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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No.: 0-26823
ALLIANCE RESOURCE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 73-1564280
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1717 South Boulder Avenue, Suite 600, Tulsa, Oklahoma 74119
(Address of principal executive offices and zip code)
(918) 295-7600
(Registrant's telephone number, including area code)
______________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of May 10, 2001, 8,982,780 Common Units and 6,422,531 Subordinated Units
are outstanding.
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TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000 1
Consolidated Statements of Income for the three-months
ended March 31, 2001 and 2000 2
Condensed Consolidated Statements of Cash Flows for the
three-months ended March 31, 2001 and 2000 3
Notes to Consolidated Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 8
FORWARD-LOOKING STATEMENTS 9
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
ASSETS
March 31, March 31,
2001 2000
---------- --------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 16,804 $ 6,933
Trade receivables 34,205 35,898
Due from affiliates 41 208
Marketable securities (at cost, which approximates
fair value) 23,414 37,398
Inventories 12,684 10,842
Advance royalties 2,865 2,865
Prepaid expenses and other assets 1,101 1,168
-------- --------
Total current assets 91,114 95,312
PROPERTY, PLANT AND EQUIPMENT AT COST 337,863 320,445
LESS ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION (145,405) (135,782)
-------- --------
192,458 184,663
OTHER ASSETS:
Advance royalties 9,872 10,009
Coal supply agreements, net 15,263 16,324
Other long-term assets 2,750 2,858
-------- --------
$311,457 $309,166
======== ========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 29,548 $ 25,558
Accrued taxes other than income taxes 5,962 4,863
Accrued payroll and related expenses 9,332 6,975
Accrued interest 1,662 5,439
Workers' compensation and pneumoconiosis benefits 4,318 4,415
Other current liabilities 6,577 5,710
Current maturities, long-term debt 7,500 3,750
-------- --------
Total current liabilities 64,899 56,710
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 222,500 226,250
Accrued pneumoconiosis benefits 21,660 21,651
Workers' compensation 17,405 16,748
Reclamation and mine closing 15,119 14,940
Due to affiliates 1,745 1,278
Other liabilities 3,137 3,376
-------- --------
Total liabilities 346,465 340,953
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 8,982,780 units outstanding 147,801 149,642
Subordinated Unitholder 6,422,531 units outstanding 115,478 116,794
General Partners (298,287) (298,223)
-------- --------
Total Partners' capital (deficit) (35,008) (31,787)
-------- --------
$311,457 $309,166
======== ========
See notes to consolidated financial statements.
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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except unit and per unit data)
(Unaudited)
Three Months Ended March 31,
----------------------------------
2001 2000
----------- -----------
SALES AND OPERATING REVENUES:
Coal sales $ 100,816 $ 86,041
Transportation revenues 3,912 2,947
Other sales and operating revenues 2,024 432
----------- ----------
Total revenues 106,752 89,420
----------- ----------
EXPENSES:
Operating expenses 73,132 64,093
Transportation expenses 3,912 2,947
Outside purchases 4,865 2,961
General and administrative 4,923 3,587
Depreciation, depletion and amortization 11,260 9,641
Interest expense (net of interest income and interest capitalized
for the three months ended March 31, 2001 and 2000 of
$632 and $706, respectively) 4,262 4,058
----------- -----------
Total operating expenses 102,354 87,287
INCOME FROM OPERATIONS 4,398 2,133
OTHER INCOME 241 233
----------- -----------
NET INCOME $ 4,639 $ 2,366
=========== ===========
GENERAL PARTNERS' INTEREST IN NET INCOME $ 93 $ 47
=========== ===========
LIMITED PARTNERS' INTEREST IN NET INCOME $ 4,546 $ 2,319
=========== ===========
BASIC NET INCOME PER LIMITED PARTNER UNIT $ 0.30 $ 0.15
=========== ===========
DILUTED NET INCOME PER LIMITED PARTNER UNIT $ 0.29 $ 0.15
=========== ===========
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING-BASIC 15,405,311 15,405,311
=========== ===========
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING-DILUTED 15,680,594 15,550,489
=========== ===========
See notes to consolidated financial statements.
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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
------------------------------
2001 2000
-------- --------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 21,741 $ 8,114
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (17,994) (5,235)
Proceeds from sale of property, plant and equipment -- 14
Purchase of marketable securities (5,195) (18,489)
Proceeds from the maturity of marketable securities 19,179 25,056
-------- --------
Net cash provided by (used in) investing activities (4,010) 1,346
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to Partners (7,860) (7,860)
-------- --------
Net cash used in financing activities (7,860) (7,860)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 9,871 1,600
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,933 8,000
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,804 $ 9,600
======== ========
CASH PAID FOR:
Interest $ 8,465 8,452
======== ========
See notes to consolidated financial statements.
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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND PRESENTATION
Alliance Resource Partners, L.P., a Delaware limited partnership (the
"Partnership"), was formed on May 17, 1999, to acquire, own and operate certain
coal production and marketing assets of Alliance Resource Holdings, Inc., a
Delaware corporation ("ARH") (formerly known as Alliance Coal Corporation),
consisting of substantially all of ARH's operating subsidiaries, but excluding
ARH.
The accompanying consolidated financial statements include the accounts and
operations of the Partnership and present the financial position as of March 31,
2001 and December 31, 2000, and the results of its operations and cash flows for
the three months ended March 31, 2001 and 2000. All material intercompany
transactions and accounts have been eliminated. Certain reclassifications have
been made to the 2000 consolidated statements to conform with classifications
used in 2001.
These consolidated financial statements and notes thereto for interim
periods are unaudited. However, in the opinion of management, these financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the results of the periods
presented. Results for interim periods are not necessarily indicative of results
for a full year.
These consolidated financial statements and notes are prepared pursuant to
the rules and regulations of the Securities and Exchange Commission for interim
reporting and should be read in conjunction with the consolidated and combined
financial statements and notes included in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 2000.
2. CONTINGENCIES
The Partnership is involved in various lawsuits, claims and regulatory
proceedings, including those conducted by the Mine Safety and Health
Administration, incidental to its business. In the opinion of management, the
outcome of such matters to the extent not previously provided for or covered
under insurance, will not have a material adverse effect on the Partnership's
business, financial position or results of operations, although management
cannot give any assurance to that effect.
3. WORKERS' COMPENSATION AND PNEUMOCONIOSIS ("BLACK LUNG") BENEFITS
During the quarter ended March 31, 2001, the Partnership reduced the
discount rate used to estimate the present value of the accrued workers'
compensation liabilities, including black lung benefits from 6.0% to 5.5%.
Additionally, during this quarter, the Partnership reduced its preliminary
estimate of black lung benefits attributable to the revised federal regulations
that would have altered the claims process for federal black lung benefit
recipients since the Bush Administration halted the implementation of these
regulations pending further evaluation. The effect of these separate events on
the accrued workers' compensation liabilities, including black lung benefits was
not material.
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4. SUBSEQUENT EVENT
On April 26, 2001, the Partnership declared a minimum quarterly
distribution for the period from January 1, 2001 to March 31, 2001, of $0.50 per
unit, totaling approximately $7,703,000, on all of its Common and Subordinated
Units outstanding, payable on May 15, 2001 to all unitholders of record on May
4, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
SELECTED OPERATING DATA
Three Months Ended
----------------------------
March 31, March 31,
2001 2000
-------- --------
Tons sold (000s) 4,302 3,725
Tons produced (000s) 4,240 3,888
Revenues per ton sold (1) $23.91 $23.21
Cost per ton sold (2) $19.27 $18.96
(1) Revenues per ton sold is based on the total of coal sales and other sales
and operating revenues divided by tons sold.
(2) Cost per ton is based on the total of operating expenses, outside purchases
and general and administrative expenses divided by tons sold.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Coal sales. Coal sales for the three months ended March 31, 2001 (the "2001
Quarter") increased 17.2% to $100.8 million from $86.0 million for the
three months ended March 31, 2000 (the "2000 Quarter"). The increase of $14.8
million was primarily attributable to higher sales prices and utility demand as
well as additional revenues from the new Gibson County Coal mining complex,
which was not in operation during the 2000 Quarter. Tons sold increased 15.5% to
4.3 million for the 2001 Quarter from 3.7 million for the 2000 Quarter. Tons
produced increased 9.1% to 4.2 million tons for the 2001 Quarter from
3.9 million for the 2000 Quarter.
Transportation revenues. Transportation revenues increased to $3.9 million
for the 2001 Quarter from $2.9 million for the 2000 Quarter. The increase of
$1.0 million was primarily attributable to increased tons sold. The Partnership
reflects reimbursement of the cost of transporting coal to customers through
third party carriers as transportation revenues and the corresponding expense as
transportation expense in the consolidated statements of income. No profit
margin is realized on transportation revenues.
Other sales and operating revenues. Other sales and operating revenues
increased to $2.0 million for the 2001 Quarter from $0.4 million for the 2000
Quarter. The increase of $1.6 million results from the introduction of a third
party coal synfuel production facility at the Partnership's Hopkins County Coal
mining complex. Hopkins County Coal receives various fees for operating the
third party's coal synfuel facility and providing other services. The synfuel
shipments continue in 2001 on a month-to-month basis,
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currently contemplated through mid-2001. The continuation of the operating
revenues associated with the coal synfuel production facility can not be
assured.
Operating expenses. Operating expenses increased 14.1% to $73.1 million for
the 2001 Quarter from $64.1 million for the 2000 Quarter. The increase of
$9.0 million primarily results from increased sales volumes and the addition of
operating expenses from the new Gibson County Coal mining complex, which was not
in operation during the 2000 Quarter.
Transportation expenses. See "Transportation revenues" above concerning the
increase in transportation expenses.
Outside purchases. Outside purchases increased 64.3% to $4.9 million for
the 2001 Quarter compared to $3.0 million for the 2000 Quarter. The increase of
$1.9 million was primarily the result of outside purchases to fulfill new
contract commitments at Hopkins County Coal, which had previously suspended
production at one of its surface mines. The idled surface operation will be
brought back on-line during the second quarter of 2001 after having its
production suspended for almost one year.
General and administrative. General and administrative expenses increased
37.2% to $4.9 million for the 2001 Quarter compared to $3.6 million for the 2000
Quarter. The increase of $1.3 million was primarily attributable to accruals
related to the Short-Term Incentive Plan, which are based upon financial
performance, along with additional restricted units granted under the Long-Term
Incentive Plan, which is impacted by the increased value of common units.
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expenses increased 16.8% to $11.3 million for the 2001 Quarter
compared to $9.6 million for the 2000 Quarter. The increase of $1.7 million was
primarily the result of the additional depreciation expense associated with the
new Gibson County Coal mining complex, which was not in operation during the
2000 Quarter.
Interest expense. Interest expense was comparable for the 2001 and 2000
Quarters at $4.2 million and $4.1 million, respectively.
EBITDA (income from operations before net interest expense, depreciation,
depletion and amortization) increased 25.5% to $20.2 million for the 2001
Quarter compared with $16.1 million for the 2000 Quarter. The $4.1 million
increase is primarily attributable to higher sales prices and utility demand as
well as the addition of the new Gibson County Coal mining complex, which was not
in operation during the 2000 Quarter.
EBITDA should not be considered as an alternative 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 is not intended to represent cash flow and does not represent
the measure of cash available for distribution, but provides additional
information for evaluating the Partnership's ability to make minimum quarterly
distributions. The Partnership's method of computing EBITDA also may not be the
same method used to compute similar measures reported by other companies, or
EBITDA may be computed differently by the Partnership in different contexts
(i.e., public reporting versus computation under financing agreements).
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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash provided by operating activities was $21.7 million for the 2001
Quarter compared to $8.1 million in the 2000 Quarter. The increase in cash
provided by operating activities was principally attributable to an increase in
net income for the 2001 Quarter compared to the 2000 Quarter and a comparative
decrease in working capital.
Net cash used in investing activities was $4.0 million for the 2001 Quarter
compared to net cash provided by investing activities of $1.3 million in the
2000 Quarter. The increase is principally attributable to capital expenditures
related to both the completion of the new Gibson County Coal mining complex that
commenced production in late 2000 and the extension of our existing White County
Coal mining complex into adjacent coal reserves.
Net cash used in financing activities were comparable for the 2001 and 2000
Quarters at $7.9 million.
Capital Expenditures
Capital expenditures increased to $18.0 million in the 2001 Quarter
compared to $5.2 million in the 2000 Quarter. See "Cash Flows" above concerning
the increase in capital expenditures.
Notes Offering and Credit Facility
Concurrently with the closing of the Partnership's initial public offering,
Alliance Resource GP, LLC (the "Special GP"), the Partnership's special general
partner, issued and the Intermediate Partnership assumed the obligations with
respect to $180 million principal amount of 8.31% senior notes due August 20,
2014. The Special GP also entered into, and Alliance Resource Operating
Partners, L.P. (the "Intermediate Partnership") assumed the obligations under,
a $100 million credit facility. The credit facility consists of three tranches,
including a $50 million term loan facility, a $25 million working capital
facility and a $25 million revolving credit facility. The Partnership has
borrowings outstanding of $50 million under the term loan facility and no
borrowings outstanding under either the working capital facility or the
revolving credit facility at March 31, 2001. The weighted average interest rate
on the term loan facility at March 31, 2001, was 6.31%. The credit facility
expires August 2004. The senior notes and credit facility are guaranteed by all
of the subsidiaries of the Intermediate Partnership. In addition, the credit
facility is further secured by a pledge of treasury securities, which, upon
written notice, are released for purposes of financing qualifying capital
expenditures of the Intermediate Partnership or its subsidiaries. The senior
notes and credit facility contain various restrictive and affirmative covenants,
including limitations on the amount of distributions by the Intermediate
Partnership and the incurrence of other debt.
Recent Accounting Pronouncements
On January 1, 2001, the Partnership adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which established accounting and reporting standards for derivative
instruments and for hedging activities. It required that all derivatives be
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recognized as either assets or liabilities in the statement of financial
position and be measured at fair value. The Partnership currently has no
identified derivative instruments or hedging activities. Accordingly, this
standard had no material effect on the Partnership's consolidated financial
statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Almost all of the Partnership's transactions are denominated in
U.S. dollars, and as a result, does not have material exposure to currency
exchange-rate risks.
The Partnership does not, engage in any interest rate, foreign currency
exchange rate or commodity price-hedging transactions.
The Intermediate Partnership assumed obligations under a $100 million
credit facility. Borrowings under the credit facility are at variable rates and,
as a result, the Partnership has interest rate exposure.
As of March 31, 2001, there were no significant changes in the
Partnership's quantitative and qualitative disclosures about market risk as set
forth in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 2000.
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FORWARD-LOOKING STATEMENTS
Alliance Resource Partners, L.P. is including the following cautionary
statement in this Report on Form 10-Q to make applicable and take advantage
of the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995 for any forward-looking statements made by, or on behalf of, the
Partnership. With the exception of historical matters, any matters discussed are
forward-looking statements (as defined in Section 21E of the Exchange Act) that
involve risks and uncertainties that could cause actual results to differ
materially from projected results. These risks, uncertainties and contingencies
include, but are not limited to, the following:
o competition in coal markets and the Partnership's ability to respond
to such competition;
o fluctuation in coal prices, which could adversely affect the
Partnership's operating results and cash flows;
o deregulation of the electric utility industry and or the effects of
any adverse change in the domestic coal industry, electric utility
industry, or general economic conditions.
o dependence on significant customer contracts, including renewing
customer contracts upon expiration;
o customer cancellations of, or breaches to, existing contracts;
o customer delays or defaults in making payments;
o fluctuations in coal demand, price and availability due to labor and
transportation costs and disruptions, equipment availability,
governmental regulations and other factors;
o greater than expected environmental regulation, costs and liabilities;
o a variety of operational, geologic, permitting, labor and
weather-related factors;
o risk of major mine-related accidents or interruptions; and
o results of litigation.
Additional information concerning these and other factors can be found in
the Partnership's press releases and public periodic filings with the Securities
and Exchange Commission, including the Partnership's Annual Report on Form 10-K
filed on March 26, 2001. Except as required by applicable securities laws, the
Partnership does not intend to update its forward-looking statements.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information under "Contingencies" in Note 2 of the Notes to Unaudited
Consolidated Financial Statements herein is hereby incorporated by reference.
See also "Item 3. Legal Proceedings" in the Annual Report on Form 10-K for the
year ended December 31, 2000.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in Tulsa, Oklahoma, on May 10, 2001.
ALLIANCE RESOURCE PARTNERS, L. P.
By: Alliance Resource Management GP, LLC
its managing general partner
/s/ Michael L. Greenwood
------------------------
Michael L. Greenwood
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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