(Source: Business Wire)
Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported increased revenues, EBITDA and net income for the quarter ended June 30, 2009 (the "2009 Quarter"). Comparing the 2009 Quarter to the quarter ended June 30, 2008 (the "2008 Quarter"), revenues grew 10.0% to $303.9 million, EBITDA increased 17.9% to $77.1 million, and net income rose 13.0% to $41.5 million, or $0.72 of net income per basic and diluted limited partner unit. (For a discussion of our 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 $0.745 per unit (an annualized rate of $2.98 per unit), payable on August 14, 2009 to all unitholders of record as of the close of trading on August 7, 2009. The announced distribution represents a 12.9% increase over the cash distribution of $0.66 for the 2008 Quarter and a 2.1% increase over the cash distribution of $0.73 for the first quarter of this year.
"ARLP has delivered record financial results through the first six months of 2009 and we remain on track to post our ninth consecutive year of record results," said Joseph W. Craft III, President and Chief Executive Officer. "Despite strong current headwinds from significant reductions in electricity generation and decreased demand for coal, we continue to be optimistic about the long-term fundamentals for our Partnership. Supporting this optimism, we continue to be encouraged by discussions with customers seeking to secure long-term coal supplies of low-chlorine, high-sulfur coal from the Illinois Basin. These discussions are evidence of the confidence our customers place in ARLP's long-term operational reliability, supply diversity and financial strength."
Consolidated Financial Results
Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
Higher revenues in the 2009 Quarter were driven primarily by improved pricing under ARLP's coal sales contracts, which more than offset lower sales ton volumes. ARLP realized average coal sales prices of $46.04 per ton sold in the 2009 Quarter, an increase of 16.6% compared to the 2008 Quarter. Sales volumes fell to 6.2 million tons in the 2009 Quarter, a decrease of 5.7% compared to the 2008 Quarter, primarily due to reduced spot market and export sales and the impact of unplanned outages at several customers' power plants. Reflecting ARLP's ongoing efforts to match production to contractual obligations and market demand, production volumes also declined in the 2009 Quarter to 6.3 million tons, compared to 6.5 million tons in the 2008 Quarter.
Operating expenses increased to $204.5 million, compared to $191.4 million in the 2008 Quarter, primarily as a result of higher labor and labor-related expenses, sales-related expenses, and maintenance costs. Reflecting the previously mentioned weakness in the spot coal markets, expenses for outside coal purchases declined $4.1 million in the 2009 Quarter compared to the 2008 Quarter.
Financial results for the 2009 Quarter were also impacted by higher depreciation, depletion and amortization, which increased in the 2009 Quarter to $28.3 million, compared to $25.6 million in the 2008 Quarter, as a result of recent capital expenditures related to infrastructure improvements, efficiency projects and expansion of production capacity. In addition, net interest expense increased $4.5 million in the 2009 Quarter to $7.5 million due to ARLP's $350 million private placement of debt in June 2008. General and administrative expenses decreased in the 2009 Quarter to $9.3 million, compared to $12.1 million in the 2008 Quarter, primarily as a result of lower incentive compensation expenses.
Comparative results between the 2009 and 2008 Quarters were also impacted by non-recurring benefits to net income in the 2008 Quarter totaling $9.9 million related to favorable claims settlements and sale of non-core coal reserves.
Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
For the six months ended June 30, 2009 (the "2009 Period"), ARLP reported records for revenues, EBITDA and net income. Revenues for the 2009 Period rose to $633.2 million, an increase of 13.1% compared to the six months ended June 30, 2008 (the "2008 Period"). Average coal sales prices for the 2009 Period increased $8.35 per ton sold to $47.33 per ton sold, more than offsetting lower coal sales volumes, which fell approximately 942,000 tons compared to the 2008 Period. EBITDA for the 2009 Period increased 37.7% to $184.9 million, compared to EBITDA of $134.2 million for the 2008 Period. Net income for the 2009 Period was $114.0 million, or $2.28 of net income per basic and diluted limited partner unit, compared to net income of $79.9 million, or $1.60 of net income per basic and diluted limited partner unit, for the 2008 Period. (For a discussion of our net income presentation and a definition of EBITDA and related reconciliations to GAAP, please see the end of this release).
Compared to the 2008 Period, financial results for the 2009 Period were also impacted by higher operating expenses and depreciation, depletion and amortization, lower general and administrative expenses and outside coal purchases, and the 2008 Period non-recurring events discussed above.
Regional Results and Analysis % Change 2009 Second 2008 Second Quarter / 2009 First % Change (in millions, except per ton data) Quarter Quarter Quarter Quarter Sequential Illinois Basin Tons sold 5.062 4.959 2.1 % 4.963 2.0 % Coal sales price per ton (1) $ 43.06 $ 34.01 26.6 % $ 44.64 (3.5 )% Segment Adjusted EBITDA Expense per ton(2) $ 27.88 $ 24.50 13.8 % $ 26.48 5.3 % Segment Adjusted EBITDA (2) $ 77.0 $ 47.3 62.8 % $ 90.8 (15.2 )% Central Appalachia Tons sold 0.615 0.866 (29.0 )% 0.764 (19.5 )% Coal sales price per ton (1) $ 66.70 $ 60.89 9.5 % $ 70.41 (5.3 )% Segment Adjusted EBITDA Expense per ton(2) $ 56.69 $ 44.57 27.2 % $ 48.56 16.7 % Segment Adjusted EBITDA (2) $ 6.2 $ 16.9 (63.3 )% $ 16.8 (63.1 )% Northern Appalachia Tons sold 0.570 0.797 (28.5 )% 0.700 (18.6 )% Coal sales price per ton (1) $ 50.25 $ 50.43 (0.4 )% $ 52.13 (3.6 )% Segment Adjusted EBITDA Expense per ton(2) $ 48.63 $ 42.25 15.1 % $ 43.65 11.4 % Segment Adjusted EBITDA (2) $ 1.6 $ 7.6 (78.9 )% $ 6.7 (76.1 )% Total (3) Tons sold 6.247 6.622 (5.7 )% 6.427 (2.8 )% Coal sales price per ton (1) $ 46.04 $ 39.50 16.6 % $ 48.59 (5.2 )% Segment Adjusted EBITDA Expense per ton(2) $ 32.77 $ 29.55 10.9 % $ 31.26 4.8 % Segment Adjusted EBITDA (2) $ 86.4 $ 77.5 11.5 % $ 117.5 (26.5 )% -------------------------------------------------------------------------------
(1) Sales price per ton is defined as total coal sales divided by total tons sold. (2) For definitions of Segment Adjusted EBITDA expense per ton and Segment Adjusted EBITDA and related reconciliations to GAAP, please see the end of this release. (3) Total includes other, corporate and eliminations. -------------------------------------------------------------------------------
Generally weak coal demand and reduced deliveries due to unplanned outages experienced by several customers pushed total coal sales volumes down in the 2009 Quarter by 5.7% compared to the 2008 Quarter and 2.8% compared to the first quarter of 2009. In addition, lower coal sales volumes in the Central and Northern Appalachian regions reflect the impact of reduced spot market sales. Partially offsetting these reductions, Illinois Basin coal sales volumes in the 2009 Quarter increased slightly compared to the 2008 Quarter and the first quarter of 2009. Coal inventories increased in each of ARLP's operating regions during the 2009 Quarter to a total of approximately 915,000 tons, an increase of approximately 574,000 tons over the 2008 Quarter and 89,000 tons over the sequential 2009 quarter.
Comparing the 2009 Quarter to the 2008 Quarter, ARLP continued to benefit from improved contract pricing resulting in a 16.6% increase in total average coal sales price per ton. Sequentially, lower average coal sales prices per ton in the 2009 Quarter reflect the completion in the first quarter 2009 of high-priced sales from spot and export market transactions initiated in 2008. Lower sales prices in the 2009 Quarter, compared to the first quarter of 2009, also reflect the impact of reduced pricing due to index price adjustments under several long-term contracts.
Efforts to adjust production in response to reduced coal demand, as well as the previously discussed increases to labor and labor-related expenses, sales-related expenses, maintenance costs and inventory levels, all contributed to higher Segment Adjusted EBITDA expense per ton in each of ARLP's operating regions during the 2009 Quarter. Increased labor-related expenses included higher workers' compensation expense (primarily due to a non-cash charge related to discount rate fluctuations), which impacted Segment Adjusted EBITDA expense by $0.95 per ton on a consolidated basis, $0.61 per ton in the Illinois Basin, $0.93 per ton in Northern Appalachia and $4.17 per ton in Central Appalachia. As anticipated, costs per ton in the Central Appalachian region also reflect higher operating costs as the Pontiki mine completed its transition from the Pond Creek coal seam into the thinner Van Lear coal seam during the 2009 Quarter. In addition, a longwall move at the Mountain View mine during the 2009 Quarter also resulted in increased costs per ton in Northern Appalachia. Expenses related to the River View and Tunnel Ridge organic growth projects also contributed to the increased costs for the Illinois Basin and Northern Appalachian regions, respectively, during the 2009 Quarter. (For a definition of Segment Adjusted EBITDA and reconciliation to GAAP, please see the end of this release.)
Outlook
Commenting on ARLP's outlook for the remainder of 2009, Mr. Craft said, "Reflecting continuing economic weakness and low natural gas prices, year-over-year coal fired power generation is down nearly 12% nationwide and over 14% in the eastern markets. With reduced power generation and historically high utility stockpiles, we anticipate coal demand is likely to remain constrained through 2010. As evidenced by ARLP's actions to reduce production earlier this year and, more recently at our Pontiki mine, we will continue to exercise discipline as we manage production volumes in this difficult market environment. Due to the operational adjustments made thus far, ARLP is currently anticipating coal production for 2009 in a range of 25.9 to 26.4 million tons, substantially all of which is contractually committed and priced. Although we are lowering guidance to reflect these adjustments necessitated by lower market demand, ARLP is well positioned to deliver record financial results in 2009 relying on strong contractual commitments at favorable pricing and operational excellence."
Looking beyond 2009, ARLP has also secured sales commitments for approximately 25.7 million tons, 23.8 million tons and 16.9 million tons in 2010, 2011 and 2012, respectively. Approximately 1.5 million, 1.5 million and 1.0 million tons of these coal sales commitments remain open to market pricing in 2010, 2011 and 2012, respectively.
Based on current estimates, ARLP is reducing 2009 guidance for revenues, excluding transportation revenues, to a range of $1.20 to $1.30 billion; EBITDA, to a range of $335.0 to $365.0 million; and net income, to a range of $185.0 to $215.0 million. These estimated ranges reflect ARLP's current expectations and its best judgments regarding the coal markets, coal sales volumes and other factors for 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 our net income presentation and a definition of EBITDA and related reconciliations to GAAP, please see the end of this release.)
Total capital expenditures for 2009 have been further reduced to a range of $350.0 to $400.0 million, including maintenance capital expenditures. Since the beginning of the year, adjustments to operating plans and construction schedules have reduced planned capital expenditures by $70.0 to $80.0 million. As a result, although 2009 financial results will be below initial estimates, ARLP currently anticipates year end liquidity levels comparable to original expectations.
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 (866) 831-6272 and provide pass code 97717775. International callers should dial (617) 213-8859. 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 89249803. 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.
