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Exhibit 99.1

 

PRESS RELEASE

 

Picture 1

CONTACT:

Brian L. Cantrell

Alliance Resource Partners, L.P.

1717 South Boulder Avenue, Suite 400

Tulsa, Oklahoma 74119

 

FOR IMMEDIATE RELEASE

(918) 295-7673

 

ALLIANCE RESOURCE PARTNERS, L.P.

 

Reports Increased Quarterly Sales Volumes, Net Income and EBITDA; Maintains Quarterly Cash Distribution of $0.4375 Per Unit; Increases Guidance

 

TULSA, OKLAHOMA, October 28, 2016 — Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported financial and operating results for the quarter ended September 30, 2016 (the "2016 Quarter").  On the strength of record coal sales volumes, net income in the 2016 Quarter rose 7.7% to  $89.8 million,  or $0.91 per basic and diluted limited partner unit ("EPU"), compared to $83.4 million, or $0.61 per basic and diluted limited partner unit, for the quarter ended September 30, 2015 (the "2015 Quarter").  Total revenues in the 2016 Quarter declined 2.5% compared to the 2015 Quarter to $552.1 million, as lower coal sales prices more than offset increased sales volumes.  The absence in the 2016 Quarter of equity in loss of affiliates related to White Oak Resources LLC ("White Oak") incurred prior to our acquisition of the remaining equity interests in White Oak in late July 2015 (the "White Oak Acquisition") led EBITDA higher to $178.4 million, compared to $175.1 million in the 2015 Quarter.  Comparative results between the 2016 and 2015 Quarters were also impacted by a non-cash asset impairment charge of $10.7 million due to the surrender in the 2015 Quarter of undeveloped coal reserve leases and related property.  EPU for the 2016 Quarter also benefited from reduced incentive distribution rights allocated to our managing general partner compared to the 2015 Quarter.  (For a definition of EBITDA, Adjusted EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.)

 

ARLP’s financial and operating performance for the 2016 Quarter also improved compared to the quarter ended June 30, 2016 (the "Sequential Quarter").  Led by increased coal sales volumes, ARLP’s revenues rose 25.7% compared to the Sequential Quarter.  Increased revenues helped drive net income higher by 8.6% and EBITDA up by 5.2%, both compared to the Sequential Quarter.

 

ARLP also announced that the Board of Directors of its managing general partner (the "Board") approved a cash distribution to unitholders for the 2016 Quarter of $0.4375 per unit (an annualized rate of $1.75 per unit), payable on November 14, 2016 to all unitholders of record as of the close of trading on November 7, 2016.  The announced distribution is equal to the distribution declared for the Sequential Quarter and compares to the quarterly unitholder distribution of $0.675 per unit for the 2015 Quarter.

 

"ARLP continued to perform well in the 2016 Quarter and slightly better than our expectations," said Joseph W. Craft III, President and Chief Executive Officer.  "Record sales volumes allowed us

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to significantly reduce coal inventories and, along with ongoing cost containment efforts, led to increased net income and EBITDA.  We also continued to strengthen our contract portfolio during the 2016 Quarter, taking advantage of improving market conditions to secure coal sales agreements for the delivery of an additional 11.2 million tons through 2020.  ARLP’s distributable cash flow also increased in the 2016 Quarter, improving 5.5% sequentially lifting our distribution coverage ratio to 2.43 times.  Based on ARLP’s solid year-to-date performance and strong coverage ratio, the Board today elected to maintain our current quarterly unitholder distribution of $0.4375 per unit."

 

Consolidated Financial Results

 

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

 

Strong sales performance at the River View, Gibson South and Tunnel Ridge mines in the 2016 Quarter drove total coal sales volumes to a quarterly record 10.8 million tons, an increase of 4.5% compared to the 2015 Quarter.  Reflecting operating adjustments made in response to market conditions, coal production decreased 25.7% to 8.5 million tons in the 2016 Quarter compared to the 2015 Quarter, primarily due to idling our Onton and Gibson North mines in the fourth quarter of 2015, the planned depletion of reserves at our Elk Creek mine in the first quarter of 2016 and reduced production at our Hamilton, Dotiki and River View mines. 

 

Compared to the 2015 Quarter, operating expenses increased 3.3% to $347.7 million, primarily as a result of the previously discussed increase in coal sales volumes, while Segment Adjusted EBITDA Expense per ton decreased slightly to $32.44 reflecting a favorable production cost mix due to ARLP’s initiatives to shift production to lower-cost operations.

 

Depreciation, depletion and amortization decreased $4.0 million to $80.6 million in the 2016 Quarter compared to the 2015 Quarter, primarily as a result of the previously discussed volume reductions at our Onton, Gibson North and Elk Creek mines, partially offset by increased depreciation, depletion and amortization associated with the acquisition of the Hamilton mine in July 2015 and at our Pattiki mine, which is expected to cease production by the end of 2016.

 

For the 2016 Quarter, we recognized equity in income of affiliates of $1.1 million compared to equity in loss of affiliates of $17.2 million for the 2015 Quarter.  The change in equity in earnings of affiliates is due to the previously discussed elimination of losses related to our prior position as a non-controlling equity owner in White Oak following the White Oak Acquisition and an increase in equity earnings from our investments in oil & gas mineral interests.

 

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015 

 

Total revenues decreased 18.9% to $1.4 billion for the nine months ended September 30, 2016 (the "2016 Period") compared to $1.7 billion for the nine months ended September 30, 2015 (the "2015 Period") due to the previously discussed reduction of volumes at our Onton, Gibson North and Elk Creek mines, lower average coal sales prices and the absence of coal royalty and surface facilities revenues from White Oak.

 

Operating expenses decreased 19.0% to $847.5 million compared to the 2015 Period, due to the previously discussed reductions in coal production volumes and favorable production cost mix.  For the 2016 Period, we recognized equity in income of affiliates of $1.0 million compared to equity in

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loss of affiliates of $49.0 million for the 2015 Period; that change was primarily due to the absence of equity in loss of affiliates from White Oak in the 2016 Period.  Comparative results between the 2016 and 2015 Periods were also impacted by the previously discussed $10.7 million non-cash asset impairment due to the surrender in the 2015 Period of undeveloped coal reserve leases and related property.

 

The factors discussed above contributed to reduce net income for the 2016 Period to $219.8 million, or EPU of $2.08, compared to $284.7 million or EPU of $2.29 in the 2015 Period, and drove Adjusted EBITDA lower in the 2016 Period to $483.9 million, compared to $560.3 million in the 2015 Period.  (For a definition of EBITDA, Adjusted EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.)

 

Regional Results and Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

% Change

    

 

 

    

 

 

 

 

2016 Third

 

2015 Third

 

Quarter /

 

2016 Second

 

% Change

(in millions, except per ton data)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Sequential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illinois Basin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

7.853

 

 

8.134

 

(3.5)

%  

 

 

5.509

 

42.5

%  

Coal sales price per ton (1)

 

$

47.48

 

$

50.50

 

(6.0)

%  

 

$

51.78

 

(8.3)

%  

Segment Adjusted EBITDA Expense per ton (2)

 

$

31.45

 

$

30.69

 

2.5

%  

 

$

27.99

 

12.4

%  

Segment Adjusted EBITDA (2)

 

$

126.0

 

$

147.5

 

(14.6)

%  

 

$

137.7

 

(8.5)

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appalachia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

2.855

 

 

2.160

 

32.2

%  

 

 

2.455

 

16.3

%  

Coal sales price per ton (1)

 

$

53.22

 

$

61.61

 

(13.6)

%  

 

$

55.24

 

(3.7)

%  

Segment Adjusted EBITDA Expense per ton (2)

 

$

33.49

 

$

37.23

 

(10.0)

%  

 

$

36.43

 

(8.1)

%  

Segment Adjusted EBITDA (2)

 

$

57.1

 

$

53.4

 

6.9

%  

 

$

47.1

 

21.2

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

10.757

 

 

10.294

 

4.5

%  

 

 

7.964

 

35.1

%  

Coal sales price per ton (1)

 

$

49.63

 

$

53.18

 

(6.7)

%  

 

$

53.05

 

(6.4)

%  

Segment Adjusted EBITDA Expense per ton (2)

 

$

32.44

 

$

32.65

 

(0.6)

%  

 

$

30.93

 

4.9

%  

Segment Adjusted EBITDA (2)

 

$

196.6

 

$

203.8

 

(3.5)

%  

 

$

187.3

 

5.0

%  


(1)

Sales price per ton is defined as total coal sales divided by total tons sold.

(2)

For definitions of Segment Adjusted EBITDA Expense per ton and Segment Adjusted EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.

(3)

Total reflects consolidated results which include the other and corporate segment and eliminations in addition to the Illinois Basin and Appalachia segments highlighted above.

 

Higher coal sales volumes from various operations, including increased sales from coal inventories, led to a record 10.8 million total tons sold in the 2016 Quarter, an increase of 4.5% and 35.1% over the 2015 and Sequential Quarters, respectively.  Strong sales performance from the Tunnel Ridge longwall operation drove coal sales tons for the 2016 Quarter higher in Appalachia by 32.2% compared to the 2015 Quarter.  Compared to the Sequential Quarter, coal sales tons increased by 16.3% in Appalachia due to higher sales volumes across the region.  In the Illinois Basin, coal sales volumes decreased 3.5% compared to the 2015 Quarter reflecting the idling of our Onton and Gibson North mines in the fourth quarter of 2015 and the planned depletion of reserves at our Elk Creek mine in the first quarter of 2016, partially offset by strong sales performance in the 2016 Quarter from our River View and Gibson South operations.  Compared to the Sequential Quarter, increased sales volumes from coal inventories as well as strong sales performance at our low-cost River View, Gibson South and Hamilton mines combined to drive sales tons for the 2016 Quarter higher by 42.5% in the Illinois Basin.    ARLP ended the 2016 Quarter with total coal inventory of

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2.0 million tons, a reduction of approximately 2.2 million tons compared to the end of the Sequential Quarter.

 

ARLP’s total coal sales price per ton in the 2016 Quarter decreased compared to both the 2015 and Sequential Quarters.  Decreased coal sales prices in Appalachia primarily reflect lower average prices at our MC Mining and Tunnel Ridge mines due to current market conditions.  Coal sales prices also declined in the Illinois Basin, primarily due to lower coal sales prices at our River View and Gibson South mines.

 

Total Segment Adjusted EBITDA Expense per ton in the 2016 Quarter decreased slightly compared to the 2015 Quarter as a result of reduced expenses per ton in the Appalachian region offset by increased per ton costs in the Illinois Basin.  Primarily due to higher costs in the Illinois Basin, total Segment Adjusted EBITDA Expense per ton in the 2016 Quarter increased 4.9% compared to the Sequential Quarter.  Higher Illinois Basin costs in the 2016 Quarter were primarily due to non-cash inventory adjustments related to the previously discussed significant sell-off of coal inventory, offset in part by the benefit of a lower-cost production mix.  Sequentially, higher roof support and maintenance costs also contributed to increased Segment Adjusted EBITDA Expense per ton in the Illinois Basin.  In Appalachia, Segment Adjusted EBITDA Expense per ton decreased by 10.0% compared to the 2015 Quarter due to an increase of lower-cost longwall sales from the Tunnel Ridge mine.  Compared to the Sequential Quarter, Segment Adjusted EBITDA Expense per ton in Appalachia decreased 8.1% as a result of lower inventory charges at the Tunnel Ridge and MC Mining operations. 

 

Outlook

 

"Strong summer coal burn, favorable natural gas prices and reduced coal inventories, for both utilities and producers, all contributed to improved supply/demand fundamentals during the 2016 Quarter," said Mr. Craft.  "Several factors have also recently contributed to an improvement in seaborne markets, creating attractive opportunities for the export of U.S. coals.  ARLP is participating in this rally by opportunistically contracting for the export of 3.0 million tons to be shipped over the next six months.  Assuming a normal winter heating season, market conditions appear favorable through the end of the year and we expect our fourth quarter coal sales to be comparable to the quarter’s record volume.  Looking to 2017 and beyond, we anticipate a recovery in the domestic thermal coal markets as higher natural gas prices spur increased demand for coal and supply is reduced by increased shipments of U.S. coal into the export markets.  We remain convinced that our strategically-located, low-cost operations, conservative balance sheet and consistently strong performance have ARLP well positioned to benefit from an improved market environment.  ARLP intends to capitalize on these advantages by continuing to deliver industry leading performance and create long-term value for our unitholders."

 

Based on results to date and expectations for the remainder of 2016, ARLP is increasing its 2016 full-year estimates for coal production to a range of 34.5 to 35.5 million tons and coal sales volumes to a range of 36.5 to 37.0 million tons.  ARLP is also adjusting its expectations for 2016 average coal sales price per ton to a range of 5.0% to 6.0% below 2015 average realizations.  Reflecting updated coal sales volume and pricing estimates, ARLP now anticipates 2016 revenues, excluding transportation revenues, in a range of $1.88 to $1.92 billion.

 

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In addition, ARLP continues to anticipate year-over-year improvement in its per ton costs and is now estimating total Segment Adjusted EBITDA Expense per ton in 2016 will be approximately 6.0% to 7.0% below 2015 levels.  Based on year-to-date performance and updated volume, price and cost expectations, ARLP is adjusting its 2016 full-year estimate for net income to a range of $300.0 to $310.0 million and increasing its estimate for EBITDA to a range of $650.0 to $660.0 million.  (For definitions of Segment Adjusted EBITDA Expense per ton and EBITDA and related reconciliations to the most comparable GAAP financial measures, please see the end of this release.)

 

ARLP continues to be essentially fully priced and committed for its estimated 2016 volumes and has also increased its coal sales and price commitments to approximately 29.1 million tons, 17.4 million tons and 8.9 million tons in 2017, 2018 and 2019, respectively.

 

Capital expenditures during the 2016 Quarter were again slightly below our expectations and, as a result, we are reducing estimated 2016 total capital expenditures to a range of $97.5 to $102.5 million.  In addition to these capital expenditures, ARLP continues to anticipate its current commitment to acquire oil and gas mineral interests will be completed by the end of the year and estimated investment for this activity in 2016 is expected to remain in a range of $80.0 to $85.0 million.

 

A conference call regarding ARLP’s 2016 Quarter financial results is scheduled for today at 10:00 a.m. Eastern.  To participate in the conference call, dial (855) 793-3259 and provide conference number 91247495.  International callers should dial (631) 485-4928 and provide the same conference number. Investors may also listen to the call via the "investor information" section of ARLP’s website at http://www.arlp.com.

 

An audio replay of the conference call will be available for approximately one week.  To access the audio replay, dial (855) 859-2056 and provide conference number 91247495.  International callers should dial (404) 537-3406 and provide the same conference number.

 

This announcement is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b), with 100% of the partnership’s distributions to foreign investors attributable to income that is effectively connected with a United States trade or business.  Accordingly, ARLP’s distributions to foreign investors are subject to federal income tax withholding at the highest applicable tax rate.

 

About Alliance Resource Partners, L.P.

 

ARLP is a diversified producer and marketer of coal to major United States utilities and industrial users.  ARLP, the nation’s first publicly traded master limited partnership involved in the production and marketing of coal, is currently the second largest coal producer in the eastern United States with mining operations in the Illinois Basin and Appalachian coal producing regions.

 

ARLP currently operates nine mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia.  ARLP also operates a coal loading terminal on the Ohio River at Mount Vernon, Indiana.

 

News, unit prices and additional information about ARLP, including filings with the Securities and Exchange Commission, are available at http://www.arlp.com. For more information, contact the investor relations department of Alliance Resource Partners, L.P. at (918) 295-7674 or via e-mail at investorrelations@arlp.com.

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***

The statements and projections used throughout this release are based on current expectations.  These statements and projections are forward-looking, and actual results may differ materially.  These projections do not include the potential impact of any mergers, acquisitions or other business combinations that may occur after the date of this release.  At the end of this release, we have included more information regarding business risks that could affect our results.

 

FORWARD-LOOKING STATEMENTS:  With the exception of historical matters, any matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projected results.  These risks, uncertainties and contingencies include, but are not limited to, the following: changes in coal prices, which could affect our operating results and cash flows; changes in competition in coal markets and our ability to respond to such changes; legislation, regulations, and court decisions and interpretations thereof, including those relating to the environment and the release of greenhouse gases, mining, miner health and safety and health care; deregulation of the electric utility industry or the effects of any adverse change in the coal industry, electric utility industry, or general economic conditions; risks associated with the expansion of our operations and properties; dependence on significant customer contracts, including renewing existing contracts upon expiration; adjustments made in price, volume or terms to existing coal supply agreements; changing global economic conditions or in industries in which our customers operate; liquidity constraints, including those resulting from any future unavailability of financing; customer bankruptcies, cancellations or breaches to existing contracts, or other failures to perform; customer delays, failure to take coal under contracts or defaults in making payments; fluctuations in coal demand, prices and availability; we have made investments in oil and gas mineral interests through Cavalier Minerals JV, LLC and the value of those investments and related cash flows may be materially adversely affected by a continuation or worsening of depressed oil and gas prices; our productivity levels and margins earned on our coal sales; the coal industry’s share of electricity generation, including as a result of environmental concerns related to coal mining and combustion and the cost and perceived benefits of other sources of electricity, such as natural gas, nuclear energy and renewable fuels; changes in raw material costs; changes in the availability of skilled labor; our ability to maintain satisfactory relations with our employees; increases in labor costs including costs of health insurance and taxes resulting from the Affordable Care Act, adverse changes in work rules, or cash payments or projections associated with post-mine reclamation and workers’ compensation claims; increases in transportation costs and risk of transportation delays or interruptions; operational interruptions due to geologic, permitting, labor, weather-related or other factors; risks associated with major mine-related accidents, such as mine fires, or interruptions; results of litigation, including claims not yet asserted; difficulty maintaining our surety bonds for mine reclamation as well as workers’ compensation and black lung benefits; difficulty in making accurate assumptions and projections regarding pension, black lung benefits and other post-retirement benefit liabilities; uncertainties in estimating and replacing our coal reserves; a loss or reduction of benefits from certain tax deductions and credits; difficulty obtaining commercial property insurance, and risks associated with our participation (excluding any applicable deductible) in the commercial insurance property program; and difficulty in making accurate assumptions and projections regarding future revenues and costs associated with equity investments in companies we do not control.

 

Additional information concerning these and other factors can be found in ARLP’s public periodic filings with the Securities and Exchange Commission ("SEC"), including ARLP’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 26, 2016 and ARLP’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016, filed on May 10, 2016 and August 5, 2016, respectively, with the SEC.  Except as required by applicable securities laws, ARLP does not intend to update its forward-looking statements.

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING DATA

(In thousands, except unit and per unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

 

2016

    

2015

    

2016

    

2015

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

 

10,757

 

 

10,294

 

 

26,177

 

 

30,276

 

Tons Produced

 

 

8,512

 

 

11,450

 

 

25,759

 

 

31,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales

 

$

533,817

 

$

547,466

 

$

1,357,578

 

$

1,632,493

 

Transportation revenues

 

 

7,692

 

 

9,395

 

 

19,732

 

 

24,323

 

Other sales and operating revenues

 

 

10,565

 

 

9,584

 

 

26,743

 

 

74,765

 

Total revenues

 

 

552,074

 

 

566,445

 

 

1,404,053

 

 

1,731,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (excluding depreciation, depletion and amortization)

 

 

347,711

 

 

336,527

 

 

847,513

 

 

1,045,954

 

Transportation expenses

 

 

7,692

 

 

9,395

 

 

19,732

 

 

24,323

 

Outside coal purchases

 

 

1,514

 

 

2

 

 

1,514

 

 

326

 

General and administrative

 

 

18,114

 

 

17,948

 

 

53,015

 

 

52,336

 

Depreciation, depletion and amortization

 

 

80,612

 

 

84,661

 

 

240,640

 

 

242,730

 

Asset impairment

 

 

 —

 

 

10,695

 

 

 —

 

 

10,695

 

Total operating expenses

 

 

455,643

 

 

459,228

 

 

1,162,414

 

 

1,376,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

96,431

 

 

107,217

 

 

241,639

 

 

355,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(8,001)

 

 

(7,352)

 

 

(23,386)

 

 

(23,626)

 

Interest income

 

 

3

 

 

285

 

 

8

 

 

1,421

 

Equity in income (loss) of affiliates, net

 

 

1,105

 

 

(17,221)

 

 

1,041

 

 

(49,049)

 

Other income

 

 

293

 

 

455

 

 

545

 

 

750

 

INCOME BEFORE INCOME TAXES

 

 

89,831

 

 

83,384

 

 

219,847

 

 

284,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

 

7

 

 

12

 

 

4

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

89,824

 

 

83,372

 

 

219,843

 

 

284,696

 

LESS:  NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

 

(44)

 

 

7

 

 

(40)

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO ALLIANCE RESOURCE PARTNERS, L.P. ("NET INCOME OF ARLP")

 

$

89,780

 

$

83,379

 

$

219,803

 

$

284,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GENERAL PARTNERS' INTEREST IN NET INCOME OF ARLP

 

$

20,571

 

$

37,311

 

$

60,723

 

$

111,735

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIMITED PARTNERS' INTEREST IN NET INCOME OF ARLP

 

$

69,209

 

$

46,068

 

$

159,080

 

$

172,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED NET INCOME OF ARLP PER LIMITED PARTNER UNIT

 

$

0.91

 

$

0.61

 

$

2.08

 

$

2.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT

 

$

0.4375

 

$

0.6750

 

$

1.5500

 

$

1.9875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED

 

 

74,375,025

 

 

74,188,784

 

 

74,347,157

 

 

74,169,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

 

2016

    

2015

 

ASSETS

    

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,372

 

$

33,431

 

Trade receivables

 

 

146,209

 

 

122,875

 

Other receivables

 

 

492

 

 

696

 

Due from affiliates

 

 

198

 

 

190

 

Inventories, net

 

 

89,904

 

 

121,081

 

Advance royalties, net

 

 

2,016

 

 

6,820

 

Prepaid expenses and other assets

    

 

18,106

    

 

29,812

 

Total current assets

 

 

278,297

 

 

314,905

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

Property, plant and equipment, at cost

 

 

2,994,420

 

 

3,044,260

 

Less accumulated depreciation, depletion and amortization

 

 

(1,352,117)

 

 

(1,243,985)

 

Total property, plant and equipment, net

 

 

1,642,303

 

 

1,800,275

 

OTHER ASSETS:

 

 

 

 

 

 

 

Advance royalties, net

 

 

30,872

 

 

21,295

 

Equity investments in affiliate

 

 

128,051

 

 

64,509

 

Goodwill

 

 

136,399

 

 

136,399

 

Other long-term assets

 

 

28,353

 

 

23,903

 

Total other assets

 

 

323,675

 

 

246,106

 

TOTAL ASSETS

 

$

2,244,275

 

$

2,361,286

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS' CAPITAL

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

$

63,465

 

$

83,597

 

Due to affiliates

 

 

44

 

 

129

 

Accrued taxes other than income taxes

 

 

22,007

 

 

15,621

 

Accrued payroll and related expenses

 

 

43,396

 

 

37,031

 

Accrued interest

 

 

2,607

 

 

306

 

Workers' compensation and pneumoconiosis benefits

 

 

8,701

 

 

8,688

 

Current capital lease obligations

 

 

27,035

 

 

19,764

 

Other current liabilities

 

 

15,420

 

 

18,929

 

Current maturities, long-term debt, net

 

 

509,155

 

 

238,086

 

Total current liabilities

 

 

691,830

 

 

422,151

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

Long-term debt, excluding current maturities, net

 

 

144,949

 

 

579,420

 

Pneumoconiosis benefits

 

 

62,529

 

 

60,077

 

Accrued pension benefit

 

 

38,239

 

 

39,031

 

Workers' compensation

 

 

50,051

 

 

47,486

 

Asset retirement obligations

 

 

124,925

 

 

122,434

 

Long-term capital lease obligations

 

 

92,376

 

 

80,150

 

Other liabilities

 

 

13,647

 

 

21,174

 

Total long-term liabilities

 

 

526,716

 

 

949,772

 

Total liabilities

 

 

1,218,546

 

 

1,371,923

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PARTNERS' CAPITAL:

 

 

 

 

 

 

 

Alliance Resource Partners, L.P. ("ARLP") Partners' Capital:

 

 

 

 

 

 

 

Limited Partners - Common Unitholders 74,375,025 and 74,188,784 units outstanding, respectively

 

 

1,329,934

 

 

1,280,218

 

General Partners’ deficit

 

 

(275,153)

 

 

(258,883)

 

Accumulated other comprehensive loss

 

 

(34,174)

 

 

(34,557)

 

Total ARLP Partners' Capital

 

 

1,020,607

 

 

986,778

 

Noncontrolling interest

 

 

5,122

 

 

2,585

 

Total Partners' Capital

 

 

1,025,729

 

 

989,363

 

TOTAL LIABILITIES AND PARTNERS' CAPITAL

 

$

2,244,275

 

$

2,361,286

 

 

 

 

-MORE-


 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 

 

 

 

2016

    

2015

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

$

494,528

 

$

528,895

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Property, plant and equipment:

 

 

 

 

 

 

 

Capital expenditures

 

 

(70,267)

 

 

(159,182)

 

Decrease in accounts payable and accrued liabilities

 

 

(7,965)

 

 

(3,093)

 

Proceeds from sale of property, plant and equipment

 

 

756

 

 

1,519

 

Purchases of equity investments in affiliates

 

 

(65,367)

 

 

(47,624)

 

Payments for acquisitions of businesses, net of cash acquired

 

 

(1,011)

 

 

(74,953)

 

Payment for acquisition of customer contracts

 

 

(23,000)

 

 

 —

 

Advances/loans to affiliate

 

 

 —

 

 

(7,300)

 

Other

 

 

2,167

 

 

1,807

 

Net cash used in investing activities

 

 

(164,687)

 

 

(288,826)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Borrowings under securitization facility

 

 

44,600

 

 

6,500

 

Payments under securitization facility

 

 

(27,700)

 

 

(6,500)

 

Payments on term loan

 

 

(106,250)

 

 

(20,319)

 

Borrowings under revolving credit facilities

 

 

140,000

 

 

463,000

 

Payments under revolving credit facilities

 

 

(215,000)

 

 

(200,000)

 

Payment on long-term debt

 

 

 —

 

 

(205,000)

 

Proceeds on capital lease transactions

 

 

33,881

 

 

 —

 

Payments on capital lease obligations

 

 

(17,769)

 

 

(994)

 

Contributions to consolidated company from affiliate noncontrolling interest

 

 

2,557

 

 

1,483

 

Net settlement of employee withholding taxes on vesting of Long-Term Incentive Plan

 

 

(1,336)

 

 

(2,719)

 

Cash contributions by General Partners

 

 

47

 

 

95

 

Distributions paid to Partners

 

 

(194,870)

 

 

(258,697)

 

Other

 

 

(60)

 

 

(5,583)

 

Net cash used in financing activities

 

 

(341,900)

 

 

(228,734)

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(12,059)

 

 

11,335

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

33,431

 

 

24,601

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

21,372

 

$

35,936

 

 

 

 

 

-MORE-


 

Reconciliation of GAAP "net income" to non-GAAP "EBITDA," "Adjusted EBITDA" and "Distributable Cash Flow" (in thousands).

 

EBITDA is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes and depreciation, depletion and amortization and Adjusted EBITDA is EBITDA modified for certain items that may not reflect the trend of future results, such as non-cash impairments.  Distributable cash flow ("DCF") is defined as Adjusted EBITDA excluding equity in income or loss of affiliates, interest expense (before capitalized interest), interest income, income taxes and estimated maintenance capital expenditures.  Distribution coverage ratio ("DCR") is defined as DCF divided by distributions paid to partners.

 

Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) provide additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation and planning decisions and (iii) present measurements that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations.

 

EBITDA, Adjusted EBITDA, DCF and DCR should not be considered as alternatives to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles.  EBITDA, Adjusted EBITDA and DCF are not intended to represent cash flow and do not represent the measure of cash available for distribution.  Our method of computing EBITDA, Adjusted EBITDA, DCF and DCR may not be the same method used to compute similar measures reported by other companies, or EBITDA, Adjusted EBITDA, DCF and DCR may be computed differently by us in different contexts (i.e. public reporting versus computation under financing agreements).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

Three Months Ended

 

Year Ended

 

 

 

September 30, 

 

September 30, 

 

June 30, 

 

December 31, 

 

 

    

2016

    

2015

    

2016

    

2015

    

2016

    

2016E Midpoint

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

89,824

 

$

83,372

 

$

219,843

 

$

284,696

 

$

82,711

 

$

305,000

 

Depreciation, depletion and amortization

 

 

80,612

 

 

84,661

 

 

240,640

 

 

242,730

 

 

79,145

 

 

319,000

 

Interest expense, net

 

 

8,045

 

 

7,219

 

 

23,698

 

 

22,723

 

 

7,814

 

 

31,000

 

Capitalized interest

 

 

(47)

 

 

(152)

 

 

(320)

 

 

(518)

 

 

(46)

 

 

 —

 

Income tax expense

 

 

7

 

 

12

 

 

4

 

 

17

 

 

6

 

 

 —

 

EBITDA

 

 

178,441

 

 

175,112

 

 

483,865

 

 

549,648

 

 

169,630

 

 

655,000

 

Asset impairment

 

 

 —

 

 

10,695

 

 

 —

 

 

10,695

 

 

 —

 

 

 —

 

Adjusted EBITDA

 

 

178,441

 

 

185,807

 

 

483,865

 

 

560,343

 

 

169,630

 

 

655,000

 

Equity in (income) loss of affiliates, net

 

 

(1,105)

 

 

17,221

 

 

(1,041)

 

 

49,049

 

 

37

 

 

(2,000)

 

Interest expense, net

 

 

(8,045)

 

 

(7,219)

 

 

(23,698)

 

 

(22,723)

 

 

(7,814)

 

 

(31,000)

 

Income tax expense

 

 

(7)

 

 

(12)

 

 

(4)

 

 

(17)

 

 

(6)

 

 

 —

 

Estimated maintenance capital expenditures (1)

 

 

(40,432)

 

 

(56,792)

 

 

(122,355)

 

 

(156,096)

 

 

(39,724)

 

 

(166,250)

 

Distributable Cash Flow

 

$

128,852

 

$

139,005

 

$

336,767

 

$

430,556

 

$

122,123

 

$

455,750

 

Distributions paid to partners

 

$

53,059

 

$

88,100

 

$

194,870

 

$

258,697

 

$

53,062

 

$

247,700

 

Distribution Coverage Ratio

 

 

2.43

 

 

1.58

 

 

1.73

 

 

1.66

 

 

2.30

 

 

1.84

 


 

-MORE-


 

(1)

Our maintenance capital expenditures, as defined under the terms of our partnership agreement, are those capital expenditures required to maintain, over the long-term, the operating capacity of our capital assets.  We estimate maintenance capital expenditures on an annual basis based upon a five-year planning horizon.  For the 2016 planning horizon, average annual estimated maintenance capital expenditures are assumed to be $4.75 per produced ton compared to the estimated $4.96 per produced ton in 2015.  Our actual maintenance capital expenditures vary depending on various factors, including maintenance schedules and timing of capital projects, among others.  We annually disclose our actual maintenance capital expenditures in our Form 10-K filed with the Securities and Exchange Commission.

 

Reconciliation of GAAP "Operating Expenses" to non-GAAP "Segment Adjusted EBITDA Expense per ton" and Reconciliation of non-GAAP "Adjusted EBITDA" to "Segment Adjusted EBITDA per ton" (in thousands, except per ton data).

 

Segment Adjusted EBITDA Expense per ton includes operating expenses, outside coal purchases and other income divided by tons sold.  Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any margin on transportation revenues.  Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments.  Segment Adjusted EBITDA Expense is a key component of EBITDA and Adjusted EBITDA in addition to coal sales and other sales and operating revenues.  The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses.  Outside coal purchases are included in Segment Adjusted EBITDA Expense because tons sold and coal sales include sales from outside coal purchases.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

September 30, 

 

June 30, 

 

 

    

2016

    

2015

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense

 

$

347,711

 

$

336,527

 

$

246,499

 

Outside coal purchases

 

 

1,514

 

 

2

 

 

 

Other income

 

 

(293)

 

 

(455)

 

 

(161)

 

Segment Adjusted EBITDA Expense

 

$

348,932

 

$

336,074

 

$

246,338

 

Divided by tons sold

 

 

10,757

 

 

10,294

 

 

7,964

 

Segment Adjusted EBITDA Expense per ton

 

$

32.44

 

$

32.65

 

$

30.93

 

 

Segment Adjusted EBITDA per ton is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and asset impairment divided by tons sold.  Segment Adjusted EBITDA removes the impact of general and administrative expenses from Adjusted EBITDA (discussed above) to allow management to focus solely on the evaluation of segment operating performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

September 30, 

 

June 30, 

 

 

    

2016

    

2015

    

2016

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (See reconciliation to GAAP above)

 

$

178,441

 

$

185,807

 

$

169,630

 

General and administrative

 

 

18,114

 

 

17,948

 

 

17,663

 

Segment Adjusted EBITDA

 

$

196,555

 

$

203,755

 

$

187,293

 

Divided by tons sold

 

 

10,757

 

 

10,294

 

 

7,964

 

Segment Adjusted EBITDA per ton

 

$

18.27

 

$

19.79

 

$

23.52

 

 

-END-