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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 JUNE 30, 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 August 9, 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
----
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets as of June 30, 2001 and
December 31, 2000 ........................................................ 1
Consolidated Statements of Income for the three and six-months
ended June 30, 2001 and 2000 ............................................. 2
Condensed Consolidated Statements of Cash Flows for the six-
months ended June 30, 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 ........................................................ 10
FORWARD-LOOKING STATEMENTS ............................................... 11
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ........................................................ 12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ................................ 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .......................................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS ......................................................... 12
ITEM 5. OTHER INFORMATION ........................................................ 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ......................................... 12
</Table>
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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
JUNE 30, DECEMBER 31,
2001 2000
--------- ------------
CURRENT ASSETS:
Cash and cash equivalents ........................................... $ 8,104 $ 6,933
Trade receivables ................................................... 39,020 35,898
Due from affiliates ................................................. 990 208
Marketable securities (at cost, which approximates fair value) ...... 23,694 37,398
Inventories ......................................................... 12,966 10,842
Advance royalties ................................................... 2,865 2,865
Prepaid expenses and other assets ................................... 873 1,168
--------- ---------
Total current assets ........................................... 88,512 95,312
PROPERTY, PLANT AND EQUIPMENT AT COST .................................. 343,282 320,445
LESS ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION .............. (151,568) (135,782)
--------- ---------
191,714 184,663
OTHER ASSETS:
Advance royalties ................................................... 10,183 10,009
Coal supply agreements, net ......................................... 14,153 16,324
Other long-term assets .............................................. 2,589 2,858
--------- ---------
$ 307,151 $ 309,166
========= =========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................... $ 29,882 $ 25,558
Accrued taxes other than income taxes ............................... 6,399 4,863
Accrued payroll and related expenses ................................ 7,753 6,975
Accrued interest .................................................... 5,402 5,439
Workers' compensation and pneumoconiosis benefits ................... 4,335 4,415
Other current liabilities ........................................... 6,327 5,710
Current maturities, long-term debt ............................... 11,250 3,750
--------- ---------
Total current liabilities ...................................... 71,348 56,710
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities ........................ 218,750 226,250
Accrued pneumoconiosis benefits ..................................... 13,962 21,651
Workers' compensation ............................................... 17,450 16,748
Reclamation and mine closing ........................................ 15,355 14,940
Due to affiliates ................................................... 2,215 1,278
Other liabilities ................................................... 3,062 3,376
--------- ---------
Total liabilities .............................................. 342,142 340,953
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 8,982,780 units outstanding ...................... 147,810 149,642
Subordinated Unitholder 6,422,531 units outstanding ................. 115,486 116,794
General Partners .................................................... (298,287) (298,223)
--------- ---------
Total Partners' capital (deficit) .............................. (34,991) (31,787)
--------- ---------
$ 307,151 $ 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)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
SALES AND OPERATING REVENUES:
Coal sales ........................................................ $ 104,012 $ 82,698 $ 204,828 $ 168,739
Transportation revenues ........................................... 5,301 3,787 9,213 6,734
Other sales and operating revenues ................................ 1,409 167 3,433 599
----------- ----------- ----------- -----------
Total revenues .......................................... 110,722 86,652 217,474 176,072
----------- ----------- ----------- -----------
EXPENSES:
Operating expenses ................................................ 77,699 59,436 150,831 123,529
Transportation expenses ........................................... 5,301 3,787 9,213 6,734
Outside purchases ................................................. 8,360 4,332 13,225 7,293
General and administrative ........................................ 4,023 3,625 8,946 7,212
Depreciation, depletion and amortization ........................ 11,095 9,560 22,355 19,201
Interest expense (net of interest income and interest capitalized
for the three months and six months ended June 30, 2001 and
2000 of $536, $656, $1,168 and $1,362, respectively) ....... 4,221 4,204 8,483 8,262
Unusual item .................................................... (7,691) -- (7,691) --
----------- ----------- ----------- -----------
Total operating expenses .............................. 103,008 84,944 205,362 172,231
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS ................................................ 7,714 1,708 12,112 3,841
OTHER INCOME .......................................................... 163 390 404 623
----------- ----------- ----------- -----------
NET INCOME ............................................................ $ 7,877 $ 2,098 $ 12,516 $ 4,464
=========== =========== =========== ===========
GENERAL PARTNERS' INTEREST IN
NET INCOME ....................................................... $ 158 $ 42 $ 250 $ 89
=========== =========== =========== ===========
LIMITED PARTNERS' INTEREST IN
NET INCOME ....................................................... $ 7,719 $ 2,056 $ 12,266 $ 4,375
=========== =========== =========== ===========
BASIC NET INCOME PER LIMITED
PARTNER UNIT ..................................................... $ 0.50 $ 0.13 $ 0.80 $ 0.28
=========== =========== =========== ===========
DILUTED NET INCOME PER LIMITED
PARTNER UNIT ..................................................... $ 0.49 $ 0.13 $ 0.78 $ 0.28
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-BASIC ................................................ 15,405,311 15,405,311 15,405,311 15,405,311
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-DILUTED .............................................. 15,681,411 15,550,845 15,680,817 15,550,845
=========== =========== =========== ===========
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)
<Table>
SIX MONTHS ENDED
JUNE 30,
-----------------------
2001 2000
-------- --------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES ..................... $ 30,402 $ 16,982
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ................... (27,236) (14,233)
Proceeds from sale of property, plant and equipment ......... 21 73
Purchase of marketable securities ........................... (23,526) (35,714)
Proceeds from the maturity of marketable securities ....... 37,230 41,804
-------- --------
Net cash used in investing activities ........... (13,511) (8,070)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to Partners .................................... (15,720) (15,720)
-------- --------
Net cash used in financing activities ........... (15,720) (15,720)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ......................... 1,171 (6,808)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................ 6,933 8,000
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 8,104 $ 1,192
-------- --------
CASH PAID FOR:
Interest ................................................... $ 9,325 $ 9,423
======== ========
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 June
30, 2001 and December 31, 2000, and the results of its operations for the
three-month and six-month periods ended June 30, 2001 and 2000 and cash flows
for the six months ended June 30, 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 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 incidental to its business. In the opinion of management, the
outcome of such matters 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. PNEUMOCONIOSIS ("BLACK LUNG") BENEFITS
The Partnership revised its method of estimating coal workers'
pneumoconiosis ("black lung") benefits liability during the quarter ended June
30, 2001. Previously, the Partnership accrued the black lung benefits liability
at the present value of the actuarially determined current and future estimated
black lung benefit payments. The revision results in the accrual of the black
lung benefits liability using a service cost method as prescribed by Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"). The Partnership
believes that the SFAS 106 method of estimating the black lung liability is more
widely used in practice by other coal companies and better matches black lung
costs over the service lives of the miners who ultimately receive black lung
benefits. The effect of this revision in estimating the black lung liability
resulted in a reduction of this liability and a corresponding non-cash increase
in net income of $7,691,000 or $0.50 and $0.49 per basic and dilutive limited
partner unit. This amount is reported as an unusual item in the
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accompanying consolidated statements of income for the three-month and the
six-month periods ended June 30, 2001.
4. SUBSEQUENT EVENT
On July 26, 2001, the Partnership declared a minimum quarterly
distribution for the period from April 1, 2001 to June 30, 2001, of $0.50 per
unit, totaling approximately $7,703,000, on all of its Common and Subordinated
Units outstanding, payable on August 14, 2001 to all unitholders of record on
August 3, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SELECTED OPERATING DATA
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2001 2000 2001 2000
------ ------ ------ ------
Tons sold (000s) 4,278 3,500 8,580 7,225
Tons produced (000s) 3,828 3,168 8,068 7,056
Revenues per ton sold (1) $24.64 $23.68 $24.27 $23.44
Cost per ton sold (2) $21.06 $19.26 $20.16 $19.11
</Table>
(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 June 30, 2001 Compared to Three Months Ended June 30, 2000
Coal sales. Coal sales for the three months ended June 30, 2001 (the
"2001 Quarter") increased 25.8% to $104.0 million from $82.7 million for the
three months ended June 30, 2000 (the "2000 Quarter"). The increase of $21.3
million was primarily attributable to higher sales prices and utility demand as
well as additional revenues from the new Gibson County Coal, LLC mining complex,
which was not in operation during the 2000 Quarter. Tons sold increased 22.2% to
4.3 million for the 2001 Quarter from 3.5 million for the 2000 Quarter. Tons
produced increased 20.8% to 3.8 million tons for the 2001 Quarter from 3.2
million for the 2000 Quarter.
Transportation revenues. Transportation revenues increased to $5.3
million for the 2001 Quarter from $3.8 million for the 2000 Quarter. The
increase of $1.5 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 $1.4 million for the 2001 Quarter from $0.2 million for the 2000
Quarter. The increase of $1.2 million results from the
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introduction of a third party coal synfuel production facility at the
Partnership's Hopkins County Coal, LLC mining complex. Hopkins County Coal
receives various fees for operating the third party's coal synfuel facility and
providing other services. The synfuel shipments will continue on a
month-to-month basis through August 2001. While current negotiations are
underway to continue synfuel arrangements beyond this date, continuation of the
operating revenues associated with the coal synfuel production facility can not
be assured.
Operating expenses. Operating expenses increased 30.7% to $77.7 million
for the 2001 Quarter from $59.4 million for the 2000 Quarter. The increase of
$18.3 million primarily resulted from increased sales volumes and the addition
of operating expenses associated with the new Gibson County Coal mining complex,
which was not in operation during the 2000 Quarter. Additionally, difficult
mining conditions were encountered at several operations, which placed an undue
burden on equipment scheduled for replacement, resulting in unanticipated
equipment failures and higher maintenance costs.
Transportation expenses. See "Transportation revenues" above concerning
the increase in transportation expenses.
Outside purchases. Outside purchases increased to $8.4 million for the
2001 Quarter compared to $4.3 million for the 2000 Quarter. The increase of $4.1
million primarily resulted from increased activity in the domestic coal
brokerage market due to favorable spot price levels, which resulted in increased
volumes at higher purchase prices.
General and administrative. General and administrative expenses increased
11.0% to $4.0 million for the 2001 Quarter compared to $3.6 million for the 2000
Quarter. The increase of $0.4 million was primarily attributable to accruals
related to the additional restricted units granted under the Long-Term Incentive
Plan, such accrual is impacted by the increased value of the common units.
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expenses increased 16.1% to $11.1 million for the 2001 Quarter
compared to $9.6 million for the 2000 Quarter. The increase of $1.5 million
resulted primarily from the 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, respectively.
Unusual item. The Partnership revised its method of estimating workers'
pneumoconiosis ("black lung") benefits liability during the 2001 Quarter. The
Partnership had previously accrued the black lung benefits liability at the
present value of the actuarially determined current and future estimated black
lung benefits payments. The revision results in the accrual of the black lung
benefits liability using a service cost method as prescribed by Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"). The Partnership
believes the SFAS 106 method, among other things, is more widely used in
practice by other coal companies. The effect of this revision resulted in a
reduction of the black lung benefits liability and a corresponding increase in
net income of $7.7 million. See "Part I, Item 1.
Financial Statements - Note 3. Pneumoconiosis ("Black Lung") Benefits."
EBITDA (income from operations before net interest expense, depreciation,
depletion and amortization) increased 46.2% to $23.2 million for the 2001
Quarter compared with $15.9 million for the
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2000 Quarter. The $7.3 million increase is primarily attributable to the unusual
item recorded during the 2001 Quarter. See "Unusual item" described above.
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 has not been adjusted for unusual items. 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).
Six Months Ended June 30, 2001 compared to Six Months Ended June 30, 2000
Coal sales. Coal sales for the six months ended June 30, 2001 (the "2001
Period") increased 21.4% to $204.8 million from $168.7 million for the six
months ended June 30, 2000 (the "2000 Period"). The increase of $36.1 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 Period. Tons sold increased 18.8% to 8.6
million for the 2001 Period from 7.2 million for the 2000 Period. Tons produced
increased 14.3% to 8.1 million tons for the 2001 Period from 7.1 million for the
2000 Period.
Transportation revenues. Transportation revenues increased to $9.2
million for the 2001 Period from $6.7 million for the 2000 Period. The increase
of $2.5 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 $3.4 million for the 2001 Period from $0.6 million for the 2000
Period. The increase of $2.8 million resulted 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 will continue on a month-to-month basis through August 2001. While
current negotiations are underway to continue synfuel arrangements beyond this
date, continuation of the operating revenues associated with the coal synfuel
production facility can not be assured.
Operating expenses. Operating expenses increased 22.1% to $150.8 million
for the 2001 Period from $123.5 million for the 2000 Period. The increase of
$27.3 million primarily resulted from increased sales volumes and the addition
of operating expenses associated with the new Gibson County Coal mining complex,
which was not in operation during the 2000 Period. Additionally, difficult
mining conditions were encountered at several operations, which placed an undue
burden on equipment scheduled for replacement, resulting in unanticipated
equipment failures and higher maintenance costs.
Transportation expenses. See "Transportation revenues" above concerning
the increase in transportation expenses.
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Outside purchases. Outside purchases increased to $13.2 million for the
2001 Period compared to $7.3 million for the 2000 Period. The increase of $5.9
million primarily resulted from increased activity in the domestic coal
brokerage market due to favorable spot price levels, which resulted in increased
volumes at higher purchase prices.
General and administrative. General and administrative expenses increased
24.0% to $8.9 million for the 2001 Period compared to $7.2 million for the 2000
Period. The increase of $1.7 million was primarily attributable to higher
accruals related to the Short-Term Incentive Plan, combined with additional
restricted units granted under the Long-Term Incentive Plan, such accrual is
impacted by the increased value of the common units.
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expenses increased 16.4% to $22.4 million for the 2001 Period
compared to $19.2 million for the 2000 Period. The increase of $3.2 million
primarily resulted from additional depreciation expense associated with the new
Gibson County Coal mining complex, which was not in operation during the 2000
Period.
Interest expense. Interest expense was comparable for the 2001 and 2000
Periods at $8.5 million and $8.3 million respectively.
Unusual item. The Partnership revised its method of estimating workers'
pneumoconiosis ("black lung") benefits liability during the 2001 Quarter. The
Partnership had previously accrued the black lung benefits liability at the
present value of the actuarially determined current and future estimated black
lung benefits payments. The revision results in the accrual of the black lung
benefits liability using a service cost method as prescribed by Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"). The Partnership
believes the SFAS 106 method, among other things, is more widely used in
practice by other coal companies. The effect of this revision resulted in a
reduction of the black lung benefits liability and a corresponding increase in
net income of $7.7 million. See "Part I, Item 1.
Financial Statements - Note 3. Pneumoconiosis ("Black Lung") Benefits."
EBITDA (income from operations before net interest expense, depreciation,
depletion and amortization) increased 35.8% to $43.4 million for the 2001 Period
compared with $31.9 million for the 2000 Period. The $11.4 million increase is
primarily attributable to the unusual item recorded during the 2001 Period. See
"Unusual item" described above. Additionally, the new Gibson County Coal mining
complex, which was not in operation during the 2000 Period contributed to the
increase in EBITDA.
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 has not been adjusted for unusual items. 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 $30.4 million for the 2001
Period compared to $17.0 million in the 2000 Period. The increase in cash
provided by operating activities was principally attributable to a decrease in
working capital.
Net cash used in investing activities was $13.5 million for the 2001
Period compared to net cash used in investing activities of $8.1 million in the
2000 Period. The increased use of cash 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, LLC mine into adjacent coal reserves.
Net cash used in financing activities was comparable for the 2001 and
2000 Periods at $15.7 million.
Capital Expenditures
Capital expenditures increased to $27.2 million in the 2001 Period
compared to $14.2 million in the 2000 Period. 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 Alliance Resource Operating Partners, L.P.
("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 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 June 30, 2001. The weighted average interest rate
on the term loan facility at June 30, 2001, was 5.11%. 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
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," and No. 142, "Goodwill and Intangible Assets". SFAS No. 141
eliminates the pooling-of-interest method of accounting for business
combinations and requires that all business combinations be accounted for under
the purchase method. In
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addition, it further clarifies the criteria for recognition of intangible assets
separately from goodwill. This statement is effective for business combinations
completed after June 30, 2001.
SFAS No. 142 discontinues the practice of amortizing goodwill and
indefinite lived intangible assets and initiates an annual review for
impairment. This statement is effective January 1, 2002 for all goodwill and
other intangible assets included in an entity's statement of financial position
at that date, regardless of when those assets were initially recognized. The new
standards are not expected to have a material impact on the Partnership's
financial position or results of operations.
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, it 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 Intermediate Partnership has interest rate exposure.
As of June 30, 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 Securities Exchange
Act of 1934) 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 fluctuations in coal demand, price and availability due to labor and
transportation costs and disruptions, equipment availability, governmental
regulations and other factors;
o competition in coal markets and the Partnership's ability to respond to
such competition;
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 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
for the year ended December 31, 2000 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 August 9, 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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