2023 Quarter Highlights
- Coal sales price realizations of $64.94 per ton sold, up 8.3%
year-over-year
- Record oil & gas royalty volumes of 772 MBOE sold, up 28.2%
year-over-year
- Completed two strategic new ventures investments, totaling
approximately $50.0 million
- Declares a quarterly cash distribution of $0.70 per unit, or
$2.80 per unit annualized, up 40.0% year-over-year
- Reduced outstanding senior notes by $54.6 million during the
2023 Quarter, resulting in total and net leverage ratio of 0.36
times and 0.17 times, respectively
Alliance Resource Partners, L.P. (NASDAQ: ARLP) ("ARLP" or the
"Partnership") today reported financial and operating results for
the quarter ended September 30, 2023 (the "2023 Quarter"). Total
revenues in the 2023 Quarter increased slightly to $636.5 million
compared to $632.5 million for the quarter ended September 30, 2022
(the "2022 Quarter") primarily as a result of higher transportation
and other revenues, partially offset by lower oil & gas
royalties. Net income for the 2023 Quarter was $153.7 million, or
$1.18 per basic and diluted limited partner unit, compared to
$167.7 million, or $1.25 per basic and diluted limited partner
unit, for the 2022 Quarter as a result of increased total operating
expenses, partially offset by higher interest income and lower
income tax expense. EBITDA for the 2023 Quarter was $227.6 million
compared to $253.8 million in the 2022 Quarter. (Unless otherwise
noted, all references in the text of this release to "net income"
refer to "net income attributable to ARLP.")
Compared to the quarter ended June 30, 2023 (the "Sequential
Quarter"), total revenues in the 2023 Quarter decreased 0.8%
primarily as a result of lower coal sales volumes of 8.5 million
tons sold compared to 8.9 million tons sold in the Sequential
Quarter, partially offset by higher average coal sales prices,
which increased 3.2% to $64.94 per ton sold in the 2023 Quarter.
Lower revenues and higher total operating expenses contributed to a
reduction in net income and EBITDA of 9.5% and 8.7%, respectively,
compared to the Sequential Quarter. (For a definition of EBITDA and
related reconciliation to its comparable GAAP financial measure,
please see the end of this release.)
Financial and operating results for the nine months ended
September 30, 2023 (the "2023 Period") increased compared to the
nine months ended September 30, 2022 (the "2022 Period"). Coal
sales prices and coal sales revenues during the 2023 Period were
higher by 16.8% and 14.8%, respectively, compared to the 2022
Period. Increased revenues and lower income tax expense were
partially offset by higher total operating expenses in the 2023
Period, which resulted in higher net income and EBITDA by 39.4% and
14.1%, respectively, both as compared to the 2022 Period.
CEO Commentary
"Our well-contracted coal order book enabled us to navigate an
otherwise challenging operating environment during the 2023
Quarter," commented Joseph W. Craft III, Chairman, President and
Chief Executive Officer. "Our coal segment achieved higher realized
pricing per ton sold relative to both the 2022 and Sequential
Quarters, a theme that continues to favorably impact year-to-date
results, particularly with regards to EBITDA and net income.
However, we faced some difficult mining conditions in Appalachia at
all three mines during the 2023 Quarter, which resulted in higher
operating costs and fewer tons produced versus previous
expectations."
Mr. Craft added, "Our Oil & Gas Royalties segment reported
continued growth resulting in record production volumes,
underscoring the success of recent acquisitions in core parts of
the prolific Permian Basin. Although average realized pricing per
BOE during the 2023 Quarter was lower compared to near record
levels in the 2022 Quarter, our royalty portfolio is
well-positioned to provide significant cash flow via hedge-free
exposure to commodity price and cost-free organic growth."
Mr. Craft concluded, "We are excited to announce direct
investments in Ascend Elements and Infinitum during the 2023
Quarter. These companies are led by proven management teams and
possess innovative, commercial technologies that, in our view, will
reshape their respective industries. Beyond our direct investments,
we are actively engaged in discussions with both companies to
explore additional strategic opportunities intended to unlock value
and growth for our unitholders."
Segment Results and Analysis
% Change
2023 Third
2022 Third
Quarter /
2023 Second
% Change
(in millions, except per ton and per
BOE data)
Quarter
Quarter
Quarter
Quarter
Sequential
Coal Operations
(1)
Illinois Basin
Coal Operations
Tons sold
6.049
6.109
(1.0
)%
6.066
(0.3
)%
Coal sales price per ton sold
$
56.66
$
51.44
10.1
%
$
54.70
3.6
%
Segment Adjusted EBITDA Expense per
ton
$
35.25
$
31.91
10.5
%
$
35.39
(0.4
)%
Segment Adjusted EBITDA
$
132.4
$
120.8
9.7
%
$
119.6
10.8
%
Appalachia Coal
Operations
Tons sold
2.407
3.076
(21.7
)%
2.838
(15.2
)%
Coal sales price per ton sold
$
85.74
$
76.82
11.6
%
$
80.52
6.5
%
Segment Adjusted EBITDA Expense per
ton
$
54.84
$
43.78
25.3
%
$
42.04
30.4
%
Segment Adjusted EBITDA
$
74.8
$
102.0
(26.6
)%
$
109.6
(31.7
)%
Total Coal
Operations
Tons sold
8.456
9.185
(7.9
)%
8.904
(5.0
)%
Coal sales price per ton sold
$
64.94
$
59.94
8.3
%
$
62.93
3.2
%
Segment Adjusted EBITDA Expense per
ton
$
41.19
$
36.20
13.8
%
$
37.85
8.8
%
Segment Adjusted EBITDA
$
204.3
$
220.1
(7.1
)%
$
226.2
(9.7
)%
Royalties
(1)
Oil & Gas
Royalties (4)
BOE sold (2)
0.772
0.602
28.2
%
0.765
0.9
%
Oil percentage of BOE
43.9
%
44.1
%
(0.5
)%
45.2
%
(2.9
)%
Average sales price per BOE (3)
$
44.19
$
64.27
(31.2
)%
$
43.27
2.1
%
Segment Adjusted EBITDA Expense
$
3.9
$
3.9
(1.3
)%
$
3.6
8.7
%
Segment Adjusted EBITDA
$
31.4
$
39.4
(20.4
)%
$
29.1
8.0
%
Coal
Royalties
Royalty tons sold
4.993
5.654
(11.7
)%
5.118
(2.4
)%
Revenue per royalty ton sold
$
3.36
$
2.96
13.5
%
$
3.24
3.7
%
Segment Adjusted EBITDA Expense
$
6.9
$
5.5
23.6
%
$
5.6
22.4
%
Segment Adjusted EBITDA
$
9.9
$
11.2
(11.2
)%
$
11.0
(9.6
)%
Total Royalties
(4)
Total royalty revenues
$
53.1
$
58.3
(9.0
)%
$
50.0
6.2
%
Segment Adjusted EBITDA Expense
$
10.7
$
9.5
13.2
%
$
9.2
17.1
%
Segment Adjusted EBITDA
$
41.3
$
50.6
(18.4
)%
$
40.0
3.1
%
Consolidated
Total (4)(5)
Total revenues
$
636.5
$
632.5
0.6
%
$
641.8
(0.8
)%
Segment Adjusted EBITDA Expense
$
350.4
$
330.5
6.0
%
$
338.4
3.5
%
Segment Adjusted EBITDA
$
247.7
$
275.2
(10.0
)%
$
269.4
(8.1
)%
(1)
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 Operations (as
reflected in the reconciliation table at the end of this release)
divided by total tons sold. Beginning in 2023, we redefined Total
Coal Operations to reflect the activity of our wholly-owned
subsidiary, Alliance Coal, LLC ("Alliance Coal"), which is the
holding company for our coal mining operations. We have
retrospectively adjusted Total Coal Operations for the 2022 Quarter
to be on the same basis.
(2)
Barrels of oil equivalent ("BOE")
for natural gas volumes is calculated on a 6:1 basis (6,000 cubic
feet of natural gas to one barrel).
(3)
Average sales price per BOE is
defined as oil & gas royalty revenues excluding lease bonus
revenue divided by total BOE sold.
(4)
The 2022 Quarter has been recast
to reflect the JC Resources Acquisition as though we, rather than
JC Resources, acquired the mineral interests in 2019.
(5)
Reflects total consolidated
results, which include our other and corporate activities and
eliminations in addition to the Illinois Basin Coal Operations,
Appalachia Coal Operations, Oil & Gas Royalties and Coal
Royalties reportable segments highlighted above.
Coal Operations
ARLP's coal sales prices per ton increased in all regions
compared to both the 2022 and Sequential Quarters. Improved
domestic pricing, partially offset by lower export price
realizations, drove coal sales prices higher by 10.1% and 3.6% in
the Illinois Basin and 11.6% and 6.5% in Appalachia as compared to
the 2022 and Sequential Quarters, respectively. Tons sold decreased
by 21.7% and 15.2% in Appalachia compared to the 2022 and
Sequential Quarters, respectively, due to reduced volumes across
the region caused by lock outages, customer plant maintenance,
reduced operating units at MC Mining, and unique geologic
conditions that delayed development of a new district at our
Mettiki longwall operation. ARLP ended the 2023 Quarter with total
coal inventory of 1.8 million tons, representing an increase of 0.5
million tons compared to the end of the 2022 Quarter and comparable
to the end of the Sequential Quarter.
Segment Adjusted EBITDA Expense per ton for the 2023 Quarter
increased by 10.5% in the Illinois Basin compared to the 2022
Quarter, resulting from increased sales-related expenses due to
higher price realizations and higher labor-related, roof support
and maintenance costs due to days lost by a sizable roof fall in
July and a longwall move in August at our Hamilton mine. Segment
Adjusted EBITDA Expense per ton in Appalachia increased by 25.3%
and 30.4% compared to the 2022 and Sequential Quarters,
respectively, due primarily to lower production volumes, purchased
coal and increased labor-related, roof support, maintenance and
selling expenses per ton.
Royalties
Segment Adjusted EBITDA for the Oil & Gas Royalties segment
decreased to $31.4 million in the 2023 Quarter compared to $39.4
million in the 2022 Quarter. The decrease was directly connected to
lower price realizations, which decreased by 31.2%, partially
offset by record oil & gas volumes, which increased 28.2% to
772 MBOE sold in the 2023 Quarter. Compared to the Sequential
Quarter, Segment Adjusted EBITDA increased by 8.0% due to higher
prices and volumes. Higher volumes during the 2023 Quarter resulted
from increased drilling and completion activities on our interests
and the acquisition of additional oil & gas mineral
interests.
Segment Adjusted EBITDA for the Coal Royalties segment was $9.9
million for the 2023 Quarter, representing a decrease of $1.3
million and $1.1 million compared to the 2022 and Sequential
Quarters, respectively, as a result of lower royalty tons sold and
increased selling expenses, partially offset by higher average
royalty rates per ton received from the Partnership's mining
subsidiaries.
Balance Sheet and Liquidity
As of September 30, 2023, total debt and finance leases
outstanding were $371.0 million, including $284.6 million in ARLP's
2025 senior notes. During the 2023 Quarter, ARLP redeemed $50.0
million and repurchased $4.6 million of its senior notes due May 1,
2025. The Partnership's total and net leverage ratio was 0.36 times
and 0.17 times, respectively, as of September 30, 2023. ARLP ended
the 2023 Quarter with total liquidity of $629.5 million, which
included $197.2 million of cash and cash equivalents and $432.3
million of borrowings available under its revolving credit and
accounts receivable securitization facilities.
Distributions
On October 25, 2023, the Board of Directors of ARLP’s general
partner (the "Board") approved a cash distribution to unitholders
for the 2023 Quarter of $0.70 per unit (an annualized rate of $2.80
per unit), payable on November 14, 2023, to all unitholders of
record as of the close of trading on November 7, 2023. The
announced distribution represents a 40.0% increase over the cash
distribution of $0.50 per unit for the 2022 Quarter and is
consistent with the Sequential Quarter cash distribution.
Strategic Investments
During the 2023 Quarter, ARLP invested approximately $50 million
in two companies that align with the Partnership’s strategy to
allocate a portion of excess cash flows into high-growth businesses
where ARLP can leverage its core competencies to generate
meaningful, risk-adjusted returns.
Ascend Elements, Inc. ("Ascend Elements")
As previously announced, on September 6, 2023, ARLP invested $25
million in Ascend Elements, a U.S.-based manufacturer and recycler
of sustainable, engineered battery materials for electric vehicles,
as part of its $460 million Series D funding round. This capital,
combined with $480 million in total grants awarded by the
Department of Energy, will advance construction of North America’s
first commercial-scale manufacturing facility, located near
Hopkinsville, Kentucky, producing cathode materials for electric
vehicle batteries.
In close proximity to ARLP’s western Kentucky mining operations,
when complete, the 1-million-square-foot manufacturing facility
will produce enough cathode materials for 750,000 electric vehicles
per year. ARLP intends to explore other strategic opportunities
with Ascend Elements to expand investment in the battery recycling
industry and leverage our unique operational expertise, geographic
footprint, and strategic relationships in Kentucky and the
surrounding battery-belt states to drive value creation for both
companies.
Infinitum
During the 2023 Quarter, ARLP invested an additional $24.6
million in Infinitum, a Texas-based developer and manufacturer of
high-efficiency electric motors, as part of their ongoing Series E
equity raise. The incremental amount brings ARLP’s total investment
in the company to approximately $67 million. Infinitum believes
that its patented air core motors offer superior performance in
half the weight and size, at a fraction of the carbon footprint of
traditional motors, making them pound for pound the most efficient
in the world.
In addition to the investment, ARLP’s wholly-owned subsidiary
Matrix Design Group LLC ("Matrix") and Infinitum are actively
evaluating opportunities to combine Matrix’s underground mining
expertise with Infinitum’s technology to deliver much needed
innovation to the growing global mining industry by improving the
safety, efficiency, and performance of certain mining
machinery.
Outlook
"As we assess current market conditions, we have elected to
slightly adjust our full year 2023 guidance for coal sales volumes
and pricing, which will be highly dependent on logistics during the
fourth quarter," commented Mr. Craft. "We expect Appalachia
operating expense per ton sold to be 8-10% higher during the fourth
quarter of 2023 as development for the new district at Mettiki is
not expected to be complete until late November 2023 and Tunnel
Ridge has a normally scheduled longwall move. The new longwall
district at Mettiki allows us to develop longer panels that will
increase production and reduce unit costs in 2024."
Mr. Craft closed, "As we look beyond 2023, we are encouraged by
improving fundamentals for coal export demand based on recent
trends in international benchmark pricing and emerging
opportunities we see in the market. On the domestic front, we hold
firm in our conviction that the reliability of our product is
highly valued by our customers and the long-term potential for
higher natural gas prices and growth in electric demand will
sustain our projections for coal demand and lead to a slowing in
the pre-mature closure of coal-fired power plants in the eastern
U.S."
ARLP is providing the following updated guidance for the 2023
full year:
2023 Full Year
Guidance
Coal
Operations
Volumes (Million
Short Tons)
Illinois Basin Sales Tons
24.5 — 24.8
Appalachia Sales Tons
10.0 — 10.2
Total Sales Tons
34.5 — 35.0
Committed & Priced Sales Tons
2023 — Domestic/Export/Total
29.7/5.3/35.0
2024 — Domestic/Export/Total
25.7/1.6/27.3
Per Ton
Estimates
Coal Sales Price per ton sold (1)
$64.50 — $66.00
Segment Adjusted EBITDA Expense per ton
sold (2)
$39.50 — $40.50
Royalties
Oil & Gas
Royalties
Oil (000 Barrels)
1,400 — 1,500
Natural gas (000 MCF)
4,750 — 5,250
Liquids (000 Barrels)
565 — 615
Segment Adjusted EBITDA Expense (% of Oil
& Gas Royalties Revenue)
~ 11.0%
Coal
Royalties
Royalty tons sold (Million Short Tons)
20.4 — 22.6
Revenue per royalty ton sold
$3.00 — $3.20
Segment Adjusted EBITDA Expense per
royalty ton sold
$1.00 — $1.10
Consolidated (Millions)
Depreciation, depletion and
amortization
$270 — $280
General and administrative
$80 — $85
Net interest expense
$31 — $32
Income tax expense
$18 — $20
Total capital expenditures
$390 — $440
Growth capital expenditures
$40 — $50
Maintenance capital expenditures
$350 — $390
Acquisition of oil & gas royalties
(3)
$100 — $110
(1)
Sales price per ton is defined as
total coal sales revenue divided by total tons sold.
(2)
Segment Adjusted EBITDA Expense
is defined as operating expenses, coal purchases and other
expenses.
(3)
Acquisition of oil & gas
royalties reflects the $72.3 million acquisition from JC Resources
LP plus anticipated ground game acquisitions.
Conference Call
A conference call regarding ARLP's 2023 Quarter financial
results is scheduled for today at 10:00 a.m. Eastern. To
participate in the conference call, dial (877) 407-0784 and request
to be connected to the Alliance Resource Partners, L.P. earnings
conference call. International callers should dial (201) 689-8560
and request to be connected to the same call. Investors may also
listen to the call via the "investors" section of ARLP's website at
www.arlp.com.
An audio replay of the conference call will be available for
approximately one week. To access the audio replay, dial U.S. Toll
Free (844) 512-2921; International Toll (412) 317-6671 and request
to be connected to replay using access code 13741573.
Concurrent with this announcement, we are providing qualified
notice to brokers and nominees that hold ARLP units on behalf of
non-U.S. investors under Treasury Regulation Section 1.1446-4(b)
and (d) and Treasury Regulation Section 1.1446(f)-4(c)(2)(iii).
Brokers and nominees should treat one hundred percent (100%) of
ARLP’s distributions to non-U.S. investors as being attributable to
income that is effectively connected with a United States trade or
business. In addition, brokers and nominees should treat one
hundred percent (100%) of the distribution as being in excess of
cumulative net income for purposes of determining the amount to
withhold. Accordingly, ARLP’s distributions to non-U.S. investors
are subject to federal income tax withholding at a rate equal to
the highest applicable effective tax rate plus ten percent (10%).
Nominees, and not ARLP, are treated as the withholding agents
responsible for withholding on the distributions received by them
on behalf of non-U.S. investors.
About Alliance Resource Partners, L.P.
ARLP is a diversified energy company that is currently the
largest coal producer in the eastern United States, supplying
reliable, affordable energy domestically and internationally to
major utilities, metallurgical and industrial users. ARLP also
generates operating and royalty income from mineral interests it
owns in strategic coal and oil & gas producing regions in the
United States. In addition, ARLP is evolving and positioning itself
as a reliable energy partner for the future by pursuing
opportunities that support the advancement of energy and related
infrastructure.
News, unit prices and additional information about ARLP,
including filings with the Securities and Exchange Commission
("SEC"), are available at www.arlp.com. For more information,
contact the investor relations department of ARLP at (918) 295-7673
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 expectations with
respect to our future financial performance, coal and oil & gas
consumption and expected future prices, our ability to increase
unitholder distributions in future quarters, business plans and
potential growth with respect to our energy and infrastructure
transition investments, optimizing cash flows, reducing operating
and capital expenditures, preserving liquidity and maintaining
financial flexibility, and our future repurchases of units and
senior notes, among others. These risks to our ability to achieve
these outcomes include, but are not limited to, the following:
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; changes in macroeconomic and market
conditions and market volatility, and the impact of such changes
and volatility on our financial position; changes in global
economic and geo-political conditions or changes in industries in
which our customers operate; changes in commodity prices, demand
and availability which could affect our operating results and cash
flows; the outcome or escalation of current hostilities in Ukraine
and the Israel-Gaza conflict; the severity, magnitude and duration
of any future pandemics and impacts of such pandemics and of
businesses' and governments' responses to such pandemics on our
operations and personnel, and on demand for coal, oil, and natural
gas, the financial condition of our customers and suppliers,
available liquidity and capital sources and broader economic
disruptions; actions of the major oil-producing countries with
respect to oil production volumes and prices could have direct and
indirect impacts over the near and long term on oil & gas
exploration and production operations at the properties in which we
hold mineral interests; 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 oil & gas mineral interests due to
low commodity prices or the lack of downstream demand or storage
capacity; risks associated with the expansion of our operations and
properties; our ability to identify and complete acquisitions and
to successfully integrate such acquisitions into our business and
achieve the anticipated benefits therefrom; our ability to identify
and invest in new energy and infrastructure transition ventures;
the success of our development plans for our wholly owned
subsidiary, Matrix Design Group, LLC, and our investments in
emerging infrastructure and technology companies; dependence on
significant customer contracts, including renewing existing
contracts upon expiration; adjustments made in price, volume, or
terms to existing coal supply agreements; the effects of and
changes in trade, monetary and fiscal policies and laws; central
bank policy actions, bank failures and associated liquidity risks;
the effects of and changes in taxes or tariffs and other trade
measures adopted by the United States and foreign governments;
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; investors' and other stakeholders'
increasing attention to environmental, social, and governance
matters; 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 equipment, raw material, service or
labor costs or availability, including due to inflationary
pressures; changes in our ability to recruit, hire and maintain
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, supply chain shortage of equipment or mine supplies, 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 mineral reserves
and resources; 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; uncertainties in the
future of the electric vehicle industry and the market for EV
charging stations; 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, 2022, filed on February 24, 2023, and ARLP's
Quarterly Reports on Form 10-Q for the quarters ended March 31,
2023 and June 30, 2023, filed on May 9, 2023 and August 8, 2023,
respectively. 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
Nine Months Ended
September 30,
September 30,
2023
2022*
2023
2022*
Tons Sold
8,456
9,185
25,829
26,280
Tons Produced
8,356
8,988
26,997
27,044
Mineral Interest Volumes (BOE)
772
602
2,296
1,690
SALES AND OPERATING REVENUES:
Coal sales
$
549,123
$
550,563
$
1,688,238
$
1,470,730
Oil & gas royalties
34,125
38,695
101,709
111,378
Transportation revenues
34,964
28,548
95,729
93,305
Other revenues
18,309
14,655
55,603
40,348
Total revenues
636,521
632,461
1,941,279
1,715,761
EXPENSES:
Operating expenses (excluding
depreciation, depletion and amortization)
339,099
330,694
1,012,224
909,567
Transportation expenses
34,964
28,548
95,729
93,305
Outside coal purchases
11,530
—
15,739
151
General and administrative
20,097
21,360
61,312
62,462
Depreciation, depletion and
amortization
65,393
70,669
199,582
202,499
Total operating expenses
471,083
451,271
1,384,586
1,267,984
INCOME FROM OPERATIONS
165,438
181,190
556,693
447,777
Interest expense, net
(7,736
)
(9,245
)
(29,845
)
(28,304
)
Interest income
2,669
426
8,084
554
Equity method investment income (loss)
(1,842
)
2,108
(3,784
)
4,576
Other income (expense)
223
193
(173
)
1,339
INCOME BEFORE INCOME TAXES
158,752
174,672
530,975
425,942
INCOME TAX EXPENSE
3,401
6,600
11,641
55,646
NET INCOME
155,351
168,072
519,334
370,296
LESS: NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTEREST
(1,652
)
(364
)
(4,660
)
(977
)
NET INCOME ATTRIBUTABLE TO ARLP
$
153,699
$
167,708
$
514,674
$
369,319
NET INCOME ATTRIBUTABLE TO ARLP
GENERAL PARTNER
$
—
$
3,101
$
1,384
$
6,582
LIMITED PARTNERS
$
153,699
$
164,607
$
513,290
$
362,737
EARNINGS PER LIMITED PARTNER UNIT -
BASIC AND DILUTED
$
1.18
$
1.25
$
3.93
$
2.76
WEIGHTED-AVERAGE NUMBER OF UNITS
OUTSTANDING – BASIC AND DILUTED
127,125,437
127,195,219
127,198,805
127,195,219
* Recast to reflect the JC Resources
Acquisition as though we, rather than JC Resources, acquired the
mineral interests in 2019.
ALLIANCE RESOURCE PARTNERS,
L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except unit
data)
(Unaudited)
September 30,
December 31,
2023
2022*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
197,243
$
296,023
Trade receivables
220,138
241,412
Other receivables
13,854
8,601
Inventories, net
135,868
77,326
Advance royalties
5,824
7,556
Prepaid expenses and other assets
14,962
26,675
Total current assets
587,889
657,593
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost
4,133,738
3,931,422
Less accumulated depreciation, depletion
and amortization
(2,152,278
)
(2,050,754
)
Total property, plant and equipment,
net
1,981,460
1,880,668
OTHER ASSETS:
Advance royalties
73,798
67,713
Equity method investments
44,966
49,371
Equity securities
92,541
42,000
Operating lease right-of-use assets
17,249
14,950
Other long-term assets
16,138
15,726
Total other assets
244,692
189,760
TOTAL ASSETS
$
2,814,041
$
2,728,021
LIABILITIES AND PARTNERS'
CAPITAL
CURRENT LIABILITIES:
Accounts payable
$
116,819
$
95,122
Accrued taxes other than income taxes
22,516
22,967
Accrued payroll and related expenses
40,803
39,623
Accrued interest
10,631
5,000
Workers' compensation and pneumoconiosis
benefits
14,052
14,099
Other current liabilities
30,715
53,790
Current maturities, long-term debt,
net
38,603
24,970
Total current liabilities
274,139
255,571
LONG-TERM LIABILITIES:
Long-term debt, excluding current
maturities, net
321,208
397,203
Pneumoconiosis benefits
102,193
100,089
Accrued pension benefit
11,770
12,553
Workers' compensation
41,303
39,551
Asset retirement obligations
143,707
142,254
Long-term operating lease obligations
14,358
12,132
Deferred income tax liabilities
34,343
35,814
Other liabilities
18,092
24,828
Total long-term liabilities
686,974
764,424
Total liabilities
961,113
1,019,995
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
ARLP Partners' Capital:
Limited Partners - Common Unitholders
127,125,437 and 127,195,219 units outstanding, respectively
1,867,721
1,656,025
General Partner's interest
—
66,548
Accumulated other comprehensive loss
(39,365
)
(41,054
)
Total ARLP Partners' Capital
1,828,356
1,681,519
Noncontrolling interest
24,572
26,507
Total Partners' Capital
1,852,928
1,708,026
TOTAL LIABILITIES AND PARTNERS'
CAPITAL
$
2,814,041
$
2,728,021
* Recast to reflect the JC Resources
Acquisition as though we, rather than JC Resources, acquired the
mineral interests in 2019.
ALLIANCE RESOURCE PARTNERS,
L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2023
2022*
CASH FLOWS FROM OPERATING
ACTIVITIES
$
735,411
$
556,206
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property, plant and equipment:
Capital expenditures
(295,356
)
(221,286
)
Change in accounts payable and accrued
liabilities
(23,006
)
39,500
Proceeds from sale of property, plant and
equipment
3,436
5,006
Contributions to equity method
investments
(2,257
)
(20,220
)
Purchase of equity securities
(49,560
)
(32,639
)
JC Resources acquisition
(64,999
)
—
Payments for acquisitions of
businesses
—
(11,391
)
Escrow deposit for oil & gas reserve
acquisition
—
(4,150
)
Oil & gas reserve acquisition
(13,902
)
—
Other
1,160
(2,317
)
Net cash used in investing activities
(444,484
)
(247,497
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under securitization
facility
—
27,500
Payments under securitization facility
—
(27,500
)
Payments on equipment financings
(11,421
)
(12,360
)
Borrowing under long-term debt
75,000
—
Payments on long-term debt
(120,080
)
—
Payments on finance lease obligations
(334
)
(623
)
Payment of debt issuance costs
(11,744
)
—
Payments for purchases of units under unit
repurchase program
(19,432
)
—
Payments for tax withholdings related to
settlements under deferred compensation plans
(10,334
)
—
Excess purchase price over the contributed
basis from JC Resources acquisition
(7,251
)
—
Cash retained by JC Resources in
acquisition
(2,933
)
(7,652
)
Distributions paid to Partners
(273,767
)
(130,898
)
Other
(7,411
)
(1,108
)
Net cash used in financing activities
(389,707
)
(152,641
)
NET CHANGE IN CASH AND CASH
EQUIVALENTS
(98,780
)
156,068
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD
296,023
122,403
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$
197,243
$
278,471
* Recast to reflect the JC Resources
Acquisition as though we, rather than JC Resources, acquired the
mineral interests in 2019.
Reconciliation of Non-GAAP Financial Measures
Reconciliation of GAAP "net income
attributable to ARLP" to non-GAAP "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. Distributable cash flow ("DCF") is defined as EBITDA
excluding equity method investment earnings, interest expense
(before capitalized interest), interest income, income taxes and
estimated maintenance capital expenditures and adding distributions
from equity method investments. 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, 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 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, DCF and DCR may not be the same method
used to compute similar measures reported by other companies, or
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,
2023
2022 (1)
2023
2022 (1)
2023
Net income attributable to ARLP
$
153,699
$
167,708
$
514,674
$
369,319
$
169,790
Depreciation, depletion and
amortization
65,393
70,669
199,582
202,499
68,639
Interest expense, net
6,876
9,083
26,193
28,255
8,024
Capitalized interest
(1,809
)
(264
)
(4,432
)
(505
)
(1,216
)
Income tax expense
3,401
6,600
11,641
55,646
3,999
EBITDA
227,560
253,796
747,658
655,214
249,236
Equity method investment loss (income)
1,842
(2,108
)
3,784
(4,576
)
1,994
Distributions from equity method
investments
904
2,448
2,878
4,963
960
Interest expense, net
(6,876
)
(9,083
)
(26,193
)
(28,255
)
(8,024
)
Income tax expense
(3,401
)
(6,600
)
(11,641
)
(55,646
)
(3,999
)
Deferred income tax expense (benefit)
(2)
(2,400
)
269
(2,981
)
37,275
(209
)
Estimated maintenance capital expenditures
(3)
(58,910
)
(50,872
)
(190,329
)
(153,069
)
(66,249
)
Distributable Cash Flow
$
158,719
$
187,850
$
523,176
$
455,906
$
173,709
Distributions paid to partners
$
90,899
$
52,338
$
273,767
$
130,898
$
90,930
Distribution Coverage Ratio
1.75
3.59
1.91
3.48
1.91
(1)
Recast to reflect the JC
Resources Acquisition as though we, rather than JC Resources,
acquired the mineral interests in 2019.
(2)
Deferred income tax expense
(benefit) is the amount of income tax expense (benefit) during the
period on temporary differences between the tax basis and financial
reporting basis of recorded assets and liabilities. These
differences generally arise in one period and reverse in subsequent
periods to eventually offset each other and do not impact the
amount of distributable cash flow available to be paid to
partners.
(3)
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 2023 planning horizon,
average annual estimated maintenance capital expenditures are
assumed to be $7.05 per ton produced compared to an estimated $5.66
per ton produced in 2022. Our actual maintenance capital
expenditures fluctuate depending on various factors, including
maintenance schedules and timing of capital projects, among
others.
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 and the change in accounts
payable and accrued liabilities from purchases of property, plant
and equipment. 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,
2023
2022 (1)
2023
2022 (1)
2023
Cash flows from operating activities
$
231,388
$
316,815
$
735,411
$
556,206
$
280,764
Capital expenditures
(110,339
)
(99,304
)
(295,356
)
(221,286
)
(89,543
)
Change in accounts payable and accrued
liabilities
2,624
30,549
(23,006
)
39,500
(37,740
)
Free cash flow
$
123,673
$
248,060
$
417,049
$
374,420
$
153,481
(1)
Recast to reflect the JC Resources
Acquisition as though we, rather than JC Resources, acquired the
mineral interests in 2019.
Reconciliation of GAAP "Operating
Expenses" to non-GAAP "Segment Adjusted EBITDA Expense" and
Reconciliation of non-GAAP " EBITDA" to "Segment Adjusted EBITDA"
(in thousands).
Segment Adjusted EBITDA Expense includes operating expenses,
coal purchases, if applicable, and other income or expense.
Transportation expenses are excluded as these expenses are passed
on 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 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. Segment Adjusted EBITDA Expense – Coal
Operations represents Segment Adjusted EBITDA Expense from our
wholly-owned subsidiary, Alliance Coal, which holds our coal mining
operations and related support activities.
Three Months Ended
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2023
2022 (1)
2023
2022 (1)
2023
Operating expense
$
339,099
$
330,694
$
1,012,224
$
909,567
$
334,402
Outside coal purchases
11,530
—
15,739
151
4,209
Other expense (income)
(223
)
(193
)
173
(1,339
)
(177
)
Segment Adjusted EBITDA Expense
350,406
330,501
1,028,136
908,379
338,434
Segment Adjusted EBITDA Expense – Non Coal
Operations (2)
(2,116
)
2,002
(6,945
)
(410
)
(1,409
)
Segment Adjusted EBITDA Expense – Coal
Operations
$
348,290
$
332,503
$
1,021,191
$
907,969
$
337,025
(1)
Recast to reflect the JC
Resources Acquisition as though we, rather than JC Resources,
acquired the mineral interests in 2019.
(2)
Non Coal Operations represent
activity outside of Alliance Coal and primarily consist of Total
Royalties, our investments in the advancement of energy and related
infrastructure and various eliminations primarily between Alliance
Coal and our Coal Royalty segment.
Segment Adjusted EBITDA is defined as net income attributable to
ARLP before net interest expense, income taxes, depreciation,
depletion and amortization and general and administrative expenses.
Segment Adjusted EBITDA – Coal Operations represents Segment
Adjusted EBITDA from our wholly-owned subsidiary, Alliance Coal,
which holds our coal mining operations and related support
activities and allows management to focus primarily on the
operating performance of our Illinois Basin and Appalachia
segments.
Three Months Ended
Nine Months Ended
Three Months Ended
September 30,
September 30,
June 30,
2023
2022 (1)
2023
2022 (1)
2023
EBITDA (See reconciliation to GAAP
above)
$
227,560
$
253,796
$
747,658
$
655,214
$
249,236
General and administrative
20,097
21,360
61,312
62,462
20,130
Segment Adjusted EBITDA
247,657
275,156
808,970
717,676
269,366
Segment Adjusted EBITDA – Non Coal
Operations (2)
(43,322
)
(55,093
)
(132,735
)
(148,380
)
(43,140
)
Segment Adjusted EBITDA – Coal
Operations
$
204,335
$
220,063
$
676,235
$
569,296
$
226,226
(1)
Recast to reflect the JC
Resources Acquisition as though we, rather than JC Resources,
acquired the mineral interests in 2019.
(2)
Non Coal Operations represent
activity outside of Alliance Coal and primarily consist of Total
Royalties, our investments in the advancement of energy and related
infrastructure and various eliminations primarily between Alliance
Coal and our Coal Royalty segment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231027022085/en/
Investor Relations Contact Cary P. Marshall Senior Vice
President and Chief Financial Officer 918-295-7673
investorrelations@arlp.com
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