NSP Insperity Inc

Highlights: * Net income increases 40% to a record $28.5 million or $1.01 per unit * Revenues increase 28% to a record $46.5 million * Distributable cash flow increases 45% to a record $34.3 million HOUSTON, May 3 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE:NRPNYSE:andNYSE:NYSE:NYSE:NSP) today reported a 40% increase in net income to a record $28.5 million, or $1.01 per unit, for the first quarter of 2006 compared to $20.4 million, or $0.77 per unit, for the first quarter of 2005. Distributable cash flow, a non-GAAP performance measure reconciled in the attached tables, rose to $34.3 million, which is a 45% increase over the first quarter 2005 distributable cash flow of $23.7 million. "Strong pricing in all regions helped boost NRP to record earnings, revenues and, most importantly, distributable cash flows for the first quarter of 2006," said Nick Carter, President and Chief Operating Officer. "These results reflect the efforts of all of our lessees, who we believe are among the best coal miners in the industry. They also are indicative not only of the continued strength of the coal market but also the diversity of our growing reserve base." First Quarter 2006 Total revenues increased 28% to a record $46.5 million for the first quarter of 2006 compared to $36.2 million reported for the same period last year. First quarter 2006 coal royalty revenues increased 20% to $39.1 million from $32.5 million last year as the partnership experienced increased coal royalty revenues per ton in all regions and increased production in all regions except Central Appalachia where production was comparable to the first quarter of 2005. Coal royalty revenues increased due to a 9% improvement in the average coal royalty revenue per ton to $2.79 in the first quarter 2006 from $2.55 for the same period last year. Production by our lessees grew 10% to 14.0 million tons over the 12.8 million tons reported for the same period last year. Production from two of the properties NRP acquired in Appalachia in 2005 offset the decline of production from other Appalachian properties as some of the lessees are mining off NRP properties and will return at a later date. Metallurgical coal, which sells for much higher prices than steam coal, accounted for approximately 30% of the first quarter 2006 coal royalty revenues and 24% of production. Oil and gas revenues increased 274% to $1.7 million from $0.5 million due to increases in price and production, as well as lease bonus payments on several new leases. Other revenues also increased 334% primarily due to a $2.2 million gain on the sale of timber properties during the quarter. The sale is the first, and largest, of three related transactions involving timber and the associated surface acreage located in Virginia that we acquired at the time we purchased the coal and mineral rights. The remaining two transactions are expected to close in the second quarter of 2006. The gain increased net income for the quarter by $0.08 per unit. Total expenses increased 10% to $14.9 million from $13.6 million for the first quarter 2005. General and administrative expenses increased $0.8 million to $4.1 million. The increase includes approximately $0.7 million related to the adoption this quarter of Statement of Financial Accounting Standards No. 123R "Share-Based Payments." This adjustment had the impact of reducing net income for the quarter by $0.02 per unit. Property, franchise and other taxes increased $0.4 million mainly due to taxes on properties acquired since last year, the majority of which are offset by reimbursements from our lessees which are recorded in revenues. Interest expense increased 47% over last year to $3.6 million due to additional borrowings associated with acquisitions completed during the last year. Acquisitions and Capital Structure During the first quarter, Natural Resource Partners completed the second closing of the Williamson Development acquisition of high sulfur reserves in the Illinois Basin for $35 million. NRP borrowed an additional $50 million of senior notes at 5.05% that financed the acquisition and repaid $15 million in borrowings under the credit facility. At March 31, 2006, the partnership had a debt to total capitalization ratio of 37% and a cash balance in excess of $67 million, which equates to three full quarters of coverage of its current distribution for both NRP and NSP. "Our strong balance sheet and capital structure will allow us to continue to aggressively pursue accretive acquisitions to fuel growth for our future while continuing to increase our distributions," said Dwight Dunlap, Chief Financial Officer. 2006 Guidance "Our results for this quarter exceeded our expectations due to higher than expected prices received by our lessees and an opportunistic sale of some of our timber assets and surface acreage," said Dwight L. Dunlap. "While the performance of our lessees in the first quarter bodes well for the partnership's annual performance, we are reaffirming our current guidance for net income of $2.85 to $3.15 per unit. We will monitor our lessees' production and sales prices during the second quarter and update our annual guidance if necessary when our second quarter results are announced in early August." Market Outlook Pricing in the coal industry remains very strong as coal stockpile levels, while improved, remain low at the utilities and several factors continue to constrain expansion of coal production by the various mining companies. The expansion of coal-fired power generation is being planned by several utilities and the development of coal conversion technologies such as coal-gasification and coal-to-liquids are expected to result in significant growth in coal demand over the long-term. "We see coal prices remaining strong for the foreseeable future," said Nick Carter. Distributions On April 18, the partnership announced its eleventh consecutive increase in its quarterly distribution to $0.79 per unit or $3.16 on an annualized basis, a 15% increase over the first quarter distribution last year. The distribution will be paid on May 12, 2006 to unitholders of record on May 1, 2006. 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 . 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 2006 outlook. 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) For the three months ended March 31, 2006 2005 (Unaudited) Coal royalty revenues: Appalachia Northern $ 3,307 $ 2,464 Central 25,842 22,178 Southern 5,484 5,011 Total Appalachia $34,633 $29,653 Illinois Basin 1,953 1,307 Northern Powder River Basin 2,524 1,570 Total $39,110 $32,530 Sales volumes (tons): Appalachia Northern 1,732 1,308 Central 8,195 8,239 Southern 1,426 1,324 Total Appalachia 11,353 10,871 Illinois Basin 1,162 867 Northern Powder River Basin 1,500 1,032 Total 14,015 12,770 Average royalty revenue per ton: Appalachia Northern $ 1.91 $ 1.88 Central 3.15 2.69 Southern 3.85 3.79 Total Appalachia $ 3.05 $ 2.73 Illinois Basin 1.68 1.51 Northern Powder River Basin 1.68 1.52 Total $ 2.79 $ 2.55 NATURAL RESOURCE PARTNERS L.P. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per unit data) For the three months ended March 31, 2006 2005 (Unaudited) Revenues: Coal royalties $39,110 $32,530 Oil and gas royalties 1,719 460 Property taxes 1,749 1,434 Minimums recognized as revenue 371 453 Override royalties 303 615 Other 3,276 755 Total revenues 46,528 36,247 Operating costs and expenses: Depletion and amortization 7,853 7,879 General and administrative 4,115 3,312 Property, franchise and other taxes 2,245 1,830 Coal royalty and override payments 691 553 Total operating costs and expenses 14,904 13,574 Income from operations 31,624 22,673 Other income (expense) Interest expense (3,618) (2,457) Interest income 518 231 Net income $28,524 $20,447 Net income attributable to: General partner (A) $ 2,095 $ 830 Other holders of incentive distribution rights (A) $ 821 $ 227 Limited partners $25,608 $19,390 Basic and diluted net income per limited partner unit: Common $ 1.01 $ .77 Subordinated $ 1.01 $ .77 Weighted average number of units outstanding: Common 16,825 13,987 Subordinated 8,515 11,354 (A) Other holders of the incentive distribution rights (IDRs) include the WPP Group at 25% and NRP Investment LP at (10%). The net income allocated to the general partner includes the general partner's portion of the IDRs (65%). NATURAL RESOURCE PARTNERS L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the three months ended March 31, 2006 2005 (Unaudited) Cash flows from operating activities: Net income $28,524 $20,447 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 7,853 7,879 Non-cash interest charge 100 71 Gain from sale of assets (2,176) --- Change in operating assets and liabilities: Accounts receivable (4) (2,390) Other assets 268 250 Accounts payable 37 (285) Accrued interest 1,906 2,247 Deferred revenue (632) (2,155) Accrued incentive plan expenses 371 5 Property, franchise and taxes payable 403 1 Net cash provided by operating activities 36,650 26,070 Cash flows from investing activities: Acquisition of land, plant and equipment, coal and other mineral rights (35,000) (21,544) Proceeds from sale of assets 3,932 --- Net cash used in investing activities (31,068) (21,544) Cash flows from financing activities: Proceeds from loans 50,000 18,000 Repayment of loans (15,000) --- Distributions to partners (20,905) (17,526) Net cash provided by (used in) financing activities 14,095 474 Net increase in cash and cash equivalents 19,677 5,000 Cash and cash equivalents at beginning of period 47,691 42,103 Cash and cash equivalents at end of period $67,368 $47,103 Supplemental cash flow information: Cash paid during the period for interest $ 1,600 $ 137 NATURAL RESOURCE PARTNERS L.P. CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS March 31, December 31, 2006 2005 (Unaudited) Current assets: Cash and cash equivalents $ 67,368 $ 47,691 Accounts receivable 21,956 21,946 Accounts receivable - affiliate --- 6 Other 565 833 Total current assets 89,889 70,476 Land 12,731 14,123 Plant and equipment, net 5,842 5,924 Coal and other mineral rights, net 617,487 590,459 Loan financing costs, net 2,344 2,431 Other assets, net 1,420 1,583 Total assets $729,713 $684,996 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $ 715 $ 677 Accounts payable - affiliate 87 88 Current portion of long-term debt 9,350 9,350 Accrued incentive plan expenses - current portion 4,262 1,105 Property, franchise and other taxes payable 4,541 4,138 Accrued interest 3,440 1,534 Total current liabilities 22,395 16,892 Deferred revenue 14,219 14,851 Accrued incentive plan expenses 2,609 5,395 Long-term debt 256,950 221,950 Partners' capital: Common units (outstanding: 16,825,305) 297,062 292,990 Subordinated units (outstanding: 8,515,228) 125,328 123,114 General partner's interest 10,944 10,024 Holders of incentive distribution rights 995 582 Accumulated other comprehensive loss (789) (802) Total partners' capital 433,540 425,908 Total liabilities and partners' capital $729,713 $684,996 NATURAL RESOURCE PARTNERS L.P. RECONCILIATION OF UNAUDITED GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (In thousands) For the three months ended March 31, 2006 2005 (Unaudited) Cash flow from operations $36,650 $26,070 Less reserves for future principal payments (2,350) (2,350) Distributable cash flow $34,300 $23,720 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, or Web site: http://www.nrplp.com/

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