Natural Resource Partners L.P. Reports Third Quarter 2012 Results

Third Quarter 2012 Highlights:

- Total revenues of $94.2 million

- Net income per unit of $0.48

- Distributable cash flow of $65.1 million

- Distribution of $0.55 per unit

- Metallurgical production accounted for 33% of production and 44% of coal royalty revenues for the first nine months

05 Nov, 2012, 17:05 ET from Natural Resource Partners L.P.

HOUSTON, Nov. 5, 2012 /PRNewswire/ -- Natural Resource Partners L.P. (NYSE: NRP) today reported revenues of $94.2 million, and net income per unit of $0.48 for the third quarter 2012.  In addition, NRP reported distributable cash flow, a non-GAAP measure, of $65.1 million

(Logo: http://photos.prnewswire.com/prnh/20060109/NRPLOGO)

"In spite of a weak coal market, compared to the second quarter 2012, production from NRP's lessees increased in the third quarter by 11% and coal royalty revenues by 12%, as we exceeded our expectations," said Nick Carter, President and Chief Operating Officer.

Third Quarter 2012 Compared to Second Quarter 2012

Highlights

3Q12

2Q12

% Change

(in thousands, except per ton and per unit)

Total revenues

$ 94,175

$   90,664

4%

Coal production

13,340

11,982

11%

Coal royalty revenues

$ 70,259

$   62,878

12%

Average coal royalty revenue per ton

$     5.27

$       5.25

0%

Revenues other than coal royalty

$ 23,916

$   27,786

-14%

Net income to limited partners

$ 50,961

$   48,939

4%

Net income per unit

$     0.48

$       0.46

4%

Average units outstanding

106,028

106,028

0%

Distributable cash flow(1)

$ 65,063

$   70,653

-8%

(1)See Non-GAAP reconciliation

Revenues Total revenues for the third quarter increased 4% over the second quarter 2012 to $94.2 million, driven by an 11% increase in coal production. Coal royalty revenues increased $7.4 million, or 12%, while average coal royalty revenue per ton remained virtually flat.   In the third quarter, NRP saw increases in production in every region but the Illinois Basin, which was flat.  Increases in metallurgical coal production in Southern Appalachia more than offset the declines in both Central and Northern Appalachia metallurgical coal production, and metallurgical prices in Southern Appalachia were significantly higher than Northern and Central Appalachia.  In addition to the more than $1.2 million increase in metallurgical coal revenues, steam coal revenues increased $6.2 million with increases in every region except Northern Appalachia.  NRP experienced significantly higher production and revenues in the Northern Powder River Basin due to more coal being shipped from NRP properties as well as a periodic sales price adjustment with our lessee's customer.  With respect to revenues other than coal royalty, NRP saw decreases in infrastructure fees of $1.7 million, $1.4 million of which was related to a preparation plant sold in July, and a $2.8 million decrease in oil and gas royalties mainly due to three lease bonus payments, received in the second quarter, on oil and gas totaling $2.6 million.

Operating Expenses Total operating costs and expenses for the third quarter of 2012 increased $1.4 million to $28.5 million over the second quarter mainly due to increased general and administrative costs and higher property and franchise taxes.

Net income Net income to the limited partners for the third quarter 2012 totaled $51.0 million, or $0.48 per unit, compared to the second quarter 2012 net income of $48.9 million or $0.46 per unit.

Distributable cash flow Distributable cash flow decreased $5.6 million, or 8%, to $65.1 million mainly due to working capital changes.  In the second quarter NRP received more advance minimums and had higher collections of accounts receivable.

Highlights

Quarter Ended

Nine Months Ended

September

September

%

September

September

%

2012

2011

Change

2012

2011

Change

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

Revenues

Total revenues

$    94,175

$  103,164

-9%

$  276,711

$  284,548

-3%

Coal production

13,340

13,135

2%

37,437

37,109

1%

Coal royalty revenues

$    70,259

$    74,976

-6%

$  193,053

$  211,583

-9%

Average coal royalty revenue per ton

$        5.27

$        5.71

-8%

$        5.16

$        5.70

-9%

Revenues other than coal royalties

$    23,916

$    28,188

-15%

$    83,658

$    72,965

15%

Net income (loss)

Net income (loss) to limited partners

$    50,961

$   (29,948)

NM

$  150,183

$    69,510

116%

Net income (loss) per unit

$        0.48

$       (0.28)

NM

$        1.42

$        0.66

115%

Average units outstanding

106,028

106,028

0%

106,028

106,028

0%

Net income before considering the impairment(1)

Net income to limited partners

50,961

59,166

-14%

150,183

158,624

-5%

Net income per unit

$        0.48

$        0.56

-14%

$        1.42

$        1.50

-5%

Distributable cash flow(1)

$    65,063

$    76,442

-15%

$  172,143

$  200,363

-14%

(1) See Non-GAAP reconciliation

Revenues Third Quarter Total revenues for the third quarter of $94.2 million decreased 9%, or $9.0 million from the third quarter 2011 mainly due to decreases in coal royalty revenue and oil and gas royalties. 

Coal royalty revenue decreased $4.7 million, while production rose modestly from the third quarter 2011.  This decline in revenues reflects the $0.44 per ton decrease realized in the combined average royalty revenue per ton.  Most of the change relates to reductions in both price and production in Central Appalachia, where production declined 816,000 tons and prices realized per ton decreased $0.85.  These declines were partially offset by the significant increase in both production and price in Southern Appalachia, where sales from the Oak Grove metallurgical mine resumed after damage to the preparation plant last year.

Revenues other than coal royalty decreased $4.3 million mainly due to decreases in oil and gas revenues and coal processing fees, partially offset by increases in other revenue.  Coal processing fees decreased $2.3 million due to reduced throughput and prices in Central Appalachia, as well as a small portion due to the sale of a preparation plant in the third quarter of 2012.  Oil and gas revenues decreased $3.8 million mainly due to lower gas production and significantly lower natural gas prices. Other revenue increased $3.6 million primarily due to a gain on the sale of a preparation plant. 

Nine Months Total revenues for the first nine months decreased 3% over the 2011 period to $276.7 million.  While coal royalty revenues declined approximately 9%, or $18.5 million, due to $0.54 per ton lower coal royalty realizations; other revenues increased $10.7 million, which helped partially offset that decline.  The lower realizations per ton resulted from lower prices received in Appalachia on both thermal and metallurgical coal, as well as   new production in Northern Appalachia from an older lease that has a much lower royalty rate. Metallurgical coal accounted for 33% of NRP's production and 44% of its coal royalty revenues for the first nine months of 2012 compared to 35% of production and 45% of coal royalty revenues in 2011.

Revenues other than coal royalty revenues increased $10.7 million from the first nine months of 2011 to $83.7 million mainly due to the following:

  • $9.6 million minimum recognized as revenue in the first quarter on the Gatling Ohio property,
  • $4.6 million increase in gains on property sales,
  • $1.8 million increase in transportation fees associated with Illinois Basin production,
  • $3.3 million decrease in coal processing fees from lower throughput in Central Appalachia as well as the lost volumes associated with the plant sold,
  • $3.3 million decrease in oil and gas royalties mainly due to lower natural gas price realizations and slightly lower production.

Operating Expenses Third Quarter Total operating costs and expenses for the third quarter 2012 totaled $28.5 million compared to the $121.0 million reported in the 2011 quarter.  The third quarter 2011 costs and expenses included an impairment charge of $90.9 million.  Excluding the impairment, costs and expenses declined $1.5 million between quarters.  The decrease was associated with $5.3 million lower depreciation, depletion and amortization due to production in 2012 on properties with lower basis, and the third quarter 2011 included $2.8 million associated with assets that have either been sold or impaired, partially offset by a $2.7 million increase in general and administrative expenses.

Nine Months Total operating costs and expenses for the first nine months of 2012 were $82.8 million, down $4.1 million from 2011, after excluding the $90.9 million impairment. Lower depreciation, depletion and amortization partially offset by higher property, franchise and other taxes and slightly higher general and administrative expense accounted for the decrease.

Net income Third Quarter Net income to the limited partners totaled $51.0 million compared to the loss of $29.9 million shown in the third quarter 2011, which included the impairment. Excluding the impairment, net income to the limited partners was down $8.2 million from the 2011 third quarter, primarily due to lower coal royalty revenues. 

Net income per unit was $0.48 compared to a loss of $0.28 per unit reported in 2011.  Excluding the impairment in 2011, the net income per unit for the third quarter 2011 was $0.56

Nine Months Net income attributable to the limited partners for the first nine months of 2012 was $150.2 million, or $1.42 per unit, compared with $0.66 per unit reported in the third quarter 2011, or $1.50 per unit excluding the impairment.

Distributable cash flow Third Quarter Third quarter distributable cash flow of $65.1 million was $11.4 million lower than the third quarter of 2011, mainly due to lower revenues and a $5.4 million increase in the reserve for future principal payments on NRP's senior notes. 

Nine Months Distributable cash flow for the first nine months of 2012 decreased $28.2 million to $172.1 million from 2011, primarily due to an increase in the reserve for future principal payments on NRP's senior notes of $15.7 million and increased interest payments of $6.0 million due to increased borrowings in addition to the decreased revenues.

Market Outlook "Both the metallurgical and thermal coal markets appear to have hit bottom. Margins are slim or non-existent for much of Central Appalachian thermal production, and metallurgical coal demand seems to be increasing globally. That having been said, we do not expect a quick recovery of either market and would expect that metallurgical coal demand will increase slowly over the next 12 months as steel production grows globally and restocking occurs," said Nick Carter.

"Additionally we expect that 2013 will be a hard year for thermal coal producers in Central Appalachia where current large stockpiles will need to be reduced, and the situation is further exacerbated by a large number of rollover contracts for deferred coal deliveries that resulted from the weak market in 2012.  While we have recently seen an increase in natural gas prices and some reversal of coal to gas switching for coal produced in the Powder River Basin and to some extent the Illinois Basin, we still expect there to continue to be some fuel switching from coal to natural gas into 2013 and beyond for Appalachian coal unless there are further increases in natural gas prices."

Acquisitions and Liquidity

As previously announced, in the third quarter 2012 NRP completed the final $40.0 million acquisition of the Deer Run coal reserves located in the Illinois Basin. 

As of September 30, 2012, NRP had $197 million in available capacity under its credit facility and approximately $122 million in cash. 

Distributions

As reported on October 17, 2012, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.55 per unit to be paid on November 14, 2012 to unitholders of record as of November 5, 2012.

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 and proceeds from assets sales and returns on direct financing leases and contractual overrides 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 condition, borrowing capacity and any references to future guidance.  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.

-Financial statements follow-

 

Natural Resource Partners L.P.

Operating Statistics

(in thousands except per ton data)

Quarter Ended

 Nine Months Ended

September

September

September

September

2012

2011

2012

2011

(unaudited)

(unaudited)

(restated)

(restated)

Coal Royalties:

Coal royalty revenues:

Appalachia

Northern

$      3,300

$      4,731

$    10,996

$    14,592

Central

39,404

50,595

119,880

151,156

Southern

9,672

1,554

20,694

9,742

Total Appalachia

$    52,376

$    56,880

$  151,570

$  175,490

Illinois Basin

13,205

14,313

34,886

29,598

Northern Powder River Basin

4,493

3,622

6,264

6,135

Gulf Coast Lignite

185

161

333

360

Total

$    70,259

$    74,976

$  193,053

$  211,583

Coal royalty production (tons):

Appalachia

Northern

1,814

1,156

5,866

3,530

Central

6,590

7,406

19,632

22,756

Southern

1,159

290

2,547

1,410

Total Appalachia

9,563

8,852

28,045

27,696

Illinois Basin

2,907

3,084

7,908

7,118

Northern Powder River Basin

853

1,119

1,447

2,024

Gulf Coast Lignite

17

80

37

271

Total

13,340

13,135

37,437

37,109

Average royalty revenue per ton:

Appalachia

Northern

$        1.82

$        4.09

$        1.87

$        4.13

Central

5.98

6.83

6.11

6.64

Southern

8.35

5.36

8.12

6.91

Total Appalachia

5.48

6.43

5.40

6.34

Illinois Basin

4.54

4.64

4.41

4.16

Northern Powder River Basin

5.27

3.24

4.33

3.03

Gulf Coast Lignite

10.88

2.01

9.00

1.33

Combined average royalty 

revenue per ton

$        5.27

$        5.71

$        5.16

$        5.70

Aggregates:

Royalty revenues

$      1,643

$      2,099

$      5,061

$      5,030

Aggregate royalty bonus

-

-

-

94

Production

1,239

1,682

4,053

4,618

Average base royalty per ton

$        1.33

$        1.25

$        1.25

$        1.09

Oil and gas:

Royalty revenues

$      1,246

$      5,059

$      6,712

$    10,047

 

Natural Resource Partners L.P.

Consolidated Statements of Income

(in thousands, except per unit data)

Quarter Ended

Nine Months Ended

September

September

September

September

2012

2011

2012

2011

(unaudited)

(unaudited)

(restated)

(restated)

Revenues:

Coal royalties

$    70,259

$    74,976

$  193,053

$  211,583

Aggregate royalties

1,643

2,099

5,061

5,124

Processing fees

1,641

3,967

6,905

10,229

Transportation fees

5,007

4,765

14,361

12,608

Oil and gas royalties

1,246

5,059

6,712

10,047

Property taxes

3,602

2,974

11,421

9,563

Minimums recognized as revenue

1,096

2,429

13,748

5,456

Override royalties

3,359

4,131

11,998

10,666

Other

6,322

2,764

13,452

9,272

Total revenues

94,175

103,164

276,711

284,548

Operating costs and expenses:

Depreciation, depletion and amortization

14,485

19,819

42,066

51,576

Asset impairments

-

90,932

-

90,932

General and administrative

8,225

5,521

24,204

22,156

Property, franchise and other taxes

4,853

3,915

13,640

10,918

Transportation costs

446

540

1,446

1,531

Coal royalty and override payments

523

233

1,396

700

Total operating costs and expenses

28,532

120,960

82,752

177,813

Income (loss) from operations

65,643

(17,796)

193,959

106,735

Other income (expense)

Interest expense

(13,677)

(12,779)

(40,815)

(35,795)

Interest income

35

16

104

40

Income (loss) before non-controlling interest

$    52,001

$   (30,559)

$  153,248

$    70,980

Less non-controlling interest

-

-

-

51

Net income (loss)

$    52,001

$   (30,559)

$  153,248

$    70,929

Net income (loss) attributable to:

General partner

$      1,040

$        (611)

$      3,065

$      1,419

Limited partners

$    50,961

$   (29,948)

$  150,183

$    69,510

Basic and diluted net income (loss) per limited partner unit:

$        0.48

$       (0.28)

$        1.42

$        0.66

Weighted average number of units outstanding:

106,028

106,028

106,028

106,028

Comprehensive income (loss)

$    52,015

$   (30,545)

$  153,285

$    70,968

 

Natural Resource Partners L.P.

Consolidated Statements of Cash Flow

(in thousands, except per unit data)

Quarter Ended

Nine Months Ended

September

September

September

September

2012

2011

2012

2011

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Cash flows from operating activities:

Net income (loss)

$      52,001

$    (30,559)

$    153,248

$      70,929

Adjustments to reconcile net income (loss) to 

net cash provided by operating activities:

Depreciation, depletion and amortization

14,485

19,819

42,066

51,576

Asset Impairments

-

90,932

-

90,932

Gain on sale of assets

(4,715)

(1,058)

(8,823)

(1,058)

Gain on reserve swap

-

-

(2,990)

Non-cash interest charge, net

153

225

453

493

Non-controlling interest

-

-

51

Change in operating assets and liabilities:

Accounts receivable

(5,185)

(8,985)

666

(12,770)

Other assets

345

24

369

556

Accounts payable and accrued liabilities

493

698

1,055

213

Accrued interest

(2,613)

(3,578)

(2,771)

(1,710)

Deferred revenue

5,316

12,022

11,867

24,541

Accrued incentive plan expenses

1,717

1,116

(3,544)

(14)

Property, franchise and other taxes payable

(132)

(1,014)

(714)

(2,427)

Net cash provided by operating activities:

61,865

79,642

193,872

218,322

Cash flows from investing activities:

Acquisition of land, coal and other mineral rights

(40,010)

(8,241)

(134,463)

(107,509)

Acquisition or construction of plant and equipment

(189)

(681)

(325)

Proceeds from sale of assets

14,762

4,500

15,047

5,500

Return on direct financing lease and contractual override

1,495

-

2,399

-

Acquisition of contracts

-

-

(59,009)

-

Net cash used in investing activities

(23,942)

(3,741)

(176,707)

(102,334)

Cash flows from financing activities:

Proceeds from loans

30,000

-

103,000

335,000

Repayment of loans

(7,692)

(7,693)

(30,800)

(210,519)

Deferred financing costs

-

(1,722)

-

(2,774)

Payment of obligation related to acquisitions

-

(3,600)

(500)

(7,625)

Costs associated with equity transactions

(59)

(1)

(59)

(141)

Distributions to partners

(59,727)

(58,478)

(181,309)

(175,323)

Net cash provided by (used in) financing activities

(37,478)

(71,494)

(109,668)

(61,382)

Net increase (decrease)  in cash and cash equivalents

445

4,407

(92,503)

54,606

Cash and cash equivalents at beginning of period

121,974

145,705

214,922

95,506

Cash and cash equivalents at end of period

$    122,419

$    150,112

$    122,419

$    150,112

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest

$      16,137

$      16,215

$      43,113

$      37,074

Non-cash  activities:

Non-controlling interest

$             -

$             -

$             -

$           373

Obligation related to purchase of reserves and infrastructure

$             -

$             -

$             -

$        4,100

Notes receivable related to sale of asset

$        1,808

$        1,808

 

Natural Resource Partners L.P.

Consolidated Balance Sheets

(in thousands, except for unit information)

ASSETS

September 30,

December 31,

2012

2011

(unaudited)

(audited)

Current assets:

Cash and cash equivalents

$        122,419

$       214,922

Accounts receivable, net of allowance for doubtful accounts

36,761

30,923

Accounts receivable - affiliates

10,077

10,138

Other

218

832

Total current assets

169,475

256,815

Land

24,515

24,534

Plant and equipment, net

33,968

46,185

Coal and other mineral rights, net

1,352,800

1,257,501

Intangible assets, net

71,900

75,164

Loan financing costs, net

4,430

4,846

Long-term contracts receivable - affiliates

55,741

-

Other assets, net

849

604

Total assets

$     1,713,678

$    1,665,649

LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:

Accounts payable and accrued liabilities

$            3,223

$           2,366

Accounts payable - affiliates

573

375

Obligation related to acquisitions

-

500

Current portion of long-term debt

87,230

30,801

Accrued incentive plan expenses - current portion

7,585

8,374

Property, franchise and other taxes payable

5,602

6,316

Accrued interest

7,990

10,761

Total current liabilities

112,203

59,493

Deferred revenue

123,689

113,303

Accrued incentive plan expenses

8,915

11,670

Long-term debt

852,039

836,268

Partners' capital:

Common units outstanding (106,027,836)

604,430

629,253

General partner's interest

10,013

10,517

Non-controlling interest

2,845

5,638

Accumulated other comprehensive loss

(456)

(493)

Total partners' capital

616,832

644,915

Total liabilities and partners' capital

$     1,713,678

$    1,665,649

 

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"

Quarter Ended

Nine Months Ended

September

September

September

September

2012

2011

2012

2011

(unaudited)

(unaudited)

Net cash provided by operating activities

$    61,865

$    79,642

$  193,872

$  218,322

Less scheduled principal payments

(7,692)

(7,692)

(30,800)

(31,518)

Less reserves for future scheduled principal payments

(13,059)

(7,700)

(39,175)

(23,459)

Add reserves used for scheduled principal payments

7,692

7,692

30,800

31,518

Return on direct financing lease and contractual override

1,495

-

2,399

-

Proceeds from sale of assets

14,762

4,500

15,047

5,500

Distributable cash flow

$    65,063

$    76,442

$  172,143

$  200,363

 

Reconciliation of GAAP "Total operating costs and expenses"

to Non-GAAP "Total operating costs and expenses before considering the impairment"

Quarter Ended

For the Nine Months Ended

September

September 

September

September 

2012

2011

2012

2011

(unaudited)

(unaudited)

Operating costs

Total operating costs as reported

$    28,532

$   120,960

$    82,752

$   177,813

Impairments

$            -

$    (90,932)

$            -

$    (90,932)

Total operating costs before considering the impairment

$    28,532

$     30,028

$    82,752

$     86,881

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

to Non-GAAP "Net income attributable to the limited partners before considering the impairment"

Quarter Ended

For the Nine Months Ended

September

September

September

September

2012

2011

2012

2011

(unaudited)

(unaudited)

Net income (loss) attributable to the limited partners

Net income (loss) as reported

$    52,001

$    (30,559)

$  153,248

$     70,929

Impairments

$            -

$     90,932

$            -

$     90,932

Net income before considering the impairment

$    52,001

$     60,373

$  153,248

$   161,861

Net income, before considering the impairment, attributable to:

  General partner

$      1,040

$       1,207

$      3,065

$       3,237

  Limited partners

$    50,961

$     59,166

$  150,183

$   158,624

Reconciliation of GAAP "Basic and diluted net income per unit"

to Non-GAAP "Net income per unit before considering the impairment"

Quarter Ended

For the Nine Months Ended

September

September

September

September

2012

2011

2012

2011

(unaudited)

(unaudited)

Net income (loss) per unit

Net income (loss) per unit as reported

$        0.48

$        (0.28)

$        1.42

$         0.66

Adjustment for impairments

$            -

$         0.84

$            -

$         0.84

Net income per limited partner unit, before considering the impairment

$        0.48

$         0.56

$        1.42

$         1.50

Weighted number of units outstanding

106,028

106,028

106,028

106,028

 

SOURCE Natural Resource Partners L.P.



RELATED LINKS

http://www.nrplp.com