Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported
financial and operating results for the year and quarter ended
December 31, 2018 (the "2018 Year" and "2018 Quarter",
respectively).
For the 2018 Year, on the strength of record coal sales volumes
and higher coal sales prices, total revenues increased 11.5% to
$2.0 billion compared to the year ended December 31, 2017 (the
"2017 Year"). Net income attributable to ARLP increased 20.7% to
$366.6 million for the 2018 Year, compared to $303.6 million for
the 2017 Year. Net income attributable to ARLP per basic and
diluted limited partner unit was $2.74 for the 2018 Year compared
to $2.80 for the 2017 Year as higher net income was offset by
increased weighted-average common units outstanding due to the
issuance of additional common units pursuant to the July 2017
Exchange Transaction. EBITDA increased 12.2% in the 2018 Year to
$686.9 million compared to $612.1 million in the 2017 Year.
For the 2018 Quarter, $40.5 million of non-cash asset impairment
charges negatively impacted earnings. Absent these charges
(discussed in more detail below), the 2018 Quarter financial
results compared favorably to both the quarter ended December 31,
2017 (the "2017 Quarter") and the quarter ended September 30, 2018
(the "Sequential Quarter"). Increased coal sales volumes and prices
in the 2018 Quarter led ARLP's revenues higher by 10.1% to $531.8
million compared to $483.2 million for the 2017 Quarter. The asset
impairment charges contributed to a 31.6% decrease in net income
attributable to ARLP for the 2018 Quarter to $50.8 million, or
$0.38 per basic and diluted limited partner unit, compared to $74.2
million, or $0.55 per basic and diluted limited partner unit, for
the 2017 Quarter. EBITDA also decreased 14.7% to $136.4 million in
the 2018 Quarter compared to $159.8 million for 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.)
ARLP’s comparative results for 2018 and 2017 were impacted by
the following items:
- 2018 results include an $80.0 million
settlement gain recorded in March 2018 upon resolution of
litigation related to a coal supply agreement and $40.5 million of
non-cash impairment charges in the 2018 Quarter comprised of (i) a
$34.3 million impairment related to an uncertain mine life at our
Dotiki mine and (ii) a $6.2 million impairment of certain coal
reserves in Illinois.
- 2017 results include an $8.1 million
debt extinguishment loss related to ARLP's early repayment of its
Series B Senior Notes in May 2017.
Excluding these items, Adjusted net income attributable to ARLP
increased 4.9% to $327.1 million for the 2018 Year, compared to
$311.8 million for the 2017 Year, and Adjusted EBITDA for the 2018
Year increased 4.4% to $647.4 million, compared to $620.3 million
for the 2017 Year. Comparing the 2018 Quarter to the 2017 Quarter,
Adjusted net income attributable to ARLP increased 22.9% to $91.3
million and Adjusted EBITDA increased 10.7% to $176.8 million.
ARLP’s Adjusted net income attributable to ARLP and Adjusted EBITDA
for the 2018 Quarter also increased compared to the Sequential
Quarter by 23.9% and 15.0%, respectively. (For definitions of
Adjusted net income attributable to ARLP and 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 general
partner (the "Board") increased the cash distribution to
unitholders for the 2018 Quarter to $0.53 per unit (an annualized
rate of $2.12 per unit), payable on February 14, 2019 to all
unitholders of record as of the close of trading on February 7,
2019. The announced distribution represents a 3.9% increase over
the cash distribution of $0.51 per unit for the 2017 Quarter and a
1.0% increase over the cash distribution of $0.525 per unit for the
Sequential Quarter.
Commenting on the year, Joseph W. Craft III, Chairman, President
and Chief Executive Officer, said, "ARLP entered 2018 with
expectations for strong operating and financial results and
continued execution on its strategic objective to generate future
growth in cash flow. Our performance certainly met those
expectations. Capitalizing on positive fundamentals in the domestic
and international coal markets in 2018, we grew our production by
7.1%, delivered record coal sales volumes, improved coal sales
price realizations and posted higher year-over-year revenues, net
income and EBITDA."
Mr. Craft added, "ARLP’s exceptional performance generated
strong cash flow in 2018 and supported meaningful return of cash to
unitholders. During 2018, the Board elected to increase
distributions per unit 3.9% and ARLP repurchased approximately 3.7
million units for approximately $70.6 million in open market
transactions."
Consolidated Financial Results
Year Ended December 31, 2018 Compared to Year Ended December 31,
2017
Coal sales revenues increased by 7.8% to $1.84 billion for the
2018 Year compared to $1.71 billion for the 2017 Year due primarily
to record coal sales volumes. For the 2018 Year, the re-opening of
the Gibson North mine and adding a continuous mining unit at our
River View mine helped drive total coal sales volumes up 6.9% to
40.4 million tons and production volumes higher by 7.1% to 40.3
million tons compared to the 2017 Year. Transportation revenues and
expenses increased to $112.4 million in the 2018 Year from $41.7
million in the 2017 Year primarily due to increased coal shipments
to the international markets.
Increased coal sales volumes in the 2018 Year also led operating
expenses higher to $1.21 billion, an increase of 10.6% compared to
$1.09 billion for the 2017 Year. Segment Adjusted EBITDA Expense
per ton increased 3.8% to $29.98 primarily as a result of difficult
mining conditions encountered at several mines, higher roof support
expense and additional longwall move days in the 2018 Year.
Compared to the 2017 Year, depreciation, depletion and amortization
increased 4.2% to $280.2 million in the 2018 Year as a result of
the previously discussed increase in coal sales volumes.
Increased earnings from our investments in oil and gas mineral
interests led equity method investment income higher by $8.3
million in the 2018 Year compared to the 2017 Year. Equity
securities income increased $9.3 million to $15.7 million in the
2018 Year compared to $6.4 million for the 2017 Year due to
increased distributions from our preferred investment in gas
compression services.
Three Months Ended December 31, 2018 Compared to Three Months
Ended December 31, 2017
Coal sales revenues for the 2018 Quarter increased 6.6% to
$484.9 million, compared to $454.9 million for the 2017 Quarter,
due to increased coal sales volumes and prices. Coal sales volumes
of 10.5 million tons were 3.6% 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 second quarter of 2018 at our Gibson North mine.
Coal sales prices increased 2.9% to $46.34 per ton sold for the
2018 Quarter, compared to $45.03 per ton sold for the 2017 Quarter,
primarily as a result of higher price realizations from our
Appalachian mines. Transportation revenues and expenses increased
to $36.4 million in the 2018 Quarter from $16.8 million in the 2017
Quarter primarily due to increased export shipments.
Compared to the 2017 Quarter, operating expenses increased 4.5%
to $310.9 million, resulting from increased coal sales volumes.
Segment Adjusted EBITDA Expense of $29.75 per ton in the 2018
Quarter was comparable to $29.48 per ton in the 2017 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.)
General and administrative expenses increased $3.0 million to
$18.8 million in the 2018 Quarter, primarily due to higher
incentive compensation expenses. Equity method investment income
was $7.6 million in the 2018 Quarter compared to $3.4 million in
the 2017 Quarter due to increased income from our investments in
oil and gas minerals.
Regional Results and Analysis
% Change 2018
Fourth 2017 Fourth Quarter / 2018 Third
% Change (in millions, except per ton data)
Quarter Quarter Quarter Quarter
Sequential
Illinois
Basin
Tons sold 7.981 7.391 8.0 % 7.246 10.1 % Coal sales price per ton
(1) $ 40.26 $ 39.13 2.9 % $ 39.92 0.9 % Segment Adjusted EBITDA
Expense per ton (2) $ 26.16 $ 24.93 4.9 % $ 27.41 (4.6 ) % Segment
Adjusted EBITDA (2) $ 112.9 $ 105.5 7.0 % $ 90.7 24.5 %
Appalachia
Tons sold 2.483 2.712 (8.4 ) % 2.825 (12.1 ) % Coal sales price per
ton (1) $ 64.03 $ 60.12 6.5 % $ 59.60 7.4 % Segment Adjusted EBITDA
Expense per ton (2) $ 38.98 $ 40.39 (3.5 ) % $ 37.31 4.5 % Segment
Adjusted EBITDA (2) $ 62.9 $ 54.7 15.0 % $ 63.7 (1.3 ) %
Total
(3)
Tons sold 10.464 10.103 3.6 % 10.071 3.9 % Coal sales price per ton
(1) $ 46.34 $ 45.03 2.9 % $ 45.71 1.4 % Segment Adjusted EBITDA
Expense per ton (2) $ 29.75 $ 29.48 0.9 % $ 30.70 (3.1 ) % Segment
Adjusted EBITDA (2) $ 195.6 $ 175.6 11.4 % $ 169.6 15.3 %
_______________________________
(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.
The resumption of operations at our Gibson North mine in the
2018 second quarter and strong sales performance at our Gibson
South and River View mines drove Illinois Basin coal sales volumes
in the 2018 Quarter higher by 8.0% to 8.0 million tons compared to
the 2017 Quarter. Appalachia coal sales volumes decreased 8.4%
compared to the 2017 Quarter due to lower sales volumes from our MC
Mining and Mettiki mines. Tons sold increased sequentially by 10.1%
in the Illinois Basin primarily due to increased coal sales volumes
at our Gibson North, Hamilton and River View mines in the 2018
Quarter as well as a longwall move during the Sequential Quarter at
our Hamilton mine. In Appalachia, coal sales volumes decreased
12.1% compared to the Sequential Quarter primarily due to reduced
recoveries and fewer longwall unit shifts at our Tunnel Ridge mine
in the 2018 Quarter. ARLP ended the 2018 Quarter with total coal
inventory of approximately 600,000 tons, a reduction of
approximately 100,000 tons and 300,000 tons compared to the end of
the 2017 and Sequential Quarters, respectively.
Illinois Basin coal sales price per ton sold in the 2018 Quarter
increased 2.9% due to improved domestic market conditions and
higher export sales prices compared to the 2017 Quarter. In
Appalachia, increased export sales prices for metallurgical coal at
our Mettiki mine and improved prices at our MC Mining and Tunnel
Ridge mines led coal sales prices higher by 6.5% and 7.4% per ton
sold in the 2018 Quarter compared to the 2017 and Sequential
Quarters, respectively.
In the Illinois Basin, Segment Adjusted EBITDA Expense per ton
increased 4.9% compared to the 2017 Quarter primarily due to
reduced recoveries at our Hamilton and River View mines. Segment
Adjusted EBITDA Expense per ton in Appalachia decreased 3.5%
compared to the 2017 Quarter reflecting increased recoveries and
lower selling expenses at Tunnel Ridge during the 2018 Quarter.
Compared to the Sequential Quarter, Segment Adjusted EBITDA Expense
per ton decreased 4.6% in the Illinois Basin resulting primarily
from increased production and improved productivity at our Hamilton
mine in the 2018 Quarter following a longwall move and difficult
mining conditions encountered at the mine during the Sequential
Quarter. In Appalachia, Segment Adjusted EBITDA Expense per ton
increased 4.5% compared to the Sequential Quarter primarily due to
decreased production and reduced recoveries at our Tunnel Ridge
mine in the 2018 Quarter.
Market Update and Outlook
"ARLP anticipates its strong operating and financial performance
will continue in 2019," said Mr. Craft. "Current domestic coal
market fundamentals are favorable as cold weather across much of
the eastern U.S. has increased coal burn and reduced utility
stockpiles in ARLP’s markets. Customers in our markets have been
actively securing tons and our strategically located, low-cost
operations have allowed ARLP to expand its domestic coal contract
book. With positive international coal market fundamentals intact,
ARLP has already secured commitments to export approximately 8.0
million tons this year. Realizing the full year benefits of the
production units added in 2018, ARLP is expecting 2019 coal
production and sales volumes to increase by approximately 10.0%
each at the midpoint of our 2019 guidance. Increased volumes along
with continued strong cost performance by our mines and a stable
price environment are expected to drive solid results from ARLP’s
coal operations in 2019."
Mr. Craft continued, "We also expect ARLP’s financial results
from our oil and gas activities will increase meaningfully in 2019
and the years ahead. With ARLP’s recent mineral interests
acquisition, the EBITDA contribution in 2019 from oil and gas
royalties is currently estimated in a range of $37.0 to $47.0
million. Strong performance from our coal operations and increasing
contributions from ARLP’s oil and gas royalty platform are expected
to generate healthy distributable cash flow to support our
continuing goal of increasing quarterly distributions for the
foreseeable future."
For 2019, ARLP is providing the following full-year guidance for
its operating and investment activities:
2019 Full Year Guidance
Coal
Volumes (Million
Short Tons)
Illinois Basin Production 32.8 — 33.8 Appalachia Production 10.7 —
11.2 Total Coal Production 43.5 — 45.0 Illinois Basin Sales
Tons 32.9 — 33.9 Appalachia Sales Tons 10.6 — 11.1 Total Sales Tons
43.5 — 45.0 Committed & Priced Sales Tons 2019 —
Domestic 28.8 2019 — Export 8.0 2020 — Domestic 18.0 2020 — Exports
—
Per Ton
Estimates
Coal Sales Price per ton sold (1) ~ $44.75 — $45.25 Segment
Adjusted EBITDA Expense per ton sold (2) ~ $28.20 — $29.15 Segment
Adjusted EBITDA per ton sold (2) ~ $17.25 — $17.45
Oil & Gas
Royalty
Net Average Daily Production (Boe/d) (3) 3,400 — 3,600
Percentage Oil ~ 59.0% Production and Ad Valorem Taxes (% of
Revenue) ~6.1%
Consolidated
Revenues (Excluding Transportation Revenues) $2.04 — $2.14 billion
EBITDA (4) Consolidated — excluding AllDale Gain (5) $720.0 —
$760.0 million
• EBITDA (4) contribution from Oil &
Gas Royalty (6) — excluding AllDale Gain (5)
$37.0 — $47.0 million Net Income Attributable to ARLP $505.5 —
$545.5 million Depreciation, depletion and amortization $305.0 —
$330.0 million Capital Expenditures and Investments (7) $360.0 —
$400.0 million (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. For 2019, estimated Segment
Adjusted EBITDA per ton excludes estimated EBITDA related to oil
and gas royalties. (3)
Barrel of oil equivalent ("Boe")
calculated on a 6:1 basis (6,000 cubic feet of natural gas to 1
barrel of oil).
(4) For a definition of EBITDA and related reconciliations to
comparable GAAP financial measures, please see the end of this
release. (5) In the first quarter of 2019, ARLP anticipates
recording a non-cash gain of $145.0 to $155.0 million to reflect
the fair value of its previous investments in the AllDale
partnerships. (6) The estimated EBITDA contribution from oil and
gas royalties is subject to a number of factors including estimated
drilling activity and estimated oil and gas production volumes and
price realizations, each of which is subject to change. (7) Capital
expenditures in 2019 are primarily related to maintenance capital
expenditures for ARLP’s coal operations, including $40.0 - $45.0
million for development of the Excel Mine No. 5, as well as $40.0 -
$ 45.0 million of growth capital to support increased production at
our River View and Gibson South mines. Considering its current
five-year planning horizon, ARLP is estimating total average
maintenance capital expenditures for its coal operations of
approximately $5.57 per ton produced for long-term distribution
planning purposes.
A conference call regarding ARLP's 2018 Quarter and Year
financial results and 2019 outlook 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 10127566.
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
gross income, gain or loss 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 natural resource company that generates
income from coal production and oil and gas mineral interests
located in strategic producing regions across the United
States.
ARLP currently produces coal from eight mining complexes it
operates in Illinois, Indiana, Kentucky, Maryland and West
Virginia. ARLP also operates a coal loading terminal on the Ohio
River at Mount Vernon, Indiana. ARLP markets its coal production to
major domestic and international utilities and industrial users and
is currently the second largest coal producer in the eastern United
States.
ARLP generates royalty income from mineral interests it owns in
premier oil and gas producing regions in the United States,
primarily the Anadarko, Permian, Williston and Appalachian
basins.
ARLP also generates income from a variety of other sources,
including investments in 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.
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, June 30, 2018 and
September 30, 2018, filed on May 7, 2018, August 6, 2018 and
November 5, 2018, 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 Ended Year Ended December
31, December 31, 2018 2017 2018
2017 Tons Sold 10,464 10,103 40,421 37,824
Tons Produced 10,196 9,398 40,266 37,609
SALES AND
OPERATING REVENUES: Coal sales $ 484,943 $ 454,946 $ 1,844,808
$ 1,711,114 Transportation revenues 36,371 16,767 112,385 41,700
Other sales and operating revenues 10,526
11,518 45,664 43,406 Total
revenues 531,840 483,231
2,002,857 1,796,220
EXPENSES:
Operating expenses (excluding depreciation, depletion and
amortization) 310,870 297,427 1,207,713 1,091,855 Transportation
expenses 36,371 16,767 112,385 41,700 Outside coal purchases 24 —
1,466 — General and administrative 18,785 15,778 68,298 61,760
Depreciation, depletion and amortization 76,031 74,872 280,225
268,981 Settlement gain — — (80,000 ) — Asset impairment
40,483 — 40,483 —
Total operating expenses 482,564 404,844
1,630,570 1,464,296
INCOME FROM OPERATIONS 49,276 78,387 372,287 331,924
Interest expense, net (9,565 ) (10,481 ) (40,218 ) (39,385 )
Interest income 38 12 159 94 Equity method investment income 7,634
3,446 22,189 13,860 Equity securities income 4,129 3,598 15,696
6,398 Debt extinguishment loss — — — (8,148 ) Other expense
(420 ) (376 ) (2,621 ) (332 )
INCOME BEFORE
INCOME TAXES 51,092 74,586 367,492 304,411
INCOME TAX
EXPENSE 24 213 22
210
NET INCOME 51,068 74,373 367,470
304,201 LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTEREST (295 ) (138 ) (866 ) (563 )
NET INCOME ATTRIBUTABLE TO ALLIANCE RESOURCE PARTNERS,
L.P. ("NET INCOME OF ARLP") $ 50,773 $ 74,235 $
366,604 $ 303,638
GENERAL PARTNERS'
INTEREST IN NET INCOME OF ARLP $ — $ 542 $ 1,560
$ 21,904
LIMITED PARTNERS' INTEREST IN NET
INCOME OF ARLP $ 50,773 $ 73,693 $ 365,044
$ 281,734
BASIC AND DILUTED NET INCOME OF ARLP PER
LIMITED PARTNER UNIT $ 0.38 $ 0.55 $ 2.74
$ 2.80
WEIGHTED-AVERAGE NUMBER OF UNITS
OUTSTANDING – BASIC AND DILUTED 129,771,010
130,704,217 130,758,169
98,707,696
ALLIANCE RESOURCE PARTNERS, L.P. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except unit
data)
(Unaudited)
December 31, 2018 2017 ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 244,150 $ 6,756
Trade receivables 174,914 181,671 Other receivables 395 146 Due
from affiliates 17 165 Inventories, net 59,206 60,275 Advance
royalties, net 1,274 4,510 Prepaid expenses and other assets
20,730 28,117 Total current assets 500,686
281,640
PROPERTY, PLANT AND EQUIPMENT: Property, plant and
equipment, at cost 2,925,808 2,934,188 Less accumulated
depreciation, depletion and amortization (1,513,450 )
(1,457,532 ) Total property, plant and equipment, net 1,412,358
1,476,656
OTHER ASSETS: Advance royalties, net 42,923 39,660
Equity method investments 161,309 147,964 Equity securities 122,094
106,398 Goodwill 136,399 136,399 Other long-term assets
18,979 30,654 Total other assets
481,704 461,075
TOTAL ASSETS $
2,394,748 $ 2,219,371
LIABILITIES AND
PARTNERS' CAPITAL CURRENT LIABILITIES: Accounts payable
$ 96,397 $ 96,958 Due to affiliates 816 771 Accrued taxes other
than income taxes 16,762 20,336 Accrued payroll and related
expenses 43,113 35,751 Accrued interest 5,022 5,005 Workers'
compensation and pneumoconiosis benefits 11,137 10,729 Current
capital lease obligations 46,722 28,613 Other current liabilities
18,902 19,071 Current maturities, long-term debt, net 92,000
72,400 Total current liabilities 330,871
289,634
LONG-TERM LIABILITIES: Long-term debt, excluding
current maturities, net 564,004 415,937 Pneumoconiosis benefits
68,828 71,875 Accrued pension benefit 43,135 45,317 Workers'
compensation 41,669 46,694 Asset retirement obligations 127,655
126,750 Long-term capital lease obligations 10,595 57,091 Other
liabilities 20,304 14,587 Total
long-term liabilities 876,190 778,251
Total liabilities 1,207,061 1,067,885
PARTNERS' CAPITAL: Alliance Resource Partners, L.P.
("ARLP") Partners' Capital: Limited Partners - Common Unitholders
128,095,511 and 130,704,217 units outstanding, respectively
1,229,268 1,183,219 General Partner's interest — 14,859 Accumulated
other comprehensive loss (46,871 ) (51,940 ) Total
ARLP Partners' Capital 1,182,397 1,146,138 Noncontrolling interest
5,290 5,348 Total Partners' Capital
1,187,687 1,151,486
TOTAL
LIABILITIES AND PARTNERS' CAPITAL $ 2,394,748 $
2,219,371
ALLIANCE RESOURCE PARTNERS, L.P. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Year Ended December 31, 2018
2017 CASH FLOWS FROM OPERATING ACTIVITIES: $
694,345 $ 556,116
CASH FLOWS FROM INVESTING
ACTIVITIES: Property, plant and equipment: Capital expenditures
(233,480 ) (145,088 ) Increase (decrease) in accounts payable and
accrued liabilities (1,051 ) 7,404 Proceeds from sale of property,
plant and equipment 2,409 2,139 Contributions to equity method
investments (15,600 ) (20,688 ) Purchase of equity security —
(100,000 ) Distributions received from investments in excess of
cumulative earnings 2,473 11,462 Net
cash used in investing activities (245,249 ) (244,771
)
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings
under securitization facility 304,600 100,000 Payments under
securitization facility (285,000 ) (127,600 ) Payments on term loan
— (50,000 ) Borrowings under revolving credit facilities 245,000
215,486 Payments under revolving credit facilities (100,000 )
(440,486 ) Borrowings under long-term debt — 400,000 Payment on
long-term debt — (145,000 ) Payments on capital lease obligations
(29,353 ) (27,071 ) Payment of debt issuance costs — (16,487 )
Payment for debt extinguishment — (8,148 ) Payments for purchases
of units under unit repurchase program (70,604 ) — 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 1,105 Cash contribution by affiliated entity
2,142 — Cash obtained in Simplification Transactions 1,139 —
Distributions paid to Partners (275,902 ) (240,812 ) Other
(1,684 ) (2,621 ) Net cash used in financing activities
(211,702 ) (344,371 )
NET CHANGE IN CASH
AND CASH EQUIVALENTS 237,394 (33,026 )
CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD 6,756 39,782
CASH AND CASH EQUIVALENTS AT END OF PERIOD $
244,150 $ 6,756
Reconciliation of GAAP "net income
attributable to ARLP" to non-GAAP "Adjusted net income attributable
to ARLP" (in thousands).
Adjusted net income is defined as net income attributable to
ARLP modified for certain items that may not reflect the trend of
future results, such as settlement gains, asset impairments and
debt extinguishment losses.
Adjusted net income attributable to ARLP should not be
considered as an alternative to net income attributable to ARLP or
any other measure of financial performance presented in accordance
with GAAP. Adjusted net income attributable to ARLP excludes
certain items that management believes affect the comparability of
our operating results. This adjusted financial measure is used by
our management and external users of our financial statements, such
as investors, commercial banks, research analysts and others, to
assess:
- our operational trends and performance
relative to other coal companies;
- the comparability of our performance to
earnings estimates provided by security analysts; and
- our performance excluding items which
are generally nonrecurring in nature or whose timing or amount
cannot be reasonably estimated.
We believe Adjusted net income attributable to ARLP is a useful
measure for investors because it further demonstrates our financial
performance without regard to items that may not reflect the trend
of future results.
Three Months Ended
Year Ended
Three MonthsEnded
December 31, December 31, September 30,
2018 2017 2018 2017 2018
Net income attributable to ARLP $ 50,773 $ 74,235 $ 366,604 $
303,638 $ 73,733 Settlement gain — — (80,000 ) — — Debt
extinguishment loss — — — 8,148 — Asset impairment 40,483
— 40,483 — — Adjusted net income
attributable to ARLP $ 91,256 $ 74,235 $ 327,087 $ 311,786 $
73,733
Reconciliation of GAAP "net income
attributable to ARLP" to non-GAAP "EBITDA," "Adjusted EBITDA" and
"Distributable Cash Flow" (in thousands).
EBITDA is defined as net income attributable to ARLP 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, asset impairments 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).
Three Months Ended
Year Ended
Three MonthsEnded
Year Ended December 31, December 31,
September 30, December 31, 2018 2017
2018 2017 2018 2019E Midpoint
Net income attributable to ARLP $ 50,773 $ 74,235 $ 366,604 $
303,638 $ 73,733 $ 525,500 Depreciation, depletion and amortization
76,031 74,872 280,225 268,981 70,196 317,500 Interest expense, net
9,942 10,666 41,365 39,842 10,138 45,500 Capitalized interest (415
) (197 ) (1,306 ) (551 ) (330 ) — Income tax expense 24
213 22 210
5 1,500 EBITDA 136,355 159,789 686,910 612,120
153,742 890,000 Gain on AllDale transaction — — — — — (150,000 )
Settlement gain — — (80,000 ) — — — Debt extinguishment loss — — —
8,148 — — Asset impairment 40,483 —
40,483 — — —
Adjusted EBITDA 176,838 159,789 647,393 620,268 153,742
740,000 Interest expense, net (9,942 ) (10,666 ) (41,365 ) (39,842
) (10,138 ) (45,500 ) Income tax expense (24 ) (213 ) (22 ) (210 )
(5 ) (1,500 ) Estimated maintenance capital expenditures (1)
(48,126 ) (39,941 ) (190,056 ) (159,838 )
(46,605 ) (246,500 ) Distributable Cash Flow $
118,746 $ 108,969 $ 415,950 $ 420,378 $
96,994 $ 446,500 Distributions paid to partners $
69,220 $ 67,528 $ 275,902 $ 240,812 $
69,239 $ 277,700 Distribution Coverage Ratio
1.72 1.61 1.51 1.75
1.40 1.61
_______________
(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 2019 planning horizon, average annual
estimated maintenance capital expenditures are assumed to be $5.57
per ton produced compared to the estimated $4.72 per ton produced
in 2018. Reflecting the timing of rebuild schedules, major
infrastructure projects and extension capital, we are currently
estimating actual maintenance capital expenditures in 2019 of
approximately $7.43 per ton produced. 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 expense 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.
Three Months Ended
Year Ended
Three MonthsEnded
December 31, December 31, September 30,
2018 2017 2018 2017 2018
Operating expense (1) $ 310,870 $ 297,427 $ 1,207,713 $ 1,091,855 $
308,404 Outside coal purchases 24 — 1,466 — — Other expense (1)
420 376 2,621 332 812 Segment
Adjusted EBITDA Expense $ 311,314 $ 297,803 $ 1,211,800 $ 1,092,187
$ 309,216 Divided by tons sold 10,464 10,103
40,421 37,824 10,071 Segment Adjusted EBITDA Expense
per ton $ 29.75 $ 29.48 $ 29.98 $ 28.88 $ 30.70
_______________
(1) Operating expenses and other expense for the 2017 Quarter and
2017 Year have been recast to reflect the reclass of the
non-service components of net benefit cost previously included in
operating expense now being presented within other expense in
accordance with new generally accepted accounting principles
effective in 2018.
Segment Adjusted EBITDA per ton is defined as net income
attributable to ARLP before net interest expense, income taxes,
depreciation, depletion and amortization, general and
administrative expenses, settlement gain, debt extinguishment loss
and asset impairment divided by tons sold. Segment Adjusted EBITDA
removes the impact of general and administrative expenses from
Adjusted EBITDA (discussed above) to allow management to focus
solely on the evaluation of segment operating performance.
Three Months Ended
Year Ended
Three MonthsEnded
December 31, December 31, September 30,
2018 2017 2018 2017 2018
Adjusted EBITDA (See reconciliation to GAAP above) $ 176,838 $
159,789 $ 647,393 $ 620,268 $ 153,742 General and administrative
18,785 15,778 68,298 61,760
15,836 Segment Adjusted EBITDA $ 195,623 $ 175,567 $ 715,691 $
682,028 $ 169,578 Divided by tons sold 10,464 10,103
40,421 37,824 10,071 Segment Adjusted EBITDA
per ton $ 18.69 $ 17.38 $ 17.71 $ 18.03 $ 16.84
Actual basic and diluted earnings per
limited partner unit and pro forma earnings per basic and diluted
limited partner unit
Below is the actual basic and diluted earnings per limited
partner unit as well as pro forma basic and diluted earnings per
limited partner unit for the three and twelve months ended December
31, 2018 and 2017, as if the Simplification and Exchange
Transactions had occurred on January 1, 2017. For a detailed
reconciliation of actual and pro forma net income of ARLP to actual
and pro forma basic and diluted earnings per limited partner unit,
please see our Form 10-K for the year ended December 31, 2018
expected to be filed on or about February 22, 2019.
Three Months Ended Year
Ended December 31, December 31, 2018
2017 2018 2017
Actual
(in thousands, except per unit data) Net income of ARLP available
to limited partners $ 49,472 $ 72,449 $ 358,289 $ 276,369
Weighted-average limited partner units outstanding – basic and
diluted 129,771 130,704 130,758 98,708
Basic and diluted net income of ARLP per limited partner unit $
0.38 $ 0.55 $ 2.74 $ 2.80
Pro
forma
Pro forma net income of ARLP available to limited partners $ 49,472
$ 72,507 $ 358,598 $ 296,676 Pro forma weighted-average limited
partner units outstanding – basic and diluted 129,771
132,048 131,310 132,024 Pro forma basic and diluted
net income of ARLP per limited partner unit $ 0.38 $ 0.55 $ 2.73 $
2.25
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version on businesswire.com: https://www.businesswire.com/news/home/20190128005167/en/
Brian L. CantrellAlliance Resource Partners, L.P.(918)
295-7673
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