Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported
financial and operating results for the quarter ended June 30, 2015
(the "2015 Quarter"). Reflecting higher other sales and operating
revenues, total revenues increased to a record $604.7 million
compared to $598.6 million for the quarter ended June 30, 2014 (the
"2014 Quarter"). Although total revenue increased, higher operating
expenses and equity in loss of affiliates from White Oak led to
lower EBITDA, which decreased $30.7 million to $182.4 million for
the 2015 Quarter. These factors and increased depreciation,
depletion and amortization expense contributed to lower net income
for the 2015 Quarter, which decreased 31.1% compared to the 2014
Quarter to $94.9 million, or $0.76 per basic and diluted limited
partner unit. (For a definition of EBITDA and related
reconciliations to comparable GAAP financial measures, please see
the end of this release.)
ARLP also announced that the Board of Directors of its managing
general partner (the "Board") increased the cash distribution to
unitholders for the 2015 Quarter to $0.675 per unit (an annualized
rate of $2.70 per unit), payable on August 14, 2015 to all
unitholders of record as of the close of trading on August 7, 2015.
The announced distribution represents an 8.0% increase over the
cash distribution of $0.625 per unit for the 2014 Quarter and a
1.9% increase over the cash distribution of $0.6625 per unit for
the quarter ended March 31, 2015 (the "Sequential Quarter").
"ARLP delivered another solid performance in the 2015 Quarter,"
said Joseph W. Craft III, President and Chief Executive Officer.
"Key to this performance was shipping record coal sales volumes
during the quarter, which contributed to record quarterly revenues.
Coal inventories fell by approximately 962,000 tons during the 2015
Quarter, exceeding our expectations. Operations also performed well
and finished the first half of this year with the best safety
performance in ARLP’s history. Excluding the results from our
preferred equity investments in White Oak, the 2015 Quarter and
year-to-date financial results came in as we expected. As
previously announced, we reached agreement to acquire the remaining
equity interests in White Oak not already owned by ARLP and are on
track to close this transaction later this week. We believe
acquiring full ownership of White Oak and assuming operating and
marketing control of the White Oak Mine No. 1 provides ARLP with
significant strategic advantages in the Illinois Basin and will
benefit us in the long term."
Mr. Craft added, "Based on ARLP’s quarterly results, our strong
1.71x distribution coverage ratio and confidence in ARLP’s outlook,
the Board announced today an increase in unitholder distributions
for the twenty-ninth consecutive quarter."
Consolidated Financial Results
Three Months Ended June 30, 2015 Compared to Three Months Ended
June 30, 2014
Increased total revenues for the 2015 Quarter reflect higher
other sales and operating revenues of $29.7 million, which climbed
$12.1 million compared to the 2014 Quarter, partially offset by
lower coal sales revenues, which decreased $7.9 million to $567.3
million. Other sales and operating revenues increased primarily due
to higher surface facility services and coal royalties from ARLP’s
investments related to the White Oak Mine No. 1, which rose $14.5
million compared to the 2014 Quarter. Despite record coal sales
volumes of 10.5 million tons, coal sales revenues for the 2015
Quarter declined slightly to $567.3 million as a result of lower
average coal sales prices of $54.13 per ton sold, a decrease of
2.5% compared to the 2014 Quarter.
Compared to the 2014 Quarter, operating expenses rose 6.3% to
$375.1 million, primarily as a result of higher sales-related
expenses due to increased coal sales volumes in the 2015 Quarter,
as well as non-recurring benefits realized in the 2014 Quarter from
a gain of $4.4 million recognized on the sale of assets at the
Pontiki mine and a $7.0 million insurance settlement related to an
adverse geological event in 2013 at the Onton mine. These
comparative factors also contributed to higher Segment Adjusted
EBITDA Expense per ton of $35.77 in the 2015 Quarter, an increase
of 5.1% compared to the 2014 Quarter.
Reflecting ARLP’s decision to reduce unit shifts in response to
market conditions, coal production volumes decreased to 9.5 million
tons in the 2015 Quarter, a reduction of 2.5% compared to the 2014
Quarter.
Depreciation, depletion and amortization increased $12.7 million
to $79.8 million in the 2015 Quarter compared to the 2014 Quarter,
due to the previously announced reduction of the economic mine life
at our Hopkins mine, which is expected to close in early 2016,
increased production at the Gibson South mine, which commenced
initial production in April 2014, amortization of coal supply
agreements acquired in December 2014 and capital expenditures
related to infrastructure investments at various operations.
General and administrative expenses decreased $2.2 million to $17.5
million in the 2015 Quarter, primarily as a result of lower
incentive compensation expenses.
Total net equity in loss of affiliates increased to $22.1
million for the 2015 Quarter, compared to a loss of $7.4 million
for the 2014 Quarter, primarily due to low coal sales price
realizations and higher expenses reflecting White Oak’s continued
ramp up of longwall production following the commencement of
operations in late 2014. As discussed herein, we have reached an
agreement with White Oak to acquire all equity interests not
currently owned by ARLP and will begin to account for White Oak on
a consolidated basis after the anticipated July 31, 2015 closing of
the transaction.
Six Months Ended June 30, 2015 Compared to Six Months Ended June
30, 2014
For the six months ended June 30, 2015 (the "2015 Period"),
increases at the Tunnel Ridge and Gibson South mines led to a
record 20.0 million tons sold and produced, slightly above sales
and production volumes compared to the six months ended June 30,
2014 (the "2014 Period"). Total revenues rose 2.2% to a record $1.2
billion in the 2015 Period on the strength of higher other sales
and operating revenues, primarily due to increased surface facility
services and coal royalties from White Oak. Coal sales revenues
declined slightly to $1.1 billion for the 2015 Period as average
coal sales prices decreased approximately 2.0% to $54.30 per ton
sold. Increased operating expenses and equity in loss of affiliates
drove EBITDA for the 2015 Period down 7.2% to $374.5 million and,
along with higher depreciation, depletion and amortization,
contributed to lower net income of $201.3 million, or $1.68 of net
income per basic and diluted limited partner unit, a decrease of
20.6% compared to the 2014 Period.
Regional Results and Analysis
% Change
2015 2015 Second 2014 Second Quarter / First % Change
(in millions, except per ton data) Quarter Quarter Quarter Quarter
Sequential
Illinois
Basin
Tons sold 7.739 8.014 (3.4 )% 7.119 8.7 % Coal sales price per ton
(1) $ 51.91 $ 52.52 (1.2 )% $ 51.73 0.3 % Segment Adjusted EBITDA
Expense per ton (2) $ 31.64 $ 31.94 (0.9 )% $ 31.78 (0.4 )% Segment
Adjusted EBITDA (2) $ 157.2 $ 165.9 (5.2 )% $ 142.7 10.2 %
Appalachia
Tons sold 2.742 2.348 16.8 % 2.374 15.5 % Coal sales price per ton
(1) $ 59.22 $ 65.61 (9.7 )% $ 61.45 (3.6 )% Segment Adjusted EBITDA
Expense per ton (2) $ 43.31 $ 39.99 8.3 % $ 41.20 5.1 % Segment
Adjusted EBITDA (2) $ 45.5 $ 67.1 (32.2 )% $ 55.8 (18.5 )%
White
Oak
Tons processed 2.797 0.730 N/M(4) 3.054 (8.4 )% Surface
facility/royalty revenues $ 18.7 $ 4.2 N/M(4) $ 18.4 1.6 % Equity
in loss of affiliates $ (22.0 ) $ (7.5 ) N/M(4) $ (9.4 ) N/M(4)
Segment Adjusted EBITDA (2) $ (7.0 ) $ (4.9 ) (42.9 )% $ 5.3 N/M(4)
Total
(3)
Tons sold 10.481 10.362 1.1 % 9.501 10.3 % Coal sales price per ton
(1) $ 54.13 $ 55.51 (2.5 )% $ 54.49 (0.7 )% Segment Adjusted EBITDA
Expense per ton (2) $ 35.77 $ 34.03 5.1 % $ 35.21 1.6 % Segment
Adjusted EBITDA (2) $ 199.9 $ 232.8 (14.1 )% $ 209.0 (4.4 )%
(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, Appalachia and White Oak segments
highlighted above. (4) Percentage change not meaningful.
Higher coal sales volumes primarily from the Tunnel Ridge and
Gibson South mines led to a record 10.5 million total tons sold in
the 2015 Quarter, an increase of 1.1% and 10.3% over the 2014 and
Sequential Quarters, respectively. Strong sales performance from
the Tunnel Ridge longwall operation drove coal sales tons for the
2015 Quarter higher in Appalachia by 16.8% and 15.5% compared to
the 2014 and Sequential Quarters, respectively. Compared to the
2014 Quarter, coal sales volumes decreased 3.4% in the Illinois
Basin due primarily to lower sales at our Warrior mine as it
continues to transition to a new mining area, shift reductions at
our Gibson North mine and an inventory build at our Dotiki and
River View mines, offset in part by strong performance at Gibson
South reflecting increased production at the mine since
commencement of initial production in April 2014. Coal sales
volumes in the Illinois Basin increased from the Sequential Quarter
primarily as a result of strong performance at the Gibson South
mine and increased sales from coal inventories across the
region.
Reflecting current market conditions, ARLP's total coal sales
price per ton in the 2015 Quarter decreased in line with
expectations compared to both the 2014 and Sequential Quarters.
Lower coal sales prices in Appalachia also reflect the impact at
Tunnel Ridge of a previously disclosed customer breach of an
above-market coal supply agreement, which is now the subject of
litigation.
Total Segment Adjusted EBITDA Expense per ton in the 2015
Quarter increased 5.1% compared to the 2014 Quarter, primarily as a
result of increased expenses per ton in the Appalachian region and
the previously discussed insurance settlement at Onton and gain on
sale of assets at Pontiki benefiting the 2014 Quarter. In
Appalachia, Segment Adjusted EBITDA Expense per ton increased 8.3%
compared to the 2014 Quarter primarily due to lower recoveries
across the region. Compared to the Sequential Quarter, Segment
Adjusted EBITDA Expense per ton in Appalachia increased 5.1% as a
result of lower recoveries and increased longwall move days at both
our Mettiki and Tunnel Ridge mines. In the Illinois Basin, Segment
Adjusted EBITDA Expense per ton decreased slightly in the 2015
Quarter compared to both the 2014 and Sequential Quarters primarily
due to increased production from our Gibson South mine and
decreased workers’ compensation and materials and supplies expenses
at various locations. Compared to the 2014 Quarter, these decreases
in the Illinois Basin were offset in part by the Onton insurance
settlement in 2014 and fewer work days due to the timing of miner
vacations.
Outlook
Commenting on ARLP’s current outlook for the rest of the year,
Mr. Craft said, "Most of our coal industry counterparts are under
extreme duress, particularly those with high leverage and
significant exposure to the metallurgical coal markets. Thermal
coal demand in the domestic utility market has also fallen this
year primarily due to lower natural gas prices and a weaker export
market. We believe, however, that market demand is beginning to
stabilize and recent market weakness is causing a supply response.
Total coal production has declined from the Sequential Quarter by
13.5% in the Illinois Basin and 15.0% in the northern Appalachian
markets. We expect further supply reductions, which will continue
to improve the oversupply situation in those regions."
Mr. Craft added, "While we have also been impacted by reduced
demand, ARLP continues to distinguish itself from others in our
industry. Our sales contract position, strong balance sheet,
low-cost operations and strategy to focus on the domestic utility
market have allowed us to perform well and increase distributable
cash flow through the first half of the year."
ARLP currently anticipates closing the acquisition of the
remaining equity interests in White Oak within the week. ARLP
continues to expect full year EBITDA and net income will be within
the range of prior guidance and, once closing has occurred, we will
provide a full update to 2015 guidance to reflect consolidation of
the White Oak Mine No. 1 and termination of the current coal
royalty and surface facilities services agreements and the
preferred equity interests related to White Oak.
A conference call regarding ARLP’s 2015 Quarter financial
results is scheduled for Tuesday, July 28, 2015 at 9:00 a.m.
Eastern. To participate in the conference call, dial (855) 793-3259
and provide conference number 85117094. 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 85117094. 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 third largest
coal producer in the eastern United States with mining operations
in the Illinois Basin and Appalachian coal producing regions.
ARLP currently operates ten mining complexes in Illinois,
Indiana, Kentucky, Maryland and West Virginia. ARLP has also made
equity investments in White Oak and purchased reserves and operates
surface facilities related to the White Oak Mine No. 1. ARLP
has reached an agreement to acquire all of the equity interests in
White Oak not currently owned by ARLP. In addition, ARLP 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.
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. 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
competition in coal markets and our ability to respond to such
changes; changes in coal prices, which could affect our operating
results and cash flows; risks associated with the expansion of our
operations and properties; legislation, regulations, and court
decisions and interpretations thereof, including those relating to
the environment, 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; dependence on significant customer
contracts, including renewing customer contracts upon expiration of
existing contracts; 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; adjustments made in price, volume or terms to existing
coal supply agreements; fluctuations in coal demand, prices and
availability; our productivity levels and margins earned on our
coal sales; 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, 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; 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; 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, 2014, filed on February 27,
2015 with the SEC. Except as required by applicable
securities laws, ARLP does not intend to update its forward-looking
statements.
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
Six Months Ended June 30, June 30, 2015
2014 2015 2014 Tons
Sold 10,481 10,362 19,982 19,857
Tons Produced 9,519
9,761 20,021 20,014
SALES AND OPERATING REVENUES:
Coal sales $ 567,288 $ 575,191 $ 1,085,027 $ 1,100,736
Transportation revenues 7,780 5,810 14,928 11,815 Other sales and
operating revenues 29,652 17,561
65,181 28,049 Total revenues 604,720
598,562 1,165,136
1,140,600
EXPENSES: Operating expenses
(excluding depreciation, depletion and amortization) 375,065
352,893 709,427 675,135 Transportation expenses 7,780 5,810 14,928
11,815 Outside coal purchases 2 2 324 4 General and administrative
17,542 19,771 34,388 37,206 Depreciation, depletion and
amortization 79,801 67,052
158,069 133,893 Total operating expenses
480,190 445,528 917,136
858,053
INCOME FROM OPERATIONS 124,530
153,034 248,000 282,547 Interest expense, net (8,306 )
(8,748 ) (16,274 ) (16,811 ) Interest income 605 417 1,136 806
Equity in loss of affiliates, net (22,142 ) (7,373 ) (31,828 )
(13,614 ) Other income 177 323
295 629
INCOME BEFORE INCOME TAXES
94,864 137,653 201,329 253,557
INCOME TAX EXPENSE
7 - 5 -
NET INCOME 94,857 137,653 201,324 253,557
LESS:
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST 7
- 20 -
NET INCOME ATTRIBUTABLE TO ALLIANCE RESOURCE PARTNERS, L.P.
("NET INCOME OF ARLP") $ 94,864 $ 137,653 $
201,344 $ 253,557
GENERAL PARTNERS’
INTEREST IN NET INCOME OF ARLP $ 37,541 $ 34,781
$ 74,424 $ 68,149
LIMITED PARTNERS’
INTEREST IN NET INCOME OF ARLP $ 57,323 $ 102,872
$ 126,920 $ 185,408
BASIC AND DILUTED NET
INCOME OF ARLP PER LIMITED PARTNER UNIT $ 0.76 $ 1.37
$ 1.68 $ 2.47
DISTRIBUTIONS PAID PER
LIMITED PARTNER UNIT $ 0.6625 $ 0.61125 $ 1.3125
$ 1.21
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING – BASIC AND DILUTED 74,188,784
74,060,634 74,159,756 74,027,932
ALLIANCE RESOURCE PARTNERS, L.P. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands, except unit data)
(Unaudited)
ASSETS
June 30, December 31, 2015 2014
CURRENT ASSETS: Cash and cash equivalents $ 43,279 $ 24,601
Trade receivables 191,505 184,187 Other receivables 635 1,025 Due
from affiliates 23,235 7,221 Inventories 88,272 83,155 Advance
royalties 9,440 9,416 Prepaid expenses and other assets
21,774 31,283 Total current assets 378,140
340,888
PROPERTY, PLANT AND EQUIPMENT: Property,
plant and equipment, at cost 2,927,115 2,815,620 Less accumulated
depreciation, depletion and amortization (1,270,593 )
(1,150,414 ) Total property, plant and equipment, net 1,656,522
1,665,206
OTHER ASSETS: Advance royalties 24,901
15,895 Due from affiliate 11,166 11,047 Equity investments in
affiliates 221,768 224,611 Other long-term assets 37,432
27,412 Total other assets 295,267
278,965
TOTAL ASSETS $ 2,329,929
$ 2,285,059
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES: Accounts payable $ 72,552 $ 85,843 Due
to affiliates 381 370 Accrued taxes other than income taxes 23,097
19,426 Accrued payroll and related expenses 38,207 57,656 Accrued
interest 317 318 Workers’ compensation and pneumoconiosis benefits
8,873 8,868 Current capital lease obligations 1,316 1,305 Other
current liabilities 15,437 17,109 Current maturities, long-term
debt 68,750 230,000 Total current
liabilities 228,930 420,895
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 788,000 591,250
Pneumoconiosis benefits 57,235 55,278 Accrued pension benefit
39,377 40,105 Workers’ compensation 47,906 49,797 Asset retirement
obligations 94,605 91,085 Long-term capital lease obligations
14,946 15,624 Other liabilities 7,173 5,978
Total long-term liabilities 1,049,242
849,117 Total liabilities 1,278,172
1,270,012
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL: Alliance Resource Partners, L.P. (“ARLP”)
Partners’ Capital:
Limited Partners - Common Unitholders
74,188,784 and 74,060,634 units outstanding, respectively
1,342,072 1,310,517 General Partners' deficit (257,512 ) (260,088 )
Accumulated other comprehensive loss (34,395 )
(35,847 ) Total ARLP Partners' Capital 1,050,165 1,014,582
Noncontrolling interest 1,592 465 Total
Partners' Capital 1,051,757 1,015,047
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 2,329,929 $
2,285,059
ALLIANCE RESOURCE PARTNERS, L.P.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, 2015
2014 CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES $ 338,880 $ 379,389
CASH
FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment:
Capital expenditures (107,758 ) (154,578 ) Changes in accounts
payable and accrued liabilities (5,797 ) 2,608 Proceeds from sale
of property, plant and equipment 243 19 Proceeds from insurance
settlement for property, plant and equipment - 4,512 Purchases of
equity investments in affiliates (30,757 ) (60,000 ) Payment for
acquisition of businesses, net of cash acquired (28,078 ) -
Payments to affiliate for acquisition and development of coal
reserves - (1,401 ) Advances/loans to affiliate (7,300 ) - Other
1,807 - Net cash used in investing
activities (177,640 ) (208,840 )
CASH FLOWS
FROM FINANCING ACTIVITIES: Payments under term loan (12,500 )
(6,250 ) Borrowings under revolving credit facilities 363,000
142,800 Payments under revolving credit facilities (110,000 )
(222,800 ) Payment on long-term debt (205,000 ) - Payments on
capital lease obligations (667 ) (734 ) Contribution to
consolidated company from affiliate noncontrolling interest 1,147 -
Net settlement of employee withholding taxes on vesting of
Long-Term Incentive Plan (2,719 ) (2,991 ) Cash contributions by
General Partners 95 111 Distributions paid to Partners (170,597 )
(154,904 ) Other (5,321 ) - Net cash used in
financing activities (142,562 ) (244,768 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 18,678 (74,219 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
24,601 93,654
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 43,279 $ 19,435
Reconciliation of GAAP "Net Income" to
non-GAAP "EBITDA" and non-GAAP "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. EBITDA is used as a
supplemental financial measure by our management and by external
users of our financial statements such as investors, commercial
banks, research analysts and others, to assess:
- the financial performance of our assets
without regard to financing methods, capital structure or
historical cost basis;
- the ability of our assets to generate
cash sufficient to pay interest costs and support our
indebtedness;
- our operating performance and return on
investment as compared to those of other companies in the coal
energy sector, without regard to financing or capital structures;
and
- the viability of acquisitions and
capital expenditure projects and the overall rates of return on
alternative investment opportunities.
Distributable cash flow ("DCF") is defined as 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. DCF and DCR are used as supplemental financial measures
by our management and by external users of our financial
statements, such as investors, commercial banks, research analysts
and others, to assess:
- the cash flows generated by our assets
(prior to the establishment of any retained cash reserves by the
general partner) to fund the cash distributions we expect to pay to
unitholders;
- our success in providing a cash return
on investment and whether or not the Partnership is generating cash
flow at a level that can sustain or support an increase in its
quarterly distribution rates;
- the yield of our units, which is a
quantitative standard used throughout the investment community with
respect to publicly-traded partnerships as the value of a unit is
generally determined by a unit’s yield (which in turn is based on
the amount of cash distributions the entity pays to a
unitholder).
EBITDA and DCF 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
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, DCF and DCR may not be the same method
used to compute similar measures reported by other companies, or
EBITDA, DCF and DCR may be computed differently by us in different
contexts (i.e. public reporting versus computation under financing
agreements).
Three Months Three Months Ended
Six Months Ended Ended June 30, June
30, March 31, 2015 2014 2015
2014 2015 Net income $ 94,857 $ 137,653
$ 201,324 $ 253,557 $ 106,467 Depreciation, depletion and
amortization 79,801 67,052 158,069 133,893 78,268 Interest expense,
gross 7,855 8,392 15,504 16,838 7,649 Capitalized interest (154 )
(61 ) (366 ) (833 ) (212 ) Income tax expense (benefit) 7
- 5 - (2 )
EBITDA 182,366 213,036 374,536 403,455 192,170 Equity in loss of
affiliates, net 22,142 7,373 31,828 13,614 9,686 Interest expense,
gross (7,855 ) (8,392 ) (15,504 ) (16,838 ) (7,649 ) Income tax
(expense) benefit (7 ) - (5 ) - 2 Estimated maintenance capital
expenditures (1) (47,214 ) (57,590 ) (99,304 )
(118,083 ) (52,089 ) Distributable Cash Flow $
149,432 $ 154,427 $ 291,551 $ 282,148 $
142,120 Distributions paid to partners $ 86,241 $
78,394 $ 170,597 $ 154,904 $ 84,365
Distribution Coverage Ratio 1.73 1.97
1.71 1.82 1.68
(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
2015 planning horizon, average annual estimated maintenance capital
expenditures are assumed to be $4.96 per produced ton compared to
the estimated $5.90 per produced ton in 2014. Our current per ton
estimate of average annual maintenance capital expenditures
decreased from our initial estimate of $5.55 per ton as a result of
optimization efforts across all of our operations. 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 "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 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 EndedJune
30,
Three MonthsEndedMarch
31,
2015 2014 2015 Operating expense
$ 375,065 $ 352,893 $ 334,362 Outside coal purchases 2 2 322 Other
income (177 ) (323 ) (118 ) Segment Adjusted
EBITDA Expense $ 374,890 $ 352,572 $ 334,566 Divided by tons sold
10,481 10,362 9,501
Segment Adjusted EBITDA Expense per ton $ 35.77 $ 34.03
$ 35.21
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 and
general and administrative expenses divided by tons sold. Segment
Adjusted EBITDA removes the impact of general and administrative
expenses from EBITDA (discussed above) to allow management to focus
solely on the evaluation of segment operating performance.
Three Months EndedJune
30,
Three MonthsEndedMarch
31,
2015 2014 2015 EBITDA (See
reconciliation to GAAP above) $ 182,366 $ 213,036 $ 192,170 General
and administrative 17,542 19,771 16,846
Segment Adjusted EBITDA $ 199,908 $ 232,807 $ 209,016 Divided by
tons sold 10,481 10,362 9,501 Segment Adjusted
EBITDA per ton $ 19.07 $ 22.47 $ 22.00
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version on businesswire.com: http://www.businesswire.com/news/home/20150728005391/en/
Alliance Resource Partners, L.P.Brian L. Cantrell,
918-295-7673
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