NSP Insperity Inc

Second Quarter 2006 Highlights: HOUSTON, Aug. 3 /PRNewswire-FirstCall/ -- Natural Resource Partners L.P. (NYSE:NRPNYSE:andNYSE:NYSE:NYSE:NSP) today reported net income of $25.0 million for the second quarter 2006, equaling the $25.0 million reported for the same period in 2005. While net income was the same over the two periods, net income per unit slightly decreased from $0.92 in the 2005 period to $0.86 for the second quarter 2006 as a result of NRP allocating more income to the general partner and the holders of the incentive distribution rights. Distributable cash flow for the second quarter this year rose 4% to $30.2 million, up from $29.1 million a year ago. For the first six months of 2006, NRP reported net income of $53.6 million, an 18% increase over the $45.4 million reported for the same period last year, while net income per unit rose 11% to $1.87 per unit from $1.69 per unit for the six month periods. Distributable cash flow rose 22% to $64.5 million from $52.8 million in 2005. "Following an exceptional first quarter, our lessees performed as expected this quarter," said Chief Operating Officer Nick Carter. "These variations from quarter to quarter are typical as our lessees move on and off of our property. In addition, as we have stated in previous announcements, we don't expect to see the full impact of some our recent acquisitions until 2007." Second Quarter 2006 Financial Results As forecasted, second quarter revenues decreased slightly to $41.0 million from $41.7 million for the same period last year. Production decreased by 0.7 million tons to 13.4 million tons from the same period last year due to several of our lessees producing a larger percentage of coal from adjacent properties rather than NRP properties. Average coal royalty revenues per ton increased slightly to $2.73 from $2.69, partially offsetting the decreased production. Coal royalty revenues decreased $1.5 million to $36.5 million over the second quarter 2005. Other revenues increased by $0.7 million to $1.6 million including $0.5 million, or $0.02 per unit, associated with the gain on the sale of some timber assets. Total second quarter 2006 expenses decreased approximately 10% to $13.0 million from the $14.5 million reported in the second quarter last year. Depreciation, depletion and amortization was $1.4 million lower primarily due to lower production. Year-to-date Financial Results NRP's total revenues increased 12% to $87.5 million for the first six months from $77.9 million for 2005. Year-to-date 2006 coal royalty revenues rose 7% to $75.6 million compared to $70.5 million in 2005. This increase results from both a 5% increase in average per ton royalty revenue to $2.76 and a slight increase in production to 27.4 million tons. Appalachian production decreased 1%, while Illinois Basin and Northern Powder River Basin production increased approximately 31% and 11%, respectively. For the first six months of 2006, approximately 28% of NRP's coal royalty revenues and 22% of its production were from metallurgical coal, which is normally priced higher than steam coal. Other revenue rose $4.4 million, or 59%, to $11.9 million primarily due to gains on two timber sales totaling $2.6 million, or $0.09 per unit, and a $1.6 million, or 136%, increase in oil and gas income due to increased production. Total expenses were essentially flat with 2005 at $27.9 million for 2006 versus $28.1 million. Depreciation, depletion and amortization decreased 8% as a result of lower production and lower depletion rates. General and administrative expenses increased 15% or $1.0 million over last year primarily due to increased costs associated with managing a larger number of properties and incentive compensation accruals. Property, franchise and other taxes increased $0.5 million due to franchise taxes in additional states in which the partnership now operates. Distributions; Expected Conversion of NSP Units On July 19, 2006, NRP announced its twelfth consecutive increase in its quarterly distribution, raising the distribution to $0.82 per unit, or $3.28 per unit on an annualized basis, for both NRP and NSP. This represents a 15% increase in Natural Resource Partners' distributions compared to the second quarter of 2005. This distribution will be paid on August 14 to holders of record on August 1. Following the payment of the next distribution in November with respect to the third quarter, NRP expects that approximately one-third of the currently outstanding subordinated units that trade under the ticker symbol "NSP" will convert into common units and begin trading under the "NRP" ticker symbol. Strong Balance Sheet During the second quarter, NRP further strengthened its balance sheet. NRP paid $13.65 million of scheduled principal and interest payments, $16.44 million for acquisitions, $22.3 million in distributions and still has a cash balance of approximately $53 million and a debt to total capitalization ratio of 36%. 2006 Guidance With six months of actual results, NRP is reiterating its overall 2006 guidance. NRP anticipates announcing full year results within the framework of the previously announced ranges. While NRP is forecasting production to be at the lower end of its previously announced range, revenues, net income and distributable cash flow are anticipated to be at the upper end of the ranges announced on January 19. 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/ . Forward Looking Statements This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. 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. Such statements include comments regarding growth of the partnership and increases in distributions. 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. 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. Natural Resource Partners L.P. Operating Statistics (In thousands except per ton data) (Unaudited) Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005 Coal royalty revenues: Appalachia Northern $2,730 $2,105 $6,038 $4,569 Central 24,543 25,894 50,385 48,072 Southern 5,133 6,346 10,617 11,357 Total Appalachia $32,406 $ 34,345 $67,040 $63,998 Illinois Basin 1,704 1,093 3,656 2,400 Northern Powder River Basin 2,417 2,519 4,941 4,089 Total $36,527 $ 37,957 $75,637 $70,487 Coal royalty production (tons): Appalachia Northern 1,482 1,108 3,214 2,416 Central 7,982 8,958 16,176 17,197 Southern 1,436 1,675 2,862 2,999 Total Appalachia 10,900 11,741 22,252 22,612 Illinois Basin 977 707 2,140 1,574 Northern Powder River Basin 1,497 1,665 2,998 2,697 Total 13,374 14,113 27,390 26,883 Average royalty revenue per ton: Appalachia Northern $1.84 $1.90 $1.88 $1.89 Central 3.07 2.89 3.11 2.80 Southern 3.58 3.79 3.71 3.79 Total Appalachia 2.97 2.93 3.01 2.83 Illinois Basin 1.74 1.55 1.71 1.52 Northern Powder River Basin 1.61 1.51 1.65 1.52 Total $2.73 $2.69 $2.76 $2.62 Natural Resource Partners L.P. Consolidated Statements of Income (In thousands, except per unit data) (Unaudited) Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005 Revenues: Coal royalties $36,527 $37,957 $75,637 $ 70,487 Oil and gas royalties 928 610 2,647 1,070 Property taxes 1,546 1,547 3,295 2,981 Minimums recognized as revenue 250 481 621 934 Override royalties 181 209 484 824 Other 1,550 893 4,826 1,648 Total revenues 40,982 41,697 87,510 77,944 Operating costs and expenses: Depreciation, depletion and amortization 7,236 8,625 15,089 16,504 General and administrative 3,420 3,162 7,535 6,474 Property, franchise and other taxes 2,099 1,954 4,344 3,784 Coal royalty and override payments 263 745 954 1,298 Total operating costs and expenses 13,018 14,486 27,922 28,060 Income from operations 27,964 27,211 59,588 49,884 Other income (expense) Interest expense (3,675) (2,570) (7,293) (5,027) Interest income 755 331 1,273 562 Net income $25,044 $24,972 $53,568 $ 45,419 Net income attributable to: (A) General partner $2,253 $1,155 $4,348 $1,985 Holders of incentive distribution rights $943 $353 $1,764 $580 Limited partners $21,848 $23,464 $ 47,456 $ 42,854 Basic and diluted net income per limited partner unit: Common $0.86 $0.92 $1.87 $1.69 Subordinated $0.86 $0.92 $1.87 $1.69 Weighted average number of units outstanding: Common 16,825 13,987 16,825 13,987 Subordinated 8,515 11,354 8,515 11,354 (A) 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) (Unaudited) Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005 Cash flows from operating activities: Net income $25,044 $24,972 $53,568 $45,419 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 7,236 8,625 15,089 16,504 Non-cash interest charge 91 54 191 125 Gain from sale of assets (458) --- (2,634) --- Change in operating assets and liabilities: Accounts receivable (103) (979) (107) (3,369) Other assets (25) 351 243 601 Accounts payable (57) 161 (20) (124) Accrued interest (689) (2,078) 1,217 169 Deferred revenue 1,040 (176) 408 (2,331) Accrued incentive plan expenses 1,139 1,219 1,510 1,224 Property, franchise and other taxes payable (708) (771) (305) (770) Net cash provided by operating activities 32,510 31,378 69,160 57,448 Cash flows from investing activities: Acquisition of land, plant and equipment, coal and other mineral rights (16,438) --- (51,438) (21,544) Proceeds from sale of assets 829 --- 4,761 --- Net cash used in investing activities (15,609) --- (46,677) (21,544) Cash flows from financing activities: Proceeds from loans --- --- 50,000 18,000 Repayments of loans (9,350) (9,350) (24,350) (9,350) Distributions to partners (22,299) (18,371) (43,204) (35,897) Net cash used in financing activities (31,649) (27,721) (17,554) (27,247) Net (decrease) or increase in cash and cash equivalents (14,748) 3,657 4,929 8,657 Cash and cash equivalents at beginning of period 67,368 47,103 47,691 42,103 Cash and cash equivalents at end of period $52,620 $50,760 $52,620 $50,670 SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $4,261 $4,575 $5,861 $4,712 Natural Resource Partners L.P. Consolidated Balance Sheets (In thousands, except for unit information) ASSETS June 30, Dec. 31, 2006 2005 (Unaudited) Current assets: Cash and cash equivalents $52,620 $47,691 Accounts receivable 22,051 21,946 Accounts receivable - affiliate 8 6 Other 590 833 Total current assets 75,269 70,476 Land 12,436 14,123 Plant and equipment, net 5,760 5,924 Coal and other mineral rights, net 626,858 590,459 Loan financing costs, net 2,266 2,431 Other assets, net 1,257 1,583 Total assets $723,846 $684,996 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $659 $677 Accounts payable - affiliate 86 88 Current portion of long-term debt 9,350 9,350 Accrued incentive plan expenses - current portion 4,763 1,105 Property, franchise and other taxes payable 3,833 4,138 Accrued interest 2,751 1,534 Total current liabilities 21,442 16,892 Deferred revenue 15,259 14,851 Accrued incentive plan expenses 3,247 5,395 Long-term debt 247,600 221,950 Partners' capital: Common units (outstanding: 16,825,307) 298,190 292,990 Subordinated units (outstanding: 8,515,228) 126,029 123,114 General partner's interest 11,559 10,024 Holders of incentive distribution rights 1,296 582 Accumulated other comprehensive loss (776) (802) Total partners' capital 436,298 425,908 Total liabilities and partners' capital $723,846 $684,996 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 Six months ended June 30, June 30, 2006 2005 2006 2005 Cash flow from operations $32,510 $31,378 $69,160 $57,448 Less scheduled principal payments (9,350) (9,350) (9,350) (9,350) Less reserves for future principal payments (2,350) (2,350) (4,700) (4,700) Add reserves used for scheduled principal payments 9,400 9,400 9,400 9,400 Distributable cash flow $30,210 $29,078 $64,510 $52,798 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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