Third Quarter Highlights: - Distributable cash flow of $34.0 million, up 10% over 3Q06 - Record revenues of $56.4 million, up 36% - Net income attributable to limited partners of $22.9 million, up 7% - Net income per unit decreases 17% to $0.35 - Distribution increases for seventeenth consecutive quarter to $0.475 per unit - Guidance reaffirmed for 2007 HOUSTON, Nov. 1 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE: NRP; NSP) today reported distributable cash flow, a non-GAAP measure, of $34.0 million, up 10% from the $31.0 million reported for the third quarter 2006. Net income attributable to the limited partners increased to $22.9 million for the third quarter of 2007, compared to $21.5 million for the third quarter of 2006. Net income per unit decreased from $0.42 for the third quarter 2006 to $0.35 per unit in the third quarter 2007. Highlights 3Q07 2Q07 3Q06 (in thousands except per ton and per unit) Coal Production: 14,708 13,573 12,798 Coal Royalty Revenues: $44,378 $40,733 $36,902 Average coal royalty revenue per ton: $3.02 $3.00 $2.88 Total revenues: $56,366 $51,097 $41,491 Net income to limited partners: $22,902 $18,145 $21,483 Average units outstanding in quarter: 64,891 64,886 50,681 Net income per unit: $0.35 $0.28 $0.42 Distributable cash flow: $34,045 $43,511 $31,034 "Our third quarter results demonstrated improvement over our second quarter performance, largely due to the strengthening price environment for both metallurgical and steam coal," said Nick Carter, President and Chief Operating Officer. "We are pleased with the operating performance of our lessees in the third quarter, and as a whole they have met our expectations for the quarter." "Distributable cash flow for the third quarter was down from second quarter due to changes in working capital and the allocation of $1.9 million to our quarterly debt service reserve in recognition of additional scheduled principal payments on another series of senior notes that will begin amortizing in July 2008," said Dwight Dunlap, Chief Financial Officer. Third Quarter and Nine Month Results Revenues Third Quarter Total revenues increased 36% to a record $56.4 million for the third quarter of 2007, compared to $41.5 million reported for the same period last year. Third quarter 2007 coal royalty revenues increased 20% to $44.4 million from $36.9 million last year as the partnership continued to experience increased coal royalty revenues per ton in all regions, with an overall average coal royalty revenue per ton of $3.02. Total production for the partnership in the third quarter was 14.7 million tons compared to 12.8 million tons in 2006. Aggregate royalties, coal processing fees and transportation fees generated approximately $4.5 million in the third quarter of 2007 versus $0.2 million in the same period last year, the first quarter for these operations. Nine Months Total revenues improved to $157.7 million, or 22% over the first nine months of 2006, while distributable cash flow increased 11% to $105.9 million over the same period. Coal royalty revenues increased 12% to $126.1 million, largely the result of improved pricing. Average royalty revenue per ton increased to $3.02 from $2.80, or 8%, while NRP's total production increased approximately 4% to 41.8 million tons over the nine month comparative period. Aggregate royalties, coal processing fees and transportation fees, generated approximately $11.5 million for the first nine months of 2007 versus $0.2 million in the same period last year. Expenses Third Quarter Total expenses increased $8.2 million to $21.1 million in the third quarter. Depreciation, depletion and amortization, a non-cash item, accounted for $6.0 million, or approximately 73% of the increase, primarily as a result of acquisitions over the last year. Property, franchise and other taxes nearly doubled to $4.0 million mainly due to taxes on acquisitions acquired since last year, of which the majority of the property taxes are offset by reimbursements from our lessees, which are recorded in revenues. The remainder is due to additional franchise taxes. Interest expense increased $3.1 million over the third quarter last year to $7.1 million due to additional borrowings associated with acquisitions completed during the last year. Nine Months For the nine month period, total expenses increased $24.1 million to $64.9 million, $15.2 million of which was associated with depreciation, depletion and amortization and $4.1 million was associated with property, franchise and other taxes, both due to the same reasons discussed earlier. In addition, general and administrative expenses increased $4.9 million mainly due to increases in personnel, salaries, and incentive compensation accruals; increased costs associated with reporting partners' tax information; and increases in the allowance for doubtful accounts. Interest expense for the nine month period increased by $10.3 million due to increased borrowings associated with acquisitions. Net Income Third quarter While total revenues for the third quarter increased by $14.9 million over third quarter 2006, net income attributable to the limited partners only increased $1.4 million to $22.9 million. The increase in revenues was largely offset by increases in expenses primarily due to increases in depreciation, depletion and amortization as well as interest on debt incurred to finance NRP's recent acquisitions. Net income per unit decreased $0.07 to $0.35 per unit mainly due to approximately 14.2 million additional units that have been issued for acquisitions, some of which are under development and not yet generating significant revenues, since the third quarter 2006. Nine months For the nine month period, net income attributable to the limited partners decreased $10.1 million to $58.8 million, or $0.91 per unit for the reasons discussed previously. Distributable Cash Flow Third quarter Distributable cash flow increased $3.0 million, or 10%, over the same quarter last year predominantly due to increases in net income. In the third quarter 2007, NRP reserved $1.9 million for one quarter of the debt payment due in July 2008. Nine months For the nine month period distributable cash flow increased $10.4 million, or 11%, predominantly due to increases in deferred revenue and depreciation, depletion and amortization, offset by a decline in net income. Update on Acquired Properties and Outlook The Gatling WV property has continued to experience operational issues while ramping up to full production but the mining conditions and operating results are steadily improving. The Williamson operation in Illinois is currently at full production during the development phase of the longwall. The longwall is expected to be operational sometime in the first quarter of 2008. Coal is currently being shipped and the stockpile is also being reduced, which will generate increased coal royalty revenues and transportation fees for NRP in the fourth quarter. We anticipate those revenue streams will significantly increase in 2008 as longwall production commences. While the properties acquired in the Dingess-Rum acquisition have contributed significantly to NRP's 2007 coal royalty revenues, the properties continue to substantially underperform expectations as a result of continued geological and operational issues. However, recent mine plan changes at one of the operations should improve production over current levels. Because NRP's other lessees are collectively producing and selling coal as forecasted and prices are improving, NRP is reaffirming the guidance issued in August 2007 and anticipates issuing next year's guidance in January 2008. Current Market "This quarter we have seen improvements in prices in all regions over the second quarter of this year. These increases more than offset some modest declines in sales in Northern and Southern Appalachia as some of our lessees have coal ready for export and awaiting ships. We are seeing significantly stronger export markets for both metallurgical coal as well as steam coal, which will bode well for improved pricing going into 2008," said Nick Carter. "We continue to believe that our concentration in metallurgical coal, with approximately 25% of our reserves and 23% of our current production, could benefit us significantly in the future." Distributions As reported on October 17, the Board of Directors of NRP's general partner declared a quarterly distribution of $0.475 per unit, an increase of $0.01 per unit, for both the common units traded under the symbol NRP and the subordinated units traded as NSP. This made the seventeenth consecutive increase in the quarterly distribution and represented a 2.2% increase over the second quarter distribution and an 11.8% increase over the third quarter last year. Capital Structure Following the payment of the third quarter distribution, all financial conditions precedent to the conversion of the subordinated units into common units required by the partnership agreement, will have been satisfied. After the close of trading on November 14, all outstanding subordinated units will convert, in a tax free conversion, on a one-for-one basis into common units. Following this transaction, the subordinated units will no longer exist and NRP will be the only remaining security that trades on the NYSE for Natural Resource Partners L.P. Company Profile Natural Resource Partners L.P. is headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is a master limited partnership that is principally engaged in the business of owning and managing coal properties, and coal handling and transportation infrastructure in the three major coal producing regions of the United States: Appalachia, the Illinois Basin and the Powder River Basin. In addition, the partnership also manages aggregate reserves, oil and gas properties and timber assets across the United States. For additional information, please contact Kathy Hager at 713-751-7555 or . 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 2007 outlook and current coal market conditions. 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) (Unaudited) Three Months Ended For the Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Coal Royalties: Coal royalty revenues: Appalachia Northern $3,941 $2,292 $11,064 $8,330 Central 29,662 24,568 88,248 74,953 Southern 4,649 5,471 13,677 16,088 Total Appalachia $38,252 $32,331 $112,989 $99,371 Illinois Basin 2,462 808 4,941 4,465 Northern Powder River Basin 3,664 3,763 8,154 8,703 Total $44,378 $36,902 $126,084 $112,539 Coal royalty production (tons): Appalachia Northern 1,640 1,177 4,875 4,391 Central 8,927 7,873 27,022 24,050 Southern 1,184 1,395 3,514 4,256 Total Appalachia 11,751 10,445 35,411 32,697 Illinois Basin 1,147 368 2,307 2,507 Northern Powder River Basin 1,810 1,985 4,072 4,983 Total 14,708 12,798 41,790 40,187 Average royalty revenue per ton: Appalachia Northern $2.40 $1.95 $2.27 $1.90 Central 3.32 3.12 3.27 3.12 Southern 3.93 3.92 3.89 3.78 Total Appalachia 3.26 3.10 3.19 3.04 Illinois Basin 2.15 2.20 2.14 1.78 Northern Powder River Basin 2.02 1.90 2.00 1.75 Combined average royalty revenue per ton $3.02 $2.88 $3.02 $2.80 Aggregates: Royalty revenues $2,096 - $5,785 - Production: 1,583 - 4,455 - Average base royalty per ton: $1.32 - $1.30 - Natural Resource Partners L.P. Consolidated Statements of Income (In thousands, except per unit data) Three Months Ended For the Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Revenues: Coal royalties $44,378 $36,902 $126,084 $112,539 Aggregate royalties 2,096 - 5,785 - Coal processing fees 1,374 203 3,404 203 Transportation fees 1,000 - 2,306 - Oil and gas royalties 1,388 853 3,924 3,500 Property taxes 2,963 1,532 7,836 4,827 Minimums recognized as revenue 913 633 1,698 1,254 Override royalties 953 283 2,994 767 Other 1,301 1,085 3,639 5,911 Total revenues 56,366 41,491 157,670 129,001 Operating costs and expenses: Depreciation, depletion and amortization 13,045 7,009 37,324 22,098 General and administrative 3,687 3,475 15,880 11,010 Property, franchise and other taxes 3,993 2,142 10,618 6,486 Transportation costs 79 - 149 - Coal royalty and override payments 246 296 914 1,250 Total operating costs and expenses 21,050 12,922 64,885 40,844 Income from operations 35,316 28,569 92,785 88,157 Other income (expense) Interest expense (7,124) (3,960) (21,584) (11,253) Interest income 736 665 2,239 1,938 Net income $28,928 $25,274 $73,440 $78,842 Net income attributable to: (1) General partner $4,119 $2,641 $10,012 $6,989 Holders of incentive distribution rights $1,907 $1,150 $4,602 $2,914 Limited partners $22,902 $21,483 $58,826 $68,939 Basic and diluted net income per limited partner unit: Common $0.35 $0.42 $0.91 $1.36 Subordinated $0.35 $0.42 $0.91 $1.36 Weighted average number of units outstanding: Common 53,537 33,651 53,009 33,651 Subordinated 11,354 17,030 11,354 17,030 (1) Net income is allocated among the limited partners, the general partner and holders of the incentive distribution rights (IDRs) based upon their pro rata share of distributions. The IDRs are allocated 65% to the general partner and the remaining 35% to affiliates of the general partner. The IDRs allocated to the general partner are included in the net income attributable to the general partner. Natural Resource Partners L.P. Statements of Cash Flows (In thousands) Three Months Ended For the Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Cash flows from operating activities: Net income $28,928 $25,274 $73,440 $78,842 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 13,045 7,009 37,324 22,098 Non-cash interest charge 117 97 326 288 Gain from sale of assets - - - (2,634) Change in operating assets and liabilities: Accounts receivable (4,835) (2,332) (7,634) (2,439) Other assets 326 282 883 525 Accounts payable and accrued liabilities 77 255 (217) 235 Accrued interest (2,763) 1,020 (166) 2,237 Deferred revenue 2,890 625 10,807 1,033 Accrued incentive plan expenses 495 996 (138) 2,506 Property, franchise and other taxes payable 45 158 304 (147) Net cash provided by operating activities 38,325 33,384 114,929 102,544 Cash flows from investing activities: Acquisition of land, plant and equipment, coal and other mineral rights (7,435) (54,401) (40,068)(105,839) Proceeds from sale of timber assets - - - 4,761 Cash placed in restricted accounts 74 - (6,240) - Net cash used in investing activities (7,361) (54,401) (46,308)(101,078) Cash flows from financing activities: Proceeds from loans 7,000 53,000 262,400 103,000 Deferred financing costs (6) - (1,292) - Repayments of loans (400) - (235,942) (24,350) Distributions to partners (37,635) (23,819) (108,099) (67,023) Contribution by general partner - - 2,645 - Net cash used in financing activities (31,041) 29,181 (80,288) 11,627 Net (decrease) or increase in cash and cash equivalents (77) 8,164 (11,667) 13,093 Cash and cash equivalents at beginning of period 54,454 52,620 66,044 47,691 Cash and cash equivalents at end of period $54,377 $60,784 $54,377 $60,784 SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $9,752 $2,841 $21,379 $8,702 Non-cash investing activities: Units issued for assets and liabilities $- $- $350,741 $- Liability assumed in business combination 39 - 1,989 - Natural Resource Partners L.P. Consolidated Balance Sheets (In thousands) ASSETS September 30, December 31, 2007 2006 (Unaudited) Current assets: Cash and cash equivalents $54,377 $66,044 Restricted cash 6,240 - Accounts receivable, net of allowance for doubtful accounts 30,003 23,357 Accounts receivable - affiliate 1,009 21 Other 237 1,411 Total current assets 91,866 90,833 Land 24,532 17,781 Plant and equipment, net 61,650 29,615 Coal and other mineral rights, net 1,004,081 798,135 Intangible assets 111,179 - Loan financing costs, net 3,202 2,197 Other assets, net 825 932 Total assets $1,297,335 $939,493 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $2,550 $1,041 Accounts payable - affiliate 368 105 Current portion of long-term debt 17,234 9,542 Accrued incentive plan expenses - current portion 4,260 5,418 Property, franchise and other taxes payable 4,634 4,330 Accrued interest 3,680 3,846 Total current liabilities 32,726 24,282 Deferred revenue 31,461 20,654 Asset retirement obligation 39 - Accrued incentive plan expenses 5,599 4,579 Long-term debt 473,057 454,291 Partners' capital: Common units 661,094 338,912 Subordinated units 78,701 83,772 General partner's interest 15,418 12,138 Holders of incentive distribution rights (48) 1,616 Accumulated other comprehensive loss (712) (751) Total partners' capital 754,453 435,687 Total liabilities and partners' capital $1,297,335 $939,493 Natural Resource Partners L.P. Reconciliation of GAAP "Net cash provided by operating activities" To Non-GAAP "Distributable cash flow" (In thousands) (Unaudited) Three Months Ended For the Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Cash flow from operations $38,325 $33,384 $114,929 $102,544 Less scheduled principal payments - - (9,350) (9,350) Less reserves for future principal payments (4,280) (2,350) (9,080) (7,050) Add reserves used for scheduled principal payments - - 9,400 9,400 Distributable cash flow $34,045 $31,034 $105,899 $95,544 http://www.newscom.com/cgi-bin/prnh/20060109/NRPLOGO http://photoarchive.ap.org/ DATASOURCE: Natural Resource Partners L.P. CONTACT: Kathy Hager of Natural Resource Partners L.P., +1-713-751-7555, Web site: http://www.nrplp.com/

Copyright