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,|
|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|
|Income tax benefit||(102||)||(317||)||(726||)||(221||)||(257||)||(1,000||)|
|Asset impairment charge||19,031||-||19,031||-||-||19,000|
|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 $4.70 per produced ton in 2011. Our actual maintenance capital expenditures vary depending on various factors, including maintenance schedules and timing of capital projects, among others. We annually disclose our actual maintenance capital expenditures in our Form 10-K filed with the Securities and Exchange Commission.|
Reconciliation of GAAP "Operating Expenses" to non-GAAP "Segment Adjusted EBITDA Expense per ton" and Reconciliation of non-GAAP "EBITDA" to "Segment Adjusted EBITDA" (in thousands, except per ton data).
Segment Adjusted EBITDA Expense per ton includes operating expenses, outside coal purchases and other income divided by tons sold. Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any margin on transportation revenues. Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments. Segment Adjusted EBITDA Expense is a key component of EBITDA in addition to coal sales and other sales and operating revenues. The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses. Outside coal purchases are included in Segment Adjusted EBITDA Expense because tons sold and coal sales include sales from outside coal purchases.
|Three Months Ended September 30,||Three Months Ended June 30,|
|Outside coal purchases||4,424||19,864||16,154|
|Other (income) loss||(254||)||(360||)||(2,384||)|
|Segment Adjusted EBITDA Expense||$||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||$||40.23|
|Three Months Ended September 30,||Three Months Ended June 30,|
|Adjusted EBITDA (See reconciliation to GAAP above)||$||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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