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Alliance Resource Partners, L.P. Increases Quarterly Distribution By 2.1% To $1.085 Per Unit: Posts Record Coal Sales And Production Volumes And Reports Quarterly Financial Results

Distributable cash flow (“DCF”) is defined as Adjusted EBITDA excluding interest expense (before capitalized interest), interest income, income taxes and estimated maintenance capital expenditures. DCF is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others, to assess:

  • the cash flows generated by our assets (prior to the establishment of any retained cash reserves by the general partner) to fund the cash distributions we expect to pay to unitholders;
  • our success in providing a cash return on investment and whether or not the Partnership is generating cash flow at a level that can sustain or support an increase in its quarterly distribution rates;
  • the yield of our units, which is a quantitative standard used through the investment community with respect to publicly-traded partnerships as the value of a unit is generally determined by a unit’s yield (which in turn is based on the amount of cash distributions the entity pays to a unitholder).

EBITDA, Adjusted EBITDA and DCF should not be considered as alternatives to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles. EBITDA, Adjusted EBITDA and DCF are not intended to represent cash flow and do not represent the measure of cash available for distribution. Our method of computing EBITDA, Adjusted EBITDA and DCF may not be the same method used to compute similar measures reported by other companies, and EBITDA and DCF may be computed differently by us in different contexts (i.e. public reporting versus computation under financing agreements). We have not previously modified EBITDA for any non-recurring charges to calculate Adjusted EBITDA and, as a result, EBITDA and Adjusted EBITDA are equivalent in all historical periods.

         
Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

June 30,

Year Ended

December 31,

2012   2011 2012   2011 2012

2012E

Midpoint

 
Net income $ 60,510 $ 104,093 $ 238,933 $ 297,651 $ 95,455 $ 307,500
Depreciation, depletion and amortization 59,781 40,275 154,923 117,237 52,109 217,500
Interest expense, gross 9,053 8,869 27,821 27,455 9,995 37,000
Capitalized interest (1,701 ) (170 ) (6,433 ) (482 ) (1,778 ) (7,500 )
Income tax benefit   (102 )   (317 )   (726 )   (221 )   (257 )   (1,000 )
EBITDA 127,541 152,750 414,518 441,640 155,524 553,500
Asset impairment charge   19,031     -     19,031     -     -     19,000  
Adjusted EBITDA 146,572 152,750 433,549 441,640 155,524 572,500
Interest expense, gross (9,053 ) (8,869 ) (27,821 ) (27,455 ) (9,995 ) (37,000 )
Income tax benefit 102 317 726 221 257 1,000
Estimated maintenance capital expenditures (1)   (49,500 )   (35,927 )   (141,334 )   (109,971 )   (45,018 )   (190,500 )
Distributable Cash Flow $ 88,121   $ 108,271   $ 265,120   $ 304,435   $ 100,768   $ 346,000  
 

(1) Our maintenance capital expenditures, as defined under the terms of our partnership agreement, are those capital expenditures required to maintain, over the long-term, the operating capacity of our capital assets.  We estimate maintenance capital expenditures on an annual basis based upon a five-year planning horizon.  For the current five-year planning horizon, average annual estimated maintenance capital expenditures are assumed to be $5.50 per produced ton compared to the estimated $4.70 per produced ton in 2011.  Our actual maintenance capital expenditures vary depending on various factors, including maintenance schedules and timing of capital projects, among others.  We annually disclose our actual maintenance capital expenditures in our Form 10-K filed with the Securities and Exchange Commission.

 

Reconciliation of GAAP "Operating Expenses" to non-GAAP "Segment Adjusted EBITDA Expense per ton" and Reconciliation of non-GAAP "EBITDA" to "Segment Adjusted EBITDA" (in thousands, except per ton data).

Segment Adjusted EBITDA Expense per ton includes operating expenses, outside coal purchases and other income divided by tons sold. 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 and other sales and operating 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. Outside coal purchases are included in Segment Adjusted EBITDA Expense because tons sold and coal sales include sales from outside coal purchases.

       
Three Months Ended

September 30,

Three Months Ended

June 30,

2012   2011 2012
 
Operating expense $ 338,644 $ 294,771 $ 334,647
Outside coal purchases 4,424 19,864 16,154
Other (income) loss   (254 )   (360 )   (2,384 )
Segment Adjusted EBITDA Expense $ 342,814 $ 314,275 $ 348,417
Divided by tons sold   8,910     8,326     8,661  
Segment Adjusted EBITDA Expense per ton $ 38.48   $ 37.75   $ 40.23  
 

Segment Adjusted EBITDA is defined as net income before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and asset impairment charge.

       
Three Months Ended

September 30,

Three Months Ended

June 30,

2012   2011 2012
 
Adjusted EBITDA (See reconciliation to GAAP above) $ 146,572 $ 152,750 $ 155,524
General and administrative   13,598   13,276   16,052
Segment Adjusted EBITDA $ 160,170 $ 166,026 $ 171,576
 




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