Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported
significant increases to financial and operating results for the
quarter ended September 30, 2020 (the "2020 Quarter") on improved
demand for coal and oil & gas compared to the quarter ended
June 30, 2020 (the "Sequential Quarter"). On a consolidated basis,
total revenues increased 39.4% to $355.7 million, net income rose
158.3% to $27.2 million and EBITDA climbed 146.4% to $118.8
million, all as compared to the Sequential Quarter. With improved
coal demand and a resumption of production at all of ARLP’s mining
complexes, our coal operations delivered increases to coal sales
and production volumes of 48.5% and 66.6%, respectively, leading
coal sales revenue and Segment Adjusted EBITDA higher by 42.1% and
113.8%, respectively, all as compared to the Sequential Quarter.
Our Minerals segment also reported improved performance compared to
the Sequential Quarter as oil & gas production and price per
BOE increased 13.9% and 9.5%, respectively, to drive total revenues
from oil & gas royalties and lease bonuses up by 23.9% and
Segment Adjusted EBITDA higher by 29.3%. (Unless otherwise noted,
all references in the text of this release to "net income (loss)"
refer to "net income (loss) attributable to ARLP." For a definition
of EBITDA and Segment Adjusted EBITDA and related reconciliations
to comparable GAAP financial measures, please see the end of this
release.)
Compared to the quarter ended September 30, 2019 (the "2019
Quarter"), financial and operating results for the 2020 Quarter
continued to reflect the impacts of reduced global energy demand
and weak commodity prices as a result of lockdown measures imposed
in response to the COVID-19 pandemic. Total revenues of $355.7
million in the 2020 Quarter were lower compared to $464.7 million
for the 2019 Quarter, primarily due to reduced coal sales volumes
and prices. Reflecting the lower revenues partially offset by
reduced total operating expenses, net income for the 2020 Quarter
was $27.2 million, or $0.21 per basic and diluted limited partner
unit, compared to $39.1 million, or $0.30 per basic and diluted
limited partner unit, for the 2019 Quarter. EBITDA in the 2020
Quarter of $118.8 million was also lower compared to $123.1 million
in the 2019 Quarter.
"As we expected, ARLP’s performance during the 2020 Quarter
benefited from improved economic activity, increased coal demand
and recovering oil & gas production volumes and prices," said
Joseph W. Craft III, Chairman, President and Chief Executive
Officer. "Our coal operations responded to increased customer
requirements by successfully ramping up production to meet
contractual commitments while effectively mitigating the impacts of
COVID-19 through the enhanced health and safety protocols
implemented earlier this year. Stronger commodity prices led oil
& gas operators to bring previously shut-in wells back online
and slowly resume drilling and completion of wells on our mineral
interests. The continuing efforts of the entire organization to
optimize cash flow, reduce working capital and control capital
expenditures and expenses enhanced our financial position and
liquidity. As a result, all of ARLP’s operating and financial
metrics improved significantly during the 2020 Quarter."
Financial and Liquidity Update
Compared to the Sequential Quarter, ARLP’s free cash flow
increased 79.0% to $103.0 million, which contributed to liquidity
expanding by 41.4% to $422.2 million and total debt reductions of
$100.8 million. With total leverage improving to 1.69 times at the
end of the 2020 Quarter, compared to 1.82 times at the end of the
Sequential Quarter, ARLP’s balance sheet remains strong and
comfortably in compliance with all debt covenants, including its
total leverage covenant of 2.5 times. (For a definition of free
cash flow and related reconciliations to comparable GAAP financial
measures, please see the end of this release.)
As previously announced, the Board of Directors of ARLP's
general partner (the "Board") suspended the cash distribution to
unitholders for the 2020 Quarter. At its quarterly meeting last
week, the Board extended the suspension of distributions through
the quarter ending December 31, 2020.
Consolidated Financial Results
Our financial and operating results for the 2020 Quarter and the
nine months ended September 30, 2020 (the "2020 Period") continued
to be impacted by reduced global energy demand, lower commodity
prices and economic disruptions caused by the ongoing effects of
the COVID-19 pandemic, compared to the 2019 Quarter and the nine
months ended September 30, 2019 (the "2019 Period").
Three Months Ended September 30, 2020 Compared to Three Months
Ended September 30, 2019
Total revenues for the 2020 Quarter decreased 23.5% to $355.7
million compared to $464.7 million for the 2019 Quarter. Operating
expenses of $216.0 million for the 2020 Quarter were 22.4% lower
compared to $278.3 million in the 2019 Quarter.
Coal Operations –
Coal sales volumes declined to 7.7 million
tons in the 2020 Quarter compared to 9.3 million tons in the 2019
Quarter reflecting reduced export sales volumes. Coal sales price
realizations fell by 3.3% in the 2020 Quarter due to lower priced
thermal and metallurgical markets compared to the 2019 Quarter.
Lower volumes and pricing resulted in a 20.1% decrease in coal
sales revenues to $335.8 million compared to $420.0 million for the
2019 Quarter. Transportation revenues and expenses decreased to
$6.2 million from $20.0 million primarily due to reduced coal
shipments to international markets. Other revenues in the 2020
Quarter decreased by $6.8 million to $4.0 million primarily due to
reduced sales of mining technology products by our Matrix Design
subsidiary and lower volumes at our Mt. Vernon transloading
facility.
ARLP’s focus on reducing coal inventories and
matching production to meet customer requirements resulted in coal
production of 7.2 million tons in the 2020 Quarter, a reduction of
28.5% compared to the 2019 Quarter. Operating expenses and outside
coal purchases decreased 24.9% from the 2019 Quarter to $215.1
million, primarily as a result of lower coal production
volumes.
Segment Adjusted EBITDA Expense per ton
decreased 8.8% in the 2020 Quarter to $28.03 per ton, compared to
$30.75 per ton in the 2019 Quarter. The decrease is attributed
primarily to ongoing expense control initiatives at all operations,
and, as discussed below in our segment results, a favorable sales
mix from our lower cost mines and improved recovery percentages at
certain operations. Costs per ton were further reduced by lower
inventory costs and the absence of higher cost purchased tons sold
at our Appalachian mines. These reductions were partially offset by
higher excise and severance taxes per ton due to a $0.60 per ton
increase in the federal black lung excise tax, effective January 1,
2020, and a greater mix of coal sales from operations in states
with higher severance taxes per ton during the 2020 Quarter.
Lower coal sales revenues, partially offset
by lower expenses, resulted in total Segment Adjusted EBITDA from
our coal operations of $123.8 million in the 2020 Quarter, a 14.0%
decline compared to $144.0 million for the 2019 Quarter. (For a
definition of Segment Adjusted EBITDA and Segment Adjusted EBITDA
Expense and related reconciliations to comparable GAAP financial
measures, please see the end of this release.)
Minerals –
Primarily due to lower oil & gas sales
prices in the 2020 Quarter compared to the 2019 Quarter, total
revenues from oil & gas royalties and lease bonuses
attributable to our mineral interests declined to $9.7 million from
$14.2 million. Partially offsetting lower price realizations,
revenues benefited from higher volumes as a result of the Wing
Acquisition in August 2019. Our Minerals segment contributed
Segment Adjusted EBITDA of $8.9 million for the 2020 Quarter,
compared to a contribution of $12.2 million for the 2019
Quarter.
ARLP's expense reduction initiatives drove general and
administrative expenses lower to $13.9 million in the 2020 Quarter,
a reduction of 22.4% compared to the 2019 Quarter. Depreciation,
depletion and amortization increased 10.8% to $80.2 million in the
2020 Quarter, primarily due to charges related to increased sales
from coal inventory.
Comparative results for the 2020 Quarter were also impacted by a
non-cash asset impairment charge of $15.2 million recorded in the
2019 Quarter due to the closure of our Dotiki mine.
Nine Months Ended September 30, 2020 Compared to Nine Months
Ended September 30, 2019
Total revenues decreased 36.2% to $961.6 million for the 2020
Period compared to $1.51 billion for the 2019 Period. Lower
revenues and a non-cash goodwill impairment charge of $132.0
million, partially offset by lower operating expenses, resulted in
a net loss of $164.2 million, or $(1.29) per basic and diluted
limited partner unit for the 2020 Period. This compares to net
income of $373.6 million, or $2.86 per basic and diluted limited
partner unit for the 2019 Period, which included a non-cash net
gain of $170.0 million related to the AllDale Acquisition.
Excluding the impact of non-cash items (each described in more
detail below), Adjusted net income (loss) attributable to ARLP and
Adjusted EBITDA for the 2020 Period decreased to $(7.2) million and
$265.3 million, respectively, compared to $218.8 million and $472.9
million, respectively, for the 2019 Period. (For a definition of
Adjusted net income (loss) attributable to ARLP and Adjusted EBITDA
and related reconciliations to comparable GAAP financial measures,
please see the end of this release.)
Coal Operations –
Due to reduced coal sales volumes and prices,
coal sales revenues for the 2020 Period decreased 34.7% to $886.7
million, compared to $1.36 billion for the 2019 Period. Tons sold
declined 32.5% to 20.1 million tons in the 2020 Period, primarily
due to reduced shipments to international markets. Coal sales price
realizations declined 3.1% in the 2020 Period to $44.03 per ton
sold, compared to $45.46 per ton sold during the 2019 Period.
Reduced export shipments also impacted transportation revenues and
expenses, which declined $66.2 million to $16.7 million in the 2020
Period.
ARLP’s temporary idling of production at
certain mines in response to weak market conditions during the 2020
Period, reduced coal production volumes to 19.5 million tons
compared to 31.4 million tons during the 2019 Period. Primarily as
a result of lower coal production volumes, combined operating
expenses and outside coal purchases for our coal operations
decreased 30.0% to $633.8 million. Segment Adjusted EBITDA Expense
per ton increased 4.2% in the 2020 Period to $31.59 per ton,
compared to $30.33 per ton in the 2019 Period. The increase is
attributed primarily to the per ton cost impact of lower coal
volumes and higher excise and severance taxes discussed above.
Lower coal sales revenues, partially offset by lower expenses,
resulted in total Segment Adjusted EBITDA from our coal operations
of $276.9 million in the 2020 Period, a 42.6% decline compared to
$482.7 million for the 2019 Period.
Minerals –
For the 2020 Period, our mineral interests
contributed total revenues of $31.8 million from oil & gas
royalties and lease bonuses, compared to $37.3 million for the 2019
Period. The decrease in revenues is primarily due to lower average
product prices, partially offset by higher volumes resulting from
the Wing Acquisition in August 2019, and continued drilling and
development of our mineral interests. Comparative results between
the 2020 and 2019 Periods were also impacted by a non-cash
acquisition gain of $177.0 million, of which $7.1 million was
attributable to non-controlling interest, related to the AllDale
Acquisition during the 2019 Period. Our Minerals segment
contributed net income of $4.5 million for the 2020 Period,
compared to $174.9 million for the 2019 Period, which included the
acquisition gain. Excluding the gain, Segment Adjusted EBITDA
related to our Minerals segment decreased 8.9% to $29.5 million for
the 2020 Period compared to $32.4 million for the 2019 Period.
General and administrative expenses decreased $14.1 million to
$41.1 million in the 2020 Period as a result of ARLP's expense
reduction initiatives. Compared to the 2019 Period, depreciation,
depletion and amortization increased 7.8% to $237.7 million
primarily due to charges related to increased sales from coal
inventory and increased oil & gas production from our Minerals
segment in the 2020 Period.
During the 2020 Period, we recorded $157.0 million of non-cash
impairment charges, which included a $132.0 million goodwill
impairment charge associated with our Hamilton mine and a $25.0
million asset impairment charge due to the permanent closure of our
Gibson North mine and a decrease in the fair value of certain
mining equipment and greenfield coal reserves. These non-cash
charges reflect the impact of weak coal market conditions and
reduced global energy demand resulting from the COVID-19 pandemic.
During the 2019 Period, we recorded an asset impairment charge of
$15.2 million due to the closure of our Dotiki mine.
As a result of the redemption by Kodiak Gas Services, LLC of our
preferred equity interest for $135.0 million cash in the 2019
Period, ARLP did not realize equity securities income in the 2020
Period, compared to $12.9 million realized in the 2019 Period.
Segment Results and Analysis
% Change
2020 Third
2019 Third
Quarter /
2020 Second
% Change
(in millions, except per ton and per
BOE data)
Quarter
Quarter
Quarter
Quarter
Sequential
Coal
Operations
Illinois
Basin
Tons sold
5.219
6.553
(20.4
)%
3.350
55.8
%
Coal sales price per ton (1)
$
39.54
$
39.11
1.1
%
$
40.05
(1.3
)%
Segment Adjusted EBITDA Expense per ton
(2)
$
23.95
$
26.52
(9.7
)%
$
32.38
(26.0
)%
Segment Adjusted EBITDA (2)
$
81.6
$
87.8
(7.0
)%
$
26.2
212.0
%
Appalachia
Tons sold
2.483
2.767
(10.3
)%
1.836
35.2
%
Coal sales price per ton (1)
$
52.12
$
58.66
(11.1
)%
$
55.62
(6.3
)%
Segment Adjusted EBITDA Expense per ton
(2)
$
34.82
$
39.03
(10.8
)%
$
40.28
(13.6
)%
Segment Adjusted EBITDA (2)
$
43.4
$
55.2
(21.4
)%
$
30.5
41.9
%
Total
Coal
Tons sold
7.702
9.320
(17.4
)%
5.186
48.5
%
Coal sales price per ton (1)
$
43.59
$
45.06
(3.3
)%
$
45.56
(4.3
)%
Segment Adjusted EBITDA Expense per ton
(2)
$
28.03
$
30.75
(8.8
)%
$
35.95
(22.0
)%
Segment Adjusted EBITDA (2)
$
123.8
$
144.0
(14.0
)%
$
55.2
124.4
%
Minerals
(3)
Volume - BOE
0.468
0.433
8.1
%
0.411
13.9
%
Volume - oil percentage of BOE
49.4
%
44.8
%
10.3
%
53.3
%
(7.3
)%
Average sales price per BOE (3)
$
20.71
$
32.22
(35.7
)%
$
18.92
9.5
%
Segment Adjusted EBITDA Expense (2)
$
0.85
$
2.52
(66.3
)%
$
1.12
(24.1
)%
Segment Adjusted EBITDA (2)
$
8.9
$
12.2
(27.1
)%
$
6.9
29.3
%
Consolidated
Total (4)
Total revenues
$
355.7
$
464.7
(23.5
)%
$
255.2
39.4
%
Segment Adjusted EBITDA Expense (2)
$
216.8
$
289.1
(25.0
)%
$
187.5
15.6
%
Segment Adjusted EBITDA (2)
$
132.7
$
156.2
(15.0
)%
$
62.1
113.8
%
____________________
(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)
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).
(4)
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.
Compared to the 2019 Quarter, total coal sales volumes decreased
17.4% in the 2020 Quarter due to the impacts of the COVID-19
pandemic and reduced export shipments. Driven by improved coal
demand during the 2020 Quarter, ARLP’s coal sales volumes increased
across all regions compared to the Sequential Quarter. Higher
volumes at all of our mines in the Illinois Basin increased coal
sales volumes by 55.8% compared to the Sequential Quarter. In
Appalachia, coal sales volumes increased 35.2% compared to the
Sequential Quarter primarily due to higher sales from our Tunnel
Ridge mine. Total coal inventory fell to 1.2 million tons at the
end of the 2020 Quarter, a decrease of 1.3 million tons and 0.5
million tons compared to the end of the 2019 and Sequential
Quarters, respectively.
In the Illinois Basin, coal sales price per ton in the 2020
Quarter was comparable to both the 2019 and Sequential Quarters. In
Appalachia, price realizations decreased by 11.1% compared to the
2019 Quarter primarily due to weak market conditions and the
absence of higher priced metallurgical coal sales in the 2020
Quarter. Coal sales price per ton sold in Appalachia during the
2020 Quarter decreased by 6.3% compared to the Sequential Quarter,
primarily due to an increased sales mix of lower-priced Tunnel
Ridge sales tons in the 2020 Quarter.
Total Segment Adjusted EBITDA Expense per ton decreased by 8.8%
compared to the 2019 Quarter as a result of lower expenses per ton
in both the Illinois Basin and Appalachian regions. In the Illinois
Basin, Segment Adjusted EBITDA Expense per ton decreased 9.7%
compared to the 2019 Quarter primarily as a result of reduced
maintenance expenses per ton as well as lower materials and
supplies expenses per ton. The reduced expenses reflect a greater
mix of sales from lower cost River View production, the elimination
of high cost Dotiki production in 2019 and improved recovery
percentages at Gibson, partially offset by reduced total coal
production volumes from the region. In Appalachia, Segment Adjusted
EBITDA Expense per ton decreased 10.8% compared to the 2019 Quarter
as a result of improved recoveries at our Mettiki and Tunnel Ridge
mines, lower maintenance expenses across the region, lower
inventory costs and the absence of higher cost purchased tons sold.
Compared to the 2019 Quarter, expenses per ton for both segments
were impacted by higher excise and severance taxes as discussed
above. Sequentially, Segment Adjusted EBITDA Expense per ton
decreased 26.0% in the Illinois Basin as a result of significantly
higher volumes in the 2020 Quarter. In Appalachia, Segment Adjusted
EBITDA Expense per ton decreased 13.6% compared to the Sequential
Quarter due to higher sales volumes and an increased sales mix of
lower-cost Tunnel Ridge production in the 2020 Quarter. Compared to
the Sequential Quarter, both regions benefited from lower inventory
costs per ton in the 2020 Quarter.
Segment Adjusted EBITDA for our Minerals segment decreased 27.1%
to $8.9 million in the 2020 Quarter compared to $12.2 million in
the 2019 Quarter primarily due to lower sales price realizations
per BOE resulting from reduced demand amid the COVID-19 pandemic,
partially offset by higher volumes, which increased 8.1% compared
to the 2019 Quarter primarily as a result of production from the
additional mineral interests acquired in the Wing Acquisition.
Compared to the Sequential Quarter, Segment Adjusted EBITDA
increased 29.3% due to higher price realizations and volumes, which
increased by 9.5% and 13.9%, respectively.
Outlook
"Looking ahead, we remain cautiously optimistic," said Mr.
Craft. "Our customers experienced strong coal burn during the 2020
Quarter and with a higher forward price curve for natural gas
heading into the heating season, we currently estimate coal burn
for the 2020 fourth quarter will be even better. As a result, we
continue to expect total coal sales of approximately 28.0 million
tons this year. Several utilities have recently issued
solicitations seeking significant coal supply commitments for
multi-year terms. ARLP currently has priced contract commitments
for approximately 20.0 million tons in 2021 and, in anticipation of
higher natural gas prices and improved energy demand, we are
targeting total sales volumes for next year approximately 10.0%
above 2020 levels."
Mr. Craft continued, "We currently anticipate results from our
Minerals segment will improve modestly during the fourth quarter of
2020 as virtually all shut-in production on our acreage has been
brought online and drilling and completion activity and commodity
prices are expected to gradually recover. These favorable trends
should be constructive for our operators as they establish their
capital allocation and development plans for 2021. With our
minerals strategically located in key basins, ARLP is well
positioned to benefit from improved pricing for oil, natural gas
and natural gas liquids and the increases in drilling and
completion activity anticipated in 2021."
A conference call regarding ARLP's 2020 Quarter financial
results is scheduled for today at 10:00 a.m. Eastern. To
participate in the conference call, dial (877) 506-1589 and request
to be connected to the Alliance Resource Partners, L.P. earnings
conference call. Canadian callers should dial (855) 669-9657 and
all other international callers should dial (412) 317-5240 and
request to be connected to the same call. Investors may also listen
to the call via the "investor information" section of ARLP's
website at http://www.arlp.com.
An audio replay of the conference call will be available for
approximately one week. To access the audio replay, dial US Toll
Free (877) 344-7529; International Toll (412) 317-0088; Canada Toll
Free (855) 669-9658 and request to be connected to replay access
code 10148449.
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 operates seven coal mining complexes 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 and Williston 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. Those forward-looking statements include optimizing cash
flows, reducing operating and capital expenditures, preserving
liquidity and maintaining financial flexibility, among others.
These risks to our ability to achieve these outcomes include, but
are not limited to, the following: the impact of COVID-19 both to
the execution of our day to day operations including potential
closures, as well as to the pandemic's broader impact on demand for
coal, oil and natural gas, the financial condition of our customers
and suppliers, available liquidity and credit sources and broader
economic disruption that is evolving. In addition, the actions of
the major oil producing countries with respect to oil production
and prices may have direct and indirect impacts over the near and
long term to our Minerals segment. These risks compound the ongoing
risks to our business, including decline 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 and
fuels, such as oil & gas, nuclear energy, and renewable fuels;
changing global economic conditions or in industries in which our
customers operate; changes in coal prices and/or oil & gas
prices, demand and availability 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; potential shut-ins of production by operators of the
properties in which we hold mineral interests due to lack of
downstream demand or storage capacity; 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; 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; 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,
hydraulic fracturing, 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; 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; our productivity levels and margins
earned on our coal sales; disruptions to oil & gas exploration
and production operations at the properties in which we hold
mineral interests; 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 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; the impact of current and potential changes to federal
or state tax rules and regulations, including 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;
evolving cybersecurity risks, such as those involving unauthorized
access, denial-of-service attacks, malicious software, data privacy
breaches by employees, insiders or others with authorized access,
cyber or phishing-attacks, ransomware, malware, social engineering,
physical breaches or other actions; 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,
2019, filed on February 20, 2020 and ARLP's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020,
filed on May 8, 2020 and August 6, 2020, 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 OPERATIONS AND OPERATING DATA
(In thousands, except unit and
per unit data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Tons Sold
7,702
9,320
20,139
29,857
Tons Produced
7,202
10,071
19,546
31,430
Mineral Interest Volumes (BOE)
468
433
1,374
1,113
SALES AND OPERATING REVENUES:
Coal sales
$
335,767
$
420,005
$
886,690
$
1,357,331
Oil & gas royalties
9,693
13,969
31,718
36,254
Transportation revenues
6,226
20,024
16,722
82,892
Other revenues
3,965
10,728
26,486
31,905
Total revenues
355,651
464,726
961,616
1,508,382
EXPENSES:
Operating expenses (excluding
depreciation, depletion and amortization)
216,027
278,254
637,533
895,255
Transportation expenses
6,226
20,024
16,722
82,892
Outside coal purchases
—
10,599
—
15,910
General and administrative
13,871
17,885
41,131
55,218
Depreciation, depletion and
amortization
80,182
72,348
237,662
220,400
Asset impairments
—
15,190
24,977
15,190
Goodwill impairment
—
—
132,026
—
Total operating expenses
316,306
414,300
1,090,051
1,284,865
INCOME (LOSS) FROM OPERATIONS
39,345
50,426
(128,435
)
223,517
Interest expense, net
(11,186
)
(11,698
)
(34,911
)
(33,831
)
Interest income
30
92
112
321
Equity method investment income
62
659
650
1,533
Equity securities income
—
—
—
12,906
Acquisition gain
—
—
—
177,043
Other expense
(723
)
(228
)
(1,456
)
(370
)
INCOME (LOSS) BEFORE INCOME
TAXES
27,528
39,251
(164,040
)
381,119
INCOME TAX EXPENSE
293
50
111
130
NET INCOME (LOSS)
27,235
39,201
(164,151
)
380,989
LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTEREST
(36
)
(117
)
(97
)
(7,407
)
NET INCOME (LOSS) ATTRIBUTABLE TO
ARLP
$
27,199
$
39,084
$
(164,248
)
$
373,582
EARNINGS PER LIMITED PARTNER UNIT -
BASIC AND DILUTED
$
0.21
$
0.30
$
(1.29
)
$
2.86
WEIGHTED-AVERAGE NUMBER OF UNITS
OUTSTANDING – BASIC AND DILUTED
127,195,219
128,391,191
127,154,398
128,311,609
ALLIANCE RESOURCE PARTNERS,
L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except unit
data)
(Unaudited)
September 30,
December 31,
2020
2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
34,135
$
36,482
Trade receivables
120,875
161,679
Other receivables
1,919
256
Inventories, net
74,879
101,305
Advance royalties
344
1,844
Prepaid expenses and other assets
10,984
18,019
Total current assets
243,136
319,585
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost
3,619,568
3,684,008
Less accumulated depreciation, depletion
and amortization
(1,758,646
)
(1,675,022
)
Total property, plant and equipment,
net
1,860,922
2,008,986
OTHER ASSETS:
Advance royalties
59,850
52,057
Equity method investments
27,415
28,529
Goodwill
4,373
136,399
Operating lease right-of-use assets
15,388
17,660
Other long-term assets
20,256
23,478
Total other assets
127,282
258,123
TOTAL ASSETS
$
2,231,340
$
2,586,694
LIABILITIES AND PARTNERS'
CAPITAL
CURRENT LIABILITIES:
Accounts payable
$
54,789
$
80,566
Accrued taxes other than income taxes
17,397
15,768
Accrued payroll and related expenses
41,667
36,575
Accrued interest
12,691
5,664
Workers' compensation and pneumoconiosis
benefits
11,162
11,175
Current finance lease obligations
732
8,368
Current operating lease obligations
1,863
3,251
Other current liabilities
23,803
21,062
Current maturities, long-term debt,
net
89,271
13,157
Total current liabilities
253,375
195,586
LONG-TERM LIABILITIES:
Long-term debt, excluding current
maturities, net
571,019
768,194
Pneumoconiosis benefits
96,906
94,389
Accrued pension benefit
41,862
44,858
Workers' compensation
46,404
45,503
Asset retirement obligations
132,627
133,018
Long-term finance lease obligations
1,656
2,224
Long-term operating lease obligations
13,599
14,316
Other liabilities
21,109
23,182
Total long-term liabilities
925,182
1,125,684
Total liabilities
1,178,557
1,321,270
PARTNERS' CAPITAL:
ARLP Partners' Capital:
Limited Partners - Common Unitholders
127,195,219 and 126,915,597 units outstanding, respectively
1,116,626
1,331,482
Accumulated other comprehensive loss
(75,272
)
(77,993
)
Total ARLP Partners' Capital
1,041,354
1,253,489
Noncontrolling interest
11,429
11,935
Total Partners' Capital
1,052,783
1,265,424
TOTAL LIABILITIES AND PARTNERS'
CAPITAL
$
2,231,340
$
2,586,694
ALLIANCE RESOURCE PARTNERS,
L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2020
2019
CASH FLOWS FROM OPERATING
ACTIVITIES
$
291,788
$
408,418
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property, plant and equipment:
Capital expenditures
(102,820
)
(241,142
)
Change in accounts payable and accrued
liabilities
(9,698
)
319
Proceeds from sale of property, plant and
equipment
2,750
892
Distributions received from investments in
excess of cumulative earnings
841
2,309
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
(108,927
)
(423,566
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under securitization
facility
46,100
153,500
Payments under securitization facility
(47,700
)
(179,000
)
Proceeds from equipment financings
14,705
10,000
Payments on equipment financings
(10,622
)
(1,021
)
Borrowings under revolving credit
facilities
70,000
300,000
Payments under revolving credit
facilities
(190,000
)
(235,000
)
Payments on finance lease obligations
(8,204
)
(23,270
)
Payment of debt issuance costs
(5,821
)
—
Payments for purchases of units under unit
repurchase program
—
(5,251
)
Payments for taxes related to net
settlement of issuance of units in deferred compensation plans
(1,310
)
(7,817
)
Distributions paid to Partners
(51,753
)
(208,653
)
Other
(603
)
(673
)
Net cash used in financing activities
(185,208
)
(197,185
)
NET CHANGE IN CASH AND CASH
EQUIVALENTS
(2,347
)
(212,333
)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD
36,482
244,150
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
34,135
$
31,817
Reconciliation of GAAP "net income (loss)
attributable to ARLP" to non-GAAP "Adjusted net income (loss)
attributable to ARLP" (in thousands).
Adjusted net income (loss) attributable to ARLP is defined as
net income (loss) attributable to ARLP modified for certain items
that may not reflect the trend of future results, such as asset and
goodwill impairments and acquisition gains.
Adjusted net income (loss) attributable to ARLP should not be
considered as an alternative to net income (loss) attributable to
ARLP or any other measure of financial performance presented in
accordance with GAAP. Adjusted net income (loss) 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
and mineral 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 (loss) 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
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2020
2019
2020
2019
2020
Net income (loss) attributable to ARLP
$
27,199
$
39,084
$
(164,248
)
$
373,582
$
(46,664
)
Asset impairments
—
15,190
24,977
15,190
—
Goodwill impairment
—
—
132,026
—
—
Acquisition gain
—
—
—
(177,043
)
—
Acquisition gain attributable to
noncontrolling interest
—
—
—
7,083
—
Adjusted net income (loss) attributable to
ARLP
$
27,199
$
54,274
$
(7,245
)
$
218,812
$
(46,664
)
Reconciliation of GAAP "net income (loss)
attributable to ARLP" to non-GAAP "EBITDA," "Adjusted EBITDA" and
"Distributable Cash Flow" (in thousands).
EBITDA is defined as net income (loss) 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 asset and goodwill 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 (loss) attributable to ARLP, net income
(loss), income (loss) 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
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2020
2019
2020
2019
2020
Net income (loss) attributable to ARLP
$
27,199
$
39,084
$
(164,248
)
$
373,582
$
(46,664
)
Depreciation, depletion and
amortization
80,182
72,348
237,662
220,400
83,559
Interest expense, net
11,355
11,904
36,064
34,300
11,925
Capitalized interest
(199
)
(298
)
(1,265
)
(790
)
(509
)
Income tax expense (benefit)
293
50
111
130
(77
)
EBITDA
118,830
123,088
108,324
627,622
48,234
Asset impairments
—
15,190
24,977
15,190
—
Goodwill impairment
—
—
132,026
—
—
Acquisition gain
—
—
—
(177,043
)
—
Acquisition gain attributable to
noncontrolling interest
—
—
—
7,083
—
Adjusted EBITDA
118,830
138,278
265,327
472,852
48,234
Interest expense, net
(11,355
)
(11,904
)
(36,064
)
(34,300
)
(11,925
)
Income tax (expense) benefit
(293
)
(50
)
(111
)
(130
)
77
Estimated maintenance capital expenditures
(1)
(35,002
)
(56,095
)
(94,994
)
(175,065
)
(21,010
)
Distributable Cash Flow
$
72,180
$
70,229
$
134,158
$
263,357
$
15,376
Distributions paid to partners
$
—
$
70,153
$
51,753
$
208,653
$
—
Distribution Coverage Ratio
—
1.00
2.59
1.26
—
___________________
(1)
Maintenance capital expenditures are those
capital expenditures required to maintain, over the long-term, the
existing infrastructure of our coal 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 $4.86
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 "Cash flows from
operating activities" to non-GAAP "Free cash flow" (in
thousands).
Free cash flow is defined as cash flows from operating
activities less capital expenditures. Free cash flow should not be
considered as an alternative to cash flows from operating
activities or any other measure of financial performance presented
in accordance with GAAP. Our method of computing free cash flow may
not be the same method used by other companies. Free cash flow is a
supplemental liquidity measure used by our management to assess our
ability to generate excess cash flow from our operations.
Three Months Ended
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2020
2019
2020
2019
2020
Cash flows from operating activities
$
121,620
$
106,715
$
291,788
$
408,418
$
91,449
Capital expenditures
(18,575
)
(75,515
)
(102,820
)
(241,142
)
(33,881
)
Free cash flow
$
103,045
$
31,200
$
188,968
$
167,276
$
57,568
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
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2020
2019
2020
2019
2020
Operating expense
$
216,027
$
278,254
$
637,533
$
895,255
$
187,164
Outside coal purchases
—
10,599
—
15,910
—
Other expense
723
228
1,456
370
377
Segment Adjusted EBITDA Expense
216,750
289,081
638,989
911,535
187,541
Minerals expenses
(849
)
(2,517
)
(2,851
)
(6,109
)
(1,119
)
Segment Adjusted EBITDA Expense - Coal
$
215,901
$
286,564
$
636,138
$
905,426
$
186,422
Divided by tons sold
7,702
9,320
20,139
29,857
5,186
Segment Adjusted EBITDA Expense per
ton
$
28.03
$
30.75
$
31.59
$
30.33
$
35.95
Segment Adjusted EBITDA is defined as net income (loss)
attributable to ARLP before net interest expense, income taxes,
depreciation, depletion and amortization, general and
administrative expenses, asset and goodwill impairments 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
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2020
2019
2020
2019
2020
Adjusted EBITDA (See reconciliation to
GAAP above)
$
118,830
$
138,278
$
265,327
$
472,852
$
48,234
General and administrative
13,871
17,885
41,131
55,218
13,822
Segment Adjusted EBITDA
132,701
156,163
306,458
528,070
62,056
Minerals segment
(8,898
)
(12,202
)
(29,534
)
(32,432
)
(6,881
)
Equity securities income
—
—
—
(12,906
)
—
Segment Adjusted EBITDA – Coal
$
123,803
$
143,961
$
276,924
$
482,732
$
55,175
Divided by tons sold
7,702
9,320
20,139
29,857
5,186
Segment Adjusted EBITDA per ton
$
16.07
$
15.45
$
13.75
$
16.17
$
10.64
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201026005150/en/
Brian L. Cantrell Alliance Resource Partners, L.P. (918)
295-7673
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