Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported
financial and operating results for the quarter ended September 30,
2015 (the "2015 Quarter"). Net income in the 2015 Quarter fell to
$83.4 million, or $0.61 per basic and diluted limited partner unit,
compared to $120.0 million, or $1.13 per basic and diluted limited
partner unit, for the quarter ended September 30, 2014 (the "2014
Quarter"). Results for the 2015 Quarter were negatively impacted by
two non-recurring items. First, compared to the 2014 Quarter,
equity in loss of affiliates related to White Oak Resources LLC
("White Oak") increased $17.0 million prior to ARLP’s July 31, 2015
acquisition of the remaining equity interests in White Oak and
assumption of operating control of the White Oak Mine No. 1 (now
known as the "Hamilton Mine No. 1") (the "Acquisition"). Second,
ARLP recently elected to surrender leases to certain undeveloped
coal reserves resulting in a $10.7 million non-cash asset
impairment in the 2015 Quarter. Adjusted EBITDA, which excludes
this non-cash impairment, decreased 6.1% to $185.8 million compared
to the 2014 Quarter. (For a definition of EBITDA, Adjusted 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") approved a cash distribution to
unitholders for the 2015 Quarter of $0.675 per unit (an annualized
rate of $2.70 per unit), payable on November 13, 2015 to all
unitholders of record as of the close of trading on November 6,
2015. The announced distribution represents a 5.9% increase over
the cash distribution of $0.6375 per unit for the 2014 Quarter and
is equal to the amount paid in the quarter ended June 30, 2015 (the
"Sequential Quarter").
"ARLP once again distinguished itself as a leader in the coal
industry by posting solid results in the 2015 Quarter," said Joseph
W. Craft III, President and Chief Executive Officer. "Our
operations led the way by producing a record 11.5 million tons
during the 2015 Quarter and reducing segment adjusted EBITDA
expense per ton by approximately 8.0% and 8.7% compared to the 2014
and Sequential Quarters, respectively. Quarterly results were
impacted by a non-cash asset impairment and inventory builds at
various operations due in part to delays in scheduled shipments on
coal sales agreements. As previously announced, we completed the
White Oak Acquisition during the 2015 Quarter and assumed operating
and marketing control of the Hamilton Mine No. 1. The integration
of Hamilton Mine No. 1 into our operations is progressing rapidly;
however, low-priced legacy contracts and transition costs, as well
as the equity in loss of affiliates passed through from White Oak
prior to the acquisition will be a drag on 2015 results.
Nonetheless, we continue to believe that adding this low-cost
longwall operation to our portfolio provides ARLP with significant
strategic advantages in the Illinois Basin which will benefit us in
the long term."
Mr. Craft added, "ARLP’s cash flow and profits remain strong.
Overall for the U.S. domestic thermal coal outlook, we expect
future demand to be stable; however, the market continues to be
oversupplied causing weak commodity prices. We see no near term
catalyst to improve pricing except a supply response by the
industry. As we evaluate our own supply response to an uncertain
coal market, ARLP is electing to maintain quarterly cash
distributions per unit at current levels. We are committed to
managing ARLP as an enduring, profitable enterprise that will
create long term value for our unitholders. We believe this
proactive decision to maintain current distribution levels, along
with our low-cost, strategically located operations, conservative
balance sheet and strong 1.66x distribution coverage ratio keeps
ARLP well positioned to deliver on this objective."
Consolidated Financial Results
Three Months Ended September 30, 2015 Compared to Three Months
Ended September 30, 2014
For the 2015 Quarter, increased coal sales and production
volumes from the Gibson South mine and Hamilton Mine No. 1 drove
coal sales volumes up 4.8% to 10.3 million tons and production
volumes higher by 12.0% to a record 11.5 million tons, both as
compared to the 2014 Quarter. Despite increased sales volumes, coal
sales revenues of $547.5 million for the 2015 Quarter were slightly
lower compared to the 2014 Quarter as a result of lower average
coal sales prices, which declined 4.7% to $53.18 per ton sold. The
lower coal sales prices per ton were due primarily to shipments on
the Hamilton Mine No. 1’s lower-priced legacy contracts and the
impact of market conditions on realized prices.
Other sales and operating revenues decreased by $5.4 million to
$9.6 million primarily due to the absence of certain payments in
lieu of shipments received from a customer in the 2014 Quarter
related to an Appalachian coal sales contract. Lower other sales
and operating revenues in the 2015 Quarter also reflect the
termination of the previously existing coal royalty and surface
facilities services agreements with White Oak upon closing of the
Acquisition.
As mentioned above, equity in loss of affiliates from White Oak
prior to the Acquisition increased $17.0 million in the 2015
Quarter primarily due to the impact of a July longwall move at the
Hamilton Mine No. 1 and the impact in the 2014 Quarter on ARLP’s
GAAP equity income and loss allocations as a result of equity
contributions from another White Oak equity partner during the 2014
Quarter.
Operating expenses decreased 3.6% to $336.5 million due to an
inventory build at various operations in the 2015 Quarter and a
favorable production mix as compared to the 2014 Quarter, resulting
from increased production and improved recoveries at our Gibson
South mine and the addition of lower cost longwall production from
the Hamilton Mine No. 1. Lower cost production also contributed to
lower Segment Adjusted EBITDA Expense per ton, which declined to
$32.65 in the 2015 Quarter, an improvement of 8.0% compared to the
2014 Quarter.
Depreciation, depletion and amortization increased $15.0 million
to $84.7 million in the 2015 Quarter compared to the 2014 Quarter,
due to the reduction of the economic mine life at our Hopkins mine,
which is expected to close by the end of the first quarter of 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 the addition of the
Hamilton Mine No. 1 to ARLP’s operations in the 2015 Quarter.
As previously discussed, ARLP also recognized a non-cash asset
impairment charge of $10.7 million in the 2015 Quarter to write
down assets associated with the recent surrender of a lease
agreement for certain undeveloped coal reserves and related
property in western Kentucky. Following ARLP’s recent successful
acquisition of more than 450 million tons of western Kentucky coal
reserves, we determined that coal reserves held under a previous
lease agreement were not a core part of our foreseeable development
plans. As such, ARLP surrendered the lease in order to avoid the
high holding costs of those reserves.
Nine Months Ended September 30, 2015 Compared to Nine Months
Ended September 30, 2014
For the nine months ended September 30, 2015 (the "2015
Period"), increased production at our Tunnel Ridge mine, the
start-up of coal production at our Gibson South mine in April 2014
and the addition of Hamilton Mine No. 1 to our operations, led to
record coal production and sales volumes. Tons produced climbed to
31.5 million tons and tons sold increased to 30.3 million tons,
compared to 30.2 million tons and 29.7 million tons, respectively,
in the nine months ended September 30, 2014 (the "2014 Period").
Total revenues rose 1.3% to a record $1.7 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 prior to the Acquisition. Coal sales
revenues declined slightly to $1.6 billion for the 2015 Period as
average coal sales prices decreased approximately 3.0% to $53.92
per ton sold. Increased operating expenses and equity in loss of
affiliates drove Adjusted EBITDA for the 2015 Period down 6.8% to
$560.3 million and, along with the asset impairment charge and
higher depreciation, depletion and amortization, contributed to
lower net income of $284.7 million, or $2.29 of net income per
basic and diluted limited partner unit, a decrease of 23.8%
compared to the 2014 Period.
Regional Results and Analysis
(in millions, except per ton data)
2015 ThirdQuarter
2014 ThirdQuarter
% ChangeQuarter /Quarter
2015SecondQuarter
% ChangeSequential
Illinois Basin
(1)
Tons sold 8.134 7.361 10.5 % 7.739 5.1 % Coal sales price per ton
(2) $ 50.50 $ 52.82 (4.4 )% $ 51.91 (2.7 )% Segment Adjusted EBITDA
Expense per ton (3) $ 30.69 $ 33.64 (8.8 )% $ 32.12 (4.5 )% Segment
Adjusted EBITDA (3) $ 147.5 $ 145.3 1.5 % $ 150.3 (1.9 )%
Appalachia
Tons sold 2.160 2.464 (12.3 )% 2.742 (21.2 )% Coal sales price per
ton (2) $ 61.61 $ 64.76 (4.9 )% $ 59.22 4.0 % Segment Adjusted
EBITDA Expense per ton (3) $ 37.23 $ 38.94 (4.4 )% $ 43.31 (14.0 )%
Segment Adjusted EBITDA (3) $ 53.4 $ 68.5 (22.0 )% $ 45.5 17.4 %
Total
(4)
Tons sold 10.294 9.825 4.8 % 10.481 (1.8 )% Coal sales price per
ton (2) $ 53.18 $ 55.81 (4.7 )% $ 54.13 (1.8 )% Segment Adjusted
EBITDA Expense per ton (3) $ 32.65 $ 35.48 (8.0 )% $ 35.77 (8.7 )%
Segment Adjusted EBITDA (3) $ 203.8 $ 214.8 (5.1 )% $ 199.9 2.0 %
(1) In the 2015 Quarter, ARLP realigned its segment
presentation. The Illinois Basin segment now includes the
consolidated Hamilton Mine No. 1 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.
Reflecting higher coal sales volumes from our Gibson South mine
and additional volumes from the assumption of operations at the
Hamilton Mine No. 1, the Illinois Basin sold 8.1 million tons of
coal in the 2015 Quarter, an increase of 10.5% over the 2014
Quarter. The increase from Gibson South and Hamilton Mine No. 1 was
offset in part by reduced unit shifts at our Pattiki, Warrior,
Onton, River View and Gibson North mines in response to current
market conditions. Compared to the Sequential Quarter, the addition
of Hamilton Mine No. 1 pushed sales volumes in the Illinois Basin
higher by 5.1%. In Appalachia, coal sales volumes decreased in the
2015 Quarter compared to both the 2014 and Sequential Quarters due
to reduced sales from the Tunnel Ridge mine. Reflecting current
market conditions, customer deferrals of scheduled shipments in the
2015 Quarter also impacted coal sales volumes and contributed to a
1.2 million ton increase in coal inventory.
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 reflecting current market conditions. Reduced
coal sales prices in the Illinois Basin also reflect lower-priced
legacy contracts at the Hamilton Mine No. 1 inherited by ARLP upon
closing of the Acquisition. In Appalachia, favorable sales mix in
the 2015 Quarter resulted in higher coal sales prices compared to
the Sequential Quarter.
Total Segment Adjusted EBITDA Expense per ton in the 2015
Quarter decreased 8.0% and 8.7% compared to the 2014 and Sequential
Quarters, respectively, 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 compared
to the 2014 and Sequential Quarters primarily due to the addition
of lower-cost longwall production from Hamilton Mine No. 1,
increased production and recoveries from our Gibson South mine,
improved recoveries from our Dotiki and Hopkins mines partially
offset by the impact of reduced unit shifts at various mines
discussed above in response to market conditions. In Appalachia,
Segment Adjusted EBITDA expense per ton improved by 4.4% and 14.0%
compared to the 2014 and Sequential Quarters, respectively, due to
increased recoveries and fewer longwall move days at our Tunnel
Ridge mine. In addition, Segment Adjusted EBITDA Expense per ton
for both segments decreased compared to the 2014 and Sequential
Quarters as a result of lower coal inventory charges in the 2015
Quarter.
Outlook
"Coal supply reversed trend in the 2015 Quarter as production
increased compared to the Sequential Quarter in both the Illinois
Basin and the northern Appalachian basin as competitors fight for
survival. Due to this oversupply, our increasing inventories and
our customers’ focus on their short-term supply needs, ARLP has
curtailed production by reducing unit shifts and will continue to
produce below our installed capacity for the foreseeable future,
which may include some near-term shifting of production to our
lowest-cost mines. We will work to mitigate this reduction in
production and sales volume by lowering our costs and capital
expenditures. Historically, ARLP’s cash flow growth has been driven
by increased coal volumes. Even though we are well positioned to
continue this growth with low cost excess capacity, the market has
to demand our coal at reasonable prices before ARLP will increase
its production," Mr. Craft said.
Based upon current market conditions, ARLP is adjusting its
previous 2015 full-year ranges for coal production to 41.1 to 41.7
million tons, coal sales volumes to 40.9 to 41.5 million tons and
revenues, excluding transportation revenues, to $2.27 to $2.30
billion. Adjusted EBITDA is currently estimated in a range of
$730.0 to $750.0 million and net income in a range of $360.0 to
$380.0 million. (For a definition of Adjusted EBITDA and related
reconciliation to the most comparable GAAP financial measure,
please see the end of this release.)
ARLP is essentially fully priced and committed for its
anticipated 2015 coal sales volumes and has also secured coal sales
and price commitments for approximately 31.9 million tons, 16.8
million tons and 12.5 million tons in 2016, 2017 and 2018,
respectively.
ARLP continues to anticipate 2015 total capital expenditures in
a range of $265.0 to $285.0 million. In addition to these capital
expenditures, ARLP currently anticipates funding investments in
2015 of $105.0 to $115.0 million. These anticipated investments
include the $50.0 million cash payment for White Oak equity upon
closing of the Acquisition and $10.8 million of preferred equity
contributions funded to White Oak prior to the closing. These 2015
investments include approximately $45.0 to $55.0 million to both
complete our original $50.0 million commitment to acquire oil and
gas mineral interests and begin funding of ARLP’s recent commitment
to invest an additional $100.0 million in this activity over the
next two years.
A conference call regarding ARLP’s 2015 Quarter financial
results is scheduled for Tuesday, October 27, 2015 at 9:00 a.m.
Eastern. To participate in the conference call, dial (855) 793-3259
and provide conference number 51932077. 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 51932077. 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 eleven 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. 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 and ARLP’s Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2015 and June 30, 2015, filed on May 8, 2015 and
August 6, 2015, respectively, 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2015 2014 2015
2014 Tons Sold 10,294 9,825 30,276 29,682
Tons Produced 11,450 10,219 31,471 30,233
SALES
AND OPERATING REVENUES: Coal sales $ 547,466 $ 548,357 $
1,632,493 $ 1,649,093 Transportation revenues 9,395 6,001 24,323
17,816 Other sales and operating revenues 9,584
14,970 74,765 43,019
Total revenues 566,445 569,328
1,731,581 1,709,928
EXPENSES:
Operating expenses (excluding depreciation, depletion and
amortization) 336,527 349,170 1,045,954 1,024,305 Transportation
expenses 9,395 6,001 24,323 17,816 Outside coal purchases 2 3 326 7
General and administrative 17,948 16,995 52,336 54,201
Depreciation, depletion and amortization 84,661 69,646 242,730
203,539 Asset impairment charge 10,695 -
10,695 - Total operating
expenses 459,228 441,815
1,376,364 1,299,868
INCOME FROM
OPERATIONS 107,217 127,513 355,217 410,060 Interest
expense, net (7,352 ) (8,584 ) (23,626 ) (25,395 ) Interest income
285 432 1,421 1,238 Equity in (loss) income of affiliates, net
(17,221 ) 68 (49,049 ) (13,546 ) Other income 455
549 750 1,178
INCOME
BEFORE INCOME TAXES 83,384 119,978 284,713 373,535
INCOME TAX EXPENSE 12 -
17 -
NET INCOME 83,372 119,978
284,696 373,535
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING
INTEREST 7 - 27
-
NET INCOME ATTRIBUTABLE TO ALLIANCE
RESOURCE PARTNERS, L.P. ("NET INCOME OF ARLP") $ 83,379
$ 119,978 $ 284,723 $ 373,535
GENERAL PARTNERS’ INTEREST IN NET INCOME OF ARLP $ 37,311
$ 35,316 $ 111,735 $ 103,465
LIMITED PARTNERS’ INTEREST IN NET INCOME OF ARLP $ 46,068
$ 84,662 $ 172,988 $ 270,070
BASIC AND DILUTED NET INCOME OF ARLP PER LIMITED PARTNER
UNIT $ 0.61 $ 1.13 $ 2.29 $ 3.59
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT $ 0.675
$ 0.625 $ 1.9875 $ 1.835
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND
DILUTED 74,188,784 74,060,634
74,169,538 74,038,952
ALLIANCE RESOURCE PARTNERS, L.P. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands, except unit data)
(Unaudited)
ASSETS
September 30, December 31, 2015 2014
CURRENT ASSETS: Cash and cash equivalents $ 35,936 $ 24,601
Trade receivables 171,402 184,187 Other receivables 628 1,025 Due
from affiliates 168 7,221 Inventories 123,608 83,155 Advance
royalties 7,663 9,416 Prepaid expenses and other assets
17,740 31,283 Total current assets 357,145
340,888
PROPERTY, PLANT AND EQUIPMENT: Property,
plant and equipment, at cost 3,215,566 2,815,620 Less accumulated
depreciation, depletion and amortization (1,336,176 )
(1,150,414 ) Total property, plant and equipment, net 1,879,390
1,665,206
OTHER ASSETS: Advance royalties 26,887
15,895 Due from affiliate - 11,047 Equity investments in affiliates
48,034 224,611 Goodwill 161,985 - Other long-term assets
31,952 27,412 Total other assets
268,858 278,965
TOTAL ASSETS $
2,505,393 $ 2,285,059
LIABILITIES AND PARTNERS'
CAPITAL CURRENT LIABILITIES: Accounts payable $ 100,456
$ 85,843 Due to affiliates 170 370 Accrued taxes other than income
taxes 21,032 19,426 Accrued payroll and related expenses 47,514
57,656 Accrued interest 3,330 318 Workers' compensation and
pneumoconiosis benefits 8,893 8,868 Current capital lease
obligations 1,333 1,305 Other current liabilities 27,003 17,109
Current maturities, long-term debt 142,159
230,000 Total current liabilities 351,890 420,895
LONG-TERM LIABILITIES: Long-term debt, excluding current
maturities 810,889 591,250 Pneumoconiosis benefits 58,858 55,278
Accrued pension benefit 38,566 40,105 Workers' compensation 49,084
49,797 Asset retirement obligations 107,820 91,085 Long-term
capital lease obligations 14,602 15,624 Other liabilities
22,453 5,978 Total long-term liabilities
1,102,272 849,117 Total liabilities
1,454,162 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 1,340,572 1,310,517 General
Partners' deficit (257,593 ) (260,088 ) Accumulated other
comprehensive loss (33,669 ) (35,847 ) Total ARLP
Partners' Capital 1,049,310 1,014,582 Noncontrolling interest
1,921 465 Total Partners' Capital
1,051,231 1,015,047 TOTAL LIABILITIES
AND PARTNERS' CAPITAL $ 2,505,393 $ 2,285,059
ALLIANCE RESOURCE PARTNERS, L.P. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
Nine Months EndedSeptember
30,
2015 2014 CASH FLOWS PROVIDED
BY OPERATING ACTIVITIES $ 528,895 $ 586,393
CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant
and equipment: Capital expenditures (159,182 ) (233,659 ) Changes
in accounts payable and accrued liabilities (3,093 ) 145 Proceeds
from sale of property, plant and equipment 1,519 272 Proceeds from
insurance settlement for property, plant and equipment - 4,512
Purchases of equity investments in affiliates (47,624 ) (85,250 )
Payments for acquisitions of businesses, net of cash acquired
(74,953 ) - 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 (288,826 ) (315,381 )
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under
securitization facility 6,500 - Payments under securitization
facility (6,500 ) - Payments under term loans (20,319 ) (12,500 )
Borrowings under revolving credit facilities 463,000 221,800
Payments under revolving credit facilities (200,000 ) (301,800 )
Payment on long-term debt (205,000 ) (18,000 ) Payments on capital
lease obligations (994 ) (1,113 ) Contribution to consolidated
company from affiliate noncontrolling interest 1,483 - 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 (258,697 ) (235,344
) Other (5,583 ) - Net cash used in financing
activities (228,734 ) (349,837 )
NET CHANGE
IN CASH AND CASH EQUIVALENTS 11,335 (78,825 )
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,601 93,654
CASH AND CASH EQUIVALENTS AT END OF PERIOD $
35,936 $ 14,829
Reconciliation of GAAP "Net Income" to
non-GAAP "EBITDA" and "Adjusted 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 and Adjusted EBITDA is
EBITDA modified to reflect significant non-recurring items that may
not reflect the trend of future results. 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 non-recurring charges.
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 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, 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
Three MonthsEndedJune
30,
Year EndedDecember 31,
2015 2014 2015
2014 2015 2015E Midpoint Net income $
83,372 $ 119,978 $ 284,696 $ 373,535 $ 94,857 $ 370,000
Depreciation, depletion and amortization 84,661 69,646 242,730
203,539 79,801 330,000 Interest expense, gross 7,219 8,152 22,723
24,990 7,855 29,300 Capitalized interest (152 ) - (518 ) (833 )
(154 ) - Income tax expense 12 -
17 - 7 - EBITDA
175,112 197,776 549,648 601,231 182,366 729,300 Asset impairment
charge 10,695 - 10,695
- -
10,700
Adjusted EBITDA 185,807 197,776 560,343 601,231 182,366
740,000 Equity in loss (income) of affiliates, net 17,221 (68 )
49,049 13,546 22,142 50,000 Interest expense, gross (7,219 ) (8,152
) (22,723 ) (24,990 ) (7,855 ) (29,300 ) Income tax expense (12 ) -
(17 ) - (7 ) - Estimated maintenance capital expenditures (1)
(56,792 ) (60,292 ) (156,096 ) (178,375
) (47,214 ) (205,500 ) Distributable Cash Flow $
139,005 $ 129,264 $ 430,556 $ 411,412 $
149,432 $ 555,200 Distributions paid to partners $
88,100 $ 80,440 $ 258,697 $ 235,344 $
86,241 Distribution Coverage Ratio 1.58
1.61 1.66 1.75 1.73
(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
the integration of Hamilton Mine No. 1 and 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 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 EndedSeptember
30,
Three MonthsEndedJune
30,
2015 2014 2015 Operating
expense $ 336,527 $ 349,170 $ 375,065 Outside coal purchases 2 3 2
Other income loss (455 ) (549) (177 ) Segment
Adjusted EBITDA Expense $ 336,074 $ 348,624 $ 374,890 Divided by
tons sold 10,294 9,825 10,481
Segment Adjusted EBITDA Expense per ton $ 32.65 $ 35.48 $
35.77
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 charge
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 EndedSeptember
30,
Three MonthsEndedJune
30,
2015 2014 2015 Adjusted
EBITDA (See reconciliation to GAAP above) $ 185,807 $ 197,776 $
182,366 General and administrative 17,948 16,995
17,542 Segment Adjusted EBITDA $ 203,755 $ 214,771 $ 199,908
Divided by tons sold 10,294 9,825 10,481
Segment Adjusted EBITDA per ton $ 19.79 $ 21.86 $ 19.07
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151027005507/en/
Alliance Resource Partners, L.P.Brian L. Cantrell,
918-295-7673
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