Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported
financial and operating results for the quarter ended March 31,
2016 (the "2016 Quarter"). Net income in the 2016 Quarter was $47.3
million, or $0.36 per basic and diluted limited partner unit,
compared to $106.5 million, or $0.92 per basic and diluted limited
partner unit, for the quarter ended March 31, 2015 (the "2015
Quarter"). Total revenues were $412.8 million in the 2016 Quarter
compared to $560.4 million in the 2015 Quarter, primarily resulting
from planned reductions in coal sales and production volumes and
lower other sales and operating revenues following our acquisition
of the remaining equity interests in White Oak Resources LLC
("White Oak") in July 2015 (the "White Oak Acquisition"). Lower
revenues were offset in part by reduced operating expenses and
equity in loss of affiliates related to White Oak and led to EBITDA
of $135.8 million for the 2016 Quarter, compared to $192.2 million
for the 2015 Quarter. (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") has decreased the quarterly cash
distribution to unitholders for the 2016 Quarter to $0.4375 per
unit (an annualized rate of $1.75 per unit), payable on May 13,
2016 to all unitholders of record as of the close of trading on May
6, 2016. The announced distribution compares to quarterly
unitholder distributions of $0.6625 per unit for the 2015 Quarter
and $0.675 per unit for the quarter ended December 31, 2015 (the
"Sequential Quarter").
"ARLP’s operating and financial performance for the 2016 Quarter
was in line with our expectations as our results remained solid in
the face of an extremely challenging coal market," said Joseph W.
Craft III, President and Chief Executive Officer. "Although ARLP’s
performance continues to lead the industry and our balance sheet
remains strong, we are unfortunately being impacted by the
contagion caused by the financial struggles facing many of our
competitors. In the current capital market environment, it has
become clear that we must be proactive in preserving liquidity in
order to maintain access to capital. The decision by our Board to
reduce ARLP’s unitholder distribution, while difficult, is a
significant step toward maintaining that access."
Mr. Craft continued, "ARLP’s guidance for 2016 distributable
cash flow has not changed from our year-end earnings release. For
unitholders, this new distribution level provides stability as it
meaningfully improves ARLP’s coverage to nearly 2.0x for the
remaining three quarters of 2016 and an estimated 1.6x at the
midpoint of current guidance for the 2016 calendar year. In the
near term, we intend to use our excess cash flow to reduce
indebtedness and further strengthen our balance sheet. Longer term,
we are focused on growing our cash flows and returning to our past
practice of steadily increasing distributions to our
unitholders."
Consolidated Financial Results
Three Months Ended March 31, 2016 Compared to Three Months Ended
March 31, 2015
Coal sales revenues in the 2016 Quarter were $401.3 million as
compared to $517.7 million for the 2015 Quarter primarily as a
result of lower coal sales and production volumes due to idling our
Onton and Gibson North mines in the Sequential Quarter, the planned
depletion of reserves at our Elk Creek mine in the 2016 Quarter and
reduced production at our River View, Pattiki, Warrior, Tunnel
Ridge and MC Mining operations. Compared to the 2015 Quarter, these
reductions were partially offset by volumes from the Hamilton mine
acquired as part of the White Oak Acquisition discussed above.
ARLP’s coal sales revenue was also impacted by lower total average
coal sales price realizations in the 2016 Quarter, which fell
approximately 1.2% to $53.82 per ton sold compared to $54.49 per
ton sold for the 2015 Quarter.
Other sales and operating revenues were $5.0 million in the 2016
Quarter compared to $35.5 million for the 2015 Quarter due to the
absence of coal royalty and surface facilities revenues from White
Oak as discussed above and the receipt in the 2015 Quarter of
certain customer payments in lieu of shipments related to an
Appalachian coal sales contract.
Operating expenses in the 2016 Quarter decreased 24.2% to $253.3
million primarily as a result of the previously discussed reduction
of coal production volumes, a favorable production cost mix due to
ARLP’s initiative to reduce production from higher-cost operations
and a build in coal inventory at various mines. The lower-cost
production mix and reduced selling expenses also contributed to
decreased Segment Adjusted EBITDA Expense per ton, which improved
3.6% to $33.96 in the 2016 Quarter compared to the 2015
Quarter.
Depreciation, depletion and amortization increased $2.6 million
to $80.9 million in the 2016 Quarter compared to the 2015 Quarter,
due to the addition of the Hamilton mine partially offset by the
impact of idling the Onton and Gibson North mines in the Sequential
Quarter and reduced production at our Elk Creek mine. Equity in
loss of affiliates decreased $9.7 million primarily due to the
absence of losses in the 2016 Quarter related to our equity
ownership in White Oak prior to the White Oak Acquisition.
Regional Results and Analysis
(in millions, except per ton data)
2016 FirstQuarter
2015 FirstQuarter
% ChangeQuarter /Quarter
2015FourthQuarter
% ChangeSequential
Illinois Basin
(1)
Tons sold 5.530 7.119 (22.3 )% 7.809 (29.2 )% Coal sales price per
ton (2) $ 51.12 $ 51.73 (1.2 )% $ 49.96 2.3 % Segment Adjusted
EBITDA Expense per ton (3) $ 30.94 $ 32.29 (4.2 )% $ 28.33 9.2 %
Segment Adjusted EBITDA (3) $ 112.3 $ 148.0 (24.1 )% $ 171.3 (34.4
)%
Appalachia
Tons sold 1.926 2.374 (18.9 )% 2.162 (10.9 )% Coal sales price per
ton (2) $ 59.89 $ 61.45 (2.5 )% $ 61.08 (1.9 )% Segment Adjusted
EBITDA Expense per ton (3) $ 39.99 $ 41.20 (2.9 )% $ 47.97 (16.6 )%
Segment Adjusted EBITDA (3) $ 39.4 $ 55.8 (29.4 )% $ 29.1 35.4 %
Total
(4)
Tons sold 7.456 9.501 (21.5 )% 9.971 (25.2 )% Coal sales price per
ton (2) $ 53.82 $ 54.49 (1.2 )% $ 52.70 2.1 % Segment Adjusted
EBITDA Expense per ton (3) $ 33.96 $ 35.21 (3.6 )% $ 33.19 2.3 %
Segment Adjusted EBITDA (3) $ 153.0 $
209.0 (26.8 )% $ 202.0
(24.3 )% (1) In the third quarter of 2015, ARLP realigned
its segment presentation. The Illinois Basin segment now includes
the consolidated Hamilton mine previously owned by White Oak. Prior
periods have been conformed to include our activities with White
Oak in the Illinois Basin segment. (2) Sales price per ton is
defined as total coal sales divided by total tons sold. (3) 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. (4) Total
reflects consolidated results which include the other and corporate
segment and eliminations in addition to the Illinois Basin and
Appalachia segments highlighted above.
Total tons sold in the 2016 Quarter decreased 21.5% and 25.2%
compared to the 2015 and Sequential Quarters, respectively, as a
result of planned reductions of coal sales volumes in both the
Illinois Basin and Appalachian regions. Lower Illinois Basin coal
sales volumes reflect the idling of our Onton and Gibson North
mines in the Sequential Quarter, customer deferrals of scheduled
shipments during the 2016 Quarter at our River View and Gibson
South mines and reduced production at our Hamilton mine. In
Appalachia, lower coal sales volumes in the 2016 Quarter were
primarily due to the planned scale back of production at our Tunnel
Ridge and MC Mining operations in response to weak coal demand and
customer deferrals in the 2016 Quarter. Customer deferrals and soft
coal demand due to a mild winter and excessive customer stockpiles
also contributed to an inventory build at our mines of
approximately 1.4 million tons during the 2016 Quarter.
Reflecting challenging market conditions and lower-priced legacy
contracts at the Hamilton mine obtained in conjunction with the
White Oak Acquisition, ARLP's total coal sales price per ton in the
2016 Quarter decreased 1.2% compared to the 2015 Quarter.
Sequentially, total coal sales price per ton increased by 2.1% due
to a favorable Illinois Basin sales mix in the 2016 Quarter.
Total Segment Adjusted EBITDA Expense per ton improved by 3.6%
compared to the 2015 Quarter as a result of reduced expenses per
ton in both the Illinois Basin and Appalachian regions. In the
Illinois Basin, Segment Adjusted EBITDA Expense per ton decreased
by 4.2% compared to the 2015 Quarter primarily due to a favorable
production mix in the 2016 Quarter as discussed above and improved
recoveries at our Gibson South and Warrior mines. Segment Adjusted
EBITDA Expense per ton in Appalachia decreased by 2.9% compared to
the 2015 Quarter as a result of lower selling expenses and
inventory charges at our Tunnel Ridge and MC Mining mines, offset
in part by lower recoveries across the region. Sequentially, total
Segment Adjusted EBITDA Expense per ton increased 2.3% as a result
of increased expenses per ton in the Illinois Basin partially
offset by lower expenses per ton in Appalachia. Higher expenses per
ton in the Illinois Basin reflect higher inventory charges at
various mines, the planned reduction of lower-cost longwall
production at Hamilton due to reduced coal demand and high customer
inventory levels compared to the Sequential Quarter. The impact of
reduced production at Hamilton was offset in part by improved
recoveries at Gibson South and planned volume reductions at certain
higher-cost mines in the Illinois Basin during the 2016 Quarter as
discussed above. Expenses per ton declined in Appalachia during the
Sequential Quarter primarily due to increased production and lower
inventory charges at the Tunnel Ridge mine.
Outlook
"Coming into 2016, we expected lower coal demand for our
Illinois Basin and northern Appalachian markets due to tepid power
demand, persistently low natural gas prices, excess utility
stockpiles and regulatory impacts," said Mr. Craft. "Mild weather
conditions during the 2016 Quarter exacerbated these conditions,
keeping the coal markets oversupplied and intensifying pressure on
producers to curtail supply. Supply rationalization is occurring
rapidly as evidenced by U.S. coal production falling by
approximately 30% year-over-year in the 2016 Quarter, and we
anticipate production cuts are likely to accelerate throughout the
rest of the year. We continue to view current natural gas prices as
unsustainable, eventually setting the stage for improved coal
demand as gas supplies and pricing are impacted by significant
reductions in drilling capital."
Mr. Craft added, "We expect the coal markets will remain
oversupplied for several quarters and near-term pricing will be
challenging. Later this year the reducing supply picture for both
coal and natural gas should support higher prices for both
commodities, and we are beginning to see some signs of increased
buying interest for 2017. As utilities make their purchasing
decisions for 2017 and beyond, we believe ARLP will benefit from
our strategically-located, low-cost operations and strong balance
sheet. We are unwavering in our commitment to deliver long-term
value to our unitholders and believe ARLP is well positioned to
deliver on this commitment."
Based on results to date and expectations for the balance of
2016, ARLP is maintaining its previous 2016 full-year ranges for
coal production of 33.7 to 35.7 million tons, coal sales volumes of
34.6 to 38.1 million tons and revenues, excluding transportation
revenues, of $1.82 to $1.95 billion. EBITDA continues to be
estimated in a range of $545.0 to $615.0 million and net income in
a range of $230.0 to $300.0 million. (For a definition of EBITDA
and related reconciliation to the most comparable GAAP financial
measure, please see the end of this release.)
ARLP has secured volume and price commitments for approximately
34.5 million tons in 2016 and has also secured coal sales and price
commitments for approximately 21.5 million tons, 14.5 million tons
and 7.1 million tons in 2017, 2018 and 2019, respectively.
Capital expenditures of $33.3 million during the 2016 Quarter
were below our expectations and ARLP continues to evaluate
opportunities to minimize future capital expenditures. As a result,
we are reducing anticipated 2016 total capital expenditures by
approximately $27.0 million at the midpoint of prior guidance to a
range of $105.0 to $115.0 million. In addition to these capital
expenditures, ARLP continues to anticipate funding investments in
2016 of $60.0 to $70.0 million related to its commitment to acquire
oil and gas mineral interests.
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 74677339. 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 74677339. 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.
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 gasses, 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 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 EndedMarch
31,
2016 2015 Tons Sold 7,456
9,501
Tons Produced 8,884 10,502
SALES AND
OPERATING REVENUES: Coal sales $ 401,292 $ 517,739
Transportation revenues 6,558 7,148 Other sales and operating
revenues 4,979 35,529 Total revenues
412,829 560,416
EXPENSES:
Operating expenses (excluding depreciation, depletion and
amortization) 253,303 334,362 Transportation expenses 6,558 7,148
Outside coal purchases - 322 General and administrative 17,238
16,846 Depreciation, depletion and amortization 80,883
78,268 Total operating expenses 357,982
436,946
INCOME FROM OPERATIONS
54,847 123,470 Interest expense, net (7,615 ) (7,968 )
Interest income 3 531 Equity in loss of affiliates, net (27 )
(9,686 ) Other income 91 118
INCOME
BEFORE INCOME TAXES 47,299 106,465
INCOME TAX
BENEFIT (9 ) (2 )
NET INCOME 47,308
106,467
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING
INTEREST 2 13
NET INCOME
ATTRIBUTABLE TO ALLIANCE RESOURCE PARTNERS, L.P. (“NET INCOME OF
ARLP”) $ 47,310 $ 106,480
GENERAL
PARTNERS’ INTEREST IN NET INCOME OF ARLP $ 19,722 $
36,883
LIMITED PARTNERS’ INTEREST IN NET INCOME OF
ARLP $ 27,588 $ 69,597
BASIC AND
DILUTED NET INCOME OF ARLP PER LIMITED PARTNER UNIT $ 0.36
$ 0.92
DISTRIBUTIONS PAID PER LIMITED
PARTNER UNIT $ 0.675 $ 0.65
WEIGHTED
AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED
74,291,114 74,130,405
ALLIANCE RESOURCE PARTNERS, L.P. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands, except unit data)
(Unaudited)
ASSETS
March 31, December 31, 2016 2015
CURRENT ASSETS: Cash and cash equivalents $ 29,988 $ 33,431
Trade receivables 119,662 122,875 Other receivables 848 696 Due
from affiliates 322 190 Inventories, net 155,344 121,081 Advance
royalties, net 6,770 6,820 Prepaid expenses and other assets
23,754 29,812 Total current assets 336,688
314,905
PROPERTY, PLANT AND EQUIPMENT: Property,
plant and equipment, at cost 3,065,155 3,044,260 Less accumulated
depreciation, depletion and amortization (1,309,334 )
(1,243,985 ) Total property, plant and equipment, net 1,755,821
1,800,275
OTHER ASSETS: Advance royalties, net 32,666
21,295 Equity investments in affiliates 84,234 64,509 Goodwill
136,399 136,399 Other long-term assets 22,694
23,903 Total other assets 275,993
246,106
TOTAL ASSETS $ 2,368,502 $ 2,361,286
LIABILITIES AND PARTNERS' CAPITAL CURRENT
LIABILITIES: Accounts payable $ 63,132 $ 83,597 Due to
affiliates 41 129 Accrued taxes other than income taxes 16,602
15,621 Accrued payroll and related expenses 33,459 37,031 Accrued
interest 2,801 306 Workers' compensation and pneumoconiosis
benefits 8,843 8,688 Current capital lease obligations 20,148
19,764 Other current liabilities 19,534 18,929 Current maturities,
long-term debt, net 240,436 238,086
Total current liabilities 404,996 422,151
LONG-TERM
LIABILITIES: Long-term debt, excluding current maturities, net
644,736 579,420 Pneumoconiosis benefits 61,079 60,077 Accrued
pension benefit 38,781 39,031 Workers' compensation 48,337 47,486
Asset retirement obligations 123,302 122,434 Long-term capital
lease obligations 74,895 80,150 Other liabilities 21,684
21,174 Total long-term liabilities
1,012,814 949,772 Total liabilities
1,417,810 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 1,258,251 1,280,218 General Partners' deficit (276,509
) (258,883 ) Accumulated other comprehensive loss (34,429 )
(34,557 ) Total ARLP Partners' Capital 947,313 986,778
Noncontrolling interest 3,379 2,585
Total Partners' Capital 950,692 989,363
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 2,368,502 $
2,361,286
ALLIANCE RESOURCE
PARTNERS, L.P. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited)
Three Months EndedMarch
31,
2016 2015 CASH FLOWS PROVIDED
BY OPERATING ACTIVITIES $ 80,594 $ 161,622
CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and
equipment: Capital expenditures (31,733 ) (50,330 ) Changes in
accounts payable and accrued liabilities (6,247 ) 659 Proceeds from
sale of property, plant and equipment 458 299 Purchases of equity
investments in affiliates (20,168 ) (18,804 ) Payments for
acquisitions of businesses, net of cash acquired - (28,078 ) Other
416 1,807 Net cash used in investing
activities (57,274 ) (94,447 )
CASH FLOWS
FROM FINANCING ACTIVITIES: Borrowings under securitization
facility 22,500 - Payments under securitization facility (13,900 )
- Payments on term loan (6,250 ) (6,250 ) Borrowings under
revolving credit facility 105,000 95,000 Payments under revolving
credit facility (40,000 ) (65,000 ) Payments on capital lease
obligations (4,871 ) (343 ) Contributions to consolidated company
from affiliate noncontrolling interest 796 333 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 (88,749 ) (84,356 ) Other -
(2,141 ) Net cash used in financing activities
(26,763 ) (65,381 )
NET CHANGE IN CASH AND CASH
EQUIVALENTS (3,443 ) 1,794
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 33,431 24,601
CASH AND
CASH EQUIVALENTS AT END OF PERIOD $ 29,988 $ 26,395
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 and gains and losses
on acquisition related accounting. 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.
We believe Adjusted EBITDA is a useful measure for investors
because it further demonstrates the performance of our assets
without regard to items that may not reflect the trend of future
results.
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. 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, 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 EndedMarch
31,
Three MonthsEndedDecember
31,
Year EndedDecember 31,
2016 2015 2015 2016E
Midpoint Net income $ 47,308 $ 106,467 $ 21,475 $
265,500 Depreciation, depletion and amortization 80,883 78,268
90,983 281,000 Interest expense, net 7,839 7,649 7,666 33,500
Capitalized interest (227 ) (212 ) (177 ) - Income tax (benefit)
expense (9 ) (2 ) 4 -
EBITDA 135,794 192,170 119,951 580,000 Asset impairment charge - -
89,435 - Acquisition gain, net - -
(22,548 ) - Adjusted EBITDA 135,794 192,170
186,838 580,000 Equity in loss (income) of affiliates, net 27 9,686
(3 ) 2,200 Interest expense, net (7,839 ) (7,649 ) (7,666 ) (33,500
) Income tax benefit (expense) 9 2 (4 ) - Estimated maintenance
capital expenditures (1) (42,199 ) (52,089 )
(48,147 ) (164,700 ) Distributable Cash Flow $ 85,792
$ 142,120 $ 131,018 $ 384,000 Distributions
paid to partners $ 88,749 $ 84,356 $ 88,102 $
244,600 Distribution Coverage Ratio 0.97
1.68 1.49 1.57
(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 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 EndedMarch
31,
Three MonthsEndedDecember
31,
2016 2015 2015 Operating
expense $ 253,303 $ 334,362 $ 331,099 Outside coal purchases - 322
1 Other income (91 ) (118 ) (205 ) Segment
Adjusted EBITDA Expense $ 253,212 $ 334,566 $ 330,895 Divided by
tons sold 7,456 9,501 9,971
Segment Adjusted EBITDA Expense per ton $ 33.96 $
35.21 $ 33.19
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, asset impairment charge and
acquisition gain, net 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 EndedMarch
31,
Three MonthsEndedDecember
31,
2016 2015 2015 Adjusted
EBITDA (See reconciliation to GAAP above) $ 135,794 $ 192,170 $
186,838 General and administrative 17,238 16,846
15,148 Segment Adjusted EBITDA $ 153,032 $ 209,016 $ 201,986
Divided by tons sold 7,456 9,501 9,971 Segment
Adjusted EBITDA per ton $ 20.52 $ 22.00 $ 20.26
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version on businesswire.com: http://www.businesswire.com/news/home/20160426005488/en/
Alliance Resource Partners, L.P.Brian L. Cantrell,
918-295-7673
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