NRP 10-Q Quarter ended Sept. 30, 2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2012

OR

Commission file number: 001-31465

NATURAL RESOURCE PARTNERS L.P.

(Exact name of registrant as specified in its charter)

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)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨ No x

At November 7, 2012 there were 106,027,836 Common Units outstanding.

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TABL E OF CONTENTS

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Forward-Looking Statements

Statements included in this Form 10-Q are forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

Such forward-looking statements include, among other things, statements regarding capital expenditures, acquisitions and dispositions, expected commencement dates of mining, projected quantities of future production by our lessees and projected demand for or supply of coal, aggregates and oil and gas that will affect sales levels, prices and royalties and other revenues realized by us.

These forward-looking statements are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

You should not put undue reliance on any forward-looking statements. Please read “Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2011 for important factors that could cause our actual results of operations or our actual financial condition to differ.

Prior Year Financial Information

We restated certain income-related items with respect to 2011 to properly reflect them in the correct quarter. Please read Note 17. “Supplemental Financial Information (unaudited)” in our Form 10-K for the year ended December 31, 2011 for additional information related to the restatements of our prior year financial data.

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NATURAL RESOURCE PARTNERS L.P.

(In thousands, except unit data)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

(In thousands, except per unit data)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

(In thousands)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(In thousands, except unit data)

The accompanying notes are an integral part of these financial statements.

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NATURAL RESOURCE PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Basis of Presentation and Organization

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for future periods.

You should refer to the information contained in the footnotes included in Natural Resource Partners L.P.’s 2011 Annual Report on Form 10-K in connection with the reading of these unaudited interim consolidated financial statements. The Partnership restated certain income-related items with respect to 2011 to properly reflect them in the correct quarter. Please read Note 17. “Supplemental Financial Information (unaudited)” in the Partnership’s Form 10-K for the year ended December 31, 2011 for additional information related to the restatements of its prior year interim financial data.

The Partnership engages principally in the business of owning, managing and leasing mineral properties in the United States. The Partnership owns coal reserves in the three major coal-producing regions of the United States: Appalachia, the Illinois Basin and the Western United States, as well as lignite reserves in the Gulf Coast region. The Partnership also owns aggregate reserves in several states across the country. The Partnership does not operate any mines on its properties, but leases reserves to experienced operators under long-term leases that grant the operators the right to mine the Partnership’s reserves in exchange for royalty payments. Lessees are generally required to make payments based on the higher of a percentage of the gross sales price or a fixed royalty per ton, in addition to a minimum payment.

In addition, the Partnership owns transportation and preparation equipment, other mineral related rights and oil and gas properties on which it earns revenue.

The general partner of the Partnership is NRP (GP) LP, a Delaware limited partnership, whose general partner is GP Natural Resource Partners LLC, a Delaware limited liability company.

2.    Recent Accounting Pronouncements

In June 2011, the FASB amended the presentation of comprehensive income. The amendments in this update gave the Partnership the option to present the total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this update also require the Partnership to present changes in accumulated other comprehensive income by component in the statement of unitholders’ equity or in the notes to the financial statements. These amendments are effective for fiscal years and interim periods within those years, beginning on or after December 15, 2011. The Partnership adopted this amendment on January 1, 2012 and elected to present other comprehensive income in a single continuous statement, Consolidated Statements of Comprehensive Income. The Partnership also elected to present changes in accumulated other comprehensive income in the Consolidated Statements of Partners’ Capital.

In May 2011, the FASB amended fair value measurement and disclosure requirements. The amendments result in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (IFRSs). Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principal or requirement for measuring fair value or for disclosing information about fair value measurements. These amendments are effective for fiscal years and interim periods within those years, beginning on or after December 15, 2011. The Partnership adopted this amendment on January 1, 2012. The amendment did not have a material impact on its financial position, results of operations, cash flows or notes to the financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Partnership’s financial position, results of operations and cash flows.

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3.    Significant Acquisitions

Colt . In September 2009, the Partnership signed a definitive agreement to acquire approximately 200 million tons of coal reserves related to the Deer Run Mine in Illinois from Colt, LLC, an affiliate of the Cline Group, through several separate transactions for a total purchase price of $255 million. During the three and nine month periods ended September 30, 2012, the Partnership paid $40.0 million and $80.0 million, respectively, to complete the acquisition of reserves at this mine.

Oklahoma Oil and Gas. From December 2011 through June 2012, the Partnership acquired approximately 19,200 net mineral acres located in the Mississippian Lime oil play in Northern Oklahoma for approximately $63.9 million, of which 15,600 net mineral acres were acquired during the first nine months of 2012 for $51.3 million.

Sugar Camp . In March 2012, the Partnership acquired from Sugar Camp Energy, an affiliate of the Cline Group, the rail loadout and associated infrastructure assets at the Sugar Camp mine in Illinois for total consideration of $50.0 million. At the time of the acquisition, the Partnership also entered into a lease agreement related to the rail loadout and associated facilities that has been accounted for as a direct financing lease. The lease provides for payments based upon tons of coal transported over the facilities subject to quarterly recoupable minimum payments of $1.25 million. The lease is for a term of 20 years but may be extended by the lessee. Total projected remaining payments under the lease at September 30, 2012 are $97.1 million with unearned income of $47.6 million. The unearned income will be reflected as transportation fees over the term of the lease using the effective interest method. Any amounts in excess of the contractual minimums will be recorded as transportation fees as earned. The net amount receivable under the lease as of September 30, 2012 was $50.0 million, of which $1.7 million is included in accounts receivable – affiliates while the remaining is included in long-term contracts receivable - affiliate. The Partnership recognized $2.6 million in transportation fees during the nine months ended September 30, 2012 related to this lease.

In a separate transaction, the Partnership acquired, from Ruger, LLC, an affiliate of the Cline Group, a contractual overriding royalty interest for $8.9 million that will provide for payments based upon production from specific tons at the Sugar Camp operations. This overriding royalty was accounted for as a financing arrangement and is reflected as an affiliate receivable. The payments the Partnership receives with respect to the overriding royalty will be reflected partially as a return of the initial investment and partially as override revenue over the life of the contract using the effective interest method based upon actual production and adjusted periodically for differences in projected and actual production. The net amount receivable under the agreement as of September 30, 2012 was $7.3 million of which $1.1 million is included in accounts receivable – affiliates while the remaining is included in long-term contracts receivable - affiliate. The Partnership recognized $0.8 million in overriding royalty during the nine months ended September 30, 2012 related to the contractual overriding royalty interest.

4.    Plant and Equipment

The Partnership’s plant and equipment consist of the following:

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During the third quarter the Partnership sold a preparation plant to Taggart Global USA, LLC, a related party, for $12.3 million. See Note 9. “Related Party Transactions” for an understanding of Taggart and the Partnership’s relationship. The Partnership received $10.5 million in cash and a note receivable from Taggart, payable over three years for the balance. The note receivable balance at September 30, 2012 was $1.8 million. The Partnership recorded a gain of $4.7 million included in Other income of the Consolidated Statements of Income for the third quarter of 2012. The net book value of the asset sold was $7.6 million.

5.    Coal and Other Mineral Rights

The Partnership’s coal and other mineral rights consist of the following:

6.    Intangible Assets

Amounts recorded as intangible assets along with the balances and accumulated amortization are reflected in the table below:

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The estimates of future amortization expense relating to intangible assets for the periods indicated below are based on current mining plans, which are subject to revision in future periods.

Long-term debt consists of the following:

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Principal payments due in:

The senior note purchase agreement contains covenants requiring our operating subsidiary to:

The 8.38% and 8.92% senior notes also provide that in the event that the Partnership’s leverage ratio exceeds 3.75 to 1.00 at the end of any fiscal quarter, then in addition to all other interest accruing on these notes, additional interest in the amount of 2.00% per annum shall accrue on the notes for the two succeeding quarters and for as long thereafter as the leverage ratio remains above 3.75 to 1.00.

The Partnership made principal payments of $30.8 million on its senior notes during the nine months ended September 30, 2012.

At September 30, 2012, the Partnership had $103 million outstanding on its revolving credit facility; while at December 31, 2011 the Partnership did not have any outstanding balance. The weighted average interest rates for the nine months ended September 30, 2012 and year ended December 31, 2011 were 2.13% and 1.83%, respectively. The Partnership incurs a commitment fee on the undrawn portion of the revolving credit facility at rates ranging from 0.18% to 0.40% per annum. The facility includes an accordion feature whereby the Partnership may request its lenders to increase their aggregate commitment to a maximum of $500 million on the same terms.

The revolving credit facility contains covenants requiring the Partnership to maintain:

The Partnership was in compliance with all terms under its long-term debt as of September 30, 2012.

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8.    Fair Value

The Partnership’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying amount of the Partnership’s financial instruments included in accounts receivable and accounts payable approximates their fair value due to their short-term nature except for the accounts receivable – affiliate relating to the Sugar Camp override and Taggart preparation plant sale that includes both current and long-term portions. The Partnership’s cash and cash equivalents include money market accounts and are considered a Level 1 measurement. The fair market value and carrying value of the contractual override, Taggart note receivable and long-term senior notes are as follows:

The fair value of the Sugar Camp override, Taggart plant sale and long-term debt is estimated by management using comparable term risk-free treasury issues with a market rate component determined by current financial instruments with similar characteristics which is a Level 3 measurement. Since the Partnership’s credit facility is variable rate debt, its fair value approximates its carrying amount.

9.    Related Party Transactions

Reimbursements to Affiliates of our General Partner

The Partnership’s general partner does not receive any management fee or other compensation for its management of Natural Resource Partners L.P. However, in accordance with the partnership agreement, the general partner and its affiliates are reimbursed for expenses incurred on the Partnership’s behalf. All direct general and administrative expenses are charged to the Partnership as incurred. The Partnership also reimburses indirect general and administrative costs, including certain legal, accounting, treasury, information technology, insurance, administration of employee benefits and other corporate services incurred by our general partner and its affiliates. The Partnership had an amount payable to Quintana Minerals Corporation of $0.3 million at September 30, 2012 for services provided by Quintana to the Partnership and a payable of $0.3 million to Western Pocahontas Properties for an overriding royalty interest on one of the Partnership’s leases.

The reimbursements to affiliates of the Partnership’s general partner for services performed by Western Pocahontas Properties and Quintana Minerals Corporation are as follows:

The Partnership also leases an office building in Huntington, West Virginia from Western Pocahontas Properties and pays $0.6 million in lease payments each year through December 31, 2018.

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Cline Affiliates

Various companies controlled by Chris Cline lease coal reserves from the Partnership, and the Partnership provides coal transportation services to them for a fee. At September 30, 2012, Mr. Cline, both individually and through another affiliate, Adena Minerals, LLC, owns a 31% interest in the Partnership’s general partner, as well as 12,617,673 common units. Revenues from the Cline affiliates are as follows:

At September 30, 2012, the Partnership had amounts due from Cline affiliates totaling $62.9 million, of which $57.3 million was attributable to agreements relating to the recent Sugar Camp acquisition. See Note 3. “Significant Acquisitions” for further disclosure relating to the Sugar Camp agreements. The Partnership had received $57.7 million in minimum royalty payments that have not been recouped by Cline affiliates, of which $20.8 million was received in the current year. The $9.6 million in minimums recognized as revenue during the first nine months of 2012 was attributable to an agreement in 2012 by Gatling Ohio, LLC to relinquish its recoupment rights.

During 2011, the Partnership recognized a $3.0 million gain on a reserve exchange of over one million tons in Illinois with Williamson Energy, a Cline affiliate. The fair value of the reserves was estimated using Level 3 cash flow approach. The expected cash flows were developed using estimated annual sales tons, forecasted sales prices and anticipated market royalty rates. The tons received will be fully mined during 2012, while the tons exchanged are not included in the current mine plans. The gain is included in Other revenues on the Consolidated Statements of Comprehensive Income.

Quintana Capital Group GP, Ltd.

Corbin J. Robertson, Jr. is a principal in Quintana Capital Group GP, Ltd., which controls several private equity funds focused on investments in the energy business. In connection with the formation of Quintana Capital, the Partnership adopted a formal conflicts policy that establishes the opportunities that will be pursued by the Partnership and those that will be pursued by Quintana Capital. The governance documents of Quintana Capital’s affiliated investment funds reflect the guidelines set forth in NRP’s conflicts policy.

A fund controlled by Quintana Capital owns a significant membership interest in Taggart Global USA, LLC, including the right to nominate two members of Taggart’s 5-person board of directors. The Partnership owns and leases preparation plants to Taggart Global, which designs, builds and operates the plants. The lease payments are based on the sales price for the coal that is processed through the facilities. During the third quarter, the Partnership sold a preparation plant to Taggart for $12.3 million. The Partnership received $10.5 million in cash and a note receivable from Taggart, payable over three years for the balance. As a result of the sale, the Partnership recorded a gain of $4.7 million included in Other revenue in the Statements of Comprehensive Income. The note receivable balance at September 30, 2012 was $1.8 million.

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The Partnership currently leases three facilities to Taggart. Revenues from Taggart are as follows: