Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported
financial and operating results for the year and quarter ended
December 31, 2019 (the "2019 Year" and "2019 Quarter",
respectively).
For the 2019 Year, net income attributable to ARLP increased
8.9% to $399.4 million, or $3.07 per basic and diluted limited
partner unit, compared to $366.6 million, or $2.74 per basic and
diluted limited partner unit, for the year ended December 31, 2018
(the "2018 Year"). The increase in net income resulted from a
$170.0 million non-cash net gain related to the AllDale
Acquisition, the addition of oil & gas royalty revenues and
lower operating expenses in the 2019 Year, partially offset by
decreased coal sales revenues and increased depreciation in the
2019 Year as well as an $80.0 million net gain on settlement of
litigation in the 2018 Year. EBITDA increased 9.7% in the 2019 Year
to $753.8 million compared to $686.9 million in the 2018 Year.
Adjusted EBITDA decreased 7.5% to $599.0 million in the 2019 Year,
compared to $647.4 million for the 2018 Year. (Unless otherwise
noted, all references in this release to "net income" refer to "net
income attributable to ARLP." For a definition of EBITDA, Adjusted
EBITDA and related reconciliations to comparable GAAP financial
measures, please see the end of this release.)
For the 2019 Quarter, total revenues were $453.3 million
compared to $531.8 million for the quarter ended December 31, 2018
(the "2018 Quarter"), primarily due to lower coal sales revenues
resulting from reduced coal sales volumes and prices, partially
offset by the addition of oil & gas royalty revenues in the
2019 Quarter. Lower total revenues, partially offset by lower total
operating expenses, pushed net income attributable to ARLP for the
2019 Quarter down to $25.8 million, or $0.20 per basic and diluted
limited partner unit, compared to $50.8 million, or $0.38 per basic
and diluted limited partner unit, for the 2018 Quarter. EBITDA and
Adjusted EBITDA in the 2019 Quarter of $126.2 million were lower
compared to EBITDA and Adjusted EBITDA in the 2018 Quarter of
$136.4 million and $176.8 million, respectively.
ARLP also announced today that the Board of Directors of its
general partner has decreased the quarterly cash distribution to
unitholders for the 2019 Quarter to $0.40 per unit (an annualized
rate of $1.60 per unit), payable on February 14, 2020 to all
unitholders of record as of the close of trading on February 7,
2020. The announced distribution compares to quarterly unitholder
distributions of $0.53 per unit declared for the 2018 Quarter and
$0.54 per unit declared for the quarter ended September 30, 2019
(the "Sequential Quarter").
Commenting on ARLP’s performance for the year, Joseph W. Craft
III, Chairman, President and Chief Executive Officer, said,
"Following a year where we grew our coal 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, we entered 2019 anticipating a continuation of the
favorable domestic and international coal market fundamentals that
led to our success in 2018. After posting solid results in the
first quarter of 2019, recording 15% growth in total revenues over
the first quarter of 2018, the international thermal indexes began
to move lower. Unfortunately, the price for thermal coal in the
international marketplace continued to deteriorate throughout the
year, dropping significantly since the beginning of 2019. As a
result, export volumes shrank and the industry soon faced a growing
oversupply in the domestic market. ARLP proactively responded by
modifying our operations to shift production to our lowest-cost
mines, reducing total volumes, adjusting our coal sales mix to
increase domestic market share in the face of weak export pricing
and delivered solid results for the year despite extremely
challenging coal market conditions."
Mr. Craft added, "ARLP made tremendous progress in diversifying
our business through growth in our oil & gas minerals segment.
During 2019, we invested approximately $320.0 million in the
segment and transitioned to active participation in the industry
with direct ownership of over 55,000 net royalty acres in premier
basins. The cash flow generated by these assets has become a
meaningful contributor to ARLP’s performance, representing
approximately 7.0% of our consolidated Segment Adjusted EBITDA in
2019. With senior leadership recently added, we expect this part of
our business will play an even greater role in ARLP’s future
performance."
Commenting on the distribution, Mr. Craft continued, "ARLP
finished the year with a respectable 1.18 distribution coverage
ratio. The partnership remains profitable and continues to generate
solid cash flows. As I have advised repeatedly, if our future
outlook dictates a change in distributions necessary for ARLP to
protect its strong balance sheet to allow us to execute our plans
and take advantage of opportunities by preserving liquidity and
maintaining access to capital, then our Board will act
appropriately. The decision by our Board to reduce ARLP’s
unitholder distribution, while difficult, is a significant,
proactive step toward achieving these objectives. Assuming ARLP can
achieve results this year at the midpoint of our guidance, we would
finish 2020 with a 1.27 distribution coverage ratio."
Consolidated Financial Results
Year Ended December 31, 2019 Compared to Year Ended December 31,
2018
Coal Operations –
Reflecting lower coal sales volumes and
prices, coal sales revenues for the 2019 Year decreased 4.5% to
$1.76 billion, compared to $1.84 billion for the 2018 Year. Coal
sales volumes declined 2.8% to 39.3 million tons due primarily to
lower export sales, partially offset by increased coal sales to
domestic customers. Weak coal market conditions also impacted price
realizations which declined 1.7% in the 2019 Year to $44.86 per ton
sold, compared to $45.64 per ton sold during the 2018 Year. Reduced
shipments of coal to international markets in the 2019 Year led
transportation revenues and expenses lower by 11.5% to $99.5
million.
Compared to the 2018 Year, combined operating
expenses and outside coal purchases for our coal operations
decreased 1.1% to $1.20 billion, primarily due to lower coal sales
volumes offset in part by increased expenses per ton. On a per ton
basis, curtailed coal production volumes in response to reduced
exports and increased outside coal purchases led Segment Adjusted
EBITDA Expense per ton higher by 1.6% in the 2019 Year to $30.47
per ton, compared to $29.98 per ton in the 2018 Year.
Segment Adjusted EBITDA from our coal
operations declined 9.8% to $612.1 million, compared to $678.7
million for the 2018 Year, primarily due to lower coal sales
revenues offset in part by lower expenses in the 2019 Year
discussed above. (For a definition of Segment Adjusted EBITDA,
Segment Adjusted EBITDA Expense and related reconciliation to
comparable GAAP financial measures, please see the end of this
release.)
Minerals –
For the 2019 Year, our mineral interests
contributed total revenues of $53.0 million from oil & gas
royalties and lease bonuses. During the 2019 Year, we also recorded
a non-cash acquisition gain of $177.0 million to reflect the fair
value of the interests in AllDale I and II we already owned at the
time of the AllDale Acquisition. Inclusive of this gain, of which
$7.1 million was attributable to noncontrolling interest, our
Minerals segment contributed $177.0 million to ARLP’s net income,
compared to $21.3 million for the 2018 Year. Excluding the impact
of the acquisition gain, Segment Adjusted EBITDA related to our
Minerals segment increased to $47.0 million for the 2019 Year,
compared to $21.3 million for the 2018 Year. (Please see ARLP Press
Release dated January 3, 2019 for a full description of the AllDale
Acquisition. Following the AllDale Acquisition, results related to
the mineral interests controlled by ARLP are included in our
consolidated results while activity related to our limited partner
interest in AllDale III continues to be reflected as equity method
investment income.)
Compared to the 2018 Year, depreciation, depletion and
amortization increased 10.3% to $309.1 million primarily due to
depletion from production of our oil & gas royalty interests in
the 2019 Year.
In the 2019 Year, we recorded a non-cash asset impairment charge
of $15.2 million at our Dotiki mine in the Sequential Quarter as we
ceased operations to shift production to our lower cost mines. In
the 2018 Year, we recognized $40.5 million of non-cash impairment
charges, comprised of a $34.3 million impairment related to the
reduction of the economic life of our Dotiki mine and a $6.2
million impairment as a result of a decrease in the fair value of
an option entitling us to lease certain coal reserves in
Illinois.
In the 2018 Year, ARLP finalized an agreement with a customer
and certain of its affiliates to settle litigation we initiated in
2015. The settlement 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 Year reflecting the cash payment received
net of certain costs associated with the gain.
Three Months Ended December 31, 2019 Compared to Three Months
Ended December 31, 2018
Coal Operations –
Due to reduced coal sales volumes and prices,
coal sales revenues for the 2019 Quarter decreased 16.5% to $405.1
million, compared to $484.9 million for the 2018 Quarter. Coal
sales volumes declined 9.9% to 9.4 million tons in the 2019 Quarter
due primarily to lower export sales in addition to production
ceasing at our Dotiki mine in the Sequential Quarter, partially
offset by increased volumes from our Tunnel Ridge mine. Coal sales
price realizations declined 7.3% in the 2019 Quarter to $42.95 per
ton sold, compared to $46.34 per ton sold during the 2018 Quarter
due primarily to lower met coal prices and shipments at our Mettiki
mine. Operating revenues increased by $5.4 million resulting from a
customer buy-out of certain coal contracts at Tunnel Ridge.
Transportation revenues and expenses decreased to $16.6 million in
the 2019 Quarter from $36.4 million in the 2018 Quarter, primarily
due to reduced coal volumes shipped to international markets.
Compared to the 2018 Quarter, combined
operating expenses and outside coal purchases for our coal
operations decreased 6.3% to $291.4 million, primarily as a result
of lower coal sales volumes. Segment Adjusted EBITDA Expense per
ton increased 3.9% in the 2019 Quarter to $30.92 per ton, compared
to $29.75 per ton in the 2018 Quarter, due primarily to the per ton
cost impact of curtailed coal production in response to reduced
export sales, partially offset by lower coal inventory charges.
Lower coal sales revenues, partially offset by lower expenses
caused total Segment Adjusted EBITDA from our coal operations to
decline 29.8% to $129.4 million in the 2019 Quarter, compared to
$184.2 million for the 2018 Quarter.
Minerals –
For the 2019 Quarter, our mineral interests
contributed total revenues of $15.7 million from oil & gas
royalties and lease bonuses. Including equity income from our
AllDale III investment, our Minerals segment contributed Segment
Adjusted EBITDA of $14.6 million for the 2019 Quarter, compared to
a contribution of $7.3 million in the 2018 Quarter.
Compared to the 2018 Quarter, depreciation, depletion and
amortization increased 16.6% to $88.7 million primarily due to
depletion from production of our oil & gas royalty interests in
the 2019 Quarter.
During the 2018 Quarter, we recorded $40.5 million of non-cash
impairment charges due to the uncertain mine life at our Dotiki
mine and a decrease in the fair value of an option entitling us to
lease certain coal reserves, as discussed above.
Segment Results and Analysis
% Change
2019 Fourth
2018 Fourth
Quarter /
2019 Third
% Change
(in millions, except per ton and per
BOE data)
Quarter
Quarter
Quarter
Quarter
Sequential
Coal
Operations
Illinois
Basin
Tons sold
6.687
7.981
(16.2)
%
6.553
2.0
%
Coal sales price per ton (1)
$
37.84
$
40.26
(6.0)
%
$
39.11
(3.2)
%
Segment Adjusted EBITDA Expense per ton
(2)
$
26.46
$
26.34
0.5
%
$
26.52
(0.2)
%
Segment Adjusted EBITDA (2)
$
78.6
$
115.8
(32.1)
%
$
87.8
(10.4)
%
Appalachia
Tons sold
2.745
2.483
10.6
%
2.767
(0.8)
%
Coal sales price per ton (1)
$
54.89
$
64.03
(14.3)
%
$
58.66
(6.4)
%
Segment Adjusted EBITDA Expense per ton
(2)
$
40.35
$
38.98
3.5
%
$
39.03
3.4
%
Segment Adjusted EBITDA (2)
$
48.3
$
62.9
(23.2)
%
$
55.2
(12.4)
%
Total
Coal
Tons sold
9.432
10.464
(9.9)
%
9.320
1.2
%
Coal sales price per ton (1)
$
42.95
$
46.34
(7.3)
%
$
45.06
(4.7)
%
Segment Adjusted EBITDA Expense per ton
(2)
$
30.92
$
29.75
3.9
%
$
30.75
0.6
%
Segment Adjusted EBITDA (2)
$
129.4
$
184.2
(29.8)
%
$
144.0
(10.1)
%
Minerals
(3)
Volume - BOE
0.498
—
n/m
0.433
15.0
%
Volume - oil percentage of BOE
45.2
%
—
n/m
44.8
%
0.9
%
Average sales price per BOE (4)
$
31.11
$
—
n/m
$
32.22
(3.4)
%
Segment Adjusted EBITDA Expense (2)
$
1.70
$
—
n/m
$
2.52
(32.4)
%
Segment Adjusted EBITDA (2), (3)
$
14.6
$
7.3
98.5
%
$
12.2
19.4
%
Consolidated
Total (5)
Total revenues
$
453.3
$
531.8
(14.8)
%
$
464.7
(2.5)
%
Segment Adjusted EBITDA Expense (2)
$
293.4
$
311.3
(5.8)
%
$
289.1
1.5
%
Segment Adjusted EBITDA (2)
$
143.9
$
195.6
(26.4)
%
$
156.2
(7.8)
%
_______________________________________
n/m - Percentage change not meaningful.
(1)
Coal sales price per ton is defined as
total coal sales divided by total tons sold.
(2)
For definitions of Segment Adjusted EBITDA
Expense and Segment Adjusted EBITDA and related reconciliations to
comparable GAAP financial measures, please see the end of this
release. Segment Adjusted EBITDA Expense per ton is defined as
Segment Adjusted EBITDA Expense – Coal (as reflected in the
reconciliation table at the end of this release) divided by total
tons sold.
(3)
We restructured our reportable segments in
the first quarter of 2019 to include our consolidated oil & gas
mineral interests held by AllDale I & II and our equity method
investment in AllDale Minerals III, LP (collectively with AllDale I
& II, the "AllDale Partnerships") in a new Minerals reportable
segment. In August 2019, we acquired additional oil & gas
mineral interests through the Wing Acquisition which are also
included within the Minerals reportable segment. The 2018 Quarter
includes equity method investment income from the AllDale
Partnerships prior to the AllDale Acquisition.
(4)
Average sales price per BOE is defined as
royalty revenues excluding lease bonus revenue divided by total
barrels of oil equivalent ("BOE"). BOE for natural gas volumes is
calculated on a 6:1 basis (6,000 cubic feet of natural gas to one
barrel).
(5)
Total reflects consolidated results, which
include our other and corporate category and eliminations in
addition to the Illinois Basin, Appalachia and Minerals segments
highlighted above.
Lower export sales in the 2019 Quarter and the cessation of
production at our Dotiki mine in the Sequential Quarter led to a
decrease in Illinois Basin sales volumes of 16.2% compared to the
2018 Quarter. Compared to the Sequential Quarter, coal sales
volumes increased by 2.0% in the Illinois Basin due to increased
sales at our Gibson South mine, partially offset by the closure of
our Dotiki mine. In Appalachia, strong performance by our Tunnel
Ridge longwall operation in the 2019 Quarter led coal sales volumes
higher by 10.6% compared to the 2018 Quarter.
Reduced coal production and increased coal sales volumes during
the 2019 Quarter led total coal inventory lower to 1.8 million tons
at the end of the 2019 Quarter, a decrease of 0.7 million tons
compared to total coal inventory of 2.5 million tons at the end of
the Sequential Quarter. Compared to the 2018 Quarter, total coal
inventory increased by 1.2 million tons. Coal sales price per ton
sold in the 2019 Quarter decreased in both regions compared to the
2018 and Sequential Quarters reflecting weakened market
conditions.
In the Illinois Basin, Segment Adjusted EBITDA Expense per ton
in the 2019 Quarter was comparable to both the 2018 and Sequential
Quarters. In Appalachia, Segment Adjusted EBITDA Expense per ton
increased 3.5% compared to the 2018 Quarter as a result of lower
recoveries and increased labor and workers' compensation expenses
per ton at our Mettiki and MC Mining mines, increased longwall move
days at our Mettiki and Tunnel Ridge operations and higher
purchased coal costs, partially offset by increased recoveries at
the Tunnel Ridge mine in the 2019 Quarter. Segment Adjusted EBITDA
Expense per ton in Appalachia was also higher sequentially,
increasing 3.4% due to longwall moves at Mettiki and Tunnel Ridge
in the 2019 Quarter and reduced production at MC Mining.
Our Minerals segment continued to deliver strong growth in the
2019 Quarter as production from our mineral interests increased
15.0% over the Sequential Quarter. Segment Adjusted EBITDA also
increased, climbing to $14.6 million compared to $7.3 million and
$12.2 million in the 2018 and Sequential Quarters,
respectively.
Market Update and Outlook
"ARLP anticipates challenging coal market conditions will
persist throughout 2020 as low natural gas prices, tepid power
demand and elevated stockpiles are likely to keep the industry in
an oversupplied position and continue to exert pressure on pricing
for the near future," said Mr. Craft. "As we navigate these
challenging and uncertain markets, ARLP will focus on minimizing
expenses and reducing capital expenditures so that we can target
our coal production to match demand at the lowest possible cost.
While the performance of our coal operations will be impacted in
the near term, as reflected in our initial 2020 guidance below,
ARLP is well positioned to benefit over the long term. We continue
to believe current market conditions are unsustainable for most of
our competitors and will result in meaningful supply
rationalization – providing opportunities for ARLP to capture
additional domestic market share."
Mr. Craft continued, "Turning to our oil & gas minerals
business, ARLP is expecting significant organic growth as
development of our existing acreage continues in 2020. At the
midpoint of our initial 2020 estimates, we currently anticipate oil
& gas production will increase approximately 52.0% compared to
2019. Oil & gas royalties revenue and Segment Adjusted EBITDA
are also expected to be approximately 56.0% and 62.0% higher,
respectively. This performance should result in the contribution
from our minerals business increasing to approximately 13.0% of
ARLP’s consolidated Segment Adjusted EBITDA this year and, as we
look to expand our existing base by acquiring additional mineral
interests, this contribution is expected to grow in the
future."
Looking forward, Mr. Craft concluded, "We continue to believe
ARLP’s strategically-located, low-cost coal operations will
generate solid long-term cash flow and that the contribution from
our oil & gas minerals will enhance our future performance.
This combination and our strong balance sheet position ARLP with
the opportunity to create long-term value for our unitholders and
we remain unwavering in our commitment to deliver on this
opportunity for all of our stakeholders."
ARLP is providing the following initial full-year guidance for
2020:
2020 Full Year
Guidance
Coal
Volumes (Million
Short Tons)
Illinois Basin Production
25.5— 27.3
Appalachia Production
10.0 — 10.2
Total Coal Production
35.5 — 37.5
Illinois Basin Sales Tons
26.8 — 28.6
Appalachia Sales Tons
10.0 ─ 10.2
Total Sales Tons
36.8 — 38.8
Committed & Priced Sales Tons
2020 — Domestic
28.5
2020 — Export
0.9
2021 — Domestic
18.4
2021 — Exports
—
Per Ton
Estimates
Coal Sales Price per ton sold (1)
~ $41.50 — $42.30
Segment Adjusted EBITDA Expense per ton
sold (2)
~ $29.75 — $30.05
Segment Adjusted EBITDA per ton sold
(2)
~ $12.70 — $13.70
Minerals
Oil (000 Barrels)
1,165 — 1,285
Natural Gas (000 MCF)
4,045 ─ 4,470
Liquids (000 Barrels)
485 ─ 535
Marketing Expenses (% of Revenue)
~5.1%
Production and Ad Valorem Taxes (% of
Revenue)
~ 6.1%
Segment Adjusted EBITDA (2) contribution
from Minerals (3)
$72.0 — $80.0 million
Consolidated
Revenues (Excluding Transportation
Revenues)
$1.65 — $1.77 billion
EBITDA (4)
$465.0 — $540.0 million
Net Income Attributable to ARLP
$81.0 — $159.0 million
Depreciation, depletion and
amortization
$319.0 — $340.0 million
Capital Expenditures (5)
$165.0 — $190.0 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 and Segment Adjusted EBITDA and related reconciliations to
comparable GAAP financial measures, please see the end of this
release. Segment Adjusted EBITDA Expense per ton excludes Minerals
and Segment Adjusted EBITDA per ton excludes Minerals and equity
securities income.
(3)
The estimated Segment Adjusted EBITDA
contribution from Minerals is subject to a number of factors
including estimated drilling activity, oil & gas production
volumes and price realizations, each of which is subject to
change.
(4)
For a definition of EBITDA and related
reconciliations to comparable GAAP financial measures, please see
the end of this release.
(5)
Capital expenditures in 2020 are primarily
related to maintenance capital expenditures for ARLP’s coal
operations, including $15.0 - $18.0 million for development of the
Excel Mine No. 5. Considering its current five-year planning
horizon, ARLP is estimating total average maintenance capital
expenditures for its coal operations of approximately $5.04 per ton
produced for long-term distribution planning purposes.
A conference call regarding ARLP's 2019 Quarter and Year
financial results and 2020 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 10138052.
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 & gas mineral interests
located in strategic producing regions across the United
States.
ARLP currently produces coal from seven 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 & gas producing regions in the United States,
primarily the Permian, Anadarko, Williston and Appalachian
basins.
In addition, ARLP also generates income from a variety of other
sources.
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 domestic and international coal markets and our
ability to respond to such changes; legislation, regulations, and
court decisions and interpretations thereof, both domestic and
foreign, 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; our ability to
identify and complete acquisitions; 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; recent action and the
possibility of future action on trade made by United States and
foreign governments; the effect of new tariffs and other trade
measures; 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 & gas prices, which could,
among other things, affect our investments in oil & gas mineral
interests; our productivity levels and margins earned on our coal
sales; decline in or change in 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, mine fires, mine floods or other interruptions; results
of litigation, including claims not yet asserted; foreign currency
fluctuations that could adversely affect the competitiveness of our
coal abroad; 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;
uncertainties in estimating and replacing our oil & gas
reserves; uncertainties in the amount of oil & gas production
due to the level of drilling and completion activity by the
operators of our oil & gas properties; a loss or reduction of
benefits from certain tax deductions and credits; difficulty
obtaining commercial property insurance, and risks associated with
our participation in the commercial insurance property program;
uncertainties in our ability to generate sufficient cash from
operations to maintain our per unit distribution level;
uncertainties in our ability to meet guidance, market expectations
and internal projections; 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,
2018, filed on February 22, 2019 and ARLP's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2019, June 30, 2019 and
September 30, 2019, filed on May 6, 2019, August 5, 2019 and
November 5, 2019, 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,
2019
2018
2019
2018
Tons Sold
9,432
10,464
39,289
40,421
Tons Produced
8,551
10,196
39,981
40,266
Mineral Interest Volumes (BOE)
498
—
1,611
—
SALES AND OPERATING REVENUES:
Coal sales
$
405,111
$
484,943
$
1,762,442
$
1,844,808
Oil & gas royalties
15,481
—
51,735
—
Transportation revenues
16,611
36,371
99,503
112,385
Other revenues
16,135
10,526
48,040
45,664
Total revenues
453,338
531,840
1,961,720
2,002,857
EXPENSES:
Operating expenses (excluding
depreciation, depletion and amortization)
286,845
310,870
1,182,100
1,207,713
Transportation expenses
16,611
36,371
99,503
112,385
Outside coal purchases
7,447
24
23,357
1,466
General and administrative
17,779
18,785
72,997
68,298
Depreciation, depletion and
amortization
88,675
76,031
309,075
280,225
Settlement gain
—
—
—
(80,000)
Asset impairment
—
40,483
15,190
40,483
Total operating expenses
417,357
482,564
1,702,222
1,630,570
INCOME FROM OPERATIONS
35,981
49,276
259,498
372,287
Interest expense, net
(12,044)
(9,565)
(45,875)
(40,218)
Interest income
58
38
379
159
Equity method investment income
670
7,634
2,203
22,189
Equity securities income
—
4,129
12,906
15,696
Acquisition gain
—
—
177,043
—
Other income (expense)
931
(420)
561
(2,621)
INCOME BEFORE INCOME TAXES
25,596
51,092
406,715
367,492
INCOME TAX EXPENSE (BENEFIT)
(341)
24
(211)
22
NET INCOME
25,937
51,068
406,926
367,470
LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTEREST
(105)
(295)
(7,512)
(866)
NET INCOME ATTRIBUTABLE TO ARLP
$
25,832
$
50,773
$
399,414
$
366,604
NET INCOME ATTRIBUTABLE TO ARLP
GENERAL PARTNER
$
—
$
—
$
—
$
1,560
LIMITED PARTNERS
$
25,832
$
50,773
$
399,414
$
365,044
EARNINGS PER LIMITED PARTNER UNIT -
BASIC AND DILUTED
$
0.20
$
0.38
$
3.07
$
2.74
WEIGHTED-AVERAGE NUMBER OF UNITS
OUTSTANDING – BASIC AND DILUTED
127,538,211
129,771,010
128,116,670
130,758,169
ALLIANCE RESOURCE PARTNERS,
L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except unit
data)
(Unaudited)
December 31,
2019
2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
36,482
$
244,150
Trade receivables
161,679
174,914
Other receivables
256
395
Inventories, net
101,305
59,206
Advance royalties, net
1,844
1,274
Prepaid expenses and other assets
18,019
20,747
Total current assets
319,585
500,686
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost
3,684,008
2,925,808
Less accumulated depreciation, depletion
and amortization
(1,675,022)
(1,513,450)
Total property, plant and equipment,
net
2,008,986
1,412,358
OTHER ASSETS:
Advance royalties, net
52,057
42,923
Equity method investments
28,529
161,309
Equity securities
—
122,094
Goodwill
136,399
136,399
Operating lease right-of-use assets
17,660
—
Other long-term assets
23,478
18,979
Total other assets
258,123
481,704
TOTAL ASSETS
$
2,586,694
$
2,394,748
LIABILITIES AND PARTNERS'
CAPITAL
CURRENT LIABILITIES:
Accounts payable
$
80,566
$
96,397
Accrued taxes other than income taxes
15,768
16,762
Accrued payroll and related expenses
36,575
43,113
Accrued interest
5,664
5,022
Workers' compensation and pneumoconiosis
benefits
11,175
11,137
Current finance lease obligations
8,368
46,722
Current operating lease obligations
3,251
—
Other current liabilities
21,062
19,718
Current maturities, long-term debt,
net
13,157
92,000
Total current liabilities
195,586
330,871
LONG-TERM LIABILITIES:
Long-term debt, excluding current
maturities, net
768,194
564,004
Pneumoconiosis benefits
94,389
68,828
Accrued pension benefit
44,858
43,135
Workers' compensation
45,503
41,669
Asset retirement obligations
133,018
127,655
Long-term finance lease obligations
2,224
10,595
Long-term operating lease obligations
14,316
—
Other liabilities
23,182
20,304
Total long-term liabilities
1,125,684
876,190
Total liabilities
1,321,270
1,207,061
PARTNERS' CAPITAL:
ARLP Partners' Capital:
Limited Partners - Common Unitholders
126,915,597 and 128,095,511 units outstanding, respectively
1,331,482
1,229,268
Accumulated other comprehensive loss
(77,993)
(46,871)
Total ARLP Partners' Capital
1,253,489
1,182,397
Noncontrolling interest
11,935
5,290
Total Partners' Capital
1,265,424
1,187,687
TOTAL LIABILITIES AND PARTNERS'
CAPITAL
$
2,586,694
$
2,394,748
ALLIANCE RESOURCE PARTNERS,
L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended
December 31,
2019
2018
CASH FLOWS FROM OPERATING
ACTIVITIES:
$
514,895
$
694,345
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property, plant and equipment:
Capital expenditures
(305,858)
(233,480)
Decrease in accounts payable and accrued
liabilities
(81)
(1,051)
Proceeds from sale of property, plant and
equipment
1,266
2,409
Contributions to equity method
investments
—
(15,600)
Distributions received from investments in
excess of cumulative earnings
2,501
2,473
Payments for acquisitions of businesses,
net of cash acquired
(320,232)
—
Cash received from redemption of equity
securities
134,288
—
Net cash used in investing activities
(488,116)
(245,249)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under securitization
facility
184,500
304,600
Payments under securitization facility
(202,700)
(285,000)
Proceeds from equipment financings
63,086
—
Payments on equipment financings
(2,607)
—
Borrowings under revolving credit
facilities
400,000
245,000
Payments under revolving credit
facilities
(320,000)
(100,000)
Payments on finance lease obligations
(46,725)
(29,353)
Payments for purchases of units under unit
repurchase program
(22,892)
(70,604)
Net settlement of withholding taxes on
issuance of units in deferred compensation plans
(7,817)
(2,081)
Cash contribution by General Partner
—
41
Cash contribution by affiliated entity
—
2,142
Cash obtained in Simplification
Transactions
—
1,139
Distributions paid to Partners
(278,425)
(275,902)
Other
(867)
(1,684)
Net cash used in financing activities
(234,447)
(211,702)
NET CHANGE IN CASH AND CASH
EQUIVALENTS
(207,668)
237,394
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD
244,150
6,756
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
36,482
$
244,150
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 acquisition gains.
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 Months Ended
Year Ended
December 31,
December 31,
September 30,
December 31,
2019
2018
2019
2018
2019
2020E Midpoint
Net income attributable to ARLP
$
25,832
$
50,773
$
399,414
$
366,604
$
39,084
$
120,000
Depreciation, depletion and
amortization
88,675
76,031
309,075
280,225
72,348
329,500
Interest expense, net
12,407
9,942
46,707
41,365
11,904
54,600
Capitalized interest
(421)
(415)
(1,211)
(1,306)
(298)
(1,700)
Income tax expense (benefit)
(341)
24
(211)
22
50
100
EBITDA
126,152
136,355
753,774
686,910
123,088
502,500
Settlement gain
—
—
—
(80,000)
—
—
Asset impairment
—
40,483
15,190
40,483
15,190
—
Acquisition gain
—
—
(177,043)
—
—
—
Acquisition gain attributable to
noncontrolling interest
—
—
7,083
—
—
—
Adjusted EBITDA
126,152
176,838
599,004
647,393
138,278
502,500
Interest expense, net
(12,407)
(9,942)
(46,707)
(41,365)
(11,904)
(54,600)
Income tax (expense) benefit
341
(24)
211
(22)
(50)
(100)
Estimated maintenance capital expenditures
(1)
(47,629)
(48,126)
(222,694)
(190,056)
(56,095)
(184,000)
Distributable Cash Flow
$
66,457
$
118,746
$
329,814
$
415,950
$
70,229
$
263,800
Distributions paid to partners
$
69,772
$
69,220
$
278,425
$
275,902
$
70,153
$
207,000
Distribution Coverage Ratio
0.95
1.72
1.18
1.51
1.00
1.27
_______________________________________
(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 2020 planning horizon,
average annual estimated maintenance capital expenditures are
assumed to be $5.04 per ton produced compared to the estimated
$5.57 per ton produced in 2019. 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" and
Reconciliation of non-GAAP "Adjusted EBITDA" to "Segment Adjusted
EBITDA" (in thousands).
Segment Adjusted EBITDA Expense includes operating expenses,
coal purchases and other expense. Segment Adjusted EBITDA Expense –
Coal excludes expenses of our Minerals segment. 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, royalty revenues and other 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 Months Ended
December 31,
December 31,
September 30,
2019
2018
2019
2018
2019
Operating expense
$
286,845
$
310,870
$
1,182,100
$
1,207,713
$
278,254
Outside coal purchases
7,447
24
23,357
1,466
10,599
Other (income) expense
(931)
420
(561)
2,621
228
Segment Adjusted EBITDA Expense
293,361
311,314
1,204,896
1,211,800
289,081
Minerals expenses
(1,702)
—
(7,811)
—
(2,517)
Segment Adjusted EBITDA Expense - Coal
$
291,659
$
311,314
$
1,197,085
$
1,211,800
$
286,564
Divided by tons sold
9,432
10,464
39,289
40,421
9,320
Segment Adjusted EBITDA Expense per
ton
$
30.92
$
29.75
$
30.47
$
29.98
$
30.75
Segment Adjusted EBITDA is defined as net income attributable to
ARLP before net interest expense, income taxes, depreciation,
depletion and amortization, general and administrative expenses,
settlement gain, asset impairment and acquisition gain. Segment
Adjusted EBITDA – Coal excludes the contribution of our Minerals
segment and equity securities income to allow management to focus
solely on the operating performance of our coal segments.
Three Months Ended
Year Ended
Three Months Ended
December 31,
December 31,
September 30,
2019
2018
2019
2018
2019
Adjusted EBITDA (See reconciliation to
GAAP above)
$
126,152
$
176,838
$
599,004
$
647,393
$
138,278
General and administrative
17,779
18,785
72,997
68,298
17,885
Segment Adjusted EBITDA
143,931
195,623
672,001
715,691
156,163
Minerals segment
(14,565)
(7,339)
(46,997)
(21,323)
(12,202)
Equity securities income
—
(4,129)
(12,906)
(15,696)
—
Segment Adjusted EBITDA – Coal
$
129,366
$
184,155
$
612,098
$
678,672
$
143,961
Divided by tons sold
9,432
10,464
39,289
40,421
9,320
Segment Adjusted EBITDA per ton
$
13.72
$
17.60
$
15.58
$
16.79
$
15.45
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200127005136/en/
Brian L. Cantrell Alliance Resource Partners, L.P. (918)
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