UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 001-31465
 NATURAL RESOURCE PARTNERS L.P.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    35-2164875(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 601 Jefferson Street, Suite 3600
Houston, Texas 77002
(Address of principal executive offices)
(Zip Code)
 (713) 751-7507
(Registrants telephone number, including area code)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




---



##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONITEM 1. Financial Statements
    
    
    4Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    4Consolidated Statements of Income For the Three and Nine Months Ended September 30,
2008 and 2007
    
    
    5Consolidated Statements of Cash Flows For the Nine Months Ended September 30,
2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    13Executive Overview
    
    
    13Results of Operations
    
    
    16Liquidity and Capital Resources
    
    
    19Related Party Transactions
    
    
    21Environmental
    
    
    22ITEM 3. Quantitative And Qualitative Disclosures About Market Risk
    
    
    22ITEM 4. Controls And Procedures
    
    
    22PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    23ITEM 1A. Risk Factors
    
    
    23ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23ITEM 3. Defaults Upon Senior Securities
    
    
    23ITEM 4. Submission Of Matters to a Vote of Security Holders
    
    
    23ITEM 5. Other Information
    
    
    23ITEM 6. Exhibits
    
    
    24Signatures
    
    
    25
  2




---



##### 



Forward-Looking Statements
     3




---



##### 



Part I. Financial Information
 
 Item 1. Financial Statements
 NATURAL RESOURCE PARTNERS L.P.
 
 CONSOLIDATED BALANCE SHEETS
(In thousands)
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64,412
    
    
    $
    58,341Restricted cash
    
    
    6,240
    
    
    
    6,240Accounts receivable, net of allowance for doubtful accounts
    
    
    37,577
    
    
    
    27,643Accounts receivable  affiliate
    
    
    2,365
    
    
    
    1,005Other
    
    
    202
    
    
    
    1,009Total current assets
    
    
    110,796
    
    
    
    94,238Land
    
    
    24,343
    
    
    
    24,343Plant and equipment, net
    
    
    67,741
    
    
    
    61,441Coal and other mineral rights, net
    
    
    987,370
    
    
    
    1,030,088Intangible assets, net
    
    
    103,798
    
    
    
    106,222Loan financing costs, net
    
    
    2,784
    
    
    
    3,098Other assets, net
    
    
    516
    
    
    
    601Total assets
    
    $
    1,297,348
    
    
    $
    1,320,031LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    3,012
    
    
    $
    2,567Accounts payable  affiliate
    
    
    106
    
    
    
    104Current portion of long-term debt
    
    
    17,234
    
    
    
    17,234Accrued incentive plan expenses  current portion
    
    
    4,455
    
    
    
    3,993Property, franchise and other taxes payable
    
    
    4,539
    
    
    
    6,415Accrued interest
    
    
    3,077
    
    
    
    6,276Total current liabilities
    
    
    32,423
    
    
    
    36,589Deferred revenue
    
    
    40,275
    
    
    
    36,286Asset retirement obligations
    
    
    39
    
    
    
    39Accrued incentive plan expenses
    
    
    5,501
    
    
    
    6,469Long-term debt
    
    
    478,822
    
    
    
    496,057Partners capital:Common units
    
    
    726,021
    
    
    
    731,113General partners interest
    
    
    14,413
    
    
    
    14,177Holders of incentive distribution rights
    
    
    514
    
    
    
    Accumulated other comprehensive loss
    
    
    (660
    )
    
    
    (699
    )Total partners capital
    
    
    740,288
    
    
    
    744,591Total liabilities and partners capital
    
    $
    1,297,348
    
    
    $
    1,320,031
  4




---



##### 



NATURAL RESOURCE PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)Revenues:Coal royalties
    
    $
    58,323
    
    
    $
    44,378
    
    
    $
    167,501
    
    
    $
    126,084Aggregate royalties
    
    
    2,280
    
    
    
    2,096
    
    
    
    7,575
    
    
    
    5,785Coal processing fees
    
    
    2,044
    
    
    
    1,374
    
    
    
    5,698
    
    
    
    3,404Transportation fees
    
    
    3,183
    
    
    
    1,000
    
    
    
    8,193
    
    
    
    2,306Oil and gas royalties
    
    
    2,201
    
    
    
    1,388
    
    
    
    5,579
    
    
    
    3,924Property taxes
    
    
    2,263
    
    
    
    2,963
    
    
    
    7,760
    
    
    
    7,836Minimums recognized as revenue
    
    
    737
    
    
    
    913
    
    
    
    1,193
    
    
    
    1,698Override royalties
    
    
    3,133
    
    
    
    953
    
    
    
    7,638
    
    
    
    2,994Other
    
    
    2,032
    
    
    
    1,301
    
    
    
    4,706
    
    
    
    3,639Total revenues
    
    
    76,196
    
    
    
    56,366
    
    
    
    215,843
    
    
    
    157,670Operating costs and expenses:Depreciation, depletion and amortization
    
    
    17,042
    
    
    
    13,045
    
    
    
    48,849
    
    
    
    37,324General and administrative
    
    
    1,732
    
    
    
    3,687
    
    
    
    12,771
    
    
    
    15,880Property, franchise and other taxes
    
    
    2,822
    
    
    
    3,993
    
    
    
    10,569
    
    
    
    10,618Transportation costs
    
    
    431
    
    
    
    79
    
    
    
    960
    
    
    
    149Coal royalty and override payments
    
    
    287
    
    
    
    246
    
    
    
    939
    
    
    
    914Total operating costs and expenses
    
    
    22,314
    
    
    
    21,050
    
    
    
    74,088
    
    
    
    64,885Income from operations
    
    
    53,882
    
    
    
    35,316
    
    
    
    141,755
    
    
    
    92,785Other income (expense)Interest expense
    
    
    (6,912
    )
    
    
    (7,124
    )
    
    
    (21,336
    )
    
    
    (21,584
    )Interest income
    
    
    368
    
    
    
    736
    
    
    
    1,124
    
    
    
    2,239Net income
    
    $
    47,338
    
    
    $
    28,928
    
    
    $
    121,543
    
    
    $
    73,440Net income attributable to:General partner
    
    $
    8,023
    
    
    $
    4,119
    
    
    $
    19,885
    
    
    $
    10,012Other holders of incentive distribution rights
    
    $
    3,810
    
    
    $
    1,907
    
    
    $
    9,738
    
    
    $
    4,602Limited partners
    
    $
    35,505
    
    
    $
    22,902
    
    
    $
    91,920
    
    
    $
    58,826Basic and diluted net income per limited partner unit
    
    $
    0.55
    
    
    $
    0.35
    
    
    $
    1.42
    
    
    $
    0.91Weighted average number of units outstanding
    
    
    64,891
    
    
    
    64,891
    
    
    
    64,891
    
    
    
    64,363
  5




---



##### 



NATURAL RESOURCE PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine Months EndedSeptember 30,2008
    
    
    2007(Unaudited)Cash flows from operating activities:Net income
    
    $
    121,543
    
    
    $
    73,440Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation, depletion and amortization
    
    
    48,849
    
    
    
    37,324Non-cash interest charge, net
    
    
    266
    
    
    
    326Loss from disposition of assets
    
    
    32
    
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (11,294
    )
    
    
    (7,634
    )Other assets
    
    
    892
    
    
    
    883Accounts payable and accrued liabilities
    
    
    447
    
    
    
    (217
    )Accrued interest
    
    
    (3,199
    )
    
    
    (166
    )Deferred revenue
    
    
    3,989
    
    
    
    10,807Accrued incentive plan expenses
    
    
    (506
    )
    
    
    (138
    )Property, franchise and other taxes payable
    
    
    (1,876
    )
    
    
    304Net cash provided by operating activities
    
    
    159,143
    
    
    
    114,929Cash flows from investing activities:Acquisition of land, coal and other mineral rights.
    
    
    
    
    
    
    (24,233
    )Acquisition or construction of plant and equipment.
    
    
    (9,952
    )
    
    
    (15,835
    )Cash placed in restricted accounts
    
    
    
    
    
    
    (6,240
    )Net cash used in investing activities
    
    
    (9,952
    )
    
    
    (46,308
    )Cash flows from financing activities:Proceeds from loans
    
    
    
    
    
    
    262,400Deferred financing costs
    
    
    
    
    
    
    (1,292
    )Repayment of loans
    
    
    (17,235
    )
    
    
    (235,942
    )Distributions to partners
    
    
    (125,885
    )
    
    
    (108,099
    )Contribution by general partner
    
    
    
    
    
    
    2,645Net cash used in financing activities
    
    
    (143,120
    )
    
    
    (80,288
    )Net increase (decrease) in cash and cash equivalents
    
    
    6,071
    
    
    
    (11,667
    )Cash and cash equivalents at beginning of period
    
    
    58,341
    
    
    
    66,044Cash and cash equivalents at end of period
    
    $
    64,412
    
    
    $
    54,377Supplemental cash flow information:Cash paid during the period for interest
    
    $
    24,179
    
    
    $
    21,379Non-cash investing activities:Equity issued in business combinations
    
    
    
    
    
    $
    350,741Liability assumed in business combination
    
    
    
    
    
    
    1,989
  6




---



##### 



NATURAL RESOURCE PARTNERS L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation and Organization
      2. Recent Accounting Pronouncements
    7




---



##### 



Earnings per Share
  . Plant and Equipment
  September 30,
    
    
    December 31,2008
    
    
    2007(In thousands)(Unaudited)Construction in process
    
    $
    7,803
    
    
    $
    11,238Plant and equipment at cost
    
    
    68,197
    
    
    
    54,758Accumulated depreciation
    
    
    (8,259
    )
    
    
    (4,555
    )Net book value
    
    $
    67,741
    
    
    $
    61,441
 Nine months endedSeptember 30,2008
    
    
    2007(In thousands)(Unaudited)Total depreciation expense on plant and equipment
    
    $
    3,707
    
    
    $
    2,827
 4. Coal and Other Mineral Rights
  September 30,
    
    
    December 31,2008
    
    
    2007(In thousands)(Unaudited)Coal and other mineral rights
    
    $
    1,247,814
    
    
    $
    1,247,814Less accumulated depletion and amortization
    
    
    (260,444
    )
    
    
    (217,726
    )Net book value
    
    $
    987,370
    
    
    $
    1,030,088
 Nine months endedSeptember 30,2008
    
    
    2007(In thousands)(Unaudited)Total depletion and amortization expense on coal and other mineral rights
    
    $
    42,718
    
    
    $
    33,243
 8




---



##### 



5. Intangible Assets
  September 30, 2008
    
    
    December 31, 2007Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization(In thousands)
    
    
    (In thousands)(Unaudited)Finite-lived intangible assetsAbove market transportation contracts
    
    $
    82,276
    
    
    $
    2,930
    
    
    $
    82,276
    
    
    $
    1,045Above market coal leases
    
    
    25,281
    
    
    
    829
    
    
    
    25,281
    
    
    
    290$
    107,557
    
    
    $
    3,759
    
    
    $
    107,557
    
    
    $
    1,335
  Estimated amortization expense (In thousands)For remainder of year ended December 31, 2008
    
    
    1,609For year ended December 31, 2009
    
    
    4,810For year ended December 31, 2010
    
    
    5,862For year ended December 31, 2011
    
    
    5,862For year ended December 31, 2012
    
    
    5,862For year ended December 31, 2013
    
    
    5,862
 6. Long-Term Debt
  September 30,
    
    
    December 31,2008
    
    
    2007(In thousands)(Unaudited)$300 million floating rate revolving credit facility, due March 2012
    
    $
    48,000
    
    
    $
    48,0005.55% senior notes, with semi-annual interest payments in June and
December, maturing June 2013
    
    
    35,000
    
    
    
    35,0004.91% senior notes, with semi-annual interest payments in June and
December, with annual principal payments in June, maturing in June
2018
    
    
    49,750
    
    
    
    55,8005.05% senior notes, with semi-annual interest payments in January
and July, with scheduled principal payments beginning July 2008,
maturing in July 2020
    
    
    92,308
    
    
    
    100,0005.31% utility local improvement obligation, with annual principal
and interest payments, maturing in March 2021
    
    
    2,498
    
    
    
    2,6915.55% senior notes, with semi-annual interest payments in June and
December, with annual principal payments in June, maturing in June
2023
    
    
    43,500
    
    
    
    46,8005.82% senior notes, with semi-annual interest payments in March and
September, with scheduled principal payments beginning March 2010,
maturing in March 2024
    
    
    225,000
    
    
    
    225,000Total debt
    
    
    496,056
    
    
    
    513,291Less  current portion of long term debt
    
    
    (17,234
    )
    
    
    (17,234
    )Long-term debt
    
    $
    478,822
    
    
    $
    496,057
  9




---



##### 



7. Net Income Per Unit Attributable to Limited Partners
  8. Related Party Transactions
 Reimbursements to Affiliates of its General Partner
   Transactions with Cline Affiliates
   Quintana Energy Partners, L.P.
   10




---



##### 



9. Commitments and Contingencies
 Legal
  Environmental Compliance
  10. Major Lessee
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Revenues
    
    Percent
    
    Revenues
    
    Percent
    
    Revenues
    
    Percent
    
    Revenues
    
    PercentLessee A
    
    
    8,758
    
    
    
    12
    %
    
    
    5,246
    
    
    
    9
    %
    
    
    25,114
    
    
    
    12
    %
    
    
    15,916
    
    
    
    10
    %Lessee B
    
    
    4,993
    
    
    
    7
    %
    
    
    6,553
    
    
    
    12
    %
    
    
    16,003
    
    
    
    7
    %
    
    
    14,910
    
    
    
    9
    %
 11. Incentive Plans
   11




---



##### 



Outstanding grants at the beginning of the period
    
    
    507,466Grants during the period
    
    
    171,328Grants vested and paid during the period
    
    
    (105,230
    )Forfeitures during the period
    
    
    Outstanding grants at the end of the period
    
    
    573,564
    12. Distributions
  13. Subsequent Events
  12




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of the financial condition and results of operations should be read
in conjunction with the historical financial statements and notes thereto included elsewhere in
this filing and the financial statements and footnotes included in the Natural Resource Partners
L.P. Form 10-K , as filed on February 29, 2008.
 
 Executive Overview
 Our Business
     Current Market Conditions and our Liquidity
    13




---



##### 



Current Results
      Distributable Cash Flow
   14




---



##### 



Reconciliation of GAAP Net cash provided by operating activities  to Non-GAAP Distributable cash flow  (In thousands)
 For the Quarter Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)Net cash provided by operating activities
    
    $
    58,273
    
    
    $
    38,325
    
    
    $
    159,143
    
    
    $
    114,929Less scheduled principal payments
    
    
    (7,691
    )
    
    
    
    
    
    
    (17,234
    )
    
    
    (9,350
    )Less reserves for future principal payments
    
    
    (4,308
    )
    
    
    (4,280
    )
    
    
    (12,924
    )
    
    
    (9,080
    )Add reserves used for scheduled principal payments
    
    
    7,691
    
    
    
    
    
    
    
    17,234
    
    
    
    9,400Distributable cash flow
    
    $
    53,965
    
    
    $
    34,045
    
    
    $
    146,219
    
    
    $
    105,899
 Acquisitions
  Mid-Vol Coal Preparation Plant
 Licking River Preparation Plant
 Massey Energy
 National Resources
 Cheyenne Resources
 Mettiki
 Westmoreland.
 Dingess-Rum
 Cline
 15




---



##### 



Results of Operations
 Three Months Ended
    
    
    Increase
    
    
    PercentagenSeptember 30,
    
    
    (Decrease)
    
    
    Change2008
    
    
    2007(In thousands, except percent and per ton data)(Unaudited)Coal:Coal royalty revenuesAppalachiaNorthern
    
    $
    3,433
    
    
    $
    3,941
    
    
    $
    (508
    )
    
    
    (13
    %)Central
    
    
    40,371
    
    
    
    29,662
    
    
    
    10,709
    
    
    
    36
    %Southern
    
    
    5,397
    
    
    
    4,649
    
    
    
    748
    
    
    
    16
    %Total Appalachia
    
    
    49,201
    
    
    
    38,252
    
    
    
    10,949
    
    
    
    29
    %Illinois Basin
    
    
    6,438
    
    
    
    2,462
    
    
    
    3,976
    
    
    
    161
    %Northern Powder River Basin
    
    
    2,684
    
    
    
    3,664
    
    
    
    (980
    )
    
    
    (27
    %)Total
    
    $
    58,323
    
    
    $
    44,378
    
    
    $
    13,945
    
    
    
    31
    %Production (tons)AppalachiaNorthern
    
    
    1,172
    
    
    
    1,640
    
    
    
    (468
    )
    
    
    (29
    %)Central
    
    
    8,859
    
    
    
    8,927
    
    
    
    (68
    )
    
    
    (1
    %)Southern
    
    
    1,015
    
    
    
    1,184
    
    
    
    (169
    )
    
    
    (14
    %)Total Appalachia
    
    
    11,046
    
    
    
    11,751
    
    
    
    (705
    )
    
    
    (6
    %)Illinois Basin
    
    
    2,441
    
    
    
    1,147
    
    
    
    1,294
    
    
    
    113
    %Northern Powder River Basin
    
    
    1,448
    
    
    
    1,810
    
    
    
    (362
    )
    
    
    (20
    %)Total
    
    
    14,935
    
    
    
    14,708
    
    
    
    227
    
    
    
    2
    %Average gross royalty per tonAppalachiaNorthern
    
    $
    2.93
    
    
    $
    2.40
    
    
    $
    0.53
    
    
    
    22
    %Central
    
    
    4.56
    
    
    
    3.32
    
    
    
    1.24
    
    
    
    37
    %Southern
    
    
    5.32
    
    
    
    3.93
    
    
    
    1.39
    
    
    
    35
    %Total Appalachia
    
    
    4.45
    
    
    
    3.26
    
    
    
    1.19
    
    
    
    37
    %Illinois Basin
    
    
    2.64
    
    
    
    2.15
    
    
    
    0.49
    
    
    
    23
    %Northern Powder River Basin
    
    
    1.85
    
    
    
    2.02
    
    
    
    (0.17
    )
    
    
    (8
    %)Combined average gross
royalty per ton
    
    
    3.91
    
    
    
    3.02
    
    
    
    0.89
    
    
    
    29
    %Aggregates:Royalty revenue
    
    $
    1,980
    
    
    $
    1,932
    
    
    $
    48
    
    
    
    2
    %Aggregate royalty bonus
    
    $
    300
    
    
    $
    164
    
    
    $
    136
    
    
    
    83
    %Production
    
    
    1,484
    
    
    
    1,584
    
    
    
    (100
    )
    
    
    (6
    %)Average base royalty per ton
    
    $
    1.33
    
    
    $
    1.22
    
    
    $
    0.11
    
    
    
    9
    %
 Coal Royalty Revenues and Production
 Appalachia.
 16




---



##### 



Illinois Basin
 Northern Powder River Basin
 Aggregates Royalty Revenues and Production
 Nine Months Ended
    
    
    Increase
    
    
    PercentagenSeptember 30,
    
    
    (Decrease)
    
    
    Change2008
    
    
    2007(In thousands, except percent and per ton data)(Unaudited)Coal:Coal royalty revenuesAppalachiaNorthern
    
    $
    11,838
    
    
    $
    11,064
    
    
    $
    774
    
    
    
    7
    %Central
    
    
    117,642
    
    
    
    88,248
    
    
    
    29,394
    
    
    
    33
    %Southern
    
    
    14,697
    
    
    
    13,677
    
    
    
    1,020
    
    
    
    7
    %Total Appalachia
    
    
    144,177
    
    
    
    112,989
    
    
    
    31,188
    
    
    
    28
    %Illinois Basin
    
    
    14,995
    
    
    
    4,941
    
    
    
    10,054
    
    
    
    203
    %Northern Powder River Basin
    
    
    8,329
    
    
    
    8,154
    
    
    
    175
    
    
    
    2
    %Total
    
    $
    167,501
    
    
    $
    126,084
    
    
    $
    41,417
    
    
    
    33
    %Production (tons)AppalachiaNorthern
    
    
    4,436
    
    
    
    4,875
    
    
    
    (439
    )
    
    
    (9
    %)Central
    
    
    27,430
    
    
    
    27,022
    
    
    
    408
    
    
    
    (2
    %)Southern
    
    
    3,239
    
    
    
    3,514
    
    
    
    (275
    )
    
    
    (8
    %)Total Appalachia
    
    
    35,105
    
    
    
    35,411
    
    
    
    (306
    )
    
    
    (1
    %)Illinois Basin
    
    
    5,899
    
    
    
    2,307
    
    
    
    3,592
    
    
    
    156
    %Northern Powder River Basin
    
    
    4,493
    
    
    
    4,072
    
    
    
    421
    
    
    
    10
    %Total
    
    
    45,497
    
    
    
    41,790
    
    
    
    3,707
    
    
    
    9
    %Average gross royalty per tonAppalachiaNorthern
    
    $
    2.67
    
    
    $
    2.27
    
    
    $
    0.40
    
    
    
    18
    %Central
    
    
    4.29
    
    
    
    3.27
    
    
    
    1.02
    
    
    
    31
    %Southern
    
    
    4.54
    
    
    
    3.89
    
    
    
    0.65
    
    
    
    17
    %Total Appalachia
    
    
    4.11
    
    
    
    3.19
    
    
    
    0.92
    
    
    
    29
    %Illinois Basin
    
    
    2.54
    
    
    
    2.14
    
    
    
    0.40
    
    
    
    19
    %Northern Powder River Basin
    
    
    1.85
    
    
    
    2.00
    
    
    
    (0.15
    )
    
    
    (8
    %)Combined average gross
royalty per ton
    
    
    3.68
    
    
    
    3.02
    
    
    
    0.66
    
    
    
    22
    %Aggregates:Royalty revenue
    
    $
    5,028
    
    
    $
    5,293
    
    
    $
    (265
    )
    
    
    (5
    %)Aggregate royalty bonus
    
    $
    2,544
    
    
    $
    492
    
    
    $
    2,052
    
    
    
    417
    %Production
    
    
    3,876
    
    
    
    4,456
    
    
    
    (580
    )
    
    
    (13
    %)Average base royalty per ton
    
    $
    1.30
    
    
    $
    1.19
    
    
    $
    0.11
    
    
    
    9
    %
 Coal Royalty Revenues and Production
 Appalachia.
 17




---



##### 



Illinois Basin
 Northern Powder River Basin
 Aggregates Royalty Revenues and Production
 Other Operating Results
 Coal Processing and Transportation Revenues
  Oil and Gas Royalties
 Override revenues.
 Other revenues. ,
 Operating costs and expenses.
 
    
    Depreciation, depletion and amortization of $17.0 million and $13.0 million for the
quarters ended September 30, 2008 and 2007 and $48.8 million and $37.3 million for the nine
months ended September 30, 2008 and 2007, respectively. Depletion increased as a result of
higher total production for 2008 and a greater portion of the production on the new
properties that we acquired in 2007 and at the end of 2006, which are being depleted at much
higher rates than our older properties. In the quarter ending September 30, 2008, we also
fully depleted the remaining basis on an asset for which the remaining tons were
unrecoverable. The depletion expense related to the asset was $1.0 million.
    
    General and administrative expenses of $1.7 million and $12.8 million for the quarter and
nine month periods ended September 30, 2008 compared to $3.7 million and $15.9 million for
the same periods during 2007. The change in general and administrative expense is primarily
due to accruals under our long-term incentive plan attributable to fluctuations in our unit
price.
 18




---



##### 




    
    Property, franchise and other taxes have decreased approximately $1.2 million for the
quarter ended September 30, 2008 when compared to the same period of 2007, while for the
nine month periods ending September 30, 2008 and 2007 property taxes were virtually the
same. The third quarter of 2007 reflected higher than normal accruals needed to provide for
an increase in West Virginia taxes of almost $1.0 million due to higher tax assessments and
taxes on new properties acquired in 2007. A substantial portion of our property taxes is
reimbursed to us by our lessees and is reflected as property tax revenue on our statement of
income.
 Interest Expense.
 
 Liquidity and Capital Resources
 Cash Flows and Capital Expenditures
     Long-Term Debt
  
    
    $48.0 million of our $300 million floating rate revolving credit facility, due March
2012;
    
    $35 million of 5.55% senior notes due 2013;
    
    $49.8 million of 4.91% senior notes due 2018;
    
    $92.3 million of 5.05% senior notes due 2020;
    
    $2.5 million of 5.31% utility local improvement obligation due 2021;
    
    $43.5 million of 5.55% senior notes due 2023; and
    
    $225 million of 5.82% senior notes due 2024.
  19




---



##### 



Credit Facility.
  
    
    the higher of the federal funds rate plus an applicable margin ranging from 0% to 0.50%
or the prime rate as announced by the agent bank; or
    
    at a rate equal to LIBOR plus an applicable margin ranging from 0.45% to 1.50%.
   
    
    a ratio of consolidated indebtedness to consolidated EBITDDA (as defined in the credit
agreement) of 3.75 to 1.0 for the four most recent quarters; provided however, if during one
of those quarters we have made an acquisition, then the ratio shall not exceed 4.0 to 1.0
for the quarter in which the acquisition occurred and (1) if the acquisition is in the first
half of the quarter, the next two quarters or (2) if the acquisition is in the second half
of the quarter, the next three quarters; and
    
    a ratio of consolidated EBITDDA to consolidated fixed charges (consisting of consolidated
interest expense and consolidated lease operating expense) of 4.0 to 1.0 for the four most
recent quarters.
 Senior Notes.
  
    
    not permit debt secured by certain liens and debt of subsidiaries to exceed 10% of
consolidated net tangible assets (as defined in the note purchase agreement); and
 
    
    maintain the ratio of consolidated EBITDA to consolidated fixed charges (consisting of
consolidated interest expense and consolidated operating lease expense) at not less than 3.5
to 1.0.
 Shelf Registration Statement
  20




---



##### 



Off-Balance Sheet Transactions
  
 Related Party Transactions
 Reimbursements to Affiliates of our General Partner
   Transactions with Cline Affiliates
   Quintana Energy Partners, L.P.
    21




---



##### 



Environmental
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Commodity Price Risk
  Interest Rate Risk
  
 Item 4. Controls and Procedures
   22




---



##### 



Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Our ability to make acquisitions and pay distributions to our unitholders depends, in part,
upon our ability to access the capital markets. We may not be able to obtain long-term financing
on acceptable terms or obtain funding under our current credit facility because of the
deterioration of the credit and capital markets.
    Some of our lessees may be adversely impacted by the current deterioration in the credit
markets.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  23




---



##### 



Item 6. Exhibits
 31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley.32.1**
    
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350.32.2**
    
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350.
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 24




---



##### 



SIGNATURES
  NATURAL RESOURCE PARTNERS L.P.By:
    
    NRP (GP) LP, its general partnerBy:
    
    GP NATURAL RESOURCEPARTNERS LLC, its general partnerDate: November 7, 2008By:
    
    /s/ Corbin J. Robertson, Jr.Corbin J. Robertson, Jr.,Chairman of the Board andChief Executive Officer(Principal Executive Officer)Date: November 7, 2008By:
    
    /s/ Dwight L. DunlapDwight L. Dunlap,Chief Financial Officer andTreasurer(Principal Financial Officer)Date: November 7, 2008By:
    
    /s/ Kenneth HudsonKenneth HudsonController(Principal Accounting Officer)
 25