Natural Resource Partners L.P. (NRP) reported third quarter net income attributed to limited partners of 36 cents per unit, well above the Zacks Consensus Estimate of 21 cents and second quarter net income of 7 cents.
Results were driven by improved reported revenues as well as lower expenses during the quarter, offset by increased units outstanding due to the issuance of an additional 4.6 million units for an acquisition in 2009. However, net income declined 35% from 55 cents posted in the year-ago period.
Total revenues declined 16% year over year to $64 million, while it rose 8% sequentially, driven by higher coal royalty revenues as a result of increased realizations for coal royalty per ton. Coal production in the quarter decreased 24% over last year and 4% from the previous quarter to 11.3 million tons, while coal royalty revenues declined 15% and 6%, respectively, to $49.3 million. Average coal royalty revenue per ton this quarter increased 12% year over year and 11% sequentially, to $4.37.
Natural Resource Partners reported distributable cash flow (DCF) of $30.1 million in the quarter, down 44% from last year and 39% from the second quarter, predominantly due to changes in working capital that offset improvements in revenues. In addition, distributable cash flow was impacted by higher semi-annual interest payments that were made in the third quarter and an increase of $3.8 million in the accrual for future principal payments.
Total operating expenses were $22.6 million in the quarter, flat versus last year. Depreciation, depletion and amortization expenses were down $4.1 million due to lower production in 2009, offset by $4.2 million in higher general and administrative expenses and property and franchise taxes. These expenses were higher due to fluctuations in NRP’s long-term incentive plan accrual, as well as higher property taxes in several states.
In the quarter, the company acquired coal reserves associated with the Deer Run mine in the Illinois Basin for an initial payment of $10 million. The future acquisitions of reserves at Deer Run, totaling $245 million are to be completed over the next 27 months.
Following the initial acquisition at Deer Run, NRP had $22 million outstanding on it credit facility with an additional $278 million available. The company made $25.2 million in annual principal and semi-annual interest payments during the quarter, however, its cash and cash equivalents at quarter-end amounted to $60.9 million.
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