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Section 1: 8-K (8-K)

arlp_Current_Folio_8K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): October 29, 2018

 

ALLIANCE RESOURCE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Delaware

 

 

 

73-1564280

(State or other jurisdiction of
incorporation or organization)

 

Commission
File No.:
0-26823

 

(IRS Employer
Identification No.)

 

1717 South Boulder Avenue, Suite 400, Tulsa, Oklahoma 74119

(Address of principal executive offices and zip code)

 

(918) 295-7600

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of

the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2

of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition

period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act. ☐

 

 

 

 

 


 

ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On October 29, 2018, Alliance Resource Partners, L.P. (the “Partnership”) announced, via press release, its quarterly earnings and operating results for the quarter ended September 30, 2018.  A copy of the Partnership’s press release is attached hereto as Exhibit 99.1.

 

The information furnished in this Item 2.02 including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically referenced in any such filings.

 

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)Exhibits

 

99.1Alliance Resource Partners, L.P. press release dated as of October 29, 2018. 

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

Alliance Resource Partners, L.P.

 

 

 

 

 

 

 

By:

Alliance Resource Management GP, LLC,

 

 

its general partner

 

 

 

 

 

 

 

By:

/s/ Joseph W. Craft III

 

 

Joseph W. Craft III

 

 

President, Chief Executive Officer

 

 

and Director

 

 

 

 

Date: October 29, 2018

3


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Section 2: EX-99.1 (EX-99.1)

arlp_Ex99_1

Exhibit 99.1

PRESS RELEASE

 

Picture 1

CONTACT:

Brian L. Cantrell

Alliance Resource Partners, L.P.

1717 South Boulder Avenue, Suite 400

Tulsa, Oklahoma 74119

 

FOR IMMEDIATE RELEASE

(918) 295-7673

 

ALLIANCE RESOURCE PARTNERS, L.P.

 

Reports Increased Financial and Operating Results; Raises Quarterly Cash Distribution to $0.525 Per Unit; and Updates Guidance

 

TULSA, OKLAHOMA, October 29, 2018 —  Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported financial and operating results for the quarter ended September 30, 2018 (the "2018 Quarter").  Led by higher revenues and investment income, net income attributable to ARLP increased 20.3% to $73.7 million for the 2018 Quarter, compared to $61.3 million for the three months ended September 30, 2017 (the "2017 Quarter").  Strong coal sales volumes in the 2018 Quarter drove total revenues higher to $497.8 million, an increase of 9.8% compared to the 2017 Quarter.  Net income attributable to ARLP per basic and diluted limited partner unit was $0.55 for the 2018 Quarter compared to $0.52 for the 2017 Quarter as higher net income was partially offset by increased weighted-average common units outstanding due to the issuance of additional common units pursuant to the July 2017 Exchange Transaction.  EBITDA also increased 8.3% in the 2018 Quarter to $154.0 million compared to $142.2 million in the 2017 Quarter.  (For a definition of EBITDA and related reconciliation to comparable GAAP financial measures, please see the end of this release.  For actual and pro forma earnings per basic and diluted limited partner unit reflecting the Simplification and Exchange Transactions as if the transactions had occurred on January 1, 2017, please see the end of this release.)

 

As previously announced on October 26, 2018, the Board of Directors of ARLP's general partner (the "Board") increased the cash distribution to unitholders for the 2018 Quarter to $0.525  per unit (an annualized rate of $2.10 per unit), payable on November 14, 2018 to all unitholders of record as of the close of trading on November 7, 2018.  The announced distribution represents a 4.0% increase over the cash distribution of $0.505 per unit for the 2017 Quarter and a 1.0% increase over the cash distribution of $0.52 per unit for the quarter ended June 30, 2018 (the "Sequential Quarter").

 

"ARLP delivered strong results for the 2018 Quarter, posting increases to all major operating and financial metrics," said Joseph W. Craft III, President and Chief Executive Officer.  "In addition to delivering solid performance, we also continued to position ARLP for long term success.  Taking advantage of positive fundamentals in the domestic and international coal markets, our operations increased production compared to the 2017 and Sequential Quarters and our marketing team strengthened ARLP’s coal contract book by securing new commitments for approximately 11.1 million tons to be delivered through 2021, including 4.9 million tons for export through 2019."

 

-MORE-


 

Mr. Craft added, "ARLP remained focused on executing its strategic objectives of investing in our business for long-term cash flow growth and returning cash to unitholders.  During the 2018 Quarter, we brought the second continuous mining unit into operation at our Gibson North mine and added the tenth continuous mining unit at our River View mine.  These additions, along with additional efforts outlined below, will allow ARLP to increase future production to meet developing market opportunities.  ARLP also continued to focus on returning cash to unitholders, first by the Board again electing to increase distributions to unitholders and, second, by executing on the recently authorized unit repurchase program.  Under this program, through the end of the 2018 Quarter, ARLP has repurchased approximately 1.1 million units for approximately $21.1 million in open market transactions." 

 

Consolidated Financial Results

 

Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017

 

Coal sales revenues for the 2018 Quarter increased 5.8%, compared to the 2017 Quarter, to $460.3 million due to increased coal sales volumes and prices.  Coal sales volumes of 10.1 million tons were 4.4% higher than the 2017 Quarter, primarily reflecting increased export volumes from our Gibson South mine and increased volumes resulting from the resumption of operations in the Sequential Quarter at our Gibson North mine.  Coal sales prices increased 1.3% to $45.71 per ton sold for the 2018 Quarter, compared to $45.12 per ton sold for the 2017 Quarter, primarily as a result of higher price realizations from our Appalachian mines.

 

Compared to the 2017 Quarter, operating expenses increased 4.7% to $308.4 million, primarily as a result of increased coal sales volumes.  Segment Adjusted EBITDA Expense per ton remained comparable to the 2017 Quarter, increasing slightly to $30.70 per ton in the 2018 Quarter. (For a definition of Segment Adjusted EBITDA Expense per ton and related reconciliation to comparable GAAP financial measures, please see the end of this release.)

 

Investment income from our oil and gas minerals and gas compression services equity investments contributed income of $10.0 million in the 2018 Quarter, an increase of $3.4 million compared to the 2017 Quarter, primarily due to increased earnings from our investments in oil and gas minerals.

 

Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017

 

Net income attributable to ARLP increased $86.4 million to $315.8 million for the nine months ended September 30, 2018 (the "2018 Period"), compared to $229.4 million for the nine months ended September 30, 2017 (the "2017 Period"). The increase was due to higher revenues and investment income, a net gain on settlement of litigation and a debt extinguishment loss in the 2017 Period, partially offset by higher operating expenses and depreciation, depletion and amortization.

 

Total revenues increased by 12.0% to $1.47 billion for the 2018 Period compared to the 2017 Period due primarily to increased coal sales volumes.  For the 2018 Period, strong performances at River View and our Gibson County Complex mines, which includes the resumption of operations at Gibson North in the 2018 Period, drove total coal sales volumes up 8.1% to 30.0 million tons and production volumes higher by 6.6% to 30.1 million tons compared to the 2017 Period.   

 

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Increased coal sales volumes in the 2018 Period also led operating expenses higher to $896.8 million, an increase of 12.9% compared to the 2017 Period.  Segment Adjusted EBITDA Expense per ton also increased 4.9% to $30.06 primarily as a result of difficult mining conditions encountered at several mines, higher roof support expense and additional longwall move days in the 2018 Period.  Compared to the 2017 Period, depreciation, depletion and amortization increased 5.2% to $204.2 million in the 2018 Period as a result of the previously discussed increase in coal sales volumes. 

 

On March 9, 2018, ARLP finalized an agreement with a customer and certain of its affiliates to settle litigation we initiated in 2015.  The agreement provided for a $93.0 million cash payment to ARLP, future conditional coal supply commitments, continued export trans-loading capacity for our Appalachian mines and the acquisition of 57 million tons of additional coal reserves near our Tunnel Ridge operation.  A settlement gain of $80.0 million was recorded in the 2018 Period reflecting the cash payment received net of certain costs associated with the gain.

 

Increased earnings from our investments in oil and gas mineral interests led equity method investment income higher by $4.1 million in the 2018 Period compared to the 2017 Period.  Equity securities income increased $8.8 million to $11.6 million in the 2018 Period compared to the 2017 Period due to increased distributions of preferred interests from our investment in gas compression services, which investment was made during the 2017 Quarter.  Comparative results between the 2018 and 2017 Periods were also impacted by the $8.1 million debt extinguishment loss incurred related to ARLP's early repayment of its Series B Senior Notes in May 2017.    

 

Regional Results and Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

% Change

    

 

 

    

 

 

 

 

2018 Third

 

2017 Third

 

Quarter /

 

2018 Second

 

% Change

(in millions, except per ton data)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Sequential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illinois Basin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

7.246

 

 

6.872

 

5.4

%  

 

 

7.820

 

(7.3)

%  

Coal sales price per ton (1)

 

$

39.92

 

$

40.56

 

(1.6)

%  

 

$

39.70

 

0.6

%  

Segment Adjusted EBITDA Expense per ton (2)

 

$

27.41

 

$

28.01

 

(2.1)

%  

 

$

25.69

 

6.7

%  

Segment Adjusted EBITDA (2)

 

$

90.7

 

$

86.4

 

5.0

%  

 

$

109.6

 

(17.2)

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appalachia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

2.825

 

 

2.773

 

1.9

%  

 

 

2.666

 

6.0

%  

Coal sales price per ton (1)

 

$

59.60

 

$

54.77

 

8.8

%  

 

$

61.10

 

(2.5)

%  

Segment Adjusted EBITDA Expense per ton (2)

 

$

37.31

 

$

35.09

 

6.3

%  

 

$

38.84

 

(3.9)

%  

Segment Adjusted EBITDA (2)

 

$

63.7

 

$

55.5

 

14.8

%  

 

$

60.1

 

6.0

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

10.071

 

 

9.645

 

4.4

%  

 

 

10.488

 

(4.0)

%  

Coal sales price per ton (1)

 

$

45.71

 

$

45.12

 

1.3

%  

 

$

45.38

 

0.7

%  

Segment Adjusted EBITDA Expense per ton (2)

 

$

30.70

 

$

30.55

 

0.5

%  

 

$

29.73

 

3.3

%  

Segment Adjusted EBITDA (2)

 

$

169.8

 

$

157.2

 

8.0

%  

 

$

185.5

 

(8.5)

%  


(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 other and corporate and eliminations in addition to the Illinois Basin and Appalachia segments highlighted above.

 

Total coal sales volumes increased 4.4% in the 2018 Quarter to 10.1 million tons compared to the 2017 Quarter, due to higher coal sales volumes, particularly export volumes, from both the Illinois

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Basin and Appalachian regions.  In the Illinois Basin, the resumption of operations at our Gibson North mine in the Sequential Quarter and improved sales at our Gibson South mine drove tons sold higher by 5.4% to 7.2 million tons in the 2018 Quarter compared to the 2017 Quarter.  Sequentially, a longwall move at the Hamilton mine during the 2018 Quarter and increased sales from inventory in the Sequential Quarter caused coal sales volumes to decline by 7.3% in the Illinois Basin.  In Appalachia, coal sales volumes increased 6.0% compared to the Sequential Quarter primarily due to improved recoveries and fewer longwall move days at our Tunnel Ridge mine in the 2018 Quarter.  ARLP ended the 2018 Quarter with total coal inventory of 0.9 million tons, a reduction of approximately 0.6 million tons and 0.2 million tons compared to the end of the 2017 and Sequential Quarters, respectively.

 

Coal sales price realizations increased 8.8% per ton sold in Appalachia in the 2018 Quarter compared to the 2017 Quarter, primarily due to increased export sales prices for metallurgical coal at our Mettiki mine and improved prices at our MC Mining and Tunnel Ridge mines. 

 

In the Illinois Basin, Segment Adjusted EBITDA Expense per ton decreased 2.1% compared to the 2017 Quarter primarily due to improved recoveries and increased longwall shifts at our Hamilton mine.  Segment Adjusted EBITDA Expense per ton in Appalachia increased 6.3% compared to the 2017 Quarter reflecting lower yields at our MC Mining mine and a longwall move at the Tunnel Ridge mine during the 2018 Quarter.  Compared to the Sequential Quarter, Segment Adjusted EBITDA Expense per ton increased 6.7% in the Illinois Basin resulting primarily from reduced production at our Hamilton mine due to a longwall move and difficult mining conditions during the 2018 Quarter and increased labor and materials and supplies expenses per ton at our Warrior mine.  In Appalachia, Segment Adjusted EBITDA Expense per ton decreased 3.9% compared to the Sequential Quarter primarily due to increased production and improved recoveries at our Tunnel Ridge mine in the 2018 Quarter.

 

Market Update and Outlook

 

"Favorable seaborne thermal coal markets continue to create significant opportunities for ARLP," said Mr. Craft.  "Around the world, increased coal-fired power generation, strong power demand and lack of supply response point to sustained global demand for U.S thermal coal producers.  Positive fundamentals in the international metallurgical coal markets also support continued participation by U.S. producers.  As mentioned earlier, ARLP has significantly increased its international presence and now expects to export 10.4 million tons of thermal coal in 2018 and has current commitments for 7.7 million tons of thermal coal in 2019.  In addition, we currently plan to export approximately 930,000 tons of metallurgical coal in 2018 and have commitments to deliver 100,000 tons of metallurgical coal in 2019.  In the U.S. markets served by ARLP, higher natural gas prices, expected weather-related load increases and significantly lower utility inventories continue to support constructive market dynamics.  Domestic utilities are actively looking to fill open positions, with several seeking longer-term supply commitments into 2021."

 

Mr. Craft continued, "ARLP is continuing to respond to strong coal demand in our markets.  By bringing Gibson North back into production, increasing mining units at River View and making infrastructure investments to improve productivity at several operations, ARLP expects to increase 2018 coal production by approximately 8.0% over 2017 levels.  Production in 2019 will benefit from the full-year impact of these 2018 capital projects leading to increased production in 2019 by

-MORE-

 


 

6% to 10% over 2018 levels.  ARLP has also secured volume and price commitments for approximately 32.9 million tons, 17.7 million tons and 7.9 million tons in 2019, 2020 and 2021, respectively, some of which is subject to customer requirements."

 

Factoring in the impact of cost increases year-to-date and training costs for additional headcount currently being hired in anticipation of the increased production discussed above, we currently anticipate full-year Segment Adjusted EBITDA Expense per ton in 2018 will be approximately 4.5% higher compared to 2017.  Accordingly, we are updating guidance ranges for 2018 full-year net income to $415.0 million to $425.0 million and EBITDA to $730.0 million to $740.0 million.  These 2018 estimates for net income and EBITDA include the $80.0 million settlement gain recorded in the first quarter of 2018 and expected contribution related to our current investments in oil and gas minerals and gas compression services of approximately $35.0 million to $40.0 million. (For a definition of EBITDA and Segment Adjusted EBITDA Expense per ton and related reconciliations to the most comparable GAAP financial measure, please see the end of this release.)

 

To fund our growing production, ARLP is also increasing its 2018 full-year guidance for capital expenditures for its coal business to a range of $245.0 million to $260.0 million.

 

A conference call regarding ARLP's 2018 Quarter financial results is scheduled for today at 10:00 a.m. Eastern.  To participate in the conference call, dial (877) 506-1589 and request to be connected to the Alliance Resource Partners, L.P. earnings conference call.  Canadian callers should dial (855) 669-9657 and all other international callers should dial (412) 317-5240 and request to be connected to the same call.  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 US Toll Free (877) 344-7529; International Toll (412) 317-0088; Canada Toll Free (855) 669-9658 and request to be connected to replay access code 10125074.

 

About Alliance Resource Partners, L.P.

 

ARLP is a diversified producer and marketer of coal to major United States and international 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 eight mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia as well as a coal loading terminal on the Ohio River at Mount Vernon, Indiana.  ARLP also generates income from a variety of other sources, including investments in oil and gas mineral interests and gas compression services.

 

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

 

***

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

 

FORWARD-LOOKING STATEMENTS:  With the exception of historical matters, any matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projected results.  These risks, uncertainties and contingencies include, but are not limited to, the following: changes in coal prices, which could affect our operating results and cash flows; changes in competition in coal markets and our ability to respond to such changes; legislation, regulations, and court decisions and interpretations thereof, including those relating to the environment and the release of greenhouse gases, mining, miner health and safety and health care; deregulation of the electric utility industry or the effects of any adverse change in the coal industry, electric utility industry, or general economic conditions; risks associated with the expansion of our operations and properties; dependence on significant customer contracts, including renewing existing contracts upon expiration; adjustments made in price, volume or terms to existing coal supply agreements; changing global economic conditions or in industries in which our customers operate; liquidity constraints, including those resulting from any future unavailability of financing; customer bankruptcies, cancellations or breaches to existing contracts, or other failures to perform; customer delays, failure to take coal under contracts or defaults in making payments; fluctuations in coal demand, prices and availability; changes in oil and gas prices, which could affect our investments in oil and gas mineral interests and gas compression services; 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 post-mine reclamation as well as 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 SEC, including ARLP's Annual Report on Form 10-K for the year ended December 31, 2017, filed on February 23, 2018 and ARLP's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018, filed on May 7, 2018 and August 6, 2018, respectively, with the SEC.  Except as required by applicable securities laws, ARLP does not intend to update its forward-looking statements.

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING DATA

(In thousands, except unit and per unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

 

2018

    

2017

    

2018

    

2017

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

 

10,071

 

 

9,645

 

 

29,957

 

 

27,721

 

Tons Produced

 

 

9,874

 

 

8,521

 

 

30,070

 

 

28,211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales

 

$

460,330

 

$

435,162

 

$

1,359,865

 

$

1,256,168

 

Transportation revenues

 

 

28,697

 

 

8,009

 

 

76,014

 

 

24,933

 

Other sales and operating revenues

 

 

8,731

 

 

10,018

 

 

35,138

 

 

31,888

 

Total revenues

 

 

497,758

 

 

453,189

 

 

1,471,017

 

 

1,312,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (excluding depreciation, depletion and amortization)

 

 

308,404

 

 

294,497

 

 

896,843

 

 

794,428

 

Transportation expenses

 

 

28,697

 

 

8,009

 

 

76,014

 

 

24,933

 

Outside coal purchases

 

 

 —

 

 

 —

 

 

1,442

 

 

 —

 

General and administrative

 

 

15,836

 

 

15,005

 

 

49,513

 

 

45,982

 

Depreciation, depletion and amortization

 

 

70,196

 

 

69,962

 

 

204,194

 

 

194,109

 

Settlement gain

 

 

 —

 

 

 —

 

 

(80,000)

 

 

 —

 

Total operating expenses

 

 

423,133

 

 

387,473

 

 

1,148,006

 

 

1,059,452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

74,625

 

 

65,716

 

 

323,011

 

 

253,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(9,840)

 

 

(10,773)

 

 

(30,653)

 

 

(28,904)

 

Interest income

 

 

32

 

 

 4

 

 

121

 

 

82

 

Equity method investment income

 

 

5,980

 

 

3,798

 

 

14,555

 

 

10,414

 

Equity securities income

 

 

3,989

 

 

2,800

 

 

11,567

 

 

2,800

 

Debt extinguishment loss

 

 

 —

 

 

 —

 

 

 —

 

 

(8,148)

 

Other (expense) income

 

 

(812)

 

 

(114)

 

 

(2,201)

 

 

44

 

INCOME BEFORE INCOME TAXES

 

 

73,974

 

 

61,431

 

 

316,400

 

 

229,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE (BENEFIT)

 

 

 5

 

 

 5

 

 

(2)

 

 

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

73,969

 

 

61,426

 

 

316,402

 

 

229,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LESS:  NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

 

(236)

 

 

(155)

 

 

(571)

 

 

(425)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

73,733

 

$

61,271

 

$

315,831

 

$

229,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GENERAL PARTNERS' INTEREST IN NET INCOME OF ARLP

 

$

 —

 

$

612

 

$

1,560

 

$

21,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIMITED PARTNERS' INTEREST IN NET INCOME OF ARLP

 

$

73,733

 

$

60,659

 

$

314,271

 

$

208,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED NET INCOME OF ARLP PER LIMITED PARTNER UNIT

 

$

0.55

 

$

0.52

 

$

2.35

 

$

2.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED

 

 

131,169,538

 

 

114,237,979

 

 

131,090,838

 

 

87,924,986

 

 

-MORE-

 


 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

 

2018

    

2017

 

ASSETS

    

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,355

 

$

6,756

 

Trade receivables

 

 

149,980

 

 

181,671

 

Other receivables

 

 

640

 

 

146

 

Due from affiliates

 

 

 —

 

 

165

 

Inventories, net

 

 

66,907

 

 

60,275

 

Advance royalties, net

 

 

1,510

 

 

4,510

 

Prepaid expenses and other assets

    

 

11,436

    

 

28,117

 

Total current assets

 

 

268,828

 

 

281,640

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

Property, plant and equipment, at cost

 

 

3,044,530

 

 

2,934,188

 

Less accumulated depreciation, depletion and amortization

 

 

(1,581,666)

 

 

(1,457,532)

 

Total property, plant and equipment, net

 

 

1,462,864

 

 

1,476,656

 

OTHER ASSETS:

 

 

 

 

 

 

 

Advance royalties, net

 

 

51,042

 

 

39,660

 

Equity method investments

 

 

162,097

 

 

147,964

 

Equity securities

 

 

117,965

 

 

106,398

 

Goodwill

 

 

136,399

 

 

136,399

 

Other long-term assets

 

 

18,178

 

 

30,654

 

Total other assets

 

 

485,681

 

 

461,075

 

TOTAL ASSETS

 

$

2,217,373

 

$

2,219,371

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS' CAPITAL

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

$

102,944

 

$

96,958

 

Due to affiliates

 

 

1,010

 

 

771

 

Accrued taxes other than income taxes

 

 

19,252

 

 

20,336

 

Accrued payroll and related expenses

 

 

45,874

 

 

35,751

 

Accrued interest

 

 

12,499

 

 

5,005

 

Workers' compensation and pneumoconiosis benefits

 

 

10,685

 

 

10,729

 

Current capital lease obligations

 

 

30,668

 

 

28,613

 

Other current liabilities

 

 

15,938

 

 

19,071

 

Current maturities, long-term debt, net

 

 

 —

 

 

72,400

 

Total current liabilities

 

 

238,870

 

 

289,634

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

Long-term debt, excluding current maturities, net

 

 

388,237

 

 

415,937

 

Pneumoconiosis benefits

 

 

73,211

 

 

71,875

 

Accrued pension benefit

 

 

40,489

 

 

45,317

 

Workers' compensation

 

 

45,552

 

 

46,694

 

Asset retirement obligations

 

 

127,556

 

 

126,750

 

Long-term capital lease obligations

 

 

33,886

 

 

57,091

 

Other liabilities

 

 

19,299

 

 

14,587

 

Total long-term liabilities

 

 

728,230

 

 

778,251

 

Total liabilities

 

 

967,100

 

 

1,067,885

 

 

 

 

 

 

 

 

 

PARTNERS' CAPITAL:

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Limited Partners - Common Unitholders 130,712,346 and 130,704,217 units outstanding, respectively

 

 

1,294,049

 

 

1,183,219

 

General Partner's interest

 

 

 —

 

 

14,859

 

Accumulated other comprehensive loss

 

 

(49,093)

 

 

(51,940)

 

Total ARLP Partners' Capital

 

 

1,244,956

 

 

1,146,138

 

Noncontrolling interest

 

 

5,317

 

 

5,348

 

Total Partners' Capital

 

 

1,250,273

 

 

1,151,486

 

TOTAL LIABILITIES AND PARTNERS' CAPITAL

 

$

2,217,373

 

$

2,219,371

 

-MORE-

 


 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 

 

 

 

2018

    

2017

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

$

579,267

 

$

456,079

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Property, plant and equipment:

 

 

 

 

 

 

 

Capital expenditures

 

 

(184,408)

 

 

(105,455)

 

Increase in accounts payable and accrued liabilities

 

 

673

 

 

4,182

 

Proceeds from sale of property, plant and equipment

 

 

2,361

 

 

1,488

 

Contributions to equity method investments

 

 

(15,600)

 

 

(16,487)

 

Purchase of equity security

 

 

 —

 

 

(100,000)

 

Distributions received from investments in excess of cumulative earnings

 

 

1,685

 

 

10,880

 

Net cash used in investing activities

 

 

(195,289)

 

 

(205,392)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Borrowings under securitization facility

 

 

182,600

 

 

100,000

 

Payments under securitization facility

 

 

(255,000)

 

 

(100,000)

 

Payments on term loan

 

 

 —

 

 

(50,000)

 

Borrowings under revolving credit facilities

 

 

70,000

 

 

165,000

 

Payments under revolving credit facilities

 

 

(100,000)

 

 

(420,000)

 

Borrowings under long-term debt

 

 

 —

 

 

400,000

 

Payment on long-term debt

 

 

 —

 

 

(145,000)

 

Payments on capital lease obligations

 

 

(22,106)

 

 

(20,186)

 

Payment of debt issuance costs

 

 

 —

 

 

(16,221)

 

Payment for debt extinguishment

 

 

 —

 

 

(8,148)

 

Payment for purchase of units under unit repurchase program

 

 

(21,070)

 

 

 —

 

Contributions to consolidated company from affiliate noncontrolling interest

 

 

 —

 

 

251

 

Net settlement of withholding taxes on issuance of units in deferred compensation plans

 

 

(2,081)

 

 

(2,988)

 

Cash contributions by General Partners

 

 

41

 

 

905

 

Cash contribution by affiliated entity

 

 

2,142

 

 

 —

 

Cash obtained in Simplification Transactions

 

 

1,139

 

 

 —

 

Distributions paid to Partners

 

 

(206,682)

 

 

(173,284)

 

Other

 

 

(1,362)

 

 

(2,405)

 

Net cash used in financing activities

 

 

(352,379)

 

 

(272,076)

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

31,599

 

 

(21,389)

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

6,756

 

 

39,782

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

38,355

 

$

 18,393

 

 

-MORE-

 


 

 

Reconciliation of GAAP "net income attributable to ARLP" and "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 settlement gains and debt extinguishment losses.  Distributable cash flow ("DCF") is defined as Adjusted EBITDA excluding interest expense (before capitalized interest), interest income, income taxes and estimated maintenance capital expenditures.  Distribution coverage ratio ("DCR") is defined as DCF divided by distributions paid to partners. 

 

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

 

EBITDA, Adjusted EBITDA, DCF and DCR should not be considered as alternatives to net income attributable to ARLP, net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP.  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).

 

-MORE-

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

Three Months Ended

 

Year Ended

 

 

 

September 30, 

 

September 30, 

 

June 30, 

 

December 31,

 

 

    

2018

    

2017

    

2018

    

2017

    

2018

    

2018E Midpoint

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to ARLP

 

$

73,733

 

$

61,271

 

$

315,831

 

$

229,403

 

$

86,190

 

$

419,170

 

Net income attributable to noncontrolling interests

 

 

236

 

 

155

 

 

571

 

 

425

 

 

187

 

 

830

 

Net income

 

 

73,969

 

 

61,426

 

 

316,402

 

 

229,828

 

 

86,377

 

 

420,000

 

Depreciation, depletion and amortization

 

 

70,196

 

 

69,962

 

 

204,194

 

 

194,109

 

 

72,150

 

 

275,000

 

Interest expense, net

 

 

10,138

 

 

10,876

 

 

31,423

 

 

29,176

 

 

10,227

 

 

41,340

 

Capitalized interest

 

 

(330)

 

 

(107)

 

 

(891)

 

 

(354)

 

 

(296)

 

 

(1,350)

 

Income tax expense (benefit)

 

 

 5

 

 

 5

 

 

(2)

 

 

(3)

 

 

 3

 

 

10

 

EBITDA

 

 

153,978

 

 

142,162

 

 

551,126

 

 

452,756

 

 

168,461

 

 

735,000

 

Settlement gain

 

 

 —

 

 

 —

 

 

(80,000)

 

 

 —

 

 

 —

 

 

(80,000)

 

Debt extinguishment loss

 

 

 —

 

 

 —

 

 

 —

 

 

8,148

 

 

 —

 

 

 —

 

Adjusted EBITDA

 

 

153,978

 

 

142,162

 

 

471,126

 

 

460,904

 

 

168,461

 

 

655,000

 

Interest expense, net

 

 

(10,138)

 

 

(10,876)

 

 

(31,423)

 

 

(29,176)

 

 

(10,227)

 

 

(41,340)

 

Income tax (expense) benefit

 

 

(5)

 

 

(5)

 

 

 2

 

 

 3

 

 

(3)

 

 

(10)

 

Estimated maintenance capital expenditures (1)

 

 

(46,605)

 

 

(36,214)

 

 

(141,930)

 

 

(119,897)

 

 

(45,850)

 

 

(191,300)

 

Distributable Cash Flow

 

$

97,230

 

$

95,067

 

$

297,775

 

$

311,834

 

$

112,381

 

$

422,350

 

Distributions paid to partners

 

$

69,239

 

$

66,844

 

$

206,682

 

$

173,284

 

$

69,047

 

$

276,000

 

Distribution Coverage Ratio

 

 

1.40

 

 

1.42

 

 

1.44

 

 

1.80

 

 

1.63

 

 

1.53

 


(1)

Our maintenance capital expenditures 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 2018 planning horizon, average annual estimated maintenance capital expenditures are assumed to be $4.72 per ton produced compared to the estimated $4.25 per ton produced in 2017. Our actual maintenance capital expenditures fluctuate 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 SEC.

 

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" and "Segment Adjusted EBITDA per ton" (in thousands, except per ton data).

 

Segment Adjusted EBITDA Expense per ton includes operating expenses, 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

-MORE-

 


 

Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

Three Months Ended

 

 

 

September 30, 

 

September 30, 

 

June 30, 

 

 

    

2018

    

2017

    

2018

    

2017

    

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense (1)

 

$

308,404

 

$

294,497

 

$

896,843

 

$

794,428

 

$

311,201