million for the comparable
period last year. This significant increase is due to both a 27% increase in
average royalty revenue to $2.07 per ton and a 12% increase in production to
23.7 million tons. The increase in production is due to the acquisitions in
Appalachia since the beginning of 2003.
PINNACLE MINE UPDATE
The Pinnacle mine restarted with limited production in April and by the end of
June had resumed full operations.
DISTRIBUTIONS
On July 22, 2004, NRP announced an increase of $0.025 in its quarterly
distribution to $0.60 per unit, or $2.40 per unit on an annualized basis. This
represents a 15% increase in Natural Resource Partners' distributions compared
to the second quarter of 2003. "Our recent distribution increase partially
reflects the anticipated continued production at Pinnacle and does not reflect
our higher realized prices," said Corbin J. Robertson. "Once the Pinnacle mine
has maintained production for a longer period of time and as we become more
comfortable that today's prices are sustainable, we will consider further
distribution increases."
2004 OUTLOOK
Due to a very strong coal market and the anticipated continued production from
the Pinnacle mine, NRP is increasing its guidance for the full year 2004. NRP
anticipates coal royalty revenues of over $100 million with net income per unit
increasing to between $2.10 and $2.25 per unit, up from our previous guidance of
$1.70 to $1.80 per unit. A table is attached to the release with further details
regarding guidance.
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.
NRP Reports Record Second Quarter 2004 Results Page 3 of 9
Natural Resource Partners L.P. is headquartered in Houston, TX, with its
operations headquarters in Huntington, WV. NRP is a master limited partnership
that is principally engaged in the business of owning and managing coal
properties in the three major coal producing regions of the United States:
Appalachia, the Illinois Basin and the Powder River Basin.
For additional information, please contact Kathy Hager at 713-751-7555 or
khager@nrplp.com. Further information about NRP is available on the
partnership's website at www.nrplp.com.
This press release may include "forward-looking statements" as defined by the
Securities and Exchange Commission. Such statements include the 2004 guidance
and comments related to the Pinnacle mine. 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.
04-13
- financials follow-
NRP Reports Record Second Quarter 2004 Results Page 4 of 9
NATURAL RESOURCE PARTNERS L.P.
OPERATING STATISTICS
(IN THOUSANDS EXCEPT PER TON DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- --------------------------
2004 2003 2004 2003
------- ------- ------- --------
Coal royalty revenues:
Appalachia $24,390 $16,886 $45,672 $29,599
Illinois Basin 783 970 1,498 1,835
Northern Powder River Basin 1,006 1,332 1,857 3,163
----- ----- ----- -----
Total $26,179 $19,188 $49,027 $34,597
======= ======= ======= =======
Coal Royalty Production (tons):
Appalachia 10,537 9,464 20,868 16,960
Illinois Basin 692 829 1,298 1,550
Northern Powder River Basin 806 1,083 1,492 2,684
----- ----- ----- -----
Total 12,035 11,376 23,658 21,194
======= ======= ======= =======
Average royalty revenue per ton:
Appalachia $ 2.31 $ 1.78 $ 2.19 $ 1.75
Illinois Basin 1.13 1.17 1.15 1.18
Northern Powder River Basin 1.25 1.23 1.24 1.18
----- ----- ----- -----
Total $ 2.18 $ 1.69 $ 2.07 $ 1.63
======= ======= ======= =======
NRP Reports Record Second Quarter 2004 Results Page 5 of 9
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
2004 2003 2004 2003
-------- -------- -------- ---------
(UNAUDITED)
Revenues:
Coal royalties $26,179 $19,188 $49,027 $34,597
Property taxes 1,278 1,301 2,584 2,189
Minimums recognized as revenue 165 455 928 1,259
Override royalties 757 200 1,434 661
Other 1,118 695 1,886 1,203
------- ------- ------- -------
Total revenues 29,497 21,839 55,859 39,909
Operating costs and expenses:
Depletion and amortization 7,493 6,369 14,841 12,173
General and administrative 2,422 2,131 5,133 4,307
Taxes other than income 1,712 1,421 3,369 2,581
Override payments -- -- -- 388
Coal royalty payments 398 161 786 311
------- ------- ------- -------
Total operating costs and expenses 12,025 10,082 24,129 19,760
------- ------- ------- -------
Income from operations 17,472 11,757 31,730 20,149
Other income (expense)
Interest expense (2,404) (1,131) (5,540) (1,597)
Interest income 60 56 112 103
Loss from interest rate hedge -- (499) -- (499)
------- ------- ------- -------
Net income $15,128 $10,183 $26,302 $18,156
======= ======= ======= =======
Net income attributable to:
General partner(1) $ 394 $ 204 $ 641 $ 363
======= ======= ======= =======
Other holders of incentive distribution rights(1) $ 49 $ -- $ 61 $ --
======= ======= ======= =======
Limited partners $14,685 $ 9,979 $25,600 $17,793
======= ======= ======= =======
Basic and diluted net income per limited partner unit:
Common $ .58 $ .44 $ 1.05 $ .78
======= ======= ======= =======
Subordinated $ .58 $ .44 $ 1.05 $ .78
======= ======= ======= =======
Weighted average number of units outstanding:
Common 13,987 11,354 12,902 11,354
======= ======= ======= =======
Subordinated 11,354 11,354 11,354 11,354
======= ======= ======= =======
(1) Other holders of the incentive distribution rights (IDRs) include the WPP
Group (25%) and NRP Investment LP (10%). The net income allocated to the
general partner includes the general partner's portion of the IDRs (65%).
NRP Reports Record Second Quarter 2004 Results Page 6 of 9
NATURAL RESOURCE PARTNERS L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
-------- --------- ---------- ------------
Cash flows from operating activities:
Net income $ 15,128 $ 10,183 $ 26,302 $ 18,156
Adjustments to reconcile
Operating activities:
Depletion and amortization 7,493 6,369 14,841 12,173
Non-cash interest charge 13 1 27 1
Change in operating assets and liabilities:
Accounts receivable (1,265) (2,650) (3,208) (557)
Other assets 348 (2,343) 657 (2,180)
Accounts payable and accrued liabilities (218) 366 (422) (734)
Accrued interest (2,430) (53) (414) 91
Deferred revenue (1,860) (638) (1,792) (217)
Accrued incentive plan expenses 656 607 485 798
Property and franchise taxes payable (295) 229 15 (91)
------ -------- ------- --------
Net cash provided by operating activities 17,570 12,071 36,491 27,440
Cash flows from investing activities:
Acquisition of property (2,430) (53,812) (77,332) (65,664)
Cash placed in escrow -- (58,000) -- (58,000)
------ -------- ------- --------
Net cash used in investing activities (1,673) (111,812) (77,332) (123,664)
Cash flows from financing activities:
Proceeds from loans -- 236,600 75,500 248,100
Repayment of loans (9,350) (122,600) (111,850) (122,600)
Distributions to partners (14,918) (12,106) (27,951) (21,917)
Contributions by general partner -- -- 2,147 --
Proceeds from sale of 5,250,000 common units,
net of transaction costs (66) -- 200,355 --
Redemption of 2,616,752 common units from Arch
Coal, Inc. net of transaction costs -- -- (100,121) --
Settlement of hedge included in other
comprehensive income -- (931) -- (931)
------ -------- ------- --------
Net cash provided by (used in) financing
activities (24,334) 100,963 38,080 102,652
------ -------- ------- --------
Net increase in cash and cash equivalents (8,437) 1,222 (2,761) 6,428
Cash and cash equivalents at beginning of period 29,996 12,959 24,320 7,753
------ -------- ------- --------
Cash and cash equivalents at end of period $ 21,559 $ 14,181 $ 21,559 $ 14,181
======== ======== =========== ==============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 4,821 $ 1,025 $ 5,927 $ 1,416
======== ======== =========== ==============
NRP Reports Record Second Quarter 2004 Results Page 7 of 9
NATURAL RESOURCE PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
2004 2003
---------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 21,559 $ 24,320
Accounts receivable 14,198 9,553
Accounts receivable - affiliate -- 1,437
Other 465 1,186
------- -------
Total current assets 36,222 36,496
Land 13,721 13,532
Coal and other mineral rights, net 538,743 475,493
Loan financing costs, net 2,327 2,884
Other assets, net 2,944 3,271
------- -------
Total assets $ 593,957 $ 531,676
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 195 $ 423
Accounts payable - affiliate 111 305
Current portion of long-term debt 9,350 9,350
Accrued incentive plan expenses - current portion 1,122 1,186
Property and franchise taxes payable 2,814 2,799
Accrued interest 267 681
------- -------
Total current liabilities 13,859 14,744
Deferred revenue 13,262 15,054
Accrued incentive plan expenses 1,619 1,070
Long-term debt 156,300 192,650
Partners' capital:
Common units (outstanding: 13,986,906 in 2004, 11,353,658 in 2003) 243,864 143,956
Subordinated units (outstanding: 11,353,658) 157,217 158,633
General partners' interest 8,670 6,474
Holders of incentive distribution rights 44 --
Accumulated other comprehensive loss (878) (905)
------- -------
Total partners' capital 408,917 308,158
------- -------
Total liabilities and partners' capital $ 593,957 $ 531,676
========== ==========
NRP Reports Record Second Quarter 2004 Results Page 8 of 9
NATURAL RESOURCE PARTNERS L.P.
RECONCILIATION OF GAAP FINANCIAL MEASURES
TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2004 2003 2004 2003
========= ======== ======== =======
(UNAUDITED)
Reconciliation of GAAP "Net cash provided by operating
activities" to Non-GAAP "Distributable cash flow"
Cash flow from operations $17,570 $12,071 $36,491 $27,440
Less scheduled principal payments (9,350) -- (9,350) --
Less reserves for future principal payments (2,350) -- (4,700) --
Add reserves used for scheduled principal payments 9,400 -- 9,400 --
------- ------- ------- -------
Distributable cash flow $15,270 $12,071 $31,841 $27,440
======= ======= ======= =======
NRP Reports Record Second Quarter 2004 Results Page 9 of 9
NATURAL RESOURCE PARTNERS L.P.
GUIDANCE
(IN MILLIONS EXCEPT PER UNIT AMOUNTS)
FULL YEAR 2004
(RANGE)
--------------------------
Coal royalty production (tons)
Appalachia 43.0 - 45.0
Illinois Basin 2.4 - 2.8
Northern Powder River Basin 3.1 - 3.5
Total 48.5 - 51.3
Coal royalty revenues
Appalachia $ 94.0 - $ 97.0
Illinois Basin 3.0 - 3.2
Northern Powder River Basin 3.8 - 4.2
Revenues
Coal royalty revenue $100.8 - $104.4
Other revenues (1) 12.0 - 13.5
Expenses
Depletion and amortization $ 30.0 - $ 32.0
General and administrative 9.6 - 10.0
Other expenses (2) 8.3 - 8.6
Interest expense (net) $ 10.0 - $ 10.4
Net income $ 52.0 $ 60.0
Net income per unit $ 2.10 - $ 2.25
Scheduled principal payments $ 9.4 - $ 9.4
Distributable cash flow (3) $ 75.0 - $ 80.0
(1) Other revenues consist of property taxes, minimums, oil & gas, timber,
overrides, wheelage and rentals.
(2) Other expenses include taxes other than income, override payments, coal
royalty payments, and non-participating royalty interests.
(3) Distributable cash flow represents net income plus depletion and
amortization minus scheduled principal payments on NRP senior notes.
Distributable cash flow is a "non-GAAP financial measure" that is
presented because management believes it is a useful adjunct to net cash
provided by operating activities under GAAP. Distributable cash flow is a
significant liquidity metric which is an indicator of NRP's ability to
generate cash flows at a level that can sustain or support an increase in
quarterly cash distributions paid to its partners. Distributable cash flow
is also the quantitative standard used throughout the investment community
with respect to publicly-traded partnerships. Distributable cash flow is
not a measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operating, investing or
financing activities. We believe that "net cash provided by operating
activities" would be the most comparable financial measure to
distributable cash. However, due to the substantial uncertainties
associated with forecasting future changes to operating assets and
liabilities, we cannot provide guidance on forward-looking net cash
provided by operating activities or provide reconciliations of
distributable cash flow to that measure.
-end-