(Source: Business Wire)
On the strength of improved pricing from contractual coal sales commitments, Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported records for EBITDA and net income for the quarter ended March 31, 2009 (the "2009 Quarter"). Comparing the 2009 Quarter to the quarter ended March 31, 2008 (the "2008 Quarter"), EBITDA increased 56.6% to $107.8 million and net income rose 68.0% to $72.5 million, or $1.56 of net income per basic and diluted limited partner unit. (For a discussion of net income presentation and a definition of EBITDA and related reconciliations to GAAP, please see the end of this release).
ARLP also announced that the Board of Directors of its managing general partner (the "Board") increased the cash distribution to unitholders for the 2009 Quarter to $0.73 per unit (an annualized rate of $2.92 per unit), payable on May 15, 2009 to all unitholders of record as of the close of trading on May 8, 2009. The announced distribution represents a 24.8% increase over the cash distribution of $0.585 for the 2008 Quarter and a 2.1% increase over the cash distribution of $0.715 for the fourth quarter of 2008.
"With substantial coal supply commitments reflecting improved contract pricing, ARLP entered 2009 well positioned for a strong start and we delivered -- posting new records for quarterly revenues, EBITDA and net income," said Joseph W. Craft III, President and Chief Executive Officer. "These results are particularly gratifying in light of the challenges created by the continuing global recession and the disruptive ice storm that hit western Kentucky during the quarter. Looking ahead, even though reduced electricity generation and falling natural gas prices have resulted in lower coal demand and weakened spot coal prices, we remain optimistic that ARLP will achieve substantial year-over-year growth in earnings and cash flows in 2009. Accordingly, our Board was comfortable declaring another increase in quarterly cash distributions to ARLP unitholders."
Consolidated Financial Results
Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
In addition to the previously discussed records for net income and EBITDA, ARLP also reported record revenues for the 2009 Quarter of $329.3 million, an increase of 16.1% compared to revenues of $283.6 million for the 2008 Quarter. Higher revenues in the 2009 Quarter primarily reflect improved pricing under ARLP's coal sales contracts, which helped push its average price realization up to a record $48.59 per ton sold, an increase of $10.11 per ton sold compared to the average coal sales price realized in the 2008 Quarter.
Operating expenses increased to $196.4 million, compared to $192.6 million in the 2008 Quarter, primarily due to higher sales-related expenses, materials and supply costs, and maintenance costs. As anticipated, labor and labor-related expenses also increased in the 2009 Quarter as ARLP continued to hire and train new employees for the River View and Tunnel Ridge mine development projects.
Financial results for the 2009 Quarter were also impacted by higher depreciation, depletion and amortization, which increased in the 2009 Quarter to $27.4 million, compared to $23.3 million in the 2008 Quarter, as a result of recent capital expenditures related to infrastructure improvements, efficiency projects, reserve acquisitions and expansion of production capacity. In addition, net interest expense increased $4.5 million in the 2009 Quarter to $7.4 million due to ARLP's $350 million private placement of debt in June 2008.
Regional Results and Analysis 2009 Quarter 2008 Quarter % Change 2008 Qtr 4 % Change Illinois Basin Tons Sold (millions) 4.963 5.365 (7.5 )% 5.238 (5.3 )% Coal sales price per ton (1) $ 44.64 $ 34.28 30.2 % $ 36.31 22.9 % Segment Adjusted EBITDA Expense per ton(2) $ 26.48 $ 23.68 11.8 % $ 27.85 (4.9 )% Segment Adjusted EBITDA (millions) (2) $ 90.8 $ 57.5 57.9 % $ 44.6 103.6 % Central Appalachia Tons Sold (millions) 0.764 0.845 (9.6 )% 0.907 (15.8 )% Coal sales price per ton (1) $ 70.41 $ 58.08 21.2 % $ 61.42 14.6 % Segment Adjusted EBITDA Expense per ton(2) $ 48.56 $ 45.12 7.6 % $ 46.32 4.8 % Segment Adjusted EBITDA (millions) (2) $ 16.8 $ 11.1 51.4 % $ 13.8 21.7 % Northern Appalachia Tons Sold (millions) 0.700 0.784 (10.7 )% 0.806 (13.2 )% Coal sales price per ton (1) $ 52.13 $ 46.12 13.0 % $ 58.48 (10.9 )% Segment Adjusted EBITDA Expense per ton(2) $ 43.65 $ 35.98 21.3 % $ 44.24 (1.3 )% Segment Adjusted EBITDA (millions) (2) $ 6.7 $ 9.0 (25.6 )% $ 12.6 (46.8 )% Total (3) Tons Sold (millions) 6.427 6.994 (8.1 )% 6.951 (7.5 )% Coal sales price per ton (1) $ 48.59 $ 38.48 26.3 % $ 42.15 15.3 % Segment Adjusted EBITDA Expense per ton(2) $ 31.26 $ 27.92 12.0 % $ 32.76 (4.6 )% Segment Adjusted EBITDA (millions) (2) $ 117.5 $ 77.7 51.2 % $ 71.8 63.6 % (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 GAAP, please see the end of this release. (3) Total includes other, corporate and eliminations. -------------------------------------------------------------------------------
Reduced coal sales volumes in all operating regions resulted in lower total coal sales volumes of 6.4 million tons in the 2009 Quarter, compared to 7.0 million tons in the 2008 Quarter. Coal sales volumes in the Illinois Basin were impacted by weather disruptions in western Kentucky during the 2009 Quarter, particularly at the Dotiki, Warrior and Elk Creek mines. These disruptions coupled with unplanned customer outages also contributed to increased Illinois Basin coal inventory during the 2009 Quarter compared to the 2008 Quarter. Lower sales volumes and increased coal inventory in the Central Appalachian region reflect timing delays for scheduled coal shipments during the 2009 Quarter. Lower than anticipated spot market sales in the 2009 Quarter impacted sales volumes and coal inventory in the Northern Appalachian region, compared to the 2008 Quarter.
As previously discussed, ARLP continued to benefit from improved contract pricing across all operating regions during the 2009 Quarter resulting in a 26.3% increase in total average coal sales price per ton over the 2008 Quarter. In addition, higher average coal sales prices per ton in the Central Appalachian and Northern Appalachian regions reflect increased price realizations on sales of purchased tons during the 2009 Quarter.
Total Segment Adjusted EBITDA Expense per ton increased 12.0% during the 2009 Quarter to $31.26 per ton sold, compared to the 2008 Quarter. As previously discussed, all of ARLP's operating regions experienced higher sales related expenses and labor expenses, as well as increased materials and supply costs during the 2009 Quarter. In addition, costs in the Illinois Basin were impacted by the weather disruptions in western Kentucky while the Central and Northern Appalachian regions experienced higher purchased coal costs in the 2009 Quarter. Expenses related to our River View and Tunnel Ridge organic growth projects also contributed to the increased costs for the Illinois Basin and Northern Appalachian Basin, respectively, during the 2009 Quarter. Compared to the fourth quarter of 2008, however, Segment Adjusted EBITDA expenses per ton in the 2009 Quarter declined by 4.6% as ARLP began to benefit from lower costs for certain consumables and cost control efforts at all operations. (For a definition of Segment Adjusted EBITDA and reconciliation to GAAP, please see the end of this release.)
Outlook
Commenting on ARLP's outlook, Mr. Craft said, "The effects of the ongoing economic slowdown and a lack of confidence as to the timing of an economic rebound continue to create significant uncertainties for energy demand in general, including coal and competing fuels. Consequently, we are seeing very little spot buying activity for 2009 and most of our customers are cautious about predicting 2010 demand levels for coal. In response, ARLP is adjusting its production and sales estimates for the balance of 2009 to reflect reduced demand. These adjustments will include reducing overtime and moving a production unit in the second half of this year from one of our western Kentucky operations to our new River View mine. This move will allow us to stay on our planned development schedule at River View while managing overall production levels in a difficult market. In addition, we are adjusting the construction schedule at our Tunnel Ridge mine to coincide initial continuous miner development production with completion of the coal preparation plant in mid-2010. As a result, longwall production at Tunnel Ridge is now anticipated to begin in late 2011. We intend to remain flexible and disciplined in our response to these evolving market dynamics. Fortunately, our strong balance sheet and cash flows, solid customer base and significant contracted positions leave ARLP well positioned to successfully navigate through the current market environment."
Due to the operational adjustments discussed above, ARLP is currently anticipating coal production for 2009 in a range of 27.1 to 27.5 million tons. ARLP currently has approximately 26.3 million tons of coal contractually committed and priced in 2009 and has secured sales commitments for approximately 25.3 million tons, 22.9 million tons and 16.2 million tons in 2010, 2011 and 2012, respectively. Approximately 1.5 million tons, 1.5 million tons and 2.5 million tons of these coal sales commitments remain open to market pricing in 2010, 2011 and 2012, respectively.
Based on current estimates for coal sales volumes and pricing for uncommitted tons, ARLP is reducing 2009 estimates for revenues, excluding transportation revenues, to a range of $1.29 to $1.37 billion, and is currently anticipating EBITDA and net income near the lower end of its previous guidance ranges of $400.0 to $440.0 million and $240.0 to $280.0 million, respectively. These estimated ranges reflect ARLP's current expectations and its best judgments regarding the coal markets and other factors, including coal sales volumes and price realizations for uncommitted tons during the balance of 2009. As reflected in the Forward-Looking Statements Disclosure below, a number of these factors are beyond ARLP's control and, consequently, its actual results may differ from current expectations. (For a discussion of net income presentation and a definition of EBITDA and related reconciliations to GAAP, please see the end of this release.)
Reflecting revised operating plans and mine construction schedules, ARLP is also lowering estimated 2009 total capital expenditures, including maintenance capital expenditures, to a range of $375.0 to $425.0 million. Due to lower capital expenditures in 2009, ARLP's liquidity is expected to be $25 to $50 million higher for the year even with the lower production outlook.
A conference call regarding ARLP's 2009 Quarter financial results is scheduled for today at 10:00 a.m. Eastern. To participate in the conference call, dial (800) 901-5218 and provide pass code 53546355. International callers should dial (617) 786-4511. 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 (888) 286-8010 and provide pass code 68264747. International callers should dial (617) 801-6888.
This announcement is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b), with 100% of the partnership's distributions to foreign investors attributable to income that is effectively connected with a United States trade or business. Accordingly, ARLP's distributions to foreign investors are subject to federal income tax withholding at the highest applicable tax rate.
About Alliance Resource Partners, L.P.
ARLP is a diversified producer and marketer of coal to major United States utilities and industrial users. ARLP, the nation's only publicly traded master limited partnership involved in the production and marketing of coal, is currently the fifth largest coal producer in the eastern United States with operations in all major eastern coalfields. ARLP currently operates eight underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia. We are constructing two new mining complexes, one in Kentucky and one in West Virginia, and also operate a coal loading terminal on the Ohio River at Mt. Vernon, Indiana.
News, unit prices and additional information about ARLP, including filings with the Securities and Exchange Commission, are available at http://www.arlp.com. For more information, contact the investor relations department of 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. At the end of this release, we have included more information regarding business risks that could affect our results.
FORWARD-LOOKING STATEMENTS: With the exception of historical matters, any matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. These risks, uncertainties and contingencies include, but are not limited to, the following: increased competition in coal markets and our ability to respond to the competition; sustained decreases in coal prices, which could adversely affect our operating results and cash flows; decreases in spot market prices for coal; risks associated with the expansion of our operations and properties; deregulation of the electric utility industry or the effects of any adverse change in the coal industry, electric utility industry, or general economic conditions; dependence on significant customer contracts, including renewing customer contracts upon expiration of existing contracts; the impact and duration of the current worldwide economic downturn; liquidity constraints, including those resulting from the cost or unavailability of financing due to current credit market conditions; customer bankruptcies or cancellations or breaches to existing contracts; customer delays or defaults in making payments; fluctuations in coal demand, prices and availability due to labor and transportation costs and disruptions, equipment availability, governmental regulations, including those related to carbon emissions, and other factors; legislation, regulatory and court decisions and interpretations thereof, including but not limited to issues related to climate change and miner health and safety; our productivity levels and margins that we earn on our coal sales; greater than expected increases in raw material costs; greater than expected shortage of skilled labor; any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments associated with post-mine reclamation and workers' compensation claims; any unanticipated increases in transportation costs and risk of transportation delays or interruptions; greater than expected environmental regulation, costs and liabilities; a variety of operational, geologic, permitting, labor and weather-related 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; coal market's share of electricity generation; prices of fuel that compete with or impact coal usage, such as oil or natural gas; replacement of coal reserves; a loss or reduction of direct or indirect benefits from certain state and federal tax credits; and difficulty obtaining commercial property insurance, and risks associated with our participation (excluding any applicable deductible) in the commercial insurance property program.
Additional information concerning these and other factors can be found in ARLP's public periodic filings with the Securities and Exchange Commission ("SEC"), including ARLP's Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 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.
