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Release – Alliance Resource Partners, L.P. Reports Increased Financial and Operating Results

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Alliance Resource Partners, L.P. Increases Quarterly Cash Distribution 40% to $0.35 Per Unit; Provides Preliminary View of Results for the Quarter Ended March 31, 2022; and Increases Guidance

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TULSA, Okla.–(BUSINESS WIRE)– Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported increased financial and operating results for the quarter ended March 31, 2022 (the “2022 Quarter”). Total revenues in the 2022 Quarter increased 44.6% to $460.9 million compared to $318.6 million for the quarter ended March 31, 2021 (the “2021 Quarter”) as a result of higher coal sales volumes and prices, which rose 19.5% and 13.0%, respectively, and higher oil & gas royalty volumes and prices, which increased by 26.3% and 74.9%, respectively. Total operating expenses increased to $373.0 million in the 2022 Quarter, compared to $282.3 million in the 2021 Quarter, due primarily to increased coal sales volumes and inflationary cost pressures. Income before income taxes increased 221.0% to $79.7 million in the 2022 Quarter as compared to $24.8 million in the 2021 Quarter. As previously reported, during the 2022 Quarter, ARLP recognized a one-time non-cash deferred income tax charge of $37.3 million and a current income tax expense of $4.8 million associated with its election to have our oil & gas royalty activities treated as a taxable entity for federal and state income tax purposes, which collectively reduced net income by $0.33 per basic and diluted limited partner unit. This election effectively reduces the total income tax burden on our oil & gas royalties, as ARLP will pay entity-level taxes at corporate tax rates that are well below the individual tax rates that would otherwise be paid by our unitholders. Reflecting higher revenues, partially offset by increased total operating and income tax expenses, net income for the 2022 Quarter increased to $36.7 million, or $0.28 per basic and diluted limited partner unit, compared to $24.7 million, or $0.19 per basic and diluted limited partner unit, for the 2021 Quarter. EBITDA also increased 61.5% in the 2022 Quarter to $152.3 million compared to $94.3 million in the 2021 Quarter. (Unless otherwise noted, all references in the text of this release to “net income” refer to “net income attributable to ARLP.” For a definition of EBITDA and related reconciliation to its comparable GAAP financial measure throughout this release, please see the end of this release.)

Compared to the quarter ended December 31, 2021 (the “Sequential Quarter”), total revenues decreased by 2.7% primarily as a result of lower coal sales volumes due to previously reported coal shipment delays, partially offset by higher coal sales price realizations and increased oil & gas royalty volumes and prices. Total operating expenses decreased 9.5% to $373.0 million due primarily to lower coal sales volumes in the 2022 Quarter and expenses incurred in the Sequential Quarter related to an $11.8 million buy-out of a coal contract and $6.8 million of unfavorable year end non-cash actuarial and accrual adjustments. Lower total operating expenses more than offset reduced revenues leading income before income taxes higher by 52.5% to $79.7 million in the 2022 Quarter compared to $52.2 million for the Sequential Quarter. Although income before income taxes was higher in the 2022 Quarter, net income decreased to $36.7 million compared to $51.8 million in the Sequential Quarter due to the impact of income tax expense attributable to the above discussed change in tax status of our oil & gas royalty segment. EBITDA increased 16.9% in the 2022 Quarter to $152.3 million compared to $130.2 million in the Sequential Quarter.

As previously announced on April 26, 2022, the Board of Directors of ARLP’s general partner (the “Board”) increased the cash distribution to unitholders for the 2022 Quarter to $0.35 per unit (an annualized rate of $1.40 per unit), payable on May 13, 2022, to all unitholders of record as of the close of trading on May 6, 2022. The announced distribution represents a 250.0% increase over the cash distribution of $0.10 per unit for the 2021 Quarter and a 40.0% increase over the cash distribution of $0.25 per unit for the Sequential Quarter.

“Buoyed by robust energy market fundamentals during the 2022 Quarter, ARLP delivered strong operating and financial performance with coal and oil & gas sales volumes, total revenues, net income and EBITDA all increasing significantly over the 2021 Quarter,” said Joseph W. Craft III, Chairman, President and Chief Executive Officer. “Our coal operations performed exceptionally well, particularly in light of the transportation challenges experienced during the 2022 Quarter, which resulted in delayed shipments of approximately 1.1 million tons. Through the efforts of our marketing teams, ARLP continued to benefit from rising coal markets as coal price realizations per ton increased $5.48 and $2.39 compared to the 2021 and Sequential Quarters, respectively. We also further strengthened our contract book during the 2022 Quarter, securing new agreements for the delivery of approximately 8.7 million tons through 2025 at prices well above our initial expectations. Higher energy prices and increased royalty volumes also drove strong performance by our royalties businesses, with both oil & gas royalties and coal royalties achieving a record EBITDA during the 2022 Quarter.”

Operating Results and Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Change

 

 

 

 

 

 

 

 

2022 First

 

2021 First

 

Quarter /

 

2021 Fourth

 

% Change

(in
millions, except per ton and per BOE data)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Sequential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal Operations (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Illinois Basin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

5.882

 

 

4.760

 

23.6

%

 

 

6.329

 

(7.1)

%

Coal sales price per ton sold

 

$

43.17

 

$

38.37

 

12.5

%

 

$

41.63

 

3.7

%

Segment Adjusted EBITDA Expense per ton

 

$

30.19

 

$

26.38

 

14.4

%

 

$

31.27

 

(3.5)

%

Segment Adjusted EBITDA

 

$

78.2

 

$

57.7

 

35.6

%

 

$

67.7

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appalachia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

2.280

 

 

2.068

 

10.3

%

 

 

2.771

 

(17.7)

%

Coal sales price per ton sold

 

$

58.97

 

$

50.70

 

16.3

%

 

$

53.30

 

10.6

%

Segment Adjusted EBITDA Expense per ton

 

$

36.72

 

$

35.65

 

3.0

%

 

$

37.47

 

(2.0)

%

Segment Adjusted EBITDA

 

$

51.1

 

$

31.5

 

62.2

%

 

$

46.7

 

9.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Coal Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons sold

 

 

8.162

 

 

6.828

 

19.5

%

 

 

9.100

 

(10.3)

%

Coal sales price per ton sold

 

$

47.58

 

$

42.10

 

13.0

%

 

$

45.19

 

5.3

%

Segment Adjusted EBITDA Expense per ton

 

$

32.90

 

$

29.72

 

10.7

%

 

$

33.86

 

(2.8)

%

Segment Adjusted EBITDA

 

$

132.0

 

$

90.6

 

45.7

%

 

$

116.4

 

13.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalties (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Royalties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOE sold (2)

 

 

0.505

 

 

0.400

 

26.3

%

 

 

0.458

 

10.3

%

Oil percentage of BOE

 

 

44.2

%

 

48.4

%

(8.7)

%

 

 

45.9

%

(3.7)

%

Average sales price per BOE (3)

 

$

61.26

 

$

35.02

 

74.9

%

 

$

51.80

 

18.3

%

Segment Adjusted EBITDA Expense

 

$

3.0

 

$

2.1

 

45.8

%

 

$

2.8

 

6.2

%

Segment Adjusted EBITDA

 

$

28.6

 

$

11.9

 

139.0

%

 

$

22.4

 

27.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal Royalties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty tons sold

 

 

5.553

 

 

4.521

 

22.8

%

 

 

5.675

 

(2.1)

%

Revenue per royalty ton sold

 

$

2.73

 

$

2.50

 

9.2

%

 

$

2.64

 

3.4

%

Segment Adjusted EBITDA Expense

 

$

4.8

 

$

4.0

 

19.6

%

 

$

5.1

 

(5.7)

%

Segment Adjusted EBITDA

 

$

10.3

 

$

7.3

 

42.3

%

 

$

9.9

 

4.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Royalties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total royalty revenues

 

$

46.1

 

$

25.3

 

82.2

%

 

$

39.4

 

16.9

%

Segment Adjusted EBITDA Expense

 

$

7.8

 

$

6.1

 

28.5

%

 

$

7.9

 

(1.5)

%

Segment Adjusted EBITDA

 

$

38.9

 

$

19.2

 

102.4

%

 

$

32.3

 

20.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

460.9

 

$

318.6

 

44.6

%

 

$

473.5

 

(2.7)

%

Segment Adjusted EBITDA Expense

 

$

261.2

 

$

197.7

 

32.1

%

 

$

301.1

 

(13.3)

%

Segment Adjusted EBITDA

 

$

170.9

 

$

109.8

 

55.6

%

 

$

148.8

 

14.9

%

_________________

 (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.

(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)

 

Reflects total consolidated results, which include our other and corporate activities and eliminations in addition to the Illinois Basin, Appalachia, Oil & Gas Royalties and Coal Royalties reportable segments highlighted above.

ARLP’s coal sales prices per ton increased in all regions compared to both the 2021 and Sequential Quarters as a result of favorable market conditions. In the Illinois Basin, increased domestic prices and significantly higher export prices during the 2022 Quarter drove coal sales prices higher by 12.5% and 3.7% compared to the 2021 and Sequential Quarters, respectively. In Appalachia, sales prices increased by 16.3% and 10.6% compared to the 2021 and Sequential Quarters, respectively, primarily due to significantly higher export price realizations at our Mettiki and MC Mining operations. Coal sales volumes were higher by 23.6% in the Illinois Basin compared to the 2021 Quarter as a result of increased sales volumes across all mines in the region. In Appalachia, coal sales volumes increased 10.3% compared to the 2021 Quarter as a result of higher export volumes. Compared to the Sequential Quarter, shipment delays resulted in reduced coal sales volumes in both the Illinois Basin and Appalachian regions, which fell 7.1% and 17.7%, respectively, during the 2022 Quarter. ARLP ended the 2022 Quarter with total coal inventory of 1.6 million tons, representing a decrease of 0.2 million tons compared to the end of the 2021 Quarter and an increase of 1.0 million tons compared to the end of the Sequential Quarter.

Segment Adjusted EBITDA Expense per ton increased by 14.4% and 3.0% in the Illinois Basin and Appalachia, respectively, compared to the 2021 Quarter as a result of inflationary pressures on numerous expense items, including labor-related expenses and supply and maintenance costs, as well as longwall moves at our Hamilton, Tunnel Ridge and Mettiki mines. Lower recoveries at our Illinois Basin mines also contributed to increased per ton expenses in that region compared to the 2021 Quarter. Compared to the Sequential Quarter, Segment Adjusted EBITDA expense per ton decreased 3.5% and 2.0% in the Illinois Basin and Appalachia, respectively, primarily due to the previously discussed contract buy-out expense and unfavorable non-cash actuarial and accrual adjustments recognized in the Sequential Quarter.

For our Oil & Gas Royalties segment, significantly higher sales price realizations per BOE and increased volumes in the 2022 Quarter drove Segment Adjusted EBITDA higher by 139.0% to a record $28.6 million compared to $11.9 million for the 2021 Quarter. Compared to the Sequential Quarter, Segment Adjusted EBITDA increased by $6.2 million in the 2022 Quarter due to higher volumes, which increased 10.3%, and increased oil & gas prices, which rose by 18.3%.

Segment Adjusted EBITDA for our Coal Royalties segment increased 42.3% to a record $10.3 million for the 2022 Quarter compared to $7.3 million for the 2021 Quarter as a result of increased royalty tons sold and higher average royalty rates per ton.

Matrix and Alliance Technologies Group High
Level Strategy

Matrix Design Group, LLC (“Matrix”) is a wholly owned subsidiary of ARLP created in 2006 as a technical service group focused on deploying technology in domestic underground coal operations in response to the passage of The MINER Safety Act by the United States Congress. The Matrix strategy evolved over the last decade with a primary focus on supporting U.S. based coal mining operations with proximity detection equipment and other products and services. The customer base has grown to include international coal mining operations and expanded into non-coal mining applications. In 2021 Matrix had revenue of $22.7 million and EBITDA of $4.7 million. As factored into our 2022 consolidated guidance, we estimated revenue of approximately $35.0 million and EBITDA of $8.0 million for Matrix. Matrix is and always has been a cash flow positive business growing organically with limited capital investment to date.

We have more recently been developing Matrix as an incubator as a key component of our diversification strategy. Matrix and its subsidiaries today employ over 100 professionals covering hardware and software development, data analytics and AI technologies. There are many “AI companies” and many “software development” companies that exist but we believe Matrix has attributes which distinguish it from many of its peers. Matrix combines hardware, software and analytics in one platform, which is a powerful combination. Moreover, we believe the investments we are making into Francis Energy and Infinitum Electric (discussed below) have the potential to significantly benefit from the growing skills base, analytics and AI opportunities being developed by Matrix. These three companies are all focused in strong growth sectors aligned with the broader energy transition. Our long-term goals for these companies are to provide tangible offerings which are enhanced by this transition, rather than being dependent on it.

Over the past year, Matrix has embarked on a new strategy, which aims to position the company to compete in the energy transition space, while at the same time remaining committed to the markets they already serve. The reduction of base load coal powered generation resources from our country’s electrical grid combined with the anticipated growth of renewable power sources and the electric vehicle (“EV”) market are changing how electricity is generated, consumed and priced in the United States. As intermittent resources become a more significant portion of the energy mix, the market value of power will become more correlated with generation capacity in real time. This transition creates additional challenges for the electrical infrastructure in America, which was not designed to accommodate this load. ARLP’s relationships with electric utilities, industrial customers, and federal and state governments, along with our technology and manufacturing capabilities give us confidence that these challenges will provide growth opportunities for our Partnership.

Matrix is currently delivering products focused on data networking, communication and tracking systems, mining proximity detection systems, industrial collision avoidance systems, and data and analytics software. Future areas of potential investment by Matrix and ARLP’s broader management team focused on technology development (our “Alliance Technologies Group”) include smart cameras, energy storage, energy efficiency, renewable power generation, EV charging, smart metering and energy demand management.

Francis Energy

Earlier today Francis Renewable Energy, LLC (“Francis Energy”), an Oklahoma-based owner and operator of a leading comprehensive statewide network of EV fast charging infrastructure, with plans to service states across the Midwest and Eastern U.S., announced an equity investment by ARLP to help propel Francis Energy’s future growth. To date, Francis Energy has built a network with hundreds of fast chargers across Oklahoma and several other states, with a goal of providing EV drivers convenient, affordable, easy to use public access to charging stations.

The $1.2 trillion infrastructure bill that President Biden signed into law in November 2021 includes a large federal investment in electric vehicle charging infrastructure. The law authorizes $7.5 billion in federal spending available through two new programs to incentivize the buildout of EV infrastructure to eliminate range anxiety for EV drivers and support the booming growth of the U.S. electric vehicle market. The money will be allocated to private sector companies by federal, state and local governments creating opportunities for project developers and equipment manufacturers, like Matrix and Francis Energy.

Infinitum Electric Inc.

ARLP has also agreed to an equity investment in Infinitum Electric, Inc. (“Infinitum”), a Texas-based startup developer and manufacturer of electric motors featuring printed circuit board stators which have the potential to result in motors that are smaller, lighter, quieter, more efficient and capable of operating at a fraction of the carbon footprint of conventional electric motors. Infinitum’s products are supported by multiple patents and patent applications, which may have broad application across multiple industries.

Outlook

“Much has changed since we last released earnings in January,” said Mr. Craft. “We are excited to share our current energy transition strategy and the announcement of our investment in two entrepreneurial companies that we believe will provide significant returns for our unitholders within four to seven years. We are equally excited to continue supporting Matrix efforts to develop new product offerings that have the potential to grow their sales by 5 to 10 times over the same time period.”

Addressing ARLP’s current outlook, Mr. Craft added, “Commodity price realizations escalated dramatically during the 2022 Quarter, reflecting systemic supply shortages due, in part, to the impact of governmental policies over the last fifteen years and exacerbated by uncertainties created by Russia’s invasion of Ukraine in February of this year. Energy supplies have also been impacted by labor shortages along with supply chain and transportation disruptions. Demand has remained surprisingly strong despite Covid-19 related cases still impacting economies around the world, sanctions imposed on Russia and inflationary cost pressures in the United States not seen in 40 years.”

Mr. Craft added, “Forward pricing for worldwide commodities also rose dramatically during the 2022 Quarter, well above our initial expectations earlier this year. As a result, we updated 2022 full year guidance on April 26, 2022 (as shown below) as well as released our Board’s decision to increase ARLP’s cash distribution to unitholders by 40.0% to $0.35 for the 2022 Quarter. Future distributions will be considered by our Board on a quarterly basis. Consistent with our full-year guidance, management anticipates current market conditions continuing for the foreseeable future, which supports ARLP targeting increases to unitholder distributions of 10.0% to 15.0% per quarter over the balance of this year.”

ARLP’s updated guidance, as reported on April 26, 2022, is outlined below:

 

 

 

 

 

 

 

 

 

 

 

 

2022 Full Year Guidance

 

 

 

 

 

 

Coal Operations

 

 

 

 

 

Volumes (Million Short Tons)

 

 

 

 

 

Illinois Basin Sales Tons

 

 

 

 

25.2 — 26.0

Appalachia Sales Tons

 

 

 

 

10.3 — 11.0

Total Sales Tons

 

 

 

 

35.5 — 37.0

 

 

 

 

 

 

Committed
& Priced Sales Tons

 

 

 

 

 

2022 — Domestic/Export/Total

 

 

 

 

30.1/4.1/34.2

2023 — Domestic/Export/Total

 

 

 

 

17.9/2.0/19.9

 

 

 

 

 

 

Per
Ton Estimates

 

 

 

 

 

Coal Sales Price per ton sold (1)

 

 

 

 

$54.00 — $63.00

Segment Adjusted EBITDA Expense per ton sold (2)

 

 

 

 

$33.50 — $35.50

 

 

 

 

 

 

Royalties

 

 

 

 

 

Oil & Gas Royalties

 

 

 

 

 

Oil (000 Barrels)

 

 

 

 

885 – 935

Natural gas (000 MCF)

 

 

 

 

3,000 – 3,400

Liquids (000 Barrels)

 

 

 

 

350 – 380

Segment Adjusted EBITDA Expense (% of Oil & Gas Royalties Revenue)

 

 

 

 

~ 12.0%

 

 

 

 

 

 

Coal Royalties

 

 

 

 

 

Royalty tons sold (Million Short Tons)

 

 

 

 

21.5 — 22.0

Revenue per royalty ton sold

 

 

 

 

$3.10 — $3.20

Segment Adjusted EBITDA Expense per royalty ton sold

 

 

 

 

$1.10 — $1.20

 

 

 

 

 

 

Consolidated (Millions)

 

 

 

 

 

Depreciation, depletion and amortization

 

 

 

 

$260 — $270

General and administrative

 

 

 

 

$82 — $84

Net interest expense

 

 

 

 

$37 — $38

Income tax expense

 

 

 

 

$53 — $55

Capital expenditures

 

 

 

 

$220 — $240

_________________

(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 expense.

A conference call regarding ARLP’s 2021 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 “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 U.S. Toll Free (844) 512-2921; International Toll (412) 317-6671 and request to be connected to replay using access code 13729024.

About Alliance Resource Partners, L.P.

ARLP is a diversified energy company that is currently the second largest coal producer in the United States. 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 positioning itself as an energy provider for the future by leveraging its core technology and operating competencies to make strategic investments in the fast-growing energy and infrastructure transition.

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 [email protected]

About Matrix Design Group, LLC

Matrix is an ISO 9001 certified designer, developer and marketer of safety and productivity technology for use in mining and industrial applications. Its innovative, industry-leading systems include products focused on data networking, communication and tracking systems, mining proximity detection systems, industrial collision avoidance systems, and data and analytics software. Headquartered in Newburgh, Indiana, Matrix has offices in Lexington, KY, Johannesburg and Pretoria, South Africa and service locations throughout its mining regions.

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 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 Matrix, Francis Energy and Infinitum, 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
outcome or escalation of current hostilities in Ukraine, the severity,
magnitude, and duration of the COVID-19 pandemic and the emergence of new virus
variants, including impacts of the pandemic and of businesses’ and governments’
responses to the pandemic, including actions to mitigate its impact and the
development of treatments and vaccines, 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; changes in macroeconomic and market conditions and market
volatility arising from hostilities in Ukraine, the COVID-19 pandemic or
otherwise, including inflation, changes in coal, oil, natural gas, and natural
gas liquids prices, and the impact of such changes and volatility on our
financial position; 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 global economic and geo-political 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; 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 mineral interests due to low oil, natural gas, and natural gas
liquid 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; the success of our development plans for
Matrix and our investments in Francis Energy and Infinitum which are 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, including the
interest rate policies of the Federal Reserve Board; 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 raw material costs, including due to inflationary
pressures; changes in our ability to recruit, hire and maintain labor,
including, as a result of, the potential impact of government-imposed vaccine
mandates; 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 shortages 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,
2021, filed on February 25, 2022 with the SEC. Except as required by applicable
securities laws, ARLP does not intend to update its forward-looking statements.

 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING
DATA

(In thousands, except unit and per unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

2021

 

 

 

 

 

 

 

 

 

Tons Sold

 

 

8,162

 

 

 

6,828

 

 

Tons
Produced

 

 

9,178

 

 

 

8,001

 

 

Mineral Interest Volumes (BOE)

 

 

505

 

 

 

400

 

 

 

 

 

 

 

 

 

 

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

Coal sales

 

$

388,360

 

 

$

287,487

 

 

Oil & gas royalties

 

 

30,927

 

 

 

13,999

 

 

Transportation revenues

 

 

29,372

 

 

 

11,068

 

 

Other revenues

 

 

12,204

 

 

 

6,068

 

 

Total revenues

 

 

460,863

 

 

 

318,622

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation, depletion and amortization)

 

 

261,746

 

 

 

196,520

 

 

Transportation expenses

 

 

29,372

 

 

 

11,068

 

 

General and administrative

 

 

18,596

 

 

 

15,504

 

 

Depreciation, depletion and amortization

 

 

63,314

 

 

 

59,202

 

 

Total operating expenses

 

 

373,028

 

 

 

282,294

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

 

87,835

 

 

 

36,328

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(9,662

)

 

 

(10,396

)

 

Interest income

 

 

35

 

 

 

17

 

 

Equity method investment income

 

 

883

 

 

 

62

 

 

Other income (expense)

 

 

566

 

 

 

(1,197

)

 

INCOME BEFORE INCOME TAXES

 

 

79,657

 

 

 

24,814

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE (BENEFIT)

 

 

42,715

 

 

 

(12

)

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

36,942

 

 

 

24,826

 

 

 

 

 

 

 

 

 

 

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

 

(290

)

 

 

(78

)

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO ARLP

 

$

36,652

 

 

$

24,748

 

 

 

 

 

 

 

 

 

 

EARNINGS PER LIMITED PARTNER UNIT –
BASIC AND DILUTED

 

$

0.28

 

 

$

0.19

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF UNITS
OUTSTANDING – BASIC AND DILUTED

 

 

127,195,219

 

 

 

127,195,219

 

 

 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2022

 

2021

 

ASSETS

 

 

 

 

 

 

 

CURRENT
ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,191

 

 

$

122,403

 

 

Trade receivables

 

 

156,698

 

 

 

129,531

 

 

Other receivables

 

 

440

 

 

 

680

 

 

Inventories, net

 

 

95,745

 

 

 

60,302

 

 

Advance royalties

 

 

4,385

 

 

 

4,958

 

 

Prepaid expenses and other assets

 

 

19,238

 

 

 

21,354

 

 

Total current assets

 

 

404,697

 

 

 

339,228

 

 

PROPERTY,
PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

Property, plant and equipment, at cost

 

 

3,666,987

 

 

 

3,608,347

 

 

Less accumulated depreciation, depletion and amortization

 

 

(1,975,381

)

 

 

(1,909,669

)

 

Total property, plant and equipment, net

 

 

1,691,606

 

 

 

1,698,678

 

 

OTHER
ASSETS:

 

 

 

 

 

 

 

Advance royalties

 

 

71,403

 

 

 

63,524

 

 

Equity method investments

 

 

26,194

 

 

 

26,325

 

 

Goodwill

 

 

4,373

 

 

 

4,373

 

 

Operating lease right-of-use assets

 

 

15,165

 

 

 

14,158

 

 

Other long-term assets

 

 

12,109

 

 

 

13,120

 

 

Total other assets

 

 

129,244

 

 

 

121,500

 

 

TOTAL ASSETS

 

$

2,225,547

 

 

$

2,159,406

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

CURRENT
LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

$

92,904

 

 

$

69,586

 

 

Accrued taxes other than income taxes

 

 

15,209

 

 

 

17,787

 

 

Accrued payroll and related expenses

 

 

31,178

 

 

 

36,805

 

 

Accrued interest

 

 

12,500

 

 

 

5,000

 

 

Workers’ compensation and pneumoconiosis benefits

 

 

12,293

 

 

 

12,293

 

 

Current finance lease obligations

 

 

665

 

 

 

840

 

 

Current operating lease obligations

 

 

2,133

 

 

 

1,820

 

 

Other current liabilities

 

 

19,815

 

 

 

17,375

 

 

Current maturities, long-term debt, net

 

 

15,359

 

 

 

16,071

 

 

Total current liabilities

 

 

202,056

 

 

 

177,577

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

Long-term debt, excluding current maturities, net

 

 

415,990

 

 

 

418,942

 

 

Pneumoconiosis benefits

 

 

108,491

 

 

 

107,560

 

 

Accrued pension benefit

 

 

24,857

 

 

 

25,590

 

 

Workers’ compensation

 

 

44,669

 

 

 

44,911

 

 

Asset retirement obligations

 

 

123,989

 

 

 

123,517

 

 

Long-term finance lease obligations

 

 

590

 

 

 

618

 

 

Long-term operating lease obligations

 

 

13,009

 

 

 

12,366

 

 

Deferred income tax liabilities

 

 

37,621

 

 

 

391

 

 

Other liabilities

 

 

20,882

 

 

 

21,865

 

 

Total long-term liabilities

 

 

790,098

 

 

 

755,760

 

 

Total liabilities

 

 

992,154

 

 

 

933,337

 

 

 

 

 

 

 

 

 

 

COMMITMENTS
AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PARTNERS’
CAPITAL:

 

 

 

 

 

 

 

ARLP Partners’ Capital:

 

 

 

 

 

 

 

Limited Partners – Common Unitholders 127,195,219 units outstanding

 

 

1,285,725

 

 

 

1,279,183

 

 

Accumulated other comprehensive loss

 

 

(63,439

)

 

 

(64,229

)

 

Total ARLP Partners’ Capital

 

 

1,222,286

 

 

 

1,214,954

 

 

Noncontrolling interest

 

 

11,107

 

 

 

11,115

 

 

Total Partners’ Capital

 

 

1,233,393

 

 

 

1,226,069

 

 

TOTAL LIABILITIES AND PARTNERS’ CAPITAL

 

$

2,225,547

 

 

$

2,159,406

 

  

 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

2021

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

$

89,036

 

 

$

54,647

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Property, plant and equipment:

 

 

 

 

 

 

 

Capital expenditures

 

 

(59,153

)

 

 

(31,437

)

 

Increase in accounts payable and accrued liabilities

 

 

13,551

 

 

 

7,200

 

 

Proceeds from sale of property, plant and equipment

 

 

928

 

 

 

1,139

 

 

Distributions received from investments in excess of cumulative earnings

 

 

131

 

 

 

361

 

 

Other

 

 

(982

)

 

 

 

 

Net cash used in investing activities

 

 

(45,525

)

 

 

(22,737

)

 

 

 

 

 

 

 

 

 

CASH
FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Payments under securitization facility

 

 

 

 

 

(17,800

)

 

Payments on equipment financings

 

 

(4,472

)

 

 

(4,239

)

 

Borrowings under revolving credit facilities

 

 

 

 

 

10,000

 

 

Payments under revolving credit facilities

 

 

 

 

 

(42,500

)

 

Borrowings from line of credit

 

 

 

 

 

1,830

 

 

Payments on finance lease obligations

 

 

(203

)

 

 

(185

)

 

Payment of debt issuance costs

 

 

 

 

 

(6

)

 

Distributions paid to Partners

 

 

(32,750

)

 

 

 

 

Other

 

 

(298

)

 

 

(141

)

 

Net cash used in financing activities

 

 

(37,723

)

 

 

(53,041

)

 

 

 

 

 

 

 

 

 

NET
CHANGE IN CASH AND CASH EQUIVALENTS

 

 

5,788

 

 

 

(21,131

)

 

 

 

 

 

 

 

 

 

CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

122,403

 

 

 

55,574

 

 

 

 

 

 

 

 

 

 

CASH
AND CASH EQUIVALENTS AT END OF PERIOD

 

$

128,191

 

 

$

34,443

 

 

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 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, 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

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2022

 

2021

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to ARLP

 

$

36,652

 

 

$

24,748

 

 

$

51,826

 

 

Depreciation, depletion and amortization

 

 

63,314

 

 

 

59,202

 

 

 

68,679

 

 

Interest expense, net

 

 

9,697

 

 

 

10,465

 

 

 

9,628

 

 

Capitalized interest

 

 

(70

)

 

 

(86

)

 

 

(82

)

 

Income tax expense (benefit)

 

 

42,715

 

 

 

(12

)

 

 

190

 

 

EBITDA

 

 

152,308

 

 

 

94,317

 

 

 

130,241

 

 

Interest expense, net

 

 

(9,697

)

 

 

(10,465

)

 

 

(9,628

)

 

Income tax (expense) benefit

 

 

(42,715

)

 

 

12

 

 

 

(190

)

 

Deferred income tax expense (benefit) (1)

 

 

37,294

 

 

 

(12

)

 

 

123

 

 

Estimated maintenance capital expenditures (2)

 

 

(51,947

)

 

 

(39,205

)

 

 

(42,821

)

 

Distributable Cash Flow

 

$

85,243

 

 

$

44,647

 

 

$

77,725

 

 

Distributions paid to partners

 

$

32,750

 

 

$

 

 

$

26,072

 

 

Distribution Coverage Ratio

 

 

2.60

 

 

 

 

 

 

2.98

 

 

_________________

(1)

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.

(2)

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 2022 planning horizon, average annual estimated maintenance capital expenditures are assumed to be $5.66 per ton produced compared to an estimated $4.90 per ton produced in 2021. 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. 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

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2022

 

2021

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

$

89,036

 

 

$

54,647

 

 

$

114,225

 

 

Capital expenditures

 

 

(59,153

)

 

 

(31,437

)

 

 

(34,323

)

 

Free cash flow

 

$

29,883

 

 

$

23,210

 

 

$

79,902

 

 

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 and other expense. 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 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 excludes expenses of our Oil & Gas Royalties segment and is adjusted for intercompany interactions with our Coal Royalties segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2022

 

2021

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense

 

$

261,746

 

 

$

196,520

 

 

$

300,497

 

 

Outside coal purchases

 

 

 

 

 

 

 

 

193

 

 

Other expense (income)

 

 

(566

)

 

 

1,197

 

 

 

388

 

 

Segment Adjusted EBITDA Expense

 

 

261,180

 

 

 

197,717

 

 

 

301,078

 

 

Segment Adjusted EBITDA Expense – Oil & Gas Royalties

 

 

(3,001

)

 

 

(2,058

)

 

 

(2,827

)

 

Segment Adjusted EBITDA Expense – Coal Royalties

 

 

(4,819

)

 

 

(4,028

)

 

 

(5,112

)

 

Intercompany coal royalties (1)

 

 

15,167

 

 

 

11,301

 

 

 

14,992

 

 

Segment Adjusted EBITDA Expense – Coal Operations

 

$

268,527

 

 

$

202,932

 

 

$

308,131

 

 

_________________

(1)

Intercompany coal royalties earned by our Coal Royalties segment represent coal royalty expense incurred by our operating mines and are therefore added back to consolidated Segment Adjusted EBITDA Expense to reflect Segment Adjusted EBITDA Expense – Coal Operations.

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 excludes the contribution of our Oil & Gas and Coal Royalties segments to allow management to focus solely on the operating performance of our Illinois Basin and Appalachia segments.

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31,

 

December 31,

 

 

 

2022

 

2021

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (See reconciliation to GAAP above)

 

$

152,308

 

 

$

94,317

 

 

$

130,241

 

 

General and administrative

 

 

18,596

 

 

 

15,504

 

 

 

18,509

 

 

Segment Adjusted EBITDA

 

 

170,904

 

 

 

109,821

 

 

 

148,750

 

 

Segment Adjusted EBITDA – Total Royalties

 

 

(38,900

)

 

 

(19,219

)

 

 

(32,318

)

 

Segment Adjusted EBITDA – Coal Operations

 

$

132,004

 

 

$

90,602

 

 

$

116,432

 

 

 

Brian L. Cantrell
Alliance Resource Partners, L.P.
(918) 295-7673

Source: Alliance Resource Partners, L.P.

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