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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________TO_____________
COMMISSION FILE NO.: 0-26823
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ALLIANCE RESOURCE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 73-1564280
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1717 SOUTH BOULDER AVENUE, SUITE 600, TULSA, OKLAHOMA 74119
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(918) 295-7600
(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 is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of August 11, 2003, 11,481,262 Common Units and 6,422,531
Subordinated Units are outstanding.
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TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page
----
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2002 ............................................................. 1
Condensed Consolidated Statements of Income for the three-months and
six-months ended June 30, 2003 and 2002 ....................................... 2
Condensed Consolidated Statements of Cash Flows for the six-months ended
June 30, 2003 and 2002 ........................................................ 3
Notes to Condensed Consolidated Financial Statements .......................... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ................................................................. 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .................... 15
ITEM 4 CONTROLS AND PROCEDURES ....................................................... 15
FORWARD-LOOKING STATEMENTS .................................................... 16
i
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ............................................................. 17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ..................................... 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................................... 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS .............................................................. 17
ITEM 5. OTHER INFORMATION ............................................................. 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .............................................. 17
ii
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT UNIT DATA)
JUNE 30, DECEMBER 31,
2003 2002
--------------------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................. $ 32,168 $ 9,028
Trade receivables, net ..................................................... 41,958 33,018
Marketable securities (at cost, which approximates fair value) ............. 480 470
Inventories ................................................................ 23,419 13,165
Advance royalties .......................................................... 5,233 5,232
Prepaid expenses and other assets .......................................... 824 2,784
---------- ----------
Total current assets .................................................. 104,082 63,697
PROPERTY, PLANT AND EQUIPMENT AT COST 458,631 446,629
LESS ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION (234,289) (216,777)
---------- ----------
224,342 229,852
OTHER ASSETS:
Advance royalties .......................................................... 7,919 10,542
Coal supply agreements, net ................................................ 6,806 8,167
Other long-term assets ..................................................... 3,871 4,674
---------- ----------
$ 347,020 $ 316,932
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................... $ 20,916 $ 23,330
Due to affiliates .......................................................... 3,113 1,286
Accrued taxes other than income taxes ...................................... 9,549 8,105
Accrued payroll and related expenses ....................................... 9,739 10,004
Accrued interest ........................................................... 5,361 5,361
Workers' compensation and pneumoconiosis benefits .......................... 5,540 5,275
Other current liabilities .................................................. 11,390 9,877
Current maturities, long-term debt ......................................... 18,750 16,250
---------- ----------
Total current liabilities ............................................. 84,358 79,488
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities ............................... 185,000 195,000
Accrued pneumoconiosis benefits ............................................ 16,858 16,067
Workers' compensation ...................................................... 22,790 19,949
Reclamation and mine closing ............................................... 22,096 21,821
Due to affiliates .......................................................... 8,882 20,652
Other liabilities .......................................................... 3,032 2,717
---------- ----------
Total liabilities ..................................................... 343,016 355,694
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 11,481,262 and 8,982,780 units outstanding, respectively. 201,149 144,219
Subordinated Unitholder 6,422,531 units outstanding ........................ 114,340 112,916
General Partners ........................................................... (306,065) (290,472)
Unrealized loss on marketable securities ................................... (145) (150)
Minimum pension liability .................................................. (5,275) (5,275)
---------- ----------
Total Partners' capital (deficit) ..................................... 4,004 (38,762)
---------- ----------
$ 347,020 $ 316,932
========== ==========
See notes to condensed consolidated financial statements.
1
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
SALES AND OPERATING REVENUES:
Coal sales ............................................................ $ 122,589 $ 117,571 $ 237,039 $ 233,416
Transportation revenues ............................................... 5,071 4,362 9,386 9,458
Other sales and operating revenues .................................... 5,811 4,895 11,971 9,342
------------ ------------ ------------ ------------
Total revenues .............................................. 133,471 126,828 258,396 252,216
------------ ------------ ------------ ------------
EXPENSES:
Operating expenses .................................................... 94,933 84,213 177,685 168,730
Transportation expenses ............................................... 5,071 4,362 9,386 9,458
Outside purchases ..................................................... 370 2,806 1,389 5,611
General and administrative ............................................ 6,654 5,165 12,305 10,106
Depreciation, depletion and amortization .............................. 13,662 12,622 26,793 25,613
Interest expense (net of interest income and interest capitalized
for the three months and six months ended June 30, 2003 and
2002 of $88, $304, $367 and $636, respectively) ................ 3,990 4,209 7,957 8,146
------------ ------------ ------------ ------------
Total operating expenses .................................... 124,680 113,377 235,515 227,664
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS ................................................... 8,791 13,451 22,881 24,552
OTHER INCOME ............................................................. 457 385 450 837
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ............................................... 9,248 13,836 23,331 25,389
INCOME TAX EXPENSE (BENEFIT) ............................................. 720 (176) 1,675 (23)
------------ ------------ ------------ ------------
NET INCOME ............................................................... $ 8,528 $ 14,012 $ 21,656 $ 25,412
============ ============ ============ ============
ALLOCATION OF NET INCOME:
PORTION APPLICABLE TO WARRIOR COAL
EARNINGS (LOSS) PRIOR TO ITS ACQUISITION ON
FEBRUARY 14, 2003 .................................................. $ - $ (208) $ (666) $ (28)
PORTION APPLICABLE TO PARTNERS' INTEREST ............................... 8,528 14,220 22,322 25,440
------------ ------------ ------------ ------------
NET INCOME ............................................................... $ 8,528 $ 14,012 $ 21,656 $ 25,412
============ ============ ============ ============
GENERAL PARTNERS' INTEREST IN
NET INCOME (LOSS) ...................................................... $ 170 $ 77 $ (219) $ 481
============ ============ ============ ============
LIMITED PARTNERS' INTEREST IN
NET INCOME ............................................................. $ 8,358 $ 13,935 $ 21,875 $ 24,931
============ ============ ============ ============
BASIC NET INCOME PER LIMITED
PARTNER UNIT ........................................................... $ 0.47 $ 0.90 $ 1.27 $ 1.62
============ ============ ============ ============
DILUTED NET INCOME PER LIMITED
PARTNER UNIT ........................................................... $ 0.45 $ 0.88 $ 1.23 $ 1.57
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-BASIC ...................................................... 17,903,793 15,405,311 17,252,320 15,405,311
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-DILUTED .................................................... 18,485,741 15,842,657 17,833,368 15,841,864
============ ============ ============ ============
See notes to condensed consolidated financial statements.
2
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-------------------------
2003 2002
---------- ----------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 43,727 $ 38,461
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ......................... (20,019) (31,963)
Purchase of Warrior Coal .......................................... (12,661) -
Proceeds from sale of property, plant and equipment ............... 463 320
Proceeds from the maturity of marketable securities ............... -- 10,085
---------- ----------
Net cash used in investing activities ....................... (32,217) (21,558)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common unit offering to public ...................... 53,965 -
Cash contribution by General Partners ............................. 9 -
Payment of Warrior Coal's revolving credit agreement balance ...... (17,000) -
Borrowings under revolving credit facility ........................ 10,600 39,500
Payments under revolving credit facility .......................... (10,600) (39,500)
Payments on long-term debt ........................................ (7,500) (7,500)
Distribution to Partners .......................................... (17,844) (15,720)
---------- ----------
Net cash provided by (used in) financing activities ......... 11,630 (23,220)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS .............................. 23,140 (6,317)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..................... 9,028 11,093
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................... $ 32,168 $ 4,776
========== ==========
CASH PAID FOR:
Interest .......................................................... $ 8,138 $ 8,114
========== ==========
Income taxes to taxing authorities ................................ $ 1,625 $ -
========== ==========
See notes to condensed consolidated financial statements.
3
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PRESENTATION
Alliance Resource Partners, L.P., a Delaware limited partnership (the
"Partnership"), was formed in May 1999 to acquire, own and operate certain coal
production and marketing assets of Alliance Resource Holdings, Inc., a Delaware
corporation ("ARH") (formerly known as Alliance Coal Corporation), consisting of
substantially all of ARH's operating subsidiaries, but excluding ARH.
The accompanying condensed consolidated financial statements include
the accounts and operations of the Partnership and present the financial
position as of June 30, 2003 and December 31, 2002, and the results of its
operations for the three-month and six-month periods ended June 30, 2003 and
2002 and cash flows for the six-month periods ended June 30, 2003 and 2002. All
material intercompany transactions and accounts have been eliminated.
On February 14 and March 14, 2003, the Partnership issued 2,250,000 and
288,000 additional Common Units at a public offering price of $22.51 per unit
and received net proceeds of $48.5 million and $6.2 million, respectively,
before expenses of approximately $0.7 million, excluding underwriters' fees.
On February 14, 2003, the Partnership acquired Warrior Coal, LLC
("Warrior Coal") (Note 3). Because the Warrior Coal acquisition is between
entities under common control, the acquisition is recorded at historical cost in
a manner similar to that used in a pooling of interests. Accordingly, the
condensed consolidated financial statements and notes of the Partnership have
been restated to reflect the combined historical results of operations,
financial position and cash flows of the Partnership and Warrior Coal for all
periods presented.
These condensed consolidated financial statements and notes thereto for
interim periods are unaudited. However, in the opinion of management, these
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the results of the
periods presented. Results for interim periods are not necessarily indicative of
results for a full year.
These condensed consolidated financial statements and notes are
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and should be read in conjunction with the
consolidated financial statements and notes included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 2002.
2. CONTINGENCIES
The Partnership is involved in various lawsuits, claims and regulatory
proceedings incidental to its business. The Partnership provides for costs
related to litigation and regulatory proceedings, including civil fines issued
as part of the outcome of these proceedings, when a loss is probable and the
amount is reasonably determinable. Although the ultimate outcome of these
matters cannot be predicted with certainty, in the opinion of management, the
outcome of these matters, to the extent not previously provided for or covered
under insurance, are not expected to have a material adverse effect on the
Partnership's business, financial position or results of operations.
Nonetheless, these matters or estimates that are based on current facts and
circumstances, if resolved in a manner different from the basis on
4
which management has formed its opinion, could have a material adverse effect on
the Partnership's financial position or results of operations.
The Partnership is involved in a dispute with PSI Energy Inc. ("PSI")
concerning the procedures for and testing of a certain coal quality
specification relating to the minimum Hardgrove Grindability Index (i.e.
physical hardness of coal) of coal supplied by its Gibson County mining complex.
Gibson County Coal and PSI have had on-going discussions since March 2001
concerning the procedures for and testing of coal supplied by the Gibson County
mining complex, and have been unable to resolve their differences to-date.
During March and April 2002, PSI withheld approximately $234,000 in payments due
to Gibson County Coal; PSI has not withheld any additional payments and has
verbally advised that it does not intend to withhold any future payments until
this dispute is resolved. Based on Gibson County Coal's understanding of PSI's
position, the current penalties alleged by PSI are estimated to be approximately
$2,450,000 through June 30, 2003.
During April 2002, Gibson County Coal and PSI agreed to proceed with
mediation in an effort to resolve this contractual dispute. The mediation of the
dispute occurred in August 2002 during which the parties concluded an outline of
a tentative settlement, subject to the negotiation of a definitive settlement
agreement. The parties are in the process of negotiating such settlement
agreement, but no assurance can be provided that a final settlement can be
reached. In the event the final settlement agreement and certain other
agreements cannot be concluded, the parties will proceed with either additional
mediation efforts or resort to arbitration. Gibson County Coal continues to
strongly disagree with PSI's position. The Partnership believes that it has
recorded adequate accruals related to the dispute with PSI.
3. ACQUISITION
On February 14, 2003, the Partnership acquired Warrior Coal pursuant to
the terms of an Amended and Restated Put and Call Option Agreement ("Put/Call
Agreement") with ARH Warrior Holdings, Inc., a subsidiary of ARH. The
Partnership acquired Warrior Coal for approximately $12.7 million and paid
Warrior Coal's borrowings of $17.0 million under a revolving credit agreement
between Alliance Resource GP, LLC, a subsidiary of ARH, and Warrior Coal.
Because the Warrior Coal acquisition was between entities under common control,
the acquisition is accounted for at historical cost in a manner similar to that
used in a pooling of interests. As a result of recording Warrior Coal's assets
and liabilities at their historical book values, as required by generally
accepted accounting principles, while acquiring Warrior Coal at market value,
the General Partners' capital account was decreased by $7.9 million. The
Partnership financed the transaction with a portion of the net proceeds of the
recently completed public offering of 2,538,000 Common Units (Note 1).
Under the terms of the Put/Call Agreement, the Partnership assumed
certain other obligations, including a mineral lease and sublease with SGP Land,
LLC, an affiliate of ARH Warrior Holdings, Inc., covering coal reserves that
have been and will continue to be mined by Warrior Coal. The terms and
conditions of the mineral lease and sub-lease remained unchanged following the
closing of the acquisition.
4. MINE IDLING
On June 2, 2003, the Partnership idled its Hopkins County Coal mining
complex. Hopkins County Coal's two surface mines produced 1.6 million tons of
coal in 2002 and was idled in response to soft market demand. The Partnership
evaluated the recoverability of the appropriate asset group and concluded that
there is no impairment loss.
5. COAL SYNFUEL
5
The Partnership entered into long-term agreements with Synfuel
Solutions Operating LLC ("SSO") to host and operate its coal synfuel facility
located at Warrior Coal (originally the coal synfuel facility was located at
Hopkins County Coal), and to supply the facility with coal feedstock, assist SSO
with the marketing of coal synfuel, and provide rental and other services. These
agreements expire on December 31, 2007 and provide the Partnership with coal
sales, rental and service fees from SSO based on the synfuel facility throughput
tonnages. These amounts are dependent on the ability of SSO's members to use
certain qualifying tax credits applicable to the facility. Warrior Coal has
maintained arrangements whereby it may sell any coal not purchased by SSO to
other coal buyers.
In recent weeks, the Internal Revenue Service ("IRS") has announced a
review of the issue of the chemical change required to qualify for synfuel tax
credits and, in the meantime, has suspended the issuance of new private letter
rulings ("PLRs") related to coal synfuel facilities. The Partnership believes
the IRS will eventually review SSO's PLR issued for its synfuel facility. The
Partnership is unable to predict the out-come of any such review or the ultimate
impact, if any, of the review on SSO's synfuel facility. SSO continues to
produce and sell coal synfuel.
As previously disclosed, the term of each of the agreements with SSO is
subject to early cancellation provisions customary for transactions of these
types, including the unavailability of synfuel tax credits, the termination of
associated coal synfuel sales contracts, and the occurrence of certain force
majeure events. Assuming the currently forecasted throughput tonnages for the
SSO synfuel facility, the incremental annual net income benefit from the
combination of the various coal synfuel-related agreements is between $13
million and $15 million, assuming that coal pricing would not be impacted
without the availability of synfuel. The continuation of the incremental net
income benefit associated with SSO's coal synfuel facility cannot be assured.
The Partnership earns income by supplying SSO's synfuel facility with coal
feedstock, assisting SSO with the marketing of coal synfuel, and providing
rental and other services. Pursuant to our agreements with SSO, the Partnership
is not obligated to make retroactive adjustments or reimbursements if SSO's tax
credits are disallowed.
6. NET INCOME PER LIMITED PARTNER UNIT
6
A reconciliation of net income and weighted average units used in
computing basic and diluted earnings per unit is as follows (in thousands,
except per unit data):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net income per limited partner unit $ 8,358 $ 13,935 $ 21,875 $ 24,931
Weighted average limited partner units - basic 17,904 15,405 17,252 15,405
Basic net income per limited partner unit $ 0.47 $ 0.90 $ 1.27 $ 1.62
========= ========= ========= =========
Weighted average limited partner units - basic 17,904 15,405 17,252 15,405
Units contingently issuable:
Restricted units for Long-Term Incentive Plan 527 390 527 390
Directors' compensation units deferred 16 13 16 12
Supplemental Executive Retirement Plan 39 35 38 35
--------- --------- --------- ---------
Weighted average limited partner units, assuming
dilutive effect of restricted units 18,486 15,843 17,833 15,842
--------- --------- --------- ---------
Diluted net income per limited partner unit $ 0.45 $ 0.88 $ 1.23 $ 1.57
========= ========= ========= =========
7. COMMON UNIT-BASED COMPENSATION
The Partnership has elected to account for the compensation expense of
the non-vested common units granted under the Long-Term Incentive Plan using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and the related Financial Accounting
Standards Board Interpretation No. 28, "Accounting for Stock Appreciation Rights
and Other Variable Stock Option or Award Plans." Compensation cost for the
non-vested common units is recorded on a pro-rata basis, as appropriate given
the "cliff vesting" nature of the grants, based upon the current market value of
the Partnership's common units at the end of each period.
7
Based on the disclosure requirements of Statement of Financial
Accounting Standards ("SFAS") No. 148, "Accounting for Stock Based Compensation
Transition and Disclosure," and amendment of SFAS No. 123, "Accounting for
Stock-Based compensation," the following table provides pro forma results as if
the fair value-based method had been applied to all outstanding and non-vested
awards, including Long-Term Incentive Plan units, in each period presented (in
thousands, except per unit data):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net income, as reported $ 8,528 $ 14,012 $ 21,656 $ 25,412
Add: compensation expenses related to Long-Term
Incentive Plan units included in reported net income 2,207 597 2,742 958
Deduct: compensation expense related to Long-
Term Incentive Plan units determined under fair
value method for all awards (852) (568) (1,736) (1,117)
--------- --------- --------- ---------
Net income, pro forma $ 9,883 $ 14,041 $ 22,662 $ 25,253
========= ========= ========= =========
General partners' interest in net income (loss), pro forma $ 198 $ 77 $ (199) $ 478
========= ========= ========= =========
Limited partners' interest in net income, pro forma $ 9,685 $ 13,964 $ 22,861 $ 24,775
========= ========= ========= =========
Earnings per limited partner unit:
Basic, as reported $ 0.47 $ 0.90 $ 1.27 $ 1.62
========= ========= ========= =========
Basic, pro forma $ 0.54 $ 0.91 $ 1.33 $ 1.61
========= ========= ========= =========
Diluted, as reported $ 0.45 $ 0.88 $ 1.23 $ 1.57
========= ========= ========= =========
Diluted, pro forma $ 0.52 $ 0.88 $ 1.28 $ 1.56
========= ========= ========= =========
8. SUBSEQUENT EVENT
On July 25, 2003, the Partnership declared a quarterly distribution of
$0.525 per unit for the quarterly period ended June 30, 2003 (an annualized rate
of $2.10), on all of its Common and Subordinated Units outstanding, payable on
August 14, 2003, to all unitholders of record as of August 5, 2003. The total
distribution is approximately $9,591,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SELECTED OPERATING DATA
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
2003 2002 2003 2002
------- -------- -------- --------
Tons sold (000s) 4,749 4,443 9,205 8,917
Tons produced (000s) 4,643 4,691 9,633 9,451
Revenues per ton sold (1) $ 27.04 $ 27.56 $ 27.05 $ 27.22
Cost per ton sold (2) $ 21.47 $ 20.75 $ 20.79 $ 20.68
8
(1) Revenues per ton sold is based on the total of coal sales and other sales
and operating revenues divided by tons sold.
(2) Cost per ton is based on the total of operating expenses, outside purchases
and general and administrative expenses divided by tons sold.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002
Coal sales. Coal sales for the three months ended June 30, 2003 (the
"2003 Quarter") increased 4.3% to $122.6 million from $117.6 million for the
three months ended June 30, 2002 (the "2002 Quarter"). The increase of $5.0
million was primarily attributable to higher sales volumes partially offset by
lower sales prices. Tons sold increased 6.9% to 4.7 million for the 2003 Quarter
from 4.4 million for the 2002 Quarter. Tons produced decreased 1.0% to 4.6
million tons for the 2003 Quarter from 4.7 million for the 2002 Quarter.
Transportation revenues. Transportation revenues increased to $5.1
million for the 2003 Quarter from $4.4 million for the 2002 Quarter. The
increase of $0.7 million was primarily attributable to increased shipments to a
customer with above-average transportation costs. The Partnership reflects
reimbursement of the cost of transporting coal to customers through third-party
carriers as transportation revenues and the corresponding expense as
transportation expense in the condensed consolidated statements of income. No
profit margin is realized on transportation revenues.
Other sales and operating revenues. Other sales and operating revenues
increased to $5.8 million for the 2003 Quarter from $4.9 million for the 2002
Quarter. The increase of $0.9 million is primarily attributable to additional
rental and service fees associated with increased volumes at a third-party coal
synfuel facility originally located at Hopkins County Coal and moved to Warrior
Coal in April 2003.
Operating expenses. Operating expenses increased 12.7% to $94.9 million
for the 2003 Quarter from $84.2 million for the 2002 Quarter. The increase of
$10.7 million is primarily due to the increase in aggregate operating expenses
associated with additional coal sales of 306,000 tons. Lower productivity at
Mettiki and Pattiki resulted in increased operating expenses as fewer costs were
deferred to coal inventory. The productivity at Mettiki for the 2003 Quarter was
lower than the record quarterly production achieved in the 2002 Quarter. At
Pattiki, transition issues involving access to a new reserve area adversely
impacted productivity during the 2003 Quarter. At Warrior Coal, aggregate
operating expenses increased, but declined on a per ton basis, reflecting
increased productivity. Warrior Coal's per ton operating expenses are beginning
to benefit from the use of new mine access infrastructure completed in the 2003
Quarter and the addition of a third continuous mining unit in the second quarter
of 2003. At Hopkins County Coal, aggregate operating expenses decreased, but
increased on a per ton basis. Production at the Hopkins County Coal mining
complex was impacted by the idling of its two surface mines on June 2, 2003 and
the closure of its depleted underground mine in April 2003, resulting in an
increase in operating expenses per ton sold. Workers' compensation costs
increased approximately $1.0 million as a result of a reduction in the discount
rate for valuing traumatic injury claims and adverse claims experience.
Transportation expenses. See "Transportation revenues" above concerning
the increase in transportation expenses.
9
Outside purchases. Outside purchases decreased to $0.4 million for the
2003 Quarter compared to $2.8 million for the 2002 Quarter. The decrease of $2.4
million was primarily the result of not purchasing coal from a third-party
contractor that ceased production in the fourth quarter of 2002.
General and administrative. General and administrative expenses
increased to $6.7 million for the 2003 Quarter compared to $5.2 million for the
2002 Quarter. The increase of $1.5 million was primarily attributable to
increased accruals related to the Long-Term Incentive Plan. The Long-Term
Incentive Plan accrual is impacted by the increased market value of the
Partnership's common units.
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expense increased to $13.7 million for the 2003 Quarter compared to
$12.6 million for the 2002 Quarter. The increase of $1.1 million was primarily
the result of additional depreciation expense associated with recently completed
capital expenditures at Pattiki that were necessary for the extension across a
fault zone and into an adjacent coal reserve area. Pattiki's transition of
operating units to the new reserve area began in October 2002 and was completed
in May 2003.
Interest expense. Interest expense was comparable for the 2003 and 2002
Quarters at $4.0 million and $4.2 million, respectively.
Income taxes. Income taxes increased to $0.7 million for the 2003
Quarter compared to $(0.2) million for the 2002 Quarter. Although the
Partnership is not a taxable entity for federal or state income tax purposes,
the Partnership's indirect wholly-owned subsidiary, Alliance Service, Inc. is
subject to federal and state income taxes. In conjunction with a decision to
relocate the coal synfuel facility from Hopkins County Coal to Warrior Coal,
agreements for a portion of the services provided to the coal synfuel producer
were assigned to Alliance Service in December 2002. Additionally, Warrior Coal
was subject to income taxes prior to its acquisition by the Partnership on
February 14, 2003.
Net income. Net income decreased to $8.5 million for the 2003 Quarter
from $14.0 million for the 2002 Quarter. The decrease of $5.5 million is
attributable to: (a) lower sales prices, (b) higher operating expenses
associated with lower productivity at Hopkins County Coal, Pattiki and Mettiki
and increased workers' compensation costs, (c) additional general and
administrative expenses related to increased accruals for the Long-Term
Incentive Plan, (d) additional depreciation expense associated with recently
completed expansion capital expenditures at Pattiki, and (e) increased income
tax expense associated with the coal synfuel-related services now performed by
Alliance Service, partially offset by the benefit of increased volumes
associated with coal synfuel-related agreements and lower per ton operating
expenses at Warrior Coal.
In regard to the forgoing, Warrior Coal's per ton operating expenses
are beginning to benefit from the use of new mine access infrastructure
completed in the 2003 Quarter and the addition of a third continuous mining unit
in the second quarter of 2003; Pattiki's productivity was negatively impacted by
transition issues in connection with accessing a new reserve area; and Hopkins
County Coal idled its two surface mines on June 2, 2003 and closed its depleted
underground mine in April 2003.
Six Months Ended June 30, 2003 compared to Six Months Ended June 30, 2002
Coal sales. Coal sales for the six months ended June 30, 2003 (the
"2003 Period") increased 1.6% to $237.0 million from $233.4 million for the six
months ended June 30, 2002 (the "2002 Period"). The increase of $3.6 million was
primarily attributable to higher sales volumes partially offset by lower sales
prices. Tons sold increased 3.2% to 9.2 million for the 2003 Period from 8.9
million for the 2002 Period. Tons produced increased 1.9% to 9.6 million tons
for the 2003 Period from 9.5 million for the 2002 Period.
10
Transportation revenues. Transportation revenues were comparable for
the 2003 and 2002 Periods at $9.4 million and $9.5 million, respectively. The
Partnership reflects reimbursement of the cost of transporting coal to customers
through third-party carriers as transportation revenues and the corresponding
expense as transportation expense in the condensed consolidated statements of
income. No profit margin is realized on transportation revenues.
Other sales and operating revenues. Other sales and operating revenues
increased to $12.0 million for the 2003 Period from $9.3 million for the 2002
Period. The increase of $2.7 million is primarily attributable to additional
rental and service fees associated with increased volumes at a third-party coal
synfuel facility originally located at Hopkins County Coal and moved to Warrior
Coal in April 2003.
Operating expenses. Operating expenses increased 5.3% to $177.7 million
for the 2003 Period from $168.7 million for the 2002 Period. The increase of
$9.0 million is primarily attributable to the increase in aggregate operating
expenses associated with additional coal sales of 288,000 tons and the negative
impact on per ton operating expenses of (a) lower productivity associated with
Pattiki's transition across a fault zone to a new reserve area and (b) Hopkins
County Coal's idling of its two surface mines on June 2, 2003 and closure of its
depleted underground mine in April 2003, partially offset by the productivity
benefits at Warrior Coal associated with the use of new mine access
infrastructure completed during the second quarter of 2003 and the addition of a
third continuous mining unit in May 2003. At Hopkins County Coal, aggregate
operating expenses decreased, but increased on a per ton basis as a result of
lower production. At Warrior Coal, aggregate operating expenses increased, but
declined on a per ton basis reflecting increased productivity. Workers
compensation costs increased as a result of a reduction in the discount rate for
valuing traumatic injury claims and adverse claims experience.
Transportation expenses. See "Transportation revenues" above concerning
the decrease in transportation expenses.
Outside purchases. Outside purchases decreased to $1.4 million for the
2003 Period compared to $5.6 million for the 2002 Period. The decrease of $4.2
million was primarily the result of not purchasing coal from a third-party
contractor that ceased production in the fourth quarter of 2002.
General and administrative. General and administrative expenses
increased to $12.3 million for the 2003 Period compared to $10.1 million for the
2002 Period. The increase of $2.2 million was primarily attributable to
increased accruals related to the Long-Term Incentive Plan. The Long-Term
Incentive Plan accrual is impacted by the increased market value of the
Partnership's common units.
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expenses increased 4.6% to $26.8 million for the 2003 Period
compared to $25.6 million for the 2002 Period. The increase of $1.2 million was
primarily the result of additional depreciation expense associated with recently
completed capital expenditures at Pattiki that were necessary for the extension
across the fault zone into an adjacent coal reserve area. Pattiki's transition
of operating units to the new reserve area began in October 2002 and was
competed in May 2003.
Interest expense. Interest expense was comparable for each of the 2003
and 2002 Periods at $8.0 million and $8.1 million, respectively.
Income taxes. Income taxes increased to $1.7 million for the 2003
Period. Although the Partnership is not a taxable entity for federal or state
income tax purposes, the Partnership's indirect subsidiary, Alliance Service is
subject to federal and state income taxes. In conjunction with a decision to
11
relocate the coal synfuel facility from Hopkins County Coal to Warrior Coal,
agreements for a portion of the services provided to the coal synfuel producer
were assigned to Alliance Service in December 2002. Additionally, Warrior Coal
was subject to income taxes prior to its acquisition by the Partnership on
February 14, 2003.
Net income. Net income decreased to $21.7 million for the 2003 Period
from $25.4 million for the 2002 Period. The decrease of $3.7 million is
primarily attributable to lower sales prices. Additionally the Partnership
experienced higher costs associated with (a) Pattiki's transition across a fault
zone to a new reserve area, (b) Hopkins County Coal's idling of its two surface
mines on June 2, 2003 and closure of its depleted underground mine in April
2003, (c) increased workers' compensation expense and (d) increased income tax
expense associated with coal synfuel-related services now performed by Alliance
Service, partially offset by the benefit of increased volumes associated with
coal synfuel-related agreements and lower per ton operating expenses at Warrior
Coal. Warrior Coal's operating expenses are beginning to benefit from the use of
new mine access infrastructure completed during the second quarter of 2003
and the addition of a third continuous mining unit in the 2003 quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash provided by operating activities was $43.7 million for the 2003
Period compared to $38.5 million for the 2002 Period. The increase in cash
provided by operating activities was principally attributable to decreased
working capital during the 2003 Period compared to the 2002 Period.
Net cash used in investing activities was $32.2 million for the 2003
Period, compared to $21.6 million for the 2002 Period. The increase in the use
of cash is principally attributable to reduced liquidation of marketable
securities, net of purchases, during the 2003 Period compared to the 2002
Period.
Net cash provided by financing activities was $11.6 million for the
2003 Period, compared to net cash used in financing activities of $23.2 million
for the 2002 Period. The increase is primarily attributable to the proceeds
received from a Common Unit offering during the 2003 Period partially offset by
the increase in distribution to Partners due to an increase in the quarterly
distribution rate of $0.025 per unit to $0.525 per unit and the additional
Common Units outstanding from the Common Unit offering and payment of Warrior
Coal's borrowings of $17.0 million under a revolving credit agreement.
Capital Expenditures
Capital expenditures were comparable for each of the 2003 and 2002
Periods at $32.7 million and $32.0 million, respectively. The capital
expenditures in the 2003 Period of $32.7 million included $12.7 million for the
Warrior Coal acquisition. Excluding the Warrior Coal acquisition, capital
expenditures for the 2003 Period decreased $11.9 million compared to capital
expenditures for the 2002 Period. The decrease is primarily attributable to the
completion of the extension into an adjacent reserve area at Pattiki and the new
service shaft at Dotiki during April 2003. The majority of the capital
expenditures associated with the Pattiki and Dotiki projects were incurred
during 2002. Capital expenditures for the remainder of 2003 are estimated to be
$24.1 million.
Notes Offering and Credit Facility
12
Alliance Resource Operating Partners, L.P. (the "Intermediate
Partnership") has $180 million principal amount of 8.31% senior notes due August
20, 2014 payable in ten equal annual installments of $18 million beginning in
August 2005 with interest payable semiannually. The Intermediate Partnership
also has a $100 million credit facility. The credit facility consists of three
tranches, including a term loan facility with an initial balance of $50 million,
a $25 million working capital facility and a $25 million revolving credit
facility. At June 30, 2003 the balance of the term loan facility was $23.8
million and cannot be increased. There are no borrowings outstanding under
either the working capital facility or revolving credit facility at June 30,
2003. The weighted average interest rate on the term loan facility at June 30,
2003 was 2.38%. The credit facility expires August 2004. The senior notes and
credit facility are guaranteed by all of the subsidiaries of the Intermediate
Partnership. The senior notes and credit facility contain various restrictive
and affirmative covenants, including the amount of distributions by the
Intermediate Partnership and the incurrence of other debt. The Partnership was
in compliance with the covenants of both the credit facility and senior notes at
June 30, 2003.
The Partnership is currently negotiating to replace the existing credit
facility with a new $75 million credit facility. The new credit facility is
expected to include the following provisions: (a) a guarantee by all of the
subsidiaries of the Intermediate Partnership, (b) various restrictive and
affirmative covenants and interest rates based on either the (i) London
Interbank Offered Rate or (ii) the "Base Rate," which is equal to the greater of
the JPMorgan Chase Prime Rate or the Federal Funds Rate plus 1/2 of 1%, plus, in
either case, an applicable margin and (c) an expiration date of September 30,
2006.
On July 10, 2003 Fitch Ratings assigned a `BBB-' (Triple-B minus)
corporate rating of Alliance Resource Operating Partners, L.P. for the 8.31%
unsecured senior notes dated August 1999 with a Stable Outlook. The rating is
subject to change should business, financial or other conditions warrant.
The Partnership previously entered into and has maintained agreements
with three banks to provide letters of credit in an aggregate amount of $35.0
million to maintain surety bonds to secure its obligations for reclamation
liabilities and workers' compensation benefits. At June 30, 2003, the
Partnership had $25.5 million in letters of credit outstanding. Alliance
Resource GP, LLC, the Partnership's special general partner (the "Special GP")
guarantees the letters of credit.
Related Party Transactions
On February 14, 2003, the Partnership acquired Warrior Coal pursuant to
the terms of the Put/Call Agreement with ARH Warrior Holdings, Inc., a
subsidiary of ARH. The Partnership acquired Warrior Coal for approximately $12.7
million and paid Warrior Coal's borrowings of $17.0 million under a revolving
credit agreement between the Special GP and Warrior Coal. Because the Warrior
Coal acquisition was between entities under common control, the acquisition is
accounted for at historical cost in a manner similar to that used in a pooling
of interests. As a result of recording Warrior Coal's assets and liabilities at
their historical book values, as required by generally accepted accounting
principles, while acquiring Warrior Coal at market value, the General Partners'
capital account was decreased by $7.9 million. The Partnership financed the
transaction with a portion of the net proceeds of the recently completed public
offering of 2,538,000 Common Units. See Note 1 to the condensed consolidated
financial statements in "Item 1. Financial Statements" above.
Under the terms of the Put/Call Agreement, the Partnership assumed
certain other obligations, including a mineral lease and sublease with SGP Land,
LLC, an affiliate of ARH Warrior Holdings, covering coal reserves that have been
and will continue to be mined by Warrior Coal. The terms and conditions of the
mineral lease and sub-lease remained unchanged following the closing of the
acquisition. Prior to the acquisition of Warrior Coal on February 14, 2003, the
Partnership purchased coal
13
from and sold coal to Warrior Coal and had agreements with Warrior Coal related
to administrative services and reclamation procedures.
The Partnership has continuing related-party transactions with its
Managing General Partner and the Special General Partner, including the Special
General Partner's affiliates. These related party transactions relate
principally to the provision of administrative services by the Managing General
Partner, mineral and equipment leases with the Special General Partner,
including its affiliates, and guarantees from the Special General Partner for
letters of credit.
Please read the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2002, "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Related Party Transactions - "
for additional information concerning the related party transactions described
above.
Coal Synfuel
The Partnership entered into long-term agreements with Synfuel
Solutions Operating LLC ("SSO") to host and operate its coal synfuel facility
located at Warrior Coal (originally the coal synfuel facility was located at
Hopkins County Coal), and to supply the facility with coal feedstock, assist SSO
with the marketing of coal synfuel, and provide rental and other services. These
agreements expire on December 31, 2007 and provide the Partnership with coal
sales, rental and service fees from SSO based on the synfuel facility throughput
tonnages. These amounts are dependent on the ability of SSO's members to use
certain qualifying tax credits applicable to the facility. Warrior Coal has
maintained arrangements whereby it may sell any coal not purchased by SSO to
other coal buyers.
In recent weeks, the Internal Revenue Service ("IRS") has announced a
review of the issue of the chemical change required to qualify for synfuel tax
credits and, in the meantime, has suspended the issuance of new private letter
rulings ("PLRs") related to coal synfuel facilities. The Partnership believes
the IRS will eventually review SSO's PLR issued for its synfuel facility. The
Partnership is unable to predict the out-come of any such review or the ultimate
impact, if any, of the review on SSO's synfuel facility. SSO continues to
produce and sell coal synfuel.
As previously disclosed, the term of each of the agreements with SSO is
subject to early cancellation provisions customary for transactions of these
types, including the unavailability of synfuel tax credits, the termination of
associated coal synfuel sales contracts, and the occurrence of certain force
majeure events. Assuming the currently forecasted throughput tonnages for the
SSO synfuel facility, the incremental annual net income benefit from the
combination of the various coal synfuel-related agreements is between $13
million and $15 million, assuming that coal pricing would not be impacted
without the availability of synfuel. The continuation of the incremental net
income benefit associated with SSO's coal synfuel facility cannot be assured.
The Partnership earns income by supplying SSO's synfuel facility with coal
feedstock, assisting SSO with the marketing of coal synfuel, and providing
rental and other services. Pursuant to our agreement with SSO, the Partnership
is not obligated to make retroactive adjustments or reimbursements if SSO's tax
credits are disallowed.
Recent Accounting Pronouncements
On January 1, 2003, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement
Obligations," which requires the fair value of a liability for an asset
retirement obligation to be recognized in the period in which it is incurred.
When the
14
liability is initially recorded, a cost is capitalized by increasing the
carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value for each period, and the capitalized cost is
depreciated over the useful life of the related asset. To settle the liability,
the obligations for its recorded amount is paid or a gain or loss upon
settlement is incurred. Since the Partnership has historically adhered to
accounting principles similar to SFAS No. 143, this standard had no material
effect on the Partnership's consolidated financial statements upon adoption.
On January 1, 2003, the Partnership adopted Financial Accounting
Standards Board Interpretation No. 45 "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." This interpretation elaborates on the disclosures to be made by a
guarantor in its financial statements about its obligations under certain
guarantees that it has issued. It also requires a guarantor to recognize, at the
inception of a guarantee, a liability for the fair value of the obligations it
has undertaken in issuing the guarantee. This Interpretation had no material
effect on the Partnership's consolidated financial statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of the Partnership's transactions are denominated in U.S. dollars
and, as a result, the Partnership does not have material exposure to currency
exchange-rate risks.
The Partnership did not engage in any interest rate, foreign currency
exchange rate or commodity price-hedging transactions as of June 30, 2003.
The Intermediate Partnership assumed obligations under a $100 million
credit facility. Borrowings under the credit facility are at variable rates and,
as a result, the Partnership has interest rate exposure. The Partnership's
earnings are not materially affected by changes in interest rates. If interest
rates would have increased by 100 basis points, interest expense for the six
months ended June 30, 2003 would have increased by approximately $133,000.
As of June 30, 2003, there were no significant changes in the
Partnership's quantitative and qualitative disclosures about market risk as set
forth in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was carried out by management, including our chief
executive officer and principal accounting officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon this
evaluation, the chief executive officer and the principal accounting officer
concluded that the design and operation of these disclosure controls and
procedures were effective as of the end of the period covered by this report.
During the quarterly period ended June 30, 2003, there has not been any
changes in the Partnership's internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified
in connection with this evaluation that have materially affected, or is
reasonably likely to materially affect, the Partnership's internal control over
financial reporting.
Each of the chief executive officer and the principal accounting
officer of our Managing General Partner has furnished as Exhibit 32.1 and
Exhibit 32.2, respectively, a certificate to the Securities and Exchange
Commission as required by Section 906 of the Sarbanes-Oxley Act of 2002.
15
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements.
These statements are based on our beliefs as well as assumptions made by, and
information currently available to, us. When used in this document, the words
"anticipate," "believe," "continue," "estimate," "expect," "forecast", "may,"
"project", "will," and similar expressions identify forward-looking statements.
These statements reflect our current views with respect to future events and are
subject to various risks, uncertainties and assumptions. Specific factors which
could cause actual results to differ from those in the forward-looking
statements include:
- competition in coal markets and our ability to respond to the
competition;
- fluctuation in coal prices, which could adversely affect our
operating results and cash flows;
- deregulation of the electric utility industry and/or the
effects of any adverse changes in the domestic coal industry,
electric utility industry, or general economic conditions;
- dependence on significant customer contracts, including
renewing customer contracts upon expiration;
- loss of the ability by us or others to realize benefits from
state and federal tax credits;
- customer cancellations of, or breaches to, existing contracts;
- customer delays or defaults in making payments;
- fluctuations in coal demand, price and availability due to
labor and transportation costs and disruptions, equipment
availability, governmental regulations and other factors;
- our productivity levels and margins that we earn on our coal
sales;
- any unanticipated increases in labor costs or unexpected cash
payments associated with post-mine reclamation and workers'
compensation claims;
- greater than expected environmental regulations, costs and
liabilities;
- a variety of operational, geologic, permitting, labor and
weather-related factors;
- risks of major mine-related accidents or interruptions;
- results of litigation;
- difficulty maintaining our surety bonds for mine reclamation
as well as workers' compensation and black lung benefits; and
- difficulty in obtaining commercial property insurance.
If one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, our actual results may differ
materially from those described in any forward-looking statement. When
considering forward-looking statements, you should also keep in mind the risk
factors described in our Annual Report on Form 10-K for the year ended December
31, 2002. Those risk factors could also cause our actual results to differ
materially from those contained in any forward-looking statement. We disclaim
any obligation to update the above list or to announce publicly the result of
any revisions to any of the forward-looking statements to reflect future events
or developments.
You should consider the above information when reading any
forward-looking statements contained in:
- this Quarterly Report on Form 10-Q;
- other reports filed by us with the SEC;
- our press releases; and
- oral statements made by us or any of our officers or other
persons acting on our behalf.
16
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information under "Contingencies" in Note 2 of the Notes to Unaudited
Condensed Consolidated Financial Statements herein is hereby incorporated by
reference. See also "Item 3. Legal Proceedings" in the Annual Report on Form
10-K for the year ended December 31, 2002.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.40 Amendment No. 2 to Coal Feedstock Supply Agreement dated April 1,
2003, between Synfuel Solutions Operating LLC and Hopkins County
Coal, LLC. (Portions of this agreement have been omitted based upon
a request for confidential treatment. Those omitted portions have
been filed with the SEC).
31.1 Certification of Joseph W. Craft III, President and Chief Executive
Officer of Alliance Resource Management GP, LLC, the managing
general partner of Alliance Resource Partners, L.P., dated August
11, 2003, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
furnished herewith.
31.2 Certification of Dale G. Wilkerson, Vice President and Controller
(Principal Accounting Officer) of Alliance Resource Management GP,
LLC, the managing general partner of Alliance Resource Partners,
L.P., dated August 11, 2003, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 furnished herewith.
32.1 Certification of Joseph W. Craft III, President and Chief Executive
Officer of Alliance Resource Management GP, LLC, the managing
general partner of Alliance Resource Partners, L.P., dated August
11, 2003, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
furnished herewith.
17
32.2 Certification of Dale G. Wilkerson, Vice President and Controller
(Principal Accounting Officer) of Alliance Resource Management GP,
LLC, the managing general partner of Alliance Resource Partners,
L.P., dated August 11, 2003, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 furnished herewith.
(b) Reports on Form 8-K:
A Form 8-K was filed on April 4, 2003 to submit to the Securities
and Exchange Commission a press release announcing increased production in
Central Appalachia and a notice, in accordance with the Worker Adjustment
and Retraining Notification Act of 1988, of an impending reduction-in-force
for one of its Illinois Basin operations.
A Form 8-K was filed on April 28, 2003 to submit to the Securities
and Exchange Commission a press release announcing earnings and operating
results for the first quarter of 2003. The press release contains the
following financial statements: (i) consolidated statements of income and
operating data for the three months ended March 31, 2003 and 2002; (ii)
consolidated balance sheets at March 31, 2003 and December 31, 2002; and
(iii) consolidated condensed statements of cash flow for the three months
ended March 31, 2003 and 2002.
A Form 8-K/A was filed on May 13, 2003 to submit to the Securities
and Exchange Commission an amendment to the press release announcing
earnings and operating results for the first quarter of 2003 that provided
additional information in the consolidated statements of income and
operating data for the three months ended March 31, 2003 and 2002 related
to Warrior Coal, LLC ("Warrior Coal") and to correct a misclassification in
the consolidated condensed statement of cash flows for the three months
ended March 31, 2003. The Partnership expanded the consolidated statements
of income and operating data for the three months ended March 31, 2003 and
2002 to disclose the amount of Warrior Coal's net income (loss) prior to
the acquisition on February 14, 2003. Warrior Coal's net income (loss)
prior to the acquisition on February 14, 2003 is allocated entirely to the
General Partners' Interest. The Partnership also reclassified the Purchase
of Warrior Coal line item of $12.6 million on the consolidated condensed
statement of cash flows from a cash flows from financing activities item to
a cash flows from investing activities item. Total net income and net
change in cash and cash equivalents did not change from the amounts
originally reported.
A Form 8-K was filed on June 6, 2003 to submit to the Securities
and Exchange Commission a press release announcing the idling of its
Hopkins County Coal mine.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in Tulsa, Oklahoma, on August 11, 2003.
ALLIANCE RESOURCE PARTNERS, L.P.
By: Alliance Resource Management GP, LLC
its managing general partner
/s/ Joseph W. Craft III
-------------------------------------
Joseph W. Craft III
President, Chief Executive
Officer and Director
/s/ Dale G. Wilkerson
-------------------------------------
Dale G. Wilkerson
Vice President and Controller
(Principal Accounting
Officer)
19
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.40 Amendment No. 2 to Coal Feedstock Supply Agreement dated April 1,
2003, between Synfuel Solutions Operating LLC and Hopkins County
Coal, LLC. (Portions of this agreement have been omitted based
upon a request for confidential treatment. Those omitted portions
have been filed with the SEC).
31.1 Certification of Joseph W. Craft III, President and Chief
Executive Officer of Alliance Resource Management GP, LLC, the
managing general partner of Alliance Resource Partners, L.P.,
dated August 11, 2003, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 furnished herewith.
31.2 Certification of Dale G. Wilkerson, Vice President and Controller
(Principal Accounting Officer) of Alliance Resource Management
GP, LLC, the managing general partner of Alliance Resource
Partners, L.P., dated August 11, 2003, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 furnished herewith.
32.1 Certification of Joseph W. Craft III, President and Chief
Executive Officer of Alliance Resource Management GP, LLC, the
managing general partner of Alliance Resource Partners, L.P.,
dated August 11, 2003, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 furnished herewith.
32.2 Certification of Dale G. Wilkerson, Vice President and Controller
(Principal Accounting Officer) of Alliance Resource Management
GP, LLC, the managing general partner of Alliance Resource
Partners, L.P., dated August 11, 2003, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 furnished herewith.
20