Exhibit 99.1
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PRESS RELEASE
CONTACT:
Brian L. Cantrell
Alliance Resource Partners, L.P.
(ALLIANCE RESOURCE PARTNERS, L.P. LOGO) 1717 South Boulder Avenue, Suite 600
Tulsa, Oklahoma 74119
(918) 295-7673
FOR IMMEDIATE RELEASE
ALLIANCE RESOURCE PARTNERS, L.P.
Reports Record 2003 Financial Results Including 38% Annual and 194% Quarterly
Increases to Net Income; Announces TVA Long Term Sales Contract; and Increases
Quarterly Cash Distribution by 7% to $0.5625 Per Unit
Tulsa, Oklahoma, January 26, 2004 - Alliance Resource Partners, L.P. (NASDAQ:
ARLP) today announced record annual and quarterly financial results for 2003.
The Partnership reported net income for 2003 of $47.9 million, an increase of
38% over 2002 net income of $34.8 million. Net income per basic limited
partnership unit in 2003 increased to $2.71, as compared to $2.31 per unit in
2002. Fourth quarter net income increased 194% to $15.4 million compared to $5.2
million net income during the same period in 2002. Net income for the fourth
quarter of 2003 increased to $0.85 per basic limited partnership unit, as
compared to $0.38 per unit for the 2002 fourth quarter.
The Partnership also announced a 7% increase in its quarterly cash distribution
as its Board of Directors declared a quarterly cash distribution of $0.5625 per
unit for the fourth quarter of 2003 (an annualized rate of $2.25 per unit),
payable on February 13, 2004 to all unitholders of record as of February 5,
2004. The cash distribution for the third quarter of 2003 was $0.525 per unit
(an annualized rate of $2.10 per unit).
"Better than expected operating costs and revenues led the way for
record-breaking results in the fourth quarter of 2003," said Joseph W. Craft
III, President and Chief Executive Officer. "Through the continuing dedicated
efforts of everyone at Alliance, we have achieved record financial and
operational results for the third consecutive year. Our strong year-over-year
cash flow growth and projections for the future have allowed us to increase our
quarterly cash distribution for the second year in a row. The Board of Directors
reviews the Partnership's distribution policy periodically and will determine
future distributions based primarily upon earnings, cash flows, capital needs
and the general coal industry outlook."
For the 2003 fourth quarter, the Partnership reported revenue and tons sold of
$142.6 million, and 5.1 million tons, respectively, compared to 2002 fourth
quarter revenue of $133.9 million and 4.8 million tons sold. The increases in
revenues and tons sold for the quarter are attributable to the increased
capacity added during 2003 at the Partnership's Warrior Coal, Gibson County Coal
and Eastern Kentucky operations. The Partnership's quarterly revenue was also
impacted by a contractual modification that resulted in a $2.0 million favorable
pricing adjustment associated with coal feedstock sales to Synfuel Solutions
Operating LLC ("SSO") for shipments made this
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past year prior to the fourth quarter of 2003. The pricing adjustment, which
also applies to all future sales to SSO, increased quarterly net income by $1.8
million after associated expenses.
The Partnership continues to benefit from infrastructure investments completed
over the last several years, as productivity increased at essentially all of the
Partnership's mining complexes. These benefits are reflected in an 8% reduction
in cost per ton sold for the 2003 fourth quarter as compared to the fourth
quarter of 2002. Partially offsetting these reduced operating costs, general and
administrative expenses rose during the quarter primarily due to a $3.0 million
increase in incentive compensation expense. The majority of this expense
increase was related to the Long-Term Incentive Plan and was caused by the
increased market value of the Partnership's common units, which closed the year
at $34.38 per unit.
Partnership revenues and tons sold were at record levels for the year ended
December 31, 2003 at $542.7 million and 19.5 million tons, respectively,
compared to $518.9 million and 18.4 million tons for 2002. Increased revenues
and tons sold reflect higher sales volume due to improved production levels at
essentially all of the Partnership's active operations, partially offset by
lower sales prices. Reflecting benefits from the Partnership's infrastructure
investments, cost per ton sold for the full year 2003 improved approximately 4%
compared to prior year costs.
Financial results for the year 2003, compared to the year 2002, were adversely
impacted by higher expense accruals of $6.9 million associated with incentive
compensation programs and a $3.7 million increase in income tax expense.
Approximately $2.1 million of the increase in income tax expense was due to coal
synfuel-related services performed by Alliance Service, Inc., an indirect
wholly-owned subsidiary of the Partnership, which is subject to federal and
state income taxes. The balance of the income tax expense increase was
attributable to Warrior Coal, which had a net income tax benefit for the year
2002 of approximately $1.3 million. Since its acquisition by the Partnership on
February 14, 2003 (See ARLP Press Releases, dated November 14, 2002, March 14,
2003 and April 25, 2003), the financial results of Warrior Coal are no longer
subject to federal or state income taxes.
Commenting on 2003 performance, Mr. Craft said, "We continue to realize the
benefits of optimizing our operating capacity and striving to be the low-cost
producer for the markets we serve. Alliance is continually working to improve
efficiencies as evidenced by our investment in a new mine shaft at Dotiki,
completion of a new portal facility and addition of a production unit at MC
Mining, and extension of the Pattiki mine into an adjacent coal reserve.
Additional efficiencies were realized as we added a fourth production unit at
our Gibson County Coal operation and idled two surface mines and closed a
depleted underground mine at Hopkins County Coal (See ARLP Press Releases, dated
April 3 and June 2, 2003). In addition to ongoing investments in our existing
assets, the Partnership is also constantly evaluating strategic growth
opportunities as demonstrated by our acquisition of Warrior Coal. Shortly after
acquiring Warrior, we added a production unit and relocated SSO's coal synfuel
production unit to this facility. I am extremely proud that, through all of
these initiatives and the dedicated efforts of our entire organization, we were
able to grow our net income by 38% this past year. Since 2000, our first full
year after becoming a publicly-traded partnership in 1999, Alliance has
increased its net income at a compounded annual growth rate of 45%."
In 2003, the Partnership's capital expenditures totaled $55.7 million, including
maintenance
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capital expenditures of approximately $30.0 million. The remaining capital
expenditures related primarily to the purchase of Warrior Coal and the
completion of the efficiency projects discussed above. Alliance is estimating
full-year 2004 capital expenditures of approximately $46.5 million, including
maintenance capital expenditures of approximately $33.9 million. The balance of
the capital expenditures in 2004 relate to new efficiency efforts, including
$7.7 million in projects to increase capacity at the Dotiki mine in Western
Kentucky. The Partnership expects depreciation expense to increase by
approximately $1.4 million in 2004 as compared to 2003.
The Partnership's Webster County Coal, LLC subsidiary, has entered into a
20-year, 30 million ton coal sales agreement with the Tennessee Valley Authority
("TVA") to supply Illinois Basin coal to TVA's coal-fired power plants. The TVA
agreement contains periodic contract re-opening provisions addressing market
price and other terms and conditions. Under the agreement, Webster County Coal's
Dotiki mine will initially provide approximately 1.0 million tons of coal to
TVA, beginning January 1, 2004, with annual shipments increasing to 1.5 million
tons beginning January 1, 2005.
In addition to the TVA agreement, the Partnership has also completed
negotiations with several other customers for multi-year coal sales contracts
beginning in 2004. The Partnership is anticipating 19.7 million tons of coal
production for 2004, an increase of 700,000 tons over the most recent estimate
(See ARLP Press Release, dated October 24, 2003.) Currently, the Partnership has
commitments for substantially all of its 2004 estimated production. For 2005,
the Partnership is currently estimating coal production at levels similar to
2004. With respect to the Partnership's estimated 2005 production, approximately
83% is committed under existing coal sales agreements and approximately 50% is
subject to market price negotiations.
Looking ahead, Mr. Craft stated, "We are obviously pleased with our results in
2003 and the outlook is also promising, as we anticipate that demand for our
product will be stable and improving during 2004. Alliance is well positioned to
take advantage of potential additional coal demand in the markets we serve. With
the capital investments we have made over the past three years, the Partnership
has excess production capacity of approximately 2 million tons to respond to
additional increases in marketplace demand."
During 2004, the Partnership is anticipating higher per ton sales prices, offset
in part by slightly higher per ton costs. Based on its current projections, the
Partnership is giving guidance that net income for the full year ending December
31, 2004 is expected in the range of $50.0 to $55.0 million.
The statements and projections used throughout this release are based on current
expectations. These statements and projections are forward-looking, and actual
results may differ materially. These projections do not include the potential
impact of any mergers, acquisitions or other business combinations that may
occur after the date of this release. At the end of this release, we have
included more information regarding the business risks that could affect our
results.
Alliance Resource Partners is the nation's only publicly traded master limited
partnership involved in the production and marketing of coal. Alliance Resource
Partners currently operates mining complexes in Illinois, Indiana, Kentucky and
Maryland.
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FORWARD-LOOKING STATEMENTS: WITH THE EXCEPTION OF HISTORICAL MATTERS, ANY
MATTERS DISCUSSED IN THIS PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS 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: COMPETITION IN COAL MARKETS AND
OUR ABILITY TO RESPOND TO THE COMPETITION; FLUCTUATION IN COAL PRICES, WHICH
COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND CASH FLOWS; DEREGULATION OF THE
ELECTRIC UTILITY INDUSTRY OR THE EFFECTS OF ANY ADVERSE CHANGES IN THE DOMESTIC
COAL INDUSTRY, ELECTRIC UTILITY INDUSTRY, OR GENERAL ECONOMIC CONDITIONS;
DEPENDENCE ON SIGNIFICANT CUSTOMER CONTRACTS, INCLUDING RENEWING CUSTOMER
CONTRACTS UPON EXPIRATION OF EXISTING CONTRACTS; CUSTOMER BANKRUPTCIES AND/OR
CANCELLATIONS OF, OR BREACHES TO, EXISTING CONTRACTS; CUSTOMER DELAYS OR
DEFAULTS IN MAKING PAYMENTS; FLUCTUATIONS IN COAL DEMAND, PRICES AND
AVAILABILITY DUE TO LABOR AND TRANSPORTATION COSTS AND DISRUPTIONS, EQUIPMENT
AVAILABILITY, GOVERNMENTAL REGULATIONS AND OTHER FACTORS; OUR PRODUCTIVITY
LEVELS AND MARGINS THAT WE EARN ON OUR COAL SALES; ANY UNANTICIPATED INCREASES
IN LABOR COSTS, ADVERSE CHANGES IN WORK RULES, OR UNEXPECTED CASH PAYMENTS
ASSOCIATED WITH POST-MINE RECLAMATION AND WORKERS' COMPENSATION CLAIMS; ANY
UNANTICIPATED INCREASES IN TRANSPORTATION COSTS AND RISK OF TRANSPORTATION
DELAYS OR INTERRUPTIONS; GREATER THAN EXPECTED ENVIRONMENTAL REGULATIONS, COSTS
AND LIABILITIES; A VARIETY OF OPERATIONAL, GEOLOGIC, PERMITTING, LABOR AND
WEATHER-RELATED FACTORS; RISKS OF MAJOR MINE-RELATED ACCIDENTS OR INTERRUPTIONS;
RESULTS OF LITIGATION; DIFFICULTY MAINTAINING OUR SURETY BONDS FOR MINE
RECLAMATION AS WELL AS WORKERS' COMPENSATION AND BLACK LUNG BENEFITS; DIFFICULTY
OBTAINING COMMERCIAL PROPERTY INSURANCE; AND RISKS ASSOCIATED WITH OUR 10.0%
PARTICIPATION (EXCLUDING ANY APPLICABLE DEDUCTIBLE) IN THE COMMERCIAL PROPERTY
PROGRAM.
ADDITIONAL INFORMATION CONCERNING THESE AND OTHER FACTORS CAN BE FOUND IN THE
PARTNERSHIP'S PUBLIC PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC"), INCLUDING THE PARTNERSHIP'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2002 FILED ON MARCH 20, 2003 WITH THE SEC. EXCEPT AS
REQUIRED BY APPLICABLE SECURITIES LAWS, THE PARTNERSHIP DOES NOT INTEND TO
UPDATE ITS FORWARD-LOOKING STATEMENTS.
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ALLIANCE RESOURCE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING DATA
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ------------ ----------- ------------
Tons sold 5,081 4,750 19,467 18,370
Tons produced 4,876 4,439 19,238 17,970
SALES AND OPERATING REVENUES:
Coal sales $ 133,426 $ 123,858 $ 501,596 $ 479,515
Transportation revenues 4,936 4,502 19,553 18,992
Other sales and operating revenues 4,190 5,536 21,598 20,385
----------- ------------ ----------- ------------
Total revenues 142,552 133,896 542,747 518,892
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EXPENSES:
Operating expenses 92,686 99,057 368,835 367,567
Transportation expenses 4,936 4,502 19,553 18,992
Outside purchases 3,275 1,693 8,508 10,077
General and administrative 9,471 5,915 28,270 20,337
Depreciation, depletion and amortization 13,146 13,892 52,495 52,408
Interest expense 3,936 4,206 15,981 16,360
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Total operating expenses 127,450 129,265 493,642 485,741
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INCOME FROM OPERATIONS 15,102 4,631 49,105 33,151
OTHER INCOME 580 115 1,374 540
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INCOME BEFORE INCOME TAXES 15,682 4,746 50,479 33,691
INCOME TAX EXPENSE (BENEFIT) 239 (501) 2,577 (1,094)
----------- ------------ ----------- ------------
NET INCOME $ 15,443 $ 5,247 $ 47,902 $ 34,785
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GENERAL PARTNERS' INTEREST
IN NET INCOME (LOSS) $ 309 $ (680) $ 306 $ (778)
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LIMITED PARTNERS' INTEREST
IN NET INCOME $ 15,134 $ 5,927 $ 47,596 $ 35,563
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BASIC NET INCOME PER LIMITED PARTNER UNIT $ 0.85 $ 0.38 $ 2.71 $ 2.31
=========== ============ =========== ============
DILUTED NET INCOME PER LIMITED PARTNER UNIT $ 0.82 $ 0.37 $ 2.62 $ 2.24
=========== ============ =========== ============
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-BASIC 17,903,793 15,405,311 17,580,734 15,405,311
=========== ============ =========== ============
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-DILUTED 18,486,098 15,842,783 18,162,839 15,842,708
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ALLIANCE RESOURCE PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT UNIT DATA)
DECEMBER 31,
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2003 2002
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,156 $ 9,028
Trade receivables, net 38,305 33,018
Marketable securities 23,615 470
Inventories 14,527 13,165
Advance royalties 1,108 5,232
Prepaid expenses and other assets 3,432 2,784
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Total current assets 91,143 63,697
PROPERTY, PLANT AND EQUIPMENT AT COST 474,357 446,629
LESS ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION (251,567) (216,777)
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222,790 229,852
OTHER ASSETS:
Advance royalties 12,439 10,542
Coal supply agreements, net 5,445 8,167
Other long-term assets 4,637 4,674
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$ 336,454 $ 316,932
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LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 22,651 $ 23,330
Due to affiliates 13,546 1,286
Accrued taxes other than income taxes 10,375 8,105
Accrued payroll and related expenses 11,095 10,004
Accrued interest 5,402 5,361
Workers' compensation and pneumoconiosis benefits 5,905 5,275
Other current liabilities 5,739 9,877
Current maturities, long-term debt -- 16,250
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Total current liabilities 74,713 79,488
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LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 180,000 195,000
Accrued pneumoconiosis benefits 17,633 16,067
Workers' compensation 22,819 19,949
Reclamation and mine closing 21,717 21,821
Due to affiliates 3,735 20,652
Other liabilities 3,280 2,717
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Total liabilities 323,897 355,694
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COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 14,692,527 and 8,982,780 units
outstanding, respectively 263,961 144,219
Subordinated Unitholder 3,211,266 and 6,422,531 units
outstanding, respectively 58,411 112,916
General Partners (305,924) (290,472)
Unrealized loss on marketable securities (102) (150)
Minimum pension liability (3,789) (5,275)
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Total Partners' capital (deficit) 12,557 (38,762)
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$ 336,454 $ 316,932
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ALLIANCE RESOURCE PARTNERS, L.P.
CONDENSED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
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2003 2002
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CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 110,312 $ 101,306
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (43,004) (67,339)
Purchase of Warrior Coal (12,661) --
Proceeds from sale of property, plant and equipment 913 323
Purchase of marketable securities (23,091) --
Proceeds from the maturity of marketable securities -- 10,085
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Net cash used in investing activities (77,843) (56,931)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common unit offering to public 53,927 --
Cash contribution by General Partners 9 --
Payments on Warrior Coal revolver (17,000) --
Borrowings under revolving credit and working capital facilities 31,600 66,400
Payments under revolving credit and working capital facilities (31,600) (66,400)
Payments on long-term debt (31,250) (15,000)
Distributions to Partners (37,027) (31,440)
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Net cash used in financing activities (31,341) (46,440)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 1,128 (2,065)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,028 11,093
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,156 $ 9,028
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Reconciliation of GAAP "Cash Flows Provided by Operating Activities" to Non-GAAP
"EBITDA" and Reconciliation of Non-GAAP "EBITDA" to GAAP "Net Income"
(in thousands)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------- -----------------------
2003 2002 2003 2002
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Cash flows provided by operating
activities $ 47,821 $ 44,932 $ 110,312 $ 101,306
Reclamation and mine closing (336) (473) (1,341) (1,365)
Coal inventory adjustment to market (679) 1,223 (687) (48)
Other 385 664 353 1,014
Net effect of changes in operating
assets and liabilities (18,602) (27,207) (8,240) (13,714)
Interest expense 3,936 4,206 15,981 16,360
Income taxes 239 (501) 2,577 (1,094)
-------- -------- --------- ---------
EBITDA 32,764 22,844 118,955 102,459
Depreciation, depletion and amortization (13,146) (13,892) (52,495) (52,408)
Interest expense (3,936) (4,206) (15,981) (16,360)
Income taxes (239) 501 (2,577) 1,094
-------- -------- --------- ---------
Net income $ 15,443 $ 5,247 $ 47,902 $ 34,785
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EBITDA is defined as income before net interest expense, income taxes and
depreciation, depletion and amortization. Management believes EBITDA is a useful
indicator of its ability to meet debt service and capital expenditure
requirements and uses EBITDA as a measure of operating performance. 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. The Partnership's method of
computing EBITDA 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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