Alliance Resource Partners Lp (ARLP) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, December 31, 2019

Earnings Press Release
10-K Annual Report
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Alliance Resource Partners Lp
Ticker: ARLP CIK: 1086600

Exhibit 99.1

PRESS RELEASE

	CONTACT:
	Brian L. Cantrell
	Alliance Resource Partners, L.P.
	1717 South Boulder Avenue, Suite 400
	Tulsa, Oklahoma 74119
FOR IMMEDIATE RELEASE	(918) 295-7673

ALLIANCE RESOURCE PARTNERS, L.P.

Reports Annual Increases to Net Income and EBITDA; Declares Quarterly Cash Distribution of $0.40 Per Unit; and Provides Initial 2020 Guidance

TULSA, OKLAHOMA, January 27, 2020 — Alliance Resource Partners, L.P. (NASDAQ: ARLP) today reported financial and operating results for the year and quarter ended December 31, 2019 (the "2019 Year" and "2019 Quarter", respectively).

For the 2019 Year, net income attributable to ARLP increased 8.9% to $399.4 million, or $3.07 per basic and diluted limited partner unit, compared to $366.6 million, or $2.74 per basic and diluted limited partner unit, for the year ended December 31, 2018 (the "2018 Year"). The increase in net income resulted from a $170.0 million non-cash net gain related to the AllDale Acquisition, the addition of oil & gas royalty revenues and lower operating expenses in the 2019 Year, partially offset by decreased coal sales revenues and increased depreciation in the 2019 Year as well as an $80.0 million net gain on settlement of litigation in the 2018 Year. EBITDA increased 9.7% in the 2019 Year to $753.8 million compared to $686.9 million in the 2018 Year. Adjusted EBITDA decreased 7.5% to $599.0 million in the 2019 Year, compared to $647.4 million for the 2018 Year. (Unless otherwise noted, all references in this release to "net income" refer to "net income attributable to ARLP." For a definition of EBITDA, Adjusted EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.)

For the 2019 Quarter, total revenues were $453.3 million compared to $531.8 million for the quarter ended December 31, 2018 (the "2018 Quarter"), primarily due to lower coal sales revenues resulting from reduced coal sales volumes and prices, partially offset by the addition of oil & gas royalty revenues in the 2019 Quarter. Lower total revenues, partially offset by lower total operating expenses, pushed net income attributable to ARLP for the 2019 Quarter down to $25.8 million, or $0.20 per basic and diluted limited partner unit, compared to $50.8 million, or $0.38 per basic and diluted limited partner unit, for the 2018 Quarter. EBITDA and Adjusted EBITDA in the 2019 Quarter of $126.2 million were lower compared to EBITDA and Adjusted EBITDA in the 2018 Quarter of $136.4 million and $176.8 million, respectively.

ARLP also announced today that the Board of Directors of its general partner has decreased the quarterly cash distribution to unitholders for the 2019 Quarter to $0.40 per unit (an annualized rate of $1.60 per unit), payable on February 14, 2020 to all unitholders of record as of the close of trading on February 7, 2020. The announced distribution compares to quarterly unitholder distributions of

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$0.53 per unit declared for the 2018 Quarter and $0.54 per unit declared for the quarter ended September 30, 2019 (the "Sequential Quarter").

Commenting on ARLP’s performance for the year, Joseph W. Craft III, Chairman, President and Chief Executive Officer, said, "Following a year where we grew our coal production by 7.1%, delivered record coal sales volumes, improved coal sales price realizations and posted higher year-over-year revenues, net income and EBITDA, we entered 2019 anticipating a continuation of the favorable domestic and international coal market fundamentals that led to our success in 2018. After posting solid results in the first quarter of 2019, recording 15% growth in total revenues over the first quarter of 2018, the international thermal indexes began to move lower. Unfortunately, the price for thermal coal in the international marketplace continued to deteriorate throughout the year, dropping significantly since the beginning of 2019. As a result, export volumes shrank and the industry soon faced a growing oversupply in the domestic market. ARLP proactively responded by modifying our operations to shift production to our lowest-cost mines, reducing total volumes, adjusting our coal sales mix to increase domestic market share in the face of weak export pricing and delivered solid results for the year despite extremely challenging coal market conditions."

Mr. Craft added, "ARLP made tremendous progress in diversifying our business through growth in our oil & gas minerals segment. During 2019, we invested approximately $320.0 million in the segment and transitioned to active participation in the industry with direct ownership of over 55,000 net royalty acres in premier basins. The cash flow generated by these assets has become a meaningful contributor to ARLP’s performance, representing approximately 7.0% of our consolidated Segment Adjusted EBITDA in 2019. With senior leadership recently added, we expect this part of our business will play an even greater role in ARLP’s future performance."

Commenting on the distribution, Mr. Craft continued, "ARLP finished the year with a respectable 1.18 distribution coverage ratio. The partnership remains profitable and continues to generate solid cash flows. As I have advised repeatedly, if our future outlook dictates a change in distributions necessary for ARLP to protect its strong balance sheet to allow us to execute our plans and take advantage of opportunities by preserving liquidity and maintaining access to capital, then our Board will act appropriately. The decision by our Board to reduce ARLP’s unitholder distribution, while difficult, is a significant, proactive step toward achieving these objectives. Assuming ARLP can achieve results this year at the midpoint of our guidance, we would finish 2020 with a 1.27 distribution coverage ratio."

Consolidated Financial Results

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Coal Operations –

Reflecting lower coal sales volumes and prices, coal sales revenues for the 2019 Year decreased 4.5% to $1.76 billion, compared to $1.84 billion for the 2018 Year. Coal sales volumes declined 2.8% to 39.3 million tons due primarily to lower export sales, partially offset by increased coal sales to domestic customers. Weak coal market conditions also impacted price realizations which declined 1.7% in the 2019 Year to $44.86 per ton sold,

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compared to $45.64 per ton sold during the 2018 Year. Reduced shipments of coal to international markets in the 2019 Year led transportation revenues and expenses lower by 11.5% to $99.5 million.

Compared to the 2018 Year, combined operating expenses and outside coal purchases for our coal operations decreased 1.1% to $1.20 billion, primarily due to lower coal sales volumes offset in part by increased expenses per ton. On a per ton basis, curtailed coal production volumes in response to reduced exports and increased outside coal purchases led Segment Adjusted EBITDA Expense per ton higher by 1.6% in the 2019 Year to $30.47 per ton, compared to $29.98 per ton in the 2018 Year.

Segment Adjusted EBITDA from our coal operations declined 9.8% to $612.1 million, compared to $678.7 million for the 2018 Year, primarily due to lower coal sales revenues offset in part by lower expenses in the 2019 Year discussed above. (For a definition of Segment Adjusted EBITDA, Segment Adjusted EBITDA Expense and related reconciliation to comparable GAAP financial measures, please see the end of this release.)

Minerals –

For the 2019 Year, our mineral interests contributed total revenues of $53.0 million from oil & gas royalties and lease bonuses. During the 2019 Year, we also recorded a non-cash acquisition gain of $177.0 million to reflect the fair value of the interests in AllDale I and II we already owned at the time of the AllDale Acquisition. Inclusive of this gain, of which $7.1 million was attributable to noncontrolling interest, our Minerals segment contributed $177.0 million to ARLP’s net income, compared to $21.3 million for the 2018 Year. Excluding the impact of the acquisition gain, Segment Adjusted EBITDA related to our Minerals segment increased to $47.0 million for the 2019 Year, compared to $21.3 million for the 2018 Year. (Please see ARLP Press Release dated January 3, 2019 for a full description of the AllDale Acquisition. Following the AllDale Acquisition, results related to the mineral interests controlled by ARLP are included in our consolidated results while activity related to our limited partner interest in AllDale III continues to be reflected as equity method investment income.)

Compared to the 2018 Year, depreciation, depletion and amortization increased 10.3% to $309.1 million primarily due to depletion from production of our oil & gas royalty interests in the 2019 Year.

In the 2019 Year, we recorded a non-cash asset impairment charge of $15.2 million at our Dotiki mine in the Sequential Quarter as we ceased operations to shift production to our lower cost mines. In the 2018 Year, we recognized $40.5 million of non-cash impairment charges, comprised of a $34.3 million impairment related to the reduction of the economic life of our Dotiki mine and a $6.2 million impairment as a result of a decrease in the fair value of an option entitling us to lease certain coal reserves in Illinois.

In the 2018 Year, ARLP finalized an agreement with a customer and certain of its affiliates to settle litigation we initiated in 2015. The settlement agreement provided for a $93.0 million cash payment to ARLP, future conditional coal supply commitments, continued export trans-loading capacity for

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our Appalachian mines and the acquisition of 57 million tons of additional coal reserves near our Tunnel Ridge operation. A settlement gain of $80.0 million was recorded in the 2018 Year reflecting the cash payment received net of certain costs associated with the gain.

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

Coal Operations –

Due to reduced coal sales volumes and prices, coal sales revenues for the 2019 Quarter decreased 16.5% to $405.1 million, compared to $484.9 million for the 2018 Quarter. Coal sales volumes declined 9.9% to 9.4 million tons in the 2019 Quarter due primarily to lower export sales in addition to production ceasing at our Dotiki mine in the Sequential Quarter, partially offset by increased volumes from our Tunnel Ridge mine. Coal sales price realizations declined 7.3% in the 2019 Quarter to $42.95 per ton sold, compared to $46.34 per ton sold during the 2018 Quarter due primarily to lower met coal prices and shipments at our Mettiki mine. Operating revenues increased by $5.4 million resulting from a customer buy-out of certain coal contracts at Tunnel Ridge. Transportation revenues and expenses decreased to $16.6 million in the 2019 Quarter from $36.4 million in the 2018 Quarter, primarily due to reduced coal volumes shipped to international markets.

Compared to the 2018 Quarter, combined operating expenses and outside coal purchases for our coal operations decreased 6.3% to $291.4 million, primarily as a result of lower coal sales volumes. Segment Adjusted EBITDA Expense per ton increased 3.9% in the 2019 Quarter to $30.92 per ton, compared to $29.75 per ton in the 2018 Quarter, due primarily to the per ton cost impact of curtailed coal production in response to reduced export sales, partially offset by lower coal inventory charges. Lower coal sales revenues, partially offset by lower expenses caused total Segment Adjusted EBITDA from our coal operations to decline 29.8% to $129.4 million in the 2019 Quarter, compared to $184.2 million for the 2018 Quarter.

Minerals –

For the 2019 Quarter, our mineral interests contributed total revenues of $15.7 million from oil & gas royalties and lease bonuses. Including equity income from our AllDale III investment, our Minerals segment contributed Segment Adjusted EBITDA of $14.6 million for the 2019 Quarter, compared to a contribution of $7.3 million in the 2018 Quarter.

Compared to the 2018 Quarter, depreciation, depletion and amortization increased 16.6% to $88.7 million primarily due to depletion from production of our oil & gas royalty interests in the 2019 Quarter.

During the 2018 Quarter, we recorded $40.5 million of non-cash impairment charges due to the uncertain mine life at our Dotiki mine and a decrease in the fair value of an option entitling us to lease certain coal reserves, as discussed above.

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Segment Results and Analysis


						% Change
	2019 Fourth			2018 Fourth		Quarter /		2019 Third			% Change
(in millions, except per ton and per BOE data)	Quarter			Quarter		Quarter		Quarter			Sequential

Coal Operations

Illinois Basin
Tons sold		6.687			7.981	(16.2)	%		6.553		2.0	%
Coal sales price per ton (1)	$	37.84		$	40.26	(6.0)	%	$	39.11		(3.2)	%
Segment Adjusted EBITDA Expense per ton (2)	$	26.46		$	26.34	0.5	%	$	26.52		(0.2)	%
Segment Adjusted EBITDA (2)	$	78.6		$	115.8	(32.1)	%	$	87.8		(10.4)	%

Appalachia
Tons sold		2.745			2.483	10.6	%		2.767		(0.8)	%
Coal sales price per ton (1)	$	54.89		$	64.03	(14.3)	%	$	58.66		(6.4)	%
Segment Adjusted EBITDA Expense per ton (2)	$	40.35		$	38.98	3.5	%	$	39.03		3.4	%
Segment Adjusted EBITDA (2)	$	48.3		$	62.9	(23.2)	%	$	55.2		(12.4)	%

Total Coal
Tons sold		9.432			10.464	(9.9)	%		9.320		1.2	%
Coal sales price per ton (1)	$	42.95		$	46.34	(7.3)	%	$	45.06		(4.7)	%
Segment Adjusted EBITDA Expense per ton (2)	$	30.92		$	29.75	3.9	%	$	30.75		0.6	%
Segment Adjusted EBITDA (2)	$	129.4		$	184.2	(29.8)	%	$	144.0		(10.1)	%

Minerals (3)
Volume - BOE		0.498			—	n/m			0.433		15.0	%
Volume - oil percentage of BOE		45.2	%		—	n/m			44.8	%	0.9	%
Average sales price per BOE (4)	$	31.11		$	—	n/m		$	32.22		(3.4)	%
Segment Adjusted EBITDA Expense (2)	$	1.70		$	—	n/m		$	2.52		(32.4)	%
Segment Adjusted EBITDA (2), (3)	$	14.6		$	7.3	98.5	%	$	12.2		19.4	%

Consolidated Total (5)
Total revenues	$	453.3		$	531.8	(14.8)	%	$	464.7		(2.5)	%
Segment Adjusted EBITDA Expense (2)	$	293.4		$	311.3	(5.8)	%	$	289.1		1.5	%
Segment Adjusted EBITDA (2)	$	143.9		$	195.6	(26.4)	%	$	156.2		(7.8)	%

The following information was filed by Alliance Resource Partners Lp (ARLP) on Monday, January 27, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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